Delhi District Court
Axis Bank Ltd. (Formerly Known As Uti ... vs . on 28 November, 2011
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IN THE COURT OF SH. SUSHIL ANUJ TYAGI
METROPOLITAN MAGISTRATE: DWARKA COURT:NEW DELHI
CC No. 16960/10
IN THE MATTER OF
Axis Bank Ltd. (Formerly Known as UTI Bank Ltd.) ... Complainant
At Trishul, 3rd Floor,
Law Garden, Ellisbridge,
Ahmedabad 380009
Vs.
Sh. Vishal Aggarwal ... Accused
R/o S258, Top Floor,
Greater Kailash, Part1
New Delhi 110048
Also at:
DFL Cyber Greens, Infinity Tower
Seventh Floor Sector 25A
Opposite Ericsson Building,
Gurgaon, Haryana122002.
Date of institution of case : 09.04.2010
Date of reserving Judgment : 15.11.2011
Date of pronouncement : 28.11.2011
Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10
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JUDGMENT
1. Serial No. of the case : 16960/2010 2. Name of the complainant : Axis Bank Ltd. 3. Name of the accused : Sh. Vishal Aggarwal 4. Offence complained of : S.138 N. I. Act 5. Plea of accused : Not guility 6. Final Order : Acquitted 7. Date of such order : 28.11.2011 BRIEF FACTS AND REASONS FOR DECISION OF THE CASE
1. The present complaint under section 138 of Negotiable Instruments Act,1881 (hereinafter referred to as "NI Act") is filed by the complainant.
2. Succinctly, the facts which has led to the culmination of the present complaint as per the complainant are that the accused is a customer of the complainant and maintains a Home Loan account bearing no. 245010600694704. The accused has taken a home loan of Rs. 12,00,000 from the complainant and for repayment of the said loan, he gave a post dated cheque bearing no. 354560 dated 20.01.10 drawn on HDFC Bank Ltd. for amount of Rs.12,00,000/ which got dishonoured on presentation for the reason "Funds Insufficient" vide return memo dated 24.01.10. The complainant mailed legal notice dt. 22.02.2010 to the accused vide courier and UPC and despite service the accused did not Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..3..
paid the cheque amount. Hence, the present complaint was filed against the accused by the complainant through its authorized representative (hereinafter referred to as "AR") on 09.04.10.
3. The AR was examined under section 200 Code of Criminal Procedure (hereinafter referred to as "CrPC") by way of tendering of presummoning affidavit on 30.09.2010.
4. After being satisfied that prima facie ingredients of Section 138 NI Act are made out, cognizance was taken and accused was summoned under section 204 CrPC whereupon the accused appeared and the notice under section 251 CrPC was served on the accused to which he pleaded not guilty and claimed trial.
5. In Complainant's evidence, the AR (CW 1) tendered his affidavit in post summoning evidence as Ex CW 1/2 and relied on documents:
Ex CW 1/1 Copy of certificate of incoporation
Ex CW1/2 Copy of office order and extract of board resolution & GPA
Ex CW1/3 Cheque in question
Ex CW1/4 Return memo
Ex CW1/5 Legal notice
Ex CW1/6 to 9 Courier receipts and postal receipts of UPC
Ex CW1/10 Complaint
6. The CW1 was examined, crossexamined and discharged. During cross examination the following documents were also filed on record:
Mark A Tripartite Agreement dt. 30.10.06
Mark B Buyer's Agreement dt. 10.08.06
Mark C Letter of Allotment dt. 24.07.06
Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10
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Ex CW1/DX1Letter dt. 10.09.10 byAxis Bank to accused and Ganpati Builders Vide order dt. 13.09.2011, this court directed the complainant to produce the original Tripartite Agreement, Buyers Agreement and the Allotment letter, however despite giving ample opportunities to the complainant the aforesaid documents were not produced and thus, the Complainant evidence was accordingly closed on 20.10.2011.
