Bangalore District Court
Ms. 3M India Limited vs Ajith Kumar T K on 1 June, 2024
KABC0C0026142017
IN THE COURT OF XXXIV ADDL. CHIEF METROPOLITAN
MAGISTRATE, MAYO HALL UNIT, BENGALURU. (ACMM-34)
PRESENT: Smt. PARVEEN A BANKAPUR,B.Com.LLB.
XXXIV ADDL. CHIEF METROPOLITAN
MAGISTRATE,
Dated : This the 1st day of June, 2024
C.C.No.51103/2017
COMPLAINANT : M/s. 3M India Limited
A company incorporated under the
Companies Act, 1956,
Having its office at
Concorde Block, U B City,
24, Vittal Mallya Road,
Bengaluru - 560 0010
Rep by its General Manager - Legal,
Mr. Manjunath A. Dwarkanath
(By M/s. Induslaw - Advocates)
V/s
ACCUSED : Mr. Ajith Kumar T K
Proprietor,
M/s. Lakshmi Enterprises,
No.39/1038, Udayareshmi,
Karakkat Road,
Kochi - 682 016.
(By M/s. Bail & Trial - Advocates)
1 Date of Commencement 15.06.2016
of offence
2 Date of report of offence 06.08.2016
3 Presence of accused
3a. Before the Court 03.01.2018
3b. Released on bail 03.01.2018
4 Name of the Complainant M/s. 3M India Limited
5 Date of recording of 16.08.2021
evidence
6 Date of closure of evidence 09.01.2024
7 Offences alleged U/s 138 of the Negotiable
Instruments Act.
8 Opinion of Judge Accused is found guilty.
2 C.C.No.51103/2017
JUDGEMENT
The Private Complaint filed by the Complainant under Section 200 of Cr.P.C against the accused alleging that he has committed the offence punishable under Section 138 of Negotiable Instruments Act.
2. The brief facts of the complaint are as follows:
The complainant submits that, it is a company engaged in manufacture, import supply and marketing of a wide variety of innovative products. The Complainant had executed a Consignee Sales Agent Agreement dtd.3.9.2012 with Accused.
Under the agreement the Complainant would transfer goods to the Accused under Form 'F' for the Accused to perform a forward sale to their customers and accordingly, collect monies towards the sale from their customers. Under the agreement, the Accused was required to receive the incoming goods from the Complainant and then forward the goods in its name as a Consignee Sales Agent of the Complainant, as per the instruction given by the Complainant from time to time.
Accordingly, the Accused was required to make payments to the Complainant for the sale of each of the products under the Agreement. The Complainant had supplied various goods to the 3 C.C.No.51103/2017 Accused under the Agreement, for which the Accused was required to make payments for sale of each of the products supplied.
It is further submitted by the Complainant that towards the partial discharge of the debt under the Agreement, the Accused issued a cheque bearing No.352140 dtd.15.06.2016 for Rs.25,60,680/- drawn on State Bank of India, Kochi with an assurance that the same would be honoured on its presentation for enashment.
It is further submitted by the Complainant that the Complainant presented said cheque through his banker HSBC Bank, M.G. Road branch, Bengaluru on 15.6.2016. However, the said cheque came to be dishonoured for the reason "Refer to drawer" on 16.6.2016. Thereafter, the Complainant got issued legal notice to the Accused through RPAD on 8.7.2016 through his counsel and the same was duly served on the Accused on 28.7.2016. After receipt of legal notice, the Accused has not paid the cheque amount. Accordingly, the Complainant has filed present complaint against the Accused for the offence punishable u/Sec.138 of N.I. Act.4 C.C.No.51103/2017
3. Based on the complaint, the sworn statement affidavit, and documents etc., took cognizance of an offence punishable Under Section 138 of N.I. Act by following the guidelines of Apex Court issued in Indian Bank Association case and ordered to be registered a criminal case against the accused for the offence punishable Under Section 138 of N.I. Act.
4. After issuance of summons, accused appeared before the court and enlarged himself on bail. Plea was recorded, read over and explained to the accused, who pleads not guilty and claims to be tried. Hence, the case is posted for complainant's evidence.
5. The Complainant got examined himself as PW-1 and got marked documents Ex.P.1 to Ex.P.19. Ex.P20 and 21 document came to be marked through confrontation during the cross-examination of DW1 and DW2 respectively.
6. Accused was examined U/S 313 of Cr.P.C.
Incriminating evidence appearing in the complainant's evidence was read over and explained to the accused who denies the same. The Accused got examined himself as DW1 and got marked documents Ex.D4 to Ex.D12. Ex.D.1 to 3 came to be 5 C.C.No.51103/2017 marked through confrontation during he cross-examination of PW1. He also got examined one more witness from his end as DW2.
7. Heard arguments of Complainant at full length. In addition to the oral arguments, both the learned counsels appearing for the parties have filed their respective written arguments.
