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[Cites 23, Cited by 0]

Delhi District Court

India'S Judgment In Rangappa vs . S. Mohan, (2010) 11 Scc 441 Which on 30 May, 2012

                                                1

                IN THE COURT OF MS. SURABHI SHARMA VATS 
                 MM­01 (138 NEGOTIABLE INSTRUMENTS ACT) 
                    PHC, NEW DELHI DISTRICT, NEW DELHI.


(a)  Complaint Case No.                     220/1/11

(b)  Date of Institution                    27.10.1998

(c)  Date of offence                     The date on which cheque dishonored.

(d)  Complainant                            M/s Sheo Prasad Mahesh Chand
                                            Y­187, Loha Mandi, Naraina
                                            New Delhi­110018
                                            Through its proprietor Sh. Mahesh Chand

(e)  Accused                                1. The Dimensions
                                                RZ­15, Inderpuri, New Delhi
                                                Through its Proprietor                
                                            2. Mr. Yogesh
                                                Partner of the Dimensions 
                                                RZ­15, Inderpuri, New Delhi
                                            Also At    
                                                11­D, Nilgiri No. 3, Sector No.­34
                                                Noida (U.P.)

(f)  Offence                                Under Section 138 N.I. Act

(g)  Plea of the accused                    Pleaded not guilty and claimed trial

(h) Argument heard and
      reserve for order                     04.05.2012

i)  Final order                        

(j) Date of Judgment                        30.05.2012


JUDGMENT

Brief facts of the case:­ C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 2

1. It is the case of the complainant that the complainant is the sole proprietorship concern of Sh. Mahesh Chand and he is carrying on his business of iron and iron products. It is stated in the complaint that accused no. 1 is a partnership firm and carrying on its business through its partners and accused no. 2 is the partner of accused no. 1. It is further stated that the accused firm through its partners approached the complainant for the supply of goods and the complainant as per the orders and specification of the accused supplied the goods to the accused firm.

2. It is further stated that accused in discharge of their partial liability issued and delivered the following cheques to the complainant :­ Cheque No. Dated Amount Drawn on 889507 20.06.98 30,000/­ State Bank of India Inderpuri 889514 06.07.98 30,000/­ State Bank of India Inderpuri 889515 20.07.98 30,000/­ State Bank of India Inderpuri It is averred that accused assured the complainant that the said cheques would be honoured on presentation as they have sufficient balance amount in their bank account.

3. It is further contended that the complainant within six months of the issue of the said cheques, presented the said cheques through his banker State Bank of Bikaner & Jaipur, Naraina Branch, New Delhi but on 07.09.1998, the complainant received an information from his banker about the dishonour of the cheques for the reason "Refer to Drawer" vide cheques return memos Ex. CW1/B­1, Ex. CW1/B­2 and Ex. CW1/B­3.

4. It is further stated that thereafter, a legal demand notice dated 15.09.1998 was posted on 17.09.1998, under registered A.D. Post at C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 3 RZ­15, Inderpuri, New Delhi vide postal receipts Ex. CW1/D­1 and Ex. CW1/D­2 and at 11­D, Nilgiri No. 3, Sector No.­34, Noida (U.P.) vide postal receipt Ex. CW1/D­3 calling upon the accused to make payment of the dishonoured cheque within a period of 15 days from the date of the receipt of the said notice as required under law. It is further contended that the accused no. 2 was served with the legal demand notice of the complainant at his residence on or about 18.09.1998 but the registered envelopes at the address of the business premises returned with the postal remarks "Refused" and there is no response to the legal notices of the complainant as such the allegations of the said legal demand notices presumed to be admitted by the accused. Despite receiving the legal demand notice, accused had failed to make the payment and then present complaint has been filed under section 138 Negotiable Instrument Act.

5. The Court has summoned the accused after taking cognizance and after supplying the documents, a notice under section 251 Cr. P.C. for offence under section 138 Negotiable Instrument Act was served upon the accused on 24.05.2005. The accused pleaded not guilty and claimed trial. After completion of Complainant's Post Notice Evidence, statement of the accused was recorded and accused submitted that he wants to lead evidence in his defence and in his defence evidence, Sh. Rajesh Kumar Sharma, Sr. Assistant, State Bank of India, Inder Puri Branch, New Delhi was examined as DW1 and Sh. Yogesh Mohan Sikoria, accused himself, was examined as DW2.

6. I have heard Ld. Counsel for both the parties and also perused the entire record, testimony of witnesses, documents placed on record and the C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 4 judgments relied upon by both the counsels

7. The defence of the accused is three fold :­

(i) It is submitted by the accused that he has never received the legal demand notice Ex. CW1/9 as the legal demand notice was sent at incorrect business address i.e. RZ­15, Inderpuri and not at R­15, Inderpuri. It is averred that the accused in his cross­examination stated that R block and RZ block are two different blocks and RZ block is an unauthorized colony. Accused further contended that other address of Noida also did not pertain to the accused.

