Delhi District Court
M/S Shree Sambhav Papers Pvt. Ltd vs . on 6 April, 2019
IN THE COURT OF SH. PRANJAL ANEJA
METROPOLITAN MAGISTRATE-01, SHAHDRA DISTRICT,
KARKARDOOMA COURTS, DELHI
CC No. 510/SHD/18
Comp. ID No. 1700/16
IN THE MATTER OF: -
M/s Shree Sambhav Papers Pvt. Ltd.
A-5/A-6, Main Karawal Nagar Road,
Johripur, Shahdara, Delhi-94.
(Through Shri Neeraj Jain, Director) ....Complainant
VS.
1. M/s Shree Ram Straw Products ltd.
Village Lalpur, Kundra Sultangarh Farm,
Kashipur-244713 (U.S. Nagar),
Uttarakhand.
2. Shri Anil Kumar Mittal
Chairman-cum-Managing Director
M/s Shree Ram Straw Products ltd.
Village Lalpur, Kundra Sultangarh Farm,
Kashipur-244713 (U.S. Nagar),
Uttarakhand.
Also at:
Chamunda Vihar, Ramnagar Road,
Kashipur, (U.S. Nagar)
Uttarakhand.
3. Smt. Meera Mittal
Director
M/s Shree Ram Straw Products ltd.
Village Lalpur, Kundra Sultangarh Farm,
Kashipur-244713 (U.S. Nagar),
Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 1 of 28
Uttarakhand.
Also at:
Chamunda Vihar, Ramnagar Road,
Kashipur, (U.S. Nagar)
Uttarakhand. ...Accused
Date of institution : 13.04.2009
Date on which order reserved : 29.03.2019
Date of final order : 06.04.2019
Final Order : Acquitted
COMPLAINT UNDER SECTION 138/142 OF NEGOTIABLE
INSTRUMENT ACT
JUDGMENT:
1. This is a complaint U/s 138 of Negotiable Instrument Act, filed by the complainant against the accused in respect of alleged dishonour of cheque bearing no. 008818 dt. 30.11.2008 of Rs. 50,00,000/- drawn on State Bank of India, Kashipur, Dist. Udham Singh Nagar, Uttarakhand-244713 which was allegedly issued by accused to complainant towards discharged of legal liability. It be here mentioned that the complainant filed 8 other similar cases against the same accused persons with respect to same transaction for similar cheques for same amount of Rs. 50,00,000/- each, thus making total cases 9 in number including the present case. Out of these case file bearing Comp. ID No. 1625/2016 has been treated as main case as all documents and exhibits have been read from that case.
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2. It is the case of complainant that complainant is a company registered under the Indian Companies Act 1956 and Shri Neeraj Jain is the Director of the Company duly authorized to sign and verify the pleadings/complaint/FIR, swear affidavit, appoint advocate on behalf of Company. It is further alleged that accused no. 1 is also a company registered under the Indian Companies Act 1956 and accused no. 2 is the Chairman-cum-Managing Director of the Company and accused no. 3 is the Director of Company. It is alleged that accused no. 2 and 3 have jointly purchased 997500 shares @ Rs. 41.50 per share for a total sum of Rs. 4,13,96,250/- from the complainant and accused no. 1 was also liable to pay a sum of Rs. 36,03,750/- towards advance lying with the accused no. 1 for sale of paper of the complainant. It is further alleged that in total, accused persons are liable to pay a sum of Rs. 4,50,00,000/- against purchase of shares and advance for sale of paper and in order to clear their debt/liability accused had issued a cheque bearing no. 008818 dated 30.11.2008 of Rs. 50,00,000/- drawn on State Bank of Indai, Kashipur, Dist. Udham Singh Nagar, Uttarakhand-244713 towards the part payment against total sum of Rs. 4,50,00,000/- payable by the accused. Thereafter, complainant had presented the above said cheque with its banker for encashment but same was returned unpaid vide return memo dt. 19.02.2009 with remarks "Stop Payment". Thereafter complainant had sent a legal notice of demand dt. 23.02.2009 through registered A.D as well as Under Postal Certificate which was duly served upon the accused as it has not Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 3 of 28 been returned back and A/D has been received back duly signed but despite that accused have not discharged their liability against the cheque in question. Thereafter present complaint has been filed.
3. After recording the pre-summoning evidence of complainant, cognizance of offence was taken against accused persons in respect of offence U/s 138 of NI Act and summons were issued against the accused for offence U/s 138 of NI Act.
4. After supply of complaint along with documents to the accused, notice of accusation U/s 251 Cr.P.C was framed against the accused persons vide order dt. 05.06.2010 to which the accused persons pleaded not guilty and claimed trial.
