Delhi District Court
Axis Bank vs Sanjay Kumar on 7 May, 2012
IN THE COURT OF SH.NAVJEET BUDHIRAJA, METROPOLITAN MAGISTRATE,
SPECIAL COURT06, DWARKA COURTS, NEW DELHI.
AXIS BANK
VERSUS
SANJAY KUMAR
P.S.: SABZI MANDI
U/S: 138 NEGOTIABLE INSTRUMENTS ACT
1. Serial No/ CC No. of the case : 32886/10
2. Name of the complainant : Axis Bank Ltd. [Formerly known as UTI Bank
Ltd.] At Trishul, 3rdFloor, Law Garden,
Ellisbridge,
Ahmedabad - 3800009
Also At [Branch Office] 4/6B, Asaf Ali road,
New Delhi Through Mr.Gopal Bora, Deputy
Manager, RAC Axis Bank Ltd.
3. Date of institution : 28.01.2010
4. Name of the accused, his : Sanjay Kumar
parentage and residence 150/38, Makshuda Colony, Najafgarh,
Near Krishan Mandir,
New Delhi110043
Also at Official Address.
Shop No.1117, Som Bazar, Najafgarh,New
Delhi110043
5. Date when judgment was :
reserved 13.04.2012
CC. No.32886/10 Page no.1 of 28
6. Date when judgment was : 07.05.2012
pronounced
7. Offence complained of and : Section 138 Negotiable Instruments Act
proved
8. Plea of accused : Pleaded not guilty and claimed trial
9. Final Judgment : Accused acquitted of offence under Section
138 Negotiable Instruments Act and convicted
for the same.
:J U D G M E N T:
1 Vide this judgment, I shall decide the complaint in hand filed by the
complainant Axis Bank Ltd. under Section 138 of Negotiable Instruments Act (hereinafter
referred to as NI Act) against the accused Sanjay Kumar.
2 Facts necessary to be adumbrated are that the complainant is a banking
company having its branch office at New Delhi. It is averred that accused had taken personal
loan of Rs.6,80,000/ from the said branch of the complainant bank vide loan account bearing
number PP1260100068740 and for the repayment of the said loan, accused gave 6 cheques
bearing no. 471065, 471066, 471067, 471068, 471069 and 471070 of Rs. 19,618/ each
dated 05.06.2009, 05.07.2009, 05.08.2009, 05.09.2009, 05.10.2009 and 05.11.2009 drawn
on Axis Bank Ltd. G12 A, Vikas Puri, New Delhi110018. The said 6 cheques got dishonored
vide returning advice/memo dt. 07.11.2009 with the endorsement "Funds insufficient".
CC. No.32886/10 Page no.2 of 28
Thereafter, complainant bank issued the legal notice on 05.12.2009 through courier and UPC
at the residential address as well as the official address of the accused demanding Rs.
1,17,708/ being the aggregate amount of the said 6 cheques and the said notice addressed
to the residential and official address of the accused was served upon the accused on
07.12.2009 and 10.12.2009 respectively. The legal notice through UPC reached the accused
on 07.12.2009 but despite service of the legal notice the accused did not pay the said cheque
amount within the stipulated period of 15 days as envisaged by Section 138 NI Act, hence the
present complaint.
3 After taking cognizance of the offence under Section 138 Negotiable
Instruments Act, summons were issued to the accused post which accused entered
appearance and was admitted to bail on 13.04.2010. Thereafter, notice under Section 251
Criminal Procedure Code (for short Cr.P.C) was served upon the accused encompassing all
the accusations against him to which he pleaded not guilty and specified his defence.
Thereafter matter got fixed for defence evidence.
4 In the meanwhile, application under Section 145 (2) of the N.I.Act was
filed on behalf of the accused for recalling the complainant witness i.e the AR of the
complainant stating the grounds of defence which was allowed and matter got fixed for cross
examination of the complainant.
5 Before proceeding with the cross examination, complainant substituted
its Authorized Representative (for short AR) and the new AR Sh. Govind Singh tendered his
evidence by way of affidavit Ex CW1/A and also relied upon the following documents: the
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true copy of certificate of incorporation is Ex.CW1/1, true copy of power of attorney is
Ex.CW1/2 [colly], the cheques alongwith cheque returning advice are Ex. CW1/3 to Ex.
