Delhi District Court
CT CASES/626499/2016 on 15 July, 2022
M.C. Modi v. Rajeev Kapoor
CC No.626499/2016
IN THE COURT OF MS. TWINKLE CHAWLA: MM, NI ACT-02, SOUTH-
EAST DISTRICT, SAKET COURTS COMPLEX: NEW DELHI
M.C. Modi v. Rajeev Kapoor
CC No. 626499/2016
U/s 138 Negotiable Instruments Act, 1881
1. CIS number :
DLSE020001582002
2. Name of the Complainant : M.C. Modi & Co.; Proprietorship of M/s
Deepa Electronics, through Sh.
Shyamsunder Satyanarain Modi.
3. Name of the Accused, : Sh. Rajeev Kapoor, Proprietor, M/s
parentage & residential Welcome Enterprises, 114-A, Skylark
address Building, 60, Nehru Place, New Delhi-
110019.
4. Offence complained of or : U/s 138 of Negotiable Instruments Act,
proved 1881
5. Plea of the Accused : Pleaded not guilty and claimed trial
6. Final Judgment/order : ACQUITTED
7. Date of judgment/order : 15.07.2022
JUDGMENT
1. The Complainant filed the present complaint u/s 138 r/w 142 of Negotiable Instruments Act, 1881 ("NI Act"), with the averments that the Accused had purchased computer parts and peripherals from the Complainant, and in discharge of the payment of which, the Accused issued:
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M.C. Modi v. Rajeev Kapoor CC No.626499/2016
(i) Cheque bearing no. 541642 dated 28.02.2001 for an amount of Rs. 1,14,800/-
in favour of the Complainant ("Cheque in question 1");
(ii) Cheque bearing no. 541639 dated 03.03.2001 for an amount of Rs. 1,05,000/-
in favour of the Complainant ("Cheque in question 2");
(iii) Cheque bearing no. 541637 dated 02.03.2001 for an amount of Rs.99,500/-
in favour of the Complainant ("Cheque in question 3"); and
(iv) Cheque No. 541641 dated 01.03.2001 for an amount of Rs.1,03,500/- in favour of the Complainant ("Cheque in question 4");
(collectively, hereinafter referred to as "Cheques in question").
2. As per the Complainant, the cheques in question were returned unpaid vide return memo dt. 27.04.2001 for the reason "insufficient funds". The Complainant sent the legal demand notice dated 07.05.2001 through registered post at address of the Accused.
3. Hence, despite the service of the legal demand notice, the Accused failed to make the payment within the stipulated period and the Complainant filed the present complaint.
4. After taking pre-summoning evidence, Accused was ordered to be summoned in this case for commission of offence under Section 138 of NI Act vide order dated 31.08.2001.
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M.C. Modi v. Rajeev Kapoor CC No.626499/2016
5. Accused appeared on 17.03.2001; and was released on bail. On finding a prima facie case, notice U/s 251 of the Criminal Procedure Code, 1973 ("CrPC") was served upon the Accused on 22.11.2003 to which he pleaded not guilty and opted to contest after disclosing the following defence:
"I want to contest the case. I have no liability."
6. CW1/Complainant was then examined in chief on 14.10.2005 and he proved the following documents:
Ex. CW1/A1: Original cheque bearing No. 541642 dt.
28.02.2001 for an amount of Rs.
1,14,800/-.
Ex. CW1/A2: Original cheque bearing No. 541639 dated 03.03.2001 for an amount of Rs.
1,05,000/-.
Ex. CW1/A3: Original cheque bearing No. 541637 dated 02.03.2001 for an amount of Rs.99,500/-.
Ex. CW1/A4: Original cheque bearing No. 541641 dated 01.03.2001 for an amount of Rs.1,03,500/-.
Ex. CW1/B1 Cheque returning memo dt. 27.04.2001 in to Ex. respect of the cheques in question.
CW1/B4:
Ex. CW1/C: Copy of legal demand notice dt.
