Delhi District Court
Indiabulls Financial Services Ltd vs Harbhajan Singh on 30 June, 2012
IN THE COURT OF SH.NAVJEET BUDHIRAJA, METROPOLITAN MAGISTRATE,
SPECIAL COURT06, DWARKA COURTS, NEW DELHI.
INDIABULLS FINANCIAL SERVICES LTD.
VERSUS
HARBHAJAN SINGH
P.S.: CONNAUGHT PLACE
U/S: 138 NEGOTIABLE INSTRUMENTS ACT
1. Serial No./CC No. of the case : 26847/10
2. Name of the complainant : Indiabulls Financial Services Ltd.
(Through its Authorized
Representative)
Registered Office at F60, Second
Floor, Malhotra Building, Connaught
Place,
New Delhi110070.
3. Date of institution : 20.03.2010
4. Name of the accused, his : Harbhajan Singh
parentage and residence 106 Ground Floor Kailash Hills,
East of Kailash Delhi;
Delhi110065
Also At:
Basement Floor 106, Kailash Hills,
East of Kailash Delhi;
Delhi110065
5. Date when judgment was : 08.06.2012
reserved
6. Date when judgment was : 30.06.2012
CC No. 26847/10 Page no.1 of 30
pronounced
7. Offence complained of and : Section 138 Negotiable Instruments
proved
Act
8. Plea of accused : Pleaded not guilty and claimed trial
9. Final Judgment : Accused is acquitted for the offence
under Section 138 Negotiable
Instruments Act.
:J U D G M E N T:
1 Vide this judgment, I shall decide the present complaint filed by the
complainant Indiabulls Financial Services Ltd. under Section 138 of Negotiable
Instruments Act (hereinafter referred to as NI Act) against the accused Harbhajan
Singh.
2 Factual matrix of the complaint is that the M/s Indiabulls Credit
Services Ltd., a Company incorporate under the provision of Companies Act,
1956(hereinafter referred to as the "Former Company"), amalgated into M/s
Indiabulls Financial Services Ltd.(hereinafter referred to as the "Complainant
Company") under a Scheme of Arrangement, duly sanctioned by the Hon'ble High
Court of Delhi, as per the provisions of the Companies Act, 1956 having its
registered office at New Delhi. It is averred that accused approached the Former
Company and requested PL Plus loan and was given a loan for a sum of
Rs.7,87,500/ under the scheme of PL Plus vide loan account number S000170754
CC No. 26847/10 Page no.2 of 30
was disbursed in favour of the accused.It is further averred that accused defaulted
in paying the installments regularly and then in discharge of his legal liability issued
the cheque bearing number 941292 dt. 03.08.2009 for Rs.30,894/ drawn on
Oriental Bank of Commerce. The aforesaid cheque when presented by former
company for encashment returned unpaid with the remarks "Insufficient Funds" vide
memo dt. 31.12.2009. Thereafter, legal notice dt. 27.01.2010 was sent to the
accused through Speed Post and Courier on 28.01.2010 calling upon the accused to
make the payment of the cheque amount within the stipulated time period.But
accused failed to pay the same thereby committing offence under Section 138 of
Negotiable Instrument Act, hence the present complaint.
3 After taking cognizance of the offence summons were issued to the
accused post which he entered appearance and was admitted to bail on 06.09.2010.
Thereafter, notice under Section 251 Cr.P.C encompassing all the accusations
against the accused was served upon him to which he pleaded not guilty and
intended to compromise the matter but later on the compromise fell through and
eventually matter was proceeded further.
4 In complainant's evidence complainant got examined Sh. Mahesh
Kumar, Authorized Representative (hereinafter referred as "AR") for the
complainant as CW1 who reiterated the facts of the complaint by tendering his
evidence by way of affidavit which is Ex.CW1/I1. Other documents relied upon by
CW1 are Incorporation certificate Ex. CW1/A, power of attorney Ex.CW1/B1,
cheques Ex.CW1/C, returning memo Ex.CW1/D, legal notice Ex.CW1/E, postal
CC No. 26847/10 Page no.3 of 30
receipts are Ex.CW1/F1 to Ex.CW1/G and complaint is Ex. CW1/H.In cross
examination CW1 stated that the present cheque was issued by the accused
towards his scheduled EMI of Rs.30,892/.He denied the suggestion that the
present cheque was not towards the EMI and that the present cheque was taken as
blank from the accused for security purpose.He further denied that accused had
given 8 blank cheques for security purpose.He further stated that the present
cheque was not handed over by the accused to the complainant in his presence and
the same was not filled in his presence.He further stated that the present cheque
was the post dated cheque given by the accused, since the mode of payment of the
loan was through PDC. He further stated that as per the statement of account
Ex.CW1/J, PDC cheque for a sum of Rs.30892/ was cleared in favour of the
complainant as EMI of the accused.He voluntarily stated that the excess amount if
any was added to the EMI's of the borrower. He further stated that the fact of
excess amount was not mentioned in the complaint.He admitted that there was no
installment of Rs.30894/ but volunteered that in fact the EMI amount was Rs.
