Delhi District Court
Section 138 Of The Negotiable ... vs Harphool Khan (Air 1976 Allahabad 23) on 27 April, 2012
IN THE COURT OF SH.NAVJEET BUDHIRAJA, METROPOLITAN MAGISTRATE,
SPECIAL COURT06, DWARKA COURTS, NEW DELHI.
Citi Financial Consumer Finance India Ltd.
VERSUS
Manoj Kumar Gupta
P.S.: Saket
U/S: 138 NEGOTIABLE INSTRUMENTS ACT
1. Serial No./CC No. of the case : 26246/10
2. Name of the complainant : Citi Financial Consumer Finance India Ltd.,
(formely known as "Associates India
Financial Services Ltd.")
3 L.S.C. Pushp Vihar,
New Delhi - 110 0062
3. Date of institution : 22.02.2010
4. Name of the accused, his : Manoj Kumar Gupta
parentage and residence B Block House No. 18/A Gali No.15,
Bharat Vihar Raja Puri, Uttam Nagar,
New Delhi - 110 059
5. Date when judgment was :
reserved 09.04.2012
6. Date when judgment was : 27.04.2012
pronounced
7. Offence complained of and : Section 138 Negotiable Instruments Act
proved
8. Plea of accused : Pleaded not guilty and claimed trial
9. Final Judgment : Accused is acquitted for the offence
under Section 138 of Negotiable
Instruments Act
CC.No.26246/10 Page No. 1 of 31
:J U D G M E N T:
1 Vide this judgment, I shall decide the present complaint filed by the
complainant M/s Citi Financial Consumer Finance India Ltd. under Section 138 of
Negotiable Instruments Act (hereinafter referred to as NI Act) against the accused Manoj
Kumar Gupta.
2 Factual matrix of the case is that on the request and representation
of the accused and upon agreeing to various terms, conditions and covenants and
execution of agreement no.15593837, complainant has granted personal loan facility to
the accused. It is further averred that towards the discharge of part debts accrued on
account of dues on the complainant company, the accused issued cheque bearing
number 946149 dt. 23.12.2009 amounting to Rs.1,95,000/ which when presented by the
complainant with its banker for encashment was returned unpaid by the drawee bank with
the returning memo dt. 29.12.2009 for the reason "funds insufficient".Thereafter,
complainant through its counsel served a legal demand notice dated 15.01.2010 to the
accused through speed post on 18.01.2010 calling upon him to make the payment of the
dishonoured cheque. It is further averred that despite service accused failed to make the
payment of the cheque amount demanded through the legal notice thereby committing
offence under Section 138 of NI Act for the prosecution of which the present complaint has
been filed.
3 After taking cognizance of the offence under Section 138 Negotiable
Instruments Act, summons were issued to the accused post which accused entered
appearance and was admitted to bail on 08.10.2010. Thereafter, notice under Section 251
CC.No.26246/10 Page No. 2 of 31
Cr.P.C was served upon the accused encompassing all the accusations against him to
which accused pleaded not guilty and wanted to settle the matter with the complainant.
Thereafter matter got fixed for defence evidence.
4 In the meanwhile, application under Section 145 (2) of the N.I.Act
was filed on behalf of the accused for recalling the witness of the complainant stating the
grounds of defence which was allowed and matter got fixed for examination of the
complainant.
5 In complainant's evidence, complainant got examined Sh. Sanjeev
Sharma, Authorized Representative (hereinafter referred as "AR") for the complainant as
CW1 who tendered his evidence by way of affidavit Ex.CW1/A. Other documents relied
upon by CW1 are special power of attorney Ex.CW1/1, cheque Ex.CW1/2, returning
memo Ex.CW1/3, legal notice Ex.CW1/4, postal receipt Ex.CW1/5. In cross examination,
CW1 Sanjeev Sharma deposed that the loan was granted to the accused in the month of
September, 2008 and that at the time of disbursal of the loan they did not take any cheque
from the accused. He further stated that he did not know whether it is mentioned in the
agreement that post dated blank cheques are taken at the time of loan.He denied the
suggestion that loan agreement contains the provision of taking PDCs at the time of taking
the loan. He further stated that he can file the copy of complete loan application as well as
loan agreement. He admitted that the postal receipt mentioned the name of the accused M
K Gupta, 328 New Delhi110 but denied the suggestion that legal notice was not sent at
the address of the accused. He further stated that he did not know as to the cheque in
question comprises of how many installments. He admitted that accused settled the matter
with the complainant but stated that he did not remember the name of the person
concerned from the complainant bank with whom settlement was arrived at. He further
CC.No.26246/10 Page No. 3 of 31
stated that he did not know whether any settlement letter was issued to the accused. He
denied the suggestion that complainant itself filled the amount of the cheque in question.
He further stated that the monthly installment of the accused was of Rs. 6825/.He denied
the suggestion that at the time of taking the loan four cheques were given to the
complainant by the accused and the cheque in question is one of those cheques. He
further stated that he can file the statement of account pertaining to the accused which
was filed with the permission of the court which is Ex CW1/7.He admitted that the EMI of
the accused as reflected in the statement of account is Rs.6,825/. He denied the
suggestion that the complaint in question does not bear his signature. He denied the
suggestion that at the time of taking the loan in the year 2008 accused had given 4 blank
cheques to the complainant. He further stated that he was not present at the time of
issuing of cheque in question and also that the legal notice was not sent in his presence
but the same was sent through our counsel. He admitted that the address mentioned on
the face of the legal notice is Bblock House no. 18 A, Gali No.15, Bharat Vihar, Rajapuri,
Uttam Nagar110059 and the address mentioned on the receipt of speed post is M.K.
Gupta, 328, New Delhi110.He denied the suggestion that complainant has misused the
cheque in question and has falsely implicated the accused. Complainant evidence got
closed vide order dated 14.02.2011.
