Delhi District Court
Cc Ni Act. 1435 Of 2021 Sumit Arora vs . Ranjit Singh Page No. 1 on 24 May, 2022
CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 1
IN THE COURT OF MS. AISHWARYA SHARMA,
METROPOLITAN MAGISTRATE (NI ACT) DIGITAL COURT02,
SOUTHEAST DISTRICT, SAKET COURT COMPLEX, NEW DELHI
Criminal Complaint No: CC NI ACT1435/2021
SUMIT ARORA ... Complainant
Versus
RANJIT SINGH ... Accused
1. Name & address of the complainant: Sh. Sumit Arora
S/O Sh. Jagdish Kr. Arora
R/O L34, Block J, JJ Colony,
Srinivaspuri, New Delhi110065
2. Name & address of the accused : Sh. Ranjit Singh
S/O Sh. Atma Ram
R/O RZ31, Second Floor, I Block
Sagarpur, New Delhi110046
3. Offence complained of : U/S 138 of The Negotiable
Instruments Act,1881.
4. Plea of accused : Pleaded not guilty.
5. Final Arguments : 17.05.2022
6. Date of Institution of case : 02.02.2021
7. Date of decision of the case : 24.05.2022
JUDGEMENT
1. Vide this judgment, I shall dispose of the aforementioned complaint case filed by the complainant Sumit Arora (hereinafter referred to as the 'complainant') against accused, Ranjit Singh (hereinafter referred to as the 'accused').
2. Factual Matrix: The complainant's case is that the complainant had taken the delivery of one Maruti Suzuki Swift Desire Tour CNB bearing Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:20:27 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 2 Registration No. DLIZC0142 in June, 2018 after obtaining loan from HDFC Bank, Moti Nagar, however, his family members told him that the vehicle number is inauspicious and that he should dispose it off as early as possible. Thereafter, in the month of March, 2019, the accused approached the complainant for purchase of said car for a total consideration of Rs. 6,72,270/ and the complainant entered into an agreement dated 25.03.2019 with the accused and as per the agreement, the complainant promised the accused for issuance of sale letter after the release of the car from Hypothecation of HDFC Bank. The accused paid Rs. 1,20,000/ initially to the complainant (Rs. 40,000/ in cash and Rs. 80,000/ by account transfer) and obtained the possession of said Vehicle and promised to pay the balance amount of Rs. 5,52,720/ by way of 40 monthly installments of Rs. 13,818/ each and in discharge of his liability towards the above said loan, accused issued 20 post dated cheques to complainant including the cheque bearing No. 000027 dated 09.10.2020 for a sum of Rs. 27,636/ drawn on Punjab & Sindh Bank, Delhi Cantonment Branch, New Delhi 110010 (herein after referred to as the cheque in question), when the said cheque was presented by the complainant in the ICICI Bank, Lajpat Nagar, Branch New Delhi, the same was dishonored vide returning memo dated 13.10.2020 for the reason "Funds Insufficient". When the complainant informed the accused about dishonour of cheques, the accused requested the complainant to present the same and then the complainant again presented the said cheque with his banker i.e. ICICI Bank, Lajpat Nagar, Branch New Delhi, the same was again dishonored vide returning memo dated 04.12.2020 for the reason "Funds Insufficient". Thereafter, when the complainant tried to approach the accused for payment of balance amount, the accused avoided meeting with the complainant, then the complainant issued legal demand notice dated 31.12.2020 by registered post, acknowledgement at the address of the accused requiring him to make the payment of cheque amount within 15 days of the receipt of the notice. However, the accused did not come forward to repay this Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:20:36 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 3 amount within the prescribed period. Hence, being aggrieved, the complainant filed the present complaint under section 138 of The Negotiable Instruments Act, 1881 on 02.02.2021 and prayed that the accused be tried and punished under section 138 of The Negotiable Instruments Act, 1881 and he be also directed to pay compensation to the complainant.
3. Summoning of accused: This court summoned the accused after hearing the arguments at the stage of presummoning vide order dated 10.09.2021 and the accused entered appearance in the present case on 09.11.2021 and he was admitted to bail vide same order.
