Delhi District Court
Religare Finvest Ltd. vs . Sudhir Jain on 31 May, 2023
IN THE COURT OF MS. ANAM RAIS KHAN,
METROPOLITAN MAGISTRATE -01 (NI ACT),
NEW DELHI DISTRICT, RACC, NEW DELHI
1. Complaint Case : 8195/2017
number DLND020203472016
2. Name & address of the : Religare Finvest Limited
complainant Having its registered office
at :- D3, P3B, district
Centre, Saket, New Delhi-
1100017.
Through its AR
3. Name and address : Sudhir Jain
of the accused S/o Sh. Kanwar Lal Jain
R/o 35A, D.N. Tagore
Street, Beadon Street,
S.O.Kolkata, West Bengal-
700006.
4. Offence complained : Section 138 Negotiable
Instruments Act, 1881.
5. Plea of the guilt : Pleaded not guilty
6. Final Order : Acquitted
7. Date of institution : 17.10.2016
8. Date on which : 25.05.2023
reserved for judgment
9. Date of judgment : 31.05.2023
CC No. 8195/17 Page 1 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
BRIEF STATEMENT OF FACTS AND REASONS FOR
THE DECISION
1. Vide this judgement, this court shall dispose of the
aforementioned complaint case filed by the complainant
company, namely, Religare Finvest Limited against the accused,
namely Sudhir Jain in respect of the dishonour of one cheque
bearing no. 000357 dated 06.05.2016 for an amount of
Rs.8,81,00,000/- (Rs. Eight Crores & Eighty One Lacs only)
drawn on HDFC Bank Ltd. Stephen House, 4 B.B.D Bag East,
Kolkata-700001, West Bengal (hereinafter referred to as the
"Impugned Cheque").
2. Succinctly, it is the case of the complainant company that
M/s Eversight Tradecomm Pvt. Ltd. through its directors
approached it for the purpose of obtaining a loan facility against
shares and after execution of loan agreement dated 28.02.2008,
the accused stood as a guarantor for repayment of the loan
facility provided to the said company. Thereafter, a deed of
settlement dated 17.08.2012 was executed between the accused
(as guarantor), Eversight Tradecomm Pvt. Ltd. (as a borrower)
and the complainant (as a lender) for repayment of the
outstanding loan amount however the accused as well as the
borrower failed to pay the settlement amount.
3. It is further the case of the complainant company that in
discharge of his aforesaid legal liability as a guarantor of the loan
advanced, the accused had issued the impugned cheque, which
upon presentation, was dishonoured for the reason "funds
insufficient" and was returned vide cheque return memo dated
04.08.2016. Thereafter, the complainant company sent a legal
CC No. 8195/17 Page 2 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
demand notice dated 24.08.2016 to the accused through speed
post and courier which was duly served upon him. Since the
accused failed to pay the amount of the impugned cheque within
the statutory period of 15 days from the receipt of legal demand
notice, hence, the complainant company has moved this court
with the present complaint under Section 138 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as the "NI Act").
4. In the pre-summoning evidence, the Authorised
Representative (hereinafter referred to as the "AR") of the
complainant company examined himself as CW-1 on affidavit
being Ex.CW1/1 and placed on record certain documents i.e.
copy of power of attorney of the AR being Ex.CW1/A,
impugned cheque bearing no. 000357 dated 06.05.2016 for an
amount of Rs.8,81,00,000/- being Ex.CW1/B, cheque return
memo dated 04.08.2016 being Ex.CW1/C, copy of legal demand
notice dated 24.08.2016 being Ex.CW1/D, postal receipts being
Ex.CW1/E1 & Ex.CW1/E2 and tracking reports thereof being
Ex.CW1/F1 and Ex.CW1/F2.
5. Upon prima facie consideration of the pre-summoning
evidence, the accused was summoned vide order dated
17.10.2016.
6. Upon the appearance of the accused, notice under Section
251, Cr.P.C. was served upon him. At this stage, the accused
pleaded not guilty and stated that the impugned cheque belongs
to him and admitted his signatures therein and the receipt of the
legal demand notice. He further stated that after the issuance of
the impugned cheque, some amount has been paid to the
complainant company and hence the liability is not to the tune of
CC No. 8195/17 Page 3 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
the impugned cheque.
7. After an application under Section 145 (2) of the NI Act
moved on behalf of the accused was allowed, AR of the
complainant was recalled for his examination.
8. CW-1 Yogesh Kumar was examined-in-chief and partly
cross examined and thereafter, an application seeking substitution
of AR of the complainant was moved which was allowed vide
order dated 07.07.2022 and Mr. Arun Mohan Sharma (hereinafter
referred to as the 'substituted AR') was substituted as an AR of
the complainant company in the present case.
9. Substituted AR of the complainant was examined-in-chief,
cross-examined and discharged. Since no other witnesses were
sought be examined by the complainant company, complainant
evidence was closed vide statement of the substituted AR and
Order of this court dated 03.03.2023 and matter was adjourned
for recording the statement of accused.
