Bangalore District Court
M/S. Aga Fruit (P) Ltd vs M/S.Karpagam Agro HiTech India on 2 April, 2019
IN THE COURT OF THE XXXIII ADDL. CHIEF
METROPOLITAN MAGISTRATE, BENGALURU CITY.
(SCCH5)
DATED THIS THE 2ND DAY OF APRIL, 2019
PRESENT: SMT.SHARMILA.S. B.Com., LLB.,
VIII ADDL. SCJ & XXXIII ACMM
MEMBER - MACT , BENGALURU.
C.C No.27466/2012
COMPLAINANT M/s. AGA FRUIT (P) LTD.,
Registered Head Office at No.14,
Berlie Street, Langford Town,
Bengaluru - 560 025.
Also having Office at No.18,
Hayath Residency,
Kemp Road, Near Coles Park,
Frazer Town,
Bengaluru - 560 005.
Represented by its authorized
representative : C.E.O,
Mr.Syed Ateeq Aga
(By Sri.Irshad Ahmed K. Adv.,)
V/s
ACCUSED : M/s.Karpagam Agro HITech India
(P) Ltd.,
Kavandanoor Village & Post,
Mathur 635 203,
Krishnagiri District,
Tamilnadu,
Represented by its
Managing Director
Sri.V.Vediyappan
(By Sri.Harsha G. Reddy, Adv.,)
*****
2 C.C.NO.27466/2012
SCCH - 5
::JUDGMENT::
The Complainant has filed a private complaint under Section 200 of Cr.P.C., against the Accused for the offence punishable under Section 138 of Negotiable Instrument Act [in short NI Act].
2. The case of the Complainant is that; The Complainant is carrying on the business under the name and style of AGA FRUIT (P) Ltd., and exports of the Mango Fruit Pulp. By the Board of Directors, a resolution has been passed to authorized the Complainant Sri.Syed Ateeq Aga C.E.O to present the complaint and to prosecute the same vide resolution dated 19.11.2011. Further the Complainant contends that, it has entered into a contract with the Accused on 20.05.2009, placed an order for processing of Totapuri and Alphanso Mango Pulps from 2009 crops on job work basis, at Rs.50/ only per carton finished product and 3 C.C.NO.27466/2012 SCCH - 5 the same was reduced in writing and the Accused have accepted and signed the said contract. As per the contract, the Complainant has to supply the Mango at the factory of Accused at the cost of the Complainant and the Accused have undertaken to process the said mango, make the pulp and the same has to be packed in cans in a very hygienic condition and store the same in dry place and deliver the same after packing to the Complainant. Accordingly, the Complainant has delivered the mangoes and cans to the Accused factory and the Accused have undertaken to deliver 52% of the yield mangoes and after making the pulp, these goods has to be packed in the cans and deliver to the Complainant.
3. Further the Complainant contends that, the Accused have manufactured 1,29,097 cans of Alphonso Mango on the Complainant's behalf and delivered 99,738 cans till 28.05.2011 and to deliver balance quantity of 4 C.C.NO.27466/2012 SCCH - 5 29,359 cans of Alphonso Mango Pulp to the Complainant. Inspite of repeated requests and demands, the Accused have not delivered the same to the Complainant. The Complainant further contends that, on several occasions, as informed by the Accused, the Complainant has sent the trailers to dispatch the goods from the Accused factory for export purpose, but the Accused have returned the trailers which resulted huge loss for the Complainant. But on one pretext or the other, on the lame excuses, the Accused have returned the empty trailers, which were sent by the Complainant, without dispatching the consignment as agreed. After several requests and demands, the Accused have dispatched only 10,350 cans of Mango Pulp, the remaining 19,009 cans of Alphonso Mango Pulp were not delivered to the Complainant till date with malafide 5 C.C.NO.27466/2012 SCCH - 5 intention in order to cause wrongful loss to the Complainant.
