Delhi District Court
Cc No. 40286/16 M/S Iris Computers ... vs . M/S Elkosta Security Systems India & ... on 11 June, 2020
IN THE COURT OF MS.JYOTI MAHESHWARI: MM (NI ACT) -01
PATIALA HOUSE COURT: NEW DELHI DISTRICT: NEW DELHI
In the matter of:
CC No: 40286/16
M/S IRIS COMPUTERS LIMITED
No. 108, Prestige Center Point,
Cunningham Road, Bangalore 560052
Represented by its Accounts Executive
Shri Bramhananda Reddy ..... Complainant
Versus
1. M/S ELKOSTA SECURITY SYSTEMS INDIA
101, Mercantile House, 15 K.G. Marg,
New Delhi 110021
Represented by its Proprietor/ Authorized Signatory Accused no: 1
2. MR. ABHAY KUMAR JHA
Proprietor/ Authorized Signatory,
M/S ELKOSTA SECURITY SYSTEMS INDIA
101, Mercantile House, 15 K.G. Marg,
New Delhi 110021.............................................Accused no: 2
ALSO AT
MR. ABHAY KUMAR JHA
Proprietor/ Authorized Signatory,
M/S ELKOSTA SECURITY SYSTEMS INDIA
Flat No.104, Tower 6,
Commonwealth Games Village, Delhi ................. Accused persons
Date of Institution of Complaint : 16.12.2015
Offence Complained of : u/s 138 N.I. Act
Plea of Accused : NOT GUILTY
Order reserved : 16.03.2020
CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 1 of 19
Decision : CONVICTED
Date of Decision : 11.06.2020
JUDGMENT
BRIEF FACTS OF THE CASE
1. The brief facts of the case averred by the complainant are: The complainant is a company registered under the provisions of the Companies Act, 1956 and is engaged in business of computers, printers and its peripherals. The complainant company, in the present case, is represented by its authorized representative, (hereinafter referred to as the "AR"), Shri R. Sundaresan, who is also serving as General Manager (Legal and Administration) in the complainant company.
2. It is alleged by the complainant that accused No.1, M/s Elkosta Security Systems, Indiais a proprietorship concern, of which accused No.2Abhay Kumar Jha is the proprietor. Accused No.2 made credit purchases of various electronic items worth Rs.1,26, 36, 456/ vide invoice No.N10122 1308268 dated 24.08.2013 (Ex. CW1/3) and issued a cheque bearing No.687556 dated 05.09.2013 for a sum of Rs.5,93,527/ (Ex. CW1/4) drawn on State Bank of Bikaner and Jaipur, Gurgaon Branch (hereinafter referred to as the "impugned cheque") in favor of the complainant towards discharge of his liability. However, the impugned cheque, upon its presentation, was returned dishonored for the reason "payment stopped by drawer" vide return memo dated 18.11.2013 (Ex.CW1/5). Thereafter, the complainant sent a legal notice dated 04.12.2013 (Ex.CW1/6) to the accused, intimating the accused about the dishonor of the impugned cheque and raising a demand in support of the same. The accused duly received the legal notice and sent a reply of the same to the complainant dated 21.12.2013 (Ex.CW1/7). It is to be noted that the complainant also sent a corrigendum CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 2 of 19 to the legal notice on 07.01.2014, which was also received by the accused. Despite service of the legal demand notice, the accused failed to pay the cheque amount within the prescribed period of 15 days and hence, the complainant instituted the present complaint under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "the NI Act") against accused no.1 as the proprietorship firm and accused no. 2 for being the proprietor and authorized signatory of accused No.1. It is a settled position of law that when the proprietorship firm is an accused, the proprietor of the firm, being the whole and sole of the proprietorship, shall be construed as the accused. Therefore, for the sake of clarity, any references in the present judgment to "accused no.1" or "accused" shall be construed as a reference to accused no.2, Sh. Abhay Kumar Jha.
