M/S Sai Auto Agencies Thr. Its ... vs Hemant Ambadas Bajad
2022 Latest Caselaw 8026 Bom

                                 1                CRI. APPEAL.382-2022 JUDGMENT.odt




      IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                NAGPUR BENCH : NAGPUR


               CRIMINAL APPEAL NO. 382 OF 2022


      M/s Sai Auto Agencies,
      through its partner,
      Dnyandeo s/o Ramdas Rane,
                                                       APPELLANT
      Aged about 53 years,
      Occupation - Business,
      R/o Sainagar, Amravati.

                                 Versus

      Hemant Ambadas Bajad,
      Aged 45 years,                                 RESPONDENT
      Occupation - Broker and Agent,
      R/o. Chandrawati Nagar,
      Amravati, Tahsil & Dist - Amravati.



      Mr. Ritesh N. Badhe Advocate for the Appellant.
      Mr. P.R. Agrawal, Advocate for the Respondent.

                        CORAM : AVINASH G. GHAROTE, J.

Judgment reserved on                 : 22/07/2022
Judgment pronounced on               : 19/08/2022

JUDGMENT

1. Heard Mr. Badhe, learned counsel for the

appellant/original complainant and Mr. Agrawal, learned counsel for

the respondent/original accused. Admit. Heard finally with the

consent of the learned counsels for the rival parties.

2 CRI. APPEAL.382-2022 JUDGMENT.odt

2. The present appeal arises out of the judgment by the

learned Sessions Court in Criminal Appeal No.30/2018 dated

05.01.2022 whereby the judgment dated 18.01.2018 passed by the

learned Chief Judicial Magistrate, convicting the accused for the

offence punishable under Section 138 of the Negotiable Instruments

Act (hereinafter to be referred as the "N.I. Act") and sentencing him

to suffer simple imprisonment for three months and to pay a

compensation of Rs.10,50,000/-, in default to suffer simple

imprisonment for one month, has been set aside on the ground that

since an amount of Rs.3,90,000/- was recovered by the complainant

prior to the issuance of cheque by the accused which is claimed to

have been admitted in his evidence, he was not entitled to present

the cheque, but was liable to return it and take a fresh cheque for the

balance amount and present it thereafter (para 10 page 19/20). The

complainant having not so done it was held that the presumption

under Section 139 of the N.I. Act stood rebutted and therefore, the

accused was entitled to an acquittal which was so ordered.

3. The factual matrix is as under :

(i) The complainant is a dealer, who deals in sale of

tractors. On 19.09.2009 an agreement came to be entered between

the complainant and the accused, (Exh.34 page 86), under the terms 3 CRI. APPEAL.382-2022 JUDGMENT.odt

of which the accused had agreed to sell tractors and take a

commission for such sale. It was further agreed that the commission

would not be included in the price of the tractors but would be

separately chargeable and receivable by the accused directly from the

purchaser and price of the tractor would be remitted by the accused

to the complainant.

(ii) It is in pursuance to this agreement dated 19.09.2009 at

Exh.34, that the accused made multiple transactions of sale of

tractors for the complainant.

(iii) There was accounting in between the complainant and

the accused on 15.06.2011, as a result of which, the accused issued a

letter to the complainant of the same date (Exh.42 page 94), in

which, the accused admitted his liability to the tune of

Rs.14,72,799/- and in pursuance to that issued a cheque bearing

No.215535, dated 16.06.2011 in the aforesaid sum drawn on the

Axis Bank, Pune in favour of the complainant (Exh.44-cheque).

(iv) The said cheque was presented by the complainant to

his bankers for realization, however, by a cheque return memo dated

13.07.2011 issued by the State Bank of India (bankers of the

complainant) it was intimated that the amount could not be realized

on account of the payment having been stopped by the drawer 4 CRI. APPEAL.382-2022 JUDGMENT.odt

(Exh.47 page 99).

(v) On 11.08.2011, a demand notice under Section 138 of

the N.I. Act (Exh.49 page 100) was issued by the complainant.

During the period 13.07.2011 and 11.08.2011, the complainant had

recovered a sum of Rs.40,500/- on 03.08.2011 from a customer

directly (not from the accused) which was fairly disclosed in the

notice under Section 138 of the N.I. Act and it was intimated that the

accused was liable to pay the balance of the cheque amount i.e. less

the amount received by the complainant directly from the customer,

which was being credited to account of the accused.

(vi) By a reply dated 17.09.2011 (Exh.53 page 104), the

liability was denied by the accused.

(vii) The complaint came to be filed on 23.09.2011 (page

52), which also disclosed the receipt of the amount of Rs.40,500/- by

the complainant directly from one of the customers to whom the

accused had sold one of the tractor (para 7 page 55).

(viii) The complainant filed an affidavit and entered into the

witness box. In his examination-in-chief, he has proved the letter

dated 15.06.2011 Exh.42 (page 94), which Mr. Agrawal, learned

counsel for the accused/respondent also does not dispute here too.

                                 5               CRI. APPEAL.382-2022 JUDGMENT.odt




(ix)        The complainant in his cross-examination, made a

further admission that an amount of Rs.3,90,000/- was also

recovered by him, by seizure and sale of a tractor belonging to one

Pramod Sakhare to whom the accused had sold the same.

(x) PW-2 the employee from Kotak Mahendra Finance was

examined to prove the nature of transaction and has stated that upon

the customer giving the margin money to the dealer, which was then

intimated to the company, the process of financing of the tractor, to

the purchaser was completed and the balance amount was credited

directly to the account of the dealer (complainant) or cheque was

issued in the name of dealer.

