Delhi District Court
Avinash Kumar vs . on 17 October, 2015
IN THE COURT OF MS. NEHA: METROPOLITAN
MAGISTRATE03 : (SOUTH EAST) DELHI
CC no. 216/6/13
Unique ID no. 02406R0207212011
Avinash Kumar
s/o Late Shri H. L. Sharma
R/o 197, Gali No. 54P,
Near 1st 60 Futa Road,
Block EIII, Molarband Ext.
Badarpur, New Delhi. .....Complainant
Vs.
Ram Bilas Sharma
S/o Sh. Radha Krishan Sharma,
R/o H. No. 2429, Gali No. 64
Block E II Molarband Ext.,
Badarpur, New Delhi. .....Accused
Date of Institution of complaint : 12.08.2011
Date of Reserving the Judgment : 30.09.2015
Date of Decision : 17.10.2015
Offence Complained of : Section 138 NI Act
Plea of accused : Not Guilty
Final Order : Acquitted
Counsels for the Parties:
Sh. S. D. Wadhwa, Ld. Counsel for the complainant.
Sh. V. P. Kaushik, Ld. Counsel for the accused.
CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma
PS Badarpur Page No. 1 of 30
BRIEF FACTS AND REASONS FOR DECISION:
Vide this order, I shall decide the present complaint filed by the complainant under Section 138, Negotiable Instruments Act, 1881 (hereinafter called the NI Act). The case of complainant in brief is that accused alongwith his wife had approached the complainant for a friendly loan of Rs. 2,00,000/ (Rs. Two Lacs Only) on 20.09.2009 which was given by complainant seeing need of accused. In lieu of the said friendly loan, accused and his wife namely Neelam Sharma had signed agreement dated 20.09.2009.
2. It is further stated in the complaint that as per the agreement, accused had to pay the said amount within 18 months .i.e. on or before 20th March 2011, for which accused have issued two cheques bearing no. 065471 and 065472 dated 20.03.2011 to complainant amounting Rs. 1,00,000/ each drawn on State Bank of Bikaner & Jaipur, Sarita Vihar Branch.
3. It is further stated in the complaint that again on 20.12.2009 accused and his wife namely Neelam approached complainant for friendly loan of Rs. 4,00,000/. When complainant asked about as to why accused needed such big amount, accused gave the reason that he CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 2 of 30 had some genuine personal reasons which could not be disclosed and asked complainant to take his property bearing no. 2429, part of Khasra no. 116 & 105/2 situated in area of village Tajpur as mortgage on which complainant refused to take the said property. But on insistence of accused and his wife Neelam Sharma, complainant got ready and took property papers of accused as mortgage and mortgage agreement dated 23.12.2009 was executed. Complainant gave a sum of Rs. 4 lacs as a friendly loan.
4. It is further stated that as per the mortgage agreement, accused was required to pay entire amount within 18 months i.e. on or before 20th June 2011 and for that accused had issued two cheques dated 20.06.2011 of Rs. 2,00,000/ each bearing no. 065474 & 065475 drawn on State Bank of Bikaner & Jaipur.
5. It is also stated in the complaint that complainant found accused's need as genuine one and gave Rs. 6,00,000/ in total as friendly loan on which accused promised the complainant to refund the above said loan and issued post dated cheques and assured that they would be honoured at the time of their presentation.
6. It is alleged that on 02.06.2001 before presenting the said cheques in question, complainant asked the accused that if the said CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 3 of 30 cheques would will be honoured. The accused assured complainant that they would be honoured at the time of their presentation. But to the utter surprise of complainant, they had been dishonoured and complainant received return memo from his banker i.e. Syndicate Bank, Khan Market Branch dated 04.06.2011 with remarks of "Insufficient Funds". When complainant contacted the accused, the accused requested complainant to present the said cheques in the last week of June 2011 with the rest of cheques. The accused asked complainant to deposit all four cheques bearing numbers 065474 & 065475 of Rs. 2,00,000/ each and 065471 & 065472 of Rs. 1,00,000/ each in the last week of June 2011 as accused would have sufficient balance in his account. Accused asked the complainant to deposit all cheques in question on same day and assured that all those cheques would be honoured. On 28.06.2011 complainant again asked the accused that whether he should present the said cheques, on which accused again assured complainant that they would be honoured at the time of presentation.