4. Further the Complainant contends that, on 28.10.2010 the Complainant's staff has visited the Accused factory and noticed that, even the empty cans which were supplied by the Complainant to fill the mango pulp was not found in the Accused factory. On noticing the above said facts, the Complainant's staff has questioned the Accused, if they have not delivered 19,009 cans of Mango Pulp, atleast the damaged empty cans should have been available in the Accused factory for inspection nor the Accused have informed the Complainant about the damaged cans. On the above said facts, the Accused have not satisfactorily replied, the Accused with a malafide intention and in order to cause loss, misappropriated the goods supplied by the Complainant to the Accused without supplying the 6 C.C.NO.27466/2012 SCCH - 5 finished goods of mango pulp and the cans. The Complainant further contends that, it has trusted the Accused and supplied the Alphonso Mangoes to the Accused factory to make the pulp, fill in the cans and supply the finished goods i.e., the Mango pulp. According to the Complainant, the Accused has intentionally misappropriated the said goods and sold the same to some third parties and caused loss and damages to the Complainant which amounts to a criminal breach of trust and cheating. The Accused not applied balance 19,009 Cans of finished Alphonso Mango Pulp to the Complainant, the cost of the said 19,009 Cans amounts to Rs.39,53,872/ inclusive of VAT. Inspite of several repeated requests and demands, the Accused have not supplied the finished goods or paid the cost of the said finished goods which amounts to Rs.39,53,872/. The Complainant has also entered in to a contract to deliver 7 C.C.NO.27466/2012 SCCH - 5 the Totapuri finished goods, but the Accused have misappropriated the Mangoes of Totapuri and not supplied the finished goods as agreed.
5. Further the Complainant contends that, it had written a letter on 23.10.2010 calling upon the Accused to pay the cost of the goods for a sum of Rs.39,53,872/ or supply the finished goods, in spite of the service of letter, the Accused have not applied the demand made in the letter. The Accused have issued the reply without complying the demands made in the letter on a filthy and lame excuses alleging that, the cans were damaged. If the cans have been damaged, the same should be available in the Accused factory. On verification by the Complainant's staff it was found that, even the damaged cans were not available in the Accused factory.
6. It is the case of the Complainant that, the Accused have issued two blank cheques for the purpose 8 C.C.NO.27466/2012 SCCH - 5 of security, that if any damage or loss caused to the Complainant in violation of the terms of the contract dated 20.05.2009 or if the Accused failed to supply the finished goods as agreed upon. The Accused failed to supply the finished goods of Mango Pulp of 19,009 Cans which costs about Rs.39,53,872/. According to the Complainant, in spite of repeated requests and demands, on several occasions, the Accused have promised to sit across the table in the Complainant's office and resolve this matter amicably and then the Accused will pay the costs as per the settlement or supply the finished goods. But on one pretext or the other, the Accused postponed the same on lame excuses. The Complainant has trusted the Accused and waited till today, that the Accused may honour the commitment. But the Accused bluntly refused to settle the issue and pay the costs of the 9 C.C.NO.27466/2012 SCCH - 5 finished goods or supply the finished goods to the tune of Rs.39,53,872/.
7. Further the Complainant contends that, after the issue of notice to the Accused on 29.06.2011 and the same was acknowledged by the Accused, it had issued untenable reply without complying the demand made in the notice. The Accused are also aware that the Complainant has already informed the Accused through the above said notice that if the Accused fail to comply the demand made in the notice, the cheque issued by the Accused as stated above will be presented for encashment towards the legal recoverable debt in a sum of Rs.39,53,872/. The Complainant has presented the cheque bearing No.792042 dated 08.09.2011 for Rs.20,00,000/ and cheque bearing No.792043 dated 08.09.2011 for Rs.19,53,872/, both drawn on State Bank of India, Palacode 636 808 to the Complainant's 10 C.C.NO.27466/2012 SCCH - 5 BankerJammu & Kashmir Bank, OTC Road Branch, Bangalore. The said cheques were bounced with an endorsement 'Stop Payment by Drawer' communicated by the Complainant's Banker on 15.10.2011. The Complainant was surprised and shocked to note that in spite of having knowledge about the liability to pay the said amount, with malafide intention in collusion with the Bank officials, the Accused have stopped the payment of the two cheques and the said cheques were dishonoured. Hence, the Complainant filed a private complaint against the Accused.
8. After perusal of the material available on record and on primafacie material grounds, this Court took cognizance and thereafter sworn statement was recorded and summons was issued to Accused. After service of summons, the Accused appeared through counsel and got enlarged himself on bail and substance 11 C.C.NO.27466/2012 SCCH - 5 of accusation was recorded as to the alleged offence under Section 138 of Negotiable Instrument Act. The Accused person pleaded not guilty and claimed to be tried.
9. The Authorized Representative: CEO of the Complainant Sri.Syed Ateeq Aga examined himself as PW1 and got marked Ex.P.1 to Ex.P.15 documents on his behalf and closed his side. Further the General ManagerOperations in the Complainant's Company examined as PW2. The statement of the Accused under Section 313 of Cr.P.C. was recorded. The Accused denied all the incriminating evidence appearing against him and not chosen to lead his side evidence.
