Delhi District Court
Sh. Rakesh Manocha vs Sh. Rajinder Kumar on 28 August, 2018
IN THE COURT OF MS. RUCHI AGGARWAL ASRANI,
M.M., N.I. ACT, WEST -03, TIS HAZARI COURTS, DELHI
C.C. No. 1828/16
Sh. Rakesh Manocha
S/o Sohan Lal Manocha
R/o Flat no. 180,
Milansar Apartments
New Delhi-110063. ...Complainants
Versus
Sh. Rajinder Kumar
S/o Ramesh Chand
R/o C-45 Luxmi Park
Nangloi
New Delhi-110041
Also at
N-38/2 Budh Vihar
Phase-I
New Dlehi-110086. ...Accused
Date of Institution : 18.09.2013
Offence complained of : 138 NI Act
Date of final arguments : 21.08.2018
Date of decision : 28.08.2018
Plea of guilt : Not guilty.
Decision : Acquitted.
JUDGMENT:
The present complaint has been filed by the complainant against the accused under section 138 Negotiable Instruments Act, 1881.
Version of the complainant:
2. The complainant has stated in his complaint that he and the accused had friendly relations. In April 2013, the accused approached the complainant and C.C. No. 1828/16 Dated 28.08.2018 Page 1/13 induced him to advance loan of Rs. 4,50,000/- to him. At that time, the accused stated to the complainant that the amount is urgently required in cash. Thus, the complainant advanced a friendly loan of Rs. 4,50,000/- in cash to the accused. A promissory note was executed that the accused will pay Rs. 3,50,000/- back to the complainant in the month of July 2013 and the balance amount of Rs. 1,00,000/- in the month of August 2013. In discharge of his part liability, the accused issued a cheque bearing no. 047480 dated 22.07.2013 for Rs.3,50,000/-. On presentation, the said cheque was returned dishonoured vide return memo dated 23.07.2013.
Thereafter, the complainant requested the accused to make the entire payment.
3. On 10.08.2013, the accused issued a cheque bearing no. 047481 dated 10.08.2013 in favour of the complainant towards discharge of complete liability. However, on presentation of the said cheque, the same was returned dishonoured for the reasons "Funds Insufficient" vide cheque return memo dated 13.08.2013.
4. The complainant then issued a legal notice dated 19.08.2013 vide Registered post as well as AD. However, despite due service, the accused did not make the payment within the stipulated period. Hence the accused has committed an offence under section 138 Negotiable Instruments Act, 1881 and he is liable to be prosecuted in accordance with law.
5. Summons were issued upon the accused vide order dated 24.09.2013. The accused entered his appearance on 21.06.2014. He was granted bail on the same day.
Notice against the accused:
6. Following notice was framed against the accused on 19.11.2014:
I, Preeti Agarwala, MM-01 (West) Delhi do hereby serve notice upon you Rajinder Kumar S/o Shri Ramesh Chand, aged about 42 years R/o N-38/2, Budh Vihar, Phase-I, New Delhi. It is the allegation against you that you had issued a cheque bearing no. 047481 dated 10.08.2013 for Rs. 4,50,000/- drawn on The Nainital Bank Limited, Guru Harikrishan Nagar, Rohtak Road, C.C. No. 1828/16 Dated 28.08.2018 Page 2/13 Pashchim Vihar, New Delhi in favour of complainant in discharge of its legal liability towards the complainant. On presentation by the complainant with its banker same got dishonoured with remarks "funds insufficient" as reflected vide returning memo with remarks of accused bank received through Bank. Thereafter legal demand notice dated 19.08.2013 was served upon you to pay the cheque amount. Despite the service of the legal notice you have not paid the cheque amount within stipulated period of 15 days as per NI Act, and thus committed the offence under section 138 NI Act within cognizance of this court. By this notice it is called upon you to show cause why you should not be tried of the said offence."
Plea of defence of the accused:
"Q. Do you plead guilty or claim trial?
A. I plead not guilty and claim trial.
Q. What is your plea of defence?
A. I requested to the complainant for arranging bank loan on my behalf as the complainant is a financial advisor. He took my signatures n plain documents and also taken the cheque in question as security cheque for the pre requisite condition of getting the bank loan but later on complainant misused my documents and cheque in question with ulterior motive. I have no legal enforceable liability towards the complainant. Q. Whether the cheque in question bears your signatures? A. Yes. Particulars were not filled by me. (Answer is given after perusal of the cheque in question.) Q. Whether you received the above mentioned legal notice under section 138 NI Act?
