Delhi District Court
Court In Case Titled M. S. Narayana Menon vs . State Of Kerala Air 2006 Sc on 28 July, 2012
IN THE COURT OF SH. ARVIND BANSAL
METROPOLITAN MAGISTRATE03, NI ACT
NEW DELHI DISTRICT: NEW DELHI
JUDGMENT
Chaitnaya Dalmia S/o Sh. Ajay Hari Dalmia R/o 1, Tees January Marg, New Delhi Through his General Power of Attorney Sh. Hari Ballabh S/o Sh. Pitambar Dutt R/o H.No. 1777, DDA Flats, Nand Nagari, Delhi110095 .....Complainant Versus
1. M/s Paam Pharmaceuticals (Delhi) Limited 13, Alipur Road, The Exchange Store Building Civil Lines, Delhi110054
2. Sh Anil Bhargava (Chairman cum Managing Director) M/s Paam Pharmaceuticals (Delhi) Limited 3, Bhargava Lane, Nityanand Marg, Civil Lines, Delhi110054
3. Sh Arvind Bhargava Director, M/s Paam Pharmaceuticals (Delhi) Limited 3, Bhargava Lane, Nityanand Marg, Civil Lines, Delhi110054
4. Sh Mukesh Bhargava CC No. 3746/1(Original CC No.18/1/98) Page No. 1/49 Director, M/s Paam Pharmaceuticals (Delhi) Limited 3, Bhargava Lane, Nityanand Marg, Civil Lines, Delhi110054
5. Smt Prabha Rani Bhargava Director, M/s Paam Pharmaceuticals (Delhi) Limited 3, Bhargava Lane, Nityanand Marg, Civil Lines, Delhi110054
6. Sh P.D Nigam Director, M/s Paam Pharmaceuticals (Delhi) Limited A2, Multi Storey Building, Baba Kharak Singh Marg, New Delhi110001
7. Sh Akhil Swamy (nominee DirectorPICUP) Care of PICUP, 4A, Vandana Building, 11, Tolstoy Marg, New Delhi110001
8. Sh T.N Bhan D15, Pamposh Enclave, New Delhi110048
9. Sh Lalit Khaitan Director, M/s Paam Pharmaceuticals (Delhi) Limited 39, Friends Colony (East), New Delhi
10. Sh K.S Mehta Director, M/s Paam Pharmaceuticals (Delhi) Limited CC No. 3746/1(Original CC No.18/1/98) Page No. 2/49 9 A, Atmaram House, 1, Tolstoy Marg, New Delhi
11. Sh Vaidyanathan Raiaraman D97, Anand Niketan, New Delhi110020
12. Sh Rakesh Gogia Vice President (Corporate Affairs) M/s Paam Pharmaceuticals (Delhi) Limited 13, Alipur Road, The Exchange Store Building, Civil Lines, Delhi110054
13. Sh S.K Gupta Vice President (Finance) Director, M/s Paam Pharmaceuticals (Delhi) Limited 13, Alipur Road, The Exchange Store Building, Civil Lines, Delhi110054.
14. Sh. S. C. Arora G.M. Marketing, M/s Paam Pharmaceuticals (Delhi) Limited 13, Alipur Road, The Exchange Store Building, Civil Lines, Delhi110054.
.....Accused
(a) Complaint Case No: 3746/1(Original CC No.18/1/98)
(b) Date of Institution: 02.01.1998
(c) Offence: U/s 138 N I Act
CC No. 3746/1(Original CC No.18/1/98) Page No. 3/49
(d) Plea of accused: Pleaded not guilty and claimed trial.
(e) Argument heard and
reserved for order: 10.07.2012
(f) Final Order: Accused no. 1, 2 & 3 Convicted
Accused no. 4 & 5 Acquitted
(g) Date of Judgment: 28.07.2012
BRIEF REASONS FOR JUDGMENT:
FACTS OF THE CASE:
1. Before deciding upon the issues involved in the present complaint under Section 138 of Negotiable Instruments Act, 1881 (hereinafter referred to as 'the Act'), it is necessary here to adumbrate the facts which form the basis of present complaint. It is the averment of the complainant Chaitanya Dalmia that accused no. 1 is a public limited company incorporated and registered under the Companies Act, 1956. It is averred that accused no. 2 is the Chairman and Managing Director, accused no. 3 to 11 are the Directors and accused no. 12 to 14 are the Officers of accused no. 1 and being that accused no. 2 to 14 are persons incharge of and responsible to accused no. 1 for the conduct of its business and affairs at the relevant time. It is averred in the complaint that accused no. 2 to 11 being the Directors of accused no. 1 in their meeting held on 24.09.1996, approved a fixed deposit scheme and for that purpose an advertisement, which was approved by them in the said meeting, was issued under the authority and in the name of Board of Directors of accused no. 1 and CC No. 3746/1(Original CC No.18/1/98) Page No. 4/49 the said advertisement was submitted with the Registrar of the Companies, New Delhi. It is averred that the fixed deposits under the aforesaid scheme were invited by the accused persons with a promise of an ambitious growth plan to put up a state of art factory with the funds so collected from the depositors.
2. It is averred that the complainant in response to and under the aforesaid scheme deposited a sum of Rs. 30,00,000/ with the accused persons as fixed deposit with interest @ 15 per cent per annum vide FDR No. 4223 dated 31.03.1997 for a period of six months, which was repayable with interest on 30.09.1997.
3. It is averred that the complainant again deposited a sum of Rs. 5,00,000/ with the accused persons as fixed deposit with interest @ 15 per cent per annum vide FDR No. 1305 dated 16.05.1997 for a period of six months, which was repayable with interest on 15.11.1997.
4. It is averred that the accused persons in discharge of their legal debt / liabilities towards the complainant issued three cheques bearing no. 532696 dated 30.09.1997 for Rs. 30,00,000/ drawn on PNB, Civil Lines, Delhi; cheque bearing no. 057635 dated 15.11.1997 for Rs. 5,00,000/ drawn on UTI Bank Ltd, B.K. Road, New Delhi and cheque bearing no. 057636 dated 15.11.1997 for Rs. CC No. 3746/1(Original CC No.18/1/98) Page No. 5/49 34,830/ drawn on UTI Bank Ltd, B.K. Road, New Delhi (The last cheque as a payment of interest on the aforesaid deposits after deducting the TDS).
5. It is averred that the complainant presented the aforesaid cheques for encashment through his banker i.e PNB, 74, Janpath Branch, New Delhi but the cheques were returned unpaid by the banker of the accused with remarks 'Exceeds Arrangement' vide intimation letter / Debit advice dated 01.11.1997, 20.11.1997 and 19.11.1997 and cheque return memos dated 31.10.1997, 19.11.1997 and 18.11.1997 respectively.
