Delhi District Court
Judgment Is Relevant: vs P.V.Perumal Reported In 2005 Crl.L.J ... on 1 May, 2012
IN THE COURT OF SH.NAVJEET BUDHIRAJA, METROPOLITAN MAGISTRATE,
SPECIAL COURT06, DWARKA COURTS, NEW DELHI.
Axis Bank Ltd.
VERSUS
Gurdeep Luthra
P.S.: Sabzi Mandi
U/S: 138 NEGOTIABLE INSTRUMENTS ACT
1. Serial No./CC No. of the case : 26044/10
2. Name of the complainant : Axis bank Ltd.(formerly known as U.T.I.
Bank Ltd.)
Trishul, 3rd Floor,
Law Garden, Ellisbridge,
Ahmedabad3800009
Also at
4/6B, Asaf Ali Road,
New Delhi
3. Date of institution : 06.02.2010
4. Name of the accused, his : Gurdeep Luthra
parentage and residence B 1/145, Vishnu Garden,
New Delhi110018
5. Date when judgment was : 10.04.2012
reserved
6. Date when judgment was : 01.05.2012
pronounced
7. Offence complained of and : Offence under Section 138 of Negotiable
proved Instruments Act
8. Plea of accused : Accused pleaded not guilty and claimed
CC No. 26044/10 Page No.1 of 22
trial
9. Final Judgment : Accused is acquitted for the offence under
Section 138 of Negotiable Instruments Act
:J U D G M E N T:
1 Vide this judgment, I shall decide the complaint in hand filed by the
complainant Axis Bank Ltd. under Section 138 of Negotiable Instruments Act (hereinafter
referred to as NI Act) against the accused Gurdeep Luthra.
2 Facts necessary to be adumbrated are that the complainant is a
banking company having its branch office at New Delhi. It is averred that accused had
taken personal loan of Rs.1,50,000/ from the said branch of the complainant bank vide
loan account bearing number 245010601344840 and for the repayment of the said loan,
accused gave 5 cheques bearing nos. 798300, 773950, 773949, 773948 and 773947 of
Rs.4,685/ each dated 05.07.09, 05.08.09, 05.09.09, 05.10.09 and 05.11.09 drawn on The
Bank of India, Vishnu Garden Branch, Delhi - 110 018. The said 5 cheques got
dishonored vide returning advice/memo dt. 18.11.2009 with the endorsement "Funds
Insufficient". Thereafter, complainant bank issued the legal notice on 16.12.2009 through
courier and UPC at the residential address as well as the official address of the accused
demanding Rs.23,425/ being the aggregate amount of the said 5 cheques. Despite
service of the legal notice, accused did not pay the said cheque amount within the
stipulated period of 15 days as envisaged by Section 138 NI Act, hence the present
complaint.
3 After taking cognizance of the offence under Section 138 Negotiable
Instruments Act, summons was issued to the accused post which accused entered
CC No. 26044/10 Page No.2 of 22
appearance and was admitted to bail on 19.11.2010. Thereafter, notice under Section 251
Cr.P.C was served upon the accused encompassing all the accusations against him to
which he pleaded not guilty and specified his defence. Thereafter matter got fixed for
defence evidence.
4 In the meanwhile, application under Section 145 (2) of the N.I.Act
was filed on behalf of the accused for recalling the complainant witness i.e authorized
representative of the complainant stating the grounds of defence which was allowed and
matter got fixed for cross examination of the complainant.
