Himachal Pradesh High Court
____________________________________________________________ vs M/S Spirit And Beverages L on 22 June, 2018
Author: Sandeep Sharma
Bench: Sandeep Sharma
IN THE HIGH COURT OF HIMACHAL PRADESH AT
SHIMLA
.
Cr. Appeal No. 592 of 2017
Reserved on: May 14, 2018
Decided on: June 22, 2018
____________________________________________________________
M/s Mohan Meakin Limited .........Appellant
Versus
M/s Spirit and Beverages L-1 ...Respondent
____________________________________________________________
Coram
Hon'ble Mr. Justice Sandeep Sharma, Judge.
Whether approved for reporting?1 Yes.
____________________________________________________________
For the appellant:
r Mr. K.D. Sood, Senior Advocate with
Mr. Rajnish K. Lal, Advocate.
For the respondent: Mr. Sudhir Thakur, Advocate.
____________________________________________________________
Sandeep Sharma, J.
Instant criminal appeal is directed against judgment dated 18.5.2015, passed by the learned Judicial Magistrate 1st Class, Solan in Criminal Complaint No. 863/3 of 2011/05, whereby complaint under Section 138 of the Negotiable Instruments Act (hereinafter, 'Act') having been filed by the appellant-complainant (hereinafter, 'complainant'), came to be dismissed.
2. Necessary facts, shorn of unnecessary details as emerge from record are that the complainant filed a complaint under Section 138 of the Act, averring therein that the complainant is a Company duly incorporated and Whether reporters of the Local papers are allowed to see the judgment? .
::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 2registered under the Companies Act, 1956 with the Registrar of Companies vide Registration No. 06-00135 dated .
2.10.1934. Complainant further averred that the Board of Directors of the Company in its meeting held on 29.9.1979, passed a Resolution No. 9, resolving therein to execute Power of Attorney in favour of Shri H.N. Handa, Secretary of the Company to perform and execute all the acts, deeds, things and matters with regard to the business of the company. A General Power of Attorney was executed on 25.3.1980 in favour of Shri H.N. Handa, who was further authorized vide clause No. 22 of the General Power of Attorney to delegate such powers from time to time and at any time specifically any of the powers given therein except the power under the said Clause No. 7 to any person from time to time or at any time to enlarge, modify or revoke any such delegation and for the purpose to sign, execute, and/or register for and /or on behalf of the Company any power(s) of attorney. Mr. H.N. Handa, in terms of Clause 22 of the General Power of Attorney, authorized one Shri Sudesh Kumar on behalf of the Company to act on his behalf to prosecute the complaint on behalf of the Company. Complainant further averred that it deals in the business of manufacture and sale of Indian made foreign spirit and beer. It is further averred in the complaint that the respondent-accused (hereinafter, 'accused') also ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 3 deals in liquor trade in the name and style of M/s Spirit and Beverages, holding L-1 licence and had been purchasing .
different brands of liquor from the complainant for the last four-five years. Since accused had to pay a sum of Rs.8,03,248/- to the complainant as per accounts with regard to purchase of liquor, he issued a duly signed cheque No. 361413 dated 26.2.2005 in the sum of Rs.8,03,248/-
drawn on Punjab National Bank, Sector 22-D, Chandigarh of his account No. CC-4 in favour of the complainant, however, fact remains that on presentation, said cheque was returned with the remarks "account closed". After having received memo with regard to aforesaid information furnished by the Bank, complainant sent a registered A.D. notice dated 7.4.2005 on 8.4.2005, which was duly delivered to the accused on 11.4.2005 but despite that he failed to make payment within stipulated period of 15 days, as a consequence of which, complaint under Section 138 of the Act came to be filed.
3. Learned court below, on the basis of evidence led on record by the complainant came to the conclusion that the complainant has failed to prove its case beyond reasonable doubt and accordingly acquitted the accused by extending him benefit of doubt. In the aforesaid background, complainant has approached this Court in the instant ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 4 proceedings, praying therein to allow the complaint filed by it under Section 138 of the Act, after setting aside impugned .
judgment of acquittal recorded by the learned Court below.
4. Mr. K.D. Sood, learned Senior Advocate duly assisted by Mr. Rajnish K. Lal, Advocate, appearing for the complainant, while referring to the impugned judgment passed by the court below, vehemently argued that same is not sustainable in the eye of law as the same is not based upon proper appreciation of evidence as well as law and as such same deserves to be set aside. Mr. Sood, while inviting attention of this Court to the Special Power of Attorney exhibit CW-2/G dated 24.5.2005, vehemently argued that the complainant successfully proved on record that CW-2 Sudesh Kumar, representative of the company was duly authorized by Shri H.N. Handa, Secretary of the Company to represent the complainant-company in the court of law, as such, there was no occasion for the court below to conclude that Sudesh Kumar was not authorized representative of the company to prosecute the case in the court of law on behalf of the company. With a view to substantiate his aforesaid argument, Mr. Sood placed reliance upon M/s. Sri Balaji Agencies Pvt.
Ltd. Goa Vs. M/s Samudra Ropes Pvt. Ltd. 2011(4) Civil Court Cases 515 Bombay and contended that the complaint can be filed through Power of Attorney as such, finding ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 5 returned by the court below qua this aspect of the matter deserves to be quashed and set aside being erroneous and .
contrary to settled law. Mr. Sood, while making this Court to peruse evidence adduced on record by the complainant i.e. exhibits CW-1/A, CW-1/B, CW-1/C, CW-2/D, CW-2/E, CW-
2/F, CW-2/H, CW-2/J, CW-2/L and CW-2/M, strenuously argued that the complainant proved beyond reasonable doubt that the respondent-accused being proprietor of the company, issued cheque amounting to Rs. 8,03,248/- with a view to discharge his liability and same was dishonoured on its presentation to the Bank. He further contended that bare perusal of Exhibit CW-1/A clearly suggests that the cheque in question was presented to the bank, however, same was returned with the remarks "account closed". He further argued that it further stands duly proved on record that the complainant after having received memo from the concerned bank, got issued a legal notice by way of registered A.D. as well as under postal certificate, which was duly delivered to the accused and as such, there was no occasion for the court below to dismiss the complaint. Lastly, Mr. Sood contended that it stands duly proved on record that accused was purchasing liquor from the complainant company and with a view to discharge his liability, he issued the cheque in question. He further stated that the factum with regard to ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 6 issuance of cheque is also not in dispute because accused in his statement under Section 313 CrPC, has admitted the .
factum with regard to issuance of cheque by stating that cheque in question was issued as a security cheque but there is nothing on record to prove that the cheque in question was a security cheque.
