Delhi District Court
:: vs :: on 18 April, 2018
IN THE COURT OF SHRI SUMEET ANAND
METROPOLITAN MAGISTRATE (N.I. ACT)
PATIALA HOUSE COURTS : NEW DELHI
M/s Murti Udyog Ltd.
10133-36, East Park Road,
Model Basti, Industrial Area,
New Delhi - 110005 ................. Complainant
::Versus::
1. M/s Cap Cab India Ltd.
Second Floor, 7 Central Market,
Above Canara Bank,
Punjabi Bagh (West)
New Delhi 110026
2. Sh. J.P. Singh
(Same as Above)
3. Sh. Gurpreet Singh
(Not Summoned)
4. Sh. I.P. Singh
(Same as Accused No. 1 & 2) .............Accused persons
Old Case Number. : 141/1/13
New Case Number. : 25765/16
Date of Institution of Case. : 01.04.2013
Offence Complained Of. : 138 NI Act
Plea of the Accused. : Pleaded not guilty
Arguments Heard On. : 27.03.2018
Final Order. : Convicted
Date of Judgment. : 18.04.2018
CC No.25765/16 Page No.1 of 35
:: JUDGMENT ::
1. This judgment shall decide and dispose off criminal complaint case No. 25765/16 (old CC No. 141/1/13) titled as M/s Murti Udyog Ltd. Vs. M/s Cap Cab India instituted under section 138 of the Negotiable Instruments Act, 1881 (hereinafter NI Act) for the dishonour of five (5) cheques totaling to a sum of Rs.13,73,880.
2. Complainant is a company incorporated under the provisions of the Companies Act, 1956. On its behalf this case has been instituted and prosecuted by its director Naveen Goel.
3. Accused No. 1 M/s Cap Cab India is also incorporated under the provisions of Companies Act, 1956. Accused No. 2 (J.P. Singh) and accused No. 4 (I.P. Singh) are alleged to be its directors and responsible for conducting its business and also exercising financial control over it.
4. The complainant also arrayed one Gurpreet Singh as accused No. 3, however, he was not summoned. As such the trial has been conducted only qua accused No. 1 company and accused No. 2 and 3 only.
5. It is alleged that the accused had been dealing with the complainant by placing orders for aluminium wires and rods and used to make payments to the complainant through account payee cheques.
6. It is the case of the complainant that the accused in discharge of its liability issued the five dishonoured cheques in question, which are detailed hereunder;CC No.25765/16 Page No.2 of 35
Sr. Cheque Date Amount Drawn on Date of
No No. Dishonor
1. 684626 07.02.2013 2,40,000 Canara Bank, 09.02.2013
Janpath,
New Delhi
2. 684627 -DO- 2,50,000 -DO- 09.02.2013
3. 684628 -DO- 2,60,000 -DO- 11.02.2013
4. 684629 -DO- 2,70,000 -DO- 09.02.2013
5. 684630 -DO- 3,53,880 -DO- 09.02.2013
7. It is alleged that the dishonoured cheques in question were handed over to the complainant by the accused on 31.01.2013. It is also alleged that the cheques were issued by the accused without filling up the dates thereon with an understanding that they shall be presented upon instructions of the accused which ought to have been given within a day or two from the date of handing over of the cheques; or failing which all the cheques shall be presented on 07.02.2013.
8. It is the case of the complainant that he presented all the cheques on 07.02.2013, however, all the five cheques were dishonoured and returned back unpaid to the complainant for the reason "Insufficiency of Funds" and "Account Blocked".
9. As the payment of the dishonoured cheques was not forthcoming the complainant set the legal course into motion and issued the statutory legal demand notice dated 19.02.2013 to the accused calling upon him to make the payment of all the dishonoured cheques in question within the prescribed period. It is also alleged that the legal demand notice was duly served upon the accused.
CC No.25765/16 Page No.3 of 3510. It is the grievance of the complainant that despite compliance of all statutory requirements of law the accused has failed to make the payment of the dishonoured cheque in question within the prescribed period. Hence this complaint.
11. The AR of the complainant filed his evidence by way of affidavit. Based on the averments made by the complainant in his complaint and evidence affidavit and also upon the documents placed on record by the complainant the court took cognizance of offence under section 138 NI Act and summoned the accused No. 1 company and accused No. 2 and accused No. 4.
12. Upon appearance of accused persons, the notice of accusation under section 251 Cr.P.C was served upon the accused No. 2 (for himself as well as for accused No. 1 company) on 08.08.2014.
13. Accused No. 4 contested for his discharge from this case, first before this court and subsequently before the Ld. Sessions Court in a Revision Petition. However, his application for discharge by this Court and his Revision Petition were dismissed. Subsequently, notice of accusation under section 251 Cr.P.C was served upon accused No. 4 on 16.03.2016. Both the accused pleaded not guilty and claimed trial. The accused also moved an application under section 145 (2) NI Act. It was allowed and the accused availed opportunity to cross examine the witness of the complainant.
14. Except for the AR of the complainant, who was examined and cross-examined as CW-1, no other witness was examined by the complainant in support of his case.
CC No.25765/16 Page No.4 of 3515. After the complainants evidence in the post-summoning evidence stage, the statement of accused persons under section 313 Cr.P.C was recorded wherein all incriminating facts and evidences lead against them were explained to them affording an opportunity to give their explanation.
