Delhi District Court
Dolphin Mart vs Ms Sairaj Artifacts Pvt Ltd on 26 April, 2024
IN THE COURT OF METROPOLITAN MAGISTRATE,
(NEGOTIABLE INSTRUMENT ACT) -07, SOUTH, SAKET
COURTS, NEW DELHI
Presided over by: SH. RISHABH TANWAR
CT Cases 471892/2016
Dolphin Mart Vs Ms Sairaj
Artifacts Pvt Ltd
A. CNR No. : DLST020048802015
B. Date of Institution : 23.04.2013
C. Date of commission of : 07.04.2013
offence
D. Name of the complainant : M/s Dolphin Mart Ltd
through its AR Sh. Lalit Kumar
Sharma.
Having its office Address at: D-
189, Okhla Industrial Area, Phase-
I, New Delhi - 110020
E. Name of the accused, his : (1) M/s Sairaj Artifacts Pvt Ltd
parentage and address
Having its office Address at: 10/13,
Joseph Mansion, Himanshu Rai
Road, Behind Police Station, Malad
(W), Mumbai-400016,
Maharashtra.
Also At: Shop no.6, Ground Floor,
Sai Complex, Pimpalwadi Road,
Near Shirdi Mandir, Shirdi-423109,
Maharshtra.
CT Cases 471892/2016
Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 1 of 29
Digitally
signed by
RISHABH
RISHABH TANWAR
TANWAR Date:
2024.04.26
14:12:29
+0530
(2) Mr. Rajesh Ramesh
Kalangutkar (Director)
R/o 23, Krishna Kunj, Haryali
Village, Plot No. 29/7, Vikhroll
(E),Mumbai-400083, Maharashtra.
(3) Mr. Mahesh Ulhas Telei
(Director)
R/o Date Building, Ganeshwadi,
Building no.3, NB Road, Behind
Chincholi Municipal School, Malad
(W),Mumbai-400083, Maharashtra
(4) Mr. Santosh Mistry (Director)
R/O 10/13, Joseph Mansion,
Himanshu Rai Road, Behind Police
Station, Malad (W), Mumbai-
400016, Maharashtra.
Offence complained of : Under section 138 Negotiable
Instruments Act, 1881
G. Plea of the accused : Pleaded not guilty and claimed trial.
H. Judgment reserved on : 22.03.2024
I. Date of Judgment : 26.04.2024
J. Final Order : ACQUITTAL
BRIEF FACTS OF THE CASE:-
1. The instant matter has originated out of a complaint under Section 138 Negotiable Instruments Act (hereinafter referred to as 'NI Act'), filed by the complainant company M/s. Dolphin Mart Pvt Ltd. through its AR Sh. Shashi Ranjan, against the accused company M/s. Dolphin Mart Limited (accused No.1), accused No.2 Sh. Rajesh Ramesh Kalangutkar, being the CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 2 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:12:45 +0530 director of accused No.1 company, accused No.3 Sh. Mahesh Ulhas Teli, being the director of accused No.1 company, accused No.4 Sh. Santosh Mistry, alleging that cheques bearing no. 000027 of Rs.15,00,000/- dated 18.02.2013 drawn on Kotak Mahindra Bank, Shop No.1, Gr. Flr, Centre Point Andheri-Kurla Rd. Opp. RPG Tower, Andheri East, Mumbai- 40059 Branch was issued by the accused persons in favour of the complainant company, in discharge of legal liability. The above-mentioned cheque has been dishonored and the accused has not paid the said amount even after receiving the prescribed legal demand notice dated 06.03.2013. By virtue of this judgment, the present complaint is being disposed of.
