Delhi District Court
Complainant vs Sh. Pramod Kumar Jain on 2 March, 2012
1
IN THE COURT OF SH. PAWAN KUMAR , METROPOLITAN
MAGISTRATE, SPECIAL COURT10, DWARKA COURTS,
NEW DELHI.
CC NO3595/06
M/s Pasco Investment & Finance Company
Through its Prop. P. C. Gupta and Sons (H.U.F.)
Through Karta Sh. P. C. Gupta
S/o late Sh. H. P. Gupta
R/o 29, Baldev Park, Delhi110051
...... COMPLAINANT
VERSUS
Sh. Pramod Kumar Jain
S/o late Sh. Shambhu Nath Jain
R/o Plot No. 50, H. No. 1/5998,
Kabool Nagar, Shahdara,
Delhi110032
Second Address :
At present posted in Allahabad Bank,
Branch Pachperwa, Distt. Balrampur, U.P.
..... ACCUSED
P.S.: Anand Vihar,
U/S:138 N.I.Act
a) Sl.No. of the case :3595/06
b) Date of commission of offence :10.10.2006
c) Name of the complainant :Pasco Investment &
CC No. 3595/06 1 of 21
2
Finance Company
d) Name of the accused ,and
his parentage and residence : Sh. Pramod Kumar Jain
S/o late Sh. Shambhu
Nath Jain
R/o Plot No. 50, H. No.
1/5998,
Kabool Nagar,
Shahdara,
Delhi110032
e) offence complained of : Section 138 N.IAct.
f) Plea of accused : Pleaded not guilty and
claimed trial.
g) final order : The accused found not
guilty and acquitted for
offence u/s 138 NI Act.
h)date of such order : 02.03.2012
Date of institution of the complaint : 09.11.2006
Date of Reserving the judgment : 21.02.2012
Date of pronouncing the judgment : 02.03.2012
1.The present complaint is filed u/s 138 Negotiable Instrument Act (in short "N.I Act") filed by Pasko Investment & Finance Company "Financial Institution" before this court which is a special court constituted for dealing exclusively with criminal complaints CC No. 3595/06 2 of 21 3 relating to dishonour of the cheque instituted by "Financial Institution" only.
2. The complainant version in brief is that the accused approached the complainant for a loan of Rs. 1,50,000/ and the complainant advanced a loan of Rs. 1,50,000/ to the accused through cheque no. 036445 datd 26.04.99 drawn on State Bank of India and the same was credited in the account of accused. During the period from April, 1999 to April, 2005 the accused made a total payment of Rs. 2,32,726/ and thereafter, the complainant approached the accused several times to clear the balance of principal and interest. After that the accused had issued a cheque in the sum of Rs. 3,40,356/ vide no. 186503 dated 01.09.2006 drawn on Allahbad Bank. The said cheque when presented for encashment returned by bank with the remarks "Funds Insufficient" vide bank returning memo dated 02.09.2006. Thereafter the complainant issued a legal notice dated 23.09.2006 to the accused demanding the cheque amount in question, and the same was posted on 25.09.2006 through registered AD / UPC. As per the complainant, despite the expiry of statutory 15 days period from the date of receipt of the notice, the accused failed to make the payment of the cheque in question. Thus, present complaint was filed on 09.11.2006.
CC No. 3595/06 3 of 21 4
3. The complainant tendered his presummoning evidence by way of affidavit.Aalong with the affidavit complainant also relied upon documents which are EX CW 1/A to EX CW 1/G. After considering the material on record the accused was summoned on 15.11.2006. The accused appeared in the court on 06.07.2007 and was admitted to bail.
4. Notice u/s 251 Cr.P.C. was framed against the accused on 15.02.2008 to which accused pleaded not guilty and claim trial.
5. During the trial the complainant examined only one witness CW1, Sh P. C. Gupta the Proprietor of the complainant. Further it is provided U/S 145 N.I. Act that the complainant can give his evidence by way of affidavit. The complainant in his evidence filed post summoning evidence by way of affidavit. The affidavit of CW1 is exhibited as Ex. PW1. Original cheque in question is exhibited as CW1/A. The cheque returning memo is exhibited as CW1/B. Office copy of the legal notice is exhibited as CW1/D. The original postal receipts of registered post and AD card are exhibited as CW1/E and CW1/F and the original receipt of UPC is exhibited as CW1/G.
