Delhi District Court
M/S Kamp Developers Pvt. Ltd vs State on 28 February, 2025
IN THE COURT OF
ADDITIONAL SESSIONS JUDGE (FTC)
SOUTH-WEST DISTRICT, NEW DELHI
PRESIDED BY : Mr. SHARAD GUPTA
CA No. 314/2023
CNR No. DLSW010061372023
IN THE MATTER OF
M/s Kamp Developers Pvt. Ltd.,
Through its Authorised Representative,
Mr. Pardeep Sehrawat,
S/o Sh. Mool Chand Sehrawat,
Registered office at:
T-303, Tirupati Plaza,
Plot No.-11, Sector-11,
Pocket-4, Dwarka,
New Delhi - 110075 .......APPELLANT
VERSUS
1. The State
Through Ld. Public Prosecutor,
District Court Dwarka,
New Delhi.
2. Urmil Nag
R/o A2/302, Param Puneet Apartment,
Plot No.-27, Sector - 6, Dwarka,
New Delhi - 110075
......RESPONDENTS
AND
CA No. 315/2023
CNR No. DLSW010061382023
Digitally
signed by
SHARAD CA No. 314/2023 & 315/2023 Page 1 of 30
SHARAD GUPTA
GUPTA Date:
2025.03.12
18:46:02
+0530
IN THE MATTER OF
Mr. Pardeep Sehrawat,
S/o Sh. Mool Chand Sehrawat,
Registered office at:
T-303, Tirupati Plaza,
Plot No.-11, Sector-11,
Pocket-4, Dwarka,
New Delhi - 110075 .......APPELLANT
VERSUS
1. The State
Through Ld. Public Prosecutor,
District Court Dwarka,
New Delhi.
2. Urmil Nag
R/o A2/302, Param Puneet Apartment,
Plot No.-27, Sector - 6, Dwarka,
New Delhi - 110075
......RESPONDENTS
Date of institution : 22.06.2023
Date on which reserving : 18.12.2024
Date of pronouncement : 28.02.2025
JUDGMENT
1. The present common judgment is being passed in two connected appeals bearing number CA3247/23 titled as Ms. Kamp Developers vs State and another and CA3248/23 titled as Pradeeep Sharawat Vs State and another against common Digitally signed by SHARAD CA No. 314/2023 & 315/2023 Page 2 of 30 SHARAD GUPTA GUPTA Date:
2025.03.12 18:46:26 +0530 impugned judgment of conviction dated 20.03.2023 and order on sentence dated 22.05.2023. The present appeal has been preferred against the judgment dated 20.03.2023 passed by the court of Sh. Manuj Kaushal, Ld. MM-06, South West District, Dwarka Courts, Delhi in case titled Urmil Nag V/s Kamp Developers Pvt. Ltd. and the order on sentence dated 22.05.2023 whereby the appellant/convict Pradeep Sehrawat has been sentended to SI for one year and convict Pradeep Sehrawat and Kamp Developers Pvt. Ltd. have been sentenced jointly and severely to pay a sum of Rs.50,00,000/- as compensation to the complainant, within 30 days, failing which the convict Pradeep Sehrawat shall undergo further SI for three month.
2. On notice of the appeal having been issued to the respondent, Mr. Avnesh Kumar, son of respondent no. 2/complainant (since deceased) entered appearance and contested the appeal through counsel.
3. It is a matter of record that the appellant settled the matter with the complainant in respect of present appeal and connected appeal for a total sum of Rs.90,00,000/- in terms of settlement award dated 05.09.2023. It is a matter of record that after making part payment the appellants resiled from the said settlement and stopped appearing in the court after 01.08.2024. Thereafter, repeated opportunities were given to the appellant to proceed further in the matter. It was specifically observed that in case arguments are not addressed, the matter shall be disposed off on the basis of material on record. However, despite repeated opportunities, the appellants failed to address arguments and also did not appear in the court. Accordingly, the matter is being Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 3 of 30 GUPTA Date:
2025.03.12 18:46:34 +0530 disposed off on the basis of material on record.
