Delhi District Court
Of The Judgment Passed In Case Rangappa vs Mohan, Air 2010 Sc 1898, on 28 July, 2014
IN THE COURT OF MS. JASJEET KAUR
CIVIL JUDGEI/ METROPOLITAN MAGISTRATE
NEW DELHI
C.C. No. 73/11
Unique ID No.
Beer Singh
s/o Late Ch. Munshi Ram
r/o 169, Tughalakabad Village
Kuan Mohalla, New Delhi44 ... Complainant
Versus
Vijay Kumar
s/o Manohar Lal
r/o G4, Police Station Lodhi Colony
New Delhi ... Accused
Date of Institution: 12.09.2008
Date of Reserving Judgement: 28.07.2014
Date of Judgment: 28.07.2014
JUDGMENT
1. Brief facts of the case from the perspective of the complainant are that the accused had availed a friendly loan in the sum of Rs.5,25,000/ from the complainant on 14.03.1997 and had issued three cheques in discharge of his liability to repay the said loan. However, the said cheques were dishonoured on presentation and the complainant had instituted a criminal complaint for the commission of offence punishable u/s 138 Negotiable Instruments Act, 1881 (hereinafter referred to as N. I. Act) against the accused in respect of dishonour of the said three cheques, which was pending trial in the Court of competent jurisdiction. It is the alleged case of the complainant that during the pendency of said criminal complaint, the accused had availed a second loan of the same amount, that is, in the sum of CC No. 73/11 1/25 Rs.5,25,000/ from the complainant on the pretext that the said second loan of the same amount would help the accused in getting a big contract for drainage work executed in his favour from the Government of Haryana and with the help of funds generated from the said contract, the accused would be able to make payment of the previous loan of Rs.5,25,000/ as well as of the second loan of Rs.5,25,000/ which is a subject matter of the present complaint.
2. It has been alleged in the complaint that the accused had issued a cheque bearing no. 003287 dated 26.04.2008 drawn on Dena Bank, Lodhi Road, New Delhi in the sum of Rs.5,25,000/ in discharge of his liability to repay the second loan availed by the accused. However, the said cheque issued by the accused was dishonoured on presentation vide return memo dated 21.07.2008 on account of closure of his bank account by the accused and consequently, the complainant had issued a legal demand notice dated 30.07.2008 to the accused calling upon the accused to make payment of the amount stipulated in the dishonoured cheque. Consequent upon the failure of the accused to make payment of the cheque amount within fifteen days of receipt of the legal demand notice, the complainant was compelled to file the present complaint against accused Vijay Kumar for the alleged commission of offence punishable U/S 138 read with 142 of Negotiable Instruments Act, 1881 (hereinafter referred to as NI Act).
3. Upon receipt of the complaint, the learned Predecessor Court had directed the complainant to lead presummoning evidence and in compliance of the directions given by the Court, complainant Beer Singh had examined himself as CW1 in presummoning evidence and had proved on record cheque in question issued by the accused Ex.CW 1/A, return memo Ex.CW1/B vide which the cheque in question was dishonoured by the banker of the accused, legal notice Ex. CW 1/C whereby the complainant had called CC No. 73/11 2/25 upon the accused to make payment of the cheque amount, registered AD card and postal receipts Ex.CW1/D vide which the complainant had dispatched the legal notice to the accused and the reply of the accused to the legal notice issued by the complainant Ex.CW1/E. After a perusal of complaint, the testimony of the complainant as well as documents placed on record by the complainant, accused Vijay Kumar was summoned to face trial for the commission of offence punishable U/S 138 of N I Act vide order on summoning dated 16.09.2008.
4. During the course of trial, notice of accusation U/S 251 of the Code of Criminal Procedure, 1973 ( hereinafter referred to as CrPC) was served upon accused Vijay Kumar on 25.02.2012 for the alleged commission of offence punishable U/S 138 N I Act to which the accused had pleaded not guilty and had claimed trial.
5. Upon the accused pleading not guilty to the notice U/S 251 CrPC served upon him, an opportunity was given to complainant to prove his case by leading evidence in support of the same. Complainant examined himself as CW 1 in support of his case. A brief account of the deposition of the complainant is reproduced below:
6. CW 1 Beer Singh tendered his evidence by way of affidavit Ex. CW 1/A wherein he had reiterated the facts set out in his complaint Ex.CW1/F by alleging that accused Vijay Kumar had initially availed a loan of Rs.5,25,000/ from him and had issued three cheques in discharge of liability to pay the said loan amount. However, the said cheques were dishonoured upon presentation and thereafter, he had filed a complaint against the accused for the commission of offence punishable u/s 138 NI Act. He further deposed that during the pendencey of the said complaint, the accused had availed another loan in the sum of Rs.5,25,000/ from him on assurance that the second loan would help the accused in getting a big contract for drainage CC No. 73/11 3/25 work executed in his favour from the Government of Harayana. Complainant CW1 Beer Singh further deposed that with the help of funds generated from the said contract, the accused had assured to return both loans simultaneously. CW1 further stated that accused had issued a cheque bearing no.033287 dated 26.04.2008 Ex.CW1/A in the sum of Rs.5,25,000/ in discharge of his liability to repay the said loan. However, upon presentation cheque Ex.CW1/A was dishonoured vide return memo dated 21.07.2008 Ex.CW1/B on account of closure of his bank account by the accused and thereafter, he had issued legal demand notice dated 30.07.2008 Ex.CW1/C calling upon the accused to make payment of the cheque amount and had sent the said legal demand notice to the accused vide registered AD with postal receipts Ex.CW1/D. CW1 further deposed that the accused had sent a reply Ex.CW1/E to his legal notice.