(xi) The learned trial Court by the judgment dated

18.01.2018 (page 30 to 51) held the accused guilty and convicted

him for the offence under Section 138 of the N.I. Act and sentenced

him as indicated above. A fine of Rs.10,50,000/- was imposed

considering the amounts of Rs.40,500/- and Rs.3,90,000/- claimed

to have been recovered by the complainant from third parties which

he had debited to the account of the accused.

(xii) In appeal, the learned Appellant Court noting that the

amount of Rs.3,90,000/- was received by the complainant prior to

the issuance of the cheque by the appellant/accused, held that there 6 CRI. APPEAL.382-2022 JUDGMENT.odt

was suppression on behalf of the complainant and since the cheque

amount was not recoverable on account of the aforesaid amount

having already been received, set aside the judgment of conviction

by the learned Magistrate, dated 18.01.2018 and acquitted the

accused of the offence under Section 138 of the N.I. Act.

4. Mr. Badhe, learned counsel for the complainant

submits :

(i) That there is no basis for the finding rendered by the

learned Sessions Court that the amount of Rs.3,90,000/- was

recovered by the complainant prior to issuance of the cheque by the

accused as there is no such material on record brought by the

accused either by leading evidence or otherwise.

(ii) The only basis of receipt of such amount by the

complainant is his admission in his cross-examination (page 74)

however, according to him this admission does not contain a date

and therefore, cannot be related to a point of time prior to the

issuance of the cheque itself.

(iii) That apart, the complainant has been fair enough to

make a disclosure of the recovery of Rs.40,500/- on 03.08.2011 after

the dishonour of the cheque on 13.07.2011 and before the issuance 7 CRI. APPEAL.382-2022 JUDGMENT.odt

of the notice of demand dated 11.08.2011, in his notice of demand

itself Exh.49 (page 102) and therefore, was not guilty of any

suppression.

(iv) The reply dated 17.09.2011 (Exh.53 page 104) by the

accused, also did not make any mention of such recovery in case the

same was the position.

(v) Even the complaint filed under section 138 discloses the

receipt of Rs.40,500/- (para 7 page 55) and therefore, the disclosure

has been throughout.

(vi) The recovery of Rs.3,90,000/- has been sometime after

the filing of the complaint and therefore, could not have any effect

upon the proceeding which were already instituted.

(vii) The requirement of Section 138 of the N.I. Act regarding

the constitution of offence, cause of action, demand of the cheque

amount and non payment thereof all stand complied with as a result

of which the offence stood completed on the date of filing of the

complaint.

(viii) There were three occasions for the complainant to have

made a disclosure of recovery of any amount. The first in the notice

of demand (which was accordingly made) ; the second in the 8 CRI. APPEAL.382-2022 JUDGMENT.odt

complaint ; and the third in his affidavit evidence, of any recovery

having been made even after filing of the complaint. He submits that

another occasion was during the course of cross-examination and in

the instant case, the complainant has admitted in the course of his

cross-examination of the recovery of Rs.3,90,000/- from a third

party. He therefore submits that there is absolutely no suppression

whatsoever and the conduct of the complaint has been fair

throughout.

(ix) The ingredients of Section 138 of the N.I. Act having

being fulfilled, the learned Magistrate was fully justified in convicting

the accused and passing the sentence imposed.

(x) The learned Sessions Court was not justified to draw the

inference as is indicated in para 10 of his judgment as the same, ran

contrary to the evidence and material on record. If this was the case,

it was permissible for the accused to lead evidence in defence, by

examining the said Pramod Sakhare whose tractor was seized and

sold by the complainant recovering Rs.3,90,000/- as sale proceeds,

and getting appropriate documents on record regarding the date,

time and recovery, which having not been so done, the admission by

the complainant in his cross-examination of recovery of

Rs.3,90,000/- cannot be related to a point of time prior to the 9 CRI. APPEAL.382-2022 JUDGMENT.odt

issuance of the cheque and the finding in that regard is clearly

unjustified and without any basis whatsoever. The reversal having

been done only on that basis, the same is liable to be set aside and

the judgment of the learned Magistrate is required to be restored.

5. The arguments of Mr. Agrawal, learned counsel for the

accused are as under :

(i) By inviting my attention to Exh.35 dated 27.05.2011

(page 87) which according to him contains the details of total debts

due from the accused he submits that the names of the persons

appearing at Serial Nos.3, 5 and 9 therein, are found in the evidence

of PW-2 and these persons, were given finance by the Kotak

Mahendra Bank which was repaid and therefore the said amounts

were not recoverable.

(ii) Further by inviting my attention to the cross-

examination of the complainant (page 71) which indicates the

nature of the transaction being performed between the complainant

and the accused, he submits that the same would indicate in the light

of evidence of PW-2, that noting was due and payable from the

accused to the complainant, as the amounts were receivable from the

finance company and not from the accused.

                                 10              CRI. APPEAL.382-2022 JUDGMENT.odt




(iii)       That the judgment of the learned Sessions Court is

correct and proper and so far as the finding recorded in para 10 of

the impugned judgment (page 20) that an amount of Rs.3,90,000/-

was received by the complainant prior to the issuance of the cheque

by the accused, he fairly concedes that there is no material either in

the cross examination of the complainant or even otherwise to

indicate the date of recovery of the aforesaid amount.