6. The complainant evidence was concluded on 22.07.2009 and CW1/AR was discharged after cross examination. Complainant CC No. 3595/06 4 of 21 5 evidence was closed vide recording statement of the counsel for the complainant on dated 08.12.2009. The crossexamination of the CW1 Shri P. C. Gupta, proprietor of the complainant firm, mainly pertains to the issue whether the cheque in question was given as a blank signed security cheque and issued at the time of disbursement of loan and whether the liability of the accused to the extent of cheque amount in question. Further, during cross examination the accused raised doubt as to the authority of the complainant to file the present complaint.
7. The accused was examined u/s 313 Cr.P.C. and all the incriminating evidence were put to the accused. In his statement the accused stated that he had availed a friendly loan of R s. 1,50,000/ at the interest rate of 2.5% per month on reducing balance. It is further stated that in the beginning of taking the loan the complainant had obtained forty blank signed cheques. Out of the forty cheques , one cheque was filled for principal amount and the remaining 39 were blank. The cheques were stated to be given with the understanding that the complainant shall fill the EMI amount and present the same on monthly basis. It is further stated that he did not receive any legal demand notice about the dishonoring of the cheque in question.
8. The counsel for the accused lead defence evidence. In his CC No. 3595/06 5 of 21 6 defence the accused examined Shri Bheem Singh, General Officer, Allahabad Bank, 17, Parliament Street, New Delhi as DW1 who depose regarding postings of the accused from 1996 to 2009 and produce the document exhibited as DW1/A. Further, in the defence the accused exmined bank official Shri Susheel Kumar Gupta, Special Assistant, Allahabad Bank, Hauz Kazi as DW2. The witness produced the summoned record i.e statement of account exhibited as DW2/A and certified copy of the cheque book registered and the same exhibited as DW2/B. No other defence witness was examined and defence evidence was closed vide recording statement of the counsel for the accused on 15.02.2011.
9. Ld. Counsel for the Complainant argued that they have satisfied every ingredients of offence U/S 138 N.I. Act. It is further argued that in his statement recorded U/S 313 Cr.P.C, the accused has admitted the factum of taking loan from the complainant. It is further argued that accused has failed to rebut the presumption as contemplated by Section 118 (b) and 139 N.I Act. It is further argued by Ld. Counsel for the complainant that in any case the accused was supposed to maintain sufficient balance for the installments which he was admittedly supposed to pay.
10. The main argument of the accused is that the cheque in CC No. 3595/06 6 of 21 7 question was issued at the time of sanctioning of loan and not in discharge of any legally enforceable liability. The counsel for the accused has further argued that the cheque in question was issued as the security cheque at the time of sanctioning of loan. It is argued that the accused did not receive any legal demand notice from the complainant. It is further argued that the complainant is a sole proprietorship concerned and is not a legal entity and, therefore, the present complaint is not maintainable. Further, the complainant is not having necessary permission from RBI to finance and lending and, therefore, the recovery of the loan is barred under Punjab Money Lenders' Act.
11. At this stage it would be necessary to see the effect of statutory presumption under section 118 and section 139 N.I. Act in order to judge the legal and factual merit of the defence's contention.
Section 118 and 139 of N.I.Act, have been dealt with in cantena of judicial pronouncements by the Hon'ble Supreme Court. And it would be sufficient to refer to the following judgments in this regard.
In " K. Bhaskaran Vs. Sankaran Vaidhyan Balan"(AIR 1999 SC 3762), it was observed that as the signature in the cheque is admitted to be that of the accused, the presumption CC No. 3595/06 7 of 21 8 envisaged in Sec.118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins on the Court to presume that the holder of the cheque received it for the discharges of any debt or liability. The burden was on the accused to rebut the aforesaid presumption.
Thus, the effect of these presumptions is to place the evidential burden on the Accused of proving that the cheque was not received by the bank towards the discharge of any liability.
In this regard it is fruitful to refer to the ratio of the judgment in "M. S. Narayana Menon v. State of Kerala" (AIR 2006 S C 3366) and "Krishna Janardhan Bhat Vs. Dattatraya G.Hegde (2008 A.I.R. (SC) 1325 ), on the point that it is not necessary that the rebuttal is always essentially by leading separate contrary evidence and it would suffice if the accused can demonstrate from the cross examination of the complainant that the burden to prove contrary is discharged. So far as presumption as to issuance of cheque for consideration and in discharge of debt, the accused need not disprove the complainant case in its entirety. He can discharge his burden on the preponderance of probabilities through direct or circumstantial evidence for which he can rely on evidence adduced by the complainant.