7. The accused was examined under section 313 CrPC where all the incriminating evidence was put to the accused. The accused admitted that he has availed a home loan of Rs.12,00,000 vide account no. 245010600694704. Accused also admitted that he has handed over the cheque in question to the complainant at the time of grant of loan but for the security. It was stated by the accused that he has taken a loan from the complainant for a flat in Shastripuram, Agra in respect of which a tripartite agreement was executed between him, complainant and the builder. As per the agreement he was alloted flat no. G9, the possession of which was to be given in Decembe 2007. He further stated that he visited the premises and was shocked to know that there was no flat G9. He stated that he neither have the money nor the flat in hand. He further stated that as per clause 15 of the tripartite agreement in case of termination of agreement due to any reason the builder is required to refund the amount to the Axis Bank. It is further stated that he has by his notice dated 29.03.2010 terminated the agreement. Finally, it was stated that he does not have liability under the cheque in question. The accused wished to lead any defence evidence.
8. In defence evidence, the accused examined himself as defence witness and relied Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..5..
on the following document:
Mark 1A - letter dated 29.03.2010 DW1 was cross examined by the counsel for the complainant. DE was accordingly closed and the matter was fixed for final arguments.
9. During the final arguments, it is averred on behalf of the complainant that all the ingredients of Section 138 NI Act are satisfied in the present case. It is argued that the accused has admitted the address on which the legal demand notice was served and has merely denied the receipt of legal demand notice without bringing any evidence on record to rebut the presumption of service. It is further submitted that a separate agreement was executed between the builder and the accused, which is terminated and the tripartite agreement is still not terminated. The notice of termination was sent to the builder and not to the complainant. It is further averred that the accused has admitted his liability towards the loan. It is argued that the the accused has not got the possession of flat the bank is not responsible or liable. The learned counsel contended that as per section 10 of the tripartite agreement the bank has a right to recall the entire loan amount from the accused and also by virtue of separate home loan agreement executed between the complainant and the accused.
10. Per contra, the learned counsel for the accused has filed written arguments. The main contentions are that the present cheque in question do not come within the fold of s.138 NI Act as there is no legally enforceable liability or debt. It is contended that the present cheque in question was issued for security and thus does not come within the Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..6..
ambit of s. 138 NI Act. The learned counsel relied on Ramakrishna Urban Cooperative Credit Society Ltd v. Rajendra Bhagchand Warma 2010 (2) DCR 317 to support his contentions. It is contended that as per clause 15 of tripartite agreement the builder is liable to refund the loan amount to the bank directly in case of cancellation of termination of the agreement for any reason. It is further contended that accused has terminated that agreement vide his letter dt. 29.03.2010 written to the builder. It is further contended that complainant also vide their letter dt. 10.09.2010 has terminated the agreement. It is therefore contended that the legally enforceable liability ceases to exist and accused is not liable under the impugned cheque. It is further contended that since the builder has not given possession of the flat G9, there is neither money nor flat in hand.
11. Now the question in the present case revolves around as to whether the impugned cheque was issued towards the discharge in whole or in part of legally enforceable liability or debt as envisaged under section 138 NI Act. Thus it becomes apposite at this juncture to reproduce section 138 NI Act.
"138. Dishonour of cheque for insufficiency, etc., of funds in the accounts 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 extend to two year", or with fine which may extend to twice the Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..7..
amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless
(a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.
(b) The payee or the holder induce course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer, of the cheque, "within thirty days" of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and
(c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability."
12. Undoubtedly, it is a sine qua non for constitution of the offence u/s 138 NI Act that the cheque must have been issued for the discharge in whole or in part of legally enforceable liability or debt. Section 138 NI Act has to be read with the legal presumptions u/s 139 and 118 NI Act in favour of the payee or holder in due course. The said sections are reproduced below:
"139. Presumption in favour of holder 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, or any debt or other liability."
"118. Presumptions as to negotiable instruments of consideration Until the contrary is proved, the following presumptions shall be made:
(a) Of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has bee accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration.
(b) As to date that every negotiable instrument bearing a date was made or drawn on such date;
Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10
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(c) ............................................................................"
