Delhi District Court
M/S Jhv Finance & Leasing Ltd. ... ... vs Sharafat Ali & Ors ...Accused on 27 February, 2023
CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. 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 ACT/7127/2021
M/S JHV FINANCE & LEASING LTD. ... Complainant
Versus
SHARAFAT ALI & ORS ...Accused
1. Name & address of the complainant: M/S JHV Finance & Leasing Ltd.
704, Shakuntala Building, 59,
Nehru Place, New Delhi110019,
Through its AR Sh. Rajesh Kumar.
2. Name & address of the accused : 1) Sh. Sharafat Ali,
S/O Sh. Mohammad Siddiq,
R/O K34, Thokar No.5, Abdul
Fazal Enclave, Jamia Nagar, New
Friends Colony, New Delhi
110025.
2) Sh. Sudhir Mandal,
S/O Sh. Kisto Mandal,
R/O H No. E85/3, Abdul Fazal,
Enclave, Shaheen Bagh, Okhla,
New Delhi110025
3. Offence complained of :
U/S 138, The Negotiable
Instruments Act,1881.
4. Plea of accused : Pleaded not guilty.
5. Final Arguments : 21.02.2023
6. Date of Institution of case : 06.09.2021
7. Date of decision of the case : 27.02.2023
JUDGEMENT
1. Vide this judgment, I shall dispose of the aforementioned complaint case Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:06:22 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.2 filed by the complainant, JHV Finance & Leasing Ltd. Through it's AR Sh. Rajesh Kumar (hereinafter referred to as the 'complainant') against accused persons namely Sh. Sharafat Ali and Sh. Sudhir Mandal, (hereinafter referred to as the 'accused persons'). At the very outset, it is pertinent to point out that this court vide order dated 11.05.2022, this court only took cognizance of offence U/S 138 of Negotiable Instruments Act against the accused Sh. Sharafat Ali and refused to take cognizance against the other accused Sh. Sudhir Mandal, as he is not signatory of the cheque in question.
2. Factual Matrix: The complainant's case is that the complainant is a company established under the provisions of Companies Act engaged in the business of hirepurchase and financial services and has filed this complaint through it's Authorized Representative Mr. Rajesh Kumar who is executive of the complainant and has been authorized vide it's power of attorney to pursue this complaint. It is stated that Mr. Sudhir Mandal entered into an hypothecation agreement with the complainant company for purchase of e rickshaw and the accused Mr. Sharafat Ali stood guarantor for this transaction, as reflected in SPA and loan documents, as per which the loan amount was to be repaid in installments. It is stated that Mr. Sudhir Mandal failed to make the payment as per agreed installments and thus, in discharge of his liability, the accused Mr. Sharafat Ali being his guarantor issued one cheque bearing no.130600 dated 17.03.2021 drawn on J & K bank, Batla House, Zakir Nagar for a sum of Rs.38,656/ (herein after referred to as the 'cheque in question') and when the said cheque was presented by the complainant, it was dishonoured for the reason "Funds insufficient" vide return memo dated 19.03.2021. The complainant thereafter, sent a legal demand notice dated 12.04.2021 to the accused calling upon him to repay the loan amount within fifteen days of the receipt thereof. However, the accused did not come forward to repay his debt within the prescribed period of fifteen Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:06:26 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.3 days. Hence, being aggrieved, the complainant filed the present complaint under section 138 of The Negotiable Instruments Act, 1881 on 06.09.2021 and prayed that the accused be summoned, tried and punished under section 138 of The Negotiable Instruments Act, 1881 and fine equivalent to double the cheque amount be imposed upon the accused.
3. Summoning of accused: This court summoned the accused after hearing the arguments at the stage of presummoning vide order dated 11.05.2022 and the accused entered appearance in the present case on 09.09.2022 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 pursuant to arguments being advanced on the point of consideration thereof on 25.11.2022. 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.
5. Plea of the accused: The accused did not plead guilty. In his defence, he stated that he had given the cheque in question to the complainant being surety for a vehicle loan of Erickshaw availed by one person namely Sh. Sudhir Mandal, who is still plying that Erickshaw and thus, he has no liability towards the complainant. He further stated that he did not receive any prior intimation regarding presentation of the cheque in question. He admitted his signatures on the cheque in question. However, denied filling particulars of the same. He admitted that the address mentioned in the legal demand notice is his correct address, however, he denied receiving of the same at the said address. On the same date, the statement of accused for admission / denial was recorded U/S 294 Cr. P.C, wherein he admitted the correctness of dishonour memo, pursuant to which the bank witness mentioned at Sr.No. 2 in the list of witness filed by the complainant was dropped.
