Delhi District Court
17. The Hon'Ble Supreme Court In Kumar ... vs . Sharma Carpets (2009) 2 Scc on 9 September, 2022
IN THE COURT OF SH. P. BHARGAV RAO, M.M.01, N.I. ACT, WEST DISTRICT,
TIS HAZARI, DELHI
C.C. No.18472/16
PS Nangloi DLWT020102482015
The Delhi State Coop Bank Ltd
Head Office at 31, Netaji Subhash
Marg, Darya Ganj, New Delhi110002
....Complainant
Versus
Azad Singh
S/o Sh. Yograj Verma
R/o 662A, First Floor,
Goushala Road, Najafgarh,
New Delhi110043
.....Accused
Date of institution : 16.11.2015
Offence complained of: 138 NI Act
Matter was reserved for judgment: 30.07.2022
Date of Decision: 09.09.2022
Plea of guilt: Plead not guilty
Decision: Convicted
C.C. No. 18472/16 Dated 09.09.2022 Pages 1
JUDGMENT:
The present complaint has been filed by the complainant against the accused under section 138 Negotiable Instruments Act, 1881 (hereinafter referred as the "Act").
Complainant's Version:
1. Complainant avers that complainant is a cooperative bank. The accused persons are the member of the complainant bank and have taken a loan of Rs. 14,70,000/ in account no.014088000008 from the Najafgarh Branch of the complainant bank on 16.01.2004 and Sh.
Rakesh Kumar Verma and Sh. Kartar Singh stood guarantor for the same. The accused persons are the persistent defaulter in repayment of the above said loan and have flouted the terms and conditions of the loan documents with the malafied intention and Rs. 2740964 is still outstanding against the accused upto 31.10.2015. The complainant bank had to file an Arbitration case under the 70/71 of DCS Act which was allowed by the Ld. Arbitrator as the nominee of Ld. RCS an award dated 22.01.2009 was passed against the accused persons and his guarantor. There after recovery certificate dated 30.04.2009 was also issued against the accused and his guarantors. The bank filed the execution of the award dated 22.01.2009 of which execution is pending before the Assistant Collector as per DCS Act. In discharge of legal liabilities, the accused issued two cheques to the complainant bearing no.003154 amounting to Rs. 50,000/ dated 10.06.2015 and cheque bearing no.003155 amounting to Rs.50,000/ dated 10.06.2015 both drawn on ICICI Bank, Safdarjung Development Area (S. D. A) Branch, C18, New Delhi110016. Consequently, the complainant presented the impugned cheques with its Banker, ICICI Bank, Safdarjung Development Area, Nangloi Branch, New Delhi, which got dishonoured vide return memos dated 30.08.2015 with remarks "account closed".
2. Thereafter, the complainant sent a legal demand notice dated 28.09.2015 on address of the accused.
3. Upon failure of the accused to make payment of the cheque in question within the stipulated time of 15 days, the complainant has filed the present complaint u/s 138 of the Act.
C.C. No. 18472/16 Dated 09.09.2022 Pages 2
4. The complainant examined himself in presummoning evidence and after considering the complaint and entire documents on record, summon was issued by this Court against the accused on 19.11.2015.
Notice against the accused:
5. Notice was framed against the accused on 23.02.2017 and the accused pleaded not guilty and claim trial.
Plea of defence of the accused:
6. The accused had taken the following plea in his defence:
"I plead not guilty and claim trial.
I have no legal liability towards the complainant as both the cheques have been given as a security. I had repaid the said cheque amount by way of DD no.205841 to the complainant. Complainant has misused the cheque in question.
7. Thereafter, accused was permitted to crossexamine the complainant on 08.05.2017.
Complainant's evidence:
8. The complainant relies upon the documents Ex. CW1/1 to CW1/8.
• Authority letter/Delegation of powers is Ex.CW1/1 • Statement of account of accused is Ex. CW1/2(colly) • Original cheques in question are Ex. CW1/3 and Ex. CW1/4 • Original return memos in question are Ex. CW1/5(colly) • Copy of legal demand notice is Ex.CW1/6 • Original postal receipt is Ex. CW1/7 and Ex.CW1/8
9. Thereafter, despite giving several opportunities, CE was closed by this Court vide order dated 09.07.2018.
C.C. No. 18472/16 Dated 09.09.2022 Pages 3 Statement of the accused
10. Statement of the accused was recorded under section 313 Code of Criminal Procedure (hereinafter referred as "Cr.P.C") on 29.08.2018 wherein all the incriminating evidences were put up before the accused.
