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Delhi District Court

Hon'Ble Supreme Court In Case Titled M S ... vs . State Of on 23 June, 2011

                    IN THE COURT OF SH. ARVIND BANSAL  
                        METROPOLITAN MAGISTRATE
                      NEW DELHI DISTRICT: NEW DELHI


       Harjeet Singh son of Shri Shamsher Singh. 
       Resident of 11/1,  Gurdwara Road, (Jangpura Road),  Bhogal,
       New Delhi­110014                                .....Complainant


                                    Versus


       1.  Shri Rajeev Nayer son of  Late Shri N N Nayer.  
       Resident of B­129,  Surya Nagar,  Gaziabad,  UP.  


                                                            .....Accused
          (a)  Complaint Case No.        1265/01(original CC No.1702/1/06)


       (b)  Date of Institution:         3.10.2006


       (c)  Offence:                     Offence U/s 138 N I Act


       (d) Plea of accused               Pleaded not guilty and claimed trial.


       (e)  Argument heard and 
              reserve for order:         19.5.2011


       (f)  Final Order:                 Acquitted


       (j)  Date of Judgment:            23.6.2011




                                             1
                        :2:
BRIEF REASONS FOR JUDGMENT:­
FACTS OF THE CASE:

1. The present is a complaint under section 138 of Negotiable Instruments Act 1881 (hereinafter referred to as 'the Act') filed by the complainant on the averments that the cheque issued by accused for discharge of a legal liability got dishonored on presentation. It is averred that the complainant and the accused were having good relationship and in the year 1996, the accused approached the complainant for investment in properties and both of them entered into a partnership for the same. It is averred that complainant gave money as required by accused from time to time for the purpose of investment in properties.

2. It is further averred that in June 2006, the accused dissolved the partnership firm and settled the accounts with the complainant. It is further the averment of complainant that after settlement of accounts, to discharge his legal liability, the accused issued cheque no. 304853 dated 7.8.2006 for Rs. 26,00,000/­ drawn on State Bank of India, Dilshad Garden, New Delhi. The complainant presented the said cheque with his banker for encashment but the same was returned unpaid by the Bank on 8.8.2006 for reasons 'insufficient funds'.

3. It is averred that complainant sent a legal demand notice to accused on 31.8.2006 through registered AD/UPC/Courier. The accused allegedly 2 did not make the payment of the cheque amount despite service of legal demand notice and hence the present complaint. It is averred that complaint has been filed within period of limitation. PROCEEDINGS BEFORE THE COURT

4. The accused was summoned vide order dated 4.10.2006 for the offence u/s 138 N I Act in respect of the aforesaid cheque. Thereafter, the accused person appeared before the Court and was admitted to bail in the present case. Notice u/s 251 Cr.P.C for the offence u/s 138 N I Act was served upon the accused on 4.12.2007 to which he pleaded not guilty and claimed trial.

5. The complainant in support of his case led his evidence by way of affidavit which is Exhibit C­1, reiterating the averments made in the complaint. The dishonored cheque is Exhibit CW­1/A, the memo is Exhibit CW­1/B and C, the legal demand notice is Exhibit CW­1/D, the postal receipt is Exhibit CW­1/E, UPC is Exhibit CW­1/F, Courier receipts are Exhibit CW­1/G and H. CW­1 was duly cross­examined by the counsel for accused.

6. After complainant evidence was led, the statement of the accused was recorded u/s 313 Cr.P.C on 18.1.2008 wherein all incriminating material existing on record including exhibited documents were put to the accused to which the stand of all the accused was of general denial. He stated that he had not given any cheque to the complainant. He further 3 stated that he was running a partnership firm with the complainant for last about ten years and during the existence of partnership, the complainant removed his signed cheques and misutilised the same in the present case. He stated that he had received a legal demand notice but he was not under any liability to pay the cheque amount. He expressed his willingness to lead defence evidence.

