Delhi District Court
Court. The Relevant Portion Of The ... vs . on 23 April, 2014
1
IN THE COURT OF SH. BABRU BHAN, METROPOLITAN MAGISTRATE,
(SPL. NI COURT )14 DWARKA COURT, NEW DELHI
M/S S.E. INVESTMENTS LTD.
Vs.
MR. PRABHJOT SINGH SAWHNEY
C.C. No.773/14
P.S.: U/s 138 N.I. Act
JUDGEMENT
a) Date of commission of offence: 15.09.2012
b) Name of Complainant M/s S.E. Investments Ltd. through its authorized representative Sh.
Umesh Chandra Gupta.
c) Name of the accused and Prabhjot Singh Sawhney S/o Sh.
Address: Bhupinder Singh Sawhney, R/o
A41, Rosewood City, Sector49,
Gurgaon (Haryana)
d) Offence complained of: U/s 138 N.I. Act
e) Plea of accused: Pleaded not guilty
f) Final order: Acquittal
g) Date of order: 23.04.2014
h) Date of institution of case: 22.09.2012
i) Date of decision of case: 23.04.2014
CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 1 of 22 2 Brief facts and reasons for decision of the case:
1. The present case been instituted upon a complaint made by S.E. Investment Ltd. (hereinafter referred as 'the complainant') against Prabhjot Singh Sahini (hereinafter referred as 'the accused'), alleging that Bhupinder Singh Sahini had taken a loan of Rs.
1,90,00,000/ (rupees one crore ninety lacs) from the complainant. The loan agreement was executed on 27.12.2011.
2. To secure the repayment of loan, accused stood as a guarantor by executing the guarantee agreement dated 27.12.2011 in favour of the complainant. As per the agreement, Bhupender Singh Sahnini was liable to repay the loan amount on 28.06.2012 in one lot. However, he failed to make the payment on the said date. Consequently, cheque of the accused bearing no.'362337' dated 19.07.2012 for sum of Rs.1,90,00,000/ drawn on HDFC Bank Ltd. was presented, but the same was returned unpaid with the reasons and remarks 'funds insufficient' vide bank memo dated 23.07.2012. On receiving the intimation of the dishonour, the complainant sent a demand notice dated 06.08.2012 via speed post at the correct and CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 2 of 22 3 last known address of the accused. It is alleged that despite service, accused failed to make the payment within the statutory period of 15 days. Thus, the above factual matrix ultimately resulted into filing of present complaint u/s.138 N.I. Act.
3. Cognizance was taken and accused was summoned. On appearance, a notice u/s.251 CrPC was served upon him, to which he pleaded not guilty and disclosed his defence in brief.
4. During the complainant evidence, Sh. Umesh Chandra Gupta, Authorized representative was examined as sole complainant witness. He filed his evidence by way of affidavit Ex.CW1/2. The other documents filed and relied upon by the complainant are as under: a. Copy of Board Resolution Ex.CW1/A. b. Certificate of disbursal of loan Ex.CW1/X1, c. List of directors Ex.CW1/X2, CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 3 of 22 4 d. Impugned cheque Ex.CW1/B, e. Return Memo Ex.CW1/C, f. legal demand notice Ex.CW1/D, g. Postal receipt Ex.CW1/E, h. Speed Post track report Ex.CW1/F, i. Guarantee agreement Ex.CW1/G, j. Minutes of meeting Ex.CW1/I, k. Loan agreement Ex.CW1/J, l. Photocopy of cheque issued by Bhupender Singh Sahini and copy of return memo of the cheque issued by Bhupender Singh Sahini Ex.CW1/DX1 (colly.).
