Gujarat High Court
Kalpesh Ramanlal Thakkar vs State Of Gujarat on 22 March, 2024
NEUTRAL CITATION
R/CR.A/864/2022 ORDER DATED: 22/03/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL APPEAL (AGAINST ACQUITTAL) NO. 864 of 2022
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KALPESH RAMANLAL THAKKAR
Versus
STATE OF GUJARAT & ORS.
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Appearance:
MS MONIKA K THAKKAR(12055) for the Appellant(s) No. 1
BAILABLE WARRANT SERVED for the Opponent(s)/Respondent(s) No. 2,3
JAYDEEP H SINDHI(9585) for the Opponent(s)/Respondent(s) No. 3
MR. HARDIK MEHTA, APP FOR Opponent(s)/Respondent(s) No. 1
RULE SERVED for the Opponent(s)/Respondent(s) No. 2
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CORAM: HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 22/03/2024
ORAL ORDER
1. This is an appeal filed by the appellant-original complainant under Section 378 of the Code of Criminal Procedure, challenging the judgment and order of acquittal dated 18.02.2022 passed by learned 26th Additional Chief Judicial Magistrate, Vadodara in Criminal Case No.13362 of 2016. By the said judgment and order, the learned Magistrate has proceeded to acquit the respondent No.3- original accused for the offence alleged under Section 138 of the N.I. Act.
2. The brief facts, leading to filing of the present appeal as contended by the appellant-original complainant, are reproduced as under:
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NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined 2.1. The Appellant-original complainant herein is a permanent resident at the address mentioned in cause title since last 21 years and has been doing business of chemical trading under the name and style of "Kalpesh Chemicals" since 1992.
2.2. Respondent No. 3-original accused No.2 is the proprietor/authorized signatory of Khodiyar Plastic (Respondent No.2-original accused No.1) firm, involved in the manufacturing business of plastic products at the abovementioned address. Close friendship developed between the Appellant and Respondent, when Respondent No. 3 became neighbour of the Appellant in year 2012 and soon they started doing financial transactions with each other, guided by mutual trust and assurance.
2.3. Respondent No. 3 approached the Appellant with a request of financial aid to clear his financial debt and also made proposal to the Appellant for making investment in his firm. He thereby offered appellant to become partner in his manufacturing business of plastic bags/products. Appellant therefore agreed to extend financial help of Rs.20,00,000/- to the Respondent which was paid through cheque as well as in cash, in the month of February/March, 2013.
2.4. In June, 2013, the Appellant had further lended sum of Rs.10,00,000/- through cheque as well as cash to the Respondent No. 3 for making purchase Page 2 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined of machinery (New Tupin Plant) required for manufacturing plastic at Respondent Proprietary Firm.
2.5. Upon the proposal made by the Respondent, on 13.08.2013 a Partnership Firm in the name of Om Plastic was started between Appellant's Wife namely, Rita Thakkar & Respondent No. 3 as Partners, on the location of Respondent Proprietary Firm by replacement. The Partnership deed was executed on a stamp paper however it was neither notarised nor registered. And the said Partnership Firm is involved in the same manufacturing business. Even Municipal Tax has been paid in the name of the said Partnership Firm.
2.6. In the year 2014, Respondent No. 3 approached the Appellant with the idea of making purchase of neighbouring factory, being a decent place to conduct manufacturing business, from the owner of the said factory namely, Mr. Kantilal Panchal, and hence a total investment of Rs.81,00,000/- was made by the Appellant to purchase factory premise as well as for making necessary construction therein. On 17.01.2014, a Partnership Deed was executed between Respondent No. 3 and Kantilal Hiralal Panchal.
2.7. In October, 2014, Respondent No. 3 took sum of Rs. 34,00,000/- from the Appellant for making purchase of raw material for production of different Page 3 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined varieties of plastic bags and after the production and sale, a profit of approximately Rs. 14,00,000/- to Rs. 16,00,000/- was accrued. However, after due collection of funds, the said profit was spent by the Respondent and when this came to the knowledge Appellant, the Respondent stated that the said funds have been used by him to clear his debt. And thereby the Respondent broke the trust of Appellant by committing fraud. Also, after waiting for significant period of time the Appellant started demanding his money back from the Respondent but it was to no avail.
2.8. After such turn of events, various attempts were made for the settlement of issues between the Appellant and Respondent, by the Appellant. In a settlement meeting, former partner in factory Mr. Kantilal Panchal, Appellant's Advocate, Respondent's Advocate, Wife of the Appellant, Wife of the Respondent, and their respective friends were present; whereby it was concluded that one Memorandum of Understanding will be made with respect to Respondent's liability towards payment of debt.
2.9. On 06.01.2015, a Partnership Deed was executed between Respondent No. 3 & Appellant with regards to Ashwin Engineering Works, having retrospective effect from 01.11.2014. Wherein it has been expressly stated that Mr. Kantilal Hiralal Panchal has resigned from the firm on 31.10.2014 Page 4 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined and the Appellant has been made a partner in the firm since 01.11.2014.