CC No. 3595/06 8 of 21 9 But again each case depends on its own facts and circumstances. And now I would examine whether in present case the accused is able to prove successfully to the contrary.
12. It is admitted by the accused that he entered into loan agreement and availed a friendly loan from the complainant. It is also admitted by the accused that the cheque in question was issued by him after signing it, however the particulars of the same are not filled by him. It is also proved that the cheque in question is presented within six months of date of issuance. It is further proved that on presentation the cheque in question, it returned dishonored vide return memo for the reasons "Insufficient Funds".
13. The receiving of legal demand notice was denied by the accused but it is established by the complainant that the legal demand notice was sent through registered AD / UPC at the correct address of the accused. AD card and the receipt of the registered post is placed on record as Ex. CW1/E, CW1/F and CW1/G (colly). Hence, it can be presumed u/s 27 General Clause Act r/w section 114 in Indian Evidence Act that in due course legal demand notice was served upon the accused. So, this submissions of the accused is not tenable.
CC No. 3595/06 9 of 21 10
14. The defence of the accused is constructed on the grounds as follows : ● The complainant is a sole proprietorship concern and is not a legal entity, therefore, the complainant is not maintainable. ● The complainant has no requisite permission from RBI for lending and financing and, therefore, recovery of the financed amount is barred under the Punjab Money Lenders' Act. ● The liability of the accused was not to the extent of the cheque amount in question.
● The cheque in question was given in blank signed as a security at the time of disbursement of loan.
15. In the background of the facts and circumstances of the present case the court will appreciate the defence of the accused one by one. As far as the first defence of the accused is concern, it is contended on behalf of the accused that the complainant is proprietorship concern and is not legal entity, therefore, the complaint cannot be filed. On this issue the complainant relied on the judgment of Hon'ble Delhi High Court in SVAPN Constructions vs. IDPL Employee's Cooperative Group Housing Society Ltd. and Ors. 127 (2006) DLT 80. It was held that the sole proprietorship firm is not a legal entity, the petition suit should have been filed by the proprietor in his own name on behalf of sole proprietorship firm and not in the CC No. 3595/06 10 of 21 11 name of sole proprietorship firm. Further, it is held that the inevitable inference is that a petition in the name of a sole proprietorship firm which is not a legal entity is not maintainable. In the present case the complainant is the proprietorship concern of the P. C. Gupta & Sons (HUF) and the complaint is instituted through Karta of the HUF. The facts of the judgment relied on are not similar to the facts of the case in hand as the present complaint is instituted in the name of proprietorship concern through its proprietor and, therefore, the defence of the accused is not sustainable.
16. The second defence of the accused is that the complainant has no permission from RBI to conduct the business of financing and, therefore, recovery suit of the financed loan is barred by The Punjab Registration of Money Lenders' Act. During cross examination proprietor of the complainant stated that the complainant is the proprietorship concern of P.C. Gupta & Sons (HUF) and I am Karta of said HUF. It is further stated that this firm is doing the business of finance. Further, he states that the complainant do not have any permission from RBI to do the business of finance. Further, complainant company is stated to not having any license for money lending. On this point it is quite relevant to have a glance on certain relevant provisions of THE PUNJAB REGISTERATION OF CC No. 3595/06 11 of 21 12 MONEY LENDERS' ACT 1938. As per section 2 (7) of the Act loan means an advance whether secured or unsecured of money or in kind at interest and sell include any transaction which the court finds to be in substance a loan. Further, section 2 (8) of the Act defines Money Lender as a person, or a firm carrying on the business of advancing loans as defined in this Act and shall include ........... Section 3 of the Act bars a suit for the recovery of a loan and the application for execution of a decree relating to a loan by Money Lender unless the money lender is registered and holds a valid license in such form and manner as may be prescribed. Further, section 4 (2) of the Act provides that no money lender shall carry on the business of advancing loans unless he gets himself registered u/s 4 (1) of the Act. Section 5 provides for licensing of the money lenders. To sum up the above mentioned provisions section 3 of the Act bars the suit for recovery of the loan and application for execution of decree relating to loan unless at the time of institution of the suit and complaint the money lender is registered and having valid license under the Act. In the present case the accused put the question regarding the registration of the complaint and authority to conduct the business of financing. The complainant failed to place on record any document to show that he CC No. 3595/06 12 of 21 13 is having valid license for conducting the business of financing and stated in his cross examination that he is having no permission of RBI for money lending and finance. One of the essential condition of the section 138 NI Act is that the cheque is issued in discharge of any legally recoverable debt or liability. Section 3 of The Punjab Registration of Money Lender Act of 1938 bars the suit for recovery of the loan by the Money Lender, if he is not registered or having a valid license for money lending. In view of the above bar the recovery suit of the present loan is barred and, therefore, provision of section 138 Act is not attracted. In view of the above discussion this defence of the accused is sustained.
