Delhi District Court
Surya Products Limited vs Suresh Khatwaji on 5 March, 2025
IN THE COURT OF SH. RISHABH TANWAR,
JUDICIAL MAGISTRATE FIRST CLASS/NI ACT-01/WEST/TIS
HAZARI COURT/DELHI
CT Cases no. 6386/2016
CNR No. DLWT020037592015
M/s Surya Products Limited,
Having its office at A-14, Sector-02,
DSIDC Industrial Area, Delhi-110039
Through its AR Sh. Dungar Dev Kotalia .........Complainant
Vs.
Suresh Khatwaji
Proprietor of M/s Shri Shyam Packers,
R/o J-1/1405, Mansarovar Park,
Shahdara, New Delhi-110027 ............Accused
::J U D G M E N T::
1. Date of institution of case : 04.07.2015
2. Date of reserving the judgment : 24.01.2025
3. Date of pronouncement of judgment : 05.03.2025
4. Offence complained or proved : 138 N.I. Act
5. Plea of Accused : "Not Guilty"
6. Final Order : CONVICTION CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 1/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:02:38 +0530
7. Date of Final Order : 05.03.2025 BRIEF FACTS AND REASONS FOR DECISION
1. The present case has arisen out of a complaint filed under section 138 read with section 142 of Negotiable Instrument Act, 1881 (hereinafter referred to as N.I. Act) by one Surya Products Limited through its authorized representative (A.R.) (hereinafter referred to as 'the Complainant') for dishonor of cheques bearing number 257328 and 300445 dated 18.03.2015 and 11.05.2015 respectively, for an amount of Rs.2,50,000/- and Rs. 50,000/- each respectively and each of the cheque drawn on State Bank of India, GT road, Shahdara branch (hereinafter referred to as 'the cheques in question') issued by one Suresh Khatwaji, being the proprietor of Shri Shyam Packers (hereinafter referred to as 'the accused') in favor of the complainant.
2. Brief facts of the case are that the complainant company is a limited company registered under Companies Act 1956 and is engaged in the business of sale, purchase and manufacture of EPE sheets and EPE liners wads. It is inter alia alleged that the accused had purchased EPE liners from the complainant on credit from time to time and as per the statement of account maintained by the complainant company from 01.04.2015 to 18.05.2015, a sum of Rs. 3,78,896/- was due against the accused. It is further alleged that the accused issued the cheques in question towards discharge of this liability. These cheques came to be dishonored upon presentation through the return memos dated 16.05.2015 and 20.05.2015 respectively CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 2/17 Digitally signed RISHABH by RISHABH TANWAR TANWAR Date: 2025.03.05 15:02:42 +0530 issued by the complainant's bank with the remark 'payment stopped by drawer'. The complainant issued the legal demand notice dated 27.05.2015 under section 138(b) NI Act. The present complaint came to be filed by the complainant when the accused failed to pay the amount of the cheques despite receipt of the legal demand notice.
3. The complainant examined himself as CW-1 on 30.06.2016 and tendered his evidence on affidavit which was exhibited as Ex. CW-1/1. He also placed reliance on the following documents: -
(a) Ex. CW1/2 is the ledger account of the accused maintained by the complainant company.
(b) Ex. CW1/3 to Ex. CW1/7 are the tax invoices.
(c) Ex. CW-1/8 and Ex. CW-1/10 are the cheques in question.
(d) Ex. CW-1/9 and Ex. CW-1/11 are the return memos dated 16.05.2015 and 20.05.2015 respectively.
(c) Ex. CW1/12 is the demand notice dated 27.05.2015.
(e) Ex. CW1/13 is the postal receipt.
4. The defense of the accused under section 251 Cr.P.C. was recorded, after serving upon him the substance of accusation on 06.12.2022 wherein he pleaded not guilty and stated that the cheques in question bore his signature, and he did not fill in the remaining particulars. He further stated that the complainant had raised wrong invoices and sent them on the incorrect address. He denied receiving any goods from the complainant in relation to the invoice and he had already made payments for the goods received. He further stated that the cheques in question were security CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 3/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:02:46 +0530 cheques, and they have been misused by the complainant. He further denied receiving the legal notice and stated that the address on the legal notice was incorrect.
6. This court had allowed the accused to cross-examine the complainant under section 145(2) NI Act on 19.09.2019. The complainant's evidence on affidavit (Ex. CW-1/A) was read as his examination in chief under section 145(1) NI Act. CW-1 was cross-examined by Ld. Counsel for the accused, wherein he was confronted with the original receipts of the goods (Ex.