5 Before proceeding with the cross examination, complainant
substituted its Authorized Representative (for short AR) and the new AR Sh. Govind Singh
tendered his evidence by way of affidavit Ex CW1/A1 and also relied upon the following
documents: true copy of power of attorney is Ex.CW1/2A, the cheques alongwith cheque
returning advice are Ex. CW1/3 to Ex. CW1/8, true copy of the legal notice, courier
receipts, postal receipts of UPC and delivery report of courier on both the addresses of the
accused are respectively exhibited as Ex.CW1/9 to Ex.CW1/12. In cross examination,
CW1 stated that he has been working with the complainant bank since, 2008 but he was
not present at the time of submission of the loan application form by the accused. He
further stated that accused applied a loan for a sum of Rs. 1,50,000/ and the interest rate
at which the loan was granted to the accused was 20 % approximately annually. He
denied the suggestion that the interest rate was not 20 % approximately. He further stated
that he did not know whether the interest rate was floating or not and whether the interest
rate was reducing or not. He denied the suggestion that complainant inflated the amount
of the cheque by charging interest at floating rate. He further stated that till date accused
has paid only 17 EMI's and 31 EMI's are outstanding against him. He denied the
CC No. 26044/10 Page No.3 of 22
suggestion that accused has never defaulted in paying his EMI. He further stated that the
EMI amount was Rs.4,685/ and tenure of the loan was 4 years or 48 installments. He
denied the suggestion that no loan was disbursed in favour of the accused. He further
stated that he cannot place on record the loan agreement pertaining to the accused. He
further stated that he did not know the number of EMI's outstanding against the accused
as on the date mentioned on the cheques in question but volunteered that more than 5
EMI's were outstanding against accused. He denied the suggestion that the amount of the
cheques was not due against the accused as on the date of the cheques in question. He
further stated that the cheques in question were EMI cheques of the accused. He admitted
that there is no document on record in the form of loan agreement or the statement of
account which shows that accused has availed loan from the complainant. Thereafter, his
cross examination was deferred as he sought time to file loan agreement and statement of
account but despite sufficient opportunity he failed to file those documents and eventually
his right to file those documents stood closed. In his further cross examination, he
admitted that there is no document on record which shows the liability of the accused to
the extent of the amount covered in the cheques i.e. total amount of Rs.23,425/. He
denied the suggestion that he has filed false complaint against the accused by
misappropriating the blank cheques given by the accused. He further stated that he did
not know the mode of sending the legal notice to the accused and that the internet
generated report of delivery of notice to the accused is on record which is Ex.CW1/12. He
denied the suggestion that no legal notice was served upon the accused. Lastly, he denied
that he was deposing falsely.
6 Complainant's evidence was followed by Statement of the Accused
under Section 313 Cr.P.C r/w 281 Cr.P.C wherein all the incriminating evidences were put
to the accused. Accused stated that he availed loan from UTI Bank and not from Axis
CC No. 26044/10 Page No.4 of 22
Bank. Regarding the issuance of the cheques, accused stated that the cheques in
question were issued blank for security purpose and not towards the discharge of any
liability. Accused denied to have received the legal demand notice but stated that he has
been residing at the given address for the last 30 years. Lastly, he stated that he did not
wish to lead defence evidence and consequently matter was fixed for final arguments.
7 Learned counsel for accused addressed his final arguments at length
and learned counsel for the complainant sought time of a week to file written arguments
but the same was not filed. Before appreciating the evidences and arguments of both the
parties, it would be appropriate to advert to the relevant provisions of N.I Act.
Section 138 of N.I Act reads as under :
S. 138 Dishonour of cheque for insufficiency, etc. of funds in
the account - where any cheque drawn by a person on an
account maintained by him with a banker for payment of any
amount of money to another person from out of that account for
the discharge, in whole or in part, of any debt or other liability,
is returned by the bank unpaid, either because of the amount of
money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to
be paid from that account by an agreement make with that
bank, such person shall be deemed to have committed an
offence and shall, without prejudice to any other provision of
this Act, be punished with imprisonment for a term which may
extend to twice the amount of the cheque or with both.
Provided that nothing contained in this section shall apply
unless
(a) The cheque has been presented to the bank within a period
of six months from the bank within a period of six months from
the date on which it was drawn or within the period of its
validity, whichever is earlier.
(b) The payee or the holder in due course of the cheque, as the
CC No. 26044/10 Page No.5 of 22
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; and
(c) the drawer of such cheque fails to make the payment of the
said amount of money to the payee or as the case may be, to
the holder in due course of the cheque, within 15 days of the
receipt of the said notice.
Explanation - For the purposes of this section, "debt or other
liability" means a legally enforceable debt or other liability.
8 Section 138 of the NI Act has three ingredients, viz., (i) that there is a
legally enforeceable debt; (ii) that the cheque was drawn from the account of bank for
discharge in whole or in part of any debt or other liability which pre supposes a legally
enforeceable debt; and (iii) that the cheque so issued had been returned due to
insufficiency of funds. The proviso appended to the said section provides for compliance of
legal requirements before a compliant petition can be acted upon by a court of law.
