Delhi District Court
M/S Autovikas Sales & Services Pvt. Ltd. vs . Shri Udaybir Singh on 10 December, 2018
1
IN THE COURT OF MS. SNIGDHA SARVARIA : MM : NI ACT-03
(CENTRAL) : TIS HAZARI COURTS : DELHI.
CC No.537159/16
DATE OF INSTITUTION : 24.08.2009
DATE RESERVED FOR JUDGMENT: 03.12.2018
DATE OF JUDGMENT : 10.12.2018
IN THE MATTER OF:
M/s Autovikas Sales & Services Pvt. Ltd.
12-A, Shivaji Marg,
New Delhi-110015
Through Shri Surender Vasudeva,
Senior Manager (Finance)
........Complainant
VERSUS
Shri Udaybir Singh,
S/o Shri. Chhiddu Singh,
M/s Guru Auto Parts,
Plot No.454, Kakrola Housing Complex,
Near Metro Pillar No.795,
Main Najafgarh Road,
New Delhi-110059.
Also At: A-3/168-188, Vipan Garden,
Kakrola More, Delhi-110059.
..........Accused
JUDGMENT:
a) Srl. No. of the case & Date of institution : 467/2009 & 13.08.2009
b) Date of commission of offence :on the 15th day of service of legal demand notice
c) Name of the complainant : M/s Autovikas Sales & CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 2 Services Pvt. Ltd.
d) Name of the accused : Shri Udaybir Singh e) Nature of offence complained of : S. 138 NI Act f) Plea of the accused person :Accused pleaded not guilty h) Final Order : Acquitted i) Date of order : 10.12.2018 COMPLAINT UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881
BRIEF STATEMENT OF REASONS FOR DECISION OF THE CASE:-
Brief facts
1. The brief facts of the present complaint filed U/s. 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "NI Act") are that complainant company is dealing in the sale, service and repairs of cars and other allied vehicles and in consideration of balance price of vehicle purchased by the accused from the complainant, the accused issued a cheque bearing no.011941 dated 28.05.2009 for a sum of Rs.86,233/- drawn on Allahabad Bank, Kakrola, New Delhi in favour of the complainant, in discharge of his liability qua the complainant. The complainant presented the said cheque for encashment with its banker namely Oriental Bank of Commerce, Old Rajinder Nagar, New Delhi but to the utter surprise of the complainant, the said cheque was returned dishonoured with the remarks 'funds insufficient' vide bank returning memo dated 01.06.2009. Upon receipt of the dishonour memo, the complainant approached the accused and apprised him about the fate of the said cheque, but the accused avoided the same. The complainant was constrained to serve upon the accused with a legal notice dated 10.06.2009, through Regd. A. D. Post / UPC (posted on 29.06.2009) thereby calling upon him to pay the amount of the dishonoured cheque within 15 days from the CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 3 receipt thereof. The respondent despite receipt of the said legal notice has neither paid the amount in lieu of the dishonoured cheque nor complied with the same within the stipulated period.
The accused has issued false and frivolous reply dated 05.08.2009 through his counsel. Therefore, the accused has committed an offence, which is an offence under the provision of Section 138 of NI Act.
Proceedings Before Court
2. In the present complaint summons were issued against the accused. The accused entered appearance and notice of accusation was framed against the accused on 09.03.2011 to which accused pleaded not guilty and claimed trial. In his defence the accused stated that there is no liability towards the complainant. He stated that the cheque in question was never issued by him as the complainant had already taken 10 blank cheques from him for getting the loan sanctioned against the vehicle to be sold to the accused and the complainant could not succeed in getting the loan sanctioned from ICICI Bank and misused this cheque against alleged liability against him. He has also filed a case in District Consumer Forum, Janakpuri, New Delhi for return of initial amount as well as damages. In the written statement filed by the complainant there, the complainant admitted that they are not the financed company and as such the complainant appears to have been showing imaginary outstanding against the accused.