30892.He admitted that the cheque in question was presented for encashment on
30.12.2009.He denied the suggestion that the statement of account Ex.CW1/J was
forged and fabricated document.He admitted that the said statement of account
was neither signed nor stamped. He further stated that he can produce the attested
copy of the same.On 03.05.2012, attested copy of the statement of account was
filed which was Ex.CW1/S(colly) and loan application form alongwith loan
agreement was Ex. CW1/L (colly) (OSR). He denied the suggestion that the
cheque in question was not post dated cheque. He admitted that in his account
statement Ex. CW1/S (colly) the date of depositing the cheque in question was
CC No. 26847/10 Page no.4 of 30
16.01.2010 and that he cannot say as to how come when the cheque was presented
on 16.01.2010 and the returning memo was dated 31.12.2009.Counsel for the
accused questioned him that statement of account Ex.CW1/S was fraught with
irregularities and is forged and fabricated to which he answered that same was the
matter of record.He denied the suggestion that despite knowing that statement of
account was forged and fabricated still he filed the same on record. He voluntarily
stated that account statement was prepared by account department and therefore
they were the best person to explain it.He admitted that the mode of repayment of
the installment was ECS.He further stated that he did not know how many PDCs
were given by the accused and also did not know when the cheque in question was
given by the accused as the same was given to the collection department.He further
stated that he got to know from company records that the cheque in question was
PDC.He further stated that he cannot tell anything about the company record as
same was the province of the collection department.He denied the suggestion that
in the present complaint material facts have been suppressed willfully.Lastly, he
denied the suggestion that accused was not liable to pay the cheque
amount.Complainant's evidence got closed vide order dt. 03.05.2012.
5 Complainant's evidence was followed by Statement of Accused u/s
313 Cr.PC r/w 281 Cr.PC, wherein accused admitted to have availed a loan of Rs.
7,87,500/ from the complainant. Regarding the issuance of the cheque in question,
he stated the cheque in question bears his signature but he had neither filled the
date nor the amount or the name of the payee and the cheque was given for
security purpose at the time of availing the loan.Accused further stated that he did
CC No. 26847/10 Page no.5 of 30
not receive any legal demand notice from the complainant and his residential
address is 106 ground floor, Kailash Hill, East of Kailash, Delhi65 where he has
been residing for the last 22 yrs and 106 basement floor, Kailash Hill, East of
Kailash, Delhi65 was his business address.Lastly, he stated that he wanted to lead
defence evidence but later he submitted that he did not want to lead defence
evidence and the same was closed vide order dated 23.05.2012.Thereafter, matter
got fixed for final arguments.
6 Learned counsel for complainant addressed his final arguments at
length.Counsel for the accused tendered written submissions on behalf of the
accused.Before appreciating the evidences and arguments of both the parties, it
would be appropriate to advert to the relevant provisions of N.I Act.
Section 138 of N.I Act reads as under
138 Dishonour of cheque for insufficiency, etc., of funds
in the account where any cheque drawn by a person on
an account maintained by him with a banker for payment
of any amount of money to another person from out of
that account for the discharge, in whole or in part, of any
debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to the
credit of that account is insufficient to honour the cheque
or that it exceeds the amount arranged to be paid from
that account by an agreement make with that bank, such
person shall be deemed to have committed an offence
and shall, without prejudice to any other provision of this
Act, be punished with imprisonment for a term which
may extend to twice the amount of the cheque or with
both.
Provided that nothing contained in this section shall
CC No. 26847/10 Page no.6 of 30
apply unless
(a) The cheque has been presented to the bank within a
period of six months from the date on which it was drawn
or within the period of its validity, whichever is earlier.
(b) The payee or the holder in due course of the cheque,
as the case may be, makes a demand for the payment of
the said amount of money by giving a notice, in writing,
to the drawer of the cheque, within thirty days of the
receipt of information by him from the bank regarding the
return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment
of the said amount of money to the payee or as the case
may be, to the holder in due course of the cheque, within
15 days of the receipt of the said notice.
Explanation - For the purposes of this section, "debt or
other liability" means a legally enforceable debt or other
liability.
7 Section 138 of the NI Act has three ingredients, viz., (i) that there is a legally
enforceable debt; (ii) that the cheque was drawn from the account of bank for
discharge in whole or in part of any debt or other liability which pre supposes a
legally enforeceable debt; and (iii) that the cheque so issued had been returned due
to insufficiency of funds. The proviso appended to the said section provides for
compliance of legal requirements before a complaint petition can be acted upon by
a court of law.