07.05.2001.
Ex. CW1/D: Copy of the postal slip Ex. CW1/E: AD card and return envelope.
Ex. CW1/F: Copy of Certificate of Register of Firms of M/s Deepa Electronics, as of February 1997.
Ex. CW1/G: Complaint u/s 138 NI Act.
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M.C. Modi v. Rajeev Kapoor CC No.626499/2016
7. CW-1 was cross-examined and the cross-examination was closed on 09.10.2009. on 08.03.2010, the statement of the Accused u/s 313 CrPC was recorded. Accused then led DE and examined himself as part of defence evidence. During the course of the defence evidence, an application for dismissal of complaint was filed by the Accused, which was dismissed on the ground that the question as to whether the complaint was properly instituted or not, would be decided at the final stage. During the course of these arguments, the Ld. Counsel for the Complainant filed an application for placing on record additional documents. Vide order dt. 08.09.2014, the said application was allowed and the matter was re-listed for cross-examination of the AR of the Complainant only on the point of authorization/locus to institute the complaint. CW1 then filed an additional evidence affidavit and tendered the following documents:
Ex. CW1/H: Special Power of attorney drawn by Sh.
Mahesh Chand Modi dt. 16.10.2012, in favour of Sh. Satyanarayan Sunder Modi.
Ex. CW1/I: Minutes of the meeting of the board of directors of Invesca Share Securities Ltd., dt. 10.02.2003.
8. CW1 was cross-examined on 21.01.2016 and matter was listed for additional statement of Accused. In between, a fresh application u/s 311 CrPC was filed by the Ld. Counsel for the Complainant, which was dismissed by way of order dt. 04.01.2017. Additional examination of the Accused u/s 313 CrPC was conducted on 06.06.2017. DW-1, was cross-examined and discharged on 02.11.2017. Defence Page 4 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 Evidence was then closed vide separate statement of the Accused on 01.09.2018.
9. I have heard Ld. Counsel for the parties and have perused the case file along with the written submissions filed by the parties carefully and meticulously. Submissions of the Complainant and Accused
10.The Ld. Counsel for the Complainant has submitted that all ingredients of Section 138 NI Act are fulfilled in the present case and hence, the presumption under Section 139 NI Act arises in the favour of the Complainant, which has not been successfully rebutted by the Accused.
11.Per contra, Ld. Counsel for the Accused has submitted that the Accused deserves to be acquitted as the complaint in itself is defective as neither has the legal status of the Complainant been correctly identified nor has the complaint been filed through an authorized representative.
Legal Framework Ingredients of Section 138 NI Act:
12.The Hon'ble Supreme Court of India in Kusum Ingots & Alloys Ltd and Ors v. K Pennar Peterson Securities Ltd and Ors., (2000) 2 SCC 745 ("Kusum Ingots Case"), has clearly stipulated that "the ingredients which are to be satisfied for making out a case under the provision are:
(i) a person must have drawn a cheque on an account maintained by him in a Page 5 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability; 1
(ii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier;
(iii) that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;
(iv) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the 2 drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice;
If the aforementioned ingredients are satisfied then the person who has 1 Reduced to three months vide RBI circular dated 4.11.2011. 2 The same is now enhanced to 30 days.
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M.C. Modi v. Rajeev Kapoor CC No.626499/2016 drawn the cheque shall be deemed to have committed an offence."
13.Therefore, if the aforesaid ingredients are made out, the Accused is deemed to have committed an offence under Section 138 NI Act.
Presumption under Section 139 NI Act/Section 118 NI Act:
14.Section 139 NI Act states that:
"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"
15.Section 139 NI Act is a type of reverse onus clause, which stipulates a presumption in the favour of the Complainant as to fact of a cheque being received in discharge of a legal debt or liability.
