Delhi District Court
12. In Rangappa vs . Mohan, Air 2010 Sc 1898, It Was Observed ... on 16 January, 2013
IN THE COURT OF CIVIL JUDGEI/ METROPOLITAN MAGISTRATE, NEW DELHI
DISTRICT, NEW DELHI
Presided By : Sh. Apoorv Sarvaria, DJS
C.C. No: 550/11
Unique Case ID No. 02403R0723222006
JVD Chits Pvt. Ltd.
Through
Sh. Sushil Kumar Garg
1089/44 DDA Flats
Kalkaji, New Delhi.
.....Complainant
Versus
Sh. Sanjay Dhaka
Dhaka Auto Service Station
140 A5/9 J.N.U. Road
Vasant Kunj, New Delhi.
.....Accused
COMPLAINT UNDER SECTION 138 OF THE NEGOTIABLE
INSTRUMENTS ACT, 1881
DATE OF INSTITUTION : 21.11.2006
DATE OF ARGUMENTS :05.12.2012
DATE OF DECISION :16.01.2013
JUDGMENT
Brief Facts
1. The facts leading to filing the present complaint under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "NI Act") are that the complainant JVD Chits Private Limited is stated to be a chit company doing the business from the address at 1089/44 DDA flats, Kalkaji, New Delhi and Shri Sushil Garg is the Director and authorised representative of the complainant company. CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 1 of 15
2. It is further stated that the accused Shri Sanjay Dhaka approached the complainant through some common friend and wanted to become the member of the complainant chit company. The accused was told about the rules and regulations of the complainant company and he was also told about the procedure of the complainant company. It is further stated that the accused agreed to the same & signed the required documents and became the member of the complainant chit company.
3. It is further stated in the complaint that accused was in the need of money and being the member of the chit, asked the complainant for a loan. The complainant agreed to the request of the accused and asked him to fulfill some formalities and as per the policy, he was asked to bring a guarantor. The loan was sanctioned to the accused and the accused agreed to pay the same in instalments. He also gave certain cheques in advance and assured the complainant that they will be encashed in time. However, the accused did not pay the amount in time. Thereafter, the complainant approached the guarantor and the accused came to the office of the complainant and settled the account as full and final settlement and in discharge of his liability, he gave a cheque of Rs. 70,000/ bearing number 242969 dated 25th September 2006 of Andhra Bank, Vasant Kunj, New Delhi.
4. The complainant presented the said cheque in its bank. However, the cheque was returned dishonoured due to the reasons "Payment Stopped by Drawer" and the complainant came to know about this fact on 6th October 2006 vide return memo dated 6th October 2006. Legal notice dated 17th October 2006 was given by the complainant to the accused through courier on 19th October 2006 as well as through UPC on 28th October 2006. It is further stated in the complaint that despite the service of the legal notice, the accused did not make the payment of the cheque amount within the time stipulated in the Negotiable Instruments Act and hence, the CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 2 of 15 accused had committed the offence under Section 138 of the NI act. Proceedings before Court
5. The present complaint was filed on 21st November 2006. The learned Predecessor took cognizance and summoned the accused. The accused entered appearance and notice of accusation was framed against him on 18th September 2007 to which he pleaded not guilty and claimed trial.
6. In its evidence, the complainant produced Shri Sushil Garg, Director of the complainant company who tendered his evidence by way of affidavit Ex. CW1/A and relied on documents Ex. CW1/A to Ex. CW 1/G. Thereafter, CW1 Sh. Sushil Garg was crossexamined. The complainant also produced Shri Pankaj Kumar, the accountant of the complainant company as CW2, who tendered his evidence by way of affidavit Ex.CW2/B and furnished the statement of accounts Ex.CW2/A. Thereafter, CW2 was crossexamined after which the complainant closed its evidence.
7. In the examination conducted under Section 313 of Cr.P.C., the accused Shri Sanjay Dhaka stated that it is correct that he was a member of the complainant company. He also stated that he knew that he was to share the profit and he could pick up chit or take money in any month. He also stated that he knew that he was required to pay Rs. 5000/ for 20 months. He also admitted that he had picked up a chit of Rs. 1 lakhs and received Rs. 65,000 and he had picked up the money at a loss of Rs. 35,000. He also stated that the cheque Ex. CW1/B was issued as a security with an understanding that it would be returned upon the payment made for the relevant month. He also stated that he had paid the money and the cheque was issued as a security cheque. He also admitted that he had received the legal demand notice Ex. CW1/D and he had also replied to the said legal notice. He also stated that he had CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 3 of 15 paid the dues of the complainant and the cheque Ex.CW1/B was a security cheque which had been misused by the complainant. He also stated that the cheque Ex.CW1/B was promised to be returned back upon payment of cash and he had given a series of cheques to the complainant which were to be used on a monthly basis in case he did not make the cash payment.
