Bangalore District Court
S Naresh Kumar vs M/ S Ygk Infra India Pvt Ltd on 1 March, 2024
KABC030616232018
Presented on : 21-08-2018
Registered on : 21-08-2018
Decided on : 01-03-2024
Duration : 5 years, 6 months, 9 days
IN THE COURT OF THE XXI ACMM, BENGALURU
Dated: This the 01st day of March, 2024
Present:
SRI.GIRISH CHATNI, B.A.,LL.B.,(Spl)
XXI ACMM, Bengaluru
C.C.No.22951/2018
Complainant : Sri.S.Naresh Kumar,
S/o. late N.Shamanna,
Aged about 40 years,
Managing Director
(Personal Capacity)
M/s.Monuments Advertising Pvt.Ltd,
No.407, 8th 'B' Main,
4th Block, Jayanagar,
Bengaluru - 560 011.
(By Sri.V.B.S., Adv)
V/s
Accused : 1. M/s. Y.G.K. Infra India Pvt.Ltd,
A Company incorporated
Under the provisions of
Companies Act 1956,
2 CC.No.22951/2018
and having its Registered Office at:
"Anjana Ganga", 1st Cross,
Adarsha Nagar, Belagumba Road,
Tumkur - 672 103.
2. Sri.Keshavamurthy Gangappa,
S/o Sri.Gangappa,
Aged about 37 years,
"Anjana Ganga",
1st Cross, Adarsha Nagar,
Belagumba Road,
Tumkur - 572 103.
3. Smt.Swetha Nataraj,
W/o Sri.Keshavamurthy Gangappa,
Aged about 33 years,
D/o. Sri.Appaiah Nagaraja,
No.61, Sanjeevappa Lane,
Avenue Road Cross,
Bengaluru - 560 002.
(By Sri.R.V.S, Adv.)
JUDGMENT
This case emanates from a private complaint filed by the complainant alleging that the accused persons have committed an offence punishable under section 138 of Negotiable Instruments Act, 1881.
2. THE ESSENTIAL FACTS IN BRIEF.
It is the case of the complainant that, M/s Y.G.K., Infra India Private Limited is a private Limited company incorporated under the provisions of Indian Companies Act 1956. It has two directors 3 CC.No.22951/2018 viz., accused No.2 and 3. The accused No.1 company is an Income Tax Assessee and it is assessed with income tax independently by accused No.2 and 3 and as a company therein. It is further contended that the complainant is doing business and he is the Managing Director of M/s Monument Advertising Pvt. Ltd. Apart from the said business, the complainant independently carries on business activities for the purpose of various categorized business. It is further contended that the accused No.2 and 3 being in-charge of the company doing business have approached the complainant that they have under taken certain projects from the Governmental Organization and have become qualified in the tenders invited and therefore have under taken commitment to complete the projects in terms of the contract and under that circumstances they required financial assistance. In that regard, the accused No.2 and 3 have indicated that they required an amount of Rs.1,00,00,000/-. The complainant with great difficulty and out of the income derived from the business and under the running account of arranged an amount of Rs.1,00,00,000/- and lent the same by way of cash. The accused No.2 and 3 have acknowledged under two On Demand Promissory Notes and consideration receipts for an receipt of amount of Rs.50,00,000/- each.
4 CC.No.22951/2018
2(i). It is further contended that, in the month of March 2016, the complainant who was in business requested to repay the amount since it was a temporary arrangement for having borrowed the loan and the interest indicated in the document was 12%. It is further contended that, the complainant on persuasion of accused No.2 and 3 have handed over two cheques dated 03.01.2016, which are pertaining to the accused No.1 company, representing to the complainant that the same would be repaid to the company. It is further contended that upon confirmation from the accused No.2, whether the cheques could be presented for encashment, the complainant on representation made that cheques will be honoured, presented the cheques for encashment, to the shock and surprise of the complainant, the same came to be dishonoured. Thereafter, the accused has written letters and correspondence indicating that he shall discharge the liability. It is further contended that, the complainant finding the accused persons will not make payment got issued legal notice dated 23.05.2016, which came to be served. Therefore, the complainant filed the present complaint against the accused persons alleging the commission of offence punishable under section 138 of Negotiable Instrument Act. 5 CC.No.22951/2018
3. The complainant has led his pre summoning evidence. The complainant has filed his affidavit by way of sworn statement in lieu of oral evidence, in which, he has reiterated the complaint averments.
4. Prima-facie case has been made out against the accused persons and have been summoned vide order of the same date. Accused No.2 and 3 have appeared before the court and have been enlarged on bail. The substance of accusation was read over to them, to which they pleaded not guilty and claimed to be tried.
5. The complainant has examined himself as PW.1 by filing examination-in-chief by way of affidavit in lieu of oral evidence. He got produced 14 documents as per Ex.P.1 to Ex.P.14 and closed his side. Thereafter, the accused No.2 and 3 were examined as provided under section 313 of Cr.P.C., by explaining the incriminating evidence available against them. The accused No.2 and 3 have not led their oral or documentary evidence. However, the accused No.1 to 3 have examined one K.Selvaraj, Income Tax Officer, as CW.1 and got marked ITR of the year 2015 and 2016 of complainant as per Ex.C.1.
6 CC.No.22951/2018
6. Heard the learned counsel for the complainant and learned counsel for the accused. The counsel for the complainant has filed synopsis. He also relied on the following decisions;
1) Aironline 2018(1) SCC (Crl) 752
2) AIR 2014 SC 2528
3) (2018)2 CIVLJ 558
4) 2001 CRI.L.J.4647
5) AIR 2019 SC 2446
6) AIR 2010 SC 1898
7) AIR 2001 SC 2895
8) AIR 2017 SC 4594
9) (2002) 1 BANKJ 361;
10) AIRONLINE 2021 SC 82
11) AIR 1992 SC 1604
12) AIRONLINE 1996 SC 315
13) 2020(1) AKR 611
14) 2015 AIR SCW 3040
15) 2020(1) AKR 550
16) 2022 (6) SCC 735 :: AIR Online 2022 SC 942
17) Criminal Revision Petition No.485/2009 passed by the Hon'ble High Court.
18) Criminal Appeal Nos.849-850 of 2011 passed by the Hon'ble Supreme Court
19) AIR 2019 SC 1983
20) AIR 2015 SC 2240
21) AIR 2018 SC 3601 7 CC.No.22951/2018
7. During the course of the arguments, the counsel for the complainant has filed reply to the submissions made by the accused.
8. During the course of the arguments, the counsel for the accused has relied on the following decisions in support of his contentions;
1) AIR 2019 Supreme Court 1983
2) (2009) 2 Supreme Court Cases 513
3) AIR 2009 Supreme Court 1168
4) AIR 2013 Supreme Court 3210
5) 2010 Crl.L.J 3386 KAR
6) Rasheeda Mehaboob V/s Refilicon Software (India) Private Limited.
7) Crl.R.P.No.793/2015 Shantha Kumar V/s Kumaraswamy
8) (2009) 14 Supreme Court Cases 683
9) Order passed in (IB) - 447(ND)/2021 of the Hon'ble NCLT New Delhi dated 23.05.2022.
9. The following points would arise for consideration.
1. Whether the complainant proves that the accused No.1 has issued Two Cheques bearing No.471036 dated: 31.01.2016 another cheque bearing No.471037 dated:31.01.2016 in favor of complainant for a sum of Rs. 1,00,00,000/- in total in discharge of legally enforceable debt and same are returned unpaid on account of 8 CC.No.22951/2018 "FUNDS INSUFFICIENT" and thereby committed an offence punishable under section 138 of Negotiable Instrument Act?
2. What Order?
10. My findings on the above points are as under:-
Point No.1: In the "Negative"
Point No.2: As per the final orders for the following:
REASONS
11. Point No.1:
Section 138 of the Negotiable Instrument Act has been enacted to lend credibility to the financial transactions.
The main ingredients of the offence punishable U/s 138 of Negotiable Instrument Act are ;
(I) Drawing up of a cheque by the accused towards payment of an amount of money, for discharge, in whole or in part, of any debt or any other liability.
(ii) Return of the cheque by the Bank as unpaid.
(iii) The drawer of the cheque fails to make the payment of the said amount within 15 days of the receipt of notice under the proviso (b) to Section
138.
The explanation appended to the section provides that the debt or other liability, for the purpose of this section means a 9 CC.No.22951/2018 legally enforceable debt or other liability.
12. Apart from this, section 139 of Negotiable Instruments Act lays down a presumption in favour of the holder of cheque in the following terms;
"It shall be presumed unless the contrary is proved, that - the holder of the cheque received the cheque, of the nature referred to him section 138, for the discharge in whole or in part, of any debt or other liability."