3. In support of its case, the complainant examined Surender Vasudeva as CW1 and he was also cross-examined. Cw1 proved his affidavit in evidence as Ex C1; the certificate of incorporation of the complainant dated 02.11.2001 as ExCW1/1; extracts of minutes of meetings dated 11.08.2009 of the complainant CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 4 appointing Mr. Suriender Vasudeva as AR of the complainant as Ex CW1/2; cheque bearing no. 011941 dated 28.05.2009 in the sum of Rs. 86,233/- drawn on Allahabad Bank, Kakrola, New Delhi- 110059 as Ex CW1/3; return memo dated 29.05.2009 as Ex CW1/4; legal demand notice dated 10.06.2009 as Ex CW1/5; postal receipt as Ex CW1/6; UPC receipt as Ex CW1/7; AD card as Ex CW1/8; returned courier envelope as Ex CW1/9; ledger account statement as Ex CW1/10 (colly.). He admitted using cheque no. 014761 dated 30.12.2008 for Rs. 4,86,304/- as Ex CW1/D1; he denied that the vehicle in question was handed over to the accused after receiving passing report from Gurgaon Authorities Ex CW1/D2 and temporary certificate Ex CW1/D3Counsel for the complainant closed complainant evidence on 11.04.2012.
4. Statement of accused Udaybir Singh was recorded on 03.07.2012 wherein he stated that the cheque in question bears his signatures but the contents of the same were not filled by him. He stated that he had received the legal demand notice and he had duly replied to it. He stated that the present complaint is a false complaint filed by the complainant to harass him and extort money. He stated that the cheque in question is one of the ten blank cheques which were given to the complainant as a security for sanctioning of loan of vehicle and the same was misused by the complainant. Later on, the vehicle was snatched by the complainant company and he has filed a consumer complaint case which is pending at Janakpuri consumer court. He stated that he has no liability towards the complainant.
5. The accused examined Sh. Taranjeet Singh as DW1 in his defence and he proved copy of price list as Mark DW1/1 and he was also cross-examined. Accused deposed as DW1 and proved receipt dated 11.04.2008 as Ex DW1/1; receipt dated 28.04.2008 as Ex CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 5 DW1/2; cheque book leaf as Ex DW1/3 and he was also cross- examined. He examined DW3 Deepak Jain, handwriting expert who proved his handwriting report as Ex DW3/A and enlarged photographs as Ex DW3/B and was also cross-examined. He examined DW4 Deepak Chaudhary who proved his handwriting report as Ex DW4/1. Accused closed his defence evidence on 30.10.2018.
6. I have heard counsel for the parties, perused the record and have gone through the relevant provisions of the law.
Findings
7. The following are the components of the offence punishable under Section 138 of Negotiable Instrument Act:-
(1) drawing of the cheque by a person on an account maintained by him with a banker, for payment to another person from out of that account for discharge in whole/part any debt or liability, (2) presentation of the cheque by the payee or the holder in due course to the bank, (3) returning the cheque unpaid by the drawee bank for want of sufficient funds to the credit of the drawer or any arrangement with the banker to pay the sum covered by the cheque, (4) giving notice in writing to the drawer of the cheque within 15 days of the receipt of information by the payee from the bank regarding the return of the cheque as unpaid demanding payment of the cheque amount, (5) failure of the drawer to make payment to the payee or the holder in due course of the cheque, of the amount covered by the cheque within 15 days of the receipt of the notice.
8. The accused stated in his defence recorded at the time of framing of notice under S. 251 CrPC and statement under S. 313 CrPC that he had received the legal demand notice and he had duly replied to CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 6 it.
9. As regards the defence raised by the accused that he did not fill the details in the cheque himself, at this juncture it would be worthwhile to discuss the provisions under S. 20 and S. 118 of the Negotiable Instruments Act, which is as under:
20.Inchoate stamped instruments. Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in [India], and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as then case may be, upon it a negotiable instrument, instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount, provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.