2. It is the case of the complainant that they are engaged in importing and marketing of crystals, crockery, luxurey home decor, gift items and that the complainant and accused No.1 were engaged in business since 2010 and accused No.1 was business associate that runs a showroom for selling life style decorative and silverware in Shirdi. It is further the case that they were business associate which latter reduced into writing by exchange of documents and finalised newly agreed terms. It is further the case that thereafter various good were supplied for which cheque was handed over as payment, however on request and on a special case cheque were deposited for encashment after sometime. It is further the case that a total amount of Rs.29,16,741/- as outstanding and was due to complainant against supply of consignments of goods received by accused No.1 company on various dates during course of business and towards value of C forms. It is further the case of CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 3 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:12:51 +0530 complainant company that in discharge of aforesaid liability, accused No.2 on behalf of accused No.1 company handed over the cheque in question i.e. cheque bearing No. 000027 of Rs.15,00,000/- dated 18.02.2013 drawn on Kotak Mahindra Bank, Shop No.1, ground floor, Centre Point Andheri-Kurla Rd. Opp. RPG Tower, Andheri East, Mumbai-40059 Branch signed by accused No.4 towards the part payment of the outstanding due to the complainant company at their Delhi office. And when the complainant company presented the above-mentioned cheque to its banker Canara Bank, Gulmohar Enclave, New Delhi for encashment, the same got returned dishonored with remarks 'funds insufficient' vide dishonor memo dated 23.02.2013. The statutory legal notice dated 06.03.2013 was sent to the accused persons and email was also sent on 13.03.2018 about the dishonor the cheque and for payment within 15 days. The accused persons received the same on 07.03.2013 through speed post. It is further the case that after receiving the notice accused No.1 returned goods worth Rs.6,96,654/- and the present total outstanding was Rs.22,32,707/-. It is further the case that meanwhile accused No.2 and 4 replied admitting the liability but making false allegations and disputing the total outstanding. It is further the case of the complainant company that accused No.4 was always representing himself as part of accused No.1 company which in reply he was trying to falsely deny the fact of issuance of cheque in question. It is further the case that the accused receive the legal notice and replied to same and consequently the present complaint was filed against accused persons as the accused persons had failed to pay the same within the CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 4 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:12:56 +0530 prescribed statutory period of 15 days.
3. Cognizance was taken on 09.09.2013 and summons were issued against the accused persons. On 15.02.2014, both parties have stated that they were making efforts for settlement, but the matter was not settled. Vide order dt. 30.09.2015, case was transferred due to its jurisdiction and on 11.01.2016, notice was issued to both the parties to appear before the court. Again, vide order dt. 23.03.2016 complaint was transferred in terms of NI Act Ordinance, 2015. The accused No.2 and 3 entered their first appearance before this court on 08.12.2016 wherein they were admitted to bail. Accused No.4 entered his first appearance before this court on 20.01.2017 wherein he was admitted to bail. Notice u/s. 251 Criminal Procedure Code, 1973 (hereinafter referred to as "CrPC") was framed against all accused persons on 20.01.2017.
4. Notice was framed on accused No.1 M/s. Sairaj Artifacts Pvt. Ltd. (through accused No.2) and accused No.2 Rajesh Ramesh Kalangutkar, being director of accused No.1 company, accused no. 3 Mahesh Ulhas Teli on 20.01.2017, wherein they all had stated that cheque in question was given as security which was given at the time of execution of dealer selling agreement dt. 21.09.2010 on behalf of accused No.1 company. They further stated that he did not receive the legal demand notice. They further stated that some of the goods supplied by the complainant were returned to the complainant as they were closing their business. They further stated that all the payments, apart from payment pertaining to returned good had been made CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 5 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:04 +0530 to the complainant.
5. Notice was framed on accused No.4 Santosh Mistry, being representative of accused No.1 company on 20.01.2017 wherein he stated that cheque in question was given as security which was given at the time of execution of dealer selling agreement dt. 21.09.2010 on behalf of accused No.1 company.
He further stated that the said cheque was issued from his personal bank account as the account in name of accused No.1 company was not opened as yet. He further stated the cheque in question bears his signatures, other details on the same apart from date, were in his handwriting. He further stated that he did not receive the legal demand notice. He further stated that some of the goods supplied by the complainant were returned to the complainant as they were closing down their business. He further stated that all the payments, apart from payment pertaining to returned good had been made to the complainant.