3. Originally, the complaint was filed in Bangalore on the basis that the cheque was presented in complainant's account in Bangalore. Subsequently, after enactment of Negotiable Instruments (Amendment) Act in 2015, the complaint was returned and the case was refiled at Delhi.
4. At the stage of presummoning evidence, the AR of the complainant led his evidence by way of affidavit (Ex.CW1/A) and also relied upon the following documents :
Sr. Exhibit/ Mark Nature of document No. Board Resolution dated 20.06.2007 in favour of Sh.
1. Ex.CW1/1 Bramhananda Reddy Board Resolution dated 25.07.2014 in favour of AR of
2. Ex.CW1/2 the complainant, Sh. R. Sundaresan Invoice No.N101221308268 dated 24.08.2013 raised
3. Ex.CW1/3 by the complainant.
Original cheque bearing No.687556 drawn on State
4. Ex. CW1/4 Bank of Bikaner and Jaipur, Gurgaon.
5. Ex. CW1/5 Return memo dated 18.11.2013 CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 3 of 19 Legal demand notice dated 04.12.2013 sent to the
6. Ex. CW1/6 accused along with AD cards, postal receipts etc. Reply of the accused dated 21.12.2013 to the legal
7. Ex. CW1/7 notice.
5. After perusal of material on record, prima facie case was made out and cognizance of the offence was taken vide order dated 03.10.2016. Thereafter, accused No.2 entered appearance and Notice under Section 251, CrPC was served upon accused No.2 Abhay Kumar Jha for being the proprietor of accused No.1. The accused admitted his signatures on the impugned cheque, but pleaded not guilty and claimed trial. The accused was afforded an opportunity to crossexamine the complainant and the AR of the complainant, Shri R. Sundaresan, was examined and crossexamined as CW
1. Thereafter, complainant evidence was closed and Statement of the accused under Section 313, CrPC was recorded, wherein all the incriminating evidence was put to the accused. The accused sought permission to lead defence evidence, which was allowed. The accused examined Mr. Pran Anand, General Manager of accused No.1, as DW1 and Sh. Shambhu Kumar Mishra, Branch Manager, SBI, Arjun Marg Branch, Gurgaon as DW2. Subsequently, defence evidence (DE) was closed and the matter proceeded to the stage of final arguments.
6. Detailed arguments were heard on behalf of both parties and their written submissions have been perused.
DEFENCE OF THE ACCUSED
7. In his defence, accused No.2 categorically admitted that he is the proprietor of accused No.1 and had signed the impugned cheque. The accused pleaded that he had placed an order with the complainant company for a number of electronic equipments worth Rs.5,73,87,089.80/. However, the complainant failed to supply the complete order and the payment was made to the CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 4 of 19 complainant through Letter of Credit (LC) for the supplied portion of the order. He also pleaded that the accused incurred huge losses due to incomplete supply of the purchase order and denial of warranties from the manufacturer, with respect to the supplied products and therefore, the accused was compelled to instruct the banker to "stop payment" of the impugned cheque. The accused also pleaded that the cheque in question is given as security for the complete order, but the same was not complied with by the complainant and hence, no liability was attracted qua the impugned cheque.
