Delhi District Court
17. The Hon'Ble Supreme Court In Kumar ... vs . Sharma Carpets (2009) 2 Scc on 23 December, 2022
IN THE COURT OF SH. P. BHARGAV RAO, M.M.01, N.I. ACT, WEST DISTRICT,
TIS HAZARI, DELHI
C.C. No.7419/16
PS Punjabi Bagh DLWT020003742010
M/s Him Alloys & Steel Pvt. Ltd.
D9, Udyog Nagar, New Rohtak Road
Peera Garhi, Delhi110041
....Complainant
Versus
1. M/s Balaji Sales Corporation
Through its partner(s)
2. Rajesh Sharma @ Anil
s/o Sh. Nageshwar Rao @ Nagorao Sakote,
office at Mate square, Gopal Nagar,
Nagpur, Maharastra
3. Gopal Tiwari @ Tribhuwan
s/o Sh. Kashi Nath Tiwari
office at Mate square, Gopal Nagar,
Nagpur, Maharastra
.....Accused
Date of institution : 03.03.2010
Offence complained of: 138 NI Act
Matter was reserved for judgment: 15.10.2022
Date of Decision: 23.12.2022
Plea of guilt: Plead not guilty
Decision: Convicted
C.C. No. 7419/16 Dated 23.12.2022 Pages 1
JUDGMENT:
The present complaint has been filed by the complainant against the accused under section 138 Negotiable Instruments Act, 1881 (hereinafter referred as the "Act").
Complainant's Version:
1. Complainant avers that the accused no.2 and 3 had held out that they were partners and were carrying out business in the name and style of M/s Balaji Sales Corporation(accused no.1) and were dealing in HMS 1 scrap etc. The accused had entered into an agreement dated 31.01.2009 for supply of 30,000 MT of heavy Melting steel Scrap i.e CR/HR Trimmings and cut pieces, miss role of TMT bars, Angle/Channel etc to the complainant company within a period of six months from the date of the agreement. It had been agreed that 200 tones of scrap would be loaded and remitted to the complainant company on daily basis. As per the agreement the price of Rs.16000/ per MT excluding CST @ 2 per cent was agreed. As per the agreement the complainant company paid an amount of Rs. 1,60,00,000/ to the accused vide two multicity cheques bearing no.155142 dated 31.01.2009 and cheque no.155143 dated 02.02.2009 for Rs.1,00,00,000/ and Rs.60,00,000/ respectively both drawn on Syndicate bank in favour of the accused no.1 firm. The freight charges were to be paid by the complainant company @ Rs.2000/ per ton, which was inclusive of all fee, charges, taxes etc. The complainant company paid an amount of Rs.15,00,000/ towards advance payment of freight charges vide Multicity cheque bearing no.155144 dated 03.02.2009 drawn on Sydicate Bank in favour of the accused no.1 firm. The accused failed to supply the material as per the commitment and agreement and merely supplied 547 MT of scrap to the complainant company upto 23.06.2009. After deducting the amount for the material supplied an amount of Rs.70,42,960/ remained as excess payment as had been made by the complainant company for which the material had not been supplied by the accused. The said amount was refundable by the accused to the complainant company as the accused had failed to supply the material. In discharge of legal liabilities, the accused issued four cheques to the complainant bearing no.000047 amounting to Rs. 20,00,000/ (Rs.20 lakhs) dated 23.06.2009, cheque bearing no.000048 amounting to Rs.20,00,000/(Rs.
C.C. No. 7419/16 Dated 23.12.2022 Pages 2 20 lakhs) dated 23.06.2009, cheque bearing no.000049 amounting to Rs.20,00,000/(Rs. 20 lakhs) dated 23.06.2009 and cheque bearing no.000050 amounting to Rs.10,42,000/(Rs. 10 lakhs and 42 thousand) dated 23.06.2009 all drawn on Kotak Mahindra Bank, 345 Shri Mohini Complex, Kingsway, Nangpur440001. Consequently, the complainant presented the impugned cheques with its Banker, Syndicate Bank, Punjabi Bagh, New Delhi110026 which got dishonoured vide return memos dated 16.11.2009 and 21.12.2009 with remarks "funds insufficient".