4. Notice: The court has framed notice of accusation under Section 251 Cr.P.C. against the accused on 20.11.2021. The substance of accusation was read over and explained to the accused and after being satisfied that the accused comprehended the same, the court recorded his plea. The accused pleaded not guilty and claimed trial. The accused admitted his signatures on the cheque in question and also admitted that the legal demand notice has been sent at his correct address, however, claimed that he has not received the legal demand notice as he had shifted to his permanent address in Village Moosa, Tehsil Mansa, Punjab somewhere in March,2020. He stated in his defence that the complainant got the vehicle in question financed from HDFC Bank and after the possession of the vehicle was handed over to the accused pursuant to execution of agreement to sale and purchase between the parties, he got it insured in July, 2019, however, the vehicle was stolen in September, 2019 but the complainant did not take insurance claim though he was supposed to do so being registered owner of vehicle in question. He further stated that as per their agreement to sale and purchase, he gave the cheque in question as security and as per the terms of sale and purchase agreement, the complainant was supposed to hand him over the cheque in question and other cheques given in the same transaction upon payment of every two installments. He claimed that he has no liability towards the Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:20:40 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 4 complainant and the complainant has misused the cheque in question and therefore, he stopped payment against the cheque in question and the cheque was not honored due to Insufficient Funds. On 23.02.2022, the statement of accused U/s 294 Cr. P.C regarding admission/denial of documents was also recorded wherein he admitted the correctness of dishonor memo.
5. Evidence on behalf of complainant : To prove his case prima facie, the complainant has examined himself as CW1 and has filed his evidence under Section 200 of the Cr.P.C. by way of an affidavit which is Ex. CW1/H wherein the complainant averred the same facts as are averred in the complaint. To prove the above claims, the complainant has also filed, Mark CW1/1 which is the agreement executed between the parties, Ex. CW1/A original Cheque in question dated 09.10.2020, Ex. CW1/B & Ex. CW1/C original Return Memos dated 13.10.2020 and 04.12.2020, Ex. CW1/D the legal demand notice along with its postal receipts Ex. CW1/E and the envelope containing the same Ex. CW/F. Thereafter, CW1 was subjected to cross examination by Ld. Counsel for accused.
6. During his crossexamination, CW1 admitted that before entering into the agreement Mark CW1/1, he did not obtain permission from any bank and stated that the permission was not required for entering into the agreement and it was only required for sale. He denied the suggestion that he was informed by the accused about the theft of vehicle. He also denied the suggestion that he was asked by the accused to follow the complaint lodged by accused at PS Dabri regarding theft of the vehicle. He admitted that after transfer of possession of vehicle by him in favour of accused, the accused got the vehicle insured. However, he denied that he was aware of the fact that the insurance of the vehicle was valid for next 7 months after the theft of the same. He admitted that he has filed one complaint in PS Srinivas Puri against the accused, however, no FIR was lodged on the basis of that complaint as he was told by police officials that since he has entered into an agreement regarding the same Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:20:44 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 5 vehicle, he has to approach the court for lodging of FIR and the same is still pending in the court. He admitted that one person namely Rajesh came to his house and informed him about theft of his vehicle and he also accompanied Rajesh to Police Chowki BahalGarh, Sonepat, Haryana. He denied the suggestion that he was asked by accused to lodge any complaint against Rajesh, as he had purchased the vehicle on the basis of forged documents created by one Suresh who was the driver of the vehicle engaged by accused. He also denied the suggestion that after obtaining information regarding sale of vehicle to third party, he did not file any complaint and stated that he lodged complaint against accused, Suresh and Rajesh, which is pending in the court of Ms. Swati Sharma, Ld. MM, South East District, Saket Courts. He admitted that at the time of selling of this vehicle, he was being shown as owner in M Pariwahan Application and he claimed ignorance about the fact as to who is currently shown as owner in the application. He admitted that the cheque in question and other two cheques, were given as security and it was agreed that after payment of every 2 installments, he will return one cheque. He also admitted that accused gave him total 20 cheques, out of which he has already returned 3 cheques after receiving 6 installments and additional Rs. 7,000/. He stated that after theft of the vehicle, he approached the accused by calling him several times, but accused did not respond to his calls and accused used to send him messages for assuring him for making payment after he took legal action regarding theft of his vehicle. He denied the suggestion that at the time of theft of vehicle, the insurance was in his name but he did not make any efforts to recover the amount from insurance company and he claimed that he could not do the same as he was told by insurance company that since he has already entered into the agreement for sale of vehicle, only the intended purchaser can make claim from the insurance company.