8 I would now embark upon the evidences adduced and the arguments
advanced by both the parties.
CC No. 26847/10 Page no.7 of 30
9 Learned counsel for the complainant has contended that accused had
taken loan of Rs7,87,500/ from the complainant which was to be repaid in
installments but accused defaulted in paying his installments on time and then
issued cheque in question towards monthly installment which got dishonoured.It is
further contended that accused in his statement under section 313 Cr.P.C has
admitted that loan for a sum of Rs7,87,500/ was availed by him and also admitted
his signature on the cheque. It is further contended that although accused has
stated that cheque in question was issued as blank signed for security purpose but
the same has not been proved and accused has also failed to rebut the presumption
under section 118 and 139 of N.I Act which is in favour of the complainant.
10 Learned counsel for complainant reiterated the facts as are mentioned
in the complaint and also contended that accused has failed to lead any evidence to
prove that cheque in question was a blank signed security cheque.It is also
contended that cheque was an EMI cheque and accused has also failed to rebut the
presumptions under section 118 and 139 of N.I Act in favour of the complainant. In
retort, learned counsel for the accused has contended that the cheque was a blank
signed security cheque given at the time of the loan which has been misused by the
complainant.It is further contended that the statement of account filed by the
complainant is forged and fabricated and hence inadmissible and same is the case
with return memo showing the factum of dishonour which is neither signed nor
stamped hence no offence is made out under section 138 of N.I Act.Counsel for the
accused also pointed out in his written submissions certain infirmities in the cross
CC No. 26847/10 Page no.8 of 30
examination of the complainant.
11 Before deliberating upon the submission of learned counsels, it will be
useful to refer to the relevant paragraphs of the Judgment of the Apex Court in
Krishna Janardhan Bhat v. Dattatraya G. Hegde (1) Apex Court Judgments 412
SC. Para 31 reads as under...
"31. The courts below, as notice hereinbefore,
proceeded on the basis that section 139 raises a
presumption in regard to existence of a debt also. The
courts below, in our opinion, committed a serious error
in proceeding on the basis that for proving the defence
the accused is required to step into the witness box and
unless he does so he would not be discharging his
burden. Such an approach on the part of the courts, we
feel, is not correct" (Emphasis added)
12 The Apex Court thus reiterated well established legal position that for
rebutting the presumption under section 139 of the said Act, it is not necessary in
every case for the accused to step into the witness box. The Apex Court held that
the standard of proof on the part of the accused and that of prosecution to prove a
case is different. The prosecution has to prove the guilt of an accused beyond
reasonable doubt, but the standard of proof so as to prove a defence is
"preponderance of probability". Inference of preponderance of probabilities can be
drawn even by reference to circumstances. In paragraph 44 the Apex Court
observed thus :
"The presumption of innocence is a human right (see
Narendra Singh v. State of M.P., Ranjitsing
Brahmajeetsing Sharma V. State of Maharashtra and
CC No. 26847/10 Page no.9 of 30
Rajesh Rajan Yadav V. CBI) Article 6 (2) of the
European Convention on Human Rights provides :
"Everyone charged with a criminal offence shall
be presumed innocent until proved guilty according to
law." Although, India is not bound by the aforementioned
convention and as such it may not be necessary like the
countries forming European countries to bring common
law into land with the Convention, a balancing of the
accused's rights and the interest of the society is
required to be taken into consideration. In India,
however, subject to the statutory interdicts, the said
principle forms the basis of criminal jurisprudence. For
the aforementioned purpose the nature of the offence,
seriousness as also gravity thereof may be taken into
consideration. The courts must be on guard to see that
merely on the application of presumption as
contemplated under section 139 of the Negotiable
Instruments Act, the same may not lead to injustice or
mistaken conviction........." (Emphasis added).
In paragraph 45 the Apex Court held thus:
"45. We are not oblivious of the fact that the said
provision has been inserted to regulate the growing
business, trade, commerce and industrial activities of the
country and the strict liability to promote greater vigilance
in financial matters and to safeguard the faith of the
creditor in the drawer of the cheque which is essential to
the economic life of a developing country like India.
This, however, shall not mean that the courts shall put a
blind eye to the ground realities.Statute mandates raising
of presumption but it stops at that. It does not say how
presumption drawn should be held to have rebutted.
Other important principles of legal jurisprudence,
namely, presumption of innocence as human rights and
the doctrine of reverse burden introduces by section 139
CC No. 26847/10 Page no.10 of 30
should be delicately balanced. Such balancing acts,
indisputably would largely depend upon the factual
matrix of each case, the materials brought on record and
having regard to legal principles governing the same."
(Emphasis added)
13 Thus, what has been held by Apex court is that presumption of
innocence forms part of human rights and therefore the doctrine of reverse burden
introduced by section 139 has to be delicately balanced.
