Delhi District Court
Subhash Chand vs Devender Kumar Sethi on 27 September, 2024
IN THE COURT OF SH. ANMOL NOHRIA,
JUDICIAL MAGISTRATE FIRST CLASS (NI ACT)
DIGITAL COURT, SHAHDARA, KKD COURTS
CC No. : 2067/2022
U/s : 138 N. I. Act
P.S : Vivek Vihar
Subhash Chand v. Devender Kumar Sethi
JUDGMENT
1. CC No. : 2067/2022
2. Date of institution of the case : 01.11.2022
3. Name of complainant : Subhash Chand,
S/o Sh. Bhagwan Dass,
R/o B-129, Second Floor,
Jhilmil Colony, Delhi
4. Name of accused, parentage
and address : Sh. Devender Kumar Sethi,
S/o Late Sh. S.L. Rathi,
R/o H. No. 1351, A/13, Govind Park,
Kalkaji, Delhi
5. Offence complained of : 138 N. I. Act
CC No. 2067/2022
Subhash Chand v. Devender Kunar Sethi Page no 1 of 24 (Anmol Nohria)
JMFC (NI Act) (Digital Court)
6. Plea of accused : Accused pleaded not guilty
7. Final order : Acquitted
8. Date on which order was
reserved : 21.08.2024
9. Date of pronouncement : 27.09.2024
1. The instant matter has originated out of a complaint under section 200 Cr.PC read with Section 142 Negotiable Instruments Act (hereinafter referred to as the 'N I Act'), filed by the complainant against the accused under Section 138 N I Act alleging that cheques bearing number- 044497 dated 11.07.2022 amounting to Rs. 500000/- drawn on Bank of India, Govind Puri, Delhi-110019 issued by the accused in favour of the complainant, in discharge of a legal debt or other liability, has been dishonored and the accused has not paid the said amount even after receiving the prescribed legal demand notice. By virtue of this judgment, the present complaint is being disposed off.
BRIEF REASONS FOR THE DECISION OF THE CASE FACTUAL BACKGROUND OF THE CASE:
2. Briefly stated facts of this case as per complaint are that complainant and accused were having cordial relations with each other. Accused had demanded a friendly loan from the complainant for a sum of Rs. 5,00,000/- in the month of September, 2019 for urgent need for three years. Complainant had managed Rs 500000/- and gave to the CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 2 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) accused in cash at his house on 19.09.2019. In this regard, a loan agreement was executed between the accused and complainant in presence of marginal witnesses on 19.09.2019. In lieu of this, the accused had issued a post dated cheque dated 11.07.2022 bearing no. 044497 issued from Bank of India, Govind Puri Branch, New Delhi with a assurance that the said cheque would be encashed on its presentation. Upon presentation same was returned unpaid with remarks "funds insufficient" vide return memo dated 06.08.2022. Thereafter, complainant got issued a legal notice dated 24.08.2022; but no payment was made by the accused and hence, the present complaint was filed under Section 138 Negotiable Instruments Act.
PROCEEDINGS BEFORE COURT
3. On the basis of pre-summoning evidence, accused was summoned by the court for the offence under Section 138 of Negotiable Instrument Act. The accused put in his own appearance and thereafter notice under Section 251 Cr.P.C. was framed upon the accused on 26.04.2023 to which accused pleaded not guilty and claimed trial. In his plea of defence, the accused stated that he has taken loan of Rs. 50,000/- from the complainant on 19.09.2019 in cash. In lieu of the said loan amount, he has given one signed blank cheque to the complainant as a security and he has also signed two blank papers. In the month of January, 2020, he has given back the loan amount of Rs. 50,000/- in cash to the complainant but complainant did not give back the said security cheque with the excuse that the said cheque has been misplaced. Complainant misused the cheque in question and has no legal liability towards the complainant. Statement under Section 294 Cr.P.C of the accused was also recorded on 26.04.2023 wherein he has admitted his signatures on the cheque in question and address upon legal demand notice, the cheque return memo. Further, he has denied receiving of legal demand notice and and has also denied filling of particulars on the same.CC No. 2067/2022
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4. The accused had orally made a request under Section 145 (2) NI Act to cross examine the complainant and request has been allowed to cross examine the complainant.