2. Thereafter, the complainant sent a legal demand notice dated 15.01.2010 on address of the accused.
3. Upon failure of the accused to make payment of the cheque in question within the stipulated time of 15 days, the complainant has filed the present complaint u/s 138 of the Act.
4. The complainant examined himself in presummoning evidence and after considering the complaint and entire documents on record, summon was issued by this Court against the accused on 11.11.2010.
Notice against the accused:
5. Notice was framed against the accused persons on 11.01.2012 and the accused persons pleaded not guilty and claim trial. Notice was framed against the accused no.1 on 17.09.2022 wherein he adopted the defence raised by other accused persons. The accused no.1 through accused no.3 adopted his statement u/s 313 CrP.C, crossexamination of the complainant and witnesses and DE.
Plea of defence of the accused:
6. The accused persons had taken the following plea in his defence:
"I plead not guilty and claim trial.
I am partner of M/s Balaji Sales Corporation, Nagpur. I have no liability towards the complainant. I never entered into any agreement with the complainant neither I had ever issued cheque in favour of the complainant. However, some documents were got signed by me alongwith blank cheque at Crime Branch, Nagpur C.C. No. 7419/16 Dated 23.12.2022 Pages 3 and in this regard an FIR is also registered against me and the above said cheques and some signed blank paper obtained by the officials of the Crime Branch, Nagpur for security purpose. I was the mediator for the business dealing of the complainant company with the local scrap dealer and the complainant company directly received the scrap material from the local dealer through me and I had worked only on commission basis. I have received the legal notice regarding dishonor of the cheques in question and duly replied the same".
7. Thereafter, accused was permitted to crossexamine the complainant on 24.02.2012.
Complainant's evidence:
8. The complainant examined himself as CW1 and reiterating the statements made in the complaint. They also relied upon the documents Ex. CW1/1 to CW1/52.
• Certificate of incorporation is Ex. CW1/1 • Certificate of commencement of business of the complainant company is Ex.
CW1/2• Board resolution is Ex. CW1/3 • Original cheques in question are Ex. CW1/4, Ex.CW1/5, Ex.CW1/6 and Ex.CW1/7 • Agreement entered into at the time of issuance of said cheques is Ex.CW1/7A • Photocopy of the seizure memo is Ex. CW1/7B • Original return memos in question are Ex. CW1/8, Ex.CW1/9, Ex.CW1/10 and Ex.CW1/11 • Four original pay slips are Ex. CW1/12, Ex. CW1/13, Ex. CW1/14 and Ex.
CW1/15• Original return memos in question are Ex. CW1/16, Ex.CW1/17, Ex.CW1/18 and Ex.CW1/19 • Copy of legal demand notice is Ex.CW1/20 • Original postal receipts are Ex. CW1/21, Ex.CW1/22, Ex.CW1/23, Ex.CW1/24, Ex. CW1/25, Ex. CW1/26, Ex.CW1/27, Ex.CW1/28, Ex.CW1/29 and Ex. CW1/30 C.C. No. 7419/16 Dated 23.12.2022 Pages 4 • Courier receipts are CW1/31, Ex.CW1/32, Ex.CW1/33 and Ex.CW1/34 and Ex. CW1/35 • Certificate of posting is Ex. CW1/36 • Tracking report are CW1/37, Ex.CW1/38, Ex.CW1/39 and Ex.CW1/40 and Ex. CW1/41 • Five original envelope sent vide registered post are CW1/42, Ex.CW1/43 Ex.CW1/44 and Ex.CW1/45 and Ex. CW1/46 • Five original envelope sent vide speed post are CW1/47, Ex.CW1/48 Ex.CW1/49 and Ex.CW1/50 and Ex. CW1/51 • Reply to the legal demand notice is Ex. CW1/52 • Delivery challan cum bill is Ex. CW1/X1 • Contract for supply of 30000 Tonnes HMS 1 Scrap is Ex. CW1/X2 • Photocopy of Purchase of goods is Mark A(colly) • Affidavit is Ex. CW1/A
9. Thereafter, the complainant as CW1 was duly crossexamined by the Ld. Counsel of the accused. No other witness was examined by complainant. CE was closed by this Court vide order dated 21.03.2018.
