Delhi District Court
Manish Uppal vs Pradeep Sharma Proprietor Of M/S Sharma ... on 31 January, 2025
UNIQUE QR CODE:
IN THE COURT OF JUDICIAL MAGISTRATE FIRST CLASS
N.I. ACT, (DIGITAL COURT NO. 03) (CENTRAL)
TIS HAZARI COURTS : DELHI
Presiding Officer: Ms. Meena Chauhan, DJS
CC NI Act No. 5161/2022
Manish Uppal vs. Pradeep Sharma
U/s 138 Negotiable Instruments Act
PS: Bara Hindu Rao
JUDGMENT
a Case Number Record(CNR) : DLCT020155532022 b Date of dishonour of cheque : 08.04.2022 c Date of institution of case 10.06.2022 Mr. Manish Uppal S/o Late Shanti Swroop d Name of the Complainant : Uppal R/o I=13, Parwana Vihar Apartment, Sector-09, Rohini, Delhi.
Mr. Pradeep Sharma, Proprietor of M/s
e Name of Accused : Shamra Constructions R/o 4169 Gali
Ahiran, Pahari Dheeraj, Delhi-110006
U/s 138 of the Negotiable Instruments
f Offences complained of :
Act
g Plea of the Accused : Not pleaded guilty
h Arguments concluded on 22.01.2025
i Final Order : Conviction
j Date of Final Order : 31.01.2025
CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.1/29
Digitally signed
by MEENA
MEENA CHAUHAN
CHAUHAN Date: 2025.01.31
17:05:18 +0530
It is the spirit and not the form of law that keeps justice alive.
-Chief Justice Earl Warren BRIEF STATEMENT OF REASONS FOR THE DECISION:
1. The present complaint under Section 138 of Negotiable Instruments Act, 1881 (hereinafter referred to as "NI Act") is filed by the complainant Mr. Manish Uppal (hereinafter referred to as "the complainant") U/s 200 of The Code of Criminal Procedure (hereinafter referred as "Cr.P.C.") against the accused Mr. Pradeep Sharma, the proprietor of M/s Sharma Constructions (hereinafter referred to as "the accused").
Facts Matrix:
2. The essence of the allegations and claims in the complaint centers around the friendly relationship that developed between the parties involved. The accused offered to sell the first floor of his property located at no. 1/10597, Gali No. 3, Mohan Park, Naveen Shahdara, Delhi-110034 (hereafter referred to as 'the property') to the complainant. He asserted his ownership of the property through a compromise deed dated March 19, 2016. Additionally, the accused stated that he had filed an execution petition for possession of the property, which he believed would be resolved in his favor.
3. The accused agreed to sell the property to the complainant for a total of Rs.
15 lakhs and also committed to settling a debt of Rs. 5 lakhs owed to Mr. Shivesh Pal as part of the sale consideration. Furthermore, the accused CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.2/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:05:45 +0530 assured that he would execute the sale deed on or before March 31, 2022. If he failed to do so, he promised to refund the consideration amount along with interest at a rate of 1.25% per month to the complainant.
4. Due to their amicable relationship and assurances from the accused, both parties entered into an Agreement to Sell on October 19, 2020. According to this agreement, the accused promised to execute the sale deed in favor of the complainant if the outcome of the execution petition was favorable to him on or before March 31, 2022. If not, he would refund the amount received from the complainant.
5. The complainant paid a total of Rs. 6 lakhs to the accused and agreed to pay off a debt of Rs. 5 lakhs owed by the accused to Mr. Shivesh Pal. In total, the complainant paid Rs. 11 lakhs to the accused as consideration. It is alleged that the sale deed was not executed on or before March 31, 2022, as outlined in the agreement.
6. Consequently, the accused issued two cheques: one, Cheque No. 153824, dated March 31, 2022, amounting to Rs. 11 lakhs for the repayment of the principal amount; and another, Cheque No. 153825, dated March 31, 2020, amounting to Rs. 2,39,250, drawn on Punjab National Bank, Bara Hindu Rao, Delhi (hereinafter referred to as the "impugned cheque"), in favor of the complainant.
7. When the impugned cheque was presented for encashment, it was returned with the remark "Funds Insufficient," as noted in the return memo dated CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.3/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:05:54 +0530 April 8, 2022. The accused was subsequently served with a demand-cum- legal notice dated April 27, 2022. However, despite receiving the notice, the accused failed to make the payment within the stipulated time. Therefore, it is alleged that the accused has committed an offence punishable under Section 138 of the Negotiable Instruments Act.
Cognizance and Summoning:
8. Ld. Predecessor of this court took cognizance of the commission of an offence U/s 138 of NI Act and summoned the accused vide summoning order dated 20.08.2022. The accused appeared before the Court through his counsel and he was admitted to bail, thereafter.