2.10. On 05.02.2015, Memorandum of Understanding was executed between Respondent & Appellant wherein the Respondent has admitted of receiving the amount to the tune of Rs.
1,30,00,000/- from the Appellant.
The said MOU was made with the object to insert the name of Appellant as a partner and for the removal of the Respondent as a partner in the firm, through execution of dissolution deed.
Further it has been stated in the MOU that as per the amount mentioned in the MOU, the Respondent will bear liability of clearing all the dues payable by him to the Appellant, at the time of dissolution of the firm.
2.11. However, the Respondent failed to comply with contents of the MOU and was not co-operating with the Appellant by bearing his liability to clear his debts towards the Appellant so that he can be subsequently be removed from the firm as a partner, and thereafter the partnership firm could be dissolved as per MOU.
2.12. On 04.05.2015, Appellant filed a complaint at D.C.B. Police Station, Vadodara, being Application No. CPAR 104/15 stating that the Respondent has Page 5 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined fraudulently obtained amount to the tune of Rs. 1,30,00,000/- and, has failed to comply with MOU executed between them by refusing to transfer the ownership of Ashwin Engineering Works, due to which the Appellant has been incurring heavy loss. 2.13. On 28.06.2015, the Respondent allegedly attempted suicide by consuming Termite Repellent Liquid and was then admitted at SSG Hospital, Vadodara, however, afterwards the Respondent himself filed a Complaint, with regards to his such alleged attempt for suicide, accusing the Appellant by stating that he tried committing suicide due to demands from Appellant for him resign from firm, at Karelibaug Police Station. The Appellant had made himself available for the said inquiry & even gave his statement. It is pertinent to note that the said complaint was never culminated into an FIR. 2.14. Later, the Appellant and Respondent No. 3 arrived at a settlement on 02.01.2016 with regards to Complaint dated 04.05.2015 made by the Appellant against the Respondent at Crime Branch, Vadodara. And the Respondent having received a total sum of Rs. 1,30,00,000/- since February, 2013 from the Appellant for business purpose of the Respondent Firm, had assured the Appellant to re- turn the said amount within short period.
2.15. Thereafter on 17.02.2016, Respondent issued a cheque bearing no. 286513 for sum of Page 6 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined Rs.1,30,00,000/- of IDBI Bank, Siddhant Road Branch, Vadodara, in favour of Appellant from the account of Respondent No. 2, produced at Exhibit-13, towards payment of due amount.
Thereafter, the Appellant deposited the said cheque which came to be dishonoured on 18.02.2016, due to insufficient funds.
2.16. Pursuant to the dishonor of cheque, the Appellant on 21.02.2016, addressed a statutory legal notice of demand to be served upon Respondents, i.e., at Exhibit-15 by way of Registered Post A.D. The said notice was served upon and received by Respondent No.2 and 3 on 24.02.2016 and 23.02.2016 respectively, as per the track consignment details which are produced at Exhibit-20 & 23. However, there was no compliance by the Respondent towards the said legal notice and sent a reply a vague reply on 03.03.2016 i.e., Exhibit-24.
2.17. Thereafter on 23.03.2016, the Appellant filed Criminal Case No.13362 of 2016 before the Ld. Additional Chief Judicial Magistrate, Vadodara, to initiate proceedings against Respondent No. 2 & 3 (original accused) for offence under Section 138 and 141 of the NI Act.
2.18. That, the verification of the Complainant under Section 200 of the Code of Criminal Page 7 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined Procedure Code, 1973 was recorded and thereafter considering the facts of the case of the complainant, summons to the accused, as per Section 204 of the Code of Criminal Procedure Code, 1973, was issued by the Learned Trial Judge vide order, below Exhibit-1, dated 23.03.2016. That vide Exhibit-5 the Complainant/Appellant gave his statement on oath on 23.03.2016 and thereon his Cross examination has been conducted on 28.06.2021 & 06.07.2021 respectively. The plea of the Accused was recorded on 10.03.2017 vide Exhibit-11 wherein he has denied the alleged offence and pleaded to face the trial.
The Complainant gave his closing pursis vide Exhibit-44 on 22.07.2021. After the completion of same, further statement of the Accused was recorded on 09.09.2021, under Section 313 of Code of Criminal Procedure, 1973 wherein the Accused has not shown his readiness and willingness to give his statement on oath and his cross-examination has not been conducted thereof.
That vide Exhibit-63 Respondent filed his written statement on 23.12.2021.
ANALYSIS OF TRIAL COURT'S ORDER:-
3. Upon recording the evidence and after considering the Page 8 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined submissions of the respective parties, the learned Trial Judge has passed the impugned judgment and order dated 18.02.2022 acquitting the respondent No.3-original accused by recording the following findings:
(1) That the signature of the accused on the cheque was endorsed in Hindi language, whereas rest of the contents of the cheque was filled up in Gujarati language. It had emerged on record that the complainant had no knowledge whether the accused was able to right in Gujarati;
(2) In cross-examination of the complainant, he is unable to establish that the accused had borrowed any money from the complainant;
(3) That the complainant has been unable to establish the alleged outstanding amount of sum of Rs.1.30 Crores due from the accused both in his individual capacity as well as on behalf of Kalpesh Chemicals as alleged from the year 2013 to 2016.
