Delhi District Court
Shree Hari Cloth vs M N Mode on 29 October, 2024
CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode
IN THE COURT OF Ms. TABASSUM KHAN,
JUDICIAL MAGISTRATE FIRST CLASS (NI ACT-02), SOUTH EAST
DISTRICT, SAKET COURT COMPLEX, NEW DELHI
Criminal Complaint No.: CC NI ACT 619973/2016
DLSE020003572011
M/S SHREE HARI CLOTHING HOUSE ...Complainant
Versus
M/S M. N. MODE ...Accused
A. Name and address of the Complainant:
M/s Shree Hari Clothing House, through Ms. Anita Tiberwal, LR of its
proprietor Mr. Anil Kumar Tibrewal, Office at 88, 1st floor, Hari Nagar,
Ashram, New Delhi- 110014
B. Name and address of the Accused:
1. M/s M. N. Mode through its partners office at B-85, Sector 5, Noida, UP
2. Sh. Ajay Kalra, Partner, R/o 2-J/96, NIT Faridabad, Haryana, 121001.
3. Sh. M. N. Beg, Partner, R/o D-14, DDA Flats, Kalkaji, new Delhi-
110019.
C. Offence complained of: Under Section 138 Negotiable Instruments
Act, 1881 (In short "NI Act".)
D. Plea of the accused : Pleaded not guilty.
E. Date of institution : 09.04.2012
F. Final order : Conviction
I. Date of pronouncement : 29.10.2024
Digitally signed
by TABASSUM
Page 1 of 26 KHAN
TABASSUM
Date:
KHAN 2024.10.29
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JUDGMENT
Brief facts and reasons for decision of the case
1. Vide this judgment, I shall dispose of the present complaint case filed by the complainant, M/s Shree Hari Clothing House through its proprietor Ms. Anita Tiberwal, LR of late Sh. Anil Kumar Tibrewal (hereinafter referred as the 'complainant) against the accused partnership firm M/s M.N. Mode (hereinafter, referred as the 'accused No.1') through its partners Sh. Ajay Kalra (hereinafter, referred as the 'accused No.2') and Sh. M.N. Beg (hereinafter referred as the 'accused No.3'), u/s 138 of the Negotiable Instruments Act, 1881 (in short "NI Act"). Complainant's case
2. In a nutshell, the facts of the present case as per the complaint are that the Complainant is a whole sale Cloth Merchant/ Dealer and that the Accused No.2 and No.3 had represented to be the Partners of Accused No.1 firm to the complainant and they had purchased large quantities of clothing material on behalf of Accused no.1. It is further averred that the Accused persons had made the part payment of the aforesaid purchase/Clothing material through a Cheque bearing no. 329326 drawn on State Bank of Patiala, NFC, New Delhi- 110005 dated 30.12.2010 for a sum of Rs. 3,50,000/- (cheque in question) and when the cheque in question was presented to the complainant's bank the aforesaid cheque was dishonoured with the remarks "Exceeds arrangement" vide return memo dated 30.12.2010.
3. That the Complainant informed the Accused persons that their Cheque has returned dishonored, and also asked them to immediately make the payment of the Cheque Amount. Thereafter, the Complainant sent a Legal Notice dated-12.01.2011 to the Accused persons vide Registered AD & Digitally signed Page 2 of 26 by TABASSUM TABASSUM KHAN KHAN Date:
2024.10.29 15:32:11 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode UPC dated 13.01.2011, calling upon the Accused persons to make the payment of the Cheque amount within 15 days, however the accused persons failed to make the payment thereof within the statutory period. Hence, on non-payment of the above said amount the present complaint was filed seeking prosecution of the accused persons for the offence punishable under Section 138/142 NI Act Summoning order, appearance of accused, and admission to bail
4. In view of the judgment of A. C. Narayanan Vs. State of Maharashtra & Anr." (2014) 11 SCC 790, by only relying upon the evidence by way of affidavit, which is Ex. CW-1/A and upon the documents on record, without formally examining the complainant in support of complainant's case, Ld. Predecessor of this Court had taken cognizance and had issued summons upon the accused persons on 23.02.2011.
5. Accused no. 2 entered an appearance on 05.04.2014 only after issuance of Bailable warrants against him and was then admitted to bail. Whereas Accused no. 3 was declared as an absconder vide order dated 05.07.2016. Accused no. 3 was then arrested and released on bail on 20.11.2018.
Notice u/s 251 Cr.P.C.