5. During the trial, complainant has led the oral and documentary evidence against the accused to prove his case beyond reasonable doubt. The following evidence are as under:
Oral Evidence CW1 Subhash Chand (complainant) Documentary Evidence CW-1/1 Copy of loan Agreement dated 19.09.2019 Ex. CW-1/2 Cheque bearing no. 044497 dated 11.07.2020 Ex. CW-1/3 Cheque return memos dated 06.08.2022 Ex. CW1/4 Legal demand notice dated 24.08.2022 Ex. CW-1/5 Tracking report Ex. CW-1/6 Postal receipt Ex. CW-1/7 Copy of Aadhar Card
6. The complainant was cross examined at length by the counsel for the accused on 01.12.2023. Thereafter, no other witness was examined by the complainant and the complainant's evidence was closed vide order dated 01.12.2023. Statement of accused CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 4 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) was recorded under Section 313 of The Code of Criminal Procedure, 1973 read with Section 281 of The Code of Criminal Procedure, 1973 on 07.05.2024. Incriminating evidence was put to him wherein he has admitted all the documents except Loan Agreement Ex. CW-1/1 as he has signed on a blank papers, postal receipt Ex. CW-1/6 and tracking report Ex. CW-1/5 and Aadhar Card Ex. CW-1/7.
7. Ld. Counsel for accused had sought time to file an application u/s 315 Cr.P.C seeking examination of accused as a defence witness. However, counsel for the accused had submitted that he does not want to lead any DE. Hence, no DE was led in the present matter.
8. Afterwards, final arguments were heard on behalf of both the parties and after hearing the arguments, trial was concluded.
It has been argued that he has been able to prove his case by way of presumptions in his favor and the accused has failed to rebut the same by leading any cogent evidence. It has been further argued that the accused in his various statements has admitted his signatures on the cheque in question and he is entitled to the presumptions enumerated in NI Act. It is further argued that accused has admitted his address but denied receiving legal demand notice, however presumptions of law are in his favor It has been further argued that the accused failed to discharge the burden cast upon him and has put forward a false defense, and the case of the complainant is supported by the agreement between the complainant and the accused qua the advancement placed on record. It has been further argued that the complainant has been able to prove his case beyond reasonable doubt in order to secure a conviction.
Per contra, it has been argued on behalf of the accused that the case of the complainant is false one and the complainant has created false and fabricated story. To CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 5 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) buttress his submission counsel for the accused has argued that even if the version of the complainant is believed to be true the accused does not have liability as the alleged debt itself is not legally enforceable on the date of encashment of the cheque. It is further argued that by way of cross examination of the complainant, the accused has been able to show that the accused does not have any legal liability as asserted by the complainant. It has been further argued that there exist inconsistencies in the version of the complainant owing to which the complainant has not been able to prove his case beyond reasonable doubt for securing a conviction and the accused has successfully rebutted the presumptions drawn against him. It is submitted that the accused is defending the case upon the following grounds:
a) The cheque in question is blank security cheque;
b) The legal demand notice has not been served upon the accused;
c) The accused does not have liability as per the version of the complainant.
9. I have heard the counsels for both the parties; perused the record and have gone through relevant provisions of the law and the judgments relied upon by both the parties.
INGREDIENTS OF OFFENCE AND DISCUSSION-
10. Before dwelling into the facts of the present case, it would be apposite to discuss the legal standards required to be met by both sides. In order to establish the offence under Section 138 of NI Act, the prosecution must fulfill all the essential ingredients of the offence. Perusal of the bare provision reveals the following necessary ingredients of the offence:-
First Ingredient: The cheque was drawn by a person on an account maintained by him for payment of money and the CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 6 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) same is presented for payment within a period of 3 months from the date on which it is drawn or within the period of its validity;
Second Ingredient: The cheque was drawn by the drawer for discharge of any legally enforceable debt or other liability; Third Ingredient: The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid from that account on an agreement made with that bank; Fourth Ingredient: A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within thirty days of the receipt of information of the dishonour of cheque from the bank;
Fifth Ingredient: The drawer fails to make payment of the said amount of money within fifteen days from the date of receipt of notice.