CW1/14, true copy of the legal notice, courier receipts, postal receipts of UPC and delivery
report of courier on both the addresses of the accused are respectively exhibited as
Ex.CW1/15 to Ex.CW1/19. In the cross examination CW1 i.e AR for the complainant stated
he has not filed the present complaint and that the cheques in question were presented at
Axis Bank for encashment. He denied the suggestion that the cheques in question were not
presented in any bank. He further stated that he did not read the legal notice sent to the
accused since he was not present at that time but volunteered that later he had gone through
the legal notice that was sent to the accused. He denied the suggestion that the cheques
were given as blank security at the time of availing of loan and that the particulars of the
cheque were filled by the complainant and not by the accused. He further stated that he
cannot say as to how come the cheque later in serial number i.e, 471070 dt. 05.06.2009 was
issued earlier than the other cheques which were prior to the aforesaid serial number. He
expressed ignorance about the mode of payment of EMI in the present case but volunteered
that as per the policy of the bank the EMI can be paid either through ECS or through cash or
cheque. He further stated that he did not know whether the mode of payment of the loan was
through ECS. He further stated that he can file the statement of account of the accused as
and when required by the court. He denied the suggestion that the cheques in question got
dishonored because the same were presented on the same date. He further stated that the
cheques in question were presented for encashment after obtaining the due consent of the
accused but that he did not remember the name of the person who talked to the accused
regarding the presentation of the cheques in question. He denied the suggestion that
complainant did not have any talks with the accused regarding the presentation of the
CC. No.32886/10 Page no.4 of 28
cheques. He further stated that he did not know as to how many cheques of the accused are
lying with the complainant bank.
6 Thereafter, complainant pleaded for reexamination of its witness and
sought to place on record the loan agreement and other documents executed between the
complainant and the accused i.e copy of loan agreement bearing number PP1260100068740
is Ex.CW1/Y [colly], copy of Loan Application Form is Ex.CW1/X and copy of letter of topup
of loan is Ex.CW1/T, copy of demand promissory note is Ex.CW1/Z. Accused was accorded
opportunity to again cross examine the complainant witness wherein he denied the
suggestion that the signatures at point A, A1, A2, A3, A4 and A5 upon the cheques in
question are not of the accused. He stated that he did not know the amount of the loan given
to the accused at the initial stage before the top up loan and whether the cheques in question
were given by the accused at the time of initial loan. He voluntarily stated that the cheques
were given by the accused for the repayment of loan amount in question. He admitted that he
did not know the exact amount outstanding against the accused at the time of filing this
complaint but the same was more than the amount of the cheques in the present complaint
and also the rate of interest charged at the time of previous loan as well as the top up loan
which is the loan in question. He also admitted that he did not know how much amount
accused has paid towards his previous loan as well as the top up loan i.e. the loan in
question. Then after the conclusion of the cross examination, Court questioned him as to
when were the cheques in question given by the accused to the complainant to which he
answered that he did not know. Then he was questioned regarding Clause 3 of Loan
agreement to which he replied that since the cheques were not given in his presence,
therefore, he did not have any information regarding the same. Lastly he was questioned
CC. No.32886/10 Page no.5 of 28
whether the cheques in question were given blank or duly filled up to which he answered that
the cheques were duly filled up before they were given by the accused. Complainant's
evidence stood closed vide order dated 14.03.2012.
7 Complainant's evidence was followed by Statement of the Accused
under Section 313 Cr.P.C r/w 281 Cr.P.C wherein all the incriminating evidences were put to
the accused. Accused admitted to have received the loan of Rs.6,80,000/ from the
complainant. Regarding the issuance of the cheques, accused admitted that the cheques in
question were issued but not towards the discharge of his liability but as security purpose. He
also stated that cheques were presented for encashment without his consent and without any
intimation and his loan was supposed to be repaid through ECS. He denied receiving legal
demand notice from the complainant but admitted that he has been living at his residential
address i.e. 1506/38, Maksuda Colony, Najafgarh, Near Krishan Mandir, New Delhi110043
for last 27 years and his official address i.e. 117, Som Bazar, Najafgarh, New Delhi110043
which is his shop address was closed about 4 years back. Lastly, he stated that he did not
want to lead defence evidence.
8 Learned counsel for complainant Mr. Sandeep Kumar and learned
counsel for accused Mr. Pramod Sinha addressed their respective final arguments at length
Before appreciating the evidences and arguments of both the parties, it would be appropriate
to advert to the relevant provisions of N.I Act.
Section 138 of N.I Act reads as under :
S. 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
CC. No.32886/10 Page no.6 of 28
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 make with that bank, such
person shall be deemed to have committed an offence and shall,
without prejudice to any other provision of this Act, be punished
with imprisonment for a term which may extend to 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 bank within a period of six months from the
date on which it was 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 15 days of the receipt of
the said notice.
Explanation - For the purposes of this section, "debt or other
liability" means a legally enforceable debt or other liability.
9 Section 138 of the NI Act has three ingredients, viz., (i) that there is a
legally enforeceable debt; (ii) that the cheque was drawn from the account of bank for
discharge in whole or in part of any debt or other liability which pre supposes a legally
CC. No.32886/10 Page no.7 of 28
enforeceable debt; and (iii) that the cheque so issued had been returned due to insufficiency
of funds. The proviso appended to the said section provides for compliance of legal
requirements before a compliant petition can be acted upon by a court of law.
10 I would now embark upon the evidences adduced and the arguments
advanced by both the parties.
