Delhi District Court
Pronouncements To That Effect (See Ravi ... vs State And Anr. 2008(2) on 13 October, 2015
IN THE COURT OF BHARAT CHUGH,
METROPOLITAN MAGISTRATE (NI ACT)-1, CENTRAL:
ROOM NO.275, TIS HAZARI COURT COMPLEX, DELHI
Chander Bhan
VERSUS
Manoj Kumar Sharma
JUDGMENT
Part A - The lis at a glance A. Serial No. of the Case 7893/13 B. Date of Commission of the offence 24.04.2013 C. Name of the Complainant Chander Bhan, S/o Late Sh. Fateh Chand, R/o A-672, Shastri Nagar, Delhi-110052.
D. Name of Accused person & his Manoj Kumar Sharma, S/o Sh. Madan parentage & residence Lal Sharma, R/o A-763, Shastri Nagar, Delhi.
E. Offence complained of Dishonor of cheque - culpable u/s 138 of the Negotiable Instruments Act.
F. Plea of the accused and his Pleaded not guilty. Contended that the examination in brief. cheque in question was given as a security and not in discharge of a legally enforceable debt or liability.
G. Final Order Conviction H. Judgment reserved on 06.10.2015 I. Judgment pronounced on 13.10.2015
Part B - A brief statement of reasons for the decision (As mandated u/s 355(i) of the Code of Criminal Procedure, 1973.) Complainant's case
1. Shorn of unnecessary details, the complainant claims that his family and the accused are very close to each other and have "friendly as well as family In the case of Chander Bhan v. Manoj Kumar Sharma Page 1 of 26 relations". It is the complainant's case, that in the month of March, 2012, the accused approached the complainant for a loan of Rs. 5,00,000/-, stating that he was in dire need of this amount as he had to purchase a property. The accused agreed to repay the amount within one year. Having regard to the friendly relations between the parties, the complainant arranged the sum of Rs. 5,00,000/- and paid the same to the accused; against this loan, the accused issued a cheque to the complainant (bearing No. 081581, dated 19.03.2013 - hereinafter 'cheque in question'), which much to his despair, got dishonored on presentation with the remarks 'account inoperative/dormant' vide returning memo dated 21.03.2013. This constrained the complainant to send a legal demand notice to the accused, which when went unheeded, led to the filing of the present case.
The Defence.
2. The accused entered appearance and pleaded not guilty. In his plea of defence recorded on 01.04.2015, the accused admitted being the drawer of the cheque. He admitted having signed the same. The accused, however, denied having filled in the other particulars on the cheque. The accused conceded to having taken a sum of Rs. 3,00,000/- from the complainant, and not Rs. 5,00,000/- as claimed by the complainant. He claims, that he had given the cheque in question as security for the repayment of that loan. The accused, therefore, disputed the factum of cheque having been issued in discharge of a debt or liability. He also argued that he had already repaid a sum of Rs. 60,000/- which has not been accounted for by the complainant. The accused also admitted his liability to pay a sum of Rs. 3,00,000/- to the complainant.
As regards service of legal notice, the accused remained evasive. In his plea of defence recorded on 01.04.2015, the accused stated in this regard "I cannot say whether I received the legal demand notice from the complainant or not". However, the address on the legal demand notice was admitted by the accused to be his correct address.
In the case of Chander Bhan v. Manoj Kumar Sharma Page 2 of 26This, in sum and substance, is the factual exposé.
The Law
3. The factual position being thus, Now let us quickly run through the legal benchmark which is to be satisfied in order to constitute an offence under S. 138 N.I. Act :-
(i) Person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
(ii) The cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;
(iii)That cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier;
(iv)That cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;
(v) The payee or the holder in due course of the cheque 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 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(vi) The drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.In the case of Chander Bhan v. Manoj Kumar Sharma Page 3 of 26
Being cumulative, it goes without saying that it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the Act.
The legal benchmark being thus. Let us apply it to the facts of the case.
Appreciation of Evidence and Application of law to the facts of the case.
On an analysis of the facts and legal position above, I find the parties to be at variance on two primary issues, viz - Service of legal demand notice; and the question of existence of legally enforceable debt/liability.
I. SERVICE OF LEGAL DEMAND NOTICE
4. Let us begin at the beginnings and first examine the clichéd defence of non service of legal notice. As we have already seen, that in his defence recorded on 01.04.2015 (at the time of framing of notice), the accused, when confronted with the legal notice, had remarked that "I cannot say whether I received the legal demand notice from the complainant or not". However, in his statement u/s 313 of the Cr.PC recorded on 25.08.2015, the accused outrightly denied the service of legal notice.
It is therefore clear that the accused has gone from ambivalence (in his initial plea of defence) to blanket denial (in statement u/s 313 of the Cr.PC). There are a number of compelling reasons as to why the later statement as to the non service of legal notice appears to be an improvement and an afterthought.
We have already seen, that the accused had earlier given a vague answer as to the service of legal notice. He neither affirmed or denied it positively. Such an In the case of Chander Bhan v. Manoj Kumar Sharma Page 4 of 26 evasive answer, by itself, renders his defence unworthy of belief. He seems to have become wiser during trial and recanted from his earlier statement and denied the service of legal notice in positive terms.