Digitally signed by AISHWARYA SHARMA AISHWARYA Date: SHARMA 2023.02.27 17:06:31 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.4
6. Evidence on behalf of complainant: To prove the case of the complainant, the AR of the complainant has examined himself as CW1. He has filed his evidence under Section 200 of the Cr.P.C. by way of an affidavit EX. CW1/1 wherein the AR of the complainant has averred the same facts as are averred in the complaint. To prove the claim of the complainant, AR of the complainant has filed EX. CW1/A the copy of his GPA (OSR), EX. CW1/B the original Loan Agreement, EX. CW1/C the original cheque in question dated 17.03.2021, EX. CW1/D the original return memo dated 19.03.2021, EX.CW1/E the legal demand notice dated 12.04.2021 along with it's postal receipts EX. CW1/F& EX. CW1/G and tracking report EX. CW1/H & EX. CW1/I, EX. CW1/J the original complaint bearing his signatures at Point A. Thereafter, this witness was subjected to crossexamination.
7. During his crossexamination, this witness stated that he knows the contents of his affidavit. He admitted that the loan was sanctioned to one Sh. Sudhir Mandal, however, he could not tell the exact loan amount which was advanced to Sh. Sudhir Mandal then stated that it was approximately Rs. 77,000/. He denied the suggestion that the loan amount of Rs. 75,000/ only was sanctioned to Sh. Sudhir Mandal. He stated that he was not aware that down payment of Rs.65,000/ was given by the accused to the dealer of the company namely i.e. Khan Battery Auto E Rickshaw. He deposed that total 11 EMI's were to be paid against the said loan amount to the complainant company and out of 11 EMI's, total 8 EMI's were paid to the complainant company. He denied the suggestion that the borrower namely Sh. Sudhir Mandal has paid 9 EMI's against the loan obtained. He stated that he was not aware about the fact that ERiskshaw which Sh. Sudhir Mandal got financed from the complainant company was sold by him to one person namely Sh. Munna Khan. He denied the suggestion that the officials of the complainant company had picked up this Erickshaw from Mr. Munna Khan forcefully somewhere in July August, 2020.
Digitally signed by AISHWARYA AISHWARYA SHARMA
SHARMA Date:
2023.02.27
17:06:35 +0530
CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.5
He stated that he was not aware if Mr. Munna Khan had made call at 100 number and also made a complaint regarding the same and pursuant to this complaint of Mr. Munna Khan, the owner of their company Mr. Bhupender Sharma, took E rickshaw to P.S. Shaheen Bagh. He also denied the suggestion that pursuant to such complaint of Mr. Munna Khan, they entered into one settlement with Mr. Munna Khan and received pending dues from Mr. Munna Khan and gave no dues certificate to him. He stated that they have filed loan agreement entered with Mr. Sudhir Mandal on record. He stated that he has not gone through the contents of the said loan agreement. He deposed that Mr. Sudhir Mandal had affixed his signatures on the Loan agreement and it was also signed by the guarantor. He denied the suggestion that only the borrower is liable in a Loan agreement and not the guarantor. He stated that the guarantor is also liable when the borrower resides at the rental premise. He stated that at the time of granting loan to borrower, they took his identity card, PAN Card and bank statement. He stated that they also obtain the copy of the Aadhar Card of Guarantor. He admitted the suggestion that they obtain security cheques for EMIs from the borrower and that they have not filed such security cheques of Mr. Sudhir Mandal on record. He denied the suggestion that the borrower Mr. Sudhir Mandal paid all the money to the complainant company. He denied the suggestion that this is false and fabricated case filed against the accused and that there is no liability on the part of Guarantor. He admitted that they also obtain one cheque from the guarantor. He stated that they had not obtained any cheque from the guarantor at the time of sanctioning loan to the borrower and they obtained cheque from the guarantor, when the borrower did not pay the EMI's. He stated that they had only taken one cheque from the guarantor in the present case. He denied the suggestion that they had taken blank cheque from the guarantor. Thereafter, CE was closed vide separate statement of the AR of the complainant recorded on 07.12.2022.