6. It is further averred that the complainant served two legal notice dated 10.11.1997 and 03.12.1997 through his lawyer for dishonor of the aforesaid cheques calling upon each of the accused to pay the aforesaid cheque amounts, by Registered AD. It is averred that despite service, the accused did not pay the dishonored cheques amounts, however, accused no. 1 replied the aforesaid legal notice dated 10.11.1997 vide a letter dated 14.11.1997, expressing its inability to pay the said amount and accused no. 10,6 and 9 sent their replies dated 08.12.1997, 09.12.1997 and 18.12.1997 with respect to the notice dated 03.12.1997 to the complainant simply stating therein that they had resigned from the Directorship of accused no. 1 on 29.09.1997 and that they are not liable to the said amount to the complainant. It is averred that none of the accused paid CC No. 3746/1(Original CC No.18/1/98) Page No. 6/49 the cheque amount despite service of legal notice and thus, the complainant filed the present complaint under Section 138 read with 141 of the Act. It is averred that the complaint is within the period of limitation. PROCEEDINGS BEFORE THE COURT:
7. The court took cognizance of the offence on the aforesaid facts and the accused was summoned vide order dated 02.04.1998 for the offence u/s 138 of the Act in respect of the dishonor of the aforesaid cheque. Thereafter, the complainant dropped proceedings against accused no. 6 to 14. The trial was commenced only against accused no. 1 to 5. Notice u/s 251 Cr. P.C. for the offence u/s 138 of the Act was served upon accused No. 1 to 5 on 21.08.2004, to which they pleaded not guilty and claimed trial.
8. The complainant filed a post summoning affidavit in the name of Mr. Hari Ballabh S/o Sh. Pitambar Dutt, Attorney of the complainant. The Power of Attorney dated 18.12.1997 executed in favour of AR is Exhibit PW1/1. The FDR No. 4223 dated 31.03.1997 is Ex. PW 1/2. The FDR No. 1305 dated 16.05.1997 is Ex. PW 1/3. The dishonored cheque no. 532696 is Ex. PW 1/4. The dishonored cheque no. 057635 is Ex. PW 1/5. The dishonored cheque no. 057636 is Ex. PW 1/6. The intimation letters / debit advice are Ex. PW 1/7 to Ex. PW 1/9 respectively. The cheques return memo's are Ex. PW 1/10 to Ex. PW 1/12 CC No. 3746/1(Original CC No.18/1/98) Page No. 7/49 respectively. Legal demand notice dated 10.11.1997 is Ex. PW 1/13. Postal receipt for the said legal notice are Ex. PW 1/14 to Ex. PW 1/24. The respective AD cards are Ex. PW 1/25 to Ex. PW 1/32. Legal demand notice dated 03.12.1997 is Ex. PW 1/33. Postal receipt for the said legal notice are Ex. PW 1/34 to Ex. PW 1/47. The respective AD cards are Ex. PW 1/48 to Ex. PW 1/52.
The reply of accused no. 1 dated 14.11.1997 to the legal notice dated 10.11.1997 is mark A. The replies of accused no. 10, 6 and 9 dated 08.12.1997, 09.12.1997 and 18.12.1997 to the legal demand notice dated 03.12.1997 are mark B, C and D respectively. CW 1 Mr. Hari Ballabh was duly crossexamined by the Counsel for accused no. 1 to 5. Thereafter, on request and separate statement of AR of complainant (dated 30.09.2010) CE was closed.
9. The statements of all the accused were recorded u/s 313 Cr. P.C. on 08.11.2010 wherein all incriminating material existing on record including exhibited documents were put to the accused to which the stand of every accused was of general denial.
Accused no. 2 stated that it was correct that he was the Chairman and Manging Director of Accused no. 1 company and was incharge and responsible for the conduct of its business during the period of year 1996. He stated that it was also correct that Board of Director of accused no. 1 company had approved a fixed deposit scheme and had issued an advertisement and sent it to ROC, for CC No. 3746/1(Original CC No.18/1/98) Page No. 8/49 the same purpose. He stated that he did not know whether complainant had deposited a sum of Rs. 30,00,000/ and Rs. 5,00,000/ vide separate FDR receipts, which were to be repaid with interest @ 15 per cent per annum. He stated that he did not know when the impugned cheques were issued and by whom the same were issued. He stated that he had no knowledge of the presentation of the cheques and dishonor thereof. He denied the receipt of legal demand notice. He stated that he did not know whether accused no. 1 had replied the legal demand notice of the complainant. He also stated that after passing of the Resolution by Board of Directors that the company shall start the fixed deposit scheme, he left the country and went to US to look after his ailing son. He stated that day to day affairs of the company were looked after by the paid Directors and Executive Directors of the company such as Ashok Dutta, Rakesh Gogia, S.K.Gupta and one Mr. Arora and Ors. He stated that he had no role in the day to day functioning and working of the company.
Accused no. 3 stated that it was correct that he was the Director of Accused no. 1 company and was incharge and responsible for the conduct of its business during the period of year 1996. He stated that it was also correct that Board of Director of accused no. 1 company had approved a fixed deposit scheme and had issued an advertisement and sent it to ROC, for the same purpose. He stated that it was correct that complainant had deposited a sum of Rs. 30,00,000/ and Rs. 5,00,000/ vide separate FDR receipts, which were to be CC No. 3746/1(Original CC No.18/1/98) Page No. 9/49 repaid with interest @ 15 per cent per annum. He stated that he had resigned by the time the impugned cheques were issued to complainant, presented and got dishonored. He denied the receipt of legal demand notice. He also stated that he did not have knowledge of any reply by accused no. 1 company to complainant because he has resigned by that time. He further stated that before presenting the cheques, the complainant was required to surrender the FDR at least 15 days prior to the presentation of cheques. He stated that the said terms is clearly written on the back of FDR but the complainant never surrendered the FDR with the company and therefore, the company was never put to a notice that certain FDR's issued in favour of complainant were to be discharged and thus they were required to keep requisite amount in their account. He also stated that he was not aware as to when these FDR were issued to complainant by Sh. Rakesh Gogia etc., when the impugned cheques were issued in favour of the complainant, by whom they were issued and when they were handed over to the complainant.
Accused no. 4 stated that it was correct that he was the Director of Accused no. 1 company and was incharge and responsible for the conduct of its business during the period of year 1996. He stated that it was also correct that Board of Director of accused no. 1 company had approved a fixed deposit scheme and had issued an advertisement and sent it to ROC, for the same purpose. He stated that he had resigned by the time complainant deposited a CC No. 3746/1(Original CC No.18/1/98) Page No. 10/49 sum of Rs. 30,00,000/ and Rs. 5,00,000/ vide separate FDR receipts, which were to be repaid with interest @ 15 per cent per annum. He stated that he had resigned by the time the impugned cheques were issued to complainant, presented and got dishonored. He denied the receipt of legal demand notice. He also stated that he did not have knowledge of any reply by accused no. 1 company to complainant because he has resigned by that time. He stated that he had no knowledge with whom the complainant made these deposits and who had issued the cheques in favour of the complainant. He stated that because he was not the Director and thus, not responsible for day to day functioning and affairs of the company. He stated that he had no liability to discharge qua the cheques in question.