16. The accused also preferred to lead defence evidence. In support of their case Accused No. 2 (J.P. Singh) appeared as a defence witness and was examined-in-chief and cross- examined as DW-1. In support of their case, the accused further examined two more witnesses; viz DW-2, Anchal Anand (Bank Official from Canara Bank) and DW-3, Amit (Bank Official from Punjab National Bank).
17. Thereafter both the parties addressed detailed final arguments. The complainant also filed his arguments in writing. The same are on record.
18. This court has perused the entire record and has considered the evidence lead by the parties and has also taken into consideration the arguments putforth by the contesting parties in support of their respective cases.
19. Based on the evidence on record it is undisputed that the parties were in business transactions since the year 2008. It is also undisputed that all the dishonoured cheques in question belonging to the accused No. 1 bearing the signatures of accused No. 2 (J.P. Singh) and were issued to the complainant by the accused voluntarily.
20. However, it is disputed that the dishonoured cheques were issued by the accused to the complainant in discharge of any existing and legally enforceable debt or any other liability.
CC No.25765/16 Page No.5 of 3521. Based on the plea of defence raised by the accused, the averments made in their application moved under section 145 (2) NI Act, answers / explanations given by them in their statement recorded under section 313 Cr.P.C and also upon the testimony of DW-1 the fundamental defence raised by the accused persons are;
21.1 The dishonoured cheque in question was issued in blank bearing only the signatures of accused No. 2. As such it was issued as a security cheque, but not in discharge of any existing or legally enforceable debt or any other liability. As such the complainant has misused the cheques.
21.2 The returning memo's qua the dishonoured cheques cannot be relied upon as they have been interpolated by the complainant to bring the case within the purview of section 138 NI Act; as the returning memo's show the cheques to have be dishonoured for two reasons i.e. "Account blocked" and "funds insufficient". However, a cheque cannot be dishonoured for more than one reason. Therefore, complainant has himself put a tick mark on the reason "insufficiency of funds" on the returning memo leading to forgery of a document which cannot be relied upon.
21.3 The accused did not receive the statutory legal demand notice.
21.4 The essential ingredients of section 138 NI Act are not meted out in this case.
21.5 The averments made in the complaint are not CC No.25765/16 Page No.6 of 35 substantiated with any document showing existence of liability of Rs. 13,73,880/- by the accused towards the complainant.
21.6 The accused has given a loan to the AR of the complainant herein Naveen Goel to the tune of Rs. 25 lakh and the accused inclusive of interest has a claim of Rs. 28 lakhs from the AR of the complainant. 21.7 Although accused No. 4 (I.P. Singh) is a director of accused No. 1 company, however, he is not in-charge of and responsible for day to day affairs of accused No. 1 company. All the work of accused No. 1 company was looked after by accused No. 2 (J.P. Singh). Moreover, he is not the signatory to the dishonoured cheques in questions and he has not issued / handed over them to the complainant.
22. Amongst the various defences raised by the accused, it is imperative to first ascertain whether all the ingredients of section 138 NI Act are meted out in this case or not. For ready reference section 138 NI Act is reproduced herein below;
"[138 Dishonour of cheque for insufficiency, etc., of funds in the account. --Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without CC No.25765/16 Page No.7 of 35 prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless--
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.-- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.]"
23. It is undisputed that the dishonoured cheque(s) in question belong to accused No. 1 company and they bear signatures of accused No. 2 and have been voluntarily issued by the accused to the complainant. Although the veracity / reliability of the Returning Memo(s) qua the dishonoured cheque(s) has been questioned by the accused owing to alleged interpolation made thereon by the complainnant, however, the fact that the cheques dishonoured and were returned unpaid remains undisputed.
24.The very existence of the original bank Returning Memo(s) on record bearing the official mark denoting that the cheque has CC No.25765/16 Page No.8 of 35 been dishonoured invokes section 146 of the NI Act which mandates it for the court to presume, unless it is disproved, the fact of dishonour of the cheque. For ready reference Section 146 of the NI Act is reproduced herein below;
"146 Bank's slip prima facie evidence of certain facts.- the court shall in every proceeding under this chapter, on production of bank's slip or memo having thereon the official mark denoting that the cheque has been dishonoured, presume the fact of dishonour of such cheque, unless and until such fact is disproved."
25. Accordingly, the burden of disproving the fact of dishonour of cheque was on the accused, which he has failed to discharge. Moreover, DW-2 and DW-3, both defence witnesses have proved the fact of all the dishonoured cheques in question.
26. Furthermore, the accused No. 2 in his plea of defence alleged that he did not receive the legal demand notice. However, the accused No. 2, in his statement recorded under section 313 Cr.P.C to a specific question, categorically admitted having received the statutory legal demand notice.
27. At the outset, it is pertinent to note that the accused has not given any valid / cogent reason for taking different stand qua the same issue during the two different stages of trial. Now, the issue is whether the claim made by the accused in his plea of defence of not having received the legal demand notice is to be believed and relied upon; or his admission made in his statement recorded under sction 313 Cr.P.C is to be taken to be correct.
