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M/S Ruby Auto & Rubber Industries vs Dinesh Garg Page 1 Of 11 on 17 May, 2012

   IN     THE COURT OF SH. DHEERAJ MITTAL: M.M-02 (N.I.ACT):
        SOUTH-EAST DISTRICT, SAKET COURTS COMPLEX: NEW DELHI

                  M/s Ruby Auto & Rubber Industries
                                versus
               Dinesh Gargq (Prop. M/s Techno Conveyors)

                                    CC No.2514/1/2003
                  U/s 138 Negotiable Instruments Act, 1881


1. Unique    Identification : 02403R0046832003
   Number of the case

2. Name of the complainant : M/s Ruby Auto & Rubber
                             Industries,
                             20, Old Rajender Nagar Market,
                             New Delhi-60
                             (Through Prop. Puran Chand)

3. Name of the accused     : Dinesh Garg,
   parentage & residential   Prop. Techno Conveyors
   address                   3/3, Railway Colony,
                             Sarojini Nagar, Chankiyapuri,
                             New Delhi

4. Offence complained of                    : U/s 138 Negotiable Instruments
   or proved                                  Act, 1881

5. Plea of the accused                        Pleaded not guilty and claimed
                                              trial.

6. Final order                              : Acquitted

7. Date of order                            : 17.05.2012


                             Date of Institution         :   07.10.2003
                             Date of Reserving Order     :   21.04.2012
                             Date of Pronouncement of Order: 17.05.2012



M/s Ruby Auto & Rubber Industries vs Dinesh Garg                        Page 1 of 11
                                          JUDGMENT

Brief reasons for the decision are: -

1. This is a complaint filed u/s 138 read with Section 142 of the Negotiable Instruments Act 1881 (hereinafter referred to as N.I. Act).

2. Brief facts of the case are:

That the complainant firm is a proprietorship firm and is dealing in steel fabrication. That complaint is filed through its sole proprietor namely Puran Chand. It has been alleged that towards discharge of its liability, the accused had given cheque No.285002 dated 04.08.2003 for Rs.16,225/- and cheque no.285003 dated 13.08.2003 for Rs.46,027/- (cheques in question), both drawn on Bank of Baroda, Chankyapuri, New Delhi to the complainant but when the complainant presented the cheques for encashment in his bank, the same were returned unpaid with remarks "Funds Insufficient". Thereafter, the complainant issued a legal notice dated 25.08.2003 to the accused and demanded money but when the accused did not pay the amount to the complainant, complainant filed the present complaint case.

3. After being satisfied that prima facie case against the accused u/s Section 138 N.I.Act is made out, cognizance was taken and accused was summoned for the offence u/s 138 N.I.Act by my Ld. Predecessor vide summoning order dated 07.10.2003.

4. After the appearance of the accused, notice u/s 251 Cr.P.C was framed against the accused on 01.03.2005 to which he pleaded not guilty and claimed trial.

5. In post notice evidence, the complainant Sh.Puran Chand examined himself as CW-1 by tendering the affidavit dated 04.10.2005 Ex.CW1/X, and deposed on the same lines as in the complaint and exhibited the relevant documents as under:-

(i)Cheque bearing No.285002 dated 04.08.2003 amounting Rs. 16,225/- (Rupees Sixteen Thousand Two Hundred Twenty Five only) drawn on Bank of Bardoa, New Delhi as Ex.CW1/A.

(ii) Returning memo dated 05.08.2003 tof cheque No.285002 with remarks "Funds Insufficient" as Ex.CW1/B.

(ii)Cheque bearing No.285003 dated 13.08.2003 amounting Rs.46,027/- (Rupees Forty Six Thousand Twenty Seven only) drawn on Bank of Bardoa, New Delhi as Ex.CW1/C.

(iv) Returning memo dated 14.08.2003 of cheque No.285003 with remarks "Funds Insufficient" as Ex.CW1/D.

(v) Legal demand notice dated 25.08.2003 as Ex.CW1/E. Registered postal dispatch receipt as Ex.CW1/F, UPC dispatch receipt as Ex.CW1/G & Undelivered registered cover as Ex.CW1/H.

6. After his evidence (complainant/CW-1), complainant closed his evidence and thereafter on 23.01.2008 statement of accused was recorded u/s 313 Cr.P.C. where all the incriminating evidence was put to him. Briefly stated, in his statement accused took the defence that cheques were not meant for discharge of any legal liability but the same were issued as security. He further said that he did not receive any legal notice.

In his defence, accused examined only himself as DW-1 and therefore, closed his defence.

7. Before going into the merits of the present complaint case, lets consider the important legal provisions and case laws.

7.1 It is settled proposition of law that for fastening liability u/s 138 Negotiable Instruments Act, following requirements are to be fulfilled: -

(a) Drawing of the cheque by the person on the account maintained by him.