9 I would now embark upon the evidences adduced and the arguments
advanced by both the parties.
10 It is contended by learned counsel for the accused that accused had
availed loan from the UTI Bank and not from the complainant and the cheques in question
were given as blank for security purpose which have been misused by the complainant by
filling them up. It is further contended that complainant has neither filed any loan
documents nor any statement of account of the accused to show the liability of the
accused to the extent of the amount of the cheques in question on the date of the
CC No. 26044/10 Page No.6 of 22
cheques. It is also contended that the legal notice was not served upon the accused and
there is no proof of service of legal notice on record, therefore accused is not liable to be
convicted for offence under section 138 of N.I Act.
11 I have perused the records of the case giving consideration to the
submissions of the counsel.
12 Before deliberating upon the submission of learned counsels, it will
be useful to refer to the relevant paragraphs of the Judgment of the Apex Court in Krishna
Janardhan Bhat v. Dattatraya G. Hegde (1) Apex Court Judgments 412 SC. Para 31
reads as under...
"31. The courts below, as notice hereinbefore, proceeded on the
basis that section 139 raises a presumption in regard to existence of
a debt also. The courts below, in our opinion, committed a serious
error in proceeding on the basis that for proving the defence the
accused is required to step into the witness box and unless he does
so he would not be discharging his burden. Such an approach on the
part of the courts, we feel, is not correct" (Emphasis added)
13 The Apex Court thus reiterated well established legal position that for
rebutting the presumption under section 139 of the said Act, it is not necessary in every
case for the accused to step into the witness box. The Apex Court held that the standard
of proof on the part of the accused and that of prosecution to prove a case is different.
The prosecution has to prove the guilt of an accused beyond reasonable doubt, but the
standard of proof so as to prove a defence is "preponderance of probability". Inference of
preponderance of probabilities can be drawn even by reference to circumstances. In
paragraph 44 the Apex Court observed thus :
CC No. 26044/10 Page No.7 of 22
"The presumption of innocence is a human right (see
Narendra Singh v. State of M.P., Ranjitsing Brahmajeet
Singh Sharma V. State of Maharashtra and Rajesh Rajan
Yadav V. CBI) Article 6 (2) of the European Convention on
Human Rights provides :
"Everyone charged with a criminal offence shall be presumed
innocent until proved guilty according to law." Although, India is
not bound by the aforementioned convention and as such it
may not be necessary like the countries forming European
countries to bring common law into land with the Convention, a
balancing of the accused's rights and the interest of the society
is required to be taken into consideration. In India, however,
subject to the statutory interdicts, the said principle forms the
basis of criminal jurisprudence. For the aforementioned
purpose the nature of the offence, seriousness as also gravity
thereof may be taken into consideration. The courts must be
on guard to see that merely on the application of presumption
as contemplated under section 139 of the Negotiable
Instruments Act, the same may not lead to injustice or
mistaken conviction........." (Emphasis added).
In paragraph 45 the Apex Court held thus:
"45. We are not oblivious of the fact that the said
provision has been inserted to regulate the growing business,
trade, commerce and industrial activities of the country and the
strict liability to promote greater vigilance in financial matters
and to safeguard the faith of the creditor in the drawer of the
cheque which is essential to the economic life of a developing
country like India. This, however, shall not mean that the
courts shall put a blind eye to the ground realities. 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 introduces by section 139 should be
delicately balanced. Such balancing acts, indisputably would
largely depend upon the factual matrix of each case, the
CC No. 26044/10 Page No.8 of 22
materials brought on record and having regard to legal
principles governing the same." (Emphasis added)
14 Thus, what has been held by Apex court is that presumption of
innocence forms part of human rights and therefore the doctrine of reverse burden
introduced by Section 139 of N I Act has to be delicately balanced.