7. Examination of the accused under section 313 Cr.P.C.: The accused was examined under section 313 Cr.P.C. on 02.03.2022, wherein, the accused Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:20:48 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 6 admitted that he approached the complainant for purchase of Maruti Suzuki Swift Dezire bearing No. DLIZC0142 in March, 2019 for a total consideration of Rs. 6,72,270/ and both the parties entered into an agreement dated 25.03.2019 Mark CW1/1. He admitted that as per the agreement, the complainant promised the accused for issuance of sale letter after the release of the car from Hypothecation of HDFC Bank. He also admitted that he obtained possession of vehicle upon payment of Rs. 1,20,000/ and promised to pay the balance amount of Rs. 5,52,720/ by way of 40 monthly instalments of Rs. 13,818/ each and in discharge of his liability, he issued 20 post dated cheques to complainant including the cheque in question Ex. CW1/1 bearing No. 000027 dated 09.10.2020 for a sum of Rs. 27,636/ drawn on Punjab & Sindh Bank, Delhi Cantonment Branch, New Delhi 110010. He admitted that when the said cheque was presented by the complainant in the ICICI Bank, Lajpat Nagar, Branch New Delhi, the same was dishonored vide returning memo dated 13.10.2020 Ex. CW1/B and returning memo dated 04.12.2020 Ex. CW1/C, for the reasons "Funds Insufficient". The accused admitted his signatures on the cheque in question and filling all the particulars in cheque. He denied receiving the legal demand notice and claimed that he has no liability towards the complainant as the vehicle in question was stollen and he got the vehicle insured with his own money in the name of complainant after receiving the possession and he could not get the insurance claim as the ownership of vehicle in question was not transferred. He further stated that the complainant did not lodge any complaint regarding the theft and he did not even pursue claim from the insurance company despite having information about the theft and further, claimed that the ownership of the vehicle has already been transferred and the same could not have been done without the signatures of the owner/ complainant. He admitted knowing the complainant after seeing his advertisement on OLX. He stated that he intends to lead defence evidence.
8. Defence Evidence: The accused got himself examined as DW1 U/S Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:20:52 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 7 315 Cr.PC. During his examination, the accused stated that he entered into one agreement with the complainant on 25.03.2019 qua purchase of vehicle bearing registration no. DL 1ZC0142 for consideration of Rs. 672,720/ and for the same, he had made payment of Rs. 1,20,000 to the complainant on 25.03.2019. He further stated that it was agreed that balance amount of Rs. 5,52,720/ would be paid in 40 EMIs of Rs. 13818/ each and for the same, he had given 20 security cheques of Rs. 27636/ each with the understanding that the monthly installments would be paid on 7th day of every month and upon payment of every 2 installments, it was undertaken that complainant would return one security cheque. He further stated that pursuant to this agreement, the complainant handed over the possession of the vehicle on 25.09.2019 and the complainant promised to issue sale letter in his favour after release of hypothecation of the vehicle from HDFC Bank, Moti Nagar from whom the complainant had procured loan for purchase of vehicle. He further stated that this agreement Ex.CW1/1 was not entered with the permission of HDFC Bank and the same was frustrated after theft of the vehicle. He stated that all the cheques including the cheque in question were issued as security and not in discharge of any liability. He further claimed that he had also credited various amount in the account of complainant from 05.06.2019 to 06.10.2019 and the copy of his bank statement showing these entries is Ex. DW1/A (colly.). He stated that in the month of July 2019, he after going through an advertisement on OLX that a Government Office was in need of a vehicle, fixed an appointment with one Suresh who gave the advertisement and thought of attaching the vehicle with the said Government office to supplement his income. He stated that he met with Suresh on 15.07.2019 and after discussing the terms of agreement with him and procuring copies of his Driving License and Pan Card, he handed over the vehicle to Suresh who paid him Rs. 5,000/ in cash and deposited Rs.15,000/ in his account and he further assured to pay Rs. 25,000/ per month for using the vehicle, on 15.08.2019 when he called Suresh for Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2022.05.24 15:20:56 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 8 paying balance money and next installment, Suresh assured him to make payment between 30th August to 4th September,2019, however, Suresh did not make payment and stopped taking his calls, pursuant to which he filed one complaint against him on 9th September, 2019 with PS Dabri, New Delhi and copy of the same is Ex. DW1/B. He further stated that he informed the complainant of this development and requested him to pursue the complaint by following the IO. He further stated that on 06.10.2019, he paid only half EMI i.e. Rs.7,000/ to the complainant and requested him to deposit the balance half from his pocket as the vehicle was stolen and income generation from the vehicle had stopped and the complainant deposited the remaining half installment. He also stated that the complainant filed a complaint against him in PS Srinivaspuri, New Delhi and concerned IO summoned him and upon being informed that he had issued twenty security cheques to the complainant and was regularly paying installments every month, as per agreement from his pension account, the IO stopped any further enquiry in the matter and closed the file. He further stated that complainant did not pursue his complaint due to which FIR could not be registered and insurance proceeds could not be claimed despite the fact that period of seven months was available to the complainant for making claim. The accused has also filed Original Policy Bond Ex. DW1/C. He stated that due to attitude of the complainant, he stopped payment of the security cheques issued to the complainant. He further stated that one Rajesh Kumar from Haryana purchased the vehicle in question from Suresh Kumar on fake papers but when Rajesh came to know that the vehicle sold to him was financed by a bank and has been fraudulently sold to him, he filed an FIR with POLICE CHOWKI BAHALGARH SONIPAT. He further stated that Rajesh visited the house of the complainant and also met him and he along with complainant visited the Police Chowki, Bahalgarh, Sonipat, where Rajesh showed all the documents on the basis of which he purchased the vehicle for a sum of Rs. 3,00,000/ but all those documents were fake and forged. Thereafter, he Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:00 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 9 again requested the complainant for lodging a complaint against Rajesh for purchasing the vehicle on the basis of forged documents from Suresh, but the complainant neither pursued the complaint filed by the accused before PS, Dabri, Delhi nor filed his own complaint before PS Dabri, New Delhi nor took any step to recover the possession of the vehicle from Rajesh. Further, the complainant did not even claim insurance proceeds from insurance company despite a period of seven months being available to him.