6. Complainant entered the witness box and examined himself as CW-1. He tendered his evidence by way of affidavit as Ex. CW- 1/B and relied upon the documents namely board resolution dated 26.03.2013 Ex. CW1/1, the dealer selling agreement dated 21.09.2010 Ex. CW1/2, the cheque in question Ex. CW1/3, the return memo dated 23.02.2013 Ex. CW1/4, Office copy of legal notice dated 06.03.2013 Ex. CW1/5, the postal receipts Ex. CW1/6 (colly), the reply of legal notice Ex. CW1/7 (colly), the board resolution in favour of the AR 03.03.2015 Ex. CW1/A. CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 6 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:09 +0530
7. CW-1 is his cross examination admitted that he has been working in the complainant company as Asstt. General Manager since 2009. Board resolution is in his favour is already on record. The director of the complainant is Mr, K.V Rao and Mrs. K.S. Rao and complainant company deals in decorative items, wooden furniture, and other high-end status of gods. Written agreement was executed between complainant and accused somewhere in August 2010 however, he do not remember the execution of said agreement, but the said agreement was executed in Delhi. He also does not know about the stamp papers from where it was purchased. He was not aware whether there is any reference regarding the cheque in question in the said agreement. He cannot say about the validity of the said agreement Ex. CW1/2. He has no knowledge that agreement is valid for 2 years. However, he can see and say that he was not present at the time of execution of the said agreement. Only one cheque was given to the complainant under the said agreement, which is cheque in question. he do not remember whether other cheques were also given by accused to the complainant. He has no knowledge about the present case or the cheque in question and agreement. Vouchers for supply of goods involved have not been filed in the present case. There was no dispute regarding the supply of the goods between the complainant and accused. He do not know the quantity of total goods supplied. There was some return of goods also which was Rs. 6,96,000/- approx. Value of returned goods has been set off from amount payable by the accused. As per clause 17 of the agreement Ex. CW1/2 the said agreement was for a period of 2 years. He do not remember that the said CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 7 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:15 +0530 agreement was extended by mutual consent of the parties. He do not remember whether any of the sides approached the other for extension of contract and accused had deposited any cheque with the complainant as security. There might be arbitration was given to the accused regarding the present dispute. Goods were supplied to the accused for the last time in 2013. No other transaction has been made between him and the accused. He had visited the accused company for the last time in year 2011 or 2012. Accused no.2 and 4 are directors of accused no.1 company. he knows one Manoj Singh who was his employee, and he left the company in 2014-15. He further submits that he had mentioned newly agreed terms dated 21.08.2010 Ex. CW1/2 and there was no agreement prior to this agreement or post. He had not checked or verified as to who were directors at the time of filing the present complaint. Witness has shown Ex. CW1/2 to identify the signatures and he had correctly identified the signatures. The cheque Ex. CW1/3 was filled by Santosh Mistry. The same was already filled when gave to him. He was not aware whether it was verified before filing the present complaint as to who all were directors of accused company at the relevant time. Witness had brought C forms and ledger copy and the relevant vouchers and the said C form is Ex. CW1/D1 (colly) and ledger account statement of accused for period of 01.04.2009 to 01.04.2018 is Ex. CW1/D2 and vouchers are marked as Mark CW1/D3 (colly). Entry regarding return of goods has been reflected at point A at page no.7 in ledger account statement Ex. CW1/D2. Closing balance as per statement of account Ex. CW1/D2 was Rs. 8,59,447/-. The said figure as well as figure of Rs. 29,16,741/- appearing in para 4 CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 8 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:22 +0530 of his affidavit are correct. Amount of Rs. 8,59,447/- has been arrived at after setting off amount of Rs. 6,96,654/- on account of return of goods and around Rs. 11 lacs on account of C forms worth Rs. 90 lacs given by the accused during the present proceedings. The outstanding amount of Rs. 29,16,741/- does not find mentioned in statement of account Ex. CW1/D2 as stated in his affidavit.
8. Thereafter, vide order dated 01.12.2018, the complainant closed his evidence.
9. The statement of accused No.1 company through accused No.2 Rajesh Ramesh Kalangutar and statement of accused No.2 u/s. 313 Cr.P.C was recorded on 04.01.2018 in which accused stated that accused No.1 company was the business associate of complainant since 2010, however the association/contract between complainant and accused was for period of one year only i.e. 2010 to 2011. He further stated that all the payments were made to the complainant against goods supplied. He further stated that cheque in question was not given on behalf of accused No.1 company, the same was given by Santosh Mistry to one Manoj Singh, executive of complainant. However, the said cheque was not given regarding business transaction between the complainant and accused. He further stated he had no knowledge about the dishonor of the cheque in question. He further stated that he did not receive any legal demand notice. He further stated that there was no question of making the payment as cheque in question was not issued in CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 9 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:28 +0530 discharge of any legally enforceable liability. He further stated that he wishes to lead defence evidence.