15 Thus, it is amply clear from the above mentioned Judgment of Apex
Court that for proving his case accused need not in every case step into the witness box to
adduce defence evidence. He can rely on the broad improbabilities in the case of the
complainant, the improbabilities in the evidence of the witnesses of the complainant, the
acceptability of suggestions made to the complainant witnesses in the course of cross
examination as also defence evidence if any. So, the presumption under section 139 of N.I
Act need not be rebutted only by leading defence evidence and the said presumption can
be rebutted even on the basis of the facts elicited in the cross examination of the
complainant.
16 Now adverting to the facts of the present complaint. Complainant
witness has stated in his affidavit that accused has taken personal loan from the
complainant which fact is disputed by the accused by putting suggestion to the
complainant witness in cross examination and also in his statement under section 313
Cr.P.C. read along with 281 Cr.P.C. But accused admitted availing loan of Rs 1,50,000/
from the UTI Bank .Another contention of the accused is that that the cheques in question
were issued as blank for security purpose at the time of the loan and not in discharge of
any debt or liability. On the other hand, complainant witness has stated in his affidavit that
the cheques were issued for repayment of the said loan.
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17 One of the main ingredients of offence under section 138 of N.I Act is
existence of legal enforceable debt or liability.
Existence of Legally Enforceable Debt or Liability.
It is clear from the provision of section 138 N.I. Act
that only after the cheque is drawn to discharge in whole or in
part any debt or liability by the accused when presented before
the bank was returned on the ground of insufficient fund
standing in the credit of the account of the accused or some
other reason. The explanation to the above said provision of
law clearly tells that to attract an offence under section 138 of
N.I. Act there shall be a legally enforceable debt or other
liability subsisting on the date of the drawal of the cheque.
18 At this juncture, it would be appropriate to refer to the provisions in
Section 118 and 139 of N.I Act. Under Section 118, unless the contrary is proved, it is to
be presumed that the Negotiable Instrument (including a cheque) had been made or
drawn for consideration. Under section 139 the Court has to presume, unless the contrary
was proved, that the holder of the cheque received the cheque for discharge, in whole or
in part of a debt or liability. Thus, in complaints under Section 138 the court has to
presume that the cheque had been issued for a debt or liability. This presumption is
rebuttable.
19 Although, there is a presumption in favour of holder of the cheque but
it is necessary to point out that it cannot be the intention of the legislature that whenever
holder of the cheque files a complaint against the drawer of the cheque and if the drawer
admits only his signature on the cheque then he shall be held liable to the extent of the
amount of the cheque by virtue of the said presumption. In my opinion, mere production of
CC No. 26044/10 Page No.10 of 22
the cheque on record and admission of signature on the same by the accused are not
sufficient to fasten criminal liability on the accused. Merely stating in the complaint and
affidavit that cheques in question were given for the repayment of the loan will not advance
the cause of the complainant. It is pertinent to mention that in his cross examination, CW1
has admitted that neither the loan was sanctioned in his presence nor the accused gave
the cheques in question in his presence. He denied the suggestion that accused gave 6 to
7 blank cheques before the disbursement of the loan and also denied that cheques were
filled by the complainant itself. Then he admitted that he has not filed any statement of
account or loan agreement which showed the liability of the accused but sought time to file
the same. Thereafter, cross examination of CW1 got deferred and he sought time to
produce the loan agreement which was granted to him but on 21st of March, he
expressed his inability to place the aforesaid documents on record and submitted that
those documents could not be procured. Then before closing his evidence, in his further
cross examination he admitted that despite number of opportunities given by this court, he
has failed to place on record the said loan agreement and statement of account.He denied
the suggestion that cheques in question were given at the time of the loan for security
purpose and reiterated that the cheques were installments cheques.