It is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the NI Act
11. The accused can only be held guilty of the offence under Section 138 NI Act if the above-mentioned ingredients are proved by the complainant co-extensively. Additionally, the conditions stipulated under Section 142 NI Act have to be fulfilled.
APPRECIATION OF EVIDENCE- .
12. Notably, there is no dispute qua the proof of first, third, and fifth ingredient. The complainant had proved the original cheque vide Ex. CW1/2 which the accused had not disputed as being drawn on the account of the accused. It was not disputed that the cheque in question was presented within its validity period.
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13. The cheque in question was returned unpaid vide return memo Ex. CW1/3,and the same has been admitted by the accused under his statement u/s 294 CrPC, as such the same is proved in view of the same. Consequently, third ingredient stands proved.
14. Notably, no dispute has been raised qua the fifth ingredient as such the same is deemed to be proved that no payment has been made after issuance of legal demand notice.
15. The questions which arise for consideration in the present matter are:
a) Whether the legal demand notice issued by the complainant, has been served upon the accused?
b) Whether presumption under section 118(a)read with section 139of the Act can be raised in favor of complainant in the present case?
c) Whether the impugned cheque was issued by the accused in discharge of a legally enforceable debt as per the version of the complainant?
I shall be deciding the above-mentioned points of determination separately.
a) Whether the legal demand notice issued by the complainant, has been served upon the accused?
16. The issuance and service of legal demand notice is one of the statutory requirements in order to bring home the guilt of the accused under section 138. Any defect in the statutory requirement would go to the very root of the proceedings as such it is essential to first discuss whether the legal notice issued by the complainant in compliance with the provisions of section 138 or not.
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17. Proviso (b) appended to Section 138 with respect to legal demand notice is reproduced below for ready reference:
(a) "The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid;"
As such, it is necessary that the payee or holder in due course makes demand of money due by giving a notice to the drawer, in writing, within 30 days of receipt of information from the bank regarding the return of the cheque is dishonored. The object of notice is to give a chance to the door of the cheque to rectify his omission and also to protect an honest drawer. Reliance is placed upon, Central Bank of India vs Saxons Farms, 1999(39) ACC891(SC).
18. In the landmark decision of Hon'ble Supreme Court of India in matter of " C. C. Alavi Haji Vs. Palapetty Mohd. &Anr. " reported in (2007) 6 Supreme Court Cases 555 held that as under:-
"16. It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is no stipulation of giving of a notice before filing a complaint Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the Court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 9 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) rejected. A person who does not pay within 15 days of receipt of the summons from the Court along with the copy of the complaint under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the G.C. Act and Section 114 of the Evidence Act. In our view, any other interpretation, of the proviso would defeat the very object of the legislation. As observed in Bhaskarans case (supra), if the giving of notice in the context of Clause (b) of the proviso was the same as the receipt of notice a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act."
19 So far as the service of demand legal notice is concerned, the accused in his statement u/s294 as well as at the stage of framing of notice has admitted the address upon the legal demand notice to be his address. Further, no question qua the address or the legal demand notice has been put to the complainant in his cross examination nor any evidence has been led to disprove the address of the accused after his answers in statements at the time of framing of notice or u/s 294 Cr.P.C. It is noteworthy that the accused in his statement u/s 313 Cr.P.C has admitted to the fact of receiving the legal demand notice.
20. In view of the discussion above I am of the considered opinion that the plea of the accused that he has not received the legal demand notice is not tenable.
