Delhi District Court
Satish Kumar vs . Ram Kumar Cc No. 25374/17 Page No. 1 Of 16 on 25 June, 2019
IN THE COURT OF MR. MRIDUL GUPTA, METROPOLITAN MAGISTRATE,
SOUTH-WEST, DWARKA, DELHI
In Re:
CNR No. DLSW02-035475-2017
CC No. 25374/17
Satish Kumar
S/o Sh. Nathu Ram
R/o T-138-139, Upper Ground Floor
Vishwas Park, Uttam Nagar,
New Delhi - 59 ............Complainant
Versus
Ram Kumar
S/o Sh. Banwari Lal
R/o E-39, Nanhe Park
Som Bazar, E-Block, Matiala
Delhi -59 .............Accused
(1) Offence complained of or
proved : 138 N.I. Act
(2) Plea of accused : Pleaded not guilty
(3) Date of institution of case : 11.12.2017
(4) Date of conclusion of arguments: 24.05.2019
(5) Date of Final Order : 25.06.2019
(6) Final Order : Acquitted
Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 1 of 16
JUDGMENT
1. Vide this judgment I shall dispose of the complaint filed by the complainant under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the 'Act ').
2. Brief facts relevant for the decision of the case are as under:-
The complainant alleges that accused was running a chit fund committee and complainant was also member of the said committee. It is alleged that accused required loan for purpose of business. Complainant granted friendly loan of an amount of Rs. 1,00,000/- on 05.08.2013, and again an amount of Rs. 1,00,000/- on 14.09.2013, to the accused. Both loans were granted against written acknowledgments of accused and it was assured by accused that he would repay the entire amount of Rs. 2,00,000/- after two months of taking the amount on 14.09.2013. It is also alleged that complainant also joined two committees of Rs.
2,25,000/- each on 03.05.2015 run by the accused and the committee matured in July 2016, but accused assured him that he will repay the remaining committee amount and previous loan amount within one year. However accused to repay the amount at end of one year. It is alleged that after persistent reminders, in August 2017, the accused in part discharge of his liability, issued three post dated cheques of Rs. 55,000/-, Rs. 50,000/- and Rs. 46,000/-, i.e. cheques in question no. 253524, 253526 and 253527 respectively, all dated 10.09.2017, all drawn on State Bank of India, Mohan Garden, Uttam Nagar, Delhi to complainant with an assurance of its encashment. The complainant presented the cheques in his account maintained at Bank of Baroda, District Centre, Janakpuri, Delhi which were all returned with the remarks "Payment Stopped by Drawer" vide bank return memo dated 28.09.2017. Thereafter, complainant served a legal notice dated 26.10.2017 upon the accused through his counsel demanding the said amount. Despite service of aforesaid notice, neither any reply was sent nor the money was repaid by the accused. Thereafter, complainant has filed the present complaint case with the submission that accused be summoned, tried and punished according to law.
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3. In his pre-summoning evidence, complainant examined himself on affidavit Ex. CW-1/1. He reiterated the contents of complaint and placed on record, loan receipts/written acknowledgments issued by accused as Ex. CW-1/A (Colly), original three cheques of Rs. 55,000/-, Rs. 50,000/- and Rs. 46,000/-, i.e. cheques in question no. 253524, 253526 and 253527 respectively, all dated 10.09.2017, all drawn on State Bank of India, Mohan Garden, Uttam Nagar, Delhi as Ex. CW-1/B, Ex. CW-1/C and Ex. CW-1/D, cheque returning memo dated 28.09.2017 as Ex. CW-1/E, legal demand notice dated 26.10.2017 as Ex. CW-1/F, postal receipts as Ex. CW-1/G, tracking report as Ex. CW1/H and certificate u/s 65B of Indian Evidence Act, 1872 as Ex. CW1/I.