5. Thereafter matter proceeded to the stage of complainant's evidence. Complainant has examined himself only as CW-1 and filed his examination-in-chief by way of affidavit Ex. C1 & Ex. P1/X and relied upon documents i.e. Cheque bearing no. 008818 dt. 30.11.2008 as Ex. CW1/1, returning memo dt. 19.02.2009 as Ex CW1/2, legal notice dt. 23.02.2009 as Ex. CW1/3, Postal receipt as Ex. CW1/4, original UPC certificate as Ex. CW1/5, AD Card as Ex. CW1/6, copy of certificate of Incorporation as Ex. CW1/7 and copy of resolution as Ex. CW1/8. CW-1 was also cross-examined by the ld. Defence Counsel. Thereafter, vide order dt. 16.01.2012, CE was closed. Statement of accused U/s 313 Cr.P.C. was recorded. In their statement U/s 313 Cr.P.C., accused persons set up the defence that Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 4 of 28 accused Anil Kumar Mittal is the Managing Director and accused Meera Mittal is Director of M/s Shri Ram Straw Products ltd. and accused Meera Mittal does not look after or is involved in any of the business affairs of the said company. Accused Anil Kumar Mittal stated that neither he has purchased any share from Neeraj Jain/Sambhav Paper Pvt. Ltd. nor any of his family member has purchased any share, therefore there is no liability to pay and there is no question of rate of share being 41.50, as there was no sale/purchase and he had already purchased all the shares of Shri Ram Straw Products Ltd. from Mr. Vinod Gupta and his family/group, in the financial year 07-08, therefore there was no question of purchasing shares from the complainant company and further stated that so far as remaining amount of Rs. 36,03,750/- is concerned he was unable to say anything as he has not seen his account/recall his accounts. Accused further stated that 10 cheques from the cheque book got misplaced, the information of which was given to the concerned bank and to concerned police chowki and this cheque is one of those missing cheques and the misuse of said cheques came to his knowledge, when the present case was filed. Accused further stated that bank did not honour the instrument, as written intimation of misplacement was already given to them. Accused persons opted to lead DE and examined accused Anil Kumar Mittal as DW-2 who tender his evidence by way of affidavit as Ex. DW2/X and relied upon list of shares alongwith share certificates as Ex. DW2/1 (Colly.) and one Mr. Prahbakar as DW1 who exhibited the photographs of Vishwakarma Puja as Ex. DW1/A (Colly.).
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6. I have heard the final arguments on behalf of the parties and perused the record. I have also perused the written submissions filed by the parties. Ld. Counsel for complainant has relied upon various rulings viz. Mahendra A. Dadia And Others Vs. State Of Maharashtra & Another 1999 BomCR Cri, CriLJ 4361, V. Raja Kumari Vs. Subbarmana Naidu 2004 X AD (SC) 433, V.S. Yadav Vs. Reena 2010(4) JCC (NI) 323, K.N. Beena Vs. Maniyappan (2001) 107 Comp. Case 459 (SC), Bansal Plywood Vs. The State (NCR of Delhi) & Ors. Crl. Appeal No. 17/2017 decided on 04.09.2017 by Hon'ble High Court of Delhi. Ld. Counsel for accused has also relied upon various rulings such as P.J. Agro Tech. Ltd. & Ors. Vs. Water Base Ltd. (2010) 12 SCC 146, Rushi International vs. State 2010 (174) DLT 254, Aneeta Hada Vs. M/s Godfather Travels & Tours 2012(5) SCC 661, Shri Parveen Sharda Vs. Chopsani Ice Aerated Water and Oils Mills Ltd. Appeal no. 1 of 1982 decided on 10.01.1983 (CLB), Dinesh Chandra Pandey Vs. High Court of M.P. (2010) 11 SCC 500, Durga Periwal Vs. PNB Division Bench of Delhi High Court WP (C) NO. 7446/2007, M.S. Narayan Menon Vs. State of Kerala 2006 (6) SCC 39, Kumar Exports Vs. Sharma Carpets 2009 (2) SCC 513 and S.K. Jain Vs. Vijay Kalra Crl. A. 1011 of 2013 decided on 06.03.2014 by Hon'ble High Court of Delhi.
7. Culpability for the offence of dishonor of cheque under Section 138 of the NI Act requires that the accused should have drawn the cheque on a bank account maintained by him and issued Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 6 of 28 the same to the complainant in discharge of a debt or other legal liability. It further enjoins the payee to send a notice to the drawer demanding payment of the cheque amount within 30 days of the dishonor of the cheque. It is only upon non payment of the cheque amount within 15 days of the receipt of demand notice that the complainant is at liberty to file a criminal complaint against the drawer for dishonor of the cheque.