7. The accused sought the permission of Court U/s 315 Cr.P.C to appear as defence witness which was allowed. Accused appeared as DW­1 and tendered his evidence by way of affidavit Exhibit D­1. He relied upon documents i.e., copy of a police complaint dated 4.9.2006 and 6.9.2006 Exhibit DW­1/1 and his own statement of account Exhibit DW­1/2. He was duly cross­examined by the counsel for complainant.

8. Accused also summoned two more witnesses to defend himself. Mr Kishore Kumar, Computer Operator, Bank of Baroda, Bhogal, New Delhi appeared as DW­2 with summoned documents i.e., the true copy of account opening form of HAR Builders which is Exhibit DW­2/A. Mr. Deepak Ahuja, LDC with the office of Registrar of Firms appeared as DW­3 with the summoned documents. The registration certificate form A and B of Registrar of Firms are Exhibit DW­3/A to C. The witnesses were not cross examined despite opportunity.

9. After the examination of DW­1, DW­2 and DW­3, the defence 4 evidence was closed on the request of counsel for accused. Thereafter, with the permission of the Court the complainant again appeared as a witness and exhibited two documents Exhibit CW­1/J and K. He was cross­examined by the counsel for accused. Thereafter, final argument were heard on behalf of both the parties at length. I have carefully gone through the material placed on record by both the parties and the case laws relied upon by both of them.

APPRECIATION OF EVIDENCE:­

10. For proving an offence u/s 138 of N I Act, following ingredients are required to be fullfilled :

1) That there is a legally enforceable debt or liability,
2) The drawer of the cheque issued the cheque to discharge in part or whole the said legally enforceable debt or liability,
3) The cheque so issued was returned unpaid by the banker of the drawer,
4) Legal demand notice was served upon the accused and the accused failed to make the payment within 15 days of the receipt of said notice.

INGREDIENTS NO. 1 & 2.

11. Before deciding ingredient no. 1 and 2, it is necessary here to reproduce section 118 (a) and section 139 of the Act which deal with the 5 law particularly necessary to decide ingredient no. 1 and 2. The section 118(a) reads as:

"that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration".

And Section 139 reads as under:

"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".

12. The said two sections have been elaborately discussed, and interpreted by the Hon'ble Supreme Court in a series of judgments. The Hon'ble Supreme Court in case titled M S Narayana Menon Vs. State of Kerala AIR 2006 SC 3366 made the following observations:

"32. Applying the definitions of 'proved' and 'disproved' to the principle behind Section 118 (a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non­existence of the consideration so probable that a prudent matter ought, 6 under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose , the evidence adduced on behalf of the complainant could be relied upon."

13. The following observations of the Hon'ble Supreme Court in Hiten P Dalal Vs. Bratindra nath Banerjee (2001) 6 SCC 16, at this stage are also important;

"..because both Sections 138 and 139 require the Court 'shall presume' the liability of the drawer of the cheques for the amounts for which the cheques are drawn... it is obligatory on the Court to raise this presumption in every case where the factual basis for raising the presumption has been established. It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused".

But the standard of proof to discharge the burden shifted on accused to rebut the presumption raised by the Court U/s 139 is not the same as upon the prosecution to prove the case.

14. The complainant through his complaint, the affidavit, dishonored cheque and the return memo has drawn a factual basis for raising a 7 presumption U/s 139 of the Act against the accused that the impugned cheque was issued for discharge of a legal debt/liability.

15. It is the case of the complainant that after dissolution of the partnership firm and settlement of account, a sum of Rs. 26 lacs became due towards the accused and to discharge his legal debt/liability he issued the impugned cheque which got dishonored on presentation. Further, no payment was made despite service of legal demand notice.

16. To rebut the presumption of law raised against him, the accused cross examined the complainant at length, got his statement U/s 313 Cr.P.C recorded and adduced his defence evidence through three different defence witnesses.

