Delhi District Court
Muthoot Finance vs . Juggal Kishore Cc. No. 2770/12 on 30 August, 2012
Muthoot Finance vs. Juggal Kishore CC. No. 2770/12
IN THE COURT OF MS. SWATI KATIYAR, METROPOLITAN
MAGISTRATE-05 (NEGOTIABLE INSTRUMENTS ACT), DWARKA
COURTS, DELHI
CC No. 2770/12
ID No. 02405R0316372006
M/S Muthoot Finance Private Ltd.
Corporation Office (North):- 3C, White House
10, Bhagwan Dass Road,
New Delhi-110001
Through its Authorized Representatives:
Mr. John V. George, Mr. Raja Imam,
Mr. L. D. Sharma & Sh. Sunil Barthwal
...........Complainant
Vs.
Mr. Juggal Kishore
Prop. Of M/S Chhabra Jewellers,
S/o Sh. Krishan Lal Rana,
R/o J-66, Ashok Vihar,
Phase-I, Delhi
Alternate Address:-
R/o 20, National Park
Lajpat Nagar-IV, New Delhi
Also At:-
C/o Dhan Lakshmi Jewellers,
R/o B-90, Main Road,
Kalkaji, New Delhi-110019.
..................Accused
Date of Institution : 19.04.2006
Offence Complained of : u/s 138 Negotiable Instruments Act, 1881
Plea of Accused : Not Guilty
Date of Reserving order : 23.08.2012
Date of Decision : 30.08.2012
Decision : Acquitted
Page 1 of 23
Muthoot Finance vs. Juggal Kishore CC. No. 2770/12
JUDGMENT
1. The present complaint has been filed by the complainant through Mr. John V. George, Mr. Raja Imam, Mr. L. D. Sharma & Sh. Sunil Barthwal, Authorized Representatives (AR) of the complainant. Complainant submits that it is engaged in the business of financing/ granting loans against pledging of gold ornaments amongst other businesses. It is submitted that during the course of its business, accused had approached the complainant company at its Vikas Marg branch on various occasions and had expressed his desire for availing loan. It is submitted that accused had agreed to pledge gold ornaments with the complainant company as security for repayment of the loan along with interest thereon.
2. Complainant submits that accused also represented that gold ornaments offered by him as security and pledged with the complainant company belongs to him. Complainant states that acting on the representation of the accused, complainant granted a total finance/ loan facility of Rs. 13,45,000/- to the accused vide 15 separate written loan agreements as mentioned below:
S. No. GL No. (Gold Loan A/c) Loan Amount (in Rs.) 1 GL-2318 1,40,000/-
2 GL-2319 25,000/-
3 GL-2320 75,000/-
4 GL-2378 50,000/-
5 GL-2467 1,22,000/-
6 GL-2468 1,03,000/-Page 2 of 23
Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 7 GL-2475 1,00,000/-
8 GL-2483 1,02,000/-
9 GL-2484 1,08,000/-
10 GL-2489 1,07,000/-
11 GL-2490 1,03,000/-
12 GL-2525 1,99,000/-
13 GL-2632 30,000/-
14 GL-2804 56,000/-
15 GL-2870 25,000/-
TOTAL LOAN AMOUNT 13,45,000/-
3. It is submitted that accused failed to maintain the financial discipline of repayment of the dues under the said agreements and in part discharge of his legal liability towards the complainant, issued a cheque bearing no. 720491 dated 27.09.2005 for a sum of Rs. 6,54,548/- drawn on ICICI Bank, Preet Vihar Branch, New Delhi-92 (hereinafter referred to as 'cheque in question') in favour of the complainant.
4. Complainant submits that when the cheque in question was presented for encashment, the same was returned unpaid with remarks "insufficient funds" vide cheque return memo dated 28.01.2006. It is submitted that the complainant bank served legal notice dated 28.02.2006 upon the accused by registered AD as well as by UPC post but the accused failed to make payment of the cheque amount within statutory period despite service of notice.
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5. Feeling aggrieved from the conduct of the accused, complainant has filed the present complaint praying that accused be summoned, prosecuted and punished in accordance with Section 138 Negotiable Instruments Act (NI Act).