4. Upon appreciation of pre-summoning evidence, accused was summoned for an offence punishable under Section 138 of the Act and notice under Section 251 Cr.P.C. for this offence was framed upon accused on 05.09.2018 to which he pleaded not guilty and claimed trial. He admitted his signature on the cheque in question, however stated that remaining details in the same had not been filled in by him. He denied receipt of legal demand notice. He stated that about 8-10 months ago he wanted to take a loan of Rs. 3,00,000/- from the complainant. The complainant asked for six blank signed cheques including the three cheques in question. Thus he gave the same as blank signed security cheques. However no loan was disbursed to him by the complainant. Complainant did not return his cheques despite asking for the same and misused the cheques.
5. The accused moved an application to cross-examine the complainant. Complainant as CW-1 was duly cross examined by the accused. No other witness was produced by the complainant and he closed his evidence by giving a separate statement to this effect. Thereafter, statement of accused under Section 313 Cr.P.C. was recorded in which all the incriminating evidence were put to him to which accused reiterated the stand taken by him in answer to notice under Section 251 Cr.P.C. He further admitted to taking of loan of an amount of Rs. 1,00,000/- on 05.08.2013, and again an amount of Rs. 1,00,000/- on Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 3 of 16 14.09.2013, from the complainant, against the written acknowledgments Ex. CW- 1/A (colly). He also admitted that he used to run two committees of Rs. 2,25,000/- each, of which complainant was also a member. However he denied that he owed any money to complainant regarding the committees. He further stated that he had also repaid the loan of Rs. 2 lakhs to complainant in year 2015 in the presence of witnesses.
6. Accused preferred to lead evidence in his defence and had examined his son Raju Gupta as DW-1 and himself as DW-2. Both the witnesses were cross- examined by counsel for complainant. The accused did not examine any other witness and vide his statement, defence evidence was closed.
7. Thereafter, matter was listed for final arguments. It was argued by the Ld. counsel for the complainant that this is a fit case for conviction of the accused as all the essential ingredients of Section 138 of the Act read with Section 139 of the Act have been fulfilled and that the same has been aptly demonstrated by the complainant before the court. The accused admitted his signatures on the cheque in question in answer to notice under section 251 Cr.P.C and in his statement U/s 313 Cr.P.C. He argued that accused never gave reply to the legal demand notice. The accused also admitted taking of loan of Rs. 2,00,000/- from complainant against written acknowledgments. However accused could not produce any receipt of repayment of the same. The only defence taken by the accused is that he gave blank signed cheques to complainant for purpose of loan in 2017, however there were material inconsistencies in version of defence witnesses. It is averred that accused failed to raise the probable defence to disprove the case of complainant and to rebut the presumption under Section 139 of the Act. Therefore, accused be convicted for the offence under Section 138 of the Act.
8. Per contra, Ld. Counsel for the accused reiterated the version of the accused in his statement U/s 313 Cr.P.C and in defence evidence that the accused had repaid the loan of Rs. 2,00,000/- to complainant and did not owe any money to complainant for the committees. It was argued that complainant did not Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 4 of 16 produce any written record of the committees. It was argued that accused did not take any further loan from the complainant and the blank signed cheque given for purpose of loan were misused and loan was also not advanced. It was argued that evidence of complainant suffered from material lapses and was not sufficient to establish the case against accused. He submitted that complainant has failed to prove his case beyond reasonable doubt and accused is entitled to be acquitted of offence u/s 138 of the Act.
9. I have perused the entire record as well as evidence led by the complainant as well as by the accused.
10. Before appreciating the facts of the case in detail for the purpose of decision, let relevant position of law be discussed first:-
For the offence under Section 138 of the Act to be made out against the accused, the complainant must prove the following points, that:-
1. the accused issued a cheque on account maintained by him with a bank.
2. the said cheque had been issued in discharge, in whole or in part, of any legal debt or other liability.
3. the said cheque has been presented to the bank within a period of three months from the date of cheque or within the period of its validity.
4. the aforesaid cheque, when presented for encashment, was returned unpaid/dishonoured.
5. the payee of the cheque issued a legal notice of demand to the drawer within 30 days from the receipt of information by him from the bank regarding the return of the cheque.
6. the drawer of the cheque failed to make the payment within 15 days of the receipt of aforesaid legal notice of demand.