5. Mr. Sudhir Thakur, learned counsel representing the accused supported the impugned judgment and contended that there is no illegality or infirmity in the impugned judgment, as such, same deserves to be affirmed.
Mr. Thakur, while referring to exhibit CW-2/G, i.e. Special Power of Attorney executed by Shri H.N. Handa in favour of Sudesh Kumar, contended that there is no document available on record suggestive of the fact that Shri H.N. Handa was Secretary/Director of company and he was authorized to delegate power further to Sudesh Kumar, representative of the complainant, in the present case. Mr. Thakur further contended that there is no resolution placed on record authorizing Shri H.N. Handa to further nominate Shri Sudesh Kumar, to represent the company in the present lis, as such, learned Court below rightly dismissed the complaint on this count. While referring to the statement of CW-2, Sudesh Kumar, Mr. Thakur made a serious attempt to persuade this Court to agree with his contention that the ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 7 cheque in question was a security cheque because, as per statement of CW-2, Sudesh Kumar, account with regard to .
sale and purchase, if any, made by the company of accused was closed in October, 2004, whereas, cheque in question is dated 26.2.2005, which itself creates doubt with regard to correctness of the averments contained in the complaint. Mr. Thakur further contended that as per statement of the representative of the company, cheque was given on 26.2.2004, whereas, it is dated 26.2.2005, which raises doubt with respect to outstanding amount on the date when cheque was issued and CW-2 Sudesh Kumar in his statement has admitted that they dealt with the accused till October, 2004 and as such, there was no occasion for the accused to give cheque, if any, after four months of last dealing. While referring to the observations made by learned Court below in para-24 of the judgment, Mr. Thakur tried to persuade this Court to agree with his contention that bare perusal of the handwriting on the cheque suggests that a blank cheque was issued as a security by the accused but the same has been later on filled in by the complainant that too after the settlement of accounts in the month of October, 2004.
6. I have heard learned counsel representing the parties and have carefully gone through the record made available.
::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 87. Having carefully perused the pleadings and evidence, be it ocular or documentary, led on record, it clearly .
emerges that at the time of filing complaint under the Act, complainant specifically averred that Board of Directors of the Company in its meeting held on 29.9.1979 passed a resolution authorizing Shri H.N. Handa, Secretary of the Company to perform and execute all acts and things with regard to matters of the company, however, the fact remains that no such resolution is placed on record. Similarly, though there is mention with regard to execution of General Power of Attorney on 25.3.1980 in favour of Shri H.N. Handa, who as per Clause 22 of the General Power of Attorney, subsequently authorized Shri Sudesh Kumar, representative of the company to prosecute the complaint on behalf of the company, but same is not placed on record.
8. True it is, that perusal of record of the court below nowhere suggests that copy of resolution dated 29.9.1979 and General Power of Attorney dated 25.3.1980 are/were placed on record but definitely the Special Power of Attorney Exhibit CW-2/G placed on record by the complainant clearly suggests that Shri H.N. Handa, Secretary of the Company drawing power from Clause 22 of the General Power of Attorney executed on 25.3.1980, authorized Sudesh Kumar, to represent the company in the case at hand.
::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 9Careful perusal of contents of Special Power of Attorney clearly reveal that there is specific mention with regard to .
passing of resolution dated 29.9.1979, by Board of Directors and execution of General Power of Attorney dated 25.3.1980, in favour of Shri H.N. Handa, who by way of Special Power of Attorney, further authorized Sudesh Kumar, to represent the company in the complaint.
9. Having carefully perused the contents of the complaint and Special Power of Attorney exhibit CW-2/G, this Court finds considerable force in the arguments of Mr. Sood, learned Senior Advocate that the court below after having noticed omission, if any, on the part of company to place on record resolution and General Power of Attorney, ought to have afforded opportunity to the complainant to rectify its mistake by placing aforesaid documents on record.
10. Hon'ble Apex Court in 2013(3) ACJ 323 SC and 2011(4) CCC 515 Bombay, which has also been otherwise taken note by the court below, have categorically held that complaint can be filed through General Power of Attorney holder, if he is aware of the transaction and an explicit assertion is made about his knowledge of transaction in the complaint. These judgments further lay down that Power of Attorney holder can initiate criminal proceedings on behalf of the principal and not in his own name. Though, Power of ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 10 Attorney can not delegate his functions in the absence of specific clause permitting same in the Power of Attorney but .
Power of Attorney can file, appear and oppose on behalf of the principal in the complaint.
11. It is quite apparent from the aforesaid exposition of law that there is no bar for Power of Attorney of a principal to lodge or prosecute complaint on behalf of the complainant.
High Court of Bombay in 2011 (4) CCC 515 Bombay (supra) has further held that where a company raises plea that there was resolution passed by company authorizing its director to file complaint and no reason has been assigned, why such resolution has not been placed before the court, same is required to be observed/termed to be an inherent defect in the complaint. Hon'ble Apex Court in The Associated Cement Co. Ltd vs Keshvanand, AIR 1998 SC 596 has categorically observed that the complainant must be a corporeal person, who is capable of making physical presence in the court. The corollary is that even if a complaint is made in the name of an incorporeal person (like a company or corporation) it is necessary that a natural person represents such juristic person in the court and it is that natural person who is looked upon, for all practical purposes to be the complainant in the case. Court has further held that it is the duty of the complainant that it must be human being as de ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 11 facto complainant to represent the former in court proceedings, that no magistrate shall insist that the .
particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till end of the proceedings. It has also been held in the aforesaid judgment that it is open for the complainant to seek permission of the court for sending any other person to represent the company in the court, meaning thereby, if initially there was no authority, still the company can, at any time, rectify the defect and at a subsequent stage, company can send a person, who is competent to represent the company.