Digitally signed by AISHWARYA AISHWARYA SHARMA
SHARMA Date:
2023.02.27
17:06:39 +0530
CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.6
8. Examination of the accused under section 313 Cr.P.C.: The accused was examined under section 313 Cr.P.C. on 19.12.2022, wherein he admitted that Mr. Sudhir Mandal entered into an hypothecation agreement with the complainant company for purchase of e rickshaw and he stood guarantor for the same, as reflected in SPA EX.CW1/A and loan documents EX.CW1/B, as per which the loan amount was to be repaid in installments. He denied that Mr. Sudhir Mandal failed to payment EMI's as agreed and thus, in discharge of liability of Mr. Sudhir Mandal, he being his guarantor, issued the cheque in question bearing no.130600 dated 17.03.2021 drawn on J & K bank, Batla House, Zakir Nagar for a sum of Rs.38,656/ i.e. EX. CW1/C. He stated that the blank cheque in question was given by him to the complainant being surety, when Mr. Sudhir Mandal had applied for loan. He admitted that when the said cheque was presented by the complainant, it was dishonoured for the reason "Funds insufficient" vide return memo dated 19.03.2021 i.e. EX. CW1/D. He denied receiving of the legal demand notice dated 12.04.2021 U/S 138 of the N.I. Act. He admitted his signatures on the cheque in question. However, denied filing of it's particulars. He stated that the complainant company had misused the cheque in question despite the fact that one Mr. Munna Khan who had purchased Erickshaw from Mr. Sudhir Mandal had settled the matter with complainant company on 22.12.2020 pursuant to lodging of one DD entry through ASI Suresh Kumar P.S. Shaheen Bagh pursuant to one call made by Mr. Munna Khan at 100 number. He admitted knowing the complainant company and stated that Mr. Sudhir Mandal had taken loan from the complainant company for purchase of Erickshaw and he stood surety for him. He stated that his cheque in question was misused by the complainant company. He also stated that he intends to lead defence evidence.
9. Evidence on behalf of accused: In his defence, the accused has examined SI Suresh Chand, PS Shaheen Bagh, Delhi, as DW1 who stated that he is Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:06:44 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.7 a summoned witness and he has brought the record of DD No.25A dated 22.12.2020 in respect of snatching of Erickshaw red color bearing Regn. No. 4ER5991 and copy of same is Mark DW1/A. He stated that the call was made by Munna Khan. He further deposed that he has also brought the closure report dated 22.12.2020 in respect of one Bhupender who is the officer of JHV Finance taken away the possession of said erickshaw and thereafter, compromise has been executed between the complainant and the officers of JHV finance and copy of same is Mark DW1/B. Thereafter, he was subjected to crossexamination. During his crossexamination, this witness admitted that he has no personal knowledge about the compromise/settlement executed between the parties. He admitted that there is no record about the settlement in the police records.
10. To establish his defence, the accused has also examined Sh. Munna Khan as DW2. This witness deposed that he had one erickshaw bearing registration number 4ER5991 registered in his name. He stated that the representative of the complainant company had picked this vehicle during lockdown and then he made a call on 100 number and police officials accompanied him and took him to the office of the complainant company. He stated that thereafter, two representatives along with him went to police station Shaheen Bagh and in the police station, the concerned SHO got the matter compromised. He stated that the complainant company's representative told him that the actual owner Sudhir Mandal could not pay two installments and thereafter he paid Rs.16,000/ to the representatives of the complainant company. He stated that thereafter, the complainant told him that they will issue NOC in his favour and they handed over the possession of Erickshaw to him in police station but they never gave NOC to him. Thereafter, this witness was subjected to cross examination. During his cross examination, this witness stated that at the time of purchasing the abovesaid erickshaw, he did not know whether Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2023.02.27 17:06:48 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.8 abovesaid erickshaw was financed or not and that he had purchased the erickshaw for a sum of Rs.70,000/ from Sudhir Mandal. He stated that he does not know the persons who snatched his erickshaw. He stated that at the time of snatching of the abovesaid erickshaw, he did not know if these persons were from the company or not. He stated that after purchasing the erickshaw from Sudhir Mandal, the RC was not transferred in his favor. He stated that the company did not give him any receipt against the payment of Rs.16,000/ made by him at the Police Station. He stated that one written settlement was executed in the police station when he had made this payment, however, he did not file copy of any such settlement. He admitted that he has not filed any application for obtaining copy of that settlement from the police station and stated that since no written document was executed, he has not filed the same. He admitted that he has not written any letter to the complainant company and stated that he has visited the office of the complainant company for obtaining the same. He admitted that he has come to the Court along with the accused. He denied the suggestion that he is deposing falsely at the behest of accused. He also denied that he has never made any payment of Rs.16,000/ to the complainant company and that is why, he was not able to produce any written document/receipt regarding this. He denied the suggestion that since the rickshaw was financed from the complainant company, he could not have purchased the same from the accused. He denied the suggestion that he has never visited the office of the complainant company individually or along with the police officials. Thereafter, the DE was closed.