16.Further, Section 118(a) of the NI Act, states as follows:
"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 accepted, indorsed, negotiated or transferred for consideration;"Page 7 of 25
M.C. Modi v. Rajeev Kapoor CC No.626499/2016
17.The Hon'ble Supreme Court of India has in a number of judgments dealt with the combined effect of the presumptions raised under Section 139 and Section 118(a) NI Act.
18.The following proposition can be summarized on a perusal of the judgments of the Hon'ble Supreme Court of India in Sunil Todi & Ors v. State of Gujarat, LL 2021 SC 706, Kalamani Tex v. P. Balasubramanian, 2021 SCC OnLine SC 75; APS Forex Services Pvt. Ltd. v. Shakti International Fashion Linkers and Ors., AIR 2020 SC 945; Rohitbhai Jivanlal Patel v. State of Gujarat and Ors., AIR 2019 SC 1876; Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513; K.N. Beena v. Muniyappan and Anr., (2001) 8 SCC 458; and Dhanvantrai Balwantrai Desai v. State of Maharashtra, 1964 Cri. LJ 437:
(i) Once the execution of cheque is admitted; Section 139 of the NI Act mandates a presumption that the cheque was for the discharge of legally enforceable debt or liability;
(ii) The presumption under Section 139 is a rebuttable presumption and the onus is on the Accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities;
(iii) Something which is probable has to be brought on record by the Accused for getting the burden of proof shifted to the Complainant. To disprove the presumptions, the Accused should bring on record such facts and Page 8 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist;
(iv) The words "unless the contrary is proved" which occur in Section 139, make it clear that the presumption has to be rebutted by 'proof' and not by a bare explanation which is merely plausible. A fact is said to be proved when its existence is directly established or when upon the material before it the Court finds its existence to be so probable that a reasonable man would act on the supposition that it exists. Unless, therefore, the explanation is supported by proof, the presumption created by Section 139 NI Act cannot be said to be rebutted;
(v) To rebut the presumption, it is open for the Accused to rely on evidence led by him or Accused can also rely on the materials submitted by the Complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely;
(vi) That it is not necessary for the Accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a Page 9 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 persuasive burden.
Analysis
19.In the case at hand, it is not in dispute that the cheques in question were drawn by the Accused from the bank account of his firm. Further, it is also not in dispute that the Accused is the proprietor of the Accused firm and is also the signatory of the cheques in question. Presentation of the cheques in question by the Complainant and their subsequent dishonour is also not in dispute.
20.The Complainant sent the legal demand notice, dated 07.05.2001 (Ex. CW1/C) by way of post (Ex. CW1/E (Colly)). The Accused has stated that he did not receive the legal demand notice as he had shifted his address. However, while he has made these averments, no documents were produced by the Accused in support of this submission to show that he had left the said premises. Admittedly, the address mentioned on the legal demand notice was the address at which Accused used to conduct his business. Hence, the legal demand notice was sent on the correct address of the Accused. Therefore, a presumption of due service is drawn u/s 27 of General Clauses Act, 1897; which provides that where the notice is sent by registered post to the correct address, the same shall be presumed to have been duly served. In M/s Darbar Exports and other v. Bank of India, 2003 (2) SCC (NI) 132 (Delhi), the Hon'ble High Court of Delhi held that a presumption of service of notice Page 10 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 is to be drawn where the notice is sent through registered post as well as UPC on correct address. Further, the Hon'ble Supreme Court in C.C. Alavi Hazi v. Palapetty Muhammad & Anr, (2007) 6SCC 555 has held that:
"Any drawer who claims that he did not receive the notice by post, can, within 15 days of receipt of summons from the court in respect of the complaint U/s 138 of the Act, make payment of the cheque amount and submit to the court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the court along with the copy of complaint U/s 138 of the Act, cannot obviously contend that there was no proper service of notice as required U/s 138, by ignoring statutory presumption to the contrary U/s 27 of the General Clauses Act and Section 114 of the Evidence Act."