(iv) Even otherwise, he submits that the amount of

Rs.40,500/- was admittedly received on 03.08.2011 after the

dishonour of the cheque on 13.07.2011 and therefore, the cheque

amount no longer remained something which could be claimed to

have been legally recoverable from the accused and therefore, the

complaint was not maintainable on the basis of the cheque in

question. Reliance is placed on M/s. Alliance Infrastructure Project

Pvt. Ltd Vs. Vinay Mittal 2010 (2) Crimes 672 ; Sunil Todi and Ors.

Vs. State of Gujarat and Anr. Criminal Appeal No.1446 of 2021

decided on 03.12.2021 (para 25).

(v) He also relies upon the following judgments, in addition

to those mentioned above namely : (a) Angu Parameshwari Textiles

Vs. Sri Rajam & Co. Acq. D.C.C. 801, (para 4), (b) Laxmikant D. Naik

Karmali Vs. Santosh V. Naik, 2006(2) Bom.C.R (Cri) 830, (para 19), 11 CRI. APPEAL.382-2022 JUDGMENT.odt

(c) Karekar Finance Pvt. Ltd. Vs. M.N. Bashyam, 2007 All M.R. (Cri.)

3073, (para 8), (d) Joseph Sartho Vs. G. Gopinathan & Anr., (2008)

3 KLJ 784, (para 21), (e) Ramkrishna Urban Co-operative Credit

Society Ltd., Vs. Shri Rajendra Bhagchand Warma, Cri. Appln. No.

898/2009, decided on 16.02.2010, (para 11, 20, 21), (f) Ranjit

Singh Sethi Vs. Abdul Jalil Shaikh Abdulla, 2013 ALL MR (Cri) 2885,

(para 16, 17, 18), (g) Shiju K. Vs. Nalini & Anr., 2016 (2) KLT 517,

(para 10, 11, 12), (h) Lyca Finance Ltd. Vs. State & Anr., 2016 ACD

875, (para 4, 5), (i) Sundaravadanan Proprietor M/s.S.V.M. Auto

Products Vs. M/s. Innoventive Industries Ltd., 2017 (2) MadWN

(Cri) 59, (para 5, 6), (j) M/s.Industrial Fuel Consultants Vs. Shri

Laxman Sharma, 2022 (1) AIR Bom.R (Cri) 34, (para 8, 9, 10),

(k) Triyambak S. Hegde Vs. Sripad, 2022 (1) SCC 742, (para 20,

21).

6. Mr. Badhe, learned counsel for the

appellant/complainant in rebuttal invites my attention, to the finding

rendered by the learned Magistrate to the effect that the amount of

Rs.3,90,000/- was received after filing of the complaint, which

according to him, is based upon a correct appreciation of the

evidence on record and without any other material ought not to have

been digressed from, by the learned Sessions Court. Insofar as the 12 CRI. APPEAL.382-2022 JUDGMENT.odt

contention that the amount of Rs.40,500/- having been received

after the dishonour of the cheque concerned, Mr. Badhe, learned

counsel for the appellant/complainant submits that the liability does

not go away and more so where in the present case, in the notice of

demand at Exh.49 (page 102) dated 11.08.2011 the same was

disclosed and a demand for the balance was made. Reliance was

placed upon Vishnu Bhat Vs. Narayan Bandekar 2008 (1) Mh. L.J.

497 (paras 10, 13, 28) and Hazi Jahangir Molla Vs. Md. Alim Mallick

and Anr 2017 (1) Bank Cases 319 (para 20).

7. The requirements to be satisfied for attracting

Section 138 as well as the presumption under Section 139 of the N.I.

Act, has been spelt out by the Hon'ble Apex Court in Rohitbhai

Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106, as under:

"15. So far the question of existence of basic ingredients for drawing of presumption under Sections 118 and 139 of the NI Act is concerned, apparent it is that the appellant-accused could not deny his signatures on the cheques in question that had been drawn in favour of the complainant on a bank account maintained by the accused for a sum of Rs. 3 lakhs each. The said cheques were presented to the bank concerned within the period of their validity and were returned unpaid for the reason of either the balance being insufficient or 13 CRI. APPEAL.382-2022 JUDGMENT.odt

the account being closed. All the basic ingredients of Section 138 as also of Sections 118 and 139 are apparent on the face of the record. The trial court had also consciously taken note of these facts and had drawn the requisite presumption. Therefore, it is required to be presumed that the cheques in question were drawn for consideration and the holder of the cheques i.e. the complainant received the same in discharge of an existing debt. The onus, therefore, shifts on the appellant-accused to establish a probable defence so as to rebut such a presumption."

"17. On the aspects relating to preponderance of probabilities, the accused has to bring on record such facts and such circumstances which may lead the Court to conclude either that the consideration did not exist or that its non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist. This Court has, time and again, emphasised that though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfil the requirements of rebuttal as envisaged under Sections 118 and 139 of the NI Act. This Court stated the principles in Kumar Exports [Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513 : (2009) 1 SCC (Civ) 629 : (2009) 1 SCC (Cri) 823] as follows : (SCC pp. 520-21, paras 20-

21).

14 CRI. APPEAL.382-2022 JUDGMENT.odt

"20. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the nonexistence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note 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 disprove the non-

existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non- existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from 15 CRI. APPEAL.382-2022 JUDGMENT.odt

adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act."

"21. The accused has also an option to prove the non-existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, therefore, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue."