7. In his cross examination by Sh. Sunder Lal, learned counsel for the accused, CW1 Beer Singh deposed that he was not an income tax assessee and he was a pensioner having retired from the post of UDC in Education Department of Delhi Government. He stated that his total income included monthly pension of Rs.7840/ as well as bi annual (six monthly) rental income of Rs.40,000/ to Rs.60,000/ . He could not recall the date on which he had advanced the second loan to the accused and stated that he had given the said loan to the accused in cash. He deposed that he had not taken out the cash from any bank as the same was lying with him. He further deposed that his relative, named, Dheeraj Singh, who was also a friend of the accused, was present at the time when he had handed over the loan amount to the accused. He clarified that he had advanced the second loan to the accused despite non repayment of first loan as the accused had shown to him the documents of a case filed by him pending in the Hon'ble High Court of Punjab and Haryana. CW1 further deposed that he has advanced the first CC No. 73/11 4/25 loan to the accused on 14.03.1997 and had advanced the second loan to the accused in April, 2008. He, however, expressed his inability to recall the exact date on which he had handed over the loan amount of the second loan to the accused in the present case. He admitted that the case regarding non payment of the first loan was pending trial when he had advanced the second loan to the accused. He stated that no compromise was arrived at between himself and the accused in respect of the first loan. On the contrary, the accused had sought adjournment for making payment of dishonoured cheque but had never made any payment thereafter. He categorically said that no compromise in writing had taken place between himself and the accused in the case pending in respect of the first loan in Saket Court. He denied the suggestion that he had made a statement in the Saket Court to the effect that he would withdraw this complaint if payment was made by the accused. He stated that the loan advanced by him to the accused was interest free. He further denied the suggestion that he had taken an interest of Rs.25,000/ on the first loan in the Saket Court. He denied the suggestion that the accused had given a blank cheque to him. He stated that he had no knowledge of the fact whether the accused had replied to the legal notice issued by his advocate or not. He expressed his inability to tell whether the accused had taken a defence in his reply to the legal notice that the cheque in question was taken as a security for the first loan and was not supposed to be presented. He deposed that the first loan was in the sum of Rs.4,00,000/. He, however, admitted that the total cheque amount in both the cases was exactly the same. He denied the suggestion that the cheque amount in both cases was same as the cheque in question had been given as a security for the first loan during settlement in the concerned Court.
8. After the complainant closed his evidence, statement of accused Vijay Kumar under section 313 Cr.PC was recorded on 27.03.2014 CC No. 73/11 5/25 wherein an opportunity was given to the accused to explain all the incriminating circumstances that had appeared against him in the evidence of prosecution. The accused denied all the incriminating circumstances that were put to him and had claimed that he had been falsely implicated in the present case by the complainant. The accused claimed that the cheque in question was given by him to the complainant as a security cheque in respect of the previous loan of Rs. 4,00,000/ availed by him from the complainant and out of the said loan, Rs.1,00,000/ had been repaid by him to the complainant in cash whereas Rs.38,000/ had been paid by him to the complaint through a cheque of Bank of Maharashtra, South Extension. He had further claimed that he had also given Rs.50,000/ and Rs.1,50,000/ in cash to a relative of the complainant, namely, Sh. Dheeraj Singh on two different occasions for repayment of the first loan and the present cheque was merely a security cheque and the same was not issued and discharge of any liability. Accused preferred to lead evidence in his defence and had examined himself as DW1.
9. In his examinationinchief as DW1, accused Vijay Kumar deposed that he had borrowed Rs.4,00,000/ from the complainant in March, 1997 and had returned a sum of Rs. 1,00,000/ in cash to the complainant in May, 1997. He stated that he had repaid another sum of Rs.50,000/ to the complainant in June, 1997. He further deposed that he had also paid Rs.28,000/ to the complainant through cheque towards interest. DW1 Vijay Kumar deposed that he had handed over two cheques in the sum of Rs.2,50,000/ each towards the repayment of remaining principal loan amount and towards security respectively to the complainant. He stated that he had also handed over another cheque of Rs.25,000/ to the complainant towards interest. He further stated that all the three cheques mentioned above were dishonoured on presentation and the complainant had filed a CC No. 73/11 6/25 complaint against him at Saket Court in the year, 2002 for the commission of offence punishable under section 138 of NI Act which was decided by the Court of Sh. Vikrant Vaid, learned MM on 05.11.2012. He further deposed that during the pendency of said case on 13.08.2004, he had entered into a settlement with the complainant whereby the complainant had agreed to withdraw the said case on receipt of a sum of Rs.5,25,000/. However, since the complainant had no trust in him, therefore, the complainant had taken a security cheque of Rs.5,25,000/ from him and had agreed not to present the same. DW1 further stated that the complainant had misused the said security cheque by presenting it in the year 2008. He further deposed that after being convicted by the Court of Sh. Vikrant Vaid, learned MM in the previous case filed by the complainant, he had again entered into a compromise with the complainant during the pendency of his appeal whereby he had agreed to make payment of Rs.8,40,000/ to the complainant as compensation vide statements of himself and complainant recorded on 20.11.2012 and 28.05.2013. Copy of the said statements was proved on record by DW1 as Mark C.