11. The Act raises two presumptions in favour of the holder of the cheque i.e. Complainant in the present case; firstly, in regard to the passing of consideration as contained in Section 118 (a) and secondly, a presumption that the holder of cheque receiving the same of the nature referred to in Section 139 discharged in Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 5 of 16 whole or in part any debt or other liability.
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".
12. For the offence under Section 138 of the Act, the presumptions under Sections 118(a) and 139 have to be compulsory raised as soon as execution of cheque by accused is admitted or proved by the complainant and thereafter burden is shifted to accused to prove otherwise. These presumptions shall be rebutted only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability etc. A presumption is not in itself evidence but only makes a prima facie case for a party for whose benefit it exists. Presumptions both under Sections 118 and 139 are rebuttable in nature. Same was held by the Hon'ble Supreme Court of India in Hiten P. Dalal v. Bratindranath Banerjee [(2001) 6 SCC 16].
13. In the present case, accused has admitted his signatures on the cheque in question, in answer to notice under Section 251 Cr.P.C. and in his statement u/s 313 Cr.P.C. He did not deny his signature on the cheque in cross-examination of complainant. Reference can be made to Judgment of Apex Court in Rangappa v. Mohan, AIR 2010 SC 1898,that, "Once the cheque relates to the account of the accused and he accepts and admits the signatures on the said cheque, then initial presumption as contemplated under Section 139 of the Negotiable Instruments Act has to be raised by the Court in favour of the complainant."
Also in the case of K. Bhaskaran Vs. Sankaran Vaidhyan Balan 1999 (4) Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 6 of 16 RCR (Criminal) 309, it has been held by the Hon'ble Supreme Court as under:
"As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins on the court to presume that the holder of the cheque received it for the discharge of any debt or liability."
14. As per the scheme of the Act, on proof of the foundational facts, a presumption arises as to the 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 accused, and also keeping in mind that negative evidence is not easy to be led by its very nature. It is now fairly well 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. It has been held in M/s. Kumar Exports v. M/s. Sharma Carpets, [2009 A.I.R. (SC) 1518] that the accused may rebut these presumptions by leading direct evidence and in some and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. In light of aforestated legal position, let us carry out a scrutiny of the evidence led at the trial.
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15. The case of complainant is based on two different sets of transactions. The first set comprises of friendly loan of an amount of Rs. 2,00,000/- given to accused i.e. Rs. 1,00,000/- on 05.08.2013, and again an amount of Rs. 1,00,000/- on 14.09.2013. The second set comprises of amount of Rs. 4,50,000/- invested by complainant in two committees of Rs. 2,25,000/- each, run by the accused, which committees matured in July 2016. It is alleged that the three cheques in question were issued in partial discharge of both the abovesaid liabilities.
16. Adverting to the first set of transactions i.e. the friendly loan of Rs. 2,00,000/- given to accused. In his cross-examination, accused i.e. DW-2 admitted to taking of loan of Rs. 1 lakh each from complainant on 05.08.2013 and 14.09.2013 and also giving written receipts regarding the same i.e. Ex. CW-1/A. Even otherwise, throughout trial, accused has not denied or disputed the factum of taking these loans from complainant. His only defence in this regard is that he has already repaid the amount to complainant, however he could not produce any receipt or proof of repayment in this regard.
17. However it is also pertinent to consider another aspect regarding the friendly loans given by complainant i.e. whether the same is a time barred debt or not. It is trite law that offence under Section 138 of the Act can be fastened on an accused only if he commits a default in repayment of the dishonoured cheque which was issued in discharge of a legally recoverable debt. This position of law was also endorsed by the Apex Court in Sasseriyil Joseph Vs. Devassia, SLP (Crl.)1785/2001, DoD 10.09.2001. Here, as per own case of complainant, the first loan of Rs. 1,00,000/- was given on 05.08.2013, and second amount of Rs. 1,00,000/- was given on 14.09.2013. As per the written acknowledgments of debt i.e. Ex. CW-1/A, the whole amount of Rs. 2,00,000/- was to be paid after two months of taking the second amount. Simply put the amount of loan of Rs. 2,00,000/- was due and payable on 14.11.2013. However all the three cheques in question are dated 10.09.2017, i.e. beyond the period of three years of due date of repayment of loans.