8. Upon hearing the arguments and on perusal of the materials placed on record, the following points arise for my consideration.
1) Whether complainant proves beyond all reasonable doubts that accused in discharge of legally recoverable debt has issued a Cheque cheque No.352140 dtd.15.06.2016 for Rs.25,60,680/- drawn on State Bank of India, Kochi. in favour in favour of the complainant which came to be dishonoured with an endorsement "funds insufficient"
and in spite of service of notice accused has not paid the Cheque amount and thereby committed an offence under Section 138 of N.I.Act?
2) What Order?
9. My findings on the above points is:
Point No.1: In the Affirmative 6 C.C.No.51103/2017 Point No.2: As per final order for the following:
REASONS Point No.1:-
10. Existence of legally recoverable debt is a sine qua non for prosecuting the case under Section 138 of Negotiable Instruments Act. For convenient purpose the essential ingredients to constitute offence under section 138 of N.I.Act is summarized as below:
(i) That there must be a legally enforceable debt.
(ii) That the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes the legally enforceable debt.
(iii)That the cheque so issued had been returned due to "insufficient funds".
11. It is the core contention of the complainant that, it is a company engaged in manufacture, import supply and marketing of a wide variety of innovative products. The Complainant had executed a Consignee Sales Agent Agreement dtd.3.9.2012 with Accused. Under the agreement the Complainant would transfer goods to the Accused under Form 'F' for the Accused to perform a forward sale to their customers and accordingly, collect monies towards the sale from their 7 C.C.No.51103/2017 customers. Under the agreement, the Accused was required to receive the incoming goods from the Complainant and then forward the goods in its name as a Consignee Sales Agent of the Complainant, as per the instruction given by the Complainant from time to time. Accordingly, the Accused was required to make payments to the Complainant for the sale of each of the products under the Agreement. The Complainant had supplied various goods to the Accused under the Agreement, for which the Accused was required to make payments for sale of each of the products supplied. Towards the partial discharge of the debt under the Agreement, the Accused issued a cheque bearing No.352140 dtd.15.06.2016 for Rs.25,60,680/- drawn on State Bank of India, Kochi with an assurance that the same would be honoured on its presentation for enashment , which came to be dishonoured for the reason "Refer to drawer" on 16.6.2016 on its presentation. Thereafter, the Complainant got issued legal notice to the Accused through RPAD on 8.7.2016 through his counsel and the same was duly served on the Accused on 28.7.2016. After receipt of legal notice, the Accused has not paid the cheque amount. Accordingly, the Complainant 8 C.C.No.51103/2017 has filed present complaint against the Accused for the offence punishable u/Sec.138 of N.I. Act.
12. In order to bring home the guilt of the accused, Complainant got examined himself as PW1 and reiterated the contents of complaint in his examination-in-chief. He has also placed the Board Resolution at Ex.P1, original Cheque bearing No.352140 dtd.15.06.2016 for at Ex.P2, bank endorsement at Ex.P3, office copy of legal notice issued by the Complainant to the Accused on 8.7.2016 at Ex.P4, postal receipts at Ex.P5 and 6, postal acknowledgement at Ex.P7, Ex.P.8 is the reply notice, Ex.P9 is the copy of Consignee Sales Agent Agreement, Ex.P10 and 11 are book balance dtd.31.7.2014 and book balance dtd.31.8.2014, Ex.P12 is the copy of e-mail communication, Ex.P13 is the certified copy of MOU, Ex.P14 and 15 are copies of e-mail communications, Ex.P16 is the accounts statement, Ex.P17 is the certified copy of Arbitral Award, Ex.P18 is the certified copy of Judgment in Commercial A.P.No.39/2020, Ex.P19 is the bank account statement of the Complainant company. Ex.P20 is the certified copy of order of Arbitrator 9 C.C.No.51103/2017 in A.C.No.114/2018 and Ex.P21 is the certified copy of order of Arbitrator in A.C.No.114/2018.
13. The documents produced by the complainant of course established that complainant meets out the procedural requirements of Section 138 of Negotiable Instrument Act, but it is to be considered whether all these documents establish the offence committed by the accused.
14. The Negotiable Instruments Act raises two presumptions. One contained in Section 118 and the other in Sec. 139 thereof. For the sake of convenience Sec 118(1) of the N.I. Act is extracted here below:
118. Presumptions as to negotiable Instruments--
Until the contrary is proved, the following presumptions shall be made ;--
(a) of consideration that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.
1. To (g) . . . . . . . . . . . .
Provided that where the instrument has been obtained from its lawful owner, or from an person in 10 C.C.No.51103/2017 lawful custody thereof, by means of an offence of fraud, or has been obtained from the maker or acceptor thereof by means of an offence of fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him".
15. Further Section 139 of the Negotiable Instruments Act reads as under:
"139, Presumption in favour of holder. It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in section 138, for the discharge, in whole or in part, of any debt or other liability."