13. These presumptions in favour or complainant are rebuttable in nature and it is no more res integra that the burden lies on the shoulder of the accused to rebut the same. It is now well established that the accused can prove the nonexistence of any debt or any other liability by raising a probable defence or by demolishing or discrediting the case of the complainant in crossexamination of witness adduced by the complainant.
14. In the present case, indisputably the accused had booked a flat no. G9 at Shastripuram, Agra with Ganpati builders in respect of which an allotment letter dated 24.07.2006 was issued to the accused by Ganpati Builders and also a buyers agreement dt. 10.08.2006 was executed between accused and Ganpati Builders. To pay the builder the accused took a home loan from the Axis Bank of Rs. 12,0000/ and consequently, a tripartite agreement dt. 31.10.2006 was signed between the accused, Axis Bank and Ganpati Builders. The loan amount was directly disbursed to the Ganpati Builders by the Axis Bank in accordance with tripartite agreement. In clause 15 of the tripartite agreement it is stipulated that in case of termination or cancellation of the agreement for any reason the Ganpati Builders shall refund the loan amount with interest thereon to the bank directly. It is reproduced below for reference:
"In case of termination/ cancellation of the agreement for any reason whatsoever the Party of the First Part shall refund the following amounts to the Bank within fifteen days from the date of such termination cancellation:
(i) the amount of loan disbursed by the Bank: and
(ii) Interest, overdue interest and other payments that are due to the Bank.
It is agreed and understood that M/s. Ganpati Builders shall be entitled to retain Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..9..
the nonrefundable earnest money, if any, and/ or any other amount, which may be retained by M/s. Ganpati Builders under the Agreement to Sell, the balance amount shall be refunded to the borrower."
15. The Ganpati builders has promised to give the possession of flat till December 2007 which they did not fulfill. Hence, the tripartite agreement was breached with the fault attributable to the Ganpati Builders. The breach of agreement entails that the Ganpati Builders was liable to refund the complete loan amount with interest back to the Bank. Conspicuously the Ganpati builders has failed to give possession as well as refund.
16. Now, the complainant has filed the present complaint on the basis of dishonour of cheque which were furnished by the accused as post dated allegedly for repayment of loan. The question is whether the cheque remain to be issued for legally enforceable liability or debt. The answer comes in negative to my mind. Perusal of tripartite agreement evinces that the Ganpati Builders was liable to refund the loan amount to the Bank directly in case of termination or cancellation of agreement. The said agreement was breached by the Ganpati Builders by not giving possession of flat in December 2007. Admittedly, no possession of the flat has been given till date. No fault can be attributed to the accused for non fulfillment of the agreement. It was beyond reasonable control of the accused to avoid the breach of the agreement by Ganpati Builders. The tripartite agreement stood cancelled/terminated. No further agreement was signed between the parties to renew the existing contract or to extend the period. Thus, the Axis Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..10..
bank was entitled to recover the loan amount from Ganpati Builders.
17. It is well settled law that time is not the essence in the contracts relating to immovable properties and if it is assumed that the tripartite agreement was not terminated when the Ganpati builders did not hand over the possession of flat in December 2007 even then it cannot be said that the tripartite agreement will be valid till eternity. The Ganpati builders was under the obligation to hand over the possession of flat within the reasonable period after December 2007 and thus after the expiry of reasonable period the contract stands terminated thereby entitling the Axis Bank to recover the loan amount from Ganpati Builders.
