Delhi District Court
:: vs :: on 27 September, 2022
IN THE COURT OF MR. SAHIL KHURMI,
METROPOLITAN MAGISTRATE (N.I. ACT)- 02,
ROUSE AVENUE COURT COMPLEX: NEW DELHI
DLND020080872018
Case No: 10672/2018
Mahender Singh
s/o Late Sh. Jatan Singh,
r/o Diary No.20, Masoodpur,
Vasant Kunj, New Delhi
...... Complainant
::Versus::
Inder Sain
s/o Sh. Ranjeet
r/o B-63, Pocket-2,
Sector-16A, JJ Colony,
Dwarka, New Delhi - 110078
.......Accused
Offence Complained of: 138 NI Act
Plea of the Accused: Not guilty
Date of Institution: 30.05.2018
Arguments Heard On: 22.09.2022
Date of Judgment: 27.09.2022
Decision: ACQUITTAL
Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 1 of 15
JUDGMENT
1. Vide this judgment, I shall decide the present complaint filed u/s 138 NI Act bearing CC No.10672/2018, against the dishonor of cheque bearing no. 974401 dated 17.02.2018 for an amount of Rs.1,80,000/- (Hereinafter referred to as cheque in question)
2. Shorn to unnecessary details, the brief facts of the case put forth by the complainant are that in the month of September, 2018, the accused approached the complainant for a friendly loan of Rs.2 lakhs and on 15.10.2017, the complainant gave a sum of Rs.1,80,000/- in cash to the accused after arranging this money from his family members and himself. It is further stated that accused has promised to repay the same within 2 months and in discharge of liability the accused had issued the cheque in question which was dishonored with the remarks 'funds insufficient' vide cheque returning memo dated 20.02.2018 and with the reason 'dormant ISF' on 09.03.2018 and 11.04.2018.
3. Legal demand notice dated 28.04.2018 was sent to the accused. However, no payment was made within 15 days and hence, the present complaint.
4. The complainant examined himself as CW-1 in pre- summoning evidence, and relied upon his evidence by way of affidavit along with the following documents: -
Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 2 of 15S.No Documents relied upon Exhibited as:
1. Cheque in question Ex. CW-1/A
2. Cheque return memo Ex. CW-1/B
3. Legal demand notice Ex. CW-1/C
4. Postal receipts Ex. CW-1/D
5. Complaint u/s 138 NI Act Ex. CW-1/E
6. Evidence by way of affidavit Ex. CW-1/F
5. On appearance of accused, notice of accusation u/s 251 Cr.PC was served upon the accused on 17.03.2020, to which the accused pleaded not guilty and claimed trial. Accused stated that he had taken Rs.50,000/- from the complainant and the cheque in question was given for security purpose and he has not filled the details of the cheque apart from the signature and he denied his liability qua cheque in question.
6. On 17.03.2020, oral application u/s 145(2) NI act was moved which was allowed. CW1 was examined in chief, cross- examined and discharged on 06.05.2022.
7. Thereafter all the incriminating evidence was put before the accused and the statement of accused u/s 313 Cr.PC was recorded on 06.05.2022 in which accused stated that the signature on the cheques are his and he has not filled the contents of the cheque. He further stated that he has taken Rs.50,000/- from the complainant and returned the same. He further stated that the cheque in question was given to the Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 3 of 15 complainant for security purposes which has been misused by the complainant. Thereafter, matter was fixed for DE.
8. Thereafter DW-1 Vinod Kumar was examined in chief, cross examined and discharged on 30.07.2022. Thereafter, vide separate statement of accused, DE stood closed and the matter was fixed for final arguments.
9. Thereafter, final arguments were heard on behalf of both the parties. I have heard the counsels for both parties at length, considered the evidence led by them carefully and have perused the court records thoroughly.
INGREDIENTS OF OFFENCE AND DISCUSSION
10. Before going into the facts of the present case, it would be apposite to discuss the legal standards required to be met by both sides. In order to establish the offence under Section 138 of NI Act, the prosecution must fulfill all the essential ingredients of the offence, as highlighted below:
1st Ingredient: The cheque was drawn by a person on an account maintained by him/her for payment of money and the same is presented for payment within a period of 3 months from the date on which it is drawn or within the period of its validity;
2nd Ingredient: The cheque was drawn by the drawer for discharge of any legally enforceable debt or other liability; 3rd Ingredient: The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 4 of 15 from that account on an agreement made with that bank; 4th Ingredient: A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within thirty days of the receipt of information of the dishonour of cheque from the bank; 5th Ingredient: The drawer fails to make payment of the said amount of money within fifteen days from the date of receipt of notice.