14 Thus, it is amply clear from the above mentioned Judgment of Apex
Court that for proving his case accused need not in every case step into the witness
box to adduce defence evidence. He can rely on the broad improbabilities in the
case of the complainant , the improbabilities in the evidence of the witnesses of the
complainant , the acceptability of suggestions made to the complainant witnesses in
the course of cross examination as also defence evidence if any. So , the
presumption under section 139 of N.I Act need not be rebutted only by leading
defence evidence and the said presumption can be rebutted even on the basis of
the facts elicited in the cross examination of the complainant.
15 Before zeroing in on the contentions of both the parties, let me decide
the validity of the power of attorney (for short POA) of the present AR of the
complainant Sh. Mahesh kumar which is Ex CW1/B1. Before appreciating the same,
let me refer to section 85 of the Evidence Act, 1872 which is as follows:
"85. Presumption as to powers of attorney The Court
shall presume that every document purporting to be a
CC No. 26847/10 Page no.11 of 30
Power of Attorney, and to have been executed before,
authenticated by, notary public, or any Court, Judge,
Magistrate, Indian Consul, or Vice Consul, or
representative of the Central Government, was so
executed and authenticated."
16 The above provision uses the words , notary , execution and
authentication. Now referring to the Advanced Law Lexicon of P. Ramanatha Aiyar,
where the word Notarize is defined as under: "Notarize. To take acknowledgments,
affidavits or depositions, authenticate documents, as a notary public; to swear or
affirm to, before a notary. To attest to the authenticity of (a signature, mark, etc.)"
17 Also referring to the functions of the Notaries as specified in Section 8
of the Notaries Act, 1952 where clause (a) reads as under:
"8. Functions of notaries. (1) A notary may do all or any
of the following acts by virtue of his office, namely: (a)
verify, authenticate, certify or attest the execution of any
instrument;"
18 Now turning to the definition of „authentication‟ under the Advanced
Law Lexicon of P. Ramanatha Aiyar, which reads as under:
"Authentication. 1. Broadly, the act of proving that
something (as a document) is true or genuine, esp. so
that it may be admitted as evidence; the condition of
being so proved (authentication of the handwriting).
2. Specific., the assent to or adoption of a writing as
CC No. 26847/10 Page no.12 of 30
one‟s own. (Black, 7th Edn., 1999)
Authentication is the process of validating the identity of
someone or something (Information Technology)
The act of authenticating.
A process used to confirm the identity of a person or to
prove the integrity of the specific information.
(Information Technology)
19 So from the above, it is clear that there is a statutory presumption
under Section 85 of Evidence Act that the Power of Attorney was executed by the
person by whom it purports to have been executed and the person who executed
the power of attorney was fully competent in this regard. When a seal of the Notary
is put on the document, Section 85 of the Evidence Act comes into play and a
presumption can be raised regarding the genuineness of the seal of the said Notary,
meaning thereby that the said document is presumed to have been attested by a
competent Notary of that country. Mere attestation of POA cannot lead to an
inference that it was executed before the Notary Public. Execution of POA before
the Notary Public and authentication by it is essential condition for valid notarization
under the Notary Act and Evidence Act. The condition of notarization can only be
fulfilled if it was executed before the Notary Public, meaning thereby that execution
and notarization of the POA are on the same date and notarization bears the words
"signed/executed before me". The Stamp of Notary indicating the registration
number need to be affixed by the Notary.
20 In the complaint in hand, complainant witness Sh. Mahesh Kumar has
CC No. 26847/10 Page no.13 of 30
stated in Para 3 of his evidence by way of affidavit that he is authorized for and on
behalf of the complainant Company to file, sign and verify the present complaint by
virtue of power of attorney exhibit CW1/B1.Relevant portion of the said Power of
Attorney is as follows:
" IN WITNESS WHEREOF the Authorized
Representative of the company has executed this Power
of Attorney at New Delhi on 2nd day of November, 2010
pursuant to board resolution dated April 27, 2010."
........................
Vipin Saroha 21 So, it is clear from the above that the said power of attorney was executed by Mr. Vipin Saroha on 2nd day of November 2010 whereas it is shown to be notarized by notary public on 11 November, 2010 which is after the date of execution.So, it appears from this that execution of the said power of attorney was not before the Notary Public and consequently there cannot be proper authentication of the same meaning thereby that presumption under section 85 of Evidence Act cannot be raised.Neither any other witness is examined by the complainant to prove the execution of Power of Attorney in favour of the complainant witness Sh. Mahesh Kumar nor any explanation has been tendered by the complainant with regard to the aforesaid discrepancy. 22 To bolster my observation , I would like to refer to the judgment of the Allahabad High Court in Wali Mohammad Chaudhari & Ors. Vs. Jamal Uddin CC No. 26847/10 Page no.14 of 30 Chaudhari AIR (37) 1950 Allahabad 524, which analyzed Section 85 of the Evidence Act. It was observed that authentication is not merely attestation but something more. Authentication would require a person to have assured himself of the identity of the person who has signed the instrument as well as the fact of execution. It is for this reason that a Power of Attorney bearing the authentication of a Notary Public or an authority mentioned in Section 85 of the Evidence Act is taken as sufficient evidence of the execution of the instrument by the person who appears to be the executant.