6 Complainant's evidence was followed by Statement of the Accused
under Section 313 Cr.P.C r/w 281 Cr.P.C wherein all the incriminating evidences were put
to the accused. Accused stated that he availed loan from complainant in sum of
approximately Rs.1,80,000/[which includes 5 top up]. Regarding the issuance of the
cheque, accused stated that the cheque in question was issued blank at the time of
availing the loan. Accused denied to have received the legal demand notice as the
address mentioned on the receipt was not his address. Lastly, he stated that he wanted to
CC.No.26246/10 Page No. 4 of 31
lead defence evidence and matter got fixed for Defence evidence.
7 In defence evidence, accused examined himself as DW1 and
admitted that he had taken a loan of Rs. 30,000/ out of which the complainant bank has
disbursed the loan amount of Rs. 29,339/ through cheque bearing number 113084 dt.
04.10.2005 which is Ex.DW1/A and was pointed as Mark "A" and he had paid 9 EMIs of
Rs.1850/ each which is reflected in his pass book Ex.DW1/A [Original Seen and
returned].He further stated that again he had taken a loan of Rs. 45,000/ out of which the
complainant bank had disbursed the loan amount of Rs. 21,279/ through cheque bearing
number 747660 dt. 27.07.2006 to him which is Ex.DW1/B and was pointed as Mark "B".He
further stated that he had paid 9 installment of Rs.1841/ each which is reflected in his
pass book Ex.DW1/B [Original Seen and returned]. He further stated that the complainant
bank had adjusted the remaining balance and that again he had taken a loan of Rs.
68,000/ out of which the complainant bank had disbursed an amount of Rs.26,212/ dt.
02.02.2007 which is Ex.DW1/C was pointed as Mark "C" and had paid 9 EMI of Rs.2705/
each which was reflected in his pass book Ex.DW1/C [Original Seen and returned].He
further stated that the complainant bank had adjusted the remaining amount and that
again he had taken an amount of Rs. 1,08,000/ out of which the complainant bank has
disbursed the amount of Rs. 41,445/ dt 07.12.2007 through cheque bearing number
178116 dt. 07.12.2007 which is Ex.DW1/D was pointed as Mark "D" and he had paid 9
EMIs for an amount of Rs. 3668/ each which was reflected in his pass book Ex.DW1/D
[Original Seen and returned]. He further stated that the complainant bank had adjusted the
entire loan amount. In cross examination, he admitted that he has taken the loan of
Rs.30,000/ from the complainant company in the year 2005 but stated that he did not
remember how many installments were to be made for the payment of the said loan.He
further stated that he did not remember whether the loan was to be repaid in 24
CC.No.26246/10 Page No. 5 of 31
installments or 36 installments but volunteered that he has cleared the full loan amount.He
admitted that he has paid only 9 EMI's of Rs.1850/ and that he did not pay the entire loan
amount as his loan was topped up.He further admitted that he was sanctioned a loan of
Rs.45,000/ out of which he was paid Rs.21,279/ on 27.07.2006 and that he repaid only 9
EMI's of Rs.1841/ out of 42 EMI's to the complainant bank. He admitted that his loan was
topped up again and he was sanctioned an amount of Rs.68,000/ out of which he repaid
only 9 EMI's of Rs.2705/.He admitted that his loan was further topped up and he was
sanctioned an amount of Rs.1,08,000/ to be repaid in 48 EMIs and he repaid only 9
EMI's of Rs. 3668/ out of 48 EMI's to the complainant bank. He also admitted that he was
sanctioned loan of Rs.1,95,000/ out of which he was paid Rs.41,433/ and that he did not
remember the total EMI's of the said loan. He further stated that he did not remember
whether this loan was to be repaid in 48 installments or not. He admitted that he has paid
only 4 EMI's of Rs.6825/ to the complainant bank regarding the loan in question and that
the balance EMI's have not been paid by him. He further admitted that he was liable to pay
the balance amount of the loan in question. He further stated that he has not received any
legal notice from the side of the complainant. He further stated that he has not issued the
cheque in question against his liability to the complainant company. He admitted that the
address mentioned in the legal notice as well as in the complaint is his address. He denied
the suggestion that there was any liability towards the complainant company. Defence
evidence got closed vide order dated 22.03.2012 and thereafter matter got fixed for final
arguments.
8 Counsel for the complainant has tendered written submissions but
none appeared on behalf of the accused on the date fixed for final arguments. Before
appreciating the evidences and arguments of both the parties, it would be appropriate to
advert to the relevant provisions of N.I Act.
CC.No.26246/10 Page No. 6 of 31
Section 138 of N.I Act reads as under
138 Dishonour of cheque for insufficiency, etc. of funds in the
account - where any cheque drawn by a person on an account
maintained by him with a banker for payment of any amount of
money to another person from out of that account for the
discharge, in whole or in part, of any debt or other liability, is
returned by the bank unpaid, either because of the amount of
money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to
be paid from that account by an agreement make with that
bank, such person shall be deemed to have committed an
offence and shall, without prejudice to any other provision of
this Act, be punished with imprisonment for a term which may
extend to twice the amount of the cheque or with both.
Provided that nothing contained in this section shall apply
unless
(a) The cheque has been presented to the bank within a period
of six months from the bank within a period of six months from
the date on which it was drawn or within the period of its
validity, whichever is earlier.
(b) The payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said
amount of money by giving a notice, in writing, to the drawer of
the cheque, within thirty days of the receipt of information by
him from the bank regarding the return of the cheque as
unpaid; and
(c) the drawer of such cheque fails to make the payment of the
said amount of money to the payee or as the case may be, to
the holder in due course of the cheque, within 15 days of the
receipt of the said notice.
Explanation - For the purposes of this section, "debt or other
liability" means a legally enforceable debt or other liability.
CC.No.26246/10 Page No. 7 of 31
9 Section 138 of the NI Act has three ingredients, viz., (i) that there is a
legally enforeceable 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 pre supposes a legally
enforeceable debt; and (iii) that the cheque so issued had been returned due to
insufficiency of funds. The proviso appended to the said section provides for compliance of
legal requirements before a complaint petition can be acted upon by a court of law.