Scope and ambit and function of the presumption U/s 118(a) and Sec 139 of NI Act came to be considered by the Hon'ble Apex Court of Indian in Krishna Janardhan Bhat Vs Dattatraya G.Hegde (2008 AIAR (Criminal 151) The Supreme Court has laid down the law in the following phraseology.
"D Negotiable Instruments Act 1881, Secs 139, 138--Presumption under-same arises in regard to second aspect of the matter provided under Sec 138-- Existence of legally enforceable debt is not a matter of presumption under Sec 139- It merely raises presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability - Merely an application of presumption 11 C.C.No.51103/2017 contemplated under Section 139 of N.I.Act should not lead to injustice or mistaken conviction."
16. Further, said decision was followed by Hon'ble High Court of Karnataka in Kempanarasimhaiah Vs P.Rangaraju & Others (2008 (5) KCCR 3371). Relevant paragraph of the said judgment reads as under: -
"12. As to the provisions of Sections 138 of N.I.Act, the following principles emerge from the above observations of Hon'ble Supreme Court at para Nos 21, 23, 25, 26 and 34 of its Judgment in the above said case of Krishna Janardhan Bhat Vs Dattatraya G.Hegde, AIR 2008 SC 1325.
(i) Section 139 of the Act merely raises a presumption that the cheque was issued towards discharge in whole or in part in any debt or other liability, which presupposed legally enforceable debt. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability." ( para 21)
(ii) The question as to whether the presumption stood rebutted or not, must be determined keeping in view the other evidences on record. Where the chances of false implication cannot be ruled out, the background fact and the conduct of the parties together with their legal requirements are required to be taken into consideration. (para 26) 12 C.C.No.51103/2017
(iii) An 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 records (para 23)
(iv) Standard of proof on the part of an accused and that of the prosecution in a criminal case is different. Further more where as prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is " preponderance of probabilities'" ( para 23 & 25)
(v) Inference of preponderance of probabilities can be drawn not only from the materials brought on records by the parties but also by reference to the circumstances upon which he relies ( para 25)
(vi) Other important principles of legal jurisprudence, namely presumption of innocence as human rights and the doctrine of reverse burden introduced by Section 139 should be deliberately balanced (para 34)
17. Thus from the observations extracted above, it is clear that presumption Under Section 139 of the N.I. Act is only to the extent that the cheque was drawn for discharge in full or in part of any debt or other liability and the said presumption do not relate to the existence of legally enforceable debt or liability. Therefore, before drawing the presumption under Section 139 of the N.I.Act, it is the duty of the Court to see whether or not the complainant has discharged his initial burden as to existence of legally enforceable debt. No doubt, as 13 C.C.No.51103/2017 per Section 118(a) of the Act, there is a rebuttable presumption that every negotiable instrument, is accepted, endorsed, negotiated or transferred was accepted, endorsed, negotiated or transferred for consideration."
18. Factual matrix of the case is required to be tested on the anvil of principles emerging from the above-referred decisions.
19. The defence taken by the Accused is that, the Accused was the proprietor of Laxmi Enterprises and the Accused had paid total sum of Rs.11,90,90,410/- to the Complainant during the period between January 2013 to August 2014. It is further submits by the Accused that, sum of Rs.2,28,17,648/- was paid between January 2014 and August 2014 and Rs.1,35,03,506/- was paid during the period between February 2014 and August 2014. It is further submitted that disputed Cheque, which issued in the month of August 2014 and Complainant presented it on 15.6.2016 and Accused is not liable to pay any amount to the Complainant, in light of excess payment having already been made by Accused. 14 C.C.No.51103/2017
20. To substantiate his claim, the Complainant's representative, who is General Manager of the Complainant company examined himself as PW1. In the evidence he deposed that, the Complainant has executed a Consignee Sales Agreement dtd.3.9.2012 with Laxmi Enterprises and under that agreement, the Complainant transferred goods to the Accused under Form 'F' for the Accused to perform a forwarded sale to their customers and accordingly, collect monies towards the sale from their customers. It is further deposed that the Complainant had supplied various goods to the Accused, for which the Accused was required to make payments for sale of each product supplied. It is further deposed that towards partial discharge of the debt under the agreement, the Accused had issued Ex.P2 Cheque, which was dishonoured as per Ex.P2 and the Complainant had issued legal notice to the Accused, calling upon him to pay the Cheque amount of Rs.25,60,680/-. It is further deposed that the said Cheque was dishonoured with reason "refer to the drawer" as per Ex.P3 and the Complainant got issued legal notice as per Ex.P4 to the Complainant, which was duly served upon the Accused as per Ex.P7. It is further deposed that the Accused replied by stating 15 C.C.No.51103/2017 that they denied the complaint allegations and submits that, the Complainant has fraudulently converted one of the signed blank Cheque and misused the same and presented before the bank for encashment.