23 A reference is also made to the judgment of the Supreme Court in Jugraj Singh & Anr. Vs. Jaswant Singh & Ors. 1970 (2) SCC 386. It was noticed that there was no prescribed form of authentication but reliance was placed in Wali Mohammad Chaudhari case (supra). In that context it was noticed that a proper Power of Attorney duly authenticated as required by law had to be made before the power could be conferred on another person to execute the document or to present it for registration.
24 In Electric Construction & Equipment Company Ltd v. Jagjit Electric Works AIR 1984 Delhi 363, it was held by Delhi High Court that :
"...........It is, therefore, very essential to stress the two ingredients which are contained in Section 85 of the Evidence Act, viz., execution before the Notary Public and the authentication by the Notary Public. The words are "executed before, and authenticated by". Both these CC No. 26847/10 Page no.15 of 30 conditions must be satisfied. It appears that neither condition is satisfied in this case because the common seal was affixed on 27th November, 1973, and there is merely an attestation by a Notary Public on 13th December, 1973. There is no authentication at all. So, Section 85 of the Evidence Act does not apply to raise any presumption in favor of this power of attorney."
25 So, from the foregoing discussion, it is amply clear that complainant witness Sh. Mahesh Kumar does not have a valid power of attorney in his favour to prosecute the present complaint, hence present complaint has to go on this ground. 26 Now embarking upon the next issue on which both the parties are wrangling over that whether the cheque in question was given as blank signed at the time of the loan for security purpose or not.
27 The most important ingredient of the offence under section 138 of N.I Act is that the cheque has to be drawn in discharge of a debt or liability.
Existence of Legally Enforceable Debt or Liability.
It is clear from the provision of section 138 N.I. Act that only after the cheque is drawn to discharge in whole or in part any debt or liability by the accused when presented before the bank was returned on the ground of insufficient fund standing in the credit of the account of the accused or some other reason. The explanation to the above said provision of law clearly tells that to attract an offence under section 138 of N.I.Act there shall be a legally enforceable debt or other liability subsisting on the date of the drawal of the cheque.
CC No. 26847/10 Page no.16 of 30 28 At this juncture, it would be appropriate to refer to the provisions in
Section 118 and 139 of N.I Act. Under Section 118, unless the contrary is proved, it is to be presumed that the Negotiable Instrument (including a cheque) had been made or drawn for consideration. Under section 139 the Court has to presume, unless the contrary was proved, that the holder of the cheque received the cheque for discharge, in whole or in part of a debt or liability. Thus, in complaints under Section 138 the court has to presume that the cheque had been issued for a debt or liability. This presumption is rebuttable.
29 So from the above it is clear that there is an initial presumption in favour of the complainant i.e the holder of the cheque which needs to be rebutted by the accused to prove his stand.In the present complaint, what is to be seen is whether accused had issued cheque in favour of the complainant for a sum of Rs.30,892/ in the manner alleged by the complainant or not. 30 Although, there is a presumption in favour of the holder of the cheque but it is necessary to point out that it cannot be the intention of the legislature that whenever holder of the cheque files a complaint against the drawer of the cheque and if the drawer admits his signature on the cheque then he shall be held liable to the extent of the amount of the cheque by virtue of the said presumption.In my opinion, mere production of the cheque on record and admission of signature on the same by the accused are not sufficient to fasten criminal liability on the accused.Merely stating in the complaint and affidavit that cheque in question was given as EMI for the repayment of the loan will not advance the cause of the CC No. 26847/10 Page no.17 of 30 complainant.It is pertinent to mention that CW1 has at one point of time in his cross examination has stated that mode of repayment of the loan was through Post dated cheque (PDC) and in later part he admitted that mode of repayment was through ECS i.e Electronic Clearing System.Then it is the case of the complainant that cheque in question of Rs30,894/ was issued towards EMI whereas in his cross examination CW1 admitted that there was no installment of Rs30,894/ and infact the installment was Rs30,892/.Regarding the issuance of the cheque, although complainant witness has denied that the cheque was not given blank signed for security purpose but he also admitted that he did not know when the cheque in question was given by the accused as the same was not given in his presence but to the collection department.Complainant has not examined any person from collection department as the witness who could vouchsafe for the alleged handing over of the cheque.So in the light of the aforesaid, it appears that CW1 is waffled as to what was the mode of repayment of the loan and how much was the EMI.All this and the fact that no date/year of handing over of the cheque is mentioned in the complaint further bolsters the stand of the accused that cheque might have been given as blank signed.All these circumstances raise serious doubts on the veracity of the claim of the complainant thereby probablising the stand of the accused and which also go on to show that the cheque in question was not issued in the manner as has been alleged by the complainant and in fact the same might have been issued as blank for security purpose which is subsequently filled up by the complainant.And on this, the law is settled that cheque issued for security purpose will not fall within the purview of section 138 of N.I Act.The proceedings under Section 138 of Negotiable Instrument Act cannot be initiated when a cheque is given CC No. 26847/10 Page no.18 of 30 as security to Banks.Such proceeding can be initiated only when there is a liability.Liability and security has to be distinguished because Section 138 is envisaged only in a case when a person issues a cheque to clear his liability or part of his liability from the account held by him in Bank and only if the said cheque is dishonoured by paying bank.