6. Pre-summoning evidence was filed in the present matter on 19.04.2006 and summons were issued against the accused who entered appearance on 05.06.2010.
7. Notice was framed upon the accused on 23.07.2010 to which the accused pleaded not guilty and claimed trial. Repeated opportunities were granted to the accused for moving application u/s 145 (2) Negotiable Instruments Act but the same was not filed by the accused and ultimately the right of the accused to cross- examine the complainant was closed vide order dated 07.01.2011. Statement of accused was recorded on 16.03.2011 wherein accused admitted that he had taken loan from the complainant by pledging gold ornaments. However, accused stated that the loan amount was more than Rs. 13,45,000/-. Accused further stated that he had issued the cheque in question at the time of disbursement of loan after signing. Accused stated that complainant has even sold out the gold which was pledged by him and no prior information was given to him qua the same as well as the amount for which the gold was sold was not informed to him. Accused stated that complainant has also not disclosed these facts before the court.
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8. Accused further stated that complainant had presented the cheque for encashment when the account of the accused had already been closed and he was not informed about the presentation of the cheque. Accused denied having received any legal demand notice from the complainant. Accused stated that a settlement was arrived at with the complainant in the year 2007 but the papers of the settlement were never handed over to him. Accused stated that he had given Rs. 50,000/- to the complainant but could not pay the amount of Rs. 1,00,000/- due to which the complainant had not released the gold items. Accused expressed willingness to settle the dispute subject to the condition that the complainant releases his gold items on present market value.
9. After recording of statement of accused under Section 313 of Code of Criminal Procedure, an application was filed on behalf of accused under Section 311 of Code of Criminal Procedure seeking recall of AR of complainant for cross-examination. The application was allowed subject to cost of Rs. 1500/- vide order dated 01.06.2011 . Another application was filed on behalf of complainant for placing on record certain documents which was also allowed vide order dated 18.08.2011.
10. Sh. L. D. Sharma, AR of the complainant examined himself as CW1 in terms of order dated 01.06.2011 on 15.09.2011. CW1 tendered affidavit Ex. CW1/A and relied upon the documents Ex.
Page 5 of 23Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 PW1/1 to Ex. PW1/23. Ex. PW1/1 is the certificate of incorporation of complainant, Ex. PW1/2 is the power of attorney in favour of CW1, Ex. PW1/3 is the copy of resolution dated 22.09.2005, Ex. PW1/4 is the third legal notice dated 26.10.2004, Ex. PW1/5 is the fourth legal notice dated 26.11.2004, Ex. PW1/6 (colly.) is the 4th legal notice dated 16.12.2004, Ex. PW1/7 (colly.) is 4th legal notice dated 24.12.2004 with receipts, Ex. PW1/8 (colly.) is 4th legal notice dated 28.12.2004 with receipts, Ex. PW1/9 (colly.) is the 3rd legal notice dated 30.12.2004 along with UPC, Ex. PW1/10 is the reply to notice dated 30.06.2005, Ex. PW1/11 is reply to notice dated 13.07.2005, Ex. PW1/12 is the cheque bearing no. 720491, Ex. PW1/13 is the cheque return memo dated 28.01.2006, Ex. PW1/14 is the legal notice dated 28.02.2006, Ex. PW1/15 is the UPC receipt, Ex. PW1/16 to Ex. PW1/20 are the AD cards, Ex. PW1/21 is the complaint, Ex. PW1/22 (colly) are the legal notice dated 29.04.2008 and Ex. PW1/23 is the statement of account after auction.