Notice of accusation:
9. Upon seeing the prima facie case against the accused, a Notice of accusation U/s 251 Cr.P.C. was given to the accused on 17.08.2023. The accused admitted his signature on the disputed cheque, confirmed that he received the legal demand notice, and agreed that the address mentioned in the demand notice was correct. However, he pleaded his innocence regarding the allegations of an offence under Section 138 of the NI Act and presented his defense as follows:
"That the complainant had advanced me a loan of Rs. 6,00,000/- through intervention of a common friend Mr. Shivesh Pal, advocate in the month of October-November probably in the year 2021-21. I could not repay the said amount. My liability is only to the extent of Rs. 6,00,000/-CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.4/29 Digitally signed by MEENA CHAUHAN
MEENA Date: CHAUHAN 2025.01.31 17:06:11 +0530 in total. The complainant is misuing the two secutiry cheques by mentioning an exaggerated amount. Anothe rcomplaint bearing no. 6155/2022 has been filed by the complainant in respect of another cheque."
10. Upon an oral request to cross-examine the complainant U/s 145(2) of NI Act and no objection on behalf of the complainant, the accused was permitted to cross-examine the complainant. The trial was converted from summary to a summons case.
Complainant's Evidence:
11. On 16.04.2024, the complainant examined himself as CW1 and tendered his evidence by way of an affidavit, thereby adopting his pre-summoning evidence, Ex.CW1/A, in post-summoning evidence. The complainant placed reliance on the following documents:
1. Ex. CW1/1 Agreement to sell dated 19.10.2020
2. Ex. CW1/2 Original Cheque No. 153825 dated 31.03.2022 of Rs.
2,39,250/-
3. Ex. CW1/3 Original Return memo dated 08.04.2022
4. Ex. CW1/4 Legal notice dated 27.04.2022
5. Ex. CW1/5 Original postal receipt
6. Ex. CW1/6 Tracking report of postal receipt
7. Ex. CW1/7 Certificate U/s 65 of Indian Evidence Act
12. As no other was to be examined, the complainant closed his evidence on the CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.5/29 Digitally signed by MEENA CHAUHAN MEENA Date: CHAUHAN 2025.01.31 17:06:19 +0530 same date via giving a separate statement to this effect.
Examination under Section 313 Cr.P.C.
13. Incriminating circumstances appearing in the evidence were explained to the accused as required under Section 313 Cr.P.C. read with Section 281 Cr.P.C. to which he pleaded his innocence by reiterating the same ground of defence as earlier taken by him U/s 251 Cr.P.C. The accused opted to lead defence evidence.
Defence Evidence:
14. The accused examined himself as DW1 and relied upon the copy of execution petition No. 1576/2018 along with meditation settlement of civil suit No. 7922/2016 and compromise decree dated 19.03.2016, Ex. DW1/C1 (colly).
15. During the cross-examination of the accused, two documents, i.e., a tax invoice, Ex. DW1/C1, and a handwritten undertaking dated 10.09.2020, Ex. DW1/C2 were exhibited. Defence Evidence was closed.
Contentions of the Complainant:
16. Mr. Manjul Mayank Shukla, Ld. Counsel for the complainant argued that the accused has admitted his signatures on Agreement to sell and also, admitted the terms of the agreement. It is further the terms of the agreement are clearly defined as per the said agreement, the accused to sell his property and to CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.6/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:06:27 +0530 assign the debt owed to Mr. Shivesh Pal towards the consideration amount.
17. It is alleged that the defence raised by the accused during his examination is an afterthought as U/s 251 Cr.P.C. as well U/s 313 Cr.P.C., the accused admitted the partial liability towards the complainant and did not dispute the genuineness of Agreement to sell. No suggestion of falsity and forgery of the said agreement was put forth by the accused in his entire defence.
18. It is further contended that there is no iota of evidence to substantiate any of the defences of the accused. It is stated that all the essential requirements of Section 138 of the NI Act have been fulfilled in the present complaint and statutory presumptions are to be raised in favour of the complainant. Since the defences of the accused are full of contradictions, the same deserved to be discarded and the accused is liable to be convicted under Section 138 of the NI Act.
Contentions of the Accused:
19. Mr. Shiv Kumar Gautam, Ld. Counsel for the accused questioned the legal enforceability of Agreement to sell. It is alleged that the said agreement is contingent and an agreement by way of wager, the same is void as per the Contract Act. Further, the contents of the agreement have not been proved as no witness to the agreement has been examined by the complainant.
20. It is argued that the complainant has not placed on record any document showing the transfer of Rs. 6 lakhs to the accused or payment of Rs. 5 lakhs to Mr. Shivesh Pal on behalf of the accused. Further, it is argued that Mr. CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.7/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date: 2025.01.31 17:06:36 +0530 Shivesh Pal was not examined by the complainant and failed to prove the liability of the accused towards the complainant. The transfer of alleged debt of the accused towards Mr. Shivesh Pal to the complainant by way of an agreement is also against the rules of Bar Council of India.