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18. It is profitable to refer of Section 18 of the Limitation Act,1963 which deals with acknowledgement and explanation of limitation and reads as under:-
"Section 18 - Effect of acknowledgment in writing( limitation act) (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.
(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.
Explanation.--For the purposes of this section,--
(a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-
off, or is addressed to a person other than a person entitled to the property or right;
(b) the word "signed" means signed either personally or by an agent duly authorised in this behalf; and
(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.
19. Reliance can also be placed on the Dicta of the Hon'ble High Court of Delhi in M/s. Vijay Polymers Pvt. Ltd. & Anr. v. Vinnay Aggarwal, Crl.M.C.1682/2008 & Crl.M.A.Nos. 6167/2008 & 12878/2008, DoD 24.04.2009, wherein while dealing with similar facts, it was categorically held that when the cheques in question were issued after the debt having become time barred, offence under Section 138 of the Act was not made out. It was held as under:
"A perusal of the complaint and other documents as referred to above goes to show that the complainant had paid a sum of Rs. 6 lakhs by way of cheque to petitioner No.1 at the asking of petitioner No.2 somewhere in January, 2002 and the said cheque was credited in the account of petitioner No.1 on 1.2.2002 and was payable after six months and was not paid within Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 9 of 16 three years from 31.8.2002 that is the period within which it was under
limitation and as such the loan became time barred as on 31.8.2002. A perusal of the complaint also clarified that first two cheques which stated to have been paid to the complainant by the petitioners were paid on 27.4.2006 and 31.5.2006. Thus those cheques were paid after three years of the friendly loan having became time barred. Similarly, the cheques issued in lieu of the original cheque i.e. a cheque of Rs. 50,000/- bearing No. 817773 dated 30-08- 2006 and another cheque bearing No. 350562 dated 05-05- 2007."
20. Perusal of the aforesaid legal position shows that for computing the limitation of the liability beyond a period of three years, the acknowledgment, if any, must be there before period of limitation is over, which is not the case in present proceedings. It is also important to refer to a statement made by complainant in his examination in chief by way of affidavit:
"That I also join the two committee of Rs. 2,25,000/- each on 03-05-2015 run by Ram Kumar as member and the said committee was mature on July, 2016 but Ram Kumar assured me that he will repay the remaining committee amount and previous loan amount with in one year"
However the same remains a verbal averment of complainant. No such written acknowledgment of the loan has been relied upon or produced by the complainant to serve as an acknowledgment within the time period of limitation.
21. Coming to the second set of transactions, i.e. amount of Rs. 4,50,000/- due under chit fund committees run by accused. The accused in his cross-examination has admitted that he ran some committees and also that accused was subscriber paying his share of contribution into the committees. Thus it is clear that the actual transaction between the parties was akin to a chit fund. However the accused also stated is his cross-examination that the committee run by him is not registered with any government authority. Thus, it is important to address the issue as to whether the cheques in question which are said to have been issued towards payment due on such a chit fund/committee can be said to have been issued in discharge of a legal debt or liability.
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22. At the outset, it is profitable to discuss the law governing Chit funds/committees in India. A Pan-India legislation in the form of Chit Funds Act, 1982 (hereinafter referred to as the 'Chit Funds Act '). was enacted with a view to institutionalize the system of chit funds and have a regulatory mechanism in place, to ensure investor protection and smooth conduct of chit funds. This legislation (supplemented by Delhi Chit Fund Rules 2007), inter-alia, provides for mandatory registration of chit fund companies, in addition to sanction with respect to each chit scheme individually. It also mandated a provision for minimum capital requirements for a company intending to organize a chit fund, written chit agreements between the foreman and the subscribers detailing their respective contractual obligations, and other similar regulations to protect investor's interest.