8. On 25th August 2012, the accused submitted that he does not wish to lead any evidence in his defence and the defence evidence was closed. Arguments of Advocates
9. Shri Rama Shankar, learned Advocate for the complainant submitted that the execution of the cheque Ex.CW1/D bearing number 242969 dated 25 th September 2006 for Rs. 70,000/ is not disputed. Hence, the presumption under Section 139 of the NI Act is raised. He further submitted that the only defence raised by the accused is that the complainant is not a registered chit fund under the Madras Chit Fund Act, 1961 and the complainant had taken 20 cheques from the accused for clearance of the instalments and the cheque of Rs. 70,000/ Ex.CW1/B was one of the said cheques. He also submitted that the accused has admitted that he had not paid regular instalments and once the accused has admitted the payment of loan, he cannot dispute the liability of the cheque in question given for repayment of loan. He also submitted that as per Section 65 of the Contract Act 1872, even if the agreement between the complainant and the accused is assumed to be void, the accused who has received advantage under the said agreement is bound to restore the advantage or make compensation for it to the complainant. Sh. Rama Shankar also relied upon the decisions in P. Arumugam v. P. Velusamy C.R.C No. 402 of 2004, decision dated October 2008 (Madras High Court), SP Singh Chandel v. Utam Singh Thapa, decision dated 17th October 2012 in CS (OS) 1232/2010 CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 4 of 15 (Delhi High Court) and Rangappa v. Sri Mohan AIR 2010 SC 1898.
10. On the other hand, Shri Kamal JS Mann, learned Advocate for the accused submitted that the cheque Ex. CW1/B was given for instalments and there is no averment of chit funds made by the complainant. He further submitted that the complainant has failed to prove beyond reasonable doubt the commission of the offence under Section 138 of the NI Act. He also stated that the complainant had not mentioned either in the legal notice or in the complaint filed before this court that the accused was the member of a chit fund of Rs. 1 lakh. He also stated that the relevant records of the chit fund were not produced by the complainant to prove the legally recoverable debt/liability of the accused. In support of his submission, he relied upon the decisions in Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm (2008) 7 SCC 655, Kalavally v. Parthasarathy 2009 (1) RCR (Criminal) 333 (Madras), MS Narayana Menon @ Mani v. State of Kerala AIR 2006 SC 3366, Krishna Janardhan Bhat v. Dattatraya G. Hegde AIR 2008 SC 1235, Kumar Exports v. Sharma Carpets AIR 2009 SC 1518 and Bharat Barrel and Drum Manufacturing Company v. Amin Chand Pyarelal AIR 1999 SC 1008. Findings
11. This court has heard the submissions of learned Advocates for the complainant as well as the accused and perused the record. The signatures of the accused on the cheque Ex.CW1/B are admitted. Hence, the execution of the cheque by the accused is not disputed. Hence, the presumption under Section 139 of the NI Act is raised.
Nature of presumption raised
12. In Rangappa Vs. Mohan, AIR 2010 SC 1898, it was observed by the Hon'ble Supreme Court as under :
CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 5 of 15
"14. In light of these extracts, we are in agreement with the respondentclaimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/defendant cannot be expected to discharge an unduly high standard or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own. " (emphasis added) CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 6 of 15
13. In view of the abovesaid observations of the Supreme Court in Rangappa, the decision relied upon by the accused in Krishna Janardhan Bhat has been overruled by the Supreme Court in Rangappa. Hence, the said decision in Krishna Janardhan Bhat on the point of nature of presumption raised under Section 139 of the NI Act cannot be relied upon.
14. For rebutting the presumption raised under Section 139 of the NI Act, as can be noted from the observations of the Supreme Court in Rangappa, the accused has to raise a probable defence.
