Bangalore District Court
M/S.Gauge Sewing Machines & vs Indus Fila Ltd on 15 November, 2016
BEFORE VII ADDL. JUDGE & XXXII ACMM
Court of Small Causes, Bangalore, (SCCH-3)
DATED THIS THE 15TH NOVEMBER 2016
PRESENT:
Smt.GOMATI RAGHAVENDRA
LL.M, D.I.P.R, D.C.L
VII Addl. Judge & XXXII ACMM,
Court of Small Causes, Bengaluru.
C.C.No.24611 OF 2012
Complainant : M/s.Gauge Sewing Machines &
Spares,
Proprietor-Mr.M.Lakshmichand Jain,
No.1023/140, 20th Main, V Block,
West of Chord Road, Rajajinagar,
Bengaluru-560 010.
Represented by its
Power of Attorney Holder,
Sri.D.Anand Kumar,
S/o.Sri.Dhanaraj, 51 years,
R/at No.13, 2nd Cross,
Subbannapalya,
Banasawadi Main Road,
Bengaluru-560 043.
(By Sri.C.Prasanna Kumar, Advocate)
-Vs-
Accused: 1. Indus Fila Ltd.,
Represented by its Directors,
2. Hansraj Rathore,
CFO & Company Secretary,
2 SCCH-3 C.C.No.24611/2012
3. Shashikanth Mandana,
Director/Authorized Signatory,
All are situated at No.107,
Industrial Sub-Urb,
II Stage, Yeshwanthpur,
Bengaluru-560 022.
(By Sri.B.N.Prakash, Advocate)
JUDGMENT
This complaint is filed by the complainant against the accused under Section 200 Cr.P.C., for the offence punishable under section 138 of Negotiable Instruments Act.
2. The case of the complainant in brief is as under:
Accused No.1 is a Company represented by its Directors, Accused No.2 is the CFO and Company Secretary and Accused No.3 is the Director of Accused No.1 respectively. The directors of the accused No.1 company had cordial relation with the complainant for the urgent business necessities and requirement of the Industrial Sewing Machines etc. The accused during the August 2010,
3 SCCH-3 C.C.No.24611/2012 persuaded the complainant to procure the same from their known exporter M/s.Zhejiang Founder Electricity and Machinery Co., Ltd., China, where the required machines of accused were manufactured. When the complainant assisted the accused to procure the same from the manufacturer and the accused got the required machines from them by importing the same in the month of August 2010 vide their three invoices 10F116-001, dated 15.08.2010 for USD 84,000/-, No.10F114-003, dated 15.08.2010 for USD 36,000/- and No.10F114-001, dated 25.09.2010 for USD 49,270/- totaling to USD 1,69,270/-, out of which the accused made only a small payment of USD 25,000/- only on 25.08.2011. The accused has not made entire payment and there was an outstanding of USD 1,44,270/-.
3.Since the accused did not make payments due by them to the principal exporter as agreed and came out with a payment schedule and accordingly the accused had issued 4 SCCH-3 C.C.No.24611/2012 three cheques during 2011 and which got dishonored and later after a long gap the accused had made another small payment of USD 20,000/- and the accused were still due USD 1,24,270/- to their exporter. Accused came out with another payment schedule and towards discharge of their part payment, the accused issued a cheque bearing No.366335, dated 31.07.2012 for Rs.10,32,000/- duly signed by the accused No.2 being the CFO and Company Secretary and the Accused No.3 being the Director and authorized persons jointly. The cheque was drawn on Standard Chartered Bank, M.G.Road Branch, Bengaluru drawn in favour of the complainant towards discharge of liability of the accused persons.
4.The accused instructed the complainant to present the cheque on 01.08.2012 and accordingly complainant presented the said cheque with his banker Union Bank of India, Rajajinagar Branch, Bengaluru on 01.08.2012 and to 5 SCCH-3 C.C.No.24611/2012 the surprise of the complainant the same came to be dishonored for the reason "Funds Insufficient".
5.As per the cheque return memo of the complainant banker dated 03.08.2012 and thereafter complainant constrained to issue Legal Notice dated 14.08.2012 to all the three accused. The legal notice sent to the accused has been duly served on them on 14.08.2012. Inspite of the same, accused failed to repay the amount covered under the cheque to the complainant within stipulated time. Hence, present complaint.