What is important to note is that the accused at both the occasions (at the time of recording of plea of defence and also at the time of statement u/s 313 of the CrPC) has not disputed the correctness of his address appearing on the legal notice. Infact the address disclosed by the accused in this case is exactly the address on which the legal demand notice has been dispatched. The address once having been admitted to be his correct address, and the legal notice having been dispatched by Registered Post, a presumption of due service arises (See : Section 27 of the General Clauses Act and Section 114 of the Indian Evidence Act); It was incumbent on the accused to lead evidence to prove that the notice was not served on him. Not even an iota of evidence has been brought on record by the accused to displace the presumption of due service. A mere denial that the legal notice has not been served, would not ipso facto rebut the presumption of due service. The accused ought to have rebutted the presumption by establishing that he was not residing at the said address at the given point of time or that the notice was not served on him for any other reason, by examining the postal authorities or any other mode. He has not led any evidence on that count. In these circumstances there is no reason to doubt the service of legal notice.
It deserves mention that, in any event, in view of the authoritative pronouncement of the Hon'ble Supreme Court in C.C. Alavi Haji v. Palapetty Muhammed and Another (2007) 6 SCC 555, the rigor of the requirement of service of legal notice has been reduced to an almost vanishing point in Section 138 NI Act jurisprudence. The Hon'ble Supreme Court while distilling the true intent behind the requirement of service of legal demand notice as a precursor to launching of prosecution, has quite categorically held that, the service of summons of the court is opportunity enough for the In the case of Chander Bhan v. Manoj Kumar Sharma Page 5 of 26 accused to pay the cheque amount and evade prosecution; and ny accused who fails to pay the amount within 15 days of the service of summons, cannot shield himself behind the technical defence of non service of legal notice. The relevant extract from the decision deserves to be quoted in extenso :-
"17. It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is no stipulation of giving of a notice before filing a complaint. Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the Court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the Court along with the copy of the complaint under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the G.C. Act and Section 114 of the Evidence Act. In our view, any other interpretation of the proviso would defeat the very object of the legislation."
5. The 'non service of legal notice' challenge having been met, let us now, turn to the core issue in this case and examine 'whether the cheque in question can be said to have been issued in discharge of a legal liability or not ?' In the case of Chander Bhan v. Manoj Kumar Sharma Page 6 of 26 II. EXISTENCE OF LEGALLY ENFORCEABLE/DEBT OR LIABILITY.
6. To appreciate this issue, let us again briefly recapitulate that the accused has admitted having drawn the cheque on a bank account maintained in his name, having signed the same and also having handed over the cheque to the complainant. Once these foundational facts are admitted and a factual basis is established, by virtue of Section 118(a) and Section 139 of the NI Act, a presumption of the cheque having been issued in discharge of a legally sustainable liability and drawn for good consideration, arises :-
Section 118 of the N.I Act provides :-
"Presumptions as to negotiable instruments: Until the contrary is proved, the following presumptions shall be made: (a) of consideration - that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred was accepted, indorsed, negotiated or transferred for consideration;"
Section 139 of the N.I Act further provides as follows:
"Presumption in favour of holder - It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability"
It is thus clear that as per the scheme of the N.I Act, on proof of foundational facts - a presumption arises as to a cheque having been issued in discharge of a legal liability, and the burden of proof lies upon the accused to rebut the said presumption. This clearly is an instance of the rule of 'reverse onus' in action, where it is incumbent on the accused to lead what can be called 'negative evidence'. Evidence of a character, not to prove a fact affirmatively, but to lead evidence to show non existence of liability. Keeping in view, that this is a departure from the cardinal rule of 'presumption of innocence' in favour of the In the case of Chander Bhan v. Manoj Kumar Sharma Page 7 of 26 accused, and also keeping in mind that negative evidence is not easy to be led by its very nature. It is now fairly settled that the accused can displace this presumption on a scale of preponderance of probabilities and the lack of consideration or a legally enforceable debt need not be proved to the hilt or beyond all reasonable doubts. The accused can either prove that the liability did not exist or make the non existence of liability so probable that a reasonable person ought under the circumstances of the case - act on the supposition that it does not exist. Simply put, the accused has to make out a fairly plausible hypothesis. This the accused can do either by leading own evidence in his defence or even by punching holes within the case of the complainant in the testing ordeal of cross examination.
While adjudging whether in a case the presumption of consideration has been rebutted, it becomes important to underscore that a mere denial of liability or vague defence of blank cheque as security, cannot be taken at the mere ipse dixit of the accused. The accused has to come forth with a convincing defence that appeals to the judicial conscience. Needless to state that if on a bare denial the presumption is stated to be rebutted, that would defeat the legislative intention of having a presumption in the first place. The reverse onus clause, as aforesaid, has been introduced to further the legislative objective of improving the credibility of negotiable instruments. The presumption that a person would not ordinarily hand over a signed cheque (a valuable security) to another unless the same is for a liability, this presumption that is inspired out of common human conduct and affairs, has to be respected and given its full play. Only in a case where the accused comes up with a convincing defence to liability, that the presumption can be stated to have been rebutted, lest the statutory intent as adumbrated above would be the direct casualty. In that light, let us embark to examine the defence of the accused and answer whether the same is a plausible one. In this venture, we would at all occasions, juxtapose the conduct of the accused with that of the hypothetical reasonable man and see how he fares.
