Delhi District Court
National Insurance Co Ltdn vs Bhim Singh on 27 October, 2023
THE COURT OF SH. ABHINAV SINGH, MM (N.I. ACT)-
04, NEW DELHI DISTRICT, ROUSE AVENUE
COURTS COMPLEX, NEW DELHI
National Insurance Co. Ltd. vs. Bhim Singh
CC No. 1111-2020
U/s 138 Negotiable Instruments Act, 1881
1. CIS number : DLND020009922020
2. Name of the complainant : National Insurance Co. Ltd.,
1st Floor BMC House,
N-1, Connaught Place, New Delhi-
110001
3. Name of the accused, : Mr. Bhim Singh,
parentage & residential S/o Sh. Bhanu Pratap Singh
address Proprietor M/s Shiva Auto Galary,
D-1/12, Thana Road,
Sangam Vihar,
New Delhi-110062
4. Offence complained of or : U/s 138 of Negotiable
proved Instruments Act, 1881
5. Plea of the accused : Pleaded not guilty and claimed
trial.
6. Final Judgment/order : Convicted
7. Date of judgment/order : 27.10.2023
Date of Institution: 18-01-2020
Date of Reserving Judgment/Order: 26-09-2023
Date of Pronouncement of Judgment/Order: 27-10-2023
JUDGMENT
National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 1 of 15
1. By way of the present Judgment, this court shall dispose of the present complaint filed by the complainant National Insurance Co. Ltd. through its Senior Divisional Manager, Mr. Naresh Kumar Mittal (hereinafter referred to as 'complainant') against Mr. Bhim Singh (hereinafter referred as the 'accused') u/s 138 of Negotiable Instruments Act, 1881 r/w Section 142 of Negotiable Instruments Act, 1881 (hereinafter referred to as 'NI Act' in short).
Brief facts:
2. The case of the complainant, in brief, is that the complainant is engaged in the business of general insurance and the accused is running an agency under M/s. Hero Insurance Broking India Ltd. (hereinafter referred to as "Hero Insurance") as a sub agency to the main agency. It is alleged that as per the terms and conditions between the complainant company and the accused, the accused was to deposit the premium collected by accused from policy holders, on behalf of the complainant company, in the bank account of the complainant. The accused failed to deposit the premium so collected as a result of which an amount of Rs. 38,54,163/- remains to be deposited by the accused.
2.1. After a lot of persuasions, the accused issued the following three cheque towards the discharge of the liability towards the complainant;
Serial No. Cheque Amount Date
1. 059040 Rs. 1,00,000/- 11.11.2019
2. 059035 Rs. 2,00,000/- 15.11.2019
National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 2 of 15
3. 059037 Rs. 2,00,000/- 22.11.2019 2.2. Upon being presented for encashment by the complainant with his banker, the aforesaid cheques were returned as dishonored on 13.11.2019, 19.11.2019 and 26.11.2019 respectively, with remarks "Exceed Arrangements".
2.3. Thereafter, the complainant got served legal demand notice on 05.12.2019 to the accused by way of speed post demanding the payment of the cheques amount. It is alleged that despite service of legal demand notice, accused did not make any payment to discharge the liability. Consequently, the present complaint has been preferred by the complainant against the accused.
Proceedings before the Court:
3. On the basis of complaint and pre-summoning evidence tendered by the complainant, cognizance of the offence U/s 138 NI Act was taken by Ld. Predecessor of this Court and process was issued against the accused on 01.10.2021.
3.1. The notice of substance of accusation u/s 251 of the Code of Criminal Procedure, 1973 (hereinafter "CrPC") was given to the accused on 06.01.2023 to which accused pleaded not guilty and claimed trial. The accused admitted his signatures on the cheque and also admitted the receipt of legal demand notice. On the same day, the accused moved an application u/s 145(2) NI Act which was allowed vide order of the same date i.e., 06.01.2023. The matter was then listed for CE. CE was led and closed on 24.03.2023.
National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 3 of 15 3.2. Thereafter, statement of the accused u/s 313 CrPC was recorded on 20.04.2023 wherein the accused, inter alia, admitted his signatures on the cheques in question, the knowledge of the dishonor of the cheques and the receipt of the legal demand notice.
