Delhi District Court
On Account Of Several Pronouncements To ... vs State on 4 September, 2015
IN THE COURT OF BHARAT CHUGH,
METROPOLITAN MAGISTRATE (NI ACT)-1, CENTRAL:
ROOM NO.275, TIS HAZARI COURT COMPLEX, DELHI
Satish Kumar
VERSUS
Sanjay Ahuja
JUDGMENT
Part A - The lis at a glance A. Serial No. of the Case 8660/13 B. Date of Commission of the offence 03.10.2013 C. Name of the Complainant Satish Kumar D. Name of Accused person & his Sanjay Ahuja, s/o Late Sh.
parentage & residence D.Y.Ahuja, r/o S-132, GK-2, New Delhi - 110048 E. Offence complained of Dishonor of cheque - culpable u/s 138 of the Negotiable Instruments Act.
F. Plea of the accused and his Pleaded not guilty. Contended that
examination in brief. the cheque in question was not given
in discharge of a legal debt or
liability, but as security.
Alternatively, he argued that, even
otherwise, the liability towards the
complainant stands mitigated on
account of payments made by him,
which have not been accounted for,
by the complainant.
G. Final Order Conviction
H. Judgment reserved on 27.08.2015
I. Judgment pronounced on 04.09.2015
Part B - A brief statement of reasons for the decision (As mandated u/s 355(i) of the Code of Criminal Procedure, 1973.) In re : Satish Kumar v. Sanjay Ahuja Page 1 of 28 Complainant's case
1. "There are two sure ways to lose a friend, one is to borrow, the other to lend" ('The name of the Wind' by Patrick Rothfuss). The complainant would have the court believe that this is one such case, where a 'friendly loan' has meant the end of a 'friendship' and led to this embittered litigation over the unsettled 'loan'.
2. Shorn of unnecessary details, the complainant claims that he and accused, being involved in a similar kind of business & in the same vicinity, know each other for a long time and have enjoyed cordial and friendly relations, until of course, money became involved, as we shall shortly see.
2. The complainant claims that sometime in December, 2012, the accused approached him for a friendly loan of Rs. 3,00,000/- on account of financial difficulties and some urgent personal needs; with an undertaking to return the same within three months. On account of the close relations between them, the complainant claims to have advanced the loan to the accused.
3. The complainant claims that even after expiry of the stipulated period, accused did not keep his word and failed to return the amount. Inspite of repeated reminders from the complainant, the accused kept dilly-dallying the matter on one pretext or the other. This went on for about seven months, before the complainant ran out of patience and he sought the return of his amount with vehemence. Finally, the accused accepted his default, and issued a post dated cheque to the complainant in the first week of August, 2013 (cheque No. 915807, dated 15.08.2013 - in short 'the cheque in question') as repayment. This cheque is what became the ruination of their friendship, as, much to the dismay of the complainant, the cheque got dishonored on presentation with the remarks "insufficient funds" vide memo dated In re : Satish Kumar v. Sanjay Ahuja Page 2 of 28 03.09.2013 and constrained the complainant to send a legal demand notice to the accused, which also fell on deaf ears, leaving him with no option but to file the present case.
The Defence.
4. The accused entered appearance and pleaded not guilty. In his plea of defence recorded on 04.07.2014, the accused admitted knowing the complainant. He also admitted that the cheque in question pertained to his bank account. He further admitted having signed the cheque. He, however, denies having filled-in the particulars on the cheque and contends that the cheque was given to the complainant not as repayment of a loan but security. The accused claims to have taken a loan of Rs. 2,00,000/- from the complainant and not Rs. 3,00,000/- as alleged by the complainant. He claims to have repaid Rs. 1,50,000/- out of the said amount to the complainant, in the shape of three installments of Rs. 50,000/- paid in January, February & March, 2013.
5. Therefore, the defence of the accused is two pronged, firstly - he claims that, the cheque was issued security and not in discharge of a legally enforceable debt or liability in praesenti, taking it out of the ambit of Section 138 of the NI Act; Secondly - he argues that his liability is much lesser than what is claimed by the complainant and further mitigated on account of payments made by him, which have not been accounted for, by the complainant.
6. As regards the question of dishonor of the cheque, the accused has not disputed the factum of dishonor of cheque on the grounds of insufficiency of funds.
7. As regards the service of legal demand notice as a precursor to the prosecution, the accused denied having received the legal notice, however, he In re : Satish Kumar v. Sanjay Ahuja Page 3 of 28 has admitted his address appearing on the legal notice and A.D.Card to be his correct address.
This, in sum and substance, is the factual exposé.
The Law
8. The factual position being thus, Now let us quickly run through the legal benchmark which is to be satisfied in order to constitute an offence under S. 138 N.I. Act :-
(i) Person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
(ii) The cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;
(iii)That 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;
(iv)That cheque is 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;
(v) The payee or the holder in due course of the cheque 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 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(vi) 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 In re : Satish Kumar v. Sanjay Ahuja Page 4 of 28 the cheque within 15 days of the receipt of the said notice.