(b) Drawer of the cheque issued the cheque to discharge in whole or in part,any legal enforceable debt or other liability.

(c) The cheque issued has been returned unpaid due to insufficiency of funds or exceeds the arranged amount.

(d) The drawer fails to make payment within stipulated time after the receipt of demand notice.

7.2 Important presumptions relating to offence u/s 138 N.I.Act are:-

Section 118 Clause (a) of Negotiable Instruments Act provides for presumptions regarding the consideration for the Negotiable Instruments. It 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".

Section 139 of the Negotiable Instruments Act provides for presumption in favour of a holder. It 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."

The combined reading of above said sections 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. However, it is settled principle of law that the presumption available u/s 139 Negotiable Instruments Act can be rebutted by the accused by raising a probable defence but the burden of proof is on the accused.

7.3 Important case laws are: -

In "Rangappa vs S.Mohan AIR 2010 SC 1898" the Apex Court of India held that the standard of proof on the accused for rebutting presumption is that of "preponderance of probabilities". The relevant para is reproduced here: -

".... it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."

Similar observations have been made by the Apex Court in the following judgments: -

(a) "M.S. Narayana Menon vs State of Kerala" (2006) 6 SCC 39.

(b) "M/s Kumar Exports vs M/s Sharma Carpets" AIR 2009 SC 1518.

(c) "Kamla S. vs Vidyadharan M.J. & Anr." (2007) 5 SCC 264.

(d) "K.Prakashan vs P.K. Surenderan" (2008) 1 SCC 258.

8. I have perused the record and heard submissions from the Ld. counsels of the parties.

During course of the final arguments, Ld. counsel for the accused vehemently argued that the present complaint is not maintainable and therefore, the same be dismissed and the accused be acquitted from the offence u/s 138 N.I.Act. The counsel for the accused argued that the cheques in question have been in the name of the firm namely M/s Ruby Auto & Rubber Industries, (hereinafter referred as "payee firm"), whereas the complaint has been filed by the one namely Puran Chand by claiming that he is the sole proprietor of the firm, but Sh.Puran Chand has not produced even a single document on record to show/prove that he is/was the sole proprietor of the firm. It was further argued that it was the duty of Sh.Puran Chand who claimed himself to be proprietor of the payee firm to prove on record that he was the sole proprietor of the same. It was further argued that as per Section 142 N.I.Act, only the payee/or as the case may be the holder in due course of the cheque can file the complaint u/s 138 N.I.Act. He M/s Ruby Auto & Rubber Industries vs Dinesh Garg Page 6 of 11 submitted that in this case the payee of the cheques in question is M/s Ruby Auto & Rubber Industries and not Sh.Puran Chand who has filed the complaint claiming to be the sole proprietor of the firm without brining on record any document which could connect Sh.Puran Chand with the firm. Hence, it was vehemently argued that the complaint in itself is not maintainable as as per Section 142 N.I.Act only payee of the cheque can file the complaint. It was further argued that since it is legal requirement that only payee has capacity to file the complaint and in this case Sh.Puran Chand has failed to prove that he was a payee, thus the complaint should be dismissed. The counsel extensively relied upon the judgment of Apex Court titled as "Milind Shripad Chandrukar vs Kalim M.Khan & Anr, 2011 (2) JCC (NI) 0 and submitted that in view of the judgment /mandate of the Apex Court, the accused is entitled to acquittal and the complaint should be dismissed because Sh.Puran Chand had no locus to file the present complaint as payee in this case is firm namely M/s Ruby Auto & Rubber Industries and Sh.Puran Chand could not connect himself with the payee firm in any way.

On the other hand, in reply to the above said arguments raised by the counsel for the accused, counsel for the complainant submitted that this objection cannot be raised at this juncture as the same was not raised at any point during trial. He further submitted that the objections taken by the counsel for the accused are frivolous in nature and the same should be rejected and the accused be convicted of the offence u/s 138 N.I.Act.

9. Before addressing the above said arguments of the M/s Ruby Auto & Rubber Industries vs Dinesh Garg Page 7 of 11 Ld.counsel, lets have a look upon Section 142 N.I.Act and the judgment of the Apex Court cited supra, upon which counsel for the accused has heavily relied upon.

Section 142 N.I.Act reads as:-

"Cognizance of offences- Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)-

(a) no Court shall take cognizance of any offence punishable under Section 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.............."