The complainant has also not adduced the balance-sheet of the Kalpesh Chemicals from the year 2014 to 2016.
(4) The complainant has suppressed facts and figures related to his books of accounts.
(5) The account was to be settled at the time of dissolution of Ashwin Engineering Works and the Page 9 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined security cheque was not to be used against the accused as per the MoU.
(6) It was noticed that the complainant had deposited cheque just 12 days after the date of the execution of MoU between the parties.
(7) The complainant has not examined any
witness in support of his case.
(8) The complainant has not obtained any prior
consent of the accused before presentation of the cheque to the bank as agreed between the parties in terms of condition No.19 of the partnership deed, which otherwise provides of serving three months prior notice for dissolution of partnership firm.
(9) The conduct of the complainant upon perusal of the statements of the complainant recorded at police station, which was relied upon by the accused and admitted as an evidence at Exh.50 and Exh.51, were taken into consideration.
(10) The contents of the demand notice at Exh.52 goes to suggest that no settlement with regard to accounts was arrived at between the parties. Hence, there was no agreement between the parties with regard to a particular figure as against the dissolution of partnership firm.
(11) The complainant has misused the cheque since the accused had not issued the cheque in question towards the discharge of any legally Page 10 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined enforceable debt.
(12) The complainant has been unsuccessful in proving his case beyond reasonable doubt and on the other hand, the accused was able to bring on record the contrary facts to raise preponderance of probability shifting the burden upon the complainant.
4. The learned Magistrate has noticed that the accused has raised defence of misuse of the cheque by the complainant mainly on the ground that the cheque was issued for 'security' purpose. Simultaneously, the reference is made to the condition No.19 of the partnership deed as well as the mutual understanding between the parties as reflected in the recitals of the MoU, to contend that the cheque was not to be utilized without the consent of the respondent-accused. The cause would have arisen for presentation of the cheque only at the stage, when the parties have mutually entered into settlement of accounts followed by the execution of the separate settlement deed, where the outstanding amount to be realized, was to be finalized. The second ground for challenge of misuse of cheque as can be gathered from the cross-examination of the complainant, was that hand writing of the content of the cheque appears in Gujarati language whereas signature of the respondent-accused as endorsed on the cheque was in Hindi language. In cross-examination, a very Page 11 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined specific question was put to the complainant about the aforesaid facts and it was inquired as to whether the complainant was aware about the fact that the accused was knowing both languages. In other words, the accused has challenged the actual outstanding amount to be realized by the complainant.
5. Noticing the aforesaid circumstances, the learned Magistrate has formed the opinion that the complainant has failed to establish the existence of the legally enforceable debt against the accused and that the cheque was drawn towards any debt. The learned Magistrate has found that the accused has been successful in rebutting the presumption drawn under Section 118 (a) and 139 of the N.I. Act. The learned Magistrate has shifted the burden upon the complainant to prove his case beyond reasonable doubt and has concluded by recording acquittal of the respondent-accused for the offence alleged.
6. Based on the aforesaid findings, the learned trial court was convinced that the complainant has not adduced sufficient material on record manifesting the existence of legally enforceable debt against the accused and on the other hand, the accused has been successful by cross-examining the complainant and by adducing the documentary Page 12 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined evidence that the complainant had misused the cheque. Thus, on account of failure of the complainant to establish all the ingredients so as to attract the offence punishable under Section 138 of the N.I. Act and taking into consideration the settled principle of law as laid down by the Hon'ble Supreme Court in the case of Jugesh Sehgal vs. Shamsher Singh Gogi reported in (2009) 14 SCC 683, the order of ac- quittal impugned was passed by the trial court.
7. I have heard learned advocate Ms. Monika K. Thakkar for the appellant-original complainant, learned advocate Mr. Jaydeep Sindhi for the respondent No.3-original accused and learned APP Mr. Hardik Mehta for the respondent-State. Considering the request of learned advocate for the appellant for final hearing and learned advocate for the respondent-accused having argued for, the matter was heard finally. At the end of conclusion of argument, the matter was kept for order.
SUBMISSIONS OF APPELLANT:-
8. At the outset, learned advocate on record for the appellant- original complainant had invited my attention to the nature of transaction, to contend that the respondent No.3-original accused had, in fact, drawn the disputed cheque bearing No.286513 dated 17.02.2016 for an amount of Rs.1.30 Crores, which was proved and Page 13 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined admitted as an evidence at Exh.13 from the account maintained by him. According to her, sufficient material in the nature of MoU executed between the parties on 05.02.2015 was proved and admitted as an evidence, which goes to indicate that there existed outstanding dues of Rs.1.30 crores to be realized from the respondents. However, the learned Magistrate committed a serious error by treating disputed cheque as security cheque on wrong interpretation of the recitals of the MoU.