8. In the present case, all the statutory time limits stand complied with. As the accused has denied the receipt of legal demand notice, I shall deal with that aspect first.
9. The successive interpretation of Section 27 of General Clauses Act 1887 read with Section 114 of the Indian Evidence Act has obviated the need of the complainant to adduce positive evidence regarding receipt of demand notice by the accused. It is now settled law that if the demand notice is properly and correctly addressed, there is presumption of service thereof. It is then for the accused to prove that he did not receive the demand notice and this cannot be accomplished by a mere denial. For this proposition, reliance is placed upon the pronouncements of the Hon'ble Supreme Court in C.C. Alavi Haji v. Palapetty Muhammad 2007 Cri.L.J. 3214 reiterated in Ajeet Seeds Ltd. v. K. Gopala Krishnaiah VI (2014) SLT 524. The reason for casting this evidentiary burden upon the complainant is to ensure that unscrupulous drawers are not given a wide berth to escape the rigor of law merely by manipulating the Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 7 of 28 postal report at their end.
10. Accused has denied the service of legal demand notice U/s 138 N.I. Act upon him in his statement recorded U/s 313 Cr.P.C.
11. It is noted that although after notice U/s 251 Cr.P.C.
was framed, the accused in his statement U/s 313 Cr.P.C. stated that he had not received any legal notice and therefore he did not reply the same. It is observed that the demand notice Ex. CW1/3 has been sent to the accused persons at their given addresses. No where in the cross-examination of complainant/CW-1, it is suggested that the address mentioned on these documents is incorrect or does not belong to the accused persons. Even that address is also seen mentioned during the recording of statement of accused persons U/s 313 Cr.P.C. Section 27 of General Clauses Act, emphasizes the requirement that notice must be "properly" addressed. The word "properly" obviously envisages notice being sent to correct present address of noticee. The address over the legal notice and postal receipts have not been challenged and therefore the same can well be said to be properly addressed. It is therefore evident that the demand notice has been sent by the complainant to the accused at correct address and in view of the legal position as stated above, the burden was heavily upon the accused to prove that he actually did not receive the legal demand notice. But accused person did not discharge this burden. It is thus established that legal demand notice Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 8 of 28 Ex. CW1/3 was duly served upon the accused persons.
12. Having therefore established that the technical parameters of the offence constituted by Section 138 of the NI Act are met by the present complaint, it is opportune to now proceed to the decisive issue i.e. whether the cheques in question was issued by the accused persons to the complainant in discharge of any legal liability owed to them.
13. Before proceeding further, it would be germane to refer to the well settled propositions of law and jurisprudence on issue of dishonour of cheques. The Negotiable Instrument Act, 1881 raises two rebuttable presumptions which are as follows:
1. Presumption U/s 118(a): According to Section 118(a) of Negotiable Instrument Act, it shall be presumed that every negotiable instrument was made or drawn for consideration. By virtue of this clause, the Court is obliged to presume that the instrument was made for valid consideration, until the contrary is proved.
2. Presumption U/s 139 : According to Section 139 of NI Act, it shall be presumed, unless the contrary is proved that the holder of a cheque Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 9 of 28 received the cheque for discharge in whole or in part, of any debt or other liability. Under section 139 NI Act there is a legal presumption that the cheque was issued for discharging an antecedent liability and that presumption can be rebutted only by the drawer of the cheque and once complainant has discharged this initial burden only then onus shifts to accused to discharge the burden U/s 118(a) and 139 of Negotiable Instrument Act by standard of proof of "preponderance of probability".
14. It was observed by Hon'ble Supreme Court of India in case of Krishna Janardhan Bhat Vs. Dattatraya G. Hegde (2008) 4 SCC 54, that essential ingredients of section 138 of Negotiable Instruments Act, 1881 are:-
1. that there is a legally enforceable debt;
2. that cheque was drawn from account of bank for discharge in whole or in part of any debt or other liability which pre-supposes a legally enforceable debt and;
3. that the cheque so issued had been returned due to insufficiency of funds.
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15. It has been clearly held by Hon'ble Supreme Court of India in Rangappa Vs. Shri Mohan (2010) 11 SCC 441 that presumption of Section 139 of NI Act 1881 includes presumption regarding existence of legally enforceable debt or liability and presumption contemplated U/s 139 of NI Act is rebuttable presumption and it is enough for the accused to rebut the presumption by preponderance of probabilities.
16. Having dwelt upon the law, I shall now deal with the merits of the present case as regards the issue that whether the cheques in question was issued by the accused persons to the complainant in discharge of any legal liability owed to them.