7. It is stated in the complaint that believing version of accused, complainant presented the above said cheques for encashment with his banker i.e. Syndicate Bank, but to the utter surprise of complainant, CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 4 of 30 the above said cheques were returned unpaid by his banker with the reason "Insufficient Funds" and complainant received this information via memo dated 30.06.2011. Complainant contacted the accused on phone but this time accused refused to return the loan amount and threatened the complainant of dire consequences and stated that he would not return even a single penny.
8. It is further stated in the complaint that the complainant sent a legal notice by registered post as well as speed post through his advocate to the accused persons vide Legal Notice dated 11.07.2011 sent on 12.07.2011, asking therein to repay the cheque amount within 15 days and the said notice was received by the accused on 20.07.2011. But no reply has been received by the complainant or counsel of the complainant from accused. Hence, the complainant has filed the present complaint.
9. The court examined the complainant. After perusing the material available on record, the Court took the cognizance and process was issued against the accused. The accused appeared in the Court. He was released on bail. The notice u/s 251 Cr.P.C. was served upon the accused to which he pleaded not guilty and claimed trial. Accused has taken defence that he had given total six cheques towards CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 5 of 30 security to the complainant towards loan of Rs. 2.5 lakhs taken from him. He had returned the loan amount to the complainant. When he demanded his cheques and documents of his property, the complainant came to his shop and quarreled with him.
10. The complainant has examined himself as CW1 to prove his case. The complainant has tendered his evidence by way of affidavit Ex.CW1/A1, wherein he has reiterated the allegations in the complaint. The CW1 has relied upon the following documents:
a) Agreement dated 20.09.2009 is Ex. CW1/A
b) Cheques bearing no. 065471, 065472 dt. 20.03.2011 for a sum of Rs. 1,00,000/ each are Ex.CW1/B and Ex.CW1/C
c) Agreement dated 23.12.2009 is Ex.CW1/D
d) Cheques bearing no. 065474 & 065475 dt.
20.06.2011 for a sum of Rs. 2,00,000/ each are Ex. Ex.CW1/E and Ex.CW1/F.
e) Cheque return memo dt. 04.06.2011 and 30.06.2011 are Ex.CW1/G and Ex.CW1/H.
f) Statement of account is Ex.CW1/H.
g) Copy of legal Notice is Ex.CW1/J and postal CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 6 of 30 receipts are Ex.CW1/K.
h) AD cards and speed post tracking report are Ex.CW1/M to Ex.CW1/O.
11. The witness was cross examined. The complainant has examined bank official Shri Sunny Kumar as CW2 to prove his statement of account. The statement of account is Ex.CW2/A. The complainant did not examine any other witness. The CE was closed vide order dated 12.05.2015.
12. Accused was examined and his statement was recorded u/s 281 Cr.P.C, by putting all the incriminating evidence to him. Accused denied incriminating evidence put to him. Accused has examined his friend Shri Dharmendra Kumar as DW1. Accused has examined himself as DW2. DE was closed vide order dated 22.09.2015 and matter was fixed for final arguments.
13. Ld. counsel for complainant has argued that there are contradictions and inconsistencies in the testimony of DW1 and DW2 which shows that their evidence is not trustworthy. The accused has alleged that he had taken only Rs. 2.5 lacs as loan, however there is nothing to show that the said loan amount has been returned. It is argued that the accused has failed to prove even on the balance of CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 7 of 30 probability that he is not liable to pay any money towards the cheques in question. It is therefore submitted that the accused shall be convicted as per law.
14. Per Contra, Ld. Counsel for accused has argued that the defence witnesses have proved that the accused has not taken a sum of Rs. 6 lacs as loan and the loan of Rs. 2.5 lacs taken from the complainant has been returned. The defence witnesses have also proved that the cheques in question were given as security for said loan of Rs. 2.50 Lacs. The complainant during cross examination has admitted that he used to pay income tax but has not shown the loan amount in the ITR which is also in violation of Income Tax Act. It is also submitted that the mortgage agreement which is the second agreement does not find any mention of the first agreement nor any mention of the first loan amount. It is argued that the accused has been able to prove on the balance of probability that he is not liable to pay any money to the complainant. However, the complainant has failed to prove that the accused is liable to make the payment towards the cheques. Therefore, the complaint is liable to be dismissed.