(ii) Another defence of the accused is that the cheques in question were issued in advance as security. The accused examined himself as DW1 to prove that the other cheques corresponding to the cheques issued to the complainant were issued by the accused during the period of 1992 to 1993 till the time the bank account of the accused was declared protested account and that thereafter there was no further transaction. Impliedly if the corresponding cheques were issued by the accused during the period of 1992­1993, presumption is raised that the cheques in question were issued during that period.

(iii) The final defence of the accused is that cheques in question were issued in discharge of time barred debt and there is no such any legally enforceable debt or liability. It is stated by the complainant that the bills Ex. CW1/1 and Ex. CW1/2 are dated 16.02.1994 and 22.02.1994, whereas the alleged cheques stated to be issued in discharge of liability against the said bills are dated 20.06.1998, 06.07.1998 and 20.07.1998. There has been no acknowledgment of debt and/or liability of the accused C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 5 during this period of more than four and a half years. It is submitted that any debt and/or liability, if any, is legally recoverable within a period of three years and thereafter the same is not legally recoverable debt and/or liability.

8. Section 138 of the Negotiable Instrument 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.

9. Before proceeding further, this court would like to reproduce section 138, section 118 (a) and 139 of the Negotiable Instrument Act. Section 138 reads as under :­

138. Dishonour of cheque for insufficiency, etc., of funds in the account--Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may 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 C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 6 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 118 of NI Act reads as follows:­ Presumptions as to negotiable instruments.-Until the contrary is proved, the following presumptions shall be made:

(a) of consideration : that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration;
"That every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration."

and section 139 presumption in favour of holder reads as under:­ "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 C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 7 part, of any debt or other liability."

10. It would be appropriate to quote here the Hon'ble Supreme Court of India's judgment in Rangappa vs. S. Mohan, (2010) 11 SCC 441 which reads as under :

"It must be remembered that the offence made punishable by Section 138 can be better described as 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."

11. A presumption is a legal or factual assumption drawn from the existence of certain facts. It was furthermore opined that if the accused had been able to discharge his initial burden, thereafter it shifted to the second respondent in that case.

12. The nature and extent of presumption came up for consideration before the Apex Court in M.s. Narayana Menon Alias Mani vs. State of C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 8 Kerala and Anr. [(2006) 6 SCC 39] wherein it was held:

"The Act contains provisions raising presumption as regards the negotiable instruments under Section 118(a) of the Act as also under Section 139 thereof. The said presumptions are rebuttable ones. Whether presumption stood rebutted or not would depend upon the facts and circumstances of each case."
"30. Applying the said definitions of proved or disproved to the principle behind Section 118(a) of the Act, the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non­existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon. It is not necessary for the defendant to disprove the existence of consideration by way of direct evidence. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which the accused relies. The accused need not disprove the prosecution case in its entirety. Moreover, the onus on an accused is not as heavy as the of the prosecution. It may be compared with that on a defendant in a civil proceedings. Thus, it was for the accused only to discharge the initial onus of proof. He was not necessarily required to disprove the prosecution case. Whether in the given facts and circumstances of a case the initial burden has been discharged by an accused would be a question of fact. It is a matter relating to appreciation of evidence.
C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 9 "38. If for the purpose of a civil litigation, the defendant may not adduce any evidence to discharge the initial burden placed on him, a fortiori even an accused need not enter into the witness box and examine other witnesses in support of his defence. He, it will bear repetition to state, need not disprove the prosecution case in its entirely as has been held by the High Court."

13. The Hon'ble Supreme Court of India has clearly laid down the law that standard of proof in discharge of the burden in terms of Section 139 of the Act being of preponderance of a probability, the inference therefor can be drawn not only from the materials brought on record but also from the reference to the circumstances upon which the accused relies upon. Categorically stating that the burden of proof on accused is not as high as that of the prosecution.

14. Hon'ble Supreme Court in Hiten P. Dalal vs. Bratindranath Banerjee, (2001) 6 SCC 16 has observed that :

"Provided the facts required to form the basis of a presumption of law exists, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists. Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the prudent man."