5. Complainant witness was cross examined at length by ld. Counsel for the accused.
CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 4 of 22 5
6. Complainant's evidence was followed by the statement of accused U/s. 313 CrPC, wherein, the entire incriminating evidence was put to the accused. During the statement, the accused admitted that he stood guarantor for the loan agreement Ex.CW1/J for sum of Rs.1,90,00,000/. However, the accused stated that actual amount disbursed to borrower was Rs.1.56 crore (approx.). The guarantee agreement dated 27.12.2011 has also not been denied by the accused. Accused also admitted that borrower did not make the payment on 28.06.2012. However, he explained that the default was might have committed due to the fact that against the loan agreement of Rs.1.90 crore, a sum of Rs.1.56 crore (approx.) was disbursed to him. Regarding the impugned cheque, accused clarified his stand and deposed that impugned cheque was given as blank signed for purpose of security on 27.12.2011 and he was informed that the said cheque would be presented only in case the principle borrower made any default. The service of legal demand notice has also been denied by the accused. During the statement, accused opted to lead defence evidence.
CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 5 of 22 6
7. During the defence evidence, Sh. Sanjeev Kumar Solanki, Postal Assistant was examined as DW1 and Sh. B.N. Shrivastava, Handwriting and Fingerprint Expert was examined as DW2.
8. Ld. Counsel for the accused has also relied upon the following judgments: a. Krishna Raju Finances Vs. Abida Sultana & Ors.; Crl.
Appeal No.333/1998 (A.P. High Court), b. Murugan Financiers Vs. P.V. Perumal; Crl. Appeal No. 791/1997 D/1372004 (Madras High Court), c. Bharat Barrel and Drum Manufacturing Company Vs. Amin Chand Payrelal, Crl. Appeal No.4576/1997 (S.C.) d. K. Subba Rao, Raghubar Dayal and J.R. Mudholkar (C.A. No.433/1959), e. M. Vairavan Vs. T.M. Selvaraj, Crl. A. No.352/09 (Madras H.C.), CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 6 of 22 7 f. Ramkrishna Urban Cooperative Credit society Ltd. Vs. Rajendra Bhagchand Warma; Crl. A. No.898/09 (H.C. of Bombay), g. M/s collage Culture and Ors. Vs. Apparel Export Promotion Council and Anr; Crl. M.C. No.3011/04 (H.C. of Delhi).
9. Ld. Counsel for the complainant relied upon the following judgments: a. I.C.D.S. Ltd. Vs. Beena Shabeer and anr.;
MANU/SC/0669/2002 (S.C), b. Krish International P. Ltd. and Ors. Vs. State and Anr.;
Crl. M.C. Nos. 905 & 906/12 (Delhi High Court), c. Hiten P. Dala Vs. Bratindranath Banerjee;
MANU /SC/0359/2001 (S.C.), CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 7 of 22 8 d. Gummadi Industries Ltd. Vs. Khushroo F. Engineer, Crl. R.C. Nos. 1242, 1248/98 and 387, 388/99, 9469, 9497/98 (H.C. of Madras), e. K.K. Abootty Vs. K.P. Satheesan, Crl. No.979/10 (Kerala H.C.), f. K. Mohanan Vs. State of Kerala, Crl. No.3735/07 (Kerala H.C.), g. Kamruddin Ali Vs. Citi Financial and Ors., Crl. No. 280/12 (H.C. of Delhi), h. Yogendra Bhagatram Sachdev Vs. The State of Maharashtra and anr., Crl. A. No.4307/02, I. C.C. Alavi Haji Vs. Palapetty Muhammed and Anr., Crl.
A. No.767/07.
10. Ld. Counsel for the accused has advanced his first argument that though the loan of Rs.1,90,00,000/ was sanctioned by the complainant in favour of the borrower on 27.12.2011. However, CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 8 of 22 9 actual amount disbursed to the borrower was Rs.1.56 crore (approx.) only and the remaining amount of around Rs.34,50,000/ was illegally deducted from the sanctioned amount. It is argued by ld. Counsel for the accused that liability of the accused / guarantor is coextensive with the liability of the principle borrower and since the principle borrower was not disbursed an amount of Rs. 1,90,00,000/. Hence, liability of the accused is also not to the extent of said amount.