Being cumulative, it goes without saying that it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the Act.
The legal benchmark being thus. Let us apply it to the facts of the case.
Appreciation of Evidence and Application of law to the facts of the case.
On an analysis of the facts and legal position above, I find the parties to be at variance on two primary issues, viz - Service of legal demand notice; and the question of existence of legally enforceable debt/liability.
I. SERVICE OF LEGAL DEMAND NOTICE
9. Let us begin at the beginnings and first examine the clichéd defence of non service of legal notice. We've already seen that the accused has denied the service of legal notice, but notably, has not disputed the correctness of his second address appearing on the legal notice and the AD Card (Ex. CW1/3 & Ex. CW1/8 respectively). In this factual background, the plea as to non service of legal notice is downright false and frivolous, for the simple reason that, the address on the legal notice/postal articles is exactly the address on which the accused has been successfully served in this case. The address once having been admitted to be his correct address, and the legal notice having been dispatched by Registered Post, a presumption of due service arises (See :
Section 27 of the General Clauses Act and Section 114 of the Indian Evidence Act) and now it was incumbent on the accused to lead evidence to prove that In re : Satish Kumar v. Sanjay Ahuja Page 5 of 28 the notice was not served on him. Not even an iota of evidence has been brought on record by the accused to displace the presumption of due service.
A mere denial that the legal notice has not been served, would not ipso facto rebut the presumption of due service. The accused ought to have rebutted the presumption by establishing that he was not residing at the said address at the given point of time or that the notice was not served on him for any other reason, by examining the postal authorities or any other mode. He has similarly not tried disproving the AD card available on record, which bears an acknowledgment. He has not tried disputing the correctness of this acknowledgment. In these circumstances there is no reason to doubt the service of legal notice.
Ld.Counsel for the Accused has argued with great vehemence relied on an internet generated delivery track report with respect to the consignment carrying the legal notice, and has claimed that according to the search results "such consignment details were not found". Two printouts have been filed to corroborate the same.
This argument leaves me cold and fails to convince for the simple reason that this document/computer print out, has not been led or proved in evidence. Even though the accused entered the witness box himself as DW1, he did not exhibit these tracking reports, much less prove them. Infact, as noted above, the accused did not lead any evidence at all to disprove the service of legal notice.
I find that, it stands to reason that such an old record can also be weeded out and it is possible that the same may not be available online after elapse of a good deal of time. These documents (reflecting consignment not found), no attempt to prove which has been made by the accused, cannot be taken at his mere ipse dixit. As opposed to this, the complainant has produced In re : Satish Kumar v. Sanjay Ahuja Page 6 of 28 a more contemporaneous internet generated delivery report Ex. CW1/9 and Ex. CW1/10 which shows due delivery.
In my opinion, the delivery reports, relied so strenously by the accused, have gone unproved and the court has to fall back upon the initial premise of presumption of due service, when the address is admitted to be correct and believe the service of legal notice as accused has taken no steps to rebut the said presumption.
It deserves mention that, in any event, in view of the authoritative pronouncement of the Hon'ble Supreme Court in C.C. Alavi Haji v. Palapetty Muhammed and Another (2007) 6 SCC 555, the rigor of the requirement of service of legal notice has been reduced to an almost vanishing point in Section 138 NI Act jurisprudence. The Hon'ble Supreme Court while distilling the true intent behind the requirement of service of legal demand notice as a precursor to launching of prosecution, has quite categorically held that, the service of summons of the court is opportunity enough for the accused to pay the cheque amount and evade prosecution; and ny accused who fails to pay the amount within 15 days of the service of summons, cannot shield himself behind the technical defence of non service of legal notice. The relevant extract from the decision deserves to be quoted in extenso :-
"17. It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is no stipulation of giving of a notice before filing a complaint. 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 the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the Court that he had made payment within 15 days of receipt of In re : Satish Kumar v. Sanjay Ahuja Page 7 of 28 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 the summons from the Court along with the copy of the 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 the G.C. Act and Section 114 of the Evidence Act. In our view, any other interpretation of the proviso would defeat the very object of the legislation."
10. The 'non service of legal notice' challenge having been met, let us now, turn to the core issue in this case and examine 'whether the cheque in question can be said to have been issued in discharge of a legal liability or not ?' II. EXISTENCE OF LEGALLY ENFORCEABLE/DEBT OR LIABILITY.
