Delhi District Court
Ms Nk Publications Thru. Its Prop ... vs . Ms Aa Book Gallery Thru. on 8 August, 2023
IN THE COURT OF SH. ANMOL NOHRIA,
METROPOLITAN MAGISTRATE (NI ACT) Digital Court, KKD Courts, DELHI
CNR No. : DLSH020015252021
CC No. : 408/21
U/s : 138 N. I. Act
P.S : Shahdara
MS NK Publications Thru. Its Prop Nishant Kapoor Vs. MS AA Book Gallery Thru.
Its Prop M. Prabhu
JUDGMENT
1. Sl. No. of the case : 408/21
2. Date of institution of the case : 04.03.2021
3. Name of complainant : Sh. Nishant Kapoor, Proprietor of
N.K. Kapoor, office at 605, second
Floor, Opp. Presidium School, Niti
Khand-II, Indirapura, Ghaziabad,
U.P.
4. Name of accused, parentage
and address : Sh. Prabhu, Proprietor of M/s AA
Book Gallery, S/o M. Manokaran,
R/o 1241, Max Building, Big Bazar,
Main Street, Town Hall, Coimbatore,
Tamil Nadu-64100
CC No 408/21 NK Publication Vs. AA Book Gallery Page no 1 of31
5. Offence complained of : 138 N. I. Act
6. Plea of accused : Accused pleaded not guilty
7. Final order : Convicted
8. Date on which order was
reserved : 31.05.2023
9. Date of pronouncement : 08.08.2023
1. The instant matter has originated out of a complaint under section 200 Cr.PC read with Section 142 Negotiable Instruments Act (hereinafter referred to as the 'N I Act'), filed by the complainant against the accused for offence under Section 138 N I Act alleging that cheques bearing number- 500722, 500723 and 500724 dated 31.12.2020, 31.12.2020 and 31.12.2020, amounting to Rs. 10,00,000/- Rs. 10,00,000/- and Rs. 4,84,618/- all drawn on State Bank Of India respectively, issued by the accused in favour of the complainant, in discharge of a legal debt or other liability, have been dishonored and the accused persons has not paid the said amount even after receiving the prescribed legal demand notice. By virtue of this judgment, the present complaint is being disposed off.
BRIEF REASONS FOR THE DECISION OF THE CASE Factual Background of the case:
2. Briefly stated facts of this case as per complaint are that the complainant and the accused are both business partners. That in the October 2019 the accused persons purchased printed books from the complainant worth Rs. 24,84,618/- on 04.10.2019. A CC No 408/21 NK Publication Vs. AA Book Gallery Page no 2 of31 Memorandum of Understanding dt. 04.10.2019 was executed for the same. Thereafter, the accused no.1 and accused no. 2 have issued three cheques bearing number- 500722, 500723 and 500724 dated 31.12.2020, 31.12.2020 and 31.12.2020, amounting to Rs.
10,00,000/- Rs. 10,00,000/- and Rs. 4,84,618/- all drawn on State Bank Of India respectively. However upon presentation the same were dishonoured on 11.01.2021 and returned back unpaid on 12.01.2021 with the remarks "payment stopped by drawer" and thereafter on the same day the complainant informed the accused persons about the dishonour of cheques. Thereafter the accused no.2 requested two days from the complainant to remit the money within two days but accused persons did not make any amount regarding cheques in question. Thereafter, the complainant issued a legal notice dated 22.01.2021 to the accused persons through speed post and via email dated 28.01.2021, sent to the accused persons calling upon the accused persons to make payment withing stipulated period of 15 days of cheques amount. But, no payment was made by the accused persons and hence, the present complaint was filed for offence under Section 138 Negotiable Instruments Act.
Proceedings Before Court
3. On the basis of pre-summoning evidence, accused was summoned by the court for the offence under Section 138 of Negotiable Instrument Act. The accused put in his own appearance and thereafter notice under Section 251 Cr.P.C. was framed upon the accused on 13.12.2022, to which accused pleaded not guilty and claimed trial. In his plea of defence, the accused stated that he had given the cheques in question on trust building. He had issued a return notice to the complainant to take back his books and returned his cheques in the month of December 2020. However complainant did not take the books back. Thereafter, he misused his cheques.
4. The accused was granted the liberty to cross examine the complainant under section 145(2).
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5. During the trial, complainant has led the oral and documentary evidence against the accused to prove his case beyond reasonable doubt. The evidence led is as under:
Oral Evidence CW-1 Nishant Kapoor Proprietor of M/s N.K. Publications (Complainant) Documentary Evidence Ex. CW1/1 MoU dt. 09.10.2019 Ex. CW1/2 Invoice dt. 07.10.2019 Ex. CW1/3 Logistic Bill dt. 07.10.2019 Ex. CW1/4 Cheque bearing no 500722 dt. 31.12.2020 Ex. CW1/5 Cheque bearing no 500723 dt. 31.12.2020 Ex. CW1/6 Cheque bearing no 500724 dt. 31.12.2020 Ex. CW1/7 Cheque returning memo dated 12.01.2021 Ex. CW1/8 Legal notice on behalf of accused dt. 28.12.2020 Ex. CW1/9 Reply of legal notice dt. 06.01.2021 Ex. CW1/10(colly) Copies of Postal receipts Ex. CW1/11 Legal demand notice w.r.t. Cheque bearing no 500722 dt.