11. The second argument advanced by ld. Counsel for the accused is that blank signed impugned cheque was issued by the accused on 27.12.2011, i.e., on the date when loan was sanctioned to the principle borrower. However, loan amount was disbursed on 28.12.2011. Hence, the said cheque was taken as security prior to the existence of liability. It is argued that security cheque are not within the purview of section 138 N.I. Act.
CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 9 of 22 10
12. In response to the first arguments advanced by ld. Counsel for the accused, ld. Counsel for the complainant argued that the amount sanctioned to the accused was Rs.1,90,00,000/. However, interest amount @2.5% per month was deducted from the sanctioned amount and the said interest amount is exactly Rs. 31,35,000/. Ld. Counsel argued that the said deduction was made as per agreement.
13. In response to the second argument of ld. Counsel for the accused, it is argued by ld. Counsel for the complainant that impugned cheque was not a security cheque. It was a post dated cheque issued by the accused in discharge of borrower's liability in case the principle borrower failed to repay the loan on scheduled date.
14. I have heard the arguments. Now, I proceed with the judgment.
CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 10 of 22 11
15. After hearing the arguments from the ld. Counsels appearing on behalf of the parties, this court is of the considered opinion that decision of present case depends upon the findings on following two points: a. Firstly, whether the liability of the accused was to the tune of Rs.1,90,00,000/ or not?
b. Secondly, whether the impugned cheque was issued towards any legally enforceable debt or liability or it was a security cheque?
16. As per the complaint, the complainant company had provided loan of Rs.1,90,00,000/ (one crore ninety lacs) to the borrower Bhupender Singh Sahini on 27.12.2011. The borrower was to repay the said amount in one shot on 28.06.2012. Similarly, in loan agreement Ex.CW1/J, the loan of above mentioned amount was sanctioned in favour of the borrower at the flat rate interest of 2.75% per month. Similar facts are mentioned in the affidavit Ex.CW1/2 filed by the complainant witness.
CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 11 of 22 12
17. However, during the statement of accused u/s.313 CrPC, accused stated that the actual amount disbursed to the borrower was Rs.1.56 crore (approx.). The defence pleaded by the accused is that deductions made were not justified and thus, the liability of the accused cannot be Rs.1,90,00,000/.
18. During the cross examination, CW1 deposed that though the loan sanctioned in favour of the borrower was Rs.1,90,00,000/, however, he admitted that amount disbursed to the borrower was Rs.1,56,55,430/. CW1 further stated that a sum of Rs.31,35,000/ as finance charges, upfront interest of Rs.1,90,000/ and service tax of Rs.19,570/ was deducted from the sanctioned amount. The CW1 failed to tell any rule or provision under which the above deductions were made.
19. The CW1 when resummoned for further cross examination on 24.05.2013, he made some changes in his statement regarding the nature of above detailed deductions in the sanctioned loan CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 12 of 22 13 amount. CW1 clarified that interest @2.75% per month was charged by the complainant from the borrower on the loan of Rs. 1,90,00,000/ and not on Rs.1.56 crore (approx.). The said interest amount was Rs.31,35,000/. Interestingly, ld. Counsel for the accused again put a specific question to the complainant witness that "Ques: On last date of hearing, you have deposed that a sum of Rs.1.56 crore was disbursed to Mr. Bhupender Singh Sahini (borrower) after deduction of finance charge of Rs.31,35,000/, upfront interest of Rs.1.90 lacs and service tax of Rs.19,570/. Today, you have deposed that an interest of Rs.31.35 lacs was charged from Bhupender Singh Sawhney can you explain?" and the answer was "my previous statement dated 18.02.2013 is correct."