12. Hon'ble Apex Court in H.S. Co-op., Supply and Mkt. Federation Ltd. v. Jayam Textiles AIR 2014 SC 1926 has held that once specific averment is made by the appellant before the Judicial Magistrate that a General Power of Attorney has been executed which has neither been denied nor disputed by the respondent, court below ought to have granted opportunity to the complainant to place the document containing authorization on record and prove the same in accordance with law. Hon'ble Apex Court has further held that procedural defects and irregularities, which are curable, should not be allowed to defeat substantive rights or to cause injustice. Procedure a hand-maiden to justice, ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 12 should never be made a tool to deny justice or perpetuate injustice by any oppressive or punitive use. The Hon'ble Apex .
Court has held as under:
"6. Having heard learned counsel for the parties and after perusing the material on record, we find that admittedly authorisation by the Board of Directors of the appellant-Federation was not placed before the Courts below. But, we may notice that a specific averment was made by the appellant-Federation before the learned Judicial Magistrate that the said General Power of Attorney has been filed in connected case being CC No. 1409/1995, which has neither been denied nor disputed by the respondents. In any case, in our opinion, if the Courts below were not satisfied, an opportunity ought to have been granted to the appellant-Federation to place the document containing authorisation on record and prove the same in accordance with law. This is so because procedural defects and irregularities, which are curable, should not be allowed to defeat substantive rights or to cause injustice. Procedure, a hand-maiden to justice, should never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use. {See Uday Shankar Triyar Vs. Ram Kalewar Prasad Singh, (2006) 1 SCC 75}.
7. In view of the fact that in spite of arbitration award against the respondents, there was non- payment of amount by the respondents to the appellant-Federation, and also in the light of authorisation contained in Annexure-P/7, we are of the opinion that, in the facts and circumstances of the case, an opportunity should be given to the appellant-Federation to produce and prove the authorisation before the Trial Court, more so, when money involved is public money. We, therefore, set aside the judgments of the Courts below and remit the matters back to the Trial Court with a direction to conduct trial afresh taking into consideration the authorisation placed before us and dispose of the matter as expeditiously as possible in accordance with law."::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 13
13. In the case at hand, complainant has specifically .
averred in the complaint that Board of Directors vide resolution No. 9 passed in its meeting held on 29.9.1979, resolved to execute Power of Attorney in favour of Shri H.N. Handa, authorizing him to act, perform and do all the acts and things, in the matters with regard to business and affairs of the company as detailed in the said General Power of Attorney. It stands further averred in the complaint that General Power of Attorney was executed on 25.3.1980 in favour of Shri H.N. Handa, who further as per Clause 22 of the General Power of Attorney, delegated such power to Shri Sudesh Kumar, who subsequently represented company before the court of law. Apart from above, Special Power of Attorney, which is placed on record as Exhibit CW-2/G, further contains recital with regard to passing of resolution and execution of General Power of Attorney in favour of Shri H.N. Handa. There is a specific averment contained in the complaint that Shri H.N. Handa is Secretary of the Company as such finding returned by the court below to the effect that there is no mention, if any, with regard to Shri H.N. Handa, being Secretary or Director of the company, is contrary to record and can not be allowed to sustain.
::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 1414. Careful perusal of cross-examination conducted upon CW-2, Sudesh Kumar nowhere reveals that suggestion, .
if any, was ever put to him with regard to power of Shri H.N. Handa, who further authorized him to represent the complainant in the court of law, rather, CW-2 has categorically stated in his statement that he has been authorized by Shri H.N. Handa, to represent the company, by way of Special Power of Attorney. No suggestion worth the name has been put to the complainant during his cross-
examination with regard to his authorization, meaning thereby no dispute whatsoever is/was ever raised by the accused with regard to capacity and competence of Sudesh Kumar CW-2 to represent the complainant company.
Otherwise also as has been specifically held by Hon'ble Apex Court, court below having taken note of specific averments contained in the complaint ought to have granted sufficient opportunity to the complainant to place on record authorization as well as General Power of Attorney.
15. At this stage, it may be noticed that during the pendency of the present appeal, application under Section 482 CrPC came to be filed (CrMP No. 1014 of 2017), on behalf of the complainant, seeking therein permission to place on record copy of General Power of Attorney executed by the company in favour of Shri H.N. Handa and Vakalatnama ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 15 signed by H.N. Handa and Sudesh Kumar. Though, accused by way of reply opposed the prayer made in the application .
referred to herein above, but no specific dispute with regard to correctness of General Power of Attorney dated 25.3.1980 has been raised in the reply rather, prayer made in the application has been opposed on the ground that present application has been filed with a view to fill up lacuna with mala fide intention as such, same deserves to be rejected.
Respondent has further stated in the reply that during the course of trial neither resolution No. 9 nor General Power of Attorney dated 25.3.1980 was placed on the case file, as such, application is not maintainable at this stage and deserves to be rejected.
16. Since, there is no specific challenge with regard to correctness and genuineness of the averments contained in the General Power of Attorney sought to be placed on record by complainant, this Court deems it proper to accept the prayer made in the application and accordingly, General Power of Attorney/documents are taken on record, which otherwise court below ought to have called for, after having noticed averments contained in the complaint, as has been held by the Hon'ble Apex Court in judgments supra.
17. Since there is no denial/dispute with regard to passing of resolution No. 9 and valid execution of General ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 16 Power of Attorney dated 25.3.1980 in favour of Shri H.N. Handa, there is no force in the argument of Mr. Sudhir .
Thakur, learned counsel representing the accused that in case this court intends to take note of the documents referred to herein above, opportunity of cross-examination on this aspect of the matter is required to be afforded to the accused.
Had accused disputed correctness and genuineness of General Power of Attorney in the reply filed to the application, aforesaid contention having been made by the learned counsel representing the accused could be considered by the Court
18. In view of detailed discussion made herein above, finding returned by court below that there was no authorization in the name of Sudesh Kumar to represent the company in the court of law, in the instant proceedings, can not be allowed to sustain.