In the case of Chander Bhan v. Manoj Kumar Sharma Page 8 of 267. In my opinion, the accused has not succeeded in rebutting the presumption. The accused has adopted contradictory stands at different stages of trial as would be demonstrated in this judgment. It would apposite to recapitulate that the accused, at the time of framing of notice within the meaning of Section 251 of the Cr.PC, had conceded to having taken a sum of Rs. 3,00,000/- from the complainant, and not Rs. 5,00,000/- as claimed by the complainant. He had claimed, that he had given the cheque in question as security for the repayment of that loan. The accused, therefore, disputed the factum of cheque having been issued in discharge of a debt or liability. He had also contended that he had already repaid a sum of Rs. 60,000/- to the complainant, which has not been accounted for by the complainant. The accused had also admitted his liability to pay a sum of Rs. 3,00,000/-.
In stark contrast to this, at the time of recording of his statement u/s 313 of the Cr.PC, the accused admitted having taking a sum of Rs. 5,00,000/- from the complainant. The accused added that he had repaid a sum of Rs. 4,00,000/- to the complainant and as per his accounts a sum of Rs. 1.5 lacs was due and outstanding towards the complainant, which he was ready to repay.
It is clear from a juxtaposition of these two versions, that the accused has adopted different stances, which are fundamentally inconsistent and reflect the falsity of his defence.
8. Another factor that shatters the plausibility quotient of the accused's defence is the fact, that the accused has claimed that the cheque in question was issued, signed in blank, as security alongwith another cheque of Rs. 1,60,000/- to the complainant. The latter amount, as per the accused was the actual outstanding towards the complainant.
It beats logic and does not stand to reason as to when the accused had already In the case of Chander Bhan v. Manoj Kumar Sharma Page 9 of 26 given the cheque of Rs. 1,60,000/- to the complainant, which according to him was the total outstanding, what was the occasion for the accused to issue a blank signed cheque for the purpose of security, the original obligation having stood discharged by the said cheque of Rs. 1,60,000/-. This has not been explained by the accused.
9. It has been argued by the Ld.Counsel for the Accused, that the complainant who had initially stated that the amount advanced to the accused was Rs. 5,00,000/-, later changed his stance and conceded during cross examination that the amount advanced was Rs. 9,00,000/- out of which a sum of Rs. 4,00,000/- was returned to him, leaving a balance of Rs. 5,00,000/-. He submits that this fact was not stated by the complainant in his complaint, legal notice or the affidavit in lieu of examination in chief. He submits that this falsifies the story of the complainant.
Though there is no denying that the complainant ought to have stated the entire story in his complaint, however, that omission by itself, does not render the story of the complainant unworthy of belief, when seen in the totality of the circumstances. The complainant was fair enough to concede that a sum of Rs. 4,00,000/- had been repaid by the accused to the complainant, in his cross examination. It is not entirely unthinkable that this sum of Rs. 9,00,000/- might have been given to the accused in tranches, and 4,00,000/- having been repaid, must have left the balance of Rs. 5,00,000/- towards the accused and the complainant had stated this. The omission to state this in the complaint and other documents, might be because of inartistic drafting. The complainant who is a man of 88 years of age, has frankly conceded the payment of Rs. 4,00,000/- in his cross examination, without a hesitation and his testimony inspires confidence.
The accused can hardly lay the blame at the door of the complainant, having himself adopted diametrically opposite stands at different times. He had In the case of Chander Bhan v. Manoj Kumar Sharma Page 10 of 26 agreed to his liability to the tune of Rs. 3,00,000/- having taken a loan of that amount and claimed having repaid Rs. 60,000/- out of the same. However, after the aforesaid cross examination, he seems to have improved his case and tried to capitalise on the frank concession of the complainant. The accused in his statement u/s 313 of the CrPC admitted having taken a sum of Rs. 5,00,000/- from the complainant, but argued that the amount of Rs. 4,00,000/- had been repaid. In view of his shifting stands, his defence is unworthy of credence.
10. Ld.Counsel for the Accused has argued at great lengths that the financial competency of the complainant to advance a sum of Rs. 5,00,000/- (i.e the cheque amount) is suspect and the bank statements (in the shape of passbooks) of the complainant, brought on record by the complainant himself, substantiates this.
This argument leaves me cold and is devoid of all merit. It does not lie in the mouth of the accused to question the financial competency of the complainant, since he has already admitted having taken a sum of Rs. 3,00,000/- (in plea of defence) and Rs. 5,00,000/- (in statement u/s 313 of the CrPC) from the complainant. In such circumstances, the financial capability of the complainant is not in dispute. The complainant has stuck to his guns in his cross examination and maintained that since he had retired from service around that time only, he had his retirement funds of about 16,00,000 at his disposal. This fact has gone unrebutted and unchallenged by the accused. In view of the admission by the accused of taking of loan of Rs. 5,00,000/- and Rs. 3,00,000/-, complainant's financial capacity is beyond the shadow of doubt.