ARGUMENTS ADVANCED
8. During the course of arguments, Ld. Counsel for the complainant argued that the accused had himself acknowledged the liability qua the impugned cheque in his reply to the legal notice dated 21.12.2013 (Ex.CW1/7) and also accepted that Rs.6,01,736/ was the value of VAT, as per the business transactions between the complainant and the accused. It is further argued that the accused had himself acknowledged in the reply to the legal notice that the impugned cheque was issued to the complainant towards the taxation portion of the first lot of the purchase order dated 19.07.2013. It was argued that the accused categorically admitted his signature on the impugned cheque and all the ingredients of the offence under Section 138 of the Negotiable Instruments Act are met in the present case. It was upon the accused to rebut the presumption and raise a credible defence, which the accused failed to do and hence, the accused is liable for the offence under consideration. Further, Ld. Counsel for the complainant also denied the documents i.e. email exchanges dated 15.10.2013 (Ex.CW1/D2) and dated 22.10.2013 (Ex.CW1/D1) wherein, it was agreed that the complainant would return the impugned cheque to the accused and the accused would issue a fresh cheque in lieu of the same being returned. It was submitted that these email exchanges could not be read in evidence as they were not CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 5 of 19 accompanied by the relevant certificate under Section 65B of the Indian Evidence Act. Ld. Counsel also denied the defence of security cheque on the ground that there exists a liability to pay the amount qua the impugned cheque on the date of its presentation.
9. Per contra; Ld. Counsel for accused has argued the following :
a) The present complaint does not fulfill the statutory requirements of Section 138 of the Negotiable Instruments Act as the corrigendum to the legal notice was sent on 07.01.2014, which is more than 30 days after the receipt of the return memo dated 18.11.2013 (Ex.CW1/5).
b) The present complainant cannot be entertained as it has been filed by an unauthorized person, and the Board Resolution (Ex.CW1/2) does not stand proved.
c) The impugned cheque was issued only towards security and not in discharge of any legally enforceable liability.
d) The accused had clearly communicated to the complainant to return the impugned cheque and the same was agreed to by the complainant. Despite this, the complainant presented the impugned cheque with malafide intention and thus, the accused has no liability towards the complainant.
10. This Court has heard the submissions of the parties and gone through the entire material on record.
APPRECIATION OF EVIDENCE
11. In order to ascertain whether the accused has committed an offence under Section 138 of the NI Act, it is deemed fit to examine whether all the CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 6 of 19 ingredients under the offence have been proved. The offence under Section 138 of the NI Act has the following ingredients:
a) Existence of legally enforceable debt or liability and issuance of cheque in discharge of said debt or liability;
b) Dishonor of cheque in question which must have been drawn on an account maintained by the accused;
c) Service of demand notice seeking payment of cheque amount within fifteen days from the date of service;
d) Nonpayment of cheque amount within fifteen days from the date of service of notice; and
e) Filing of complaint within one month from the date on which cause of action arises.
12. In the case at hand, the issuance of the impugned cheque (Ex.CW1/4) by the accused, its presentation in the bank for encashment and subsequent dishonor due to the reason "payment stopped by drawer", is not disputed and is a matter of record, as proved by the return memo dated 18.11.2013 (Ex.CW1/5). The accused has categorically admitted the receipt of legal demand notice (Ex.CW1/6) and his reply to the same, dated 21.12.2013 (Ex.CW1/7). These admitted facts need not be proved as per Section 58 of the Indian Evidence Act, 1872. Therefore, the presentation of the impugned cheque, its dishonorment and service of legal demand notice stand proved. It is also established that the impugned cheque belongs to the accused and also bears his signatures. Once these facts are established, a presumption of the cheque having been issued in discharge of a legally existing liability and drawn for good consideration, arises by virtue of Section 118(a) and Section 139 of the Negotiable Instruments Act. Once Section 139 of the Negotiable Instruments Act comes into picture, the Court presumes that the cheque was issued in discharge, in whole or in part, of any debt or liability. At this stage, CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 7 of 19 with the help of presumption under Section 139 of the Negotiable Instruments Act, the case of the complainant stands proved.