11 It is contended by learned counsel for the complainant that accused had
taken personal loan of Rs 6,80,000/ from the complainant and for the repayment of the same
issued cheques in question which got bounced and consequently legal notice was sent to him
but despite service he did not pay the cheque amount leading to the filing of present
complaint. It is further contend that there is a presumption in favour of the complainant under
section 139 of N.I Act which accused has failed to rebut therefore offence under section 138
of N.I Act is clearly made out. On the other hand, counsel for the accused has contended that
the cheques in question were given as blank for security purpose which have been misused
by the complainant by filling them up and which is evident from the fact that cheque later in
serial number bears the date of earlier month. It is further contended that return memos
placed on record are also not proper which cannot be taken into consideration. It is lastly
contended that accused did not receive any legal notice from the complainant as envisaged
by section 138 of N.I Act, therefore accused is not liable to be convicted for offence under
section 138 of N.I Act.
12 I have perused the records of the case giving consideration to the
submissions of the counsel.
CC. No.32886/10 Page no.8 of 28
13 Before deliberating upon the submission of learned counsels, it will be
useful to refer to the relevant paragraphs of the Judgment of the Apex Court in Krishna
Janardhan Bhat v. Dattatraya G. Hegde (1) Apex Court Judgments 412 SC. Para 31
reads as under...
"31. The courts below, as notice hereinbefore, proceeded on the
basis that section 139 raises a presumption in regard to existence
of a debt also. The courts below, in our opinion, committed a
serious error in proceeding on the basis that for proving the
defence the accused is required to step into the witness box and
unless he does so he would not be discharging his burden. Such
an approach on the part of the courts, we feel, is not correct"
(Emphasis added)
14 The Apex Court thus reiterated well established legal position that for
rebutting the presumption under section 139 of the said Act, it is not necessary in every case
for the accused to step into the witness box. The Apex Court held that the standard of proof
on the part of the accused and that of prosecution to prove a case is different. The
prosecution has to prove the guilt of an accused beyond reasonable doubt, but the standard
of proof so as to prove a defence is "preponderance of probability". Inference of
preponderance of probabilities can be drawn even by reference to circumstances. In
paragraph 44 the Apex Court observed thus :
"The presumption of innocence is a human right (see Narendra
Singh v. State of M.P., Ranjitsing Brahmajeet Singh Sharma
V. State of Maharashtra and Rajesh Rajan Yadav V. CBI)
Article 6 (2) of the European Convention on Human Rights
provides :
"Everyone charged with a criminal offence shall be presumed
innocent until proved guilty according to law." Although, India is
CC. No.32886/10 Page no.9 of 28
not bound by the aforementioned convention and as such it may
not be necessary like the countries forming European countries to
bring common law into land with the Convention, a balancing of
the accused's rights and the interest of the society is required to
be taken into consideration. In India, however, subject to the
statutory interdicts, the said principle forms the basis of criminal
jurisprudence. For the aforementioned purpose the nature of the
offence, seriousness as also gravity thereof may be taken into
consideration. The courts must be on guard to see that merely on
the application of presumption as contemplated under section 139
of the Negotiable Instruments Act, the same may not lead to
injustice or mistaken conviction........." (Emphasis added).
In paragraph 45 the Apex Court held thus:
"45. We are not oblivious of the fact that the said
provision has been inserted to regulate the growing business,
trade, commerce and industrial activities of the country and the
strict liability to promote greater vigilance in financial matters and
to safeguard the faith of the creditor in the drawer of the cheque
which is essential to the economic life of a developing country like
India. This, however, shall not mean that the courts shall put a
blind eye to the ground realities. Statute mandates raising of
presumption but it stops at that. It does not say how presumption
drawn should be held to have rebutted. Other important principles
of legal jurisprudence, namely, presumption of innocence as
human rights and the doctrine of reverse burden introduces by
section 139 should be delicately balanced. Such balancing acts,
indisputably would largely depend upon the factual matrix of each
case, the materials brought on record and having regard to legal
principles governing the same." (Emphasis added)
15 Thus, what has been held by Apex court is that presumption of
innocence forms part of human rights and therefore the doctrine of reverse burden introduced
CC. No.32886/10 Page no.10 of 28
by Section 139 of N I Act has to be delicately balanced.
16 Thus, it is amply clear from the above mentioned Judgment of Apex
Court that for proving his case accused need not in every case step into the witness box to
adduce defence evidence. He can rely on the broad improbabilities in the case of the
complainant, the improbabilities in the evidence of the witnesses of the complainant, the
acceptability of suggestions made to the complainant witnesses in the course of cross
examination as also defence evidence if any. So, the presumption under section 139 of N.I
Act need not be rebutted only by leading defence evidence and the said presumption can be
rebutted even on the basis of the facts elicited in the cross examination of the complainant.