The aspect of presumption under Section 139 of the N.I.

Act, has been reiterated in Bir Singh v. Mukesh Kumar, (2019) 4 SCC

197, as under:

16 CRI. APPEAL.382-2022 JUDGMENT.odt

"33. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted."

*****

"36. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt."

Thus, what is necessary is to show that

a) the cheque was issued for a legal debt or liability;

b) the cheque was presented during the period of its

validity [sec.138(a)];

c) on such presentation it was dishonored;

17 CRI. APPEAL.382-2022 JUDGMENT.odt

d) a notice of demand was issued within the statutory

period as provided in Section 138 (b)

e) upon service of notice, the demand was not met with

or paid with the time stipulated in Section 138(c).

8. In the instant matter, the issuance of the cheque bearing

No.215535, dated 16.06.2011, by the accused, to the complainant,

which cheque was drawn on the Axis Bank Pune (Exh. 44), is not in

dispute. Its dishonour (Exh. 47) as well as issuance of the notice of

demand (Exh. 49), the reply thereto (Exh.53) are not in dispute. In

the reply at Exh. 53 dated 17.09.2011, the issuance of the cheques

and the signature thereupon by the accused, is not disputed. The

defence which is raised is that the cheque in question alongwith

other cheques were given as a matter of security and were blank

without any dates and amounts. The fact that the accused was a

commission agent for sale of tractors for the complainant is also

admitted. That the accused, also sold tractors for the complainant is

also admitted. The receipt of the letter dated 23.05.2011 (Exh. 36

page 88) and the letter dated 27.05.2011 (Exh. 37/page 89) are

admitted. It was however denied that any liability was admitted and

that the said cheque was issued in discharge of that liability.

18 CRI. APPEAL.382-2022 JUDGMENT.odt

9. The entire matter has therefore has to be construed in

light of the above position. Once the issuance of the cheque and the

signature thereupon is admitted, the presumption under Section 139

of the N.I. Act, is clearly attracted, and therefore, the burden, would

shift upon the accused to show that either by way of cross-

examination or by leading defence evidence, the presumption stood

rebutted. In the instant matter admittedly no defence evidence has

been led.

10. The evidence of the complainant therefore assumes

importance. The complainant, in his evidence has proved a document

namely Exh. 42 (page 94) dated 15.06.2011 which is a

communication issued by the accused, in favour of the complainant.

A perusal of this communication, would indicate, that the accused in

clear and specific terms, has admitted the relationship as indicated in

the complaint. He had also admitted that an amount of

Rs. 14,72,791/- was payable by him to the complainant on account

of sale of tractors and other counts. It also admits the issuance of the

cheque bearing No. 215535 in the aforesaid sum, dated 16.06.2011

drawn on the Axis Bank Ltd. Pune, in discharge of that liability. It

also gives an assurance that in case the cheque is not encashed the

accused would be responsible for the consequences. Exh. 42, the 19 CRI. APPEAL.382-2022 JUDGMENT.odt

letter dated 15.06.2011, further categorically states that the accused

had taken in all 26 tractors from the complainant for the purpose of

selling them on commission, all of which were sold and payment of

12 tractors was made and on account of balance value of 14 tractors

sold by the accused and other counts as indicated therein, the

aforesaid cheque was being issued. The complainant in his evidence

being the recipient of this letter dated 15.06.2011, has proved the

same as Exh. 42.

11. A perusal of the evidence of the complainant, indicates

that in the cross-examination (page 76) a mere suggestion in respect

of Exh. 42 was given that the signature on Exh. 42 was different

from the signature of the accused on Exh. 33, which has been

denied. Apart from that, there is no serious cross-examination of the

complainant vis-a-vis the letter at Exh. 42.

12. The letter dated 15.06.2011 at Exh. 42, by the accused

is preceded by the demand in that regard as indicated by the

communication addressed by the complainant to the accused dated

27.05.2011 Exh. 37 (page 89). The commercial relationship between

the complainant and the accused, is further reflected from the letter

dated 26.02.2010 Exh. 38 (page 90) which has been addressed to

the complainant by the accused. It is thus apparent, that the liability 20 CRI. APPEAL.382-2022 JUDGMENT.odt

of the accused, on the basis of the contents of the documents at

Exhs. 34, 38, 37, and 42, is clearly spelt out.

13. The complainant, in his notice under Section 138 of the

N.I. Act (Exh. 49 page 100) has categorically stated that a sum of

Rs.40,500/-, was received by him from one Prafulla Kale, directly

towards balance amount of sale of a tractor which the accused had

sold to him, the receipt of which payment was after the dishonour of

the cheque in question. This position has further been stated in the

complaint as well as in the affidavit in lieu of the oral evidence. It is

thus apparent that no amounts have been recovered by the

complainant, prior to the presentation of the cheque in question.

That apart the amount of Rs.40,500/- which has been recovered by

the complainant, post dishonor, is not from the accused but from a

third party.