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21. Hence, placing reliance upon Hon'ble Supreme Court of India in matter of " C. C. Alavi Haji Vs. Palapetty Mohd. &Anr(Supra), there is a deemed delivery of legal demand notice.
22. Ergo, this contention of accused does not hold any water and is dismissed as devoid of any substance and merit; and consequently, the fourth ingredient of the offence u/s138 stands proved.
b.) Whether presumption under section 118(a)read with section 139of the Act can be raised in favor of complainant in the present case?
23. With regards to the second ingredient, the complainant has to prove that the impugned cheque was drawn for a legally enforceable debt; however, as per the scheme of the NI Act, once the accused admits signature on the cheque in question, certain presumptions are drawn, which result in shifting of onus. Section 118(a) of the NI Act lays down the presumption that every negotiable instrument was made or drawn for consideration. Another presumption is enumerated in Section 139 of NI Act. The provision lays down the presumption that the holder of the cheque received it for the discharge, in whole or part, of any debt or other liability.
24. The combined effect of these two provisions is a presumption that the cheque was drawn for consideration and given by the accused for the discharge of debt or other liability. Both the sections use the expression "shall", which makes it imperative for the court to raise the presumptions, once the foundational facts required for the same are proved. Reliance is placed upon the judgment of the Hon'ble Supreme Court, Hiten P. Dalal vs. Bratindranath Banerjee (2001) 6 SCC 16.
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25. The Hon'ble Supreme Court in Kumar Exports vs. Sharma Carpets (2009) 2 SCC 513, while discussing the contours of section 118(a) r/w 139 of the N I Act, has held interalia the following:
"14. Section 139 of the Act provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."
26. Applying the definition of the word "proved" in section 3 of the Evidence Act to the provisions of sections 118 and 139 of the Act, it becomes evident that in a trial under section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under section 118 and 139 of the Act help him shift the burden on the accused. The presumption will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists."
27. In the instant case, the accused at the time of framing of notice u/s 251 CrPC, statement u/s 294 Cr.P.C has admitted his signatures on the cheque in question albeit has denied the filing of particulars on the same and has also disputed the purpose of issuance of the impugned cheque stating the same to be a security cheque.
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28. At this stage a reference has to be sought from section 20 of NI Act which talks about inchoate instruments. As per the provision if a person gives a duly signed cheque which is either blank or partly filled then he is deemed to have given implied authority to the holder to fill up the particular in it and complete the cheque, thus making the drawer liable for the payment mentioned in it. It is immaterial that the cheque may have been filled by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provision of section138 would be attracted.
29. Further, the Hon'ble Supreme Court in the case of Bir Singh vs. Mukesh Kumar (2019) 4 SCC 197, while upholding the validity of blank signed cheque in a proceeding u/s 138 of the Act has interalia held the following:-
"If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence."
30. It is noteworthy that the Hon'ble Apex Court in the case of Sripati Singh Vs. The State of Jharkhand and Ors., AIR 2021 SC 5732, has held that:
"16. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state 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 CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 13 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) 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.
31. When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security' cannot be presented prior to the loan or the installment 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 CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 14 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) 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."
32. It was held by the Hon'ble Delhi High Court, in Suresh Chandra Goyal Vs. Amit Singhal, Crl.L.P. 706/2014, that:
"The appellant was well within his rights to enforce the security in respect whereof the cheques in question were issued and to seek to recover the outstanding debt by encashment of the said cheques. Since the cheques in question were dishonoured upon presentation, the accused suffered all consequences as provided for in law and the appellant became entitled to invoke all his rights as created by law. Thus, the appellant was entitled to invoke Section 138 of the NI Act; issue the statutory notice of demand, and; upon failure of the accused to make payment in terms of notice of demand - to initiate the complaint under Section 138 of the NI Act."