10. In his crossexamination by Sh. Hari Chand, learned counsel for the complainant, DW1 admitted that the Haryana Government owed to him a sum of Rs.2,00,00,000/ (Two Crore) as outstanding dues for the drainage work carried out by him. He admitted that he was not in possession of any documentary proof of the fact that the cheque in question was a security cheque. He admitted that in the ordersheet dated 20.11.2012 he had undertaken to make payment of the settlement amount to the complainant but clarified that the undertaking was given by him in relation to the compromise deed Mark C. He denied the suggestion that on account of non receipt of his outstanding dues amounting to Rs.2,00,00,000/ from the Government of Haryana, he had availed a second loan of Rs.5,25,000/ from CC No. 73/11 7/25 the complainant to pay bribe to the engineers of Haryana Government for facilitating the release of his outstanding dues amounting to Rs.2,00,00,000/.
11. After the closing of defence evidence, final arguments were heard from Hari Chand, learned counsel for the complainant and Sh. Sunder Lal, learned counsel for the accused on 11.07.2014 as well as today on 28.07.2014.
12. Learned counsel for complainant has argued that the complainant has proved his case beyond reasonable doubt by examining CW1 Beer Singh who has categorically deposed that he had advanced two loans in the sum of Rs.5,25,000/ to the accused and the cheque in question Ex. CW1/A was handed over to him by the accused towards repayment of the second loan which is a subject matter of the present complaint. Learned counsel for the complainant has further argued that through the return memo Ex. CW1/D, it has been established that the cheque in question issued by the accused pertains to an account which had been already closed by the accused and therefore, the accused has committed the offence punishable under section 138 NI Act by issuing a cheque pertaining to an account which had been previously closed by the accused.
13. Learned counsel for the complainant has further submitted that despite receipt of legal demand notice Ex.CW1/C, accused Vijay Kumar had failed to make payment of the cheque amount stipulated in the dishonoured cheque Ex.CW1/A within the statutory period of 15 days from the date of receipt of legal notice and therefore, the accused deserves to be held guilty for the commission of the offence punishable u/s 138 NI Act read with section 142 of NI Act.
14. Sh. Sunder Lal, learned counsel for accused has on the other hand argued that the cheque in question was a security cheque issued by the accused in discharge of liability to repay the previous loan availed by the CC No. 73/11 8/25 accused from the complainant in March, 1997 and the said cheque has been misused by the complainant to falsely implicate the accused in the present case despite being aware of the no second loan was ever availed by the accused from the complainant. Learned counsel for accused has further argued that the complainant has failed to place on record any documentary proof of having advanced cash loan of Rs.5,25,000/ to the accused in the year 2008.
15. In this context, learned defence counsel has submitted that the complainant has failed to place on record any receipt issued by the accused as an acknowledgment of having received cash loan of Rs.5,25,000/ from the complainant. Besides, the complainant has failed to produce his income tax return wherein he had depicted any such loan in the sum of Rs.5,25,000/ advanced by him to the accused. Learned counsel for accused has further submitted that according to the provisions of the IncomeTax Act, no loan above a sum of Rs.20,000/ can be advanced in cash and all such loans having value of more than Rs.20,000/ are supposed to be advanced through cheques on written instruments and they are also supposed to be reflected in the incometax return of the lender.
16. Learned defence counsel has also submitted that the case of the complainant is liable to be rejected on account of the fact that the complainant has failed to examine alleged eyewitness, namely, Sh. Dinesh Kumar, in whose presence the cash amount of Rs.5,25,000/ was handed over to the accused by the complainant.
17. I have considered the rival submissions of the parties and perused the entire evidence led by the Complainant as well as by the accused. Before analyzing the records of the present case for appreciation of evidence, it is important to examine the provisions of sections 138 & 139 of Negotiable Instruments Act in the light of law of precedents. In this context, it CC No. 73/11 9/25 is noteworthy that Negotiable Instruments Act makes it an offence to issue cheques pertaining to one's bank account without having sufficient balance in the account to honour the cheques. Besides, in the scheme of the Act, the drawer of cheque has been made liable to make payment of the cheque amount by incorporating a presumption in favour of the holder of the cheque in section 139 of N.I. Act. The relevant provisions of sections 138 & 139 NI Act are reproduced below : Section 138. Dishonour of cheque for insufficiency, etc., of funds in the account Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
139. Presumption in favour of holderIt shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.
18. A perusal of the abovecited provisions of section 138 & 139 of NI Act, it can be safely concluded that in order to constitute an offence punishable under section 138 N.I. Act, the following ingredients must be CC No. 73/11 10/25 satisfied :
(i) the cheque must be drawn or issued by an account holder in respect of his account maintained in any bank.
(ii) the cheque must be presented within the period of its validity.