22.01.2021 Ex. CW1/12 Legal demand notice w.r.t. Cheque bearing no 500723 dt.
22.01.2021 Ex. CW1/13 Legal demand notice w.r.t. Cheque bearing no 500724 dt.s 22.01.2021 Ex. CW1/14(colly) Postal receipts with respect to legal notice sent w.r.t.
abovesaid cheques Ex. CW1/15 Print out of delivery emails dt. 28.01.2021 Ex. CW1/16(colly) Refused notices(6 in number) Ex. CW1/17 Account statement of complainant's firm Mark A Copy of ID card of accused no.2 Ex. CW1/A Complainant's evidence by way of affidavit.
CC No 408/21 NK Publication Vs. AA Book Gallery Page no 4 of31 Complainant stepped in witness box as CW-1 and adopted his affidavit of pre- summoning as his evidence reiterating almost all facts of complaint, stating all exhibits available on record. The complainant was cross-examined at length by the counsel for the accused on 14.02.2023.
6. The complainant also wanted to examine postal authorities, however the witness present informed the court that the record being sought to be produced in court by the complainant has already been weeded out, therefore Complainant evidence was closed vide order dated 13.04.2023 and thereafter, matter was fixed for recording statement of accused.
7. The statement of accused was recorded under Section 313 of The Code of Criminal Procedure, 1973 read with Section 281 of The Code of Criminal Procedure, 1973 on 27.04.2023. Incriminating evidence was put to him. Accused denied all the allegations as well as the receipt of legal demand notice. He further stated that he had given cheques in question for "trust building". That he had issued the return notice to the complainant to take his books back and return his cheques in the month of December, 2020. However, complainant did not take the books back and misused his cheque. He have no liability towards the complainant.
8. The accused chose not to lead any defence evidence, as such the right to lead defence evidence was closed vide order dated 27.04.2023.
9. Afterwards, final arguments were heard on behalf of both the parties and after hearing the arguments, trial was concluded.
During the arguments it was argued by the counsel for the complainant that the complainant has been able to prove all the ingredients of offence under section 138 and and since the accused has admitted his signatures on the cheque in question and the presumptions under the law are in favour of the complainant and the accused has not been able to rebut the presumptions raised in his favour. Further, the accused has not brought on record any substantial evidence to prove his case and it is a subtle possession CC No 408/21 NK Publication Vs. AA Book Gallery Page no 5 of31 of law that mere denial of the contentions of the complainant will not favour the accused. He has placed reliance upon:
Kundan Lal Vs. Custodian Evacuee Property, AIR 1961 SC 1316 K.N. Beena Vs. Muniyappan and Anr., 2001 (4) RCR (Criminal) 545 Kishan Rao Vs. Shankargounda, 2018 SCC OnLine SC 651, Bharat Barrel and Drum Manufacturing Company Vs. Amin Chand Pyarelal, AIR 1999 SC 1008 Rangappa Vs. Sri Mohan, 2010 (3) RCR Crl. 164 Sripati Singh Vs. The State of Jharkhand and Ors., AIR 2021 SC 5732 Oriental Bank of Commerce Vs. Prabodh Kumar Tewari, Suresh Chandra Goyal Vs. Amit Singhal, Crl.L.P. 706/2014 ICDS Ltd. Vs. Beena Shabeer, (2002) 6 SCC 426 Credential Leasing & Credits Ltd. Vs. Shruti Investments & Ors., 2015 (4) JCC 252, CC Alavi Haji Vs. Palapetty Muhammed, 2007 (6) SCC 555 Per contra, it is argued by the counsel for the accused that the case of the complainant itself is full of infirmities, and that the legal demand notice issued by the complainant has not been received by the accused. It is further argued that that the cheque in question was issued and the security cheque and there does not exist any liability of the accused towards the completed as accused has already given the return notice to the complainant, therefore the liability of the accused as per the version of the complainant does not exist. It is further submitted that the MoU between the complainant and the accused is an illegal document and cannot be relied upon, and that the accused has also given a notice to the complainant not to present his cheques based upon the illegality of the MoU. It is further argued that by way of cross-examination of the complainant, the accused has been able to point of circumstances and contradictions show that the version of the complainant is unworthy of credit. Reliance has been placed upon:
CC No 408/21 NK Publication Vs. AA Book Gallery Page no 6 of31 Dashrathbhai Trikambhai Patel vs Hitesh Mahendrabhai Patel &An- r.S.C,2022 Sudhir Kumar Bhalla vs Jagdish Chand,S.C,2008 Krishnaa Janardhan Bhat vs Dattatraya G.Hegde,S.C,2008 P.Venugopal Vs Madan P.Sarthi,S.C.2008 Vijay v/s Laxman & Anr.,SC, 2013 Smt. Pushpa Devi v/s Smt.Sushila, DH, 2018 Anil Aggarwal v/s State and Anr.,DH, 2015 M/s Total Finaelf India Ltd. Versus Smt. Rashmi Parnami,DH, 2013 Deepshikha Kumari v/s Leela Infrastructure & Mining Pvt.Ltd, DH, 2012 M/s IKF Technologies Lt. & Ors. v/s Sasi Bhusan Raju,2012 Varun Capital Services Ltd. v/s Rajesh Kumar M/s Narayana Menon@Msmi v/s state of Kerala & Anr S.C 2006 Chandrappa and Ors. v/s State of Karnataka, SC,2007 Chittorgarh Kendriya Sahkari v/s Heera Singh, Rajasthan High Court, 2017 Sammeta Srihari v/s The State of Andra Pradesh, Andhra High Court, 2014 Shakuntala Bhasin v/s R.K.Khanna, Punjab-Haryana High Court, 2015 Smt.Shubra Mitra v/s Dipankar Saha & Anr.,Calcutta High Court, 2012 M/s.Indus Airways Pvt.Ltd.& Anr. Vs M/s.Magnum Aviation Pvt.Ltd.& Anr.,2014,S.C. Venkatesh Bhat vs Rohidas Shenoy,2009,Kar.H.C. It is further submitted that the accused is defending the present case upon the following grounds:
CC No 408/21 NK Publication Vs. AA Book Gallery Page no 7 of31 the accused has not received the statutory legal demand notice under section 138;
the cheque in question is a security cheque; there does not exist liability as per the version of the complainant;
10. I have heard the counsels for both the parties, perused the record and have gone through relevant provisions of the law and the judgments relied upon by both the parties.
INGREDIENTS OF OFFENCE AND DISCUSSION-
11. Before dwelling into the facts of the present case, it would be apposite to discuss the legal standards required to be met by both sides. In order to establish the offence under Section 138 of NI Act, the prosecution must fulfill all the essential ingredients of the offence. Perusal of the bare provision reveals the following necessary ingredients of the offence:-
First Ingredient: The cheque was drawn by a person on an account maintained by him for payment of money and the same is presented for payment within a period of 3 months from the date on which it is drawn or within the period of its validity; Second Ingredient: The cheque was drawn by the drawer for discharge of any legally enforceable debt or other liability; Third Ingredient: The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid from that account on an agreement made with that bank; Fourth Ingredient: A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within thirty days of the receipt of information of the dishonour of cheque from the bank; Fifth Ingredient: The drawer fails to make payment of the said amount of money within fifteen days from the date of receipt of notice.
CC No 408/21 NK Publication Vs. AA Book Gallery Page no 8 of31 It is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the NI Act.
APPRECIATION OF EVIDENCE- .
12. At the outset, the counsel for the accused has placed reliance upon as M/S.Total Finaelf India Limited Vs Smt.Rashmi Parnami numbered as CRL.A. 1239/2011, and pleaded that that "Mere liability of the respondent to pay her dues towards purchase of goods if any is not enough to proceed under Section 138 Negotiable Instruments Act as the appellant has civil remedy to recover outstanding dues." However, the facts of the said case do not come to the aid of the accused.
13. The accused can only be held guilty of the offence under Section 138 NI Act if the above-mentioned ingredients are proved by the complainant co-extensively. Additionally, the conditions stipulated under Section 142 NI Act have to be fulfilled.
Notably, there is no dispute qua the proof of first, third, and fifth ingredient. The complainant had proved the original cheques vide Ex. CW1/4 to Ex. CW1/6, which the accused had not disputed as being drawn on the account of the accused. It was not disputed that the cheque in question was presented within its validity period. The cheque in question was returned unpaid vide return memo Ex. CW1/7 and the same has been admitted by the accused under his statement u/s 294 CrPC, as such the same is proved in view of the same.
14. The questions which arise for consideration in the present matter are:
a) whether the legal demand notice issued by the complainant, has been served upon the accused?
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b) Whether presumption under section 118(a) read with section 139 of the Act can be raised in favour of complainant in the present case?
c) Whether the impugned cheque was issued by the accused in discharge of a legally enforceable debt?
I shall be deciding the above mentioned points of determination separately.
a) whether the legal demand notice issued by the complainant, has been served upon the accused?
15. The issuance and service of legal demand notice is one of the statutory requirements in order to bring home the guilt of the accused under section 138. Any defect in the statutory requirement would go to the very root of the proceedings as such it is essential to first discuss whether the legal notice issued by the complainant in compliance with the provisions of section 138 or not.
16. Provisio (b) appended to Section 138 with respect to legal demand notice is reproduced below for ready reference:
(a) "The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid;"
As such, it is necessary that the payee or holder in due course makes demand of money due by giving a notice to the drawer, in writing, within 30 days of receipt of information from the bank regarding the return of the cheque is dishonoured. The object of notice is to give a chance to the door of the cheque to rectify his omission and also to protect an honest drawer. Reliance is placed upon, Central Bank of India vs Saxons Farms, 1999(39) ACC891(SC).