11. To appreciate this issue, let us again briefly recapitulate that the accused has admitted having drawn the cheque on a bank account maintained in his name, having signed the same and also having handed over the same to the complainant. Once these foundational facts are admitted and a factual basis is established, by virtue of Section 118(a) and Section 139 of the NI Act a presumption of the cheque having been issued in discharge of a legally sustainable liability and drawn for good consideration, arises :-
Section 118 of the N.I 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 In re : Satish Kumar v. Sanjay Ahuja Page 8 of 28 instrument, when it has been accepted, indorsed, negotiated or transferred was accepted, indorsed, negotiated or transferred for consideration;"
Section 139 of the N.I 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"
It is thus clear that as per the scheme of the N.I Act, on proof of foundational facts - a presumption arises as to a cheque having been issued in discharge of a legal liability, and the burden of proof lies upon the accused to rebut the said presumption. This clearly is an instance of the rule of 'reverse onus' in action, where it is incumbent on the accused to lead what can be called 'negative evidence'. Evidence of a character, not to prove a fact affirmatively, but to lead evidence to show non existence of liability. Keeping in view, that this is a departure from the cardinal rule of 'presumption of innocence' in favour of the accused, and also keeping in mind that negative evidence is not easy to be led by its very nature. It is now fairly settled that the accused can displace this presumption on a scale of preponderance of probabilities and the lack of consideration or a legally enforceable debt need not be proved to the hilt or beyond all reasonable doubts. The accused can either prove that the liability did not exist or make the non existence of liability so probable that a reasonable person ought under the circumstances of the case - act on the supposition that it does not exist. Simply put, the accused has to make out a fairly plausible hypothesis. This the accused can do either by leading own evidence in his defence or even by punching holes within the case of the complainant in the testing ordeal of cross examination.
While adjudging whether in a case the presumption of consideration has been In re : Satish Kumar v. Sanjay Ahuja Page 9 of 28 rebutted, it becomes important to underscore that a mere denial of liability or vague defence of blank cheque as security, cannot be taken at the mere ipse dixit of the accused. The accused has to come forth with a convincing defence that appeals to the judicial conscience. Needless to state that if on a bare denial the presumption is stated to be rebutted, that would defeat the legislative intention of having a presumption in the first place. The reverse onus clause, as aforesaid, has been introduced to further the legislative objective of improving the credibility of negotiable instruments. The presumption that a person would not ordinarily hand over a signed cheque (a valuable security) to another unless the same is for a liability, this presumption that is inspired out of common human conduct and affairs, has to be respected and given its full play. Only in a case where the accused comes up with a convincing defence to liability, that the presumption can be stated to have been rebutted, lest the statutory intent as adumbrated above would be the direct casualty. In that light, let us embark to examine the defence of the accused and answer whether the same is a plausible one. In this venture, we would at all occasions, juxtapose the conduct of the accused with that of the hypothetical reasonable man and see how he fares.
12. In my opinion, the accused has not succeeded in rebutting the presumption of legal liability or even probablising his defence. Infact his defence has gone on to strengthen the case of the complainant. Very importantly, the accused has admitted friendly relations with the complainant and most importantly, the factum of having taken a sum of Rs. 2,00,000/- from the complainant, in cash as friendly loan. Therefore, the fact that the relations between the parties were intimate enough for the complainant to give such a loan stands proved. The financial prowess or capacity of the complainant also stands proved by this very admission. The only variance that remains is whether the loan was of Rs. 2,00,000/- (as admitted by the accused), or Rs. 3,00,000/- (as suggested by the complainant). In my opinion there is no reason In re : Satish Kumar v. Sanjay Ahuja Page 10 of 28 why it can't be the latter. When the complainant could admittedly grant a loan of Rs.2,00,000/- to the accused, a sum of Rs. 3,00,000/- cannot be said to be a sum outside his financial capacity, by any stretch of imagination. In view of these facts and circumstances the financial capability of the complainant to grant the loan of Rs. 3,00,000/- stands fairly established. The relations between the parties also appear to be such as to facilitate the grant of such loan.
The argument by the Ld.Counsel for the Accused that the complainant has not filed any documentary proof to prove the factum of loan, fails to convince, in the light of relations between the parties. The accused, himself, while deposing as DW1 conceded that no record of transactions was kept in view of the prevailing trust and faith between the parties. The accused, in his examination in chief conducted on 17.08.2015, deposed :-
" I know the complainant since 2012 and I had taken a friendly loan of Rs. 2,00,000/- in cash, instead of Rs. 3,00,000/- as alleged in the complaint by the complainant, in the month of November 2012 and I had promised to pay him back Rs. 50,000/- each in four installments from January 2013 to April 2013. I have already paid three installments of Rs. 50,000/- each from January 2013 to March 2013. However, I did not take any receipts from the complainant and I did not keep any records of the cash transactions which I returned because of our friendly relations. Moreover, the relations were amicable and there was trust and faith and I had not anticipated that things would come to such a pass"
It is apparent from the above that the relations were not such, as for the parties to feel it necessary to keep a documentary trail of the loan. In this factual background, the complainant cannot be faulted for not having adduced any written proof of grant of loan.