9. During his cross examination, he admitted execution of agreement dt. 25.03.2019 Mark CW1/1. He also admitted that at the time of execution of this agreement, he was aware that the vehicle in question is hypothecated by the bank. He further admitted that he was aware that the vehicle could be released from hypothecation upon payment of balance amount, which could have been paid upon payment of installments by him. He admitted that the physical possession of the vehicle was handed over to him on 25.03.2019. He also admitted that as per terms and conditions of the agreement, the complainant could have given him the sell letter only upon the complete payment of the remaining amount. He admitted that he has only paid 5 full installments and 6th half installments and thereafter he stopped making the payment and stated that he had informed the complainant that he will not be making the payment. However, he admitted that he has no written communication with the complainant regarding stoppage of the payment. He admitted that he had given the vehicle to Suresh for driving at his own risk and he did not execute any agreement with Suresh when he handed over the vehicle to him for driving. He denied the suggestion that the vehicle in question was not stolen but it was sold to someone else for getting money in connivance with the driver Suresh on the basis of forged and fabricated documents. He denied the suggestion that he has left his address without informing the complainant. He denied the suggestion that he issued the cheque in question in discharge of his legal liabilities towards the complainant.Digitally signed by AISHWARYA
AISHWARYA SHARMA
SHARMA Date: 2022.05.24
15:21:04 +0530
CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 10
He also denied the suggestion that the agreement dt. 25.03.2019 was not frustrated after theft of the vehicle. After conclusion of defense evidence, the matter was fixed for final arguments.
10. Final Arguments: Ld. Counsel for the complainant argued that the complainant has proved his case as it is proved that the accused entered into the agreement to sale qua the vehicle in question with the complainant and he also obtained possession of the vehicle in pursuance of the said agreement. Further, the accused has also admitted issuance of cheque in question in favour of complainant towards payment of the consideration amount qua purchase of vehicle in question and thus, the complainant has proved that the accused had issued the cheque in question to discharge his legal liability. It has also been proved that the cheque was dishonoured. Service of legal notice is also to be presumed as the legal demand notice was sent at the last known correct address of the accused. The accused was liable to make the payment, however, he did not make the payment within stipulated time despite service of legal notice. It is also proved that all the steps were taken by the complainant within the time provided by the law. The accused has failed to rebut the presumption provided in the law. Hence, the accused may be convicted for the offence punishable under Section 138, NI Act. Ld. Counsel for the complainant has also filed written arguments. The same is pursued. Along with the written arguments, ld. Counsel for the complainant has also filed communication of the complainant with the HDFC Bank dt. 17.06.2020 to establish that the complainant has paid the settlement amount to the bank and got the vehicle released from it's hypothecation.
11. Per contra, Ld. counsel for the accused argued that the accused has no liability for payment of the cheque amount as the vehicle in question was stollen and the complainant did not take any action to recover and hand over the possession of the vehicle to the accused and further, he did not even pursue the claim with the insurance company despite the fact that he was the registered owner of Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:08 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 11 the vehicle and he had insurance policy in his name which was valid for another 7 months at the time of theft of the vehicle. He further argued that the complainant could not have transferred the possession of the vehicle without the consent of the bank as at the relevant point of time, the vehicle was hypothecated with the bank.
Hence, the accused cannot be convicted for the offence punishable under Section 138 N I Act. With these submissions, Ld. Counsel for accused has prayed that he may be acquitted. Written arguments file on behalf of the accused also perused.
12. I have heard the rival submissions of the Ld. Counsels of the parties and carefully perused the material available on record.
13. Appreciation of evidence and finding: Coming to the merits of the case, I first deem it pertinent to enunciate the law relating to dishonour of cheque.