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17. In the landmark decision of Hon'ble Supreme Court of India in matter of "C. C. Alavi Haji Vs. Palapetty Mohd. & Anr." reported in (2007) 6 Supreme Court Cases 555 held that as under:-
"16. It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is no stipulation of giving of a notice before filing a complaint Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the Court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the Court along with the copy of the complaint under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the G.C. Act and Section 114 of the Evidence Act. In our view, any other interpretation, of the proviso would defeat the very object of the legislation. As observed in Bhaskarans case (supra), if the giving of notice in the context of Clause (b) of the proviso was the same as the receipt of notice a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act."
18. So far as the service of demand legal notice is concerned, I considered opinion that since the address on which summon was served upon the accused is same on which legal demand notice was sent, therefore, the plea of the accused that he has not received the legal demand notice is not tenable. The report on summons bears a stamp of the firm of the accused which mentions the same address as stated upon the legal demand notices Ex. CW1/11 to Ex. CW1/13. It is noteworthy that as per the postal endorsement upon the return envelopes Ex. CW 1/16(Colly), the same have been returned as "refused". The perusal of the address mentioned on the memo of parties, the legal demand notice, summons, and bail bonds furnished by the accused, notice u/s 251 and statement of CC No 408/21 NK Publication Vs. AA Book Gallery Page no 11 of31 accused under section 313 of Cr.P.C shows that addresses are same. Further the accused is his statement u/s294 has admitted the address mentioned on the legal demand notice to be his address.
19. It is noteworthy that the complainant has placed on record a notice dated 28.12.2020, Ex. CW1/8, which has been issued by the accused to the complainant to not present the cheques; the same has not been disputed by the accused as not being issued from his end. A perusal of the said notice Ex. CW 1/8 shows that the same bears the address of the accused which is same as the address mentioned upon the legal demand notices Ex. CW1/11 to Ex. CW1/13. As such, placing reliance upon Hon'ble Supreme Court of India in matter of "C. C. Alavi Haji Vs. Palapetty Mohd. & Anr(Supra), there is a deemed delivery of legal demand notice.
20. Ergo, this contention of accused does not hold any water and is dismissed as devoid of any substance and merit.
b.) Whether presumption under section 118 read with section 139 of the Act can be raised in favour of complainant in the present case?
21. As per the scheme of the NI Act, once the accused admits signature on the cheque in question, certain presumptions are drawn, which result in shifting of onus. Section 118(a) of the NI Act lays down the presumption that every negotiable instrument was made or drawn for consideration. Another presumption is enumerated in Section 139 of NI Act. The provision lays down the presumption that the holder of the cheque received it for the discharge, in whole or part, of any debt or other liability.
22. The combined effect of these two provisions is a presumption that the cheque was drawn for consideration and given by the accused for the discharge of debt or other CC No 408/21 NK Publication Vs. AA Book Gallery Page no 12 of31 liability. Both the sections use the expression "shall", which makes it imperative for the court to raise the presumptions, once the foundational facts required for the same are proved. Reliance is placed upon the judgment of the Hon'ble Supreme Court, Hiten P. Dalal vs. Bratindranath Banerjee (2001) 6 SCC 16.
23. The Hon'ble Supreme Court in Kumar Exports vs. Sharma Carpets (2009) 2 SCC 513, while discussing the contours of section 118(a) r/w 139 of the N I Act, has held interalia the following:
"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. 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 intstrument 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 section 118 and 139 of the Act help him shift the burden on the accused. The presumption 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."
24. In the instant case, the accused at the time of framing of notice u/s 251 and statement recorded u/s 313 Cr.P.C has explicitly admitted the issuance of cheques to the complainant albeit the accused contends that the cheques were blank and further the purpose for issuance of cheques has been disputed.
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25. Counsel for the accused has placed reliance upon Sudhir Kumar Bhalla vs Jagdish Chand,etc(2008)05 SC CK 0078 submitting that it has already been held that:
"that the criminal liability of the appellant under the provisions of the Section 138 of the Act are attracted only on account of the dishonour of the cheques issued in discharge of the liability or debt, but not on account of issuance of security cheques"
and M/s Narayana Menon@Msmi V/S State of Kerala & Anr. S.C. 2006, contending that:
"holding that the applicant clearly said that nothing is due and the cheque was issued by way security. The said defence has been accepted as probable. If the defence is acceptable as probable the there for cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of section 138 of the Act. Also it is said that where two views are possible, the appellate court should not interfere with finding of acquittal recorded by the court below."
26. At this stage, reference may be sought from the decision of Hon'ble Supreme Court in the case of Bir Singh vs. Mukesh Kumar (2019) 4 SCC 197 wherein the Apex Court while upholding the validity of blank signed cheque in a proceeding u/s 138 of the Act has interalia held the following:
"If a signed blank cheque is voluntarily presented to a payee,towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence."