6. After registration of the complaint, sworn statement of the complainant was recorded and as there were prima facie materials to proceed against the accused, a criminal case was ordered to be registered against the accused for the offence punishable under Section 138 N.I Act. After registration of the case, summons were ordered to be issued to the accused. In response to the summons 6 SCCH-3 C.C.No.24611/2012 issued, accused appeared through their counsels and got enlarged on bail.
7. Substance of accusation was recorded and read over to the accused. Accused pleaded not guilty and claimed trial.
8. During the course of trial, the complainant got examined himself as PW.1, got marked documents at Ex.P.1 to Ex.P.11.
9 Statement of the accused was recorded under Section 313 Cr.P.C. Accused denied each and every incriminating evidence appearing against them and in defence, but led no defence evidence.
10. Heard. Perused the materials available on record.
11. The points that arise for my consideration are:-
1) Whether complainant proves that the accused has issued the Cheque bearing No.366335, dated 31.07.2012 for 7 SCCH-3 C.C.No.24611/2012 Rs.10,32,000/-, in discharge of legally enforceable debt?
2) Whether complainant has complied the statutory provisions of Section 138 of N.I.Act?
3) Whether accused are guilty for the offence punishable under section 138 of N.I.Act?
4) What order?
12. My answers to the above points are as under:-
Point No.1 to 3: In the Affirmative Point No.4: As per the final order for the following:
REASONS
13.Point No.1: It is the case of the complainant that accused persons have issued cheque in question in favour of the complainant and when the said cheque was presented by the complainant for encashment, said cheque returned dishonored for "Insufficient Funds" and thereafter inspite of issuance of legal notice, accused failed to repay the amount covered under dishonored cheque. In order to 8 SCCH-3 C.C.No.24611/2012 substantiate the case of the complainant, present Power of Attorney Holder by name Yogesh.B, the Manager of complainant's company stepped into the witness box and led evidence as PW.1 and in his affidavit evidence, PW.1 has reiterated the complaint averments. In addition to his ocular evidence, he has relied upon Ex.P.1 to Ex.P.11.
14.The Power of Attorney executed by the complainant in favour of the PW.1 is marked at Ex.P.5. He has produced the Counterfoil of Union Bank of India at Ex.P.2. The cheque in question said to have been issued by the accused persons in favour of the complainant dated 31.07.2012 for Rs.10,32,000/- is marked at Ex.P.1. The signatures of accused No.2 & 3 are respectively marked at Ex.P.1(a) and Ex.P.1(b). The cheque return memo issued by the Standard Chartered Bank, Bengaluru with the shara "Insufficient Funds" is marked at Ex.P.3. The legal notice issued by the complainant dated 14.08.2012 calling upon 9 SCCH-3 C.C.No.24611/2012 the accused persons to repay the amount covered under the cheque is marked at Ex.P.1. The postal receipts for having sent legal notice through RPAD are respectively marked at Ex.P.4 (a) and postal acknowledgments for having received the legal notice by the accused persons are marked at Ex.P.4(b) to (d).