10. The statement of accused No.3 Mahesh Ulhas u/s. 313 Cr.P.C was recorded on 04.01.2018 in which accused stated that accused No.1 company was the business associate of complainant since 2010, however the association/contract between complainant and accused was for period of one year only i.e. 2010 to 2011. He further stated that payments had been made to the complainant against goods supplied. He further stated that cheque in question was not given on behalf of accused No.1 company. He further stated that same was given by Santosh Mistry to one Manoj Singh, executive of complainant before commencement of business association between complainant and accused as complainant had asked for the same for starting business. He further stated that he had no knowledge about the dishonor of the cheque in question. He further stated that he had not received legal demand notice. He further stated that there was no question of making the payment as cheque in question was not issued in discharge of any legally enforceable liability. He further stated that the cheque in question does not bear his signatures, other details on the same were also not in his handwriting. He further stated that he was the director of accused No.1 company since 2010.
11. The statement of accused No.4 Santosh Mistry u/s. 313 Cr.P.C was recorded on 04.01.2018 in which accused stated that accused No.1 company was the business associate of complainant since 2010. He further stated that he had no CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 10 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:34 +0530 knowledge about the outstanding amount of Rs.29,16,741/- against the accused No.1 company on account of goods delivered by complainant as he was director of accused No.1 company only for a period of 3 months and had retired in the year 2010-2011. He further stated that cheque in question was given to one Manoj Singh who worked for complainant before actual business transaction between complainant and accused commenced. He further stated that he gave his own cheque to the complainant at that time as accused No.1 company did not have its own bank account and he was given the assurance by accused No.1 company that the said cheque shall be replaced by cheque of accused No.1 company as and when its bank account was opened. He further stated that one franchise was entered into between complainant and accused and issuance of cheque in question is duly mentioned in the said agreement. He further that he had already retired as director of accused No.1 company before the termination of the said agreement. He further admitted that the dishonor of the cheque. He further stated that he had not received the legal demand notice, however he received one email from the complainant in that regard and the said email was duly replied by him. He further stated that there was no question of making the payment as the cheque in question was not issued in discharge of any legally enforceable liability. He further stated that cheque in question bears his signatures, other details on the same apart from date, were also in his handwriting.
12. The accused No.4 thereafter examined himself as DW-1, wherein he stated that he was the ex-director of the accused CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 11 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:40 +0530 No.1 company. He further stated that he became the director of the company in 2010 and resigned on 01.04.2011. He further stated that the company filed form No.32 with ROC, Mumbai on 07.09.2012 which was Ex.DW1/1. He further stated that the dealers selling agreement was executed on 21.09.2010 in Mumbai and stamp paper was purchased in Mumbai. He further stated that they had received a ledger from the complainant company showing the amount payable by accused company i.e. Rs.8,59,447/- as on 07.12.2013 which was Mark DW1/2. He further stated that the ledger was incorrect balance wherein the goods return and some differences were not incorporated in the ledger. He further stated that amount of Rs.6,72,678/- and Rs.57,108/- were not accounted. He further stated that the said agreement expired on 31.03.2012 and on that day, the balance was Rs.13,02,920/- payable by accused No.1 company. He further stated that on 21.10.2012 the representative of complainant company visited the accused No.1 company and settled the amount and the balance payment as on 21.10.2012 was Rs.4,64,713/- which bears the signature of representative of complainant company marked as Mark X1 and the stamp of company as Mark X2 as acceptance of the payable amount. He further stated that but the ledger of complainant company shows Rs.11,33,3791/- after 21.10.2012 to 20.02.2013, the actual purchase was Rs.3,82,805/-. He further stated that the actual balance on the date of cheque deposit was Rs.3,17,398/-, during that period it was decided orally and mutually the goods shall be sent on consignment after the expiry of the agreement dt. 21.09.2010, same was marked as Mark DW1/3. He further stated that the said amount CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 12 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:47 +0530 of Rs.13,12,485/- was added to the balance and the cheque was deposited which was given as security deposit which was undated against the said agreement. He further stated that balance as per their record was Rs.1,28,661/-. He further stated that the goods returned against the consignment was taken into amount after the bouncing of the cheques. He further stated that one of the director-Rajesh Karan Gutkar had informed the complainant company through mail dt. 29.03.2013 regarding discrepancies in the ledger account and requested to correct the ledger against the same which was Ex.DW1/4. He further stated that on 14.02.2014, a mail was received from the complainant company regarding "C" form which is already submitted to the complainant company which is Ex.CW1/5 (Colly) in which it is stated that the outstanding amount is Rs.8,59,447/-. He further that that they had given the undated cheques against the security deposit of Rs.15,00,000/- to one Manoj Singh, representative of complainant company and informed that the company bank account was not opened but he was in hurry and therefore insisted for personal cheques and same was issued with a condition to replace against the company cheque. He further stated that company account was opened on 06.10.2010 which was then Ex.DW1/6 (OSR)., however complainant did not take cheque issued from bank account of accused no.1 company and retained the earlier cheque. He further stated that there was no transaction between the complainant and accused after December 2013, at which time account between complainant and accused was closed. He further stated that after expiry of agreement in March, 2012, they had taken goods worth around Rs.3,82,000/- from the CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 13 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:13:54 +0530 complainant. He further stated that the said goods were duly paid for. He further stated that his certificate u/s. 65 B of Indian Evidence Act, 1872 with respect to ROC record as well as e- mails tendered into evidence by him were Ex.DW1/7.