10 I would now embark upon the evidences adduced and the arguments
advanced by both the parties.
Learned counsel for complainant has relied upon following Judgment :
i) I.C.D.S Ltd v. Beena Shabeer and another AIR 2002 SC 3014.
ii) Madhukar V. Desai v. Shaikh Abdul Riyaz 2007 (5) R.C.R
Criminal 817.
iii) Satish J. Shah v. Pankaj Mushroomwal 1996 (3) R.C.R
Criminal 720.
iv) K.Bhaskaran v. Sankaran Vaidhyan Balan AIR 1999 SC 3762
Hiten P Dalal v. Bratindranath Banerjee AIR 2001 SC 3897
11 It is contended by learned counsel for the complainant that accused
approached the complainant for personal loan which was granted to him and and in
discharge of the said loan, accused gave cheque in question for Rs 1,95,000/ which got
bounced due to insufficient funds. Thereafter legal notice was sent to the accused through
speed post to which he neither replied nor made any payment thereby committing offence
under section 138 of N.I Act.
12 I have perused the records of the case giving consideration to the
CC.No.26246/10 Page No. 8 of 31
submissions of the counsel.
13 Before zeroing in on the aforesaid contentions of counsel for the
complainant, let me decide the validity of the power of attorney of the present AR of the
complainant Sh.Sanjeev Sharma which is Ex CW1/1.Paragraph 1 of his affidavit reads as
under:
"1 That I am Authorized Representative of the complainant and
am authorised vide Power of Attorney dated 04.08.2009 to
institute, file, sign, verify, as well as prosecute and conduct the
complaints under the Negotiable Instruments Act. 1881....."
14 Perusal of the Attorney shows that although the date of notarization is
not clear but the same appears to be notarized on 31st August, 2009.Now let us refer to
section 85 of the Evidence Act, 1872 which is as follows:
"85. Presumption as to powers of attorney The Court shall
presume that every document purporting to be a Power of
Attorney, and to have been executed before, authenticated by,
notary public, or any Court, Judge, Magistrate, Indian Consul,
or Vice Consul, or representative of the Central Government,
was so executed and authenticated."
15 The above provision uses the words, notary, execution and
authentication. Now referring to the Advanced Law Lexicon of P. Ramanatha Aiyar, where
the word Notarize is defined as under: "Notarize. To take acknowledgments, affidavits or
depositions, authenticate documents, as a notary public; to swear or affirm to, before a
notary. To attest to the authenticity of (a signature, mark, etc.)"
CC.No.26246/10 Page No. 9 of 31
16 Also referring to the functions of the Notaries as specified in Section
8 of the Notaries Act, 1952 where clause (a) reads as under:
"8. Functions of notaries. (1) A notary may do all or any of the
following acts by virtue of his office, namely: (a) verify,
authenticate, certify or attest the execution of any instrument;"
17 Now turning to the definition of authentication under the Advanced
Law Lexicon of P. Ramanatha Aiyar, which reads as under:
"Authentication. 1. Broadly, the act of proving that something
(as a document) is true or genuine, esp. so that it may be
admitted as evidence; the condition of being so proved
(authentication of the handwriting).
2. Specific., the assent to or adoption of a writing as one‟s
own. (Black, 7th Edn., 1999)
Authentication is the process of validating the identity of
someone or something (Information Technology)
The act of authenticating.
A process used to confirm the identity of a person or to prove
the integrity of the specific information. (Information
Technology)
18 So from the above, it is clear that there is a statutory presumption
under Section 85 of Evidence Act that the Power of Attorney was executed by the person
by whom it purports to have been executed and the person who executed the power of
attorney was fully competent in this regard. When a seal of the Notary is put on the
document, Section 85 of the Evidence Act comes into play and a presumption can be
raised regarding the genuineness of the seal of the said Notary, meaning thereby that the
said document is presumed to have been attested by a competent Notary of that country.
CC.No.26246/10 Page No. 10 of 31
Mere attestation of POA cannot lead to an inference that it was executed before the Notary
Public. Execution of POA before the Notary Public and authentication by it is essential
condition for valid notarization under the Notary Act and Evidence Act. The condition of
notarization can only be fulfilled if it was executed before the Notary Public, meaning
thereby that execution and notarization of the POA are on the same date and notarization
bears the words "signed/executed before me". The Stamp of Notary indicating the
registration number need to be affixed by the Notary.
19 In the complaint in hand, complainant witness Sh. Sanjeev Sharma
has stated in Para 1 of his evidence by way of affidavit that he is authorized by the
complainant vide Power of Attorney Dated 04.08.2009 to file and institute the present
complaint. The said power of attorney is shown to be executed by Mr. Sandeep Gambhir,
Head Sales and Distributions on 4th day of August 2009 whereas it appears to be
notarized on 31 August 2009 which is after the date of execution. So, it appears from this
that execution of the said power of attorney was not before the Notary Public and
consequently there cannot be proper authentication of the same meaning thereby that
presumption under section 85 of Evidence Act cannot be raised. Neither any other witness
is examined by the complainant to prove the execution of Power of Attorney in favour of
the complainant witness Sh. Sanjeev Sharma nor any explanation has been tendered by
the complainant with regard to the aforesaid discrepancy.
20 To bolster my observation , I would like to refer to the judgment of the
Allahabad High Court in Wali Mohammad Chaudhari & Ors. Vs. Jamal Uddin
Chaudhari AIR (37) 1950 Allahabad 524, which analyzed Section 85 of the Evidence Act.
CC.No.26246/10 Page No. 11 of 31
It was observed that authentication is not merely attestation but something more.
Authentication would require a person to have assured himself of the identity of the person
who has signed the instrument as well as the fact of execution. It is for this reason that a
Power of Attorney bearing the authentication of a Notary Public or an authority mentioned
in Section 85 of the Evidence Act is taken as sufficient evidence of the execution of the
instrument by the person who appears to be the executant.