21. It is argued that the complainant has not mentioned the alleged amount in Income Tax Returns. Accused has never admitted his liability qua the cheque in question and he has adduced sufficient material and evidences on record to show that he did not have any legal liability towards the complainant and therefore, the accused is not liable under Section 138 NI Act.
22. Written submissions were filed on behalf of the accused. Several judgments are referred to in the written arguments filed by the complainant.
Points of Determination:
23. The following points of determination arise in the present case:
I. Whether the complainant has been successful in raising the presumptions under Section 118 read with Section 139 of the NI Act?
II. If yes, whether the accused can be said to have discharged his 'evidential burden', that the statutory presumptions of law had been rebutted?
III. Whether the complainant has, in the absence of the artificial force supplied by the presumption under Section 139, independently proved CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.8/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:06:45 +0530 beyond reasonable doubt that the cheque was issued in discharge of a debt/liability? (The necessity of dealing with this issue would arise if the answer to the II issue is in the affirmative) Legal Position:
24. Prior to the appreciation of the facts, it would be apt to refer to the relevant law propositions. The essential ingredients for constituting the offence U/s 138 of NI Act are elaborated by Hon'ble Supreme Court of India in Gimpex (P) Ltd. v. Manoj Goel (2022) 11 SCC in the following structure:
(i) The drawing of a cheque by a person on an account maintained by him with the banker for the payment of any amount of money to another from that account;
(ii) The cheque is drawn for the discharge in whole or in part of any debt or other liability;
(iii) Presentation of the cheque to the bank arranged to be paid from that account;
(iv) The return of the cheque by the drawee bank as unpaid either because the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount;
(v) A notice by the payee or the holder in due course making a demand for the payment of the amount to the drawer of the cheque within 30 days of the receipt of information from the bank regarding the return of the cheque; and
(vi) The drawer of the cheque failed to make payment of the amount of money to the payee or the holder in due course within 15 days of the receipt of the notice.
25. Before proceeding further, it is pertinent to discuss two presumptions that are enumerated in the Act, while considering the offence envisaged U/s 138 CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.9/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:06:53 +0530 of NI Act.
Section 139 of the Negotiable Instruments Act: "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, or any debt or other liability."
Section 118(a) of the Negotiable Instruments Act: "(a) of consideration --that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;"
26. The combined effect of Section 118(a) and Section 139 of NI Act is that it raises a presumption in favour of the holder of the cheque that he has received the same for discharge in whole or in part of any debt or other liability. At this juncture, it is worth to place reliance on the following decision reported in K. Bhaskaran v. Shankaran Vaidhyan Balan (1999) 7 SCC 510 and another decision reported in Rangappa v. Mohan (2010) 11 SCC 441, APS Forex Services Pvt. Ltd. v. Shakti International Fashion linkers and ors. (2020) 12 SCC 724.
27. In Hiten P. Dalal Vs. Bratindranath Banerjee AIR 2010 SC 1898 it was held as under: − "The words 'unless the contrary is proved' which occur in this provision (Section 139) make it clear that the presumption has to be rebutted by 'proof' and not by a bare explanation which is merely plausible. A fact is said to be proved when its existence is directly established or when upon the material before it the Court finds its existence to be so probable that a reasonable man would act on the supposition that it exists. Unless, therefore, the explanation is supported by proof, the presumption created by the provision cannot be said to be rebutted......"
28. It is a well settled legal principle that in cases under section 138 NI Act, the CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.10/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:07:04 +0530 complainant has to prove his case beyond a pale of reasonable doubt and the accused has to raise a defence on the yardstick of "preponderance of possibility". In other words, the 'legal burden' to prove the case always is on the shoulders of prosecution, however, the 'evidentiary burden' keeps on shifting during the trial.
29. Although, there is presumption in favour of the complainant that the promissory note is with consideration and the holder of the note received it for debt or liability, however, the 'existence' of such legally enforceable debt or liability is not presumed. Further, the said presumptions are also rebuttable either by way of direct evidence or by finding cavities in complainant evidence. The presumptions shall cease to exist when the contrary is proved by the accused. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists. [Kumar Exports Vs. Sharma Carpets, (2009) 2 SCC 513 relied upon]
30. In order to rebut the presumption, it is open to the accused to raise a probable defence wherein the existence of a legally enforceable debt or liability can be contested. The words 'until the contrary is proved' in Section 139 do not mean that accused must necessarily prove the negative that the promissory note is not issued in discharge of any debt/liability but the accused has the option to ask the Court to consider the non-existence of debt/liability so probable that a prudent man ought, under the circumstances of the case, to act upon the supposition that debt/liability did not exist. [Basalingappa Vs. Mudibasappa (AIR 2019 SC 1983) and Kumar Exports Vs. Sharma Carpets (2009) 2 SCC 513 relied upon.
CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.11/29 Digitally signedby MEENA MEENA CHAUHAN CHAUHAN Date: 2025.01.31 17:07:12 +0530 Admitted facts and Presumptions:
31. It is an admitted fact that the complainant and the accused have known each other. Further, the accused accepted that the impugned cheque was issued by him, bearing his signature and it was drawn on an account maintained by the accused with a bank and the accused failed to make the payment of cheque in question after receipt of legal demand notice. The accused also does not dispute the receipt of legal demand notice Ex.CW1/4 as per his statements U/s 251 Cr.P.C. and U/s 313 Cr.P.C. The dishonour memo issued by the bank is on record and the same is Ex.CW1/3. Hence, by virtue of section 146 of the NI Act, the dishonour of the cheque in question has to be presumed and the same stands proved. So, there is no need for discussion qua said ingredients and the same can be regarded as being duly proved on record and being non-controverted.
32. The law regarding the presumptions and evidentiary burden has been recently reiterated in the case of Rajesh Jain v. Ajay Singh, (2023) 10 SCC
148. The Hon'ble Supreme Court held that the presumptions stipulated under Section 139 of the NI Act presumptions of law and the 'presumed fact' directly relates to one of the crucial ingredients necessary to sustain a conviction under Section 138. It operates as a reverse onus clause and it requires the accused to prove the non-existence of the presumed fact, i.e., that the cheque was not issued in discharge of a debt/liability. It is further held that:
"37. As soon as the complainant discharges the burden to prove that the instrument, say a cheque, was issued by the accused for discharge of debt, the presumptive device under Section 139 of the Act helps shifting the CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.12/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date: 2025.01.31 17:07:28 +0530 burden on the accused. The effect of the presumption, in that sense, is to transfer the evidential burden on the accused of proving that the cheque was not received by the Bank towards the discharge of any liability. Until this evidential burden is discharged by the accused, the presumed fact will have to be taken to be true, without expecting the complainant to do anything further."
"39. The standard of proof to discharge this evidential burden is not as heavy as that usually seen in situations where the prosecution is required to prove the guilt of an accused. The accused is not expected to prove the non-existence of the presumed fact beyond reasonable doubt. The accused must meet the standard of "preponderance of probabilities", similar to a defendant in a civil proceeding. [Rangappa v. Sri Mohan[Rangappa v. Sri Mohan, (2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184 : AIR 2010 SC 1898] ]"
"41. In other words, the accused is left with two options. The first option
--of proving that the debt/liability does not exist is to lead defence evidence and conclusively establish with certainty that the cheque was not issued in discharge of a debt/liability. The second option is to prove the non-existence of debt/liability by a preponderance of probabilities by referring to the particular circumstances of the case. The preponderance of probability in favour of the accused's case may be even fifty-one to forty-nine and arising out of the entire circumstances of the case, which includes : the complainant's version in the original complaint, the case in the legal/demand notice, complainant's case at the trial, as also the plea of the accused in the reply notice, his Section 313CrPC statement or at the trial as to the circumstances under which the promissory note/cheque was executed. All of them can raise a preponderance of probabilities justifying a finding that there was "no debt/liability". [Kumar Exports v. Sharma Carpets [Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513 : (2009) 1 SCC (Civ) 629 : (2009) 1 SCC (Cri) 823] ]"
"42. The nature of evidence required to shift the evidential burden need not necessarily be direct evidence i.e. oral or documentary evidence or admissions made by the opposite party; it may comprise circumstantial evidence or presumption of law or fact."
33. Keeping in view the above-stated law and since the impugned cheque has been drawn from the account of the accused which is duly signed by the accused, a statutory presumption is raised in favour of the complainant that the impugned cheque was issued for the discharge of a legally recoverable CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.13/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:07:38 +0530 debt or liability. Hence, the first issue is answered in the affirmative.
34. Relying upon the foundational facts, once the statutory presumption has been raised in favour of the complainant, the burden of proof now lies upon the accused to rebut the statutory presumption as per the reverse onus of proof that now shifts upon the accused. [Judgment of The Hon'ble Supreme Court of India in M/s. Kalamani Tex vs. P. Balasubramanian (2021) 5 SCC 283 is relied upon].
35. It is now fairly settled that the accused can displace this presumption on a scale of "preponderance of probabilities" and the lack of consideration or a legally enforceable debt or liability need not be proved beyond all reasonable doubts. The accused can either prove that the liability did not exist or make the non-existence of liability so probable that a reasonable person ought under the circumstances of the case, act upon the supposition that it does not exist. This the accused can do either by leading his/her own evidence in his defence or by bringing out such inconsistencies or contradictions in the case of the complainant which go on to simply overthrow the complainant's case.
Analysis and Findings:
36. In the present case, in order to rebut the presumption, the accused has taken the following defences:
I. The first defence presented by the accused is that their liability is limited to Rs. 6 lakhs, which they received from the complainant as a loan.CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.14/29 Digitally signed by MEENA
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II. The second defence asserts that the cheque in question was issued solely for security purposes and that the complainant misused it by filling in an inflated amount.