31 In M.S Narayanan Menon Vs. State of Kerala and Others. 2006 SCC 39 , it has been held by Apex Court that :
".................If the defence is accepted as probable the cheque therefore cannot be held to have been issued in discharge of the debt as for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of section 138 of N.I Act."
32 To bolster my view, I would also like to refer to the judgment of the Bombay High Court in Rama Krishnan Urban Cooperative Credit Society Ltd. Vs. Sh. Rajender Bhagchand Warma, Criminal application no. 898/2009. The pertinent question which was discussed in this case was when a blank cheque is given as security, whether the provisions of 138 will be applicable or not. The court considered the entire issue and held as under :
"It is argued that the cheque drawn must be for the discharge, in whole or in part, of any debt or other liability. So the debt or other liability must be in existence when the cheque, whether blank or post dated was issued. In this case the accused respondent issued the CC No. 26847/10 Page no.19 of 30 cheque in question as security for loan before loan amount was disbursed. So, cheque was not towards any existing debt or liability. In case of loan transaction, borrower is in need of money and therefore he borrows loan amount from some one with understanding that the loan amount would be repaid in lumpsum on a future date or in installments from particular future date onwards periodically, with or without interest. It is not transaction of loan, if the amount is to be repaid the moment it is paid to borrower. So, provisions of Section 138 of the Negotiable Instruments Act are not attracted.
We may consider object and purpose for introducing amendment to the Negotiable Instruments Act, 1981 by Amendment Act, 1988, as stated in the Amendment Act and various authorities to facilitate correct interpretation of the provisions. The object and reasons clause of the bill which introduced the Amending Act of 1988 would show that the new Chapter XVII was incorporated specifically to "enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers.
Thus the object of the amendment and introduction of Chapter XVII in the Negotiable Instruments Act by Act of 1988 was mainly to encourage all major transactions including commercial or business transactions through cheques and to enforce credibility and acceptability of cheques in settlement of liability in general. Encouragement of payment by cheques/credit cards/debit cards rather than by cash is necessary for healthy economy. That also brings in transparency in transactions and discourages creation of black or CC No. 26847/10 Page no.20 of 30 unaccounted money through evasion of taxes or other malpractices. So, provisions like Section 138 of Negotiable Instruments Act are salutary to give reliability, credibility and acceptability of negotiable instruments like cheques in daily life. However, the object was not to provide effective and speedy remedy for recovery of loans. Law makers must not have intended or imagined that money lenders. or banks would obtain blank or post dated cheques while sanctioning/disbursing loans as securities and would use them to make debtors./borrowers to repay loan under threat of prosecution and punishment under Section 138 of the Negotiable Instruments Act. So, it is doubtful if provisions of Section 138 of the Negotiable Instruments Act would be attracted to a case in which a blank or post dated cheque is obtained by a bank or money lender before or while sanctioning or disbursing loan amount as security for the loan.There was no supporting evidence from the side of the complainant as to whether the accounts had been verified. No accounts had been produced by the appellant to prove that liability was subsisting. Only when it is proved that a liability was existing, an offence under Sec. 138 will arise.
33 In fairly recent Judgment of Delhi High Court in Ravi Gupta v. State of Delhi and others 1st March, 2011 para 9 and 10 are relevant which is as follows :
9. Plain reading of the above provision of law shows that criminal liability under Section 138 N.I. Act is attracted only if the dishonoured cheque was issued for the discharge in whole or in part of any existing debt or liability. The Section does not apply to a cheque issued to meet future liability which may arise on happening of some contingency. Thus, it is clear that a postdated CC No. 26847/10 Page no.21 of 30 cheque, if issued for discharge of a debt due, in the event of dishonour, would attract Section 138 of the N.I. Act but a cheque issued not for an existing debt/liability but issued by way of security for meeting some future contingency would not attract Section 138 of the N.I. Act.
10. In the matter of M.S. Narayana Menon @ Mani Vs. State of Kerala & Anr., AIR 2006 (6) SCC 39, the Supreme Court while dealing with the issue, inter alia, observed as under:
"52........If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of section 138 of the Act."