Accused no. 5 (through Counsel Sh. Neeraj Kumar) stated that it was correct that she was the Director of Accused no. 1 company but was not in charge and responsible for the conduct of its business during the period of year 1996. She stated that it was also correct that Board of Director of accused no. 1 company had approved a fixed deposit scheme and had issued an advertisement and sent it to ROC, for the same purpose. She stated that she had resigned by the time complainant deposited a sum of Rs. 30,00,000/ and Rs. 5,00,000/ vide separate FDR receipts, which were to be repaid with interest @ 15 per cent per annum. She stated that she had resigned by the time the impugned cheques were issued to complainant, presented and got dishonored. CC No. 3746/1(Original CC No.18/1/98) Page No. 11/49 She denied the receipt of legal demand notice. She also stated that she did not have knowledge of any reply by accused no. 1 company to complainant because she had resigned by that time. She stated that she had no knowledge with whom the complainant made these deposits and who had issued the cheques in favour of the complainant. She stated that because she was not the Director and thus, not responsible for day to day functioning and affairs of the company. She stated that she had no liability to discharge qua the cheques in question.
All the accused expressed their willingness to lead defence evidence.
10. The accused produced Mr. Gopal Sharma, Senior Manager, PNB, Asset Recovery Management Branch as DW 1. He produced the certified copy of minutes of meeting of the Board of Directors of Paam Pharmaceuticals (Delhi) Ltd. held on 23.11.1992 and 26.10.1988. The same are mark A and B respectively. The witness was crossexamined by Counsel for complainant. DW 1 stated during the crossexamination that he was not aware as to who was authorized in the year 1997 to sign cheques on behalf of accused company related to accounts maintained with PNB, Civil Lines, Delhi.
The accused produced Mr. Arun Kumar, SI No. D575, EOW Crime Branch, New Delhi as DW 2. He deposed that he was conducting supplementary investigation of FIR No. 723/2000 PS Connaught Place. He deposed that this case was initially investigated by SI Neeraj Arora and he filed CC No. 3746/1(Original CC No.18/1/98) Page No. 12/49 chargesheet in this case and most of the documents seized by him have been filed alongwith the chargesheet. He deposed that the documents being sought i.e. minutes of the meeting are not with him.
Thereafter, accused no. 4 sought permission to examine himself as DW. He was examined in chief on 05.08.2011. He deposed that he had resigned from the accused no.1 company way back on 30.09.97 and he had also submitted Form no.32 with the Registrar of Companies. He again deposed that he had filed his resignation with the company and the company had forwarded his resignation with Form no.32 to ROC. He produced the certified copy of Form no. 32, which is Ex.DW3/1. He deposed that he was not looking after any day to day affairs of the company M/s Paam Pharmaceuticals (Delhi) Ltd. He deposed that he never met the complainant and he did not know in what context, the cheque in question was issued to the complainant. He deposed that he did not know when and why the impugned cheque was issued to the complainant. He further deposed that he did not have any liability to pay any amount to the complainant either individually or as Director of accused no.1 company. He was duly cross examined by the Counsel for complainant on 22.09.2011. Thereafter, on request of counsel for accused, defence evidence was closed and matter was fixed for final arguments.
11. Final arguments were advanced on behalf of the complainant and the CC No. 3746/1(Original CC No.18/1/98) Page No. 13/49 accused by their respective counsels. I have carefully gone through the material placed on record by both the parties and the case laws relied upon by both of them.
INGREDIENTS OF OFFENCE :
12. For proving an offence u/s 138 of the Act, all the following ingredients are required to be fulfilled:
1) That there is a legally enforceable debt or liability,
2) The drawer of the cheque issued the cheque to discharge in part or whole the said legally enforceable debt or liability,
3) The cheque so issued was returned unpaid by the banker of the drawer,
4) Legal demand notice was served upon the accused and the accused failed to make the payment within 15 days of the receipt of said notice.
LAW OF PRESUMPTIONS UNDER THE ACT:
13. Before deciding ingredient no. 1 and 2, it is necessary here to reproduce section 118 (a) and section 139 of the Act which deal with the law particularly necessary to decide ingredient no. 1 and 2. The Section 118 (a) reads as:
"that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been CC No. 3746/1(Original CC No.18/1/98) Page No. 14/49 accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration".
And Section 139 of the Act reads as under:
"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, or any debt or other liability".
14. The said two sections have been elaborately discussed, and interpreted by the Hon'ble Supreme Court in a series of judgments. The Hon'ble Supreme Court in case titled M. S. Narayana Menon Vs. State of Kerala AIR 2006 SC 3366 made the following observations:
"32. Applying the definitions of 'proved' and 'disproved' to the principle behind Section 118 (a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non existence of the consideration so probable that a prudent matter ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. CC No. 3746/1(Original CC No.18/1/98) Page No. 15/49 Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon."
15. The following observations of the Hon'ble Supreme Court in Hiten P. Dalal Vs. Bratindra nath Banerjee (2001) 6 SCC 16, at this stage are also important;
"..because both Sections 138 and 139 require the Court 'shall presume' the liability of the drawer of the cheques for the amounts for which the cheques are drawn... it is obligatory on the Court to raise this presumption in every case where the factual basis for raising the presumption has been established. It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused".
Reading of Section 118 (a) and 139 of the Act and observations of the Supreme Court provides two settled principles of the law, which are:
1. It shall be mandatory upon the court to presume,
(a) the issuance of cheque for legally enforceable liability by the drawer, and
(b) the existence of legally enforceable debt/liability as such of the drawer.
2. The burden of proof to rebut these presumptions lies upon the CC No. 3746/1(Original CC No.18/1/98) Page No. 16/49 accused.
The court through the appreciation of evidence on record shall examine whether the accused has successfully rebutted the dual presumptions of law raised against him by the court.
APPRECIATION OF EVIDENCE: INGREDIENTS NO.1 & 2:
16. It is the case of the complainant that he deposited a particular amount in a Fixed Deposit Scheme of the accused company for a period of six months. The accused company issued the impugned cheques against the repayment of the Principal amount deposited by complainant and the amount of interest accrued thereupon. The cheques got dishonour on presentation and the complainant issued a legal demand notice to accused to pay the dishonoured cheques amount but accused failed to pay the same despite service of legal notice and hence, the present complaint was filed.
17. The complainant through his complaint, affidavit, the dishonored cheque, return memo and legal demand notice has created a factual basis to raise dual presumptions under Section 139 of the Act i.e. of issuance of cheque for legally enforceable liability and of the existence of legally enforceable liability as such.