III. The third defence argues that the alleged amount given to the accused is not reflected in their Income Tax Return (ITR), and therefore, it cannot be classified as a "debt or other liability" as defined under Section 138 of the Negotiable Instruments Act.
IV. The fourth defence contends that the purported agreement to sell is a contingent agreement and an agreement by way of wager, making it void and unenforceable under the provisions of the Indian Contract Act.
37. Ld. Counsel for the accused argued that considering these defenses, the complainant's case should be dismissed.
38. To counter the complainant's claims, rebut the statutory presumption favouring the complainant, and establish a probable defence based on the preponderance of probabilities, reliance is placed upon the cross- examination of the complainant/CW-1, the oral testimony of the accused and the documentary evidence placed on record by the accused, i.e. Ex. DW1/1(colly).
First ground of defence:
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39. In addressing the first ground of defence, the accused had the opportunity to deny his liability when the notice of accusation was presented to him under Section 251 of Cr.P.C. The accused claimed that he had borrowed Rs. 6 lakhs from the complainant through a mutual friend, Mr. Shivesh Pal, and he was unable to repay this amount. He asserted that his liability was limited to Rs. 6 lakhs and did not extend to the amounts stated in the two cheques, including the disputed cheque. This defence was reiterated by the accused during the statement recording stage under Section 313 Cr.P.C. Importantly, there was no mention or explicit denial regarding the alleged debt of Rs. 5 lakhs owed by the accused to Mr. Shivesh Pal, as indicated in the Agreement to Sell (Ex. CW1/1).
40. Regarding the aforesaid issue, the complainant was not cross-examined on the specified contentions, nor was any suggestion made to the complainant about not transferring the amount of Rs. 6 lakhs to the accused through a banking channel. In fact, during the examination of the accused, he denied receiving Rs. 6 lakhs from the complainant in his bank account. This indicates that the accused has not consistently adhered to his defence and has provided contradictory statements in his testimony.
41. If the accused's liability is limited to Rs. 6 lakhs, as stated under Section 251 and Section 313 of the Cr.P.C., and he denies owing Rs. 5 lakhs to Mr. Shivesh Pal, it is noteworthy that the accused has not raised any objections concerning the agreement, Ex. CW1/1, at any point in his defence. A review of the defence provided under Section 251 and Section 313 of the Cr.P.C., as well as his examination-in-chief, reveals no CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.16/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:08:11 +0530 challenge to the genuineness or authenticity of this agreement. Even during the cross-examination of the complainant, while some questions were posed regarding the execution of the agreement, there was no suggestion made questioning the agreement's authenticity. The challenge posed to the legality of the agreement will be discussed in detail later.
42. In contrast to the earlier version, during the defence evidence, the accused testified that the loan of Rs. 6 lakhs was arranged by Mr. Shivesh Pal. He stated that he received this amount directly into his bank account, and not from the complainant. For this loan, he provided four blank signed cheques to Mr. Shivesh Pal.
43. Amid the inconsistent statements from the accused, it is now up for interpretation whether the cheque was given to the complainant or to Mr. Shivesh Pal. It remains unclear exactly to whom the accused issued the cheque, how many cheques were given, and what the purpose of the cheque was.
44. Aside from simply denying the debt of Rs. 5 lakhs owed to Mr. Shivesh Pal, the complainant was not cross-examined on this matter. No suggestions were made to the complainant regarding the non-assignment of the debt owed to Mr. Shivesh Pal by the accused or the non-payment of Rs. 5 lakhs by the complainant to Mr. Shivesh Pal. The complainant (CW1) was only asked about the date on which the payment was made to Mr. Shivesh Pal. Even if the payment occurred after the deadline CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.17/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:08:20 +0530 specified in the agreement, it does not imply that the accused never agreed to assign the alleged debt, as outlined in the contract. Once the debt was assigned, the payment is a subsequent event that should follow. If the complainant had not fulfilled this obligation or the accused owed no debt to Mr. Pal , the accused could have called Mr. Shivesh Pal as a witness to support his defence, but he chose not to do so, likely for reasons known only to himself.
45. The complainant's evidence is presented through a document, the Agreement to Sell (Ex. CW1/1). In this agreement, the accused agreed to assign a debt of Rs. 5 lakhs owed to Mr. Shivesh Pal to the complainant, as outlined in the terms of the agreement. It is undisputed that the signatures on this agreement have been acknowledged by the accused.
46. Considering the discussion above, this ground appears highly improbable and cannot effectively rebut the presumption against the accused.
Second ground of defence:
47. It has been argued on behalf of the accused that the contested cheque was provided for security purposes and that the complainant has misused it.
During the statements made under Sections 251 and 313 of Cr.P.C., the accused did not deny having given the cheque to the complainant. As previously noted, a thorough review of the evidence reveals that the accused did not clarify to whom he actually handed over the disputed cheque.