11. In order to prove the aforesaid ingredients, the complainant has proved the following:
(a) The complainant has proved the original cheque, Ex. CW-
1/A which the accused has not disputed as being drawn on the account of the accused and the accused has admitted the signature on the cheque.
(b) The cheques in question were returned unpaid vide return memo Ex. CW-1/B. The same is also not disputed by accused.
(c) The complainant has proved on record legal notice Ex. CW1/C dated 28.04.2018, postal receipt Ex.CW1/D. However, the accused has denied receiving the legal demand notice, however he admitted that the address mentioned on the legal demand notice is correct in his notice framed u/s 251 Cr.P.C. It is observed that the accused appeared before the court after the summons were issued on the same address as mentioned on the legal demand notice and the accused has filled the same address as his residential address in the bail- bonds furnished by him during the course of trial also.
Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 5 of 15Moreover, the accused admitted his address in notice u/s 251 Cr.P.C. Therefore, it emerges that the legal demand notice being properly addressed and posted by the complainant, as proved by the postal receipts, the same is presumed to have been delivered under section 114 of the Indian Evidence Act, 1872 and the accused has failed to rebut the said presumption. Moreover, it was held by the Hon'ble Supreme Court in the decision cited as C.C. Alavi Haji vs Palapetty Muhammed & Anr. (2007) 6 SCC 555 that a person who does not pay within 15 days of receipt of the summons from the Court along with the copy of the complaint under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the General Clauses Act and Section 114 of the Evidence Act. Thus, the plea of the accused that the legal demand notice was never received is not tenable and accordingly, rejected.
(d) The fact that the payment was not made within 15 days of the receipt of the legal notice is also not disputed.
12. As such, on the basis of the above, the first, third, fourth and fifth ingredient of the offence under Section 138 NI Act stands proved against the accused.
13. As far as the proof of second ingredient is concerned, the complainant is required to prove that the cheque in question was issued by the accused and it was drawn by the drawer for discharging a legally enforceable debt.
Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 6 of 1514. In the facts of the present case, since the signature on the cheque in question is admitted by accused at every stage of trial, this court raises presumption under section 118(a) r/w. section 139 of NI Act that the cheque in question was issued by the accused to the complainant in discharge of legally enforceable debt or liability. In order to rebut the presumptions, the burden of proof shifts to the accused to prove on a preponderance of probabilities that there was no liability for the amount of cheque in question. (Reliance placed on Triyambak S. Hegde vs Sripad decided by 3 judge bench of Hon'ble SC on 23.09.2021, Basalingappa vs Mudibasappa (2019) 5 SCC 418 and P Rasiya vs. Abdul Nazer and Anr. decided by Hon'ble Supreme Court on 12.08.2022)
15. Therefore, in the present matter, the onus of proof is now upon the accused to raise a probable defence and to rebut the presumption of the existence of a legally recoverable debt arisen in favour of the complainant. Now let us examine the defense raised by the accused and evaluate the same.
DEFENCE OF NO FINANCIAL CAPCAITY OF COMPLAINANT:
16. Ld. Counsel for accused has stated that the complainant did not have financial capacity to grant the alleged loan in question. It has been contended by learned counsel for the accused that there is nothing on record, other than the oral testimony of the complainant, to show that the complainant Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 7 of 15 had advanced the alleged loan of Rs. 1,80,000/- to the accused. Ld. Counsel for accused has stated that no oral or documentary evidence has been furnished by the complainant to prove his financial capacity in the form of ITR of the relevant year of transaction or bank account statement especially when the same was extensively challenged in cross examination of complainant. Further, it has been submitted that no bank record/bank account statement of complainant has been placed on record to show that the complainant had adequate funds and financial capacity to lend the alleged loan in question and thus the factum of giving loan is not proved by the complainant.
17. Learned counsel for accused has further submitted that the complainant has stated in his cross examination dated 06.05.2022 that the money was given in presence of Madan in front of house of Madan and also stated that he had taken Rs. 1,20,000/- from Madan to given the loan in question, whereas the said person namely Madan was never summoned by complainant to depose in his favor to fortify his case.