10. Heard the arguments of both the sides and perused the materials placed before the Court. Both the counsels filed their written arguments. 12 C.C.NO.27466/2012
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11. The Complainant's counsel relied on a decisions reported in:
i) AIR 2000 SC KAR PAGE NO.169 in between H. Maregowda and etc., V/s. Thippamma and Ors.
ii) AIR 2000 SC PAGE NO.145 in between Anil Hada V/s. Indian Acrylic Ltd.,
iii) AIR 2002 SC PAGE NO.182 in between M/s. M.M.T.C. Ltd., and Anr. V/s. M/s. Medchi Chemicals and Pharma (P) Ltd., and Anr.
iv) AIR 2001 SC PAGE NO.2895 in between K.N. Beena V/s. Muniyappan and Anr.
v) LAWS (KAR) 2004 PAGE NO.152 in between L. Mohan V/s. Mohan Naidu
12. The learned counsel for the Accused has relied on following decisions;
i) ILR 2014 KAR 2168 in between CREF Finance Limited, Kolkata V/s. Sri.Shanthi Homes Pvt. Ltd., Bangalore and Anr.
13 C.C.NO.27466/2012
SCCH - 5
ii) ILR 2007 KAR 3155 in between Director Maruthi Feeds and Farms Pvt. Ltd., V/s. Basanna Patekar
iii) 1995 CRL.L.J. 560 (AP) in between Shri Tasher N. Khambati V/s. Vinayak Enterprises, Secunderabad and Ors.
iv) 2014 AIR SCW 2158 in between John K.A. Abraham V/s. Simon C. Abraham and Anr.
v) (2008) 4 SCC 54 in between Krishna Janardhan Bhat V/s. Dattatraya G. Hegde
vi) 2003 CRI.L.J. 2157 in between Subhash Chander V/s. Pritam Singh Machinewala
vii) 2009 (2) DCR 58 Crl. Apl. No.906/2005 in between National Cooperative Bank Ltd., V/s. M.V.Rangachar
viii) 2014 (2) L.W.448 in between Indus Airways Pvt. Ltd., V/s. Maonum Aviation Pvt.
Ltd.,
ix) 2010 CRI.L.J.1050 in between
Venkatesh Bhat V/s. Rohidass Shenoy 14 C.C.NO.27466/2012 SCCH - 5
x) 2009 CRI.L.R. 4460 in between M/s.Manesan Bonsanquent V/s. K.V.Manjunatha
xi) 2015 SAR (CRL.) 288 in between Pooja Ravinder Devidasani V/s. State of Maharashtra
xii) 1999 (1) CTC Page No.6 in between M/s. Balaji Seafoods Exports (India) Ltd., V/s. Mac Industries
xiii) 2011 Cri.L.J. 531 in between Joseph Vilangandam V/s. Phenominal Health Care Service
xiv) 2010 (4) AIR JHAR AT PAGE 683 in between Shivam Finance and Leasing Co., V/s. State of Jharkand and Anr.
xv) 2009 (2) SCC PAGE NO.513 in between M/s. Kumar Exports V/s. M/s.Sharma Carpets
13. From the above facts of the case, the points that arise for my consideration are:
1. Whether Complainant proves that on 20.05.2009 he has entered in to a Contract with the Accused placed an 15 C.C.NO.27466/2012 SCCH - 5 order for processing of Totapuri & Alphanso Mango Pulps from 2009 crops on job work basis at Rs.50/ only per carton finished product and the Accused have accepted and signed the said contract, afterwards the Accused have manufactured 1,29,097 cans of Alphonso Mango pulp and delivered 99738 and to deliver balance quantity of 29,359 cans to the Complainant for export purpose, after several requests and demands made by the Complainant, the Accused dispatched only 10,350 cans of Mango Pulp, but the Accused has not supplied balance 19,009 cans to the Complainant for export purpose, after several requests and demands made by the Complainant, the Accused have dispatched only 10,350 cans of Mango Pulp, but they have not supplied balance 19,009 cans amount of Rs.39,53,872/ inclusive of VAT.
Towards discharge of their liability, the Accused have issued two cheques bearing No.792042 dated 08.09.2011 for Rs.20,00,000/ and No.792043 dated 08.09.2011 for Rs.19,53,872/ drawn on S.B.I, Palcode and on presentation, both cheques were dishonoured for the reason "Payment 16 C.C.NO.27466/2012 SCCH - 5 stopped by the drawer" and despite receipt of legal notice, they did not make payment of the cheques amount within the stipulated period. Thereby the Accused has committed the offence punishable U/Sec.138 of Negotiable Instruments Act?