10. Statement of accused under Section 313 Cr.P.C. read with
Section 281 Cr.P.C. was recorded on 28.04.2023. The accused
primarily maintained his plea of defence taken by him at the
stage of framing of notice under Section 251 Cr.P.C. He
additionally stated that the impugned cheque was issued as a
blank signed security cheque in the capacity of guarantor for the
loan received by Ever Sight Tradecom Pvt. Company. He further
stated that he does not have any liability towards the complainant
company as the principal borrower of the loan in question is Ever
Sight Tradecom Pvt. Company and he had not signed any
document as a guarantor. He stated that substantial amount of
loan has already been paid by the borrower and the guarantee
CC No. 8195/17 Page 4 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
was never invoked and hence he is not liable to pay the amount
of the impugned cheque to the complainant company.
11. Since the accused chose not to lead defence evidence, the
matter was adjourned for the advancement of final arguments.
12. Final arguments were heard on behalf of both the parties
on 15.05.2023. Written submissions were also filed.
13. Rival submissions have been considered and record of the
case as well as the judgments relied upon by both the parties
have been carefully perused.
14. Before delving into the facts of the present case, it is
relevant to discuss the law applicable to the present proceedings.
To bring home a liability under Section 138 of the NI Act,
following elements must spring out from the averments in the
complaint and the evidence adduced by the complainant, which
are:
"(a) The accused issued a cheque on an account
maintained by him with a bank.
(b) The said cheque has been issued in discharge,
in whole or in part, of any legal debt or other
liability, which is legally enforceable.
(c) The said cheque has been presented to the
bank within a period of three months from the
date of cheque or within the period of its validity.
(d) The aforesaid cheque, when presented for
encashment, was returned unpaid/dishonoured.
(e) The payee of the cheque issued a legal notice
of demand to the drawer within 30 days from the
receipt of information by him from the bank
regarding the return of the cheque.
(f) The drawer of the cheque failed to make the
payment within 15 days of the receipt of aforesaid
CC No. 8195/17 Page 5 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
legal notice of demand."
15. Once the other ingredients mentioned in the foregoing
paragraph are established by the complainant, then as soon as the
execution of impugned cheque is admitted by the accused, a
factual base is established to invoke the presumption of cheque
having been issued in discharge, in whole or in part, of any debt
or other liability by virtue of Section 118(a) read with Section
139 of NI Act. This is a reverse onus clause, which means that
unless the contrary is proved, it shall be presumed that the
impugned cheque was drawn by the accused for a consideration
and that the complainant had received it in discharge of a debt/
liability from the accused. In the case titled Bir Singh Vs.
Mukesh Kumar, (2019) 4 SCC 197, it was held by Hon'ble
Supreme Court of India that once the accused has admitted the
signatures on the cheque in question, then the court is bound to
raise presumption under Section 139 NI Act.
16. It has been held by Hon'ble Supreme Court of India in the
judgment titled Rangappa Vs. Sri Mohan, (2010) 11 SCC 441
that a reverse onus clause usually imposes an evidentiary burden
and not a persuasive burden and when an accused has to rebut the
presumption under Section 139, the standard of proof for doing
so is that of "preponderance of probabilities". Therefore, if the
accused is able to raise a probable defence which creates doubts
about the existence of a legally enforceable debt or liability, the
prosecution can fail. It was further held that the accused can rely
on the materials submitted by the complainant in order to raise
such a defence and it is conceivable that in some cases the
accused may not need to adduce evidence of his/her own.
CC No. 8195/17 Page 6 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
17. In the present case, in order to discharge his initial burden
to prove the above mentioned ingredients, the substituted AR of
the complainant company relied upon his affidavit being
Ex.CW1/1 and documents relied upon in pre-summoning
evidence by CW1. Ld. Counsel for the complainant submitted
that the accused has already admitted his signatures on the
impugned cheque and hence presumption of the impugned
cheque having been issued in discharge of debt or other liability
arises in favour of the complainant in terms of Section 118(a)
read with Section 139 of NI Act. She further argued that the
accused has also admitted the genuineness and correctness of the
impugned cheque i.e. Ex.CW1/B, bank return memo i.e.
Ex.CW1/C, and the receipt of the legal demand notice i.e.
Ex.CW1/D and the fact that the complainant company received
no payment within 15 days of the service the legal demand
notice, duly proves all the ingredients of the offence under
Section 138 NI Act. She thus submitted that since all the
ingredients laid down under Section 138 NI Act are fulfilled, the
accused should be convicted.
18. Since the substituted AR of the complainant has
discharged his initial burden on the basis of the documents
mentioned hereinbefore and the admission of the accused, all the
other ingredients of the offence under Section 138 of the NI Act
stand successfully established. Further, since the accused has
admitted his signatures on the impugned cheque and the fact of
issuance of the same from his account, thus, the presumptions
under Sections118(a) and 139 of the NI Act arise against the
accused with respect to the existence of legally enforceable
CC No. 8195/17 Page 7 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
debt/liability in favour of the complainant. The onus is now upon
the accused to rebut the mandatory presumptions under the NI
Act by raising a probable defence to show that the impugned
cheque was not issued in discharge of a debt/ liability.