15. I have heard the Ld. Counsel for the parties and carefully perused the material available on record.
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16. In the present case, it is admitted by the accused that all the cheques bear his signature. It is also admitted by accused that all the cheques are drawn on his account. He has further admitted that he had handed over the cheques in question to the complainant. Complainant and accused are known to each other. Accused has also admitted that he had received the legal notice. The defence of the accused is that he did not take loan of Rs.6,00,000/ from the complainant. He had taken loan of Rs.2,50,000/ only which he has already returned. The accused has admitted that the agreements Ex.CW1/A and Ex.CW1/D dt. 20.09.2009 and 23.12.2009 respectively are signed by him and his wife. However, his defence is that he had signed both the agreements at the time of taking loan of Rs.2,50,000/ only. He has further stated that he had signed both agreements on one day and not on two dates as stated in the agreement. The agreements were got prepared by the complainant himself and complainant did not give him copy of the same despite demand. It is also contended that he had given all the cheques to complainant at the time of taking loan of Rs.2,50,000/. It is defence of the accused that he had given 6 cheques as security to the complainant towards loan of Rs. 2.50 Lacs and also the property documents to secure the repayment of loan. He had returned total Rs. CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 9 of 30 2.5 lacs in five installments of Rs. 50,000/. He has also stated that whenever he demanded the security cheques and the documents, the complainant has avoided him.
17. The accused has examined two witnesses in his defence. Sh. Dharmender has been examined as DW1. DW1 has deposed that he knows complainant Avinash and accused Ram Vilas for last about 10 years. In September 2009, a monetary transaction of Rs. 2.5 lacs had taken place between accused and complainant. Ram Vilas had taken money from Avinash by way of three installments for which Ram Vilas had given six blank signed cheques. The amount was given by Avinash at 5% per month interest. In December 2009, Avinash brought two agreements at one time which was signed by Ram Vilas. DW1 has further deposed that in December 2009 itself, accused had returned a sum of Rs.50,000/ in cash in his presence. Further amount of Rs. 50,000/ was returned in January 2010 in his presence. He does not know whether remaining amount has been returned or not.
18. Accused Ram Vilas has also entered into witness box. He has been examined as DW2. DW2 has deposed that he knew complainant Avinash Sharma since last 1012 years. He had taken a sum of Rs. 2.50 lacs as loan from complainant Avinash Sharma. He had received this CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 10 of 30 amount from the complainant in two installments. The complainant got signed two agreements from him in the month of September, 2009. He had given the original property documents and six cheques as security to the complainant at the time of advancing the said loan to him. He had returned all the amount which was given as loan to him till 2011. He had demanded back his cheques as well as property documents from the complainant but complainant did not return his cheques and property documents. He had no liability to pay to the complainant at present. The complainant had got filed two cases of cheque bouncing through his friend namely Uma Shankar Singh against him which are pending in Tis Hazari Court. He had no liability to pay to the complainant.
19. Ld. Counsel for the accused has argued that defence witnesses have proved that accused had taken only a sum of Rs.2.50 Lacs as loan from the complainant and six blank signed cheques were given as security for the said loan. The defence witnesses have also proved that loan of Rs. 2.50 Lacs had been returned to the complainant. They have also proved that both agreements were signed on one day and not on two different dates.
20. Ld. counsel for complainant, on the other hand, has argued CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 11 of 30 that the testimony of DW1 Dharmender and DW2 Ram Vilas is not very trustworthy as they have taken contradictory stands during their testimony. Ld. Counsel has also argued that the defence witnesses are not reliable and their evidences are untrustworthy. They have failed to prove that both the agreements were signed on same day. The accused has admitted that he had taken loan from the complainant. Therefore, it has been proved that the accused was in the habit of taking loan from the complainant. The accused has failed to discharge the initial burden. Therefore, the case of the complainant stands proved beyond reasonable doubts.
21. I have considered the submissions. Perusal of testimonies of defence witnesses would show that there are many contradictions in their statements. DW1 has claimed himself to be the witness of transaction between the parties in the present case. However, in his cross examination, he has stated that he is not witness of all the transactions between the parties in the present case. Further, he has stated during examination that accused had taken amount of Rs. 2.50 Lacs from complainant in three installments in September 2009. He had returned amount of Rs. 50,000/ in his presence twice, firstly in December 2009 and secondly in January 2010. However, during cross CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 12 of 30 examination, he has stated that amount was returned in FebMarch 20102011. DW2, Ram Vilas, on the other hand, has stated that he had received amount of Rs. 2.50 Lacs from the complainant in two installments. He has further stated that he returned all amount of loan till 2011.