3.3. Later, defence evidence was led on behalf of accused and examined himself as DW1. DE stood closed on 21.08.2023. Accordingly, the matter was listed for final arguments. Final arguments were heard on behalf of both the parties.
Evidence led in the matter.
4. In the present case, the complainant examined its AR as CW1 vide affidavit Ex. CW1/1 and relied upon the following documents in order to prove essential ingredients of Section 138 NI Act:
1. Ex. CW1/2: Statement of accounts;
2. Ex. CW1/3, Ex. CW1/4 and Ex. CW1/5: Original Cheques bearing no. 059040, 059035 and 09037 etc.;
3. Ex. CW1/6-Ex. CW1/8: Returning memos;
4. Ex. CW1/8A (Colly): Emails;
5. Ex. CW1/9: Legal demand notice;
6. Ex. CW1/10: Postal receipt;
7. Ex. CW1/11: Tracking report;
8. Ex. CW1/12: Certificate u/s 65B of Indian Evidence Act.
CW1 was duly cross-examined on behalf of the National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 4 of 15 accused and was discharged.
No other witness was examined on behalf of complainant and CE was closed on 24.03.2023.
4.1. The accused examined himself as DW1 vide affidavit Ex. DW1/X and relied upon the following documents;
1 Ex. DW1/A and Ex. DW1/B: Computer generated emails;
2 Mark A: Print out of notice.
No other witness was examined on behalf of accused and DE was closed on 21.08.2023.
Reasons for Decision:
5. For deciding the present case, it is essential to lay down the ingredients of the offence under Section 138 NI Act which are as follows:
(a) A person must have drawn a cheque on an account maintained by him in a bank.
(b) The cheque must be drawn for payment of certain amount of money to another person to discharge in whole or in part, any legally enforceable debt or other liability.
(c) The cheque has been presented to the bank and is returned unpaid by the bank either due to insufficiency of funds or it exceeds the amount arranged to be paid from that account by an agreement made with that bank.
National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 5 of 15
(d) The payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing to the drawer of cheque within stipulated period.
(e) The drawer fails to make payment within stipulated time after the receipt of the said notice. [Reference:
Kusum Inglots & Alloys Ltd & Ors v. K Pennar Peterson Securities Ltd and Ors (2000) 2 SCC 745].
6. Further, a negotiable instrument including a cheque carries presumption of consideration in terms of Section 118(a) and presumption of existence of liability under Section 139 of the Act.
7.1. Section 118 Clause (a) of Negotiable Instruments Act reads as under:-
"That every negotiable instrument was made or drawn for consideration and that every such instrument when it has been accepted, endorsed, negotiated or transferred was accepted, endorsed, negotiated or transferred for consideration".
7.2. Section 139 of the Negotiable Instruments Act reads as under:-
"It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 6 of 15 nature referred to in section 138, for the discharge, in whole or in part, or any debt or other liability."
8. The combined effect of Section 118(a) and Section 139 of NI Act is that it raises a presumption in favour of the holder of the cheque that he has received the same for discharge in whole or in part of any debt or other liability. In Rangappa V. Sri Mohan, (2010) 11 SCC 441, a three-judge bench observed that, Section 139 of the NI Act is stated to be an example of a reverse onus clause which is in tune with the legislative intent of improving the credibility of negotiable instruments. The Hon'ble Supreme Court observed that a reverse onus clause requires the accused to raise a probable defence or creating doubt about the existence of a legally enforceable debt or liability for thwarting the prosecution. The standard of proof for doing so would necessarily be based on "preponderance of probabilities" and not "beyond shadow of any doubt."
9. In the present case, the accused has admitted signatures on cheques in question Ex.CW1/3, Ex. CW1/4 and Ex. CW1/5, and receipt of legal demand notice, at the time of framing of notice u/s 251 CrPC, and also at the time of statement of accused u/s 313 CrPC. Hence, the presumption under sections 118 and 139 of the NI Act would operate against the accused as has been held by the Hon'ble Supreme Court in the case of M/S Kalamani Tex vs P. Balasubramanian (2021) 5 SCC 283. The relevant portion is reproduced below: -
"The Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 7 of 15 established, then the 'reverse onus' clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. Now it is upon the accused to rebut the presumption u/s 139 of NI Act by raising a probable defence in his favour on a scale of preponderance of probabilities."