A. No. I do not received the above said legal notice. However, the first address mentioned on the legal notice is my correct address. I had left the second address.
(Answer is given after perusal of the legal notice.)"
Evidence:
7. The complainant examined himself as CW-1 who was cross examined by Ld. Counsel for the accused. CE was closed vide order dated 18.12.2017. Statement of the accused was recorded under section 313 Cr.P.C on 16.05.2018. The accused did not lead DE and DE was closed vide order dated 16.08.2018. Final arguments were heard on behalf of both the parties and my findings are as under:-
C.C. No. 1828/16 Dated 28.08.2018 Page 3/13The Law:
8. Before proceeding to the merits of the case, it is considered important to lay down the basic provisions of law with respect to section 138 of the Act which are as follows:
9. Section 138 of Negotiable Instruments Act, 1881 makes dishonour of cheques an offence. It provides that "where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both".
10. Careful reading of section 138 of the Act reflects that there are three key ingredients which need to exist for there to be an offence under section 138 Negotiable Instruments Act, 1881. The three ingredients were laid down in the case of Krishna Janardhan Bhat v. Dattatraya G. Hegde AIR 2008 SC 1325 wherein the Supreme Court held that the procedural requirements of section 138 are:
(i) There is a legally enforceable debt.
(ii) The drawer of the cheque issued the cheque to satisfy part or whole of the
debt.
(iii) The cheque so issued has been returned due to insufficiency of funds.
11. It is a well settled principle of criminal jurisprudence that a criminal trial proceeds on the presumption of innocence of the accused i.e. an accused is presumed to be innocent unless proved guilty. Thus, normally the initial burden to prove is on the complainant/ prosecution to prove the guilt of the accused. Also, the standard of proof is beyond reasonable doubt. However, in offences under section C.C. No. 1828/16 Dated 28.08.2018 Page 4/13 138 of the Act, there is a reverse onus clause contained in sections 118 and 139 of the Act.
12. Section 118(a) of the Act provides that until the contrary is proved, it shall be presumed that "that 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."
13. Further, Section 139 of the Act lays down that "it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."
14. Thus, section 139 of the Act puts the burden on the accused to prove his defence. However, the accused has to prove his defence on the balance of probabilities and not beyond reasonable doubt. Once the presumption is displaced, the accused is liable to be acquitted.
Findings:
15. The accused stated in his statement under Section 313 Cr.PC that "I had given a blank signed cheque to the complainant to arrange the bank loan but the same has been misused by the complainant. He never arranged for any bank loan for me. I had also not taken any loan from the complainant as alleged in the present complaint. I have not issued the cheque in question for any legal liability." From this statement, it is clear that the accused has admitted that he had given the impugned cheque to the complainant although it is his contention that he had given the same to arrange for a bank loan which he never did.
Financial Capacity:-
16. To prove that the accused had not taken any loan from the complainant, Ld. Counsel for the accused submitted that the complainant did not C.C. No. 1828/16 Dated 28.08.2018 Page 5/13 have the financial capacity to advance loan of Rs. 4,50,000/- to the accused. He submitted that there is a grave doubt on the source of funds as when the complainant was asked about it in his cross examination, he deposed that "I did not maintain any accounts and records because there is no such big business." Ld. Counsel for the accused submitted that from the above statement of the complainant it is clear that the complainant did not have a big business and thus, his financial capacity to advance such a huge amount of money is dubious.
17. At this stage, it is imperative to point out that Hon'ble Supreme Court in the case of K. Prakashan v. P.K. Surenderan case held that if a huge amount of money is advanced as a loan then the person who has purportedly advanced the loan must also show the solvency to the extent of the loan either through the bank account or through other means. By saying and admitting that he does not have a big business, a grave doubt is raised on his financial capacity to advance a huge loan amount of Rs. 4,50,000/-.