17. The next defence of the accused is that the liability of the accused was not to the extent of the cheque amount in question as on the date of issuance of cheque. The contention of the accused is that the complainant charged the compound interest in loan amount which is not as per the agreed terms and conditions of the loan agreement. Further, as per the statement of account exhibited as CW1/H an amount of Rs. 50,000/ and Rs. 20,000/ vide entry dated 05.02.2001 and 09.02.2001 respectively is debited in the account of the accused. The above mentioned debited amount is not CC No. 3595/06 13 of 21 14 the part of the loan agreement and the interest is charged upon the amount after adding the same in the principal amount. The complainant failed to explain the debited amount in the account of the accused and charging of the interest there upon. During cross examination CW1 it is stated that the interest is calculated and compounded at reducing balance per month. On this issue the complainant relied on the judgment of Hon'ble Supreme Court of India in State of Haryana vs. S. L. Arora & Company 2010 (SLT) 298, wherein it is held that the compound interest can be awarded only if there is a specific contract, or authority under a statue, for compounding of interest. There is no general discretion in courts or tribunals to award compound interest or interest upon interest. However, the ratio of the afore mentioned judgment is not applicable to the facts of the present case as it deals with the power of the court to award interest from the date of cause of action to the date of institution of legal proceedings or initiation of arbitration proceedings. However, it is a settled proposition that the simple interest is the rule and compound interest is the acception and the same can be charged only if there is agreement to that effect. In the present case it is stated by the accused that the interest was charged on the reducing balance. In the receipt of the loan amount mark X it CC No. 3595/06 14 of 21 15 is stated by the accused that from the date of execution of the loan agreement till April, 2005 the accused shall pay interest on the said amount at the rate of 2½ % per month. Further, in case of payment of excess amount then calculated amount of interest, the excess amount will be adjusted towards the principal amount and the subsequent interest will be calculated on the balance principal amount. The language of the receipt of the loan amount suggest that both the parties agreed to charge the simple interest on the reducing balance. Moreover, the complainant failed to file the copy of loan agreement in order to show that the compound interest was agreed between the parties. Further, the complainant failed to give explanation as to the debited amount of Rs. 70,000/ in the statement of account. Further, a loan of Rs. 1,50,000/ was sanctioned on 26.04.1999 and the same was to be repaid till April, 2005. It is also admitted that till April, 2005 the accused had paid a total sum of Rs. 2,32,726/. As per the statement of account the liability of the accused on 01.09.2006 was Rs. 3,40,356/. As per the submission of the complainant the accused came to the complainant in 3rd week of June, 2006 and for clearing the balance amount he issued the cheque in question. As per the statement of account exhibited as CW1/H, if this cheque is included, the accused CC No. 3595/06 15 of 21 16 would have paid Rs. 6,81,712/ for loan of Rs. 1,50,000/ By no stretch of imagination of liability of the accused cannot Rs. 6,81,712/ for the loan of Rs. 1,50,000/ at the interest rate of 2.5% per month at the reducing balance. As per the statement of account the above mentioned liability is inclusive of the amount of Rs. 70,000/ as reflected in two entry dated 05.02.2001 and 09.02.2001. The complainant did not put any explanation as to this particular amount. Moreover, the same compound interest is charged upon this amount after adding the same in the principal amount. If this particular amount is deducted from the total liability then the liability of the accused was not to the extent of the cheque amount in question. And, therefore, the defence of the accused is upheld.