6. Thereafter, notice u/s 251 Criminal Procedure Code, (in short "Cr.P.C.") for the offence u/s 138 NI Act was framed against the accused no. 2 Sh. Ajay Kalra on 05.07.2016 to which he pleaded not guilty and claimed trial. In his defence he submitted that he is the signatory of the impugned cheque as well as the partner of M/s MN Mode. Accused no.3 Mr. M.N Beg used to the keep the blank signed cheque book. He stated that the impugned cheque was lost and an FIR in this regard was lodged in PS Tilak Marg by Mr. M. N Beg. That he had no legally enforceable liability towards Page 3 of 26 Digitally signed by TABASSUM TABASSUM KHAN KHAN Date: 2024.10.29 15:32:13 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode complainant as there were no transactions between them. He also submitted that he did not receive the legal notice.
7. Notice u/s 251 Criminal Procedure Code, (in short "Cr.P.C.") for the offence u/s 138 NI Act was also framed against the accused no. 3 Sh. M. N. Beg on 19.12.2018 wherein he pleaded not guilty and claimed trial. He took defence that he was not the signatory of the impugned cheque. He did not remember as to during which period he was the partner of M/s M N Mode and he was not aware how the impugned cheque came in the possession of complainant and for what purpose / transaction the impugned cheque was kept. He claimed not receiving the legal notice. He stated that he has no liability to pay the cheque amount to the complainant. He further stated that he himself has to receive Rs. 13-14 crores from Sh. Ajay Kalra.
8. Statement u/s Section 294 CrPC was also recorded of accused no. 3 wherein he admitted the cheque in question and the return memo but denied the receiving of legal notice.
Request under Section 145 (2) of the NI Act for cross-examining the complainant and matter to be tried as summons case.
9. Ld. Counsel for the accused moved application under Section 145 (2) of the NI Act to cross-examine the complainant, which was allowed vide order dated 01.03.2018 of Ld. Predecessor. Further, vide the same order, this Court deemed it appropriate not to try the present case as a summary trial, since a sentence for imprisonment exceeding one year could have been passed, if the trial results in a conviction, therefore, this case was tried as a summons trial case.
Complainant evidence Digitally signed
by TABASSUM
KHAN
TABASSUM
Date:
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10. Thereafter, the matter was listed for the recording of complainant evidence. To prove his case against the accused, the complainant/CW1 appeared as a witness himself. At the post summoning stage, the complainant/CW-1 tendered his affidavit Ex. CW-1/A, which was filed at the time of pre-summoning evidence. In his evidence by way of affidavit, the complainant reiterated all the facts, as stated in the complaint on oath.
11. The Complainant/CW1 Sh. Anil Kumar Tiberwal relied on the following documents:
Sr. No Exhibits/ Nature of documents
Marks
1. Ex.CW1/1 Cheque bearing no. 329326
dated 30.12.2010 for Rs.
3,50,000/-
2. Ex.CW1/2 Cheque return memo dated
30.12.2010(Reason-Exceeds
Arrangement)
3. Ex.CW1/3 Legal notice dated 12.01.2011
4. Ex.CW1/4 to Three post office registry slips
Ex. CW-1/6 dated 13.01.2011
5. Ex.CW1/7 UPC certificate
6. Ex. CW1/8 Reply to legal Notice dated
18.01.2011
7. Ex. CW1/12 Copy of Challans from 17.04.2007-
(colly) 11.02.2010
8. Ex. CW1/13 Copy of Bills from 16.04.2007-
(colly) 11.03.2010
Page 5 of 26 Digitally signed
by TABASSUM
TABASSUM KHAN
KHAN Date:
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9. Ex. CW1/14 ITR Verification Form from
(colly) 31.10.2007- 31.03.2012
10. Ex. CW1/15 Statement of account alongwith (colly) confirmation
12. CW-1 Sh. Anil Kumar Tibrewal was examined, cross examined by Accused no.2 and discharged and the complainant evidence was closed vide order dated 01.03.2018 in respect to Accused no. 2.
13. Thereafter, the complainant Sh. Anil Kumar Tibrewal expired on 9.02.2020 and an application for bringing the LR's on record was filed on 11.05.2022 which was allowed vide order dated 30.09.2022 by which wife of the complainant Mrs. Anita Tiberwal was substituted as complainant. CW2 i.e. Mrs. Anita Tiberwal was examined and cross examined on three different dates and finally discharged on 2.03.2023. Complainant Evidence was then closed on 8.05.2023. The same evidence was adopted by accused no. 3 as well.
14. Thereafter, Court Witness Shri Saket Gupta from PNB Bank, South Ex Branch was summoned on 24.04.2023 by the court as court witness after an application u/s 311 Cr.P.C. was filed by the accused and was allowed. He was examined, cross examined by the Ld. Counsel for the accused and the Ld. Counsel for the complainant and discharged on the same date i.e. 9.06.2023. Thereafter, the matter was fixed for recording statement of accused.