33. Further, in case of Credential Leasing & Credits Ltd. Vs. Shruti Investments &Ors., 2015 (4) JCC 252, it was held that:
"30. Thus, I am of the considered view that there is no merit in the legal submission of the respondent accused that only on account of the fact that the cheque in question was issued as security in respect of a contingent liability, the complaint under Section 138 of the NI Act would not be maintainable. At the same time, I may add that it would need examination on a case to case basis as to whether, on the date of presentation of the dishonoured cheque the ascertained and crystallised debt or other liability did not exist. The onus to CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 15 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) raise a probable defence would lie on the accused, as the law raises a presumption in favour of the holder of the cheque that the dishonoured cheque was issued in respect of a debt or other liability. As settled by the Supreme Court, the said onus obliges the accused to raise a defence - either by picking holes in the case of the complainant and/ or by positively leading defence evidence which leads the Court to believe that there is a probable defence raised by the accused to the claim of the complainant with regard to the existence of the debt or other liability. The said onus does not cast as stringent an obligation on the accused, as it casts on the complainant, who has to prove beyond reasonable doubt the guilt of the accused."
34. Thus, it is settled of the proposition of law that a cheque issued a security, pursuit of financial transaction, cannot be considered as a worthless piece of paper. It is given to ensure the fulfillment of an obligation undertaken. If a cheque issued to secure repayment of a loan advanced and if the loan is not repaid on or before the due date, the drawee would be entitled to get the cheque for payment, and if such a cheque is dishonored, the consequences contemplated under section 138 NI Act would follow. Further, security cheques would also fall within the purview of section 138 NI Act and a person cannot escape is liability unless he proves that the debt or liability for which cheque was issued as security is satisfied otherwise.
35. Thus, in case of a blank signed security cheque the complainant would be entitled to the benefits of presumption, once the signatures on the cheque are proved/admitted. Ergo, in light of the above discussion, this court is of the considered view that, the ground that the cheque in question is a blank security cheque does not hold water with this court and even in case of blank signed cheques, the statutory presumptions under section 118(a) and 139 would be raised in favor of the complainant. Therefore, in instant case, CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 16 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) since, accused has admitted his signatures on the cheque in question, the aforementioned statutory presumptions would be raised in favor of the complainant regarding the fact that the impugned cheque has been drawn for consideration and issued by the accused in discharge of legally enforceable debt.
c.) Whether the impugned cheque was issued by the accused in discharge of a legally enforceable debt as per the version of the complainant?
36. The presumptions contemplated in the NI Act are rebuttable presumptions and once the same are raised, it is for the accused to rebut the same by establishing a probable defence. The principles pertaining to the presumptions and the onus of proof were recently summarized by the Hon'ble Apex Court in Basalingappa vs. Mudibasappa (2019) 5 SCC 418 as under:
"25. We having noticed the ratio laid down by this Court in the above cases on Section 118(a) and 139, we now summarize the principles enumerated by this Court in the following manner:
25.1. Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
25.2. The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities.
25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.CC No. 2067/2022
Subhash Chand v. Devender Kunar Sethi Page no 17 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) 25.4. That it is not necessary for the accused to come in the witness box in support of his defence. Section 139 imposed an evidentiary burden and not a persuasive burden.
25.5. It is not necessary for the accused to come in the witness box to support his defence."
37. Since, the presumption as envisaged u/s 118 and 139 of the Negotiable Instruments Act is attracted in favor of the Complainant. As such, it is now incumbent upon the accused to rebut the said presumption on the basis of preponderance of probabilities. The rebuttal of presumption can be done in two ways, i.e. either the accused punches hole in the case of the complainant and shakes the leg of the complainant's case or the accused brings some evidence to prove his own case.
38. In the case at hand, the defence taken by the accused is that he has issued cheque in question to the complainant for security of a loan of Rs. 50,000 along with two blank signed papers and he has repaid the complainant in January 2020 but the complainant did not return his cheque citing that same has been misplaced and he has misused the same to file the present case.
39. To dislodge the version of the complainant accused at the outset has argued that the debt in question has not crystallized and there does not exist any debt which is legally enforceable at the date of presentation of the cheque and for the same he has relied upon the loan agreement Ex. CW1/1.