13. Also, Section 118 of the N.I.Act states - 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;
(b) as to date:--that every negotiable instrument bearing a date was made or drawn on such date;
(c) as to time of acceptance:--that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;
(d) as to time of transfer:--that every transfer of a negotiable instrument was made before its naturity;
(e) as to order of endorsements:--that the indorsements appearing upon a negotiable instrument were made in the order in which they appear then on;10 CC.No.22951/2018
(f) as to stamp:--that a lost promissory note, bill of exchange or cheque was duly stamped;
(g) that holder is a holder in due course:--
that the holder of a negotiable instrument is a holder in due course: 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
14. Thus the Act clearly lays down presumption in favour of the complainant with regard to the issuance of the cheque by the accused towards the discharge of his liability in favour of the complainant.
15. Under the scheme of the Act, the onus is upon the accused to rebut the presumptions in favour of the complainant by raising a probable defence.
16. It is a well settled position of law that, the defence of the accused, if is in the nature of a mere denial of the case of the complainant will not be sufficient to hold it as a probable defence. The bare denial of the passing of consideration apparently does not appear to be any defence. Something which is probable must be brought on record for getting the benefit of shifting the onus of proof to the complainant. 11 CC.No.22951/2018
17. It is also a well settled position of law that once the cheque is proved relating to the account of the accused and if he /she accepts and admits the signature of the said cheuqe, then the initial presumption as contemplated under section 139 of the N.I.Act has to be raised by the court in favour of the complainant.
18. The presumption referred to in section 139 of N.I.Act is a mandatory presumption and not a general presumption, but the accused is entitled to rebut the said presumption. What is required to be established by the accused in order to rebut the presumption is different from each case under given circumstances. However, the fact remains that a mere plausible explanation is not expected from the accused and it must be more than a plausible explanation by way of rebuttal evidence. The defence raised by the accused by way of rebuttal evidence, must be probable and capable of being accepted by the court.
19. No doubt the initial mandatory statutory presumption as provided under sections 118 and 139 of N.I.Act are in favour of the complainant. However, they are rebuttable presumptions and the accused is expected to rebut the presumption by raising a probable defence.
12 CC.No.22951/2018
20. Such being legal position, it would be appropriate to refer the defence taken by the accused person. On perusal of the materials on record, cross examination of PW.1 and the arguments advanced by the counsel for the accused, the following defences have been raised;
I) No transaction taken place in between complainant and the accused persons.
II) The accused persons have not been served with the legal notice.
III) The complainant is not having financial capacity to advance amount of Rs.1,00,00,000/- to the accused No.1 IV) Accused No.3 is not the signatory, not necessary party to the proceedings.
21. Having gone through the defence raised by the accused, now it has to be seen that whether presumption U/s 118 of N.I.Act can be drawn in favour of the complainant as the accused persons have disputed the very financial capacity of the complainant to lend such amount to the accused No.1.
22. The complainant has examined himself as PW.1 by filing examination-in-chief by way of affidavit in lieu of oral evidence and he has reiterated the entire averments made in the complaint and further deposed that he has status of a 13 CC.No.22951/2018 remuneration of Rs.25,00,000/- to Rs.27,00,000/-. PW.1 has further deposed that the accused No.1 wrote a letter to him confirming that, he will be paying the amount of Rs.1,00,00,000/- along with other expenditure of two crores with the dates. PW.1 has further deposed that, the On Demand Promissory Note and Consideration Receipt are done in his presence. Those documents are executed as security towards the loan of Rs.1,00,00,000/- borrowed by the accused No.1 company.
23. Requirements to be fulfilled by company in order to avail unsecured loan from individual or from company:-
On referring the relevant averments made in the complaint, examination-in-chief it is specifically alleged by the complainant that on the request of accused No.2 and 3, he has lent a sum of Rs.1,00,00,000/- by way of cash to the accused No.1 company. Now it is to be examined as to what are the legal provision as to whether an individual or a company concern can lend hand loan of Rs.1,00,00,000/- to another company. It would be profitable to refer the relevant provisions of the Companies Act and also the Articles of Association of the accused No.1 company.14 CC.No.22951/2018
24. During the course of the arguments, the counsel for the accused has brought to my notice, Section 186 of the Companies Act, 2013 which provides for the Loans and Investment that can be made by the company, it states that a company can make investments through more than two layers of investment companies. Section 186 of the Companies Act stipulates the provision relating to the loan and investment by company.
25. LEGAL REQUIREMENTS:-
1) Approval of board.
The approval of the board is required in all cases, Irrespective of the amount of loan, investment, guarantee or security.
The approval of the board shall be obtained by means of a Unanimous Resolution Passed at a Board meeting with the consent of all the directors.
Resolution by circulation or Resolution of the committee of Directors is not sufficient.
2. Approval of the Members by passing special resolution.
When the aggregate of the loan investment, guarantee or security already made together with the loan, 15 CC.No.22951/2018 investment, guarantee or security proposed to be made exceeds the limit as specified U/s 186(2), prior approval by means of a special resolution is necessary.
3. Limit U/s 186(2) of Companies Act, 2013.
60% of paid up share capital + Free reserves + Securities Premium.
From plain reading of contents of section 186(2) of the companies Act 2013, it can be observed that a company can grant loan to any person or other body corporate up to 60% of it paid up share capital. On perusal of section 186(3) of the Companies Act, it can be observed that when a company has given a loan exceeding the limits specified under section 186(2) then prior approval by means of special resolution is required. Section 186(5) of the Companies Act makes it mandatory to pass a Board Resolution with the consent of all the directors.
26. Having gone through the relevant provision under the Companies Act with regard to the availment of the deposit by the company, it would be proper to refer the relevant portions of the cross examination of PW.1. PW.1 has admitted that, the accused No.1 company is a Civil Contract Company. PW.1 has admitted that he had averred in the complaint that he has advanced the loan to the accused No.1 company. Further cross examination 16 CC.No.22951/2018 part of PW.1 made by the accused on 16.10.2018 further reveals that PW.1 is having knowledge about the companies and the Act. During the further cross examination of PW.1, he has admitted that in order to have transaction with any of the company relating to the financial matters, the company Board Directors have to pass resolution to that effect. I find no copy of the resolution passed by the accused No.1 company represented by its directors has been produced before this court in order to show that the accused No.1 company has sought for financial assistance of rupees one crore from the complainant and the board of directors unanimously have resolved to accept the deposit of rupees one crore from the complainant. PW.1 has further admitted that every company be it private or limited company have to maintain books of account showing the daily transactions of the said company. I find no books of account maintained by the accused No.1 company has been produced before this court in order to ascertain that the complainant has lend rupees one crore to the accused No.1 company. PW.1 has further admitted that, the Company Board Directors and Managing Directors have to pass Resolution detailing out the reason for which the company is to avail hand loan of rupees one crore from other persons not within the Directors of the company. 17 CC.No.22951/2018
27. Further cross examination of PW.1 on 16.10.2018 further fortifies that, he has volunteered by deposing that he has advanced rupees one crore not on behalf of M/s Monuments Advertising Private Limited, but on personal capacity. Further cross of PW.1 reveals that he is having knowledge that as per Memorandum of Association, the financial assistance to any of the company has to be made through cheque only. In the case on hand, the averments made in the complaint, sworn statement and in the examination-in-chief reveals that the complainant has advanced rupees one crore as hand loan to the accused No.1 company by way of cash. PW.1 has further admitted that he has not advanced the above said one crore rupees to the accused No.1 company through cheque. PW.1 has further admitted that, his company is having authorized and paid capital of Rs.5,00,000/-. PW.1 has further deposed that from the year 2014 as on 16.08.2018 i.e., on the day of deposing before the court, his company was having maximum transaction of Rs.5,00,000/-. PW.1 has further admitted that, at the time of advancing loan of rupees one crore to accused No.1 company he has not obtained the proceedings of the meetings of the accused No.1 company.
28. Having gone through the relevant portions of the cross examination of PW/1, averments made in the complaint, 18 CC.No.22951/2018 sworn statement, examination-in-chief of PW.1 and relevant provisions of the Companies Act, it could be gathered that the accused No.1 company is registered private limited company under the Companies Act. It is the sole contention of the complainant that on personal capacity he has advanced hand loan of rupees one crore to the accused No.1 company. While perusing the materials on record, I found the true copy of the Memorandum of Association and Articles of Association of the accused No.1 company produced by the complainant. Though the said document has not been marked, it would not preclude this court in considering the said document in order to ascertain about the legal position as to whether the private limited company can avail financial assistance / deposits from others not being the directors of the company.