18. To the case of complainant, it is the defence of accused, first that the CC No. 3746/1(Original CC No.18/1/98) Page No. 17/49 impugned cheques were never issued to discharge any legally enforceable liability, second that no legally enforceable liability ever arose against the accused because the complainant never surrendered the original FDR in compliance of the terms of FDR, third that the attorney holder of complainant is not legally authorized to depose on behalf of complainant and therefore, the complaint is liable to be dismissed, fourth that none of the present accused persons was incharge and responsible for the day to day affairs of the company and thus not responsible for conduct of business (as accused no. 3 and 4 had already resigned) and fifth that legal demand notice was never served upon any of the accused persons and therefore, they cannot be held liable for the offence U/s 138 NI Act.
19. To prove their innocence and to rebut the dual presumptions of law, accused duly crossexamined the complainant witness and produced some defence witness.
20. The accused have specifically questioned the complainant witness on their first and second defence of nonexistence of legally enforceable liability and nonissuance of impugned cheques for discharge of any such liability.
CW 1 testified in his crossexamination that he was aware that as per clause 2 of FDR, the payment was to be made by the accused only after its CC No. 3746/1(Original CC No.18/1/98) Page No. 18/49 discharge 15 days prior to date of maturity. He testified because they had received the cheques and the accused company did not ask for the FDR, the same remained with them even after discharge of the same. He also testified that FDR(s) were not surrendered as it was dependent upon the accused company to insist or not to insist for it. He testified that complainant had received the impugned cheques on the maturity of FDR's. He testified during crossexamination that since accused no. 1 did not demand the FDR, therefore, the cheques were received without surrendering the FDR.
CW 1 also testified that it was correct that impugned cheques were given in discharge of liability of FDR and liability would have arisen, had the FDR's been surrendered to the accused company 15 days prior to its maturity. CW 1, at this stage, volunteered to depose that it was only the accused company which could explain as to why the impugned cheques were issued without having FDR.
21. It is the argument of the defence Counsel that payment of FDR amount and interest accrued thereupon was contingent to the surrender of original FDR by complainant to the accused company. It is the argument that because the FDR was never surrendered in compliance of the terms of fixed Deposit, the legal liability of accused to pay the FDR amount alongwith interest never arose and remained subject to contingency of surrender of original FDR. It is also the argument that omission on the part of complainant to surrender the CC No. 3746/1(Original CC No.18/1/98) Page No. 19/49 original FDR(s), restricted the liability that accused on due date of maturity from crystallizing into a 'legally enforceable liability' and therefore, accused cannot be held liable for dishonour of a cheque allegedly issued for any such liability.
22. After due scrutiny of relevant documents and evidence on the aforesaid issue and defence of the accused, it is the opinion of the Court that first, the condition of surrender of original FDR with accused company 15 days prior to the due date cannot be said to be 'condition contingent' to either the maturity of FDR which was bound to become due on the expiry of period of six months or to the accrual of the consequent liability.
As submitted by counsel for accused, the condition of surrender may be an intimation of fact that the subscriber seeks his money back and does not want to get the same rolled over, but the same does not favorably apply in the facts of present case because had the purpose of surrender been an necessary intimation only, the accused would not have issued the impugned cheques to the complainant without surrender of the same in original.
Issuance of impugned cheques reflects the intention of accused company to forgo the condition of surrender of original FDR. Even otherwise, the surrender of FDR appears only to be a mode for demanding back the principal amount alongwith interest accrued thereupon and not a condition affecting the accrual of legal liability. The liability that became due on the date of maturity of CC No. 3746/1(Original CC No.18/1/98) Page No. 20/49 FDR's concerned, in opinion of Court, crystallized into an 'enforceable liability' with the issuance of impugned cheque against the payment of maturity amount.
23. The argument that cheques could not have been issued without surrender of original FDR's has remained a bald averment on part of the accused as the accused could neither prove (or even assert) that the cheque were issued as a security against the FDR's nor could it prove that cheques were never issued by the accused company at all. The accused have also failed to place any such instance or practice of the company before the Court wherein the company had first accepted the original FDR's from investor and thereafter issued a cheque of maturity amount.
The arguments / defence of the accused that complainant might have come in possession of these cheques in connivance with the two officers of accused company i.e. Mr. Rakesh Gogia and Mr. Gupta has also fallen to ground as a mere suggestion to complainant witness uncorroborated by any evidence of any sort.
24. Thus, the defence of the accused that cheuqes were never issued to complainant against any legally enforceable liability and that no such liability ever arose, does not appear to be probable in the present factual situation.
It is more so because of the reason that accused have failed to rebut or CC No. 3746/1(Original CC No.18/1/98) Page No. 21/49 even challenge investment of the fixed deposit amount, the issuance of an FDR therefore, and the mode manner or time of issuance of impugned cheques to the complainant. Such an infirmity in the defence of accused has acted fatal in the rebuttal of dual legal presumption raised by Court against the accused whereby the initial burden lies upon the accused to rebut the 'issuance of impugned cheques and existence of liability as such'
25. It is also the defence of the accused that attorney / AR of complainant was not entitled to depose as a complainant witness substituting complainant as a material witness in the present matter. The defence Counsel, for this purpose drew the attention of Court to Section 142 (a) of the Act which reads as under:
Section 142. Cognizance of offences: Nothwithstanding anything contained in the Code of Criminal Procedure, 1973:
(a) No Court shall take cognizance of any offence punishable U/s 138 except upon a complaint in writing, made by the payee or, as the case may be, the holder in due course of the cheque;....
It is the arguments that CW 1 is neither a 'payee' nor a 'holder in due course' and therefore, cognizance of offence on complaint of attorney holder could not have been taken in the first place and secondly, he could not have CC No. 3746/1(Original CC No.18/1/98) Page No. 22/49 legally deposed as a substituted witness. It is the argument that such a defect in evidence of complainant cannot be cured and the case of complainant should fall apart in absence of a competent witness.
26. At this juncture, it is pertinent to quote the following observations of the Hon'ble Supreme Court of India in case title Janki Vashdeo Bhojwani Vs. IndusInd Bank Ltd., AIR 2005 SC 439:
17. On the question of Power of Attorney, the High Courts have divergent view, In case of Shambu Dutt Shastri Vs. State of Rajasthan, 1986 (2) WLL 713, it was held that a general power of attorney holder can appear, plead, act on behalf of the party but he cannot become a witness on behalf of the party. He can only appear in his own capacity. Noone can deligate the power to appear in witness box on behalf of himself. To appear in a witness box is altogether a different act. A general power of attorney holder cannot be allowed to appear as a witness on behalf of the plaintiff in the capacity of the plaintiff.
18. ... Power of attorney of a party can appear only as a witness in his personal capacity and whatever knowledge he has about the case, he can state on oath but he cannot appear as a witness on behalf of the party in the capacity of that party. ... CC No. 3746/1(Original CC No.18/1/98) Page No. 23/49
...