18. Subsequently, the accused by his letter to Ganpati Builders dt. 29.03.10 has expressly terminated the tripartite agreement and also Axis Bank vide its letter dated 10.09.10 to accused and Ganpati Builders expressly terminated the said tripartite agreement and collaterally cancelled the allotment of flat. Further in the aforesaid letter dt. 10.09.2010 the complainant has expressly stipulated in para 7 that the said loan facility is terminated vide notice dt. 20.10.2009. It reads:
"you, the addressee Nos. 1 & 2 aforenamed, failed/ avoided to adhere to the terms of the repayment of the said loan agreement, and thus defaulted and neglected to pay various EMIs. You , the addressees aforenamed, therefore committed breach of the terms of the sid Home Loan Agreement. Our client was therefore constrained to recall/terminate the said loan facility vide Termination Notice dated 29.10.2009 served upon you the Addressee Nos. 1 & 2 through its counsel. Accordingly, you the Addressee Nos. 1 & 2 rendered yourselves liable to repay the entire loan amount, along with interest thereupon as well as other charges, to our client, forthwith. However, you the Addressee Nos. 1 & 2 failed/avoided to comply with the said notice. In addition thereto, even you the Addressee No.3 have failed to complete the construction in respect of the said flat, till date. Accordingly, our client was further constrained to call upon the Addressee No.3, interalia, to cancel the Agreement of Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..11..
Sale of the property/flat allotted to you the Addressee No.1. Therefore, as per clause 15 of the said Tripartite Agreement dated 31.10.2006, since the Agreement stood terminated/ cancelled, as such you the Addressee No.3 also rendered yourself liable to refund the loan amount disbursed by our client along with interest overdue interest and other payments, in respect of the said loan transaction."
19. The contention of the learned counsel that there is termination of only buyers agreement and not tripartite agreement is not convincing to this court. The tripartite agreement is subject to other agreements and the buyer's agreement is part and parcel of the tripartite agreement. The para 1 of the tripartite agreement reads:
"In consideration of other parties performing their part of obligations, the Bank has agreed to give a loan amount of Rs. 12,00,000/(Rupees Twelve Lacs only) to the Party of the Second Part i.e. The borrower, in terms and in accordance with the agreement/ contract dated 31.10.06 on the interest/service charges/ process fee, as agreed thereunder. The revised interest rate, if any, would be deemed to have been part of this Agreement and the Borrower shall be deemed to have been part of his Agreement and the Borrower shall be deemed to have given his unequivocal and express consent to the same."
Thus it cannot be said that there is only termination of buyers agreement and not tripartite agreement.
20. Be that as it may, if such cheque is allowed to come within the ambit of S.138 NI Act then such situation would open flood gates of undue hardship and harassment of the accused who neither got the loan amount nor the possession of flat thereby leading to travesty of justice.
21. In these circumstances, this court is of the view that the liability exists towards Ganpati Builders to refund the loan amount. As such, no legally enforceable liability or Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..12..
debt can be said to exist against the accused. The cheque issued by the accused which is the subject matter of the present case is out of the fold of S.138 NI Act being devoid of any legally enforceable liability or debt.
22. Further, in para 4 of the complaint, the complainant has averred that the accused had furnished the present cheque in question as post dated cheque with the understanding that in the event of default in repayment, the bank would be at liberty to present the said post dated cheque in order to realise its dues and any extra amount realised would be returned to the accused. The accused has consistently taken the defence that the present cheque in question was issued for security starting from his defence during notice u/s 251 CrPC, examination u/s 313 CrPC to his defence evidence. These circumstances evince that the impugned cheque was given given for security and was not the mode of repayment of the loan. Moreover, there are no speicific terms and conditions which stipulates that in the event of default the complainant can recover the outstanding amount through the cheque. The purpose of Section 138 NI Act is to inculcate faith in the transaction dealing with Negotiable Instruments, specifically cheques. It cannot be the intention of the Legislature to make the cheque as a instrument for recovery of loans which are taken by lenders and which are used in the contingency of default making the drawer accused in a criminal case under Section 138 NI Act. It is very clear that the impugned cheque is used in the contingent situation where the accused has defaulted in repaying the loan. Thus the cheque fails to comply with the requirement of Section 138 NI Act as it was not issued for legally enforceable liability Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..13..
but for security which is invoked in case of contingency. This court has placed reliance on the following judgments:
23. In M.S. Narayana Menon @ Mani vs. State of Kerala & Anr. (supra), it was observed:
"52..................................... If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act."