Digitally
signed by
TABASSUM
TABASSUM KHAN
KHAN Date:
2024.10.29
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Statement of the accused u/s 313 Cr.P.C/Defence of the accused:
15. Statement of Accused no. 3 u/s 313 CrPC r/w section 281 CrPC was recorded on 03.07.2024 wherein in his defence he stated that the complainant was supplying fabric to his company since 2005 approximately. That the complainant was paid in full for all the material supplied by him to his company. The invoices attached by the complainant with the complaint were not issued to his company and he had not purchased any material as alleged in the present complaints from the complainant. That the cheque book of accused no. 3 was misplaced and all the cheques in question in the present complaints are from the misplaced cheque book. That the accused no. 3 had filed an FIR regarding his misplaced cheque book in 2011. He averred that the cheques in question bears his signatures but they were never issued to the complainant. The complainant has misused his misplaced cheque book to file the present complaint against him. Accused no. 3 wished not to lead defence evidence.
16. Thereafter, statement under Section 313 r/w Section 281 Cr.P.C of Accused no.2 was recorded on 18.07.2024. In his statement he admitted that he and his partner had business with the complainant in 2005 which lasted till November 2006. The complainant used to supply clothing material to them and the mode of payment was cash in each and every order. The accused averred that initially they started business with the complainant and issued 11 security cheques to the complainant which form part of cheques in questions. The accused stated that he and his partner had kept a signed cheque book which was signed by both of them to be used in case of emergency. That the cheque book was lost by his partner and a complaint regarding the same was filed by his partner accused no. 3 Mr. M. N. Beg on 17.01.2011 in Tilak Marg Police Station Page 7 of 26 Digitally signed by TABASSUM TABASSUM KHAN KHAN Date:
2024.10.29 15:32:23 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode and on the same date he had intimated the bank regarding the lost cheque book. The cheques from the lost cheque book are also cheques in questions in the present complaints. He averred that he had asked the complainant to return the security cheques given to him in 2005 but the complainant did not do so. He did not file police complaint regarding these security cheques against the complainant. That the complainant had misused their security cheque and cheques from his lost cheque book to file the present complaints against them. Accused no.2 wished to lead Defence evidence.
Defence Evidence on Behalf of Accused no. 2
17. Accused no.2 moved an application u/s 315 Cr.P.C. on 31.07.2024 to examine himself as defence witness. The same was allowed by this court.
He further in his list of witnesses wished to examine DW2 Record clerk of Tilak Marg Police Station and DW3 Bank witness of SBI, NFC (formerly known as State Bank of Patiala) which was also allowed by this court. Thereafter, the matter was listed for defence evidence on 07.08.2024. DW-1/Accused no. 2 was examined and he tendered in evidence following 2 documents:
Sr. No Exhibits/ Marks Nature of documents
1. Mark DW1/1 NCR no. 197/2011 filed on 17.01.2011 at Tilak
Marg Police Station
2. Mark DW1/2 Copy of intimation of lost cheque dated
17.01.2011 to State Bank of Patiala, NFC
18. DW-2 was examined and he marked one document DW-2/1 i.e, order no.
1765-1834/HAR/NDD dated 04.04.2024 of the DCP. The same was taken on record in CC No. 616211/2016. Vide even dated order bank Digitally signed Page 8 of 26 by TABASSUM TABASSUM KHAN KHAN Date:
2024.10.29 15:32:25 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode witness/DW-3 was summoned to appear on the NDOH as a defence witness.
19. DW-3/Bank Witness Sh. Avinash Verma, Associate, SBI Branch, NFC, New Delhi appeared on 17.08.2024 wherein he stated that the records pertaining to the year 2011 are no longer available as the then State Bank of Patiala where the cheques were presented was merged with State Bank of India in 2017 and no records regarding the same are present currently.
20. Thereafter, DW-1/accused no. 2, DW-2 and DW-3 were cross examined and discharged on 17.08.2024 and vide a separate statement of accused no.2/DW1 defence evidence was closed on the same date. The detailed defence evidence will be discussed later in this judgment at the time of appreciation of evidence.
Final arguments
21. This Court heard the final arguments on 1.10.2024. The final arguments will be discussed at length at the time of appreciation of evidence.
Appreciation of evidence and application of law to the facts of the case
22. I have heard at length the submissions of both the opposite counsels. This court has also diligently gone through the complaint, documents, evidence recorded and the entire material on record.
23. Before dwelling into the merits of the present matter, it is appropriate to enunciate the law relating to dishonour of cheque as laid down u/s 138 of the NI Act.
24. To hold an accused liable u/s 138 NI Act, the following ingredients must manifest themselves from the averments of the complaint as well as the evidence adduced by the complainant:
Digitally signed by TABASSUM Page 9 of 26 TABASSUM KHAN
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a) A person must have drawn a cheque on an account maintained
by him in a bank for payment of a certain sum of money to another person from out of that account for the discharge of any legally enforceable debt or liability;
b) that the cheque has been presented to the bank within a period of three months from the date on which it is drawn or within the period of its validity whichever is earlier;
c) That the cheque has been returned by the bank unpaid, either because of the amount of money standing to the credit of the 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 the bank;
d) The payee or the holder in due course of the cheque has made a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
e) The drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 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.