27. Counsel for the accused in order to buttress the proposition of blank security cheque has placed reliance upon Deepshikha Kumari V/S Leela Infrastructure & Min- ing Pvt. Ltd., Delhi High Court, 2012; wherein it has been observed that:
CC No 408/21 NK Publication Vs. AA Book Gallery Page no 14 of31 "holding that it is also settled law that under section 138 of N.I. Act, a cheque drawn by a person for the discharge in whole or in part of any existing debt or liability would mean only the past and current liability at the time when the cheque is issued. The cheque issued in respect of uncertain future liabilities would not attract the applicability of section 138 of the Act."
and M/s IKF Technologies Ltd. & Ors. V/S Sasibhusan Raju, Delhi High Court, 2012; which observed as follows:
"holding that the criminal liability under section 138 of N.I. Act is attracted only if the dishonored cheque is issued in discharge of whole or part of any existing debt or liability. This section does not apply to the cheque issued to meet some liability which may arise in future."
28. However, counsel for the complainant has placed reliance upon the case of Suresh Chandra Goyal Vs. Amit Singhal, Crl.L.P. 706/2014, it was held by the Hon'ble Delhi High Court that:
"The appellant was well within his rights to enforce the security in respect whereof the cheques in question were issued and to seek to recover the outstanding debt by encashment of the said cheques. Since the cheques in question were dishonoured upon presentation, the accused suffered all consequences as provided for in law and the appellant became entitled to invoke all his rights as created by law. Thus, the appellant was entitled to invoke Section 138 of the NI Act; issue the statutory notice of demand, and; upon failure of the accused to make payment in terms of notice of demand - to initiate the complaint under Section 138 of the NI Act."
29. Counsel for the complainant has also placed reliance upon the case of Sripati Singh Vs. The State of Jharkhand and Ors., AIR 2021 SC 5732,wherein it was held that:
"16. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state CC No 408/21 NK Publication Vs. AA Book Gallery Page no 15 of31 of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated Under Section 138 and the other provisions of N.I. Act would flow.
17.When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security' cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceedings initiated Under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast Rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an 'on demand promissory note' and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact CC No 408/21 NK Publication Vs. AA Book Gallery Page no 16 of31 situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation."
30. It is noteworthy that in case of Credential Leasing & Credits Ltd. Vs. Shruti Investments & Ors., 2015 (4) JCC 252, it was held that:
"30. Thus, I am of the considered view that there is no merit in the legal submission of the respondent accused that only on account of the fact that the cheque in question was issued as security in respect of a contingent liability, the complaint under Section 138 of the NI Act would not be maintainable. At the same time, I may add that it would need examination on a case to case basis as to whether, on the date of presentation of the dishonoured cheque the ascertained and crystallised debt or other liability did not exist. The onus to raise a probable defence would lie on the accused, as the law raises a presumption in favour of the holder of the cheque that the dishonoured cheque was issued in respect of a debt or other liability. As settled by the Supreme Court, the said onus obliges the accused to raise a defence - either by picking holes in the case of the complainant and/ or by positively leading defence evidence which leads the Court to believe that there is a probable defence raised by the accused to the claim of the complainant with regard to the existence of the debt or other liability. The said onus does not cast as stringent an obligation on the accused, as it casts on the complainant, who has to prove beyond reasonable doubt the guilt of the accused."
31. Thus, it is a settled of the proposition of law that a cheque issued a security, pursuit of financial transaction, cannot be considered as a worthless piece of paper. It is given to ensure the fulfillment of an obligation undertaken. If a cheque issued to secure repayment of a loan advanced and if the loan is not repaid on or before the due date, the drawee would be entitled to get the cheque for payment, and if such a cheque is disordered, the consequences contemplated under section 138 NIAct would follow. Reliance is placed upon Sripati Singh v. State of Jharkhand,2021 SCCOnline1002. Further as to the plea of cheque being a security cheque, it was held in ICDS v. Beena CC No 408/21 NK Publication Vs. AA Book Gallery Page no 17 of31 Shabir & Anr. (2002)6 SCC 426, that security cheques would also fall within the purview of section 138 NI Act and a person cannot escape is liability unless he proves that the debt or liability for which cheque was issued as security is satisfied otherwise.
32. Ergo, in light of the above discussion, this court is of the considered view that, the ground that the cheque in question is a blank cheque does not hold water with this court and even in case of blank signed cheques, the statutory presumptions under section 118(a) and 139 would be raised in favour of the complainant. Therefore, in instant case, since, the accused has admitted the execution of impugned cheques, the aforementioned statutory presumptions would be raised in favour of the complainant regarding the fact that the impugned cheques have been drawn for consideration and issued by the accused in discharge of legally enforceable debt.
c.) Whether the impugned cheque was issued by the accused in discharge of a legally enforceable debt?