18. Per contra, ld. Counsel for complainant has submitted that the complainant had sufficient funds and the complainant has proved his financial capacity and stood the test of cross- examination.
19. However, mere assertion of the complainant does not come as a good defense, unless the complainant leads cogent evidence to prove the said assertion as the complainant has to prove his case beyond reasonable doubt. Section 103 of the Indian Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 8 of 15 Evidence Act provides that burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence, unless it is provided by any special law that the proof of that fact shall lie on any particular person. Section 103 of the Indian Evidence Act amplifies the general rule of Section 101 that the burden of proof lies on the person who asserts the affirmative of the facts in issue.
20. Before proceeding to decide whether the complainant had financial capacity to lend the alleged loan in question or not and whether the complainant has proved his sources of funds, it is imperative to note the settled position of law that in case of cash transactions, showcasing that complainant did not have adequate financial capacity to lend money to the accused amounts to a probable defense and can help in rebutting the presumption that accrued to the benefit of the complainant in cheque dishonor cases. The relevant case laws in this regard have been reproduced hereunder for reference.
21. In Tedhi Singh vs Narayan Dass Mahant Criminal Appeal no. 362 OF 2022 decided on 7th March 2022, the Hon'ble Supreme Court of India has held that it cannot be expected of the complainant to initially lead evidence to show that he had the financial capacity. However, the accused has the right to demonstrate that the complainant in a particular case did not have the capacity. The same can be done by accused by producing independent materials, namely, by examining his witnesses and producing documents, by pointing to the materials produced by the complainant himself, or through the Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 9 of 15 cross examination of the witnesses of the complainant.
22. In John. K. Abraham vs Simon C. Abraham and Ors. in Crmnl. Appeal 2043 of 2013 decided on 05.12.2013 in which it was held by Hon'ble Supreme Court of India that:
It has to be stated that in order to draw the presumption under Section 118 read along with 139 of the Negotiable Instruments Act, the burden was heavily upon the complainant to have shown that he had required funds for having advanced the money to the accused;
that the issuance of the cheque in support of the said payment advanced was true and that the accused was bound to make the payment as had been agreed while issuing the cheque in favour of the complainant.
(Emphasis laid)
23. In K. Prakashan v. P.K. Surenderan (2007 (4) CCC 713 (SC) the Hon'ble Apex Court has held that the Complainant is required to show his solvency to the extent of the loan either through the bank account or through other means.
24. In Basalingappa v. Mudibasappa, (2019) 5 SCC 418: AIR 2019 SC 1983, the Hon'ble Supreme Court has observed as follows:
During his cross-examination, when financial capacity to pay Rs. 6 lakhs to the accused was questioned, there was no satisfactory reply given by the complainant. The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the burden on the complainant to prove his financial capacity and other facts.
(Emphasis laid)
25. In APS Forex Service Private Limited v. Shakti Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 10 of 15 International Fashion Linkers AIR 2020 SC 945, the Hon'ble Supreme Court has clarified and explained the issue as follows:
We are of the view that whenever the accused has questioned the financial capacity of the complainant in support of his probable defence, despite the presumption under Section 139 of the N.I. Act about the presumption of legally enforceable debt and such presumption is rebuttable, thereafter the onus shifts again on the complainant to prove his financial capacity and at that stage the complainant is required to lead the evidence to prove his financial capacity, more particularly when it is a case of giving loan by cash and thereafter issuance of a cheque.
(emphasis added)
26. The crux of the aforesaid decisions of the Hon'ble Supreme Court has been summarized by the Hon'ble Kerala High Court in Sunitha v. Sheela Antony, 2020 SCC OnLine Ker 1750 In my view, the crux of the decisions referred to above is the following :
The complainant has no obligation, in all cases under Section 138 of the Act, to prove his financial capacity. But, when the case of the complainant is that he lent money to the accused by cash and that the accused issued the cheque in discharge of the liability, and if the accused challenges the financial capacity of the complainant to advance the money, despite the presumption under Section 139 of the Act, the complainant has the obligation to prove his financial capacity or the source of the money allegedly lent by him to the accused.Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 11 of 15
The complainant has no initial burden to prove his financial capacity or the source of the money. The obligation in that regard would arise only when his capacity or capability to advance the money is challenged by the accused.