11. Final arguments: Final arguments have been heard on behalf of the both the parties. The submissions made on behalf of both the parties and case laws cited have been considered. The matter was then reserved for judgment.
12. In order to ascertain whether the accused has committed the offence under Section 138 of the NI Act, it is deemed fit to examine separately as to whether all the Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:06:52 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.9 indispensable ingredients constituting the offence have been proved by the complainant. The offence under Section 138 of the NI Act has the following ingredients
a) Existence of legally enforceable debt or liability and issuance of cheque in discharge of said debt or liability;
b) Dishonor of cheque in question which must have been drawn on an account drawn on an account maintained by the accused;
c) Service of demand notice seeking payment of cheque amount within fifteen days from the date of service;
d) Nonpayment of cheque amount within fifteen days from the date of service of notice; and
e) Filing of complaint within one month from the date on which cause of action arises.
13. In the present case, the signatures of the accused on the cheque in question are not in dispute. This fact is also not disputed that the cheque in question was handed over by the accused to the complainant company being surety of one Sh. Sudhir Mandal who has arranged loan for purchase of Erickshaw from the complainant company. Further, presentation of the impugned cheque for encashment and dishonor of the cheque for the reason "funds insufficient" is also not in dispute as it is a matter of record proved by the return memo dated 19.03.2021 which is EX. CW1/D. It is also a matter of record and has been proved that the impugned cheque was presented within it's validity period and dishonoured by the banker of the accused. It is also not disputed that the impugned cheque was issued by accused and was drawn on his bank account as he has not denied his signatures on the cheque. Though the accused has admitted that the legal demand notice was sent at his correct address, however, he stated that he has never received legal demand notice at the said Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:06:57 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.10 address. Thus, the accused has disputed service of legal notice and it has been argued on behalf of the accused that there is no material on record to show that legal notice was duly served upon the accused as per law.
14. I have considered the submission. However, there are no merits in it. The complainant has filed the copy of legal demand notice and postal receipt along with tracking report. Throughout the trial, the accused has not disputed the fact that the legal demand notice was sent at his correct address. 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. On this point, I get strength from the judgment of the Hon'ble High Court of Delhi in Mayank Pathak v 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 grounds 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 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 Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:07:02 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.11 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 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 17 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 Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2023.02.27 17:07:06 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.12 notice by adopting different strategies and escape from legal consequences of Section 138 of the Act." "12. 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 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 petitioner 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 petitioner 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..."
15. On this point, I have also been enlightened by the judgment of the Division Bench of the Hon'ble High Court of Delhi in Prakash Jewellers v A.K. Jewellers 99 (2002) DLT 244. In the said case also, the accused had taken the defence that he had not received the notice under Section 138 N. I. Act. The Hon'ble High Court dismissed the objections and held as under:
"...8. There is no dispute with the proposition that a statutory obligation is cast on the holder of the cheque or the payee to give notice of demand to the drawer of the cheque asking him to make a payment of the amount covered by the cheque. It is a mandatory requirement to be satisfied for constituting an offence under Section
138.
9. It is also settled that it is not the giving of the notice which makes out an offence but its receipt which furnishes a cause of action to the complainant to file the complaint within statutory period.
10. As it is, Section 138 does not prescribe any mode for giving of demand notice by the payee or holder of the cheque. But where such notice is served by post through registered post or postal certificate, etc. with the correct address of the drawer written on it, it would raise a presumption of service unless the drawer proves that it was not received by him in fact and that he was not responsible for such non service. This is in tune with the principle embodied in Section 27 of the Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:07:10 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.13 General Clauses Act or even Rule 19A of Order V CPC.
11. Section 27 of General Clauses Act deals with the presumption of service of notice sent by post and provides that service of such notice shall be deemed to have been affected unless the contrary is proved. This principles is equally applicable to the service of notice for purpose of Section 138 of Negotiable Instrument Act also.
The same could be said about the provision of Rule 19A or Order V CPC which requires a court to make a declaration of summons having been duly served and dispatched through registered post notwithstanding that AD Card had been lost or misplaced or not received back within 30 days for some other reason. The relevant proviso provides: "Provided that where the summons was properly addressed, prepaid and duly sent by registered post, acknowledgement due, the declaration referred to in this subrule shall be made notwithstanding the fact that the acknowledgement having been lost or mislaid, or for other reason, has not been received by the Court within thirty days from the date of the issue of the summons.