118. Presumptions as to negotiable instruments of consideration Until the contrary is proved, the following presumptions shall be made:
(a) of considerationthat every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;
(b) as to date that every negotiable instrument bearing a date was made or drawn on such date;
(c) as to time of acceptance that every accepted bill of exchange was accepted within a reasonable time after its date its date and before its maturity;
(d) as to time of transfer. that every transfer of a negotiable instrument was made before its maturity;
(e) as to order of endorsements that the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;
(f) as to stampsthat a lost promissory note, bill of exchange or cheque was duly stamped;
(g) that holder is a holder in due course that the holder of a negotiable instrument is a holder in due course; provided that, where the instrument has been contained from its lawful owner, or form any person in lawful custody thereof, by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.
10. Further, in Mojj Engineering Systems Limited & Ors. Vs. A.B. Sugars Ltd.; 154 (2008) Delhi Law Times 579, the Hon'ble Delhi CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 7 High Court had observed as under :-
7. Even otherwise, prima facie, it was the petitioners who had handed over the undated cheque for a certain amount to the respondent in terms of a contract between the parties. Since an undated cheque cannot be encashed, it can only mean that the petitioners had authorized the complainant to enter an appropriate date on it. In Young Vs. Grote (1827) 4 Bing. 253 it was held that when a blank cheque is signed and handed over, it means the person signing it has given an implied authority to any subsequent holder to fill it up.
Similarly, in Scholfield Vs. Lord Londesborough (18951899) All ER Rep 282 it was held that whoever signs a cheque or accepts a bill in blank, and then puts it into circulation, must necessarily intend that either the person to whom he gives it, or some future holder, shall fill up the blank which he has left. This common law doctrine was also affirmed by Justice Macnaghten in Griffiths Vs. Dalton [1940] 2 KB 264 where it was held that the drawer of an undated cheque gives a prima facie authority to fill in the date. This aspect has also been incorporated in Section 20 of the Negotiable Instruments Act, which deals with Inchoate Stamped Instruments. The Supreme Court in T.Nagappa Vs. Y.R.Murlidhar, (2008) 5 SCC 633 while discussing the scope of Section 20 held that by reason of this provision, a right has been created in the holder of the cheque. Prima facie, the holder thereof is authorized to complete the incomplete negotiable instrument. In that view of the matter, all further issues that may be raised by the petitioners regarding the nature and scope of the authority of the respondent to put any particular date on the cheque in question, are all matters for trial.
8. It is not as if the cheque came to be issued without any consideration whatsoever in the first place or that there was such a glaring defect in the complaint that the decision of the Trial Court to issue summons has ex facie resulted in miscarriage of justice or an abuse of the process of Court, and therefore interference under Section 482 Cr.P.C. to quash the proceedings is warranted in the interest of justice. The question whether the consideration for which the cheque was issued was ultimately satisfied or whether the cheque was wrongly sought to be encashed, are all issues that must also be decided at the trial. The Supreme Court in the case of M.M.T.C. Ltd. and Another Vs. MEDCHL Chemicals and Pharma (P) Ltd. and Another,(2002) 1 SCC 234 held as follows:
"13.....the wellsettled law that the power of quashing criminal proceedings should be exercised very stringently and with circumspection. It is settled law that at this stage the Court is not justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the complaint. The inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice. At this stage the Court could not have gone into merits and/or come to a conclusion that there was no existing debt or liability."