22. Further, DW1 Dharmender has stated in his examination that in December 2009, complainant had brought two agreements at one time which were signed by accused. DW2 Ram Vilas, on the contrary, has stated that the complainant got signed two agreements from him in the month of September, 2009. These are material contradictions. The evidence of defence witnesses does not appear to be reliable and trustworthy. Their evidence does not inspire confidence.
23. As per DW1 accused had withdrawn a sum of Rs. 50,000/ once from his account and thereafter it was paid to the complainant. However, accused has not placed on record any material to show that he had withdrawn any such amount. Thus the accused has failed to prove that he had returned the said loan amount of Rs. 2.50 Lacs to the complainant. No document has been placed on record to show that any amount has been returned to the complainant.
24. Ld. Counsel for accused has argued that the complainant has CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 13 of 30 not shown loan of Rs. 6 Lacs in ITR. Therefore, it is difficult to believe that amount of Rs. 6 Lacs which was given in 2009 in cash was kept by complainant at his house since 2008.
25. I have considered the submission. However, I do not find any merit in it. The accused has admitted that he had taken a loan of Rs. 2,50,000/ from the complainant. This loan was also taken in cash. The fact that complainant did not show the amount in ITR is not relevant when there is no doubt on the capacity of the complainant to pay the amount. Further, there are two agreements on Court record which have been proved as per law. The accused has admitted his signatures on these two agreements. He has failed to prove that he had signed these two agreements on the same day. Burden was on the accused to prove that he had signed both the agreements on the same day. However, he has failed to prove the same.
26. It is noteworthy that complainant during evidence has taken a stand that amount of Rs.6 Lacs was taken by the accused to pay for settlement of dispute in which he was involved during the relevant period and loan amount was used to settle that dispute. Accused/DW2 has been asked several questions regarding his criminal background and criminal complaint of PS Badarpur during his crossexamination CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 14 of 30 by Ld. Counsel for the complainant. DW2 Ram Vilas has stated that there was no case under section 420 IPC or any criminal case against him. There was no case pending against him. He has also stated that there was no case registered in respect of plot sale and purchase of plot and the matter was settled in the PS. DW2 Ram Vilas has stated, "I had given Rs. 6 lacs in that settlement of plot dispute. Complainant had given Rs. 3 lacs in settlement of that dispute.... I had made payment of Rs. 6 lacs by way of demand draft and I have copy of demand draft."
27. Suggestion has been given to accused that he had taken money from the complainant when he was in need of money to settle the dispute of that plot.
28. The witness has denied the suggestion. DW2 Ram Vilas Sharma has stated that amount was already in his bank account when he got prepared the demand drafts and it was not prepared by way of cash. The accused has also produced the copies of demand drafts which are Mark D1 and D2. Perusal of copy of demand drafts shows that they were prepared in the month of June and August 2009. Therefore, the contention of complainant that accused had taken loan to settle property dispute is not proved.
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29. Now, I will examine the agreements relied upon by the complainant to show that he had given loan of Rs. 6 Lacs to accused and cheques were issued towards discharge of liability. These agreements have been proved as per law. The agreement dated 20.09.2009 between complainant and accused is Ex. CW1/A. The relevant portion regarding loan transaction between them reads as under:
"Whereas both the parties entered into an agreement and the second party has paid a friendly loan to the first party as sum of Rs. 2,00,000/ (Rupees Two Lac only), on dated 20.09.2009, and the second party has received two cheques from the first party bearing cheque no. 065471 & 065472, on dated 20.03.2011 drawn on State Bank of Bikaner & Jaipur, Branch pktB, Sarita Vihar, New Delhi76.
And whereas the first party has received the said amount a sum of Rs. 2,00,000/(Rupees Two lac only), from the second party as a friendly loan and the first party will pay the above said amount of Rs. 2,00,000/ (Rupees Two Lac Only), to the second party within the fixed period of "18 months" w.e.f from 20.09.2009."
30. The second agreement dated 23.12.2009 is Ex.CW1/D. The relevant portion regarding loan transaction reads as under:
"Whereas both the parties have entered into an CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 16 of 30 agreement and the second party has paid as a friendly loan Rs. 4,00,000/(Rupees Four lac only), on dated 20.12.2009, to the first party, and the first party has/have mortgage his/her/their built up property no. 2429, land measuring 40 sq. yds. With all roof rights, part of khasra no. 116, & 105/2, situated in the area of village Tajpur, and abadi known as gali no. 64, Block EII, Molar Band Extn. Tehsil Kalkaji, P. O. Badarpur, New Delhi44, and handed over the original documents such as Power of Attorney etc. of the above said property to the second party, also hand over two cheques bearing no. 065474 & 065475 to the second party.