19. In order to rebut the mandatory presumptions, the accused
has broadly raised three defences. Firstly; That there is no legally
enforceable debt or liability to the tune of the amount of the
impugned cheque against the accused and in favour of the
complainant company as on the date of its issuance or
presentation. Secondly; That the substituted AR of the
complainant company is not competent to depose as a witness in
this case, and Lastly; that the substituted AR of the complainant
company is not authorised to prosecute the present complaint on
behalf of the complainant company.
DEFENCE OF NO LEGALLY ENFORCEABLE
DEBT OR LIABILITY
20. Ld. Counsel for the accused submitted that the complaint
and the legal notice set out materially different narratives, which
dislodge the presumption drawn against the accused. It is
noteworthy, he argued, that, it is the admitted case of the
complainant that both the complaints have arisen from same set
of facts and admittedly, both cheques (being cheque no. 356 and
357) were issued towards part discharge of liabilities arising out
of same set of facts, yet, the factual matrix as mentioned in both
the complaints (CC No.8193/2017 & 8195/2017) as also the
evidence led by the complainant in each of the cases, are
materially different, inconsistent and both the complaints set out
a separate competing narrative which creates grave doubt as to
CC No. 8195/17 Page 8 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
the case of the complainant. Ld. Counsel for the accused argued
that these material discrepancies by themselves call for this court
to dismiss the complaints in limine.
21. Ld. Counsel for the accused went on to argue that as per
the complaint, complainant company allegedly provided a loan
facility against shares to M/s Eversight Tradecomm Pvt. Ltd., at
request of its Directors, vide loan agreement dated 28.02.2008,
the terms of which were breached by M/s Eversight Tradecomm
Pvt. Ltd. Materially, the complainant has remained silent on the
amount of loan advanced to the said company and the
complainant has also chosen not to tender the loan documents in
evidence.
22. Moving ahead, he argued that a Deed of Settlement was
allegedly executed on 17.08.2012, amongst (i) the Accused (as
Guarantor); (ii) M/s Eversight Tradecomm Pvt. Ltd. (the
Borrower) and; (iii) the Complainant for repayment of loan
(availed by M/s Eversight Tradecomm Pvt. Ltd.), however, in the
entire complaint or the evidence led, the complainant has failed
to set out the said 'Settlement Amount'. The complainant has
also not placed on record the Settlement Agreement or Deed even
till the culmination of the present trial.
23. Ld. Counsel for the accused further argued that it is the
complainant's case that the accused and the borrower both failed
to pay the settlement amount. Thereafter, the complainant
company admits that the accused being guarantor "has now
issued cheque" bearing no. 357 in the sum of Rs. 8,81,00,000/-
(Rupees Eight Crores Eighty One Lakhs Only) towards
"discharge of legally enforceable debt / liability arising out of
CC No. 8195/17 Page 9 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
loan facility provided to M/s Eversight Tradecomm Pvt. Ltd."
Therefore, admittedly, as per complainant's narrative, the liability
sought to cleared through impugned cheque of Rs. 8,81,00,000/-
(Rupees Eight Crores Eighty One Lakhs Only) was that of M/s
Eversight Tradecomm Pvt. Ltd. Hence, he argued that there is a
clear admission as to misuse of the impugned cheque.
24. He further went on to state that materially, the narrative
contained in complaint and evidence of CW-1 (i.e. cheques being
issued against discharge of alleged liability arising out of loan
facility to M/s Eversight Tradecomm Pvt. Ltd. in terms of the
Loan Agreement dated 28.02.2008) is in a material departure
from the case set up under legal notice dated 24.08.2016 i.e., Ex.
CW-1/D, wherein, reference has been made to said 'Guarantee
Deed' dated 17.08.2012, and the impugned cheque has been
stated to have issued under Settlement Agreement dated
17.08.2012 (as Guarantor) for payment of 'Settlement Amount'.
25. Ld. Counsel for the accused further argued that another
inherent contradiction in evidence of substituted AR vis a vis the
legal notice is that in the legal notice it has been mentioned that
the impugned cheque has been issued under 'Settlement Deed'
dated 17.08.2012, i.e., in year 2012, and yet in the same breath it
states that cheques has "now" been issued, i.e., in year 2016,
against the liability as alleged.
26. Ld. Counsel for the accused argued that even as per
complainant's evidence, there was an outstanding liability (cause
of action) under loan agreement that was being settled under
Settlement Agreement or Deed of Settlement executed in the year
2012, and in such an event, in case a cheque was presented for
CC No. 8195/17 Page 10 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
satisfaction of such liability, such liability ought to have become
time barred by year 2016, when the cheque was presented due to
lapse of 4 years. Therefore, even by complainant's own version,
when the impugned cheque was placed for encashment, there
could not have been a legally enforceable debt.
27. In view of the aforesaid, he stated that it is clear that
material discrepancies in narratives of the complainant has
rendered its own case unbelievable and rebuts the presumption
drawn against the accused. He further relied upon the judgment
of Hon'ble Supreme Court in Jayashree Mouneshwar V. Vs
Smt. R. Pushpavathi, 2019 SCC OnLine Kar 423 wherein at
Para 13, it has been held that if two views are possible, "a
plausible view, it is in favour of the accused, in any opinion, has
to be preferred....". Therefore, he argued that even by such
dictum, the material discrepancies render the presumption
dislodged.