The Court further held that:
"17. There is therefore no requirement that the complainant must specifically allege in the complaint that there was a subsisting liability. The burden of proving that there was no existing debt or liability was on the respondents. This they have to discharge in the trial. At this stage, merely on the basis of averments in the petitions filed by them the High Court could not have concluded that there was no existing debt or liability."CC No.537159/16
M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 8
11. From the aforesaid discussion, it is manifest that by reason of the provision under S. 20 NI Act, a right has been created in the holder of the cheque. Prima facie, the holder thereof is authorized to complete the incomplete negotiable instrument. Mere averment to the effect that the accused/drawer of the cheque did not fill in the details on the cheque except for signing on the cheque is not sufficient. Thus, merely that allegation of issuance of incomplete negotiable instrument does not create absolute defence in favour of the accused unless corroborative evidence exists to show that by threat or fraud, a cheque was taken. There is no law that a person drawing the cheque has to necessarily fill it up in his own handwriting. Respondent has not denied his signatures on the cheques. Once he has admitted his signatures on the cheques he cannot escape his liability on the ground that the same has not been filled in by him. When a blank cheque is signed and handed over, it means that the person signing it has given implied authority to the holder of the cheque, to fill up the blank which he has left. A person issuing a blank cheque is supposed to understand the consequences of doing so. He cannot escape his liability only on the ground that blank cheque had been issued by him. Thus, this defence is of no assistance to the accused.(See also:Jaspal Singh vs State decided on 16.11.2016 by Hon'ble High Court of Delhi in Crl. Rev P. 160/2016; Lillykutty vs Lawrence - 2003 (2) DCR 610 (Ker) (DB) & Ravi Chopra vs State and Anr. - 2008 (2) JCC (NI) 169)
12. At the time of recording of his statement under S. 313 CrPC the accused admitted his signatures on the cheque in question. Since issuance of cheque in question by the accused is not disputed, hence, presumption U/s.139 of the NI Act is raised.
13. In Rangappa v. Sri Mohan AIR 2010 SC 1898 it was observed by CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 9 the Hon'ble Supreme Court as under :
"14. In light of these extracts, we are in agreement with the respondentclaimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/defendant cannot be expected to discharge an unduly high standard or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own. "
(emphasis added)
13. In view of the decision in Rangappa laid down by the Supreme Court, the presumption raised under Section 139 of the NI Act is of legally enforceable debt or liability and it is for the accused persons to raise a probable defence to rebut the presumption.
14. S. 139 NI Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While S. 138 of the NI Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under S. 139 NI CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 10 Act is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by S. 138 NI Act can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong those impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant accused cannot be expected to discharge an unduly high standard of proof.
15. The reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under S. 139 NI Act, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. The accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.
16. As discussed herein above, under S. 139 NI Act strong rebuttable presumptions in favour of the complainant arise but same can be rebutted by the accused by way of credible defence.
17. As regards the defence of the accused that the cheque in question was a security cheque and thus complaint under S. 138 NI Act is not maintainable is without any merits in view of the decision of the Hon'ble Apex Court in ICDS Ltd vs Beena Shabeer - 2002 (2) SCC 426 and Credential Leasing & Credits Ltd. vs Shruti Investments & Anr. Of Hon'ble High Court of Delhi decided on 29/06/2015 in Crl LP No. CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 11 558/2014 and Suresh Chandra Goyal vs Amit Singhal Crl Appeal nos. 601/2015 decided on 14/05/2015 and Credential Leasing & Credits Ltd. vs Shruti Investments & Anr. Of Hon'ble High Court of Delhi the security cheques fall within the purview of S. 138 NI Act .
18. As per decision in Credential Leasing & Credits Ltd. vs Shruti Investments & Anr. Of Hon'ble High Court of Delhi decided on 29/06/2015 in Crl LP No. 558/2014 it has been held that the scope of S. 138 would cover cases where ascertained and crystallized debt or other liability exists on the date when the cheque is presented and not only to the cases where ascertained and crystallized debt or other liability exists on the date on which it was delivered to the seller as a post dated cheque or as a current cheque with a credit period.