21.Thus, the legal demand notice Ex. CW1/C is held to have been duly served upon the Accused. Finally, the complaint has been filed within the limitation period. Therefore, essential ingredients (i) to (v) as stipulated by the Hon'ble SC in Kusum Ingots Case (supra), have been duly satisfied.
22.Accordingly, it is required to be presumed that the cheques in question were drawn for consideration and the holder of the cheque i.e., the Complainant received the same in discharge of an existing debt. The onus, therefore, shifts on the Accused to Page 11 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 establish a probable defence so as to rebut such a presumption.
23.In the segment on legal framework, set out above, the legal proposition with respect to the burden of proof upon the Accused has already been discussed. Hence, it is now to be examined as to whether the Accused brought any material on record or pointed out glaring discrepancies in the material produced by the Complainant for dislodging the presumption which meets the standard of preponderance of probabilities.
24.The Accused in the present case has taken the defence that the complaint itself is not maintainable as the legal status of the payee has not been established and the complaint has not been filed by an authorized person. It is also noted that this objection has been taken by the Accused at all stages of the trial and the Ld. Predecessor vide order dt. 08.09.2014 had observed that this objection would be decided at the final stage. Hence, this will be the first issue to be decided in the present judgment.
25.The primary defence of the Accused in the present case is that the complaint has not been filed through an authorized person and that despite repeated opportunities the AR of the Complainant namely Sh. Shyam Sunder Satyanarayan Modi has not been able to establish his locus to file the present complaint on behalf of the Complainant, namely M.C. Modi & Co.
26.Perusal of the complaint shows that the complaint has been filed by a proprietorship Page 12 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 concern namely M.C. Modi & Co., whose proprietor is shown to be M/s Deepa Electronics and the complaint has been filed through Sh. Shyam Sunder Satyanarayan Modi, who is stated to be a partner of M/s. Deepa Electronics. Paragraph 1 of the complaint states that:
"That the Complainant is a proprietorship concern and M/s Deepa Electronics, a partnership firm, is the proprietor of the Complainant. Sh. Shyamsundar Satyanarain Modi is one of the partners in M/s Deepa Electronics and is competent to file the present complaint."
27.In support of this averment, the Complainant filed a certificate from the Register of Firms, Ex. CW1/F, as per which, as on 12.03.1996, Sh. Shyam Sundar Satyanarayan Modi was a partner of Deepa Electronics.
28.Ld. Counsel for the Accused has argued that firstly it is legally impermissible for a partnership firm to be a proprietor of a proprietorship concern as a proprietorship firm by definition is just a business name of a natural person, i.e., an individual and cannot be the business name of a partnership concern. He has further argued that in any event in the cross-examination of the AR of the Complainant dt. 14.10.2005, AR has stated that he is the partner of M.C. Modi & Co., which is the proprietor of Deepa Electronics; a statement contrary to averment made in the complaint. Further, in cross-examination dt. 21.01.2016, the AR has also stated that he was not a partner in Deepa Electronics at the time of filing of the complaint, again an averment contrary to the one made in the complaint. Accordingly, Ld. Counsel for the Page 13 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 Accused has submitted that by virtue of the cross-examination of the AR of the Complainant, the statement made at paragraph 1 of the complaint stands disproved.
29.During the course of the trial, the Complainant has, after seeking permission from the Court to file additional documents, placed on record two additional documents, i.e., Ex. CW1/H and Ex. CW1/I. The said application was allowed by the Ld. Predecessor by way of order dt. 08.09.2014. Along with the said documents, an additional evidence affidavit was filed, in which it was stated that:
"I have been looking after the business of the branch office for the last many years since the constitution of the Complainant as a partnership firm and as such I am well conversant with the facts of the case..... That presently there are two partners of the Complainant i.e. Sh. Mahesh Chand Modi, S/o Sh. Satya Narain Modi, who is my elder brother and another is M/s Invesca Share Securities Ltd.....