19. There is no denial, if any, with regard to issuance of cheque in question (exhibit CW-2/B) because in the cross-
examination conducted upon CW-2, representative of the complainant, no suggestion has been put that cheque in question was never issued, rather suggestion has been put that cheque in question was issued as a security. Accused in his statement recorded under Section 313 CrPC has also admitted that Sudesh Kumar has been authorized by the ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 17 company through Special Power of Attorney exhibit CW-2/G for prosecuting the complaint in the court.
.
20. Everything apart, accused in his statement recorded under Section 313 CrPC has categorically stated, while answering question No. 8 that he has signed the cheque exhibit CW-2/B. He has further stated that cheque exhibit CW-2/B is a security cheque, which has been misused by the company against him.
21. Similarly, perusal of examination-in-chief and cross-examination conducted upon CW-2 Sudesh Kumar clearly suggests that there were business dealings between complainant company and accused and accused had been purchasing liquor from the complainant company. Specific suggestion has been put to CW-2 that the business of accused with the complainant company had come to an end before 31.3.2004. CW-2 in his cross-examination has categorically stated that lastly liquor was supplied to the accused in the month of October, 2004. If pattern of cross-
examination is examined carefully, it certainly suggests that accused had been purchasing liquor from the complainant company and in this regard, sometimes payment was made through cheque and some times in cash. Accused in his statement recorded under Section 313 CrPC, while answering question No. 2 has specifically admitted that he had some ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 18 business relations with the complainant company and he had purchased different brands of liquor amounting to .
Rs.8,03,248/- from the complainant company. While answering aforesaid question, accused has stated that he had paid entire amount to the complainant for the entire liquor purchased. Though the statement recorded under Section 313 CrPC can not be read in evidence, but if same is perused in conjunction/juxtaposing cross-examination conducted upon CW-2, representative of the complainant company, it can be safely concluded that there were business dealings inter se complainant and accused and money was transacted inter se them on account of sale-purchase of liquor.
22. As has been noticed herein above, there is no dispute with regard to issuance of cheque rather, defence which has been taken by accused is that cheque in question was a security cheque, and same has been misused but this Court taking note of material available on record finds no force in the aforesaid defence taken by the accused. No doubt, CW-2 in his cross-examination has stated that representative of the accused had presented cheque in question in the Accounts Department on 26.2.2004, but that admission, if any, on the part of CW-2 can not be a basis to conclude that cheque in question was issued as a security.
Perusal of cheque, exhibit CW-2/B suggests that it is dated ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 19 26.2.2005, but issuance of post-dated cheque is well recognized mode of payment and presumption of legally .
enforceable debt or liability in favour of drawer of cheque.
Reliance is placed upon judgment of Hon'ble Apex Court in Rangappa v. Sri Mohan, (2010) 11 SCC 441, wherein it has been held as under:
"21 Specifically in relation to the nature of the presumption contemplated by Section 139 of the Act, it was observed;
"45. We are not oblivious of the fact that the said provision has been inserted to regulate the growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters and to safeguard the faith of the creditor in the drawer of the cheque which is essential to the economic life of a developing country like India. This however, shall not mean that the courts shall put a blind eye to the ground realities. Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have been rebutted. Other important principles of legal jurisprudence, namely, presumption of innocence as a human right and the doctrine of reverse burden introduced by Section 139 should be delicately balanced. Such balancing acts, indisputably would largely depend upon the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same." (emphasis supplied)
22. With respect to the decision cited above, counsel appearing for the respondent-claimant has submitted that the observations to the effect that the Rs.existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act' and that Rs.it merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability' [See Para. 30 in Krishna Janardhan Bhat (supra)] ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 20 are in conflict with the statutory provisions as well as an established line of precedents of this Court. It will thus be necessary to examine some of the extracts cited by the .
respondent-claimant. For instance, in Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16, it was held (Ruma Pal, J. at Paras. 22-23):
"22. Because both Sections 138 and 139 require that the Court Rs.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 the raising of 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 (...).
Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court may presume a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable probability of the non-existence of the presumed fact.
23. In other words, provided the facts required to form the basis of a presumption of law exists, the discretion is left with the Court to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, 'after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.' ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 21 Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either .
believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the prudent man." (emphasis supplied)"
23. Though there appears to be a clerical mistake while recording statement of CW-2 and it appears that it has been wrongly mentioned 26.2.2004 in the cross-examination of CW-2, but otherwise, bare perusal of complaint suggests that in para-3, it has been specifically stated that the accused issued cheque No. 361413 dated 26.2.2005, duly signed by him, in favour of the complainant and there is no mention, if any, with regard to acceptance or delivery of cheque on 26.2.2004. Another argument of the learned counsel representing the accused that as per statement made by CW-
2 in his cross-examination, that account of accused was closed in October, 2004, as such, there was no occasion for the accused to issue cheque dated 26.2.2005, is also not tenable because careful perusal of cross-examination conducted upon CW-2 suggests that he specifically denied the suggestion put to him that business of accused had closed on 31.3.2004. This witness has stated in his cross-
examination that last consignment was sent to the accused in ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 22 October, 2004, as such, it can not be concluded that the account was closed on 31.3.2004.
.
24. No doubt, in the case at hand, no statement of accounts, save and except exhibit CW-1/C has been produced on record by the complainant but that may not be sufficient to conclude that the accused was not able to prove that no amount was outstanding against the accused. In the case at hand, accused got his bank account closed on 27.5.2004 i.e. much prior to issuance of cheque exhibit CW-
2/B. In the case at hand, as clearly emerges from cross-
examination conducted upon CW-2, which is further substantiated by admission made by accused in his statement under Section 313 CrPC that an amount of Rs.
8,03,248/- was payable towards purchase of liquor. Since accused in his statement under Section 313 CrPC, while admitting that amount was payable, claimed that entire amount stands paid, accused ought to have placed on record statement of accounts to show that amount being claimed through cheque in question stands already remitted in the bank account of complainant company.