CW-1/D1) and the bank account statement of the accused (Ex. DW-1/A). CW-1 had also produed the competerised ledger account of the accused (Mark CW-1/X, photocopies of the sale bills (Mark CW-1/Y) and the computerized bills (Mark CW-1/Z) and the certificate under section 65B Indian Evidence Act, 1872 (hereinafter referred to as "I.E.A." for the sake of brevity) (Ex. CW-1/Z1).
7. The complainant also examined Sh. Sardar Singh, Public Relation inspector, Civil Lines Office, who had proved the letter of the Sub postmaster and the copy of the notification vide which old records of the post office articles were weeded out, as Ex. CW-2/A. He was not cross- examined by the Ld. Counsel for the accused.
8. The Statement of accused u/s. 313 Cr.P.C. was recorded on 16.08.2023 wherein he admitted that Bill no. 35 and 1285 (part of Ex. CW-1/3 to Ex. CW-1/7) were correct and the remaining bills bore his incorrect address. He admitted the statement of the account Ex. CW-1/2 to CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 4/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:02:50 +0530 be correct. He reiterated his defence taken under section 251 Cr.P.C. The accused denied the service of legal notice upon him stating that the address on the same was incorrect.
9. The accused examined himself as a witness under section 315 Cr.P.C.
He also examined one Chitra Sen Khatua, who used to work with the proprietorship of the accused and looked after its accounts, as DW-2. Both the witnesses were duly cross-examined by the Ld. Counsel for the complainant. Subsequently, the case was put up for final arguments.
THE APPLICABLE LAW
10. Before appreciating the facts of the case in detail for the purpose of decision, let relevant position of law be discussed first. It is well settled position of law that to constitute an offence under S.138 N.I. Act, the following ingredients are required to be fulfilled:
(1) That the cheque in question has been drawn by a person on an account maintained by him with a banker, for payment to another person from out of that account for discharge in whole/part any debt or liability.
(2) That the said cheque has been presented to the bank within a period of six months (now three months) from the date on which it is drawn or within the period of its validity whichever is earlier. (3) That the cheque was returned dishonoured by the drawee bank for want of sufficient funds or the same exceeded any arrangement with the banker to pay the sum covered by the cheque.
CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 5/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:02:53 +0530 (4) That the complainant gave a notice in writing to the drawer of the cheque within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid demanding payment of the cheque amount.
(5) Lastly that the accused failed to make payment to the payee (the complainant), or the holder in due course, the cheque amount within 15 days of the receipt of the notice.
11. 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 N I Act. The Act also raises two presumptions in favour of the holder of the cheque namely first, in Section 118(a) which says that every negotiable instrument was made or drawn for consideration, and, second, a presumption under Section 139, that the holder of cheque receiving the same of the nature referred to in Section 138 for discharge, in whole or in part, of any debt or other liability. Analysing all the concerned provisions of law and various pronouncements in this regard, the Hon'ble Apex Court in 'Basalingappa v. Mudibasappa, AIR 2019 SC 1983', noted at para 23 Bharat Barrel and Drum Manufacturing Company v. Amin Chand Pyarelal, (1999) 3 SCC 35; M.S. Narayana Menon alias Mani v. State of Kerala and another, (2006) 6 SCC 39; Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54; Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513; Rangappa v. Sri Mohan, (2010) 11 SCC 441]:
(i) Once the execution of cheque is admitted, Section 139 of the Act mandates a presumption that the cheque was for the discharge CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 6/17 Digitally signed RISHABH by RISHABH TANWAR TANWAR Date: 2025.03.05 15:02:57 +0530 of any debt or other liability.
(ii) The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities.
(iii) To rebut the presumption, it is open for the accused to rely on evidence led by him or 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.
(iv) That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposes an evidentiary burden and not a persuasive burden.
(v) It is not necessary for the accused to come in the witness box to support his defence.
ARGUMENTS ADVANCED ON BEHALF OF THE PARTIES
12. Sh. D.V. Goyal, Ld. counsel for the complainant has argued that the complainant has been able to prove all the pre-requisites of Section 138 NI Act against the accused and the accused has failed to rebut the presumption u/s. 138 NI Act. Ld. counsel has prayed that the accused be convicted of the offence u/s. 138 NI Act.
13. Per contra, Sh. Inderpal Khokhar, Ld. Counsel for the accused has CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 7/17 Digitally signed RISHABH by RISHABH TANWAR TANWAR Date: 2025.03.05 15:03:01 +0530 argued that the legal notice was not served upon the accused as the same was served on the wrong address. He further stated that the invoices filed by the complainant bore incorrect address of the accused and for the invoices that the accused does not dispute, the accused had already made payments for them. He has further argued that the complainant has misused the security cheques of the accused, and he has further prayed that the accused be acquitted of the offence alleged against him.