11. Accused stated that he had taken loan of Rs. 14,70,000/ from the complainant bank. The cheques were handed over on 10.06.2015 to the complainant in the legal cell. In pursuance of the execution proceedings which were on going against him. The payment was made by way of demand draft bearing no.205841 drawn on ICICI Bank and the payment was duly made. Despite repeated requests the complainant did not return the cheque. He did not owe any liability under these cheques to the complainant bank. The cheque was misused by the complainant and it was therefore dishonored on the above ground as there was no liabilities towards the complainant. He further stated that this is a false case against him and this case has been filed to victimize him so that the complainant could extort money.
12. DE was closed on 18.01.2019 and the matter was listed for final arguments.
Final arguments were heard on behalf of both the parties and I have given my thoughtful consideration to the material appearing on record.
The Law relating to Sec. 138 NI Act:
13. Before proceeding on the merits of the case, it is considered important to lay down the basic provisions of law with respect to section 138 of the Act which are as follows:
14. Section 138 of Negotiable Instruments Act, 1881 makes dishonour of cheques an offence. The Hon'ble Supreme Court in the case of Krishna Janardhan Bhat v. Dattatraya G. Hegde AIR 2008 SC 1325 held that the procedural requirements of section 138 are:
• There is a legally enforceable debt.
• The drawer of the cheque issued the cheque to satisfy part or whole of the debt.
C.C. No. 18472/16 Dated 09.09.2022 Pages 4 • The cheque so issued has been returned due to insufficiency of funds.
15. In order to establish an offence u/s 138 NI Act, following ingredients must be fulfilled by the complainant :
(i) The cheque was drawn by a person on account maintained by him for payment of money and the same is presented for payment within a period of 03 months from the date on which it is drawn or within the period of its validity;
(ii) The cheque was drawn by the drawer for discharge of any legally enforceable debt or other liability;
(iii) The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid from that account on an agreement made with that bank;
(iv) A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within 30 days of the receipt of information of the dishonor of cheque from the bank;
(v) The drawer fails to make the payment of the said amount of money within fifteen days from the date of receipt of notice.
Points for Determination:
i. Whether the accused in the present case was in receipt of legal demand notice?
ii. Whether presumption under section 118(a) read with section 139 of the NI Act can be raised in favour of complainant in the present case?
iii. If the reply to the above question is in affirmative, whether the accused successfully rebutted the presumption u/s 118(a) r/w Section 139 of the NI Act through preponderance of probabilities?
iv. If the reply to the above question is in affirmative, whether the complainant could prove his case beyond reasonable doubt?
I shall be deciding the abovementioned points of determination separately.
C.C. No. 18472/16 Dated 09.09.2022 Pages 5 Points for Determination:
(I)Whether the accused in the present case was in receipt of legal demand notice?
16. The accused during his statement u/s 313 CrPC admitted that he had received the legal demand notice.
(II) Whether presumption under section 118 read with section 139 NI Act can be raised in the favour of complainant in the present case?
17. The Hon'ble Supreme Court in Kumar Exports vs. Sharma Carpets (2009) 2 SCC 513, while discussing the contours of section 118(a) r/w 139 of the N I Act, has held interalia the following:
"14. Section 139 of the Act provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.
15. Applying the definition of the word "proved" in section 3 of the Evidence Act to the provisions of sections 118 and 139 of the Act, it becomes evident that in a trial under section 138 of the Act a presumption will have to be made that every negotiable intstrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under section 118 and 139 of the Act help him shift the burden on the accused. The presumption will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists."
C.C. No. 18472/16 Dated 09.09.2022 Pages 6
18. In the instant case, the accused at the time of framing of notice u/s 251 and statement u/s 313 CrP.C has admitted the issuance of cheque.
19. In the instant case, since the accused has admitted the execution of impugned cheque, the aforementioned statutory presumptions would be raised in favour of the complainant regarding the fact that the impugned cheque has been drawn for consideration and issued by the accused in discharge of legally enforceable debt.
(III) Whether the accused has successfully rebutted the presumption u/s 118(a) r/w Section 139 of the Act through preponderance of probabilities?
20. In order to create doubt in the complainant's claims regarding existence of a legally enforceable debt, the accused has primarily adopted the following defence:
Blank signed cheque was given to the complainant as security.
The loan was duly repaid to the complainant.
The award has been stayed by the Hon'ble High Court of Delhi vide order dated 28.08.2015.
21. I shall be dealing with these defences separately. However, before delving into the facts of the case, it is pertinent to note that the standard of proof which is required from the accused to rebut the statutory presumption under section 118 read with section 139 of the Act is preponderance of probabilities. The accused is not required to prove his case beyond reasonable doubt. This onus on the accused can be discharged from the materials available on record and from the circumstantial evidences. The Hon'ble Supreme Court in M.S Narayan Menon @ Mani vs. State of Kerala, Appeal (Crl) 1012 of 1999 has interalia held the following:
"The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies"
C.C. No. 18472/16 Dated 09.09.2022 Pages 7
22. Further, it should also be noted that the standard of proof in order to rebut the statutory presumption may be inferred from the materials on record and circumstantial evidences. It is not always mandatory for the accused to examine its own witnesses in order to rebut the said statutory presumption. At this point, reliance may be placed on the decision of the Hon'ble Supreme Court in the case of Krishna Janardhan Bhat (supra), wherein the Hon'ble Court has categorically held the following:
"32. accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on record. As accused has a constitutional right to remain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.