20 After perusing the affidavit and testimony of the complainant, I hold
that there are certain inconsistencies in the said testimony which raise suspicion on the
claim of the complainant. Firstly, although it is stated by complainant witness in his affidavit
that cheques in question were given for the repayment of the loan but it is admitted by him
in his cross examination that the cheques in question were not given by the accused in his
presence. Then he denied that accused had given 6 to 7 blank cheques before
disbursement of the loan but then at the very next moment he feigned ignorance whether
official of the complainant took blank cheques from the residence of the accused. It
CC No. 26044/10 Page No.11 of 22
appears from his testimony that he is blowing hot and cold at the same time. Secondly, in
paragraph 4 of the complaint and in affidavit it is stated that cheques were given for
repayment of the loan. Then in paragraph 8 of the complaint, it is stated that post dated
cheques were handed over at Axis Bank, Delhi. Then in cross examination, it is denied by
complainant witness that cheques in question were given blank at the time of the loan for
security purpose. So from the above, it is manifest that complainant is not clear as to when
were the cheques given by the accused, whether the cheques were installment cheques
and whether the same were post dated or not. Thirdly, although complainant witness kept
on reiterating that cheques were towards monthly installments but when he was asked as
to number of installments pending against the accused on the date of the cheques then he
was ignoramus of it and moreover admittedly there is no document on record in the form of
Books of Accounts or statement which shows the liability of the accused to the extent of
the amount of the cheques on that date and it is admitted by CW1 that he has failed to
produce any loan agreement or books of account on record. Although, it is true that for
prosecution under section 138 of N.I Act, complainant is not obliged to prove the original
transaction or original consideration as it is expected in a suit for recovery of money but
when execution of the cheque and debt or liability is disputed by the accused and
existence of the documents pertaining to loan has been admitted by the complainant, then
calling of the same becomes indispensable. Even if we assume that since it is not a civil
suit therefore there is no need to file any loan documents in view of the presumption under
section 139 of N.I Act still complainant could have filed statement of account of the
accused which could evince as to what was the amount of installment, how many
installments have been paid by the accused and how much amount is outstanding against
him. Since complainant is a financial institution and must be maintaining its books of
account, therefore, it was incumbent upon it to have filed its books of account in support of
its claim. To give teeth to my observation, I would like to refer to a judgment in Murugan
CC No. 26044/10 Page No.12 of 22
Financiers v. P.V Perumal, 2006 Cr LJ 269(Mad) wherein the order acquitting the
accused was upheld on the finding that since the complainant being a finance company
has not produced books of account in support of claim, complainant has not proved debt
or legally enforceable liability satisfactorily.
21 I would also like to refer to the Judgment in M.Vairavan v. T.M
Selvaraj Crl A No. 352 of 2009, Madras High Court. The following paragraph of
Judgment is relevant:
" In the instant case, the appellant / complainant is only an
individual, therefore, it cannot be said that nonproduction of his
account books would affect the case under Section 138 of
Negotiable Instruments Act, though the same is relevant in a
case relating to financial companies and other institutions
having books of account. The decision of this court in Murugan
Financiers Vs. P.V.Perumal reported in 2005 Crl.L.J 269 ended
in acquittal on account of the nonproduction of books of
accounts, sought for by the accused therein has no relevancy
in this case."
22 So, it is amply clear from the aforesaid Judgments that complainant
being a finance company ought to have produced accounts in support of their claim. It is
pertinent to mention that on 07.12.2011, while the complainant witness was cross
examined, his examination was deferred and he was directed to produce the loan
agreement and statement of accounts. But despite giving sufficient time, complainant
failed to produce those documents and on 21st of March, 2012, complainant witness
stated that those documents could not be procured. Now the question arises what will be
the effect of non production of those documents on the case of the complainant. As fas as
loan agreement is concerned, although accused has admitted availing loan from the UTI
CC No. 26044/10 Page No.13 of 22
bank which later on came to be known as Axis Bank in his statement under section 313
Cr.P.C but he has also stated that cheques were given blank for security purpose at the
time of the loan so in order to know the terms and conditions of the said loan and whether
any blank cheques were taken by the complainant at the time of the loan, production of
loan agreement becomes indispensable. It is also important to point out that when
accused refutes his liability to pay the amount of the cheques in question then burden
shifts upon the complainant to show the liability of the accused on the date of the cheque
in question by filing their accounts. Moreover , complainant being a financial institution
must be maintaining books of accounts in their day to day business activities, so ordinarily
there should not be any glitches to produce the books of account. And if any document
which would unfold the genesis of a transaction, not convincingly brought to fore or where
there is a gap or infirmity in the complainant case which could have been made good by
furnishing a document, the complainant case can be termed as suffering from a deficiency
and withholding of such a material document would oblige the court to draw an adverse
inference against the complainant by holding that if the document would have been
furnished it would not have supported the case of complainant. Hence, I am inclined to
raise adverse presumption against the complainant under section 114 (g) of Evidence Act
which says that evidence which could be and is not produced would, if produced, be
unfavourable to the person withholds it. No accounts had been produced by the
complainant to prove that liability was subsisting and no reason has been suggested at all
on his behalf as to why he did not produce the documents in their possession. The Penal
Provision under Section 138 N.I. Act could be attracted only when the complainant proves
that the cheque in question was drawn "..........for discharge in whole or in part of any debt
or other liability.........." .The debt or legally enforceable liability is not satisfactorily proved
by the complainant/financier.