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48. During the stage of defence evidence, the accused testified that he gave the cheque to Mr. Shivesh Pal for a loan purpose, but he denied receiving the loan from the complainant. This raises a logical question: how did the cheque in question come into the complainant's possession? If the accused did not give the cheque to the complainant, why did he not mention the possibility of the complainant having it illegally throughout his entire defence? This unanswered question leads to a negative inference against the accused.
49. Furthermore, it is now a settled law that there is no appeal in the phrase 'security cheque' and that the cheque issued for security for a loan would mature for presentation if the loan is not paid by the borrower by any other means. In this regard the observations made by Hon'ble Supreme Court in the case of Sripati Singh v. State of Jharkand (2021 SCC OnLine SC 1002) is relevant which is reproduced as under:
"17. 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 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. 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 CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.19/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:08:42 +0530 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 situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation."
50. It is a clear legal position, that at the time of presentation of cheque, a debt must exist. The expression 'any debt or other liability' is unqualified in Section 138 of the NI Act, and it includes any future debt or liability that may arise after the issuance of the cheque. There could be any arrangement between the parties regarding the mode and manner of repayment. Merely because the debt may have been repayable subsequently in installments, it cannot be said that on the date of issuance of the cheque, the debt did not exist. [Case of Suresh Chandra Goyal v. Amit Singh, Crl LP No. 706/2014 decided on 14.05.2015 by the Hon'ble High Court of Delhi relied upon]
51. In the recent judgment of the Hon'ble Supreme Court in a case titled as Sunil Todi and Ors. vs. State of Gujarat and Ors. 2021 INSC 823 , CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.20/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:08:50 +0530 elaborately discussed the scope of debt or legal liability U/s 138 of the NI Act. Differentiating the judgment of Indus Airways Pvt. Ltd. and Ors. vs. Magnum Aviation Pvt. Ltd. and Ors. (Neutral citation: 2014 INSC 257) and Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited (Neutral citation: 2016 INSC 887) , the Apex Court held that the key consideration is whether the cheque was issued to settle an existing enforceable debt or liability, or if it represented an advance payment without any outstanding debt or liability. In the former case law, the cheque was issued as an advance payment for a purchase order that ultimately did not materialize. In the latter case law, the post-dated cheque, provided as security, was meant for the repayment of a loan installment that had already come due.
52. The Apex Court concluded that Section 138 not only applies to situations where there is an outstanding debt at the time a cheque is drawn, but also covers instances where a cheque is issued for a debt incurred prior to the cheque's encashment. This interpretation aligns with the objective of the NI Act, which aims to enhance the acceptability of cheques and foster trust in the effectiveness of negotiable instruments for business transactions.
53. Thus, mere averment that the cheque in question was issued as a security cheque, or that it was not related to an existing debt or liability, cannot be sustained and is set aside. The accused must demonstrate that there was no legal debt or liability owed to the complainant, which the accused failed to do in this case.
54. As a result, the second argument does not assist the accused in meeting his CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.21/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:09:00 +0530 obligation to present a plausible defence.
Third ground of defence:
55. It is contended that the complainant failed to demonstrate the alleged amount advanced to the accused as in the Income Tax Return (ITR). The complainant testified that he had not mentioned the alleged amount in his ITR. He clarified that such disclosure is not necessary in the ITR. No opposing suggestion was made to challenge this statement, nor were there any further questions asked on this matter.
56. Even assuming that such a disclosure was required or mandatory for the complainant to be made in his ITR, suffice it to say that simply failing to disclose the amount in his ITR may entail negative consequences for a person for committing the breach of statutory provisions of the Income Tax Act; nonetheless, the same would not render the transaction itself void, illegal, void, and unenforceable. As a result, the contention of the accused cannot be sustained.
Fourth ground of defence:
57. The complainant's case is that he entered into an agreement to sell with the accused on 19.08.2020 and the said agreement is Ex. CW1/1. According to the terms of this agreement, the accused agreed to sell the first floor of the property on or before March 31, 2022. However, this sale was contingent upon the outcome of an execution petition regarding the property in favor of the accused.
58. As mentioned in paragraph 41, the accused has not raised any defence CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.22/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:09:09 +0530 disputing the authenticity of the agreement Ex. CW1/1. Instead, the defence argued that this agreement is void and unenforceable by law because it is classified as a contingent agreement or a wager-based agreement.
59. The presumption of legal liability for the accused under Section 138 of the NI Act is based solely on the issuance of the cheque and its subsequent dishonor for reasons specified in Section 138. The accused has the opportunity to present a probable defense to rebut this presumption. However, the scope of inquiry is limited to examining the existence of a debt and the legal liability of the accused; the enforceability of the agreement is not a matter to be considered by this court.