13. In his cross-examination, accused No.4 stated that he had invested in the shares of company and also made investment in form of giving unsecured loan to the company which totals to around Rs.35,00,000/- and except for the same he had no relation with accused No.1 company of any sort after his resignation on 01.04.2011. He further stated that he was not involved in day-to-day affairs of company after his resignation.
He admitted that he was not present in the office of accused company at the time when the representative visited on August, 2012 and 21.10.2012. He voluntarily stated that he was relying on the documents (i.e. handwritten statement as on 21.10.2012 wherein it is clearly written that the balance amount payable on that date but the ledger showed the higher amount than the agreed amount) shown by the directors of accused No.1 company.He further stated that he had proof that goods were returned which was reflected in ledger of accused as well as complainant company, same is reflected in Ex.CW1/D2 at page 5, 6 and 7 and the value of the goods returned was reflected in ledger account. He further stated complainant company had sent the copy of ledger account through email. He denied all other suggestions put to him.
14. Accused No.4 was recalled for examination u/s. 311 CrPC wherein he stated that he relied upon documents already on CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 14 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:14:01 +0530 record i.e. copy of email dt. 29.08.2012 along with minutes of meeting. The same was then Ex.DW1/C4 (Colly). He further relied upon certificate u/s. 65 B of Indian Evidence Act. The same was Ex.DW1/C5. In his cross-examination, he stated that he was trying to show by Ex.DW1/C4 (Colly) that an email was sent by complainant company to the accused company. He denied the suggestion that Ex.DW1/C4 (Colly) was just a proposal which was not finalised.
15. Thereafter, the defense evidence was closed on 10.02.2020 and case was put for final argument.
ARGUMENTS ADVANCED ON BEHALF OF THE PARTIES
16. Sh. Kunal Manav, Ld. counsel for the complainant submitted that the complainant has been able to prove all the pre- requisites of Section 138 NI Act against the accused and accused has failed to rebut the presumption u/s. 138 NI Act. Ld. counsel has prayed that the accused be convicted of the offence u/s. 138 NI Act.
17. Per contra, Sh. B. K. Roy, Ld. Counsel for the accused has argued that there is no material on record to show that the agreement Ex. CW-1/2 was further extended by any period and that the cheque in question was given as a security at the date of entering into the agreement. It is further argued that the aforesaid cheque was to be returned as the accused company did not have any bank account and the cheque was issued by accused no. 4 from his personal bank account. It is further CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 15 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:14:08 +0530 argued that accused no. 4 had already resigned before the presentation of cheque by the complainant. It is further submitted that the good returned by the accused company was not adjusted by the complainant company before presenting the cheque in question. Ld. Counsel has prayed that the accused company and the accused persons be acquitted for the offence alleged against them.
POINTS OF DETERMINATION
18. The following points of determination arise in the present case:
A. Whether the complainant has successfully proven the facts which would raise the presumption u/s. 118 r/w Section 139 of NI Act by proving that the cheque in question bears the /signature of the accused?