8.1 Learned advocate for the appellant had further submitted that the aforesaid facts go to suggest that in fact, the respondent owns liability towards the debt to the appellant herein. She had further submitted that once the cheque was issued, and the signature was not disputed, the presumption had arisen in favour of the holder of the cheque that it was issued in discharge of a debt or liability. The reliance was placed upon Sections 118 and 139 of the N.I. Act to contend that though the presumption is rebuttable, the duty was casted on the accused to prove that the cheque issued in favour of the complainant, was not towards any discharge of any debt or liability. 8.2 According to the learned advocate, no cogent evidence was lead by the accused to rebut such presumption and in such circumstances, the learned Judge ought to have appreciated the contents of the Page 14 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined MoU, wherein the respondent had expressly admitted of having received sum of Rs.1.30 Crores in various installments, which clearly goes to suggest the existence of the debt. She has further contended that the trial court had unnecessarily shifted the burden upon the original complainant and there was no reason for the trial court to doubt upon the issue of financial capacity of the appellant. She has also submitted that the appellant, till date, has not used any of the security cheques given by the respondent as referred in the MoU dated 05.02.2015.
8.3 The attention of this Court was invited to the contents of the MoU, to contend that the parties have specifically accepted their liability in MoU, and therefore, the aspect of dissolution of partnership firm actually being dissolved or not was irrelevant as far as issue of serving of notice for the dissolution of partnership firm was considered by the trial court.
8.4 The learned advocate had referred to the statements of the appellant recorded before the Police Authority produced by the respondent at Exh.50 and Exh.51 and taken into consideration by the trial court. In light of the contents of the reply given by the respondent-accused to the demand notice dated 03.03.2016. My attention was invited to the fact that it was the appellant who had Page 15 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined approached Crime Branch, Vadodara by lodging a complaint on 04.05.2015, which was initially in-warded as local application No. VC15165301570 and was later on registered as CPAR 104/2015. The specific allegations were made against the respondent No.3 with regard to monetary fraud and the refusal on part of the respondent to transfer the ownership of Ashwin Engineering Works, though agreed. 8.5 Learned advocate had further submitted that in fact, finding substance in the allegations made in such application, the respondent was arrested on 13.01.2016 as per the provisions of Section 151 of the Cr.P.C. and was later on released. It is in view of the aforesaid proceedings being faced by the respondent, the proposal for settlement was offered on 02.01.2016 as can be noticed from the contents of the reply given to the demand notice at Exh.24 and having arrived at a settlement, the disputed cheque dated 17.02.2016 was drawn by the respondent in favour of the appellant. She, therefore, submitted that though cogent material was brought on record, it has been misinterpreted by the learned Judge, leading to the erroneous conclusion of acquittal of respondent-accused. By referring to the aforesaid events, she had therefore, submitted that, the learned trial Judge arrived at erroneous finding on misinterpretation of evidence that the disputed cheque is forming part of the security cheque as mentioned in the MoU. She therefore urged this Court to quash and Page 16 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined set aside the order of acquittal of respondent No.3 and to allow this appeal.
SUBMISSIONS OF THE RESPONDENT-ACCUSED:-
9. On the other hand, learned advocate Mr. Jaydeep Sindhi for the respondent-original accused has referred to the findings recorded by the learned trial court and has submitted that merely because a second view is projected by the learned advocate on re-appreciation of the evidence in the way she has contended, does not fall within the ambit of the jurisdiction of this Court in an appeal under Section 378 of the Code. He has further submitted that once the order of acquittal is recorded by the trial court by recording the findings based on appreciation of the evidence in absence of any error being pointed out, the jurisdiction of this Court in appeal under Section 378 of the Code is circumscribed. He had further pointed out that scheme of N.I. Act as can be culled out from the various provisions incorporated pro- vides for raising presumption as provided under Section 118(a), which permits the Courts to raise presumption with every negotiable instrument made or drawn for consideration until the contrary is proved. Also, Section 139 of the Act permits the Court to raise the presumption that the holder of the cheque has received the cheque for discharge in whole or in part of any debt or other liability, unless Page 17 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined the contrary is proved. The reliance was placed upon the decision of three Judges Bench of the Hon'ble Supreme Court in the case of Rangappa vs. Sri Mohan reported in 2010 (5) SCALE 340, to contend that though the consideration attached to a cheque, is a matter of presumption and the complainant is not required to prove it beyond reasonable doubt, however, while considering the aforesaid scheme of the Act, the Court has further observed that aforesaid statutory presumption is rebuttable by the accused. It was further pointed out that such rebuttal can be in the form of contrary material being brought on record, not necessarily by way of leading substantial evidence or offering one self in the witness box, any probability, which may emerge even from the cross-examination of the complainant, is sufficient to rebut the aforesaid presumption. It was submitted that the burden of proof on the accused in rebutting the presumption is not high as that of the prosecution once a probable defence or the contrary facts on material is brought on record that itself is sufficient to rebut the presumption and the burden would lie upon the complainant to prove his case beyond reasonable doubt. He therefore submitted that no fault can be found with the approach of the learned trial court in shifting the burden upon the original complainant to prove his case beyond reasonable doubt. Having noticed the probable defence being brought on record by the respondent-accused, the Page 18 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined learned court has rightly recorded acquittal and therefore, urged this Court to dismiss the present appeal.