And whereas the first party has received the above said amount from the second party as a friendly loan, and the first party will pay Rs. 4,00,000/ (Rupees Four Lac only), to the second party within the fixed period of "18"
months w.e.f on dated 20 December 2009 to 20 June 2011 or this agreement final date may be extend by the both parties on the basis of mutual understanding. And the second party has handover the above said all the documents of the above said property & both cheques to the first party.
And Whereas if the first party fails to pay the said amount of Rs. 4,00,000/ (Rupees Four Lac only), within the fixed period to the second party then the second party has full right to sell the above said property and the said property and the second property will deduct his amount of Rs. 4,00,000//(Rupees Four lac only), and the balance payment shall be handed over by the second party to the CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 17 of 30 first party."
31. These two agreements are sufficient to prove that the accused had taken loans on two occasions from the complainant. In the present case, if the language of the agreement dt. 20.09.2009 is examined, it becomes clear that the accused had taken friendly loan and accused was supposed to repay the loan amount within fixed period of 18 months w.e.f. 20.09.2009. As per the agreement, the accused had to make the payment w.e.f. 20.09.2009 to 20.03.2011. As per agreement dt. 20.09.2009, the cheques were given to the complainant on the day of execution of said agreement. The accused was not liable to pay the cheque amount on the date on which the cheques were drawn and handed over to complainant.
32. As per the second agreement dated 23.12.2009 also, the cheques dt. 20.06.2011 have been handed over to the complainant on the date of agreement .i.e 23.12.2009. Vide said agreement, it was also agreed that if the accused failed to make the payment of 4 lacs within period of 18 months starting from 20.12.2009 to 20.06.2011, the complainant had full right to sell the property and recover Rs. 4 lacs after sale of property and balance payment shall be handed over to the CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 18 of 30 accused. The language of both the agreement shows that the cheques had been given as security for the alleged loan amount.
33. The language of both the agreements clearly show that the cheques had been given by the accused to the complainant on the same dates when he had taken loan on respective dates. Now, the loan was not payable immediately. A time period had been fixed. However, the dates in the cheques were filled on the day of handing over of the cheques. First agreement was signed on 20.09.2009. The money was to be repaid within a period of 18 months. However, the dates in both the cheques given on that day were filled as 20.03.2011. Thus, the cheques could not be presented for encashment before 20.03.2011. Therefore, if it is presumed that the loan was payable on demand within 18 months, then cheques were security cheques as they were not good for presentation till 20.03.2011. Thus, they were to be presented only if money was not returned within the period mentioned in the agreement. On the other hand, if it is considered that the loan was to be returned only on 20.03.2011, then there was no liability of the accused to pay any money to the complainant on the date of handing over the cheques to the complainant and thus the cheques were, again, as security cheques.
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34. Similarly, the other two cheques given with the second agreement were also security cheques for the aforesaid reasons. The law has been settled that accused is not liable for an offence under Section 138, NI Act, if the cheque in question has been given as security. I get strength from the judgment of the Hon'ble Supreme Court of India in M/S Indus Airways Pvt. Ltd and Ors. vs M/s Magnum Aviation Pvt Ltd. and Anr, in criminal appeal no.830 of 2014(Arising out of SLP (Crl.) No.9752 of 2010, decided on 7 April, 2014. The Hon'ble Supreme Court has discussed the law relating to liability under Section 138 NI Act for dishonoring of a cheque which was given as advance for purchasing of goods etc. The Hon'ble Supreme Court has discussed the facts of the said case as under:
"3. The brief facts are these: On 19.02.2007 and 26.02.2007, the purchasers placed two purchase orders for supply of certain aircraft parts with respondent No.1, M/s. Magnum Aviation Pvt. Ltd. (hereinafter referred to as 'supplier'). In respect of these purchase orders, the purchasers also issued two postdated cheques dated 15.03.2007 for a sum of Rs.34,57,164/ and 20.03.2007 for a sum of Rs. 15,91,820/. The said cheques were issued by way of advance payment for the purchase orders. One of the terms and conditions of the contract was that the entire payment would be given to the supplier in advance. The supplier says that the advance payment was made by the purchasers as it had to procure the parts from abroad.
CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 20 of 30 "4. These cheques got dishonoured when they were presented on the ground that the purchasers had stopped payment."