Statement of the accused
10. Statement of the accused persons were recorded under section 313 Code of Criminal Procedure (hereinafter referred as "Cr.P.C") on 28.05.2018 wherein all the incriminating evidences were put up before the accused persons.
11. Both the accused stated that they were partner of Balaji Sales Corporation. They have no liability towards the complainant. They had acted as a agent in arranging scrap from dealers in Nagpur to the complainant company. They had no liability to supply scarp directly to the complainant. The complainant had taken these cheques from them forcibly by exerting pressure from Government authorities in Nagpur. A case for cheating also filed by the complainant against me in Nagpur. The cheque was misused by the complainant and it was therefore dishonored on the above ground as there was no liabilities towards the complainant.
C.C. No. 7419/16 Dated 23.12.2022 Pages 5 Defence Evidence:
12. No defence evidence was led by the accused persons and DE was closed on 26.07.2019.
Final arguments were heard on behalf of both the parties via video conferencing. I have heard the both the Ld Counsels and have given my thoughtful consideration to the material appearing on record.
The Law relating to Sec. 138 NI Act:
13. Before proceeding on the merits of the case, it is considered important to lay down the basic provisions of law with respect to section 138 of the Act which are as follows:
14. Section 138 of Negotiable Instruments Act, 1881 makes dishonour of cheques an offence. The Hon'ble Supreme Court in the case of Krishna Janardhan Bhat v. Dattatraya G. Hegde AIR 2008 SC 1325 held that the procedural requirements of section 138 are:
• There is a legally enforceable debt.
• The drawer of the cheque issued the cheque to satisfy part or whole of the debt.
• The cheque so issued has been returned due to insufficiency of funds.
15. In order to establish an offence u/s 138 NI Act, following ingredients must be fulfilled by the complainant :
(i) The cheque was drawn by a person on account maintained by him for payment of money and the same is presented for payment within a period of 03 months from the date on which it is drawn or within the period of its validity;
(ii) The cheque was drawn by the drawer for discharge of any legally enforceable debt or other liability;
C.C. No. 7419/16 Dated 23.12.2022 Pages 6
(iii) The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid from that account on an agreement made with that bank;
(iv) A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within 30 days of the receipt of information of the dishonor of cheque from the bank;
(v) The drawer fails to make the payment of the said amount of money within fifteen days from the date of receipt of notice.
Points for Determination:
i. Whether the accused in the present case was in receipt of legal demand notice?
ii. Whether presumption under section 118(a) read with section 139 of the NI Act can be raised in favour of complainant in the present case?
iii. If the reply to the above question is in affirmative, whether the accused successfully rebutted the presumption u/s 118(a) r/w Section 139 of the NI Act through preponderance of probabilities?
iv. If the reply to the above question is in affirmative, whether the complainant could prove his case beyond reasonable doubt?
I shall be deciding the abovementioned points of determination separately.
(I) Whether the accused in the present case was in receipt of legal demand notice?
16. In the instant case, the accused during the framing of notice u/s 251 CR.P.C admitted the receipt of legal demand notice.
(II) Whether presumption under section 118 read with section 139 NI Act can be raised in the favour of complainant in the present case?
17. The Hon'ble Supreme Court in Kumar Exports vs. Sharma Carpets (2009) 2 SCC 513, while discussing the contours of section 118(a) r/w 139 of the N I Act, has held interalia the following:
C.C. No. 7419/16 Dated 23.12.2022 Pages 7 "14. Section 139 of the Act provides that 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. Applying the definition of the word "proved" in section 3 of the Evidence Act to the provisions of sections 118 and 139 of the Act, it becomes evident that in a trial under section 138 of the Act a presumption will have to be made that every negotiable intstrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under section 118 and 139 of the Act help him shift the burden on the accused. The presumption will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists."
18. In the instant case, the accused at the time of framing of notice u/s 251 and statement recorded u/s 313 Cr.P.C has admitted the issuance of cheque to the complainant albeit the accused contends that the cheque was given for the purpose of loan.
19. Ergo, this court is of the considered view that the statutory presumptions under section 118(a) and 139 of the NI Act would be raised in favour of the complainant. In the instant case, since, the accused has admitted the execution of impugned cheque, the aforementioned statutory presumptions would be raised in favour of the complainant regarding the fact that the impugned cheque has been drawn for consideration and issued by the accused in discharge of legally enforceable debt.