21. We hold that the view taken by Rajasthan High Court in the case of Shambu Dutt Shastri (Supra).... is the correct view.
27. The Hon'ble Supreme Court made the aforesaid observations in the peculiar circumstances of the case in hand, where power of attorney holder did not have the personal knowledge of the matter. The Hon'ble Superme Court interalia observed that if the power of attorney holder has rendered some "acts" in pursuance to the Power of Attorney, he may depose for the Principal.
28. On the similar issue, the Hon'ble High Court of Delhi observed in the case titled Ravi Gupta Vs. R.C. Tiwari, II (2008) DLT (Crl.) 279 as following:
13. The Supreme Court in Jimmy Jahangir Madan therefore, did not hold that a complaint U/s 138 NI Act cannot be filed through a POA....
14. ....This criteria is satisfied as the complaint is in the name and on behalf of the appellant company. Further, it was observed "even presuming, that initially there was no authority, still the company can, at any stage, rectify that defect. At a subsequent stage the company can send a person who is competent to represent the company."
CC No. 3746/1(Original CC No.18/1/98) Page No. 24/49
15. ....In Ruby Leather Exports Vs. V.K. Venu, III 1994 (1) Crimes 820, a DB of the Madras High Court answered the question whether the POA of a payee could file a complaint U/s 142 NI Act as under: "......it makes no difference, if the POA is executed by one individual in favour of another or executed by a company in favour of a particular person.
16. Later, another DB of Hon'ble Madras High Court in K.Gopalakrishnan Vs. Karunakaran, 2006 Cri LJ 4365 reaffirmed its earlier view in Ruby Leather Exports (Supra). The Madras High Court referred to the judgment of the Supreme Court in Ravulu Subba Rao Vs. Commissioner of Income Tax, Madras, AIR 1956 SC 604 on the scope and ambit of Section 2 of the Powers of Attorney Act, 1882. The Madras High Court explained the position as under:
"9. ....Every person has a right to appoint an agent for any purpose except in cases where the act is to be performed is personal in character or is annexed to a public office or an act involving a fiduciary obligation. Apart from the above mentioned exceptions, the law is clear that whatever a person can do himself, he can do it through an agent..... CC No. 3746/1(Original CC No.18/1/98) Page No. 25/49
10. Section 2 of Power of Attorney Act, 1882 makes it clear that POA can execute or do any instrument or thing in and with his own name and signatures and his own seal, where sealing is required by the authority of the donor of the power, and every instrument and thing so executed and done, shall be effectual in law as if it had been executed or done by the donee of the power. ... therefore, the power of attorney has the authority to act on behalf of the principal and the acts done by him in exercise of that authority are protected even if done in his own name...."
The Madras High Court has further examined the question whether, in the event of complaint being filed through a POA, the complainant should nevertheless be present at the stage of recording of evidence. The Court explained as under:
"14. ...We are of the view that actual complainant is also to be examined on oath on his appearance on a future date before the Magistrate is unwarranted and unnecessary. If the examination of the complainant on oath at a future date to enable CC No. 3746/1(Original CC No.18/1/98) Page No. 26/49 the Magistrate to exercise his discretion under Section 202 or 203 of the Code is necessary, then there will be no need or necessity for the POA to file the complaint on behalf of the principal......such examination of the complainant on a future date to enable the Court to exercise its discretion would run counter to the scheme of the Code which has not provided for review.....
15. Once the Power of Attorney agent makes the complaint, for all practical purposes, it is for the payee or holder in due course of the cheque and the power of attorney agent steps into the shoes of the payee or holder in due course of the cheque...."
17. ....in K. Ramachandra Rao Vs. State of AP, 2005(2)ALD 607, the Full Bench refer to the provision of Section 183 of the Contract Act, 1973 and the decision of the Supreme Court in Ram Chandra Vs. State of Bihar, AIR 1967 SC 349 and held:
" (since) the right accrued to the payee or the holder in due course of a dishonored cheque does not fall within the three CC No. 3746/1(Original CC No.18/1/98) Page No. 27/49 exceptions to the rule qui facit per alium, facit per se recognised by Section 183 of the Contract Act, i.e. since the act to be performed
(i) is not personal in its character,....we hold that the POA of a payee or holder in due course of a dishonored cheque can file a complaint for an offence U/s 138 of the Act..."
20. The legal position emanating from the above decisions can be summarized as follows:
....
(v) The examination of POA holder upon oath at the time of presentation of complaint and reduction into writing the substance of such examination shall be sufficient compliance with the procedure contemplated under Cr. PC. It is unnecessary thereafter for the complainant to also be examined on oath on his appearance on a future date.
29. On this issue of authority of power of attorney holder, the Hon'ble Supreme Court while dealing with a matter U/s 138 of the Act, in case titled Shankar Finance and Investments Vs. State of AP, 2008 (3) LRC 177 (SC), made the following significant observations:
11. The assumption of the High Court that where the payee is a proprietary concern, the complaint can be signed only CC No. 3746/1(Original CC No.18/1/98) Page No. 28/49 by the Proprietor of the proprietary concern and not by a POA holder of the Proprietor, is not sound....
12. ..Where the attorney holder of the complainant is in charge of the business of the payeecomplainant and the attorney holder alone is personally aware of the transactions and the complaint is signed by the attorney holder on behalf of the payee complainant, there is no reason why the attorney holder cannot be examined as the complainant....
30. The reading of the aforesaid judgments on the authority of POA holder in a case U/s 138 of the Act and otherwise, makes it explicit beyond doubt that he can appear as a witness independently to depose on the facts in his personal knowledge. There hardly remains any doubt on the proposition that a complaint U/s 138 of the Act can be filed and signed by POA holder without the necessary presence of the complainant. The aforesaid judgments also crystallize the proposition, that the offence U/s 138 of the Act is in the nature of a technical offence and on filing of the complaint U/s 138 of the Act, the POA holder falls into the shoes of the payee for all practical purposes and because the right accrued to the payee of dishonored cheque does not fall within the exceptions of the rule of qui facit per alium, facit per se, a POA holder can depose on behalf of the payee of the dishonored cheque, into a settled CC No. 3746/1(Original CC No.18/1/98) Page No. 29/49 principle of law.
31. Applying the aforesaid principles in the present factual matrix, there is no reason to interpret that CW1 i.e. the Attorney holder of the complainant could not have deposed in place of the complainant. Even otherwise, the witness has deposed on facts which were in his personal knowledge and the facts which he had come to know through the records of the case. The accused have failed to show either any instance during the entire cross examination of CW1 which could have been better answered by the personal knowledge of the complainant himself or that CW1 did not have the necessary personal knowledge to depose on the facts of the present case. The accused have further failed to establish on record that the non examination of the complainant himself has prejudiced the interests of the accused in any way or that the independent deposition of the complainant was utmost necessary on some aspects of the present complaint case. In opinion of the Court, a POA holder can validly depose on behalf of the complainant in a case U/s 138 of the Act, which is a technical offence and the evidence in which is more documentary in nature. Such a proposition may not be acceptable in a cases such as that of friendly loans wherein the complainant personally transacts with the accused and the transaction is more oral in nature. The fact situation of the present complaint case is entirely different where the entire transaction CC No. 3746/1(Original CC No.18/1/98) Page No. 30/49 is documented and the personal knowledge of the complainant did not have much role to play.