14. To bring home the liability under section 138 of The Negotiable Instruments Act, 1881, following elements must spring out from the averments in the complaint and the evidence adduced by the complainant, viz,
a) A person must have drawn a cheque on an account maintained by him in a bank for payment of a certain sum of money to another person from out of that account for the discharge of any legally enforceable debt or liability;
b) cheque has been presented to the bank within a period of three months from the date on which it is drawn or within the period of its validity whichever is earlier;
c) That cheque has been 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;
d) The payee or the holder in due course of the cheque has made 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;
and
Digitally signed
by AISHWARYA
AISHWARYA SHARMA
SHARMA Date:
2022.05.24
15:21:12 +0530
CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 12
e) 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 the cheque within 15 days of the receipt of the said notice.
Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability.
15. Thus, for securing conviction under section 138 of NIA following points are required to be proved:
a) The cheque was issued by the drawer in discharge of any debt or other liability.
b) It must be legally enforceable debt or liability.
c) The cheque must be presented by payee within period of 3 months or
it's validity, whichever is earlier.
d) The cheque is dishonoured because of insufficient funds or it exceeds
the arrangement.
e) A legal notice in writing demanding the payment of cheque is issued
within 30 days of the receipt of information from the bank.
f) There is default by the drawer to make the payment within 15 days from the date of the receipt of notice.
g) The complaint is filed within 30 days from the date of cause of action.
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.
16. The law as laid down in relation to the Negotiable Instruments Act is discussed in various judgments. It is settled position of law that there is a presumption in favour of the complainant and against the accused. However, the presumption is rebuttable. Hon'ble Supreme Court of India in Rangappa v. Sri Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2022.05.24 15:21:16 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 13 Mohan (2010) 11 SCC 441 has discussed the law in detail. The Hon'ble Supreme Court has held as under:
"15. In light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/defendant cannot be expected to discharge an unduly high standard or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden.
Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, 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."
17. Thus, it has been settled that there is a presumption in favour of the complainant and against the accused, that the cheque was issued for consideration. However, the presumption is rebuttable. The accused can prove that Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2022.05.24 15:21:20 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 14 the cheque was not issued for consideration and that the accused did not have any liability to pay the amount. It has also been held that the accused need not lead evidence in support of his defence. He can prove it on the balance of probabilities by showing the contradictions in the material produced by the complainant.
18. Since criminal liability can be attached by proving each element of the Section under which liability is sought to be enforced, I shall now go on to appreciate the evidence documentary and oral, in light of how compellingly it satisfies each of such ingredient, if at all. In the present case, the accused has admitted his signatures on the cheque. He has even admitted filling all the particulars in cheque. It is also admitted that the cheque is drawn on the account of the complainant. It is also not in dispute that the cheque has been presented by payee within period of 3 months. Further, it is also an admitted fact that accused has not made payment of the cheque amount and this complaint is filed within limitation. It is also proved that the cheque was presented for encashment and that the same was dishonored. Although, during his cross examination and notice framed U/S 251 CrPC, contrary to remarks mentioned in the return memos, the accused has claimed that the cheque was dishonored as he 'stopped payment' qua the cheque in question and it was not dishonored due to insufficient funds, however, during his statement recorded U/S 313 CrPC, the accused has admitted that the cheque in question was dishonored vide returning memos dated 13.10.2020 Ex. CW1/B and returning memo dated 04.12.2020 Ex. CW1/C for the reasons "Funds Insufficient". During his statement of admission and denial recorded U/S 294 CrPC, the accused has admitted the correctness of dishonor memo. Further, Section 146 of The Negotiable Instruments Act, 1881, in this regard also comes into play which raises a presumption that the court shall presume the fact of dishonour of the cheque in case the cheque is returned vide a return memo having thereon the official mark denoting that the cheque has been dishonoured. Such bank slip or memo is a prima facie proof of Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:24 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 15 dishonor. In view of such presumption and keeping in view the fact that the accused has not led any evidence to prove the contrary, it is established that the cheque in question was dishonoured due to insufficient funds.