(iv) the cheque must be dishonoured either on account of insufficiency funds to the credit of the drawer or on account of the fact that the cheque amount exceeded arrangement made by the drawer with his banker for encashment of cheque.
(v) the holder of cheque or the beneficiary of the cheque must issue a legal demand notice, calling upon the accused or drawer to make the payment of the cheque amount.
(vi) the drawer must fail to make payment of the cheque amount within 15 days or receipt of legal notice.
19. Section 139 of N.I. Act contains the presumption in favour of the holder of the cheque and against the drawer whereby it is presumed that the drawer had issued the cheque in question in discharge of a debt or liability to pay the cheque amount to the holder of the cheque. However, the said presumption is a rebuttable presumption and it has been time and again reiterated by Hon'ble Supreme Court of India that it is upon the accused to raise a probable defence to rebut the presumption of the existence of legally enforceable debt or liability and when the accused is called upon to rebut the presumption under section 139 N.I. Act, the standard of proof for doing so cannot be equivalent to the standard of proof which rests upon the prosecution in a criminal trial. The accused merely has to prove his defence on the scale of preponderance of probabilities whereas the prosecution is required to establish its case beyond reasonable doubt. Therefore, when the accused manages to rebut the presumption contained under section 139 N.I. Act by raising a probable defence, then the prosecution can fail and the accused need not even adduce evidence of his/ her own to prove his defence. Observations made by Hon'ble Supreme Court of India in Para14 of the Judgment passed in case Rangappa Vs Mohan, AIR 2010 SC 1898, CC No. 73/11 11/25 which is noteworthy in this case the ingredients are reproduced : "In light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clause and the accused/defendant cannot be expected to discharge an unduly high standard or proof. In the absence of compelling justifications, reverse onus clause usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under section 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."
20. Applying the ratio of the aforesaid judgement to the facts of the present case, it can be safely concluded that since the accused has admitted his signatures on the cheque in question, therefore, a presumption can be drawn that the complainant had lawfully obtained the cheque from the accused who had issued the same in discharge of a legally enforceable debt CC No. 73/11 12/25 or liability to pay the cheque amount. However, the said presumption is a rebuttable presumption and if the accused is able to disclose a probable defence, then it is the duty of the complainant to clarify how the cheque in question was issued in discharge of legally enforceable debt or liability by the accused. The presumption under Section 139 of Negotiable Instruments Act can be rebutted by an accused person through a probable defence which need not be supported by any separate evidence adduced by the accused. The defence of the accused can also be raised by impeaching the creditworthiness of the evidence produced by the complainant in support of his case. If in a case the witnesses of the complainant are unable to withstand their cross examination by defence in respect of the manner in which the accused is liable to pay the cheque amount, then the burden of proof once again shifts upon the complainant and the complainant is supposed to bring home the liability of the accused to pay the cheque amount by elaborating on the transaction in respect of which the cheque in question had been issued.
21. In the present case, the liability of the accused to pay the cheque amount is based on an alleged loan transaction whereby the complainant has claimed to have lent a sum of Rs.5,25,000/ as an interest free loan to the accused in April 2008. The said loan was not advanced by the complainant by way of any cheque, loan agreement or any other form of written instrument. Hence, complainant has claimed to have handed over a sum of Rs.5,25,000/ in cash to the accused. However, the complainant has not placed on record any passbooks or statement of account of his own bank account from where he had withdrawn a huge amount of cash to lend the same to the accused. Moreover, another peculiar fact which raises a suspicion in respect of the claims of the complainant of having handed over loan amount of Rs.5,25,000/ in cash to the accused in April 2008 is the fact CC No. 73/11 13/25 that the alleged loan extended to the accused by the complainant in April 2008 was a second loan and was given to the accused despite the fact that a first loan of the same amount advanced by the complainant to the accused way back on 14.03.1997 was still unpaid in April 2008 when the second loan was handed over to the accused by the complainant. Besides, litigation between the parties in respect of said first loan was also pending at the time of advancement of the second loan. It is highly improbable that any person who is involved in litigation with a particular person for recovery of one loan for about 11 years, would advance a second loan for a huge sum of Rs.5,25,000/ to the same person, despite being aware that first loan itself has not been repaid.
22. Moreover, the complainant has failed to reflect the alleged loan of Rs.5,25,000/ advanced by him in his income tax return. It is settled law that a loan over and above a sum of Rs.20,000/ should not be advanced in cash as per the provision of Income Tax Act and must ideally be advanced through cheques or written instruments. The said loan should also be reflected in the income tax return of the lender. It has been similarly held by Hon'ble High Court of Bombay in the case of Sanjay Mishra vs Kanishka Kapoor Criminal Application No.4694 of 2008 decided on 24 th February 2009 observed that the explanation to section 138 of NI Act clearly provides that the debt or other liability referred to in the said section should be legally enforceable debt or liability. However, the liability to repay an unaccounted cash amount not disclosed in the income tax return of the lender cannot be termed as a legally recoverable debt or liability. Observations made in para 15 of this judgement are noteworthy in this context and are reproduced below: "15. The Apex Court has held that the laws relating to the said Act are required to be interpreted in the light of the object intended to be achieved by it despite there being deviation from general law. The Apex Court expressed that the object of Section 138 of the CC No. 73/11 14/25 said Act was to ensure that commercial and mercantile activities are conducted in sooth and healthy manner. The explanation to Section 138 of the said Act clearly provides that a debt or other liability referred to in section means a legally enforceable debt or other liability. The alleged liability to repay an unaccounted cash amount admittedly not disclosed in the Income Tax Return cannot be a legally recoverable liability. If such liability is held to be a legally recoverable debt, it will render the explanation to Section 138 of the said Act nugatory. It will defeat the very object of Section 138 of the Act of ensuring that the commercial and mercantile activities are conducted in a healthy manner. The provision of Section 138 cannot be restored to for recovery of an unaccounted amount. A cheque issued in discharge of alleged liability of repaying "unaccounted" cash amount cannot be said to be a cheque issued in discharge of a legally enforceable debt or liability within the meaning of explanation of Section 138 of the said Act. Such an effort to misuse the provision of Section 138 of the said Act has to be discouraged."