2. What Order?
14. My findings to the above points are:
Point No.1: In the Affirmative Point No.2: As per final order for the following: ::REASONS::
15. Point No.1: Existence of legally recoverable debt is a sine qua non for prosecuting the case under Section 138 of Negotiable Instruments Act. For convenient purpose the essential ingredients to constitute offence under Section 138 of N.I.Act is summarized as below:
1. That there must be a legally enforceable debt.17 C.C.NO.27466/2012
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2. 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 the legally enforceable debt.
3. That the cheque so issued had been returned due to insufficiency of funds
16. It is the core contention of the Complainant that, on 20.05.2009 it had entered in to a Contract with the Accused and placed an order for processing of Totapuri & Alphanso Mango Pulps from 2009 crops on job work basis at Rs.50/ only per carton finished product and the Accused have accepted and signed the said contract, afterwards they have manufactured 1,29,097 cans of Alphonso Mango Pulp and delivered 99,738 and to deliver balance quantity of 29,359 cans to the Complainant for export purpose, after several requests and demands made by the Complainant, the Accused have dispatched only 10,350 cans of Mango 18 C.C.NO.27466/2012 SCCH - 5 Pulp, but they have not supplied balance 19,009 cans amount of Rs.39,53,872/ inclusive of VAT. Towards discharge of their liability, the Accused have issued two cheque bearing No.792042 dated 08.09.2011 for Rs.20,00,000/ and No.792043 dated 08.09.2011 for Rs.19,53,872/ drawn on S.B.I., Palacode and on presentation, both cheques were dishonoured for the reason "Payment stopped by the drawer" and despite receipt of legal notice, the Accused did not make payment of the cheques amount within the stipulated period.
17. In order to substantiate its contention, the Authorized Representative/C.E.O. of M/s Aga Fruit (P) Ltd., one Sri.Syed Ateeq Aga examined as PW1 and got marked Ex.P.1 GPA, Ex.P.2 Copy of the Order for Mango Pulp Processing, Ex.P.3 and Ex.P.4 Two Original Cheques, Ex.P.3(a) & 4(a) signatures of the Accused, Ex.P.5 to 8 Bank Endorsements, Ex.P.9 & Ex.P.10 Copy 19 C.C.NO.27466/2012 SCCH - 5 of the Legal Notices, Ex.P.11 Postal Receipt, Ex.P.12 Acknowledgement, Ex.P.13 & Ex.P.14 Reply Notices and Ex.P.15 Postal Cover.
18. The Accused's counsel crossexamined PW1 in detail wherein he deposed that:
"Our company has obtained 7 documents which are mentioned in column No.12 of Ex.P.2 from the Accused at the time of entering in to the said agreement. I do not exactly remember how many blank cheques were received from the Accused by my Company Official at the time of entering in to Ex.P.2. Ex.P.3 & Ex.P.4 are the original cheques were received by my Company person from the Accused at the time of executing Ex.P.2. These two were blank cheques received towards security. I do not know who have signed these two cheques on behalf of Accused Company. There was no cash transaction between me and the Accused at the time of signing the 20 C.C.NO.27466/2012 SCCH - 5 agreement Ex.P.2. On the said date we have taken security cheques from the Accused. Our company directly supplies fruits to the Accused. As per Ex.P.2 we supplies fruits to the Accused by trucks. All the necessary documents like assignment letter were handed over to the Accused at the time of supplying mangos to him we never allowed the Accused to directly purchase the mangos from the growers. Further he denied the suggestion that since we supplied sub standard quality of cans, they were damaged when the Accused supplied the stock to our Company. The amount of loss of Rs.39,53,870/ which is shown in para 7 of my affidavit is the cost of the products. We have not produced any calculation sheet in this regard. It is true that when notice was sent to the Accused on 29.05.2011 the security cheque given by the Accused was not presented by us before the Bank and as on 29.05.2011 the said 21 C.C.NO.27466/2012 SCCH - 5 cheques were blank cheques without any dates. Our Manager filled the contents of those cheques. We did not issued any legal notice to the other signatory to the cheques. We submits income tax returns pertaining the annual income of our company. In the income tax returns pertaining to financial year 201112 and 201213 we have not shown this cheque amount of Rs.39,53,872/ as the annual loss to our Company. In the Balance Sheet we have shown in this invoice amount I cannot produce the IT returns for the year 201112 and 201213 as they are already destroyed".
19. Further the General ManagerOperations in the Complainant's Company examined as PW2 and reiterated the complaint averments in the chief examination affidavit. Further in the crossexamination, he deposed that he admits his signature at Ex.P.2 where he has signed in capacity of authorized signatory. I have 22 C.C.NO.27466/2012 SCCH - 5 not produced any document to show that Cans and Mangos were supplied to Accused Company".