17. In order to analyze the testimony of the parties and the witnesses, it would be pertinent to summarize the defence taken by the accused persons in their statement u/s 313 Cr.P.C. which is that the accused Meera Mittal being a family member have been made Director in the company on papers and she has no role in the company and accused Anil Kumar Mittal stated that neither he has purchased any share from Neeraj Jain/Sambhav Paper Pvt. Ltd. nor any of his family member has purchased any share and further stated that he had already purchased all the shares of Shri Ram Straw Products Ltd. from Mr. Vinod Gupta and his family/group, in the financial year 07-08, therefore there was no question of purchasing shares from the complainant company and further stated Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 11 of 28 that so far as remaining amount of Rs. 36,03,750/- is concerned he was unable to say anything as he has not seen his account/recall his accounts. It is further stated that 10 cheques from the cheque book got misplaced, the information of which was given to the concerned bank and to concerned police chowki and cheque in question is one of those missing cheques and the misuse of said cheques came to his knowledge, when the present case was filed. Accused further stated that bank did not honour the instrument, as written intimation of misplacement was already given to them.
18. On the other hand, the complainant's case is that accused persons have jointly purchased 997500 shares @ Rs. 41.50 per share for a total sum of Rs. 4,13,96,250/- and accused no. 1 was liable to pay Rs. 36,03,750/- towards advance for sale of paper and the accused had given the above said cheque in question to the complainant in discharge of part of his legal liability.
19. In background of aforesaid legal propositions and the factual matrix of the case, the contentions and the challenge of the accused have to be examined as to whether accused has placed enough and cogent material before this Court to rebut said statutory presumption which arose in favour of complainant. It is settled law that in trial U/s 138 of NI Act, accused can either show that consideration and debt did not exist or consideration and debt is so probable that prudent man ought to suppose that no consideration or debt existed.
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20. Complainant appeared as CW1 and was cross-
examined. In such cross examination, he disclosed that he had purchased 9,97,500 shares of accused no. 1 company from one Vinod Kumar Gupta and his family members for the denomination of Rs. 10/-. But further cross-examination reveals that CW1 was not even aware about the status of said Vinod Kumar Gupta in the accused no. 1 Company. He even did not know the father's name & address of said Vinod Kumar Gupta though he stated that he lives somewhere in Mahipalpur near Palam Airport. CW1 admitted that he had never gone to the residence of Vinod Kumar Gupta. CW1 further deposed that he had not seen the memorandum of understanding and articles of association of M/s Shri Ram Straw Products at the time of purchase of shares from Vinod Kumar Gupta and his family members and had also not seen any resolution in this regard.
21. Thus, it is observed that CW-1 purportedly purchased large number of shares from a person whose basic details such as parentage, address and status in the company were even not known to him. It is further astonishing to note that CW1 did not even see the essential basic documents such as memorandum & articles of association of the company whose shares he was going to purchase. A prudent person in such circumstance would at least go through these documents to ascertain about the directors of the company and its nature of business/activities etc. Had it been that the seller was a relative but that is not even the case here as CW1 was not knowing Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 13 of 28 even the parentage and address of said Vinod Kumar Gupta from whom he allegedly bought such large number of shares. When asked about the mode of transfer, CW1 deposed that all shares were physically transferred to him by said Vinod Kumar Gupta and his family members. In the reason for not filing the shares on record, CW1 deposed that the shares had been taken by accused no. 2 & 3. Here it is noted that no such fact as to shares being taken by accused is mentioned in the complaint. If the shares were physically with accused no. 2 & 3, naturally a question arises as to why then upon the dishonour of cheque in question the complainant did not demand back those shares from the accused persons. No such demand of shares has been made in the legal notice dated 23.02.2009 Ex. CW1/3 or even till date.
22. Thus, by cross-examination CW1 on these points, accused has raised serious questions upon the very acquisition/purchase of shares by the complainant itself. The alleged purchase of shares is a high value transaction amounting to Rs. 99,75,000/- (7,97,500 shares @ Rs. 10/- each). It be noted here itself that complainant did not chose to examine said Vinod Kumar Gupta as its witness in this case in order to prove the alleged purchase.
23. In further cross-examination upon the transaction between complainant and accused, CW1 deposed that he had not seen the share value of accused no. 1 company from memorandum of understanding and articles of association. When asked about the Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 14 of 28 value of share at the time of sale to accused, CW1 deposed that he did not know the value at that time but he sold them for Rs. 41.50p each. It is here again surprising to note that without even looking at the value of share from the memorandum & articles of association and without even know its market value the complainant goes on to sell shares at an abrupt value of Rs. 41.50p each. The complaint is absolutely silent upon the mode of such valuation of the share. On this point CW1 has also not deposed anything voluntarily in his testimony to even given an idea as to how such valuation in an odd figure of Rs. 41.50 per share was arrived at. At least some accounting or calculation would be required to arrive at such figure. While CW1 deposed that his father and driver were present at the time of negotiation with accused persons, he did not get either of them examined as witness. In fact, except CW1 no other witness has been examined on behalf of complainant.