4. It has been urged on behalf of the appellant in the grounds of appeal that the impugned order deserves to be set aside as the same has been passed by the Ld. Trial Court without fair appreciation of evidence on record. It is added that the Ld. Trial Court also failed to appreciate the fact that the complainant in her cross- examination has admitted that she was aware of the Land Pooling Policy and that all the payments were made by her son and since the investment made by the complainant was with respect to the Land Pooling Policy thus there was no scope for any dispute with respect to legal liability to pay the cheque amount. It is further urged in the grounds of appeal that the Ld. Trial Court also ignored the terms of the MOU, while passing the impugned judgment. It is added that the defence of the appellant has also been ignored by the Ld. Trial Court. It is urged in the grounds of appeal that the Ld. Trial Court also failed to take into consideration the fact that the appellant during the trial has rebutted the presumption in favour of the complainant under Section 139 Negotiable Instrument Act. Thus the complainant is liable to prove his case which he failed to do in the instant case. It is urged in the grounds of appeal that the Ld. Trial Court also failed to take into consideration that the basic ingredient of Section 138 Negotiable Instrument Act are not fulfilled in the present case as there was no legally enforceable debt against the appellant and the Cheque was not handed over in discharge of any legally enforceable debt or part of debt. It is stated that the payments were made by the complainant as investment in the land pooling policy which was duly notified, however, there was a delay in the approval from the concerned department/DDA due Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 4 of 30 GUPTA Date:
2025.03.12 18:46:43 +0530 to which flats could not be delivered to the respondents on time. It is stated that the appellant had offered another flat in similar localities to the respondent, who however, refused the said offer. It is further added that the investment was made by the complainant in the project as a member to the same and as per the MOU, at any time if the complainant wants to withdraw his/her investment or membership then he/she has to replace himself/herself with some other member and the said condition was duly agreed by the complainant in the signed MOU. It is urged in the grounds of appeal that the Ld. Trial Court also failed to take in to consideration the fact that the cheques in question were given as security cheques to the complainant in 2015 when MOUs were entered into between the parties therefore, the debt, if any, had become time barred on the date of filing of the present complaint. It is reiterated that the impugned judgment and order on sentence have been passed by the Ld. Trial Court without appreciating the facts and circumstances explained above and the sentenced imposed is excessive.
5. In support of his arguments, Ld. Counsel for the appellant referred to the following pronouncements in the memorandum of appeal:-
(1) Jage Ram Karan Singh & Anr. Vs. STate and Anr. 2019 SCC Online Del 9486, (2) Amrit Sandhu Costar vs. State, 2022 Sec.
OnLine Del 2990, (3) M/s Vijay Polymers Pvt. Ltd. and Anr. Vs. M/s Vinnay Aggarwal, 2009 (110) DRJ 59, (4) Lalit Kumar Sharma vs. State of UP 2008 (5) SCC 638, (5) Indus Airways P. Ltd. vs. Magnum Aviation Pvt. Ltd. 2014 (12) SCC 539, (6) Khardah Company Ltd. vs. Raymon and Co. (India) Pvt. Ltd., AIR 1962 SC 1810, Digitally signed by SHARAD CA No. 314/2023 & 315/2023 Page 5 of 30 SHARAD GUPTA GUPTA Date:
2025.03.12 18:47:08 +0530 (7) Modi and Co. Vs. Union of India, AIR 1969 SC 9, (8) R. Primal Bai vs. Bhaskar Narisimaihah, Karnataka HC dated 06.07.2018, (9) Dashrathbhai Trikambhai Patel vs. Hitesh Mahendrabhai Patel and Anr. (2023) 1 Supreme Court Cases 578, (10) Virender Singh vs. Laxmi Narain and Anr., ILR (2006) II Delhi 1183, (11) Novartis Vaccines and Diagnostics Inc. vs. Aventis Pharma Limited, 2010 (2) Bom, CR 317, (12) MOH Uduman and Ors. vs. MOH Aslum, AIR 1991 SCC 1020, (13) Godhara Electricity Co. Ltd. and Anrs. vs. The State of Gujarat and Anr, 1975 2 SCR 42, (14) Veena Rani Chhabra vs. Manju Rohida, 2008 (155) DLT 447, (15) Total Sniaelf India Limited vs. Rashmi Parmani, 2013 (2) JCC 144 (NI) and (16) Pradeep Buragohan vs. Pranti Phukan, 2010 (11) SC 108.
6. Ld. Counsel for the son/LR of respondent has vehemently opposed the contentions of Ld. Counsel for the appellant. It is submitted that there is no illegality or infirmity in the impugned judgment which is well detailed, well reasoned, justified, correct in facts & law and therefore requires no interference. It is argued that the Ld. Trial Court has rightly held that the respondent no.2/original complainant has successfully proved the case beyond all the reasonable doubt and the appellant/accused failed to rebut the presumption and accordingly convicted appellant for the offence under section 138 of Negotiable Instruments Act. It is added during the admission/denial of documents and his cross examination before the Ld. Trial Court, the appellants had admitted the Cheques, Digitally signed by SHARAD CA No. 314/2023 & 315/2023 Page 6 of 30 SHARAD GUPTA GUPTA Date:
2025.03.12 18:47:17 +0530 signature on the cheques and also the MoUs dated 26.03.2015 & 29.03.2015. It is stated that the appellant failed to raise any valid grounds in the appeal and therefore the same is liable to be dismissed. It is stated that the conduct of the appellant, who is a habitual offender and has already defrauded hundred of home buyers by floating fraudulent housing projects, may also be considered while deciding the present appeal. It is further added that the in view of the conduct of the appellant, his sentence which is on lighter side may be enhanded and notice in this regard may be issued to him. Reliance is placed upon pronouncements in (i) Sahab Singh & Ors. Vs. State of Haryana (1990) 2 SCC 385 at pages 387, 388 and (ii) Kumar Ghimirey Vs. State of Sikkim (2019) 6 SCC 166.
7. The record has been carefully and thoroughly perused. The submissions of learned counsel for the respondent have been duly considered.