20. From the above evidence, the only contention of the Accused is that, the Complainant after arbitrarily filling up of the blank signed cheques in question Ex.P.3 and Ex.P.4 which were given admittedly on 20.05.2011 under Ex.P.2 as a security as referred to therein itself and that too by filling up the same towards the alleged arbitrarily and imaginary claim i.e., Rs.20,00,000/ even though there was instructions to stop payment apart from the issuance of detailed reply by the Accused.
21. At the time of arguments learned counsel for the Complainant relied on a decision decided on February 9, 2019 between Bir Singh Vs Mukesh Kumar wherein the Hon'ble Supreme Court of India held that:
"Negotiable Instruments Act, Presumption Under Section 139, Even a blank cheque leaf, volun tarily signed and handed over by the 23 C.C.NO.27466/2012 SCCH - 5 accused, which is towards some payment, would attract presumption under Section 139 of the NI Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.
Further Held: 37. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer, if the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.
38. If the signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence".
22. The learned counsel for the Accused at the time of arguments argued that the Complainant was not 24 C.C.NO.27466/2012 SCCH - 5 at all come forwarded to examine the Bankers. The burden is on the Complainant to produce the Bank Endorsement and may presumption would be raised by the Court as per decision reported in 2009 Cr.L.J.page 3454 between Rajkumar Khuranan Vs State.
23. Further it contends that, the complaint in question is not at all maintainable as the cheques in question were issued as security purpose towards advance payment for the purchase order was cancelled and also there was no existing liability as on the date of transaction as held by the Hon'ble Supreme Court in 2014 (2) L.W.448 in Indus Airways Pvt. Ltd., vs Maonum Aviation Pvt., Ltd.
24. I have perused the Ex.P.2 the order for Mango Pulp processing wherein at condition No.9 it was clearly mentioned that "As a security, the blank cheques provided by you to us shall be deposited in case we find 25 C.C.NO.27466/2012 SCCH - 5 any pilferage, damages or loss etc the cheque to be honoured on its presentation".
25. In the present case, the cheques at Ex.P.3 & Ex.P.4 presented by the Complainant within 6 months from the date of cheque. The cheque returning with an endorsement stating "Payment stopped by Drawer". The Complainant issued a legal notice to the Accused through its counsel on 29.06.2011 wherein the Complainant called upon the Accused to pay the amount of Rs.39,53,872/ within 15 days from the date of receipt of the notice as per the provisions of Section 138(c) of the NI Act. Thereafter, the present complaint was filed on 23.11.2011. Hence, the complaint is within the period of limitation. Therefore, the essential pre−requisites have been satisfied for raising the presumptions under Sections 118(a), 118(b) and Section 139 of the NI Act. Section 139 of the NI Act raises the presumption that the 26 C.C.NO.27466/2012 SCCH - 5 holder of a cheque received the cheque for discharge, in whole or in part of any debt or other liability.
26. In Rangappa v. Mohan AIR 2010 SC 1898, it was observed as under:
"14. 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. 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 27 C.C.NO.27466/2012 SCCH - 5 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".
27. 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'.
28. 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 28 C.C.NO.27466/2012 SCCH - 5 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".
29. The present case deals with dishonour of cheques due to stop payment instructions issued by the Accused. The law relating to stop payment instructions in the cases of dishonour of cheques U/s.138 of the NI Act has been laid down by the Hon'ble Supreme Court in MMTC Ltd. and another v M/s Medchl Chemicals and Pharma (P) Ltd. and another AIR 2002 SC 182 as follows: (AIR @ p. 186) held that:
"17. Lastly it was submitted that complaint under Section 138 could only be maintained if the cheque was dishonoured for reason of funds being insufficient to honour the cheque or if the amount of the cheque exceeds the amount in the account. It is submitted that as payment of the cheques had been stopped by the drawer one of the ingredient of Section 138 was not fulfilled and thus the complaints were not maintainable".29 C.C.NO.27466/2012
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30. Just such a contention has been negatived in the case of Modi Cements Ltd. Vs Kuchil Kumar Nandi reported in (1998) 3 SCC 249. It has been held that, "even though the cheque is dishonoured by reason of 'stop payment' instruction an offence under Section 138 could still be made out. It is held that presumption under Section 139 is attracted in such a case also. The authority shows that even when the cheque is dishonoured by reason of stop payment instructions by virtue of Section 139 the Court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course this is a rebuttable presumption".
31. The Accused can thus show that the "stop payment" instructions were not issued because of insufficiency or paucity of funds. If the Accused shows that in his account there was sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop payment notice had been issued because of other 30 C.C.NO.27466/2012 SCCH - 5 valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the Accused. Thus a Court cannot quash a complaint on this ground (emphasis added).