24. Ld. Counsel for accused vehemently challenged upon the mode of alleged transfer/sale of shares by illustrating step by step the procedure for transfer of shares governed by Section 108 of the Companies Act, 1956. In this regard also he cross-examined CW1. Some relevant excerpts from that testimony dt. 16.01.2012 of CW1 are necessary to be reproduced, which are as under:
"No agreement with regard to purchase share was executed neither at the time of purchasing the share form Vinod Gupta and his family nor at the time of selling those shared to accused no. 2 & 3"
"These shares were purchased about three years back.
Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 15 of 28 We purchased those shared in physical mode and were not purchased in demate account. There were one share certificate in respect of 100 shares where were handed over to our company at the time of purchase. I do not have the details of distinctive number of each share purchased by out company. It is correct that in a transaction of sale of share there is legal formality required to effectuate the transfer besides handing over the share certificate. Shares were not transferred in the name of complainant company."
25. Here, it be also mentioned that CW1 deposed that its company had passed resolution regarding sale of share to accused. A plain reading of the complaint would not show any averment that shares were purchased by accused no. 1 company. What complaint states in this regard is contained in paras no. 3, 4 & 5 of the complaint which are reproduced as under for convenience:-
"3. That the Accused no. 2 has been impleaded as a party in the present proceedings being the Chairman-cum- Managing Director of the Company and responsible for the entire dealings of the Company and even otherwise looking after the day to day affairs of the company and had purchased shares from the Complainant Company jointly with accused no. 3 against consideration in the form of Cheque which has been returned dishonoured.
4. That Accused no. 3 is also the Director of the Company and has been impleaded as party being looking after the entire accounts and administrative work of the company and even otherwise had purchased shares jointly with accused no. 2 from the Complainant company against consideration in the form of Cheque which has been returned dishonoured.
5. That the Accused no. 2 and 3 have jointly purchased 997500 shares @ Rs. 41.50 per share for a total sum of Rs. 4,13,96,250/- from the complainant."
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26. Also is necessary to reproduce para no. 6 of the complaint as under:-
"6. That the Accused no. 1 was also liable to pay a sum of Rs. 36,03,750/- towards advance lying with the Accused no. 1 for sale of paper to the Complainant."
27. Thus, from paras 3, 4 & 5 of the complaint it is deduced that accused no. 2 & 3 jointly purchased the shares in question from the complainant. It is not stated therein and therefore cannot be deduced that they both purchased shares for & on behalf of accused no. 1 company or that accused accused no. 1 company purchased the shares through its directors i.e. accused no. 2 & 3. Purchasing of its own shares or buying back its shares in such huge number i.e. 9,97,500 by accused no. 1 company is no ordinary business transaction. There ought to be clear and straight averments in the complaint regarding the same. Complainant has also raised liability upon accused no. 1 company with regard to some advance of Rs. 36,03,750/- allegedly lying for sale of paper, as stated in aforementioned para no. 6 of the complaint. It is only that in later concluding paras of the complaint it is stated that accused issued cheque to clear their debt and therefore all accused persons are liable. The affidavit-in-evidence Ex.P1/X tendered by CW1 in examination-in-chief is verbatim the same as the complaint. It is in the cross-examination dt. 30.11.2010 that CW1 for the first time asserted that accused no. 2 & 3 acted on behalf of accused no. 1. The said testimony is reproduced as under:-
"I have not filed the shares on record as the said Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 17 of 28 shares had been taken by accused no. 2 & 3 acting on behalf of accused no. 1."
28. It is here that during cross-examination CW1 deviates from the averments of his complaint and examination-in-chief as regards the 'person(s)' who actually purchased the shares in question or on whose behalf those shares were actually purchased.
29. Ld. Counsel for complainant relied upon various documents filed by the complainant in compliance of the order sheet dt. 15.02.2011 upon the application U/s 311 Cr.P.C. of accused. Clarification was also sought with respect to those documents. Though these documents filed vide covering letter dt. 08.03.2011 do not bear exhibit mark, yet it was not disputed that these documents were filed by complainant in compliance of Court's order as aforesaid and are therefore part of record and evidence. These are now marked as Ex. A to A6 for the purpose of identification. Vide these documents ld. Counsel for complainant attempted to support the transactions regarding purchase & sale of shares by complainant company. In these documents there is a document bearing Ex.A1 titled as "Investment account" for the period 01.04.2008 to 31.03.2009 in the books of complainant company. Firstly, it is noted that this document is merely a photocopy document. Secondly, the same does not bear any signature or stamp and is not also certified by the income tax department or even by a chartered accountant. Thirdly, the said account does not show the balance which has been Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 18 of 28 carried forward to the next year as is the standard accounting practice that every ledger account either gets squared off at the end of financial year or if there remains any balance, debit (Dr.) or credit (Cr.), the same is carried forward and reflected in the balance sheet accordingly.