29. Memorandum of Association and Articles of Association would fortifies that the accused No.1 company is a company limited by shares and incorporated under the Companies Act 1956. Para No.12 of part (B) of Memorandum of Association of accused No.1 company further reveals that the it can borrow or raise money for the performance or discharge of any liabilities of the company. This condition in the Article of Association further fortifies that the accused No.1 company can 19 CC.No.22951/2018 raise or borrow money from others. Now, on referring clause (d) of paragraph No.3 under the heading 'Private Company of Articles of Association' of accused No.1 company further prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives. On plain reading of the said sub-clause it prohibits the company from inviting or accepting any deposits from persons. The rider is the company can accept the deposits from its members, directors or their relatives.
30. In order to avoid the different meanings with regard to the deposit, at this juncture it would be proper to refer the meaning of deposit as provided under the Companies Act, section 2(31) of the Companies Act defines 'deposit' which includes any receipt of money by way of deposit or loan or in any other form by company. The other part in the section relates to what it does not include in the meaning of deposit. I am confined only with the first part of the meaning of deposit as provided U/s 2(31) of the Act. Therefore, the deposit includes the receipt of money by way of loan also. As discussed above clause (D) prohibits the accused No.1 company from accepting the deposit from other private persons. It would be proper to refer the HEADING GENERAL MEETINGS and its inclusions in the Articles of 20 CC.No.22951/2018 Association of the accused No.1 company. Sub-clause (D) of the General Meetings in the said Articles of Association fortifies that section 186 of the Companies Act do not apply to the accused No.1 company. Therefore, the provision enumerated U/s 186 of the Companies Act, 2013 and its requirements cannot be made applicable to the case on hand.
31. Having gone through the Articles of Association and Memorandum of Association of the accused No.1 company gathering it to be a private limited company, it would be proper to say that the accused No.1 company is a limited company. Further, on going through the Memorandum of Association of the accused No.1 company, though the liability of the members is limited, the authorized share capital of the accused No.1 company is rupees one Lakh which is divided into Rs.10,000/- equity shares of Rs.10 each. The said aspect has been taken into consideration as to ascertain that the complainant was not diligent in knowing the repaying capacity of the accused No.1 company, where it being incorporated under the Companies Act had only authorized the share capital of Rs.1,00,000/- and the complainant asserts that he has lent Rs.1,00,00,000/- to the company that to hand loan by way of csh, where, he himself has 21 CC.No.22951/2018 produced the Memorandum of Association and Articles of Association of accused No.1 company.
32. It would be appropriate to refer section 179 of the Companies Act 2013, which provides for powers of Board, which is reproduced here under for better discussion.
"179. Powers of Board.-- (1) The Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorized to exercise and do:
Provided that in exercising such power or doing such act or thing, the Board shall be subject to the provisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting:
Provided further that the Board shall not exercise any power or do any act or thing which is directed or required, whether under this Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting.
(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made.22 CC.No.22951/2018
(3) The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:--
(a) to make calls on shareholders in respect of money unpaid on their shares;
(b) to authorize buy-back of securities under section 68;
(c) to issue securities, including debentures, whether in or outside India;
(d) to borrow monies;
(e) to invest the funds of the company;
(f) to grant loans or give guarantee or provide security in respect of loans;
------- ( Emphasis supplied).
From perusal of the contents of section 179(3) of the Companies Act 2013, it can be observed that in both the situations that is at the time of granting loan as well as availing loan, a Board Resolution is required to be passed. On perusal of the materials on record, the complainant has failed to produce any such Board Resolution in order to show that the accused No.1 company and its directors have passed resolution to avail loan of rupees one crore from the complainant be it either from the company of the complainant or from the complainant personally.23 CC.No.22951/2018
33. During the course of the arguments, the counsel for the accused persons has relied on the order passed by the Hon'ble NCLT, New Delhi Bench in (IB) -447 (ND) / 2021 dated 23.05.2022. I have carefully gone through the order passed by the Hon'ble NCLT, wherein, the said tribunal dealing with section 7 of the IBC 2016 has elaborately dealt with section 186, 179 of the Companies Act and has dismissed the application filed by the financial creditor.
34. I have carefully gone through the Articles of Association and Memorandum of Association of the accused No.1 company wherein, it has not been recited that section 179 is not applicable to that company. In view of the mandatory provisions of the Companies Act, the complainant has failed to produce the Board Resolution, where the directors of the accused No.1 company have resolved to avail loan of rupees one crore from the complainant.
35. NON-SERVICE OF NOTICE :-
The accused No.1 to 3 have set up another defence that the notice as contemplated U/s 138 of N.I.Act has not been duly served upon the accused persons. With regard to the said 24 CC.No.22951/2018 contention, I would like to refer Ex.P.5 to 10, which are the office copy of the legal notice, postal receipt and postal acknowledgment. It is pertinent to mention here that, the complainant has not produced any document with regard to the proof of service of notice to the accused No.3. It would be proper to refer the address mentioned in Ex.P.5, wherein, the name of the company and its registered office has been shown as Anjanaganga, First Cross, Adarsh Nagar, Belagumba Road, Tumkur. The address of the accused No.3 has been shown as No.61, Sanjeevappa Lane, Avenue Road Cross, Bengaluru-02. Ex.P.6 to Ex.P.8 are the Postal Receipts. Ex.P.9 and Ex.P.10 are the Postal acknowledgment Cards, wherein, the same person has signed on the postal acknowledgments. As stated above, the complainant has not produced any of the documents showing the proof of service of the notice to the accused No.3. No doubt the summons to the accused no.3 has been served with and has appeared through her Advocate, but with regard to service of notice to accused no.3 has not been properly substantiated by the complanant.
36. During the course of the cross examination of PW.1, Ex.D.1, which is the identity card of MD of Accused No.1 company i.e., Accused No.2 has been confronted, wherein, the 25 CC.No.22951/2018 address of the accused No.2 has been mentioned as No.61, Sanjeevappa Lane, Avenue Road Cross, Bangalore-02.
37. The counsel for the accused persons pointing to the name of the accused No.2 in Ex.D.1, which is mentioned as G.Keshavamurthy and in comparing with Ex.P.10 has argued that the name mentioned in the Ex.P.10 is appearing as Keshavamurthy Gangappa, which are all together different. Therefore, the address mentioned in the Ex.D.1 holds to be correct one and the Legal notice has not been sent to the correct address of the accused persons. I have gone through the cross examination part of PW.1, wherein PW.1 has deposed that the name mentioned in Ex.D.1 and Ex.P.10 of accused No.2 belongs to accused No.2 only. PW.1 has also deposed that, he has issued legal notice to the address mentioned in the Memorandum of Association and Articles of Association. It would be profitable to refer Articles of Association and Memorandum of Association, though the said document has not been marked it can be looked into, in order to ascertain about the address of the accused No.1 to 3. As per the certificate of incorporation the mailing address as per the records available in Registrar of Companies is as follows;
"YGK Infra India Pvt. Ltd., Anjanaganga, 1 st Cross, Adarsh Nagara, Belagumba Road, Tumkur -572103". 26 CC.No.22951/2018
The address mentioned in the office copy of the legal notice with regard to the accused No.2 and 3 are found incosonance with the name, address, description of the accused No.1 to 3. Therefore, the said contention of the accused No.1 to 3 that the address mentioned in the Ex.D.1 and Ex.P.10 are different and there is no valid service of notice to the accused No.2 holds no water. I have gone through the cross examination part of PW.1, wherein, he has deposed that, it is not related to him with regard to the different address mentioned in the Ex.D.1 and Ex.P.10.
38. I have carefully gone through the cross examination of PW.1, wherein, he has deposed that the notice issued to accused No.3 has been served, wherein, he has produced postal receipt. PW.1 has further admitted that he has not produced postal acknowledgment of accused No.3 with regard to the proof of service of notice. I find no postal acknowledgment having been produced by the complainant in order to show that there is valid service of notice to accused No.3. It was also suggested that the signature appearing in Ex.P.9 and Ex.P.10 does not belong to the accused No.2, to which he pleaded ignorance as to who has signed over the said documents. During the course of cross examination of PW.1, he has admitted that, the name of accused 27 CC.No.22951/2018 No.3 has not been mentioned in any of the documents produced by him.