34 As regards the issuance of cheque in question by the accused is concerned, it has been the stand of the accused in cross examination of the complainant and also in his statement under section 313 Cr.p.c that the cheque was issued blank i.e. it bears his signature only and body of the cheque has not been filled by him. It is true that when the cheque in question contained the signature of the account holder, it is for the accused to explain the same, but merely because cheque contained the signature of the account holder or the accused it cannot be said that the same were executed by him. In this case, it is relevant to note that the case advanced by the accused is that the cheque in question was entrusted with the complainant and the cheque contained nothing more than his signature.Going by Section 138 of the NI Act, it can be seen that 'a drawing of cheque' by a person on an account maintained by him with the banker for payment of any amount of money CC No. 26847/10 Page no.22 of 30 to another person from out of that account 'for the discharge', in whole or in part, 'of any debt of other liability' are two important ingredients, especially in the background of this case.In the decision reported in Ch. Birbal Singh vs. Harphool Khan (AIR 1976 Allahabad 23), it was held that execution of documents consists of signing of the document written out, read over and understood and does not consist of merely signing of a blank paper.In another decision reported in Thakurlal v. Ramadhar (1986 ALJ 480), it had been held that mere admission of putting of signature and thumb mark on a blank sheet of paper is not admission of execution of the document. In the present case, accused did not dispute the signature on cheque, but his specific case is that he had entrusted with the complainant blank cheque which contained his signature.Considering the aforesaid facts, I opine that there are suspicious circumstances surrounding the transaction and the stand of the accused that cheque was given blank signed seems to be presumptive. 35 Also, in the case of "Gopal Vs. Tonny Varghese" 2008 (1) Civil Court Cases 642 (Kerela) it has been held that mere proof of signature on cheque is not proof of its execution. In the absence, of any positive evidence regarding the execution of the cheque by the accused, it is to be held that the accused had issued only blank cheque and the same was not executed by him.Simply because the cheque contained the signature of the accused, it cannot be said that the cheque was drawn by the accused as contemplated by Section 138 of the Act. 36 In a recent Judgment of Kerala High Court in C.Santhi v. Mary Sherly 2011(4) RCR Civil 269 Kerala , it has been held that mere production of cheque by CC No. 26847/10 Page no.23 of 30 complainant is not sufficient to prove execution by accused. For successful prosecution of offence under section 138 of N.I Act , complainant must allege and prove that the cheque was drawn or executed by the accused .In the absence of the allegation in the complaint that the cheque was drawn by the accused and in the absence of proof of such fact,an accused cannot be convicted for offence under section 138 of N.I Act.
37 It is pertinent to note that going by the provision namely, Section 138 of the NI Act, it can be seen that the legislature has employed certain words cautiously and not without any meaning. The word employed in Section 138 Viz., "drawn', 'discharge of any debt or other liability' are conveying the message of the legislature, through which we can understand the intention of the legislature. So while interpreting the provisions or the word, the court has to give effect to the intention of legislature. At any stretch of imagination, it cannot be said that putting signature on the blank cheque is equivalent to the word 'drawn' used in Section 138 of the NI Act. Therefore, the word 'drawn' used in Section 138 has to be understood as 'execution of cheque'.
38 A person can be said to have "drawn " a cheque , if he has made , prepared or created a cheque. A cheque is an instrument which is created in confirmity with the requirements of section 6 read with section 5 of the N.I Act. A reading of section 5 and 6 shows that a cheque consists of mainly , two parts. One is , an unconditional order in writing directing the banker to pay a certain sum of money only , or to the order of a certain person or to the bearer of the cheque. The CC No. 26847/10 Page no.24 of 30 second part is the signature of the drawer.
39 When the execution of the cheque is denied by the accused, it is for the complainant to establish the same.In the absence of any positive evidence regarding the execution of the cheque by the accused, it is to be held that the accused had issued only blank cheque and the same was not executed by him. Simply because the cheque contained the signature of the accused, it cannot be said that the cheque was drawn by the accused as contemplated by Section 138 of the NI Act.