17 Now adverting to the facts of the present complaint. Complainant
witness has stated in his affidavit that accused has taken personal loan from the complainant
which fact is not disputed by the accused either in the cross examination of the complainant
or in his own statement under section 313 read along with 281 Criminal Procedure Code,1973
(for short Cr.p.c).The only contention of the accused is that that the cheques in question were
issued as blank for security purpose before the disbursement of the loan in question. On the
other hand, complainant witness has stated in his affidavit that the cheques were issued for
repayment of the said loan.
18 One of the main ingredients of offence under section 138 of N.I Act is
existence of legal enforceable debt or liability.
Existence of Legally Enforceable Debt or Liability.
It is clear from the provision of section 138 N.I. Act that
only after the cheque is drawn to discharge in whole or in part any
CC. No.32886/10 Page no.11 of 28
debt or liability by the accused when presented before the bank
was returned on the ground of insufficient fund standing in the
credit of the account of the accused or some other reason. The
explanation to the above said provision of law clearly tells that to
attract an offence under section 138 of N.I. Act there shall be a
legally enforceable debt or other liability subsisting on the date of
the drawal of the cheque.
19 At this juncture, it would be appropriate to refer to the provisions in
Section 118 and 139 of N.I Act. Under Section 118, unless the contrary is proved, it is to be
presumed that the Negotiable Instrument (including a cheque) had been made or drawn for
consideration. Under section 139 the Court has to presume, unless the contrary was proved,
that the holder of the cheque received the cheque for discharge, in whole or in part of a debt
or liability. Thus, in complaints under Section 138 the court has to presume that the cheque
had been issued for a debt or liability. This presumption is rebuttable.
20 Although, there is a presumption in favour of holder of the cheque but it
is necessary to point out that it cannot be the intention of the legislature that whenever holder
of the cheque files a complaint against the drawer of the cheque and if the drawer admits only
his signature on the cheque then he shall be held liable to the extent of the amount of the
cheque by virtue of the said presumption. In my opinion, mere production of the cheque on
record and admission of signature on the same by the accused are not sufficient to fasten
criminal liability on the accused. Merely stating in the complaint and affidavit that cheques in
question were given for the repayment of the loan will not advance the cause of the
complainant. Accused has averred that payment of the loan was to be made through ECS i.e
Electronic Clearing System and the cheques were given as blank for security purpose.
CC. No.32886/10 Page no.12 of 28
Although CW1 has denied in his cross examination that the cheques were blank for security
purpose but when he was questioned as to how come the cheque later in serial number is
issued earlier in point of time for example cheque bearing number 471070 is dated 05.06.09
whereas the cheque having number 471065 is dated 05.11.2009, he was ignoramus of it.
Further, CW1 also expressed ignorance as to the mode of repayment of loan and whether the
same was through ECS or not meaning thereby that he has neither denied nor admitted the
factum of repayment of the loan through ECS. Then CW1 also stated that cheques were
presented for encashment after obtaining the consent of the accused but was ignoramus of
the details of the alleged conversation between the complainant and the accused. Then in
further cross examination CW1 issue of top up loan emerged. The relevant extract of cross
examination is as under:
".......I do not know the amount of the loan given to the accused at
the initial stage before the top up loan.I do not know whether the
cheques in question were given by the accused at the time of
initial loan. Vol. The cheques were given by the accused for the
repayment of the loan amount in question. I do not know the exact
amount outstanding against the accused at the time of filing this
complaint but the same was more than the amount of the cheques
in the present complaint. I do not know the rate of interest charged
at the time of previous loan as well as the top up loan which is the
loan in question.....I do not know how much amount accused has
paid towards his previous loan as well as the top up loan i.e the
loan in question..."
CC. No.32886/10 Page no.13 of 28
21 Reading of the above extract of cross examination of the complainant
witness makes it clear that the loan in question is a top up loan which fact is not divulged by
the complainant in their complainant.CW1 is totally ignoramus about the outstanding in the
loan account of the accused, rate of interest charged, amount paid by the accused towards
the previous loan and the loan in question and most importantly whether the cheques in
question were given towards the previous loan or not.Then after completion of the cross
examination, court questioned the witness regarding clause 3 of the loan agreement Ex
CW1/Y.Clause 3 is as follows :
"the borrower has signed and handed over to the bank post dated
cheques setting out the amount of each instalments and the date
on which it is payable , in order to enable the bank to adjust and
appropriate the amount standing in the account of the borrower
against the amount of instalments due on the date of the
appropriation.If at any time any cheque is dishonoured , it shall be
deemed to be an offence under Section 138 of the Negotiable
Instruments Act , which will enable the banker to initiate the
necessary legal proceedings against the borrower."
22 To the utter surprise of this court, complainant witness stated that since
the cheques were not given in his presence therefore he did not have any information
regarding the same.