11. In cross-examination recorded on 15.09.2011, CW1 admitted that he has mentioned in his affidavit the fact that the loan agreement was executed but the same has not been filed by him on record. CW1 admitted that all the terms and conditions pertaining to the gold loan were mentioned in the loan agreement executed between the parties and the loan agreement is also called Pledge form. CW1 admitted that the address of the accused mentioned on document Ex. PW1/11 and Ex. PW1/14 is 20, National Park, Lajpat Nagar-IV, New Delhi and the address Page 6 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 mentioned on documents Ex. PW1/22 is J-66, First Floor, Ashok Vihar, PH-1, Delhi-52. CW1 admitted that the loan agreements/ pledge forms were executed between the parties within the period 2003-2004 but stated that he had no knowledge as to whether any gold loan was granted to the accused after this period. CW1 admitted that except the statement of account pertaining to the loan of accused as on 13.05.2008 i.e. Ex. PW1/23, no other document was filed by him to show that the auction took place on 13.05.2008. CW1 added that the record pertaining to the said auction was in his office.
12. CW1 further deposed that the cheque in question Ex. PW1/12 was issued by the accused for the part payment of the interest of the loan amount but he cannot tell the period and the rate of interest for which the amount was mentioned in the cheque Ex. PW1/12. CW1 admitted that purity of the gold or gold ornament is verified before loan is granted to the customer but expressed inability to comment upon the fact that the purity of the gold ornament of the accused was verified by the complainant before granting loan to him. CW1 was not able to say anything regarding the fact as to how much percent of margin between the value of gold and quantum of loan sanctioned to the accused was kept by the complainant since he was not present there at that time. CW1 admitted that the amount realized from the auction was Rs. 16,62,337/- and the amount granted to the accused was Rs. 13,40,000/-. Further cross-examination of CW1 was deferred with direction to CW1 to produce loan agreement/ pledge form Page 7 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 and record pertaining to auction on next date of hearing.
13. CW1 filed pledge form and auction documents on 10.10.2011 as Ex. PW1/24 and Ex. PW1/25. Repeated opportunities were granted to the accused for further cross-examination of CW1 on 10.10.2011, 05.11.2011 and 26.11.2011 but the accused failed to avail the said opportunities and ultimately the right of accused to cross-examine CW1 further was closed on 26.11.2011.
14. Additional statement of accused under Section 313 of Code of Criminal Procedure was recorded on 27.01.2012 wherein accused admitted document Ex. PW1/24 i.e. pledge forms. With respect to auction documents Ex. PW1/25, accused stated that the same was matter of record. Accused denied that he had received reminder notices Ex. PW1/4 to Ex. PW1/9 which were sent at his previous address. Accused stated that his new address was already in the knowledge of the complainant but the notices were still sent at his previous address. Accused further stated that the replies Ex. PW1/10 and Ex. PW1/11 were in the handwriting of his brother as the case against his brother was also pending and in these replies as well his new address was mentioned. Accused denied having received auction notice Ex. PW1/22 (colly.). Accused stated that the auction details mentioned in Ex. PW1/23 were not provided to him and complainant had charged purchase tax which is never applicable on gold loan. Accused stated that on 13.05.2008, the gold rate was Rs. 12,500/- per 10 gms but the complainant had auctioned Page 8 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 the gold at the rate of Rs. 5400/- per 10 gms.
15. In defence evidence, accused examined himself on oath as DW1 u/s 315 of Code of Criminal Procedure In examination, DW1 deposed that he is in the jewelery business since long which is his family business. DW1 stated that he had taken loan against the pledge of gold from the complainant company in the year 2003 to 2004 and the loan amount was to the extent of 75 % after ascertaining the purity of gold. DW1 stated that he had availed about 15 gold loans to the tune of Rs. 13,40,000/- against gold items weighing approximately 3.100 Kg. Accused stated that loan amount was availed by him from Vikas Marg branch of the complainant and at the time of sanction of the loan in the year 2003, complainant had taken one blank signed cheque as a security. Accused stated that later on he went to the complainant a number of times during the year 2004 till 2005 with cash to repay the loan but the complainant did not close his loan account on one pretext or the other and has withheld his gold items valued at approx. Rs. 84 lacs as on that date.
16. DW1 further deposed that he has not received any legal demand notice in respect of the cheque in question and he came to know about the present case in the year 2009-2010. Accused stated that in the year 2011 during one of the hearing, the complainant had requested for withdrawal of the complaint while stating that they have got enough security by way of gold items and thus they do not want to pursue the present case. Accused Page 9 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 stated that complainant had also withdrawn a case against his brother of its own on 24.10.2010 before Dwarka Courts which had similar facts and circumstances.