19. The accused has denied the service of legal notice. It has been argued that the complaint is not maintainable as the legal notice was not served upon the accused. I have considered the submissions. However, there are no merits in it. The complainant has filed the copy of legal notice and postal receipt along with tracking report. Persual of the same reveals that the legal demand notice dt. 31.12.2020 was sent at the last known correct address of the accused i.e. RZ31, RZ 31, Second Floor, I Block, Sagarpur, New Delhi110046 through speed post and it was received back with remarks 'no such person in the address'. The same address is also mentioned as residential address of the accused in the agreement Mark CW1/1 dated 25.03.2019. The accused has also not disputed that he was residing at the said address, however, he has claimed that he has not received the legal demand notice as he had shifted to his permanent address in Village Moosa, Tehsil Mansa, Punjab somewhere in March,2020. There was no occasion for the complainant to have knowledge of this fact, unless the accused himself would have intimated the complainant of this fact and there is no such proof/communication on record to show that the accused informed the complainant about this fact. On this point, it is relevant to refer to the decision of Hon'ble Supreme Court in Raja Kumari v. Subbarama Naidu, 2004 (3) KLT 799 (SC). In this case, while referring to Section 27 of the General Clauses Act, 1897, the Supreme Court held that:
"No doubt Section 138 of the Act does not require that the notice should be given only by "post". Nonetheless the principle incorporated in Section 27 can profitably be imported in a case where the sender has dispatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was not Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:28 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 16 responsible for such nonservice. Any other interpretation can lead to a very tenuous position as the drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice".
So, there is a clear and cogent declaration in Raja Kumari's case that notice can be deemed to be served if the sendee does not prove that notice was actually not served on him and that he was not responsible for the nonservice. In the case in hand, the complainant sent legal notice at last known correct address of the accused and there is nothing on record to show that the complainant has intimation of the fact that the accused had shifted from that address to Punjab, thus, apparently, the accused has contributed to the nonservice, thus, notice can be deemed to be served.
20. Further, once it is shown by the complainant that he had posted the legal notice at the correct address of the accused, the requirement of law stands satisfied. No further proof of service of legal notice is required. The duty of the complainant was to give a legal notice. He has proved that he had given a legal notice to the accused under Section 138 N. I. Act. Hence, he has discharged the burden. It has been proved that complainant had issued a legal notice under Section 138 N.I. Act within limitation period after dishonouring of the cheque. The complaint is therefore maintainable on this aspect. I get strength from the judgment of the Hon'ble High Court of Delhi in Mayank Pathak Vs. Elcome Trading Company Pvt. Ltd. and Anr. 231 (2016) DLT 308. In the abovesaid matter before the Hon'ble High Court of Delhi, one of the ground of defence taken by the accused was that legal notice under Section 138 N. I. Act was not served upon him as it was not sent at the correct address of the petitioner. The Hon'ble High Court of Delhi, while dismissing this ground, has held that service of summons in such cases can be considered as service of notice and drawer of the cheque is having option to make the payment within 15 days of the receipt of the summons of the Court alongwith the copy of the complaint Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:33 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 17 under Section 138 of the Act. The Hon'ble High Court has held as under:
"16. Other limb of argument advanced by the counsel for the petitioner is that the legal notice sent to the petitioner was never received by the petitioner as the same was never sent to the correct address of the petitioner.
"17. Perusal of record shows that legal notice Ex.CW1/9 was sent on two addresses of the petitioner i.e. L7, Back Side Ground Floor, Lajpat NagarII, New Delhi and I90, Lower Ground Floor, Lajpat Nagar, Delhi. The legal notice sent on the former address was received back with the report that the addressee had left the address. Whereas, the notice sent on the latter address was not received back. The contention of the petitioner is that his address was never of I90, Lajpat Nagar but was L90, Lajpat NagarII. Even if for the sake of arguments, it is believed that the address was not correctly mentioned on the legal notice, the judgment of Hon'ble Apex Court in the case of C. C. Alavi Haji v. Papaletty Muhammed & Anr. 2007 (2) JCC (NI) 25 makes it clear that a if person 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 contend that there was no proper service of notice as required under Section 138 of the Act. Relevant para from the judgments is quoted hereunder:
"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 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 the 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. As observed in Bhaskaran's case (supra), if the "giving of notice" in the context of Clause (b) of the proviso was the same as the "receipt of notice" a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act."
21. In C.C. Alavi Haji's case (supra), it is made clear that drawer of the cheque is having option to make the payment within 15 days of the receipt of the Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:37 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 18 summons of the Court along with the copy of the complaint under Section 138 of the Act. But in the present case, it is nowhere the case of the accused that despite having received the copy of the summons of the Court along with a copy of the complaint under Section 138 of the Act, he had made the payment. So, the service of legal notice was not mandated and the accused was having the opportunity to make the payment within 15 days of the receipt of the summons of the Court. Now, he cannot contend that there was no proper service of notice. Therefore, the argument that the complaint is not maintainable on the ground of nonservice of legal notice is without any merits. I hold that the complaint is maintainable on this aspect.