Even otherwise, CW 1 who is an attorney holder of the complainant fulfills the condition laid down by the Hon'ble Supreme Court in Janki Vashdeo Bhojwani (Supra) as CW 1 has been a part of the entire transaction in question and has been personally aware of all the facts leading to the filing of the present complaint case. Therefore, the reliance placed by accused on the said judgment to argue that CW 1 was not the competent witness and could not have deposed substituting complainant as a witness, is factually misconceived and cannot be agreed upon.
32. It is further the defence of all the accused (no. 2 to 5) that they have never been the persons incharge of day to day affairs of the accused company and responsible for the conduct of its business. It is further the defence of accused no. 3, 4 and 5 that they had resigned from the Directorship of the accused no. 1 company prior to the date of commission of offence and therefore, they cannot be held vicariously liable for the liability of the company. It is the defence of accused no. 2 that although, he was the Chairmancum managing director of accused no. 1 company but during the relevant period, he was out of India to look after his ailing son and therefore, he can also not be held responsible for the liability of the company. Besides the aforesaid CC No. 3746/1(Original CC No.18/1/98) Page No. 31/49 defences, it is the common defence of accused no. 2 to 5 that the complainant has not made any specific allegation against any of them in the present complaint and therefore, no role for being responsible for the day to day affairs and conduct of business can be attributed to any of them.
33. The issuance of impugned cheque by / on behalf of accused no. 1 company is not disputed by the accused. It further stands established from the name of the accused no. 1 company 'Printed' on the impugned cheque.
Further, it is a settled proposition of law U/s 138 of the Act that only a person on whose account the impugned cheque is drawn, can be held responsible for the offence U/s 138 of the Act (subject to provisions of Section 141 of the Act). The following observations of Hon'ble Supreme Court in case titled P J Agro Tech Limited Vs. Water Base Ltd., 2010 (12) SCC 146 are significant to be quoted:
"8.... from reading of the Section it is very clear that in order to attract the provisions thereof a cheque which is dishonored will have to be drawn by a person on account maintained by him with the bank for payment of any amount of money to another person out of that account for the discharge, in whole or in part of any debt or other liability. It is only such cheque which is dishonored which would attract the provisions of Section 138 against the CC No. 3746/1(Original CC No.18/1/98) Page No. 32/49 drawer of the cheque."
In view of the aforesaid observations and undisputed issuance of chqeue by / on behalf of accused no. 1 company, the company can be held liable for the offence U/s 138 of the Act, if the other ingredients of offence are fulfilled.
34. Now, before appreciating the defence of accused no. 2 to 5, it is necessary to reproduce Section 141 of the Act:
"141. Offences by companies: (1) If the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was incharge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly;
Provided that nothing contained in this subsection shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. .. (2). Notwithstanding anything contained in subsection(1), where any offence under this Act has been committed by a company and CC No. 3746/1(Original CC No.18/1/98) Page No. 33/49 it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly...."
Thus, for holding 'any person' liable alongwith the company under Section 141 r/w 138 of the Act, it is sine qua non that the person under trial should be in charge of the day to day affairs of the company and responsible for the conduct of its business on the date of commission of offence.
35. Accused no. 2 to 5 are the other functionaries of the company who have been arrayed as accused in the present matter. Accused no. 2 has been implicated as the ChairmancumManaging Director and accused no. 3 to 5 as Directors of the accused no. 1 company.
36. The Court shall first appreciate the defence of accused no. 3, 4 and 5 that they had already resigned from the Directorship of accused no. 1 company before the present offence was committed.
To prove their resignation as Directors of accused no. 1 company, the accused have filed the certified copy of Form no. 32 filed by accused no. 1 with CC No. 3746/1(Original CC No.18/1/98) Page No. 34/49 the Registrar of Companies (ROC). The form no. 32 in respect of accused no. 3 is Ex. DW 2/1, accused no. 5 is Ex. DW 2/2 and that of accused no. 4 is Ex. DW 1/1.
The perusal of these documents provides that accused no. 3, 4 and 5 had 'resigned as Director' of accused no. 1 company on 30.09.1997.
It is the argument of the Defence Counsel that since the offence U/s 138 of the Act is committed and complete only on non payment of the cheque amount within 15 days of the receipt of legal notice, the present three accused cannot be held responsible for the offence alleged in the present complaint, as it stood complete much later than the date of resignation of these three Directors i.e. 30.09.1997.
37. To this defence of accused no. 3, 4 and 5, it is the counter argument of the Counsel for complainant that although, form no. 32 filed in respect of all these accused reflect 30.09.97 as their date of resignation but these forms were filed with ROC only on 28.09.99 and therefore, these Directors cannot be said to have resigned w.e.f 30.09.1997 but w.e.f the date of filing of form no. 32 with the ROC, which is 28.09.1999. For this, the Counsel has drawn the attention of Court to one stamp appearing on form no. 32 (Ex. DW 1/1, DW 2/1 and DW 2/2), which very prominently reflects the date i.e. 28.09.99. CC No. 3746/1(Original CC No.18/1/98) Page No. 35/49
38. To resolve the issue, whether it is the date appearing in the 'Prescribed column' or date appearing 'on the stamp' that should be considered to be the effective date of resignation of Director, it is befitting to refer to the following observations of Hon'ble Madras High Court in S.S. Lakshmana Pillai Vs. Registrar of Companies (decided on 24.09.1976):
"6. In the Indian Companies Act, there is no provision relating to resignation of office as Director....
...
12. In Halsbury's Law of England, 4th Edition, Vol. 7 at page 316 in paragraph 536 under the heading 'Resignation', it is stated as follows:
"Where by the Articles a Director has power to resign at any time, his resignation takes effect independently of acceptance by the other Directors of the company..."
...
14. In Palmer's Company Precedents, 7th Edition, part1, at page 565, it is stated as follows:
"Even in the absence of any express power to resign, it is submitted that unless the articles are specifically framed, a Director may by notice to the company resign his directorship. Directors 'are merely agents of the company' and an agent may CC No. 3746/1(Original CC No.18/1/98) Page No. 36/49 determine his agency."
...
28. ...for the above stated reasons and in the absence of any provision either in the Act or in MoA, I am of the view that Director who had submitted his resignation would be deemed to have resigned from his office from the date of submission of his resignation, when his intention is unequivocally expressed either orally or by a letter."