35. After discussing the facts of the case and the case laws from various High Courts, with approval, the Hon'ble Apex Court has discussed the law as under:
"18. The reasoning of the Delhi High Court in the impugned order is as follows:
"8. If at the time of entering into a contract it is one of the conditions of the contract that the purchaser has to pay the amount in advance then advance payment is a liability of the purchaser. The seller of the items would not have entered into contract unless the advance payment was made to him. A condition of advance payment is normally put by the seller for the reason that the purchaser may not later on retract and refuse to take the goods either manufactured for him or procured for him. Payment of cost of the goods in advance being one of the conditions of the contract becomes liability of the purchaser. The purchaser who had issued the cheque could have been asked to make payment either by draft or in cash. Since giving cheque is a mode of payment like any other mode of payment, it is normally accepted as a payment. The issuance of a cheque at the time of signing such contract has to be considered against a liability as the amount written in the cheque is payable by the person on the date mentioned in the cheque. Where the seller or manufacturer, on the basis of cheques issued, manufactures the goods or procures the goods from outside, and has acted upon the contract, the liability of the purchaser gets fastened, the moment the seller or manufacturer acts upon the contract and procures the goods. If for any reason, the seller fails to manufacture the goods or procure the goods it is only under those CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 21 of 30 circumstances that no liability is created. However, where the goods or raw material has been procured for the purchaser by seller or goods have been manufactured by the seller, it cannot be said that the cheques were not issued against the liability. I consider that if the liability is not construed in this manner, the sole purpose of making dishonour of the cheque as an offence stands defeated. The purpose of making or enacting Section 138 of the N.I. Act was to enhance the acceptability of cheque in settlement of commercial transactions, to infuse trust into commercial transactions and to make a cheque as a reliable negotiable instrument and to see that the cheques of business transactions are not dishonoured. The purpose of Negotiable Instrument Act is to make an orderly statement of rules of law relating to negotiable instruments and to ensure that mercantile instruments should be equated with goods passing from one hand to other. The sole purpose of the Act would stand defeated if after placing orders and giving advance payments, the stop payments are issued and orders are cancelled on the ground of pricing of the goods as was done in this case."
"19. The above reasoning of the Delhi High Court is clearly flawed inasmuch as it failed to keep in mind the fine distinction between civil liability and criminal liability under Section 138 of the N.I. Act. If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. (emphasis supplied) We are unable to accept the view of CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 22 of 30 the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be considered as subsisting liability and dishonour of such cheque amounts to an offence under Section 138 of the N.I. Act. The Delhi High Court has traveled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. In what we have discussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability.
"20. In our opinion, the view taken by Andhra Pradesh High Court in Swastik Coaters, Madras High Court in Balaji Seafoods, Gujarat High Court in Shanku Concretes and Kerala High Court in Ullas is the correct view and accords with the scheme of Section 138 of the N.I. Act."
36. Thus, the Hon'ble Supreme Court has approved the position of law in relation to liability under Section 138, NI Act as laid down by some of the Hon'ble High Courts of different states. Therefore, it would be relevant to discuss the facts and the ratio of those judgments.
37. In Swastik Coaters Pvt. Ltd. vs Deepak Brothers And Ors. 1997 (1) ALD Cri 370: 1997 (1) ALT Cri 371: 1997 89 CompCas CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 23 of 30 564 AP: 1997 CriLJ 1942; the Hon'ble High Court of Andhra Pradesh has discussed the law as under:
"3. *** "...In this case it is the specific defence of the accused that the cheque that was issued was post dated cheque and on the date of the issuing of the cheque the materials were not supplied and the accused placed an order for GradeI cloth but what has been supplied is only GradeII cloth. Precisely on this count only the jail authorities received only a part of the cloth which was up to the prescribed standards and rejected the balance cloth which was substandard. The moment the jail authorities rejected the substandard cloth, accused has intimated the same to the complainant and thereafter for the third time the cheque was presented in spite of receiving the letter from the accused intimating the rejection of the material. On the basis of this evidence the Court below held that as on the date of the cheque there was no existing debt or liability the cheque being a post dated cheque. Therefore, its rejection does not constitute an offence under Section 138 of the Negotiable Instruments Act. I do not think that there is any infirmity in this reasoning of the Court below. Explanation to Section 138 of the Negotiable Instruments Act clearly makes it clear that the cheque shall be relateable to an enforceable liability or debt and as on the date of the issuing of the cheque there was no existing liability in the sense that the title in the property had not passed on to the accused since the goods were not delivered. It is the case of the accused in this context that by taking undue advantage of receiving the entire amount of Rupees 1,00,000/ by way of a Demand Draft and the balance amount by way of a post dated cheque the complainant with a dishonest intention has supplied the substandard material, to be CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 24 of 30 supplied to the Yerrawada Central Prison."