33. In the present case, the defense raised by the accused is primarily that the cheque was given to the complainant for trust building purposes and the complainant had issued a return notice to the complainant in December 2020. Despite serving notice the complainant, did not take the books back instead he misused the security cheque to file the present case, and as such there does not exist any legally enforceable debt to fulfill the ingredients as defined in section 138 of the NI Act.
34. The counsel for the complainant has placed reliance upon, Kishan Rao Vs. Shankargounda, 2018 SCC OnLine SC 651, where in the Hon'ble Supreme Court held that:
"17. Section 139 of the Act, 1881 provides for drawing the presumption in favour of holder. Section 139 is to the following effect:
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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.
18. This Court in Kumar Exports v. Sharma Carpets, MANU/SC/8414/2008 : 2009 (2) SCC 513, had considered the provisions of Negotiable Instruments Act as well Evidence Act. Referring to Section 139, this Court laid down following in paragraphs 14, 15, 18 and 19:
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 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 of 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".
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 CC No 408/21 NK Publication Vs. AA Book Gallery Page no 19 of31 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.
19. This Court held that the Accused may adduce evidence to rebut the presumption, but mere denial regarding existence of debt shall not serve any purpose. Following was held in paragraph 20:
20....The Accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him.
However, the court need not insist in every case that the Accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the Accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non- existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist..."
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35. Counsel for the accused has further placed reliance upon to P. Venugopal V/S Madan P. Sarathi, S.C.2009; Vijay V/S Laxman & Anr., S.C. 2013; ANIL AGGARWAL VS STATE AND ANOTHER, 2015 Legal Eagle (DEL)3480 and Chittorgarh KendriyaSahkari V/S Heera Singh, Rajasthan High Court, 2017.
36. However, The Hon'ble Supreme Court in the case of M.S. Narayana Menon @ Mani v. State of Kerala (2006) 6 SCC 39 has observed as under, "32. A Division Bench of this Court in Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal [(1999) 3 SCC 35] albeit in a civil case laid down the law in the following terms:
"Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non- existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non- existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is CC No 408/21 NK Publication Vs. AA Book Gallery Page no 21 of31 neither possible nor contemplated and even if led, is to be seen with a doubt"
Further, the principles pertaining to the presumptions and the onus of proof were recently summarized by the Hon'ble Apex Court in Basalingappa vs. Mudibasappa (2019) 5 SCC 418 as under:
"25. We having noticed the ratio laid down by this Court in the above cases on Section 118(a) and 139, we now summarize the principles enumerated by this Court in the following manner:
25.1. Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
25.2. The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities.
25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.
25.4. That it is not necessary for the accused to come in the witness box in support of his defence. Section 139 imposed an evidentiary burden and not a persuasive burden. 25.5. It is not necessary for the accused to come in the witness box to support his defence."
37. In order to rebut the presumptions the accused has raised the defence that he had issued a return notice to the complainant in the month of December 2020 specifying not to present his cheques, and therefore he does not have any liability towards the complainant. He has also raised the issue that the MoU upon which reliance is placed by the complainant to support his case is an illegal document. To support his case accused has placed reliance upon the cross examination of the complainant as well as the notice issued by the accused.
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38. The two defences taken by the accused are discussed below separately. i.) The MoU placed on record is an illegal document.
39. It is argued by the counsel for the accused that the complainant had prepared the MoU in Delhi while appending his signatures and presented the same to accused at Coimbatore at the time of collecting the wholly blank but signed security cheques without filling any amount therein and assuring the accused that those were intended only for securing the rights of complainant before the Taxation authorities. The MoU had been similarly presented to the accused in Coimbatore who appended his signatures. It is argued that the complainant had not provided any copy of the MoU to the accused and also that the same had never been authenticated or Notarized even in Delhi and even without the presence of accused.
40. He has further argued that alleged agreement was clearly loaded with terms against the accused and thus was in violation of the Contract Act which requires parties having equal status in any agreement.
41. It is further submitted that the complainant in his cross examination has admitted that in general course of business he does not sign any MoU, and that he also does not remember the date on which the accused had come to Delhi to sign the MoU. It is further argued that in his cross examination the complainant has stated that he does not remember the second witness to the MoU and also that the details of the cheques were pre-filled in the MoU. It is further argued that in his cross examination the complainant has admitted that the MoU is not notarized.
42. Per contra, it is argued by the counsel for the complainant that the complainant in his cross examination has also stated that the accused had given in the details of the cheques before hand through WhatsApp, as such the complainant was in a position to put CC No 408/21 NK Publication Vs. AA Book Gallery Page no 23 of31 the details of the cheques in the MoU. It is further submitted that there does not exist any illegality the MoU as alleged by the accused.
43. It is noteworthy that the MoU is nowhere defined in law; however to a simple understanding an MoU is nothing but a mere contract between two parties. The Indian Contract Act, 1872 does not defines a specific format for a contract, a contract may be either oral or written. Now, it is a trite position in law that a person signing a document is presumed to have read the contents of the same before signing the document. Once signatures are admitted on the document no dispute as to its contents can be raised except as provided in the exceptions u/s 92 of Indian Evidence Act.
