Himachal Pradesh High Court
Jaswant Singh vs Shallu Jaswal on 8 January, 2019
Author: Tarlok Singh Chauhan
Bench: Tarlok Singh Chauhan
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Appeal No.114 of 2008 .
Reserved on: 4.1.2019
Decided on: 8.1.2019
Jaswant Singh .....Appellant/Complainant
Versus
Shallu Jaswal ......Respondent
Coram
The Hon'ble Mr. Justice Tarlok Singh Chauhan, Judge.
Whether approved for reporting?1 No For the Appellant: Mr. Tenzin Tashi Negi, Advocate, vice Mr. Onkar Jairath, Advocate.
For the Respondent: Mr. Sandeep K. Sharma, Advocate.
Tarlok Singh Chauhan, Judge The complainant is the appellant, who aggrieved by the dismissal of his complaint under Section 138 of the Negotiable Instruments Act (for short the 'Act'), has filed the instant appeal.
2. Briefly stated the facts of the case, as set out in the complaint, are that on 15.6.2005, the respondent and her husband approached the appellant with an intention to purchase remaining share of Khasra No. 1601, situated in Village Sanghnai in presence of 1 Whether the reporters of the local papers may be allowed to see the Judgment? Yes ::: Downloaded on - 09/01/2019 23:04:32 :::HCHP 2 respectable persons of the village. The appellant agreed to sell the same and consideration was settled at Rs.35,000/ in between both .
the parties. At the relevant time, the respondent and her husband paid sale consideration of Rs. 35,000/ by way of cheque No.167409 of Punjab National Bank, Gagret, District Una, H.P. making it post dated as on 10.11.2005. A written agreement was also entered into, which was duly signed by the respondent and her husband. It was also agreed that if the cheque is returned without payment, then respondent and her husband shall be liable to pay double of cheque amount. Consequently, the sale deed was executed on 17.8.2005. At the time of registration of sale deed, the appellant bonafidely stated that consideration amount had been received by him on the basis of aforesaid cheque of Rs.35,000/and consideration was shown as Rs.10,000/ on the request of respondent's husband, who along with deed writer had pretended that consideration must have to be shown in the registered sale deed. Thereafter, the appellant requested many times to the respondent to pay cheque amount, but of no avail. On 31.12.2005, the appellant presented the cheque, but on 2.1.2006, the same was returned back unpaid with the remarks "insufficient funds". Thereafter, on 20.1.2006, the appellant issued a legal notice ::: Downloaded on - 09/01/2019 23:04:32 :::HCHP 3 to the respondent, yet the payment was not made constraining him to file complaint under Section 138 of the Act.
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3 In support of his complaint, the appellant examined three witnesses, but the learned trial court after recording the evidence and evaluating the same dismissed the complaint vide judgment dated 14.12.2007 on the ground that the appellant had failed to prove his case beyond shadow of doubt.
4 It is vehemently argued by Mr. Tenzin Tashi Negi, learned vice counsel for the appellant, that the learned trial court has failed to take into consideration the presumption attached to the negotiable instrument as per Sections 118(a) and 139 of the Act and thereby reached at a wrong conclusion, whereas on the other hand, Mr. Sandeep K. Sharma, learned counsel for the respondent, would argue that no exception can be taken to the findings recorded by the learned trial court, more particularly, when the appellant has failed to prove his case.
5 I have heard the learned counsel for the parties and have also gone through the record of the case carefully.
6 In order to appreciate the rival contentions of the learned counsel for the parties, it would be necessary to examine Sections 118(a) and 139 of the Act and the same are reproduced as under: ::: Downloaded on - 09/01/2019 23:04:32 :::HCHP 4 "118. 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, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration;
139. 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."
7 Chapter XVII containing Sections 138 to 142 was introduced in the Act by Act 66 of 1988 with the object of inculcating faith in the efficacy of banking operations and giving credibility to negotiable instruments in business transactions. These provisions were intended to discourage people from not honouring the commitments by way of payment through cheques. It is for this reason that the Courts should lean in favour of an interpretation which serves the object of the statue.
8 In M.S. Narayana Menon alias Mani vs. State of Kerala and another (2006) 6 SCC 39, the Hon'ble Supreme Court while dealing with a case under Section 138 of the Act held that the presumption under Sections 118(a) and 139 were rebuttable and the standard of proof required for such rebuttal was "preponderance of ::: Downloaded on - 09/01/2019 23:04:32 :::HCHP 5 probability" and not proof "proved beyond reasonable doubt" and it was held as under: .