That the name of the M/s Deepa Electronics has been changed to M.C. Modi & Co. in the partnership deed dated 05.02.2003, which is the last partnership deed having been prepared and signed by its partners. It is further submitted that M/s Deepa Electronics was the sole proprietor of M/s M.C. Modi & Co. and PAN no. of both the concern i.e., M/s M.C. Modi & Co. and M/s Deepa Electronics is the same...." (emphasis added)
30.Ex. CW1/H is the special power of attorney drawn by Sh. Mahesh Chand Modi, in favour of Sh. Shyam Sunder Satyanarayan Modi dated as of 16.10.2012; and Ex. Page 14 of 25
M.C. Modi v. Rajeev Kapoor CC No.626499/2016 CW1/I is the board resolution passed by Invesca Share Securities Pvt. Ltd. dt. 10.02.2003 whereby authority has been granted to Sh. Shyam Sunder Satyanarayan Modi to represent the said company as well as Deepa Electronics in litigation.
31.Hence, while the initial stand of the Complainant was that M.C. Modi & Co. was a proprietorship concern, whose proprietor was M/s Deepa Electronics, a partnership firm; at a later stage, the stance of the Complainant is that M.C. Modi & Co. is a partnership firm with 2 partners, namely Sh. Mahesh Chand Modi and Invesca Share Securities Ltd. It has further been stated by the Complainant that in 2003 the name of M/s Deepa Electronics was changed to M.C. Modi & Co.. Hence, the case of the Complainant is that the nature of the legal status of the Complainant has changed in 2003 and since the absence of authority can be rectified at any stage of the proceedings, Ex. CW1/I and Ex. CW1/H which are admittedly documents which were not in existence at the time of filing of the complaint, can be considered as providing authority to Sh. Shyam Sunder Satyanarayan Modi to depose on behalf of the payee/Complainant in the present case. A clear departure from the case set up in the complaint is admitted by both parties.
32.Section 142(a) of the NI Act states that:
"Cognizance of offences. --Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)-- (a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the Page 15 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 holder in due course of the cheque;"
33.It is trite law that while criminal law can be set in motion by any person; where any special statute prescribing offences makes any special provision for taking cognizance of such offences under the statute; then the complainant requesting the Magistrate to take cognizance of the office must satisfy the eligibility criterion 3 prescribed by the statute. Section 142 NI Act is one such provision and hence, it must be established that the complaint has been filed by and in the name of the payee.
34.As per the case of the Complainant, M.C. Modi & Co. was a proprietorship concern at the time of filing the complaint. Perusal of paragraph 1 of the complaint (which has been reproduced at paragraph 26 above) shows that the complaint has been filed with the averments that (i) M.C. Modi & Co. is a proprietorship concern, of which M/s Deepa Electronics is a proprietor; and (ii) Sh. Shyam Sunder Satyanarayan Modi is the partner of M/s Deepa Electronics. I will now examine the feasibility/veracity of the two averments. Firstly, it is an established fact that a sole proprietorship firm has no distinct personality from its proprietor and is not a juristic person. The Hon'ble Supreme Court in Raghu Lakshminarayanan v. M/S. Fine Tubes, (2007) 5 SCC 103 ("Fine Tubes Case"), has observed that:
"A juristic person can be a Company within the meaning of the provisions of the Companies Act, 1956 or a partnership within the meaning of the provisions 3 M.M.T.C. and Anr. v. Medchl Chemicals & Pharma (P) Ltd. and Anr. (2002)1 SCC 234. Page 16 of 25
M.C. Modi v. Rajeev Kapoor CC No.626499/2016 of the Indian Partnership Act, 1932 or an association of persons which ordinarily would mean a body of persons which is not incorporated under any statute. A proprietary concern, however, stands absolutely on a different footing. A person may carry on business in the name of a business concern, but he being proprietor thereof, would be solely responsible for conduct of its affairs."