11. It deserves mention that the accused has examined his friend Mr.Hari Om Sharma as DW1 in support of his case. DW1 has deposed that the accused person had taken a sum of Rs. 5,00,000/- from the complainant in his presence In the case of Chander Bhan v. Manoj Kumar Sharma Page 11 of 26 and thereafter returned Rs. 4,00,000/- again in his presence. He also testified that at that time, the accused had given two cheques in which one cheque was blank and the other of an amount of Rs. 1,60,000/-.
The testimony of DW1 does not inspire confidence and he appears to be a false witness, introduced at the fag end of the trial with a view to bolster the defence hypothesis. It is important to note, that this testimony is at variance with the original version of the accused to the effect that he had taken a sum of Rs. 3,00,000/- from the complainant and not Rs. 5,00,000/-. The repayment amount initially quoted was also Rs. 60,000/- and not Rs. 4,00,000/-. There are material contradictions between the essential defence of the accused and DW1's testimony. Another reason why DW1 is not believable is the fact that no suggestion was ever made to the complainant to the effect that the loan was taken and returned to the complainant in the presence of said Mr. Hari Om Sharma. It does not stand to reason as to why the same was not put to the complainant in his cross examination. It was extremely crucial for the complainant to be confronted with this during the cross examination. There is no whisper of this aspect in the extensive cross examination.
It is also important to note that even otherwise, DW1 has made some damning admissions in his cross examination which render his testimony unworthy of belief. He has admitted being the friend and neighbor of the accused. He has conceded that he had come to the court at the asking of the accused. He also denied having any knowledge as the date, month or even the year of the incident deposed by him in the court. In these circumstances, and for the foregoing reasons, it would be extremely unsafe to rely on his testimony.
12. Learned Counsel for the accused has argued, with great vehemence that the cheque in question was given, signed in blank. He argues that the complainant in his cross examination on 18.08.2015 has admitted that his son had filled-in his name of the payee on the cheque. He argues that this filling-in In the case of Chander Bhan v. Manoj Kumar Sharma Page 12 of 26 of the cheque by the complainant's son invalidates the instrument as it constitutes material alteration.
This argument fails to convince for more reasons than one, first of all there is nothing on record to even probablise, much less establish, that the complainant's son or the complainant, has filled-in the cheque, except the name of the payee.
Even if it is assumed for an instant and for the sake of argument, that the body of the cheque was filled-in by the complainant or at his instructions (Although there is nothing on record to prove that). Even in that situation, It is no longer res integra that no law requires that whole body of the cheque should be filled by the drawer himself. If the signatures on the cheque are admitted, the same is sufficient. The legal permissibility of the much hackneyed 'defence of blank cheques' has been virtually denied by the courts on account of several pronouncements to that effect (See Ravi Chopra vs State And Anr. 2008(2) JCC (NI) 169, Vijender Singh v. M/s Eicher Motors Limited & Anr. Crl.M.C. 1454/2011 decided on 05.05.2011, Tarun Gautam vs State Crl M C No. 529/2012 decided on 13.02.2012 and Manoj Sharma vs Anil Aggarwal CRL.M.C. 1325/2012 decided on 20.04.2012). The relevant excerpts from a judgment by the Hon'ble High Court of Delhi in the case of Ravi Chopra vs State And Anr, may be referred to, in this regards :-
"
..
15. What appears to be clear from the above definitions that an essential feature of a cheque is that it has to be signed by the maker. This signing of the cheque need not be by hand alone.
After the amendment to Section 6 in 2002, the NI Act acknowledges that there can be an electronic cheque which can be "generated, written and signed in a secure system."
Nevertheless, the signing of the cheque is indeed In the case of Chander Bhan v. Manoj Kumar Sharma Page 13 of 26 an essential feature. But what about the other material particulars? Can the word "cheque"
occurring in Section 138 NI Act include a blank cheque which is signed by the drawer but the material particulars of which are left unfilled at the time it was handed over to the payee? While on the one hand Section 138 NI Act which contemplates a 'no fault liability' has to be strictly construed as regard the basic ingredients which have to be shown to exist, it requires examination of the other provisions of the NI Act in order to ascertain if a cheque that was signed but left blank can, if the material particulars are subsequently filled up and presented for payment, still attract the same liability.
...
...