28. Based on the theory of "Onus of proof" in the back drop of CC No.25765/16 Page No.9 of 35 Section 27 of the General Clauses Act, where the accused without giving specific reason such as lack of postage stamp; or incorrect address mentioned on the postal receipt merely denies the receiving of the legal demand notice, in such case the onus is on the accused to prove that he did not receive the legal demand notice. For ready reference, Section 27 of the General Clauses Act is reproduced herein below "27 Meaning of service by post. Where any [Central Act] or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression serve or either of the expressions give or send or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post."
29. Herein, it is not the defence of the accused that the legal demand notice addressed to him was not duly posted with sufficient postal stamp, or it was incorrectly addressed. However, he has merely denied having received the legal demand notice, but for true and correct reasons known to him did not take any steps, such as summoning any witness from the postal department etc. to prove that the legal demand notice was not delivered to him.
30. Moreover, the accused has made a categoric admission of having received the legal demand notice in his statement recorded under section 313 Cr.P.C. The effect of the accused CC No.25765/16 Page No.10 of 35 making inculpatory statements in answers to the questions put while recording of his statement under section 313 Cr.P.C has been dealt with by Hon'ble Apex Court in the Judgment of Ram Naresh vs. State of Chhatisgarh (2012) 4 SCC 257 that where the accused exercises his right under Section 313 Cr.P.C. and gives explanation to the incriminating facts appearing against him, then his answers, insofar as they support the case of the prosecution can be used against him.
31. Although, accused no. 2 has admitted having received the legal demand notice, however accused No. 4, in his statement recorded under section 313 Cr.P.C, has neither admitted nor denied having receiving the statutory legal demand notice. He has merely stated that "I personally did not receive the Legal demand notice". In this view it is pertinent to note that, it is undisputed that accused No. 2 and 4 both are directors of accused No. 1 company. It is the settled proposition of law that notice to one director of the company is sufficient notice to all.
32. Accordingly, based on the abovedone discussion this court safely comes to the conclusion that both accused No. 2 and 4 received the statutory legal demand notice issued by the complainant.
33. Furthermore, this court has computed all relevant dates such as date of dishonour of cheque (09.02.2013 & 11.02.2013), date of issuance (19.02.2013) and dispatch (22.02.2013) of the legal demand notice, date on which the complaint has been instituted in the court (01.04.2013). As such, all steps necessary for taking cognizance of offence under section 138 NI Act have been taken by the complainant within the CC No.25765/16 Page No.11 of 35 prescribed period.
34. The accused has questioned the compliance of all ingredients of section 138 NI Act as he alleges that the dishonored cheques have not been issued in discharge of any existing and legally enforceable debt or any other liability and the dishonoured cheques were issued merely as security cheques.
35. Whether the dishonoured cheque was issued as a security cheque or in discharge of any existing and legally enforceable debt or any other liability is a pure question of fact that can be ascertained / decided only during the trial upon leading of cogent evidences by the contesting parties. Prima facie by virtue of section 139 of the NI Act the court has to proceed with the trial with a mandatory presumption that the dishonoured cheque was issued by the accused in discharge of legally enforceable debt or other liability. The onus of rebutting this mandatory presumption of law raised in favour of the complainant by section 139 of the NI Act rests upon the accused. The accused may rebut this mandatory presumption of law either by falsifying the case of the complainant through cross examination of the complainant witnesses; or by leading cogent defence evidence in support of his defence and establishing his defence on the threshold of pre-ponderance of probabilities. For ready reference section 139 of the NI Act is reproduced herein below;
"139. Presumption in favour of holder.- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in section 138, for the discharge, in whole or in part, of any debt or other liability."CC No.25765/16 Page No.12 of 35
36. With the mandatory presumption under section 139 NI Act in favour of the complainant, unless rebutted during the trial and also in view of the fact that the legal demand notice stands duly served upon the accused and all statutory acts, necessary to take cognizance of offence under section 138 NI Act have occurred within the prescribed period and considering that the issuance of the cheque voluntarily is undisputed this court safely comes to the conclusion that all ingredients of section 138 NI Act are duly meted out in this case.
37. Now, this court proceeds to deal with another significant defence of the accused that the dishonoured cheques in question were issued merely as security cheques, but not in discharge of any existing legally enforceable debt, or any other liability.
38. Accused claims that the dishonoured chque(s) were issued by it to the complainant in blank bearing only the signatures of the accused No. 2 (J.P. Singh).
39. In this context it is relevant to highlight that the complainant in his complaint and also during his cross-examination has admitted that he himself having filled the dates on the dishonoured cheques in question.
40. Moreover, perusal of the dishonoured cheque(s) suggests that their body and the admitted signatures of accused No. 2 are in two different inks. Moreover, the date, which is admitted to have been filled up by the complainant when compared with body of the cheque(s) prima facie appear to have been filed in the same ink. Hence, it can be a possibility that the complainant made an inchoate instrument a choate one by CC No.25765/16 Page No.13 of 35 filling up particulars thereon.
41. At this stage it is relevant to discuss the provisions of law dealing with authority of the Payee / Holder to make an inchoate instrument a choate one by filling up the particulars thereon. In this regards section 20 of the NI Act is relevant. For ready reference section 20 of the NI Act is reproduced herein below;
"20. Inchoate stamped instruments.--Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in 1[India], and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount; provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder."