12. Proceeding on this premise and going by this logic, we find no hitch in taking the view that payee or the holder of a cheque was as much entitled to claim the benefit of presumption of service once he had dispatched the demand notice through registered post or postal certificate on the correct address of the sendee written on it and where he had proved such dispatch through original receipts. It becomes inconsequential whether sender had not received back the AD card or that he could not produce or prove it for having misplaced it or for some other reason." (Emphasis supplied)..."
16. In the present case also, the complainant has proved that he had issued a legal notice under Section 138 N.I. Act at the correct address of the accused, thus, the service of legal demand notice shall be deemed to have been affected as per section 27 of the General Clauses Act, as the accused has not led any evidence to prove the contrary. Further, the service of legal notice is also to be presumed in view of the judgment of the Hon'ble High Court of Delhi in Mayank Pathak v Elcome Trading Company Pvt. Ltd. and Anr. 231 (2016) DLT 308. Therefore, the argument that the complaint is not maintainable on the ground of nonservice of legal notice is without Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:07:18 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.14 any merits and I hold that the complaint is maintainable on this aspect.
17. In the present case, the accused has also objected to the maintainability of this complaint on the ground that it has not been filed within prescribed period of limitation. However, I find no merits in this submission in view of order of Hon'ble Apex Court in "IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION, in Miscellaneous Application No. 21 of 2022 and in Misc. Application No. 665 of 2021 in SMW (C) No. 3 of 2020, the period of limitation in filing petition/ application/ suits / appeals / all other proceedings, irrespective of the period of limitation prescribed under general or special laws stood extended with effect from 15.03.2020 till 28.02.2022. Since, the period of limitation in filing the complaint U/S 138 of NI Act was extended as per order of Hon'ble Apex Court, this complaint is within limitation. Therefore, all the essential ingredients mentioned from b) to e) in the above paragraph have been duly satisfied.
18. The only question remaining for determination is whether a legally valid and enforceable debt existed qua the complainant and the cheque in question was issued in discharge of said liability / debt. It is pertinent to note that Section 139 of the NI Act provides a statutory presumption that the cheque was handed over in respect of a debt or other liability and Section 118 of the NI Act provides that every negotiable instrument is presumed to have been drawn and accepted for consideration. With respect to these presumptions, the Hon'ble Supreme Court, in the case of Hiten P. Dalal v Bratindranath Banerjee (AIR 2001 SC 3897), observed as follows:
"...Because both Sections 138 and 139 require that the Court "shall presume" the liability of the drawer of the cheques for the amounts for which the cheques are drawn, as noted in State of Madras vs. A. Vaidyanatha Iyer, (AIR 1958 SC 61), it is obligatory on the Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:07:23 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.15 Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused (ibid)..."
19. Further, in the case of K. Bhaskaran v Sankaran Vaidhyan Balan 1999 (4) RCR (Criminal) 309, it has been held by the Hon'ble Supreme Court as under:
"...As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins on the court to presume that the holder of the cheque received it for the discharge of any debt or liability..."
20. Further, 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". On this point, I draw reference from the case titled as Rangappa v Srimohan (2010) 11 SCC 441, wherein the Hon'ble Supreme Court has observed:
"...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..."
21. Thus, it is an established law that onus lies upon the accused to rebut the presumption and to establish that the cheque in question was not given in respect of any debt or liability, with the standard of proof being preponderance of probabilities. Therefore, it becomes critical to examine whether the explanation of the accused Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2023.02.27 17:07:27 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.16 coupled with the evidence on record is sufficient to dislodge the presumptions envisaged by Sections 118 and 139 of the NI Act.
22. As discussed above, in this case, the accused has admitted the loan transaction between the complainant company and one Sh. Sudhir Mandal and he has also admitted that he stood as a guarantor for Mr. Sudhir Mandal, however, he has disputed his liability claiming that Mr. Sudhir Mandal as well as subsequent purchaser of ERickshaw namely Mr. Munna Khan, have paid entire loan amount to the complainant company and thus, he only being guarantor has no liability towards the complainant company and his blank cheque in question which was given to the complainant company by him as security when Mr. Sudhir Mandal applied for loan has been misused by the complainant company.