32. In accordance with the decision of the Hon'ble Supreme Court in MMTC Ltd., for rebutting the presumption U/s.139 of the NI Act, the Accused has to show that there were sufficient funds in his account to clear the amount of the cheque at the time of its presentation for encashment at the drawer bank. He is also to show that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheques for encashment. 31 C.C.NO.27466/2012
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33. The Accused has not produced any bank statement in his defence to show that there were sufficient funds in his bank account at the time of presentation of cheque at Ex.P.3 and Ex.P.4. The Accused has also to show that there were sufficient reasons in the present case for issuing stop payment instructions, which includes the non existence of a legally recoverable debt. For determining that, this Court would have to ascertain whether the guarantee for the performance of the terms of contract, in the present case, can be said to be a legally recoverable debt or liability for the purpose of attracting the provisions of Section 138 of the NI Act.
34. It is the only contention of the learned Advocate for the Accused that, the Accused had issued the cheques to the Complainant as security cheques. 32 C.C.NO.27466/2012
SCCH - 5 Admittedly, the cheque were issued as post dated cheques to the Complainant.
35. As regards the question whether the cheque at Ex.P.3 & 4 were issued as security cheques. In a decision of the Hon'ble High Court of Delhi in K.S. Bakshi v State 146 (2008) DLT 125 has made a distinction between a cheque issued by way of security and a cheque issued towards discharge of a liability to pay notwithstanding that the money is by way of security for the due performance of the contract. In the said decision, it is observed as follows:
"31. A distinction has to be drawn between a cheque issued as security and a cheque issued towards discharge of a liability to pay notwithstanding that the money is by way of security for due performance of the contract. A cheque given as security is not to be encashed in presenti. It becomes enforceable if an obligation in future is not enforced. It is not tendered in discharge of a liability which has accrued. Thus where a 33 C.C.NO.27466/2012 SCCH - 5 cheque forms part of a consideration under a contract it is paid towards a liability".
36. Admittedly in the present case, the cheques were issued as guarantee for due performance by the Accused as per the terms and conditions of the contract. Therefore, the said cheques cannot be said to be in the nature of security issued by the Accused to the Complainant once the Accused had failed to perform the obligations under the contract.
37. Hence, the Accused has failed to prove that there were sufficient reasons in the present case for issuing stop payment instructions, which includes the non existence of a legally recoverable debt. Therefore, the Accused has failed to rebut the presumption under Section 139 of the NI Act in the present case.
38. In Joseph Jose v. J. Baby 2002 Cri LJ 4392 (Ker), it has been observed that, 34 C.C.NO.27466/2012 SCCH - 5 'burden of proof as to cheque has not been issued for legal debt or liability is always on Accused. The Complainant is not required to adduce number of witnesses and bulk of documentary evidence on the question'.
39. Even otherwise, the Complainant has placed on record relate to the expenses incurred by the Complainant in manufacturing and exporting of Mango Fruit Pulp.
40. At this stage it is useful to refer a decision decided on 14.05.2015 passed by the Hon'ble Delhi High Court in Crl.L.P.706/2014 between Suresh Chandra Goyal Vs Amit Singhal wherein it was held that:
"There is no magic in the word" security cheque", such that, the moment the accused claims that the dishonoured cheque was given as a security cheque, the Magistrate would acquit the accused, the expression security cheque is not a statutorily defined expression in the NI Act. The NI Act does not per se carve out an exception in respect of a 'Security cheque' to say that a complaint in respect 35 C.C.NO.27466/2012 SCCH - 5 of such a cheque would not be maintainable. There can be mirade situations in which the cheque issued by the accused may be called as security cheque, or may have been issued by way of a security, i.e., to provide an assurance or comfort to the drawee, that in case of failure of the primary consideration on the due date, or on the happening of a contingency, the security may be enforced. While in some situations, the dishonor of such a cheque may attract the penal provisions contained in Sec.138 of the Act, in others it may not"
41. In another decision reported in III 2007 BC 211 between Umaswamy Vs Ramamanth wherein our Hon'ble High Court of Karnataka wherein it was held that:
"The contention that the cheque was issued only as security is preposterous. The cheque whether issued for payment of debt or as security makes no distinction in law. The cheque is a negotiable instrument, it may be that some times the cheque is issued with a request on the part of the drawer to defer the presentation of the cheque for some time to enable the drawer to make payment by cash and take back the cheque or allow time to arrange funds for encashment of cheque. When the amount is not paid as per oral understanding the payee is well 36 C.C.NO.27466/2012 SCCH - 5 justified to present the cheque for encashment. The cheque even if it is issued as a security for payment, it is negotiable instrument and encashable security at the hands of payee. Therefore, merely because the drawer contends that it is issued as security is not a ground to exonerate the penal liability under Sec.138 of the NI Act".