15.Admittedly there is no direct transaction between complainant and accused with regard to purchase or selling of Sewing machines. As per the case of the complainant itself for the urgent business necessities and requirements of the Industrial sewing machines, the accused persuaded the complainant to procure sewing machines from their known exporter by M/s.Zhejiang Founder Electricity and Machinery Manufacture Co., Ltd., China, where the required machines of accused were manufactured and accordingly complainant assisted the accused to procure the machines from the manufacturer and accused got the required machines by importing the 10 SCCH-3 C.C.No.24611/2012 same in the month of August 2010. As the accused did not make payments due by them to the principal exporter, accused issued a cheque in question bearing No.366335, dated 31.07.2012 for Rs.10,32,000/- duly singed by accused No.2 & 3 jointly being the CFO and Company Secretary and the accused No.3 being the director and authorized persons. PW.1 as a Power of Attorney Holder of the complainant company has been thoroughly cross examined by the accused wherein the questions were put to him regarding the authorization to represent on behalf of the complainant and to depose before the court as well as his personal knowledge with regard to the transaction in question. Perusal of the Power of Attorney marked at Ex.P.5, it reveals that the proprietor of the complainant company by name M.Lakshmichand Jain has executed power of attorney authorizing PW.1 herein to do all acts to lead evidence for and on behalf of him etc., and do all relevant acts, deeds and things in this behalf, which is 11 SCCH-3 C.C.No.24611/2012 executed on 20.11.2014. As far as the personal knowledge of PW.1 in respect of the transaction in question is concerned, PW.1 is said to have put his signature for and behalf of Complainant Company in the letter dated 05.09.2011 issued by the complainant itself to the accused marked at Ex.P.8, which relates to alleged transaction in question. PW.1 has admitted in his cross-examination that there is no document to show that complainant is authorized representative in India for Zhejang Founder Electricity and Machinery Manufacture Company Limited, China and there are no authorized dealers of machinery through the said Zhejang Company Limited. He has also admitted that Zhejang Company Limited has supplied the machinery directly to the accused himself. It is material to note that the said Zhejang Company, the manufacturer of sewing machines, which has exported sewing machines to the accused has filed original suit in O.S.No.5859/13 and the PW.1 has stated that he himself has signed the plaint. 12 SCCH-3 C.C.No.24611/2012 The said plaint in O.S.No.5859/13 is confronted by the accused from PW.1 and got marked at Ex.D.1. When the said manufacturer of sewing machines itself has filed the original suit seeking recovery of money from the accused, it cannot be said that filing of the complaint by the complainant against the accused is not known to the said manufacturer. The question arises before the court is that when the manufacturer has filed the civil suit against the accused/defendant seeking recovery of amount due from the accused for having imported sewing machines and so also filing present complaint by the complainant against accused persons in respect of the same transaction is maintainable in law or not. It is material to note here itself that filing of civil suit is different from that of filing of private complaint U/s.138 of N.I.Act. The complainant is entitled to file both private complaint for bouncing of the cheque as well as civil suit for recovery of the amount due by the accused. In view of the established principal of law 13 SCCH-3 C.C.No.24611/2012 as stated supra, there is no bar to file private complaint U/s.138 of N.I.Act, when the civil suit has also been filed with regard to the same transaction. The question was put to PW.1 in his cross-examination by the accused that in Para No.6 of Ex.D.1 in the Invoice bearing No.10F114-003, it has been raised in favour of M/s.Indus Garments (India) Private Limited and this particular portion is marked at Ex.D.1(a) by way of confrontation. By getting confronted this particular parties in Ex.D1, accused intends to show that it is M/s Indus Garments (India) Private Limited infavour of which the invoice bill is raised but not infavour of accused herein. As per the case of the complainant, the M/s.Indus Garments (India) Private Limited is sister concern of the accused No.1 and as such it is not different entity as such there are no records produced by the accused before the court to show that M/s.Indus Garments (India) Private Limited is not at all concerned or related to the accused No.1. Admittedly the accused have not 14 SCCH-3 C.C.No.24611/2012 produced any evidence either oral or documentary to show that M/s Indus Garments (India) Private Limited is not at all concerned to the accused and both are different entites altogether. Under such circumstances, it become difficult to accept the defence of accused. Hence, the relevant portion marked at Ex.D.1(a) will not come to the aid of the accused to substantiate its defence.
16.In the case on hand, the accused have not led oral evidence on their behalf, but got confronted Ex.D.1 & Ex.D.1(a) through PW.1. By going through the cross- examination of PW.1, it makes clear of the defence taken up by the accused persons. According to them the complainant has misused the cheque in question and presented the same in the name of the complainant and that accused is not at all due of any amount to the complainant and their liability if any is only against the manufacturer Zhejang Company.