19. The defence raised by the accused is that there is no liability towards the complainant. He stated that the cheque in question was never issued by him as the complainant had already taken 10 blank cheques from him for getting the loan sanctioned against the vehicle to be sold to the accused and the complainant could not succeed in getting the loan sanctioned from ICICI Bank and misused this cheque against alleged liability against him. He has also filed a case in District Consumer Forum, Janakpuri, New Delhi for return of initial amount as well as damages. In the written statement filed by the complainant there, the complainant admitted that they are not the financed company and as such the complainant appears to have been showing imaginary outstanding against the accused. He stated that the present complaint is a false complaint filed by the complainant to harass him. And extort money. He stated that the cheque in question is one of the ten blank cheques which were given to the complainant as a security for sanctioning of loan of vehicle and the same was misused by the complainant. Later on, the vehicle was snatched by the complainant company and he has filed a consumer complaint case CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 12 which is pending at Janakpuri consumer court. He stated that he has no liability towards the complainant.
20. The Hon'ble Supreme Court in Kumar Exports vs. Sharma Carpets - (2009) 2 SCC 513 held, that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.
21. Accused vide deposing as DW1 stated that receipts DW1/1 and Ex DW1/2 of Rs. 5,000/- and Rs. 1,60,000/-, respectively were issued to the accused by the complainant on receiving payments from the accused towards purchase of vehicle. He stated that he had also given 10 cheques to the complainant at that time and the agent of the complainant even signed on the cheque book leaf while taking the said signed cheque. He stated that vehicle was handed over to him on 28.04.2008 but original documents of the vehicle were not handed over to the accused and accused deposited the vehicle with the complainant on 14.01.2009. He stated that the complainant had promised to give another vehicle in lieu of the returned vehicle but the complainant failed to do the same and later he received notice of dishonour of security cheque issued by the accused earlier to the complainant. He also stated in his cross-examination that the vehicle was purchased on finance basis and employee of the complainant Taranjeet had got it financed. DW1 Taranjeet Singh, erstwhile employee of the CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 13 complainant deposed that the loan of the accused was rejected by the bank. Even CW1 Surender Vasudeva has stated that the complainant takes EMI cheques at the time of release of the vehicle and that cheque no. 014761 dated 30.12.2008 for Rs. 4,86,304/- Ex CW1/D1 of the accused was returned dishonoured on 10.01.2009. He admitted that the vehicle in question has been repossessed by the complainant. This version of the accused is consistent with his innocence and he has rebutted the presumption under S. 118/139 NI Act.
22. Now, it was upon the complainant to prove that the accused has a liability towards the complainant. The complainant has placed on record ledger statement Ex CW1/10 colly. But the said ledger statement has not been proved as per rules. In this regard the Hon'ble Supreme Courtin L.I.C. Of India &Anrvs Ram Pal Singh Bisen C.A. No.893 of 2007 has held as under:
"We are of the firm opinion that document in evidence does not amount to its proof. In ther words, mere marking of exhibit on a document does not dispense with its proof, which is required to be done in accordance with law."
It has been further held that:
"It was the duty of the appellants to have proved documents Exh. A1 to Exh.A10 in accordance withlaw. Filing of the I nquiry Report or the evidenceadduced during the domestic enquiry wo uld notpartake the character of admissible evidence in a court of law. That documentary evidence was also required to be proved by the appellants in accordance with the provisions of the Evidence Act, which they have failed to do."
23.The above judgment was relied upon by the Hon'ble Parent High Court in HC Lekh Raj (8090/Dap vs. Govt. Of NCT of Delhi OA No.23 87/2008.
".....CD is not to be treated as a document, unless the maker of it is examined and this has not been proved either by primary or secondary evidence. The decision of the Apex Court in Ram Pal Singh Bisen (supra) clearly mentions such evidence as not admissible even CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 14 in disciplinary proceedings."