Now lets see in brief what has been held by the Apex Court in the judgment of Milind Shripad cited supra. In the given judgment, the petitioner/ appellant had challenged the judgment of High Court of Bombay in which High Court acquitted the convict of the offence u/s 138 N.I.Act solely on the ground that appellant has failed to produce any evidence as to show that he was the sole proprietor of the proprietary concern. In brief, the accused/respondent before the apex court was convicted of the offence u/s 138 N.I.Act by the trial court and his conviction was upheld by the Sessions Court in appeal. Aggrieved by the order/judgment of sessions court, the accused approached the High Court of Bombay by way of a criminal revision. In the High Court, the counsel for the accused challenged the conviction of the accused solely on the ground that the complainant has failed to produce any evidence as to establish that he was the sole proprietor of the proprietary concern in question. The High Court allowed the revision of the accused and set aside the his conviction M/s Ruby Auto & Rubber Industries vs Dinesh Garg Page 8 of 11 solely on the above said ground that the complainant could not produce any evidence to connect himself with the proprietory concern.

The Apex Court upheld the decision of the High Court and held that if the cheque in question is in the name of the firm and the complaint is filed by a person claiming to the sole proprietor of the firm that person has to prove by evidence that he was the sole proprietor of the firm. The Apex Court also held that a mere statement in affidavit regarding the fact that the person is sole proprietor of the firm would not be sufficient to meet the requirement of law. The relevant portions/extracts of the judgment of Apex Court are reproduced here under for the sake of clarify:-

"......10.The High Court has set aside the judgment of the trial court as well as the Appellate Court in Revision only on the ground that as the appellant did not produce any evidence to show that he was the proprietor of the firm, he had no locus standi to file the complaint....

23.......The appellant miserably failed to prove any nexus or connection by adducing any evidence, whatsoever, worth the name with the said firm, namely, Vijaya Automobiles. Mere statement in the affidavit in this regard, is not sufficient to meet the requirement of law. The appellant failed to produce any documentary evidence to connect himself with the said firm....

24. In view of the above, we do not see any cogent reason to interfere with the impugned judgment and order of the High Court. The appeal is devoid of any merit and, accordingly, dismissed....."

10. In the present case, the cheques in question are in the name of M/s Ruby Auto & Rubber Industries and complaint has been filed by Sh.Puran Chand claiming to be sole proprietor of the complainant firm. Perusal of the record shows that Sh.puran Chand has not filed even a single document on record to show/prove that he was the sole proprietor of the payee namely M/s Ruby Auto & Rubber Industries. Although, Sh.Puran Chand has made statement in his evidence affidavit filed during pre summoning as well as post summoning evidence that he was the sole proprietor of M/s Ruby Auto & Rubber Industries, but mere statement in affidavit is not sufficient to meet the requirement of law and the same has been clearly held by the Apex Court in the judgment cited supra. Besides, his statement in the affidavit, Sh.Puran Chand has not filed any document on record to connect himself with the payee firm.

As far as, arguments of the Ld. counsel for the complainant that the accused never raised any objection/question regarding the connection of Sh.Puran Chand with the payee firm during trial are concerned, this court is of the opinion that the objection/question raised by the Ld. counsel for the accused is a question of law and the same may be raised at any point of time. As noted by the Apex Court, to meet the legal requirement that a complaint u/s 138 N.I.Act can be filed by a person who is payee of the cheque in question, it is the duty of the person who claims himself to be proprietor of the payee firm to bring on record evidence to prove the fact that he was actually the sole proprietor of the payee firm and therefore, he was competent to file complaint u/s 138 N.I.Act as per the requirement of the Section 142 N.I.Act. It is settled law that the question of law can be M/s Ruby Auto & Rubber Industries vs Dinesh Garg Page 10 of 11 raised at any point of time. In considered opinion of this court, the objection raised by the counsel for the accused seems to be sound and the arguments raised by the counsel for the complainant seems to be without any merit.

As noted above, Sh.Puran chand who has filed this complaint failed to prove by way of evidence that he was proprietor of the payee firm i.e. M/s Ruby Auto & Rubber Industries and therefore, in view of the aforesaid discussions and the observations made by the Apex Court in the judgment Milind Shripad, this court of the opinion that the present complaint has not been filed by the competent person as competent person in this case was M/s Ruby Auto & Rubber Industries who was the payee of the cheques in question and not Sh.Puran Chand who has filed this complaint.

10. Thus, in view of the above discussions, this court is of the opinion that the complaint has not been filed by the competent person and Sh.Puran Chand had no locus to file the present complaint unless he had shown that he is the proprietor of the payee firm. Since, the present complaint was not filed by a competent person as required by Section 142 N.I.Act, the same is dismissed and accused is acquitted of the offence u/s 138 N.I.Act. All bail bonds, except bail bond furnished by the accused along with surety u/s 437 A Cr.P.C., stands cancelled. Surety is/are discharged. File be consigned to record room after necessary formalities.

Pronounced in the open court                                       (Dheeraj Mittal)
on 17.05.2012                                                   M.M.(N.I. Act)-02:SED:
                                                               Saket Courts:New Delhi




M/s Ruby Auto & Rubber Industries vs Dinesh Garg                                    Page 11 of 11