42. In the present case the terms of clause 9 of the order, the Complainant Company has made it clear that as a security, the blank cheques provided by the Accused to them shall be deposited in case they find any pilferage, damages or loss etc the cheque to be honoured on its presentation. It is not the case of the Accused that, the either signed the cheque or parted with it under any threat or coercion. Nor it is the case of the Accused that, the unfilled signed cheque had been stolen. In the absence of any finding that the cheque in question was not signed by the Accused or not voluntarily made over to the payee and in the absence of any evidence with regard 37 C.C.NO.27466/2012 SCCH - 5 to the circumstances in which a blank signed cheque had been given to the Complainant, it may reasonably be presumed that the cheque was filled in by the Complainant being payee in the presence of the Accused being the drawer, at his request or with his acquiescence. The subsequent filling of an unfilled signed cheque is not an alteration. There was no change in the amount of the cheque, its date or the name of the payee.
43. Therefore, it is clear that the cheque in question was not issued as security but was issued in lieu of acceptance of the order with the Company. In the instant case the contractual relationship between the parties is not denied. It is also not in dispute that the cheque in question had been issued in the course of the contract. It would also appear from the allegations and counter allegations that the contracts in question are not 38 C.C.NO.27466/2012 SCCH - 5 completed contracts and have not been performed to the latter.
44. A bare reading of Section 138 of the NI Act indicates that.
"the purport of section 138 is to prevent and punish the dishonest drawers of cheques who evade and avoid their liability. As explained in Clause(b) of the proviso, the payee or the holder of the cheque in due course is necessarily required to serve a written notice on the drawer of the cheque within fifteen days from the date of intimation received from the bank about dishonor".
45. At this stage it is relevant to quote a decision reported in 2004 (3) KCCR 1816 between Mohan Vs Mohan Naidu wherein our Hon'ble High Court of Karnataka held that:
"Negotiable Instruments Act, 1881Sections 118 and 139Presumption as to - When once the issue of cheque and the signature of it is admitted, court has to presume that the cheque has been issued for discharging the debt or liability. The burden of proof shifts on the accused to prove that there was no 39 C.C.NO.27466/2012 SCCH - 5 liability or that the cheque was issued to a different person.
46. In the instant case also the Accused admitted that they have issued cheque for security as per terms of the agreement and the Complainant had misused the same. But they have not lodged any complaint against the Complainant for having misusing the cheque. Though the Accused stated that he had delivered full cans at the time of recording of Sec.313 statement, but in order to substantiate their contention they have not adduced any evidence. They have not issued notice to the Complainant after delivering full cans, asking for returning cheques issued by them to the Complainant. He did not taken any legal action against the Complainant for not returning cheques to them and the Accused was not denied the issuance of cheques and the signatures on the Ex.P.3 40 C.C.NO.27466/2012 SCCH - 5 and Ex.P.4 and the Court can presume that the cheques has been issued for discharging the debt or liability.
47. Now let us consider whether the Accused is able to rebut the presumption available to the Complainant U/s. 118(a) and Sec.139 of Negotiable Instruments Act. In a ratio laid down by Highest Court of the land in (2001) 3 SCC 16 (Hiten P. Dalal Vs. Bratindranath Banarjee) which reads thus:
B. Negotiable Instruments Act, 1881--Ss.138, 139 and 118--Presumptions under--Nature of--
Standard of requisite proof for rebuttal--Held, it is obligatory on the court to presume the liability of the drawer for the amount of the cheque in every case where the factual basis for such presumption is established--Such a presumption can be rebutted by the drawer by proving on evidence that the holder of the cheque had not received the same towards the discharge of any liability--Such rebuttal does not have to be conclusively established--The court must either believe the defence to exist or consider its existence to be reasonably probable--But mere explanation given by the 41 C.C.NO.27466/2012 SCCH - 5 drawer, although plausible, held would not suffice....."
48. In the instant case also, Complainant is able to discharge his onus. Therefore the principles enunciated in the above referred decision is squarely applicable to the facts of the present case. As already noticed, Complainant has discharged his onus by placing Ex.P.5 to 8, to show that Accused had issued cheque for acceptance of order with the Complainant. Under such circumstances, the presumption U/s.118(a) and Sec.139 of Negotiable Instruments Act arises in favour of Complainant. Therefore, principles enunciated in the decisions relied upon by the learned counsel for Accused are not applicable to the present facts of the case.