POINTS OF DETERMINATION
14. The following points of determination arise in the present case:
A. Whether the complainant has successfully proven the facts which would raise the presumption u/s. 118 r/w Section 139 of NI Act by proving that the cheque in question bears the signature of the accused?
B. If yes, whether the accused has been successful in raising a probable defence to rebut the presumption under section 139 NI Act?
C. If yes, whether the complainant has proved its case, beyond the shadow of reasonable doubt, without taking the aid of presumption under section 139 NI Act?
FINDINGS OF THE COURT CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 8/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:03:04 +0530 Points of determination number (A):
15. Whether the complainant has successfully proven the facts which would raise the presumption u/s. 118 r/w Section 139 of NI Act by proving that the cheque in question bears the signature of the accused?
16. It is settled law that once the signature upon the cheques in question has been admitted by the accused, 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.
17. 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 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 in 'Hiten P. Dalal vs. Bratindranath Banerjee (2001) 6 SCC 16'.
18. The Hon'ble Supreme Court in 'Kumar Exports vs. Sharma Carpets (2009) 2 SCC 513', while elaborating upon the interplay of section 118(a) r/w 139 of the N I Act, has held that:
CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 9/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:03:08 +0530 "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 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 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."
19. In the present case, the accused at the time of framing of notice u/s 251 and statement recorded u/s 313 Cr.P.C has admitted his signatures on the cheques in question. Once signatures are admitted, the presumption under section 118(a) r/w 139 NI Act becomes operative in favour of the complainant in the present case.
CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 10/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date: 2025.03.05 15:03:12 +0530
20. Accordingly, the point of determination number A is decided in the affirmative.
Points of determination number (B):
21. Whether the accused has been successful in raising a probable defence or in another words, whether he had been able to prove that the cheques were not issued towards any legally recoverable debt or any other liability?
22. Let us discuss the factual matrix of the present case. It is case of the accused that the complainant has not delivered the goods on the correct address of the accused. In his defence under section 251 Cr.P.C., the accused had stated the same. Considerable amount of time was spent in the cross- examination of CW-1 on this aspect. It is pertinent to note that CW-1 had stated in his cross-examination that the accused himself had collected the goods. Though CW-1 admitted that the same was not mentioned in the complaint, however the same does not affect the case of the complainant as the occasion to answer the same had only arisen when CW-1 was put a question to this effect. Once a probable answer has been given by the witness, the onus was upon the accused to prove the same. The question of delivery of the goods to a wrong address does not arise, when the witness had deposed that the goods were collected by the goods himself.
21. Furthermore, in order to further bolster its defence of non-delivery of the goods to the accused, CW-1 was asked to bring the sales tax record with respect to the goods sold to the accused. This question was a germane CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 11/17 Digitally signed by RISHABH TANWAR RISHABH Date:
TANWAR 2025.03.05
15:03:16
+0530
question, as if the accused had shown that the complainant company had not paid any sales tax on the goods sold to the accused, naturally a presumption would have been raised that no sales tax had been paid since the goods were never sold to the accused. However, CW-1 had brought the sale tax from the DVAT Website and proved it as Ex. CW-1/X, duly supported with a certificate under section 65B I.E.A. The record Ex. CW-1/X shows that the complainant company had duly deposited the VAT (Value Added Tax) on the goods sold to the accused. It is pertinent to note that no suggestion was given to CW-1 denying the contents or veracity of Ex. CW-1/X. Therefore, on this count, the accused has failed to raise any doubt upon the story of the complainant.
22. The accused then tried to prove his defence by demonstrating that the address mentioned on the invoices EX. CW-1/Z (colly.) and Ex. CW-1/Y (Colly.) was incorrect and the complainant company has not delivered the goods on the correct address. Though CW-1 had admitted that the address was not correctly mentioned on the aforementioned invoices. The complainant had merely mentioned '3-1/1405D' instead of 'J-1/1405D'. Moreover, this difference in the address does not affect the case of the complainant as the accused had admitted the ledger balance and the ledger account maintained by the complainant Ex. CW-1/2 as correct. Once the accused has admitted the ledger account, as brought on record by the complainant, the fact that the address on the invoices was incorrectly mentioned loses significance. Furthermore, in his testimony as DW-1, the accused stated that he used to keep making the payments to the complainant qua the raw material supplied to him by the complainant. The accused did CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 12/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:03:20 +0530 not depose in his entire testimony that the goods were not delivered to him. Therefore, in light of the aforesaid statement of the accused, his defence that goods were not delivered to him has remained 'not proved'.