8. Before proceeding further, it would be appropriate to refer to the brief facts of the case culminating in the present adjudication. The parties are being referred here with their respective nomenclature before the ld. Trial Court. Briefly stated, it is the complainant's case that the accused no.1 through accused no.2 had approached the complainant and represented that a project named "Eden Heights" was coming up in L-zone. It is the complainants case that on representations and persuasions by the accused no.1 and 2 she had agreed to book two flats/units in the aforesaid project for a total consideration of Rs 34,65,000/- which was paid by several instalments in the year of 2014 and 2015. That pursuant to part payment by the complainant two Digitally signed by SHARAD CA No. 314/2023 & 315/2023 Page 7 of 30 SHARAD GUPTA GUPTA Date:
2025.03.12 18:47:27 +0530 memorandum of Understanding dated 26.03.2015 and 29.03.2015 was entered into between complainant and accused no.1 through accused no.2. It is further stated that upon seeing that no progress has taken place even after five years from the date of entering the abovesaid MOUs, the complainant and her son demanded the repayment of consideration from the accused persons as per the MOUs. It is the complainant's case that in order to repay the aforesaid consideration the accused persons had issued two Cheques bearing No. 002909 dated 10.10.2020 for an amount of Rs 17,32,500/- and Cheque bearing No. 002910 dated 10.11.2020 for an amount of Rs 17,32,500/- both drawn on Kotak Mahindra Bank, Sector-5, Dwarka, Delhi.
9. As per assertions, the cheques when presented for encashment, were received dishonoured with remarks funds insufficient vide return memos dated 07.11.2020 and 12.11.2020 respectively. Despite issuance of legal demand notice dated 03.12.2022, the accused persons failed to make payment of the cheque amount and consequently, the complaint was filed.
10. Notice of accusation was served upon the appellant/accused on 07.12.2021. The appellant admitted signatures of appellant no. 2 on the cheques in question. They denied receipt of the legal notice but admitted that the address mentioned in the legal notice was an earlier address of the company. The appellant stated that they had entered into an MOU with the complainant but the complainant did not honour the MOU due to which they were not bound to pay the amount of the dishonoured cheques to the complainant and the cheques had been misused by the complainant.
Digitally signed by SHARAD CA No. 314/2023 & 315/2023 Page 8 of 30 SHARAD GUPTA GUPTA Date:
2025.03.12 18:47:42 +0530
11. To prove her case, the complainant stepped into the witness box and relied upon the following documents :-
i. Photocopy of MOUs dated 26.03.2015 and 29.03.2015 as Mark A. ii. Cheque in question bearing no.002909 dated 10.10.2020 and Cheque in question bearing no. 002910 dated 10.11.2020 for an amount of Rs. 17,32,500/- each as Ex.CW1/A (colly). iii. Return memo dated 13.10.2020 as Ex.CW1/B. iv. Statement of account dated 18.11.2020 as Ex.CW1/C. v. Return memo dated 12.11.2020 as Ex.CW1/D. vi. Legal demand notice dated 02.12.2020 as Ex.CW1/E. vii. Postal tracking reports of legal demand notice as Mark B. CW-1 was duly cross-examined by the accused/appellant. It is a matter of record that the accused / appellants admitted the genuineness of MOUs Mark A, cheques in question Ex. CW1/A and cheque return memo Ex.CW1/B and Ex.CW1/D vide proceedings dated 12.04.2022.
12. The accused persons were examined U/s 313 Cr.P.C. They stated that the cheques in question were given as security to the complainant, however, the complainant failed to honour her part of the MOUs and they had no liability towards the complainant. They further stated that the cheques in question were given as security cheques to the complainant. They stated that the company might have received the legal demand notice. They further took the defence that investment made by the complainant was in respect of land pooling policy which was duly notified, however there was delay in approval from the concerned departments due to which flats could not be provided to the complainant on time. That they asked complainant to take Digitally signed by SHARAD CA No. 314/2023 & 315/2023 Page 9 of 30 SHARAD GUPTA GUPTA Date:
2025.03.12 18:47:50 +0530 flats in similar localities, however, the complainant refused. They denied their liability to repay the amount. The accused examined accused no. 2 Mr. Pradeep Sehrawat as DW-1 and thereafter, closed DE.
13. Adverting the to the present adjudication, it has been observed that the accused in the present case, the accused no. 2 Mr. Pradeep Sehrawat (before the Ld. Trial Court) had admitted his signatures on the cheque in question. His contention throughout the trial was that the cheque in question were issued pursuant to MOUs executed between the complainant/respondent no. 2 (since deceased) and the appellant and the same were security cheques. Pertinently, in reply to notice of accusation, contention of the appellant was that he had filled in the particulars of the cheque in question. This being so, the Ld. Trial Court rightly drew the presumption U/s 118 and 139 of the Negotiable Instruments Act against the accused (appellant herein).
14. To discharge his onus of rebutting the said presumption, the accused has cross-examined the complainant and has also examined himself as DW-1 and thereafter closed DE.