42. Moreover, the Hon'ble Delhi High Court in the Judgment of Ravi Chopra Vs. State & Anr. II (2008) DLT (CRL.) 223 while dealing with the issue of referring of a dishonoured cheque to FSL (forensic science laboratory) has categorically dealt with the scope and application of Section 20 of the NI Act and the authority of the payee / holder to make an inchoate instrument a choate instrument by filling up particulars thereon. It is held;
14. The word "cheque" has been inclusively CC No.25765/16 Page No.14 of 35 defined under Section 6 NI Act to include a 'bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand...". The words "bill of exchange" have been defined in Section 5 NI Act as "an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument." The expression 'negotiable instrument' has been defined in Section 13 NI Act as meaning a "promissory note, bill of exchange or cheque payable either to order or to bearer."
15. What appears to be clear from the above definitions that an essential feature of a cheque is that it has to be signed by the maker. This signing of the cheque need not be by hand alone. After the amendment to Section 6 in 2002, the NI Act acknowledges that there can be an electronic cheque which can be "generated, written and signed in a secure system."
Nevertheless, the signing of the cheque is indeed an essential feature. But what about the other material particulars? Can the word "cheque" occurring in Section 138 NI Act include a blank cheque which is signed by the drawer but the material particulars of which are left unfilled at the time it was handed over to the payee? While on the one hand Section 138 NI Act which contemplates a 'no fault liability' has to be strictly construed as regard the basic ingredients which have to be shown to exist, it requires examination of the other provisions of the NI Act in order to ascertain if a cheque that was signed but left blank can, if the material particulars are subsequently filled up and presented for payment, still attract the same liability.
16. The counsel for the petitioner contended that a cheque which is signed but left blank at the time of such signing, will be materially altered if CC No.25765/16 Page No.15 of 35 it is subsequently filled up without the consent of the drawer, which according to him is what has happened in the present case. Such cheque would be void in terms of Section 87 of the NI Act and therefore cannot be presented for payment or honoured even if it is. Section 87 NI Act reads as under:
Section 87 - Effect of material alteration Any material alteration of a negotiable instrument renders the same void as against anyone who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties; Alteration by indorsee.--And any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof. The provisions of this section are subject to those of Sections 20, 49, 86 and 125.
17. While it is correct that in terms of the above provision, any material alteration to a cheque without the consent of the drawer unless it is made to carry out the common intention of the original parties thereto renders the cheque void, the expression "material alteration" has not been defined. Significantly, Section 87 has been made subject to Sections 20, 49, 86 and 125 NI Act. These provisions help us to understand what are not considered 'material alterations' for the purpose of Section 87.
18. Section 20 NI Act talks of "inchoate stamped instruments" and states that if a person signs and delivers a paper stamped in accordance with the law and "either wholly blank or have written thereon an incomplete negotiable instrument"
such person thereby gives prima facie authority to the holder thereof "to make or complete as the case may be upon it, a negotiable instrument for any amount specified therein and not exceeding the amount covered by the stamp."
Section 49 permits the holder of a negotiable CC No.25765/16 Page No.16 of 35 instrument endorsed in blank to fill up the said instrument "by writing upon the endorsement, a direction to pay any other person as endorsee and to complete the endorsement into a blank cheque, it makes it clear that by doing that the holder does not thereby incurred the responsibility of an endorser." Likewise Section 86 states that where the holder acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in the bill, or which substitutes a different place or time for payment, or which, where the drawees are not partners, is not signed by all the drawees, all previous parties whose consent has not been obtained to such acceptance would stand discharged as against the holder and those claiming under him, unless on notice given by the holder they assent to such acceptance. Section 125 NI Act permits the holder of an uncrossed cheque to cross it and that would not render the cheque invalid for the purposes of presentation for payment. These provisions indicate that under the scheme of the NI Act an incomplete cheque which is subsequently filled up as to the name, date and amount is not rendered void only because it was so done after the cheque was signed and delivered to the holder in due course.
19. The above provisions have to be read together with Section 118 NI Act which sets out various presumptions as to negotiable instruments. The presumption is of consideration, as to date, as to time of acceptance, as to transfer, as to endorsement, as to stamp. The only exception to this is provided in proviso to Section 118 which reads as under:
Provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, CC No.25765/16 Page No.17 of 35 the burden of proving that the holder is a holder in due course lies upon him.
20. A collective reading of the above provisions shows that even under the scheme of the NI Act it is possible for the drawer of a cheque to give a blank cheque signed by him to the payee and consent either impliedly or expressly to the said cheque being filled up at a subsequent point in time and presented for payment by the drawee. There is no provision in the NI Act which either defines the difference in the handwriting or the ink pertaining to the material particulars filled up in comparison with the signature thereon as constituting a 'material alteration' for the purposes of Section 87 NI Act. What however is essential is that the cheque must have been signed by the drawer. If the signature is altered or does not tally with the normal signature of the maker, that would be a material alteration. Therefore as long as the cheque has been signed by the drawer, the fact that the ink in which the name and figures are written or the date is filled up is different from the ink of the signature is not a material alteration for the purposes of Section 87 NI Act.
43. Hence, based on above-done discussions, even if the complainant himself filled up the particulars on the dishonoured cheque, which admittedly bears the signatures of accused No. 2 (J.P. Singh) and which was issued voluntarily by the accused to the complainant, he acted in accordance with the provision of law.