10. On re-appreciation of the aforesaid documentary evidence and in light of the evidence of the complainant, noticing the argument canvassed by the learned advocate for the appellant, this Court in present appeal is called upon to examine as to whether, the learned Magistrate committed error in forming opinion that the complainant has failed to establish the existence of the legally enforceable debt against the accused.
11. It is pertinent to note that the negotiable instrument is a special enactment. In order to constitute an offence under Section 138 of the N.I. Act, the essential ingredients, which are required to be fulfilled, are :
"(1) A 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 that account.
The cheque must have been issued for the discharge, in whole or in part, of any legal debt or other liability; (2) That the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(3) That the cheque is returned by the bank unpaid, ei- ther because the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that Page 19 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined bank.
(4) 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. The drawer of such cheque fails to make the payment of the said amount of money to the payee or the holder in due course of the cheque, within fifteen days of the receipt of the said notice."
12. Once the aforesaid ingredients are established, the courts are empowered with provisions, which permits the Court to draw the presumptions. This includes two provisions as incorporated in the Act itself. According to Section 118(a), the courts are permitted to raise presumption that every negotiable instrument was made or drawn for consideration. According to Section 139 of the Act, it permits the Court to raise the presumption that the holder of the cheque has received the cheque for discharge, in whole or in part of any debt or other liability. Once the signature on the cheque is not disputed in absence of any challenge to the signature of the drawer, both the aforesaid provisions raise a legal presumption, however, the same are rebuttable in nature. The burden is upon the accused to rebut the presumption and discharge the onus to show that the cheque was not issued against any liability. This brings us to the question as to what would be the standard of proof which would be required or rather expected from the accused to discharge such presumption.
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13. In the case of M.S. Narayana Menon @ Mani vs State Of Ker- ala & Anr reported in 2006 (6) SCC 39, the Court considering the issue of presumption under the N.I. Act, held that the court needs to presume the negotiable instrument for consideration unless existence of consideration is disproved. It is further held that unless on consideration of the matter before it, the Court either believes that consideration does not exist or considers the non-existence of the provisions so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that does not exist. The Court held that the initial burden of proof is on the accused to rebut the said presumption by raising a probable defence, if he discharges the said burden, the onus, thereafter, shifts on the complainant to prove the same. However, whether the initial burden has been discharged by the accused, is a question of fact. In any case, considering the overall scheme of the Act, the burden of proof on the accused is comparatively less as that of a criminal trial, to prove the guilt of the accused, which requires a strict standard of proof.
14. In case of M/s. Kalamani Tex & Anr vs. P. Balasubramanian reported in 2021 (1) SCC 720, the court had looked into aforesaid provisions of the special enactment. The court noticed that statute Page 21 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined mandates that once signature of an accused on cheque-negotiable instrument is established then the reverse onus clause becomes operative. In such a situation, the obligation shifts the burden upon the accused to discharge presumption imposed upon him. Thus, once the signature is admitted on the cheque, the courts are bound to presume that the cheque was issued for consideration against the legally enforceable debt. It would be for the accused to explain the circumstances by raising a probable defence to establish that the cheque was not issued towards any existing liability.
15. Considering the very language of the aforesaid provisions, the very reference to the words "until the contrary" goes to suggest that the preponderance of probability is suffice to rebut the presumption and once such probable defence emerges on record, the burden shifts upon the complainant to prove his case beyond reasonable doubt.
16. I have given thoughtful consideration to the submissions made by the learned advocates appearing for the respective parties. In order to appreciate the controversy raised in the present appeal in light of the scheme of the Act, it would be necessary to look into the relevant clauses of the MoU dated 05.02.2015 at Exh.41. It would be germane to record that the parties are ad idem with regard to the execution of Page 22 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined the MoU and are thus bound by the terms and conditions of the MoU, arrived at between them. The close examination of the contents of the MoU, indicates that the present complainant was to be introduced as partner in the partnership firm namely Ashwin Engineering Works, in which, the accused was one of the partners with one existing partner Kantilal H. Panchal.
16.1 The close reading of the aforesaid MoU, the terms and condi- tions as mutually agreed, are as under:
(i) It was agreed between the parties that the com-
plainant would replace the existing partner Kantilal H. Panchal,
(ii) As per para 2 of the MoU, the accused had handed over the cheque to the accused and his wife for the purpose of securing the amount otherwise credited to the respondent-accused,
(iii) As per para 3 of the MoU, the complainant was to be made partner of Ashwin Engineering Works, in lieu of the capital amount of the said firm,
(iv) It was agreed between the parties that the cheque, issued by the accused as security purpose, should not be misused or no proceedings were to be taken,
(v) It was also agreed in the MoU that at the time of Page 23 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined dissolution of Ashwin Engineering Works, the mode of payment of the amount of settlement of the account, shall be worked out by drawing separate settlement deed and such agreed amount, shall be paid by the accused to the complainant. On execution of such settlement deed, the security cheques issued, the promissory notes entered upon, were to be returned back by the complainant to the accused and were treated to be cancelled.