9.1. Thus, in view of the above legal position, the burden was upon the accused to rebut the legal presumption that had been imposed upon him. In this regard, the Hon'ble Supreme Court in Kumar Exports v. Sharma Carpets (2009) 2 SCC 513 held: -
"Bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of presumptions shifted to the complainant. To disprove the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist."
10. Thus, it is well established that to rebut the presumption raised against the accused, it is not imperative for the accused to lead direct/definite evidence, even by relying on the facts and circumstances of the case as well as upon the flaws in evidence of the complainant, such presumption can be rebutted.
National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 8 of 15
11. In the instant case, in order to rebut the presumption against accused, the accused has taken the following substantial defenses in his application u/s of the 145 (2) NI Act;
a) that the accused never received the legal demand notice;
b) that the accused did not have any privity of contract with the complainant and therefore not liable towards the complainant;
c) that the cheques in question had been given to Hero Insurance as security cheques;
d) that the AR of the complainant does not have proper authorization in his favour.
11.1. As far as the first defense of the accused is concerned, the same becomes redundant as the accused has admitted the receipt of the legal demand notice Ex. CW1/9 at the time of framing of notice u/s 251 CrPC and also at the time of the statement of accused u/s 313 CrPC.
11.2. The accused has also taken further defense that the cheques in question had been given to Hero Insurance as security cheques and the same have been misused by the Hero Insurance and the complainant. The accused has also taken the defense that there was no privity of contract i.e., no relation of principal and agent between the accused and the complainant company, and therefore, the accused is not liable towards the complainant.
National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 9 of 15 11.3. As far as the question of security cheque is concerned, it is no longer res- integra that liability can be fastened upon the accused even if the cheques in question were issued as security cheques. In this regard, it is apposite to mention the judgments of V.S. Yadav v. Reena CRL. A. NO. 1136 Of 2010 wherein it was held that:
"Mere pleading not guilty and stating that the cheques were issued as security, would not give amount to rebutting the presumption raised under Section 139 of N.I.Act. If mere statement under Section 313 Cr. P.C. or under Section 251 Cr. P.C. of accused of pleading not guilty was sufficient to rebut the entire evidence produced by the complainant/ prosecution, then every accused has to be acquitted. But, it is not the law. In order to rebut the presumption under Section 139 of N.I. Act, the accused, by cogent evidence, has to prove the circumstance under which cheques were issued."
11.4. Thus, the accused was obligated to explain circumstances and further obligated to negate the presumption of the existence of legally enforceable debt and liability. In order to wriggle out of his liability towards the complainant, the accused has argued that there was no principal and agent relationship between the accused and the complainant company. The accused has further argued that Ex. CW1/6, Ex. CW1/7 and Ex. CW1/8 i.e., the cheque returning memos also mention the name of Hero Insurance as also the back of the cheques. Per contra, Ld. Counsel for complainant has argued that accused had been making payments into the account of the National Insurance Company directly and accused had been collecting premium on behalf of the complainant. It is further argued that the accused has also raised invoices upon the complainant for expenses National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 10 of 15 incurred in the collection of premium on behalf of the complainant company.
11.5. In the facts of the present matter, it is not disputed by the accused that Hero Insurance was the agent of the complainant company. The AR of the complainant in his cross examination also brought on record the fact that Hero Insurance is the broker of the complainant company. The AR for the complainant has also stated in his cross examination that the complainant company had tied up with all the dealers of Hero Motocorp and that the dealers used to sell their vehicles and collect insurance premium from the customers and remit the same to the complainant company.
It has further been admitted by the accused in his application u/s 145 (2) NI Act that the accused had a contract with Hero Insurance for the sale of new Hero vehicles from showroom. The accused, in his cross examination, has also admitted that the accused used to issue insurance policies to different customers on behalf of the complainant company through the portal of Hero Broking. The accused has further admitted in his cross examination that the accused used to deposit money in the account of the complainant before 2019 for a period of about three to four years.