C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 10

15. Then again, Hon'ble Supreme Court in K. Prakashan vs. P.K. th Surenderan decided on 10 October, 2007 has dealt with the aspect of friendly loan and scope of presumptions of law. In para 12 and 13 of the above mentioned judgment wherein it is stated that :

12. The Act raises two presumptions; firstly, in regard to the passing of consideration as contained in Section 118 (a) therein and, secondly, a presumption that the holder of cheque receiving the same of the nature referred to in Section 139 discharged in whole or in part any debt or other liability. Presumptions both under Sections 118 (a) and 139 are rebuttable in nature. Having regard to the definition of terms proved and disproved as contained in Section 3 of the Evidence Act as also the nature of the said burden upon the prosecution vis - vis an accused it is not necessary that the accused must step into the witness box to discharge the burden of proof in terms of the aforementioned provision.
13. It is furthermore not in doubt or dispute that whereas the standard of proof so far as the prosecution is concerned is proof of guilt beyond all reasonable doubt; the one on the accused is only mere preponderance of probability.

16. In the light of all above citations and legal position, it can be safely concluded that :

a) Presumptions u/s 118 and 139 of the N.I. Act are in favour of the complainant.
b) The standard of proof for rebutting the presumptions for the accused is 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.
c) The accused is not required to step into the witness box for C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 11 rebutting the presumption u/s 118 and 139 of the N.I. Act. He may discharge his burden on the basis of materials already brought on record and the circumstances brought on record.
d) Where there is a reasonable doubt and when two incredible versions confront the court, the court should give benefit of the doubt to the accused.

17. In the instant case, Ld. defence counsel has submitted that the amount of the cheques is not legally recoverable as it is time barred. He has relied upon the judgment of of Hon'ble Madras High Court in K. Kumaravel's case (supra) and judgment of Hon'ble High Court of Delhi in M/s Vijay Polymers Pvt. Ltd. & Anr.'s case (supra).

The court has perused all these judgments. This argument of Ld. counsel for the accused is not sustainable as Section 25 (3) of Indian Contract Act and Section 29 of Limitation Act apply in this case.

Section 25 (3) Indian Contract Act and Section 29 (1) of The Limitation Act are reproduced herein for ready reference.

Section­25(3) Indian Contract Act reads as under:

"An agreement made without consideration is void, unless ­ (3) it is a promise, made in writing and signed by the person to be charged therewith or by his agent generally or specially authorised in that behalf, to pay wholly or in part debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.

Illustrations

(e) A owes B Rs. 1,000, but the debt is barred by the C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 12 Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract."

Section­29(1) of The Limitation Act reads as under:

"(1) Nothing in this Act, shall affect section 25 of the Indian Contract Act,1872."

Hon'ble Supreme Court in A.V. Murthy vs. B.S. Nagabasavanna, AIR 2002 S.C. 985 has observed as under:

"As the complaint has been rejected at the threshold, we do not propose to express any opinion on this question as the matter is yet to be agitated by the parties. But, we are of the view that the learned Sessions Judge and the learned Single Judge of the High Court were clearly in error in quashing the complaint proceedings. Under Section 118 of the Act, there is a presumption that until the contrary is proved, every negotiable instrument was drawn for consideration. Even under Section 139 of the Act, it is specifically stated that 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 discharge, in whole or in part, of any debt or other liability. It is also pertinent to note that under sub­section (3) of Section 25 of the Indian Contract Act, 1872, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract.
This is not a case where the cheque was drawn in respect of a debt or liability, which was completely barred from being enforced under law. If for example, the cheque was drawn in respect of a debt or liability payable under a wagering contract, it could have been said that that debt or liability is not legally enforceable as it is a claim, which is C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 13 prohibited under law.
Under Section 25(3) of Indian Contract Act, A debtor can enter into an agreement in writing to pay the whole or part of a debt of which the creditor might have enforced payment, but for the law of limitation. While, mere acknowledgment under Section 18 of the Limitation Act, in order to be valid, must be made before the expiry of the period of limitation, a promise, under Section 25(3) to pay the debt may be made even after the debt has become barred by the limitation. A time­barred debt can form a good consideration because, the debt is not extinguished.

18. Although, in view of the above discussion, this argument of Ld. defence counsel that the debt, if any, is time barred is untenable. But taking into consideration all the facts, circumstances, evidence on record, judgments relied upon by both the counsels, the arguments tendered by both the parties and after appreciating the evidence on record, this court is of the view that the accused persons have created a reasonable doubt in respect of the liability and one of the legal ingredient of Section 138 NI Act that is sending of legal demand notice at correct address of the accused and thus, the accused persons have rebutted the presumption u/s 118 and 139 of the N.I. Act in the present case.

19. Brief reasons for this finding are as under :­

(i) The main defence of the accused is that he has not received the legal demand notice. Accused has submitted that the correct address of the accused is R­15 Inderpuri and not RZ­15, Inderpuri where the legal demand notice was actually sent. It is further submitted that the address of R­15 was C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 14 well within the knowledge of the complainant as the bills Ex. CW1/1 and Ex. CW1/2 reflect the said address (i.e. R­15, Inderpuri).