17. Now, based on such agreement between the parties, indisputably, the complainant was entered as partner of Ashwin Engineering Works, as it is evident from the document i.e. partnership deed executed between the parties, which has been adduced as evidence at Exh.42 by the respondent.
18. From, the close examination of the said partnership deed, it has transpired that said document has been executed between the respondent-accused Virendra Rishikesh Shah and Kalpesh Ramanlal Thakkar on 05.02.2015 before the Notary in presence of Kantilal H. Panchal i.e. the existing partner, who has agreed to the fact of being relieved from the said partnership firm. It is recorded that the partnership firm was working since 17.01.2014, for which, the Page 24 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined partnership deed was also executed. Later on, the existing partner Kantilal H. Panchal has willingly exited from the said partnership firm from 31.10.2014 and for future development of the business of the firm, the complainant namely Kalpesh Ramanlal Thakkar has been introduced as the partner with effect from 01.11.2014. The terms and conditions have also been incorporated in the said partnership firm, whereby it was resolved that it would be treated as partnership at Will. The parties have further agreed that the transaction in the name of the firm, was to be conducted by signature of any of the partners. It was further agreed that both the partners were to be treated as working partners and shall have equal share of profit or loss of the partnership firm. As per condition No.19 of the partnership deed, it was provided that the partner, who intends to leave/exit the partnership firm was expected to give three months prior notice, which would be followed by the settlement of the accounts of the said partnership firm, followed by the dissolution of the firm.
19. It is evident that both MoU and partnership deed have been executed on the same day i.e. 05.02.2015, which was registered before the same Notary and has been entered in the book of Notary at serial No. 2005 and 2006 respectively. As evident from the recitals of the MoU, it has clearly transpired that the respondent-accused has Page 25 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined acknowledged the fact of receipt of amount of Rs.1.30 Crores in installment and the amount derived from the complainant, has been utilized for running partnership firm namely Ashwin Engineering Works. Thus, the amount borrowed from the complainant, has been invested in the capital of said partnership firm. In other words, though the respondent-accused owned liability of the aforesaid amount, borrowed from the complainant, the same was appropriated against the capital investment of the partnership firm. It is settled legal proposition of law that when a partner pools his assets with the partnership assets by contributing such asset as a capital of the firm, it becomes the property of the firm under section 14 of the Partnership Act by operation of law without the formality of conveyance. It is also evident that an amount of Rs. 5 Lakhs was handed over to the existing partner Kantilal H. Panchal by the complainant, for the purpose of purchasing shade of Ashwin Engineering Works. Having borrowed the aforesaid amount, the parties have mutually agreed that Kantilal H. Panchal would exit from the partnership firm and the complainant Kalpesh Ramanlal Thakkar would be introduced as the partner. It was further agreed to dissolve said firm with exit of the respondent- accused and the firm was to be transferred in the name of complainant Kalpesh Ramanlal Thakkar as it's owner. It was also agreed between the parties that at the stage of dissolution of the Page 26 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined firm, the parties would undertake settlement of the accounts and the separate settlement deed would be executed between the parties, whereby the respondent-accused had agreed to make payment of the amount, which may be agreed at the stage of the execution of the set- tlement deed. In the meanwhile, in order to secure the interest of the original complainant, the respondent-accused had agreed to retain the cheques for security purposes. It was also agreed that on settlement of the account of the firm and its dissolution, the security cheque, promissory note and deeds entered upon, were to be treated as revoked.
20. At this juncture, it would be relevant to mention that the complainant has disputed the fact that the cheque was handed over as a security cheque as erroneously recorded by the learned Magistrate while recording the order of acquittal. According to the learned advocate for the complainant, the learned Magistrate has committed gross error while recording the date of issuance of cheque, in light of the execution of the MoU followed by the partnership deed.
21. The close reading of the contents of the MoU, admittedly executed on 05.02.2015, refers to handing over of cash amount of Page 27 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined Rs.1.30 crores by the complainant to the respondent No.2 on various occasions. The reference is made to the execution of the security cheque as well as promissory notes which is prior to execution of the MOU whereas the date of cheque in question is mentioned 17.02.2016. It is on comparison of the aforesaid recitals in the MoU dated 05.02.2015 as against the date of the cheque in question, the learned Magistrate upon erroneously record the date of MoU as "05.02.2016" instead of "05.02.2015", and arrived at a finding that cheque in question was drawn after 12 days from the date of execution of the MoU between the parties. The aforesaid finding of the learned Magistrate is erroneous to the extent that actual date of the execution of the MoU is "05.02.2015" and not "05.02.2016" as noticed by the learned Magistrate. May that be, the fact remains, the complainant has presented the said cheque towards the outstanding amount of Rs.1.30 Crores as reflected in the body of the MoU.