11.6. Upon a complete appreciation of the facts and evidence in the matter, it is observed that although the accused was not appointed as an agent by the complainant company directly however the accused had been employed as a sub agent by Hero Insurance.
National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 11 of 15 11.6.1. Section 191 of the Indian Contract Act (hereinafter referred to as "the Act") provides that a sub agent is the person employed by, and acting under the control of the original agent in the business of the agency. 11.6.2. Section 192 of the Act further provides, inter alia, that sub agent is responsible for his acts to the principal in case of fraud or willful wrong.
11.6.3. Section 194 of the Act further provides that where an agent (as in the present case Hero Insurance) holding an express or implied authority to name another person to act for the principal in the business of the agency has named another person accordingly, such person is not a sub agent but an agent of the principal for such part of the business of the agency as is interested to him.
11.6.4. Section 218 of the Act further casts a duty upon the agent to pay to his principal all sums received on his account.
11.7. Thus, a comprehensive reading of the above facts and the legal position lead to an irresistible conclusion that the accused had been engaged / was acting the capacity of an agent of Hero Insurance and Hero Insurance had been acting as an agent for the complainant company. That would make the accused a sub- agent of the complainant company. As the accused was engaged in the specific task of collecting insurance premium and issuing insurance policies on behalf of the complainant, as per the provisions of Section 194 of the Act, the accused shall be considered to be an agent of the complainant company and therefore shall be liable to pay all sums collected on behalf of the National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 12 of 15 complainant, to the complainant, as per the provisions of Section 218 of the Act. As a result, the accused shall be liable to the complainant company for the dishonor of the cheques in question even if the cheques had been handed over to Hero Insurance by the accused. Accordingly, the defense taken by the accused is of no help to him.
12. The accused has also taken a defense that the AR of the complainant does not have a valid power of attorney in his favour and therefore could not have instituted the present complaint as no legal document is filed wherein the AR has been authorized to file the present complaint. In this regard, the complainant has already filed Mark A on record which is the power of attorney authorizing certain class of officials to represent the complainant company in legal proceedings before appropriate forum. Even otherwise, the objection taken is a procedural objection and it is well established that procedure is a hand maid of justice and cannot be used to defeat the substantive rights of the parties in a matter. Reliance in this regard can be placed upon the judgment of the Hon'ble High Court of Bombay in Ephrayim H. Ephrayim vs Turner, Morrison And Co. (1930) 32 BOMLR 1178. Thus the objection taken by the accused appears to be misplaced.
Conclusion
13. Signatures on the cheques in question were admitted by the accused and therefore, presumption u/s 118 NI Act of consideration and Section 139 NI Act of existence of legal liability is raised against the accused. It was then incumbent upon National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 13 of 15 the accused to rebut the presumption raised in favour of complainant either by leading direct evidence or by showing circumstances in the case of complainant which makes the story of complainant unbelievable for a reasonable man. However, the accused has miserably failed to prove the defense, and further failed to show any contradiction or discrepancy so fatal to the case of complainant that presumption raised against it stands rebutted.
14. What is imperative for the purpose of rebutting the presumption u/s 139 NI Act, as per the defence of the accused, is that on the date of issuance of cheques there should not be any outstanding legal liability towards the complainant. The nature of liability has already been put forth by the complainant. Nothing substantial to controvert the nature of liability has been proffered by the accused company. There is a presumption under Section 139 of the NI Act that there exists a legally enforceable liability.
Final Order
15. It is true that for offence U/s 138 NI Act the accused is not expected to prove his defence beyond reasonable doubt in order to rebut the statutory presumption. However, in the instant case the accused has miserably failed to discharge the onus of proving his defence even on the basis of preponderance of probabilities. Accordingly, the accused Mr. Bhim Singh, S/o Sh. Bhanu Pratap Singh stands convicted for offence under section 138 NI Act.
National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 14 of 15 Bail Bond in compliance of Section 437-A CrPC has already been furnished.
A copy of this judgment be uploaded on the official website of the District Court.
Announced in open court today i.e., 27.10.2023. (This judgment contains 15 pages. Each page has been signed by me).
(ABHINAV SINGH) MM:RACC:ND DELHI National Insurance Co. Ltd. vs. Bhim Singh CC No. 1111-2020 Page no. 15 of 15