17. The defence of accused in the given fact situation is multi­fold. First, that complainant malafidely stole some of his cheques including the impugned cheque taking advantage of their close relationship as partners of the partnership firm named M/s. HAR Builders; second, that the partnership firm was never dissolved and, therefore, the question of issuing the impugned cheque to the complainant against the settlement of accounts of the partnership firm never arose; third, that he had filed a complaint against the complainant and his father in PS Shalimar Garden, Sahibabad , Gaziabad regarding the misuse of the impugned cheque. The accused has elaborated the aforesaid offences through his defence 8 evidence.

18. To rebut the case of the complainant that the impugned cheque has been issued to discharge the legal liability of payment of settlement of accounts, it is the contended in defence of the accused that the complainant has malafidely and fraudulently stolen some of his signed and unsigned cheques including the impugned one by taking advantage of being closely related as a partner for a number of years. To establish his defence, the counsel for accused has cross­examined the complainant on this aspect. The complainant denied as wrong, the suggestion that he had misused the individual cheques of the accused fraudulently. The complainant deposed that the accused had delivered the impugned cheque to his wife Smt. Uttamjeet Kaur and the name and amount in words columns were blank. He further deposed that the impugned cheque was delivered by accused to his wife one week prior to the birthday of his son, i.e., around 4th or 5th of August 2006. He denied as wrong the suggestion that the accused had not given the impugned cheque to the wife of the complainant. He also denied as wrong the suggestion that cheques were misused by him and were without consideration. He also denied as wrong the suggestion that he had stolen the impugned cheque of the accused because an amount of Rs. 20­25 lacs was due towards him on the accounts of the partnership firm. The perusal of whole cross­examination of CW­1 reveals that the defence of the accused that the impugned cheque was stolen by the complainant does not get established. 9

19. To further establish and strengthen his defence of theft of cheques, the accused has relied upon a document alleged to be a complaint written to PS Shalimar Garden, Sahibabad which is Exhibit DW­1/1. The perusal of the said document reveals that it is dated 4.9.2006 and 6.9.2006 and the same was posted to the concerned authority on 8.9.2006. Perusal of the record further reveals that the impugned cheque got dishonored vide cheque return memo dated 12.8.2006 and legal demand notice was sent on 31.8.2006. The aforesaid complaint Exhibit DW­1/1 was written and sent to the concerned authority after receipt of the legal demand notice of the complainant. The contents of Exhibit DW­1/1 also establish this fact. It is the argument of the counsel for accused that the accused had no knowledge of the fact that his cheque has been stolen and misused by the complainant before he received the legal demand notice. It was, therefore, the immediate reaction of the accused to file a police complaint as a prudent man.

In the thoughtful opinion of the Court, the document Exhibit DW­1/1 although does not establish the defence of the accused that the impugned cheque was actually stolen and, thereafter used by the complainant but merely points towards the prudence of the accused, if any, in writing and sending the complaint to the concerned authorities.

20. The accused has further elaborated his defence of misuse of the impugned cheque and the defence that he had no knowledge of the fact that his cheque has been stolen before he received the legal demand notice 10 by relying upon his own statement of account Exhibit DW­1/2 the said statement of account for a period from 10.5.2005 to 31.8.2007. It is the argument of the counsel for accused that all the other cheques of the accused from the same cheque book had got encashed during the aforesaid period and the impugned cheque which was also a part of the cheques of the same series went missing without the knowledge of the accused.

Perusal of the statement of account of the accused reveals that most of the cheques of the same series as that of the impugned cheques got honored during 8.4.2005 to 7.8.2006. Further perusal reveals that the amount of all these cheques varies from some thousands to some lakhs but none of these cheques was for a substantial or a magnanimous amount of Rs. 26 lacs. It appears that the accused never used to deal in such huge sums of money as that in the impugned cheque.

21. It is the case of the complainant that the impugned cheque was issued by the accused in August 2006 after settlement of accounts of the partnership firm in June 2006. Per contra it is the defence of the accused that the complainant kept the impugned cheque in his possession for about one year and used it thereafter. CW­1 in his cross­examination has denied as wrong the suggestion that he kept the impugned cheque unfilled for about one year and thereafter misuse the same.