28. In the last leg of his argument, Ld. Counsel for the accused
argued that since the accused has successfully rebutted the
presumptions under Section 118 and 139 of the NI Act, the
complaint has to stand on its own legs which is not the position
in the case at hand and hence the accused deserves to be
acquitted. He placed reliance on the following judgments of
superior courts to buttress his contention:
a) K. Prakashan Vs. P.K. Surenderan, (2008) 1 SCC 258
passed by Hon'ble Apex Court.
b) Janki Vashdeo Bhojwani and Ors. Vs. IndusInd Bank
Ltd. and Ors.,(2005) 2 SCC 217 passed by Hon'ble Supreme
Court of India.
c) Satish Kumar Vs. State NCT of Delhi, 2013 SCC
CC No. 8195/17 Page 11 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
OnLine Del 2963 passed by Hon'ble High Court of Delhi.
d) John K. John vs. Tom Varghese & Anr., (2007) 12 SCC
714.
e) Order dated 20.01.2012 in Poonam Vs. Kotak
Mahindra Bank & Anr., CRL.M.C. No. 3385/2010.
f) M/s. Norang Rai Inder Sain through its proprietor Vs.
Birbal, 2018 SCC OnLine P&H 7162 passed by Hon'ble High
Court of Punjab & Haryana.
g) Wilson Mathew Vs. State NCT of Delhi & Anr., 2015
SCC OnLine Del 12009 passed by Hon'ble High Court of
Delhi.
h) C.C. Alavi Haji V.s Palapetty Muhammed, (2007) 6
SCC 555 passed by Hon'ble Supreme Court of India.
29. Per Contra, Ld. Counsel for the complainant argued that
the documents available on record are sufficient enough to
establish the guilt of the accused especially in view of the
mandatory presumptions under Section 139 and Section 118 of
the NI Act resting in favour of the complainant against the
accused. She argued that the accused has clearly admitted to have
paid some amount towards the loan advanced which implies that
there was 'some' outstanding liability against which it was paid.
She went on to state that the accused failed to produce any
document before this court with respect to the alleged repayment
of the loan by himself or by the principal borrower which implies
that the alleged part payment was never done.
30. Ld. Counsel for the complainant further argued that
Section 128 of the Indian Contract Act provides that the liability
of the surety is coextensive with that of the principal debtor,
unless it is otherwise provided in the contract. Hence, as per the
Indian Contract Act, the liability of the guarantor is coextensive
with that of the borrower which means that lender can enforce his
CC No. 8195/17 Page 12 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
right against either the principal borrower or his guarantor. She
argued that on a joint reading of Section 138 of NI Act and
Section 128 of Indian Contract Act, it is crystal clear that the
liability of the guarantor of a loan falls within the provisions of
Section 138 NI Act. She relied upon the judgment of Hon'ble
Supreme Court in LCDS Ltd. Vs. Beena Shabeer, 2002 (6)
SCC 426 in support of her contention.
31. She lastly argued that in view of the mandatory
presumption resting in favour of the complainant, onus has
shifted to the accused to show the non existence a legally
enforceable debt and unless the accused has discharged the said
onus by bringing on record such facts and circumstances as to
show the preponderance of probabilities tilting in his favour, any
doubt on the complainant's case can not be raised. She placed
reliance on the judgment of Hon'ble Supreme Court in
Kalamani Tex Vs. P. Balasubramanian (2021) 5 SCC 283 to
support her argument.
32. In rebuttal, Ld. Counsel for the accused argued that the
Kalamani Judgement (Supra), is factually distinguishable from
the case herein inasmuch wherein business relationship was
established. However, in the present case, no business
relationship has been established and in fact, the complaint by
itself has raised several versions, which, demonstrate failure to
establish any sort of relationship. He further argued that in the
present case, substituted AR has denied the contractual
relationship on which the entire case has been based. Secondly, a
plea raised by the complainant is that the liability of the
guarantor is co-extensive with that of the borrower. In this
CC No. 8195/17 Page 13 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
respect he submitted that the liability of the guarantor, if any, can
only arise upon invocation of guarantee, and as such an
uninvoked guarantee does not constitute a debt. He relied upon
the decision in Ferro Alloys Corporation Ltd Vs. Rural
Electrification Corporation Ltd (Comp App No. 92 of 2017)
passed by Hon'ble NCLAT in support of his argument.
33. After a careful perusal of the record and judgments relied
upon by both the parties and on patiently hearing them, apropos
the existence of legally enforceable debt/liability of the accused,
this court has arrived at the following findings;
a) Complainant company has placed heavy reliance upon the
loan agreement dated 28.02.2008, Deed of Settlement dated
17.08.2012, Demand Notice dated 21.07.2016, Letter of Accused
dated 09.08.2016 and Letter of Complainant dated 10.08.2016.