44.Furthermore, CW-1 (AR of the complainant) and DW-1 (Accused No. 2 J.P. Singh) in their evidence have admitted that they were in business transactions since the year 2008. Both CW-1 and DW-1 in their respective evidences have also maintained that the accused used to make payments only CC No.25765/16 Page No.18 of 35 through Banking channels and no cash payments were made by the accused for the goods supplied by the complainant to accused against its orders.
45. Some relevant excerpts from the testimonies of CW-1 and DW-1 are reproduced herein below;
Excerpts from Testimony of CW-1:
"The complainant company has been dealing with the accused company since 2008. The complainant company supply aluminium wire and aluminium rod to the accused company. Verbal orders were used to be placed by the accused company for supply of goods. I do not remember whether the accused company ever placed written order with the complainant company for supply of goods. The accused company used to pay the money in respect of supplied goods either by RTGS or by way of cheque. It is correct that the accused company never made payment in cash to the complainant."
Excerpts from Testimony of CW-2:
"I had issued the dishonoured cheque(s) inn question in 2010-2011 as security cheque(s) to the complainant company. The accused company is dealing with the complainant company since 2008. The complainant company supplied aluminium rods to the accused company. The alleged cheques issued by me were for security for goods supplied by the complainant company. The payment was made by the accused company to the complainant through RTGS / letter of credit / NEFT after receiving the goods and thereafter, the complainant company used to return back the security cheques to the accused company."
46. The Dishonoured cheques in question were issued in 2010- 2011. However, the parties were in business transactions since 2008. This court for a moment presumes the fact as alleged by CC No.25765/16 Page No.19 of 35 the accused, that from 2008 to 2010 the accused placed orders with the complainant and issued security cheques for supply of goods and after receiving the goods made payment through either of the banking channels i.e. RTGS/letter of credit/NEFT and took back the cheques issued as security.
47. Accordingly, owing to the mode of conducting business as alleged by the accused, it can be safely presumed that before the issuance of the five dishonoured cheques all previous orders placed by the accused had been received by him and all previous cheques issued as security had been received back by him after making due payments through banking channels.
48. Now, again owing to the mode of conducting business as alleged by the accused, the issuance of five dishonoured cheques by the accused to the complainant as security cheques manifestly suggest that the accused would have certainly placed certain further orders in 2010-2011, when he claims to have issued the dishonoured cheques. Accordingly, the onus was directly and heavily upon the accused to show, or at least aver during his examination-in-chief, giving opportunity to opposite party to cross-examine him with respect to the fact that what quantity and amount of goods were ordered by him to be supplied by the complainant for which he had to issue five cheques simultaneously as security. Similarly, the onus was direct and heavy upon the accused to prove on record whether the goods ordered, for which the dishonourd cheques were issued as security, were actually delivered or not delivered. However, the accused has, for reasons best known to him, preferred to remain silent on these CC No.25765/16 Page No.20 of 35 crucial aspects.
49. As the accused has preferred to remain silent on the crucial aspects as above-mentioned therefore, considering the mode of conducting business as alleged by the accused and presuming that the five dishonoured cheques were issued by the accused to the complainant as security for supply of goods, for which orders were placed verbally, this court is of the opinion that there could have been only either of the two eventualities and none other, that;
49.1 The complainant did not supply the goods ordered; or 49.2 The complainant supplied the goods as ordered.
50. In the first eventuality the accused ought to have demanded the return of his security cheques and must have ensured their return even if for the same it had to approach any law enforcing agency such as police or court. However, it is not the case of the accused that it demanded the return of his security cheques which the complainant malafidely retained from the year 2010-2011 (when they are alleged to have been issued) upto 2013 when they were dishonoured.
51. In the second eventuality also the accused ought to have demanded the return of his security cheques and must have ensured their return even if for the same it had to approach any law enforcing agency such as police or court.
52. Accordingly, in any case the onus was on the accused to show that why it did not ask for return of its cheques, allegedly issued as security cheques in 2010-2011 (when they are alleged to have been issued) till 2013(when they were presented and dishonoured). And, if he did ask for return of CC No.25765/16 Page No.21 of 35 the cheques, but they were not returned then why the accused did not recourse to the remedies available under the law.
53. It is not the case of the accused that owing to a running continuous business transaction between the parties and at the commencement of the business, owing to an agreement or a condition precedent to commence the business, the five dishonoured cheques were issued as security cheques to the complainant. It is the categoric defence of the accused, as stated by him in his examination-in-chief, that as a practice to secure the supply of goods by the complainant security cheques were issued to the complainant and after receiving the goods payment was made through RTGS/letter of credits/NEFT and thereafter the complainant used to return back the security cheques.
54. The very fact, according to the case of the accused, that the accused issued security cheques to the complainant, they would have been issued only for securing supply of goods from the complainant as ordered by the accused and for no other purpose. It is not the case of the accused, neither in his plea of defence, nor in his evidence that at any time the order placed by him to the complainant for supply of goods was not honoured and the goods were not supplied, or defective or wrong goods were supplied.
It is also not the case of the accused that after placing orders for supply of goods, for which he issued the dishonoured cheques as security, he made the payment for the goods but the security cheques were not returned in accordance to the common course of business being practiced between the CC No.25765/16 Page No.22 of 35 parties.