In the considered opinion of this Court, there appears to be a reasonable probability in the argument of the counsel for accused. It is particularly so because the other cheques of the same series as that of the 11 impugned cheque, for example 304851 got encashed on 8.4.2005, 304855 got encashed on 21.4.2005, 304856 got encashed on 1.6.2005 and so on. A reasonable or a prudent man cannot be expected to keep one cheque of an initial number preserved for one long year to issue it to somebody after all the other cheques get exhausted. Therefore, there is a probability that the impugned cheque might have come to the possession of the complainant much prior to the month and date as contrarily claimed by the complainant.

22. It is the case of the complainant that the impugned cheque was issued by the accused for discharge of his legal liability arising out of the settlement of accounts of the partnership firm i.e., M/s. HAR Builders at the time of dissolution. To rebut the case of the complainant, the accused contended that the partnership firm was never dissolved as claimed by the complainant and it is still subsisting and, therefore, the question of settlement of accounts of the firm does not arise. The accused founded his defence through the cross­examination of the complainant and his defence evidence.

23. It is pertinent here to mention that the existence of partnership from 1996 to 2006 is not disputed by both the parties. It further gets established from the partnership deed Exhibit CW­1/D­1 which was accepted by the complainant during his cross­examination. The fact that the said partnership firm is registered with the registrar of firms is also not 12 disputed by any of the parties. The undisputed true copy of certificate of registration is Exhibit CW­1/D­2. It is further not disputed that the bank account of the firm was duly opened and maintained in Bank of Baroda, New Delhi wherein the mode of operation was joint.

24. In his cross­examination, the complainant deposed that he cannot tell the exact date of June 2006 of the dissolution of the firm. It was also deposed by the complainant that a deed of dissolution of the partnership firm was also written and executed between him and the accused and the same was duly signed. The complainant also deposed that the dissolution of the firm was effected at his house. The accused, on the contrary has denied the execution of any deed of dissolution in his defence affidavit.

The complainant has not filed on record either the original or photocopy of deed of dissolution purportedly executed by both the complainant and the accused. Further, in his cross - examination, CW­1 deposed that he had not sent any intimation to the registrar of firms regarding dissolution of the aforesaid partnership firm. He also stated that he never sent any notice to the accused for dissolving the firm nor the accused ever send him any such notice. It is a settled law that a person who asserts a fact, the burden to prove the same rests upon him. Section 106 of Indian Evidence Act reads as under:

106. burden of proving fact specially within knowledge­ when any fact is specially within the knowledge of any person, the burden of proving the fact is upon him. 13

Therefore, the complainant has failed to discharge the burden to prove the dissolution of partnership firm. Consequently, the settlement of account of the alleged dissolved firm remains doubtful. The claim of complainant rests upon the legal liability of the accused arising out of the settlement of accounts of their dissolved partnership and, therefore, failure to prove the dissolution of the partnership firm casts a doubt on the claim of the complainant that the impugned cheque was issued by the accused to the complainant in discharge of his legal liability of dues after settlement of accounts.

25. Further, the law of partnership in India provides for the persons who may inform the Registrar of any change in the registered partnership firm. Section 63 of the Partnership Act reads as under :­ Section 63 : Recording of changes in an dissolution of a firm:

"......when a registered firm is dissolved any person who was a partner immediately before the dissolution or the agent of any such partner.... may give notice to the Registrar of any such change or dissolution, specifying the date thereof......"

Although the responsibilities and liabilities of all the partners in a firm are joint and several and the partners work as agents of each other and that of the firm as well but in the present fact situation, in the considered opinion of this Court it is the responsibility of the complainant as partner of the firm to inform the registrar of firms and to complete any 14 other formality in connection with dissolution of firm. As the complainant has not proved the compliance of any of the requirements under the law of partnership, therefore, the issue of dissolution of the firm hangs in a balance.