However none of these documents were ever produced before
this court even till the conclusion of the trial. In fact the
substituted AR on being asked the relevant questions pertaining
to these documents and material details contained therein either
evaded answering them or answered by stating that he shall
check the record and revert. Admittedly the substituted AR did
not take any effort to trace the record and get back with relevant
details and in fact closed his evidence on the very same day.
Relevant extracts of his cross examination conducted on
23.09.2022 & 03.03.2023 are reproduced hereunder;
"Q: Is there any document on record to substantiate the
amount outstanding as on the date of filing of the
complaint?
A: There is no document on record to show the amounts
outstanding as on the date of filing of the complaint.
CC No. 8195/17 Page 14 of 28
Religare Finvest Ltd. Vs. Sudhir Jain
Q: Have you seen the records of the company in its
entirety before coming to this depose before coming for
the examination here in this Hon'ble court?
A: No.
***
Que: Is there an agreement under which the complainant company has received impugned cheques?
Ans: No. Again said I do not remember."
b) In the absence of the above said loan agreement and the deed of settlement which are the very fulcrum of the complainant's case, there is absolutely nothing on record to establish the material details like the total amount of loan advanced and to whom, the extent of liability of the accused as a guarantor, settlement amount against which the impugned cheque is alleged to have been issued, the schedule of repayment and the amount, if any, repaid by the principal borrower, penalty interest and other charges, if any, levied.
c) Ld. Counsel for the accused relied upon Section 128 of the Indian Contract Act to state that the liability of the surety is co- extensive with that of the principal debtor, 'unless it is otherwise provided in the contract'. However in the absence of the contract itself being placed before this court, it can not be ascertained whether the said liability was meant to be co-extensive between the parties or not.
d) Substituted AR of the complainant company during his cross examination categorically stated that the company maintains loan account statement, however the same was also never produced before this court. In the absence of the loan account statement, it not possible for this court to determine the actual liability of the accused as on the date of issuance as well as CC No. 8195/17 Page 15 of 28 Religare Finvest Ltd. Vs. Sudhir Jain presentation of the impugned cheque. Relevant extract of his cross examination conducted on 03.03.2023 is reproduced hereunder;
"Que: Is it correct to state that complainant company maintains loan account statement and/or ledger statement of outstanding dues of its borrowers and guarantors?
Ans: I am not aware. Again said the complainant company maintains the loan account statement."
e) The complainant company being a Non-Banking Financial Corporation is obligated under the RBI Regulations to maintain proper documentation concerning loans and advances is expected to have maintained proper record of their loan transactions and a deliberate omission to not produce the relevant documents has caused a serious blow to the case of the complainant. Hence, an adverse inference can safely be drawn against the complainant company in terms of illustration (g) under Section 114 of the Indian Evidence Act, 1872 which enunciates the rule that the evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it.
f) It is also unclear as to which debt is sought to be satisfied through the impugned cheque, i.e., the 'Settlement Amount' or the 'Loan Facility Amount'. The complainant company also failed to convince this court as to how the obligation to pay Loan Facility Amount survived upon execution of Settlement Agreement which ideally subsumed the original loan agreement. This itself creates a doubt regarding the case of the complainant company.
g) There is material discrepancy as to the timing of receipt of the impugned cheque, i.e., in legal notice the cheque appears to CC No. 8195/17 Page 16 of 28 Religare Finvest Ltd. Vs. Sudhir Jain have been handed over under the Settlement Deed in 2012, whereas in complaint the cheque appears to have been handed over "now", i.e., around May 2016 at the time of filing of the complaint, and the term "now" has been replicated in evidence tendered by the substituted AR absurdly signifying receipt of impugned cheque in year 2022.
h) The complainant company does not seem to be approaching this court with clean hands. The possibility that several payments allegedly made by the accused or the principal borrower against the loan amount or the settlement amount might not have been acknowledged and adjusted by the complainant company, can not be ruled out as the factum of receipt of the admitted amount of Rs. 5 Lacs was never brought to the notice of this court prior to cross examination of the substituted AR. Relevant extract of cross examination of the substituted AR of the complainant company conducted on 23.09.2022 is reproduced hereunder;
"Q: Have there been any payments made by the accused towards the alleged outstanding date as claimed by you i.e Rs. 8.81 Crore?
A: I do not remember. (Vol. An amount of Rs. 5 Lacs paid by the accused in the year 2017)."
i) If complaint's narrative stating receipt of the impugned cheque under Settlement Deed in the year 2012 is assumed to be correct, in such circumstances, by 2016, the liability of settlement amount would become time barred in view lapse of more than 3 years in 2016. In this regard, reliance is placed by this court on the judgment of Hon'ble High Court of Delhi in Amrit Sandhu Costar Vs. State & Anr., (2022) 294 DLT 97, CC No. 8195/17 Page 17 of 28 Religare Finvest Ltd. Vs. Sudhir Jain whereby it has been held that "debt or other liability" means a legally enforceable debt or other liability and the accused cannot be prosecuted for offence under section 138 of the NI Act, 1881 for issuance of cheque for time barred liability or debt. Admittedly, the impugned cheque has been issued towards a time barred debt or liability. The period of limitation seeking recovery of the alleged loan ended at the expiry of three years after the due date of repayment of the alleged loan which expired way before the date of the impugned cheque. In view of the aforesaid discussion, this court is of the opinion that even if the entire case of the complainant company is admitted to be true, then also, the impugned cheque has been issued by the accused in discharge of a time-barred debt and as such, does not attract the criminal provisions of Section 138 of NI Act.