B. If yes, whether the accused has been successful in raising a probable defence?
THE APPLICABLE LAW
19. Before appreciating the facts of the case in detail for the purpose of decision, let relevant position of law be discussed first. Now, Section 138 Negotiable Instrument Act provides as under:
Section 138.- Dishonour of cheque for insufficiency, etc., of funds in the account.- Where any cheque drawn by a CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 16 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:14:14 +0530 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 made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine 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 date on which it is 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 fifteen 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.CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 17 of 29
Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:14:21 +0530 It is well settled position of law that to constitute an offence under S.138 N.I. Act, the following ingredients are required to be fulfilled: (1) drawing of the cheque by a person on an account maintained by him with a banker, for payment to another person from out of that account for discharge in whole/part any debt or liability; (2) cheque has been presented to the bank within a period of six months (now three months) from the date on which it is drawn or within the period of its validity whichever is earlier; (3) returning the cheque unpaid by the drawee bank for want of sufficient funds to the credit of the drawer or any arrangement with the banker to pay the sum covered by the cheque, (4) giving notice in writing to the drawer of the cheque within 30 days of the receipt of information by the payee from the bank regarding the return of the cheque as unpaid demanding payment of the cheque amount, (5) failure of the drawer to make payment to the payee or the holder in due course of the cheque, of the amount covered by the cheque within 15 days of the receipt of the notice. Being cumulative, it is only when all the ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the N I Act.
The Act raises two presumptions in favour of the holder of the cheque i.e. Complainant in the present case; firstly, in regard to the passing of consideration as contained in Section 118 (a) therein and, secondly, a presumption under Section 139, that the holder of cheque receiving the same of CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 18 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:14:27 +0530 the nature referred to in Section 138 for discharge, in whole or in part, of any debt or other liability. Analysing all the concerned provisions of law and various pronouncements in this regard, the Hon'ble Apex Court in Basalingappa v. Mudibasappa, AIR 2019 SC 1983, noted at para 23 as follows [Bharat Barrel and Drum Manufacturing Company v. Amin Chand Pyarelal, (1999) 3 SCC 35; M.S. Narayana Menon alias Mani v. State of Kerala and another, (2006) 6 SCC 39; Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54; Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513; Rangappa v. Sri Mohan, (2010) 11 SCC 441 referred]:
(i) Once the execution of cheque is admitted, Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
(ii) The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities.
(iii) To rebut the presumption, it is open for the accused to rely on evidence led by him or accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 19 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:14:52 +0530 circumstances upon which they rely.
(iv) That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposes an evidentiary burden and not a persuasive burden.
(v) It is not necessary for the accused to come in the witness box to support his defence.
To put in nutshell, the law regarding the presumption for the offence under Section 138 N.I. Act, is that the presumptions under Sections 118(a) and 139 have to be compulsorily raised as soon as execution of cheque by accused is admitted or proved by the complainant and thereafter burden is shifted upon the accused to prove otherwise. These presumptions shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability etc. The onus to prove the issuance of the cheque lies upon the complainant, and the same has to be proved beyond reasonable doubt, unless the accused admits the same. Once the issuance of cheque is established, either by admission or by positive evidence, the presumption under Section 139 of the Negotiable Instruments Act, 1881 arises. We can summarize the general principles in the following way:
Onus of proof: Section 139 of the Negotiable Instruments Act, 1881 states that it shall be presumed, unless the contrary is proved that the holder of a cheque received the cheque, of the nature referred to in Section 138, CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 20 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:15:10 +0530 for the discharge, in whole or in part, of any debt or other liability. Therefore, here the onus shifts upon the accused to prove the nonexistence of debt or other liability. Section 139 of the N.I. Act uses the word "shall presume", which means that the presumption under Section 139 is rebuttable. Standard of proof: The standard of proof required to rebut the presumption under Section 139 is that of "preponderance of probabilities". Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or other liability, the onus shifts back to the complainant to prove by way of evidence, beyond reasonable doubt, that the cheque in question was issued by the accused in discharge, whole or in part, of any debt or other liability, and now the presumptions under Section 118 (a) and Section 139 will not come to the aid of the complainant.
Mode of Proof: The accused may adduce direct evidence to prove that the cheque in question was not supported by consideration, and that there was no debt or liability to be discharged by him. However, the Court need not insist in every case that the accused should prove the nonexistence of the 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 a bare denial of passing of 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. To disprove the presumptions, the accused should bring on CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 21 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:15:16 +0530 record such facts and circumstances upon the consideration of which, the Court may either believe that the consideration and debt did not exist, or their nonexistence was so probable that a prudent man would, under circumstances of the case, act upon the plea that they did not exist. As discussed above, from the legal provisions and the law laid down in various judgments, it can be safely gathered that it is for the accused to rebut the presumptions. He can do so by cross examining the complainant, leading defence evidence, thereby demolishing the case of the complainant. It is amply clear that the accused does not need to discharge his or her liability beyond the shadow of reasonable doubt. He just needs to create holes in the case set out by the complainant. Accused can say that the version brought forth by the complainant is inherently unbelievable and therefore the prosecution cannot stand. In this situation the accused has nothing to do except to point inherent inconsistency in the version of the complainant or the accused can give his version of the story and say that on the basis of his version the story of the complainant cannot be believed.