In re : Satish Kumar v. Sanjay Ahuja Page 11 of 2813. This corroborates the version of the complainant of having given the loan in cash. The complainant was extensively grilled on the question of source of funds in his cross examination, however to my mind, the same achieves nothing for the accused. As aforesaid, when the complainant had the financial wherewithal to advance a cash loan of Rs. 2,00,000/-. Rs. 3,00,000/- cannot be stated to be outside his means, by any stretch of imagination. Though, the admission by the accused of acceptance of Rs.2,00,000/- from the complainant ought to have sufficed, the complainant in his cross examination on 21.08.2014, further clarified the source of funds as "This amount of Rs. 3,00,000/- was not withdrawn from my bank. (Vol. It was lying at my home and part of this amount was also taken from my wife and some amount was also with me from the sale of my business" and thus laid the foundation of his case.
14. It is pertinent to note that the complainant has also led in evidence Ex. CW1/X1, which is a printout of the cash book stated to be maintained by the complainant's accountant, which shows two withdrawals by the complainant from his business in December, 2012. It would be apposite to remind ourselves that the complainant is stated to have paid the loan on 10.12.2012, and he had withdrawn Rs. 70,000/- on 01.12.2012 and sum of Rs. 70,000/- on 04.12.2012 from his firm. This totals an amount of Rs. 1,40,000/- withdrawn by the complainant, right before advancement of loan to the accused. This further fortifies the case of the complainant by proving availability of cash in hand. This coupled with the general admission of the accused as to reciept of Rs. 2,00,000/- put it beyond the pale of doubt that the complainant could have advanced the sum of Rs. 3,00,000/- at the relevant period of time.
15. Ld.Counsel for the Accused has argued with great vehemence that if this be the case, the complainant ought to have an outstanding of Rs. 1,40,000/- against him in books of his firm, however he has not produced his In re : Satish Kumar v. Sanjay Ahuja Page 12 of 28 balance sheets thereafter, as come out in deposition dated 31.01.2015 and for this reason, his plea is not sustainable. In my opinion, though the non production of the balance sheet does raise an inference that the said outstanding may not have been shown by the complainant in his firm's corresponding balance sheets. However, that to my mind is not sufficient to displace his case. As seen above, the financial prowess of the complainant is beyond doubt in this case and the discrepancy even if any, in entries not so material so as to go to the root of the case. The basic contours of the complainant's case have been admitted. For stronger reason, since the accused, himself while appearing as DW1, has conceded during cross examination that "I had not shown the alleged loan of Rs. 2,00,000/- in my books of accounts (Vol. As the same was friendly loan).." When the accused has not disclosed the loan (admitted to be Rs.2,00,000/-) in his books, then it would be unfair to rant the complainant for not having done the same. The pot cannot be allowed to call the kettle black. It is writ large on the face of the record that the relations of the parties are such so as to enable a grant of friendly loan sans any documentation. If at all, this non disclosure by the complainant has revenue implications, this is a matter between the accused and the revenue and cannot make the present loan irrecoverable, as we shall see in the following paras.
16. We may remind ourselves that, the accused has also taken the defence of having made repayments to the tune of Rs. 1,50,000/- to the complainant, in three equated monthly installments, on account of which, he claims, his liability stands reduced to Rs. 50,000/-.
This contention has gone unsubstantiated. No evidence has been led by the accused to even probablise, much less, prove this defence of repayment. Needless to state, the burden of proving this specific fact was on the accused, which he has failed to discharge. Nothing could be elicited from the complainant either, in his cross examination that would buttress the theory of In re : Satish Kumar v. Sanjay Ahuja Page 13 of 28 repayment.
17. Learned Counsel for the accused has argued, with great vehemence that the cheque in question was given, signed in blank and subsequent filling on of the cheque by the complainant invalidates the instrument as it constitutes material alteration. He argues that a bare perusal of the cheque reveals that there is a difference in handwriting.
This argument fails to convince for more reasons than one, first of all there is nothing on record to even probablise, much less establish, that the complainant has filled in the cheque. Merely because handwriting on the cheque is, as per the accused, different, does not prove anything. A situation cannot be ruled out wherein the accused might have got the cheque filled in by somebody else.
Even if it is assumed for an instant, for the sake of argument, that, the body of the cheque was filled-in by the complainant or at his instructions (Although there is nothing on record to prove that). Even in that situation - It is no longer res integra that no law requires that whole body of the cheque should be filled by the drawer himself. If the signatures on the cheque are admitted, the same is sufficient. The legal permissibility of the much hackneyed 'defence of blank cheques' has been virtually denied by the courts on account of several pronouncements to that effect (See Ravi Chopra vs State And Anr. 2008(2) JCC (NI) 169, Vijender Singh v. M/s Eicher Motors Limited & Anr. Crl.M.C. 1454/2011 decided on 05.05.2011, Tarun Gautam vs State Crl M C No.529/2012 decided on 13.02.2012 and Manoj Sharma vs Anil Aggarwal CRL.M.C. 1325/2012 decided on 20.04.2012). The relevant excerpts from a judgment by the Hon'ble High Court of Delhi in the case of Ravi Chopra vs State And Anr, may be referred to, in this regards :-
In re : Satish Kumar v. Sanjay Ahuja Page 14 of 28"
..