22. The expression 'security cheque' is not statutorily defined under the Act however that per se does not take away from the applicability of the Act. Thus, even if the dishonored cheque in question was issued as a security cheque, it will attract penal provisions of section 138 of the Act. The supreme court in the case of Bir Singh vs. Mukest Kumar, reported in (2019) 4 SCC 197 , has held that :
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NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined 'Even blank cheque leaf, voluntarily signed over by the accused, which is towards some payment, would attract presumption under section 139 of the Negotiable Instrument Act, in absence of any co-
gent evidence to show that the cheque was issued in discharge of a debt'.
22.1 In Sripati Singh vs. State of Jharkhand and anr., (2021) SCC Online 1002, while considering the issue of maintainability of proceedings under section 138 of the Act, the Supreme Court held that a cheque issued as security, pursuant to a financial transaction, cannot be considered as a worthless piece of paper. A Security is given, deposited or pledged to ensure the fulfillment of an obligation undertaken.
In light of the aforesaid legal position, the dishonor of even security cheque attracting offence under the Act however, does not take away the right of the accused to establish that the legal dues were discharged as on the date of presentation of cheque, as a valid defense.
23. With such peculiar nature of transaction as emerged on record, in order to appreciate the essential ingredients of the offence under Page 29 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined Section 138 of the N.I. Act, as to whether, the cheque was issued towards the discharge of the aforesaid outstanding dues, it would be essential to appreciate the defence raised by the respondent-accused before the trial court, as is evident from the cross-examination of the complainant as well as the documentary evidence adduced by the accused in support of his defence as well as further statement of the accused recorded under Section 313 of the Code.
24. Indisputably, there is no challenge to the signature of the respondent-accused on the cheque. The initial statutory presumption as available in law is required to be drawn in favour of the complainant however, in defence, the respondent-accused has raised the ground of misuse of cheque. It would be essential to mention that during the cross-examination, the complainant was called upon with regard to the details of accounts being maintained by him as regards the outstanding amount of Rs.1.30 crores, due from the respondent-accused. The complainant had admitted the fact of paying the income tax returns in his personal capacity as well as proprietor of Kalpesh Chemicals during the period from 2013-2016. Though, the complainant had shown his readiness and willingness to produce the balance-sheet of the proprietorship concerned for the year 2014-2016. However, the fact remains that no such documents Page 30 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined were adduced on record. The learned Magistrate, in absence of such documents being brought on record by the original complainant, had drawn adverse inference against the complainant, in a way, the original accused has questioned the financial ability of the complainant to give such amount of Rs.1.30 crores to the respondent-accused without going into the aforesaid aspect. It would be germane to mention that once the MoU was executed between the parties, where the parties have in fact were found to be at ad idem about borrowing of an amount of Rs.1.30 crores by the respondent-accused has been acknowledged in the MoU itself, the aforesaid issued of financial ability required no further examination. The learned counsel for the complainant has placed much emphasis on the MoU, to contend that the respondent had expressly admitted and acknowledged the receipt of the amount of Rs.1.30 Crores received in the installment on various occasions. Undoubtedly, in absence of any dispute to the said document by the respondent- accused as evident from the recitals of the MoU, indisputably the respondent-accused owned liability of Rs.1.30 Crores as being received from the original complainant.
25. Now, looking at the defense raised by the respondent accused as regards misuse of cheque, as can be culled out from the cross Page 31 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined examination of the complainant, the very issuance of cheque towards outstanding dues as contended by the complainant has been challenged. The first essential ingredient to constitute the offence as highlighted earlier, is that the person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money, is required to be fulfilled. In the cross-examination of the complainant, the respondent-accused has challenged the very factum of drawing a cheque in favour of the complainant for an amount of Rs.1.30 Crores as alleged by the complainant. The close reading of the cross examination of the complainant, it has transpired that the respondent-accused has been successful to bring on record two essential facts in cross-examination of the complainant. The complainant has conceded that the cheque has been drawn by respondent No.1 proprietorship concern Khodiyar Plastic and respondent No.2 being proprietor of the said firm as authorized signatory, has endorsed on the said cheque. It is also admitted that the security cheques were drawn in the name of complainant and his wife Ritaben from the account of the accused and Khodiyar Plastics. He has also admitted that upon the existence of entity Ashwin Engineering, the said Khodiyar Plastic had ceased to operate. The aforesaid evidence of the complainant clearly establishes the fact that the disputed cheque was forming part of security cheque issued Page 32 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined prior to existence of Ashwin Engineering firm viz. 2014 and not in February-2016 as contended by the complainant.
26. This brings to the issue as to whether the cheque was issued towards the outstanding amount of Rs. 1.30 crores, as contended by the complainant. In light of having arrived at the conclusion that the disputed cheque was drawn in Year 2014, the subsequent event of execution of the MoU becomes significant as it throws light on the outstanding dues as acknowledged by the accused and the way it was to be appropriated. The recitals of MOU indicates that it was mutually agreed between the parties that the amount owned by the respondent-original accused was to be treated towards capital investment of the partnership firm- Ashwin Engineering Works. And the original complainant was to be introduced as one of the partners. The very next recital incorporated in the MoU refers to the fact that the security cheques, promissory notes and other documents entered between the parties, shall not be pressed. The reference to the agreement as to settlement of accounts and execution of separate deeds also gains significance of the fact that the parties were to sit together to settle the accounts. In such circumstances, there was no finality attached to the legal dues which was to be negotiated and finalized.