45. Further, as per the Indian Contract Act or the Notaries Act, there is no provision that the contract must bear the signatures of witnesses or that the same must be notarized.
46. In the case at hand, the accused has admitted to signing the MoU, as such there exists a presumption that he has signed the same after reading the contents of the MoU, and merely being not notarized does not cause any impediment to the validity of the contract. Albeit the accused has raised a contention that MoU is clearly loaded against the accused and thus was in violation of the Contract Act which requires parties having equal status in any agreement.
47. With respect to the unequal status of the parties a reference may be drawn to Section 14 of the Indian Contract Act, 1872, where in free consent of parties to a contract as:
Section 14. 'Free consent' defined.--Consent is said to be free when it is not caused by--
(1 )coercion, as defined in section 15, or (2) undue influence, as defined in section 16, or (3) fraud, as defined in section 17, or (4) misrepresentation, as defined in section 18, or (5) mistake, subject to the provisions of sections 20, 21 and 22.
CC No 408/21 NK Publication Vs. AA Book Gallery Page no 24 of31 Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.
48. In the instant case, no such circumstances have been brought forward by the accused qua the MoU. It is only alleged that the MoU is loaded with clauses which are heavily in favor of the complainant and not the accused. However, it is also a settled position in law that merely because a contract favors one party it cannot be said to have been made without free consent, in absence of any attending circumstances which show that the consent was vitiated.
49. The onus had shifted upon the accused only to put forth the circumstances which compelled him to sign his contract/MoU without even reading the contents of the same. No such plea of fraud/coercion/misrepresentation has been taken on behalf of accused during cross-examination of complainant. In the instant case, it is not a position where the accused had alleged that he was forced or frauded into entrying the contract by the complainant. The transaction at hand is a transaction of sale of goods, which are freely available in the market, it is not a case where the complainant is said to have monopoly in the business and said to be in a dominant position in order to dictate his own terms. Further, the accused is an educated person doing his own business of books and it is not the case that the complainant forced him to hand over the cheques or sign the MoU. The accused was always in a position not to buy the goods from the complainant and not to sign the MoU. Thus, it cannot be said that parties to the MoU, i.e. the complainant and the accused were never at an equal footing in the present transaction.
50. The accused has himself admitted to have handed over the cheques to the complainant and signing the MoU and it cannot be ruled out that the same was done after fully understanding the consequences of the same. Ergo, there does not arise any cloud over the legality or genuineness of the MoU.
CC No 408/21 NK Publication Vs. AA Book Gallery Page no 25 of31 ii.) There does not exist any legal liability towards the complainant as he has already requested to take the goods back.
51. It is argued by the counsel for the accused that the debt which is alleged by the complainant for which the cheques were issued has never arisen as the accused has already requested the complainant to take the books back as the unsold stocks which were wrongfully leading to the misuse of space due to natural calamity like the spread of COVID-19 but the failure of complainant to do so has resulted in loss of many Lakhs in money. He has placed reliance upon Deepshikha Kumari V/S Leela Infrastructure & Mining Pvt. Ltd., (Supra) and M/s IKF Technologies Ltd. & Ors. V/S Sasibhusan Raju(Supra) asserting that the cheque must be for an existing liability on the date mentioned on the cheque.
52. Per contra, counsel for the complainant argues that the goods have already been delivered to the accused, for which the cheques in question were issued as post dated cheques; as such there is no question that liability of the accused does not exist. The accused by merely issuing a notice cannot deny his liability and the accused has failed to bring anything on record to show that there did not exist any liability as on the date of the cheques.
53. Perusal of the cross examination of the complainant shows that during the cross examination on one occasion, the accused persons had suggested the complainant of having supplied the accused, books of old edition and irrelevant, on another occasion, had suggested of having requested him to take back the sold books as schools and colleges were closed because of Covid while on another occasion suggested him of not having supplied goods to the accused.
54. As such, there is a clear ambiguity in the versions put forward by the accused as what his real defence is. However, a clearer analysis of the cross examination of the CC No 408/21 NK Publication Vs. AA Book Gallery Page no 26 of31 complainant, draws the conclusion that books were indeed supplied to the accused. Further, the accused has himself admitted the fact of issuing a return notice of sold books by way of suggestion as well as during his plea of defence u/s 251, also supports the version that the books were indeed supplied to the accused.
55. The complainant, in order to corroborate his liability has placed on record his invoices as well as the logistics bill, but the accused has neither denied the same nor put up any question to the complainant regarding the same in cross examination, in order to challenge the liability or the amount due. The complainant has further placed on record the MoU which is in line with the version put forward by the complainant and corroborates his version.
56. It is noteworthy that the accused on 28.12.2020 has issued a notice Ex. CW 1/8 to the complainant. A perusal of the same shows that the major contention raised in the same is that the MoU is illegal. The only reference which is towards the return of the books is enumerated in paragraph 7 of the same, and relates to the situation of Covid-19 and not to the situation of old books or non supply of books. Further, there no contention raised in the same qua the value or amount of books supplied. It is hard to believe that a notice for return of goods would be issued when the same have not been supplied only. The notice itself is contrary to the version of non supply put forward by the accused in cross examination of the complainant.