22. Now the only question left to be determined is whether the cheque in question was issued by the accused in discharge of legally enforceable debt or liability or not? The version of the complainant is that the accused approached him for purchase of Maruti Suzuki Swift Dezire bearing No. DLIZC0142 in March, 2019 for a total consideration of Rs. 6,72,270/ and both the parties entered into an agreement dated 25.03.2019 Mark CW1/1 and as per the agreement, the accused obtained possession of vehicle upon payment of Rs. 1,20,000/ and he promised to pay the balance amount of Rs. 5,52,720/ by way of 40 monthly instalments of Rs. 13,818/ each and in discharge of his liability for payment of the remaining consideration amount, he issued 20 post dated cheques in favor of the complainant including the cheque in question as security with undertaking that the complainant will return one cheque upon payment of every two instalments and pursuant to this agreement , the complainant handed over the possession of the vehicle on 25.03.2019 and the complainant promised to issue sale letter in his favour after release of hypothecation of the vehicle from HDFC Bank, Moti Nagar from whom the complainant had procured loan for purchase of vehicle. All these facts have been admitted by accused during his examination as DW1 and are further corroborated by Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:42 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 19 the statement of accused recorded U/S 313 CrPC. Since the accused has admitted the execution of the agreement and he has even admitted the contents of the agreement, thus, the same stands proved and can be read in evidence. However, the accused has denied his liability for payment of the cheque amount on the ground that the agreement itself is void as the complainant could not have entered into such agreement without permission of the bank with whom the vehicle was hypothecated and pursuant to the theft of the vehicle, the agreement got frustrated. This submission of the accused is in contradiction with the terms of the agreement EX. CW1/1, as in Clause 5 of the said agreement, it is clearly mentioned that after 25.03.2019, all the liability and responsibility of the vehicle will be of the accused and the complainant will have no concern with the vehicle after 25.03.2019. Thus, this defence of the accused that after theft of the vehicle, the agreement got frustrated, is not plausible.
23. Now coming to the other defence of the accused qua validity of the agreement, It is undisputed that at the time of execution of agreement on 25.03.2019 , the vehicle was hypothecated with the HDFC Bank, Moti Nagar. It is also not in dispute that that possession of the vehicle in question was handed over by the complainant to the accused on 25.03.2019. Further, the complainant during his cross examination has also admitted that before entering into the agreement Mark CW1/1, he did not obtain permission from the bank. The cheque in question was admittedly issued as security for the balance consideration amount qua purchase of vehicle and this fact is also mentioned in Clause 4 of the agreement. Admittedly, the accused defaulted in payment of balance consideration amount and the accused had filled all the particulars of the cheque. Thus, the complainant was having authority to present the cheque. In view of such admitted facts, the only issue before this Court is to determine the legality of the agreement, in pursuance of which the cheque in question was issued, as it is not enough for the cheque to have been issued and the same to have been dishonoured, but it is also necessary to establish that the cheque was issued Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:46 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 20 for the discharge, in whole or in part, of any legally enforceable debt or other liability.
24. To determine the legality of this agreement, it is necessary to discuss the concept of hypothecation. In Black's Law Dictionary, Sixth Edn., at page 742 the word 'Hypothecate' has been given meaning as under:
"To pledge property as security or collateral for a debt. Generally, there is no physical transfer of the pledged property to the lender, nor is the lender given title to the property; though he has the right to sell the pledged property upon default."
In Webster's Encyclopedic Unabridged Dictionary of the English Language, 1989 Edn., at page 702, the meaning of the word 'hypothecate' is given that "to pledge to a creditor as security without delivering over."
In Corpus Juris Secundum, Vol. XLII, page 370 the word 'hypothecation' is defined as under:
"A term borrowed from the civil law, and in so far as it is naturalised in English and American law, it means a contract of mortgage or pledge in which the subject matter is not delivered into the possession of the pledge or pawnee; or, conversely, a right which a creditor has over a thing belonging to another, and which consists in a power to cause it to be sold in order to be paid as claim out of the proceeds."