25. Otherwise also, if version put forth by CW-2 in his cross-examination that last consignment was given to accused in the month of October, 2004, is taken to be correct, it is not understood how cheque issued on 26.2.2005 ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 23 could be termed to be doubtful, as has been concluded by the court below. Since parties were in business for quite .
considerable time and accused had been taking liquor from the company, it can be safely presumed that money qua purchases, if any, made by accused was paid after some interval, sometimes in cash and sometimes by way of cheque, as has been suggested to CW-2 in his cross-examination.
Though in the instant case, respondent-accused has taken a stand that the cheque in question was issued as a security but no specific evidence has been led on record to prove aforesaid factum, if any. It has been repeatedly held that once issuance of cheque and signatures thereupon are admitted, presumption of legally enforceable debt in favour of the drawer of the cheque arises and it is for the accused to rebut said presumption. True it is, accused need not adduce his own evidence and he can rely upon the material submitted by the complainant but mere statement of accused may not be sufficient to rebut presumption that he had issued cheque, rather, he is required to adduce evidence.
26. Hon'ble Apex Court in Hiten P. Dalal vs Bratindranath Banerjee, 2001(1) Apex Court Journal 617 (SC), has held that although by reason of Sections 138 and 139 of the Act, presumption of law as distinguished from presumption of fact is drawn, the Court has no other ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 24 option but to draw the same in every case where the factual basis of raising the presumption is established. 'Presumptions .
are rules of evidence and do not conflict with the presumption of innocence, because by the latter, all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact. In other words, provided the facts required to form the basis of a presumption of law exist, no discretion is left with the court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, after considering the matters before it, the court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists."
27. It is ample clear from the aforesaid exposition of law that presumption of law in fact can be rebutted by accused by adducing evidence showing the reasonable possibility of the non-existence of the presumed fact.
28. Similarly, it is true that rebuttal does not have to be conclusively established but such evidence must be ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 25 adduced before the Court in support of defence that Court must either believe the defence to exist or consider its .
existence to be reasonably probable, the standard of reasonability being that of the 'prudent man'.
29. However, in the case at hand, respondent-
accused has not been able to discharge the burden that cheque was issued as a security and not towards lawful discharge of liability or any other reasons on account of some business transaction or the cheque was obtained unlawfully.
30. At the cost of repetition, it is observed that no doubt, accused can rely upon the material submitted by complainant in order to raise his defence and in some cases, accused may not need to adduce the evidence of his/her own.
However, if the accused/drawer of a cheque in question neither raises a probable defence nor able to contest existence of a legally enforceable debt or liability, obviously statutory presumption under Section 139 of the NI Act regarding commission of the offence comes into play.
31. Reliance is placed upon judgment rendered by Hon'ble Apex Court in M/s. Laxmi Dyechem v. State of Gujarat, 2013(1) RCR (Criminal), wherein it has been held as under:
::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 26"23. Further, a three judge Bench of this Court in the matter of Rangappa vs. Sri Mohan [3] held that Section 139 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 the strong criminal remedy in relation to the dishonour of the cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. The Court however, further observed that it must be remembered that the offence made punishable by Section 138can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose money 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 defendant accused cannot be expected to discharge an unduly high standard of proof". The Court further observed that 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 all preponderance of probabilities.
24. Therefore, if the accused is able to establish a probable defence which creates doubt about the existence of a legally enforceable debt or liability, the prosecution can fail. The accused can rely on the materials submitted by the complainant in order to raise such a defence and it is inconceivable that in some cases the accused may not need to adduce the evidence of his/her own. If however, the accused/drawer of a cheque in question neither raises a probable defence nor able to contest existence of a legally enforceable debt or liability, obviously statutory presumption under Section 139 of the NI Act regarding commission of the offence comes into play if the same is not rebutted with regard to the materials submitted by the complainant.
25. It is no doubt true that the dishonour of cheques in order to qualify for prosecution under Section 138 of the NI Act precedes a statutory notice where the drawer is called upon by allowing him to avail the opportunity to arrange the payment of the amount covered by the cheque and it is only when the drawer despite the ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 27 receipt of such a notice and despite the opportunity to make the payment within the time stipulated under the statute does not pay the amount, that the said default would be considered a .
dishonour constituting an offence, hence punishable. But even in such cases, the question whether or not there was lawfully recoverable debt or liability for discharge whereof the cheque was issued, would be a matter that the trial court will have to examine having regard to the evidence adduced before it keeping in view the statutory presumption that unless rebutted, the cheque is presumed to have been issued for a valid consideration. In view of this the responsibility of the trial judge while issuing summons to conduct the trial in matters where there has been instruction to stop payment despite sufficiency of funds and whether the same would be a sufficient ground to proceed in the matter, would be extremely heavy."
32. Reliance is also placed on M.S. Narayana Menon v. State of Kerala, (2006) 6 SCC 39, wherein it has been held as under:
"26. In view of the said error of record, the findings of the High Court to the effect that the Appellant had not been able to substantiate his contention as regard the correctness of the accounts of Exhibit P-10 series must be rejected.
27. In view the aforementioned backdrop of events, the questions of law which had been raised before us will have to be considered. Before, we advert to the said questions, we may notice the provisions of Sections 118(a) and 139 of the Act which read as under:
"118. Presumptions as to negotiable instruments - Until the contrary is proved, the following presumptions shall be made:
(a) of consideration - that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 28 accepted, indorsed, negotiated or transferred for consideration."
"139. Presumption in favour of holder 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."
Presumptions both under Sections 118(a) and 139 of the Act are rebuttable in nature.
28. What would be the effect of the expressions 'May Presume', 'Shall Presume' and 'Conclusive Proof' has been considered by this Court in Union of India (UOI) v. Pramod Gupta (D) by L.Rs. and Ors., [(2005) 12 SCC 1] in the following terms:
" It is true that the legislature used two different phraseologies "shall be presumed" and "may be presumed" in Section 42 of the Punjab Land Revenue Act and furthermore although provided for the mode and manner of rebuttal of such presumption as regards the right to mines and minerals said to be vested in the Government vis- `- vis the absence thereof in relation to the lands presumed to be retained by the landowners but the same would not mean that the words "shall presume" would be conclusive. The meaning of the expressions "may presume" and "shall presume"
have been explained in Section 4 of the Evidence Act, 1872, from a perusal whereof it would be evident that whenever it is directed that the court shall presume a fact it shall regard such fact as proved unless disproved. In terms of the said provision, thus, the expression "shall presume"
cannot be held to be synonymous with "conclusive proof" "
29. In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words 'proved' and 'disproved' have been defined in Section 3 of the Evidence Act (the interpretation clause) to mean: -
"Proved" .-- A fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 29 probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.