39. Thus, as soon as a Director of Company expresses his unequivocal intention to resign, the resignation becomes effective. In the opinion of the Court, the date reflecting in the prescribed column in form no. 32 is, therefore, the effective date of resignation. It is particularly in a case, where no proof of oral / written resignation of Director is available on record. Moreover, form no. 32 is a public document U/s 74 of Indian Evidence Act and submission of this form is a statutory obligation of the company. Thus, an evidentiary value and sanctity gets attached to this document and the same cannot be ignored and should be relied upon as a conclusive proof.
The argument of Counsel for complainant that form no. 32 was filed on 28.09.1999 is misconceived as it is only the 'date of registration' of document and not filing. Perusal of all the exhibited forms reveal one another stamp CC No. 3746/1(Original CC No.18/1/98) Page No. 37/49 which reflect the date of filing as 10.10.1997 for Ex. DW 1/1 and DW 2/1, and as 25.11.1997 for Ex. DW 2/2. The Counsel for complainant has also failed to cite any law or case law to corroborate his arguments that 28.09.1999 be considered as effective date of resignation.
40. Thus, the date i.e. 30.09.1997 shall be considered as the effective date of resignation of accused no. 3, 4 and 5. But, before a final opinion on their liability for the alleged offence, it is necessary to once glance through the crossexamination of DW2 Mr. Arvind Bhargava. During crossexamination, the witness was confronted with the certified copy of an another form no. 32 which is Ex. DW 2/C1. The document Ex. DW 2/C1 reflects the re appointment of accused no. 3 as 'Additional Director' of accused no. 1 company w.e.f 04.11.1997. DW 2 deposed that he was reappointed merely to complete the Board.
Accused no. 3 has failed to produce any evidence to prove that he was inducted as Additional Director merely to complete the Board.
41. In view of the discussion in preceding paragraphs, the situation remains thus that accused no. 4 and 5 had validly and effectively resigned from the Directorship of accused no. 1 company on 30.09.1997 and since, the alleged offence was committed / completed much later than 30.09.1997, accused no. 4 CC No. 3746/1(Original CC No.18/1/98) Page No. 38/49 and 5 as Directors cannot be burdened with the liability of the Company for an office which was committed after their resignation.
As far as accused no. 3 is concerned, though he effectively resigned on 30.09.1997 but also 'effectively' rejoined the company as Director on 04.11.1997. His mere denial of joining as 'effective Director' w.e.f 04.11.1997 cannot override the documentary evidence Ex. DW 2/C1. The deposition of DW2 that he joined merely to complete the Board also suffers another jolt from the document Ex. DW 2/C2 to which he was confronted during cross examination. Document Ex. DW 2/C2 is the certified copy of 13 th Annual Report (199798) of accused no. 1 company filed with ROC, which reflects accused no. 3 as 'Director'.
Documents Ex. DW 2/C2 is a public document and U/s 74 of Evidence Act is admissible in evidence and therefore, can be relied upon.
42. In opinion of the Court, accused no. 3 was Director of accused no. 1 company at the time of commission of alleged offence and therefore, cannot take benefit of his resignation on 30.09.1997. It further appears that he resigned on 30.09.1997 only to absolve himself of any liability against the impugned cheques.
43. It is the defence of accused no. 2 and 3 first, that there are no specific CC No. 3746/1(Original CC No.18/1/98) Page No. 39/49 averments/allegations against them regarding their role as Directors in the complaint and second, that they are not the signatory of the impugned cheque and therefore, cannot be held liable on behalf of accused no. 1 company for the alleged offence.
It is the argument of the counsel for accused that the allegations against accused no. 2 and 3 in the complaint and affidavit are not specific and sufficient enough to prove that they were incharge of and responsible for the day to day affairs of accused no. 1 company and conduct of its business and therefore, liability of company cannot be placed upon them under law. It is also the argument that it is a statutory duty of complainant to specifically allege the entire role of individual Director in complaint to make him liable U/s 138 r/w 141of the Act. To put forward his arguments, defence Counsel has relied upon the judgments titled N. Rangachari Vs. BSNL II (2007) CLR 258 (SC).
44. To appreciate this argument, the following observation of Hon'ble High Court of Delhi in case titled Destinations of the World Vs. Raj Tours & Travels, 2010 (4) JCC (NI) 313 are imperative: "14. The benefit of Section 141 of not facing the prosecution because of having no responsibility of managing the business of the company can be availed only after disclosing to the Court and and proving before the Court that the particular Director was not CC No. 3746/1(Original CC No.18/1/98) Page No. 40/49 the one who was involved for conducting the business of the company, As there is a presumption under law that a cheque is issued in discharge of a debt or liability and this presumption has to be rebutted by the person issuing a cheque, in the same manner when law enjoins responsibility of running a company on all the Directors collectively, if a Director takes the stand that he had no responsibility, the onus to rebut legal presumption is on him.
15. The Director by virtue of his being a Director is responsible for conduct of business under law and if he says that he was not responsible he is supposed to prove the same. A person who is caught without ticket by virtue of his being caught without ticket is supposed to have committed a crime. If he says that he did purchase a ticket but lost it, it is 'he' who has to prove that he purchased the ticket. The onus cannot be reversed and thrust upon the complainant".
Further, on burden of proof, Section 106 of Indian Evidence Act reads as under:
106. Burden of proving fact specially within knowledge When any fact is specially within the knowledge of any person, the burden of proving the fact is upon him.
CC No. 3746/1(Original CC No.18/1/98) Page No. 41/49
45. On the Contrary, the reliance of accused no. 2 and 3 on the judgments mentioned in Para no. 43 is highly misconceived in view of the observation of Hon'ble Supreme Court, this judgment itself i.e. N. Rangachari (Supra), Hon'ble Supreme Court observed the duty of complainant payee as follows:
"14. ....he may not be aware of arrangements within the company in regard to its management, daily routine etc ....so, are that a payee of cheque that is dishonoured can be expected to allege is that the person named in complaint are incharge of its affairs the Directors are prima facie in that position. ....
16. In the light of the ratio of S.M.S. Pharmaceuticals Ltd (Supra) what is to be looked into is whether in complaint, in addition to asserting that the appellant and another are the directors of company, it is further alleged that they are incharge of and responsible to the company for the conduct of the business of the company...."
46. In the opinion of this Court, the aforesaid allegations are already there in the present complaint and therefore, complainant can be safely said to have discharged the burden upon him and shifts the specific onus to disprove the allegations upon the Directors himself.
CC No. 3746/1(Original CC No.18/1/98) Page No. 42/49
47. To this situation, it is defence of accused no. 2 that though he was the ChairmancumMD of the company, he was out of India to look after his ailing son during the relevant period and the authority was delegated the authority to persons who have put their signatures on FDRs and cheques.