25. To hold the accused guilty, the above mentioned five ingredients should be proved to exist by the complainant coextensively alongwith the conditions as mentioned under section 142 NI Act.
26. As for the abovementioned ingredients (b), (c) and (e) there is no dispute in the present matter. The complainant has convincingly proved that the impugned cheque Ex. CW1/1 was presented well within validity period of Page 10 of 26 Digitally signed by TABASSUM TABASSUM KHAN KHAN Date: 2024.10.29 15:32:47 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode 3 months. Further, the impugned cheque Ex.CW1/1 was dishonoured by bank vide return memo Ex. CW-1/2. It is also an accepted fact that the accused persons failed to make the payment within 15 days.
27. However, both the accused persons have disputed ingredient (d) of para 25 i.e. the receipt of the legal demand Notice i.e., Ex.CW1/3 alongwith postal receipts and UPC certificate (as exhibited above) in the Notice u/s 251 Cr.P.C. as well as in their statement u/s 313 Cr.P.C though the same has been accepted by them in their statement's u/s 294. The accused persons have also accepted that the address mentioned on the legal notice is their correct address. However, the accused persons have argued that date mentioned on UPC is 3.02.2011 and as the Gazette no. G.S.R 58(E) issued by Ministry of communications and Information Technology (Department of posts) on 31.01.2011, UPC was discontinued and therefore, the legal notices sent through UPC were never delivered to the accused persons.
28. Per contra, Ld. Counsel for the complainant denied the contention of the accused and submitted that the service of the legal demand notice through registered AD as well as UPC to the accused persons has been duly proved in the present matter by placing the receipts on record in all the matters.
29. This court is of the opinion that the contention qua the non-service of the legal demand notice to the accused is concerned is not tenable in the present case. It is pertinent to mention here that these are 52 connected matters and the acceptance of legal notice is admitted in 11 matters and a reply has also been sent by the accused in these 11 matters to the complainant. The legal notices in the other 41 connected matters are also sent by the same mode on the same addresses of the accused persons which are the duly accepted addresses of the accused persons.
Page 11 of 26 Digitally signed by TABASSUM KHAN TABASSUM Date: KHAN 2024.10.29 15:32:49 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode
30. Further, in the entire cross examination of the complainant by the accused, the accused has neither disputed the service of legal demand notice nor the address mentioned on the legal demand notice. Importantly, not even a single suggestion has also been put by the Ld. Counsel for the accused qua the service of the legal demand notice to the accused. Furthermore, accused has admitted that the address mentioned on the legal demand notice is correct in his notice framed u/s 251 Cr.P.C. as well as in his statement u/s 313 Cr.P.C.
31. Moreover, in the landmark decision of Hon'ble Supreme Court of India in matter of C. C. Alavi Haji Vs. Palapetty Mohd. & Anr. (2007) 6 SCC 555 held as under:
"Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of complaint Under Section 138 of the Act, make the payment of the cheque amount and submit to the court that he had made the payment within 15 days of the receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of summons from the court alongwith the copy of complaint Under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required Under Section 138, by ignoring statutory presumption to the contrary Under Section 27 of G. C. Act and 114 of the Evidence Act."
32. Now coming to the facts of the present case and in the light of the aforementioned landmark judgment of Hon'ble Supreme Court of India i.e. C. C. Alavi Haji Vs. Palapetty Mohd. & Anr. (Supra) and also in the light of s. 27 of the General Clauses Act and s.114 of the Evidence act, the delivery of the legal notice can be presumed and therefore this contention of the accused persons is not acceptable. Hence, (b), (c), (d) and (e) ingredients of the offence under section 138 as per para 24 above stands proved.
Digitally signed Page 12 of 26 by TABASSUM TABASSUM KHAN
KHAN Date:
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Whether the impugned cheques were issued for discharge of legal Liability
33. Now coming to the first ingredient (a) which is the real bone of contention in the present matter that whether the impugned cheque was drawn by the Drawer/accused for discharge of a legally enforceable debt or liability or not.
34. Once foundational facts are admitted, it is a well-settled position of law that when a negotiable instrument is drawn, two statutory presumptions arise in favour of the complainant, one under Section 139 NI Act and another under Section 118(a) of the NI Act, which is a presumption of the cheque having been issued in discharge of legal liability and drawn for good consideration.