.
"Disproved".-- A fact is said to be disproved when, after considering the matters before it the Court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it does not exist."
30. Applying the said definitions of 'proved' or 'disproved' to 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 non-existence of the consideration so probable that a prudent man ought, 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.
33. It is quite apparent from the aforesaid exposition of law that accused can raise probable defence for rebutting presumption in favour of holder of a cheque but for that purpose, burden is upon the accused for proving non-
existence of consideration, which can be direct or by bringing on record preponderance of probabilities by referring to the circumstances, upon which he relies. In such an event, complainant is entitled to rely upon law and evidence lead on record including that of complainant but in case, accused fails to discharge initial onus of proof by showing non-
existence of consideration, holder of cheque would invariably ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 30 be held entitled to benefit of presumption arising under Section 118-A. Though, court can not insist upon accused to .
disprove existence of consideration by leading direct evidence of existence because negative existence is neither possible nor contemplated and even if led, is to be seen with a doubt, but accused is obliged to adduce evidence showing reasonable possibility of non-existence of the presumed fact that may be either by way of defence evidence or by relying upon material or evidence led on record by complainant.
34. Question, whether post-dated cheque was for "discharge of debt or liability' depends upon the nature of transaction. If on the date of cheque, liability or debt exists or the amount has become legally enforceable, Section 138 is attracted and not otherwise.
35. Reliance is also placed upon Goaplast (P) Ltd. v.
Chico Ursula D'Souza, (2003) 3 SCC 232, wherein it has been held as under:
"4. The learned counsel for the appellant has submitted that mere writing of letter to the Bank stopping payment of the post- dated cheques does not take the case out of the purview of the Act. He has invited our attention to the object behind the provision contained in Chapter XVII of the Act. For appreciating the issue involved in the present case, it is necessary to refer to the object behind introduction of Chapter XVII containing Sections 138 to 142. This Chapter was introduced in the Act by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (Acts 66 ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 31 of 1998) with the object of inculcating faith in the efficacy of banking operations and giving credibility to negotiable instruments in business transactions and in order to promote .
efficacy of banking operations. With the policy of liberalisation adopted by the country which brought about increase in international trade and commerce, it became necessary to inculcate faith in banking. World trade is carried through banking operations rather than cash transactions. The amendment was intended to create an atmosphere of faith and reliance on banking system. Therefore, while considering the question of applicability of Section 138 of the Act to a situation presented by the facts of the present case, it is necessary to keep the objects of the legislation in mind. If a party is allowed to use a cheque as a mode of deferred payment and the payee of the cheque on the faith that he will get his payment on the due date accepts such deferred payment by way of cheque, he should not normally suffer on account of non payment. The faith, which the legislature has desired that such instruments should inspire in commercial transactions would be completely lost if parties are as a matter of routine allowed to interdict payment by issuing instruction to banks to stop payment of cheques. In today's world where use of cash in day to day life is almost getting extinct and people are using negotiable instruments in commercial transactions and plastic money for their daily needs as consumers, it is all the more necessary that people's faith in such instruments should be strengthened rather than weakened. Provisions contained in Sections 138 to 142 of the Act are intended to discourage people from not honouring their commitments by way of payment through cheques. It is desirable that the court should ban in favour of an interpretation which serves the object of the statute. The penal provisions contained in Sections 138 to 142 of the Act are intended to ensure that obligations undertaken by issuing cheques as a mode of payment are honoured. A post-dated cheque will lose its credibility and accepatibility if its payment can be stopped routinely. A cheque is a well recognized mode of payment and post-dated cheques are often used in various transactions in daily life. The purpose of a post-dated cheque is to provide some ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 32 accommodation to the drawer of the cheque. Therefore, it is all the more necessary that the drawer of the cheque should not be allowed to abuse the accommodation given to him by a creditor by .
way of acceptance of post-dated cheque. If stoppage of payment of a post-dated cheque is permitted to take the case out of the purview of Section 138 of the Act, it will amount to allowing the party to take advantage of his own wrong.
6. In the present case the issue is very different. The issue is regarding payment of a post-dated cheque being countermanded before the date mentioned on the face of the cheque. For purpose of considering the issue, it is relevant to see Section 139 of the Act which creates a presumption in favour of the holder of a cheque. The said Section provides that "it shall be presumed that, 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". Thus it has to be presumed that a cheque is issued in discharge of any debt or other liability. The presumption can be rebutted by adducing evidence and the burden of proof is on the person who wants to rebut the presumption. This presumption coupled with the object of Chapter XVII of the Act which is to promote the efficacy of banking operation and to ensure credibility in business transactions through banks persuades us to take a view that by countermanding payment of post- dated cheque, a party should not be allowed to get away from the penal provision of Section 138 of the Act. A contrary view would render Section 138 a dead letter and will provide a handle to persons trying to avoid payment under legal obligations undertaken by them through their own acts which in other words can be said to be taking advantage of one's own wrong. If we hold otherwise, by giving instructions to banks to stop payment of a cheque after issuing the same against a debt or liability, a drawer will easily avoid penal consequences under Section 138. Once a cheque is issued by a drawer, a presumption under Section 139 must follow and merely because the drawer issued notice to the drawee or to the bank for stoppage of payment it will not preclude an action under Section 138 of the Act by the drawee or the holder of the cheque in due course. This ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 33 was the view taken by this Court in Modi Cements Ltd. vs. Kuchil Kumar Nandi [1998 (3) SCC 249]. On same facts is the decision of this Court in Ashok Yeshwant Badave vs. Surendra Madhavrao .