60. I find it appropriate to reference the judgment of the Hon'ble Apex Court in the case of Ripudaman Singh vs. Balkrishna, 2019 (4) SCC 767. In this case, the court clarified that while an agreement to sell does not create any interest in immovable property, it does constitute a legally enforceable contract between the parties involved. Consequently, any payment made in accordance with such an agreement is considered a payment made towards a legally enforceable debt or liability under Section 138.
61. In the current situation, a close examination of the agreement, as Ex.
CW1/1, shows that the terms stipulating the execution of the sale deed for the property by the accused in favor of the complainant were contingent upon the outcome of the execution petition. This agreement cannot be classified as a wager because a wager is fundamentally based solely on chance or a bet.
62. The agreement in question can best be described as a conditional or CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.23/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:09:18 +0530 contingent agreement. It is important to note that not all contingent agreements are void and unenforceable. According to Chapter III of The Indian Contract Act of 1872, only specific contingencies can render a contingent agreement void. The agreement was not challenged on the grounds of being illegal or unlawful. Furthermore, the issue at hand in this case does not concern the legal enforceability of the agreement in a court of law.
63. The key question is whether the payments made by the complainant in accordance with the agreement create a debt for the accused or fall under the term "legal liability" as defined by Section 138 of the NI Act. Additionally, it is to be determined if the accused is required to refund the partial amount received from the complainant as stipulated in the agreement. Even if the conditions for executing the sale deed were not met, this does not absolve the accused of the obligation to repay the amount received as per the agreement.
64. In Sunil Todi and Ors. vs. State of Gujarat and Ors.(Supra) , the Supreme Court discussed the definition of debt in detail as follows:
"25. The explanation to Section 138 of the NI Act provides that 'debt or any other liability' means a legally enforceable debt or other liability. The proviso to Section 138 stipulates that the cheque must be presented to the bank within a period of six months from the date on which it is drawn or within its period of validity. Therefore, a cheque given as a gift and not for the satisfaction of a debt or other liability, would not attract the penal consequences of the provision in the event of its being returned for insufficiency of funds. Aiyar's Judicial Dictionary defines debt as follows: "Debt is a pecuniary liability. A sum payable or recoverable by action in respect of money demand."CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.24/29 Digitally signed by MEENA
MEENA CHAUHAN
CHAUHAN Date:
2025.01.31
17:09:27 +0530
Lindey L.J. in Webb v. Strention 1888 QBD 518 defined debt as "... a sum of money which is now payable or will become payable in the future by reason of a present obligation, debitum in praesenti, solvendum in futuro."
The definition was adopted by this Court in Keshoram Industries v. CWT AIR 1966 SC 1370. Justice Mookerjee writing for a Full Bench of the Calcutta High Court in Banchharam Majumdar v. Adyanath Bhattacharjee MANU/WB/0064/1909: (1909) ILR 36 Cal 936 adopted the definition provided by the Supreme Court of California in People v. Arguello 1869 37 Calif 524:
"Standing alone, the word 'debt' is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two, we say of the former that it is a debt owing, and of the latter that it is a debt due. In other words, debts are of two kinds: solvendum in praesenti and solvendum in future ... A sum of money which is certainly and in all events payable is a debt, without regard to the fact whether it be payable now or at a future time. A sum payable upon a contingency, however, is not a debt or does not become a debt until the contingency has happened."
Thus, the term debt also includes a sum of money promised to be paid on a future day by reason of a present obligation. A post-dated cheque issued after the debt has been incurred would be covered by the definition of 'debt'..."
65. In this case, the accused's obligation to repay the amount received from the complainant under the agreement cannot be dismissed, even if the Agreement to Sell is rendered unenforceable due to a future or contingent event not occurring. The Agreement to Sell, along with the consistent testimony of the complainant and the presumptions in favor of the complainant, establishes a legal obligation for the accused to return the partial consideration amount as agreed in the agreement. There has been no circumstantial or direct evidence presented to challenge the veracity of the CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.25/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:09:36 +0530 Agreement to Sell, Ex. CW1/1. The burden of proof was on the accused to provide a plausible defense, either by demonstrating inconsistencies in the complainant's testimony or by presenting direct evidence, which the accused failed to do in this case.
66. Based on the discussion above, it is clear that the defence argument put forth by the accused has not been substantiated.
Final observations:
67. It has also been observed that when presenting multiple grounds of defence, the accused fails to recognize that these grounds are fundamentally incompatible with each other. The inconsistencies in the accused's defence undermine the assertion that he has no legal liability toward the complainant and effectively counter the statutory presumptions raised against him.
68. The documentary evidence provided by the complainant demonstrates the accused person's outstanding liability to pay the cheque amount. This evidence remains unchallenged, supported with the presumption that the cheque in question was issued for a legally enforceable debt.