34. Ergo, in view of the above discussion, the complainant company has miserably failed to convince this Court that the liability of the accused was equivalent to the amount of the impugned cheque as on the date of its drawal or presentation and hence, the first defence of the accused is clearly established.
DEFENCE OF LACK OF COMPETENCY OF THE SUBSTITUTED AR TO DEPOSE ON BEHALF OF COMPLAINANT COMPANY
35. Ld. Counsel for the accused argued that the substituted AR could not stand the test of cross examination and it is established beyond doubt that he neither has any personal knowledge regarding the present case, being appointed much after the filing of the present complaint and nor does he have any due knowledge regarding the same as derived from complainant CC No. 8195/17 Page 18 of 28 Religare Finvest Ltd. Vs. Sudhir Jain company records which is evident from his evasive denial and deliberate avoidance of relevant questions. He relied upon the judgment of Hon'ble Supreme Court in A.C. Narayan v. State of Maharashtra, (2014) 11 SCC 790 to buttress his arguments.
36. Per contra, Ld. Counsel for the complainant company argued that it can not be said that the substituted AR did not stand the test of cross examination. She submitted that the substituted AR has deposed in favour of the complainant company as per the record available with him to the best of his knowledge. She lastly argued that the substituted AR is a competent witness and has 'due knowledge' regarding the facts of the present case.
37. In order to decide the competency and the knowledge of the substituted AR regarding the present transaction, it is pertinent to reproduce the relevant extracts of cross- examination conducted on 23.09.2022 & 03.03.2023 which are as follows;
Q: Have you seen the records of the company in its entirety before coming to this depose before coming for the examination here in this Hon'ble court? A: No. *** Que: Is there an agreement under which the complainant company has received impugned cheques?
Ans: No. Again said I do not remember.
Que: Whether any charges or interest have been added to compute alleged liability under the impugned cheques?
Ans: If the loan is defaulted the complainant company levies interest charges as well as the penal interest upon the principal outstanding.
Que: Whether the additional charges as stated in response to question above is inclusive of the amount of the impugned cheques?
CC No. 8195/17 Page 19 of 28Religare Finvest Ltd. Vs. Sudhir Jain Ans: I do not know.
Que: Is it correct to state that complainant company maintains loan account statement and/or ledger statement of outstanding dues of its borrowers and guarantors?
Ans: I am not aware. Again said the complainant company maintains the loan account statement. Que: Whether complainant company has on or about 22.07.2014 received Rs. 15 lakhs and Rs. 10 lakhs towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Whether complainant company has on or about 24.07.2014 received Rs. 15 lakhs and Rs. 10 lakhs towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Whether complainant company has on or about 30.07.2014 received Rs. 15 lakhs and Rs. 10 lakhs towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Whether complainant company has on or about 04.08.2014 received Rs. 15 lakhs and Rs. 10 lakhs towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Whether complainant company has on or about 24.03.2015 received Rs. 1.40 lakh and Rs. 1.55 lakhs towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Is it correct that the complainant company on or about 01.04.2015 received interest in certain flats from Mr. Sudhir Jain or his associates valued at Rs. 78,19,843/- towards the discharge of alleged debt of Mr. Sudhir Jain ?
Ans: I will have to check the record.
Que: Whether complainant company has on or about 30.06.2015 received Rs. 14.75 lakhs towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Is it correct that the complainant company on or about 21.07.2015 received interest in certain flats from Mr. Sudhir Jain or his associates valued at Rs. 2,22,13,107/- towards the discharge of alleged debt of Mr. Sudhir Jain ?
CC No. 8195/17 Page 20 of 28Religare Finvest Ltd. Vs. Sudhir Jain Ans: I will have to check the record.
Que: Whether complainant company has on or about 24.12.2015 has received an amount of Rs.
5,52,20,036/- by sale of shares held as security towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Whether complainant company has on or about 28.12.2015 has received an amount of Rs.
1,03,48,355/- by sale of shares held as security towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Whether complainant company has on or about 03.03.2016 received Rs. 37.70 lakhs towards discharge of alleged debt of Mr. Sudhir Jain? Ans: I have to check the record and revert.
Que: Whether complainant company has on or about 18.04.2016 received Rs. 5 lakhs towards discharge of alleged debt of Mr. Sudhir Jain?
Ans: I have to check the record and revert."
38. From a holistic reading of the cross-examination of the substituted AR of the complainant company it is apparent that he does not have any personal knowledge or even due knowledge derived from the company records, regarding the present case. Hence, it can not be said that he witnessed the present transaction as an agent of the payee/holder in due course. As such his testimony is unsafe to rely upon and does not inspire the confidence of the court and the second defence of the accused is clearly established.