15. The impugned judgment is sought to be challenged on the ground that there was no legally enforceable debt. That the investments were made by the respondent herein in respect of land pooling policy which was duly notified and due to delay in approval from the concerned departments, the flats could not be delivered to respondent in time. That the cheques in question were given as security cheques in 2015 when the MoUs were Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 10 of 30 GUPTA Date:
2025.03.12 18:47:58 +0530 entered between the parties and thereafter therefore the debt had become time barred on the date of filing of complaint. That the respondent failed to honour her part of the MoUs and as such the appellant could not be held liable under Section 138 NI Act. That the cheques in question were given as security cheques and as such the appellant is not liable under Section 138 NI Act. That the complainant failed to sign the complaint under Section 138 NI Act and for this reason, the prosecution could not be continued. It is further argued that there was no legally enforceable debt for the reason that the debt if any had become time barred by the time the complaint was filed.
16. It is observed that ld. Trial Court had dealt with all the objections raised by the appellant in the present appeal in the impugned judgment. It is a matter of record that the appellant had admitted the genuineness and correctness of MoUs dated 26.03.2015 and 29.03.2015 entered between the parties in proceedings under Section 294 Cr.P.C. The terms of the said MoUs were clear. Clause IV of the MoUs provided as under:-
"iv. The First party agrees, admits, confirms and acknowledges that-
a) It shall be the responsibility/ obligation of the first party to acquire land for the said housing project and it will be solely responsible to do the project planning and its implementation in pursuance to "land pooling policy" in accordance with the various sanctions obtained from the Government and other authorities. It shall also be its responsibility to obtain all statutory, legal and all other applicable clearances from all the government, semi-
Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 11 of 30 GUPTA Date:
2025.03.12 18:48:37 +0530 government and other local authorities concerned and have the housing project executed and completed.
b) If as a result of any rules or directions of the Government or any authority or if competent authority delays, withholds, denies the grant of necessary approvals for the project, the first party after provisional and or/final allotment is unable to deliver the unit to second party, the first party shall be liable only to refund the amounts received from the Second Party with interest @ 9% per annum.
Further, the second party has the option to get the entire amount back with an annual interest of 9% after 3 years from the date of signing the MOUs.
17. Thus, perusal of clause IV of MOU dated 26.03.2015 and 29.03.2015 would show that the appellant herein owned the responsibility and obligation to acquire land for housing project and to do the project planning and its implementation. He further undertook the responsibility to obtain all statutory, legal and all other applicable clearances from all the concerned authorities. He also had the liability to get the housing project executed and completed. In face of the said clause IV (a) of the MoUs, now the appellants cannot turn back and say that the project was not completed as the requisite sanction could not be obtained and further he cannot saddle the respondent herein with the responsibility for failure of MoU. Furthermore, the appellant herein under took to repay the entire amount back with an annual interest of 9 % after three years from the date of signing of MoUs. There is nothing on record to show Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 12 of 30 GUPTA Date:
2025.03.12 18:48:46 +0530 that the said agreement is either unlawful or barred by any law or if the same is hit by Section 23 of Indian Contract Act. These aspects have been dealt it at length by the ld. Trial Court in the impugned judgment. The relevant paragraphs of impugned judgment are quoted here under:
"On a perusal of the above clause it is clear that it was the responsibility to the accused no.1 to acquire the land and obtain the necessary permissions from the Government authorities for acquiring the land on which the housing project was to constructed. Further part b of the aforementioned clause specifies that in case the accused no.1 fails to give the dwelling unit/ flat to the complainant owing to Government authorities withholding, delaying or denying the necessary approvals then the accused no.1 would only be liable to return the money advanced by the complainant alongwith an interest at the rate of 9% per annum.
18.8 In the present case, it is not disputed that the accused persons have received a consideration amount of Rs 34,65,000/- to the accused persons for two residential flats/ dwelling units. Further, it is not in dispute that the accused persons have failed to deliver the possession of the said dwelling units to the complainant. In the given circumstances, as per the above clause of the MOUs entered into parties the accused is liable to refund the consideration amount to the complainant. Further the defence of the accused that there was a delay on the part of DDA to return the land for development of housing project is of no avail because as per the agreement it was the responsibility of the accused persons to acquire the land for the construction of housing project and the accused were liable to refund the Digitally amount in case they did not receive the necessary signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 13 of 30 GUPTA Date:
2025.03.12 18:48:58 +0530 sanctions from the Government.
18.9 Further, nothing has been brought forth by the accused side to show that the agreement is hit by Section 23 of Indian Contract Act. In view of the above observations, the first defence of the accused is without any merits".