34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove defence on the part of an accused is "preponderance of probabilities". Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies."
23. This principle has been reiterated by the Hon'ble Supreme Court in Rangappa vs. Sri Mohan (2010) 11 SCC 441 wherein while discussing the scope and ambit of statutory presumption under section 139 of the Act, the Hon'ble Court has held the following:
"27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendantaccused cannot be expected to discharge an unduly high standard of proof.
28. In the absence of compelling justifications, reverse onus clause usually impose an evidentiary burden and not a persuasive burden.
C.C. No. 18472/16 Dated 09.09.2022 Pages 8 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 recoverable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the material 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."
24. Thus, section 139 of the Act puts the burden on the accused to prove his defence. However, the accused has to prove his defence on the balance of probabilities and not beyond reasonable doubt. Accused can prove his defence by drawing inferences from the materials already on record (including complainant's evidences), circumstances of the case and also leading his own evidences. If the accused successfully creates doubts in the complainant's claim about the existence of legally enforceable debt then the burden of proof shifts back to the complainant who is the required to prove the guilt of the accused beyond reasonable doubt. Reference can be taken from the decision of the Hon'ble Supreme Court in the case of Bharat Barrel & Drum Manufacturing Company vs. Amin Chand Pyarelal 1999 (3) SCC 35, wherein it was held:
"Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the nonexistence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non existence of the consideration can be either direct or by bringing on record preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under section 118(a) in C.C. No. 18472/16 Dated 09.09.2022 Pages 9 his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading evidence as the existence of negative evidence is neither possible not contemplated and even if led, it is to be seen with a doubt..."
25. Keeping in mind, the pronouncements laid down by the Hon'ble SC in the aforementioned cases, let us now examine the defence of the accused one by one :
(A) Blank signed cheque was given to the complainant as security
26. It is well settled that if the accused is issuing a cheque after signing the same to the complaint albeit blank, he is giving implied authority to the complainant to fill the blank details and to present the cheque on or after the date mentioned in the cheque. Therefore, aforementioned statutory presumptions can be raised in favour of the complainant even in case of blank cheque also.
27. Reference can be taken from the recent decision of the Hon'ble Supreme Court in the case of Bir Singh vs. Mukesh Kumar (2019) 4 SCC 197 wherein the Apex Court while upholding the validity of blank signed cheque and post dated cheque in a proceeding u/s 138 of the Act has interalia held the following:
"36. The proposition of law which emerges from the judgments referred to above is that the onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act.
37. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.
38. If a signed blank cheque is voluntarily presented to a payee,towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The C.C. No. 18472/16 Dated 09.09.2022 Pages 10 onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence."
28. Further, it should also be noted that statutory presumptions under 118(a) r/w 139 of the NI Act also arises even if the cheque is issued by the accused as security for the repayment of a legally enforceable debt or other liability. It is for the accused to prove that the cheque in such cases was not issued in discharge of any legal liability. Reference can be taken from the decision of the Hon'ble Supreme Court in the case of M/S Womb Laboratories Pvt Ltd vs Vijay Ahuja Criminal Appeals No. 13821383 of 2019 has categorically held that handing over of the cheques by way of security per se would not extricate the accused from the discharge of liability arising from such cheques.
29. Further, the Hon'ble Supreme Court in the case of Sampelly Satyanarayan Rao vs. Indian Renewable Energy (2016) 10 SCC 458 while discussing the ambit of section 138 of the Act visavis a cheque which has been stated to be given as security for repayment of loan, had interalia held the following:
"We are of the view that the question whether a postdated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability."
30. Reference can also be taken from the decision of the Hon'ble Supreme Court in the case of ICDS vs. Beena Shabeer AIR 2002 SC 3014 wherein the Hon'ble Court has discussed the contours of section 138 of the Act in order to include in its ambit "any cheque"
issued in discharge of debt or other liability. Relevant extract of the judgment is reproduced below:
C.C. No. 18472/16 Dated 09.09.2022 Pages 11 "The language, however, has been rather specific as regards the intent of the legislature. The commencement of the Section stands with the words "Where any cheque". The above noted three words are of extreme significance, in particular, by reason of the user of the word "any" the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment.