35. Section 118(a) of the N.I. Act and Section 139 NI Act are reproduced for ready reference:
Section 118 NI Act provides:
"Presumptions as to negotiable instruments": "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 been accepted, indorsed, negotiated or transferred was accepted, indorsed, negotiated or transferred for consideration;
Section 139 of the NI Act further provides as follows:
"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, of any debt or other liability"
36. Hence, in view of the aforesaid provisions, it is explicit that on proof of foundational facts, the Court will presume that the cheque was made or drawn for a consideration and that it was executed for discharge of debt or liability, once the execution of negotiable instrument is either proved or Digitally Page 13 of 26 signed by TABASSUM TABASSUM KHAN KHAN Date:
2024.10.29 15:32:55 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode admitted then the burden of proof lies upon the accused to rebut the said presumption.
37. This is an example of the rule of 'reverse onus' in action, where it is an obligation on the accused to lead what can be called 'negative evidence'. The accused is not to prove a fact affirmatively, but to lead evidence to demonstrate the non-existence of debt or liability. Since, this rule is against the general principle of the criminal law of 'presumption of innocence in favour of the accused' and considering that such negative evidence, by character is difficult to lead, the threshold for the accused to rebut the presumption is on the scale of the preponderance of probabilities. This was held in 'Rangappa v. Sri Mohan' [(2010) 11 SCC 441], this means that the lack of consideration or a legally enforceable debt is not to be proved beyond all reasonable doubt.
38. The accused is required to either prove the non-existence of the liability or the existence of it so improbable that a prudent man would think that it does not exist. The accused can do this either by leading direct or relying upon circumstantial evidence in his defence. Alternatively, the accused can punch holes within the case of the complainant by way of cross- examination. Thereafter, the onus of proof shifts back to the complainant, and the presumptions under Sections 118 and 139 of the Act, will not again come to the complainant's rescue.
39. In Kumar Exports v. Sharma Carpets (2009) 2 SCC 513, it was held that the accused can either prove the nonexistence of consideration and debt by direct evidence, or by bringing on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man may act upon the plea that they did not exist.
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40. Recently in Anss Rajashekar v. Augustus Jeba Ananth (2020) 15 SCC 348 a two Judge Bench of Apex Court, reiterated the decision of the three-judge bench of Apex Court in Rangappa v. Sri Mohan (supra) on the presumption under Section 139 of the NI Act. The court held:
"12. Section 139 of the Act mandates that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it, in dis-charge, in whole or in part, of a debt, or liability. The expression "unless the contrary is proved" indicates that the presumption under Section 139 of the Act is rebuttable. Terming this as an example of a "reverse onus clause" the three-Judge Bench of this Court in Rangappa held that in determining whether the presumption has been rebutted, the test of pro- portionality must guide the determination. The standard of proof for re-buttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities.
28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of preponderance of probabilities". Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."
41. Therefore, the only question which now remains to be adjudicated by this Court is as to whether ingredient (a) of para 24 above is satisfied or not i.e. whether the accused, on a scale of preponderance of probabilities, has raised any probable defence to discredit the case of the complainant by showing that the cheque in question was not issued in discharge of a legally recoverable debt/liability so as to shift the onus placed upon him to the complainant or not.
Digitally
signed by
Page 15 of 26 TABASSUM
TABASSUM KHAN
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Defence taken by the accused
42. The present matters are 52 connected matters emanating from similar transactions of sale and purchase of clothing material by the accused 2 and accused 3 who are partners in accused no. 1 Partnership firm from the complainant. The defences taken by both accused 2 and 3 are almost similar in nature and therefore it is prudent to discuss them together. Now this court will discuss each defence taken by the accused persons in the present matter separately:
The chequebook of the accused persons was lost and NCR was lodged alongwith issuance of stop payment instructions to the bank
43. Both the accused have taken similar defence during statement u/s 313 Cr.P.C. that the chequebook containing 41 of the impugned cheques in the 52 connected matters was lost by accused no.3 on 17.01.2011 outside Patiala house court and thereafter, NCR Mark DW1/1 was lodged at the Tilak Marg police Station by accused No.3. It is further contended that on the same day intimation to the concerned bank was given by accused no. 3 i.e. Mark DW1/2 for stopping the payment of cheques to State Bank of Patiala (now SBI) and therefore, the reason for return on the returning memos is 'Payment Stopped by Drawer.' To further buttress this argument Defence witnesses DW2- Record keeper from Tilak Marg Police station and DW3- bank witness from SBI bank then State Bank of Patiala (before merger) was called to prove the Mark DW1/1 and Mark DW1/2. However, both these documents could not be proved as the records were pertaining to 2011. Mark DW1/1 was destroyed by the order of the relevant authority i.e. DW2/1 as per the testimony of DW2. As far as DW1/2 is concerned the same was also not proved as the then Bank of Patiala is now state Bank Digitally Page 16 of 26 signed by TABASSUM TABASSUM KHAN KHAN Date:
2024.10.29 15:33:03 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode of India and the records pertaining to the year 2011 were not available as per the testimony of DW3.
