Madras High Court
Marothi Chits (P) Ltd. Rep. By Its ... vs N.S. Ramakrishnan on 27 July, 2006
Equivalent citations: [2006]133COMPCAS869(MAD)
Author: S. Ashok Kumar
Bench: S. Ashok Kumar
JUDGMENT S. Ashok Kumar, J.
1. This Criminal Appeal has been filed against the order of acquittal of the accused, who was prosecuted for the offence under Section 138 of the Negotiable Instruments Act.
2. The brief facts of the case are as follows:
(a) The complainant filed a private complaint against the accused who was a subscriber of the chit for the value of Rs. 2 lakhs. The accused was paying monthly a sum of Rs. 10,000/=. He was the successful bidder in the auction held on 23.10.1996 and the bid was for a sum of Rs. 1,40,000/=. The accused received the amount and also executed necessary documents. The accused defaulted in payment of installments and when the complainant approached him for collection of the outstanding amount, he issued a cheque for a sum of Rs. 92,000/= drawn on Karur Vysya Bank Ltd., Coimbatore and requested the complainant to present the cheque in the last week of July 1998. When the cheque was presented on 31.7.1998, it was returned unpaid, because the account was already closed. The complainant issued a lawyer's notice on 11.8.1998 and it was received on 12.8.1998. But he did not make any payment. He has sent a reply notice wherein he admitted the chit transaction and receipt of Rs. 1,40,000/= and contended that he has paid the paid a sum of Rs. 1,00,000/= in ten installments in K.9 group and Rs. 50,000/= in two installments in N.9 group and a notice was received by him demanding Rs. 87,500/= in N.9 group for three installments and after deducting the future dividends the accused paid Rs. 38,125/= by cash and the entire due to the chit was paid and that the complainant agreed to return the documents and guarantee blank cheque, but did not return them saying some excuse. It was also admitted that he has closed the account and he did not issued the cheque knowing fully well that there is no sufficient balance in his account and such averment has been made falsely by the complainant. According to the accused the accounts of the complainant was settled in December 1996 itself and that the documents are given only for security purpose.
(b) Before the learned Judicial Magistrate-V, Coimbatore, on behalf of the complainant, PWs 1 and 2 were examined and Exs.P.1 to P.6 were marked. On behalf of the accused no witness was examined and no document was marked.
(c) On considering the oral and documentary evidence, the learned Judicial Magistrate-V, Coimbatore came to the conclusion that the accused is not guilty of the offence under Section 138 of the Negotiable Instruments Act and acquitted him on the simple ground that the cheque was given only for security purpose and not for discharging of a debt or liability. Aggrieved over the said order of acquittal, this Criminal Appeal has been filed.
3. In spite of notice, the respondent-accused failed to appear. Learned Counsel appearing for the appellant would contend that the conclusion reached by the learned Judicial Magistrate that the cheque was given only as a security is not correct because the cheque was given for the amount due and payable by the accused as a subscriber in a particular chit transaction. Further, according to the learned Counsel, even if the cheque is issued towards the security, such a plea ought to be rejected.
4. The fact that the respondent was a subscriber to the chit conducted by the complainant is admitted. The fact that in the Rs. 2 lakhs chit, the accused was the successful bidder and received Rs. 1,40,000/= as chit amount is also admitted. The contention of the accused is that he has paid all the installments by cheques and cash, for which he has not produced any evidence. His only contention is that the cheque for Rs. 92,000/= was given by him as collateral security at the time of receiving the chit amount. If really, the accused gave a cheque as collateral security, at the time of receiving the chit anmount, he should have given the cheque for Rs. 1,40,000/= and not for Rs. 92,000/=. This itself would show that the alleged cheque was not given as security, but only towards the liability of the accused in discharging his debt under the chit transaction.