55. It is undisputed case of both the parties that all monetary payment from the accused to the complainant were made through banking channels only and no payment was made in cash. Hence, in order to prove that the dishonoured cheques in question were issued as security for securing the supply of goods by the complainant, as alleged, then the accused ought to have shown that at the relevant period, when he alleges to have issued the dishonoured cheques i.e. in 2010-2011 he made payments through banking channels to the complainant.
56. Rather, in the opinion of this court, as the accused had always made all payments whatsoever to the complainant only through banking channels, then the best evidence for the accused would have been proving on record the total sum of money paid by him to the complainant, as would have been reflected in his statement of accounts. More particularly the payment made around the relevant period, when the dishonoured cheques are alleged to have been issued as security cheques would have significantly probablise the case of the accused. However, for true and correct reasons known to the accused he did not lead any evidence to show the total payments made by him to the complainant, or any payment made during the relevant period of time.
57. The accused in his defence has examined DW-2 i.e. an official from Canara Bank on which all the dishonoured cheques are drawn. DW-2 has placed on record the statement of account of the accused maintained with Canara Bank for the period 2008 to 2013. Despite the statement of account being on record, CC No.25765/16 Page No.23 of 35 the accused did not make attempts to show the amount of money, if any reflected in the statement, paid by him to the complainant.
58.As pert the case of the accused, it used to place orders with the complainant and to secure the supply of goods issued security cheques. Admittedly parties were in business transactions since 2008 and their business relation was such that it was being conducted orally. As per the evidence on record the complainant was supplying similar kind of articles to the accused i.e. aluminium rods/wires. As such the price of the one article would remain constant and varying only with respect to the quantity, weight etc. As such, as and when the accused placed order for supply of goods, it would be in the knowledge of both the parties about the liability incurred thereon. Based on this analogy, this court is of the opinion that even if the cheques issued by the accused are termed by him as security cheques because as a matter of business practice between the parties the accused, after receiving goods, used to make payment through RTGS/letter of credit/ NEFT and take return of his cheques, yet the cheques issued were not merely as security cheques, but cheques issued in discharge of liability because at the time they are issued the liability is ascertained.
59. A cheque falls under the category of security cheque where it is issued by one person to another when the liability / amount payable thereof through such cheque is not ascertainable at the time of its issuance and it is not ascertainable / fixed at the time of its presentation; or the liability to be discharged CC No.25765/16 Page No.24 of 35 thereof through such cheque is contingent upon happening or non-happening of an event.
The Hon'ble High Court of Delhi in Credential Leasing & Credits Ltd. Vs. Shruti Investments 223 (2015) DLT 343 held that even a security cheque can form the basis of complaint under Section 138 of the NI Act, if on the date of the deposit of the post-dated security cheque, the debt of the accused stood crystallized.
It was further held that the crucial and relevant date would be the date of presentation of the cheque and not the date of its issuance. Thus, if crystallized and ascertained debt or other liability exists on the date when the cheque is presented for payment, it would not be relevant whether, or not, such crystallized debt or other liability existed on the date when the cheque was issued.
"Thus, I am of the considered view that there is no merit in the legal submission of the respondent accused that only on account of the fact that the cheque in question was issued as security in respect of a contingent liability, the complaint under Section 138 of the NI Act would not be maintainable. At the same time, I may add that it would need examination on a case to case basis as to whether, on the date of the presentation of the dishonoured cheque the ascertained and the crystalized debt or other liability did not exist. The onus to raise a probable defence would lie on the accused, as the law raises a presumption in favour of the holder of the cheque that the dishonoured cheque was issued in respect of a debt or other liability. As settled by the Supreme Court, the said onus obliges the accused to raise a defence
- either by picking holes in the case of the CC No.25765/16 Page No.25 of 35 complainant or by positively leading defence evidence which leads the court to believe that there is a probable defence raised by the accused to the claim of the complainant with regard to the existence of the debt or other liability. The said onus does not cast as stringent an obligation on the accused, as it casts on the complainant who has to prove beyond reasonable doubt the guilt of the accused".
60. Accordingly, based on the above-done discussion this court safely comes to the conclusion that the dishonoured cheque in question was not merely issued as a security cheque as at the time of its issuance the liability of the accused towards the complainant was already liquidated / fixed / ascertainable and because the cheque was issued for securing delivery of goods ordered and accused has failed to prove, or even aver during the trial that he did not receive the goods; or if he received them he has already made payment thereof by way of agreed mode of payment between the parties such as through RTGS/letter of credit/NEFT.
61. Now this court proceeds to deal with another bone of defence raised by the accused challenging the veracity of the returning memos qua the dishonored cheques on the ground that they have been interpolated/ tampered with by the complainant resulting in forging a document on which no reliance can be placed.
62. It is an admitted case of the accused that his bank account with Canara Bank, on which all the dishonored cheques in question have been drawn, was blocked by the bank as his account turned into an NPA (Non Performing Asset). DW-2 the witness of the accused, has testified and proved the fact that CC No.25765/16 Page No.26 of 35 the account of the accused had been blocked and all the dishonored cheques in question had been returned back unpaid for the reason "account blocked".