DEFENCE OF LACK OF AUTHORISATION OF THE SUBSTITUTED AR TO FILE THE PRESENT COMPLAINT
39. Ld. Counsel for the accused argued that Mr. Arun Mohan Sharma, the substituted AR, has not been validly authorised being a Power of Attorney Holder to depose on behalf of the CC No. 8195/17 Page 21 of 28 Religare Finvest Ltd. Vs. Sudhir Jain Complainant Company. He submitted that the substituted AR has stated himself to have been authorised vide resolution of Board of Directors dated 7.11.2019 (hereinafter referred to as the "Resolution") and Power of Attorney dated 09.01.2020 (hereinafter referred to as the "PoA"), however, a bare perusal of List of Authorised Representatives in Resolution depicts a conspicuous absence of name of Mr. Arun Mohan Sharma. Therefore, it is clear that Mr. Arun Mohan Sharma has not been directly authorised vide the said Resolution. He further argued that the only other manner of authorising, Mr. Arun Mohan Sharma, in terms of said Resolution is through PoA dated 09.01.2020, which prescribes the following mechanism for grant of PoA which states as follows;
"RESOLVED FURTHER THAT upon specific request of concerned Department / Business Head of the Company and subject to prior written approval of the Managing Director / Whole Time Director/ CEO and
(ii) Legal Head / Functional Head of the Complainant Company, above mentioned authorised signatories of the Company be and hereby severally authorised to execute a power of attorney ...."
40. It is submitted by Ld. Counsel for the accused that a perusal of the said resolution reveals that any PoA authorisation, shall be undertaken (i) upon specific recommendation of concerned Department subject and (ii) subject to prior written approval of the Managing Director / Whole Time Director/ CEO and (ii) Legal Head / Functional Head of the Complainant Company. (v) However, during the course of his Cross Examination conducted on 23.09.2022, when substituted AR was confronted with questions as to prior written approval on recommendation for execution of PoA in his favour, he stated CC No. 8195/17 Page 22 of 28 Religare Finvest Ltd. Vs. Sudhir Jain that "I cannot say whether the above-said recommendation was sent to CEO/ Whole Time Director of the Complainant Company". Hence, he submitted that the substituted AR has not been validly authorised to lead evidence on behalf of the Complainant Company.
41. Per contra, Ld. Counsel for the complainant company submitted that the accused is trying to raise a hyper-technical defence and there is no defect in the authorisation of the substituted AR of the complainant company. She argued that Mark CW1/A (Colly), original of which was seen and returned vide order dated 07.07.2022 allowing the application for his substitution, duly authorises the substituted AR i.e. Mr. Arun Mohan Sharma to file and prosecute the present complaint and hence the present complaint is maintainable in the eyes of law. She drew the attention of the court to the Paras 8 and 9 of the said PoA which clearly authorises the substituted AR to validly file and adduce evidence in cases under Section 138 NI Act.
42. Rival submissions on the point of maintainability of the present complaint qua the lack of authorisation of the AR of the complainant company heard and considered.
43. Essentially, Power of Attorney dated 09.01.2020 i.e. Mark CW1/1 (OSR) (Colly) issued by Mr. Nishant Singhal, EVP & Group Head, Litigation, of the complainant company is relied upon by the substituted AR of the complainant company to establish his authorisation to file the present complaint. The said document categorically mentions that Mr. Nishant Singhal has derived the power to execute the same vide Resolution passed at the meeting of Board of Directors of the complainant company CC No. 8195/17 Page 23 of 28 Religare Finvest Ltd. Vs. Sudhir Jain held on 07.11.2019. However, the said resolution dated 07.11.2019 was never placed on record by the substituted AR. In the absence of the same it can not be established that Mr. Nishant Singhal was authorised to execute the PoA dated 09.01.2020 in favour of the substituted AR of the complainant company which authorises him to file the present case. Despite vehement objections being raised on behalf of the accused during the course of cross examination as well as final arguments as well as his written submissions regarding the authorisation of the substituted AR, the Board Resolution dated 07.11.2019 was not placed on record by the complainant even till the conclusion of the present trial. Hence, an adverse inference can again be drawn against the substituted AR of the complainant company in terms of illustration (g) under Section 114 of the Indian Evidence Act, 1872.
44. The decision of Hon'ble High Court of Andhra Pradesh in Nayagam Lourd Prakash Vs. Standard Chartered Bank And Anr. decided on 24 October, 2000, 2001 (1) ALT Cri 97 is appropriately applicable to the facts of the case at hand. Hon'ble Court in Para 9-12 of the judgment held as follows;
"9. A perusal of the deed of power of attorney, a copy of which has been filed in this petition, would indicate that it has been executed by one Mr. F.D. Irani, who has been described as Head, Bankcards, India. There is no material before the court to show that the said Irani himself was properly authorized by the resolution of the Board of Directors or under the Memorandum of Association or the Rules governing the Bank to confer the powers of instituting criminal prosecution against any one on behalf of the company. No material has been placed before the court to show the source of the authority of the said CC No. 8195/17 Page 24 of 28 Religare Finvest Ltd. Vs. Sudhir Jain Mr. Irani to confer such powers on Mr. Vijaya Bhaskar Reddy. It is pertinent to mention here that no material is placed before this court in spite of the matter having undergone several adjournments. Thus, there is no material to show that Mr. Vijaya Bhaskar Reddy who has filed the complaint on behalf of the Standard Chartered Bank was properly authorized to do so.