"29. In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words 'proved' and 'disproved' have been defined in Section 3 of the Evidence Act (the interpretation clause)....
30.Applying the said definitions of 'proved' or 'disproved' to principle behind Section 118(a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
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32.The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on records but also by reference to the circumstances upon which he relies.
41.....'23......Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the court in support of the defence that the court must either believe the defence to exist or consider its existence to be ::: Downloaded on - 09/01/2019 23:04:32 :::HCHP 6 reasonably probable, the standard of reasonability being that of the "prudent man"."
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9 Similar reiteration of law can be found in K. Prakashan vs. P.K. Surenderan (2008) 1 SCC 258 wherein it was observed as under: "13. The Act raises two presumptions; firstly, in regard to the passing of consideration as contained in Section 118 (a) therein and, secondly, a presumption that the holder of cheque receiving the same of the nature referred to in Section 139 discharged in whole or in part any debt or other liability. Presumptions both under Sections 118 (a) and 139 are rebuttable in nature......
14. It is furthermore not in doubt or dispute that whereas the standard of proof so far as the prosecution is concerned is proof of guilt beyond all reasonable doubt; the one on the accused is only mere preponderance of probability."
10 To the same effect is the decision of the Hon'ble Supreme Court in Krishna Janardhan Bhat vs. Dattatraya G. Hegde (2008) 4 SCC 54 wherein the Hon'ble Supreme Court observed as under: "32.....Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.
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34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so ::: Downloaded on - 09/01/2019 23:04:32 :::HCHP 7 as to prove a defence on the part of an accused is preponderance of probabilities......
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45..... Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have rebutted. Other important principles of legal jurisprudence, namely presumption of innocence as human rights and the doctrine of reverse burden introduced by Section 139 should be delicately balanced........"
11 r to Earlier to that the Hon'ble Supreme Court in Hiten P. Dalal vs. Bratindranath Banerjee (2001) 6 SCC 16, compared the evidentiary presumptions in favour of the prosecution with the presumption of innocence in the following terms: "22.....Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the nonexistence of the presumed fact.
23. In other words, provided the facts required to form the basis of a presumption of law exists, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary......."
::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 812 Section 139 of the Act provides for drawing a presumption in favour of the holder and the Hon'ble Supreme Court in Kumar .
Exports vs. Sharma Carpets, (2009) 2 SCC 513 has considered the provisions of the Act as well as Evidence Act and observed as under: "14. Section 139 of the Act provides that 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.
15. Presumptions are devices by use of which the courts are enabled and entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence. Under the Indian Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) "may presume" (rebuttable), (2) "shall presume"
(rebuttable) and (3) "conclusive presumptions" (irrebuttable). The term `presumption' is used to designate an inference, affirmative or disaffirmative of the existence a fact, conveniently called the "presumed fact" drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumption literally means "taking as true without examination or proof".
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18. Applying the definition of the word `proved' in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of .
the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end 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. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
19. The use of the phrase "until the contrary is proved" in Section 118 of the Act and use of the words "unless the contrary is proved" in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over."::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 10
13 The Hon'ble Supreme Court thereafter held that the accused may adduce evidence to rebut the presumption, but mere .
denial regarding existence of debt shall not serve any purpose.
14 In Rangappa vs. Sri Mohan, (2010) 11 SCC 441, Hon'ble three Judges Bench of the Hon'ble Supreme Court had occasion to examine the presumption under Section 139 of the Act and it was held that in the event the accused is able to raise a probable defence which creates doubt with regard to the existence of a debt or liability, the presumption may fail. It is apposite to refer to the relevant observations which read as under: "26. In light of these extracts, we are in agreement with the respondentclaimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat v. Dattatraya G.Hegde (2008) 4 SCC 54 may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.
27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 11 of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption .
under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/defendant cannot be expected to discharge an unduly high standard of proof."
15 In a very recent judgment in T.P. Murugan vs. Bojan (2018) 8 SCC 469, the Hon'ble Supreme Court has held that once a cheque has been signed and issued in favour of holder of cheque, there is statutory presumption that it is issued in discharge of a legally enforceable debt or liability, but at the same time, it was also held that this presumption is rebuttable one and the issuer of cheque can rebut that presumption by adducing credible evidence that the cheque was issued for some other purpose like security for loan etc..
16 Bearing in mind the aforesaid exposition of law, it can conveniently be held that in terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 12 fact, it shall regard such fact as proved unless and until it is disproved. The words "proved" and "disproved" have been defined in .
Section 3 of the Evidence Act.