25. Hypothecation is not a statutory creation but it is in usage in mercantile field since times immemorial. Hypothecation is understood in mercantile world as creation of charge on moveables in favour of hypothecatee by hypothecator where possession of goods will remain with the hypothecator. Thus, the hypothecator can be in possession of goods hypothecated and enjoy the same without causing any damage to the rights of the hypothecate. The hypothecation is neither governed by any statute nor there is any law governing the same directly or indirectly. Therefore, it has to be understood purely on general conditions of the contract as per the terms of the hypothecation agreement. There is no provision in the Contract Act regarding hypothecation nor in the Sale of Goods Act. To understand the concept of hypothecation, it is also relevant to know what is the difference between 'pledge' and Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:50 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 21 'hypothecation'. To understand the same, it is relevant to refer to judgment of Hon'ble Orissa High Court in Bhabani Shankar Patra v State Bank of India, AIR 1986 Ori 247, wherein it was held that:
"11. ...Hypothecation is an extended form of pledge which has not been expressly dealt with in the law of contract. The distinction between hypothecation of goods and pledge of goods is well known. In case of pledged goods, the goods are stored in the godown under the lock and key of the Bank under the Bank's supervision. Thus, the pledged goods remain under the physical possession of the Bank and no withdrawals or additions of the stocks in the godown are permissible without the Bank's permission. The position with regard to the hypothecated goods is, however, different because these goods are, strictly speaking, not under the lock and key of the Bank but allowed to be kept at the premises of the borrower without any lock and key of the Bank as such but are supposed to be under the constructive possession of the Bank by virtue of deed of hypothecation under which the borrower is obliged to submit regular returns to the Bank indicating the increase and decrease of the value of the said goods to enable the Bank from time to time to determine the drawing of the borrower with regard to it. In law, however, there is no difference with regard to the legal possession of the Bank. In both the cases, the goods are under the constructive possession of the Bank, while in the case of pledge they are also in the actual physical possession of the Bank, but in the case of hypothecated goods they are in actual possession of the borrower subject to the restrictions mentioned above. It is, therefore, said that hypothecation is only an extended idea of a pledge, the creditor permitting the debtor to retain possession either on behalf of or in trust for himself..."
26. In Simla Banking and Industrial Co. v. Pritams, AIR 1960 PH 42 while making a distinction between pledge and hypothecation, a Division Bench of the Punjab High Court held that:
"8...The civil law recognises two kinds of pledges, viz., the "pignus" (pawn) in which the possession of the thing is actually delivered to the person for whose benefit the pledge was made, and "hypotheca" (hypothecation) in which the possession of the thing pledged remained with the debtor, the obligation resting in mere contract without delivery. In one case possession was actually delivered to the creditor or pawnee, in the other it remained with the debtor. Hypothecation has been defined as a right which a creditor has over a thing belonging to another, and which consists in the power to cause it to be sold in order to be paid his claims out of the proceeds. It is an act of pledging a thing as security for a debt or demand without parting with Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:21:55 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 22 the possession. It follows as a consequence that although the property remains in the possession of the debtor, it cannot be transferred to a third party without the express consent or permission of the creditor...''
27. From the aforesaid decisions, it emerges that since the vehicle was hypothecated with the HDFC bank on 25.03.2019, the complainant though was in actual physical possession of the same, but the constructive possession of the vehicle was still with the hypothecator i.e. bank. It is abundantly clear from the evidence on record that the vehicle which was hypothecated by the complainant to the Bank remained in the possession of the complainant being debtor. It is equally clear that this vehicle was being held by the debtor i.e. complainant on behalf of the creditor i.e bank and the ownership or possession thereof could not have been transferred to a third party without the express consent or permission of the creditor i.e. bank. This conclusion flows from the meaning which is assigned to the expression "hypothecation" by legal compilers and commentators. However, the debtor i.e. complainant entered into agreement qua sell of the hypothecated vehicle with the accused without permission/ intimation to the creditor i.e. bank and the complainant even parted with the possession of the vehicle. According to law of Contract, it would not be possible to enforce any agreement or consideration, the object of which is unlawful, within the meaning of Section 23 of the Indian Contract Act, 1872, which is couched in the following terms : "23. What considerations and objects are unlawful, and what not The consideration or object of an agreement is lawful, unless it is forbidden by law, or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2022.05.24 15:21:59 +0530 CC NI Act. 1435 of 2021 Sumit Arora vs. Ranjit Singh Page No. 23 be unlawful, Every agreement of which the object or consideration is unlawful, is void."
Thus, pithily put, the transaction in question, is also hit by the provisions of Section 23 of the Indian Contract Act, 1872, as the complainant could not have entered into the agreement to cause injury to the property i.e. vehicle of bank, as he was only in constructive possession of the vehicle on behalf of bank and he could not have transferred possession of the vehicle to the accused. Since, the object and consideration of the agreement Ex. CW1/1 is unlawful, this agreement is void and can not be enforced. Accordingly, the cheque in question which was given as per terms of this agreement can not be said to be given in discharge of legally enforceable debt or liability.
28. In view of the discussion made above, this Court is of the considered view that the complainant could not establish his case against the accused so as to bring home the guilt on the part of the accused. The cheque in question was not issued in discharge of legally enforceable liability, therefore, notwithstanding that it was dishonoured, it cannot come within the purview of section 138 of the NI Act.
Accordingly, the accused Ranjit Singh is hereby acquitted of offence U/s 138 of NI Act. Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2022.05.24 15:22:04 +0530 Announced in the open court on (Aishwarya Sharma) this day i.e. 24.05.2022 MM (N.I. ACT)Digital Court02/SED, Saket Courts, New Delhi