18. Section 20 NI Act talks of "inchoate stamped instruments" and states that if a person signs and delivers a paper stamped in accordance with the law and "either wholly blank or have written thereon an incomplete negotiable instrument"
such person thereby gives prima facie authority to the holder thereof "to make or complete as the case may be upon it, a negotiable instrument for any amount specified therein and not exceeding the amount covered by the stamp." Section 49 permits the holder of a negotiable instrument endorsed in blank to fill up the said instrument "by writing upon the endorsement, a direction to pay any other person as endorsee and to complete the endorsement into a blank cheque, it makes it clear that by doing that the holder does not thereby incurred the responsibility of an endorser." Likewise Section 86 states that where the holder acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in the bill, or which substitutes a different place or time for payment, or which, where the drawees are not partners, is not signed by all the drawees, all previous parties whose consent has not been obtained to such acceptance would stand discharged as against the holder and those claiming under him, unless on notice given by the holder they assent to such acceptance. Section 125 NI Act permits the holder of an uncrossed cheque to cross it and that would not In the case of Chander Bhan v. Manoj Kumar Sharma Page 14 of 26 render the cheque invalid for the purposes of presentation for payment. These provisions indicate that under the scheme of the NI Act an incomplete cheque which is subsequently filled up as to the name, date and amount is not rendered void only because it was so done after the cheque was signed and delivered to the holder in due course.
19. The above provisions have to be read together with Section 118 NI Act which sets out various presumptions as to negotiable instruments. The presumption is of consideration, as to date, as to time of acceptance, as to transfer, as to endorsement, as to stamp. The only exception to this is provided in proviso to Section 118 which reads as under:
Provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him .
20. A collective reading of the above provisions shows that even under the scheme of the NI Act it is possible for the drawer of a cheque to give a blank cheque signed by him to the payee and consent either impliedly or expressly to the said cheque being filled up at a subsequent point in time and presented for payment by the drawee.
There is no provision in the NI Act which either defines the difference in the handwriting or the ink pertaining to the material particulars filled up in comparison with the signature thereon as constituting a 'material alteration' for the purposes of Section 87 NI Act. What however is essential is that the cheque must have been signed by the drawer. If the signature is altered or does not tally with the normal signature of the maker, that would be a material alteration.
Therefore as long as the cheque has been signed by the drawer, the fact that the ink in which the name and figures are written or the date is filled up is different from the ink of the signature is not a material alteration for the purposes of In the case of Chander Bhan v. Manoj Kumar Sharma Page 15 of 26 Section 87 NI Act."
It is therefore apparent, that a combined reading of Section 20 and Section 87 of the Negotiable Instruments Act, as aforesaid, amply reveals that merely filling in the particulars on a blank signed cheque would not amount to material alteration, and a person giving blank cheque can be attributed with the intention of having given implied consent to the payee to fill in that cheque. The accused could not adduce any evidence or elicit anything in the cross examination of the complainant to detract from such implied authority given to the complainant or the fact that cheque has been filled by the complainant in the first place. Therefore, this defence does not advance the case of the accused in any manner.
13. Ld.Counsel for the Accused has strenuously argued that the complainant being a Money Lender, is debarred from recovering his loan, in absence of a money lending license.
This argument leaves me cold, and fails to persuade for more reasons than one.
Firstly, There is nothing on record to suggest that the complainant has been giving loans to other people on interest earlier. It needs no gainsaying that, in order for the complainant to be a money lender, it needs to be proved that he is engaged in the business of grant of loans to several people in a commercial manner and with a certain regularity. No evidence has been brought on record to demonstrate that he is a money lender. The allegation therefore has remained unsubstantiated.
Secondly, even assuming the complainant to be a money lender for an instant, the same would not render the present complaint non-maintainable. In this In the case of Chander Bhan v. Manoj Kumar Sharma Page 16 of 26 regard, a recent decision of the Hon'ble Delhi High Court is apposite to be referred to.
In Kajal v. Marwah (Crl. A. 870/2003 - Date of Decision : 27.03.2014), the court, under similar facts, held :-
"In my view, even if the appellant/complainant was engaged in lending money, that would not debar her from filing a complaint under Section 138 of the Negotiable Instruments Act, if a cheque issued to her towards repayment of the loan advanced by her is dishonoured by the bank for want of funds and the drawer of the cheques fails to make payment within the prescribed time, after receipt of legal notice from the lender. Section 3 of the Punjab Registration of Money Lenders' Act, 1938, which applies to Delhi, to the extent it is relevant provides that notwithstanding anything contained in any other enactment for the time being in force, a suit by a money lender for the recovery of a loan shall, after the commencement of the Act, be dismissed unless the money lender at the time of institution of the suit is registered and holds a valid license or holds a certificate from the Commissioner granted under Section 11 of the Act, specifying the loan in respect of which the suit is instituted or if he is not already a registered or licensed money lender, he satisfies the court that he has applied for such registration or license but the application is pending. The aforesaid provision does not debar a money lender from instituting a complaint under Section 138 of the Negotiable Instruments Act, 1881, which is a remedy enforceable before a criminal court, and totally independent of a civil suit. The criminal liability is incurred only in case a cheque is issued in discharge of a debt or other liability, the said cheque is dishonoured for want of funds and the borrower fails to make payment of the amount of the cheque even after receipt of a notice from the lender."
It is, therefore, apparent therefore that the embargo is with respect to filing of suit for recovery of money or simply the recovery of that money. This fails to have a bearing on the present case, since what is at hand is a complaint case u/s 138 of the NI Act, which is not a recovery proceeding, but are proceedings to punish a person who after issuing a cheque fails to honour the same and also commits a default in paying the said amount on receipt of the notice.