21 A reference is also made to the judgment of the Supreme Court in
Jugraj Singh & Anr. Vs. Jaswant Singh & Ors. 1970 (2) SCC 386. It was noticed that
there was no prescribed form of authentication but reliance was placed in Wali Mohammad
Chaudhari case (supra).In that context it was noticed that a proper Power of Attorney duly
authenticated as required by law had to be made before the power could be conferred on
another person to execute the document or to present it for registration.
22 In Electric Construction & Equipment Company Ltd v. Jagjit
Electric Works AIR 1984 Delhi 363, it was held by Delhi High Court that :
"...........It is, therefore, very essential to stress the two
ingredients which are contained in Section 85 of the Evidence
Act, viz., execution before the Notary Public and the
authentication by the Notary Public. The words are "executed
before, and authenticated by". Both these conditions must be
satisfied. It appears that neither condition is satisfied in this
case because the common seal was affixed on 27th November,
1973, and there is merely an attestation by a Notary Public on
13th December, 1973. There is no authentication at all. So,
Section 85 of the Evidence Act does not apply to raise any
presumption in favor of this power of attorney."
23 So, from the foregoing discussion, it is amply clear that complainant
CC.No.26246/10 Page No. 12 of 31
witness Sh. Sanjeev Sharma did not have a valid power of attorney in his favour to
prosecute the present complaint, hence present complaint has to go on this ground.
24 Now adverting to the other issues involved in the present complaint.
Complainant witness has stated in his affidavit that accused has taken personal loan from
the complainant vide loan agreement no.15593837 which fact is not entirely disputed by
the accused but he stated in his examination in chief that he took loan of Rs.30,000/ from
the complainant in October 2005 which later on got topped.Furthermore, he stated that
he is not liable to pay the amount of the cheque and infact the cheque in question was
issued as blank for security purpose at the time of the loan and not in discharge of any
debt or liability.On the other hand, complainant witness has stated in his affidavit that the
cheque was issued for repayment of the personal loan.
25 One of the main ingredients of offence under section 138 of N.I Act is
existence of legally enforceable debt or liability.
Existence of Legally Enforceable Debt or Liability.
It is clear from the provision of section 138 N.I. Act
that only after the cheque is drawn to discharge in whole or in
part any debt or liability by the accused when presented before
the bank was returned on the ground of insufficient fund
standing in the credit of the account of the accused or some
other reason. The explanation to the above said provision of
law clearly tells that to attract an offence under section 138 of
N.I. Act there shall be a legally enforceable debt or other
liability subsisting on the date of the drawal of the cheque.
26 At this juncture, it would be appropriate to refer to the provisions in
Section 118 and 139 of N.I Act. Under Section 118, unless the contrary is proved, it is to
CC.No.26246/10 Page No. 13 of 31
be presumed that the Negotiable Instrument (including a cheque) had been made or
drawn for consideration. Under section 139 the Court has to presume, unless the contrary
was proved, that the holder of the cheque received the cheque for discharge, in whole or
in part of a debt or liability. Thus, in complaints under Section 138 the court has to
presume that the cheque had been issued for a debt or liability. This presumption is
rebuttable.
27 Although, there is a presumption in favour of the holder of the cheque
but it is necessary to point out that it cannot be the intention of the legislature that
whenever holder of the cheque files a complaint against the drawer of the cheque and if
the drawer admits his signature on the cheque then he shall be held liable to the extent of
the amount of the cheque by virtue of the said presumption. In my opinion, mere
production of the cheque on record and admission of signature on the same by the
accused are not sufficient to fasten criminal liability on the accused. Merely stating in the
complaint and affidavit that cheque in question was given for the repayment of the loan will
not advance the cause of the complainant. It is pertinent to mention that complainant has
not mentioned the amount of loan disbursed to the accused either in their complaint or in
evidence by way of affidavit which at the very threshold raises doubt on the claim of the
complainant and supports the deposition of the accused that loan amount might be
actually Rs 30,000/ which later on was topped up number of times. In cross examination
of complainant witness, he was ignoramus of the number of installments comprised in the
cheque in question.CW1 also stated that there was settlement between the accused and
the complainant but this fact is not divulged in the complaint or in his affidavit.CW1 denied
the suggestion that at the time of taking the loan 4 blank cheques were given by the
accused and cheque in question is one of those cheques.CW1 expressed ignorance about
the mode of payment of EMI but denied the suggestion that security cheque of the
CC.No.26246/10 Page No. 14 of 31
accused has been misused by filing this complaint.
28 Now embarking upon the defence evidence of the accused. Following extract
of the chief and cross is relevant :
"I had taken a loan of Rs. 30,000/ out of which the
complainant bank has disbursed the loan amount of Rs.
29,339/ through cheque bearing number 113084 dt.
04.10.2005 which is Ex.DW1/A and is to be pointed as Mark
"A" and I have paid 9 EMIS of Rs.1850/ each. The amount I
have paid is reflected in my pass book Ex.DW1/A [Original
Seen and returned]. Again I had taken a loan of Rs. 45,000/
out of which the complainant bank had disbursed the loan
amount of Rs. 21,279/ through cheque bearing number
747660 dt. 27.07.2006 to me which is Ex.DW1/B and is to be
pointed as Mark "B". I had paid 9 installment of Rs.1841/
each. The amount I have paid is reflected in my pass book
Ex.DW1/B [Original Seen and returned]. The complainant bank
had adjusted the remaining balance. Again I had taken a loan
of Rs. 68,000/ out of which the complainant bank had
disbursed an amount of Rs.26,212/ dt. 02.02.2007 which is
Ex.DW1/C is to be pointed as Mark "C" and I had paid 9 EMI of
Rs.2705/ each. The amount I have paid is reflected in my
pass book Ex.DW1/C [Original Seen and returned]. The
complainant bank had adjusted the remaining amount. Again I
had taken an amount of Rs. 1,08,000/ out of which the
complainant bank has disbursed the amount of Rs. 41,445/ dt,
07.12.2007 through cheque bearing number 178116 dt.