15. The present case deals with dishonour of cheque due to stop payment instructions issued by the accused. The law relating to stop payment instructions in the cases of dishonour of cheques u/s 138 of the NI Act has been laid down by the Hon'ble Supreme Court in MMTC Ltd. and another v M/s Medchl Chemicals and Pharma (P) Ltd. and another AIR 2002 SC 182 as follows: (AIR @ p. 186) "17. Lastly it was submitted that complaint under Section 138 could only be maintained if the cheque was dishonoured for reason of funds being insufficient to honour the cheque or if the amount of the cheque exceeds the amount in the account. It is submitted that as payment of the cheques had been stopped by the drawer one of the ingredient of Section 138 was not fulfilled and thus the complaints were not maintainable.
18. Just such a contention has been negatived by this Court has, in the case of Modi Cements Ltd. v Kuchil Kumar Nandi reported in (1998) 3 SCC 249. It has been held that even though the cheque is dishonoured by reason of 'stop payment' instruction an offence under Section 138 could still be made out. It is held that presumption under Section 139 is attracted in such a case also. The authority shows that even when the cheque is dishonoured by reason of stop payment instructions by virtue of Section 139 the Court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 7 of 15 course this is a rebuttable presumption. The accused can thus show that the "stop payment" instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there was sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused. Thus a Court cannot quash a complaint on this ground". (emphasis added)
16. In accordance with the decision of the Supreme Court in MMTC Ltd., for rebutting the presumption u/s 139 of the NI Act the accused has to show that there were sufficient funds in his account to clear the amount of the cheque at the time of its presentation for encashment at the drawer bank. He is also to show that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheques for encashment.
Whether the accused has been able to rebut the presumption?
17. Admittedly, the accused has not led any evidence in his defence. However, what is now to be seen is that whether from the material available on record or the cross examination of the complainant's witness, the accused has rebutted the said presumption. For determining the same, this court has to analyse the evidence available on record.
18. In his examinationinchief adduced by way of affidavit Ex. CW1/A, CW1 Shri Sushil Garg, who is the Director of the complainant has deposed that the accused being the member of the chit was in need of money and took loan from the complainant CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 8 of 15 and gave a cheque of Rs. 70,000/ Ex.CW1/B. In his crossexamination, CW1 has stated that he knows that to run the chit fund company, the company should be registered under the Madras Chit Fund Act. He further stated that he does not know whether the complainant company is registered under the Madras Chit Fund Act. He also stated that he had not furnished any document to the said effect in court. CW1 Sh. Sushil Garg also stated in his crossexamination that the accused had filled a membership form in the month of April 2005 to become the member of the chit fund. He also stated that the accused had become a member for a single group of Rs. 1 lakh. CW1 Sh. Sushil Garg was confronted with a receipt of cheques issued by the complainant company Ex.CW1/D1 and he admitted that the said receipt was issued and the cheques were duly filled as name, amount and date in favour of the complainant company. He also stated that on some cheques, the accused had not filled the cheque amount and the cheque Ex.CW1/B is one of those cheques whose entry is at ٍSerial No. 7 at point X of the receipt Ex.CW1/D1.
19. Analysing the above crossexamination of CW1 Sh. Sushil Garg, the accused has been able to prove that the cheque Ex.CW1/B was one of those cheques which was received by the complainant company vide receipt Ex.CW1/D1. However, for raising a probable defence that the cheque was not issued in discharge of any debt or liability and and it was issued as security, the accused must also prove that at the time when the cheque instrument was completed on 25th September 2006 (date of the cheque), the accused was not liable to pay Rs. 70,000/ i.e. the cheque amount to the complainant. From the crossexamination of CW1 Sh. Sushil Garg, the accused has not been able to prove that all the cheques mentioned in the receipt Ex. CW1/D1 and more specifically, the date and amount of the cheque Ex. CW1/B was filled at the time of receiving the same by the complainant company from the accused. Therefore, in view of Section 20 of the NI Act, the accused had authorised CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 9 of 15 the complainant to complete the cheque Ex. CW1/B. (See MOJJ Engineering System Ltd. v. A.B. Sugars Ltd. 154 (2008) DLT 579).