35.Further, the Hon'ble High Court of Delhi in MM Lal v. State of NCT of Delhi, CRL.L.P. 290/2010, has noted that:
"It is well settled that a sole proprietorship firm has no separate legal identity and in fact is a business name of the sole proprietor. Thus, any reference to sole proprietorship firm means and includes sole proprietor thereof and vice versa."
(emphasis added)
36.Accordingly, since the proprietorship firm has no distinct personality from its proprietor, if it is considered that a partnership firm is its proprietor, it would mean that the proprietorship firm is actually a partnership firm, a position which is not only factually redundant but also legally impermissible, as while a partnership firm is absolutely distinct from a proprietorship firm in as much as it is body of individuals and also considered a juristic person for the purposes of Section 141 NI Act; the latter is just the business trading name of a natural person and not even a juristic person. In the same judgment of Fine Tubes Case (supra), the Hon'ble Page 17 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 Supreme Court also made a reference to the decision in M/s. Ashok Transport Agency v. Awadhesh Kumar and another, (1998) 5 SCC 567, and went on to note the difference between a partnership firm and proprietorship concern:
"The distinction between partnership firm and a proprietary concern is well known. It is evident from Order XXX Rule 1 and Order XXX Rule 10 of the Code of Civil Procedure. The question came up for consideration also before this Court in M/s. Ashok Transport Agency v. Awadhesh Kumar and another [(1998) 5 SCC 567] wherein this Court stated the law in the following terms:-
"6. A partnership firm differs from a proprietary concern owned by an individual. A partnership is governed by the provisions of the Indian Partnership Act, 1932. Though a partnership is not a juristic person but Order XXX, Rule 1, CPC enables the partners of a partnership firm to sue or to be sued in the name of the firm. A proprietary concern is only the business name in which the proprietor of the business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of the business. In the event of the death of the proprietor of a proprietary concern, it is the legal representatives of the proprietor who alone can sue or be sued in respect of the dealings of the proprietary business. The provisions of Rule 10 of Order XXX, which make applicable the provisions of Order XXX to a proprietary concern enable the proprietor of a proprietary business to be sued in the business names Page 18 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 of his proprietary concern. The real party who is being sued is the proprietor of the said business. The said provision does not have the effect of converting the proprietary business into a partnership firm. The provisions of Rule 4 of Order XXX have no application to such a suit as by virtue of Order XXX, Rule 10 the other provisions of Order XXX are applicable to a suit against the proprietor of proprietary business "in sofar as the nature of such case permits."
This means that only those provisions of Order XXX can be made applicable to proprietary concern which can be so made applicable keeping in view the nature of the case."
We, keeping in view the allegations made in the complaint petition, need not dilate in regard to the definition of a 'Company' or a 'Partnership Firm' as envisaged under Section 34 of the Companies Act, 1956 and Section 4 of the Indian Partnership Act, 1932 respectively, but, we may only note that it is trite that a proprietary concern would not answer the description of either a Company incorporated under the Indian Companies Act or a firm within the meaning of the provisions of the Section 4 of the Indian Partnership Act."
37.Hence, the position submitted by the Complainant in the complaint appears to be legally impermissible.
38.Qua the second averment that Sh. Shyam Sunder Satyanarayan Modi was the partner of M/s Deepa Electronics, and hence competent to file the complaint, it is noted that while at the time of filing of the complaint, the Complainant has relied Page 19 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 upon a certificate from the Register of Firms, Ex. CW1/F, as per which, as on 12.03.1996, Sh. Shyam Sundar Satyanarayan Modi is shown to be a partner of Deepa Electronics; it is seen that in the cross-examination of Sh. Shyam Sundar Satyanarayan Modi on 21.01.2016, he has stated that he was not a partner in Deepa Electronics at the time of filing of the complaint, and had retired from Deepa Electronics on 01.04.1999. Hence, both averments made in paragraph number 1 of the complaint have been shown to be non-feasible and inaccurate.