14. Much argument has been advanced by Mr. Agrawal,

learned counsel for the accused, on the point that during the course

of cross-examination, the complainant has admitted to have

recovered a sum of Rs.3,90,000/- which is the fulcrum of the

judgment of the learned Appellate Court. It is, however, material to

note, that perusal of the cross-examination of the complainant

indicates the following statement :

21 CRI. APPEAL.382-2022 JUDGMENT.odt

"It is true that after issuing notice Exh. 49 and receipt of reply Exh. 53, I had received amount from some of the persons. Similarly, I have filed civil case on the basis of the said transaction. It is filed against two persons. It is true that in that civil suit my pleading is that Rs. 14,72,791/- is not outstanding against the accused" (page 70).

and the admission at page 74 which is as under:

"It is true to say that we have seized the tractor of Pramod Sakhare. It is true to say that we have sold the said tractor by auction. We have sold the said tractor for Rs.3,90,000/-. It is true to say that I was required to deduct Rs.3,90,000/- from the cheque amount. It is true to say that I have not deducted the said amount till today.

Q.No.1:- It means that you cannot recover Rs.14,72,799/- from the accused?

Ans.:- Yes. I have to recover amount from accused by deducting Rs.3,90,000/-.

It is true to say that I have not filed pursis to that effect in the said proceeding. It is not true to say that I have not stated this fact in my evidence also. It is true to say that I have not mentioned this fact in my complaint."

Insofar as the first statement is concerned, a copy of the

plaint in Special Civil Suit No.2/2014, M/s. Sai Auto Agencies Vs.

Shri Nitin Manikrao Deshmukh and another, filed on 02/01/2014, in

which the accused is the defendant no.2, has been placed on record 22 CRI. APPEAL.382-2022 JUDGMENT.odt

before the learned Special Court, at Ex.147 (pg.213 of record of Trial

Court), in which the averments as against the accused are as under :

Tractors to various customers. That out of these, the defendant No.2 duly deposited an amount to the tune of Rs.56,34,259/- to the plaintiff by duly calculating all the expenses including VAT, Finance etc. towards the sale of 12 Tractors, and in this regard, there is no dispute or grudge amongst the plaintiff, and the defendant No.2.

That for other remaining 14 Tractors, the customers cost was of Rs.70,57,000/-, and the cost for the agent was of Rs.65,91,147/-. As the amount of consideration was not paid in time, therefore the amount of the interest charged as per the terms and conditions of these agreements, was to the tune of Rs.2,44,279/-, and the amount of VAT, and the transportation was to the tune of Rs.1,14,099/-. That the expenses incurred to avail the finance for 12 Tractors as out of these 14 Tractors, 12 Tractors were purchased on finance, was to the tune of Rs.39,940/-. As such the defendant No.2 was liable to pay an amount to the tune of Rs.69,89,465/- to the plaintiff, and the plaintiff was entitled to receive the said amount to the tune of Rs.69,89,465/- from the defendant No.2. That out of the said amount, the defendant No.2 paid an amount to the tune of Rs.54,91,714/- out of which some amount is paid in Cash and some by D.D. That out of this amount some of the amount was deposited by the defendant No.2 before the stipulated time i.e. before 30 days, therefore an amount to the tune of Rs.12,339/- was credited in the account of defendant No.2 towards interest on the 23 CRI. APPEAL.382-2022 JUDGMENT.odt

deposited amount, and also as out of 14 Tractors, 12 Tractors were purchased on finance, and out of those 12 Tractors, the insurance premium was paid by the Finance company only for 6 Tractors and therefore an amount to the tune of Rs.41,480/- was credited in the account of defendant No.2 against the premium of insurance as the same was given by the Finance company to the plaintiff. That as such, the defendant No.2 paid only an amount to the tune of Rs.55,45,533/- to the plaintiff, and as such the plaintiff still to recover an amount to the tune of Rs.14,43,932/- from the defendant No.2. Not only that the defendant No.2 also taken Rs.3000/- from the plaintiff to purchase the battery, and also the plaintiff paid an amount of Rs.1867/- towards the workshop Bill of the defendant No.2's customers namely Shri Abhyankar. So also, the plaintiff paid an amount of Rs.24,000/- to the defendant No.2 to pay the rent of the shop which situate at Daryapur, Tq. Daryapur, Dist. Amravati, to run the business of defendant No.2. That as such, till June 2011, the plaintiff is in all entitled to recover an amount to the tune of Rs.14,72,799/- from the defendant No.2, and the defendant No.2 was liable to pay an amount to the tune of Rs.14,72,799/- to plaintiff.

That thereafter surprisingly one customer namely Prafulla Kale of defendant No.2, directly came to the plaintiff on 03/08/2011 and deposited an amount of Rs.40,500/- towards the amount due against him, and also one customer namely Shri Pramod Aniruddha Sakhare proposed the plaintiff, that he is availing the loan facility from Bank/finance company, and as he is in dire need, the tractor be delivered to him, and therefore 24 CRI. APPEAL.382-2022 JUDGMENT.odt

considering the demand of the said customer and the request and recommendation from the defendant No.2, the plaintiff allowed the defendant No.2 to hand over the tractor to the said customer Shri Pramod Aniruddha Sakhare. That after the receipt of delivery of said Tractor, the said Shri Pramod Aniruddha Sakhare did not exert to get the loan sanctioned from any of the Bank or Finance company, and thereby the Tractor delivered to said Shri Pramod Aniruddha Sakhare was seized, and further sold to some other person, and thereby an amount to the tune of Rs.3,90,000/- was credited to the account of defendant No.2.

That as such, because of subsequent changes, the plaintiff is in all entitled to recover an amount to the tune of Rs.10,42,299/- from the defendant No.2, and the defendant No.2 is liable to pay an amount to the tune of Rs.10,42,299/- to plaintiff.