C.C. No. 7419/16 Dated 23.12.2022 Pages 8 (III) Whether the accused has successfully rebutted the presumption u/s 118(a) r/w Section 139 of the Act through preponderance of probabilities?
20. In order to create doubt in the complainant's claims regarding existence of a legally enforceable debt, the accused has primarily adopted the following defence:
Blank signed cheque was given to the complainant.
That Sh. Arun Kumar Gupta is not a competent witness as no authority letter or power of attorney has been placed on record in favour of said witness.
The bills filed by the complainant does not match with the cheque amount.
That Ashok Raja director of the company was not examined by the complainant
21. I shall be dealing with these defences separately. However, before delving into the facts of the case, it is pertinent to note that the standard of proof which is required from the accused to rebut the statutory presumption under section 118 read with section 139 of the Act is preponderance of probabilities. The accused is not required to prove his case beyond reasonable doubt. This onus on the accused can be discharged from the materials available on record and from the circumstantial evidences. The Hon'ble Supreme Court in M.S Narayan Menon @ Mani vs. State of Kerala, Appeal (Crl) 1012 of 1999 has interalia held the following:
"The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies"
22. Further, it should also be noted that the standard of proof in order to rebut the statutory presumption may be inferred from the materials on record and circumstantial evidences. It is not always mandatory for the accused to examine its own witnesses in order to rebut the said statutory presumption. At this point, reliance may be placed on the decision of the Hon'ble Supreme Court in the case of Krishna Janardhan Bhat (supra), wherein the Hon'ble Court has categorically held the following:
C.C. No. 7419/16 Dated 23.12.2022 Pages 9 "32. accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on record. As accused has a constitutional right to remain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.
34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove defence on the part of an accused is "preponderance of probabilities". 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 he relies."
23. This principle has been reiterated by the Hon'ble Supreme Court in Rangappa vs. Sri Mohan (2010) 11 SCC 441 wherein while discussing the scope and ambit of statutory presumption under section 139 of the Act, the Hon'ble Court has held the following:
"27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendantaccused cannot be expected to discharge an unduly high standard of proof.
28. In the absence of compelling justifications, reverse onus clause usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under section 139, the standard of proof for doing so is that of "preponderance of probabilities". Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally recoverable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the material submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."
C.C. No. 7419/16 Dated 23.12.2022 Pages 10
24. Thus, section 139 of the Act puts the burden on the accused to prove his defence. However, the accused has to prove his defence on the balance of probabilities and not beyond reasonable doubt. Accused can prove his defence by drawing inferences from the materials already on record (including complainant's evidences), circumstances of the case and also leading his own evidences. If the accused successfully creates doubts in the complainant's claim about the existence of legally enforceable debt then the burden of proof shifts back to the complainant who is the required to prove the guilt of the accused beyond reasonable doubt. Reference can be taken from the decision of the Hon'ble Supreme Court in the case of Bharat Barrel & Drum Manufacturing Company vs. Amin Chand Pyarelal 1999 (3) SCC 35, wherein it was held:
"Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the nonexistence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non existence of the consideration can be either direct or by bringing on record preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading evidence as the existence of negative evidence is neither possible not contemplated and even if led, it is to be seen with a doubt..."
25. Keeping in mind, the pronouncements laid down by the Hon'ble SC in the aforementioned cases, let us now examine the defence of the accused one by one :
C.C. No. 7419/16 Dated 23.12.2022 Pages 11 (A) Blank signed cheque was given to the complainant.
26. It is well settled that if the accused is issuing a cheque after signing the same to the complaint albeit blank, he is giving implied authority to the complainant to fill the blank details and to present the cheque on or after the date mentioned in the cheque. Therefore, aforementioned statutory presumptions can be raised in favour of the complainant even in case of blank cheque also.
27. Reference can be taken from the recent decision of the Hon'ble Supreme Court in the case of Bir Singh vs. Mukesh Kumar (2019) 4 SCC 197 wherein the Apex Court while upholding the validity of blank signed cheque and post dated cheque in a proceeding u/s 138 of the Act has interalia held the following:
"36. The proposition of law which emerges from the judgments referred to above is that the onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act.
37. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.
38. If a signed blank cheque is voluntarily presented to a payee,towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence."
28. Further, it should also be noted that statutory presumptions under 118(a) r/w 139 of the NI Act also arises even if the cheque is issued by the accused as security for the repayment of a legally enforceable debt or other liability. It is for the accused to prove that the cheque in such cases was not issued in discharge of any legal liability. Reference can be C.C. No. 7419/16 Dated 23.12.2022 Pages 12 taken from the decision of the Hon'ble Supreme Court in the case of M/S Womb Laboratories Pvt Ltd vs Vijay Ahuja Criminal Appeals No. 13821383 of 2019 has categorically held that handing over of the cheques by way of security per se would not extricate the accused from the discharge of liability arising from such cheques.
29. Further, the Hon'ble Supreme Court in the case of Sampelly Satyanarayan Rao vs. Indian Renewable Energy (2016) 10 SCC 458 while discussing the ambit of section 138 of the Act visavis a cheque which has been stated to be given as security for repayment of loan, had interalia held the following:
"We are of the view that the question whether a postdated 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. 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."
30. Reference can also be taken from the decision of the Hon'ble Supreme Court in the case of ICDS vs. Beena Shabeer AIR 2002 SC 3014 wherein the Hon'ble Court has discussed the contours of section 138 of the Act in order to include in its ambit "any cheque"
issued in discharge of debt or other liability. Relevant extract of the judgment is reproduced below:
"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 C.C. No. 7419/16 Dated 23.12.2022 Pages 13 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.
XXXXXXXXXXXX The language of the Statute depicts the intent of the lawmakers 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"
31. Further, it is a settled proposition of law that if no legal liability existed on the date on which cheque was issued then offence u/s 138 of the Act would not be attracted with respect to the said cheque. Reference can be taken from the decision of Hon'ble Supreme Court in the case of Indus Airways Private Limited vs. Magnum Aviation Private Limited (2014) 12 SCC 539 wherein the Apex Court has interalia held the following:
"13. The explanation appended to Section 138 explains the meaning of the expression 'debt or other liability' for the purpose of Section 138. This expression means a legally enforceable debt or other liability. Section 138 treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability. The explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. In other words, drawal of the cheque in discharge of existing or past adjudicated liability is sine qua non for bringing an offence under Section 138. 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, in our considered view, the cheque cannot be held to have C.C. No. 7419/16 Dated 23.12.2022 Pages 14 been drawn for an exiting debt or liability. The payment by cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability."
32. A combined reading of the aforementioned decisions of the Hon'ble Supreme Court suggests that a cheque which has allegedly been issued by the accused as a security to the loan would not per se be out of the ambit of section 138 of the Act. The important consideration is the fact as to whether the said cheque has been issued in discharge of a debt or other liability or not i.e. whether any legally enforceable debt existed on the date when the cheque was issued. If the answer is in affirmative then section 138 of the Act would be attracted as the purpose for which the cheque was issued by the accused would be immaterial if the said cheque was dishonoured by the bank and there existed a legally enforceable debt on the date when the said cheque was issued. It is for the accused to prove that no legally enforceable debt existed on the date on which the cheque was issued.
(B) That Sh. Arun Kumar Gupta is not a competent witness as no authority letter or power of attorney has been placed on record in favour of said witness.