13. The effect of the presumption has been explained in a catena of judgments, including the decisions in, Hiten P. Dalal v. Bratindranath Banerjee (2001) 6 SCC 16, Rangappa vs. Sri Mohan (2010) 11 SCC 441 and more recently, in the case of Rohitbhai Jivanlal Patel v. State of Gujarat &Anr (Crl. Appeal No. 508/19 dated 15.03.2019). It has been held time and again that the said presumption is a rebuttable one and its only effect is to shift the initial burden of proof on the accused. When the presumption is raised in favor of the complainant, the burden shifts upon the accused to disprove the case of the complainant by rebutting the presumption raised in favour of the complainant. It is well settled that in order to rebut the presumption and shift back the burden of proof on the complainant, the accused is only required to raise a probable defence and he cannot be expected to discharge an unduly high standard of proof. Therefore, the standard of proof for rebutting the presumption under Section 139 NI Act is "preponderance of probabilities".
14. The accused has to make out a fairly plausible defence which is acceptable to the Court. The accused can do the same, either by leading direct evidence in his defence or by raising doubt on the material/evidence brought on record by the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the Court may either believe that the consideration and debt did not exist or their nonexistence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. However, at the same time, it is also to be remembered that bare denial of the existence of legally enforceable debt or other liability cannot be said to be sufficient to rebut the presumption and something which is probable has to be brought on record to shift the burden back to the CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 8 of 19 complainant.
15. Keeping these basic principles in mind, this Court shall now proceed to deal with the various defences taken by the accused and examine whether the accused has been able to rebut the presumption arising in favour of the complainant.
16. NONMAINTAINABILITY OF THE PRESENT COMPLAINT: It is argued on behalf of the accused that the present complaint is not maintainable as the statutory requirement under Section 138(b) of the Negotiable Instruments Act is not fulfilled. It is contended that the dishonorment memo (Ex.CW1/5) is dated 18.11.2013, but the corrigendum to legal notice was sent on 07.01.2014, which is beyond the period of thirty days as stipulated in Section 138 of the NI Act.
17. However, this contention raised on behalf of accused is not tenable in law because the original legal demand notice was sent to the accused on 09.12.2013 (Ex.CW1/6), which is within the prescribed 30days period. The accused also received the same within time and sent a reply on 21.12.2013 (Ex.CW1/7). Furthermore, this corrigendum did not contain any material alteration and was only formal in nature and thus, it did not affect the legal demand notice sent originally. In any event, the period of limitation prescribed under Section 138 of the Negotiable Instruments Act, is to be computed from the date on which the first legal demand notice is sent and whether the same is filed within the prescribed period of limitation. In the present case, the same was sent within the statutorily prescribed period and there is no question of noncompliance of Section 138(b) of the NI Act. Therefore, the argument that the present complaint is not maintainable, due to nonfulfillment of requirements of Section 138, is devoid of legal merit and accordingly, stands dismissed.
18. COMPLAINT FILED BY AN UNAUTHORIZED PERSON: It is contended on CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 9 of 19 behalf of the accused that the present complaint has been filed on behalf of the complainant by a person who has not been duly authorized by the Board of Directors of the complainant company. It is further submitted that the complainant has miserably failed to prove the Power of Attorney (Ex.CW1/1) executed in favour of Shri Brahmananda Reddy, Accounts Executive. However, the same is not relevant as Mr. Brahmananda Reddy was the authorized representative of the complainant when the complaint was originally instituted in Bangalore. Pursuant to the 2015 Amendment to the Negotiable Instruments Act, the complaint was refiled at Delhi and the complainant was represented by a new AR, Shri R. Sundaresan and the Board Resolution (Ex.CW1/2) executed in his favour is also on record.
19. The Board Resolution (Ex.CW1/2) on record was objected to, by the accused on the ground that it is only a photocopy and the original document has not been produced on record. However, the complainant produced the original document at the stage of final arguments on 24.02.2020 and the original Board Resolution was seen and returned. It is to be kept in mind that, in a complaint case, it is the sole prerogative of the complainant to produce a document authorizing a person to represent the complainant, anytime, during the course of trial and merely because the original document was produced belatedly, it cannot be said that the document itself is not valid.