38. In Shanku Concretes Pvt. Ltd. vs State Of Gujarat, 2000 CriLJ 1988, (2000) 2 GLR 753, the Hon'ble High Court of Gujrat also has taken the similar view. The facts of the case and the law discussed by the Hon'ble High Court is as under:
"3. Looking to the brief facts of the case it is revealed that one Shanku Concretes Pvt. Ltd., Halol, District Panchmahals, a company incorporated through its Managing Director Mr. Jaidev Kotak, residing at Bombay, obtained advance of Rs. 15 lacs from one Balbhadrasinh Indrasinh Zala, residing at Surendranagar. It appears that vide an agreement dated 5th June, 1995, the company Shanku Concretes Pvt. Ltd. through its Managing Director Mr. Jaidev Kotak entered into a contract with the above said Balbhadrasinh Indrasinh Zala and obtained advances by way of a debt of Rs.15 lacs to promote the production of the company. On that day, the amount of Rs. 15 lacs were paid to Mr. Jaidev Kotak, Managing Director. The agreement termed that the amount was to be returned after six months and during that period Managing Director Mr. Jaidev Kotak, as per the arrangement between the parties, issued seven cheques of due dates with a stipulation that if cheques are bounced, Balbhadrasinh Indrasinh Zala may take action against the company. Then, thereafter, a Criminal Case No. 132 of 1996 came to be filed by said Balbhadrasinh Indrasinh Zala in the court of Judicial Magistrate, First Class, at Lakhtar, against two accused (i) Shanku Concretes Pvt. Ltd. and (2) Mr. Jaidev Kotak, under Section 138 of the Negotiable Instruments Act. It was alleged in the complaint by the complainant that the accused No. 2 induced the complainant to believe CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 25 of 30 that the post dated cheques referred to above, will be accepted by bank and that the complainant would get the amount of the cheque. Out of those cheques, the complainant deposited two cheques to the account of the Union Bank of India, which were bounced with an endorsement that the fund was insufficient in the account of the accused and, therefore, the complaint. The complainant gave notice to the accused on 6th May, 1996, but within the statutory period of 15 days, the accused did not pay the amount. Learned Judicial Magistrate, First Class, Lakhtar, was pleased to issue process in the above said complaint against the accused. Summons was served on accused No. 2, but he did not appear before the learned Magistrate and, therefore, the necessary procedure is being followed by the learned Judicial Magistrate.
"***** "10. Pursuing Section 138 of the Negotiable Instruments Act, the part of the section, which is relevant for this matter is " for the discharge, in whole or in part, of any debt or other liability" the preexisting condition is, there must be the existence of any debt or any other liability, for which the cheque might have been issued and bounced. Reverting back to the facts of the case, it is an admitted case that the company i.e. the original accused No. 2 wanted to promote its production and, therefore, borrowed Rs. 15 lacs from the original complainant i.e. the present respondent No. 2. The Managing Director, at present absconding, original accused No. 2 on behalf of the company original accused No. 1, entered into an agreement, clearly binding himself and the company, to repay the amount within six months from the date of the execution of the agreement. It clearly appears that to ensure the due performance of the terms further accused No. 2 issued seven cheques of due dates to the complainant CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 26 of 30 and necessary averments were also made in the agreement that for the due performance of the agreement i.e. repayment of the advances after the six months from the date of the agreement cheques are delivered. Some of the such cheques were bounced, for which the complaint is filed.
"11. The crux of the matter, therefore, would be whether there was any existing liability on the part of the present petitioners, which required due discharge within the meaning of Section 138 of the Negotiable Instruments Act, and that whether the cheques which were bounced were issued to discharge such existing liability?
"12. Considering the facts and circumstances of this case, the answer to the above question must be in the negative because as per the agreement executed between the parties, liability which was to be discharged within the meaning of Section 138 of the Negotiable Instruments Act, was still to be arisen only on 5.12.1995 i.e. after the six months of the execution of the contract. This clearly denotes that when the cheques were delivered, there was no liability on the part of the accused to discharge any debt.