26. To rebut the case of the complainant that the partnership firm was dissolved in June 2006 and to establish his defence that the partnership firm is still subsisting, the accused summoned Shri Kishor Kumar from Bank of Baroda , Bhogal, New Delhi as DW­2 to prove that the account of the partnership firm was opened by both the partners and the same has not been closed since the alleged dissolution. The said witness brought an account opening firm Exhibit DW­2/A. The exhibit DW­2/A bears the signatures of both the complainant and the accused as partners of the firm M/s. H A R Builders and reflects the mode of operation of the account as joint. It was stated by the Bank witness DW­2 that the bank account is still subsisting. DW­2 was not cross­examined by the complainant despite opportunity.

The deposition of DW­2 and the document Exhibit DW­2/A strengthens the version of the accused that if the firm was dissolved, the bank account should have been closed by both the partners. It is the argument of the counsel for accused that the bank account was not closed because the partnership firm was never dissolved and the accounts were never settled. In the considered opinion of this Court, there appears to be reason in the aforesaid argument of the counsel for accused justified by the 15 standards of a reasonable and prudent man.

27. To further rebut the aforesaid version of the complainant and to establish his argument, the accused also summoned Sh. Deepak Ahuja from Registrar of Firms, as DW­3. The said witness brought the registration certificate Form A and B which are Exhibits DW­3/A, B and C. It was stated by DW­3 that as per their records, the partnership firm M/s. HAR Builders is still subsisting and no dissolution deed has been filed by any of the partners with their office. These documents have not been disputed by the complainant nor the fact that no dissolution deed has been filed by the firm or its partners with the Registrar of Firms.

The aforesaid documents and deposition of DW­3 further strengthens the defence of the accused that the partnership firm was never dissolved.

28. It is the case of the complainant as stated in cross examination that all his investments in the partnership firm were in cash. It was stated by the complainant that he used to take the cash amount from his father and some amount used to be withdrawn by him from his individual bank account. There is nothing on record to show or establish the proportionate investments either by the complainant or the accused. Further, there is nothing on record to show any settlement of account of the firm by both the partners. The complainant has relied upon two documents cum slips exhibit CW­1/J and K, purportedly the entries 16 regarding the investments made by the complainant in the firm from time to time. In his cross examination, CW­1 admitted that these documents neither bear his signatures nor the said documents reflect the name of the firm i.e., M/s. HAR Builders written anywhere on them. It is admitted as correct by the complainant that both these documents bear the signatures of the accountant of ACPL Company. It is admitted by the complainant in the cross examination that these documents are not a part of any notebook or dairy.

It is a settled law that only the documents maintained by a firm or a company in its regular course of business can be read in evidence. The documents Exhibit CW­1/J and K are neither a part of any book of account or ledger maintained by the firm nor a part of any other book or register used by the firm in its regular course of business to make entries of the investments of its partners. Further, the perusal of both these documents does not inspire confidence about the genuineness of the entries made therein nor show as to where a huge sum of Rs. 20, 28,826/­ was invested. The said documents appear more to be the noting of the small routine expenses of some thousands of rupees but nowhere explain the utilisation or investment of the huge sums of lacs of rupees. Therefore, the documents exhibit CW­1/J and K relied upon by the complainant do not serve any purpose to the case of the complainant.

29. Besides the above discussion, there are a number of discrepancies in the case of the complainant which makes it devoid of coherence and 17 confidence . The complainant CW­1 stated in his cross examination that when he received the cheque Exhibit CW­1/A, the date, amount in figures and signatures of accused were already there and he himself filled in his own name and amount in words in the cheque. In the opinion of this Court, no reasonable or prudent man can be expected to have issued a cheque to the payee by filling in the amount in figure but not in words and to issue and hand over the same to a person without filling in his name when it is purportedly to be issued to a particular person.

In the wake of it, the argument of the counsel for accused that the complainant has wrongly misappropriated the cheques kept in the office of accused, seems to be more justified and probable; particularly when the complainant and the accused shared a fiduciary relationship with each other.

30. Further, the complainant accepted as correct, the suggestion that he was in possession of a written letter given by the accused wherein certain amount was shown to be due against him as per the ledger of the firm. He admitted that he had not filed the same alongwith his complaint. These admissions of the complainant raise a doubt in the mind of the Court about the claim of the complainant against the accused.