07.12.2007 which is Ex.DW1/D is to be pointed as Mark "D"
and I had paid 9 EMIs for an amount of Rs. 3668/ each. The
amount I have paid is reflected in my pass book Ex.DW1/D
[Original Seen and returned]. The complainant bank had
adjusted the entire loan amount."
Cross examination by the complainant
"It is correct that I have taken the loan of Rs.30,000/ from the
CC.No.26246/10 Page No. 15 of 31
complainant company in the year 2005. I do not remember
how many installments were to be made for the payment of the
said loan. I do not remember whether the loan was to be
repaid in 24 installments or 36 installments. Vol. But I have
cleared the full loan amount. It is correct that I have paid only 9
EMI's of Rs.1850/. It is correct that I did not pay the entire
loan amount as my loan was topped up. It is correct that I was
sanctioned a loan of Rs.45,000/ out of which I was paid
Rs.21,279/ on 27.07.2006. I repaid only 9 EMI's of Rs.1841/
out of 42 EMI's to the complainant bank. It is correct that my
loan was topped up again and I was sanctioned an amount of
Rs.68,000/. I repaid only 9 EMI's of Rs.2705/ out of 42 EMI's
to the complainant bank. It is correct that my loan was further
topped up and I was sanctioned an amount of Rs.1,08,000/ to
be repaid in 48 EMI's. I repaid only 9 EMI's of Rs. 3668/ out
of 48 EMI's to the complainant bank. It is correct that I was
sanctioned loan of Rs.1,95,000/ out of which I was paid
Rs.41,433/."
29 So from the aforesaid testimony, one thing is amply clear that the
stand of the accused that initially the loan was taken in the year 2005 which later on got
topped up is correct since complainant has put suggestions to the accused regarding the
same in his cross examination. Accused also stated to have paid certain installments
towards his previous loans (which later on got topped up) which is not disputed by the
complainant. Then later on when the accused was suggested to have taken top up loan of
Rs 1,95,000/, he admitted the same but also stated that only Rs 41,433/ was paid to him.
In such a scenario, burden shifted upon the complainant to prove the disbursement of Rs
1,95,000/ as the loan amount by placing on record the loan documents. It is necessary to
note that although photocopy of certain loan documents are there on the file but the same
have not been adduced by the complainant in its evidence hence no reliance can be
placed upon them.
CC.No.26246/10 Page No. 16 of 31
30 Now embarking on the statement of accounts Ex CW1/7 filed by the
complainant witness on the perusal of which, I fail to fathom as to how come amount of Rs
1,95,000/ was outstanding against the accused. Although accused has admitted in his
cross that he was still liable to pay towards the loan but we do not have to tread upon the
aspect of liability but on the aspect whether the cheque in question is drawn by the
accused for Rs 1,95,000/ or not.CW1 has admitted in his cross examination that he did
not know as to how many installments were contained in the cheque in question. Accused
has stated in his cross examination that out of the alleged loan of Rs 1,95,000/, he was
paid Rs 41,433/ only which fact has not been objected to by the complainant as no further
suggestion was put to the accused to controvert the aforesaid fact. There is no specific
averment in the complaint or affidavit as to what all charges are included in the alleged
outstanding and how these charges are quantified. Further perusal of the statement shows
that the same is neither signed nor stamped and which appears to be computer generated.
The said statement is not accompanied by the certificate in terms of section 65B of
Evidence Act nor any witness is examined by the complainant to prove the authenticity of
the said statement. Therefore, the statement of account Ex CW1/7 cannot be read in
evidence. To fortify my view, I would like to place reliance on the latest Judgment if Kerala
High Court in A.M Perumal v. Star Tours and Travels (India) Ltd 2011 (2) , RCR Civil
371 wherein it has been held that electronic record would be admissible in evidence only if
the record produced satisfies the conditions laid down under section 65B(2) and contains a
certificate as contemplated by section 65B(4) of Evidence Act. A reading of section 65B
would be relevant:
65B.Admissibility of electronic records:
1) Notwithstanding anything contained in this Act, any
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information contained in an electronic record which is printed on
paper, stored, recorded or copied in optical or magnetic media
produced by a computer ( hereinafter referred to as the computer
output) shall be deemed to be also a document, if the conditions
mentioned in this section are satisfied in relation to the information
and computer in question and shall be admissible in any
proceedings, without further proof or production of the original, as
evidence of any contents of the original or of any fact stated
therein of which direct evidence would be admissible.
2) The conditions referred to in subsection (1) in respect
of a computer output shall be the following namely:
a) the computer output containing the information was
produced by the computer during the period over which the
computer was used regularly to store or process information for
the purpose of any activities regularly carried on over that period
by the person having lawful control over the use of the computer;
b) during the said period, information of the kind
contained in the electronic record or of the kind from which the
information so contained is derived was regularly fed into the
computer in the ordinary course of the said activities;
c) throughout the material part of the said period, the
computer was operating properly or, if not, then in respect of any
period in which it was not operating properly or was out of
operation during that part of the period, was not such as to affect
the electronic record or the accuracy of its contents; and
d) the information contained in the electronic record
reproduces or is derived from such information fed into the
computer in the ordinary course of the said activities.
4) In any proceedings where it is desired to give a
statement in evidence by virtue of this section, a certificate doing
any of the following things, that is to say.
a) identifying the electronic record containing the
statement and describing the manner in which it was produced;
b) giving such particulars of any device involved in the
CC.No.26246/10 Page No. 18 of 31
production of that electronic record as may be appropriate for the
purpose of showing that the electronic record was produced by
the computer;
c) dealing with any of the matters to which the
conditions mentioned in subsection (2) relate,
and purporting to be signed by a person occupying a
responsible official position in relation to the operation of the
relevant device or the management of the relevant activities
(whichever is appropriate) shall be evidence of any matter stated
in the certificate; and for the purposes of this subsection it shall
be sufficient for a matter to be stated to the best of the knowledge
and belief of the person stating it.