23. In view of admission of accused, this fact stands established that the accused stood surety for Mr. Sudhir Mandal and Mr. Sudhir Mandal had availed loan for purchase of Erickshaw from complainant company. The undisputed loan documents EX. CW1/B shows that the complainant company had advanced loan of Rs. 77,250/ to Mr. Sudhir Mandal and for this transaction, the accused stood surety for Mr. Sudhir Mandal. The accused had denied his liability claiming that since he was only surety, he cannot be made liable for dishonour of the cheque however, ld. Counsel for the complainant argued that the liability of the surety is coextensive with the principal borrower and this fact is also specifically mentioned in Clause 6.2 of the Loan agreement EX. CW1/B, execution of which has not been disputed by accused. Per Contra, Ld. Counsel for accused has argued that since the loan was advanced by the complainant company to Mr. Sudhir Mandal, the accused has no legal liability for repayment of said amount and thus, it cannot be said that the cheque in question was issued by the accused in discharge of any legally enforceable debt or other liability Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:07:31 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.17 towards the complainant. However, I find no force in this argument.
24. In order to maintain the complaint under section 138 of the N.I. Act, the cheque must be issued in discharge of 'any liability'. The question posed here is whether A can issue a cheque in discharge of the liability of B and words "Any liability" occurred in the section is only to mean the liability of the drawer or it can be for any other's liability? In this regard it is relevant to refer to the defence of the accused stated by him U/S 251 Cr. P.C, wherein accused has clearly stated that he had given the cheque in question being surety for Mr. Sudhir Mandal who had availed loan for purchase of E Rickshaw from the complainant company. The accused has claimed that he has no liability towards the complainant as he was only surety and principal borrower was Mr. Sudhir Mandal. Thus, for ascertaining the fact that whether the cheque in question which was issued by the accused in favour of the complainant can be said to have been issued in discharge of legally enforceable liability, it is relevant to refer to the judgment of Hon'ble Supreme Court in I.C.D.S Ltd. v Beena Shabeer,2002 (6)SCC426 wherein it was observed that "...the first three words and the language used by the Legislature while enacting the said provision is "Where any cheque". The Supreme Court observed that the first three words are of a great significance as it shows the legislative intent that in all cases where the cheque is dishonored, the provisions under Section 138 NI Act would apply to that case and the Drawer of the said cheque would be liable under the said provision. The words "where any cheque" shows the legislative intent, that all cheques that are issued for the discharge of any debt or liability are dishonored, the provision under Section 138 NI Act would apply. The Supreme Court observed, The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment..."
Digitally signed by AISHWARYA AISHWARYA SHARMA
SHARMA Date: 2023.02.27
17:07:35 +0530
CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.18
25. In the above mentioned case, Hon'ble Supreme Court refused to entertain the argument of the liability of the Guarantor being coexisting with that of the borrower and observed that the legislative intent of Section 138 NI Act is clear by the expressions "any cheque" and "other liability" and observed that whenever there is any default of a cheque that is issued in discharge of some debt or liability, there cannot be any embargo or restriction in the matter of application of Section 138. The Hon'ble Supreme Court further observed that any other contrary interpretation would defeat the legislative intent.
26. As discussed above, since the hon'ble Apex Court has clearly stated the issue of coextensive liability of the Guarantor and Principal Debtor is totally out of the purview of Section 138 of the Act as the language of the Statute depicts the intent of the lawmakers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act and the words 'Any cheque' and 'other liability' are the two key expressions which stands as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. In this case, since the accused himself admitted being surety for Mr. Sudhir Mandal and the issuance of the cheque in question towards the complainant company for the loan extended to Mr. Sudhir Mandal, in view of the judgment discussed above, he becomes liable for the dishonour of the cheque in question.
27. In the present case, the accused has also tried to dispute his liability by claiming that he had given the blank cheque to the complainant company at the time of availing loan and he did not fill any particulars in the same, thus, he cannot be held liable for dishonour of the cheque. In support of his submission, Ld. Counsel for the Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:07:40 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.19 accused has relied upon judgment of Hon'ble Bombay High Court in case titled as M/S Pinak Bharat and Company v Anil Ramrao Naik, Criminal Appeal No. 1630 of 2011 alongwith Criminal Appeal No. 1631 of 2011. The complainant company has clearly denied taking the cheque in question from the accused at the time of advancement of loan and has claimed that the same was given by the accused when Mr. Sudhir Mandal (Principle Borrower) defaulted in payment of EMI's. Ld. Counsel for the accused has thus, argued that the cheque was blank when it was handed over to the complainant as security towards repayment of loan amount. Even if this version of the accused is taken to be true in entirety, even then the same does not dilute the liability of the accused as the legal position on inchoate instruments is well settled. Section 20 of the NI Act provides that if a person sings and delivers a paper stamped in accordance with the loan and either wholly blank or have written thereon an incomplete negotiable instrument, such person thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, a negotiable instrument for any amount specified therein and not exceeding the amount covered by the stamp. Similar position has also been laid down by Hon'ble Supreme Court in case titled as Bir Singh v Mukesh Kumar, (2019) 4 SCC 197. Relevant paragraphs are produced below:
"...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 a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars.Digitally signed by AISHWARYA
AISHWARYA SHARMA
SHARMA Date:
2023.02.27
17:07:44 +0530
CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.20
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..."