In the case of Chander Bhan v. Manoj Kumar Sharma Page 17 of 26Hence the argument of amount being irrecoverable and therefore not a legally enforceable debt, is misconceived in the facts of the case and in view of the legal position as enunciated above.
14. Ld.Counsel for the Accused has also argued that the alleged loan not having been disclosed in the Income Tax Returns, cannot be termed to be legally enforceable liability in view of the bar of Section 269SS of the Income Tax Act.
This argument fails to help the accused. It is now fairly settled that the mandate of Section 269SS of the Income Tax Act, extends only to the taker or receiver of the loan and not the giver. Section 269SS of the Income Tax Act, reads as under :-
Section 269SS: Section 269SS provides that any loan or deposit shall not be taken or accepted from any other person otherwise than by an account payee cheque or account payee bank draft if,
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid and the amount or the aggregate amount remaining unpaid ; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more.."
Thus, it is clear that no person can accept any loan or deposit of Rs 20,000/-or more otherwise than by way of an account payee cheque or an account payee draft.
Consequences of contravention of Section 269SS have been provided in Section 271D of Income Tax Act 1961, which provides, that if a loan or deposit is accepted in contravention of the provisions of section 269SS then a In the case of Chander Bhan v. Manoj Kumar Sharma Page 18 of 26 penalty equivalent to the amount of such loan or deposit may be levied by the Joint commissioner.
Hence, even on a bare reading of these provisions, it is manifest that the bar pertains to the receiving or taking of loan and not giving the same.
This aspect is very succinctly highlighted by the Hon'ble High Court of Bombay in the relatively recent decision of Krishna P.Morajkar v. Joe Ferraro, 2013 SCC Online Bom 862, which reads as follows :-
"..
18. The learned Counsel for the respondent submitted that the observations of the Supreme Court in para 14 of the judgment in Rangappa (supra) show that the Supreme Court had not in any way cast any doubt on the correctness of the decision in Krishna Janardhan Bhat (supra), as it was based on specific facts and circumstances therein. Therefore, he submitted that observations in Krishna Janardhan Bhat (supra) about non- compliance of provisions of Section 269SS and the implications of Section 271D of the Income Tax Act would still stand as good law. The learned Counsel for the appellant submitted that even these observations would stand impliedly over- ruled. He pointed out that what was held in Krishna Janard han Bhat (supra) was that advance taken by way of loan of more than Rs. 20,000/- was only to be made by way of an ac- count payee cheque. He submitted that in Rangappa (supra) the Supreme Court was specifically considering the case of an advance of Rs. 45,000/- made in cash and yet the Supreme Court had upheld the conviction recorded. Thus even those observations based on the provisions of Section 269SS and 271D of the Income Tax Act made in Krishna Ja nardhan Bhat (supra) would stand impliedly overruled. I am entirely in agreement with the learned Counsel for the appellant because the Supreme court in Rangappa (supra) had specifically noted the judgment in Krishna Janardhan Bhat (supra). The Supreme Court had obviously noted the observations in para 26 in Krishna Janardhan Bhat (supra) that advance of more than Rs. 20,000/- was to be made only by way of an account payee cheque, and yet the Supreme Court accepted case of a complainant who claimed to have made an advance of Rs. 45,000/- in cash and proceeded to uphold the conviction, even though the case rested on the fact that cash advance of a sum more than Rs. 20,000/- was made. Thus, on this aspect also Krishna Janardhan Bhat (supra) stood impliedly overruled by Ranga paa (supra), and the judgment is to be held rendered on the facts of that case, not laying down any law. Therefore, judg-In the case of Chander Bhan v. Manoj Kumar Sharma Page 19 of 26
ments which follow Krishna Janardhan Bhat (supra) can be safely ignored.
19. There is another aspect of the matter. The learned Coun- sel for the respondent pointed out that inKrishna Janardhan Bhat (supra) attention of the Supreme Court was possibly not drawn to the actual wording of Section 269SS of the In- come Tax Act. He submitted that Section 269SS of the In- come Tax Act, in fact, does not cast any burden upon a per- son making advance in cash to record it in his returns and does not prevent any such cash advance from being made. It may be useful to quote provisions of Section 269SS and 271D of the Income Tax Act as under:
Section 269SS: No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit other- wise than by an account payee cheque or account payee bank draft if,-
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or
(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fall-
en due or not), the amount or the aggregate amount remaining unpaid; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:
Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or de- posit taken or accepted by-
(a) Government;
(b) any banking company, post office savings bank or co-opera- tive bank;
(c) any corporation established by a Central, State or Provincial Act;
(d) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(e) such other institution, association or body or class of institu-
tions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:
[Provided further that the provisions of this section shall not ap- ply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural in- come and neither of them had any income chargeable to tax un- der this Act.] In the case of Chander Bhan v. Manoj Kumar Sharma Page 20 of 26 Section 271D - (1) If a person takes or accepts any loan or de- posit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) any penalty imposable under sub-section (1) shall be im-
posed by the joint Commissioner.