20. Ld. Counsel for accused raised another objection to the validity of the Board Resolution (Ex.CW1/2) on the ground that the signature of the complainant's Director / Chairman, Mr. Sanjiv Krishen, on the Board Resolution (Ex.CW1/2) is remarkably different from his signature on the Power of Attorney (Ex.CW1/1), executed in favour of the original AR. On this basis, it is submitted by the accused that since the signatures of the Chairman/ Director do not stand proved, the Board Resolution is not admissible in law.
CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 10 of 1921. This Court under Section 73 of the Indian Evidence Act,1872 has ample powers to compare the signatures when any dispute arises regarding the same. The Court in exercise of its power, under the above provision perused the two signatures and it appears that the two signatures are of the same person. However, the difference in two signatures exists only because the two were signed at different periods of time, with a considerable gap. While Ex.CW1/2 is of 2014, Ex.CW1/1was executed in 2007 and it is natural, that there may arise a slight difference in signatures over the course of seven long years. While, it is apparent that Ex.CW1/1 contains the complete signature of the name i.e. Sanjiv Krishen, the signature at Ex.CW1/2 does not contain the full name of the signatory but only his partial name i.e. S. Krishen. On this sole basis, it cannot be said that two different persons had signed these two documents and the validity of Ex.CW1/2 cannot be called into question. Furthermore, the same question was put to the AR of the complainant in his crossexamination as CW1, to which he has answered satisfactorily by stating that difference in the signatures is only due to the considerable time gap between the two documents and not any other reason. The witness thus, withstood the test of crossexamination in this regard and it was upon the accused, to further cast a doubt on the testimony and credibility of the witness, but the accused failed to do so. If the accused had to further question the validity of the authorization of the present AR, the accused was required to lead evidence in this regard, but the accused again, failed to do so.
22. The accused has relied on various judgments of various Hon'ble High Courts on the ground that when a company institutes a complaint, it must be represented by an authorized person i.e. a director/ manager/ partner through a validly authorized person. However, the same is a settled position of law and does not, in any manner, aid the accused in furthering his defence.
CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 11 of 1923.The accused has also raised questions on the knowledge of the AR of the complainant with regard to the transactions in question in the present complaint and argued that the AR of the complainant has not been authorized to represent the complainant. The accused has placed reliance on the judgment of the Hon'ble Supreme Court in A C Narayanan Vs State of Maharashtra, AIR 2014 SC 630.In this light, it is to be noted that the AR of the complainant, R. Sundaresan is working in the capacity of General Manager (Legal and Administration) in the complainant company and there exists various verticals like sales, marketing, etc. other than legal department, which deal with different aspects of the transactions. Moreover, the original AR, Shri Brahmananda Reddy, who was the AR at the time of filing of the complaint in Bangalore, already left the services of the complainant company, as per the testimony of the current AR. The testimony of the witness has not been rebutted in this regard and therefore, it is reasonable to presume that the original AR was not associated with the complaint when the complaint was refiled before this Court. Therefore, what is required in such cases, where the company is being represented by a natural person, who are also substituted during the course of the trial, is not the AR's personal knowledge of the entire transaction, but his/her due knowledge of the transaction.The requirement of the due knowledge of the authorized representative is also in line with the decision relied upon by the Ld. Counsel for accused in A C Narayanan Vs State of Maharashtra (supra).Toplace the condition, that the authorized representative of the complainant should be aware of the complete transaction in its entirety, including its genesis and all the technicalities involved would be to set an impossible standard for any authorized representative and this could neither have been the intention of the legislature nor the object of the statute. Further, the AR of the complainant in his testimony, has deposed on the basis of invoice raised i.e. Ex.CW1/6 and the liability of the accused in this regard. Merely because he pleaded ignorance with regard to certain questions put forth by Ld. Counsel CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 12 of 19 for accused; it is, by itself, not a sufficient ground to call the due knowledge of the AR of the complainant into question. During the course of cross examination, it is natural for the counsels to put the witnesses in a spot and flood them with questions, such that their credibility as a witness is doubted. However, the evidence has to be read as a whole and selective reliance on only certain parts of the evidence is not only misplaced, but also does not aid the cause of justice.