15 SCCH-3 C.C.No.24611/2012
17. Ex.P.1 is the Cheque in question. It is pertinent to note that in the entire cross-examination of PW.1, accused have no where disputed their signature in Ex.P.1. According to the Sec.118 of N.I.Act once the signature of the accused on the cheque is not in dispute and the cheque has been drawn the same is for consideration. Further Ex.P.3 shows that Ex.P.1 was returned dishonored for want of "Insufficient Funds" in the account of the accused. Ex.P.4(a) shows that legal notice was sent to the accused calling upon them to repay the amount covered under dishonored cheque and Ex.P.4(b) to (d), the postal acknowledgments reveals that the notice issued by the complainant was served on the accused persons, wherein the accused have signed for having received the notice. At this stage, it is relevant to consider the Judgment reported in AIR 2010 SC 1898 in the case of Rangappa V/s. Mohan, wherein the Hon'ble Supreme Court has held that:
16 SCCH-3 C.C.No.24611/2012 "In view of Sec.139 of N.I.Act, whenever a cheque is dishonored, initial presumption arises in favour of the Complainant that the said cheque was issued for discharge of a legally enforceable debt".
18. Accused have taken up specific defence that complainant has misused the cheque since there is no transaction between them and the complainant. If at all it was the specific defence of the accused that the complainant has misused the cheque, what prevented the accused from filing complaint with regard to misuse of the cheque by the complainant as term as it soon came to their knowledge or atleast when they received legal notice. Accused have not given any explanation in this regard. At this stage, I would like to rely upon the judgment reported in 2013(3) KCCR 2223, between Peeran BI V/s. Haji Malang, wherein it is held that when accused does not deny cheque, it cannot be 17 SCCH-3 C.C.No.24611/2012 accepted that cheque was obtained by the complainant illegally."
19. Hence, in view of Principle laid down in the said judgment, as the accused have not disputed Ex.P.1 or their signature appearing therein, it cannot be accepted that the Complainant had obtained Ex.P.1 illegally and misused the same as accused have not satisfactorily proved such defence. Accused during the course of cross-examination of PW.1 have taken yet another defence that accused No.2 & 3 have not received the demand notice at Ex.P.4. In the instant case, accused have not disputed either issuance of notice as per the Ex.P.4 to them by the complainant or signature appearing in Ex.P.4 postal acknowledgments, which means that accused are admitting the issuance of notice as well as service of notice by them. When such is the case, absolutely there was no difficulty for the accused to issue reply notice to the complainant denying the 18 SCCH-3 C.C.No.24611/2012 contents stated in the legal notice. But for the reasons best known to them, accused have not done so, which in turn leads to an adverse inference against them that there is merits in the legal notice issued by the complainant. At this juncture, it is relevant to consider a judgment reported in AIR 2010 SC 1898, in the case of Rangappa V/s. Mohan, wherein Hon'ble Supreme Court has held that:
"The very fact that accused had failed to reply to the statutory notice U/s.138 of the Act leads to the inference that there was merit in the complainant's version".
20. It is the major defence of the accused that there is no contractual liability on the part of the accused to issue cheque in favour of the complainant as there is no transaction between them and as such there is no legally recoverable debt to be paid by the accused in favour of the complainant, since, the transaction was between the accused and the manufacturer Zhejang Founder Electricity 19 SCCH-3 C.C.No.24611/2012 & Machinery Manufacturer Co., Ltd., China to contravened this aspect. PW.1 has placed reliance of the letter issued by the accused on 22.06.2011 marked at Ex.P.7 in favour of the complainant issuing post dated cheques as security deposit for imported machines from china. The contents of the letter reveal that as the accused could not effect payment to the supplier immediately, hence, they are issuing the post dated cheques in favour of the complainant as a security deposit till effecting the payment to the foreign principal supplier in understanding with Zhejang Founder Electricity and Machinery Manufacturer Company Limited as per their instructions and that the complainant has to return back the said cheques once the payment is remitted to Zhejang Founder Electricity and Machinery Manufacturer Company Limited. This document has not been specifically denied by the accused, which means to say that it admits the contents stated therein. The contents of Ex.P13 discloses that the accused admits the payment to be made 20 SCCH-3 C.C.No.24611/2012 to the principal supplier for having imported sewing machines from them and that is the reason why the accused issuing the post dated cheques mentioned in the letter in favour of the complainant as a security deposit on the understand with Zhejang Founder as per their instructions. This document clearly reveals that the cheque in question came to