23 After wading through the affidavit and testimony of the complainant, I
hold that testimony of the complainant witness is fraught with inconsistencies/discrepancies
which raise suspicion on the claim of the complainant. Firstly, although it is stated by
complainant witness in his affidavit that cheques in question were given for the repayment of
the loan but it is admitted by him in his cross examination that the cheques in question were
CC. No.32886/10 Page no.14 of 28
not given by the accused in his presence. Then he also expressed ignorance whether the
cheques were given towards the previous loan or not. It appears from his testimony that he is
blowing hot and cold at the same time. Secondly, in paragraph 4 of the complaint and in
affidavit it is simply stated that cheques were given for repayment of the loan. Then in
paragraph 8 of the complaint, it is stated that post dated cheques were handed over at Axis
Bank, Delhi. Furthermore, when court questioned him regarding clause 3 of the loan
agreement which provides for handing over post dated cheques by the accused/borrower,
again he was ignoramus. The aforesaid obliviousness of the complainant witness does not
pass my comprehension for the reason that he being an employee of the complainant bank
must be cognizant of general terms and conditions of the loan. The only inference that can be
deduced from the testimony of the witness is that Clause 3 of the loan agreement is not
followed in letter and spirit and the same is included in the agreement as an artifice. So from
the above, it is manifest that complainant witness is waffled as to when were the cheques
given by the accused, whether the cheques were installment cheques and whether the same
were post dated or not. Thirdly, it is also the grievance of the accused that complainant
presented all the six blank cheques after filling them up on the same day and the justification
given by the witness in his cross examination is that consent of the accused was taken before
presenting the cheques for encashment but there is no such averment to this effect in the
complaint or his affidavit. No doubt that when a person hands over the custody of inchoate
instrument to any other person he is deemed to have given authority to him to fill the same
but then holder of the instrument does not have an unfettered right to fill the same without
obtaining the consent of the drawer. And in that case he has to aver in his pleadings that due
consent of the drawer was taken before filling the blank instrument. Lastly, although
complainant witness kept on reiterating that cheques were given for repayment of the loan but
CC. No.32886/10 Page no.15 of 28
he was nescient of the mode of repayment of the loan, outstanding amount as on the date of
the cheque, rate of interest charged, amount paid towards previous and top up loan. Also,
there is no document on record in the form of Books of Accounts or statement which depicts
the liability of the accused to the extent of the amount of the cheques on that date. Although,
it is true that for prosecution under section 138 of N.I Act, complainant is not obliged to prove
the original transaction or original consideration as it is expected in a suit for recovery of
money but when execution of the cheque and debt or liability is disputed by the accused and
existence of the documents pertaining to loan has been admitted by the complainant, then
calling of the same becomes indispensable. Even if we assume that since it is not a civil suit
therefore there is no need to file any loan documents in view of the presumption under section
139 of N.I Act still complainant could have filed statement of accounts of the accused which
could demonstrate as to what was the amount of installment, how many installments have
been paid by the accused and how much amount is outstanding against him. Since
complainant is a financial institution and must be maintaining its books of account, therefore,
it was incumbent upon it to have filed its books of account in support of its claim. To give teeth
to my observation, I would like to refer to a judgment in Murugan Financiers v. P.V Perumal,
2006 Cr LJ 269(Mad) wherein the order acquitting the accused was upheld on the finding that
since the complainant being a finance company has not produced books of account in
support of claim, complainant has not proved debt or legally enforceable liability satisfactorily.
24 I would also like to refer to the Judgment in M.Vairavan v. T.M Selvaraj
Crl A No. 352 of 2009, Madras High Court. The following paragraph of Judgment is
relevant:
" In the instant case, the appellant / complainant is only an
individual, therefore, it cannot be said that nonproduction of his
CC. No.32886/10 Page no.16 of 28
account books would affect the case under Section 138 of
Negotiable Instruments 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 nonproduction of books of accounts, sought for by
the accused therein has no relevancy in this case."
25 So, it is amply clear from the aforesaid Judgments that complainant
being a finance company ought to have produced accounts in support of their claim.It is
important to point out that when accused disavows his liability to pay the amount of the
cheques in question then burden shifts upon the complainant to show the liability of the
accused on the date of the cheque in question by filing their accounts.Moreover, complainant
being a financial institution must be maintaining books of accounts in their day to day
business activities, so ordinarily there should not be any impediment to produce the books of
account. And if any document which would unfold the genesis of a transaction, not
convincingly brought to fore or where there is a gap or infirmity in the complainant case which
could have been made good by furnishing a document, the complainant case can be termed
as suffering from a deficiency and withholding of such a material document would oblige the
court to draw an adverse inference against the complainant by holding that if the document
would have been furnished it would not have supported the case of complainant. Hence, I am
inclined to raise adverse presumption against the complainant under section 114 (g) of
Evidence Act which says that evidence which could be and is not produced would, if
produced, be unfavourable to the person withholds it. No accounts had been produced by the
complainant to prove that liability was subsisting and no reason has been suggested at all on
his behalf as to why he did not produce the documents in their possession. The Penal
CC. No.32886/10 Page no.17 of 28
Provision under Section 138 N.I. Act could be attracted only when the complainant proves
that the cheque in question was drawn "..........for discharge in whole or in part of any debt or
other liability.........." .The debt or legally enforceable liability is not satisfactorily proved by the
complainant/financier.