(emphasis added)
27. Therefore, in cases in which the underlying debt transaction is a cash transaction, the accused can raise a probable defense by questioning the financial capacity of the complainant, and once the said question is raised, the onus shifts on the complainant to prove his financial capacity.
28. In the present case in hand, it is pertinent to note that the complainant has stated in his cross-examination dated 06.05.2022 that "I have a shop in Rohini of rajai-gadda and I also earn rental income of Rs.60,000/- from my house. No documents have been furnished qua the same." The complainant further stated in his cross-examination that "the money was given to the accused in front of house of Madan and in the presence of Madan". The complainant further stated in his cross-examination that "Madan gave me Rs.1,20,000/- and I arranged Rs.60,000/- from my cash in hand". Further suggestions were given to complainant regarding not proving his sources of funds or financial capacity where in the complainant stated that, "it is wrong to suggest that since I have not filed any income proof, therefore I have not given the present friendly loan. It is wrong to suggest that I do not have the financial capacity to give the present friendly loan."
Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 12 of 1529. Thus, from the perusal of the cross-examination of the complainant, it transpires that the financial capacity of the complainant was extensive challenged by the accused in cross examination of complainant. Despite that, the complainant has not placed on record any document to prove that he was earning the rental income of Rs.60,000/- from his house by producing rent agreement or receipts of rent paid or shown any proof of his earnings from the shop of rajai-gadda in Rohini, as stated in his cross examination.
30. Since, the financial capacity of complainant was challenged in his cross examination, the onus was on the complainant to prove his rental income and earnings from his shop or produce his ITR for the relevant time to corroborate his income or produce his bank account statement to show that he had adequate funds in his account and he had sound financial capacity.
31. No oral or documentary evidence has been placed on record by the complainant to prove his financial capacity. It is further pertinent to note that the complainant has not proved the sources of funds from which he gave loan as the said person namely Madan from whom the complainant has allegedly arranged Rs.1,20,000/- was never brought as a witness to prove the same. The onus to prove that the complainant arranged Rs. 1,20,000/- from Madan and the loan in question was given in front of Madan was on the complainant by examining the said person. However, the complainant failed to bring the said person in the witness box to prove the fact of borrowing Rs. 1,20,000/- from him and to further advance the Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 13 of 15 same to accused. Therefore, in the considered opinion of this court, the complainant has failed to prove the sources of funds as well as the financial capacity to lend the alleged loan in question to the accused and has not been able to prove the factum of loan.
FINDINGS OF THE COURT
32. On the basis of the above discussion, this court arrives at the following conclusions:
a. The complainant has failed to prove the factum of advancing the alleged loan in question by cogent oral or documentary evidence.
b. The complainant has failed to prove the sources of funds to advance the alleged loan in question. c. The complainant has failed to prove his financial capacity to advance the alleged loan in question. d. The complainant has failed to prove his case beyond reasonable doubt.
e. The accused has successfully rebutted the presumptions u/s 118(a) r/w Section 139 of NI Act by raising a probable defence.
CONCLUSION:
33. Thus, it is discernible that, the onus was on the complainant to prove his case beyond reasonable doubt, which he has clearly failed to prove. Thus, the complainant has failed to prove that there was any legally enforceable debt on the accused towards the complainant.
34. At this stage, it should be noted that when the accused successfully creates doubt in the complainant's case by Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 14 of 15 drawing inferences from the materials on record and also from circumstances, statutory presumptions under Section 118(a) r/w 139 of the Act stand rebutted and burden to proof is then shifted to the complainant to prove the guilt of accused beyond reasonable doubt. Reference can be taken from the decision of the Hon'ble Supreme Court from the case of Bharat Barrel & Drum Manufacturing Company vs. Amin Chand Pyarelal 1999 (3) SCC 35.
35. On taking a holistic view of the above-mentioned observations, in the considered view of this court, the complainant has failed to prove his case beyond reasonable doubt. On the other hand, the accused has been successful in creating a reasonable doubt in the case put forth by the complainant as well raising a probable defence.
36. Accordingly, accused Inder Sain is acquitted of the offence u/s 138 NI Act.
Announced in open court Note: This judgment contains 15 pages and each page has been signed by me.
(Sahil Khurmi) Metropolitan Magistrate (NI Act) Rouse Avenue Court Complex NDD/ND/27.09.2022 Mahender Singh vs. Inder Sain CC No: 10672/2018 Page 15 of 15