FINDINGS OF THE COURT Points of determination number A:
20. The accused no. 4 Mr. Santosh Teli had during the trial has neither disputed that the cheque in question i.e., Ex.CW1/3 was drawn on an account maintained by him nor the signature upon CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 22 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:15:22 +0530 the same does not belong to him. Once the signature upon the cheque in question has been admitted by the accused no. 4 either expressly or impliedly, the presumption u/s. 139 NI Act becomes operative in favour of the complainant. In another words, it is presumed that the holder of a cheque received the cheque of the nature, as mentioned in Section 138 NI Act, for the discharge, in whole or in part, of any debt or other liability.
21. Accordingly, the point of determination number A is decided in the affirmative only qua accused no. 4 only.
Points of determination number B:
22. Once the presumption is raised, the burden of proof shifts upon the accused to prove otherwise. It is trite law that the accused does not need to necessarily lead positive evidence in his or her favour, she can shift the said burden by blowing holes in the story of the complainant. Reliance is placed upon the judgment of Hon'ble Apex Court passed in Bharat Barrel and Drum Vs. Amin Chand Pyarelal (1999) 3 SCC 35. It is further pertinent to note that the standard of proof required to rebut the presumption u/s.139 NI Act is that of "preponderance of probabilities" and at the same time, the complainant is required to prove its case beyond the shadow of reasonable doubt.
23. Coming to the facts of the present case, at the onset it is crucial to mention that accused no. 1 company has been made an accused in the present case and accused no. 2 and 3 have been arraigned as an accused persons in the present case in the CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 23 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:15:27 +0530 capacity of directors in the accused no. 1 company under section 141 NI Act.
24. Section 141 NI Act is hereby reproduced for the sake of convenience:
"141. Offences by companies. --
(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub- section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:
Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 24 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:15:32 +0530 attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.--
For the purposes of this section,--
(a) "company" means anybody corporate and includes a firm or other association of individuals, and
(b) "director", in relation to a firm, means a partner in the firm."
25. Therefore, it is clear from the reading of section 141 that the company is the primary offender under section 138 NI Act. In another words, it is imperative that the cheque in question must have been drawn on the bank account opened in the name of the accused company and it must have been signed by its authorised signatory. It is only when the primary offender is the company, then only its directors can be held guilty, if other conditions are satisfied. It is clear from the words "If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly."
26. In the present case, the cheque in question has been drawn on CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 25 of 29 Digitally signed by RISHABH TANWAR RISHABH Date:
TANWAR 2024.04.26
14:15:43
+0530
the bank account maintained by the accused no. 4 in his personal capacity. The accused persons have been categorically taking this defence throughout the trial that the accused no. 4 had given the cheque in question in his personal capacity and no suggestion was even put to accused no. 4 by the complainant in his cross-examination that the cheque in question does not belong to him but it has been drawn on the bank account maintained by the accused company.
27. Therefore, the complainant company has miserably failed to prove the prerequisites of section 141 NI Act. Therefore accused no. 1 company as well as accused no. 2 and 3 are liable to be acquitted on this ground itself and no further discussion is required as it would be a futile exercise, as the fundamental requirement has not been fulfilled in the present case.
28. As far as accused no. 4, he had examined himself as a witness in the present case as DW-1. He deposed that he had resigned from the position of the director of the accused company on 01.04.2011, that is before the date of dishonour of the cheque in question on 23.02.2013. He has proved the same with the help of the document Ex. DW-1/1. However, this defence of the accused no. 4 is not tenable as it has been already discussed above that the accused no. 4 now stands in his personal capacity and not as the director of the accused company, as the cheque in question has been issued by him in his personal capacity.