Execution of documents:-
18. To further prove that the accused had not taken any loan from the complainant, Ld. Counsel for the accused asked the complainant in his cross- examination if any loan document was executed at the time of advancement of loan to which the complainant as CW-1 deposed that "There was no written agreement was executed between me and the accused but promissory note was executed between us." Ld. Counsel for the accused submitted that the complainant has admitted that there was no written agreement. He further submitted that though the complainant is relying upon a promissory note but the same is a photocopy. He pointed out that the complainant has admitted that "It is correct that Ex. CW-1/A dated 24.09.2013, the promissory note is the photocopy." He argued that since the promissory note is a photocopy, the same cannot be relied upon. However, careful reading of the cross examination shows that the complainant stated that the original promissory note is with his counsel though the same was never produced by him. The promissory note was an essential document for the decision of the present case yet the complainant chose not to produce the original promissory note before the court. Though the photocopy of the promissory note has been exhibited by the Ld. C.C. No. 1828/16 Dated 28.08.2018 Page 6/13 Predecessor of this court, however, the exhibit does not mention that original promissory note has been seen and returned (OSR). Even on the pre-summoning evidence, it has not been mentioned that the original promissory note has been seen and returned. Since, 'OSR' has not been mentioned on the document and the original promissory note has not been produced during the course of proceedings and further, it is also settled law that mere exhibition of document does not mean that it stands proved, thus, this court is not inclined to rely upon the said promissory note. Even otherwise, Ld. Counsel for the accused submitted that the accused never signed any promissory note and further that the same in undated. Careful and minute perusal of the promissory note shows that the alleged signatures of the accused on the same do not match the admitted signatures of the accused on the bail bonds and notice under section 251 Cr.P.C. Thus, the execution of the promissory note is full of suspicion making it unreliable.
Income Tax Return:-
19. The complainant was also asked in his cross examination if he had shown the loan transaction in his income tax returns to which the complainant deposed "It is correct that I have not disclosed in my income tax return of 2013-14 about giving loan to the accused."
20. Ld. Counsel for the complainant submitted that whether the complainant shows the loan transaction in his income tax returns or not is immaterial for determining whether the offence under section 138 of the Act is made out or not. He submitted that the matter is between the complainant and the income tax department and this court is not concerned with the same for the purposes of deciding the present matter. It is pertinent to note that in the case of Krishna Janardhan (supra), the Hon'ble Supreme Court held that "The courts below failed to notice that ordinarily in terms of Section 269SS of the Income Tax Act, any advance taken by way of any loan of more than Rs. 20,000/- was to be made by way of an account payee cheque only." However, Ld. Counsel for the complainant placed heavy reliance on the judgment of Krishna P.Moajkar v. Joe Ferrato 2013 SCC online Bom 862 where Bombay High Court held as follows:
C.C. No. 1828/16 Dated 28.08.2018 Page 7/13"The learned Counsel for the respondent submitted that the observations of the Supreme Court in para 14 of the judgment in Rangappa (supra) show that the Supreme Court had not in any way cast any doubt on the correctness of the decision in Krishna Janardhan Bhat (supra), as it was based on specific facts and circumstances therein. Therefore, he submitted that observations in Krishna Janardhan Bhat (supra) about noncompliance of provisions of Section 269SS and the implications of Section 271D of the Income Tax Act would still stand as good law. The learned Counsel for the appellant submitted that even these observations would stand impliedly overruled. He pointed out that what was held in Krishna Janardhan Bhat (supra) was that advance taken by way of loan of more than Rs. 20,000/- was only to be made by way of an account payee cheque. He submitted that in Rangappa (supra) the Supreme Court was specifically considering the case of an advance of Rs. 45,000/- made in cash and yet the Supreme Court had upheld the conviction recorded. Thus even those observations based on the provisions of Section 269SS and 271D of the Income Tax Act made in Krishna Janardhan Bhat (supra) would stand impliedly overruled. I am entirely in agreement with the learned Counsel for the appellant because the Supreme Court in Rangappa (supra) had specifically noted the judgment in Krishna Janardhan Bhat (supra). The Supreme Court had obviously noted the observations in para 26 in Krishna Janardhan Bhat (supra) that advance of more than Rs. 20,000/- was to be made only by way of an account payee cheque, and yet the Supreme Court accepted case of a complainant who claimed to have made an advance of Rs. 45,000/- in cash and proceeded to uphold the conviction, even though the case rested on the fact that cash advance of a sum more than Rs. 20,000/- was made. Thus, on this aspect also Krishna Janardhan Bhat (supra) stood impliedly overruled by Rangappa (supra), and the judgment is to be held rendered on the facts of that case, not laying down any law. Therefore, judgments which follow Krishna Janardhan Bhat (supra) can be safely ignored."