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.
...
...
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 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 In re : Satish Kumar v. Sanjay Ahuja Page 15 of 28 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, 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 In re : Satish Kumar v. Sanjay Ahuja Page 16 of 28 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."
It is therefore, apparent that, a combined reading of Section 20 and Section 87 of the Negotiable Instruments Act, as aforesaid, amply reveals that merely filling in the particulars on a blank signed cheque would not amount to material alteration, and a person giving blank cheque can be attributed with the intention of having given implied consent to the payee to fill in that cheque. The accused could not adduce any evidence or elicit anything in the cross examination of the complainant to detract from such implied authority given to the complainant or the fact that cheque has been filled by the complainant in the first place. Therefore, this defence does not advance the case of the accused in any manner.
18. Ld.Counsel for the Accused has strenuously argued that the complainant being a Money Lender, is debarred from recovering his loan, in absence of a money lending license.
This argument leaves me cold, and fails to persuade for more reasons than one.
Firstly, There is nothing on record to suggest that the complainant has been In re : Satish Kumar v. Sanjay Ahuja Page 17 of 28 giving loans to other people on interest earlier. It needs no gainsaying that, in order for the complainant to be a money lender, it needs to be proved that he is engaged in the business of grant of loans to several people in a commercial manner and with a certain regularity. No evidence has been brought on record to demonstrate that he is a money lender. The allegation therefore has remained unsubstantiated.
Secondly, even assuming the complainant to be a money lender for an instant, the same would not render the present complaint non-maintainable. In this regard, a recent decision of the Hon'ble Delhi High Court is apposite to be referred to.
In Kajal v. Marwah (Crl. A. 870/2003 - Date of Decision : 27.03.2014), the court, under similar facts, held :-
"In my view, even if the appellant/complainant was engaged in lending money, that would not debar her from filing a complaint under Section 138 of the Negotiable Instruments Act, if a cheque issued to her towards repayment of the loan advanced by her is dishonoured by the bank for want of funds and the drawer of the cheques fails to make payment within the prescribed time, after receipt of legal notice from the lender. Section 3 of the Punjab Registration of Money Lenders' Act, 1938, which applies to Delhi, to the extent it is relevant provides that notwithstanding anything contained in any other enactment for the time being in force, a suit by a money lender for the recovery of a loan shall, after the commencement of the Act, be dismissed unless the money lender at the time of institution of the suit is registered and holds a valid license or holds a certificate from the Commissioner granted under Section 11 of the Act, specifying the loan in respect of which the suit is instituted or if he is not already a registered or licensed money lender, he satisfies the court that he has applied for such registration or license but the application is pending. The aforesaid provision does not debar a money lender from instituting a complaint under Section 138 of the Negotiable Instruments Act, 1881, which is a remedy enforceable before a criminal court, and totally independent of a civil suit. The criminal liability is incurred only in case a cheque is issued in discharge of a debt or other liability, the said cheque is dishonoured for want of funds and the borrower fails to make payment of the amount of the cheque even after In re : Satish Kumar v. Sanjay Ahuja Page 18 of 28 receipt of a notice from the lender."
It is, therefore, apparent therefore that the embargo is with respect to filing of suit for recovery of money or simply the recovery of that money. This fails to have a bearing on the present case, since what is at hand is a complaint case u/s 138 of the NI Act, which is not a recovery proceeding, but are proceedings to punish a person who after issuing a cheque fails to honour the same and also commits a default in paying the said amount on receipt of the notice.
Hence the argument of amount being irrecoverable and therefore not a legally enforceable debt, is misconceived in the facts of the case and in view of the legal position as enunciated above.
19. Ld.Counsel for the Accused has also argued that the alleged loan not having been disclosed in the Income Tax Returns, cannot be termed to be legally enforceable liability in view of the bar of Section 269SS of the Income Tax Act. He argues that the complainant has not filed on record any income tax returns, which goes on to raise an inference that the said loan has not been disclosed in the income tax returns.
I hasten to add, that even if it is assumed for the sake of argument that the loan was not disclosed in the IT returns (although there is nothing to record to bring home that point) the same would be inconsequential. It is now fairly settled that the mandate of Section 269SS of the Income Tax Act, extends only to the taker or receiver of the loan and not the giver. Section 269SS of the Income Tax Act, reads as under :-
Section 269SS: Section 269SS provides that any loan or deposit shall not be taken or accepted from any other person otherwise than by an account payee cheque or account payee bank draft if,
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or (b) on the date of In re : Satish Kumar v. Sanjay Ahuja Page 19 of 28 taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid and the amount or the aggregate amount remaining unpaid ; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more.."