21. In the present case the Complainant has produced Ex.P2 Cheque, which was dishonoured as per Ex.P3 and as per Ex.P4 a legal notice was issued by the complaint to the Accused through his counsel, which was duly served on the Accused as per Ex.P7. The Complainant fulfilled all the ingredients of the offence punishable u/Sec.138 of N.I Act against the Accused. In the cross-examination of PW1, he admits that the Complainant company maintained Reconciliation Statement as per Ex.P11. He further admits that, as per Ex.P11 Reconciliation Statement was prepared.
22. In the cross-examination PW1 stated that, as per Ex.P11 Reconciliation statement was made. It is further stated that Ex.P10 and 11 documents are pertaining to the balance amount of the Accused. It is further stated that, at the time of preparing Ex.P10 the final statement was not made with respect of Accused. It is further stated that, at the time of 16 C.C.No.51103/2017 Ex.P10 and after settlement, the Ex.P2 Cheque was issued. It is further stated that Ex.P11 was prepared in the month September 2014 and he further stated that, on the condition that, after final settlement only Ex.P2 Cheque was used for encashment. It is further stated that, the Complainant company during transaction with the Accused from 6 divisions, Ex.P10 is about 84th division and Ex.P11 is for 41st and 42nd divisions. It is admitted by the Complainant that, from the division of 41, 42 and 84 there is a balance due from the Accused. He further admits that as per Ex.P11 till July 2014 sum of Rs.2,77,12,102/-. He denied that, from January 2014 to August 2014 Accused has made payment to the Complainant.
23. On the other hand, to rebut the presumption, the Accused examined himself as DW1 and he deposed that, he was proprietor of Laxmi Enterprises and the Complainant was executed Consignment Sales Agreement and Complainant would supply its products to Laxmi Enterprises for stocking in Kerala. It is further deposed that, all the sales of the Complainant's products were to be under the sales invoice of the Complainant. It is further deposed that, the products sold 17 C.C.No.51103/2017 were categorized into 8 divisions of which two divisions pertained to Home Care Products i.e., division No.84 and Health Care Products at Division No.41 and 42. It is further deposed that, the customers for both products would pay consideration in two parts, the first part was paid to be paid to the Complainant and the second part was to Laxmi Enterprises. It is further deposed that, the final settlement of accounts between the parties required comprehensive reconciliation and settlement in respect of all division and of all payment due from Laxmi Enterprises to the Complainant, and from the Complainant to Laxmi Enterprises under the said divisions. It is further deposed that the Complainant prepared Ex.P10 and 11 as tentative statements based on the information that was then available, pending final reconciliation of payment obligations of both parties under the terms of CSA, and those obligations that arose outside of the terms. It is further deposed that, Ex.P2 was handed over to the Complainant on the basis of Ex.P10 the encashment of which was subject to the condition more fully detailed in the Ex.P10 and 11. It is further deposed that as per Ex.P10 the total amount payable to the Complainant under division 84 was Rs.48,95,203/- and out of 18 C.C.No.51103/2017 that, Rs.16,52,656/- was collected by the Complainant from the customers directly. It is further deposed that, due to arithmetical error on the part of Complainant, said amount was erroneously calculated as being Rs.25,60,680/- as mentioned in Ex.P2. It is further deposed that, in the arbitral proceedings the Complainant produced its bank account statement for the period July 2012 to August 2014 and as per statement during the period between January 2013 and August 2014 Laxmi Enterprises had made payments to sum of Rs.11,77,32,901/-. It is further deposed that, he has challenged arbitral award before Hon'ble Commercial Court in Com.A.P.No.29/2020 which was dismissed and that order is currently pending challenge before Hon'ble High Court of Karnataka in Com.A.P.No.358/2022. It is further deposed that, the Ex.P2 Cheque was issued by him to the Complainant in August 2024 and the Complainant presented the said Cheque in the year 2016 without reconciled or finally settled between the parties.
24. In the cross-examination he stated that, he distributing both products in Kerala State. He further stated that since the year 2012 Rs.48.93 crores products are 19 C.C.No.51103/2017 distributing in Kerala and admits that, Ex.P10 not disclosed Rs.48.93 crores transactions. He further admits that in examination in chief of DW1 para No.15 he stated payment, but he has not shown that which payment is from which division. He further admits that, in the arbitration case, he had made counter claim, but not claimed excess amount in his counter claim.