7) That it is also necessary to state here that, while working as per the agreements dtd. 10/09/09 & 19/09/09, when the defendants were practically facing the difficulties, thereby to repair the practices, the defendant No.2 by giving letter dtd. 26/02/10 to the plaintiff also made some suggestion for better practice, and the suggestions made by the defendant No.2 were also considered, and the practices to run the business were also repaired.

That, as the defendant No.2 has paid the total amount of consideration towards the sale of 12 Tractors including all the required expenses and etc., thereby the plaintiff by letter dtd. 23/05/11 informed the defendant No.2 about the tractors with all specifications 25 CRI. APPEAL.382-2022 JUDGMENT.odt

including the names of customers whose accounts are closed. So also thereafter by letter dtd. 27/05/11, the plaintiff informed the defendant No.2 that, the amount to the tune of Rs.14,72,799/- is outstanding against the defendant No.2, and the defendant No.2 do deposit the said amount within 8 days. That, to honour the said letter dtd. 27/05/11 given by the plaintiff, the defendant No.2 by letter dtd. 15/06/11 informed the plaintiff that, the defendant No.2 is issuing the cheque bearing No.215535 of Rs.14,72,799/- dtd. 16/06/11 of Axix Bank, Pune, by duly placing the signature of defendant No.2. That thereafter when the plaintiff deposited the said cheque for encashment then, the surprisingly the said cheque returned unpaid with the cheque return memo, and recent mentioned in the Memo is 'Payment Stopped by Drawer'. That because of such act on part of defendant No.2, the plaintiff was surprised. That thereafter the plaintiff issued a notice to the said defendant No.2 on 11/08/11, and the said notice is duly received by the defendant No.2, and the defendant No.2 also sent reply dtd. 19/09/11 to the said notice. That thereby the plaintiff constrained to prefer the Criminal Complaint Case Bearing No.2186/2011, before Hon'ble Criminal Court, i.e. before Hon'ble J.M.F.C. Court No.5, Amravati."

A perusal of the above would indicate that even

considering the letter dated 27/5/2011 at Ex.35, a specific averment

is there in the plaint about the amount of Rs.14,72,791/- being due

and payable by the accused, as against which the plaint itself

discloses the receipt of the amount of Rs.40,500/- from Prafulla Kale 26 CRI. APPEAL.382-2022 JUDGMENT.odt

on 3/8/2011 and the sum of Rs.3,90,000/- by the seizure and sale of

the tractor from Pramod Sakhare. The plaint however does not

disclose any information regarding the date when the tractor of

Pramod Sakhare was seized and sold, resulting in the recovery of

Rs.3,90,000/- from such sale. The letter at Ex.35 dated 27/5/2011

shows an outstanding amount of Rs.4,14,667 from Pramod Sakhare,

whose name figures at serial number 8 in the said letter. This would

indicate that the cheque amount, minus the amount of Rs.40,500/-

as received on 3.8.2011 was receivable from the accused on the date

of filing of the complaint. The said admission thus can be construed

to mean that Rs.14,72,791/- was not outstanding, but something less

was outstanding, on account of the recovery of Rs.40,500/- and/or

Rs.3,90,000/-. The very fact, that the complainant was prosecuting

the compliant, in spite of having filed civil proceedings against the

said two persons, would indicate, that amounts were recoverable.

15. The judgment of the learned Special Court, in para 9

(page 35) though indicates, recognition of the fact that the

complainant had also filed Special Civil Suit No.2/2014 against the

accused for recovery of the outstanding amount, which itself would

indicate, that the liability of the accused was in existence, however

neither the learned Special Court nor the Appellate Court, have gone 27 CRI. APPEAL.382-2022 JUDGMENT.odt

into the averments in Special Civil Suit No.2/2014 at Ex.147, to

consider the context in which such an admission is claimed to have

been made.

16. The above position would therefore clearly indicate, the

existence of a legal liability for which the cheque in question was

issued, as a result whereof the applicability of the presumption under

Section 139 of the N.I. Act, stood justified.

17. That takes me to the contention, that since an amount of

Rs.3,90,000/- was recovered by the complainant, as admitted by him

in his cross-examination, the cheque amount could not be claimed to

be the amount due and payable. At the outset, it would be material

to note, that the admission regarding the recovery of Rs. 3,90,000/-

(page 74) does not indicate when the same was received. The

statement contained in the notice of demand at Exh. 49 (page 100),

would indicate it was not received at that point of time, for the

reason that had it been so received a disclosure to that effect, would

also have been made by the complainant, as was the case in respect

of the recovery of the sum of Rs.40,500/-. The accused in his reply at

Exh.53 dated 17.09.2011, does not say anything about the amount of

Rs.40,500/- claimed to have been recovered by the complainant after

the dishonour of the cheque, which would indicate, that the accused 28 CRI. APPEAL.382-2022 JUDGMENT.odt

was unaware even of that position, much less any claim regarding

recovery of Rs.3,90,000/-. The admission, regarding the recovery of

Rs.3,90,000/- has to be read in consonance with the earlier

admission (page 70) as quoted above in which the complainant has

categorically stated that after issuance of notice at Exh. 39 and

receipt of reply at Exh. 53, he had received amount from some of

the persons. There is no question put to elicit the dates of the receipt

of the said amount of Rs.3,90,000/-. It is a settled position of law,

that the evidence has to be read and appreciated in totality and not

piece-meal by picking up stray statements here and there. Therefore

conjoint reading of the aforesaid two admissions, as quoted above,

would indicate that the recovery of the amount of Rs.3,90,000/- by

the complainant was after the filing of the compliant. There is

absolutely no material on record to justify the observation of the

learned Appellate Court in the impugned judgment (para 10 page

20) that the amount of Rs.3,90,000/- was recovered by the

complainant prior to issuance of cheque by the accused. There is

nothing of that sort in the entire cross-examination of the

complainant. As to how this observation has been made, and on

what basis, is not spelt out. The only admission in this regard is what

has been quoted above and does not indicate the date of recovery of

the aforesaid amount. In this context, since the name of the person 29 CRI. APPEAL.382-2022 JUDGMENT.odt