33. Ld. Counsel for the accused argues that the complaint was filed by AR of the complainant Sh. Lalit Bassi and extract of Resolution passed in the board meeting dated 26.02.2010 Ex. CW1/3 was brought on record by the said AR. Later, an application was moved on behalf of the complainant to transpose Sh Arun Kumar Gupta in place of Sh Lalit Bassi. The said Sh. Anil Kumar Gutpa tendered his evidence by way of affidavit CW1/A. No authority letter has been placed by the said witness that he was duly authorized by the complainant company to tender evidence. Therefore, Ld. Counsel for the accused argues that the said witness is not competent to depose in the court in the absence of board resolution. He relies on the judgment of Hon'ble Supreme Court in A. C. Narayanan Vs. State of Maharastra & Anr, Criminal appeal no. 73 of 2007 with Sh. G. Kamalakar Vs. M/s Surana Securities Ltd & Anr. Criminal appeal no.1437 of 2013, decided on 28.01.2015. In the my humble opinion, the contention of the Ld. Counsel for the accused is not sustainable as the Managing Director and Directors of a company are the authorized persons to file the complaint and give evidence. Hon'ble Supreme Court in the aforementioned case observed in para 20 as under:
C.C. No. 7419/16 Dated 23.12.2022 Pages 15 "Para 20. In this case it is not in dispute that the complaint was filed by one Sh. V. Shankar Prasad claiming to be General Power of Attorney of the complainant company. Subsequently PW1 Sh. Ravinder Singh gave the evidence on behalf of the company under the General Power of Attorney given by the complainant company. The complaint was not signed either by Managing Director or Director of the Company. It is also not in dispute that PW1 is only the employee of the company. As per Resolution of the Company ie. Ex.P3 under first part Managing Director and Director are authorized to file suits and criminal complaints against the debtors for recovery of money and for prosecution. Under third part of the said Resolution they were authorized to appoint or nominate any other person to appear on their behalf in the Court and engage lawyer etc. But nothing on the record suggest that an employee is empowered to file the complaint on behalf of the company. This apart, Managing Director and Director are authorized persons of the company to file the complaint by signing and by giving evidence. At best the said persons can nominate any person to represent themselves or the company before the Court. In the present case one Sh Shankar Prasad employee of the company signed the complaint and Deputy General Manager of the company I.e PW1 gave evidence as if he knows everything though he does not know anything. There is nothing on record to suggest that he was authorized by the Managing Director or any Director. Therefore, Magistrate by judgment dated 30th October, 2001 rightly acquitted the appellant".
34. It is a settled position of law that suits/complaints should not be rejected on technical grounds once the legal entity which files the case, contests the case to the hilt, I.e, till the stage of the final arguments. The same position of law was reiterated by the Honble High Court of Delhi in Sangat Printers Pvt. Ltd V. Wimpy International Ltd, 2012 SCC, Online Del 299.
35. Secondly, the objection raised by the respondent/defendant is fully answered against the respondent/defendant as per the celebrated decision of the Supreme Court in the case of United Bank of India V. Naresh Kumar, 1996(6) SCC 660; AIR 1997 SC 3, in which C.C. No. 7419/16 Dated 23.12.2022 Pages 16 judgment the Supreme Court has said that the cases filed by the companies should not be dismissed on technical ground with respect to validity of institution, and in fact the Supreme Court went on further to hold that as long a the suit is contested to the hilt, it ought to be held that the suit was validity instituted and filed. I therefore hold that the Trial court erred in dismissing the suit on the technical ground by returning the finding on issue no.1 that the suit was not validly instituted and filed.
36. In the present case, the said witness Arun Kumar Gupta not a mere employee of the company. Perusal of the crossexamination of CW1 dated 24.01.2014 shows that he is one of the directors of the company. Relevant portion is reproduced hereunder:
"I have been working with the complainant company since 2004. Initially I was an account consultant but now one of the the directors of the complainant company. I was present at the time when the agreement dated 31.01.2009 was executed".
37. The aforementioned testimony of his being one of the directors was not disputed by the Ld. Counsel for the accused. Further, it was duly replied by CW1 that he was authorised by Mr. Ashok Raja, director of the company. No suggestion was given to the witness with respect to his being a director of the complainant company. At this stage, reference may be sought from the Honble Delhi High Court in its judgment titled as VN Deosthali vs State through CBI 2010(1) JCC 466 held as under in para 19 that:
"19. xxxxxxx During crossexamination of this witness, no suggestion was given to him that the registration form Ex. PH1/H was not signed by the appellant or that he was not conversant with the signature of the appellant. Similarly, during crossexamination of PW6 Sh. Avdesh Narain, no suggestion was given to him that Ex. PW1/11 was not signed by the appellant at point A. In fact no suggestion was given to him that the appellant had not stayed in hotel Meridian in the night intervening 1920 February, 1991. When a witness deposes a particular fact and no suggestion to the contrary is given to him in cross examination, the party against whom the deposition is made, is deemed to have admitted that fact".