10. Conferment of proper authority on the person, who instituted criminal proceedings on behalf of a company is essential inasmuch as lack of such authority has certain consequences affecting the accused. For instance, where a complaint has been dismissed and the accused have been acquitted and the Magistrate is of the opinion that there were no reasonable grounds for making accusation against the accused, the Magistrate may by his order of acquittal direct payment of compensation to the accused under Section 250 of CrPC. If a complaint is filed on behalf of the company by a person who is not properly authorised to do so, the company may claim that it was not bound to carryout the directions of the court on the ground that the complainant was not authorized. Similarly in cases, where accused having been acquitted, seek to proceed against the complainant company for compensation for malicious prosecution, the company may come forward with a defence that it is not liable to pay any compensation on the ground that the person who filed complaint was not authorized to do so.
11. Normally, the Board of Directors of a company is vested with all the powers of governance of the company. A person who institutes criminal proceedings on behalf of the company, must have that power conferred by the Board of Directors or in a given case, the Articles of Association or the Rules governing the Management of the company may make a specific provision authorizing certain officer of the company to institute the criminal proceedings against any one on behalf of the company.
12. In this case, the person who instituted the criminal CC No. 8195/17 Page 25 of 28 Religare Finvest Ltd. Vs. Sudhir Jain proceedings, Mr. Vijaya Bhaskar reddy is said to have been authorized by one Mr. Irani to do soon behalf of the company. But, there is no material placed before the court as to what is the source of the authority of Mr. Irani to confer such powers on the said Vijayabhaskar Reddy. Under the circumstances, it appears manifest that the said Vijaya Bhaskar Reddy has no proper authority to institute the criminal proceedings on behalf of the Bank, namely, Standard Chartered Bank."
45. It is imperative to understand that in this case, obviously, Religare Finvest Limited is the payee of the impugned cheque, thus, it is the said company which alone can institute the criminal proceedings against the accused persons for an offence under Section 138 of the NI Act. Obviously, a company out of necessity would function through some individual and the complaint has to be filed by some person on behalf of the complainant company. Such person, to meet the requirement of Section 142 of the NI Act would have to be one who is 'properly authorized' by the complainant company to institute the present proceedings. In this case, as seen above, no material has been placed before the Court to show that Mr. Arun Mohan Sharma properly represents the payee of the impugned cheque being a holder in due course in terms of Section 142 (a) of the NI Act. Reliance is placed upon a decision of Hon'ble High Court of Andhra Pradesh in Satish and Company Vs. S.R. Traders and Ors. decided on 28 November, 1996, 1997 (1) ALT Cri 696 and a judgment of the Hon'ble High Court of Madras in K. N. Sankaranarayanan Vs. Shree Consultations (1994) 80 ComCas 558.
46. In view of the aforesaid findings and analysis, this court has no hesitation to hold that Mr. Arun Mohan Sharma is not CC No. 8195/17 Page 26 of 28 Religare Finvest Ltd. Vs. Sudhir Jain properly authorized to prosecute the present complaint on behalf of the complainant company. Hence, the accused has succeeded in establishing his last defence and the present complaint under the circumstances is held to be not maintainable.
47. It is imperative to understand that in order to pronounce a conviction in a criminal case, the accused 'must be' guilty and not merely 'may be' guilty. For an accused to be guilty, guilt should not be based on mere surmises and conjectures but it should be based on cogent evidence. In the present case, the accused has clearly presented a defence that is more probable than the complainant's story and consequently, the benefit of doubt must go to him.
48. In view of the aforesaid findings and analysis, this court has arrived at an irresistible conclusion that the accused has been able to cast a shadow of reasonable doubt upon the case of the complainant company by rebutting the mandatory presumption resting in its favour. Complainant company on the other hand has utterly failed to prove its case beyond reasonable doubt qua the existence of liability of the accused as on the date of the drawal or presentation of the impugned cheque. Since this basic ingredient which is pivotal to attract liability under Section 138 NI Act has not been proved by the complainant company, accordingly, no offence of dishonour of the impugned cheque under the said Section is made out. Further, owing to the lack of authorisation of the substituted AR to prosecute the present case on its behalf, the present complaint is itself held to be not maintainable.
FINAL ORDER CC No. 8195/17 Page 27 of 28 Religare Finvest Ltd. Vs. Sudhir Jain
49. In view of the aforesaid discussion, this court finds the accused Sudhir Jain S/o Kanwar Lal Jain not guilty of the offence under Section 138 Negotiable Instruments Act, 1881 and acquits him accordingly.
This judgment contains 28 signed pages and each page has been signed by the undersigned.
Announced in open (Anam Rais Khan) Court on 31.05.2023 MM(NI Act)-01/RACC/ND CC No. 8195/17 Page 28 of 28 Religare Finvest Ltd. Vs. Sudhir Jain