17. Accused stated that during the court hearing it was informed by the complainant that they had sold the gold pledged by him at the rate of Rs. 5,400/- per tola in the year 2008 while the actual rate of gold was Rs. 12,500/- per tola. Accused stated that complainant had misappropriated his gold jewellery items worth Rs. 84 lacs as per the present market value and no amount whatsoever was due or legally recoverable by the complainant at any point of time and even till date. Accused stated that complainant has misused the blank signed security cheque and filed a false and fabricated case against him and he is not liable for any amount towards the complainant. Accused stated that the gold loans were amply secured by pledge of gold items which was much higher in value than the loan amount. Photocopies of 14 counter-slip of gold loans have been filed as Ex. DW1/A (colly.) (Original seen and returned). Accused also filed photocopy of rate of gold list for the last 30 years as mark-D1 which was objected as to mode of proof by Ld. Counsel for complainant. Photocopy of rules and regulations of gold loan transactions were tendered as Ex. DW1/2 (Original seen and returned). It was stated that contents of rules and regulations of loan transaction for all 14 loan accounts were the same.
Page 10 of 23Muthoot Finance vs. Juggal Kishore CC. No. 2770/12
18. In cross-examination, DW1 admitted that all the 14 loan agreements which are Ex. PW1/24 (colly.) bears his signatures at the front and the back and that 14 loan agreements bears his correct addresses i.e. J-66, First floor, Ashok Vihar, Phase-I, Delhi-52 and house no. 102, Ashok Vihar, Phase-I, Delhi-52. Accused admitted that the cheque Ex. PW1/12 bears his signatures at point A but added that he had not filled up the said cheque. DW1 was not able to remember the date when he had given the cheque Ex. PW1/12 but stated that it might have been given in the year 2003-2004. Accused further deposed that after the dishonor of the cheque, he was not informed about the dishonor by his banker. Accused admitted that the first two addresses mentioned in the legal notice Ex. PW1/14 belongs to him, but he denied the third address mentioned on the notice. Accused stated that he had changed his first address mentioned in the given notice in the year 2005 and the same was informed to the complainant vide letter dated 13.07.2005 i.e. Ex. PW1/11.
19. Accused admitted that letter Ex. PW1/11 does not suggest that the accused has changed his address from J-66, Ashok Vihar, Phase-I, Delhi to House no. 20, National Park but stated that he had written his address as House no. 20, National Park, Delhi. Accused admitted that in the year 2006, he was residing at house no. 20, National Park, Lajpat Nagar-IV, New Delhi but denied the suggestion that AD Card Ex. PW1/20 was duly served upon him or Ex. PW1/19 bears his signatures. Accused clarified that he had stated in his examination about enough security for gold loan Page 11 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 received by the complainant since he was so informed by counsel for complainant orally. DW1 denied the suggestion that counsel for the complainant had never told him so. DW1 admitted that his brother Sh. Vijay Kumar Rana against whom the complainant had withdrawn the case has no concern with the present case.
20. DW1 stated that he has not made any part payment in respect of gold loan account no. 2320 to the complainant but the repayment was made in whole. Accused added that he has not repaid anything against the present loan account. Accused deposed that he has not repaid anything against the remaining 13 old loans. Accused denied the suggestion that he had received notices Ex. PW1/4 (colly.), Ex. PW1/5 (colly.), Ex. PW1/7 (colly.) or Ex. PW1/22 (colly.). DW1 admitted that Ex. DW1/2 bears the condition that if the loan is not repaid within the period of 12 months from the date of the loan, then the complainant can auction the same and recover the loan amount through auction. DW1 denied the suggestion that he had not given any blank cheque to the complainant as security or that he had received legal notice dated 28.02.2006 and the earlier notices of default and auction notice from the complainant. DW1 denied the suggestion that he was liable to pay any legally payable debt/ liability to the complainant in respect of the gold loan in question or that he was deposing falsely.