18. The second defence of accused is that the amount in question became time barred as much as the cheques in question were given in the year 2015 and could only be recovered within three years from the date of payment i.e. within three years after 2015. In this context, perusal of MoUs would show that under clause IV (b), which is quoted above, the appellant had the liability to return the amount with annual interest of 9 % after three years of the date of signing of MoUs. In these circumstances, when the appellant himself owned up the liability to repay the amount with interest and further the said amount could only be recovered after three years from the date of signing of MoUs, thus the respondent herein could legally seek repayment of the amount paid under the MoUs after three years from 26.03.2015 and 29.03.2015 i.e. after 26.03.2018 and 29.03.2018. As rightly observed by the ld. Trial Court, Article 27 of the Indian Limitation Act provides the period of limitation for filing of a suit for compensation for breech of a promise to do anything at a specified time or upon happening of a specify contingency within three years from the time specified or the happening of the contingency. Thus, the complainant could have filed the complaint within three years from 26.03.2018 and 29.03.2018 i.e. before 26.03.2021 and 29.03.2021. The present complaint having been filed on 23.01.2021 is found to have been Digitally filed within time. These arguments of the appellant are liable to signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 14 of 30 GUPTA Date:
2025.03.12 18:49:06 +0530 be rejected. To my mind, the ld. Trial Court rightly appreciated the facts and law in this regard in the impugned judgment, the relevant paragraphs whereof are re-produced here under:
"18.12 On a perusal of MOUs (Mark A) annexed with the complaint this Court is of the opinion that the agreement entered into between the parties by way of MOUs was a continuous agreement which was to fructify by either giving the possession of the flats/dwelling units to the complainant or by termination under the clause 7 of MOUs dated 26.03.2015 and 29.03.2015. In the present case nothing has been brought on record to suggest that the present agreement was terminated. In the given circumstances, this Court is of the opinion that the contract entered into by the parties was a continuous contract. Moreover, even if it is assumed that the said contract was not a continuous contract, still as per clause IV(b) of the MOUs dated 26.03.2015 and 29.03.2015 the complainant was entitled to recover the amount of consideration after the expiry of three years from the accused with an interest of 9% per annum.
18.13 In the present case, the MOUs were entered into between the parties on 26.03.2015 and 29.03.2015. As per clause IV(b) of the MOUs the complainant would be entitled to recover the consideration amount after the expiry of three years i.e. 26.03.2018 and 29.03.2018 respectively. Article 27 of the Indian Limitation Act, 1963 provides the period of limitation for filing a suit for compensation for breach of a promise to do anything at a specified time, or upon the happening of a specified contingency is three years from the time when the time specified arrives or the contingency happens. In the present case, the Digitally signed by SHARAD SHARAD GUPTA GUPTA Date: CA No. 314/2023 & 315/2023 Page 15 of 30 2025.03.12 18:49:14 +0530 contingency happens at the expiry of three years and the limitation for filing the suits in respect of two MOUs expire on 26.03.2021 and 29.03.2021. The present complaint has been filed before the expiry of the said period therefore the defence of time barred raised by the accused is without any merits".
19. Further defence of the accused is that the cheques in question were given as security cheques. To my mind, this argument of the accused was dealt with at length by the ld. Trial Court in the impugned judgment. The relevant paragraphs of impugned judgment are being re-produced here under:
"18.14 Further, the defence of the accused that the cheque in question was given as a security cheque is without any merits. It is highly unlikely that cheques which bear a printed date of 08.05.2019 could have been given as a security cheques in 2015. Further even if assuming that the cheques in question were given as security cheques still that does not absolve the accused persons of the liability. The law relating to the security cheques have been clarified by the Supreme Court in Sripati Singh v. State of Jharkhand, 2021 SCC OnLine SC 1002 wherein it has been observed as under:
17. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance.
'Security' in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified time frame and issues a cheque as security to secure Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 16 of 30 GUPTA Date:
2025.03.12 18:49:23 +0530 such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow.
18. When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security' cannot be presented prior to the loan or the installment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an 'on demand promissory note' and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 17 of 30 GUPTA Date:
2025.03.12 18:49:33 +0530 cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation.
On reading of the aforesaid observations of Hon'ble Supreme Court it is clear that merely because a cheque was given as a security cheque does not by itself absolve the accused from liability for an offence U/s 138 NI Act. In order to be absolved from the liability, the accused is required to show either of the following two things:
a) That the accused has already discharged the liability for which the cheque was given as a security; or
b) That the amount for which the cheque was given as a security had not become due on the date of presentation".
"18.5 In the final arguments, Ld. Counsel for the accused has raised two defences for the accused:-
a) Firstly, that the complainant was aware of the Land Pooling Policy prepared by the Delhi Development Authority (hereinafter DDA) and that the delay in handing over the flat and dwelling unit was because of the failure of on the part of DDA to return the land for development. It is further mentioned that the MOUs entered between the complainant and the accused is not lawful.
b) Secondly, it is alleged that the debt in question has become a time barred debt and therefore, there is no legally enforceable debt or liability in favour of the complainant".
Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 18 of 30 GUPTA Date:
2025.03.12 18:49:41 +0530
20. The contention of the accused is also that no legal notice was received by him. This aspect was also dealt with at length by the ld. Trial Court by rightly observing as follows:
"17.2 Accused persons had initially denied the receipt of legal notice in the Notice put to them U/s 251 Cr.P.C but had admitted that the address mentioned on the legal demand notice was the earlier address of the accused no.1 company. However, in the statement recorded U/s 313 R/w 281 Cr.P.C the accused persons have stated that the accused company might have received the legal demand notice. Further, no questions have been put by the accused side in the cross-examination of the complainant to suggest that the legal demand notice was not sent or delivered to the accused persons".