be issued by the accused on the understanding with Zhejang Founder and as per their instructions only. After this letter issued by the accused, a letter dated 05.09.2011 came to be issued by the complainant, wherein they have returned back one of the cheques mentioned in Ex.P.7 for Rs.11,12,500/- to the accused. Ex.P.11 is the major document in question produced on behalf of the complainant issued by the accused in favour of the complainant issuing five post dated cheques in favour of the complainant as a security deposit i.e., Cheques bearing No.366332, dated 30.04.2012 for Rs.10,32,000/-, No.366333, dated 31.05.2012 for Rs.10,32,000/-, 21 SCCH-3 C.C.No.24611/2012 No.366334, dated 30.06.2012 for Rs.10,32,000/-, No.366335, dated 31.07.2012 for RS.10,32,000/-, No.366336, dated 31.08.2012 for Rs.10,32,000/-. The contents in Ex.P.11 further reads that the above cheques issued only as security and to effect the payment to the supplier Zhejang Founder Electricity and Machinery Manufacturer Company Limited, as per the schedule and requests. This document has also not been specifically disputed by the accused. By going through this document, it reveals that the accused have issued the said post dated cheques in favour of the complainant as a security only, as per the instructions of manufacturer Zhejang Company, when it is clearly mentioned in the said document that as per the instructiuons of the manufacturer only accused have issued said cheque, under such circumstances, it cannot be said that there is no legally enforceable debt as required the provisions of N.I. Act. As far as cheques issued only as a 'security' is concerned, it is significant to note that there is 22 SCCH-3 C.C.No.24611/2012 no magic in the word security cheque that the movement the accused claims that the dishonored cheque was given as a security cheque, the court could acquit the accused. Expression 'security cheque' is not a statutorily defined expression in the N.I.Act. The N.I.Act does not per se carve out an exception in respect of a security cheque to say that a complaint in respect of such a cheque would not be maintainable. There can be myriad situations in which the cheque issued by the accused may be called as security cheque, or may have been issued by way of a security, i.e., to provide an assurance or comfort to the drawee, that in case of failure of the primary consideration on the due date, or on the happening (or not happening) of a contingency, the security may be enforced.
21. Accused except putting his defence by way of cross examining PW.1, have not ventured to lead any evidence on their behalf. If at all they have not issued any 23 SCCH-3 C.C.No.24611/2012 cheque in favour of the complainant or having any grievance against the documentary evidence relied upon by the complainant, they could have produced reliable materials in this regard to contravene the evidence relied upon by the complainant. But absolutely there is no contra materials produced on record by the accused persons to disbelieve the case of the complainant. In view of Sec.139 of N.I.Act, whenever cheque is dishonored initial presumptions arises in favour of the complainant that the said cheque was issued for discharge of legally enforceable debt. Accused except denying the case of the complainant or stating that the cheque has been misused by the complainant has not inclined to lodged complaint against the complainant in this regard. Because no prudent man will keep quite without taking any legal proceedings against the person who misused the cheque for such a huge amount in particular. The accused persons could have done this atleast after receipt of the legal notice, but they have not done so for the 24 SCCH-3 C.C.No.24611/2012 reasons best known to them, which show that accused indirectly admitting the case of the complainant. Further there was no difficulty in the accused persons to issue reply notice to the complainant denying the contents stated in the legal notice, but the accused have not ventured to do so, which also leads to an adverse inference against them that they have admitted the contents of the legal notice and have no counter against it.
22. In view of all the above discussion, I am of the opinion that accused have failed to rebut the presumptions raised in favour of the complainant U/s.139 of N.I.Act. Therefore, I am of the opinion that complainant has proved that Ex.P.1 was issued by the accused in discharge of legally enforceable debt. Therefore, Point No.1 is answered in the Affirmative.
23. Point No.2:- As per the statutory procedure contemplated U/s.138 of N.I. Act, after dishonour of 25 SCCH-3 C.C.No.24611/2012 cheque, complainant has to issue notice within 30 days of such dishonour and then after leaving 15 days grace period from the date of service of notice for the accused to make arrangement to honour cheque, the complaint has to be filed within 30 days after such grace period of 15 days. If the accused fails to make necessary arrangement to honor the cheque, then the complainant within 30 days from such completion of grace period shall file complaint. Now it is necessary to scrutinize whether complainant has complied the statutory procedure before filing the complaint.