31 Going by the evidence on record, I find that complainant has not
cared to satisfy the conditions under section 65B(2).Neither Ex CW1/7 contains a
certificate as contemplated under section 65B(4) of Indian Evidence Act nor the person
who took out the print copy was examined. In this view of the matter, no reliance can be
given to the said statement of accounts.
32 All the aforesaid circumstances raise serious doubts on the veracity
of the claim of the complainant thereby probablising the stand of the accused and which
also go on to show that the cheque in question was not issued in the manner as has been
alleged by the complainant and in fact the same might have been issued as blank for
security purpose which was subsequently filled up by the complainant for behemoth
amount. And on this, the law is settled that cheque issued for security purpose will not fall
within the purview of section 138 of N.I Act. The proceedings under Section 138 of
Negotiable Instrument Act cannot be initiated when a cheque is given as security to Banks.
Such proceeding can be initiated only when there is a liability. Liability and security has to
CC.No.26246/10 Page No. 19 of 31
be distinguished because Section 138 is envisaged only in a case when a person issues a
cheque to clear his liability or part of his liability from the account held by him in Bank and
only if the said cheque is dishonoured by paying bank.
33 In M.S Narayanan Menon Vs. State of Kerala and Others. 2006
SCC 39 , it has been held by Apex Court that :
".................If the defence is accepted as probable the cheque
therefore cannot be held to have been issued in discharge of
the debt as for example, if a cheque is issued for security or for
any other purpose the same would not come within the purview
of section 138 of N.I Act."
34 To bolster my view, I would also like to refer to the judgment of the
Bombay High Court in Rama Krishnan Urban Cooperative Credit Society Ltd. Vs. Sh.
Rajender Bhagchand Warma, Criminal application no. 898/2009. The pertinent
question which was discussed in this case was when a blank cheque is given as security,
whether the provisions of 138 will be applicable or not. The court considered the entire
issue and held as under :
"It is argued that the cheque drawn must be for the discharge,
in whole or in part, of any debt or other liability. So the debt or
other liability must be in existence when the cheque, whether
blank or post dated was issued. In this case the accused
respondent issued the cheque in question as security for loan
before loan amount was disbursed. So, cheque was not towards any existing debt or liability. In case of loan transaction, borrower is in need of money and therefore he borrows loan amount from some one with understanding that the loan amount would be repaid in lumpsum on a future date or in installments from particular future date onwards CC.No.26246/10 Page No. 20 of 31 periodically, with or without interest. It is not transaction of loan, if the amount is to be repaid the moment it is paid to borrower. So, provisions of Section 138 of the Negotiable Instruments Act are not attracted.
We may consider object and purpose for introducing amendment to the Negotiable Instruments Act, 1981 by Amendment Act, 1988, as stated in the Amendment Act and various authorities to facilitate correct interpretation of the provisions. The object and reasons clause of the bill which introduced the Amending Act of 1988 would show that the new Chapter XVII was incorporated specifically to "enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers. Thus the object of the amendment and introduction of Chapter XVII in the Negotiable Instruments Act by Act of 1988 was mainly to encourage all major transactions including commercial or business transactions through cheques and to enforce credibility and acceptability of cheques in settlement of liability in general. Encouragement of payment by cheques/credit cards/debit cards rather than by cash is necessary for healthy economy. That also brings in transparency in transactions and discourages creation of black or unaccounted money through evasion of taxes or other malpractices. So, provisions like Section 138 of Negotiable Instruments Act are salutary to give reliability, credibility and acceptability of negotiable instruments like cheques in daily life. However, the object was not to provide effective and speedy remedy for recovery of loans. Law makers must not have intended or imagined that money lenders. or banks would obtain blank or post dated cheques while sanctioning/disbursing loans as securities and would use them to make debtors./borrowers to repay loan under threat of prosecution and punishment under Section 138 of the Negotiable Instruments Act. So, it is doubtful if provisions of CC.No.26246/10 Page No. 21 of 31 Section 138 of the Negotiable Instruments Act would be attracted to a case in which a blank or post dated cheque is obtained by a bank or money lender before or while sanctioning or disbursing loan amount as security for the loan.There was no supporting evidence from the side of the complainant as to whether the accounts had been verified. No accounts had been produced by the appellant to prove that liability was subsisting. Only when it is proved that a liability was existing, an offence under Sec. 138 will arise.
35 Also , Delhi High Court in Pine Product Industries v. M/s R.P Gupta and Sons , 2007 (2) C.C Cases HC 166 has held that when accused pleaded that his cheque was misused and he is not liable to pay the amount covered in the cheque then keeping in view the fact that complainant had not given any details what were the liabilities of the accused, what was the amount for which cheque was issued as a part payment , on which date and what amount was given to the accused at what rate, therefore, presumption of liability has been rebutted by the accused so he is liable to be acquitted. 36 Likewise in the case in hand also, accused has pleaded misuse of the cheque and disputed his liability to the tune of Rs 1,95,000/.Keeping in view the fact that complaint is devoid of details as to the amount of loan disbursed, rate of interest charged, any statement of account showing the liabilities of the accused to the tune of Rs 1,95,000/, therefore defence of the accused seems to be probable. 37 As regards the issuance of cheque in question by the accused is concerned, it has been the stand of the accused in his examination that the cheque was given blank i.e. it bears his signature only and body of the cheque has not been filled by him. It is true that when the cheque in question contained the signature of the account holder, it is for the accused to explain the same, but merely because cheque contained the CC.No.26246/10 Page No. 22 of 31 signature of the account holder or the accused it cannot be said that the same were executed by him. In this case, it is relevant to note that the case advanced by the accused is that the cheque in question was entrusted with the complainant and the cheque contained nothing more than his signature. Going by Section 138 of the NI Act, it can be seen that 'a drawing of cheque' by a person on an account maintained by him with the banker for payment of any amount of money to another person from out of that account 'for the discharge', in whole or in part, 'of any debt of other liability' are two important ingredients, especially in the background of this case. In the decision reported in Ch. Birbal Singh vs. Harphool Khan (AIR 1976 Allahabad 23), it was held that execution of documents consists of signing of the document written out, read over and understood and does not consist of merely signing of a blank paper.In another decision reported in Thakurlal v. Ramadhar (1986 ALJ 480), it had been held that mere admission of putting of signature and thumb mark on a blank sheet of paper is not admission of execution of the document. In the present case, accused did not dispute the signature on cheques, but his specific case is that he had entrusted with the complainant blank cheque which contained his signature. Considering the aforesaid facts, I opine that there are suspicious circumstances surrounding the transaction and the stand of the accused that cheque was given blank seems to be believable.