20. The conclusion of the discussion in two preceeding paragraphs is that the complainant witness failed to explain that whether the deduction of Rs.31.35 lacs was made towards the finance charges or towards interest upon the financed amount of Rs.1.90 Crore. The complainant witness also failed to explain that under which provision the deduction of Rs.1.90 lacs as upfront CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 13 of 22 14 interest and service tax of Rs.19,570/ was made. The loan agreement Ex.CW1/J is also completely silent about any such terms qua deductions.
21. The statement of account could provide some relevant details regarding the disbursal and the deductions made in sanctioned loan amount. However, CW1 stated that "I cannot produce the statement of account of the accused though same is maintained by the complainant company." However, the complainant witness failed to give any reason for his inability to produce the statement of account.
22. At this stage, I would like to refer the judgment passed in case of M. Vairavan v. T.M Selvaraj Crl A No. 352 of 2009, Madras High Court. The relevant portion of the judgment is reproduced here as under: "in the instant case, the appellant/complainant is only an individual, therefore, it cannot be said CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 14 of 22 15 that nonproduction of his account books would affect the case under section 138 of N.I. Act, though the same is relevant in a case relating to financial companies and other institutions having books of account. The decision of this court in Murugan Financiers Vs, P.V. Perumal reported in 2005 Crl L.J. 269 ended in acquittal on account of the non production of books of accounts, sought for by the accused therein has no relevancy in this case."
23. From the discussions above, this court arrives at a finding that though the loan sanctioned in favour of the borrower was Rs.1.90 crore but the amount disbursed to him was Rs.1.56 crore (approx.). However, the complainant failed to explain the basis of deductions of Rs. 34,00,000/ (approx.) made in the sanctioned amount. The statement of account was also not produced without assigning any reason. Hence, the liability of the accused which is coextensive with the liability of borrower to the tune of Rs.1,90,00,000/ is doubtful. CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 15 of 22 16
24. The second defence pleaded by the accused is that impugned cheque was issued for purpose of security at the time of loan agreement. The admissions made by CW1 made it much easier for the accused to establish this defence. CW1 deposed that: "The loan in question was disbursed by the complainant on 27.12.2011. again said, the same was disbursed on 28.12.2011, i.e., one day after the execution of loan agreement. It is correct that the cheque in question as well as the cheque which is subject matter of C.C. No.2399/12 were given by the accused and Mr. Bhupender Singh Sawhney on 27.12.2011 as blank signed security cheque. Again said, the cheque Ex.CW1/B and the cheque on the basis of which CC No.2399/12 has been filed by the complainant are not the aforesaid cheques which were given by accused and Mr. Bhupinder Singh Sawhney as blank signed security cheques on 27.12.2011 (vol. said: the cheque Ex.CW1/B was given by the accused duly filed in after he was informed by the complainant that the cheque CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 16 of 22 17 issued by Sh. Bhupinder Singh Sawhney, which the subject matter of CC No.2399/12, has been dishonoured). I cannot tell the exact number of cheques taken by the complainant from the accused as well as from the Bhupinder Singh Sawhney as blank signed security cheques. I do not remember even the serial numbers of the aforesaid cheques. I can tell the same after verification from the records of complainant company."
25. In the above mentioned statement, CW1 has clearly admitted that impugned cheque was issued blank signed for purpose of security on 27.12.2011. Though he tried to correct himself subsequently but he admitted that some security cheques were taken from the accused and Bhupinder Singh Sawhney. However, the witness again failed to give the details of security cheques allegedly issued by the accused and borrower.
26. The complainant witness again appeared for cross examination on 21.06.2013. On this date, CW1 deposed that: "As per the records of the complainant company the accused has given only one blank signed CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 17 of 22 18 security cheque to the complainant on 27.12.2011. Similarly only one blank signed security cheque was given by Shri Bhupinder Singh Sawhney on 27.12.2011 to the complainant. However, no record as to the serial number of aforesaid cheques is available with the complainant company in as much as the accused and Mr. Bhupinder Singh Sawhney had taken back the aforesaid blank signed security cheques from the complainant and in return have issued the cheque in question in the present case as well as the cheque in question in CC No.2399/122 pending in this court."