39. It is useful to refer the decision of K. Bhaskaran v. Sankaran reported in (1999) 7 SCC 510, & In Dalmia Cement (Bharat) Ltd. v. M/s. Galaxy Traders reported in AIR 2001 SC 676, the Hon'ble Supreme Court held that to constitute an offence under section 138 N.I. Act, the complainant is obliged to prove its ingredients which includes the receipt of notice by the accused under Clause (b). It is to be kept in mind that it is not the 'giving' of the notice which makes the offence but it is the 'receipt' of the notice by the drawer which gives the cause of action to the complainant to file the complaint within the statutory period. Para No.19 of the decision referred reveals that the Hon'ble Apex Court has distinguished giving of notice from receiving of the notice. In Black's Law dictionary "Giving of Notice" is distinguished from "receiving of the notice". A person notifies or give notice to another by taking such steps as may be reasonably required to inform the other in the ordinary course, whether or not such other actually comes to know of it. A person who "Receives" a notice when it is duly delivered to him or at the place of his business. In the case on hand, mere giving of notice and production of postal receipt is not enough to conclude that 28 CC.No.22951/2018 the accused No.3 has received the notice sent by the complainant. Therefore, the said line of the arguments by the complainant that by production of the postal receipt would suffice that the notice has been duly served on accused No.3 is not sustainable.
40. On over all materials on record, the accused No.2 has failed to prove that there was no valid service of notice to him. I have carefully examined the examination of accused No.2 and 3 as provided U/s 313 of Cr.P.C., wherein, they have denied for the valid service of the notice. However, the accused No.2 has failed to show that there was no valid service of notice to him. In the absence of cogent materials on record, the complainant has failed to show there was valid service of notice to accused No.3 as he has failed to provide the postal acknowledgment or letter from the postal authorities.
41. FINANCIAL CAPACITY :-
It is well settled that the complainant in a Cheque Bounce case need not to prove / explain his financial capacity. It is only when the same is questioned by the accused, the complainant has to explain and prove his financial capacity by leading evidence to that effect. It is well settled that, section 139 of the 29 CC.No.22951/2018 N.I.Act, provides for a mandatory presumption that the cheque was issued for the discharge of a debt or liability. In such a case, the standard of proof is that of preponderance of probabilities. As discussed in earlier paragraphs of discussion, the PW.1 during his cross examination has admitted that, he has personally given the amount to the accused No.1 company. It would be proper to refer the cross examination part of PW.1 made by the accused, wherein, he deposed that on 10.02.2014 he has given Rs.1,00,00,000/- to the accused No.1 in which he had given Rs.500/- notes. Cross examination of PW.1 made by the accused on 22.01.2019 further reveals that PW.1 has deposed that on 01.10.2014, the accused No.2 has sought for and on the same day itself he has given the said amount. During the course of cross examination of PW.1 on 20.02.2019, PW.1 has deposed that he has given an amount of rupees one crore to the accused No.1 company on 10.12.2014.
42. During the cross examination of PW.1, he has deposed that if necessitated, he will produce document showing that he was having rupees one crore in cash in order to advance the same to the accused No.2. However, the complainant has not produced any documents showing that as on the date of transaction as alleged the complainant was having rupees one 30 CC.No.22951/2018 crore in cash. PW.1 further admits that, one Shashikiran and Rajapanikiran were present on the date of transaction. On perusal of the records, no documents have been produced or the said persons have been examined in order to show that the said transaction took place in their presence. On perusal of the cross- examination of P.W.1, he deposed that for the first time he is saying that he has given amount infront of Shashikiran and Rajapanikiran. On perusal of the complaint, notice, sworn statement, examination in chief of the said fact that the shashikiran and Rajapanikiran were present has not been averred.
43. I have carefully given my anxious consideration to the averments made in the complaint and sworn statement filed by way of affidavit. In comparison with the examination-in-chief filed by way of affidavit, the complainant at para No.6 of the examination-in-chief has specifically contended that he is doing business and getting individual income. Apart from that, he had status of remuneration of Rs.25,00,000/- to Rs.27,00,000/- pertaining to his remuneration. It is also contended that, he was having available amount as a running amount for the Management of his business. A minimum cash requirement of turnover of rupees one and half crores available with him since 31 CC.No.22951/2018 he had a team of persons working under him as outsourcing agent and also has employees representing his company. With regard to the said remuneration, the complainant has not produced the books of account of the Monuments Advertising Pvt.Ltd., Company showing the remuneration of the accused, salary of the employees. No relevant documents have been produced by the complainant in order to show that he was having running amount that too of rupees one and half crores with him.
44. During the course of the cross examination of PW.1 only with regard to the remuneration which he was getting he was deposed that he has produced Income Tax documents. On perusal of the materials on record, the complainant has not produced any Income Tax documents. During the course of cross examination of PW.1, he admits that in the books of account of the Monument Advertising Pvt. Ltd., it has been mentioned with regard to the payment of remuneration of rupees 25 to 27 Lakhs to the complainant. On the other hand, no such documents have been produced to show that the complainant was getting remuneration of rupees 25 to 27 Lakhs. If at all the complainant was paid remuneration of 25 to 27 Lakhs certainly there would be a TDS in the said remuneration. PW.1 has deposed that if necessiated he will produce the documents. PW.1 has admitted 32 CC.No.22951/2018 that he has paid tax on rupees one crore, which was given to the accused No.1. PW.1 has further deposed that, he will furnish the document. On perusal of the materials on record, the complainant has not produced any such documents. PW.1 has admitted that, he has not produced any documents showing his source of income.
45. During the course of cross examination of PW.1, he has admitted that he has paid Tax of rupees one crore, which has been given to the accused No.1 company, however, the complainant has not produced any I.T documents or related documents. PW.1 has further admitted that he has not produced any document to show that he was having rupees one crore.
46. On perusal of the materials on record, it is not in dispute that the complainant is the Managing Director of Monument Advertising Pvt. Ltd., in personal capacity. Such being the case, necessarily the said Private Limited company maintains books of account, files ITR every year. The accused No.1 to 3 have questioned the financial capacity of the complainant to lend such huge amount. In that regard as the complainant did not produce his ITR, the accused Nos.1 to 3 got examined the Income Tax Officer by name K.Shelvaraj as CW.1, wherein, he has 33 CC.No.22951/2018 produced the I.T document of the complainant for the year 2015 and 2016, which has been marked as Ex.C.1.
47. On careful examination of Ex.C.1, the annual income of the complainant for the year 2015 and 2016 was Rs.12,85,000/-. The said witness has not been cross examined by the complainant. In other words the evidence tendered by the Income Tax officer has remained unchallenged. Pointing to the said evidence of Income Tax Officer and Ex.C.1, the counsel for the accused would argue that the complainant did not had financial capacity in order to lend rupees one crore to the accused No.1 as alleged in the complaint. In that regard, I would like to refer some portion of the cross examination of PW.1, wherein, he has admitted that, he will utilize 50% of the Monthly Income towards the family. Therefore, it casts doubt on the financial capacity of the complainant as he has failed to produce sufficient, cogent reliable oral and documentary evidence.
48. It would be profitable to refer the decision of the Hon'ble Apex Court reported in AIR 2019 Supreme Court 1983 between Basalingappa V/s Mudibasappa, wherein, the Hon'ble Apex court has elaborately dealt with section 4 and 114 of Indian Evidence Act and summarized the principles regarding 34 CC.No.22951/2018 the standard of proof. In the decision referred the Hon'ble Apex court has dealt with rebuttal of presumption on section 139 of N.I.Act, wherein, the accused has disputed the financial capacity of the complainant to pay amount and leading evidence to prove it, the Hon'ble Apex Court holding that the accused has led probable defence, under such conditions the burden would be on the complainant to establish his financial capacity which he was unable to do. Therefore, the Hon'ble Apex Court restored the order of acquittal. In order to summarize the decision referred, the Basalingappa, who was the accused before the trial court was acquitted of the offence punishable U/s 138 of N.I.Act., wherein, the complainant by name Mudibasappa has preferred an appeal before the Hon'ble High Court of Karnataka, wherein, the Hon'ble High Court set aside the judgment of acquittal and convicted the accused Basalingappa for the offence punishable U/s 138 of N.I.Act. The Hon'ble Apex Court in the appeal preferred by Basalingappa has restored the order of the acquittal holding that the accused has led probable defence and it is the complainant, who has failed to establish his financial capacity. The said decision referred supra is aptly applicable to the case on hand.