21. In the facts of the present case, the appellant admitted that the address mentioned in the legal demand notice was his correct address. To my mind, the ld. Trial Court rightly drew the presumption against the accused in terms of ratio in C.C. Alavi Haji v. Palapetty Muhammed (2007) 6 SCC 555 that when the legal notice sent by registered post on correct addresses of the accused, due service has to be presumed under Section 27 of General Clauses Act and Section 114 of Indian Evidence Act. The relevant portion of the impugned judgment is quoted here under:
"17.1 The next ingredient which the complainant is required to prove in order to bring home the offence U/s 138 N I Act is that a legal demand notice, in writing, was served upon the accused within 30 days from the date on which the complainant received the information that the cheque was returned unpaid by Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 19 of 30 GUPTA Date:
2025.03.12 18:49:51 +0530 the banker of the complainant. In this regard, CW-1 deposing through his affidavit (Ex-CW1/1) has brought on record the demand notice dated 02.12.2020 (Ex-CW 1/E) and postal tracking reports which have been marked as Mark B. The said postal tracking reports although marked are accompanied with a certificated U/s 65B of Indian Evidence Act, 1872 and are therefore, read in evidence. A perusal of the postal tracking reports shows that the legal demand notice has been delivered. A perusal of the remarks appearing on the postal tracking report further clarifies that notice has been delivered to [Kamp (addressee)].
17.2 Accused persons had initially denied the receipt of legal notice in the Notice put to them U/s 251 Cr.P.C but had admitted that the address mentioned on the legal demand notice was the earlier address of the accused no.1 company. However, in the statement recorded U/s 313 R/w 281 Cr.P.C the accused persons have stated that the accused company might have received the legal demand notice. Further, no questions have been put by the accused side in the cross-examination of the complainant to suggest that the legal demand notice was not sent or delivered to the accused persons. 17.3 At this stage, this Court deems it to refer to the Judgment of Hon'ble Supreme Court in C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555
14. Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that Digitally the addressee is deemed to have knowledge of the signed by SHARAD SHARAD GUPTA GUPTA Date: CA No. 314/2023 & 315/2023 Page 20 of 30 2025.03.12 18:50:00 +0530 notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement "refused" or "not available in the house" or "house locked" or "shop closed" or "addressee not in station", due service has to be presumed. (Vide Jagdish Singh v.Natthu Singh [(1992) 1 SCC 647 : AIR 1992 SC 1604] ; State of M.P.\v.Hiralal[(1996) 7 SCC 523] and V. Raja Kumariv. P. Subbarama Naidu [(2004) 8 SCC 774 :
2005 SCC (Cri) 393] .) It is, therefore, manifest that in view of the presumption available under Section 27 of the Act, it is not necessary to aver in the complaint under Section 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.
17. It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of criminal law, where there is no stipulation of giving of a notice before filing a complaint. Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the court along with the copy of the complaint under Section 138 of the Act, cannot Digitally obviously contend that there was no proper service signed by SHARAD SHARAD GUPTA GUPTA Date: CA No. 314/2023 & 315/2023 Page 21 of 30 2025.03.12 18:50:08 +0530 of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the GC Act and Section 114 of the Evidence Act. In our view, any other interpretation of the proviso would defeat the very object of the legislation. As observed in Bhaskaran case[(1999) 7 SCC 510 : 1999 SCC (Cri) 1284] if the "giving of notice" in the context of Clause (b) of the proviso was the same as the "receipt of notice" a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act.
In the present case, the accused persons in the notice has admitted that the address mentioned on the legal demand notice was the correct address of the accused no.1. Further, the complainant has placed on record the postal tracking reports showing that legal demand notice has been sent to the accused persons. In the given circumstances, the presumptions under section 114 of Indian Evidence Act and Section 27 of the General Clauses Act would arise and a rebuttable presumption of service would arise against the accused. Nothing has been brought on record by the accused to rebut the presumption. Therefore, in the light of C.C. Alavi Haji judgment (Supra) the accused cannot contend that he has not received the notice.
17.4 In the given circumstances, this Court is of the opinion that the complainant has been able to prove that a legal demand notice in writing was sent to the accused within 30 days from the date of receipt of information regarding the dishonour of the cheque in question and the accused has received the same".