23. As per the rules a Chit fund company, in order to run business is required to first obtain a certificate of incorporation from the Registrar of Companies. Then the same needs to be registered with the Chit fund department of the government after compliance with the elaborate formalities including drawing up of bye laws and spot inspection by the registrar. As per the Scheme of things, therefore, in order to start and run a chit in Delhi, a prior registration is mandatory. In addition to the above, every new chit group organized needs to be approved from the Registrar. Moreover as per provisions laid down in Sections 4 and 5 of the Chit Funds Act, no person shall commence or conduct any chit or publish any notice, circular, prospectus, proposal or other document inviting the public to subscribe for tickets in any chit unless previous sanction of the State Government is obtained and unless the chit is registered in that State and thereafter a certificate of commencement under section 9(2) of the Chit Funds Act is issued in Form VII of Delhi Chit Funds Rules, 2007.
24. Another important aspect under the scheme of the Act is that a written chit agreement is mandated as per Section 6 of the Chit Funds Act which must include the details regarding the subscribers, the amount of subscription and various other particulars. Moreover, the said chit fund agreement is required to be filed Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 11 of 16 with the Registrar, as per provisions of Section 7. It is also mandated, that the foreman has to provide copy of the chit fund agreement to all the subscribers, as per provisions of Section 10 of Chit Funds Act. Most importantly, the subscribers to the chit fund are entitled to receive a receipt for the payment made by them in lieu of installments, as per provisions of Section 27 of the Chit Funds Act. The act also requires the foreman to give security of an amount equal to the chit amount, before applying for sanction. This has been done with the salutary object of protecting the interest of the investor. Also as per Section 13 of the Chit Funds Act, no foreman, other than a firm or other association of individuals or a company or co-operative society, shall commence or conduct chits, the aggregate chit amount of which at any time exceeds twenty-five thousand rupees. However in present case the amount of each chit fund committee is Rs. 2,25,000/- which is in gross violation of the Act.
25. Thus, exhaustive provisions have been laid out in the Chit Funds Act, laying out mandatory requirements regarding registration and documentation at each and every stage, as also the volume of business, to ensure protection of investors and so that same does not become an avenue for illegal and unaccounted transactions. However, it is clear that the committees of accused were being run, without any registration or sanction and in violation of the maximum prescribed chit amount, in clear contravention to the provisions of the Chit Funds Act. In light of the above the question which again begs consideration is whether such an agreement between the parties, which is clearly forbidden by law can give rise to legally enforceable contractual obligations.
26. As disccused above, to sustain a prosecution u/s 138 of the Act, the debt or liability should be legally enforceable. In other words, there should be a lawful contract between the parties. A contract, is an agreement that is enforceable by law (as per Section 2(h) of the Indian Contract Act, 1872).As per Section 10 of the Indian Contract Act, 1872:
Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 12 of 16 "10. What agreements are contracts.--All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void"
27. As to what objects are lawful, Section 23 of the Indian Contract Act, reads as :-
"23. The consideration or object of an agreement is lawful, unless - it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void."
In light of the above the question as to whether the agreement to contribute made by a subscriber to an unregistered chit fund being run in violation of the statute, is legally unenforceable, has to be answered in the affirmative. Such an agreement, the object of which is forbidden by law, if given effect to would defeat the provisions of statute i.e. Chit Funds Act. Section 4 & 5 of the Chit Funds Act, 1982, in categorical terms, prohibit running of a chit fund or proposing subscriptions in a chit fund without sanction. Also there is clear violation of Section 13 of the Chit Funds Act as discussed above.
28. It is thus clear that running a chit/committee such as the present one is clearly forbidden by law. Any such agreement between a subscriber and a foreman therefore, is forbidden by law and if given effect would defeat the provisions of the Chit Funds Act, 1982. In such circumstances, the object of the agreement cannot be said to be lawful, as a result of which the agreement, having an illegal object, is therefore void ab initio. Since the agreement is void ab initio, the benefit of Section 65 of Indian Contract Act, 1872, also does not accrue to the complainant. Section 65 of the Indian Contract Act, 1872, reads as follows :-
Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 13 of 16 "65. When an agreement is discovered be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it."