24. In the instant case, Ex.P.1 cheque is dated 31.07.2012, the said cheque was presented by the complainant to his banker for encashment and the said cheque returned dishonored for want of "Insufficient Funds"
on 03.08.2012, then the Complainant issued legal notice to the accused on 14.08.2012 as per Ex.P.4 notice, accused even thereafter failed to repay the amount covered under 26 SCCH-3 C.C.No.24611/2012 Ex.P.1, hence, the complainant filed the present complaint on 28.09.2012. Hence, it is clear that Ex.P.1 has been presented to the Bank within 6 months from the date of the said cheque, which was returned dishonored, and hence, complainant issued legal notice to the accused from the date of intimation of such dishonor, even thereafter accused failed to repay the amount and therefore, complainant filed the complaint before the court, within 30 days from the date of expiry of grace period of 15 days from the date of notice. As such, complainant has complied all the basic ingredients and statutory procedure as provided under Section 138 of N.I. Act, prior to filing the present complaint. Therefore, Point No.2 is answered in the Affirmative.
25. Point No.3 & 4:- As held under Points No.1 & 2, complainant has proved that accused have committed the offence punishable under Section 138 of N.I. Act. The punishment prescribed by the statute under the said provision is imprisonment which may extend upto two years 27 SCCH-3 C.C.No.24611/2012 or fine or with both. The amount covered under Ex.P.1 cheque is Rs.10,32,000/-. Having regard to the facts and circumstances of the case and materials available on record, I am of the considered opinion that accused be sentenced to pay a sum of Rs.10,32,000/- including Rs.20,000/- by way of compensation. Hence, I proceed to pass the following:
ORDER Acting U/s.255(2) of Cr.P.C., accused persons are convicted for the offence punishable U/s.138 of N.I.Act.
The accused persons are sentenced to pay a sum of Rs.10,32,000/- to the complainant as a cheque amount.
Acting U/s.357 of Cr.P.C., the accused persons shall pay compensation amount of Rs.10,000/- to the state and Rs.50,000/- to the 28 SCCH-3 C.C.No.24611/2012 complainant in addition to the cheque amount of Rs.10,32,000/-.
In default to pay fine amount, accused shall undergo SI for a period of one year.
Copy of this Judgment shall be furnished to the accused, at free of cost, forthwith. (Dictated to the stenographer, transcript thereof, corrected by me and then pronounced in the open court on this the 15th day of November 2016) (GOMATI RAGHAVENDRA) VII Addl. Judge & XXXII ACMM, Bengaluru.
ANNEXURE Witnesses examined on behalf of the Complainant:
PW.1 : Sri.Yogesh.B Documents marked on behalf of the Complainant:
Ex.P.1 : Cheque in question
Ex.P.1(a) & (b) : Signatures of A2 & A3
Ex.P.2 : Bank Challan
29 SCCH-3 C.C.No.24611/2012
Ex.P.3 : Cheque Return Memo
Ex.P.4 : Office Copy of Demand Notice dated
14.8.2012
Ex.P.4(a) : 3 Postal Receipts
Ex.P.4(b) to (d) : 3 Postal Acknowledgments for having served the demand notice on A1 to A3 Ex.P.5 : Notarized Copy of Power of Attorney Ex.P.6 : Complaint Ex.P.7 : Certified copy of letter dated 22.06.2011 Addressed by M/s.Indus Fila to M/s.Gauge sewing machines Ex.P.8 : Certified copy of the letter dated 05.09.2011 from M/s.Gauge Sewing Machines to M/s.Indus Fila Ex.P.9 : Copy of E-Mail letter Ex.P.10(3) : Certified copy of bankers memo (a, b & c) Ex.P.11 : Certified copy of e-mail dated 29.8.11 Sent by M/s.Indus Fila to M/s.Gauge Sewing machines 30 SCCH-3 C.C.No.24611/2012 Witnesses examined on behalf of the accused:
-NIL-
Documents marked on behalf of the Accused:
Ex.D.1 : Copy of Form No.4
Ex.D.1(a) : Copy of Order at Para No.6
(GOMATI RAGHAVENDRA)
VII Addl. Judge & XXXII ACMM,
Bengaluru.