23. It has also been held in para 7 and 13 of the aforementioned judgement that a loan below the sum of Rs. 20,000/ may be advanced in cash and also need not be reflected in the income tax return of the lender. However, a loan above the sum of Rs. 20,000/ must always be reflected in the income tax return of the financial year in which the same is advanced by any person and failure of a complainant to reflect such a loan in his books of accounts as well as in the income tax return may amount to a sufficient rebuttal of the presumption under section 139 of NI Act. Relevant observations made in paras 7 and 13 of the abovecited judgement are noteworthy in this context and are reproduced below : "7. It is true that merely because amount advanced is not shown in Income Tax Return, in every case, one cannot jump to the conclusion that the presumption under section 139 of the said Act stands rebutted. There may be cases where a small amount less than a sum of Rs.20,000/ is advanced in cash by way of loan which may be repayable within few days or within few months. A complainant may not show the said amount in the Income Tax Return as it is repayable within few days or few months in the same financial year. In such a case the failure to show the amount in the Income Tax Return may not by itself amount to rebuttal of presumption under section 139 of the said Act. If in a given case the amount advanced by the complainant to the accused is a large CC No. 73/11 15/25 amount and is not repayable within few months, the failure to disclose the amount in IncomeTax return or Books of Accounts of the complainant may be rebut the presumption under section 139 of the sufficient said Act.
13. In the present case, there is a categorical admission that the amount allegedly advanced by the applicant was entirely a cash amount and that the amount was "unaccounted". He admitted not only that the same was not disclosed in the Income Tax Return at the 2006 relevant time but till recording of evidence in the year it was not disclosed in the Income Tax Return. By no stretch of imagination it can be stated that liability to repay unaccounted cash amount is a legally enforceable liability within the meaning of explanation to section 138 of the said Act. The alleged debt cannot be said to be a legally recoverable debt. "
24. The Hon'ble Supreme Court of India had also examined the issue of advancement of friendly loan in cash in the case of Krishna Janardhan Bhat vs Dattatraya G. Hegde criminal appeal no. 518 of 2006 decided on 11 January 2008 wherein after detailing lacuna in the case of the complainant who had neither got any document or pronote executed while advancing a loan of huge amount of Rs.1.5 lacs in cash, nor taken any receipt from the accused as an acknowledgment of having received Rs.1.5 lacs in cash from the complainant, the Hon'ble Apex Court had stressed that the Court below had failed to notice that under ordinary circumstances a loan above sum of Rs.20,000/ should be advanced only by way of account payee cheque as per the provision of section 269 SS of Income Tax Act and should be reflected in the books of accounts and income tax return of the lender. Observations made in paras 18 and 19 of the judgement are noteworthy in this context and are reproduced below : "18. Before embarking upon the legal issues, we may analyse the deposition of PW1 Complainant. He was a resident of village Goddalmane. Appellant is a resident of village Kekkar. As he was running an industry at Hubli, he sometimes resided in Hubli also. They were said to be friends. He asked him to give a loan of Rs. 1.5 lakhs in the first week of June, 1998 and the amount was handed over to him on 14th June, 1998. It was allegedly agreed that on the CC No. 73/11 16/25 appellants failure to repay the said loan within one month, 15% interest would be charged. No document was executed; no pronote was executed; no receipt was obtained. Appellant is said to have come to his house suo moto on 20.07.1998 and handed over the cheque which was sent to Varada Grameen Bank for collection whereupon notice had been issued. Despite the fact that he was aware that a dispute had been raised in regard to the writings in the cheque, the same was not proved. Merely, the cheque was tendered and it was marked as an exhibit. The cheque appears to have been issued as a proprietor of a business concern.
... His acquaintance, according to him, with the appellant was only through his brotherinlaw. He did not say that he had friendship with the appellant. There also does not appear to be any business transactions between them. He could not state about the denomination of the notes although according to him he had drawn the amount from the society.
He did not produce any books of accounts or any other proof to show that he got so much money from the bank. He admittedly did not have any written document pertaining to the accused. He accepted that there was no witness to the transaction. He, of course, denied certain suggestions, but the suggestions put to him were required to be considered by the court below in the backdrop of the facts and circumstances of the case.
19. The courts below failed to notice that ordinarily in terms of Section 269SS of the Income Tax Act, any advance taken by way of any loan of more than Rs. 20,000/ was to be made by way of an account payee cheque only.