The last but not the least defence of the accused is that the accused had issued 40 cheques to the complainant at the time of sanctioning of loan. Out of the 40 cheques one cheque was for principal amount and the remaining 39 were blank and signed. He contended that the cheque in question is one of those 39 blank signed cheques and the same was not issued in discharge of any legally recoverable debt or liability and the same was issued for the purpose of security. In order to substantiate his defence the accused examined two witnesses DW1 and DW2. The DW1 is Shri Bheem CC No. 3595/06 16 of 21 17 Singh, Zonal Officer, Allahabad Bank who produce the record of posting of the accused in Allahabad Bank from 1996 to April, 2009 and the same is exhibited as DW1/A. On this issue it is contended that on the date of issuance of cheque i.e 01.09.2006 the accused was posted at Paraspur, UP and, therefore, the submission of the accused that on the above mentioned date the accused himself approached the complainant bank and issued the cheque in question is not correct. Here it is pertinent to mention that the witness DW1 has not filed any record of leave of the accused during this period. Further, in his defence the accused has examined DW2 Shri Susheel Kumar Gupta, Special Assistant, Allahabad Bank, Hauz Kazi, Delhi who produced the statement of account of the accused exhibited as DW2/A and certified copy of the cheque book register exhibited as DW2/B. As per the cheque book register the cheque book of the series starting with 184671 to 186540 is issued in the joint account number 14809 on 23.09.2000 and further, the cheques of this series are shown to be used from October, 2000 to March, 2001 although they are used randomly. In that particular cheque book out of 70 cheques only 36 cheques are reflected in the statement of account exhibited as DW2/A. The above mentioned facts clearly shows that the cheque book of the series of the cheque CC No. 3595/06 17 of 21 18 in question was issued in September,2000 and the cheques of that particular cheque book are reflected in the statement of account exhibited as CW1/H from October, 2000 to December, 2003. However, on perusal of the statement of account exhibited as CW1/H the cheques bearing number 186471 to 186490 and 186501 , 186502 are reflected in the statement of account as presented by the complainant for the payment of installments. Further, the cheque bearing number 186502 is reflected in the entry dated 22.12.2003 whereas the cheque in question i.e 186503 is entered in the statement of account exhibited as CW1/H on dated 05.09.2006. The cheque bearing number 186502 i.e preceding cheque of the cheque in question was shown in the statement of account to be presented on 22.12.2003. After December, 2003 no installment is paid by the accused and after that the cheque in question bearing number 186503 is reflected in the statement of account vide entry dated 05.09.2006. It is beyond the understanding of rationale man the preceding cheque number 186502 is issued on 22.12.2003 and the cheque next in the series i.e 186503 is issued on 05.09.2006. The above discussion raised a reasonable probabilities as raised by the accused that he had issued 40 cheques to the complainant at the time of sanctioning of loan for the purpose of payment of EMIs.
CC No. 3595/06 18 of 21 19 Further more, for the loan of Rs. 1,50,000/ the accused had paid total amount of Rs. 2,32,726/ from April, 1999 to April, 2005 and further issued the cheque of Rs. 3,40,356/ and that too after the three years of the payment of the last installment. The aforesaid facts clearly raised the probability that the cheque in question is one of the 40 blank signed cheques and the same is presented by the complainant and, therefore, the stand of the complainant is that the accused himself approached the complainant in the 3rd week of June, 2006 and for clearing the balance amount the accused issued the cheque in question is not established.
"It is very well settled by the Hon'ble Supreme court in the Judgment titled as M.S Narayana Menon @ Mani Vs. State of Kerela & Anr. (2006) 6 Supreme Court Cases 39. If cheque is issued by the accused for security or for any other purpose the same would not come within the preview section 138 of the N.I. Act."
This judgment was further relied on by Hon'ble High Court of Delhi in the judgment of College Culture & Ors. V. Apparel Export Promotion & Anr., 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.
CC No. 3595/06 19 of 21 20
21. The differences in the two kinds of post dated 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.
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 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."
18. In order to sum up the above discussion it is proved that the accused had availed the loan of Rs. 1,50,000/ at the interest rate of 2.5% per month on reducing balance amount. Further, the complainant is the proprietorship concern of P. C. Gupta & Sons (HUF) through its Karta. Further, it is also proved that the complainant is having no license from RBI for money lending as mandated by section 3 of Punjab Registration of Money Lenders' Act, 1938 and, therefore, suit to recover the loan is barred and hence provision of section 138 is not attracted. It is also established on record that the liability of the accused was not to the extent of the CC No. 3595/06 20 of 21 21 cheque amount in question as on the date of issuance of cheque. Further, the accused successfully raised the probabilities that the cheque in question is one of the blank signed security cheques given at the time of sanctioning of loan and the same was not issued on the date as alleged in the complaint.
19. In view of the above discussion the accused has successfully discharged his burden and has raised a probable defence in his favour, which the complainant miserably failed to rebut and hereby the accused is acquitted for offence u/s 138 NI Act. ANNOUNCED IN THE OPEN COURT ON 02.03.2012 All the pages from 1 to 21 are signed by me.
(PAWAN KUMAR ) METROPOLITAN MAGISTRATE, SPECIAL COURT 10, COURT NO312, DWARKA COURTS,DELHI.
CC No. 3595/06 21 of 21