49. It is appropriate to refer the decision of the Hon'ble Apex Court reported in 2023 Livelaw SC 46 between Rajaram 35 CC.No.22951/2018 Sriramulu Naidu (D) V/s Maruthachalam (D), wherein, the Hon'ble Supreme Court has observed that the standard of proof for rebutting the presumption U/s 139 of the N.I.Act is that of preponderance of probabilities. In the said case, which arose out of cheque bounce complaint, the accused was acquitted by the trial court as the accused has relied on the Income Tax Returns to show that the complainant did not had financial capacity. Against which the complainant preferred an appeal, wherein, the Hon'ble High Court has reversed the acquittal and convicted the accused. The Hon'ble Apex court in the decision referred supra noted that, if the accused questions the financial capacity of the complainant to lend the money, the burden is on the complainant to show that he had financial capacity to advance the said loan amount to the accused persons. In the case on hand, the accused Nos. 1 to 3 have not only questioned the financial capacity of the complainant, but have made an effort in examining the Income Tax Officer, wherein, it was revealed that the income of the complainant for the year 2015 and 2016 was Rs.12,85,000/- out of which Rs.1,70,465/- have been paid towards tax.
50. In John.K.Abraham V/s Simon.C Abraham and Another reported in (2014) 2 SCC 236, the Hon'ble Apex Court in para No.9 of the decision referred has observed that in 36 CC.No.22951/2018 order to draw the presumption under sections 118 and 139 of the Act, the burden is heavy on the complainant to show that he had the requisite funds for advancing the money to the accused.
51. In the decision of Basalingappa V/s Mudibasappa referred above, the Hon'ble Apex Court has observed that a complainant in Cheque Bounce case is bound to explain his financial capacity, when the same is questioned by the accused by leading evidence to that effect.
52. However, in the decision of Rangappa V/s Mohan reported in AIR 2010 SC 1898 that would prevail over both that is John Abraham and Basalingappa case in so much as it has been decided by full bench of the Hon'ble Apex Court as opposed to the said decisions referred supra, which have been decided by division benches. More over in the decision of Rangappa V/s Mohan, the Hon'ble Apex Court has extensively dealt with the issues of presumption and how it comes to play Vis a Vis a dishonoured cheque.
53. Furthermore, the observations made in the decisions of John K Abraham and Basalingappa referred above are more in domain of obiter guided by the peculiar factual matrices of those cases.
37 CC.No.22951/2018
54. Thus, if all the aforementioned decisions cited above are read conjointly, the clear picture emerges. If the defence brings on record credible material challenging the financial competence of the complainant, then only the complainant would have to discharge the burden of proving his financial competence else the presumption U/s 139 would fail. In the case on hand, the accused Nos.1 to 3 not only questioned the financial competence of the complainant, but also led the evidence of Income Tax Officer and proved that the complainant did not had financial capacity to pay such huge amount to the accused No.1 company without there being any resolution from the Board of Directors.
55. Relying on the above said decisions, it is clear that the complainant need not prove his financial capacity. The rider provided is if the accused / accused persons questions the financial capacity of the complainant to lend the amount, necessarily the complainant has to prove his financial capacity. Materials on record speaks that, the complainant was not having financial capacity in order to lend the huge amount to the accused persons. The decision referred above under the caption are aptly applicable to the case on hand.
38 CC.No.22951/2018
56. LEGALLY ENFORCEABLE DEBT :-
In order to prosecute the accused persons for the commission of offence punishable U/s 138 of the N.I.Act, the complainant has to prove that there was legally enforceable debt. On perusal of the materials on record, the accused persons have not disputed the signatures appearing in the cheques in question. The issuance of the cheques are also not disputed. However, during the course of the arguments, the counsel for the accused persons pointing to the cross examination of PW.1 in comparing with Ex.P.13 has vehemently argued that the said document has been obtained forceably from the accused No.1 by means of political power.
57. The counsel for the complainant by pointing out to the Ex.P.1 to Ex.P.10 has argued in his written notes of arguments that, the complainant has established the very essential ingredients in order to attract the provisions of section 138 of N.I.Act. On going through Ex.P.1 to Ex.P.10, no doubt the complainant has complied with the mandatory requirements in order to prosecute the accused persons for the commission of offence punishable U/s 138 of N.I.Act. However, as the accused persons have questioned the financial capacity of the 39 CC.No.22951/2018 complainant to lend such huge amount to the tune of rupees one crore, necessarily before drawing presumption as contemplated U/s 118 of N.I.Act, it has to be ascertained whether there exists legally enforceable debt.
58. The counsel for the complainant in his written notes of arguments has vehemently argued that in order to establish the legally enforceable debt, the complainant made available On Demand Promissory Note and Consideration Receipt, which have been proved beyond doubt. At this stage, it would be proper to refer the On Demand promissory Note and Consideration Receipt, the said documents are marked at Ex.P.11 and Ex.P.12, wherein, it is alleged that the accused No.2 has signed over the Ex.P.11 and Ex.P.12. However, there is no mention of name of the either of accused No.2 or accused No.3 or the accused No.1 company. It is the specific case of the complainant that the complainant has advanced hand loan of rupees one crore by way of cash to the accused No.1 company. Therefore, necessarily the said On Demand Promissory Notes and Consideration Receipts have to be executed on behalf of the accused No.1 company. Moreover, the attesting witnesses to the Ex.P.11 and Ex.P.12 have not been examined before the court. The date on Ex.P.11 it has been mentioned as 01.12.2024 and 10.12.2024, whereas, the 40 CC.No.22951/2018 complainant averred that, he has advanced rupees one crore to the accused No.1 company. On perusal of the averments made in the complaint, no dates have been mentioned as to when the said loan has been given to the accused No.1 company. Even the said fact has not mentioned in the sworn statement and also in the examination-in-chief filed by way of affidavit. On perusal of the cross examination of PW.1, he deposed that on 01.10.2014 the accused No.2 and 3 have requested the complainant to advance the amount of rupees one crore and on that day itself the complainant has advanced rupees One crore to the accused No.1 company. Then, what necessiated for the complainant to take On Demand Promissory Note and Consideration Receipt on two different dates. Moreover, the On Demand Promissory Note and Consideration Receipts does not bear any revenue stamp.
59. The counsel for the complainant by referring Ex.P.11 to Ex.P.13 has argued that, the accused No.1 has acknowledged borrowing of rupees one crore from the complainant and also argued that the accused No.2 has written letter seeking apology in delay in making payments. I have carefully examined the recitals mentioned in Ex.P.13, wherein, it is alleged that the accused No.2 has addressed letter in his own writing, wherein, the counsel for the complainant by relying to the contents of the 41 CC.No.22951/2018 letter has argued that Ex.P.13 is in the hand writings of accused No.2, who is non other than the Managing Director of the accused No.1 company. He categorically admits that there is legally enforceable debt of rupees one crore along with other expenditure amount of rupees two crore in terms of the dates, which is to be paid as soon as immediately. Payment received of rupees one crore shall be paid within 31.01.2016 their shall be no further delay in making the said payments. The counsel for the complainant further relying on the contents of the Ex.P.13 has argued that the accused No.1 has also sought for assistance in obtaining his pending bills of rupees Eight crore from KIADB, in which the accused No.1 authorized to collect the required payments on behalf of company. The accused No.1 has further submitted his sincere apologies for the delay and has not propagated any negative aspirations.
60. Counsel for the complainant in his written notes of arguments has argued that in order to establish the legally enforceable debt, the complainant has made available On Demand Promissory Notes, Consideration Receipts and the letter written by the accused No.1 dated 24.10.2015. For better understanding, it would be appropriate to reproduce the contents of Ex.P.13.
42 CC.No.22951/2018
"Adverting to the above, please accept my apologies in delay in making payments due to you.
As committed, I shall be paying the loan amount of Rs.1.00 Crore along with other expenditure amount of Rs.2.00 Crores within the following dates:
1) Rs.2.00 Crores shall be paid as soon as Immediately, the payments received.
2) Rs.1.00 Crore shall be paid within January 31 st of 2016.
There shall be no further delay in making above said, Payments beyond above said dates.
Further I request you to kindly help me in obtaining my pending bills of Rs.8.00 Crores from KIADB, in which I authorize to collect the required payments on behalf of my company.
I also request you to help me in obtaining Rs.2.00 Crores as AD-HOC payment from KIADB in which I shall be able to clear your Rs.2.00 Crores as above, committed.
These situations happened, be cause of delay in work execution, I sincerely apologize for the delay and I have not propagated any Negative aspirations, hope you will find me in good books, also encourage me for further contracts."
"1st Installment Next Bill payment within November 30 th Balance 1.00 Crore and interest amount.