(emphasis supplied).
A plain reading of Section 269SS shows that no person can accept any loan or deposit of a sum of Rs. 20,000/- or more otherwise than by an account payee cheque or account pay- ee bank draft. It does not say that a person cannot advance more than Rs. 20,000/- in cash to another person. It is clear that the restriction on cash advances was in fact on the tak- er and not the person who makes the advance. The penalty for taking such advance or deposit in contravention of pro- visions of Section 269SS was to be suffered by one who takes the advance. Therefore, it was obviously impermissible to invoke these provisions for preventing a person from recov- ering the advance which he has made..."
It is clear from the above that non disclosure of an advance would not make the same non recoverable as it is incumbent on the person taking the advance to disclose the loan and not the person giving the same.
What further fortifies this conclusion is the decision of the Hon'ble High Court of Delhi in Mukesh Gupta v. P.K.Bajaj (CS(OS) No. 1615/2003, DOD : 20.11.2006, wherein, the court in a civil suit for recovery, quite categorically held that, even assuming a non disclosure in tax returns. That by itself would not render the contract of loan void and loan irrecoverable. Relevant excerpts from the decision are as follows :-
"36. On issue No.2 framed vide order dated 2.2.2006, suffice would it be to note that as held in the report published as 2002 (8) SCC 31, Nutan Kumar &Ors. vs. IInd Additional District Judge &Ors., unless a statute specifically provides that a contract contrary to the provision of the statue would be void, the contract would remain binding between the parties and can be enforced between the parties themselves. Consequences, if any other in law, would follow.
37. Learned counsel for the defendants could not show any statutory provision under the Income Tax Act In the case of Chander Bhan v. Manoj Kumar Sharma Page 21 of 26 1961 or any other law which stipulates that a loan transaction not recorded in the Income Tax Return or a loan transaction which is in violation of Section 69-A, 69-B or Section 269SS of the Income Tax Act would be void.
38. I accordingly hold that the suit is not barred under Sections 69-A, 69-B or Sections 269SS of the Income Tax Act..."
It is therefore clear that the claim does not become irrecoverable on account of alleged violation of Section 269SS of the IT Act. Infact, this case is a classic example of a pot calling the kettle black; The accused has clearly admitted having received a loan of Rs. 5,00,000/- in cash from the complainant and has led no evidence to prove that he has disclosed the same in his Income Tax returns; In such circumstances, it is for the accused and not the complainant, who ought to answer the same with the Income Tax authorities.
15. Ld.Counsel for the Accused has also argued, with great eloquence, that the cheque in question having been issued as a security cheque, is beyond the pale of Section 138 of the Negotiable Instruments Act.
This argument is also devoid of merit, for more reasons than one. Firstly - The accused has brought no material on record to prove the handing over of the cheque as security. Nothing could be elicited from the complainant in his cross examination, which could throw his case in doubt.
The second reason why this defence ought not to succeed is that even if it is assumed for the sake of argument that the cheque in question was given as security, that ipso facto would not absolve the accused from legal liability. A security that does not secure is not even worth the paper it is on. Legal consequences flow out of a (so-called) security cheque too. The accused cannot invoke invoke the defence of a 'security cheque' as a magical chant to earn an automatic exoneration. In this regard, reliance is placed on the In the case of Chander Bhan v. Manoj Kumar Sharma Page 22 of 26 Hon'ble Delhi High Court decision in Credential Leasing & Credits Ltd. vs Shruti Investments & Anr (2015 SCC OnLine Del 10061) wherein it has been held :-
"
5. In Suresh Chandra Goyal v. Amit Singhal, Crl. Ap- peal Nos. 601/2015 decided on 14.05.2015, this Court had occasion to consider the defence of "security cheque". In that case the complainant invested monies, from time to time, in the business of the accused. A sum of Rs. 3 Lakhs was outstanding after accounting for the monies returned by the accused. The accused entered into a MOU for repayment of the said outstanding amount in 6 monthly instalments of Rs. 50,000/- each. The accused issued six security cheques of Rs. 50,000/-, which were to be returned upon payment of the corre- sponding instalment. While three instalments were ad- mittedly received by the complainant, he claimed that the remaining three were not paid. The corresponding se- curity cheques were banked; dishonoured upon presenta- tion, and; after issuance of statutory notice, the com- plaint under Section 138 NI Act filed due to non-pay- ment. This Court, inter alia, observed as follows:
"28. There is no magic in the word "security cheque", such that, the moment the accused claims that the dishonoured cheque (in respect whereof a complaint under Section 138 of the Act is preferred) was given as a "security cheque", the Magistrate would acquit the accused. The ex pression "security cheque" is not a statutorily de fined expression in the NI Act. The NI Act does not per se carve out an exception in respect of a 'secu rity cheque' to say that a complaint in respect of such a cheque would not be maintainable. There can be mirade situations in which the cheque is sued by the accused may be called as security cheque, or may have been issued by way of a secu rity, i.e to provide an assurance or comfort to the drawee, that in case of failure of the primary con sideration on the due date, or on the happening (or not happening) of a contingency, the security may be enforced. While in some situations, the dishonor of such a cheque may attract the penal provisions contained in Section 138 of the Act, in others it may not."