21. While relying on Rangappa v. Sri Mohan case, the Bombay High Court held that section 138 of the Act is attracted even if the loan transaction is in cash and is not shown in the income tax returns. The Bombay High Court also held that Rangappa case (supra) has impliedly overruled the Krishna Janardhan case (supra) and therefore, the cases that rely upon Krishna Janardhan case (supra) can safely be ignored. However, it is imperative to point out that Rangappa case (supra) has not overruled the Krishna Janardhan case (supra) as the Supreme Court had itself held in Rangappa case that :
"In light of these extracts, we are in agreement with the respondent- claimant 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."C.C. No. 1828/16 Dated 28.08.2018 Page 8/13
22. The Supreme Court in Rangappa case (supra) only overruled that part of Krishna Janardhan case which dealt with the presumption under section 139 of the Act and did not hold that an offence under section 138 of the Act is made out even if the loan transaction exceeding Rs. 20,000/- is in cash and is not shown in the income tax returns. The judgment in Rangappa case is absolutely silent on this point. Krishna Janardhan case had specifically stated that any cash transaction of more than Rs. 20,000/- cannot be given effect to. In Rangappa case this, matter was not in issue and thus, it cannot be presumed that merely because the court upheld the conviction with respect to a cash transaction for Rs. 45,000/-, it stated/ meant/ implied that even if the cash loan transaction is of Rs. 20,000/- and above and is not shown in the income tax returns, the offence under section 138 of the Act can be made out. On the contrary, the Supreme Court has categorically held in Krishna Janardhan case (supra) that such a transaction cannot be given any effect and the case under section 138 of the Act loses ground and cannot be held to be made out. It is settled principle of law that even obiter dicta is not binding though that is a finding of the court, here the court in Rangappa case (supra) has not delved into the issue of cash transaction being shown or not shown in income tax returns at all. Thus, this court is still bound by the law laid down in Krishna Janardhan case as it still holds good law. This court is clearly not bound by the judgment of Bombay High Court and thus, holds that a cash loan transaction exceeding Rs. 20,000/- which is not shown in the income tax returns cannot be the basis of an offence under section 138 of the Negotiable Instruments Act. Such transactions are unaccounted transactions. Either the transaction should be way of account payee cheque or if it is in cash, it should be adequately shown in the income tax returns so that it is an accounted transaction.
23. Since the year 2004, the Supreme Court has held that unaccounted transactions are illegal transactions. In the case of G. Pankajakshi Amma and Others v. Mathai Mathew (Dead) Through Lrs. and Another (2004) 12 SCC 83 which dealt with a suit for recovery of money, it was held that :-
"10. ...According to the 1st respondent these transactions were to be unaccounted transactions. According to the 1 st respondent, all these amounts are paid in cash. If these are unaccounted transactions then they are illegal transactions. No court can come to the aid of the party in an illegal transaction. It is settled law that in such cases the loss must be allowed to lie where it falls. In this C.C. No. 1828/16 Dated 28.08.2018 Page 9/13 case as these are unaccounted transactions, the court could not have lent its hands and passed a decree..."
24. Further, in the case of Devender Kumar v. Khem Chand 2015 (223) DLT 419 it was held as follows:
"22. Keeping the above proposition of law in mind, on an analysis of fact, the scale of balance tilts in favour of the respondent. The respondent appears to have rebutted the presumption under section 139 of the NI Act, namely, the existence of a legally enforceable debt by establishing that no loan was advanced to him even though there was an agreement and a corresponding promissory note and an affidavit. The aforesaid loan was not shown in the ITR return of the petitioner. An adverse inference could be drawn against the petitioner on that account. The loan amount also appears to be doubtful."
25. Delhi High Court had affirmed its stand on unaccounted transactions even in the case of Kulvinder Singh v. Kafeel Ahmed 2013(2) AD (Delhi) 81 where it was held as follows:
"He has not reflected the loan advanced to the respondent in his income- tax return nor is he able to tell to the court the Ward in which the income-tax return is filed. The learned Magistrate has rightly placed reliance on the provisions of Section 269 SS of the Income-Tax Act wherein it is specifically laid down that if a loan is advanced which is more than `20,000/-, it has to be by way of writing reflected in the books of account but nothing of that sort has been done in the instant case. Obviously, this clearly creates a doubt regarding the truthfulness of the stand taken by the petitioner that he had advanced a loan of `9,30,000/- to the respondent."
26. From the above decisions, it is clear that the courts above have not supported the complainants who have lent an amount more than Rs.20,000/- in cash and have not reflected the said amount in their income tax returns. This is so even if there are supportive documents to show that the loan was advanced while in the present case, there are no supportive documents (as admitted by the complainant himself). As per Section 269 SS of the Income Tax Act, it is illegal to advance loan more than an amount of Rs. 20,000/- in cash. This court is of the opinion that advancing loan of Rs. 4,50,000/- in cash and not showing the said transaction in the income tax returns has ulterior hidden motives which are against the law of the land. Allowing the case of the complainant in the present circumstances would mean the court of justice accepting and supporting the illegal act of the complainant. Allowing an illegal transaction to hold good would tantamount to an illegality being committed by this court which in no situation, can be permitted.