2nd Installment That commitment will be settled within 31 st of December. The total amount of Rs.2.00 Crores." 43 CC.No.22951/2018
Having gone through the contents of the letter written by the accused No.1, let me consider the defence raised by the accused No.1 with regard to the Ex.P.13. During the course of the arguments,the counsel for the accused No.1 has argued that the complainant by having political influence has got the letter written by the accused No.1. In that regard, I would like to refer the cross examination part of PW.1 with regard to Ex.P.13. PW.1 has deposed that, he is cordial with the deceased Ananth Kumar, who was Central Government Minister. I have carefully gone through the cross examination part of the PW.1 on 08.07.2019, wherein, PW.1 has admitted that there is a pink colour paper attached to the Ex.P.13 and other three pages are white pages. On referring the cross examination part of PW.1, it reveals that the accused No.2 has taken a defence that as per the instruction of the deceased Ananth Kumar by having influence of police authorities, Ex.P.13 was forceably got written from the accused No.2.
61. On perusal of the materials on record, the accused Nos.1 to 3, more particularly accused No.2 has failed to show that what are the steps he had taken when the Ex.P.13 was obtained forceably by using the political influence. No police 44 CC.No.22951/2018 complaint has lodged against the complainant. However, it is the complainant who has to show that he had financial capacity in order to lend such huge amount. Therefore, the said document marked at Ex.P.3 though appears to be written by the accused No.2. However, that cannot be the sole document to consider that the accused owed rupees one crore to the complainant. I have carefully examined the contents of the Ex.P.13, wherein, it is alleged that the accused No.1 not only bound to pay one crore, but he has undertaken to pay the expenditure of Rs.2,00,000/-. Further on perusal of the contents of the Ex.P.13, the accused No.2 has sought for aid in clearing the bills of rupees Eight crores from KIADB. It further reveals that the complainant is highly influenced person. Therefore, it casts doubt on the execution of demand promissory notes, Consideration Receipts and the letter written by the accused.
62. I have carefully gone through the averments made in the complaint, wherein, at para No.14 of the complaint, he has contended that the accused has written letters, correspondence indicating that he shall discharge the liability. On perusal of the sworn statement filed by the complainant, he has not stated about the letters correspondence written by the accused to the complainant. However, para No.20 of the examination-in-chief of 45 CC.No.22951/2018 the PW.1 further states that the accused has written a letter to the complainant. In the complaint at para No.8 of the complaint, the complainant has averred that the complainant on persuasion of the accused No.2 and 3 handed over two cheques dated 03.01.2016. On perusal of the materials on record, I find no cheques of dated 03.01.2016 have been produced before this court.
63. I have carefully gone through the contents of legal notice issued by the complainant, which is marked at Ex.P.5. Para No.7 of the legal notice, the complainant has averred that on 02.04.2016 the accused No.2 had written a letter in his own hand writing having handed over the said cheques and therefore, it was contended that the said cheques were issued towards discharge of the legal liability running to crores of rupees, which came to be returned dishonoured on presentation. I find no letter of dated 02.04.2016 has been produced before this court. With regard to the said averments, the accused has cross examined PW.1, wherein, he has deposed that he has no impediment to produce the said letter and further deposed that by typographical mistake, the date has been wrongly typed.
64. I once again rely on the averments made in the complaint, wherein, para No.7 reveals that the interest indicated 46 CC.No.22951/2018 in the document was 12%. Referring the relevant paragraphs in sworn statement, the interest indicating was 12%. Referring the relevant paragraphs in examination-in-chief, more particularly at para No.16, the interest indicated in the document is 18%. Now comparing with the demand promissory note, the interest is at the rate of 1%. With regard to the same, I would like to refer the cross examination part of PW.1, wherein, he has admitted that the interest described in the examination-in-chief is correct. Therefore, the averments made in the complaint and sworn statement and the averments made in the examination-in-chief of PW.1 with regard to the interest is not tallying with the each other as it is compared with the interest mentioned in the demand promissory notes. Therefore, it casts doubt on the execution of demand promissory note, consideration receipt and Ex.P.13. It is worthwhile to mention here that, in order to ascertain the legally enforceable debt only pro-Note, Consideration Receipt and Letter written by the accused No.1 are not only to be considered, but there are other factors to be considered such as financial capacity of the complainant, non- service of notice to the accused No.3 and the accused persons have rebutted the presumption U/s 118(a) of the N.I.Act. On over all assessment of the materials on record, the complainant has 47 CC.No.22951/2018 failed to show that their exist legally recoverable debt from the accused persons.
65. DEFENCE WITH REGARD TO ACCUSED NO.3 AS NOT NECESSARY PARTY :-
The counsel for the accused persons during the course of arguments has vehemently argued that the accused No.3, who is not a signatory to the cheque in question is not at all a necessary party to the present proceedings. In this regard, it would be appropriate to refer section 141 of the N.I.Act, which reads as under;
" 141. Offences by companies.--(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub- section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:
[Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central 48 CC.No.22951/2018 Government or State Government or a financial 29corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in sub-
section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty ofthat offence and shall be liable to be proceeded against and punished accordingly. Explanation.--Forthe purposes of this section,--
(a) "company" means anybody corporate and includes a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm."
On plain reading of section 141 of N.I.Act, which envisages that the every Director of the company is also responsible for the transactions of the company. As discussed in the above said paragraphs no documents have been produced in order to show that the demand notice has been served on the accused No.3. Accordingly, the very ingredients of the prosecution of commission of offence U/s 138 of N.I.Act has not been made out 49 CC.No.22951/2018 against accused No.3. Therefore, no case is made out against accused No.3. Therefore, the said line of argument of the accused Nos.1 to 3 that accused No.3 is not a necessary party holds no water.
66. ANALYSIS AND EVALUATION:
Once the execution of the cheque is admitted, section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability. The presumption U/s 139 is a rebuttable presumption, wherein, the accused has to raise probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. To rebut the presumption, it is open for the accused to rely on the evidence led by him or can rely on the materials submitted by the complainant in order to raise a probable defence. It is not necessary for the accused to come into the witness box in support of his defence. During the course of the arguments, the counsel for the complainant would argue that the accused has not entered into witness box and has not taken probable defence and proved it.
67. On perusal of the facts of the present case, it is clear that the signature on the cheques have been admitted 50 CC.No.22951/2018 necessarily a presumption shall be raised U/s 139 of the Act that the cheques were issued in discharge of debt or liability. The question to be looked into is as to under whether any probable defence was raised by the accused persons. In the case on hand, two specific defences other than the defence raised by the accused persons are firstly the accused persons have questioned the financial capacity of the complainant to lend huge amount of rupees one crore. Secondly, the Demand notice as contemplated U/s 138 of N.I.Act has not been duly served upon accused No.2 and 3. As discussed in the earlier paragraphs the accused No.2 and 3 has failed to prove that accused No.2 was not served with the demand notice. However, the complainant has not shown that the demand notice issued by him has been duly served on accused No.3. Perusal of the cross examination of the PW.1 coupled with the documents produced by the complainant and the evidence I.T officer, it further revealed that the complainant had no financial capacity to lend such huge amount. Such being the case, it was the complainant, who has to show his financial capacity. However, he got failed in proving his financial capacity in order to lend such huge amount. Therefore, there is a probable defence on behalf of the accused No.2 and 3, which shifted the burden on the complainant to prove his financial capacity and 51 CC.No.22951/2018 regarding the deemed service of the legal notice on accused No.3.
68. There is one more aspect of the matter, which also needs to be noticed. In the complaint filed by the complainant as well as in examination-in-chief, sworn statement has not mentioned as to on which date the hand loan of rupees one crore by way of cash has been advanced to the accused No.1 company. It was during the cross examination, PW.1 gave two dates on two different dates of hearings. Under section 118(b) of the Negotiable Instrument Act a presumption shall be made as to date that every negotiable instrument made or drawn on such date. Giving a cheques, which was deposited as alleged is not compatible with the case of the complainant when the averments made in the complaint is being read coupled with the admissions in the cross examination has not been satisfactorily explained. Therefore, when the complainant has failed to show his financial capacity to lend a huge sum of rupees one crore, there cannot be a legally enforceable debt as the complainant has failed to prove the very transaction.
69. During the course of the arguments, the counsel for the complainant has filed the synopsis along with list of decisions. In the synopsis, he has set out the averments made in 52 CC.No.22951/2018 the complaint. The counsel for the complainant has referred Ex.P.1 to Ex.P.13. He relied on Ex.P.11 to 13 and argued that there exists legally enforceable debt. The counsel for the complainant has also argued that, there is sufficient material to establish that the accused has not been able to establish section 139 of the Negotiable Installment Act and prayed for convicting the accused. The counsel for the complainant has also relied on as many as 18 decisions.
70. During the course of the arguments, the counsel for the complainant has relied on the decision of the Hon'ble Apex Court reported in AIR Online 2014 SC 77 between H.Pukhraj V/s D.Parasmal. I have carefully gone through the decision referred, wherein, the Hon'ble Apex Court modified the judgment of the Hon'ble High Court and sentenced accused to pay Rs.10,00,000/-. The said decision referred is not applicable to the case on hand.