22. Further contention of the appellant is that the complaint in the present case was not signed by the complainant. Digitally signed by SHARAD SHARAD GUPTA GUPTA Date: CA No. 314/2023 & 315/2023 Page 22 of 30 2025.03.12 18:50:16 +0530 This aspect has been dealt at length by the ld. Trial court in the impugned judgment and the relevant portion of the impugned judgment is quoted here under:
"11. It is not disputed that the present complaint has not been signed by either the complainant or her counsel. Therefore, this Court has to examine the effect of the non-signing of the complaint by the complainant. Similar question cropped up before the Hon'ble Punjab & Haryana High Court in M.S. Shoes East Ltd. v. Modella Knitwear Ltd., 1998 SCC OnLine P&H 346 wherein Honbl'e Court after a conjoint reader of Code of Criminal Procedure, 1973 (hereinafter Cr.P.C) and Negotiable Instruments Act, 1881 observed as under:
11. A reading of the above section would show that no court would take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, by the holder of the cheque in due course. This section starts with a specific provision that the provisions of the Negotiable Instruments Act shall apply notwithstanding anything contained in the Code of Criminal Procedure with regard to those provisions given in sub-sections (a), (b) and (c) of this section, i.e., section 142. Thus, in order to constitute a valid complaint for the purpose of section 138 of Act, there should be a complaint and that complaint must be in writing". A close scrutiny of the provisions of section 142 of the Act is not obligatory on the part of the complainant to establish that his complaint was signed by him or it. The word "complaint" has not been defined under the Act, but luckily it has been defined under the Code of Criminal Procedure and according to section 2(d) of the Code "complaint" means any allegation made orally or in writing to a magistrate, with a view to his taking Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 23 of 30 GUPTA Date:
2025.03.12 18:50:23 +0530 action under this Code, that some person, whether known or unknown, has committed an offence, but does not include a police report. The complaint under section 138 of Act is supposed to be tried as a warrant case instituted otherwise than on a police report. The scheme of the Code shows that wherever the Legislature wanted that any action on the part of a litigant should be signed, it has so stated in the relevant provisions. However, where the Code wants that a written complaint would be enough for the purpose of taking cognizance, or for the purpose of summoning the accused, the thing's can go in that fashion without any difficulty. I would like to make a mention of section 190 of Code of Criminal Procedure. As per this section the magistrate of the first class or second class can take cognizance of any offence upon receiving a complaint of facts which constitute such offence. It does not talk that the complaint should be signed by the complainant. I have already incorporated the definition of "complaint" as defined under the Code. As per section 200 of the Code once a complaint is instituted before a magistrate, he is supposed to examine upon oath the complainant and the witnesses. Their statements are supposed to be reduced into writing and those statements are further supposed to be signed by the complainant and the witnesses, meaning thereby that the complaint can be instituted in writing. It need not be signed by the complainant but the statement which shall be made by the complainant or on his or its behalf shall be reduced into writing and such statement is supposed to be signed by the complainant. Besides that, the statements of the witnesses examined by the complainant are also supposed to be signed, meaning thereby wherever the Code wanted that a SHARAD particular act should be signed, it has to be signed. GUPTA Digitally signed by SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 24 of 30 Date: 2025.03.12 18:50:31 +0530 If the Code wants a written document and if a complaint is filed in writing before a Magistrate, who has taken cognizance over the matter, such a complaint is not bad in the eyes of law. To proceed further, I would also like to refer to the provisions of section 154 of the Code of Criminal Procedure, which again states that every information relating to the commission of a cognizable offence, if given orally to the officer in charge of a police station, shall be reduced into writing. It shall be read over to the informant and it shall also be signed by the person, who gives the information. Similarly, a reading of Section 164 of Code indicates that if the magistrate is to record a confession, as per sub- section (4) of this section it is supposed to be signed by the person making the confession.
12. Things do not rest here. Even the scheme of the Negotiable Instruments Act would show that the Legislature had not laid down a stress that the complaint under section 138 of the Act should be signed by the complainant. A reading of the provisions of section 138 shows that before a complaint is filed in a court of law, the holder of the cheque is supposed to give a notice to the drawer as per the provisions of sub-section (b) of section 138 of the Act. Supposing a notice is given by the holder of a cheque and that notice is not signed, whether in such eventuality it can be said that the notice was bad and, therefore, the complainant had no cause of action to file a complaint under section 138 of the Act. The answer to this court would be in the negative. In this regard I would like to take assistance from Satyanarayana Goivda v. Rangappa (B.), [1997] 88 Comp Cas 433 (Kar), where it was held by the Karnataka High Court that when a notice under section 138(b) of the Act is not signed by the advocate of the party, such notice is not bad Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 25 of 30 GUPTA Date:
2025.03.12 18:50:40 +0530 because the provisions do not contemplate that notice under section 138(b) should be signed by the party. In the present case when the complaint was filed on behalf of Modella Knitwear Ltd., Shri Ashok Goel appeared on behalf of the company in pursuance of the resolution and it was his statement which was recorded by way of preliminary evidence. After recording the preliminary evidence, cognizance of the offence was taken and the summons was issued to the respondent (now petitioners) to face the charge under section 138 of the Act. As per section 142 of the Act, no court shall take cognizance of an 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. Thus, it can be safely said that before taking cognizance, the magistrate had a complaint in writing before him. He had the statement of Shri Ashok Goel, which statement was reduced into writing and it was signed by him. In these circumstances, I do not see any infirmity in the impugned order when the learned magistrate allowed the application of the complainant to formally sign the complaint and other documents by rejecting the application of the present petitioners that the complaint should be dismissed as it was no complaint in the eyes of law.
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14.In the present case, I have already held above that the requirements of section 142 of the Negotiable Instruments Act have been duly complied with when there was a written complaint before the magistrate and when on the basis of that complaint a statement has been recorded and the magistrate took the cognizance on the basis of that written complaint corroborated by the statement of Digitally signed by SHARAD SHARAD GUPTACA No. 314/2023 & 315/2023 Page 26 of 30 GUPTA Date:
2025.03.12 18:50:48 +0530 the authorised person.