CC No. 26044/10 Page No.14 of 22
23 All these circumstances raise serious doubts on the veracity of the
claim of the complainant thereby probablising the stand of the accused and which also go
on to show that the cheques in question were not issued in the manner as has been
alleged by the complainant and in fact the same might have been issued as blank for
security purpose which are subsequently filled up by complainant. And on this, the law is
settled that cheque issued for security purpose will not fall within the purview of section
138 of N.I Act. The proceedings under Section 138 of Negotiable Instrument Act cannot be
initiated when a cheque is given as security to Banks. Such proceeding can be initiated
only when there is a liability . Liability and security has to be distinguished because
Section 138 is envisaged only in a case when a person issues a cheque to clear his
liability or part of his liability from the account held by him in Bank and only if the said
cheque is dishonoured by paying bank.
24 In M.S Narayanan Menon Vs. State of Kerala and Others. 2006
SCC 39 , it has been held by Apex Court that :
".................If the defence is accepted as probable the cheque
therefore 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 N.I Act."
25 To bolster my view, I would also like to refer to the judgment of the
Bombay High Court in Rama Krishnan Urban Cooperative Credit Society Ltd. Vs. Sh.
Rajender Bhagchand Warma, Criminal application no. 898/2009. The pertinent
question which was discussed in this case was when a blank cheque is given as security,
CC No. 26044/10 Page No.15 of 22
whether the provisions of 138 will be applicable or not. The court considered the entire
issue and held as under :
"It is argued that the cheque drawn must be for the discharge,
in whole or in part, of any debt or other liability. So the debt or
other liability must be in existence when the cheque, whether
blank or post dated was issued. In this case the accused
respondent issued the cheque in question as security for loan
before loan amount was disbursed. So, cheque was not towards any existing debt or liability. In case of loan transaction, borrower is in need of money and therefore he borrows loan amount from some one with understanding that the loan amount would be repaid in lumpsum on a future date or in installments from particular future date onwards periodically, with or without interest. It is not transaction of loan, if the amount is to be repaid the moment it is paid to borrower. So, provisions of Section 138 of the Negotiable Instruments Act are not attracted.
We may consider object and purpose for introducing amendment to the Negotiable Instruments Act, 1981 by Amendment Act, 1988, as stated in the Amendment Act and various authorities to facilitate correct interpretation of the provisions. The object and reasons clause of the bill which introduced the Amending Act of 1988 would show that the new Chapter XVII was incorporated specifically to "enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers. Thus the object of the amendment and introduction of Chapter XVII in the Negotiable Instruments Act by Act of 1988 was mainly to encourage all major transactions including commercial or business transactions through cheques and to enforce credibility and acceptability of cheques in settlement of CC No. 26044/10 Page No.16 of 22 liability in general. Encouragement of payment by cheques/credit cards/debit cards rather than by cash is necessary for healthy economy. That also brings in transparency in transactions and discourages creation of black or unaccounted money through evasion of taxes or other malpractices. So, provisions like Section 138 of Negotiable Instruments Act are salutary to give reliability, credibility and acceptability of negotiable instruments like cheques in daily life. However, the object was not to provide effective and speedy remedy for recovery of loans. Law makers must not have intended or imagined that money lenders. or banks would obtain blank or post dated cheques while sanctioning/disbursing loans as securities and would use them to make debtors./borrowers to repay loan under threat of prosecution and punishment under Section 138 of the Negotiable Instruments Act. So, it is doubtful if provisions of Section 138 of the Negotiable Instruments Act would be attracted to a case in which a blank or post dated cheque is obtained by a bank or money lender before or while sanctioning or disbursing loan amount as security for the loan. There was no supporting evidence from the side of the complainant as to whether the accounts had been verified. No accounts had been produced by the appellant to prove that liability was subsisting. Only when it is proved that a liability was existing, an offence under Sec. 138 will arise."