71. The counsel for the accused has relied on the decision reported in Indian Bank Association Case, wherein, the Hon'ble Apex court has given directions to the trial court to follow procedures for speedy and expeditious disposal of cases falling under section 138 of N.I.Act.
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72. The counsel for the complainant has relied on the decision reported in (2018)2 CIVLJ 558 of the Hon'ble High Court of Karnataka in Arjun V/s E.Shekhar and the decision of the Hon'ble Apex Court in Hithen.P.Dalal, wherein, the Hon'ble High Court and the Hon'ble Apex court has observed that, the burden of proving that cheque was not issued for any debt or liability is on the accused. Mere, plausible explanation not sufficient to prove complainants case.
73. The counsel for the complainant has relied on the decision of the Hon'ble Apex court reported in AIR 2019 SC 2446 Between BIR Singh V/s Mukesh Kumar. I have carefully gone through the observations made by the Hon'ble Apex Court, wherein, the Hon'ble Apex Court has observed that the onus to rebut the presumption that the cheque issued in discharge of debt or liability is on the accused. The Hon'ble Apex Court has further observed that section 139 introduces an exception to general rule as to the burden of proof and shifts the onus on the accused. The presumption U/s 139 of the Act is a presumption of law as distinguished from presumption of facts. Presumptions are the rules of evidence and do not conflict with the presumption of innocence which requires the prosecution to prove the case against the accused beyond reasonable doubts. The obligation on 54 CC.No.22951/2018 the prosecution may be discharge with the help of presumptions of law and presumptions of fact, unless the accused adduces evidence showing the reasonable possibility of the non-existance of the presumed fact as held in Hithen P Dalal Case. In the case on hand, the accused Nos.1 to 3 though not stepped into the witness box, however, they have raised probable defence in order to rebut the presumption U/s 138 of N.I.Act.
74. The counsel for the complainant has also relied on the decision of the Hon'ble Apex Court reported in AIR 2010 SC 1898 between Rangappa V/s Mohan Case, wherein, it has been elaborately dealt with the existence of legally enforceable debt or liability is a matter of presumption.
75. The counsel for the complainant has relied on a decision reported in AIR 2001 SC 2895 between K.N.Beena V/s Muniyappan, wherein, the Hon'ble Apex Court has observed that the burden is on the accused to prove that cheque has not been issued for any debt or liability. The denial / averments in the reply by the accused are not sufficient to shift burden of proof on to the complainant. It is the accused, who has to prove in the trial by leading cogent evidence that there was no debt or liability. In the case on hand also, the accused No.2 and 3 not 55 CC.No.22951/2018 only raised probable defence but have proved the same by providing cogent evidence showing that the complainant had no financial capacity and not at all fulfilled the ingredients with regard to the commission of offence punishable U/s 138 of N.I.Act as against accused No.3.
76. The counsel for the complainant has also relied on the decision reported in AIR 2017 SC 4594 between M/s Meters and Instruments Pvt. Ltd., V/s Hanchan Mehatha. In the decision referred, the Hon'ble Apex Court has observed and dealt with the online procedure and dispensing with the personal attendance of the accused. The said decision is not at all applicable to the case on hand.
77. The counsel for the complainant has relied on the decision of the Hon'ble High Court Karnataka reported in (2002) 1 BANKJ 361 between M/s Tirumala Agencies and Another V/s M/s Samala Mareppa and Sons. I have gone through the decision referred, wherein, the Hon'ble High Court of Karnataka has elaborately dealt with the issuance of notice U/s 138(b) of N.I.Act, with regard to the endorsement 'Account Closed'. The Hon'ble High Court of Karnataka has dealt with the period of limitation as provided U/s 148 of N.I.Act. 56 CC.No.22951/2018
78. The counsel for the complainant has relied on the decision of the Hon'ble Apex Court reported in AIRONLINE 2021 SC 82 between M/s Kalamani Tex V/s P.Balasubramanian, wherein, the Hon'ble Apex Court has dealt with the reverse onus clause and the principles of preponderance of probability.
79. The counsel for the complainant has also relied on the decision of the Hon'ble Apex Court reported in AIR 1992 SC 1604 between Jagadish Singh V/s Natthu Singh, wherein, the Hon'ble Apex Court has dealt with the provision U/s 27 of the General Clauses Act presumption of service and section 114 of the Indian Evidence Act.
80. The counsel for the complainant has relied on the decision of the Hon'ble Apex Court reported in AIR ONLINE 1996 SC 315 between State of M.P V/s P.Hiralal. The said decision is not applicable to the case on hand.
81. The counsel for the complainant has also relied on the decision of the Hon'ble High Court of Karnataka reported in 2020(1) AKR 611 between Santhosh S Lad V/s M/s.Rockline Entertainment Pvt.Ltd. The Hon'ble High Court 57 CC.No.22951/2018 of Karnataka has dealt with the presumption and rebuttal of the presumption.
82. The counsel for the complainant had relied on the decision of the Hon'ble Apex Court reported in 2022 (6) SCC 735 :: AIR Online 2022 SC 942 between Tedhi Singh V/s Narayan Dass Mahant, wherein, the Hon'ble Apex Court has dealt with section 138 of N.I.Act, section 3 of the Indian Evidence Act and observed that the accused failed to establish probable defence in rebutting the presumption available U/s 139 and 118 of the N.I.Act, in favour of the complainant.
83. The counsel for the complainant has relied on the decision of the Hon'ble High Court of Karnataka in Crl.R.P.No.485/2009 between V.Thimmegowda V/s Shashi Bhushan Agarwal, wherein, the Hon'ble High Court of Karnataka has dealt with the presumption U/s 138 and 139 of N.I.Act, and rebuttal thereof.
84. The counsel for the complainant has relied on the Judgment passed by the Hon'ble High Court in Crl.A.Nos. 849-850 of 2011 between Triyambak S Hegde V/s Sripad, wherein, the Hon'ble Apex Court was elaborately dealt with the presumption U/s 138 of N.I.Act, 118 of the N.I.Act. 58 CC.No.22951/2018
85. The counsel for the complainant has relied on the decision of the Hon'ble Apex Court reported in AIR 2015 SC 2240 between T.Vasanthakumar V/s Vijayakumari, wherein, the Hon'ble Apex Court has dealt with section 138 and 139 of N.I.Act and observed that section 139 of N.I.Act would be attracted, if the cheque as well as the signature and they are not disputed by the accused.
86. The counsel for the accused Nos.1 to 3 has argued by contending that, the complainant had no financial capacity to lend huge amount of rupees one crore to the accused No.1 company. Secondly, no copy of the resolution from the Board of Directors of the accused No.1 company has been produced in order to show that the accused No.1 company intended to avail hand loan of rupees one crore from complainant. Thirdly, the demand notice has not been served on accused No.2 and 3.
87. The counsel for the accused No.2 and 3 has relied on the decision reported in AIR 2019 Supreme Court 1983 between Basalingappa V/s Mudibasappa. I have carefully gone through the said decision and have been elaborately discussed under the caption Financial Capacity, in the earlier paragraph.
59 CC.No.22951/2018
88. The counsel for the accused persons have relied on the decision of the Hon'ble Apex court reported in (2009) 2 SCC 513 between Kumar Exports V/s Sharma Carpets. I have carefully gone through the said decision relied on by the accused persons, wherein, the Hon'ble Apex Court has observed as to how to rebut the presumption U/s 118 and 139 of N.I.Act, standard of proof. The Hon'ble Apex Court has further held that rebuttal does not require proof beyond reasonable doubt. Something probable has to be brought on record. Burden of proof can be shifted back to the complainant by producing convincing circumstantial evidence. Thereafter, the said presumption arising U/s 118 and 139 cease to operate. To rebut the said presumption, the accused can also rely upon the presumptions under section 114 of Indian Evidence Act (Common Course of Natural Events, Human Conduct, Public and Private Business). In the said decision relied upon the Hon'ble Apex Court has observed that the accused has also an option to prove the non-existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases from the cases set out by the complainant, i.e., the averments made in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is 60 CC.No.22951/2018 adduced and accepted by the court having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and thereafter,the presumptions U/s 118 and 139 of the N.I.Act will not again come to the complainant's rescue. In the case on hand, the accused persons not only have raised the probable defence, but have rebutted the said presumptions. Therefore, the burden shifted on the complainant to show that he had financial capacity to lend such huge amount to the accused No.1 company.