28. Another defence taken by the accused is that since the entire loan amount already stands paid, he cannot be held liable for dishonour of cheque issued in lieu of the same loan transaction. The accused initially claimed during notice put U/S 251 Cr. P.C that Mr. Sudhir Mandal is still plying the E Rickshaw however, during his statement U/S 313 Cr. P.C, he claimed that Mr. Sudhir Mandal, sold the E Rickshaw to one Mr. Munna Khan from whom the complainant company forcibly repossessed the E rickshaw and when Mr.Munna Khan lodged one DD Entry dated 22.12.2022, Mark DW1/A regarding the same, the matter was compromised between the parties and the copy of the compromise is Mark DW1/B and on account of such compromise, Mr.Munna Khan paid remaining two instalments i.e. Rs. 16,000/to representative of complainant company who issued NOC in favour of Mr. Munna Khan. To prove these facts, the accused has also examined DW1 SI Suresh Chand and DW2 Sh. Munna Khan. DW2 Mr. Munna Khan admitted that the RC of E Rickshaw was not transferred in his name and though he claimed that some settlement was arrived between the parties and he made payment of Rs. 16,000/ to the representative of the complainant company in Police Station, however, he failed to file any such compromise or any receipt of such amount on record. Admittedly, this witness could not even produce any NOC in his favour. Admittedly, since the loan was obtained for E Rickshaw and it was hypothecated with the Complainant company, Mr. Sudhir Mandal could not have parted with the possession of said E Rickshaw, unless he would have made payment of complete loan amount to the complainant company and consequently, would have obtained NOC from the complainant company as upon hypothecation, Mr. Sudhir Mandal will only be in constructive possession of the ERickshaw on behalf of the complainant company, Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2023.02.27 17:07:49 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.21 however, no such document or record of payment has been filed by the accused or any witness examined by the accused. Thus, no payment of EMIs for the same E Rickshaw could have been made by any third person i.e. Munna Khan. On this point, it is relevant to refer to the judgment in case titled as 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 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...''
29. From the aforesaid decisions, it emerges that since the vehicle was hypothecated with the complainant company, Mr. Sudhir Mandal though was in actual physical possession of the same, but the constructive possession of the vehicle was still with the hypothecator i.e. complainant company. It is abundantly clear from the evidence on record that the vehicle which was hypothecated, Mr. Sudhir Mandal remained in the possession of the same being debtor of the complainant. Thus, he could not have been transferred to a third party without the express consent or permission of the creditor i.e. complainant and any agreement regarding any such Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:07:53 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.22 further transfer will also be not valid as per 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 be unlawful, Every agreement of which the object or consideration is unlawful, is void."
30. Thus, pithily put, the transaction in question between Mr. Sudhir Mandal and Munna Khan, is also hit by the provisions of Section 23 of the Indian Contract Act, 1872, as Mr. Sudhir Mandal could not have entered into the agreement to cause injury to the property i.e. vehicle of complainant, 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 Mr. Munna Khan. Thus, keeping in view the discussion made above, and in absence of any documentary evidence on record, it cannot be relied upon that the Mr. Munna Khan made payment of any EMI's to the complainant company.
31. Now the only question remained to be determined is whether Mr. Sudhir Mandal has paid entire loan amount to the complainant company. The best person to establish this fact would have been Mr. Sudhir Mandal, however, for the reasons best known to him, the accused did not examine him. It is an admitted fact that the entire loan amount was to be repaid in 11 EMI's. During cross examination, CW1 has denied that Mr. Sudhir Mandal had paid 9 EMI's against the said loan amount and stated that he has only paid 8 EMI's to the complainant company. Since, admittedly, Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2023.02.27 17:07:59 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.23 8 EMIs i.e. Rs. 65,456/ were already received against the loan of Rs. 77,250/, the question is whether the cheque amount i.e. Rs. 38,656/ could have been said to be the 'amount due' on the date of drawl i.e. 17.03.2021. With respect to this complainant had only stated in para No.3 of the complaint that the accused failed to make payment of instalments as promised and in discharge of his partial liability (including EMI/ overdue/ cheque bouncing charges), he issued the cheque in question for a sum of Rs. 38,656/ in favour of the complainant company.