40. Perusal of the loan agreement Ex. CW1/1 shows that the same is an agreement qua advancement of Rs.5,00,000 between the accused as first party and the complainant as CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 18 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) second party wherein the accused has taken money from the complainant for a period of 36 months, as per clause 2, on 19.09.2019.
41. Futher, perusal of the cheque in question Ex. CW1/2 and the cheque return memo Ex. CW1/3 shows that the cheque is dated 11.07.2022 and the same has been dishonored on 06.08.2022.
42. At this juncture, it becomes necessary to discuss the definition of legally enforceable debt in terms of Section 138 which has been provided in the explanation attached with the section. As per the explanation which is specific to Section 138, a debt of other liability means a legally enforceable debt or other liability.
43. In Indus Airways Private Limited v. Magnum Aviation Private Limited (2016) 10 SCC 458, the issue before a two-Judge Bench of Hon'ble Supreme Court of India was whether dishonour of post-dated cheques which were issued by the purchasers towards 'advance payment' would be covered by Section 138 of the Act if the purchase order was cancelled subsequently. It was held that Section 138 NI Act would only be applicable where there is a legally enforceable debt subsisted on the date when the cheque is drawn. Further, in the case of Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Limited, the respondent advanced a loan for setting up a power project and post-dated cheques were given for security. The cheques were dishonoured and a complaint was instituted under Section 138. Distinguishing Indus Airways, it was held that the test for the application of Section 138 is whether there was a legally enforceable debt on the date mentioned in the cheque. It was held that if the answer is in the affirmative, then the provisions of Section 138 would be attracted.
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44. Further, In Sripati Singh v. State of Jharkand(Supra), it was observed that:-
"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 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".
45. Also, in Credential Leasing & Credits Ltd. vs Shruti Investments & Anr. 2015(151) DRJ 147, it was held by Hon'ble High Court of Delhi that:
"28. In my view, therefore, the scope of Section 138 NI Act would cover cases where the ascertained and crystallised debt or other liability exists on the date that the cheque is presented, and not only to case where the debt or other liability exists on the date on which it was delivered to the seller as a post-dated cheque, or as a current cheque with credit period. The liability, though, should be in relation to the transaction in respect whereof the cheque is given, and cannot relate to some other independent liability. If, on the date that the cheque is presented, the ascertained and crystallised debt or other liability relatable to the dishonoured cheque exists, the dishonor of the cheque would invite action under Section CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 20 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) 138 NI Act. There could be situations where, for example, an issue may be raised with regard to the quality, quantity, deficiency, specifications, etc. of the goods/services supplied, or accounting. It would have to be examined on a case-to-case basis, whether an ascertained or crystallised debt or other liability exists, which could be enforced by resort to Section 138 NI Act, or not."
46. Recently, in Dashrathbhai Trikambhai Patel v/s Hitesh Mahendrabhai Patel (2023) 1 SCC 578 it is held by Hon'ble Supreme Court of India:-
"16. The judgments of this Court on post-dated cheques when read with the purpose of Section 138 indicate that an offence under the provision arises if the cheque represents a legally enforceable debt on the date of maturity. The offence under Section 138 is tipped by the dishonour of the cheque when it is sought to be encashed. Though a post- dated cheque might be drawn to represent a legally enforceable debt at the time of its drawing, for the offence to be attracted, the cheque must represent a legally enforceable debt at the time of encashment. If there has been a material change in the circumstance such that the sum in the cheque does not represent a legally enforceable debt at the time of maturity or encashment, then the offence under Section 138 is not made out."