21. No further evidence was led by the accused and Defence Evidence was closed upon statement of accused recorded on Page 12 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 03.08.2012.
22. Final arguments were advanced at length by Sh. Sourabh Leekha, Ld. Counsel for the complainant and Sh. D. K. Ahuja, Ld. Counsel for accused. Written arguments were also filed on behalf of accused.
23. I have considered the arguments advanced by both the parties and perused the record carefully.
24. Before adverting to the submissions made by Ld. Counsels for the parties, it would be useful to quote the relevant legal provisions:
Section 118 of Negotiable Instruments Act deals with presumptions as to negotiable instruments and provides:
"Until the contrary is proved, the following presumptions shall be made:
(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration.."
Section 138 of the Act provides:
"Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may Page 13 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 extend to two years, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless-
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation - For the purposes of this section, `debt or other liability' means a legally enforceable debt or other liability."
Section 139 of the Act lays down presumption in favour of holder and states, "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".
25. Thus, in cheque dishonor cases, what the courts have to consider is whether the ingredients of the offence enumerated in Section 138 of the Act have been met and if so, whether the accused has been able to rebut the statutory presumptions contained in Section 118 (a) and Section 139 of the Act.
26. In the case of Krishna Janardhan Bhat v. Dattatraya G. Hegde MANU/SC/0503/2008: (2008) 4 SCC 54, Hon'ble Supreme Court observed, Page 14 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 "29. Section 138 of the Act has three ingredients viz.:
(i) that there is a legally enforceable debt
(ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and
(iii) that the cheque so issued had been returned due to insufficiency of funds.
30. The proviso appended to the said section provides for compliance with legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability.
xxxxxxx
34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of the accused is `preponderance of probabilities'. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies. xxxxxxx
45. We are not oblivious of the fact that the said provision (Section
139) has been inserted to regulate the growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters and to safeguard the faith of the creditor in the drawer of the cheque which is essential to the economic life of a developing country like India. This however, shall not mean that the courts shall put a blind eye to the ground realities. Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have been rebutted. Other important principles of legal jurisprudence, namely, presumption of innocence as a human right and the doctrine of reverse burden introduced by Section 139 should be delicately balanced. Such balancing acts, indisputably would largely depend upon the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same....... (underlining added)"
27. In Rangappa v. Sri Mohan AIR 2010 SC 1898, Hon'ble Supreme Court held, ".... if the accused is able to raise a Page 15 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. ..... 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."
28. Thus, in light of the above said legal propositions, we shall now revert to the evidence brought forth and submissions made by the parties. In the present case, it is an admitted position that the accused had availed loan from the complainant against pledge of gold ornaments. Complainant states that the cheque in question was issued by the accused towards discharge of liability. However, accused denies the same and argues that the cheque was taken as security by the complainant at the time of grant of loan and the same was not issued towards discharge of any liability. Now, what falls for consideration before this Court is as to whether the cheque Ex. PW1/12 was issued by the accused towards discharge of any legally enforceable debt or liability or was the same issued as a security cheque.
29. The core of the present case rests on secured loans taken by the accused. Secured loan is a loan which is backed by assets belonging to the borrower. The assets may be forfeited to the lender if the borrower fails to make the necessary payments within stipulated time. The fact that the loan in the present case was a secured loan is clearly made out from the evidence Page 16 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 brought on record by the complainant. Reference is made to paragraphs 5 and 6 of the affidavit of CW1, Ex. CW1/A which are quoted verbatim as under, "5. That during the course of business of the complainant company, the accused had approached the complainant company at its Vikas Marg on various occasions and expressed his desire for availing/ obtaining loans and have agreed to pledge gold ornaments with the complainant company, as security, for repayment of the said loans, alongwith the interest thereon.
6. That it was also represented by the accused to the complainant company that the gold ornaments offered by him as security and which were being pledged with the complainant company by him belongs to him...."