27. The above testimony of CW1 indicates that he was trapped in his own words after making the initial admission that the cheque in question as well as the cheque which is subject matter of CC No.2399/12 were given by the accused and Bhupinder Singh Sawhney on 27.12.2011 as blank signed security cheques. His subsequent statements that the above blank signed security cheques were taken back and in return the cheque in question was issued is prima facie not convincing and reliable as no details of cheques allegedly taken back are given by the witness. The subsequent statements are clear attempts made by CW1 to cover up his earlier admissions.
CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 18 of 22 19
28. At this juncture, relevant it would be to reproduce clause5 of loan agreement Ex.CW1/J. It says: "The Guarantor/s has/have also delivered his/her/their post dated personal cheques in favour of the Company as collateral security with clear authorisation to the Company that in case the Borrower, Shri Bhupinder Singh Sawhney, fails to make the repayment to the Company due to any reason whatsoever, the Company shall realise its dues, interest and late fees and/or expenses incurred by it, by encashing their cheques."
29. Further, Sh. B.N. Shrivastava, Handwriting Expert was examined as DW2. He filed his report as Ex.DW2/A. In his report, he has given the opinion that the details in the impugned cheque (except signatures) are not filled in handwriting of the accused.
30. When the testimony of CW1 and the above mentioned part of loan agreement is taken into consideration, it leads to clear inference that the CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 19 of 22 20 complainant had taken blank signed security cheques from the accused at the time of loan agreement. The report Ex.DW2/A of handwriting expert also provides some strength to this finding as the details in the impugned cheque are not filled up by the accused and possibility cannot be ruled out that the security cheque was subsequently filled up and presented by the complainant.
31. Now, it is clear that impugned cheque was a blank signed post dated cheques received by the complainant from the accused at the time of loan agreement as collateral security. Clause5 of loan agreement makes it very clear that the cheque of accused / guarantor was to be presented in case borrower Bhupinder Singh Sawhney failed to make the repayment. Hence, the liability of the accused and occasion to present his cheque was to arise in the contingency of default by the borrower. Now, whether such cheque fall under the ambit of section 138 N.I. Act or not?
32. The above question is clearly answered by Hon'ble High court of Delhi in case titled as 'Collage Culture and ors. Vs. Apparel Export promotion council'. The relevant observations made by Hon'ble High Court are: CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 20 of 22 21 "24. it would be relevant to note that the statute does not refer to the debt being payable, meaning thereby, a post dated cheque for a debt due but payment postpone at a future date would attract Section 138 of the Negotiable Instruments Act 1881. But the cheque issued by way of a security, would not attract Section 138 of the Negotiable Instruments Act 1881, for it has not been issued for a debt which has come into in existence."
33. Thus, the Hon'ble High Court has held that a post dated cheque may be issued under two circumstances. One it may be issued in debt in presenti but payable in future. Second it may be issued for debt which may became payable in future upon occurrence of a contingent event. The difference in two kinds of cheques would be that the cheque issued under first circumstances would be for a debt due, only payment being postponed. The later cheque would be by way of security. In the given case, no debt was due upon the accused / guarantor on the date when the impugned cheque was issued. It was a security cheque payable upon contingency of failure in payment on the part of the borrower. CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 21 of 22 22
34. Conclusion of above discussion is that firstly extent of liability of the accused to the tune of cheque amount is doubtful and secondly, the accused has satisfactorily established that the cheque was not issued towards any existing debt or liability and same was a security cheque. The accused stands acquitted accordingly.
(Announced in the open court on 23.04.2014) This Judgment contains 22 pages.
and each paper is signed by me.
(BABRU BHAN) METROPOLITAN MAGISTRATE DWARKA COURTS /NEW DELHI CC No.773/14/12; M/s S.E. Investment Vs. Prabhjot Singh Sawhney Page 22 of 22