39.In any case, assuming M.C. Modi & Co. to be a proprietorship firm, at the time of filing of the complaint, it is to be seen if the conditions of Section 142 NI Act have been complied with. As set out by the Hon'ble Supreme Court in Milind Shripad 4 Chandurkar v. Kalim M.Khan , where the "payee" is a proprietary concern the complaint can be filed (i) by the proprietor of the proprietary concern describing himself as the sole proprietor of the "payee"; (ii) the proprietary concern describing itself as the sole proprietary concern represented by its proprietor; and (iii) the proprietor or the proprietary concern represented by the Attorney Holder under the power of attorney executed by the sole proprietor.
40.Hence, it is trite law that in case of the payee being a proprietorship concern, the complaint can be filed by the proprietor in his own name acting as proprietor of the proprietorship concern, the proprietorship concern through its proprietor and the proprietorship concern or the proprietor through a special power of attorney holder. 4 2011 ALL SCR 966.
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M.C. Modi v. Rajeev Kapoor CC No.626499/2016 Admittedly, the complaint has been filed in the name of M.C. Modi & Co., i.e., the payee and not in the individual name of the proprietor. Hence, it is to be seen whether the requirements of (ii) or (iii) of the aforesaid judgment have been satisfied in the present case. As per the case of the Complainant itself, Sh. Shyam Sundar Satyanarayan Modi is not the sole proprietor of M.C. Modi & Co., as Deepa Electronics is stated to be the proprietor of M.C. Modi & Co.. Hence, condition (ii) is not satisfied. Additionally, no power of attorney executed by the proprietor is on record, hence, even condition (iii) is also not satisfied. Further, even the complaint does not describe Sh. Shyam Sundar Satyanarayan Modi as the PoA holder. Since, none of the three conditions have been satisfied, the onus was on the Complainant to satisfy the locus of Sh. Shyam Sundar Satyanarayan Modi to file the complaint and depose on behalf of the Complainant. However, despite repeated opportunities, the relationship between Sh. Shyam Sundar Satyanarayan Modi and the proprietorship concern has not been deposed. In fact, by way of cross-examination of the AR of the Complainant, it is clear that Sh. Shyam Sundar Satyanarayan Modi was neither the proprietor of M.C. Modi & Co. nor the partner of Deepa Electronics, at the time of filing of the complaint.
41.As set out above, a proprietorship concern can only be a business trading name of an individual, a natural person and not a group/body of persons, i.e., a partnership. They are the most common form of businesses and are based on unlimited liability of the owner. Legally, a proprietorship is not a separate legal entity and is merely Page 21 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 the name under which proprietor carries on business. Hence, apart from failing to describing the relation between the Complainant and Sh. Shyam Sundar Satyanarayan Modi; it appears that the Complainant has also failed to correctly describe the legal status of the payee in the complaint. Further, in cross-examination dt. 21.01.2016, AR has deposed that "it is correct that M.C. Modi and company was not a proprietorship concern when the present complaint was filed." However, even in the additional affidavit filed by the Complainant in 2015, it has been stated that "It is further submitted that M/s Deepa Electronics was the sole proprietor of M/s M.C. Modi & Co." at the time of filing of the complaint. Hence, a clear stance as to the legal status of the payee has also not been taken by the Complainant and despite the same being questioned at all stages of the trial, it has not been clarified. Accordingly, at the time of filing of the complaint, the same was not filed by an authorized person; and the complaint was admittedly filed with incorrect particulars.
42.Now, admittedly, no amendment of complaint was carried out, throughout the trial. However, by virtue of additional documents, which were allowed to be taken on record vide order 08.09.2014, the Complainant has sought to state that the legal status of the Complainant has changed after filing of the complaint. In the additional evidence affidavit filed by the Complainant, it has been stated that Deepa Electronics was the proprietor of M.C. Modi & Co. and later the name of Deepa Electronics was changed to M.C. Modi & Co.