26 All these circumstances raise serious doubts on the verity of the claim of
the complainant thereby probablising the stand of the accused and which also go on to show
that the cheques in question were not issued in the manner as has been alleged by the
complainant and in fact the same might have been issued as blank for security purpose which
are subsequently filled up by complainant. And on this, the law is settled that cheque issued
for security purpose will not fall within the purview of section 138 of N.I Act. The proceedings
under Section 138 of Negotiable Instrument Act cannot be initiated when a cheque is given as
security to Banks. Such proceeding can be initiated only when there is a liability . Liability and
security has to be distinguished because Section 138 is envisaged only in a case when a
person issues a cheque to clear his liability or part of his liability from the account held by him
in Bank and only if the said cheque is dishonoured by paying bank.
27 In M.S Narayanan Menon Vs. State of Kerala and Others. 2006 SCC
39 , it has been held by Apex Court that :
".................If the defence is accepted as probable the cheque
therefore cannot be held to have been issued in discharge of the
debt as for example, if a cheque is issued for security or for any
other purpose the same would not come within the purview of
section 138 of N.I Act."
CC. No.32886/10 Page no.18 of 28
28 To bolster my view, I would also like to refer to the judgment of the
Bombay High Court in Rama Krishnan Urban Cooperative Credit Society Ltd. Vs. Sh.
Rajender Bhagchand Warma, Criminal application no. 898/2009. The pertinent question
which was discussed in this case was when a blank cheque is given as security, whether the
provisions of 138 will be applicable or not. The court considered the entire issue and held as
under :
"It is argued that the cheque drawn must be for the discharge, in
whole or in part, of any debt or other liability. So the debt or other
liability must be in existence when the cheque, whether blank or
post dated was issued. In this case the accused respondent
issued the cheque in question as security for loan before loan amount was disbursed. So, cheque was not towards any existing debt or liability. In case of loan transaction, borrower is in need of money and therefore he borrows loan amount from some one with understanding that the loan amount would be repaid in lumpsum on a future date or in installments from particular future date onwards periodically, with or without interest. It is not transaction of loan, if the amount is to be repaid the moment it is paid to borrower. So, provisions of Section 138 of the Negotiable Instruments Act are not attracted.
We may consider object and purpose for introducing amendment to the Negotiable Instruments Act, 1981 by Amendment Act, 1988, as stated in the Amendment Act and various authorities to facilitate correct interpretation of the provisions. The object and reasons clause of the bill which introduced the Amending Act of 1988 would show that the new Chapter XVII was incorporated specifically to "enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers.
CC. No.32886/10 Page no.19 of 28 Thus the object of the amendment and introduction of Chapter XVII in the Negotiable Instruments Act by Act of 1988 was mainly to encourage all major transactions including commercial or business transactions through cheques and to enforce credibility and acceptability of cheques in settlement of liability in general. Encouragement of payment by cheques/credit cards/debit cards rather than by cash is necessary for healthy economy. That also brings in transparency in transactions and discourages creation of black or unaccounted money through evasion of taxes or other malpractices. So, provisions like Section 138 of Negotiable Instruments Act are salutary to give reliability, credibility and acceptability of negotiable instruments like cheques in daily life. However, the object was not to provide effective and speedy remedy for recovery of loans. Law makers must not have intended or imagined that money lenders. or banks would obtain blank or post dated cheques while sanctioning/disbursing loans as securities and would use them to make debtors./borrowers to repay loan under threat of prosecution and punishment under Section 138 of the Negotiable Instruments Act. So, it is doubtful if provisions of Section 138 of the Negotiable Instruments Act would be attracted to a case in which a blank or post dated cheque is obtained by a bank or money lender before or while sanctioning or disbursing loan amount as security for the loan. There was no supporting evidence from the side of the complainant as to whether the accounts had been verified. No accounts had been produced by the appellant to prove that liability was subsisting. Only when it is proved that a liability was existing, an offence under Sec. 138 will arise."