25. The Accused examined one more witness on his behalf as DW2, who is brother of Accused. DW2 deposed about execution of Consignment Sales Agent Agreement and also stated that the said agreement was terminated during the end of July 2014 and accordingly, the parties were required to settle their accounts and the personnel of the Complainant had visited the office of Accused in the month of August 2014 to verify the accounts and his brother Accused was not available to attend the said meeting and he had attended the said meeting on his behalf. It is further deposed that final settlement of accounts between the parties required comprehensive reconciliation and settlement in respect of all divisions and all payments due from Laxmi Enterprises to the Complainant. It is further deposed that, during the meeting settlement of accounts 20 C.C.No.51103/2017 was not available with the parties and Complainant prepared Ex.P10 and 11 as tentative statements based on information that was then available, pending final reconciliation of payment obligations of both parties. It is further deposed that both parties were agreed that the settlement recorded in Ex.P10 and 11 would be subject to finalization in accordance with conditions stipulated in the notes therein. It is further deposed that consequently, even the undated Cheque Ex.P2 was issued by the Laxmi Enterprises to the Complainant during the meeting of August 2014 under the specific condition that, the Complainant would present the Cheque for realization only after settlement of all accounts between the Complainant and Laxmi Enterprises.
26. On considering the oral evidence of both parties, Ex.P10 and 11 are important document s to this subject matter of the Cheque. Ex.P10, as per Note - 1 of Ex.P10 that, "total collections to be cleared by CSA Laxmi for key accounts Rs.32,93,430/- which include (VAT for June 2014) (Div-26 & 27 & 84 for Rs.5,05,54,004/-) cares Rs.1,78,706/- and by RTGS/Cheuqe Rs.25,60,680/- Cheque No.352104 for 21 C.C.No.51103/2017 Rs.25,60,680/-, Cheque to be presented after final settlement of CSA Laxmi account. As per Note No.2 of Ex.P10 that, total collectable by 3M Sales - Umesh for the balance over dues for Rs.16,52,656/- directly to 3M. As per Ex.P11 note is that, the above said reconciliation subject to auditors verification on or before 20.10.2014. As per CSA Laxmi Enterprises the settlement of above said reconciliation are subject to tax liability finalization from both 3M India Ltd. and Laxmi Enterprises CSA meeting with 3M Management to be scheduled in October 2014 tentative dates between 15 th to 20th October 2014 and finalized sign off from the management to be obtained. Ex.P11 total billing done from January 2013 to July 2014 is Rs.12,15,76,574/- and total payment made from January 2013 to July 2014 is Rs.7,34,43,000/- and balance Rs.4,81,33,574/-.
27. In the cross-examination of DW1, he admits that there is no any written agreement for that both parties are agreed that the statements recorded in Ex.P10 and 11 would be subject to finalization in accordance with conditions as above stated in notes of Ex.P10 and 11. On perusal of Ex.P10 and 11, DW2 who attended the meeting with Complainant was 22 C.C.No.51103/2017 signed on Ex.P10 and 11. Therefore, it presumed that DW2 was admitted Ex.P10 and 11 on behalf of Accused.
28. The learned Counsel for accused during the course of arguments submitted that, Ex.P2 Cheque was issued under Ex.P10 and as per Note No.1 of Ex.P10, Ex.P2 Cheque was to be presented only after final settlement of CSA - Laxmi Account. Therefore, without final settlement would mean not just amounts payable by the Accused to the Complainant, after final reconciliation of Dvn 84, 41, 42, but would also mean settlement of all payments due from the Complainant to the Accused under the CSA arrangement. It is further submitted by the learned Counsel for accused that Ex.P2 Cheque was to be treated as a security Cheque that was not to be presented until such time that the condition of final settlement of the Accused account was duly complied with. It is further argued by the learned Counsel for accused that, even the reconciliation of Dvn. 41 and 42 Health Care Group under Ex.P11 is not final or conclusive. It is further submitted that Ex.P11 itself records that, there being a difference between the tax liability, reconciliation of the Complainant and the Accused for the 23 C.C.No.51103/2017 Dvn. 26, 27, & 84. Hence, there was no final reconciliation between parties. It is further submitted that Accused representative i.e., DW2 had not signed on Ex.P11 and further submits that Ex.D2 e-mail sent on 28.10.20214 soon after Ex.P10 and 11. Accused has stated in the e-mail that regarding non-settlement of accounts and called upon the Complainant to not present the Cheque until such finalization and settlement of CSA Laxmi Account and Ex.D2 and 4 e-mails would also show that, PW1 acknowledges that final settlement was not concluded as of 28.10.2014 and that settlement of Home Care, Medical Division and commission payable to the Accused was pending even as of such date. The Complainant has also not led any evidence to show that, such settlement has taken place at any point of time after issuance of Ex.D4 e-mail. Therefore, the learned Counsel for accused submits that, Ex.P2 Cheque issued by the Accused is not legally enforceable debt for Rs.25,60,080/-. In this regard, the learned Counsel for accused relied on Dashrathbhai Trikambhai Patel V/s. Hitesh Mahendrabhai Patel and Others MANU/SC 1294/2024 wherein it is held that;
24 C.C.No.51103/2017
"The Cheque cannot be presented for
encashment without recording the part payment. If
the endorsed Cheque is dishonoured on
presentation, the offence u/Sec.138 would not be attracted since the Cheque does not represent a legally enforceable debt at the time of encashment."