89. During the course of the arguments, the counsel for the accused No.1 to 3 has also relied on the decision of the Hon'ble Apex Court in AIR 2009 Supreme Court 1168 between M/s. Harman Electronics (P) Ltd and Another V/s M/s.National Panasonic India Ltd. I have carefully gone through the said decision, wherein, it is related to the territorial jurisdiction of the court to try the offence U/s 138 of N.I.Act.
90. The counsel for the accused persons has also relied on the decision of the Hon'ble Apex Court in AIR 2013 SC 3210 between Mrs.Aparna A.Shah V/s M/s.Sheth Developers Pvt. Ltd. and Another, wherein, the Hon'ble Apex 61 CC.No.22951/2018 Court in the said decision has observed that the drawer of the cheque alone can be prosecuted. Cheque issued by husband of the appellant from their joint account, wherein, appellant not being the drawer of the cheque as she has not singed the same, the criminal proceedings against the appellant was quashed. The case on hand is the cheque has been issued by the accused No.2, wherein the accused No.3 is the Managing Director of the accused No.1 company. Therefore, under the provisions of the N.I.Act every director of the company are to be prosecuted. Accordingly, the said decision is not applicable to the case on hand.
91. The counsel for the accused persons has relied on the decision of the Hon'ble High Court of Karnataka in 2010 Crl.L.J 3386 between S.Thimmappa V/s L.S.Prakash. I have carefully gone through the decision referred, wherein the Hon'ble High Court has observed that existence of debt is not the subject matter of presumption U/s 139 of N.I.Act. Drawee of cheque has to prove existence of debt or liability. Para No.10 of the decision referred reveals that the Hon'ble Apex Court has observed that the complaint is silent as to the date on which the alleged loan was advanced, even in the examination-in-chief the complainant has not spelled out the date on which the loan was advanced. 62 CC.No.22951/2018 However, in the cross examination it was elicited that the loan was advanced on 06.01.1995. In the said decision, the Hon'ble Apex court has observed that on perusal of Ex.P.1 /cheque indicates that it bears the date as 06.03.1995. therefore, according to the section 118(b) of the Act, it was deemed to have been drawn on 06.03.1995. From the above, it is clear that no consideration has passed under the cheque on 06.03.1995 as even according to the complainant the loan was advanced on 06.01.1995, therefore, the presumption under section 118(a) of N.I.Act stood rebutted.
92. The decision referred above is squarely applicable to the case on hand. The averments made in the complaint is silent as to the date on which the alleged loan was advanced. The complainant do not stated the date of which he advanced the loan. According to the averments made in the complaint, the cheques were issued on 31.01.2016 even in the examination-in- chief, the complainant has not spelled out the date on which the loan was advanced. However, in the cross examination, PW.1 has deposed differently as to the date on which he advanced loan to the accused No.1 company i.e., 01.10.2014 and 10.12.2014. Therefore, relying on the decision referred above, it is clear that no consideration has been passed under the cheques in question. 63 CC.No.22951/2018 Therefore, the presumption U/s 118 (a) of the Act stood rebutted and cannot be drawn in favour of complainant.
93. The counsel for the accused has also relied on the decision of the Hon'ble High Court of Karnataka in Rasheeda Mehaboob V/s Replicon Software ( India) Pvt. Ltd., wherein, the said decision is related to issuance of notice and served thereof. In the case on hand, the legal notice has not been served on the accused No.3, as the complainant has failed to prove the service by providing cogent evidence.
94. The counsel for the accused persons has relied on the decision of the Hon'ble High Court of Karnataka in Crl.R.P.No.793/2015, wherein, the Hon'ble High Court of Karnataka has elaborately discussed with regard to the effect of non-receipt of legal notice as contemplated U/s 138 of N.I.Act. Accordingly, acquitted the accused for the reason that, the mandatory requirement of offence U/s 138 of N.I.Act has not been made out.
95. The counsel for the accused persons has relied on the decision reported in (2009) 14 SCC 683 between Jugesh Sehgal V/s Shamsher Singh Gogi, wherein, the Hon'ble Apex 64 CC.No.22951/2018 Court has dealt with the ingredients required to constitute offence under section 138 of N.I.Act. Further held being cumulative all ingredients need to be satisfy before a person, who had drawn the cheque can be deemed to have committed offence U/s 138 of N.I.Act.
96. The counsel for the complainant has filed written reply to the submissions made by the counsel for the accused, wherein, he has argued that the accused has not been able to establish his case on the basis of provisions of law. The counsel for the complainant has further argued that there is a use of suffice, until contrary is proved U/s 118 of the N.I.Act and 139 of N.I.Act with the definition may presume shall presume, which given in section 4 of the Evidence Act makes it clear that presumption to be raised under both the provisions are rebuttal. The counsel for the complainant has relied on the statutory notice given to the accused on 23.05.2016 and argued that accused has not let in any evidence that apart the complainant in order to establish legally enforceable debt has produced undisputed document, which are On Demand Promissory Note, Letter of Admission dated 24.10.2015. Therefore, the Judgment relied in Basalingappa V/s Mudibassappa is not applicable to the case on hand.
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97. On over all perusal of the materials on record, the complainant has failed to show his financial capacity in order to lend huge amount of rupees one crore. No doubt, the accused No.2 has not replied to the notice or has stepped into witness box, in the cantena of decisions, the Hon'ble Apex Court time and again have held that the accused need not enter into the witness box in order to prove his defence. The accused can prove his defence by taking the aid of the materials made available by the complainant itself. No doubt, the issuance of the cheque and the signature appearing are not disputed and presumption can be drawn in favour of the complainant as contemplated U/s 139 of N.I.Act. It being a rebuttable presumption, the accused by adducing the evidence of the Income Tax Officer has shown that the complainant did not had financial capacity in order to lend rupees one crore to the accused No.1 company. The complainant has also failed to produce the copy of the Resolution of the Board of the accused No.1 company authorizing its Directors to avail hand loan of rupees one crore from the complainant. The accused has successfully rebutted the presumption as contemplated U/s 118(a) of N.I.Act. Documents marked at Ex.P.11 to Ex.P.13 are not sufficient to hold that there exists legally enforceable debt. Therefore, the complainant has failed to 66 CC.No.22951/2018 show that there exists legally recoverable debt from the accused persons. The complainant has also failed to establish the essential ingredients in order to prosecute the accused No.3 for the commission of offence. The accused No.2 by raising probable defence has successfully rebutted the presumption as envisaged U/s 118(a) and U/s 139 of N.I.Act. In view of the discussions made above, the accused Nos.1 to 3 are entitled for acquittal. Accordingly, I answer point No.1 in the 'Negative'.
98. Point NO.2:- In the light of discussions made at point No.1, I proceed to pass the following;
ORDER By invoking the power conferred under section 255(1) of Cr.P.C., the accused persons are hereby acquitted of the offence punishable U/S.138 of Negotiable Instrument Act.
Bail bonds of the accused No.2 and 3and that of their sureties shall stand canceled.
(Dictated to the Stenographer directly on computer, typed by her, corrected by me, signed then pronounced in the open court on this the 01 st day of March, 2024.) GIRISH Digitally signed by GIRISH SHIVANAND SHIVANAND CHATNI Date: 2024.03.02 CHATNI 11:19:14 +0530 (GIRISH CHATNI) XXI ACMM, BENGALURU 67 CC.No.22951/2018 ANNEXURE
1. List of witnesses examined on behalf of the complainant:
PW-1 : S.Naresh Kumar
2. List of witnesses examined on behalf of
the accused:
- NIL -
3. List of documents marked on behalf the
complainant:
Ex.P.1 & 2 : Two Cheques
Ex.P.1(a) & : Signatures of accused
2(a)
Ex.P.3 & 4 : Return Memo
Ex.P.5 : Copy of Legal Notice
Ex.P.6 to 8 : Postal Receipts
Ex.P.9 & 10 : Postal Acknowledgment Cards
Ex.P.11 & : On Demand Promissory Note &
12 Consideration Receipt
Ex.P.13 : Letter issued by accused
Ex.P.14 : Composition Tax Registration
Certificate
4. List of documents marked on behalf of the
accused:
- NIL -
5. List of witnesses examined by the
Accused:
CW.1 : K.Selvaraj
68 CC.No.22951/2018
6. List of documents marked by the witness
who is examined by the accused:
Ex.C.1 : Income Tax Returns of the year
2015 and 2016 of complainant
Digitally signed by
GIRISH GIRISH
SHIVANAND
SHIVANAND CHATNI
CHATNI Date: 2024.03.02
11:19:04 +0530
(GIRISH CHATNI)
XXI ACMM, BENGALURU