C.C. No. 7419/16 Dated 23.12.2022 Pages 17
38. Hon'ble Delhi High Court in its judgment titled as Smt. Shashi Bala Vs. Shri Rajiv Arora in FAO No.185/2001 decided on 21.03.2012 held as under in para 11 that:
"11. xxxxxx Consequently, the absence of proper rebuttal or failure of not putting one's case forward would certainly lead to acceptance of testimony of that witness whose deposition remains unchallaenged.xxxxx"
39. Hon'ble Delhi High Court in its judgment titled as Shri Satyendra Kumar Sharma Vs. Jitender Kudsia 2005 (119) DLT 498 held as under in para 5 that:
"5. xxxxxx. There is no dispute with the provision of law that if a witness is not cross examined on a particular point, the opposite party must be deemed to have accepted truth of that statement xxxxx."
40. Hon'ble Supreme Court in its judgment titled as Sarvan Singh Vs. State of Punjab (2003) 1 Supreme Court Cases 240 held as under in para 9 that:
"9. xxxxxx. It is a rule of essential justice that whenever the opponent has declined to avail himself of the opportunity to put his case in cross examination it must follow that the evidence tendered on that issue ought to be accepted xxxxxxx."
41. Ergo, it is undisputed that CW1 is the director of the company and as already mentioned directors and Managing directors are duly authorized to give evidence. CW1 is fully aware of the transaction between the complainant and the accused persons. He is also an attesting witness to the agreement Ex. CW1/7A and Ex. CW1/X2. Therefore, CW1 has full knowledge about the present case and has been involved in the transaction between the complainant and accused persons. Therefore, the contention that CW1 cannot tender evidence does not hold water.
C.C. No. 7419/16 Dated 23.12.2022 Pages 18 (C) The bills filed by the complainant does not match with the cheque amount.
42. Ld. Counsel for the accused contends that rates mentioned in the bills are different from the rates mentioned in the Ex. CW1/7A and EX CW1/X2 which casts a shadow of doubt on the complainant version. The said contradiction is immaterial as after the bills were raised a second agreement between the parties were executed on 26.06.2004 which is Ex. CW1/7A. The para 2 of the Ex. CW1/7A shows that the accused persons had agreed that they had supplied only 547 MT materials against advancement and the accused persons had to supplied the remaining 431 MT at the rate of Rs. 16,000/ per MT plus 2 per cent CST on bill. Further, the para 7 of the said agreement clearly shows that the cheques in question were handed over to the complainant as a security of the amount of Rs. 70,42,960/ and if the material is not supplied within the stipulated time period, the complainant has the power to encash the cheques in question. Relevant para of Ex. CW1/7A is reproduced is hereunder:
"Para 2. Now the seller has agreed that till date they had supplied only 547 MT materials against the above advance money. Now the balance amount due to Buyer is Rs. 70,42,960/(Rs. Seventy Lakhs, Forty Two thousand, Nine Hundred & Sixty only).
Para 3. Now the seller has agreed to supply the remaining 431 MT HMS1 Scrap to the Buyer as per the quality covered under original contract. The seller has to charge agreed rate I.e Rs.16000/ per MT plus 2 per cent CST on bill, If the Seller has charged rate in excess of Rs. 16,000/ per MT, then the Seller has to issue credit note for the excess rate charged by them with the bills. The buyer has immediately issued the debit note for the excess rate charged by the Seller.
Para 4. 431 MT HMS1 Scrap within a period of 45 days from the date of 2nd July 2009, with a grace period of 15 days (Total 60 days). The Seller has supplied 215 MT within 30 days from 2 nd day of July 2009 to 1st Day of August 2009 and remaining 216 MT upto 31 st day of August 2009. There is no extension of time limit in any condition.
C.C. No. 7419/16 Dated 23.12.2022 Pages 19 Para 7. The seller has issued 4 cheques of Kotak Mahinder Bank Nagpur Branch, for the remaining amount of Rs.70,42,960/(Rs. Seventy Lakhs, Forty Two thousand, Nine Hundred & Sixty only) the details of which are as Cheque no.000047 dated 23.06.2009 amount 20,00,000/, cheque no.000048 dated 23.06.2009 amounting to Rs. 20,00,000/, cheque no.000049 dated 23.06.2009 amounting to Rs.20,00,000/ and cheque no.000050 dated 23.06.2009 amounting to Rs.10,42,960/".