29 As regards the issuance of cheques in question by the accused is concerned, it has been the stand of the accused in his statement under section 313 Cr.P.C and also at the time of service of notice upon him under Section 251 Cr.P.C that the cheques were issued blank i.e. it bears his signature only and body of the cheque has not been filled CC. No.32886/10 Page no.20 of 28 by him. It is true that when the cheques in question contained the signature of the account holder, it is for the accused to explain the same, but merely because cheques contained the signature of the account holder or the accused it cannot be said that the same were executed by him. In this case, it is relevant to note that the case advanced by the accused is that the cheques in question were entrusted with the complainant and the cheques contained nothing more than his signature. Going by Section 138 of the NI Act, it can be seen that 'a drawing of cheque' by a person on an account maintained by him with the 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 of other liability' are two important ingredients, especially in the background of this case. In the decision reported in Ch. Birbal Singh vs. Harphool Khan (AIR 1976 Allahabad 23), it was held that execution of documents consists of signing of the document written out, read over and understood and does not consist of merely signing of a blank paper. In another decision reported in Thakurlal v. Ramadhar (1986 ALJ 480), it had been held that mere admission of putting of signature and thumb mark on a blank sheet of paper is not admission of execution of the document. In the present case, accused did not dispute the signature on cheques, but his specific case is that he had entrusted with the complainant blank cheques which contained his signature. Complainant at one place in their complaint has averred that cheques were given for repayment and at another place averred that post dated cheques were given by the accused. In affidavit of complainant witness, he has deposed that cheques were issued for repayment of the loan but in his cross examination he has stated that cheques were not given by the accused in his presence and also denied the suggestion they were given at the time of the loan for security purpose. Complainant has nowhere stated in its complaint as well as the affidavit that post dated cheques were given by the accused at the time of the loan. Considering the aforesaid facts, I opine that there are suspicious CC. No.32886/10 Page no.21 of 28 circumstances surrounding the transaction and the stand of the accused that cheques were given blank seems to be believable.
30 Also, in the case of "Gopal Vs. Tonny Varghese" 2008 (1) Civil Court Cases 642 (Kerela) it has been held that mere proof of signature on cheque is not proof of its execution. In the absence, of any positive evidence regarding the execution of the cheque by the accused, it is to be held that the accused had issued only blank cheque and the same was not executed by him. Simply because the cheque contained the signature of the accused, it cannot be said that the cheque was drawn by the accused as contemplated by Section 138 of the Act.
31 In a recent Judgment of Kerala High Court in C.Santhi v. Mary Sherly 2011(4) RCR Civil 269 Kerala , it has been held that mere production of cheque by complainant is not sufficient to prove execution by accused. For successful prosecution of offence under section 138 of N.I Act , complainant must allege and prove that the cheque was drawn or executed by the accused. In the absence of the allegation in the complaint that the cheque was drawn by the accused and in the absence of proof of such fact, an accused cannot be convicted for offence under section 138 of N.I Act.
32 It is also pertinent to note that going by the provision namely, Section 138 of the NI Act, it can be seen that the legislature has employed certain words cautiously and not without any meaning. The word employed in Section 138 Viz., "drawn', 'discharge of any debt or other liability' are conveying the message of the legislature, through which we can understand the intention of the legislature. So while interpreting the provisions or the word, CC. No.32886/10 Page no.22 of 28 the court has to give effect to the intention of legislature. At any stretch of imagination, it cannot be said that putting signature on the blank cheque is equivalent to the word 'drawn' used in Section 138 of the NI Act. Therefore, the word 'drawn' used in Section 138 has to be understood as 'execution of cheque'.
33 A person can be said to have "drawn " a cheque, if he has made, prepared or created a cheque. A cheque is an instrument which is created in confirmity with the requirements of section 6 read with section 5 of the N.I Act. A reading of section 5 and 6 shows that a cheque consists of mainly, two parts. One is, an unconditional order in writing directing the banker to pay a certain sum of money only, or to the order of a certain person or to the bearer of the cheque. The second part is the signature of the drawer. 34 When the execution of the cheque is denied by the accused, it is for the complainant to establish the same. In the absence of any positive evidence regarding the execution of the cheque by the accused, it is to be held that the accused had issued only blank cheque and the same was not executed by him. Simply because the cheque contained the signature of the accused, it cannot be said that the cheque was drawn by the accused as contemplated by Section 138 of the NI Act.
35 It is also proper and necessary to point out that the amendment brought in the NI Act, penalizing the dishonour of cheques, to give more sanctity to commercial transactions involving cheques have given way, rather leverage to unscrupulous money lenders to squeeze their debtors through the instrumentality of the court by resorting to prosecution against such debtors on dishonoured cheques which are very often collected in CC. No.32886/10 Page no.23 of 28 blank form with signature alone as security. True, the maker of the instrument, who signs such a instrument in blank form invites the risk of prosecution and sometimes penal consequences, on inflated claims later incorporated in the instrument without his knowledge and consent. He has taken such risk while signing the instrument in blank form is only a lame excuse and that will not relieve the court the instrumentality of Justice from examining the genuineness of the transaction covered by the instrument. A court is expected to examine whether the transaction covered by the cheque is genuine and bona fide. In a case where the materials produced disclose of suspicious circumstances surrounding the transaction unless satisfactory explanation removing such suspicion is tendered by the holder of the instrument no conviction is legally permissible solely banking upon the statutory presumptions. 36 In view of the foregoing discussion, I hold that the cheques in question were issued as blank for security purpose and not towards the discharge of any debt or liability in the manner as has been alleged by the complainant and therefore, they will not fall within the province of section 138 of N. I Act.