Section 271D of the Income Tax Act reads as under:
271D. Penalty for failure to comply with the provisions of section 269SS. (1) If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) Any penalty imposable under sub section (1) shall be imposed by the Joint Commissioner."
25. In the light of aforecited observations made by Hon'ble High Court of Bombay and Hon'ble Supreme Court of India in the decided cases of Sanjay Mishra vs Kanishka Kapoor (Supra) and Krishna Janardhan Bhat vs Dattatraya G. Hegde (Supra), it can be safely concluded that all loans having value of more than Rs.20,000/ should not only be advanced through a written instrument, such as, an account payee cheque as per the provisions CC No. 73/11 17/25 of section 269SS of the Income Tax Act, 1961 but must also be reflected in the books of accounts and income tax return of the lender. In the present case, complainant Beer Singh has claimed to have advanced a cash loan of Rs.5,25,000/ to the accused without complying with the aforementioned provisions of Income Tax Act. If such a huge amount of money was advanced by the complainant as loan to the accused, then complainant should have complied with the provisions of Income Tax Act, which have been introduced with a view to curb flow of black money by making it mandatory that such transactions are duly accounted for and subjected to tax. Therefore, the alleged unaccounted cash transaction of Rs.5,25,000/ cannot be termed as a legally enforceable debt as stipulated in the provisions of section 138 of NI Act.
26. Having arrived at the conclusion that a loan in the sum of Rs.5,25,000/ advanced without complying with the provisions of the Income Tax Act, 1961 is not a legally enforceable debt, I shall now examine other lacunae in the case of the complainant. In this context, it is noteworthy that the alleged loan transaction in the present case is in itself suspicious as the complainant has failed to disclose the source of income from which he had acquired cash amount of Rs.5,25,000/ to advance as loan to the accused. It is the case of complainant that he is a pensioner having a monthly pension income of Rs.7840/ and a sixth monthly rental income of Rs.40,000/ to Rs.50,000/. In these circumstances, complainant was required to prove that he was infact in possession of cash amount of Rs.5,25,000/ as his disposable income, which he was in a position to lend to the accused. Besides, he was supposed to explain the source of income from which he had acquired such a huge amount of cash. Moreover, complainant has also failed to disclose the exact date on which he had advanced a huge sum of Rs.5,25,000/ as loan to the accused. He has also failed to examine the only CC No. 73/11 18/25 eye witness to the advancement of the said loan in cash to the accused, namely, Sh. Dheeraj Singh. Moreover, there are several contradictions in the testimonies of the complainant. In his examinationinchief as well as the complaint, the complainant had claimed to have advanced the first loan in the sum of Rs.5,25,000/ as a friendly loan to the accused. However, in his cross examination by learned defence counsel Sh. Sunder Lal, complainant had stated that the first loan was only of Rs.4 lacs. His specific deposition is reproduced in this context : "The accused had given three cheques in the other complaint two for Rs.2,50,000/ and one for Rs.25,000/. The first loan was of Rs.4 lacs."
27. The abovementioned contradiction and other lacunae in the testimony of the complainant have impeached the creditworthiness of the deposition made by the complainant. In a similar case decided by Hon'ble Supreme Court of India, the accused was acquitted on account of material contradictions in the testimony of the complainant who had not executed any written instrument while advancing a loan in the sum of Rs.1.5 lacs to the accused and had also not charged any interest from the accused on the said loan. The Hon'ble Supreme Court of India had observed in para 10 of the judgement passed in the case of John K. John vs Tom Varghese & Anr criminal appeal no. 14331434 of 2007 decided on 12, October 2007 that it would be absurd to form an opinion that the complainant had advanced a loan of an amount as high as Rs.1.5 lacs without executing any written document to a person (the accused) who had been previously unable to pay installments in respect of chitties priced in his favour from a chit fund being run by the complainant. Relevant observations made in para 10 of the judgement are noteworthy in this context and are reproduced below : "10. Relationship between the parties is not in dispute. The complainant is a partner of a firm which is in the business of running chitty fund. The fact that the respondent subscribed three chitties and that he could not pay the instalments of the prized CC No. 73/11 19/25 amount is not in dispute. Pendency of three civil suits filed by the firm through the appellant against the respondent is also not in dispute. The High Court upon analyzing the materials brought on records by the parties had arrived at a finding of fact that in view of the conduct of the parties it would not be prudent to hold that the respondent borrowed a huge sum despite the fact that the suits had already been filed against him by the appellant. Presumption raised in terms of Section 139 of the Act is rebuttable. If, upon analysis of the evidence brought on records by the parties, in a fact situation obtaining in the instant case, a finding of fact has been arrived at by the High Court that the cheques had not been issued by the respondent in discharge of any debt, in our opinion, the view of the High Court cannot be said to be perverse warranting interference by us in exercise of our discretionary jurisdiction under Article 136 of the Constitution of India. The High Court was entitled to take notice of the conduct of the parties. It has been found by the High Court as of fact that the complainant did not approach the court with clean hands. His conduct was not that of a prudent man. Why no instrument was executed although a huge sum of money was allegedly paid to the respondent was a relevant question which could be posed in the matter. It was open to the High Court to draw its own conclusion therein. Not only no document had been executed, even no interest had been charged. It would be absurd to form an opinion that despite knowing that the respondent even was not in a position to discharge his burden to pay instalments in respect of the prized amount, an advance would be made to him and that too even after institution of three civil suits. The amount advanced even did not carry any interest. If in a situation of this nature, the High Court has arrived at a finding that the respondent has discharged his burden of proof cast on him under Section 139 of the Act, no exception thereto can be taken."