24.Also, in James Eazy Frankyvs D.R.I, the Hon'ble Delhi High Court held that:
"96. The appellant, in his statemen dated 06.01.2009, tendered under Section 313 Cr.P.C. had denied the allegations. As regards to his statement, he talked of some retractions Ex.DXZ and Ex.DXZ1. According to him, he had retracted the statement when he was produced before the Court. This is contrary to judicial record. It is also not understood as to how the alleged retractions were exhibited. No document can be exhibited unless the maker thereof enters the witness box and faces the cross examination." (emphasis supplied)
25. The complainant has also not brought on record the original records of the vehicle sold to the accused on record, which was the best evidence and has been withheld by the complainant giving rise to an adverse inference with respect to the case set up by the complainant. The complainant has not brought forth any document to show what the complainant has done with the repossessed vehicle after taking it from the accused and if they have sold the said vehicle then what are the dues of the accused towards the complainant after adjusting the difference. Thus, clearly, the existence of legally enforceable debt and liability of the accused towards the complainant has not been proved by the complainant beyond reasonable doubt.
26. In Sundaram Finance vs State of Kerela & Ors. - 1966AIR 1178 (SC) it was held that :
"a hirepurchase agreement is normally one under which an owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he has paid a certain sum, or when the hirerental payments have reached the hirepurchase price stipulated in the agreement. But there are variations when a financier is interposed between the owner of the goods and the customer. The agreement, ignoring variations of detail, broadly takes one or the other of two forms : (1) when the owner is unwilling to look to the purchaser of goods to recover the balance of the price, and the financier who pays the balance undertakes the recovery. In this form, goods are purchased by the financier from the CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 15 dealer, and the financier obtains a hirepurchase agreement from the customer under which the latter becomes the owner of the goods on payment of all the instalments of the stipulated hire and exercising his option to purchase the goods on payment of a nominal price. The decision of this Court in K. L. Johar & Company v. Deputy Commercial Tax Officer(1) dealt with a transaction of this character. (2) In the other form of transactions, goods are purchased by the customer, who in consideration of executing a hire purchase agreement and allied documents remains in possession of the goods, subject to liability to pay the amount paid by the financier on his behalf to the owner or dealer, and the financier obtains a hirepurchase agreement which gives him a licence to seize the goods in the event of failure by the customer to abide by the conditions of the hire purchase agreement. The true effect of a transaction may be determined from the terms of the agreement considered in the light of the surrounding circumstances. In each case, the Court has, unless prohibited by statute, power to go behind the documents and to determine the nature of the transaction, whatever may be the form of the documents. An owner of goods who purports absolutely to convey or acknowledges to have conveyed goods and subsequently purports to hire them under a hirepurchase agreement is not estopped from proving that the real bargain was a loan on the security of the goods. If there is a bona fide and completed sale of goods, evidenced by documents, anterior to and independent of a subsequent and distinct hiring to the vendor, the transaction may not be regarded as a loan transaction, even though the reason for which it was entered into was to raise money. If the real transaction is a loan of money secured by a right of seizure of the goods, the property ostensibly passes under the documents embodying, the transaction, but subject to the terms of the hiring agreement, which become part of the buyer's title, and confer a licence to seize. When a person desiring to purchase goods and not having sufficient money on hand borrows the amount needed from a third person and pays it over to the vendor, the transaction between the customer and the lender will unquestionably be a loan transaction. The real character of the transaction would not be altered if the lender himself is the owner of the goods and the owner accepts the promise of the purchaser to pay the price or the balance remaining due against delivery of goods. But a hirepurchase agreement is a more, complex transaction. The owner under the hire purchase agreement enters into a transaction of hiring out goods on the terms and conditions set out in the agreement, and the option to purchase exercisable by the customer on payment of all the instalments of hire arises when the instalments are paid and not before. In 'such a hirepurchase agreement there is no agreement to buy goods; the hirer being under no legal obligation to buy, has an option either to return the goods or to become its owner by payment in full of the stipulated hire and the price for exercising the option. This class of hirepurchase agreements must be distinguished from transactions in which the customer is the owner of the goods and with a view to finance his purchase he enters into an arrangement which is in the form of a hire purchase agreement with the financier, but in substance evidences a loan transaction, subject to a hiring agreement under which the lender is given the licence to seize the goods."