32. From the averments made in the complaint, it is clear that Mr. Sudhir Mandal received loan of Rs. 77,250/ which was to be paid in11 EMIs of Rs. 8,182/ each from the complainant company and as admitted by CW1 during his cross examination, Mr. Sudhir Mandal has paid at least 8 installments against the said loan amount. Therefore, from the admission of CW1, it is clear that as on the date of presentation of cheque, the liability of the accused being Guarantor could not have been for higher sum than the difference in the amount borrowed and amount to be repaid i.e. Rs. 24,546/.Thus, in view of the averments made in the complaint, the sum mentioned in the cheque is for an higher amount than the outstanding liability and the excess amount is also not towards any interest, cost, penalty and it remained unexplained as such Section 138 of NI Act cannot be applicable. On this point I find support from the decision of Hon'ble High Court of Karnataka in the case of Sami Labs Limited V Mr. M.V.Joseph reported in ILR 2019 KAR 1953 wherein, the Hon'ble High Court of Karnataka has observed as under "... 23. In the instant case, when the housing loan disbursed to the accused in full, was a sum of Rs.5 lakhs and since it is established that a portion of it has already been repaid by the accused or has already been recovered by the complainant company from out of the salary of the accused, then the total outstanding liability would be any sum lesser than the cheque amount. Thus, when any sum issued in the cheque is for an Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2023.02.27 17:08:03 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.24 higher amount, then the outstanding liability and if that excess amount is also not towards any interest, cost, penalty etc., but remains unexplained, then Section 138 of NI Act cannot be said to be applicable...."
33. In view of the above decision, it is clear that when any sum mentioned in the cheque is for an higher amount then the outstanding liability and if that excess amount is also not towards any interest, cost, penalty etc., but remains unexplained, then Section 138 of NI Act cannot be said to be applicable. In the present case, as per the averments made in the complaint, the amount advanced was only Rs. 77250/ and admittedly the principle borrower had paid 8 EMIs out of total 11 EMIs, therefore, the remaining amount could not have been higher than the balance amount i.e. Rs. 24,546/. Admittedly, the cheque in question EX. CW1/C bears sum of Rs.38,656/ which is an higher amount than the outstanding liability, Section 138 of NI Act cannot be said to be applicable in this case.
34. Since, admittedly in the present case the part payment of loan amount was made before the dishonour of the cheque in question, however, the complainant presented the cheque for higher amount than the balance amount without filing any statement of account or any other document in evidence, thus, the complainant has failed to establish that the amount of Rs. 38,656/ was legally recoverable debt on the date of drawl of the cheque in question i.e. 17.03.2021. Thus, this complaint itself is not maintainable. Reliance placed upon Alliance Infrastructure Project Ltd. V. Vinay Mittal (Crl. M C NO. 2224/2009) wherein Hon'ble High Court of Delhi held that if the cheque is presented for an amount than the amount actually payable to the payee, such a complaint should not be maintainable and the drawer of the cheque will not be guilty of offence U/S 138 of NI Act.
35. In view of the discussion made above, it is clear that in the present case, the complainant has utterly failed to prove that there exists legally recoverable debt to Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date: 2023.02.27 17:08:08 +0530 CC No. 7127 of 2021 JHV Finance & Leasing Ltd. v Sharafat Ali & Ors. Page No.25 the tune of Rs.38,656/ as on the date of drawl of cheque in question i.e. 17.03.2021 or as on the date of presentation of cheque. Since, the complainant has failed to prove the very basic ingredient of Section 138 of NI Act i.e. issuance of the cheque in question in whole or in part discharge of existing debt or liability, the offence, accordingly, stands not proved. As such, the accused Sharafat Ali is hereby acquitted for offence U/S 138 NI Act. Digitally signed by AISHWARYA AISHWARYA SHARMA SHARMA Date:
2023.02.27 17:08:13 +0530 Announced in the open court on (Aishwarya Sharma) this day i.e. 27th day of February, 2023 MM (N.I. ACT)Digital Court02/SED, Saket Courts, New Delhi