28. A similar situation had once again come up for consideration before the Hon'ble Supreme Court of India in the recently decided case of John K. Abraham v. Simon C. Abraham and another 2014 A CD 560 (SC) wherein the complainant had been unable to tell the name of person who had written the cheque as well as the date, place and time at which the cheque in question had been written. Besides, the complainant had also not been able to tell the date on which the transaction between the complainant and the accused had taken place in which the complainant had advanced a loan of Rs.1,50,000/ to the accused. The Hon'ble Apex Court had observed that the CC No. 73/11 20/25 aforementioned defects in the testimony of the complainant had given a fatal below to the very root of the complaint under Section 138 NI Act. Observations made by Hon'ble Apex Court in para 10 of the judgement are noteworthy in this context and are reproduced below : "10. Keeping the said statutory requirements in mind, when we examine the facts as admitted by the respondent complainant, as rightly concluded by the learned trial Judge, the respondent was not even aware of the date when substantial amount of Rs.1,50,000/ was advanced by him to the appellant, that he was not sure as to who wrote the cheque, that he was not even aware when exactly and where exactly the transaction took place for which the cheque came to be issued by the appellant. Apart from the said serious lacuna in the evidence of the complainant, he further admitted as PW.1 by stating once in the course of the crossexamination that the cheque was in the handwriting of the accused and the very next moment taking a diametrically opposite stand that it is not in the handwriting of the accused and that it was written by the complainant himself, by further reiterating that the amount in words was written by him. We find that the various defects in the evidence of respondent, as noted by the trial Court, which we have set out in paragraph 7 of the judgment, were simply brushed aside by the High Court without assigning any valid reason. Such a serious lacuna in the evidence of the complainant, which strikes at the root of a complaint under Section 138, having been noted by the learned trial Judge, which factor was failed to be examined by the High Court while reversing the judgment of the trial Court, in our considered opinion would vitiate the ultimate conclusion reached by it. In effect, the conclusion of the learned Judge of the High Court would amount to a perverse one and, therefore, the said judgment of the High Court cannot be sustained."
29. In yet another similar case wherein the complainant had failed to specify the exact date on which the nine cheques in question were issued, the name of the person to whom the cheques in question were handed over and the exact liability of the accused on any specific date. Besides, the complainant had failed to examine the person who had received purchase orders from the accused or had raised invoices in respect of trade transaction with the accused. The Hon'ble High Court of Delhi had upheld the acquittal of the accused by the trial Court on account of failure of the accused to explain CC No. 73/11 21/25 the liability of the accused to pay the cheque amount. Observations made in paras 6 and 7 of the judgement passed in the case of Total Finaelf India Limited v. Smt. Rashmi Parnami 2014 A CD 470 Delhi are noteworthy in this context and are reproduced below : "6. On merits also, the appellant could not establish that the cheques in question were given in consideration of existing debt or liability. Soon after getting demand notice on 27.11.1997, in the reply (Ex.CW1/48), the respondent categorically denied that the cheques in question were given towards existing debt or liability. She pleaded that the cheques in question were given as security at the time of her appointment as distributor. The burden was heavily upon the appellant to prove that the cheques in question were towards the legal debt or liability. In the demand notice or in the complaint, the appellant did not specify the exact date when nine cheques in question were given at one go. It is unclear as to whom the cheques in question were handed over and at which place. These cheques are of different dates i.e. 30.04.1997 (four cheques), 30.05.1997 (four cheques) and 30.06.1997 (one cheque). The amount for which the cheques were issued is not in round figures but for a specific odd amount. In the complaint, it is mentioned that after great persuasion, the respondent issued these cheques drawn on Indian Overseas Banks towards 'overdue outstanding dues'. Inference can be drawn that when these cheques were issued, an amount of ` 11,08,546.78/ was due from the respondent. The appellant did not elaborate as to how googmuch debt/ liability was there on any specific date prompting the respondent to issue the cheques in question. It is unbelievable that the respondent issued cheques in one sequence for different dates and different amount instead of issuing one cheque for the 'overdue outstanding liability' as on date. It is unclear as to why the appellant accepted cheques in the month of October or so for the dated 30.04.1997 or 30.05.1997. These cheques were not presented for encashment soon after issuance. Contrary to that, all the cheques in question were presented on the same date in the bank and were dishonoured. The appellant has admitted payment by way of bank drafts amounting to ` 60,500/ from the respondent after service of demand notice dated 23.11.1997. This fact does not find mention in the complaint. It appears that appellant has not examined the official who received the purchase orders or raised invoices. The distributor agreement (Ex.CW 1/4) came into existence on 17.04.1997. The invoices (Ex.CW1/5) pertain to the period from 31.11.1997 to 04.06.1998 showing balance due as 1103568.29. Credits given for incentives were reversed. Ex.CW1/5 further depicts that even after the issuance of the cheques in question, payments were made by demand drafts and cheques.