40 It is also proper and necessary to point out that the amendment brought in the NI Act, penalizing the dishonour of cheques, to give more sanctity to commercial transactions involving cheques have given way, rather leverage to unscrupulous money lenders to squeeze their debtors through the instrumentality of the court by resorting to prosecution against such debtors on dishonoured cheques which are very often collected in blank form with signature alone as security. True, the maker of the instrument, who signs such a instrument in blank form invites the risk of prosecution and sometimes penal consequences, on inflated claims later incorporated in the instrument without his knowledge and consent.He has taken such risk while signing the instrument in blank form is only a lame excuse and that will not relieve the court the instrumentality of Justice from examining the genuineness of the transaction covered by the instrument. A court is expected to examine whether the transaction covered by the cheque is genuine and bona fide.In a case where the materials produced disclose of suspicious circumstances CC No. 26847/10 Page no.25 of 30 surrounding the transaction unless satisfactory explanation removing such suspicion is tendered by the holder of the instrument no conviction is legally permissible solely banking upon the statutory presumptions. 41 Complainant has also relied upon statement of account Ex CW1/S (Colly) but counsel for the accused has assailed the authenticity of the said statement by pointing out the discrepancy in it.It was pointed out in the cross examination that in the said statement, date of depositing the cheque is mentioned as 16.01.2010 whereas the returning memo is dated 31 December, 2009.To this query, CW1 stated that he cannot say anything about it as the statement is prepared by the accounts department and they are the best person to explain it.Further, perusal of the statement Ex CW1/S shows that the same is only stamped and signed by one person whose designation is only mentioned as authorized signatory. The said statement appears to be computer generated and is not accompanied by the certificate in terms of section 65B of Evidence Act nor any witness is examined by the complainant to prove the authenticity of the said statement. Therefore, the statement of account Ex CW1/S cannot be read in evidence. To fortify my view , I would like to place reliance on the latest Judgment if Kerala High Court in A.M Perumal v. Star Tours and Travels (India) Ltd 2011 (2) , RCR Civil 371 wherein it has been held that electronic record would be admissible in evidence only if the record produced satisfies the conditions laid down under section 65B(2) and contains a certificate as contemplated by section 65B(4) of Evidence Act. A reading of section 65B would be relevant:
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65B.Admissibility of electronic records:
1) Notwithstanding anything contained in this Act,
any information contained in an electronic record which is printed on paper, stored, recorded or copied in optical or magnetic media produced by a computer ( hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
2) The conditions referred to in subsection (1) in respect of a computer output shall be the following namely:
a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purpose of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;
c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and CC No. 26847/10 Page no.27 of 30
d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.
4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say.
a) identifying the electronic record containing the statement and describing the manner in which it was produced;
b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by the computer;
c) dealing with any of the matters to which the conditions mentioned in subsection (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this subsection it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.
42 Going by the evidence on record, I find that complainant has not cared to satisfy the conditions under section 65B(2).Neither ExCW1/S contains a certificate as contemplated under section 65B(4) of Indian Evidence Act nor the person who took out the print copy was examined.In this view of the matter, no CC No. 26847/10 Page no.28 of 30 reliance can be given to statement Ex CW1/S. 43 In the light of the aforesaid narration, I hold that complainant has failed to establish that cheque was drawn by the accused for Rs.30,894/.Complainant has also failed to prove the valid authority in favour of its witness Mahesh Kumar to prosecute the present complaint and statement of account filed by the complainant is also inadmissible in evidence due to want of certificate as envisaged by Section 65B of Evidence Act. Accused has discharged initial onus by placing on record some material evincing that cheque in question was issued as blank for security purpose and not towards the discharge of any debt or liability in the manner as has been alleged by the complainant and therefore, it will not fall within the province of section 138 of N. I Act.
44 As regards the contention of the counsel for the complainant that accused in the present complaint compromised the matter with the complainant and therefore now cannot escape his liability, I am of the view that although the act of compromising the case with the complainant may point towards the guilt of the accused but then we cannot loose sight of the fact that it is a fundamental rule of criminal jurisprudence that in a criminal trial complainant has to stand on its leg and the case of the complainant must fulfill all the ingredients of N.I Act which is not so in the present case therefore the fact that accused once compromised the matter with the complainant will not advance the cause of the complainant.
CC No. 26847/10 Page no.29 of 30 45 Therefore, I hold that complainant had miserably failed to prove
that cheque in question was drawn in discharge of legal enforceable debt or liability which is the bedrock of the complaint case under section 138 and merely because of the admission of signature on the cheque, it cannot be said that the drawing of the cheque was proved. In the facts and circumstances of the case, on appreciation of the evidence and on the basis of materials on the record, I further hold that accused is able to adduce rebuttal evidence by raising a probable defence which creates doubt on the case of the complainant, hence in such a scenario the evidential burden shifts back to the complainant which has not been sufficiently discharged. Hence, issuance of notice demanding payment of the cheque in question does not assume any significance in the light of the aforesaid findings of the court.Accused has proved his stand by preponderance of probabilities by showing that the cheque was given as blank not in discharge of any liability but for security purpose.Therefore, no offence under section 138 of N.I Act is made out against the accused, hence accused Harbhajan Singh stands acquitted. He is set at liberty. Bail Bond stands discharged.
ANNOUNCED IN THE OPEN (NAVJEET BUDHIRAJA)
COURT ON 30.06.2012 METROPOLITAN MAGISTRATE
SPECIAL COURT 06,
DWARKA COURTS, DELHI.
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