24. The AR of the complainant has clearly deposed that the impugned cheque was issued in discharge of the VAT liability and the VAT liability is itself the basis of the complaint filed by the complainant. The VAT liability which is mentioned in the invoice (Ex. CW1/3) is different from the purchase order raised by the accused (Ex. CW1/D3). The AR of the complainant was clear in his testimony with regard to the liability of the accused in the present case and how it arose, in the first place. Therefore, this Court sees no reason to infer that the present complaint is not filed by authorized person or a person lacking knowledge of the material particulars.
25. On ground of the above, the defence raised by the accused that the complaint is filed by an unauthorized person stands negated. This Court shall now deal with the other defences raised by the accused.
MISUSE OF SECURITY CHEQUE
26. It is contended by the accused that the impugned cheque was given to the complainant as security, for the complete order, which was more than Rs. 5 crores, but since, the complainant failed to fulfill its contractual obligations, the liability qua the impugned cheque never arose. Further, to prove, that the alleged security cheque was indeed misused by the complainant, the accused will have to show that there was no liability qua the impugned cheque on the date of its presentment. To determine the same, it will be worthwhile to consider the law on security cheques.
CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 13 of 1927. It has been clearly stipulated by the Hon'ble Delhi High Court in Suresh Chandra Goyal v. Amit Singhal (Crl.L.P. 706/2014, dated 14.05.2015) that there is no magic in the word "security cheque", such that, the moment the accused claims that the dishonoured cheque (in respect whereof, a complaint under Section 138 of the Act is preferred) was given as a "security cheque", the Magistrate would acquit the accused. It is to be noted that whenever a cheque is issued, it is presumed to be issued in discharge of liability on part of the accused, though the liability may be an existing liability or a liability which would crystallize in future. If that were not so, there would be no purpose of obtaining a security cheque from the debtor. A security cheque is issued by the debtor so that the same may be presented for payment, as and when the apprehended liability arises. Otherwise, it would not be a security cheque. Therefore, if a cheque is issued to secure any future liability arising towards the payee of the cheque for the purpose of which the cheque was issued by the drawer, the drawer cannot raise the defence that the cheque was issued for security purposes.
28. The Hon'ble High Court of Delhi in Credential Leasing & Credits Ltd. Vs. Shruti Investments 223 (2015) DLT 343 has held that even a security cheque can form the basis of complaint under Section 138 of the NI Act, if on the date of the deposit of the postdated security cheque, the debt of the accused stood crystallized. The relevant extract from the judgment is reproduced below:
a) "27. Thus, the "debt or other liability" has to be a legally enforceable debt or other liability. Neither the main provision of Section 138, nor the explanation suggest that the debt or other liability should be in existence on the date of issuance of the cheque, i.e. on the date of its delivery to the drawee or someone on his behalf or, on the date that the cheque bears.
The only reference to time in the Section, is the point of time when the cheque is returned unpaid by the drawers' bank.
CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 14 of 19b) In my view, therefore, the scope of Section 138 NI Act would cover cases where the ascertained and crystallised debt or other liability exists on the date that the cheque is presented, and not only to case where the debt or other liability exists on the date on which it was delivered to the seller as a postdated cheque, or as a current cheque with credit period (emphasis supplied)."
29. It is now to be examined whether the accused had any liability towards the complainant on the date of presentment of the impugned cheque. For this, it will be worthwhile to see the sequence of transactions between the parties. At first, the accused placed the purchase order dated 19.07.2013 (Ex. CW1/D3), seeking supply of goods worth Rs. 5,73,87,890.80/ from the complainant. For payment of the same, the accused had opened a Letter of Credit ( LC) facility with his bank, State Bank of Bikaner and Jaipur, Gurgaon Branch. Pursuant to the purchase order, the complainant supplied certain materials worth Rs. 1,26,36,45/ to the accused vide invoice dated 24.08.2013 (Ex.CW1/3). A payment of Rs. 1,20,34,720/ was made on 24.10.2013 through RTGS under the Letter of Credit (LC) (Mark DW1/3). Therefore, it is pertinent to note that the payment of Rs.6,01,736/ remained unpaid qua the invoice (Ex.CW1/3).