Thus, it is clear that no person can accept any loan or deposit of Rs 20,000/-or more otherwise than by way of an account payee cheque or an account payee draft.
Consequences of contravention of Section 269SS have been provided in Section 271D of Income Tax Act 1961, which provides, that if a loan or deposit is accepted in contravention of the provisions of section 269SS then a penalty equivalent to the amount of such loan or deposit may be levied by the Joint commissioner.
Hence, even on a bare reading of these provisions, it is manifest that the bar pertains to the receiving or taking of loan and not giving the same.
This aspect is very succinctly highlighted by the Hon'ble High Court of Bombay in the relatively recent decision of Krishna P.Morajkar v. Joe Ferraro, 2013 SCC Online Bom 862, which reads as follows :-
"..
18. The learned Counsel for the respondent submitted that the observations of the Supreme Court in para 14 of the judgment in Rangappa (supra) show that the Supreme Court had not in any way cast any doubt on the correctness of the decision in Krishna Janardhan Bhat (supra), as it was based on specific facts and circumstances therein. Therefore, he submitted that observations in Krishna Janardhan Bhat (supra) about non- compliance of provisions of Section 269SS and the implications of Section 271D of the Income Tax Act would still stand as good law. The learned Counsel for the appellant submitted that even these observations would stand impliedly over- ruled. He pointed out that what was held in Krishna Janard In re : Satish Kumar v. Sanjay Ahuja Page 20 of 28 han Bhat (supra) was that advance taken by way of loan of more than Rs. 20,000/- was only to be made by way of an ac- count payee cheque. He submitted that in Rangappa (supra) the Supreme Court was specifically considering the case of an advance of Rs. 45,000/- made in cash and yet the Supreme Court had upheld the conviction recorded. Thus even those observations based on the provisions of Section 269SS and 271D of the Income Tax Act made in Krishna Ja nardhan Bhat (supra) would stand impliedly overruled. I am entirely in agreement with the learned Counsel for the appellant because the Supreme court in Rangappa (supra) had specifically noted the judgment in Krishna Janardhan Bhat (supra). The Supreme Court had obviously noted the observations in para 26 in Krishna Janardhan Bhat (supra) that advance of more than Rs. 20,000/- was to be made only by way of an account payee cheque, and yet the Supreme Court accepted case of a complainant who claimed to have made an advance of Rs. 45,000/- in cash and proceeded to uphold the conviction, even though the case rested on the fact that cash advance of a sum more than Rs. 20,000/- was made. Thus, on this aspect also Krishna Janardhan Bhat (supra) stood impliedly overruled by Ranga paa (supra), and the judgment is to be held rendered on the facts of that case, not laying down any law. Therefore, judg- ments which follow Krishna Janardhan Bhat (supra) can be safely ignored.
19. There is another aspect of the matter. The learned Coun- sel for the respondent pointed out that inKrishna Janardhan Bhat (supra) attention of the Supreme Court was possibly not drawn to the actual wording of Section 269SS of the In- come Tax Act. He submitted that Section 269SS of the In- come Tax Act, in fact, does not cast any burden upon a per- son making advance in cash to record it in his returns and does not prevent any such cash advance from being made. It may be useful to quote provisions of Section 269SS and 271D of the Income Tax Act as under:
Section 269SS: No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit other- wise than by an account payee cheque or account payee bank draft if,-
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or
(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fall-
en due or not), the amount or the aggregate amount remaining unpaid; or In re : Satish Kumar v. Sanjay Ahuja Page 21 of 28
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:
Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or de- posit taken or accepted by-
(a) Government;
(b) any banking company, post office savings bank or co-opera- tive bank;
(c) any corporation established by a Central, State or Provincial Act;
(d) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(e) such other institution, association or body or class of institu-
tions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:
[Provided further that the provisions of this section shall not ap- ply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural in- come and neither of them had any income chargeable to tax un- der this Act.] Section 271D - (1) If a person takes or accepts any loan or de- posit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) any penalty imposable under sub-section (1) shall be im-
posed by the joint Commissioner.
(emphasis supplied).
A plain reading of Section 269SS shows that no person can accept any loan or deposit of a sum of Rs. 20,000/- or more otherwise than by an account payee cheque or account pay- ee bank draft. It does not say that a person cannot advance more than Rs. 20,000/- in cash to another person. It is clear that the restriction on cash advances was in fact on the tak- er and not the person who makes the advance. The penalty for taking such advance or deposit in contravention of pro- visions of Section 269SS was to be suffered by one who takes the advance. Therefore, it was obviously impermissible to invoke these provisions for preventing a person from recov- ering the advance which he has made..."