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M.C. Modi v. Rajeev Kapoor CC No.626499/2016
43.Further, the Complainant has stated that the defect of absence of authorization can be rectified at any stage. It has been submitted that in 2003, the legal status of M.C. Modi & Co. has changed from a proprietorship to a partnership and the authority of Sh. Shyam Sundar Satyanarayan Modi is made out from Ex. CW1/H and Ex. CW1/I. It is noted that a careful reading of the said documents as well as the application filed by the Complainant U/s. 311 CrPC as well as the additional evidence affidavit filed by the Complainant shows that the name of Deepa Electronics was in fact changed to M.C. Modi and Co. in 2003; and Sh. Mahesh Chand Modi and Invesca Share Securities Ltd. were partners of Deepa Electronics. This is borne out from the reading of Ex. CW1/H as well, wherein it is mentioned "partner of M.C. Modi and Co. (earlier known as M/s Deepa Electronics)"; and from the board resolution of Invesca Share Securities Ltd., Ex. CW1/I dated as of 10.02.2003, which also mentions that the said company became a partner of Deepa Electronics with effect from 05.02.2003. As per the case of the Complainant by itself, at the time of filing of the complaint, M.C. Modi & Co. and Deepa Electronics were distinct entities, and hence, the payee was M.C. Modi & Co. and not Deepa Electronics. The subsequent authorization produced by the Complainant is also with respect to the partners of Deepa Electronics; and Deepa Electronics has been stated to be renamed as M.C. Modi and Co. However, it has not been clarified that what happened to the initial M.C. Modi and Co, which is the payee of the cheque in question herein. Here it is not the case that the payee's legal status has changed Page 23 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 during the trial, but is the case where another entity's name has been changed to that of the name of the payee and on this basis, the authorization is sought to be filed. No averments or record has been produced to show or state that the two entities have merged. In the absence of any document evidencing the merger; the partnership deed; other documents being filed by the Complainant to show that Deepa Electronics and M.C. Modi & Co. were one and the same entity from the time of filing of the complaint; and that the initial M.C. Modi & Co., which is the payee herein, has merged with M/s Deepa Electronics, the subsequent authorization, Ex. CW1/I and Ex. CW1/H and the renaming of Deepa Electronics as M.C. Modi & Co., do not help the case of the Complainant. It also does not help in understanding the legal status of M.C. Modi & Co. at the time of the issuance of the cheque, or the presentation or its dishonour. Since the cheques in question were drawn in the name of M.C. Modi & Co. and the same were presented and then dishonoured and since the cheques in question were account payee cheques, M.C. Modi & Co. would have had a legal status, a bank account in its own name, which was naturally distinct from Deepa Electronics. Hence, the subsequent authorizations do not help the Complainant.
44. Accordingly, the relation between Sh. Shyam Sundar Satyanarayan Modi and the payee/Complainant has not been established by the Complainant despite repeated opportunities. In fact, even the legal status of the Complainant remains vague. The Complainant appears to have been filed through a non-authorized person and hence Page 24 of 25 M.C. Modi v. Rajeev Kapoor CC No.626499/2016 his evidence, at all stages of trial, i.e., the pre-summoning and post-summoning stage cannot be read. Further, in light of the judgment of the Hon'ble Supreme Court 5 in Milind Shripad Chandurkar v. Kalim M. Khan , the complaint cannot be considered to be maintainable.
45.In view hereof, the first issue itself is decided against the Complainant. There is no need to delve into other requirements of Section 138 NI Act. In light of these observations, it appears that the ingredients of Section 138 of Negotiable Instruments Act, 1881 are not proved. Therefore, Accused is held not guilty and is acquitted of the offence punishable under Section 138 of the Negotiable Instrument Act, 1881.
ORDER: ACQUITTAL
Announced in Open Court (Twinkle Chawla)
MM (NI-Act 02), South East
Saket Court, New Delhi
Note: This judgment contains 25 pages and each page has been signed by me.
(Twinkle Chawla) MM (NI-Act 02), South East Saket Court, New Delhi 5 2011 ALL SCR 966.
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