Nighojakar and another [2001 (3) SCC 726]. The decision in Modi's case overruled an earlier decision of this Court in Electronics Trade & Technology Development Corpon. Ltd. vs. Indian Technologists & Engineers [AIR 1996 SC 2339] which had taken a contrary view. We are in respectful agreement with the view taken in Modi's case. The said view is in consonance with the object of the legislation. On the faith of payment by way of a post-
dated cheque, the payee alters his position by accepting the cheque. If stoppage of payment before the due date of the cheque is allowed to take the transaction out of the purview of Section 138 of the Act, it will shake the confidence which a cheque is otherwise intended to inspire regarding payment being available on the due date."
36. This court, having carefully perused the evidence adduced on record, especially statement of CW-2 has no hesitation to conclude that cheque in question was issued by accused towards discharge of his legally enforceable liability.
Complainant has successfully proved on record that after having received memo from the bank, he took all necessary steps as envisaged under Section 138 of the Act before filing of the complaint. CW-1, Bank official has categorically admitted the factum with regard to presentation of cheque and issuance of copy of memo and copy of cheque, exhibits CW-1/A and CW-1/B.
37. Similarly, complainant has successfully proved on record that prior to institution of complaint, he had issued ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 34 legal notice by way of registered A.D. exhibits CW-2/E, CW-
2/F and CW-2/H, CW-2/J, CW-2/L and CW-2/M. Perusal of .
CW-2/L clearly suggests that accused refused to receive the legal notice, meaning thereby that he was aware of contents of the legal notice since despite notice, he failed to pay amount, as such, complainant was well within its right to initiate proceedings under Section 138 of the Act.
38. As has been noticed above, respondent-accused has taken defence that he had issued cheque as security but his mere statement may not be sufficient to rebut the presumption of issuance of cheque, rather, respondent-
accused is/was either expected to lead positive evidence in this regard or could rely upon the material submitted by complainant but, in the case at hand, neither the respondent-accused has been able to lead specific evidence to prove his defence that cheque in question was issued as a security nor he has been able to show from the material led on record by the complainant that cheque in question was issued as a security and not towards lawful discharge of legally enforceable liability.
39. In this regard, reliance is placed upon judgment of Hon'ble Apex Court in Sampelly Satyanarayana Rao v.
Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458, has held as under:
::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 35"9. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways (supra) with .
reference to the explanation to Section 138 of the Act and the expression "for discharge of any debt or other liability"
occurring in Section 138 of the Act. We are of the view that the question whether a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise.
10. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques.
Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.
11. The judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on account of dishonour of cheque issued was not by itself at par with criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of cheque issued for discharge of later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque there was a ::: Downloaded on - 29/06/2018 22:59:19 :::HCHP 36 debt/liability in presenti in terms of the loan agreement, as against the case of Indus Airways (supra) where the purchase order had been cancelled and cheque issued .
towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as advance for the purchase order which was cancelled. Keeping in mind this fine but real distinction, the said judgment cannot be applied to a case of present nature where the cheque was for repayment of loan installment which had fallen due though such deposit of cheques towards repayment of installments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of the cheque. .
12. The Crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court.
17. In Rangappa versus Sri Mohan[9], this Court held that once issuance of a cheque and signature thereon are admitted, presumption of a legally enforceable debt in favour of the holder of the cheque arises. It is for the accused to rebut the said presumption, though accused need not adduce his own evidence and can rely upon the material submitted by the complainant. However, mere statement of the accused may not be sufficient to rebut the said ::: Downloaded on - 29/06/2018 22:59:20 :::HCHP 37 presumption. A post dated cheque is a well recognized mode of payment."
.
40. Hon'ble Apex Court in ICDS LTD v. Beena Shabeer, (2002) 6 SCC 426 has held that security cheques would fall within the purview of Section 138 of the Act and a person can not escape his liability. When there is existing liability on the date of presentation of cheque and security
41.
r to cheques issued are dishonoured, accused shall be liable under Section 138 of the Act.
In the case referred to herein above, High Court of Kerala held that when a cheque was issued as a security, no complaint will lie under Section 138 of the Act since cheque issued can not be said to be for the purpose of discharge of any debt or liability. While arriving at aforesaid conclusion, High Court of Kerala recorded that reading of the above Section would make it clear that issuance of a cheque must be for payment of amount of money from out of the account.
In the case of a guarantor or surety, even if a cheque is issued, that cannot be said to be for immediate payment of money. Section 138 of the Act further says that issuance of cheque to another person is towards discharge, in whole or in part of any debt or other liability.
Hon'ble Apex Court, while disagreeing with the aforesaid view taken by Kerala High Court held that from a ::: Downloaded on - 29/06/2018 22:59:20 :::HCHP 38 bare reading of provisions contained in Section 138 of the Act, there remains no manner of doubt that for whatever .
reason it may be, liability under this provision can not be avoided in the event same stands returned by the banker unpaid. Hon'ble Apex Court, further held that the legislature has been careful enough to record not only "discharge in whole or in part of any debt" but has included the expression, "other liability" as well. Hon'ble Apex Court has held as under:
"9. As noticed hereinbefore, the principal reason for quashing of the proceeding as also the complaint by the High Court was by reason of the fact that Section 138 of the Act provides for issuance of a cheque to another person towards the discharge in whole or in part of any debt or liability and on the factual context, the High Court came to a conclusion that issuance of the cheque cannot be co-related for the purpose of discharging any debt or liability and as such complaint under Section 138 cannot be maintainable.
10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the Section stands with the words "Where any cheque". The above noted three words are of extreme significance, in particular, by reason of the user of the word "any" the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment.
11. The issue as regards the co-extensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any ::: Downloaded on - 29/06/2018 22:59:20 :::HCHP 39 discussion therein. The language of the Statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued .
in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act: 'Any cheque' and 'other liability' are the two key expressions which stands as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. Any contra interpretation would defeat the intent of the legislature. The High Court, it seems, got carried away by the issue of guarantee and guarantor's liability and thus has overlooked the true intent and purport of Section 138 of the Act. The judgments recorded in the order of the High Court do not have any relevance in the contextual facts and the same thus does not lend any assistance to the contentions raised by the respondents."
42. Mr. Sudhir Thakur, learned counsel representing the respondent-accused, while placing reliance upon the judgment rendered by Hon'ble Apex Court in M/S Indus Airways Pvt. Ltd. and Ors. v. M/S Magnum Aviation Pvt.