Production of statement of accounts of the accused maintained by the complainant: Section 34 of the Evidence Act
20. The complainant has produced another witness CW2 Shri Pankaj Kumar, who is the Accountant of the complainant company who brought the statement of account of the accused Sanjay Dhaka maintained by the complainant Ex. CW2/A. The said statement of account clearly shows that the accused had received Rs. 65,000/ from the complainant and Rs. 5000/ was the commission of the complainant on chits. The said ledger Ex.CW2/A shows that the accused had taken the chit of Rs. 1 lakh for which he had received the payment of Rs. 65,000/ on 30 th August 2005. The said statement further shows that the complainant had charged Rs. 5000 as commission and Rs. 30,000 was credited in the account of the accused as dividend, which was given for successful bid made by the accused in the month of August, 2005. The amount of Rs. 30,000 was, in fact, the loss undertaken to be suffered by the accused for making successful bid and taking loan of Rs. 1 Lac from the chit fund. Therefore, the total amount due from the accused to the complainant was Rs. 1 lac out of which Rs. 26,025 (Rs. 19,000/1 plus Rs. 70252) had been paid back by the accused to the complainant company. Therefore, the accused was liable to pay Rs. 73,975 i.e. more than the cheque amount of Rs. 70,000/.
21. As per Section 34 of the Indian Evidence Act 1872 (hereinafter referred to as "Evidence Act"), entries in books of accounts including those maintained in an electronic form, regularly kept during the course of business, are relevant but such
1. Rs. 5000 credited on 25th April 2005, Rs. 3500 credited on 27th May 2005, Rs. 3500 credited on 28th June 2005, Rs.3500 credited on 27th July 2005 and Rs.3500 credited on 29th August 2005.
2 Rs. 1500 each for bid for months May, June, July and August 2005 plus Rs. 1025 for the month of September 2005. CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 10 of 15
statements shall not alone be sufficient evidence to charge any person with liability.
22. In Gopasunder Sabatho and another v Chunilal and another AIR 1955 Ori 6, it was held that the evidence of a party itself is a substantial compliance with the provisions of Section 34 of the Evidence Act corroborating the entries to fasten the liability. A similar view was taken in Kulamani Mohanty v Industrial Development AIR 2002 Ori 38. It was further held in the case of Kulamani Mohanty that : (@ AIR p.42) "13. ....[i]f the books of accounts produced as the primary evidence and oral evidence is led as corroborative evidence relating to the entries in the books of accounts maintained in the regular course of business, unless the contrary is proved or any doubt is raised through evidence regarding, genuineness of such books of account or any of the entries, then such books of account should be regarded as proved."
23. It was further held in Kulamani Mohanty that when the entries were proved by the official staff from the books of account and when those entries were proved not only without objection but also no evidence was brought on record worth the name to doubt correctness of those entries, there should be no reason to reject such evidence.
24. In the present case, the accused has not lead any evidence to doubt the correctness of the entries in the statement of account of accused Sanjay Dhaka Ex. CW2/A as maintained by the complainant company. Therefore, there is no reason to reject the statement of account Ex. CW2/A. Moreover, in the examination conducted under Section 313 of Cr.P.C., the accused Shri Sanjay Dhaka stated that he was a member of the complainant company and he knew that he was to share the profit and he could pick up chit or take money in any month. He also stated that he knew that he was required to pay Rs. 5000/ for 20 months. He also admitted that he had CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 11 of 15 picked up a chit of Rs. 1 lakh and received Rs. 65,000 and he had picked up the money at a loss of Rs. 35,000.
25. In Joseph Jose v. J. Baby 2002 Cri LJ 4392 (Ker), it has been observed that burden of proof as to cheque has not been issued for legal debt or liability is always on accused. The complainant is not required to adduce number of witnesses and bulk of documentary evidence on the question.
Effect of complainant being unregistered chit fund
26. It is also submitted on behalf of the accused that since the complainant company is not a registered chit fund, the debt owed by the accused is not legally recoverable debt and the accused should be exempted from the liability under Section 138 of the NI Act. In the considered view of this court, there appears to be no substance in the said submission of the accused as the accused has not lead any evidence to show that the complainant was running an unregistered chit fund. For instance, the accused could have produced a witness from the office of the Registrar appointed under the Madras Chit Funds Act, 1961 or any other Act applicable to Delhi for chit funds. Mere suggestion to the complainant witness and nonproduction of any document of registration of the complainant company with the Registrar does not probabilise this defence of the accused, especially when the accused himself had voluntarily become the member of the chit fund.
27. However, even if the accused has proved that the chit fund run by the complainant is not a registered one, in terms of Section 65 of the Contract Act, the accused who has taken the advantage of the chit fund is bound to make compensation to the complainant.