26 As regards the issuance of cheques in question by the accused is concerned, it has been the stand of the accused in his statement under section 313 Cr.P.C and also at the time of service of notice upon him under Section 251 Cr.P.C that the cheques were issued blank i.e. it bears his signature only and body of the cheque has not been filled by him. It is true that when the cheques in question contained the signature of the account holder, it is for the accused to explain the same, but merely because cheques contained the signature of the account holder or the accused it cannot be said that the same were executed by him. In this case, it is relevant to note that the case CC No. 26044/10 Page No.17 of 22 advanced by the accused is that the cheques in question were entrusted with the complainant and the cheques contained nothing more than his signature. Going by Section 138 of the NI Act, it can be seen that 'a drawing of cheque' by a person on an account maintained by him with the banker for payment of any amount of money to another person from out of that account 'for the discharge', in whole or in part, 'of any debt of other liability' are two important ingredients, especially in the background of this case. In the decision reported in Ch. Birbal Singh vs. Harphool Khan (AIR 1976 Allahabad
23), it was held that execution of documents consists of signing of the document written out, read over and understood and does not consist of merely signing of a blank paper. In another decision reported in Thakurlal v. Ramadhar (1986 ALJ 480), it had been held that mere admission of putting of signature and thumb mark on a blank sheet of paper is not admission of execution of the document. In the present case, accused did not dispute the signature on cheques, but his specific case is that he had entrusted with the complainant blank cheques which contained his signature. Complainant at one place in their complaint has averred that cheques were given for repayment and at another place averred that post dated cheques were given by the accused. In affidavit of complainant witness, he has deposed that cheques were issued for repayment of the loan but in his cross examination he has stated that cheques were not given by the accused in his presence and also denied the suggestion they were given at the time of the loan for security purpose. It is also necessary to point out that cheques in question bear the stamp of UTI Bank against the name of the payee whereas the complainant is Axis Bank. It is stated in the complaint as well as affidavit of the witness that before 20.07.2007, Axis Bank was known as UTI Bank. So, this circumstance raises a doubt in my mind that when UTI Bank became Axis Bank in the year 2007 then how come cheques in question were issued by the accused in the year 2009 in the name of UTI Bank. Complainant has CC No. 26044/10 Page No.18 of 22 nowhere stated in its complaint as well as the affidavit that post dated cheques were given by the accused at the time of the loan. Considering the aforesaid facts, I opine that there are suspicious circumstances surrounding the transaction and the stand of the accused that cheques were given blank seems to be believable.
27 Also, in the case of "Gopal Vs. Tonny Varghese" 2008 (1) Civil Court Cases 642 (Kerela) it has been held that mere proof of signature on cheque is not proof of its execution. In the absence, of any positive evidence regarding the execution of the cheque by the accused, it is to be held that the accused had issued only blank cheque and the same was not executed by him. Simply because the cheque contained the signature of the accused, it cannot be said that the cheque was drawn by the accused as contemplated by Section 138 of the Act.
28 In a recent Judgment of Kerala High Court in C.Santhi v. Mary Sherly 2011(4) RCR Civil 269 Kerala , it has been held that mere production of cheque by complainant is not sufficient to prove execution by accused. For successful prosecution of offence under section 138 of N.I Act , complainant must allege and prove that the cheque was drawn or executed by the accused. In the absence of the allegation in the complaint that the cheque was drawn by the accused and in the absence of proof of such fact, an accused cannot be convicted for offence under section 138 of N.I Act. 29 It is also pertinent to note that going by the provision namely, Section 138 of the NI Act, it can be seen that the legislature has employed certain words cautiously and not without any meaning. The word employed in Section 138 Viz., "drawn', 'discharge of any debt or other liability' are conveying the message of the legislature, through which CC No. 26044/10 Page No.19 of 22 we can understand the intention of the legislature. So while interpreting the provisions or the word, the court has to give effect to the intention of legislature. At any stretch of imagination, it cannot be said that putting signature on the blank cheque is equivalent to the word 'drawn' used in Section 138 of the NI Act. Therefore, the word 'drawn' used in Section 138 has to be understood as 'execution of cheque'.