30. Further, Ex. PW1/24 (colly) are the copies of pledge forms which are admitted by the accused. As per rules and regulations for gold loan transactions printed on the backside of Ex. PW1/24, the ornaments were to be taken back by paying the loan amount and the interest either when demanded or on completion of three months and in the event of the borrower failing to settle transactions within a period of 12 months, ornaments were to be sold without any reference to the borrower.
31. Thus, the loan in the present case was well secured with the gold ornaments and in the event of default, the gold ornaments could have been sold for satisfaction of debt of the borrower. Now, at this juncture, it would be pertinent to refer to Section 176 Page 17 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 of the Contract Act, 1872 which deals with situations of this kind and states, "If the pawner makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawner upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawner reasonable notice of the sale.
If the proceeds on such sale are less than the amount due in respect of the debt or promise, the pawner is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawner."
32. Thus, until the money due is recovered, the pledged goods may be retained, though they would have to be surrendered when the loan is realized and it is only after the goods are sold and amount is still outstanding that further action can be brought against the borrower for recovery of outstanding amount. Hon'ble Supreme Court in Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 held, "Section 173 entitles a pawnee to retain the goods pledged as security for payment of a debt and under Section 175 he is entitled to receive from the pawner any extraordinary expenses he incurs for the preservation of the goods pledged with him. Section 176 deals with the rights of a pawnee and provides that in case of default by the pawner the pawnee has (1) the right to sue upon the debt and to retain the goods as collateral security, and (2) to sell the goods after reasonable notice of the intended sale to the pawner. Once the pawnee Page 18 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 by virtue of his right under S. 176 sells the goods the right of the pawner to redeem them is of course extinguished. But as aforesaid the pawnee is bound to apply the sale proceeds towards satisfaction of the debt and pay the surplus, if any, to the pawner. So long, howsoever, the sale does not take place the pawner is entitled to redeem the goods on payment of the debt. It follows, therefore that where a pawnee files a suit for recovery of debt, though he is entitled to retain the goods he is bound to return them on payment of the debt. The right to sue on the debt assumes that he is in a position to redeliver the goods on payment of the debt and, therefore, if he has put himself in a position where he is not able to redeliver the goods he cannot obtain a decree. If it were otherwise, the result would be that he would recover the debt and also retain, the goods pledged and the pawner in such a case would be placed in a position where he incurs a greater liability than he bargained for under the contract of pledge. The pawnee, therefore, can sue on the debt retaining the pledged goods as collateral security. If the debt is paid he has to return the goods with or without the assistance of the Court and appropriate the sale proceeds towards the debt. But if he sues on the debt denying the pledge, and it is found that he was given possession of the goods pledged and had retained the same, the pawner has the right to redeem the goods so pledged by payment of the debt. If the pawnee is not in a position to, redeliver the goods he cannot have both the payment of the debt and also the goods. Where the value of the pledged property is less than the debt and in a suit for recovery of debt by the pledgee, the pledgee denies, the pledge or is otherwise not in a position to return the pledged goods he has to give credit for the value of the goods and would be entitled then to recover only the balance. That being the position the appellant Page 19 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 would not be entitled to a decree against the said promissory note and also retain the said goods found to have been delivered to him and, therefore in his custody. For, if it were otherwise the first respondent as the pawner would be compelled not only to the amount due under the promissory note but lose the pledged goods as well. That certainly is not the effect of S. 176." (underlining added)
33. Hon'ble Orissa High Court followed the abovesaid decision in Dodla Bhaskar Rao v. State Bank of India, AIR 1992 Orissa 161 to hold that a bank holding gold by way of collateral security and suing the borrower on the promissory note would get a decree conditional upon return of the gold to the borrower.
34. Thus, in the present case as well, the complainant could have sold the gold ornaments first for satisfaction of debt in terms of rules and regulations contained in Ex. PW1/24 and if the debt was not satisfied even after selling the ornaments, then the accused could have been called upon to pay the balance amount. In case the complainant was not willing to sell the gold ornaments pledged by the accused, then the gold ornaments could have been redeemed to the accused and he could have been called upon to pay the amount. But the complainant could not have retained the gold ornaments as well as take the cheque in question from the accused for satisfaction of loan account.