It is clear from the above that non disclosure of an advance would not make In re : Satish Kumar v. Sanjay Ahuja Page 22 of 28 the same non recoverable as it is incumbent on the person taking the advance to disclose the loan and not the person giving the same.
What further fortifies this conclusion is the decision of the Hon'ble High Court of Delhi in Mukesh Gupta v. P.K.Bajaj (CS(OS) No. 1615/2003, DOD : 20.11.2006, wherein, the court in a civil suit for recovery, quite categorically held that, even assuming a non disclosure in tax returns. That by itself would not render the contract of loan void and loan irrecoverable. Relevant excerpts from the decision are as follows :-
"36. On issue No.2 framed vide order dated 2.2.2006, suffice would it be to note that as held in the report published as 2002 (8) SCC 31, Nutan Kumar &Ors. vs. IInd Additional District Judge &Ors., unless a statute specifically provides that a contract contrary to the provision of the statue would be void, the contract would remain binding between the parties and can be enforced between the parties themselves. Consequences, if any other in law, would follow.
37. Learned counsel for the defendants could not show any statutory provision under the Income Tax Act 1961 or any other law which stipulates that a loan transaction not recorded in the Income Tax Return or a loan transaction which is in violation of Section 69-A, 69-B or Section 269SS of the Income Tax Act would be void.
38. I accordingly hold that the suit is not barred under Sections 69-A, 69-B or Sections 269SS of the Income Tax Act..."
It is therefore clear that the claim does not become irrecoverable on account of alleged violation of Section 269SS of the IT Act. Infact, the accused has admitted having received a loan of Rs. 2,00,000/- in cash from the complainant and made no entries in his books of accounts by his own admission. He claims to be an income tax payee, but has seemingly, not disclosed the same in his income tax returns and is therefore, subject to action under the Income Tax Act.
In re : Satish Kumar v. Sanjay Ahuja Page 23 of 2820. Ld.Counsel for the Accused has also argued, with great eloquence, that the cheque in question having been issued as a security cheque, is beyond the pale of Section 138 of the Negotiable Instruments Act.
This argument is also devoid of merit, for more reasons than one. Firstly - The accused has brought no material on record to prove the handing over of the cheque as security. Nothing could be elicited from the complainant in his cross examination, which could throw doubt on his case. The complainant has stuck to his guns, even in the testing waters of cross examination and maintained that the cheque was given much after the giving of loan and therefore, there is no reason to disbelieve the same as the accused has failed to discharge his onus on this count.
The second reason why this defence ought not to succeed is that even if it is assumed for the sake of argument that the cheque in question was given as security, that, ipso facto would not absolve the accused from legal liability. A security that does not secure is not even worth the paper it is on. Legal consequences flow out of a (so-called) security cheque too. The accused cannot invoke invoke the defence of a 'security cheque' as a magical chant to earn an automatic exoneration. In this regard, reliance is placed on the Hon'ble Delhi High Court decision in Credential Leasing & Credits Ltd. vs Shruti Investments & Anr (2015 SCC OnLine Del 10061) wherein it has been held :-
"
5. In Suresh Chandra Goyal v. Amit Singhal, Crl. Ap- peal Nos. 601/2015 decided on 14.05.2015, this Court had occasion to consider the defence of "security cheque". In that case the complainant invested monies, from time to time, in the business of the accused. A sum of Rs. 3 Lakhs was outstanding after accounting for the monies returned by the accused. The accused entered into a MOU for repayment of the said outstanding In re : Satish Kumar v. Sanjay Ahuja Page 24 of 28 amount in 6 monthly instalments of Rs. 50,000/- each. The accused issued six security cheques of Rs. 50,000/-, which were to be returned upon payment of the corre- sponding instalment. While three instalments were ad- mittedly received by the complainant, he claimed that the remaining three were not paid. The corresponding se- curity cheques were banked; dishonoured upon presenta- tion, and; after issuance of statutory notice, the com- plaint under Section 138 NI Act filed due to non-pay- ment. This Court, inter alia, observed as follows:
"28. There is no magic in the word "security cheque", such that, the moment the accused claims that the dishonoured cheque (in respect whereof a complaint under Section 138 of the Act is preferred) was given as a "security cheque", the Magistrate would acquit the accused. The ex- pression "security cheque" is not a statutorily de- fined expression in the NI Act. The NI Act does not per se carve out an exception in respect of a 'secu- rity cheque' to say that a complaint in respect of such a cheque would not be maintainable. There can be mirade situations in which the cheque is- sued by the accused may be called as security cheque, or may have been issued by way of a secu- rity, i.e to provide an assurance or comfort to the drawee, that in case of failure of the primary con- sideration on the due date, or on the happening (or not happening) of a contingency, the security may be enforced. While in some situations, the dishonor of such a cheque may attract the penal provisions contained in Section 138 of the Act, in others it may not."