29. Now it is pertinent to mention that the gist of the defence of the accused no. 4 is that certain goods were returned to the complainant company which has not been accounted and once CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 26 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:15:50 +0530 accounted for, the liability would have been lesser the amount of cheque in question. Admittedly it is the case of the complainant in a nut shell that they used to provide décor goods to the accused company for sale from their showroom and in this regard, a liability of Rs. 22,32,707/- had arisen against the accused company, after factoring in the goods returned worth Rs. 06,96,654/-. Admittedly no ledger account was filed along with the complaint and the same was brought on record by CW- 1 in his cross-examination as Ex. CW-1/D2 which matches with the ledger account brought by the accused no. 4 in his examination as Ex.DW-1/2. As per the same, as on 01.04.2013, the outstanding liability of the accused company was shown to be Rs. 10,53,778/-. When confronted with the same, CW-1 had admitted that the amount of Rs. 29,16,741/-, as stated in his evidence by way of affidavit, is not mentioned in the aforesaid ledger account.
30. Furthermore, accused no. 4 in his cross-examination had brought a memorandum of understanding dated 15.12.2012 (Ex. DW-1/C3) bearing the stamp of the complainant company, wherein it is stated that the total liability of the accused company (referred to as 'business associate') was Rs. 10,64,543/-. The only suggestion that was given by the Ld. Counsel for the complainant was that it was forged and fabricated, however the evidential value of the document has not been debilitated by the aforesaid suggestion. Therefore, as per the record brought in evidence during the trial, the accused no. 4 has been able to show that the liability on his part on the date of drawing of the cheque as well as on the date of its CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 27 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:15:55 +0530 presentation was not Rs. 15,00,000/- as alleged by the complainant.
31. Furthermore, it is also pertinent to note that it is alleged by CW- 1 in his evidence by way of affidavit that the accused no. 2 had given the cheque in question for an amount of Rs. 15,00,000/- towards part payment of the aforesaid liability. The accused no. 4 has, on the contrary, argued that it was a blank cheque given as security at the time of entering the agreement dated 21.09.2010 (Ex. CW-1/2). The defence of the accused no. 4 gains weight as clause 6 (a) of the aforesaid agreement reads that:
"Against the above Exposure Limit, the business associate shall make initial payment by way of Rs. 15 Lacs by Account Payee Cheque(s)/ Demand Draft favouring the company and Rs. 15 Lacs (Rupees Fifteen Lacs) by way of post- dated cheque(s) or bank guarantee."
32. It is also pertinent to note that CW-1 was confronted with certain documents (Mark CW-1/D3) Colly., which contained a copy of the exact same cheque as the cheque in question bearing no.. 000027, however in the copy of the same, date of the cheque is not mentioned, which shows that the cheque was deliberately left undated and the same has been filled by the complainant company, who presented the same thereafter. It is also pertinent to note that since the amount on the same had already been filled, the complainant could not have filled the total liability amount as alleged by CW-1 in his evidence by of affidavit. Be that as it may, as this court has already held above CT Cases 471892/2016 Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 28 of 29 Digitally signed by RISHABH RISHABH TANWAR TANWAR Date:
2024.04.26 14:16:02 +0530 that the accused has been able to raise a plausible doubt by demonstrating that the liability on part of accused no. 4 on the date of drawing of the cheque as well as on the date of its presentation was not Rs. 15,00,000/- as alleged by the complainant.
33. Therefore, the accused no. 4 has been able to rebut the presumption under section 139 NI Act in the present case.
CONCLUSION
34. In view of the aforesaid discussion, the accused no. 1 company M/s Sairaj Artifact Pvt. Ltd., accused no. 2 Rajesh Ramesh Kalungtkar, accused no. 3 Ms. Mahesh Ulhas Teli and accused no. 4 Mr. Santosh Mistry are held 'not guilty' and accordingly accused company as well as the accused persons are hereby acquitted of of the offence under section 138 NI Act.
35. This judgment contains 29 pages. This judgment has been pronounced by the undersigned in the open court and each page bears the signatures of the undersigned.
36. Let a copy of the judgment be uploaded on the official website of District Courts, Saket forthwith.
Digitally
signed by
RISHABH
RISHABH TANWAR
Announced in the open court TANWAR Date:
2024.04.26
on this Court on 26th Day of April 2024 14:16:16
+0530
(Rishabh Tanwar)
MM (NI Act)-07/South,
Saket District Court
CT Cases 471892/2016
Dolphin Mart Vs Ms Sairaj Artifacts Pvt Ltd Page 29 of 29