from whom the same was recovered, namely Mr. Pramod Sakhare,

was known, it was open and permissible for the accused to have

called him as a defense witness with the relevant documents, so as to

substantiate his contention that the amount of Rs.3,90,000/- was

recovered, prior to presentation of the cheque, however for reasons

best known to the accused, this has not been done. This being the

position, there was absolutely no justification, for the learned

Appellate Court to have arrived at such a finding and on its basis

attribute malafides to the complainant and dismiss the complaint by

acquitting the accused on that count. In fact a comparision of the

averments in the complaint which was filed on 29.3.2011 and that of

the plaint in Special Civil Suit No.2/2014, filed on 02.1.2014, would

indicate that the aforesaid admission quoted above, would logically

relate to a time after the filing of the complaint and before the filing

of the suit, and not to a period of time before presentation of the

cheque.

18. The submission of Mr. Agrawal, learned counsel for the

accused that the nature of the transaction as spelt out in the evidence

of the complainant and PW-2, in conjunction with Exh.35 and 36

would indicate that nothing was due and payable is clearly

misconceived. This is so for the reason that Exh.36 (page 88) is a 30 CRI. APPEAL.382-2022 JUDGMENT.odt

communication dated 23.05.2011, addressed to the accused by the

complainant, which indicated that for the 12 sale transactions as

listed therein, undertaken by the accused for the complainant, the

accused had already received his commission and so also nothing

was receivable by the complainant from the accused on account of

those transactions as listed therein. The communication at Exh.35

(page 87) is dated 27.05.2011 and lists 14 transactions, done by the

accused on which account payments were not received by the

complainant. A perusal of Exh.34 (page 86) dated 19.09.2009, the

agreement between the complainant and the accused, would indicate

that though under its terms the accused was entitled to commission,

however term Nos.1 & 2 therein reveal that the delivery of the

tractors was to be taken by the accused at Amravati and those

tractors were to be sold by the accused in the areas of Daryapur,

Anjangaon Surji, Chandur Bazar, Chikhaldara and Dharni and upon

sale of such tractors by the accused, the entire responsibility of its

down payment; finance, bank loan amount and unpaid amounts, was

to be that of the accused, who had also undertaken to make recovery

of unpaid amounts from the customers and to deposit such recovered

amounts on the same day with the complainant at Amravati. It was

also agreed that in case any customer did not pay the value of the

tractor or delayed payment, then the entire responsibility to make 31 CRI. APPEAL.382-2022 JUDGMENT.odt

the recovery within 30 days and make payment was that of the

accused and in case the same was not done, the accused undertook

to pay interest on such unpaid sums @ 16% per annum. It would

thus be apparent that Exh.34, did not contemplate a plain and simple

agreement of commission, but in fact in sum and substance, indicates

a sub-dealership to the accused. Thus under Exh.34, the entire

responsibility of recovery and repayment of the value of the tractors

sold by the accused, was that of the accused, such payment to be

made within 30 days of the sale. Read in the context of Exh.34, the

communication at Exh.35 dated 27.05.2011, merely states that the

amount of Rs.14,72,799/- for sale of the tractors by the accused to

the persons as detailed therein and on other counts was recoverable

from the accused. The communication at Exh. 42, (page 94) is dated

15.06.2011, nearly 18 days after Exh.35, and acknowledges the

liability of the accused to pay the amount of Rs.14,72,799/- for sale

of the tractors by the accused and other amounts, such as advance

paid for purchase of battery (Ex.39, dt.30/11/2009); rent paid of the

Daryapur shop of the accused to the landlord Shri Shridhar Naik of

Rs.24,000/- by cheque (Ex.40, dt.18/8/2010); bill of spares of

Santosh Abhyankar to the account of the accused of Rs.1867/-

(Ex.41, dt.24/6/2010), as stated therein and therefore Exh.35, does

not have any bearing whatsoever upon Exh.42, on which date the 32 CRI. APPEAL.382-2022 JUDGMENT.odt

accused acknowledging his liability has issued the cheque in

question. In fact in the reply by the accused at Exh.53, the accused

admits to have sold 63 tractors. The evidence of PW-2, merely

indicates that the persons named at Sr. No. 3/Sudhir Kokate (Invoice

of Sai Auto- Ex.124, dt.29/3/2010), Sr. No.5/Pandurang Khajone

(Invoice of Sai Auto- Ex.126, dt.27/9/2010) and Sr. No.9/Makrand

Deshmukh (Invoice of Sai Auto-Ex.125, dt.28/9/2010), were granted

finance for purchase of tractors and the finance amount was paid to

the complainant. These persons according to PW-2 had also paid the

margin money to the complainant (EX.68, 71 & 75). The finance

amount was repaid by them, as per their account statement with

Kotak Mahindra Bank (Ex.133, Ex.129 & Ex.131 respectively in

Evidence of P.W.-2) for which NOC was issued to them and therefore

nothing was due and payable by these three persons, considering

which though it is contended that the list at Exh.35 was a fraudulent

list and therefore since nothing was payable thereunder and the

acknowledgment at Exh.42 was a bogus document and did not

depict the correct position, such a contention would not be justifiable

as Ex.35, does not depict that the loan amounts were pending

against these persons and were being claimed, but depicts a different

picture which indicates that only those amounts as shown against

their names respectively i.e. Rs.57,110/-, Rs.1,66,626/- and 33 CRI. APPEAL.382-2022 JUDGMENT.odt