38 Also, in the case of "Gopal Vs. Tonny Varghese" 2008 (1) Civil Court Cases 642 (Kerela) it has been held that mere proof of signature on cheque is not proof of its execution. In the absence, of any positive evidence regarding the execution of the cheque by the accused, it is to be held that the accused had issued only blank cheque and the same was not executed by him. Simply because the cheque contained the signature of the accused, it cannot be said that the cheque was drawn by the accused as contemplated by Section 138 of the Act.
CC.No.26246/10 Page No. 23 of 31 39 In a recent Judgment of Kerala High Court in C.Santhi v. Mary Sherly 2011(4) RCR Civil 269 Kerala , it has been held that mere production of cheque by complainant is not sufficient to prove execution by accused. For successful prosecution of offence under section 138 of N.I Act , complainant must allege and prove that the cheque was drawn or executed by the accused .In the absence of the allegation in the complaint that the cheque was drawn by the accused and in the absence of proof of such fact,an accused cannot be convicted for offence under section 138 of N.I Act. 40 It is pertinent to note that going by the provision namely, Section 138 of the NI Act, it can be seen that the legislature has employed certain words cautiously and not without any meaning. The word employed in Section 138 Viz., "drawn', 'discharge of any debt or other liability' are conveying the message of the legislature, through which we can understand the intention of the legislature. So while interpreting the provisions or the word, the court has to give effect to the intention of legislature. At any stretch of imagination, it cannot be said that putting signature on the blank cheque is equivalent to the word 'drawn' used in Section 138 of the NI Act. Therefore, the word 'drawn' used in Section 138 has to be understood as 'execution of cheque'.
41 A person can be said to have "drawn " a cheque , if he has made , prepared or created a cheque. A cheque is an instrument which is created in confirmity with the requirements of section 6 read with section 5 of the N.I Act. A reading of section 5 and 6 shows that a cheque consists of mainly , two parts. One is , an unconditional order in writing directing the banker to pay a certain sum of money only , or to the order of a certain person or to the bearer of the cheque. The second part is the signature of the drawer. CC.No.26246/10 Page No. 24 of 31 42 When the execution of the cheque is denied by the accused, it is for the complainant to establish the same. In the absence of any positive evidence regarding the execution of the cheque by the accused, it is to be held that the accused had issued only blank cheque and the same was not executed by him. Simply because the cheque contained the signature of the accused, it cannot be said that the cheque was drawn by the accused as contemplated by Section 138 of the NI Act.
43 It is also proper and necessary to point out that the amendment brought in the NI Act, penalizing the dishonour of cheques, to give more sanctity to commercial transactions involving cheques have given way, rather leverage to unscrupulous money lenders to squeeze their debtors through the instrumentality of the court by resorting to prosecution against such debtors on dishonoured cheques which are very often collected in blank form with signature alone as security. True, the maker of the instrument, who signs such a instrument in blank form invites the risk of prosecution and sometimes penal consequences, on inflated claims later incorporated in the instrument without his knowledge and consent. He has taken such risk while signing the instrument in blank form is only a lame excuse and that will not relieve the court the instrumentality of Justice from examining the genuineness of the transaction covered by the instrument. A court is expected to examine whether the transaction covered by the cheque is genuine and bona fide. In a case where the materials produced disclose of suspicious circumstances surrounding the transaction unless satisfactory explanation removing such suspicion is tendered by the holder of the instrument no conviction is legally permissible solely banking upon the statutory presumptions.
44 Before parting with the Judgment, I would also like to place reliance on the observation of the Apex Court in Kumar Exports v. Sharma Carpets 2009 , 2 SCC CC.No.26246/10 Page No. 25 of 31 513 wherein it was held that the court need not insist in every case that the accused should disprove the non existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time , it is clear that 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 proof shifted to the complainant.
45 In view of the foregoing discussion, I hold that complainant has not approached the court with clean hands and suppressed material facts regarding the initial loan in year 2005 and thereafter the top up loan. Complainant has failed to establish that loan of Rs 1,95,000/ was actually disbursed to the accused. Accused has proved non existence of consideration by raising probable defence. He has discharged initial onus by proving that existence of consideration is improbable, doubtful and illegal thereby shifting the onus to complainant. He has brought on record some material evincing that cheque in question might have been issued as blank for security purpose and not towards the discharge of any debt or liability in the manner as has been alleged by the complainant and therefore, it will not fall within the province of section 138 of N. I Act. 46 Another important ingredient of the offence under section 138 of N.I Act is due service of legal demand notice as envisaged by proviso to Section 138 of the Act. Learned counsel for complainant has averred that statutory notice dated 15.01.2010 was issued at the correct address of the accused by speed post and notice is deemed to be served by virtue of presumption under section 27 of General Clauses Act. Accused has disputed service of the legal notice by putting counter questions in cross examination of the complainant witness.
CC.No.26246/10 Page No. 26 of 31 47 It is no longer res integra that service of legal demand notice calling upon the accused to make the payment in 15 days is indispensable for prosecution under Section 138 of the Act. Before giving my finding on the aforesaid issue, a reference to S.27 of the General Clauses Act will be useful. The section reads as under:
"S.27 Meaning of service by post Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression "serve" or either of the expressions "give" or "send" or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post."