17 Applying the said definitions of "proved" or "disproved" to the principle behind Section 118(a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the nonexistence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
18 The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies. Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 13 be reasonably probable, the standard of reasonability being that of the prudent man.
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19 Now, adverting to the facts of the case, if the cheque, Ext.
CB is perused, it would be noticed that the same has been issued by proprietor of Shammi Agro Industries and not by the respondent in her name. Moreover, the account is not of the respondent, but is of Shammi Agro Industries. The appellant has failed to show how the said firm has any connection with the debt or liability, as the case may be, in this case and, therefore, it cannot be held that he is the payee or the holder in due course of the cheque.
20 It is more than settled that it is only the holder in due course of a negotiable instrument, who is entitled to file the complaint under Section 138 of the Act. (Refer: Milind Shripad Chandurkar Vs. Kalim Khan (2011) 4 SCC 275, National Small Industries Corporation Ltd. Vs. State (2009) 1 SCC 407 and Punjab & Sindh Bank Vs. Vinkar Sahkari Bank Ltd. (2001) 7 SCC 721) 21 Learned vice counsel for the appellant has placed strong reliance on the judgment of the Hon'ble Supreme Court in Raghu Lakshminarayanan vs. Fine Tubes, (2007) 5 SCC 103 to draw distinction between a proprietary concern with that of a partnership ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 14 firm or company by relying upon observations contained in paras 6 to 14 thereof, which read thus: .
6. The learned Chief Metropolitan Magistrate issued summons on the other accused persons relying or on the basis of the averments made in the said complaint petition filed by the respondent herein. An application filed by the appellant herein for quashing the summons issued to him in an application filed before the High Court under Section 482 of the Code of Criminal Procedure was dismissed stating:
"After the presummoning evidence was recorded the learned MM found that prima facie case was made out against all the accused persons and, therefore, summoned these accused. challenging these summoning orders accused No. 3 has filed this petition under Section 482 Cr. P.C. it is inter alia, contended that he was never the director of the said accused No. 1: cheque in question was not signed by him and that he was not responsible for the conduct of business of accused No. 1 it is the case of the petitioner that he was an employee of the accused No. 1. In support appointment letter dated 15.7.2000 is enclosed as per which petitioner was appointed as "Director Production". In this capacity he was to be responsible for entire production, including machine selection as well as labour, process and material management. Thereafter, vide letter dated 21.10.2001, which is also produced by the petitioner, he was asked to head the marketing department and was given the designation ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 15 "DirectorMarketing". Prima facie, as Director Marketing the petitioner was incharge of the marketing division of the accused No. 1. I find that .
there are specific averment made in the complaint that the petitioner in that capacity was dealing with the complainant and was handling daytoday affairs of the accused No. 1. Therefore, what the petitioner contends are the disputed questions of fact and it forms his defence which is to be led before the Trial Court. Such questions cannot be entertained in this petition under Section 482 Cr.P.C."
7. A bare perusal of the complaint petition would show that the accused No. 1 was described therein as 'a business concern'. It was not described as a Company or a partnership firm or an Association of Persons.
8. The concept of vicarious liability was introduced in penal statutes like Negotiable Instruments Act to make the Directors, partners or other persons, in charge of and control of the business of the Company or otherwise responsible for its affairs; the Company itself being a juristic person.
9. The description of the accused in the complaint petition is absolutely vague. A juristic person can be a Company within the meaning of the provisions of the Companies Act, 1956 or a partnership within the meaning of the provisions of the Indian Partnership Act, 1932 or an association of persons which ordinarily would mean a body of persons which is not incorporated under any statute. A proprietary concern, however, stands absolutely on a different footing.
::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 16A person may carry on business in the name of a business concern, but he being proprietor thereof, would be solely responsible for conduct of its affairs. A proprietary concern .
is not a Company. Company in terms of the explanation appended to Section 141 of the Negotiable Instruments Act, means any body corporate and includes a firm or other association of individuals. Director has been defined to mean in relation to a firm, a partner in the firm. Thus, whereas in relation to a Company, incorporated and registered under the Companies Act, 1956 or any other statute, a person as a Director must come within the purview of the said description, so far as a firm is concerned, the same would carry the same meaning as contained in the Indian Partnership Act.
10. It is interesting to note that the term "Director" has been defined. It is of some significance to note that in view of the said description of "Director", other than a person who comes within the purview thereof, nobody else can be prosecuted by way of his vicarious liability in such a capacity. If the offence has not been committed by a Company, the question of there being a Director or his being vicariously liable, therefore, would not arise.