Ltd. and Anr. Criminal Appeal No. 830 of 2014, decided on 7.4.2014, argued that on the date of issuance of cheque dated 26.2.2005, there was no transaction between the parties and admittedly there was no debt or other liability existing on that date and as such, cheque issued as security can not be deemed to have been issued in discharge of an existing debt or liability. In M/S Indus Airways Pvt. Ltd.
(supra), question before the Hon'ble Apex Court was whether post-dated cheques issued as an advance payment in respect of purchase orders could be considered in discharge of legally enforceable debt or other liability and, if so, whether the dishonour of such cheques amounts to offence under Section ::: Downloaded on - 29/06/2018 22:59:20 :::HCHP 40 138 of the Act. Appellants before the Hon'ble Apex Court were purchasers, who had placed purchase order and issued .
post-dated cheques in favour of respondents as an advance payment. One of the terms and conditions of the contract was that the entire payment would be given to the supplier in advance. The supplier claimed that the advance payment was made by the purchasers as it had to procure the parts from aboard. The cheques were dishonoured when they were presented on the ground that purchasers had stopped payment and thereafter purchasers cancelled the purchase order requesting for return of cheques. Respondents/ suppliers later on filed complaint under Section 138 of the Act, after sending demand notice. Hon'ble Apex Court, while setting aside the judgment of Delhi High Court, observed that it failed to keep in mind fine distinction between civil liability and criminal liability under Section 138 of the Act. It would be profitable to take into account following paras of the judgment (supra):
"19. The above reasoning of the Delhi High Court is clearly flawed inasmuch as it failed to keep in mind the fine distinction between civil liability and criminal liability under Section 138 of the N.I. Act. If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of ::: Downloaded on - 29/06/2018 22:59:20 :::HCHP 41 drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be considered as subsisting .
liability and dishonour of such cheque amounts to an offence under Section 138 of the N.I. Act. The Delhi High Court has traveled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. In what we have discussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability."
43. It is amply clear from the aforesaid exposition of law that Hon'ble Apex Court, while disagreeing with the judgment of High Court, categorically observed that if cheque is issued as an advance payment for purchase of goods and for any reason, purchase order is not carried to its logical conclusion, either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability.
44. Aforesaid judgment rendered by Hon'ble Apex Court is not applicable in the facts of present case, wherein admittedly, it is none of the case of the accused that he had issued cheque as an advance payment for purchase of liquor, rather, it is admitted case of the accused that he had been ::: Downloaded on - 29/06/2018 22:59:20 :::HCHP 42 purchasing liquor from the complainant, sometimes against cash payment and sometimes against cheque.
.
45. In M/S Indus Airways (supra), Hon'ble Apex Court dismissed the complaint on the ground that there was no existing liability since contract had been terminated on the date of presentation of cheque for encashment and there was no existing, ascertained or liquidated liability or debt, rather, cheques were given as advance towards sale consideration and not for realization of any certain damage that may arise on account of wrongful termination of purchase order by the purchaser.
46. However, in the case at hand, liability or debt has arisen on account of sale of liquor made by complainant to the accused and cheque was issued purportedly for the payment to be made by accused on account of liquor purchased by him and as such, decision rendered by Hon'ble Apex Court in M/S Indus Airways (supra) can not be mechanically applied to the present case
47. Having applied ratio of the aforesaid exposition of law laid down by Hon'ble Apex Court from time to time, to the facts of the present case, this Court is of the definite view that in case plea raised by learned counsel representing the accused is accepted, it would not only defeat the object of Section 138 of the Act, rather would encourage dishonest ::: Downloaded on - 29/06/2018 22:59:20 :::HCHP 43 people to avoid their penal liabilities by raising such pleas. It would also erode the efficacy and credibility of commercial .
transactions, which admittedly, in today's world, are carried out on the basis of post-dated cheques or cheques issued towards advance payments. Hence, this Court is not persuaded to agree with the contention raised by Mr. Sudhir Thakur, learned counsel representing the accused that in case titled M/S Indus Airways (supra)Hon'ble Apex Court has laid down a general legal proposition that on the date of issuance of cheque, debt or other liability should be subsisting to maintain complaint under Section 138 of the Act, because same would be contrary to the ratio laid down by Hon'ble Apex Court in its earlier decision in ICDS LTD v.
Beena Shabeer (supra), wherein it has been specifically held that security cheques would fall within the purview of Section 138 of the Act and a person can not escape his liability. At this stage, it may be noticed that both the aforesaid judgments/ decisions have been rendered by co-equal Benches. Hence, there is no merit in the submission raised by Mr. Thakur that since cheque in question was issued as security, complaint under Section 138 of the Act is not maintainable. Law raises a presumption in favour of holder of a cheque that dishonoured cheque was issued in respect of a debt or liability.
::: Downloaded on - 29/06/2018 22:59:20 :::HCHP 4448. True it is, that the fact whether on the date of presentation of dishonoured cheque, debt or other liability .
did not exist would vary from case to case but definitely onus to raise such a probable defence would lie upon the accused, but, in the case at hand, as has been observed herein above, accused has not been able to raise probable defence to cast doubt on the claim made by the complainant with respect to enforceable debt or liability in relation to transaction in respect whereof cheque in question is alleged to have been issued as a security.
49. Consequently, in view of detailed discussion made herein above as well as law relied upon, this Court is of the view that learned Court below has wrongly arrived at a conclusion that cheque in question was issued as a security cheque. Since judgment dated 18.5.2015, passed by the learned Judicial Magistrate 1st Class, Solan in Criminal Complaint No. 863/3 of 2011/05 is not based upon proper appreciation of evidence as well as law, same is accordingly set aside and respondent-accused is held guilty of having committed offence punishable under Section 138 of the Negotiable Instruments Act. Respondent namely D.S. Kanwar is directed to remain present in the Court on July 6, 2018, to be heard on quantum of sentence.
50. List on July 6, 2018.
(Sandeep Sharma) Judge June 22, 2018 (vikrant) ::: Downloaded on - 29/06/2018 22:59:20 :::HCHP