44. As the present matters are 52 connected matters the complainant had sent legal notice to the accused persons in 11 matters on 12.01.2011 and reply to the same was sent by the accused on 18.11.2011. In the reply to legal notice the accused has accepted the transactions with the complainant and the fact that there were some dues between the parties. As far as the remaining 41 matters are concerned, the date of filing of NCR Mark DW1/1 is 17.01.2011 and the intimation to the bank Mark DW1/2 was also sent on the same date i.e. 17.01.2011 i.e. after receipt of the legal notice in the above 11 connected matters. Therefore, the filing of NCR and sending of intimation to the bank seems to be an afterthought on the part of the accused persons to make up a defence in the present matter.
45. Interestingly, the defence of lost cheque book was disclosed for the first time by accused no. 2 on 11.01.2016 at the time of framing of notice against him and it was contended by him that it was Accused no.3 who had lost the cheque book and filed the police complaint. However, when notice was framed against accused no.3 then accused no. 3 failed to mention anything about the lost cheque book or lodging of the NCR Mark DW1/1 rather he claimed that he has to recover 13-14 Crores from accused no.2. The defence of lost chequebooks or lodging of the NCR was never disclosed by accused no. 3. It is only later on at the stage of recording of statement u/s 313 Cr.P.C. in 2024 that both the accused took the same defence. The accused had no satisfactory explanation whatsoever that how the cheque book lost at Patiala House Court, New Delhi reached the complainant in Noida.
Digitally signed by TABASSUM TABASSUM KHAN KHAN Date:
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46. Again, the reason for return of cheques in 41 matters in which it is contended by the accused persons that the cheque book was lost and stop payment instructions were given should have been 'payment stopped by drawer' but in fact perusal of record shows that the reason for dishonour in 9 out of 41 matters is 'Exceeds Arrangement', in one matter 'funds insufficient' and in 31 matters the reason for dishonour is 'payment stopped by the drawer'. Therefore, based on the above discussion this court is of the opinion that the defence taken by the accused persons that their signed chequebook was lost and these lost cheques somehow reached the complainant with whom the accused persons have admitted business relations and were then misused by the complainant is highly unbelievable line of defence which is spiked with inconsistencies and cannot be held in favour of the accused persons.
Whether the cheques were given for a leaglly enforceable debt?
47. The accused persons have argued that legally Enforceable Debt has not been made out as no details of any invoices/ challans/ running account/ balance Sheets/ bank statement & other Profit and loss statements, books of accounts/ Delivery Receipts, Work Orders has been given by the complainant. The accused persons have taken the defence the complainant has failed to provide the binded bill book of invoices/bills containing carbon copies of invoices and details of other buyers and therefore the invoices i.e. Ex. CW1/13(colly) lack credibility. It is further argued that the complainant CW1 had placed the invoices on record after 7 years of filling of the present complaint at the stage of cross examination of CW1 and therefore the same were fabricated as no reason for delay in filing of the above was given. It is argued that the complainant has not pointed out in any of the complaints that which invoices in Ex. CW1/13 (colly) belong to which complaints and cheques in question and therefore it can be Page 18 of 26 Digitally signed by TABASSUM KHAN TABASSUM Date: KHAN 2024.10.29 15:33:08 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode deduced that no invoices were existing at the time of filing of the present complaint and the Ex.CW1/12- Ex. CW1/15 are in fact forged and fabricated documents.
48. Perusal of Ex. CW1/13 shows that the signature of accused no.2 are present on several invoices dated 31.03.2008 and 11.03.2010. There is a receiving on the invoices but the signatory is not known. Further in Ex. CW1/14 the balance sheets as produced by the complainant, the complainant has disclosed the accused no. 1 M.N. Modes as sundry debtor. Also, the amount outstanding to the account of Accused no. 1 on 31.03.2012 as per the Trading & Profit & loss account for the year ending on 31st March 2012 is 1,61,19,940/-. The total amount on the invoices and the balance sheet is greater than that of the total amount of the cheques in question which goes on in favour of the complainant that the same were drawn for a legally enforceable debt.
49. The accused persons have cross examined CW1 complainant Mr. Anil Kumar Tiberwal at length. The cross examination of CW1 shows that the accused no.2 tried to make up a defence that it was collusion between the complainant and the accused no.3 to file these complaints. However, the same line of defence was abandoned by accused no. 2 at the time of cross examination of CW2. The cross examination of CW1 has not brought forth any major contradictions in the case of the complainant. The documents as asked by the accused were duly produced by the complainant. Thereafter, unfortunately the complainant CW1 passed away and his wife was impleaded as the complainant CW2. The wife of the complainant was then examined as CW2. The accused persons have argued that CW2 in her cross examination has admitted that the details of vehicle numbers may be mentioned in the invoices but the same was absent and the complainant has not provided any Travelling Conveyance Account and trading Page 19 of 26 Digitally signed TABASSUM by TABASSUM KHAN KHAN Date: 2024.10.29 15:33:10 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode account. It is contended by the accused that these accounts form a necessary part of the ledger account which can show the breakup but were never produced and therefore it proves that no debt was owed by the accused to the complainant.