49. In this regard it is useful to refer to the ratio laid down by Hon'ble High Court of Karnataka in 2004(1) KCCR 8 (M/s GPR Housing Private Limited and 42 C.C.NO.27466/2012 SCCH - 5 Another Vs. K. Venugopala Krishna) which reads as under:
"CODE OF CRIMINAL PROCEDURE, 1973-- Section 482--Quashing of proceedings--Cheque dishonour proceedings--Accused approaching the High Court to quash the proceedings on the ground that the subjectmatter cheque was issued in a frustrated transaction and there was no valid consideration--Cheque was issued in favour of the respondent pursuant to the contract between the third parties, intending purchasers, from whom petitioners had collected the amounts. Whether proceedings could be quashed?
Held: Whatever liabilities which the petitioner had with the purchasers is sought to be discharged and if the cheque is issued in favour of the respondent it cannot be said that the cheque is not supported by consideration. The consideration flowing from a third party is also a valid consideration. I am unable to agree with the contention that the cheque issued is one without consideration and that the provisions of Section 138 would not attract."
50. Even though it is not incumbent upon the Accused to step into witness box to rebut the 43 C.C.NO.27466/2012 SCCH - 5 presumption available U/s.118(a) and 139 of Negotiable Instruments Act. The only contention of the Accused is that he had issued cheque for security purpose. However the fact remains that the Accused has issued the cheques viz., Ex.P.3 and 4. Hence, these defences are not accepted by the Court and in the instant case Accused has failed to rebut presumption available to Complainant under both these sections. Hence, the inevitable conclusion is that Accused has committed an offence punishable U/s.138 of Negotiable Instruments Act. Hence, I am of the considered opinion that Complainant is able to prove beyond all reasonable doubts that Accused has committed the offence punishable U/s.138 of Negotiable Instruments Act.
51. Regarding quantum of compensation, the materials placed on record depict that during 2011 Accused had issued cheques for Rs.20 lakhs and 44 C.C.NO.27466/2012 SCCH - 5 Rs.19,53,872/ as security to the Complainant. Hitherto, Accused has not paid the same which amounts to unjust enrichment. Therefore, Complainant is entitled for reasonable compensation. Accordingly, I answer Point No.1 in the affirmative.
52. Point No.2 : For the discussion made above I proceed to pass following:
::ORDER::
Acting U/s. 255(2) of Cr.P.C the Accused is convicted for the offence punishable under Section 138 of Negotiable Instrument Act and sentenced to pay a fine of Rs.50,000/, in default Accused shall undergo simple imprisonment for 6 months.
Further, it is made clear that the Accused is to be paid an amount of Rs.39,53,872/ to the Complainant as compensation as provided under Section 357[3] of Cr.P.C.45 C.C.NO.27466/2012
SCCH - 5 In default of payment of compensation amount, the Accused shall undergo Simple Imprisonment for a period of three months.
Office is directed to supply certified copy of this judgment to the Accused on free of cost in compliance of Sec.363(1) of Cr.P.C. (Dictated to the Stenographer directly on the computer, typed by her, transcript revised corrected and then pronounced by me in the Open Court on this the 2nd day of April, 2019) (SHARMILA S.) VIII ADDL. SCJ & XXXIII ACMM MEMBER - MACT, BENGALURU.
::A N N E X U R E::
LIST OF WITNESSES EXAMINED ON BEHALF OF THE COMPLAINANT:
PW1 : Sri. Syed Ateeq Aga PW2 : Sri. P.S.Viswambharan
LIST OF DOCUMENTS MARKED ON BEHALF OF THE COMPLAINANT:
Ex.P.1 : Copy of Resolution
Ex.P.2 : Order for Mango Pulp Processing
Ex.P.3 & : 2 Original Cheques
Ex.P.4
46 C.C.NO.27466/2012
SCCH - 5
Ex.P.3(a) & : Signature on Cheques
Ex.P.4(a)
Ex.P.5 to : Bank Endorsements
Ex.P.8
Ex.P.9 & : Copy of Notices
Ex.P.10
Ex.P.11 : Postal Receipt
Ex.P.12 : Postal Acknowledgment
Ex.P.13 & : Reply Notices ( 2 in Nos.)
Ex.P.14
Ex.P.15 : Postal Cover
LIST OF WITNESSES EXAMINED ON BEHALF OF THE ACCUSED:
NIL LIST OF DOCUMENTS MARKED ON BEHALF OF THE ACCUSED:
NIL (SHARMILA S.) VIII ADDL. SCJ & XXXIII ACMM MEMBER - MACT, BENGALURU.