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NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined
27. Considering the aforesaid vital terms and conditions of the MoU and the subsequent execution of the partnership deed between the parties, goes to suggest that original complainant was in fact introduced as partner in the said partnership firm. In other words, the terms and conditions of the MoU were acted upon by the parties.
28. At this stage, it would be worth mentioning that the partnership deed was not referred by the original complainant in the legal notice addressed by the complainant to the respondent- accused. Even the close reading of the contents of the complaint indicates that the original complainant for the reason best known, has not disclosed the fact of execution of the partnership deed between the parties. The partnership deed executed between the parties, has been brought on record before the trial court by the original accused at Exh.42. The original complainant was examined on the said aspect, where he has not disputed the fact about execution of the partnership deed between the parties. From joint reading of the relevant clauses appearing in MoU, in light of the execution of the partnership deed, what actually transpires is that, indisputably, an amount of Rs.1.30 crores was borrowed by the respondent- accused from the original complainant in installment on various occasion between the period of 2013-2016, however, later on, as agreed between the parties reflected in the MoU, the respondent- Page 34 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024
NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined original accused had agreed to introduce the original complainant as one of the partner in existing partnership firm and the amount, which was borrowed by the respondent-accused, was to be treated as capital investment of the said partnership firm. In a way, it was further agreed between the parties that after the settlement of the accounts of the firm, the same was required to be adduced in writing by entering into further settlement deed. Upon close examination of MoU, it was mutually agreed between the parties that respondent- accused was to leave the partnership firm i.e. property belonging to the partnership firm, in a way was to stand transferred to the original complainant.
29. The learned advocate has placed reliance upon the subsequent event of lodging of police complaint with the D.C.B. Police Station as well as Vadi Police Station, Vadodara by the complainant against the respondent-accused, to contend that the learned Magistrate committed serious error in arriving at a conclusion that after execution of MoU on 05.02.2016 within a period of 12 days, the cheque dated 17.02.2016 was endorsed. The complaints referred to by the learned advocate for the complainant, are not forming part of the record. The reply given by the complainant before the Vadi Police Station in respect of one of such complaints, has been placed on record by the respondent accused at Exhs.50 and 51. In the cross- Page 35 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024
NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined examination, the learned counsel for the respondent-accused has put specific questions with regard to aforesaid complaint. The attempt was made by the respondent-accused to raise a defence that the terms and conditions of the MoU were acted upon by contending that in the aforesaid reply, the original complainant has addressed himself as partner of Ashwin Engineering Works. For the reasons recorded in the earlier part of this order, the aforesaid evidence clearly goes to indicate that the cheque in question was handed over to the original complainant prior to the execution of the MoU and not in the month of February- 2016 as contended by the complainant. Hence the contention of the appellant that the said cheque was not a 'security' cheque cannot be accepted. In my opinion, the learned Magistrate has in the right perspective appreciated and evaluated the evidence while accepting the defence raised by the respondent- original accused. Even otherwise, upon joint reading of the recitals of the MoU and the partnership deed, which are executed on the same day, in my opinion, no error can be found with the approach of the learned Magistrate, to arrive at such a conclusion.
30. Considering the scheme of the Act in light of the evidence of the original complainant, in my view, a strong probable defence has been raised by the respondent-accused, pointing out the contradictions in the case put forward by the original complainant. It Page 36 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined was for the complainant to prove his case beyond reasonable doubt. With such circumstances viz. reference of security cheque in MoU and the execution of partnership deed, the aspect of variance in the hand writing of the body of the content of the cheque and the signature endorsed on the cheque appearing in two different languages gains significance for the purpose of examining the defence of misuse of cheque. In the cross-examination, the original complainant has admitted the fact that the accused hails from Madhya Pradesh. He has further admitted in his cross-examination that he is not aware as to whether the original accused is able to write in Gujarati or not. In my view, bringing on record such facts, the respondent-accused has been able to bring on record the material with regard to the defence raised about misuse of cheque.
31. On overall appreciation of the evidence brought on record, I am of the view that contrary circumstances have been successfully pointed out by the respondent-accused, which have taken the form of strong probable defence against the case put forward by the original complainant. In such circumstances, it was for the complainant to prove his case beyond reasonable doubt. The conspicuous silence of the original complainant with regard to the execution of the partnership deed and non production of the said Page 37 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024 NEUTRAL CITATION R/CR.A/864/2022 ORDER DATED: 22/03/2024 undefined document speaks volumes about the conduct of the original complainant. Hence, the present appeal fails and is hereby dismissed. The judgment and order of acquittal dated 18.02.2022 passed by learned 26th Additional Chief Judicial Magistrate, Vadodara in Criminal Case No.13362 of 2016, is hereby confirmed.
(NISHA M. THAKORE,J) SUYASH SRIVASTAVA Page 38 of 38 Downloaded on : Fri Apr 12 22:02:01 IST 2024