69. The ratio of the judgments cited by the accused in the written submissions have already been considered in the present case. The evidentiary burden of proof rested with the Accused Person to rebut the presumption and demonstrate that no debt was owed. However, the accused failed to discharge the said burden. [Reliance is placed upon the case of Kishan Rao CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.26/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date: 2025.01.31 17:09:47 +0530 vs. Shankargouda, (2018) 8 SCC 165, wherein the Hon'ble Supreme Court of India held that the accused may adduce evidence to rebut the presumption, but mere denial regarding existence of debt shall not serve any purpose]
70. Recently, the Hon'ble Apex Court in Tryambaka S Hedge v/s S.Sripad (2022) 1 SCC 742 reiterated the principle that when the accused admits their signature on a cheque, the presumption in Section 118 of the Act can be legally inferred that the cheque was made or drawn for consideration on the date it bears. Section 139 of the Act requires the court to presume that the holder of the cheque received it for the discharge of any debt or liability. The key consideration is whether any probable defence was raised by the accused.
71. Further, the Hon'ble Supreme Court in Rakesh Jain v. Ajay Singh Crl. No. 12802 of 2022 has held that:
"44. The accused may adduce direct evidence to prove that the instrument was not issued in discharge of a debt/liability and, if he adduces acceptable evidence, the burden again shifts to the complainant. At the same time, the accused may also rely upon circumstantial evidence and, if the circumstances so relied upon are compelling the burden may likewise shift to the complainant. It is open for him to also rely upon presumptions of fact, for instance those mentioned in Section 114 and other sections of theEvidence Act. The burden of proof may shift by presumptions of law or fact. In Kundanlal's case- (supra) when the creditor had failed to produce his account books, this Court raised a presumption of fact under Section 114, that the evidence, if produced, would have shown the non- existence of consideration. Though, in that case, this Court was dealing with the presumptive clause in Section 118 NI Act, since the nature of the presumptive clauses in Section 118 and 139 is the same, the analogy can be extended and applied in the context of Section 139 as CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.27/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date:
2025.01.31 17:10:00 +0530 well."
"56. At the stage when the courts concluded that the signature had been admitted, the Court ought to have inquired into either of the two questions (depending on the method in which accused has chosen to rebut the presumption): Has the accused led any defense evidence to prove and conclusively establish that there existed no debt/liability at the time of issuance of cheque? In the absence of rebuttal evidence being led the inquiry would entail: Has the accused proved the nonexistence of debt/liability by a preponderance of probabilities by referring to the 'particular circumstances of the case'?"
72. Section 138 of the Negotiable Instruments Act delineates specific criterias that must all be met to establish the offence of cheque bounce, as outlined in paragraph 24 of the current judgment. The legal principles pertaining to this matter are well-established. The Hon'ble Supreme Court in Tedhi Singh v. Narayan Dass Mahant, (Supra) succinctly encapsulates the prevailing stance and is quoted below:
"7. It is true that this is a case under Section 138 of the Negotiable Instruments Act. Section 139 of the N.I. Act provides that Court shall presume 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. This presumption, however, is expressly made subject to the position being proved to the contrary. In other words, it is open to the accused to establish that there is no consideration received. It is in the context of this provision that the theory of 'probable defence' has grown. In an earlier judgment, in fact, which has also been adverted to in Basalingappa, this Court notes that Section 139 of the N.I. Act is an example of reverse onus [see (2010) 11 SCC 441). It is also true that this Court has found that the accused is not expected to discharge an unduly high standard of proof. It is accordingly that the principle has developed that all which the accused needs to establish is a probable defence. As to whether a probable defence has been established is a matter to be decided on the facts of each case on the conspectus of evidence and circumstances that exist."
73. In the absence of any contrary evidence from the accused, the court has CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.28/29 Digitally signed by MEENA MEENA CHAUHAN CHAUHAN Date: 2025.01.31 17:10:08 +0530 made presumptions in favour of the complainant as provided under Sections 118 and 139 of the NI Act. In this case, the defences presented by the accused are not convincing, and no credible evidence has been provided to counter the presumption established under Section 139 of the NI Act. Therefore, the second issue is decided in negative. There is no need to address the third issue.
The Decision:
74. The proprietor of M/s Sharma Constructions, Accused Pradeep Kumar S/o Lt. Mr. Jagat Prakash Sharma is held to be guilty of the offence under Section 138 of the NI Act and is hereby convicted for the same.
75. Copy of the judgment be given to the Convict free of cost with the signed cover sheet and let the Convict be heard on sentencing.
Announced in the open court Digitally signed
by MEENA
today i.e. 31.01.2025 MEENA CHAUHAN
Date:
CHAUHAN 2025.01.31
17:10:15
+0530
(Meena Chauhan)
JMFC (NI Act), Digital Court-03,
Central, THC,Delhi
(This Judgment contains 29 pages and all the pages are digitally signed by the undersigned. ) CC No. 5161/2022 ; Manish uppal vs Pradeep Sharma Proprietor of M/s Sharma Constructions Page No.29/29