5. It is common in all chit transactions that when the cht amounts are disbursed, securities are obtained from the successful bidders and such securities also include, promissory notes as well as cheques. A cheque so issued at the time of receiving the chit amount is not only for the purpose of security, but is also in discharge of a liability, because, at the time of receiving the chit amount, the future installments have to be paid by the successful bidder and if he fails to pay the amount, the cheque can be used to collect the money from him. Therefore in such instances, it cannot be said that the cheque was given only as a security. But, in fact, the cheque is given towards the discharge of liability of payment of future installments in the concerned chits. Suppose, if there are 40 installments and in the 30th installment, the accused takes the chit as successful bidder, he is required to give the cheque only for the future 10 installments. On the other hand, if he has taken the chit in the second installment itself, he is required to give cheque for the future 38 installments. This would show that in practice, the cheque is not only given as a security, but also towards discharge of the liability that has arisen under the chit transaction. Therefore, the conclusion reached by the learned Judicial Magistrate that the cheque, which is the subject matter of the case was given only as a security is not sustainable in law.
6. Further, in Gummadi Industries Ltd., etc., & Others Khushroo F. Engineer Etc., reported in 1999 (2) L.W. 622, this Court held as follows:
18. The submission made by the counsel for the petitioners is that on the date of handing over of the post dated cheques, that its on 15.9.1995 those cheques were given only as collateral security. If this recital contained in the agreement is acted upon, then there is no case made out for the offence under Section 138 of the Negotiable Instruments Act.
19. In this context, it is appropriate to refer Section 139 of the Negotiable Instruments Act. Section 139 of the Act incorporates a rule of presumption to the effect that until the contrary is proved, 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 liability.
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20. It is also laid down in Section 140 of the Act that when a person is prosecuted for an offence under Section 138, he is not entitled to plead in his defence that he had no reason to believe that when he issued the cheque it may be dishonoured on presentment for the reasons stated in Section 138.
21. Though the rebuttable presumption under Section 139, it is made clear that unless the contrary is proved, ist shall be presumed by the Court that the holder of the 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.
22. In the light of these provisions, it is argued by the counsel for the respondent/complainant, the presumption has to be rebutted by the accused only during the course of trial by proving that the cheques were not issued towards the discharge of the liability.
7. In the above said decision, M. KARPAGAVINAYAGAM, J., while distinguishing the decision in Balaji Seafoods Exports (India) Ltd., v. Mac Industries Ltd. wherein it was held that Section 138 was not attracted since the cheques were not issued towards the discharge of the liability but only as a collateral security, also held thus:
28. The citation reported in 1999 (1) CTC 6 (supra) would not be applicable to the present case. IN the said case, though the agreement referred to by both the parties was relied upon by this Court for the disposal of the application for quashing, it was held in the facts and circumstances of that case that the cheque was given as a security and it was not a post dated cheque, but it was a blank cheque. It was further held that the said undated cheque was not handed over with the intention of making it as an instrument of immediate negotiation to discharge a subsisting liability or debt.
29. In the instant case, the cheques in question are post dated cheques and it was agreed that the cheques can be deposited for realisation of the amount after the expiry of 180 days. Therefore, the proceedings as against the second petitioner, who has signed the cheques are maintainable and consequently the Crl.O.Ps and the Revisions filed by the second petitioner are liable to be dismissed.
8. In the present case on hand as well, though it was not a blank post dated cheque, but, the accused has requested the complainant to present the cheque for collection one month later to the date of issue i.e., to present the cheque in the last week of July, 1998 which only shows that the accused has a subsisting liability towards the complainant. Further, I have already held that the cheque is not only given as a security, but also towards discharge of the liability that has arisen under the chit transaction, Therefore, the accused is bound to pay the amount due under the cheque. Since the accuse has not paid the amount in spite of statutory notice, the offence under Section 138 of the Negotiable Instruments Act alleged against the accused is proved.
9. Since there is no representation on behalf of the respondent-accused, in spite of notice, Registry is directed to issue notice to the accused to appear before this Court on 23.8.2006 to answer with regard to question of sentence.