As the complainant has not sent the legal demand notice at the correct address of the accused, thus, the presumption u/s 27 of the General Clauses Act is not applicable.

At this juncture, it would be pertinent to refer to Section 27 of the General Clauses Act which is extracted as below: ­ "27. Meaning of service by post. ­ Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression serve or either of the expressions give or send or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre­paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post."

Hon'ble Supreme Court in CC Alavi Haji Vs. Palapetty Muhammed & Another, Appeal (Crl.) 767 of 2007 wherein it has been held that : ­ "14. Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. ... ... ...

C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 15

15. Insofar as the question of disclosure of necessary particulars with regard to the issue of notice in terms of proviso (b) of Section 138 of the Act, in order to enable the Court to draw presumption or inference either under Section 27 of the G.C. Act or Section 114 of the Evidence Act, is concerned, there is no material difference between the two provisions. In our opinion, therefore, when the notice is sent by registered post by correctly addressing the drawer of the cheque, the mandatory requirement of issue of notice in terms of Clause (b) of proviso to Section 138 of the Act stands complied with. ... ... ... It is then for the drawer to rebut the presumption about the service of notice and show that he had no knowledge that the notice was brought to his address or that the address mentioned on the cover was incorrect or that the letter was never tendered or that the report of the postman was incorrect. ... ... ..."

In the present matter, the presumption u/s 27 of General Clauses Act is not applicable as the legal demand notice was not sent at the correct address of the accused.

(ii) It is submitted on behalf of the complainant that the address R­15, Inderpuri and RZ­15, Indperpuri is one and the same address but he has failed to prove the same. Ex. CW1/1 an Ex. CW1/2, the invoices raised by the complainant in the name of the accused also depict the address of the accused as R­15, Indperpuri and not RZ­15, Indperpuri. Thus, the onus of proof was upon the complainant to prove that R­15, Inderpuri and RZ­15, Inderpuri are the same. Complainant has also deposed that the legal demand notice was also sent at 11­D, Nilgiri No. 3, Sector No.­34, Noida (U.P.). Accused has categorically denied that this address of Noida was never his address. It is evident on the perusal of record that even the summons/process which were sent by this court were served upon the C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 16 accused on some other address and not on these two above­mentioned addresses. Therefore, the complainant was not able to prove that he has sent the legal demand notice at any of the correct addresses of the accused.

(iii) It is the case of the complainant that the accused approached him for supply of goods and the complainant supplied iron and iron products to the accused as per their order and specifications to the satisfaction of the accused as per bills Ex. CW1/1 and bill Ex. CW1/2 and the accused in discharge of their partial liability issued and delivered the cheques in question. The amount of cheques in question is Rs.90,000/­ although the amount of bills is Rs.82,945.20/­. So, there is a difference between the amount of bills and the amount of cheques in question. The complainant has deposed that the accused issued the cheques in question in discharge of their partial liability. Meaning thereby, there was some other liability upon the accused apart from these aforesaid bills. But the complainant has failed to prove that what was the other liability upon the accused apart from the above mentioned bills.

(iv) The accused has raised the specific defence that the cheques in question were not issued in discharge of his liability rather they were issued for the purpose of security. This defence of the accused that the cheques in question were issued for the purpose of security seems to be probable as the amount of each cheque is Rs.30,000/­ which is the round figure and even amount but the amount of bills Ex. CW1/1 and Ex. CW1/2 is an odd figure i.e. Rs.42638.70/­ and Rs.40306.50/­.

Moreover, as the accused has raised the probable defence that the C.C. No. 220/1/11 MM­01 (138 N.I. Act) : 30.05.2012 17 cheques in question were issued for the purpose of security and not for discharge of liability of any of the bills. Thus, the burden of proof again shifted upon the complainant to prove that the accused issued these cheques in question in discharge of the above mentioned bills (and some other liability) as the amount of cheques is higher than the amount of bills raised upon by the complainant on the accused. The complainant has not placed on record any document or proof regarding the other liability of the accused.

20. In view of the above discussion, this court has come to the conclusion that the accused has successfully rebutted the presumptions u/s 118 and 139 NI Act. Accordingly, accused persons are acquitted for the offence u/s 138 NI Act. Fresh bail bond and surety bond are furnished for the purposes of u/s 437­A of Cr. P.C. After compliance, file be consigned to record room. 

Announced in open court                                    (Surabhi Sharma Vats)
     th
on 30  May, 2012                                             MM­01 (138 N.I. Act)
                                                                 PHC/New Delhi




C.C. No. 220/1/11                                 MM­01 (138 N.I. Act) : 30.05.2012