30. Now, the accused has raised an objection to the payment of this alleged tax liability on the grounds: (i) the complete order was not supplied and, (ii) the tax was on the complete order, which was not fulfilled by the complainant and hence, there was no tax liability.
31. With regard to (i), it is a different concern altogether as to whether the complete order was supplied by the complainant to the accused or not. Further, it is not disputed by the accused that the first lot of shipment containing certain materials mentioned in the purchase order, was indeed supplied by the complainant to the accused. For this, the payment was also made through Letter of Credit. It is alleged by the accused that the CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 15 of 19 complainant itself had purchased the Bill of Exchange (Mark DW1/3) from the banker of the accused against the Letter of Credit opened by the accused in its bank and hence, there was no question of any dues against the purchase order. However, it is to be noted that the said Letter of Credit facility was without the taxation component and this was even communicated to the accused firm vide email dated 15.10.2013 (Ex.CW1/D1) by the complainant. Therefore, if the payment of the materials as mentioned in the invoice was made, the accused was also bound to make the payment on the tax/ VAT amount of the goods supplied to the accused. If the payment was also made on the partial order supplied, the accused was also duty bound to make the payment of the VAT liability qua the materials so supplied vide the invoice (Ex.CW1/3). At this point, the accused cannot take refuge in the fact that the complete order was not supplied, only to avoid paying his VAT/tax liability. Furthermore, it is also to be noted that the accused had himself agreed to pay the tax amount in his reply dated 21.12.2013 (Page 4 of Ex. CW1/7) to the legal notice and thus, the accused had also acceded to the tax liability.
32. The accused has also raised the concern, both in his reply to the legal notice as well as his written submissions, that there was a mistake in the calculation of the tax so computed by the complainant. The accused has asserted that some equipments supplied in the first set were attracting 2% tax while other items attracted tax @ 5%, but the tax liability as a whole was computed @ 5% of the value of the goods. Additionally, the accused has also stated that the value of goods of the first lot of shipment was also changed from the original value of Rs.1,26,36,456/ to Rs.1,20,347.20/. Therefore, there was also a difference in the tax amount to be charged on the items already supplied. The accused has himself pointed out that there is a difference in the value of tax amount (Rs.6,01,736/) as per the invoice, Ex.CW1/3 and the amount mentioned on the cheque in question i.e. Rs.5,93,527/. Therefore, it CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 16 of 19 is evident that the impugned cheque was itself issued for a lesser amount of liability than the VAT amount mentioned in the invoice. If the accused had any objection to even this reduced tax liability, the accused was bound to share this concern with the complainant company or the accused could have presented a different tax computation before the Court, but the accused failed to do so. In absence of a different or more accurate tax calculation by the accused, the Court sees no reason to disagree with the tax computation by the complainant. Moreover, even if the VAT amount would have changed due to a change in the value of the goods supplied, there is no reason to believe that the accused did not have a VAT liability to the tune of Rs. 5,93,527, at the very least. Therefore, on the basis of the above, this Court is of the opinion that had a liability at least to the extent of the cheque amount i.e. Rs.5,93,527/ on the date of presentation of the impugned cheque.
33. Accordingly, the contention of the accused that the impugned cheque being a security cheque was misused by the complainant, therefore, stands negated.