7. The Trial Court has given detailed reasons to arrive at the conclusion that the respondent had rebutted the presumption under CC No. 73/11 22/25 Section 139 Negotiable Instruments Act. The appellant could not prove that the cheques in dispute were issued against any debt or liability. Mere liability of the respondent to pay her dues towards purchase of goods (if any) is not enough to proceed under Section 138 Negotiable Instruments Act as the appellant has civil remedy to recover outstanding dues. No interference is called for in the reasoned impugned order."
30. The facts of the present case are similar to the facts of the abovecited cases of John K. John vs Tom Varghese & Anr (Supra), John K. Abraham v. Simon C. Abraham and another (Supra) and Total Finaelf India Limited v. Smt. Rashmi Parnami (Supra) decided by Hon'ble Apex Court and Hon'ble High Court of Delhi. In the present case, it is the defence of the accused that the cheque in question was issued as a security cheque towards settlement of outstanding dues in respect of the previous loan availed by the accused from the complainant in March 1997. It is also a defence of the accused that the complainant had given an assurance to him that the complainant would not present the said cheque. However, since the accused had failed to comply with the terms of settlement arrived at between the parties in respect of the first loan, therefore, the complainant had misused the present security cheque handed over by him to the complainant by presenting the same for encashment and by concocting a story that the said cheque had been issued towards repayment of a second loan. The complainant has on the other hand claimed that he had advanced the second loan in the sum of Rs.5,25,000/ to the accused in April 2008 on the assurance of the accused that the accused would utilize the said second loan in getting executed in his favour a contract for drainage work from the Government of Haryana and by utilizing the funds generated from the said contract, the accused had undertaken to repay both loans of Rs.5,25,000/ each availed by the accused. However, as observed by Hon'ble Supreme Court of India in the case of John K. John vs Tom Varghese & Anr CC No. 73/11 23/25 (Supra), it is highly improbable that when a person (the accused) was unable to repay an amount already due from him towards the installments of chitties prized in favour by the chit fund being run by the complainant and cases for recovery of the said amount are pending between the parties, then the complainant would advance a loan of a huge amount to the same person who was unable to pay installment towards the amount prized in his favour from the chit fund being managed by the complainant. By the same analogy, no person can be expected to lend a huge sum of Rs.5,25,000/ as loan to a person (accused Vijay Kumar) who had failed to repay another loan in the sum of Rs.5,25,000/ for a period of eleven years. Moreover, there are several other lacunae in the case of the complainant who has claimed to have advanced a huge amount of Rs.5,25,000/ to the accused by way of cash without disclosing the source of income from which he had acquired huge cash amount of Rs.5,25,000/. Besides, complainant has not reflected the said loan amount in his income tax return in violation of the provisions of Income Tax Act, 1961. Also, the complainant has failed to examine only eye witness to the handing over of loan amount to the accused, namely, Sh. Dheeraj Singh in support of his claim that he had handed over the amount of Rs.5,25,000/ in cash to the accused. Besides, there are certain material contradictions in the testimony of the complainant. In his examinationinchief as well as in the complaint, the complainant had claimed to have advanced the first loan in the sum of Rs.5,25,000/ as a friendly loan to the accused. However, in his cross examination by learned defence counsel Sh. Sunder Lal, the complainant had admitted that the first loan was of Rs.4 lacs. The abovementioned shortcomings in the testimony of the complainant coupled with his failure to reflect the loan amount of Rs.5,25,000/ in his income tax return have impeached the creditworthiness of the testimony of the complainant. No other witness has been examined on behalf of the CC No. 73/11 24/25 complainant to corroborate the deposition of the complainant. Hence, the complainant has failed to produce any evidence to prove that the cheque in question had been issued by the accused in discharge of his liability to pay a sum of Rs.5,25,000/ as a legally recoverable debt.
31. In these circumstances, no direct or documentary or circumstantial evidence at all has been produced by the complainant company to show that in fact a loan transaction had taken place between the complainant and the accused whereby the complainant had handed over cash amount of Rs.5,25,000/ to the accused as loan. On the other hand, the accused has successfully rebutted the presumption contained under section 139 N.I. Act by raising a probable defence that the cheque in question was issued as a security cheque in respect of settlement of the first loan. Accused Vijay Kumar is accordingly acquitted in respect of charges levelled against him for the commission of offence punishable under Section 138 read with 142 of NI Act for want of sufficient incriminating evidence against him on record.
32. In compliance of provisions of section 437A of Cr.P.C, accused Vijay Kumar is admitted to bail on furnishing bail bond in the sum of Rs.25,000/ with one surety in the like amount. Accused seeks some time to furnish sound surety.
33. Previous bail bond furnished by accused Vijay Kumar stands extended till 31.07.2014. Accused is directed to furnish sound surety on 31.07.2014. Accused be released forthwith, if not wanted in any other case.
34. After compliance of provisions of Sec437 A of Cr.P.C and other necessary formalities, file be consigned to record room.
Announced in the open Court (Jasjeet Kaur)
on 28th July, 2014 Civil JudgeI, New Delhi District
New Delhi
CC No. 73/11 25/25