63. It is contended by the accused that the returning memos show an endorsement on the face of it that the cheque has been dishonored and returned back unpaid due to the reason "account blocked". However, there is a tick mark also put on the returning memo on the reason "insufficiency of funds". It is contended by the accused that a cheque cannot be dishonored for more than one reason and in fact the cheques in question dishonored for the reason "account blocked", but the complainant himself put a tick mark on the returning memo on the reason "insufficiency of funds" only to bring this case under the purview of Section 138 NI Act. It is also contended that the moment complainant interpolated the return memo, it became a forged document, on which no reliance whatsoever can be made.
64. Accused No.4 in his plea of defence for the first time raised the issue of tampering of the returning memos. However, this issue was not raised by accused No.2 in his plea of defence. Furthermore, it is pertinent to note that in the entire cross- examination of CW-1 there is no question or suggestion whether direct or even implied put to the complainant suggesting that the complainant interpolated the returning memos. In the absence of any question to the effect of interpolation of the returning memos, preventing the complainant from giving any explanation to this effect, no reliance can be placed on the course of defence adopted by the CC No.25765/16 Page No.27 of 35 accused qua the interpolation of the returning memos. Reliance is placed upon judgment of Hon'ble Supreme Court of India in Laxmibai (Dead) THR L.Rs and & Anr. Vs. Bhagwanthuba (Dead) THR L.Rs and & Ors. AIR 2013 SC 1204; wherein it was held that, "there can not be any dispute with respect to settled legal propositions that if a party wishes to raise any doubt as regards correctness of the statement of a witness; the said witness must be given an opportunity to explain his statement by drawing his attention to that part of it, which has been objected to by the other party as being untrue.
65. Furthermore, the accused examined DW-2 and DW-3 officers from Canara Bank and Punjab National Bank respectively and successfully brought it on record that all the dishonored cheques in question have been dishonored for the reason "account blocked". However, for true and correct reasons known to the accused, no suggestion or question was put to DW-2 and DW-3 with respect to interpolation of the returning memos. The accused has raised the issue of interpolation of the returning memos in his plea of defence and in his statement recorded under Section 313 Cr.P.C., however, during the opportunities available to prove the fact of interpolation/tampering of the returning memos i.e. during the cross-examination of CW-1 and examination of DW-2 and DW- 3, the accused did not put any questions or suggestions at omitted to even touch upon the issue of tampering of returning memo.
66. By raising the defence of tampering of returning memos, the CC No.25765/16 Page No.28 of 35 accused contends that the returning memos were tampered with only to bring this case within the purview of Section 138 NI Act by showing that cheques were dishonored for the reason "insufficiency of funds". It appears that accused intends to contend that had the cheques been dishonored only for the reason "account blocked", then the rigor of Section 138 NI Act would not have been attracted.
67. In the opinion of this court, even if it is presumed that the complainant put a tick mark on the returning memo on the reason "insufficiency of funds", even then it does not tantamounts to interpolation as even if the cheque is dishonored for the reason "account blocked" the rigor of Section 138 NI Act is attracted. It is held in the judgment of Laxmi Dyechem vs. State of Gujarat (2012) 13 SCC 375, that, "15. The above line of decisions leaves no room for holding that the two contingencies envisaged under Section 138 of the Act must be interpreted strictly or literally. We find ourselves in respectful agreement with the decision in NEPC Micon Ltd. (supra) that the expression "amount of money ............. is insufficient" appearing in Section 138 of the Act is a genus and dishonour for reasons such "as account closed", "payment stopped", "referred to the drawer" are only species of that genus. Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the "signatures do not match" or that the "image is not found", which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act. This Court has in the decisions referred CC No.25765/16 Page No.29 of 35 to above taken note of situations and contingencies arising out of deliberate acts of omission or commission on the part of the drawers of the cheques which would inevitably result in the dishonour of the cheque issued by them. For instance this Court has held that if after issue of the cheque the drawer closes the account it must be presumed that the amount in the account was nil hence insufficient to meet the demand of the cheque. A similar result can be brought about by the drawer changing his specimen signature given to the bank or in the case of a company by the company changing the mandate of those authorised to sign the cheques on its behalf. Such changes or alteration in the mandate may be dishonest or fraudulent and that would inevitably result in dishonour of all cheques signed by the previously authorised signatories. There is in our view no qualitative difference between a situation where the dishonour takes place on account of the substitution by a new set of authorised signatories resulting in the dishonour of the cheques already issued and another situation in which the drawer of the cheque changes his own signatures or closes the account or issues instructions to the bank not to make the payment. So long as the change is brought about with a view to preventing the cheque being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied. There may indeed be situations where a mismatch between the signatories on the cheque drawn by the drawer and the specimen available with the bank may result in dishonour of the cheque even when the drawer never intended to invite such a dishonour. We are also conscious of the fact that an authorised signatory may in the ordinary course of business be replaced by a new signatory ending the earlier mandate to the bank. Dishonour on account of such changes that CC No.25765/16 Page No.30 of 35 may occur in the course of ordinary business of a company, partnership or an individual may not constitute an offence by itself because such a dishonour in order to qualify for prosecution under Section 138 shall have to be preceded by a statutory notice where the drawer is called upon and has the opportunity to arrange the payment of the amount covered by the cheque. It is only when the drawer despite receipt of such a notice and despite the opportunity to make the payment within the time stipulated under the statute does not pay the amount that the dishonour would be considered a dishonour constituting an offence, hence punishable. Even in such cases, the question whether or not there was a lawfully recoverable debt or liability for discharge whereof the cheque was issued would be a matter that the trial Court will examine having regard to the evidence adduced before it and keeping in view the statutory presumption that unless rebutted the cheque is presumed to have been issued for a valid consideration.