47. Hon'ble Supreme Court in NEPC Micon Ltd. v. Magna Leasing Ltd. held that the Courts must interpret Section 138 with reference to the legislative intent to supress the mischief and advance the remedy. The objective of the Act in general and Section 138 specifically is to enhance the acceptability of cheques and to inculcate faith in the efficacy of negotiable instruments for the transaction of business. Section 138 criminalises the dishonour of cheques. This is in addition to the civil remedy that is available. Through the criminalisation of the dishonour of cheques, the legislature CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 21 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) intended to prevent dishonesty on the part of the drawer of a negotiable instrument. The interpretation of Section 138 must not permit dishonesty of the drawee of the cheque as well. A cheque is issued as security to provide the drawee of the cheque with a leverage of using the cheque in case the drawer fails to pay the debt in the future. Therefore, cheques are issued and received as security with the contemplation that a part or the full sum that is addressed in the cheque may be paid before the cheque is encashed.
48. The judgments of Hon'ble Supreme Court on post-dated cheques when read with the purpose of Section 138 indicate that an offence under the provision arises if the cheque represents a legally enforceable debt on the date of maturity. The offence under Section 138 is tipped by the dishonour of the cheque when it is sought to be encashed. Though a post- dated cheque might be drawn to represent a legally enforceable debt at the time of its drawing, for the offence to be attracted, the cheque must represent a legally enforceable debt at the time of encashment. If there has been a material change in the circumstance such that the sum in the cheque does not represent a legally enforceable debt at the time of maturity or encashment, then the offence under Section 138 is not made out.
49. Based on the above analysis of precedent, the following principles emerge:
a. Where the borrower agrees to repay the loan within a specified timeline and issues a cheque for security but defaults in repaying the loan within the timeline, the cheque matures for presentation. When the cheque is sought to be encashed by the debtor and is dishonoured, Section 138 of the Act will be attracted; b. However, the cardinal rule when a cheque is issued for security is that between the date on which the cheque is drawn to the date on which the cheque matures, the loan could be CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 22 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) repaid through any other mode. It is only where the loan is not repaid through any other mode within the due date that the cheque would mature for presentation; and c. If the loan has been discharged before the due date or if there is an 'altered situation', then the cheque shall not be presented for encashment.
50. Thus, when a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security' cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Further, the crystallized debt should exist as on the date of presentation of cheque, to attract the provisions of Section 138 of Negotiable Instruments Act.
51. Coming to the case at hand, the debt never crystallized on the date of presentation of the cheque in terms of the agreement Ex. CW1/1 because in terms of the same the money is advanced for a period of 3 years from 19.09.2019 which is 19.09.2022, and thus crystallizes for repayment on 19.09.2022; but the cheque in question has ben presented for encashment on 06.08.2022. i.e. before the date of crystallization of the alleged debt.
52. To summarize the discussion above the complainant has presented the impugned cheque before the crystallization of debt, hence, there does not exist any legally enforceable debt in terms of Section 138 NI Act on the date of dishonour of the cheque, making the version of the complainant falls flat and rebutting the presumption raised against the accused.
CC No. 2067/2022Subhash Chand v. Devender Kunar Sethi Page no 23 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court) CONCLUSION:
53. To recapitulate the above discussion, the accused has been successful in establishing a probable defence on a standard of preponderance of probabilities to rebut the presumption under section 118 and 139 of the NI Act by punching the holes in the case of the complainant and making the case of the complainant doubtful. Cogent evidence is required to be proved beyond reasonable doubt to secure conviction in a criminal trial. The accused has been successful in establishing a probable defence by way of pointing out the material inconsistencies/ irregularities and contradictions in the case of the complainant and thereby proving that the cheque was not given in discharge of legal debt or liability owed to the complainant. In the result of the analysis of the present case, the accused Devender Sethi is hereby acquitted of the offence punishable under Section 138, Negotiable Instruments Act, 1881.
54. This judgment contains 24 pages. This judgment has been signed and pronounced by the undersigned in open court.
55. Let a copy of the judgment be uploaded on the official website of District Courts, Karkardooma forthwith.
Announced in the open Court On 27.09.2024 (Anmol Nohria) JMFC (NI ACT) Digital Court Shahdara/KKD/Delhi 27.09.2024 CC No. 2067/2022 Subhash Chand v. Devender Kunar Sethi Page no 24 of 24 (Anmol Nohria) JMFC (NI Act) (Digital Court)