30 A person can be said to have "drawn " a cheque, if he has made, prepared or created a cheque. A cheque is an instrument which is created in confirmity with the requirements of section 6 read with section 5 of the N.I Act. A reading of section 5 and 6 shows that a cheque consists of mainly, two parts. One is, an unconditional order in writing directing the banker to pay a certain sum of money only, or to the order of a certain person or to the bearer of the cheque. The second part is the signature of the drawer. 31 When the execution of the cheque is denied by the accused, it is for the complainant to establish the same. In the absence of any positive evidence regarding the execution of the cheque by the accused, it is to be held that the accused had issued only blank cheque and the same was not executed by him. Simply because the cheque contained the signature of the accused, it cannot be said that the cheque was drawn by the accused as contemplated by Section 138 of the NI Act.
32 It is also proper and necessary to point out that the amendment brought in the NI Act, penalizing the dishonour of cheques, to give more sanctity to commercial transactions involving cheques have given way, rather leverage to unscrupulous money lenders to squeeze their debtors through the instrumentality of the court by resorting to prosecution against such debtors on dishonoured cheques which are very often collected in blank form with signature alone as security. True, the maker of the CC No. 26044/10 Page No.20 of 22 instrument, who signs such a instrument in blank form invites the risk of prosecution and sometimes penal consequences, on inflated claims later incorporated in the instrument without his knowledge and consent. He has taken such risk while signing the instrument in blank form is only a lame excuse and that will not relieve the court the instrumentality of Justice from examining the genuineness of the transaction covered by the instrument. A court is expected to examine whether the transaction covered by the cheque is genuine and bona fide. In a case where the materials produced disclose of suspicious circumstances surrounding the transaction unless satisfactory explanation removing such suspicion is tendered by the holder of the instrument no conviction is legally permissible solely banking upon the statutory presumptions.
33 In view of the foregoing discussion, I hold that the cheques in question were issued as blank for security purpose and not towards the discharge of any debt or liability in the manner as has been alleged by the complainant and therefore, it will not fall within the province of section 138 of N. I Act.
34 Before parting with the Judgment, I would also like to place reliance on the observation of the Apex Court in Kumar Exports v. Sharma Carpets 2009 , 2 SCC 513 wherein it was held that 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. 35 Therefore, I hold that complainant had miserably failed to prove the CC No. 26044/10 Page No.21 of 22 passing of consideration i.e legal enforceable debt or liability which is the bedrock of the complaint case under section 138 and merely because of the admission of signature on the cheques, it cannot be said that the execution of the cheques were proved. In the facts and circumstances of the case, on appreciation of the evidence and on the basis of materials on the record, I further hold that accused is able to adduce rebuttal evidence by raising a probable defence which creates doubt about the existence of legally enforceable debt or liability, hence in such a scenario the evidential burden shifts back to the complainant which has not been sufficiently discharged. In view of this the dishonour of the cheques Ex.CW1/3 to 7 for reason "funds insufficient", issuance of notice demanding payment of the cheques in question, do not assume any significance in the light of the aforesaid findings of the court.
36 In the backdrop of aforesaid discussion, I hold that complainant has failed to establish that cheques in question were drawn by the accused towards the discharge of legally enforceable debt or liability. No material whatsoever is placed on record which could evince that accused was liable to pay the amount covered in the cheques in question. Accused has proved his stand by preponderance of probabilities by showing that the cheques were given as blank not in discharge of any liability but for security purpose. Therefore, no offence under section 138 of N.I Act is made out against the accused, hence accused Gurdeep Luthra stands acquitted. He is set at liberty. Bail Bond stands discharged.
ANNOUNCED IN THE OPEN (NAVJEET BUDHIRAJA)
COURT ON 01.05.2012 METROPOLITAN MAGISTRATE
SPECIAL COURT 06,
DWARKA COURTS, DELHI.
CC No. 26044/10 Page No.22 of 22