Further the learned Counsel for accused relied on
Sandan Mary V/s. R.Rajasekhar Reddy
MANU/KA/1003/2021 wherein it is held that;
"In that manner, the Complainant as PW1 has admitted that, issuance of the Cheque was subject to a condition that, its presentation must be only after obtaining a written consent from the drawer of the instrument i.e., the Accused herein. Thus, it was a conditional agreement (Contingent) towards issuance of the Cheque. That being the case, the Complainant was not justified in presenting the Cheque for its realization without obtaining such a prior written consent from the drawer of the instrument."
29. On the other hand, the learned Counsel for complainant vehemently argued that, the Complainant and Accused have entered into a Consignee Sale Agent Agreement dtd.3.9.2012 wherein, the Accused acted as a sale agent for 25 C.C.No.51103/2017 the Complainant in Kerala. Ex.P9 the agreement was terminated on 31.7.2014 and from the date of agreement to termination, the Complainant sent across its goods from Karnataka to Kerala and the Accused sold their products to the end customers and collected amounts from those customers and made payment directly to the bank account of the Complainant. The products send by the Complainant to the Accused were across 8 divisions including Health Care, Home Care, Car Care, Industrial Care etc. and the Accused made payment directly to the account of Complainant in all respective divisions. It is further submitted that the Complainant supplied products worth a total about Rs.48.93 crores in between that period, which is admitted by the DW1 in his cross-examination. It is further submitted that the Accused failed to pay the payment of Rs.3,02,72,782/- to the Complainant with relation to the Home Care Products as per Ex.P17 Arbitral Award.
30. It is pertaining to note that, the Accused has not denied his signature on Ex.P2 Cheque, which was dishonoured on 16.6.2016. As per the Arbitral Award at Ex.P17 the Accused is liable to pay debt of Rs.3,02,72,782/- to the Complainant. The Accused challenged the Arbitral Award before Hon'ble 26 C.C.No.51103/2017 Commercial Court under Com.A.P.No.39/2020 which was dismissed by the Hon'ble Commercial Court as per Ex.P18. During the course of arguments, the learned Counsel for complainant relied on 2023 (10) SCC 148 in the case of Rajesh Jain V/s. Ajay Singh wherein it is held that, "As rightly contended by the Appellant, there is a fundamental flaw in the way both the courts below have proceeded to appreciate the evidence on record. Once the presumption u/Sec.139 was given effect to, the courts ought to have proceeded on the premise that the Cheque was, indeed, issued in discharge of a debt or liability. The entire focus would then necessarily have to shift on the case set up by the Accused, since the activation of the presumption as the effect of shifting the evidential burden on the Accused. The nature of enquiry would then be to see whether the Accused has discharged his onus of rebutting the presumption. If he fails to do so, the court can straightway proceed to convict him, subject to satisfaction of the other ingredients of Sec.138. If the court finds that the evidential burden placed on the Accused has been discharged, the Complainant would be expected to prove the said fact independently, without taking aid of the presumption. The court would then take an 27 C.C.No.51103/2017 overall view based on the evidence on record and decide accordingly."
31. At the stage when the courts concluded that, the signature had been admitted, the court ought to have inquired in to either of the two questions (depending on the method in which the Accused has chosen to rebut the presumption) Has the Accused led any defence evidence to prove and conclusively establish that there existed no debt or liability at the time of issuance of Cheque? In the absence of rebuttal evidence being led in the inquiry would entail; as the Accused proved the non-existence of debt or liability by a preponderance of probabilities by referring to the particular circumstances of the case.
32. In the particular case it is not disputed that, there is a balance debt of the Accused, which payable to the Complainant. In the light of above decision now the points for consideration before this court that, whether the Accused has proved that, on the date of issuance of Cheque or date of presentation of Cheque no legally enforceable debt was due? 28 C.C.No.51103/2017
33. It is pertaining to note that, it is not denied that at the time of meeting held during the month of August 2014 a meeting held between Complainant and Accused wherein, DW2 who is brother of Accused was representing on behalf of Accused in that meeting and after that meeting Ex.P10 and 11 are prepared. As per Ex.P10 and 11 there is due amount paid to be Complainant by the Accused. After the meeting and after preparation of Ex.P10 and 11 DW2 was signed on both statements. Therefore, there is a due amount at the time of issuance of Cheque and date of presentation of Cheque. Therefore, there is a legally enforceable debt was due at the time of issuance and presentation of the Cheque.