11. Appellant herein categorically contended that accused No. 1 was a proprietary concern of the accused No. 2 and he was merely an employee thereof.
12. If accused No. 1 was not a Company within the meaning of Section 141 of the Negotiable Instruments Act, the question of an employee being preceded against in terms thereof would not arise. Respondent was aware of ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 17 the difference between a 'partnership firm' and a 'business concern' as would be evident from the fact that it described itself as a partnership firm and the accused No. .
1, as a business concern. Significantly, Respondent deliberately or otherwise did not state as to in which capacity the appellant had been serving the said business concern. It, as noticed hereinbefore, described him as in charge, Manager and Director of the accused No. 1. A person ordinarily cannot serve both in the capacity of a Manager and a Director of a Company.
13. The distinction between partnership firm and a proprietary concern is well known. It is evident from Order XXX Rule 1 and Order XXX Rule 10 of the Code of Civil Procedure. The question came up for consideration also before this Court in M/s. Ashok Transport Agency v.
Awadhesh Kumar and another [(1998) 5 SCC 567] wherein this Court stated the law in the following terms: "6. A partnership firm differs from a proprietary concern owned by an individual. A partnership is governed by the provisions of the Indian Partnership Act, 1932. Though a partnership is not a juristic person but Order XXX, Rule 1, CPC enables the partners of a partnership firm to sue or to be sued in the name of the firm. A proprietary concern is only the business name in which the proprietor of the business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of the business. In the event of the death of the proprietor of a proprietary concern, it is the ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 18 legal representatives of the proprietor who alone can sue or be sued in respect of the dealings of the proprietary business. The provisions of Rule 10 of .
Order XXX, which make applicable the provisions of Order XXX to a proprietary concern enable the proprietor of a proprietary business to be sued in the business names of his proprietary concern. The real party who is being sued is the proprietor of the said business. The said provision does not have the effect of converting the proprietary business into a partnership firm. The provisions of Rule 4 of Order XXX have no application to such a suit as by virtue of Order XXX, Rule 10 the other provisions of Order XXX are applicable to a suit against the proprietor of proprietary business "in sofar as the nature of such case permits." This means that only those provisions of Order XXX can be made applicable to proprietary concern which can be so made applicable keeping in view the nature of the case."
14. We, keeping in view the allegations made in the complaint petition, need not dilate in regard to the definition of a 'Company' or a 'Partnership Firm' as envisaged under Section 34 of the Companies Act, 1956 and Section 4 of the Indian Partnership Act, 1932 respectively, but, we may only note that it is trite that a proprietary concern would not answer the description of either a Company incorporated under the Indian Companies Act or a firm within the meaning of the provisions of the Section 4 of the Indian Partnership Act.
::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 1922 I really wonder how the aforesaid judgment is of any assistance to the appellant because it is no where his case that he .
had any dealing with the proprietorship or that debt or any other amount due was payable by the proprietorship.
23 As a matter of fact, in case the complaint is perused, there is not even a whisper therein to indicate even remotely as to how the cheque on behalf of the proprietorship firm came in possession of the appellant. More over, in the complaint filed by the appellant, it has been specifically averred that it was the respondent and her husband, who had assured the payment of the cheque amount, whereas the cheque amount does not in any manner link the respondent in an individual capacity or for that matter her husband, who otherwise is also not a party to the complaint. Therefore, in the given circumstances, the learned trial court had no other option, but to have dismissed the complaint and acquitted the respondent.
24 The respondent has had the advantage of having been acquitted by learned trial Court and the appellate Court would only interfere, where there exists perversity of fact and law. (See:Banna Reddy and others versus State of Karnataka and others, (2018) 5 SCC 790. Moreover, the presumption of innocence is further reinforced against the acquitted accused by having judgment in his ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP 20 favour. (See:Rabindra Kumar Pal alias Dara Singh versus Republic of India, (2011) 2 SCC 490, para 94).
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25 Similar reiteration of law can be found in a very recent judgment of the Hon'ble Supreme Court in Criminal Appeal No.17021706 of 2014, titled State of Uttar Pradesh versus Wasif Haider etc., decided on 10.12.2018.
26 It cannot be said that the learned trial court has not correctly appreciated the evidence on record or that acquittal of the respondent has resulted into travesty of justice. No ground for interference is called for.
27 In view of the aforesaid discussion, I find no merit in this appeal and accordingly the same is dismissed. Pending application, if any, also stands disposed of.
(Tarlok Singh Chauhan) 8.1.2019. Judge (pankaj) ::: Downloaded on - 09/01/2019 23:04:33 :::HCHP