35. However in the present case, as per complainant, the gold ornaments in the present case have been sold on 13.05.2008 Page 20 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 whereas the cheque in question was issued on 27.09.2005. Since the gold ornaments had not been sold by the year 2005 before the issuance of cheque on 27.09.2005, therefore, it cannot be said that there was any legally enforceable debt or liability qua the cheque in question against the accused to the tune of Rs. 6,54,548/- on the date of presentation of cheque. The liability if any could have arisen only after the gold ornaments were sold on 13.05.2008 and amount was outstanding against the accused qua the loan accounts.
36. Further, CW1 in his cross examination states, "I cannot tell that the amount mentioned in the cheque Ex. PW1/12 pertains to which period and also at what rate of interest..." Thus, the testimony of CW1 with regard to the issuance of cheque is also vague and fails to inspire any confidence that the cheque in question was issued subsequently towards discharge of any liability.
37. Further points which go against the complainant are that there is no statement of account on record or any other document from which the liability of the accused to the tune of Rs. 6,54,584/- on 27.09.2005 can be made out. The statement of account filed by complainant on record as Ex. PW1/23 is hardly any statement and lacks in all material particulars. Ex. PW1/23 does not give any details of the loan amount financed/disbursed in respect of each loan and the interest accrued thereupon periodically and overdue charges if any levied against the accused. Moreover, Ex.
Page 21 of 23Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 PW1/23 is a computer generated document but is neither supported with a certificate under Section 65 B of Evidence Act nor has been certified in accordance with Bankers' Books Evidence Act,1891 and thus, Ex. PW1/23 cannot be read in evidence.
38. From the entire evidence on record, nowhere the liability of accused to the tune of Rs. 6,54,548/- as on 27.09.2005 is made out. Moreso, when the loan amount taken by the accused in the year 2003-2004 was to the tune of Rs. 13,45,000/- and no payment whatsoever was made by the accused towards the loan amount, then it is hard to fathom as to on what basis the complainant has alleged that a sum of Rs. 6,54,548/- was outstanding against the accused on 27.09.2005.
39. Moreover, the occasion when the accused issued cheque in question to the complainant subsequently towards discharge of debt/ liability is also not made out from the evidence brought on record. As per Ex. PW1/11, accused had undertaken to issue postdated cheques towards discharge of liability. However, CW1 in his affidavit Ex. CW1/A states at paragraph 10 that no postdated cheques were issued by the accused in terms of undertaking contained in Ex. PW1/11. CW1 states that the cheque in question was issued subsequently but there is no evidence on record which can show that the accused issued the cheque in question in favour of the complainant on 27.09.2005. Such state of affairs only fortifies the claim of the accused that the Page 22 of 23 Muthoot Finance vs. Juggal Kishore CC. No. 2770/12 cheque in question was given as security cheque to the complainant at the time of grant of loan.
40. Thus, from the aforesaid observations, the conclusion which emerges is that the cheque Ex. CW1/12 was indeed given in blank as security cheque by the accused to the complainant. It is a settled law that a security cheque does not attract the penal provisions of Section 138 of Negotiable Instruments Act (vide M. S. Narayanan Menon v. State of Kerala and ors, 2006 SCC 39; Ravi Kumar D. v. State of Delhi decided by Hon'ble High Court of Delhi on 01.03.2011).
41. In view of the entire discussion made above, it can be said that the presumption under Section 118 (a) and Section 139 of Negotiable Instrument Act stands rebutted and the complainant has failed to establish that the cheque in question was issued by the accused towards discharge of any debt or liability. When the core ingredient of Section 138 Negotiable Instrument Act has not been made out then it would be futile exercise to analyze other ingredients of the Section. Accordingly, the offence under Section 138 Negotiable Instruments Act, 1881 is not made out against the accused. The complaint stands dismissed and accused stands acquitted. File be consigned to Record Room. Announced in Open Court 30.08.2012 (SWATI KATIYAR) METROPOLITAN MAGISTRATE-17 NEGOTIABLE INSTRUMENTS ACT DWARKA COURTS, NEW DELHI/ 30.08.2012 Page 23 of 23