43. Ergo, it has been admitted by the accused persons that they had to supply the remaining 431 MT at the rate of Rs. 16,000/ per MT. It has been stated by the accused persons in the statement u/s 251 CrP.C that no agreement was ever entered into with the complainant and some documents were got signed by them alongwith blank cheques at Crime Branch Nagpur under duress. Neither the accused persons have entered into the witness box to prove the said fact nor they examined any other witness to prove the same. Thus mere denial of execution of documents is not sufficient. The onus of proof was on the accused persons to prove that the agreements Ex. CW1/7A and EX. CW1/X2 were executed under any coercion or intimidation, however the same has not been discharged by the accused persons.
44. Reliance may be placed upon the judgment of the Hon'ble Supreme Court in Rohitbhai Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106 wherein Hon'ble Apex court held:
"The observations of the trial court that there was no documentary evidence to show the source of funds with the respondent to advance the loan, or that the respondent did not record the transaction in the form of receipt of even kachcha notes, or that there were inconsistencies in the statement of the complainant and his witness, or that the witness of the complaint was more in know of facts etc. would have been relevant if the matter was to be examined with reference to the onus on the complaint to prove his case beyond reasonable doubt. These considerations and observations do not stand in conformity with the presumption existing in favour of the complainant by virtue of Section 118 and Section 139 of NI Act. Needless to reiterate that the result of such presumption C.C. No. 7419/16 Dated 23.12.2022 Pages 20 is that existence of a legally enforceable debt is to be presumed in favour of the complainant. When such a presumption is drawn, the factors relating to the want of documentary evidence in the form of receipts or accounts or want of evidence as regards source of funds were not of relevant consideration while examining if the accused has been able to rebut the presumption or not.
(D) That Ashok Raja director of the company was not examined by the complainant.
45. Ld. Counsel for the accused argues that best evidence should have been brought by the complainant by examining Ashok Raja as he was the material witness and was involved in the transactions between the complainant company and the accused persons. The said contention is unsustainable as CW1 Arun Kumar Gupta specifically replied to the question put up in his crossexamination dated 12.03.2014.
"Q. Mr. Ashok Raja is the right person to tell regarding the terms and condition and dealing with accused person as he was directly in touch with the accused persons regarding the terms and condition of supplying of goods to complainant company.
A. I am also the witness of the agreement dated 31.01.2009. Further, I am also in touch with the accused regard to supply of material and was also present during the execution of second agreement dated 23.06.2009 and was also witness to the same.Though I know the entre facts but Mr. Ashok Raja would also know the same".
46. Thus, it was not required for the complainant company to examine Mr. Ashok Raja as all the transactions were also witnessed by CW1. If the accused wanted to examine Ashok Raja as witness, they could have summoned the witness with the permission of the court. However, the same was not done for the best reasons known to the accused persons.
47. Ergo, evaluation of the entire defence pleas shows that the accused has failed to rebut the presumption u/s 118 (a) read with Sec 139 of the NI Act by establishing a probable defence on a standard of preponderance of probabilities. Therefore, the accused has failed to create any reasonable doubt in the complainant's claim and failed to prove that no liability existed towards the complainant.
C.C. No. 7419/16 Dated 23.12.2022 Pages 21 Conclusion :
48. This court finds that a legally enforceable debt existed in favour of the complainant in the present case, impugned cheque was given by the accused in discharge of debt which got dishonoured. Execution of cheque is admitted by the accused. The accused failed to make payment to the complainant even after receiving the legal demand notice.
Decision:
49. In view of the above discussion, the accused is convicted for the offence under section 138 of the Act.
50. Let the accused be heard on the quantum of sentence on 30.01.2023.
51. Copy of this judgment be given to the accused dasti.
Announced in the open court on (P. BHARGAV RAO) 23.12.2022 MM01/NI Act/WEST/THC/DELHI 23.12.2022
It is certified that this judgment contains 22 pages and each page bears my signature.
(P. BHARGAV RAO) MM01/NI Act/WEST/THC/DELHI 23.12.2022 *The judgment could not be digitally signed today due to non functioning of digital signature certificate.
C.C. No. 7419/16 Dated 23.12.2022 Pages 22