34. On considering the oral evidence of Accused, who examined as DW1, in the examination in chief he stated that, at the instance of the Complainant, undated Cheque bearing No.352140 for sum of Rs.25,60,680/- i.e., Ex.P2 being the subject matter of the instant proceedings, was also handed over to the Complainant and further stated that, in para '4F of examination chief that, customers for Home Care Products and Health Care Products would pay sale consideration in two 29 C.C.No.51103/2017 parts. The first part was to be paid to the Complainant and second part was to be paid to the Accused. In the cross- examination DW1 stated that, other than the security Cheques, handed over to the Complainant many months back while executing the CSA Agreement and no Cheques were issued to the Complainant for discharge of any liability and further stated that it is true to suggest that there is no such understanding as he stated in his examination in chief para No.4F.
35. On considering the evidence of DW2 who is brother of the Accused and attended meeting on August 2014 on behalf of Accused. He stated in his examination in chief that, it was agreed between the parties that the statement recorded in Ex.P10 and 11 would be subject to finalization in accordance with the conditions stipulated in the notes therein. In the cross- examination he stated that there is no any written agreement for condition stipulated in notes in Ex.P10 and 11. He further stated in the cross-examination that, he has not lead evidence in the arbitration proceedings. but he accompanying with his brother in arbitration proceedings. But on perusal of Ex.P20 proceedings of the arbitration wherein DW2 has withdraw his 30 C.C.No.51103/2017 examination chief affidavit. In the cross-examination of DW2, he stated that there is a dispute in all amount mentioned in Ex.P11. As per Ex.P11 first page Sl.No.B amount mentioned that, Rs.7,34,43,000/- and in second page DW2 has affixed his signature. He further admits in cross-examination that on Ex.P11 second page I have signed.
36. On perusal of oral and documentary evidence led by both parties and as per Ex.P10 and 11 and also arbitral award passed by Hon'ble Arbitral Tribunal, the Cheque was issued for satisfaction of part of the legally enforceable debt.
37. Further the Accused has taken contention that, as per account statement Ex.D8 and 10 produced by him and based on the account statement produced by the Complainant there are additional or excess payment made by him which are not accounted for in the reconciliation statements for Health Care and Home Care Divisions being Ex.P10 and 11. However, the Accused has failed to establish that, these payments referred by him and Accused has only attempted to create confusion by referring the payments from other six divisions being made in relation to Home Care and Health Care 31 C.C.No.51103/2017 Divisions. It is pertaining to note that, in the Arbitral proceedings the excess payment contention was not taken by the Accused.
38. The only defence of the Accused is that, he had issued Ex.P2 Cheque with condition that, after finalization of Ex.P10 and 11. Therefore, the said Cheque was not issued for discharging of legally enforceable debt. Therefore, it issued as a security Cheque. Since, the Complainant has not finalized the accounts of both parties, therefore, the Complainant without knowledge of the Accused has presented the Cheque. The Accused has admitted issuance of Cheque and his signature on the Cheque. In this regard, it is useful to refer decision reported in 2014 (9) SCC 129 in the case of Dashrath Rathod V/s. State of Maharashtra and also 2019 (4) SCC 197 in the case of Bir Singh V/s. Mukesh Kumar, wherein it is held that;
"a blank undated Cheque i.e., voluntarily issued by the Accused, would not invalidate the Cheque but, would be subject to evidence adduced by the Accused. In the present case, the defence would also not be available to the Accused as the Accused as per its own submission during the course of cross- examination he stated that, the Cheque was handed 32 C.C.No.51103/2017 over to the Complainant company by him towards security purpose.
It is further useful to refer another decision reported 2021 SCC Online SC 1002 in the case of Sripathi Singh V/s.
State of Jharkhand, wherein it is held that;
"Merely issuing of Cheque towards security purpose would not absolve the Accused of the liability as the same would render the Cheque as nothing more than an on demand promissory Note. Thus the position of law on aspect of Cheques issued towards security is un-ambigious and the said defence also fails to safeguard the malafide intention of the Accused."
39. It is admitted by the DW2 that, he was attended meeting on August 2004 with the Complainant and there was no agreement between the parties with regard to thee conditions mentioned in notes Ex.P10 and 11. Ex.P10 was executed in August 2014 and thereafter by e-mail dtd.28.10.2014, the Complainant has confirmed that, the reconciliation is completed. In the cross-examination of DW1 it is suggested by the learned Counsel for complainant that, Ex.D4 was issued after such reconciliation, the Accused claims 33 C.C.No.51103/2017 that, he has issued a reply to the e-mail but, has failed to furnish such any e-mail before the court. Therefore, adverse interference has been drawn against the Accused. Therefore, from Ex.D4, 5, and 11 are unilateral and self serving e-mails, which not come to the help of Accused to show that he has discharged his liability. Therefore, considering the entire materials on record, it proved that, Ex.P2 Cheque was issued by the Accused towards discharge of part of legally enforceable debt.