XXXXXXXXXXXX The language of the Statute depicts the intent of the lawmakers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act. 'Any cheque' and 'other liability' are the two key expressions which stands as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. Any contra interpretation would defeat the intent of the legislature"
31. Further, it is a settled proposition of law that if no legal liability existed on the date on which cheque was issued then offence u/s 138 of the Act would not be attracted with respect to the said cheque. Reference can be taken from the decision of Hon'ble Supreme Court in the case of Indus Airways Private Limited vs. Magnum Aviation Private Limited (2014) 12 SCC 539 wherein the Apex Court has interalia held the following:
"13. The explanation appended to Section 138 explains the meaning of the expression 'debt or other liability' for the purpose of Section 138. This expression means a legally enforceable debt or other liability. Section 138 treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability. The explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. In other C.C. No. 18472/16 Dated 09.09.2022 Pages 12 words, drawal of the cheque in discharge of existing or past adjudicated liability is sine qua non for bringing an offence under Section 138. If a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise, and material or goods for which purchase order was placed is not supplied, in our considered view, the cheque cannot be held to have been drawn for an exiting debt or liability. The payment by cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability."
32. A combined reading of the aforementioned decisions of the Hon'ble Supreme Court suggests that a cheque which has allegedly been issued by the accused as a security to the loan would not per se be out of the ambit of section 138 of the Act. The important consideration is the fact as to whether the said cheque has been issued in discharge of a debt or other liability or not i.e. whether any legally enforceable debt existed on the date when the cheque was issued. If the answer is in affirmative then section 138 of the Act would be attracted as the purpose for which the cheque was issued by the accused would be immaterial if the said cheque was dishonoured by the bank and there existed a legally enforceable debt on the date when the said cheque was issued. It is for the accused to prove that no legally enforceable debt existed on the date on which the cheque was issued.
33. Ergo, the defence taken by the accused during the statement u/s 313 CrP.C is not sustainable.
(B) The loan was duly repaid to the complainant.
34. The accused during the statement u/s 313 CRP.C and framing of notice u/s 215 Cr.PC stated that he had repaid the cheque amount by DD no.205841 to the complainant. It is well settled law that mere denial is not sufficient to rebut the presumption u/s 139 NI Act and the onus of proof is on the accused to rebut the said presumption. However, in the present case, despite getting several opportunities, the accused did not adduced any evidence to proof the fact that the loan was repaid.
(C) The award has been stayed by the Hon'ble High Court of Delhi vide order dated 28.08.2015.
C.C. No. 18472/16 Dated 09.09.2022 Pages 13
35. Ld. Counsel for the accused argues that the award has been stayed by the Hon'ble High Court of Delhi vide order dated 28.08.2015 and despite the stay, the complainant has filed this complaint. The argument is not tenable. The operative part of the order dated 28.08.2015 is reproduced hereunder:
It is directed that subject to the petitioner depositing an amount of Rs. 3 lakhs with the respondent within a period of two months from today and payment of Rs. 15,000/ per month on or before the 15 th day of each English Calender month, commencing from November, 2015, there shall be a stay to the effect and operation of the award dated 22nd January, 2009.
36. Perusal of the order clears shows that the stay was conditional subject to the accused deposit an amount of Rs. 3 lakhs with the complainant within the period of two month and payment of Rs. 15,000/ per month was to be given to the complainant commencing from November, 2015. In the present case, the accused has not adduced any evidence to show that he has complied with the directions of the Honble High court of Delhi. Further, dishonour of cheque is a distinct offence under the NI Act.
37. Ergo, evaluation of the entire defence pleas shows that the accused has miserably failed to rebut the presumption u/s 118 (a) read with Sec 139 of the NI Act by establishing a probable defence on a standard of preponderance of probabilities. Therefore, the accused has failed to create any reasonable doubt in the complainant's claim and failed to prove that no liability existed towards the complainant.
Conclusion :
38. This court finds that a legally enforceable debt existed in favour of the complainant in the present case, impugned cheque was given by the accused in discharge of debt which got dishonoured. Execution of cheque is admitted by the accused. The accused failed to make payment to the complainant even after receiving the legal demand notice.
C.C. No. 18472/16 Dated 09.09.2022 Pages 14
39. In view of the above discussion, the accused is convicted for the offence under section 138 of the Act.
40. Let the accused be heard on the quantum of sentence on 14.10.2022.
41. Copy of this judgment be given to the accused dasti. Digitally signed P by P BHARGAV RAO BHARGAV Date:
RAO 2022.09.12
09:24:26 +0530
Announced in the open court on (P. BHARGAV RAO)
09.09.2022 MM01/NI Act/WEST/THC/DELHI
09.09.2022
It is certified that this judgment contains 15 pages and each page bears my signature.Digitally signed
P by P BHARGAV
BHARGAV RAO
Date: 2022.09.12
RAO 09:24:36 +0530
(P. BHARGAV RAO)
MM01/NI Act/WEST/THC/DELHI
09.09.2022
C.C. No. 18472/16 Dated 09.09.2022 Pages 15