50. This line of argument of the accused is bereft of any merit as the complainant has proved the basic ingredients of s. 138 of the NI act and the presumption lies in her favour. The complainant in order to support his case has brought on record Ex.CW1/12, Ex.CW1/13, Ex.CW1/14, Ex.CW1/15. Now just harping on the fact that the complainant has not brought on record additional documents is not sufficient to rebut the presumption. Also, no major contradictions are found in the testimony of CW1 and CW2. CW2 as can be made out from the perusal of the case record was the wife of CW1 who had seen the transactions from a distance and was not the one dealing with the accused persons directly. It is only after passing of CW1 that she was impleaded as the complainant. She was a house wife and not actively involved in the business therefore, this court considers that it is the testimony of CW1 which is more relevant as to the details of the transactions and not of CW2. The accused persons have argued at length that CW2 has stated that the cheques were issued at the same time when delivery was taken but the cheque amounts don't match with the invoices. Further, CW2 states in her cross examination that the cheques of Rs. 3.5 lakhs was issued on alternate day basis and they used to bounce however, the same is not supported by the date on the cheques in question. Again, the cheques that CW2 is talking about could have been undated security cheques and this line of argument taken by the accused persons is not sufficient enough to rebut the presumption in favour of the complainant.
Digitally signed by TABASSUM KHANTABASSUM Date: Page 20 of 26 KHAN 2024.10.29 15:33:13 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode The 11 cheques in question in cases where reply to legal notice were sent were in fact security cheques
51. The accused persons have argued that the 11 cheques to which reply to legal notices were sent in CC no. 619970/2016, 619971/2016, 619972/2016, 619973/2016, 619974/2016, 619975/2016, 619976/2016, 619977/2016, 619978/2016, 619979/2016, 619980/2016, the cheques with the complainant were in fact security cheques given in 2005 and though all the payments were made in cash, these cheques were wrongfully retained by the complainant and not given to the accused persons even after demanding them back and therefore, these 11 cheques which were blank signed cheques do not amount to admission of execution of cheque.
52. Per contra, ld. counsel for the complainant had argued that the accused persons had created a bogus defence by arguing that some cheques were security cheques and some were lost, however the same was not contended in the reply to the legal notice sent by the accused person. It was further argued that even after knowing that the complainant is misusing the security cheques the complainant failed to take any legal action against the complainant thus further pointing out to the sham nature of defence of the accused persons.
53. While 'security cheque'/ 'cheque issued as security' is a widely used term, it is not defined under the NI Act. What are the ingredients which when added to a cheque make it a security cheque? This crucial question can be answered by reference to paragraph 16 of the judgment in Sripati Singh which, very much in line with the existing precedent of the Court in Sampelly Satyanarayan Rao vs Indian Renewable Energy Development Agency Limited (Criminal Appeal No. 867 of 2016), and Digitally signed by TABASSUM Page 21 of 26 KHAN TABASSUM Date:
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which has further been relied upon by the Court in Sunil Todi v. The State of Gujarat (Criminal Appeal No. 1446 of 2021) LL 2021 SC 706, aptly explains the concept of a 'security' cheque:
"16. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow." (Emphasis supplied)
54. Therefore, even if the above cheques in 11 matters were issued as security cheques, then also the consequences of s. 138 will follow. The defence taken by the accused persons that they were security cheques and therefore not legally recoverable cannot be accepted.
Time Barred Debt
55. The accused persons have argued the dates mentioned on some of the invoices are of the year 2007 and therefore the amount of Rs. 80,00,000/- is time barred as it pertains to the year 2007 while the cheques are of the year 2011 and 2012 and therefore, the present complaint cases are not maintainable.
Digitally
signed by
TABASSUM
TABASSUM KHAN
KHAN Date:
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56. In that light, the limitation would be as provided under Article 34 to the Schedule in the Limitation Act, 1963. For the purpose of easy reference, the same is extracted here below:
THE SCHEDULE PERIODS OF LIMITATION Description of suit Period of Time from which limitation period begins to run PART II - SUITS RELATING TO CONTRACTS
34. On a bill of exchange or promissory note Three years When the fixed payable at a fixed time, after sight or after time expires.
demand.