The complainant further in his cross examination accepted that he was an income tax assessee but cannot say whether the amount of Rs. 26 lacs stated to be due towards the firm at the time of dissolution was shown in his income tax return. He stated that he can file the same but did 18 not file any of his income tax returns ever during the complete trial of the case. No such income tax return is on record. The complainant stated that he can confirm the aforesaid fact only after verifying the same from his C.A. No prudent man can be expected to forget whether a large sum of Rs. 26 lacs finds mention in his income tax return particularly in the circumstances where the incident of alleged dissolution of firm and settlement of accounts was merely one and a half year prior to his cross examination and the same amount was throughout in dispute thereafter. Such circumstances of the case continue to create doubts in the mind of the Court regarding the claim of the complainant against the accused.

31. Thus, the whole aforesaid discussion raises substantial doubts in the mind of the Court on the case of the complainant to dissolve the partnership firm, entering into a settlement of accounts with the accused and the consequent issuance of impugned cheque by the accused to discharge his legal liability /debt. In view thereof, Ingredient no.1 and 2 stand decided in the favour of accused and against the complainant. INGREDIENT NO. 3 AND 4:

32. As regard the return of cheque returned unpaid for reasons insufficient funds is well established from the cheque return memo placed on record Exhibit CW­1/B. Section 146 of the Act reads as under:

"The Court shall in respect of every proceeding under this chapter, on production of bank's slip or memo 19 having thereupon the official mark denoting that the cheque has been dishonored, presume fact of dishonor of such cheque unless and until such fact is disproved".

The return of the cheque unpaid on account of insufficient funds has not been disputed by the accused and in view thereof, the dishonor of the cheque stands proved.

33. The receipt of legal notice by the accused is also not in dispute. The non­payment of the cheque amount thereafter within 15 days of the receipt of the legal notice is also not in dispute. Therefore, ingredients no. 3 and 4 stand decided in the favour of the complainant and against the accused.

STANDARD OF PROOF

34. It is the basic principle of criminal law that in order to hold an accused guilty of an offence, all the ingredients of that offence should be established against him beyond reasonable doubt and the burden upon accused is not so onerous and the standard expected of him is that of preponderance of probabilities by moving cogent and viable evidence. The observations of the hon'ble Supreme Case in the case Krishna Janardhan Bhat Vs. Dutta Traya G. Hegde (2008) 4 SCC 54 are important:

" the standard of proof for accused is preponderance 20 of probabilities. The standard of proof on the part of an accused and that of the prosecution in a criminal case is different. Whereas prosecution must prove the guilt of an accused beyond all unreasonable doubt, the standard of proof as to prove a defence on part of the accused is Preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials brought on records by the parties but also by reference to circumstances upon which he relies".

This settled position finds mention in the Rangappa Vs. Sri Mohan 2010 AIAR (CRI) 584 in para 14 in the following words:

"...it is a settled position that when an accused has to rebut the presumption u/s 139, the standard of doing so is that of preponderance of probabilities...".

Similar observations have been made by the Hon'ble Supreme Court in K Prakashan Vs. P K Surenderan (2008) 1 SCC 258, Kamal S Vs. Vidhyadharan M J (2007) 5 SCC 264 and M S Narayana Menon Vs. State of Kerala AIR 2006 SC 3366.

FINAL ORDER:

35. In the thoughtful opinion of this Court, the overall circumstances of 21 the case and the above discussion into law and facts goes on to conclusion that the case of complainant has material deficiencies and it falls short of the required standard of proof of beyond reasonable doubt. At the same time, the accused has raised a number of doubts in the mind of Court on the standard of preponderance of probabilities. Hence, the accused is acquitted.

Announced in Open Court On 23rd June, 2011 (ARVIND BANSAL) METROPOLITAN MAGISTRATE:3 PATIALA HOUSE COURTS, NEW DELHI.

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