40. As discussed above, it has to be presumed that the cheque in question was issued by the accused to discharge the legally recoverable debt or liability. The accused can place rebuttal evidence so as to show that the cheque was not issued for consideration. As appreciated supra, accused has failed to put acceptable and satisfactory evidence to probabilise the defence. Therefore, there is no question of saying that the cheque was not issued for liability. Therefore, complainant has discharged his initial onus laid on him. When he has discharged his initial onus, it raises presumption U/s 118(a) and 139 of Negotiable Instruments Act. Accused has failed to 34 C.C.No.51103/2017 rebut the presumption either in cross-examining PW-1 or in his evidence.
41. So, far as sentence and compensation is concern, an offence punishable under Section 138 of N.I. Act, is a civil wrong and compensatory in nature, punitive is secondary, considering, the above settled principle of law with facts and circumstances of the case, which clearly reveals that, towards discharge of part of due amount, the cheque in question of issued by the accused to the complainant. Therefore, considering the nature of transaction, duration of pendency, litigation expenses, I am opinion that, if sentence of fine of Rs.37,74,442/- (Rupees Thirty-seven Lakhs Seventy-four Thousand Four Hundred and Forty-two only) is imposed that would meet the ends of justice, accordingly, the accused is hereby sentenced to pay a fine of Rs.37,74,442/- (Rupees Thirty-seven Lakhs Seventy-four Thousand Four Hundred and Forty-two only) out of that, the complainant is entitled for a sum of Rs.37,69,442/- (Rupees Thirty-seven Lakhs Sixty- nine Thousand Four Hundred and Forty-two only as a compensation as per Sec.357(1) of Cr.P.C., remaining amount of Rs.5,000/-, is to be appropriated to the state, in case of default the accused shall undergo simple imprisonment for a 35 C.C.No.51103/2017 period of 6 months. Accordingly, the Point No.1 is answered in Affirmative.
42. POINT No.2 : In view of discussion held in Point No.1, I proceed to pass the following :
ORDER Acting U/S 255(2) of Cr.P.C., the accused is convicted for the offence punishable Under Section 138 of Negotiable Instrument Act.
Accused is sentenced to pay fine of
Rs.37,74,442/- (Rupees Thirty-seven Lakhs
Seventy-four Thousand Four Hundred and Forty-
two only only) in default to undergo simple imprisonment for 6 months. Further, it is made clear that out of fine amount, Rs.37,69,442/- (Rupees Thirty-seven Lakhs Sixty-nine Thousand Four Hundred and Forty-two only is to be paid to the complainant as compensation and Rs.5,000/- is ordered to be remitted to the State.
Bail bond stands cancelled.
Supply the free copy of this judgement to the Accused forthwith.
(Dictated to the stenographer, transcribed by her, corrected by me and then pronounced in the open court on this 1st June, 2024) Digitally signed by PARVEEN A BANKAPUR PARVEEN A BANKAPUR Date: 2024.06.03 16:48:10 +0530 (PARVEEN A BANKAPUR) XXXIV ACMM, BENGALURU.
ANNEXURE
1. Witnesses examined on behalf of Complainant:
P.W.1 Mr. Manjunath A. Dwarkanath 36 C.C.No.51103/2017
2. Documents marked on behalf of complainant:
Ex.P.1 Board Resolution
Ex.P.2 Cheque
Ex.P.3 Bank endorsement
Ex.P.4 Office copy of legal notice
Ex.P.5 & 6 Postal receipts
Ex.P.7 Postal acknowledgement
Ex.P.8 Reply
Ex.P.9 Consignee Sales Agent Agreement
Ex.P.10 & 11 Book balance
Ex.P.12 Certified copy of e-mail communication
Ex.P.13 Certified copy of MOU
Ex.P.14 &15 Certified copy of e-mail communications
Ex.P.16 Account Statement
Ex.P.17 Certified copy of Arbital Award
Ex.P.18 Certified copy of Judgment in Commercial
A.P.No.39/2020
Ex.P.19 Bank account statement
Ex.P.20 Certified copy of order of Arbitrator in
A.C.No.114/2018
Ex.P.21 Certified copy of order of Arbitrator in
A.C.No.114/2018.
3. Witnesses examined on behalf of Accused:
D.W.1 Mr. T.K. Ajithkumar
D.W.2 Mr. T.K. Premanand
4. Documents marked on behalf of Accused:
Ex.D.1 Certified copy of cheque
Ex.D.2 E-mail communication
Ex.D.3 Certified copy of affidavit evidence in A.C.
No.114/18
Ex.D.4 to 7 E-mail communications
Ex.D.8 Statement
Ex.D.9 Certificate u/Sec.65(B) of Indian Evidence Act.
Ex.D.10 Bank account statement
Ex.D.11 Certified copy of statement of defence of
Respondent in A.C.No.114/2018
Ex.D. 12 Certified copy of statement of Counter claim of
Respondent in A.C.No.114/2018
PARVEEN A Digitally signed by PARVEEN A
BANKAPUR
BANKAPUR Date: 2024.06.03 16:48:02 +0530
(PARVEEN A BANKAPUR)
XXXIV ACMM, BENGALURU.