30. In the instant case the balance sheet for the year ending 31.03.2009 i.e. for financial year 2008-2009 (assessment year 2009-10) at page 30 of Ex. A6 does not contain any item of shares of accused no. 1 company under the "INVESTMENTS' head (schedule F) on the Assets side. Turning on to the page 34 of Ex. A6, which mentions said schedule F, also does not helps as it mentions only "Investments in shares (Unquoted at Cost)" with value of Rs. 80,15,000.
31. As per deposition of CW1 in cross-examination the shares in question were purchased by complainant in August 2008 & sold in September 2008. If this testimony is believed to be true then certainly the entries for sale of these shares must have been reflected in this very "INVESTMENT ACCOUNT" Ex. A1. But entries only with respect to purchase are seen and not with regard to sale. Additionally and more importantly, there is no item of profit shown with respect to transaction of shares in question in the "STATEMENT OF INCOME" page 24 of Ex. A6 for the relevant Assessment year i.e. A.Y. 2009-10 (F.Y. 2008-09) by the complainant company as by selling shares in question it earned huge profit of Rs. 31.50/- per Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 19 of 28 share (sale price Rs. 41.50/- less purchase price of Rs. 10/-). Therefore there is also a concealment of income by the complainant. Thus, the transaction as to sale of shares in question by the complainant company is also surrounded by clouds of doubt. This alleged sale transaction all the more came in doubts when serious questions were raised with respect to the purchase of those very shares by the complainant company. It is admitted by CW1 that there is no document executed between the parties in either transaction i.e. of purchase and sale of share. What is deposed by CW1 is that the shares were bought by physically taking the share certificates and were sold in the same manner.
32. CW1 had knowledge that there is legal formality required to effectuate transfer besides handing over the share certificate. It was so admitted by him during his cross-examination dt. 16.01.2012. Important is to further note that thereafter CW1 also deposed that "shares were not transferred in the name of complainant company". In such scenario complainant company had no title over those shares and thus could not make a legal transfer of them. Ld. Counsel for complainant relied upon document Ex. A4, an extract of the minutes of the Board of Directors of complainant company which resolved to invest funds of company, subject to overall limit of Rs. 80,15,000/- in the shares of accused no. 1 company. It is here itself noted that complainant company alleges to have purchased 9,97,500 shares @ Rs. 10/- each which amounts to total purchase price of Rs. 99,75,000/- apparently violating the Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 20 of 28 overall limit of Rs. 80,15,000/-. It is also to be noted that minutes book has not been produced on record by complainant. Alongwith this extract there is another document Ex.A5, an extract of the minutes of the meeting dated 15th October, 2008 which finally unearth's the complainant's falsity. As per this minutes extract Ex. A5 it has been resolved to sell the share of accused no. 1 company held as an investment. CW1 deposed in cross-examination dt. 30.11.2010 that shares were sold to accused in September, 2008. Thus, while this Board resolution of 15th October, 2008 is resolving to sell the shares of accused no. 1 company those shares have already been sold in September,2008. Therefore, these two minutes extracts Ex. A4 & A5 have led the complainant to nowhere except in a state of contradiction damaging and demolishing its own case. Here also comes the need to discuss the importance of the provision contained in Section 108 of the Companies Act, 1956 which reads as under:
"Sec 108 - Transfer not to be registered except on production of instrument of transfer.
(1) A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures :
Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit :
Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or debenture-holder any person Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 21 of 28 to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law.
(1A) Every instrument of transfer of shares shall be in such form as may be prescribed, and :
(a) every such form shall, before it is signed by or on behalf of the transferor and before any entry is made therein, be presented to the prescribed authority, being a person already in the service of the Government, who shall stamp or otherwise endorse thereon the date on which it is so presented, and
(b) every instrument of transfer in the prescribed form with the date of such presentation stamped or otherwise endorsed thereon shall, after it is executed by or on behalf of the transferor and the transferee and completed in all other respects, be delivered to the company,
(i) in the case of shares dealt in or quoted on a recognized stock exchange, at any time before the date on which the register of members is closed, in accordance with law, for the first time after the date of the presentation of the prescribed form to the prescribed authority under clause (a) or within twelve months from the date of such presentation, whichever is later ;
(ii) in any other case, within two months from the date of such presentation.