C.C. No. 1828/16 Dated 28.08.2018 Page 10/1327. Also, existence of legal debt or liability is an important ingredient to be proved for an offence under section 138 NI Act to be made out. Emphasis should be laid on the fact that the debt or liability should be legal. Legal means lawful by all means as per the law existing in the country and thus, the transaction by which debt or liability arises should also be legal as per the provisions of Income Tax Act. In the present case, the transaction of advancing loan, if at all, was illegal and thus, cannot be considered to be a legal debt or liability.
Requirement of Loan:
28. Ld. Counsel for the complainant sumitted that the accused has himself admitted that he required loan and thus, it is established that the complainant advanced loan to the accused. However, the accused has stated that he needed loan of Rs.1 Lac and not Rs.4.5 Lacs. Further, merely because the accused needed money, it does not mean that the complainant had advanced loan to him. Thus, this argument of Ld. Counsel for the complainant is dismissed.
Legal Notice:
29. It is the case of the accused that he did not receive the legal notice. However, he has admitted in his plea of guilt that "I do not received the above said legal notice. However, the first address mentioned on the legal notice is my correct address." The complainant has also placed on record postal receipts Ex. CW-1/E and Ex. CW-1/F to prove that the legal notice was sent. Section 27 General Clauses Act and Section 114 Indian Evidence Act raise a presumption of due service if the notice is sent at the correct address. Thereafter, the burden to prove that notice was received shifts on the accused. However, the accused has not led any evidence to prove the same. Thus, it is established that legal notice was duly served upon the accused. This plea of the accused is dismissed.
Defence of the accused:
30. Ld. Counsel for the accused submitted that the complainant had taken the cheque in question as security on a condition that he will arrange a bank loan for the accused. However, the accused has not led any evidence to prove the same.
C.C. No. 1828/16 Dated 28.08.2018 Page 11/13Thus, he has not been able to prove that the cheque was taken by the complainant to arrange bank loan.
31. At this stage, it is imperative to mention the law laid down in the case of Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal 1999 (3) SCC 35 which is as follows:
"Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non- existence of the consideration can be either direct or by bringing on record preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading evidence as the existence of negative evidence is neither possible not contemplated and even if led, it is to be seen with a doubt..."
32. It is settled law of criminal jurisprudence that the complainant has to prove his case beyond reasonable doubt and the accused has to prove his defence on the balance of probabilities. In cases under section 138 NI Act, the complainant gets the benefit of presumptions under section 118(a) and 139 NI Act but that does not mean that undue benefit will be given to the complainant. Even in cases where presumptions shift the burden on the accused, the standard of proof remains the same and the accused may displace its burden not only by proving his case but also by destroying the case of the complainant.
33. In the case at hand, the alleged loan amount was paid in cash. There was no document executed to record the advancement of loan. The loan amount was not mentioned in the income tax returns. The complainant could not establish his financial capacity to show that he was capable of advancing loan of Rs.4,50,000/-. Although, the accused did not lead DE but he has succeeded in C.C. No. 1828/16 Dated 28.08.2018 Page 12/13 rebutting the presumption under section 139 of the Act by disproving the case of the complainant. As per Bharat Barrel case, it is not important that the accused leads his evidence if he can prove his case by disproving the case of the complainant. On evaluation of the entire evidence, this court finds the version of the complainant is not only improbable but the alleged transaction is also illegal. The complainant has not been able to establish that there was a legal debt or liability standing on the part of the accused towards the complainant. Thus, the most important ingredient of section 138 Negotiable Instruments Act, 1881 has not been fulfilled.
Decision:-
34. In view of the above discussion, the accused is acquitted for the offence under section 138 Negotiable Instruments Act, 1881.
Digitally signed by RUCHI RUCHI AGGARWAL
ANNOUNCED IN THE OPEN AGGARWAL ASRANI
COURT ON 28.08.2018 ASRANI Date:
2018.08.29
14:50:24 +0530
RUCHI AGGARWAL ASRANI
MM, NI ACT, WEST-03
TIS HAZARI COURTS, DELHI.
C.C. No. 1828/16 Dated 28.08.2018 Page 13/13