This defence of accused no. 2 is totally devoid of substance because of the reason, first that it is a settled principle of law U/s 141 of Act r/w Companies Act that a Chairman / Managing Director is incharge and responsible for day to day affairs of company and conduct of its business by virtue of his position in the company and no specific allegation is required to made against him in the complaint; second that accused no. 2 has not adduced any positive evidence to show that he was out of India during that time, and third that documents (form no. 32) Ex. DW 1/1, DW 2/1 and DW 2/2 and DW 2/C1 available on record bear his signatures as ChairmancumManaging Director of company and thus, disproving that he was out of India and had no knowledge of the transaction.
48. Similarly, the defence of accused no. 3 is also devoid of any merit due to the reason that he was aware of the fixed deposit scheme floated by company; the fact of two other officers of company being responsible for looking after fixed deposit scheme; these two officers putting their signatures on FDR's and Cheques; his recognition of signatures of those officers and his awareness about issuance of cheques by those officers of company. CC No. 3746/1(Original CC No.18/1/98) Page No. 43/49
49. Consequently, in opinion of the Court, accused no. 2 and 3 were the ChairmancumManaging Director and Director of accused no. 1 company, and were also incharge of day to day affairs of company and responsible for conduct of its business. Therefore, both accused no. 2 and 3 can be held responsible U/s 141 of Act for the alleged offences alongwith the company.
50. Further, in view of the aforesaid discussion, the accused have miserably failed to rebut the dual presumptions of law raised against him by the court and consequently, ingredient no. 1 and 2 stand decided in favour of complainant and against the accused.
INGREDIENT NO. 3 AND 4:
51. As regards the return of cheques unpaid for the reasons 'Exceeds Arrangements', the same is well established from the cheque return memos placed on record which are Ex. PW1/10 to PW 1/12. Further, Section 146 of the Act reads as under:
"The Court shall in respect of every proceeding under this chapter, on production of bank's slip or memo having thereupon the official mark denoting that the cheque has been dishonored, presume fact of dishonor of such cheque unless and until such fact is CC No. 3746/1(Original CC No.18/1/98) Page No. 44/49 disproved".
The dishonour of the impugned cheques for the aforesaid reasons is undisputed by the accused. In view thereof, the dishonor of the cheques stand proved.
52. The service of legal demand notice has been disputed by the accused in the present case. It is their argument and defence that the legal notice sent by complainant to all the accused through registered AD was never served upon them and the AD cards filed by the complainant on record don't bear the signatures / endorsement of any of the accused and therefore, no presumption of the due service of legal demand notice can be raised against them. It is also the argument that complainant has failed to prove the service of legal notice by any other mode and therefore, one ingredient of offence U/s 138 of the Act remains incomplete and hence, offence is not made out against any of them.
53. The aforesaid arguments of the defence Counsel don't appear to be convincing in the light of settled law / principles on the issue of service of legal notice. The following observations of the Hon'ble Supreme Court in case titled K. Bhaskaran Vs. S.Vaidhyan Balan AIR 1999 SC 3762 are a precedent:
"24. ... In this connection a reference to Section 27 of the General Clauses Act will be useful. The section reads thus: CC No. 3746/1(Original CC No.18/1/98) Page No. 45/49
27. Meaning of service by post Where any central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression 'service' or either of the expression 'give' or send' or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.
25. No doubt section 138 of the Act does not require that the notice should be given only by 'post'. Nonetheless the principle incorporated in Section 27 (quoted above) can profitably be imported in a case where the sender has dispatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sender unless he proves that it was not really serves and that he was not responsible for such non service. Any other interpretation can lead to a very tenuous position as the drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice.
CC No. 3746/1(Original CC No.18/1/98) Page No. 46/49
54. On the issue of service of legal demand notice, Hon'ble Supreme Court, while reiterating and relying upon the aforesaid observations, further observed in C.C. Alavi Haji Vs. Palapetty Muhammed and Ors. (2007) 6 SCC 555 as follows:
10. It is, thus, trite to say that where the payee dispatches the notice by registered post with correct address of the drawe3r of the cheque the principle incorporated in Section 27 of the General Clauses Act would be attracted; the requirement of Clause (b) of Proviso to Section 138 of the Act stands complied with and cause of action to file a complaint arises on the expiry of the period prescribed in Clause (c) of the said proviso for payment by the drawer of the cheque. Nevertheless, it would be without prejudice to the right of the drawer to show that he had no knowledge that the notice was brought to his address.
55. In the case in hand, the legal demand notice has been sent through registered AD post to the correct address of all the accused. The accused have admitted their address to be correct during their cross examination. The postal receipts are already on record. The AD cards proving the service of legal demand notice have also been filed by complainant on record. The mere CC No. 3746/1(Original CC No.18/1/98) Page No. 47/49 averment of the accused that they do not know Usha Ranjan or there is no person named Usha Ranjan in their family / house, whose name / signatures appear on the AD cards, has remained uncorroborated. The accused have failed to lead any direct, indirect or cogent evidence to rebut the presumption of service of legal demand notice and thus, the legal demand notice is deemed to be duly served upon all the accused.
The nonpayment of the cheque amount thereafter within 15 days of the receipt of the legal notice is not in dispute. Therefore, ingredients no. 3 and 4 stand decided in the favour of the complainant and against the accused. STANDARD OF PROOF:
56. It is the basic principle of criminal law that in order to hold an accused guilty of an offence, all the ingredients of that offence should be established against him beyond reasonable doubt and the burden upon accused is not so onerous and the standard expected of him is that of preponderance of probabilities by moving cogent and viable evidence.
The observations of the Hon'ble Supreme Case in the case Krishna Janardhan Bhat Vs. Dutta Traya G. Hegde (2008) 4 SCC 54 are important:
"the standard of proof for accused is preponderance of probabilities. The standard of proof on the part of an accused and that of the prosecution in a criminal case is different. Whereas CC No. 3746/1(Original CC No.18/1/98) Page No. 48/49 prosecution must prove the guilt of an accused beyond all unreasonable doubt, the standard of proof as to prove a defence on part of the accused is Preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials brought on records by the parties but also by reference to circumstances upon which he relies".
Therefore, the position on standard of proof is well settled. FINAL ORDER:
57. In the light of aforesaid discussion, accused no. 4 and 5 have successfully proved that they were not the Directors of accused no. 1 on the date of commission of offence and hence, they are held not guilty and are acquitted of the offence U/s 138 of the Act. At the same time, the liability of accused no. 1 to 3 have been established by complainant beyond reasonable doubt and accused no. 1, 2 and 3 have failed to raise any probable defence or create any doubt in the mind of the Court on the standard of preponderance of probabilities and hence, accused no. 1, 2 and 3 are convicted of the offence U/s 138 of the Act.
Announced in Open Court (ARVIND BANSAL)
on 28 July, 2012.
th
MM03, NI ACT
PHC, New Delhi.
CC No. 3746/1(Original CC No.18/1/98) Page No. 49/49