57. The provision indicates that in respect of a promissory note payable at a fixed time, the period of limitation being three years would begin to run when the fixed time expires. This court is of the opinion that this argument is not legally tenable as the transactions and bill dating from 2007 till 2009 were continuing transactions between the parties and therefore, the law of limitation does not apply to these cases as limitation will start running from the date of the last bill i.e. in 2009. Moreover, the issuance of cheque in itself is acknowledgement of debt and therefore a fresh period of limitation starts from the date of issuance of cheque. The Supreme Court in A.V. Murthy v B.S. Nagabasavanna (2002) 2 SCC 642 recognized the application of Section 25(3) of the ICA while disallowing a dismissal of a complaint under section 138 of NI Act, at the behest of a complainant, where a cheque had been given for a liability which was time-barred. The relevant portion is extracted as under:
"5. As the complaint has been rejected at the threshold, we do not propose to express any opinion on this question as the matter is yet to be agitated by the parties. But, we are of the view that the learned Sessions Judge and the Page 23 of 26 Digitally signed by TABASSUM TABASSUM KHAN KHAN Date: 2024.10.29 15:33:21 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode learned Single Judge of the High Court were clearly in error in quashing the complaint proceedings. Under Section 118 of the Act, there is a presumption that until the contrary is proved, every negotiable instrument was drawn for consideration. Even under Section 139 of the Act, it is specifically stated 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 discharge, in whole or in part, of any debt or other liability. It is also pertinent to note that under sub-section (3) of Section 25 of the Indian Contract Act, 1872, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract."
58. Therefore, in view of the above discussion and judgment this court is of the view that the law of limitation does not apply to the transactions and invoices in question as the same were continuing transactions and the cheques in question were for part payment of the invoices which were given within 3 years of the date of the last invoice.
The cheques in question were filled by the complainant by apparent overwriting
59. It is contended by the accused persons that the cheque in question CW1/1 has a printed year of 1999 on it and the complainant has misappropriated the security cheques and lost cheques by overwriting 2011 on it. The overwriting is clear by bare perusal of the cheque in question. After closure of the complainant evidence the accused persons had filed an application u/s 311 Cr.P.C. for calling of the bank witness from the complainant bank. The same was allowed vide order dated 24.04.2023 of this court.
60. Court witness Shri Saket Gupta from PNB bank appeared before the court and was duly cross examined by ld. counsel for the accused as well as the Page 24 of 26 Digitally signed by TABASSUM KHAN TABASSUM Date:
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complainant. In his cross examination he stated clearly that if the cheque is having printed year of 1999 on it then it could not be presented after 1999 and as per the RBI guidelines of 2009-2010 the old series of cheque books were to be surrendered by the customers to the banks for issuance of new chequebooks. As per the bank witness if the old cheque was presented to the bank the same would have been rejected by the bank. On being further cross examined by the complainant the court witness stated that if a cheque of the year 1999 is presented then in that case reason for dishonor of the cheque will be 'invalid instrument' and not any other reason.
61. Therefore, the testimony of the court witness makes it amply clear that the contention of the accused is worthless. If the chequebook was in fact of the year 1999 and misappropriated by the complainant then the reason for dishonour in 52 connected matters would not have been-'funds insufficient', 'Payment stopped by drawer' or 'Exceeds Arrangement' but in fact it would have been Invalid instrument.
Difference in total Cheque amount and total amount as per Bills Ex.
CW1/1362. It was argued by the accused persons that the total cheque amount of 52 cheques is Rs. 1,53,63,546/- whereas the total amount as per the 237 invoices on record is Rs. 1,82,18,038/-. It is the defence of the accused persons that this extra amount in bill was not justified nor this extra amount was paid and therefore, the accused persons do not have the liability to pay the cheque amount as the same is not legally recoverable. This court is of the opinion that the same argument of the accused is not tenable as the cheque amount is less than the total bill amount and therefore it is a liability that can be recovered under the NI Act. The Digitally signed by Page 25 of 26 TABASSUM TABASSUM KHAN KHAN Date:
2024.10.29 15:33:26 +0530 CC No.619973/2016 M/S Shree Hari Clothing House Vs. M/s M. N. Mode cheques as mentioned in each and every complaint of the complainant was for the part payment of the total amount due on the accused persons as per the invoices.
Conclusion
63. Since in the instant case, the accused persons have failed to lead any convincing evidence to aid them in discharge of their onus and the presumption of law clearly operates in favour of existence of debt or liability, thus, having considered the entire evidence, I am of the opinion that the complainant has successfully proved all the essential ingredients of Section 138 of the Negotiable Instruments Act. Accordingly, Sh. Ajay Kalra Accused No.2 and Sh. M.N. Beg Accused No.3, both partners of Accused No.1 M/s M.N. Mode and others, are found guilty of offence U/S138 NI Act. Let they be heard on point of sentence on another date.
64. The judgment duly digitally signed be uploaded on CIS and a copy of the judgment be given dasti to the convict persons free of cost forthwith.
Digitally signed by TABASSUM KHAN TABASSUM Date: KHAN 2024.10.29 15:33:30 +0530 Announced in the open (TABASSUM KHAN) court on 29.10.2024 JMFC (NI Act 02) South East District, Saket, New Delhi
Certified that this judgment contains 26 pages and each page bears my signature.
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