23. Furthermore, the accused has deposed in his testimony that he had made entire payments to the complainant. He has relied upon his bank account statement Ex. DW-1/A showing payments made to the complainant from 27.05.2016 till 20.12.2017. The accused examined one Chitra Sen Khatua, who also deposed that the accused had already made payments to the complainant in lieu of the cheques given. The complainant has on the other hand has brought ledger account statement of the accused (Mark CW-1/X) supported with a certificate under section 65B I.E.A. Ex. CW-1/Z1. It is pertinent to note that Ex. DW-1/A is a mere print out and does not bear any stamp or seal of certification from the bank concerned. It is not even supported with any certificate under section 65B I.E.A. and it has not been proved by calling a bank witness. Be that as it may, even if it is to be considered, the payments, as shown in the account statement, has been factored in by the complainant in its ledger account Mark CW-1/X. Besides, these payments were made after the dishonour of cheques in question i.e., 16.05.2015 and 20.05.2015 and even after the date of issuance of the legal demand notice on 27.05.2015. Therefore, the fact that the accused had made payments to the complainant is irrelevant as the same were made, if at all, belatedly.
24. The accused has also argued that he had issued security cheques and the same have been misused by the complainant. The accused has not made CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 13/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:03:24 +0530 any complaint against the alleged misuse of cheques. Moreover, it is a settled proposition of law that a cheque, issued a security, in pursuit of financial transaction, cannot be considered as a worthless piece of paper. It is given to ensure the fulfilment 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 NI act 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 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.
25. The accused has argued that the legal notice was not served upon him. In this regard, it would be relevant to discuss the judgement of the Hon'ble Supreme Court in "C.C. Alavi Haji vs Palapetty Muhammad & Anr AIR 2007 SC (SUPP) 1705" wherein it was held that: "17. 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 CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 14/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:03:27 +0530 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."
26. It is an admitted position that the accused has not paid the amount of the cheque in question within 15 days of his appearance in this court. Therefore, in light of the aforesaid case, the accused cannot now contend that he had not received the legal notice or there was not proper service of the same upon him.
27. In the considered finding of this court, the accused has failed to raise a probable defence, on the scale of preponderance of probability and has failed to rebut the presumption under section 139 NI Act. Accordingly, the point of determination no. (ii) is decided in the negative.
28. Since the point of determination no. (ii) has been decided in the nega- tive, it would not be necessary to discuss the point of determination no. (iii).
29. It is not disputed that the cheques in question was dishonored with the remark 'funds insufficient' and the complainant had issued the legal notice within 30 days of receiving the information of receipt of the dishonor. The defence of the accused that legal notice has not been served upon him has CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 15/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:03:31 +0530 been discarded. Therefore, the complainant has been able to prove all the necessary ingredients of the offence under section 138 NI Act.
30. It is trite law that when the accused has failed to rebut the presump- tion under section 139 NI Act, the court can proceed to convict the accused. reliance is placed upon the judgment of Hon'ble Supreme Court in Supreme Court in 'Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148', which discusses the correct approach in dealing with presumption under Section 139 ob- served as under; relevant extracts are reproduced hereunder:
"54. ...Once the presumption under Section 139 was given ef- fect to, the courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would then necessarily have to shift on the case set up by the ac- cused, since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would then be to see whether the accused has discharged his onus of rebut- ting the presumption. If he fails to do so, the court can straightaway proceed to convict him, subject to satisfaction of the other ingredients of Section 138...."
CONCLUSION
31. Accordingly, this Court finds the accused Sh. Suresh Khatwaji, proprietor of M/s Shri Shyam Packers, S/o Sh. Manguni Khatwaji 'guilty' of the offence under Section 138 NI Act and accordingly he is convicted of the CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 16/17 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2025.03.05 15:03:35 +0530 said offence.
32. This judgement contains 17 pages, and each page has been signed by the undersigned as per rules.
33. Let the copy of digitally signed judgment be uploaded on the website of Tis Hazari District Court as per rules.
Digitally
signed by
RISHABH
RISHABH TANWAR
TANWAR Date:
2025.03.05
15:03:38
+0530
Announced in open Court (RISHABH TANWAR)
On 05th Day of March 2025 JMFC (NI ACT-01)/WEST/DELHI
CC No. 6386/2016 M/s Surya Products Limited VS. Suresh Khatwaji pg. no. 17/17