27. In the instant case, from the testimonies of CW and DW there was no hire purchase agreement between the complainant and the CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 16 accused at best it can be said that the accused was allowed to pay for the purchased vehicle in instalments/EMI but alternatively also, the liability of accused in respect of cheque in question has ceased to exist after the termination of agreement and seizure of vehicle. Reference in this regard can be made to decision in the case of Sudha Beevi vs State Of Kerala, 2004 CriLJ 3418 wherein it was held that:
"Section 43 of the Negotiable Instruments Act deals with a negotiable instrument made without consideration. Relevant portion of the section reads thus:43. Negotiable instruments made, etc. without consideration :- A negotiable instrument made, drawn accepted, endorsed, or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction.......".
28. If a negotiable instrument is made or drawn without consideration, it creates no obligation of payment between the parties to the transaction. Similarly, if the consideration for which the instrument was made or drawn has failed subsequently, then also the instrument creates no obligation at all. Therefore, if the hire purchase agreement in this case between the owner/complainant and the hirer/accused had stood determined by act of parties, the cheques which were accepted by the owner in advance for re-payment of the hire would become instruments without consideration; or in other words, they will be instruments for which consideration had failed. Then the remedy available to the owner is to realise the balance hire due from the hirer or to sue for damages for breach of the terms of the agreement.
29. Also, once the financier/owner under hire purchase agreement exercised the option of seizure of the vehicle, the post dated cheques obtained from the hirer cannot be presented for encashment after the seizure. The owner has to take recourse to other legal remedies for recovery of the balance amount. If and when the vehicle is sold subsequently, the owner can recover the CC No.537159/16 M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 17 balance amount after adjusting the sale proceeds of the vehicle. Of course, in the post seizure scenario, it may be open to the parties to agree upon a new schedule of payment or restructuring of the hire transaction.
30. Furthermore, it is well settled that before repossession of vehicle it is necessary that due process be followed and borrower be given an opportunity to repay and clear the over due amounts. Similarly after obtaining possession of vehicle and before its sales, borrower should be informed and given an opportunity to clear dues. In case borrower fails to make payment, the lender is duty bound to ensure that fair process is followed in sale of vehicle. To ensure fair sale, valuation of vehicle can be obtained from government approved valuer and sale can be made by auction/bidding to fetch maximum amount. Selling the vehicle at best price is of utmost importance because arbitrary sale at uncompetitive prices directly affects the the liability of borrower and is prejudicial to his rights and interests. The pith and substance of the whole process from repossession to sale is that there shall be transparent and fair procedure and all efforts should be made to give opportunity to borrower for clearing the debt. (See: Citicorp Maruti Finance Limited Vs. S. Vijaylaxmi, Civil Appeal No.9711 of 2011, Hon'ble Supreme Court of India & Bhagya Products (P) Ltd. vs Commissioner Of Police And Ors. (2003) 69 DRJ 1 (DB) Hon'ble High Court of Delhi)
31. In the absence of true value of vehicle and incomplete statement of account the liability of accused is not established.
32. In view of the aforesaid reasons, the court finds that the accused has been able to prove probable defence and the complainant has failed to rebut the defence of the accused.
CC No.537159/16M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh 18
33. In view of the foregoing discussion, the accused Udaybir Singh is acquitted of offences punishable under S. 138 NI Act.
Digitally signed by SNIGDHA SNIGDHA SARVARIA
(Announced in open
Court on 10.12.2018 )
SARVARIA Date: 2018.12.10
16:21:52 +0530
(Snigdha Sarvaria)
MM/NI Act-03/Central.
10.12.2018
Judge Code: 0530
CC No.537159/16
M/s Autovikas Sales & Services Pvt. Ltd. vs. Shri Udaybir Singh