(1B) Notwithstanding anything contained in sub-section (1A), an instrument of transfer of shares, executed before the commencement of section 13 of the Companies (Amendment) Act, 1965 (31 of 1965) or executed after such commencement in a form other than the prescribed form, shall be accepted by a company,
(a) in the case of shares dealt in or quoted on a recognized stock exchange, at any time not later than the expiry of six months from such commencement or the date on which the register of members is closed, in accordance with law, for the first time after such commencement, whichever is later ;
(b) in any other case, at any time not later than the expiry of six months from such commencement.
(1C) Nothing contained in sub-sections (1A) and (1B) shall apply to :
(A) Any share : (i) which is held by a company in any other body corporate in the name of a director or nominee in pursuance of sub-section (2), or as the case may be, sub-section(3), of section 49, or (ii) which is held by a corporation, owned or controlled by the Central Government or a State Government, in any other body corporate in the name of a director or nominee, or (iii) in respect of which a declaration has been made to the Public Trustee under section 153B, if : (1) the company or corporation, Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 22 of 28 as the case may be, stamps or otherwise endorses, on the form of transfer in respect of such share, the date on which it decides that such share shall not be held in the name of the said director or nominee or, as the case may be, in the case of any share in respect of which any such declaration has been made to the Public Trustee, the Public Trustee stamps or otherwise endorses, on the form of transfer in respect of such share under his seal, the date on which the form is presented to him, and (2) the instrument of transfer in such form, duly completed in all respects, is delivered to the : (a) body corporate in whose share such company or corporation has made investment in the name of its director or nominee, or (b) company in which such share is held in trust, within two months of the date so stamped or otherwise endorsed ; or (B) any share deposited by any person with : (i) the State Bank of India, or (ii) any scheduled bank, or (iii) any banking company (other than a scheduled bank) or financial institution approved by the Central Government by notification in the Official Gazette (and any such approval may be accorded so as to be retrospective to any date not earlier than the 1st day of April, 1966), or (iv) the Central Government or a State Government or any corporation owned or controlled by the Central Government or a State Government, by way of security for the repayment of any loan or advance to, or for the performance of any obligation undertaken by, such person, if : (1) the bank, institution, Government or corporation, as the case may be, stamps or otherwise endorses on the form of transfer of such share : (a) the date on which such share is returned by it to the depositor, or (b) in the case of failure on the part of the depositor to repay the loan or advance or to perform the obligation, the date on which such share is released for sale by such bank, institution, Government or corporation, as the case may be, or (c) where the bank, institution, Government or corporation, as the case may be, intends to get such share registered in its own name, the date on which the instrument of transfer relating to such share is executed by it ; and (2) the instrument of transfer of such form, duly completed in all respects, is delivered to the company within two months from the date so stamped or endorsed.
Explanation. : Where any investment by a company or a corporation in the name of its director or nominee referred to in clause (A)(i) or clause (A)(ii), or any declaration referred to in clause (A)(iii), or any deposit referred to in clause (B), of this sub- section is made after the expiry of the period or date mentioned in clause (a) of sub-section (1B) or after the expiry of the period mentioned in clause (b) of that sub-section, as the case may be, the form of transfer, in respect of the share which is the subject of such investment, declaration or deposit, means the prescribed form ;
Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 23 of 28 or (C) any share which is held in any company by the Central Government or a State Government in the name of its nominee, except that every instrument of transfer which is executed on or after the 1st day of October, 1966, in respect of any such share shall be in the prescribed form.
(1D) Notwithstanding anything in sub-section (1A) or sub-section (1B) or sub-section (1C) where in the opinion of the Central Government it is necessary so to do to avoid hardship in any case, that Government may on an application made to it in that behalf, extend the periods mentioned in those sub-sections by such further time as it may deem fit whether such application is made before or after the expiry of the periods aforesaid ; and the number of extensions granted hereunder and the period of each such extension shall be shown in the annual report laid before the Houses of Parliament under section 638. (2) In the case of a company having no share capital, sub-section (1) shall apply as if the references therein to shares were references instead of the interest of the member in the company.
(3) Nothing contained in this section shall apply to transfer of security effected by the transferor and the transferee both of whom are entered as beneficial owners in the records of a depository.
33. Ld. counsel for the accused in written submission has summarized the mandate of the above provision in the following steps:
"Step1: Obtain Share transfer deed in the prescribed format.
Form No. 7B as per Sec. 108 1A.
Step 2: Execute the share transfer deed duly signed by the Transferor and Transferee.