24. In M/S. Collage Culture & Ors. v. Apparel Export Promotion Council & Anr. 2008 STPL(DC) 532 DEL, it was observed by Hon'ble Delhi High Court that:
"20. A post dated cheque may be issued under 2 circumstances. Under circumstance one, it may be issued for a debt in present but payable in future. Under second circumstance it may be issued for a debt which may become payable in future upon the occurrence of a contingent event.
21. The difference in the two kinds of postdated cheques would be that the cheque issued under first circumstance would be for a debt due, only payment being postponed. The latter cheque would be by way of a security.
22. The word 'due' means 'outstanding at the relevant date'. The debt has to be in existence as a crystallized demand akin to a liquidated damages and not a demand which may or may not come into existence; coming into existence being contingent upon the happening of an event.
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24. It would be relevant to note that the statute does not refer to the debt being payable, meaning thereby, a post dated cheque for a debt due but payment postponed at a future date would attract Section 138 of the Negotiable Instruments Act 1881. But the cheque issued not for an existing due, but issued by way of a security, would not attract Section 138 of the Negotiable Instruments Act 1881, for it has not been issued for a debt which has come into in existence."
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25. In Ramakrishna Urban Cooperative Credit Society Ltd. v. Rajendra Bhagchand Warma (supra), the Bombay High Court relying on a series of judgments of Hon'ble High Courts and Supreme Court of India observed:
"14. Thus the object of the amendment and introduction of Chapter XVII in the Negotiable Instruments Act by Act o£J988 was mainly to encourage all major transactions including commercial or business transactions through cheques and to enforce credibility and acceptability of cheques in settlement of liability in general. Encouragement of payment by cheques/credit cards/debit cards rather than by cash is necessary for healthy economy. That also brings in transparency in transactions and discourages creation of black or unaccounted money through evasion of taxes or other mal practices. So, provisions like Section 138 of Negotiable Instruments Act are salutary to give reliability, credibility and acceptability of negotiable instruments like cheques in daily life. However, the object was not to provide effective and speedy remedy for recovery of loans. Law makers must not have intended or imagined that money lenders or Banks would obtain blank or post dated cheques while sanctioning/disbursing loans as securities and would use them to malte debtors/borrowers to repay loan under threat of prosecution and punishment under Section 138 of the Negotiable Instruments Act. So, it is doubtful if provisions of Section 138 of the Negotiable Instruments Act would be attracted to a case in which a blank or post dated cheque is obtained by a Bank or money lender before or while sanctioning or disbursing loan amount as security for the loan.
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21.In the present case blank cheques were issued prior to disbursement of loan as a collateral security for loan which was sanctioned. In such case there was no existing debt or liability when the cheque is issued. So, in the facts and circumstances of the case, the case does not fall within four corners of offence punishable under Section 138 of the Negotiable Instruments Act. Of course such defence is available against payee and note holder in due course."
26. In very recent judgment of of Hon'ble High of Delhi, Ravi Kumar D v. State of Delhi reported as 2011 (3) LRC 210 (Del), Hon'ble Mr. Justice Ajit Bharihoke relying Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10 ..15..
on M. S. Narayan Menon case (supra) observed:
"23. No doubt Section 138 of the Act does not require that the notice should be given only by "post". Nonetheless the principle incorporated in Section 27 (quoted above) can profitably be imported in a case where the sender has despatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was not responsible for such nonservice. Any other interpretation can lead to a very tenuous position as the drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice."
FINAL ORDER
27. In the light of the above discussions and observations, this court has no hitch to hold that the complainant has failed in proving their case beyond the shadow of reasonable doubts. This court exonerates the accused/Vishal Aggarwal for the offence under section 138 NI Act. The accused is hereby acquitted. Bail bonds are cancelled and sureties stands discharged. Endorsements, if any, stands cancelled. Announced in the open Court on 28th day of November, 2011 (Sushil Anuj Tyagi) Metropolitan Magistrate Dwarka, New Delhi 28.11.2011 Axis Bank Ltd. V. Vishal Aggarwal CC No.16960/10