57. Arguendo, even if the books were of old edition or not in consonance with the supply demanded by the accused, the accused has placed nothing on record to show that such was the case and he has accepted the goods with protest. No suggestion has even been put to the complainant regarding issuance of any protest while accepting delivery. In view of the silence of the accused, the invoice is deemed to be admitted and the fact of supply of books stands proved, and the contention of the accused that books were old edition or supplied without order does not hold water.
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58. It is noteworthy, that the accused in his plea of defence and during the entire trial has pleaded that he had issued a return notice to the complainant in the month of December 2020. However, a perusal of the MoU Ex. CW 1/1 shows that there is a 'non return clause' in para 8 of the same.
59. Section 92 of the Indian Evidence Act carves out six exceptions where in evidence to contradict the terms of written document may be lead. However, the accused has not lead any evidence to show that any such circumstances exist in order for the court to consider that his return notice would fall in any of these exceptions. It is only when any such circumstances is pointed out that oral evidence of variation of terms can be taken. Thus, the accused by merely issuing a return notice cannot claim that the terms of the contract have been changed and avoid his liability.
60. It has been held by the Hon'ble Supreme Court of India in 'Rohitbhai Jivanlal Patel v. State of Gujarat & Anr. [(2019) 18 SCC 106] -
"17. On the aspects relating to preponderance of probabilities, the accused has to bring on record such facts and such circumstances which may lead the Court to conclude either that the consideration did not exist or that its non- existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist. This Court has, time and again, emphasized that though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfil the requirements of rebuttal as envisaged under Section 118 and 139 of the NIAct. ..."
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61. Thus, the presumptions raised under Section 118(b) and Section 139 NI Act are rebutable presumptions. A reverse onus is cast on the accused, who has to establish a probable defence on the standard of preponderance of probabilities to prove that either there was no legally enforceable debt or other liability by bringing on record such facts and such circumstances which may lead the Court to conclude either that the consideration did not exist or that its non- existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist. Reliance is placed upon Rohitbhai Jivanlal Patel v. State of Gujarat & Anr (Supra).
62. Section 101 of Indian Evidence Act clearly states that who ever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person. One who asserts a particular fact is in existence, then he has to prove the said fact unless and until the law says that the burden lies anymore else.
63. I have thoroughly gone through the other judgments relied upon by the counsel for the accused. However, the same do not come to the aid of the accused in the factual matrix of the present case.
64. It is well settled law that mere denial by the accused would not rebut the statutory presumptions u/s 138 and u/s 118 of NI Act which arises in favour of the complainant under NI act and presumption will still arise in favour of complainant. In the instant case, the accused has brought nothing on record in the form of facts or circumstances to discredit the version of the complainant or to punch holes in the version put forward by him. Further, the case of the complainant is supported by the documents placed on record and the defences raised by the accused is itself contradictory in themselves as well as to the notice issued by the accused on 28.12.2020.
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65. I am of the opinion that the version of the complainant has passed the test of the cardinal principle of criminal jurisprudence "that the prosecution has to prove its case beyond reasonable doubt by leading reliable, cogent and convincing evidence; and the subtle proposition of criminal law that in order to successfully bring home the guilt of the accused, the prosecution is supposed to stand on its own legs and it cannot derive any benefits whatsoever from the weakness, if any, in the defence of the accused", and the case of the complainant is proved beyond reasonable doubt, as accused has merely denied the version of the complainant nothing has been brought on record to create a probable doubt to rebut the presumptions through the cross examination of the complainant or by way of independent evidence, in the version of the complainant. Accordingly, the defence taken by the accused does not hold ground and that the accused has failed to rebutt the presumption raised under section 139 of NI Act. Consequently, it can be said that the cheques in question was issued by the accused in discharge of legally recoverable debt/ liability/owed towards the complainant thus, the second ingredient to the offence under section 138 of NI Act stands proved.
CONCLUSION:
66 To recapitulate the above discussion, the complainant has been successful in establishing his case beyond reasonable doubt with the aid of presumptions of law raised in his favor under section 118 and 139 of the NI Act by withstanding the test of cross examination to punch the holes in the case of the complainant and making the case of the complainant doubtful. In the result of the analysis of the present case, the accused Sh. Prabhu Sankar is hereby convicted of the offence punishable under Section 138, Negotiable Instruments Act, 1881.
67. This judgment contains 31 pages. This judgment has been signed and pronounced by the undersigned in open court.
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68. Let copy of this judgment be given free of cost to the convict.
69. Let a copy of the judgment be uploaded on the official website of District Courts, Karkardooma forthwith.
Announced in the open Court (Anmol Nohria)
On 08.08.2023 MM (NI ACT) Digital Court
Shahdara/KKD/Delhi
08.08.2023
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