48 The Supreme Court in "K. Bhaskaran Vs. Sankarn Vaidhyan Balan" (supra), wherein it has been held as under:
"(24) No. doubt Section 138 of the Act does not require that the notice should be given only by "post". Nonetheless the principle incorporated in Section 27 (quoted above) can profitably be imported in a case where the sender has despatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was not responsible for such nonservice. Any other interpretation can lead to a very tenuous position as the drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice."
49 In "V. Raja Kumari vs P. Subbarama Naidu & Anr" 2004 (8) SCC CC.No.26246/10 Page No. 27 of 31 774, it was held:
In "Madhu v. Omega Pipes Ltd." [1994 (1) ALT (Crl.) 603 (Kerala)] the scope and ambit of Section 138 clauses (b) and
(c) of the Act were noted by the Kerala High Court and Justice K.T. Thomas (as His Lordship was then) observed as follows:
"In Clause (c) of the proviso the drawer of the cheque is given fifteen days from the date 'of receipt of said notice' for making payment. This affords clear indication that 'giving notice' in the context is not the same as receipt of notice. Giving is the process of which receipt is the accomplishment. The payee has to perform the former process by sending the notice to the drawer in his correct address, if receipt or even tender of notice is indispensable for giving the notice in the context envisaged in Clause (b) an evader would successfully keep the postal article at bay at least till the period of fifteen days expires. Law shall not help the wrong doer to take advantage of his tactics. Hence the realistic interpretation for the expression 'giving notice' in the present context is that, if the payee has dispatched notice in the correct address of drawer reasonably ahead of the expiry of fifteen days, it can be regarded that he made the demand by giving notice within the statutory period. Any other interpretation is likely to frustrate the purpose for providing such a notice."
50 In "M/s Indo Automobiles v. M/s Jai Durga Enterprises and others" 2008 (4) RCR (Civil) it was held that once the notice demanding payment has been sent by registered post with acknowledgment due to a correct address, it must be presumed that the service has been made effective.
51 In M/s Prakash Jewellers v. M/s A .K Jewellers 2002 (2) JCC 1171, division bench of the Delhi High Court has specifically opined that the notice under section 138 of NI Act can be served either through registered post or UPC. It is also held CC.No.26246/10 Page No. 28 of 31 that if notice is even dispatched by UPC with correct address of the drawer written on it, presumption of the service of the said notice arises. Relevant discussion is contained in para 10 of the judgment which is reproduced below:
10 "As it is section 138 does not prescribe any mode for giving of demand notice by the payee or holder of the cheque.But where such notice is served by post through registered post or postal certificate etc. with the correct address of the drawer written on it , it would raise a presumption of service unless the drawer proves that it was not received by him in fact and that he was not responsible for such nonservice. This is in tune with the principle embodied in section 27 of the General Clauses Act or even Rule 19 A of Order 11.Section 27 of General Clauses Act deals with the presumption of service of notice sent by post and provides that service of such notice shall be deemed to have been affected unless the contrary is proved. This principle is equally applicable to the service of notice for purpose of section 138 of the Negotiable Instruments Act also......."
52 So it is quite clear from S.27 of General Clauses Act and catena of Judgments that when a letter is properly addressed, prepaid and posted by registered post, service shall be deemed to be effected at the time at which the letter would be delivered in the ordinary course of post.
53 Accused has admitted that the address mentioned in the legal notice Ex CW1/4 is his correct address. As can be seen from Ex.CW1/4, the statutory notice was addressed to the residence of the accused at B Block House No. 18/AGali No. 15 Bharat Vihar Raja Puri Uttam Nagar, Delhi 59 whereas the postal receipt Ex CW1/5 shows the address as M.K Gupta, 328, New Delhi. Although, it is a known fact that registered/speed postal receipt does not contain the full address of the sendee but some basic details are mentioned on it. Accused has pinpointed the aforesaid discrepancy in the postal receipt Ex CC.No.26246/10 Page No. 29 of 31 CW1/5 by putting suggestion in the cross examination of the complainant witness and also denied the receipt of legal notice in his statement under section 313 of Cr.P.C.The Apex Court in K.Bhaskaran (supra) has held that where the sender has despatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was not responsible for such nonservice. So, the burden lies upon the accused to prove that he has not been served which in the complaint in hand appears to be discharged by the accused by pointing out discrepancy in the postal receipt Ex CW1/5.In the circumstances of the case and for the above reasons, I hold that statutory notice was not sent to the correct address of the accused and therefore I hold that the notice is not deemed to be served. Hence, the present complaint is not maintainable on the ground of non service of the mandatory legal notice on the accused.
54 Therefore, I hold that complainant had miserably failed to prove the passing of consideration i.e legal enforceable debt or liability and merely because of the admission of signature on the cheque, it cannot be said that the execution of the cheque was proved. In the facts and circumstances of the case, on appreciation of the evidence and on the basis of materials on the record, I further hold that accused is able to adduce rebuttal evidence by raising a probable defence which creates doubt about the existence of legally enforceable debt or liability, hence in such a scenario the evidential burden shifts back to the complainant which has not been sufficiently discharged. 55 In the backdrop of aforesaid discussion, I hold that complainant has failed to establish that cheque in question was drawn by the accused towards the discharge of legally enforceable debt or liability. No material whatsoever is placed on record which could evince that accused was liable to pay the amount CC.No.26246/10 Page No. 30 of 31 covered in the cheque in question. Accused has proved his stand by preponderance of probabilities by showing that the cheque was given as blank not in discharge of any debt or liability and has also proved the non service of legal notice which is sine qua non for prosecution under section 138 of N.I Act. Therefore, no offence under section 138 of N.I Act is made out against the accused, hence accused Manoj Kumar Gupta stands acquitted. He is set at liberty. Bail Bonds, if any stands discharged.
ANNOUNCED IN THE OPEN (NAVJEET BUDHIRAJA)
COURT ON 27.04.2012 METROPOLITAN MAGISTRATE
SPECIAL COURT 06,
DWARKA COURTS, DELHI.
CC.No.26246/10 Page No. 31 of 31