68. Moreover, DW-2 Officer from Canara Bank in his cross- examination has admitted that at the relevant point of time there was no sufficient balance in the account of the accused to honor the cheque and the account was blocked being an NPA (Non Performing Asset) only due to lack of funds in it.
69. In this view, based on above-done discussion this court is of the opinion that there is no interpolation or tampering with the returning memo done by the complainant bringing it under the category of a forged document making it liable to be rejected.
70. The accused has also raised a defence that they have given loans to the complainant and the complainant has a liability for an amount approximately Rs.28 Lacs inclusive of interest towards the accused. It is again pertinent to note that no CC No.25765/16 Page No.31 of 35 question or suggestion to this effect has been put to the AR of the complainant during his cross-examination affording him an opportunity to give his explanation. The accused has not shown any steps taken by him seeking recovery of money from the complainant from any court of law. Moreover, as per the defence raised by the accused the amount given by him to the complainant was in the form of loan and the present case pertains to dishonor of cheque allegedly issued in discharge of liability arising out of a business transaction. There is no question of any set-off of money, whatsoever in this case. The defence of the accused claiming to be entitled for money from the complainant given as a loan to the complainant is out of context of this case and even if it is proved or presumed that in fact complainant has liability towards the accused, it shall have no bearing on this case.
71. Accused No.4 (I.P. Singh) in addition to the defences discussed hereinabove has taken an additional defence that although he was the director of accused No.1 company, however he was not incharge of and responsible for day to day affairs of accused No.1 company. He has also taken the defence that he is neither the signatory of the dishonored cheque in question nor he issued it to the complainant.
72. Accused No.4 I.P. Singh has been summoned being a director of accused No.1 company in terms of Section 141 of the NI Act. It is categorically mentioned in the complaint as well as in the evidence affidavit of the AR of the complainant that accused No.4 along with other directors of accused No.1 company was responsible for day to day affairs of accused CC No.25765/16 Page No.32 of 35 No.1 company. During the cross-examination of DW-1, a document Mark EX DW-1/CW-A i.e. a notepad slip of accused company dated 25.08.2009 addressed to Naveen (AR of the complainant) expressing regret and saying sorry for delay in payment and agreeing to payment of interest was put to DW-
1. He admitted that the document is made on the notepad of the accused No.1 company, but he denied its execution by him. On the same date, the document EX DW-1/CW-A, in order to discover and obtain proper proof of relevant facts was put to accused No.4 I.P. Singh and a court question was asked that whether document EX DW-1/CW-A is in his handwriting and bears his signatures.
The accused voluntarily answered to the court question and admitted that it is in his handwriting, but he denied his signatures thereon.
73. In the opinion of this court, accused No.4 could have made/executed document EX DW-1/CW-A addressed to the AR of complainant in the capacity of being responsible for business transactions of accused No.1 company with the complainant. As such he was dealing on behalf of accused No.1 company.
74. In accordance to provisio appended to Section 141 NI Act, the accused No.4 in order to prove his innocence had to prove that the offence was committed without his knowledge, or that he exercised all due diligence to prevent the commission of the offence. Considering the plea of defence of accused No.4 and also considering the answers given by him in his statement recorded under Section 313 Cr.P.C., it is manifest that he was CC No.25765/16 Page No.33 of 35 having full knowledge about the issuance of the dishonored cheques to the complainant and he did not take any steps to prevent the commission of the offence.
75. In the opinion of this court if accused No.4 was not incharge of and responsible for day to day affairs of the accused No.1 company, then his authority despite being a director in accused No.1 company would have been certainly regulated through Articles of Association/ Memorandum of Association of accused No.1 company. Hence, if the claim of accused No.4 that he was not incharge of and responsible for day to day affairs of accused No.1 company is to be believed, then the best evidence available with accused No.4 was to prove on record the Articles of Association/ Memorandum of Association of accused No.1 company showing the indoor management of accused No.1 company, with which usually the persons dealing with a company are unaware off. However, the same have not even been placed on record.
76. Accordingly, except for a mere averment there is nothing on record to show that accused No.4 was not incharge of and responsible for day to day affairs of accused No.1 company and it has been proved on record that the issuance of dishonored cheques was within his knowledge. As such, this court safely comes to the conclusion that accused No.4 I.P. Singh being a director of accused No.1 company was incharge of and responsible for day to day affairs of accused No.1 company.
77. In view of the above-done discussion, this court is of the considered opinion that the dishonored cheques in question CC No.25765/16 Page No.34 of 35 were issued by the accused persons in discharge of its existing and legally enforceable debts and liabilities. Accordingly, accused No.1 M/s Cap Cab India Ltd. and accused No.2 J.P. Singh and accused No.4 I.P. Singh are found to be guilty for offence of dishonor of five cheques and are accordingly convicted.
Announced in the Open (SUMEET ANAND)
Court on 18th day of April 2018 MM(N.I Act)/PHC/ND
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