28. Moreover, in similar circumstances, in Iqbal v. Paulraj 1999 (2) MWN (Cr.) 32 (Madras), it was held by the Madras High Court that there was no force in the CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 12 of 15 contention that complaint under Section 138 of NI Act is not maintanable as the complainant had conducted an unauthorised chit. It was further held that based on the fact that the accused had successfully bid in the auction and chit amounts had already been taken, it can safely be concluded that the cheques were issued only for preexisting debt. The facts of the present case are similar to the facts of Iqbal v. Paulraj.
29. The decisions relied upon by the accused in Mallavarapu Kasivisweswara Rao v.
Thadikonda Ramulu Firm, Kalavally v. Parthasarathy , MS Narayana Menon @ Mani v. State of Kerala, Kumar Exports v. Sharma Carpets AIR 2009 SC 1518 and Bharat Barrel and Drum Manufacturing Company v. Amin Chand Pyarelal AIR 1999 SC 1008 are not applicable to the facts of the present case.
30. Therefore, the accused has not been able to rebut the presumption raised under Section 139 of the NI Act and the complainant has been able to prove its case. The accused Sanjay Dhaka is convicted for the offence committed under Section 138 of the NI Act with respect to the cheque of Rs. 70,000/ bearing number 242969 dated 25th September 2006. He shall be heard on the point of sentence on 22.01.2013 at 2 pm. Judgement be uploaded to www.delhidistrictcourts.nic.in.
Announced in the Open Court (Apoorv Sarvaria)
on 16 January, 2013
th
Civil JudgeI/MM, New Delhi District
New Delhi
CC No. 550/11
JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 13 of 15
IN THE COURT OF CIVIL JUDGEI/MM, NEW DELHI DISTRICT, DELHI Presided by : Mr Apoorv Sarvaria, DJS CC. No.550/11 22.01.2013 Present: Sh. Sushil Garg, Director of the complainant company.
Sh. Nitin Joshi, Advocate for convict along with convict Sh. Sanjay Dhaka.
1. The accused Sh. Sanjay Dhaka was convicted for the offence under Section 138 of the Negotiable Instruments Act, 1881 vide Judgment dated 16.01.2013.
2. In support of the case of the convict, the Ld. Advocate has requested for imposition of a lenient punishment on the ground that the convict has been convicted due to a technical reason. Ld. Advocate for the convict has further submitted that the convict has no past malantecedents and no previous conviction. On the other hand, the complainant submits that he should be entitled to double the cheque amount as compensation.
3. Keeping in view the objects of the Negotiable Instruments Act 1881, this Court does not deem it appropriate to extend the benefit of Probation of Offenders Act, 1958 to the convict in the present case.
4. The cheque amount of the present complaint is Rs. 70,000/. The said cheque pertains to the year 2006 and it has been more than six years when the present complaint was filed. In view of the submissions made by the Ld. Advocate for the convict, the objects of the Negotiable Instruments Act, 1881 the fact that the criminal proceedings for the offence of dishonor of cheque under Section 138 NI Act are not to be resorted to merely for the purpose of recovery of the cheque amount, and the judicial discretion available with a Magisterial Court under Section 138 NI Act, the convict Sh. Sanjay Dhaka is hereby sentenced to simple imprisonment for a term of 10 days and is sentenced to pay fine of Rs. 1,30,000/ payable as compensation to the complainant JVD Chits Pvt. Ltd. The direction to pay compensation has been issued in exercise of power under Section 357 (3) of Cr.P.C. In case of default of payment of the compensation, the convict Sh. Sanjay Dhaka shall undergo simple imprisonment of eight months.
5. The Ld. Advocate for the convict has moved an application under Section 389 of Cr.P.C. seeking suspension of sentence and release of convict on bail. The convict is admitted to bail on furnishing a bail bond in the sum of Rs.50,000/ with one surety of like amount. The bail bonds furnished are accepted.
6. The sentence of imprisonment is suspended upto 22.02.2013 or till the filing of CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 14 of 15 appeal whichever is earlier.
7. A copy of this Order as well as the Judgment be given free of cost to the convict. File be consigned to record room.
(Apoorv Sarvaria) Civil JudgeI/MM, New Delhi/22.01.2013 CC No. 550/11 JVD Chits Pvt. Ltd. v. Sanjay Dhaka Page 15 of 15