16. This Court analysed the meaning of the word "secu- rity" and the question as to what does the issuance of a In the case of Chander Bhan v. Manoj Kumar Sharma Page 23 of 26 security cheque entail, and, if there is no specific agree- ment touching upon the said aspect, what would the rights and obligations of the parties qua a security cheque, in case the primary obligation to secure which the security cheque was given, is not discharged. The relevant extract reads as follows:
"57. ..... ..... ..... The Black's Law Dictionary (6th edition), inter alia, defines "security" to mean:
"Protection; assurance; Indemnification. The term is usually applied to an obligation, pledge, mortgage, deposit, lien, etc., given by a debtor in order to assure the payment or performance of his debt, by furnishing the creditor with a resource to be used in case of failure in the principal obligation. Collateral given by debtor to secure loan. Document that indicates evidence of indebtedness. The name is also sometimes given to one who becomes surety or guarantor for another".
(Emphasis supplied)
58. Similarly, the word "security" is defined in the Shorter Oxford English Dictionary (5th edition), inter alia, to mean:
"Property etc. deposited or pledged by or on behalf of a person as a guarantee of the fulfillment of an obligation (as an appearance in court or the payment of a debt) and liable to forfeit in the event of default". (Emphasis supplied)
59. Thus, when one party gives a security to the other, implicit in the said transaction is the understanding that in case of failure of the principal obligation, the security may be enforced.
60. In V.K Ashokan v. CCE, (2009) 14 SCC 85, the Supreme Court observed that:
"The term "security" signifies that which makes secure or certain. It makes the money more assured in its payment or more readily recoverable as distinguished from, as for example, a mere IOU, which is only evidence of a debt, and the word is not confined to a document which gives a charge on specific property, but includes personal securities for money. (See Chetumal Bulchand v. Noorbhoy Jafeerji, AIR 1928 Sind 89). It is a word of general import signifying an assurance".
61. Thus, in my view, it makes no difference whether, or not, there is an express understanding between the parties that the security may be enforced in the event of failure of the debtor to pay the debt or discharge other liability on the due date. Even if there is no such express agreement, the mere fact that the debtor has given a security in the form of a post dated cheque or a cur-
In the case of Chander Bhan v. Manoj Kumar Sharma Page 24 of 26rent cheque with the agreement that it is a security for fulfill- ment of an obligation to be discharged on a future date itself, is sufficient to read into the arrangement, an agreement that in case of failure of the debtor to make payment on the due date, the security cheque may be presented for payment, i.e for re- covery of the due debt. If that were not so, there would be no purpose of obtaining a security cheque from the debtor. A secu- rity cheque is issued by the debtor so that the same may be pre- sented for payment. Otherwise, it would not be a security cheque."
This decision goes on to show that the defence of 'security cheque' cannot be the panacea for all cheque bounce prosecutions and fails to help the accused in the presence of overwhelming evidence as to liability.
16. The version of the cheque in question being security cheque also does not appear to be probable in view of the conduct of the accused, which has been quite unnatural. His conduct falls way too short of the conduct of a reasonable man of even elementary prudence in his shoes. The accused did not make any attempts to seek return of his cheque, and did not file any complaint in this regard. The accused, having allegedly made a substantial part of the payments, ought to have been anxious as to the return of his cheque. On non return, he could have issued stop payments instructions to his banker, which has not been done in the present case. His stoicism in these circumstances seriously runs down the veracity and believability quotient of his defence.
Furthermore, It has already been demonstrated above that legal notice was validly served on the accused; The non reply to the legal notice is also a circumstance that is to be marshaled against the accused. His silence in such circumstances reeks of culpability and an adverse inference deserves to be drawn against him.
All in all, the conduct of the accused is not of a man having been wronged by a friend on misuse of a cheque, but a man cowering under a legal liability that he is to discharge. Nothing rankles the human heart as In the case of Chander Bhan v. Manoj Kumar Sharma Page 25 of 26 fundamentally as injustice, more so when perpetrated by a friend. The sheer lack of indignation on the part of the accused raises an inference of culpability.
CONCLUSION
17. All factors cumulatively seen, go on to show that the accused has miserably failed to probablise lack of legal liability with respect to the cheque in question. The presumption of legal liability, therefore, has gone unrebutted. The complainant has successfully proved the basic ingredients of offence u/s 138 of the N.I.Act. Resultantly, the accused Manoj Kumar Sharma stands convicted of offence u/s 138 of the N.I.Act.
Let a copy of this judgment be provided forthwith to the convict, free of cost.
Let the convicts be heard now on the quantum of sentence separately.
A copy of this judgment be placed on the official website of the District Court.
Announced in the open court today on the 13th of October, 2015 (Bharat Chugh) MM (NI Act)-01, Central District, Delhi 13.10.2015 * Judgment contains 26 signed pages In the case of Chander Bhan v. Manoj Kumar Sharma Page 26 of 26