29. Thus it is clear that Section 65 above is applicable only when agreement is 'discovered to be void' or contract 'becomes void'. The expressions "agreement" and "contract" have distinct meanings under the Contract Act. An "agreement" becomes a "contract" only if it is enforceable in law. Thus, the phrase "a contract becomes void" appearing in the said Section 65 would not have any application in the case where an agreement is void ab initio. It applies to cases, such as of supervening impossibility due to which a contract becomes void or a case where time is of the essence of the contract and one party fails to keep up to the time obligation and the other party exercises the option to rescind the contract. As regards the agreements which are "discovered to be void". This refers to those agreements which, the contracting parties or one of them did not know, at the time of entering into the agreement, to be not enforceable in law but, it was later "discovered" by them or one of them as being void. However, in facts and circumstances of present case where the committee/chit fund was being run and subscribed to without any legal compliance whatsoever, the parties were aware and had knowledge that the agreement is unlawful and despite this knowledge they decided to go ahead with the agreement, they would not be able to take recourse to the provisions of the said Section 65 because there would be no "discovery" of the invalidity of the agreement. That the agreement was unlawful and, therefore, void, was known to them all along.
30. It is pertinent to note that the present case is not one where complainant is in a naive or extremely financially weak party who may have innocently invested all his money in committee of complainant. The complainant was also otherwise advancing loans to accused against written acknowledgments. Ignorance of statute, is no excuse and the complainant, knowing well, the illegality of the committee, still put in money in the same at his own peril. In that regard Section Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 14 of 16 65 of the Indian Contract Act also would not come to his rescue, for this is a case where the doctrine of pari delicto would apply and the courts would refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud. In this case if the agreement to pay subscription, to what is clearly an illegally run chit fund, is upheld, that would set a dangerous precedent and thereby incentivize the running of such illegal schemes.
31. Moreover the discussion above reveals that the transaction in present case was purely unaccounted cash transaction carried out in utter non-compliance of provisions of Chit Funds Act. In G. Pankajakshmi Amma and Ors. Vs. Mathai Mathew, (2004) 12 SCC 83, it was so observed that: -
"10. There is any reason also why the impugned Judgment cannot be upheld. According to the 1st respondent these transactions were to be unaccounted transactions. According to the 1st respondent, all these amounts are paid in cash. If these are unaccounted transactions then they are illegal transactions. No court can come to the aid of the party in an illegal transaction. It is settled law that in such cases the loss must be allowed to lie where it falls. In this case as these are unaccounted transaction, the court could not have lent its hands and passed a decree. For these reasons also the suit was required to be dismissed."
32. In light of above facts and circumstances, it is clear that the inherent infirmities in the case of the complainant are sufficient to rebut the presumption of legal liability. As discussed above, as regards the first set of transactions of friendly loans are concerned, offence under Section 138 of the Act is not made out, since cheques in question were issued after the debt having become time barred. Same is the fate as regards the second set of transactions, i.e. amount of Rs. 4,50,000/- due under committees run by accused. As discussed above, the agreement to contribute made by a subscriber to a chit fund being run in complete violation of the Chit Funds Act, is legally unenforceable. The same renders it as an unaccounted transaction and not enforceable in court of law. Thus the complainant has failed to establish one of the fundamental ingredients of Section Satish Kumar Vs. Ram Kumar CC No. 25374/17 Page no. 15 of 16 138 of the Act, i.e. that the dishonoured cheques were issued in discharge of a legally recoverable debt or liability.
33. In present matter, from the case of the complainant itself, the presumptions under sections 118 and 139 of the Act stand rebutted and the reverse onus cast upon accused has been discharged.
34. Accordingly, the accused Ram Kumar S/o Sh. Banwari Lal is acquitted of the offence under section 138 of the Act.
Digitally signed MRIDUL by MRIDUL
GUPTA
GUPTA Date: 2019.06.25
14:42:57 +0530
ANNOUNCED IN THE OPEN COURT (MRIDUL GUPTA)
TODAY i.e. 25th JUNE 2019 METROPOLITAN MAGISTRATE
DWARKA DISTRICT COURTS/ DELHI
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