"13. The above view further strengthen from the agreement executed between the parties. It is amply clear in the agreement that accused shall repay the amount after six months of the execution of agreement and it is also made clear that for due performance (in Gujarati is mentioned in the agreement) of the contract. The intention of the parties is clear from this averments that the cheques were issued as the collateral security for the due performance of the contract, by which the Company and the Director i.e. accused No. 2 bound themselves to repay the said amount. It is, therefore, clear that cheques were not issued to discharge any existing debt.
"14.This court relies on the decision cited by Mr. Majmudar of CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 27 of 30 the High Court of Madras (supra), wherein a principle is laid down that to attract Sec.138 of the Negotiable Instruments Act, it must be pointed out that there was subsisting liability or debt on the date when the contract was entered into. In that given case before the High Court of Madras, the contract expressly made it clear that the cheques were handed over as security. In this case, it is clear from the agreement entered into between the parties that after borrowing the money, making a statement to repay the same at some future date, the cheques were issued for due performance. Therefore, the transaction from its very nature or from the intention of the parties, as reflected in the agreement executed between the parties, is purely of a civil nature, for which a civil suit has already been filed. The very fact that the payment was agreed to some future date and there was no debt or liability on the date of delivery of the cheques, will take the case out of the purview of the Section 138 of the Negotiable Instruments Act."
39. Similarly, in M/S. Balaji Seafoods Exports ... vs Mac Industries Ltd, S. Pichalah, 1999 (1) CTC 6, Hon'ble High Court of Madras has taken the similar view. It has been held as under:
"2. The case of the complainant is that the complainant paid an advance of Rs. 35,00,000 to the accused. The accused had agreed that he will clear the advance amount of Rs. 35 lakhs within thirty days from the date of receipt of advance and also handed over a post dated cheque for a sum of Rs. 35 lakhs signed by the 2nd accused for and on behalf of the 1st accused. The transactions between the complainant and the accused came to an end in September 1996 and as on 15.7.1997 towards the outstanding balance, the accused owe to the complainant along with interest is a sum of Rs. 39,43,405. When the CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 28 of 30 cheque was presented for collection, it was returned on the ground that 'funds not arranged for'. A notice issued also did not evoke any response except a payment of a sum of Rs.2,00,000. Hence, the complaint.
"*** "10.Therefore, I am of the considered view that as an undated cheque having been given only as security, the provision of Section 138 of the Negotiable Instruments Act are not at all attracted and hence, the complaint against the accused under section 138 of the Negotiable Instruments Act cannot be maintained at all."
40. In the light of the position of the law as emerged from the judgments of the Hon'ble Supreme Court of India in M/S Indus Airways Pvt. Ltd and Ors. vs M/s Magnum Aviation Pvt Ltd. and Anr (Supra), Andhra Pradesh High Court in Swastik Coaters(supra), Madras High Court in Balaji Seafoods(supra), Gujarat High Court in Shanku Concretes(supra) and Kerala High Court in Ullas (supra), this Court is of the considered opinion that the cheques in question were not issued towards discharge of liability as there was no liability on the date of drawal of the cheque. On the date of the issuance of the cheque, there was no liability to pay any amount equivalent to the cheque amount.
41. The complainant has relied upon judgment of Hon'ble High Court of Delhi in S. K. Jain Vs. Vijay Kalra. Hon'ble High Court has CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma PS Badarpur Page No. 29 of 30 discussed the well settled principles of law .i.e presumptions and burden of proof in cases under section 138 N.I.Act. This judgment can be distinguished on the facts as in the said case, Hon'ble High Court dismissed the revision petition of complainants as the complainants had admitted receipt of some money from the accused. The judgment is of no help to Ld. Counsel for complainant in the facts and circumstances of the case.
42. In the light of discussion hereinabove, I am of the considered opinion that the accused had discharged the initial burden. The complainant has failed to prove its case beyond reasonable doubts. The benefit of doubts, as per law, has to be given to the accused. Therefore, the accused is acquitted of the offence under section 138 NI Act.
43. Bail bond and surety bond of accused under section 437A Cr. P. C. with recent photograph and address proof has been furnished. File be consigned to record room after necessary compliance.
Pronounced in the open Court (Neha)
today on 17th October, 2015 MM03 (South East)
Saket, New Delhi
CC No. 216/6/13 Avinash Kumar Vs. Ram Bilas Sharma
PS Badarpur Page No. 30 of 30