37 Now let us zero in on one more aspect which has caught my attention and which is to be deliberated upon is the return memos Ex CW1/9 to 14 which are neither signed nor stamped by either the banker of the accused or the complainant. Memos also do not show that the cheques were presented to drawee bank i.e Axis Bank, Vikaspuri Branch.All the aforesaid 6 memos are purported to be computer generated as nowadays cheque is not generally sent for clearance to the drawee bank physically but its image is sent and in case of dishonour the presenting bank issues its dishonour memo. But then in such a case if the memo is computer generated then it is admissible in evidence only when the requirements of CC. No.32886/10 Page no.24 of 28 the Evidence Act are complied with. In the complaint in hand, going by the evidence on record, I find that complainant has not cared to satisfy the conditions under section 65B(2).Neither Ex.CW1/9 to 14 contain a certificate as contemplated under section 65B(4) of Indian Evidence Act nor the person who took out the print copy was examined. To fortify my view , I would like to place reliance on the latest Judgment if Kerala High Court in A.M Perumal v. Star Tours and Travels (India) Ltd 2011 (2) , RCR Civil 371 wherein it has been held that electronic record would be admissible in evidence only if the record produced satisfies the conditions laid down under section 65B(2) and contains a certificate as contemplated by section 65B(4) of Evidence Act. A reading of section 65B would be relevant:
65B.Admissibility of electronic records:
1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on paper, stored, recorded or copied in optical or magnetic media produced by a computer ( hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
2) The conditions referred to in subsection (1) in respect of a computer output shall be the following namely:
a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purpose of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
CC. No.32886/10 Page no.25 of 28
b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;
c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and
d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.
4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say.
a) identifying the electronic record containing the statement and describing the manner in which it was produced;
b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by the computer;
c) dealing with any of the matters to which the conditions mentioned in subsection (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate;
and for the purposes of this subsection it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.
CC. No.32886/10 Page no.26 of 28 38 Also adverting to section 146 of NI Act which has made the mere
production of bank slips/memo having thereon the official mark denoting that the cheque has been dishonoured to establish the factum of dishonour of such cheques. Therefore, it does not seem to be necessary for the complainant to summon the concerned official of the bank to prove such bank's slip/memo. The complainant may prove it by its mere production. But in the present case, this presumption cannot be raised as there is no official mark to prove the factum of dishonour. Legal position is settled that mere production and marking of a document as exhibit by the Court cannot be held to be a due proof of its contents. Its execution has to be proved by admissible evidence that is by the evidence of those persons who can vouchsafe for the truth of the facts in issue. In the present complaint, from the foregoing discussion it is manifest that complainant has failed to prove the dishonour memos Ex CW1/9 to 14 of cheques Ex CW1/3 to 8 which further wanes the case of the complainant. 39 Before parting with the Judgment, I would also like to place reliance on the observation of the Apex Court in Kumar Exports v. Sharma Carpets 2009 , 2 SCC 513 wherein it was held that the court need not insist in every case that the accused should disprove the non existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time , it is clear that bare denial of the passing of the consideration and existence of debt ,apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. 40 Therefore, I hold that complainant had miserably failed to prove that cheques in question were drawn in discharge of legal enforceable debt or liability which is the CC. No.32886/10 Page no.27 of 28 bedrock of the complaint case under section 138 and merely because of the admission of signature on the cheques, it cannot be said that the drawing of the cheques were proved. In the facts and circumstances of the case, on appreciation of the evidence and on the basis of materials on the record, I further hold that accused is able to adduce rebuttal evidence by raising a probable defence which creates doubt on the case of the complainant, hence in such a scenario the evidential burden shifts back to the complainant which has not been sufficiently discharged. Hence, issuance of notice demanding payment of the cheques in question does not assume any significance in the light of the aforesaid findings of the court. 41 In the backdrop of aforesaid discussion, I hold that complainant has failed to establish that cheques in question were drawn by the accused towards the discharge of legally enforceable debt or liability. No material whatsoever is placed on record which could evince that accused was liable to pay the amount covered in the cheques in question. Complainant has also failed to prove the return memos filed on record in which case factum of dishonour of the cheques also stood not proved. Accused has proved his stand by preponderance of probabilities by showing that the cheques were given as blank not in discharge of any liability but for security purpose. Therefore, no offence under section 138 of N.I Act is made out against the accused, hence accused Sanjay Kumar stands acquitted. He is set at liberty. Bail Bond stands discharged.
ANNOUNCED IN THE OPEN (NAVJEET BUDHIRAJA)
COURT ON 07.05.2012 METROPOLITAN MAGISTRATE
SPECIAL COURT 06,
DWARKA COURTS, DELHI.
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