The deed of Share transfer must be duly executed both by the transferor and the transferee.
Step 3: Stamp the share transfer deed as per the
Indian Stamp Act ad Stamp Duty Notification
in force in the State (Delhi).
See Sec. 3 of Indian Stamp Act r/w
Schedule I Entry 62.
Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 24 of 28
Step 4: Have a witness sign the share transfer deed
with his/her signature, name and address.
Step 5: Attach the share certificate with the transfer
deed and deliver the same to the Company.
Step 6: The company must process the documents
and if approved issue new share certificate
in the name of the transferee."
34. Thus, various mandatory formalities such as execution of share transfer deed in the prescribed format duly signed by the transferor and transferee, payment of stamp duty etc are necessarily required to be fulfilled in case of transfer of shares. Admittedly none of these have been fulfilled. The alleged transactions both of purchase of shares by complainant company and its sale, are thus illegal and unlawful. Needless to say that vide these transaction payment of stamp duties and income tax on profit have also been evaded causing loss of revenue to the exchequer.
35. Another issue with regard to the validity of the cheque in question has been raised by the accused. ld. Counsel for accused argued that the words "VALID FOR Rs. 10,00,000/- & UNDER"
printed on the cheque of Rs. 50,00,000/- is such a condition which no more makes that cheque a valid instrument because a cheque, as defined U/s 6 Negotiable Instrument Act, is a bill of exchange and a bill of exchange as per Section 5 of Negotiable Instrument Act has to be an instrument containing an unconditional order.
Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 25 of 28
36. Apparently, though these printed words appear to be a condition putting a monetary limit on the instrument, there can be a situation where the drawer instructs the banker to clear certain cheque(s) overriding such monetary limitation in which case the instrument becomes a valid one. The reason for dishonour of the cheque in question is not on account of this monetary limitation imposed but due to payment being stopped by drawer. No evidence has been taken in this case to see whether the cheque of Rs. 50,00,000/- could have been passed despite the said monetary cap. Thus, no conclusive finding can be arrived at on the validity of the cheque in question.
37. As regards the claim for Rs. 36,03,750/- towards advance lying with accused no. 1 for sale of paper to the complainant, since the defence has been able to discharge its burden of statutory presumptions, the cheque therefore cannot be held to have been issued in discharge of the debt. Ld. Counsel for accused even relied upon the authority of M.S. Narayan Menon Vs. State of Kerala (2006) 6 SCC 39 para 52 in this regard. Once the presumption is rebutted, onus shifts upon the complainant to prove that the cheque was issued for a legal debt.
38. Though accused came up with a weak defence that the cheques were misplaced and could not prove the same, it would not matter in the wake of having rebutted the presumptions of Section 118(a) & Section 139 of NI Act in other manner.
Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 26 of 28
39. It was held by Hon'ble Supreme Court of India in Krishna Janardhan Bhat Vs. Dattatraya G. Hegde (2008) 4 SCC 54 that it is not necessary for accused to get into the witness box or examine any witness or produce any document, if the accused is able to show that materials available in evidence on the side of complainant and answer elicited from the complainant/complainant witnesses would improbablize the case of complainant, then such degree of proof shall be enough to rebut the presumption and shall shift the burden of proving guilt of accused on complainant and had further opined that standard of proof required from the accused is that of preponderance of probability whereas the standard of proof required in criminal case on the part of prosecution is proof beyond reasonable doubts. Inference of preponderance of probabilities can be drawn from the material on record by the parties but also by reference to the circumstances upon which parties rely. The proof required to be led by accused to rebut the presumption U/s 139 of NI Act can be made not only by leading positive evidence on the side of accused but also eliciting admission from complainant witness by pointing out improbabilities in the complaint case.
40. Therefore, in view of the mandate of the above noted authority and in light of the analysis made, it is concluded that the accused have been able to discharge the burden of proof by rebutting the statutory presumption attached with the dishonoured cheque in question by the test of preponderance of probabilities and Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 27 of 28 in reply of which the complainant has brought nothing on record to establish his case. The authorities relied upon by the complainant are therefore of no help to it. Consequently, the present complaint is dismissed and accused persons are acquitted in this case.
Digitally signed SH by SH PRANJAL
ANEJA
Directly Dictated on the PRANJAL Date:
Computer System and ANEJA 2019.04.08
17:16:34 +0530
Announced in the open (PRANJAL ANEJA)
Court on 06.04.2019 Metropolitan Magistrate-01
Shahdra District, Karkardooma
Courts, Delhi.
Comp. ID 1700/16 M/s Shree Sambhav Papers Pvt. Ltd. Vs. M/s Shree Ram Straw Products ltd. (06.04.2019) Page no. 28 of 28