11. Similar observations were made by the Hon'ble Supreme Court in Indra Kumar Patodia v. Reliance Industries Ltd., (2012) 13 SCC 1 wherein it was observed as under:
21.In the case on hand, the complaint was presented in person on 3-6-1998 and on the direction by the Magistrate, the complaint was verified on 30-7-1998 and duly signed by the authorised officer of the Company, the complainant. As rightly pointed out by the Division Bench, no prejudice has been caused to the accused for non-signing the complaint.
The statement made on oath and signed by the complainant safeguards the interest of the accused. In view of the same, we hold that the requirements of Section 142(a) of the Act are that the complaint must necessarily be in writing and the complaint can be presented by the payee or holder in due course of the cheque and it need not be signed by the complainant. In other words, if the legislature intended that the complaint under the Act, apart from being in writing, is also required to be signed by the complainant, the legislature would have used different language and inserted the same at the appropriate place. In our opinion, the correct interpretation would be that the complaint under Section 142(a) of the Act requires to be in writing as at the time of taking cognizance, the Magistrate will examine the complainant on oath and the verification statement will be signed by the complainant.
12. In view of the aforesaid observations, it is clear that non-signing of the complaint is not a statutory requirement and is not a material irregularity. Further, no prejudice has been caused to the accused persons in their defence due to non-signing of the complaint. Moreover, the present complaint has Digitally signed by SHARAD CA No. 314/2023 & 315/2023 Page 27 of 30 SHARAD GUPTA GUPTA Date:
2025.03.12 18:51:02 +0530 been accompanied by an affidavit wherein the complainant has affirmed that she has carefully gone through the contents of the complaint and the same prepared by her counsel under her instructions. Further, the evidence by way of affidavit accompanying the affidavit has been duly signed and verified by the complainant. In the given circumstances, this Court is of the opinion that non- signing of the complaint is not a material irregularity and does not vitiate the present complaint proceedings".
23. To my mind, the ld. Trial Court rightly held that in the present case, no prejudice has been caused to appellant in his defence due to non signing of the complaint. Also the complaint is duly accompanied by an affidavit of the complainant affirming the contents of complaint. Ld. Trial Court also rightly observed that the complainant had filed her evidence by way of affidavit which was duly signed and verified by her. In the facts of the present case, the present case was contensted to the hilt before the ld. Trial Court. In these circumstances, the ld. Trial Court rightly relied upon the pronouncement in M.S. Shoes East Ltd. v.
Modella Knitwear Ltd., 1998 SCC online 346 and Indra Kumar Patodia v. Reliance Industries (2012) 13 SCC1 and rightly held that mere non signing of complaint by the complainant was of no consequence in the facts of the present case. Ld. Trial Court also rightly observed that non signing of complaint itself is not a statutory requirement and is not a material irregularity. These arguments of the appellant are thus liable to be rejected.
24. Another aspect of the present case is that the appellant had settled the matter with the respondent herein in terms of settlement award dated 15.09.2023. He made part Digitally signed by SHARAD CA No. 314/2023 & 315/2023 Page 28 of 30 SHARAD GUPTA GUPTA Date:
2025.03.12 18:51:10 +0530 payments but thereafter stopped appearing. Ld. Counsel for the respondent relying upon Clause 4 (b) & 5 of the said settlement award has contented that in case of default in making payment, the amount already paid was to be forfeited. It is also contented that in terms of Clause 5, in case of default, the other party was at liberty to take appropriate action as per law. Relying upon the said clauses, the contention of the respondent is that the amount already paid under the settlement agreement stands forfeited and the respondent is pressing for disposal of the present appeal as per law. The respondent in the present case being the complainant in a complaint case filed for dishonour of cheques cannot be forced to settle the matter with the accused. Undoubtedly, the appellant has paid some amount to the respondent herein. However, the same is to be forfeited in terms of Clause 4 (b). Furthermore, under Clause 5, the respondent herein was at liberty to take appropriate steps as per law. Thus notwithstanding that the matter has been settled, due to non compliance and default by the appellant in complying with the terms of settlement award, the respondent had every right to forfeit the amount already paid and to proceed further with his complaint.
25. The ratio in the judgments referred by the appellant in the memorandum of appeal, though undisputed is of no help to the appellant in the facts of the present case.
26. In view of the aforesaid discussion, the impugned judgment is found to be based upon fair appreciation of evidence and deserves no intervention. I have also considered the impugned order on sentence and do not find it be excessive or Digitally signed by SHARAD SHARAD GUPTA CA No. 314/2023 & 315/2023 Page 29 of 30 GUPTA Date:
2025.03.12 18:51:19 +0530 unjustified. The present appeal is found to be without any merit and is accordingly dismissed.
27. The present appeal is disposed off accordingly. Copy of this judgment be also placed in the file of connected appeal.
28. Copy of this judgment be sent along with the Trial Court Record.
29. The appeal file be consigned to Record Room.
Announced in the open court on: 28th February, 2025 (Sharad Gupta) Additional Sessions Judge (FTC) South-West District, Dwarka Courts, New Delhi.
Digitally signed by SHARAD GUPTA SHARAD Date:
GUPTA 2025.03.12
18:51:25
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