34. RETURN OF THE CHEQUE AND THE COMPLAINANT PRESENTING THE CHEQUE WITH MALA FIDE INTENTION: The accused has raised the last defence, that in the various email communications (Ex.CW1/D1 & Ex.CW1/D2) between the complainant and the accused, the accused asked the complainant to return the cheque, to which the complainant had agreed. The accused assured the complainant to deliver a fresh cheque, in lieu of the cheque to be returned. The accused has alleged that despite these communications, the complainant went ahead and presented the impugned cheque in its bank and therefore, the accused issued instructions to its bank to "stop payment" qua the impugned cheque.
35. On the other hand, the complainant has raised a question on the admissibility of the emails (Ex.CW1/D1 & Ex.CW1/D2) on the ground that the same are not accompanied with the relevant Certificate under Section 65B of the CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 17 of 19 Indian Evidence Act. However, the Certificate under 65B of the Indian Evidence Act, was furnished on behalf of DW1 on 11.03.2020 and the same can be considered, even if filed belatedly. Therefore, to this limited extent, the objection raised by the complainant is rendered redundant
36. A perusal of the emails dated 15.10.2013 (Ex.CW1/D2) and dated 22.10.2013 (Ex.CW1/D1) show that the accused had some concern with the supply of the materials in the first lot of the shipment. The accused had mentioned the same in his reply dated 21.12.2013 (Ex.CW1/7) that the original papers including warranty, compliance sheet, quality test certificate, compliance of technical specifications, product instructions manual, covering technical details of warranty confirmation, inter alia were not supplied by the complainant. However, if important documents pertaining to the materials were not supplied, there was no reason for the accused to make payment qua the material supplied. Further, the accused was at liberty to initiate legal action against the complainant for the defect in the material/ incomplete supply of the material qua the invoice (Ex.CW1/3), but the accused did not avail any legal remedy. At this juncture, in a complaint under Section 138 of the Negotiable Instruments Act, the accused cannot take this defence and shirk his liability. In a complaint under Section 138 of the Negotiable Instruments Act, the Court's function is only limited to examining whether any liability is attracted towards the dishonor of the cheque in question and the Court cannot venture into the question of quality of materials supplied or whether the complete order was supplied.
37. In the present case, the accused did not initiate any suit or legal action for the defective delivery of the material. Furthermore, as per the email, the accused had informed the complainant that the accused was ready to furnish fresh cheque to the complainant after return of original cheque by the complainant. Even if the complainant did not keep its promise of returning the impugned cheque to the accused, it is, by itself not sufficient to lead to CC No. 40286/16 M/s Iris Computers Limited Vs. M/s Elkosta Security Systems India & Anr. Page 18 of 19 the inference that the accused had no liability qua the impugned cheque. This is more so, in the present case where the accused had himself acknowledged that the liability in question was related to the VAT amount. Moreover, the mere fact that the accused had instructed its banker to stop payment, is not enough for the Court to believe the alleged absence of legal liability of the accused. If this were to be the case, then it would be very easy for any party to issue instructions for stop payment of the impugned cheque whenever there is any minor difference or dispute regarding the goods supplied to the party by any party and there will be no credibility left to these financial instruments. Therefore, this Court is of the humble opinion that though the complainant agreed to return the impugned cheque to the accused and afterwards failed to do so, the same does not extinguish the liability of the accused qua the impugned cheque.
38.On account of the aforementioned observations and discussion, this Court is of the opinion that the complainant has successfully proved all the essential ingredients of Section 138 of the Negotiable Instruments Act. The accused despite his best and laudable efforts, has failed to rebut/ displace the presumption raised in favour of the complainant company. Accordingly, accused Abhay Kumar Jha is hereby convicted of the offence punishable under Section 138 of the Negotiable Instruments Act.
39. A PDF copy of the Judgment be uploaded on the website of the District Court.
Pronounced through Video (JYOTI MAHESHWARI)
conferencing in presence of all the Metropolitan Magistrate (NI Act01)
parties on 11 June, 2020 Patiala House Court, New Delhi
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