16. This Court analysed the meaning of the word "secu- rity" and the question as to what does the issuance of a security cheque entail, and, if there is no specific agree- ment touching upon the said aspect, what would the rights and obligations of the parties qua a security cheque, in case the primary obligation to secure which the security cheque was given, is not discharged. The relevant extract reads as follows:
"57. ..... ..... ..... The Black's Law Dictionary (6th edition), inter alia, defines "security" to mean:
"Protection; assurance; Indemnification. The term is usually applied to an obligation, pledge, mortgage, deposit, lien, etc., given by a debtor in order to assure the payment or performance of his debt, by furnishing the creditor with a resource to be used in case of failure in the principal obligation. Collateral given by debtor to secure loan. Document that indicates evidence of In re : Satish Kumar v. Sanjay Ahuja Page 25 of 28 indebtedness. The name is also sometimes given to one who becomes surety or guarantor for another".
(Emphasis supplied)
58. Similarly, the word "security" is defined in the Shorter Oxford English Dictionary (5th edition), inter alia, to mean:
"Property etc. deposited or pledged by or on behalf of a person as a guarantee of the fulfillment of an obligation (as an appearance in court or the payment of a debt) and liable to forfeit in the event of default". (Emphasis supplied)
59. Thus, when one party gives a security to the other, implicit in the said transaction is the understanding that in case of failure of the principal obligation, the security may be enforced.
60. In V.K Ashokan v. CCE, (2009) 14 SCC 85, the Supreme Court observed that:
"The term "security" signifies that which makes secure or certain. It makes the money more assured in its payment or more readily recoverable as distinguished from, as for example, a mere IOU, which is only evidence of a debt, and the word is not confined to a document which gives a charge on specific property, but includes personal securities for money. (See Chetumal Bulchand v. Noorbhoy Jafeerji, AIR 1928 Sind 89). It is a word of general import signifying an assurance".
61. Thus, in my view, it makes no difference whether, or not, there is an express understanding between the parties that the security may be enforced in the event of failure of the debtor to pay the debt or discharge other liability on the due date. Even if there is no such express agreement, the mere fact that the debtor has given a security in the form of a post dated cheque or a cur- rent cheque with the agreement that it is a security for fulfill- ment of an obligation to be discharged on a future date itself, is sufficient to read into the arrangement, an agreement that in case of failure of the debtor to make payment on the due date, the security cheque may be presented for payment, i.e for re- covery of the due debt. If that were not so, there would be no purpose of obtaining a security cheque from the debtor. A secu- rity cheque is issued by the debtor so that the same may be pre- sented for payment. Otherwise, it would not be a security cheque."
This decision goes on to show that the defence of 'security cheque' cannot be the panacea for all cheque bounce prosecutions and fails to help the accused in the presence of overwhelming evidence as to liability.
In re : Satish Kumar v. Sanjay Ahuja Page 26 of 28The version of the cheque in question being security cheque also does not appear to be probable in view of the conduct of the accused, which has been quite unnatural. His conduct falls way too short of the conduct of a reasonable man of even elementary prudence, in his shoes. The accused did not make any attempts to seek return of his cheques, and did not file any complaint in this regard. If the version of the accused, is to be believed for an instant, having made a substantial part of the payments, the accused ought to have been anxious as to the return of his cheques. On non return, he could have issued stop payments instructions to his bankers, which has not been done in the present case. Furthermore, it has already been demonstrated in para 4 above that legal notice was validly served on the accused, the non reply to the legal notice is also a circumstance that is to be marshaled against the accused. His silence in such circumstances reeks of culpability and an adverse inference deserves to be drawn against him.
All in all, his conduct is not of a man having been wronged by a friend on misuse of a cheque, but a man cowering under a legal liability that he is to discharge. Nothing rankles the human heart as injustice, more so, when perpetrated by a friend. The sheer lack of indignation on the part of the accused raises an inference of culpability.
CONCLUSION
21. All factors cumulatively seen, go on to show that the accused has miserably failed to probablise lack of legal liability with respect to the cheque in question. The presumption of legal liability, therefore, has gone unrebutted. The complainant has successfully proved the basic ingredients of offence u/s 138 of the N.I.Act. Resultantly, the accused Sanjay Ahuja stands convicted of offence u/s 138 of the N.I.Act.
In re : Satish Kumar v. Sanjay Ahuja Page 27 of 28Let a copy of this judgment be provided forthwith to the convict, free of cost. Let the convicts be heard now on the quantum of sentence separately. A copy of this judgment be placed on the official website of the District Court. Announced in the open court today on the 4th of September, 2015 (Bharat Chugh) MM (NI Act)-01, Central District, Delhi 04.09.2015 * Judgment contains 28 signed pages In re : Satish Kumar v. Sanjay Ahuja Page 28 of 28