Rs.77,770/- were pending against these persons and there is no

cross examination worth the name to bring out any material on

record as to the non-payability of these amounts, specifically when

Ex.42 in light of Ex.35, admits the liability of the accused. In my

considered opinion, even if the communication at Exh.35 is

discarded, still the acknowledgment of liability executed at Exh.42

(page 94) by the accused does not go away. As already indicated the

cross by the accused on Exh.42 is woefully inadequate, to render any

finding that it was a bogus document, as except for a mere

suggestion as to difference in signature, there is no cross worth the

name. In such circumstances, it cannot be held that nothing was

payable by the accused to the complainant and therefore the cheque

in question was not for the discharge of any legal debt or liability, as

Exh. 42 spells otherwise.

19. The submission by Mr. Agrawal, learned counsel for the

accused that a blank cheque was given as a security, is belied from

Exh.42, which speaks otherwise. Even otherwise, even if it is

presumed that a blank cheque was given, the holder of the cheque,

was entitled to complete the same, by virtue of the provisions as

contained in Section 20 of the N.I. Act which mandates that in such a

case the drawer gives a prima facie authority to the holder thereof to 34 CRI. APPEAL.382-2022 JUDGMENT.odt

make or complete, as the case may be, upon it, a negotiable

instrument, in view of which, in a given case the holder of the

cheque, would be entitled to fill it and present it for encashment.

That however, in the instant matter does not appear to be so in light

of Exh.42.

20. The contention by Mr. Agrawal, learned counsel for the

appellant, that since some amounts were recovered by the

complainant, the cheque amount could not have been said to be the

amount due and payable and therefore, would not be something

towards the discharge of the debt or liability, relying upon

M/s. Alliance Infrastructure Project Pvt. Ltd. (supra), is clearly

misconceived for the reason that the question which fell for

consideration therein was as to what the expression "amount of

money" means in a case where the admitted liability of the drawer of

the cheque gets reduced on account of part payment made by him

after issuing but before the presentation of the cheque in question. In

the instant case, firstly: the payment has not been made by the

accused drawer of the cheque, as the amounts of Rs.40,500/- and

Rs. 3,90,000/-, have not been paid by the accused/drawer of the

cheque, but have been recovered by the complainant from third

parties directly, which is not a disputed position on record and 35 CRI. APPEAL.382-2022 JUDGMENT.odt

secondly: the amounts, have been received after the cheque has been

presented and dishonoured, considering the fact that, the cheque

was presented on 20.06.2011 (page 97) and was dishonoured on

13.07.2011 (Exh. 47 page 99), as against which, the amount of Rs.

40,500/- has been recovered by the complainant on 03.08.2011 from

a third party (para 5 of the further examination in chief of the

complainant at record page 65). The amount of Rs.3,90,000/- as

discussed above, has been recovered from a third party after the

filing of the compliant. Thus nothing out of the cheque amount has

been paid by the accused. The notice of demand dated 11.08.2021,

specifically makes a mention of the recovery of Rs.40,500/- after the

dishonor of the cheque and claims amount, after deducting it. It is

thus apparent, that the question which fell for consideration in M/s.

Alliance Infrastructure Project Pvt. Ltd, and others (supra) was

clearly on a different footing altogether than the position which is

extant in the present matter and therefore M/s. Alliance

Infrastructure Project Pvt. Ltd, and others (supra), does not assist

Mr. Agrawal, learned counsel for the appellant. Lyca Finance Ltd. and

Sundaravadanan (supra) rely upon M/s. Alliance Infrastructure

Project Pvt. Ltd, and others (supra) and therefore for the same

reason would not be applicable.

36 CRI. APPEAL.382-2022 JUDGMENT.odt

20.1. In fact I am in agreement with what has been held in

M/s. Alliance Infrastructure Project Pvt. Ltd. and others (supra) that

in case before the presentation of the cheque, part payment of the

cheque amount is received by the payee/holder of cheque, it is not

permissible for the payee/ holder of cheque, to present the cheque

for realisation, for encashment of the amount as mentioned therein,

as that would not be the amount, then due and payable on the date

of presentation of the cheque and thus such a presentation would not

be for the discharge of a legal debt or liability of the amount as

mentioned in the cheque, for on account of receipt of part cheque

amount the amount stated in the cheque, no longer remains one, in

discharge of a legal debt or liability, as existing on the date of its

presentation.

20.2. What should then be the course of action to be followed

by the holder of the cheque ? Certain provisions of the N.I. Act, being

material are reproduced as under :

"14. Negotiation.--When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute the person the holder thereof, the instrument is said to be negotiated.

15. Indorsement.--When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed 37 CRI. APPEAL.382-2022 JUDGMENT.odt

thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to indorse the same, and is called the "indorser".

20. Inchoate stamped instruments.--Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount; provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.

48. Negotiation by indorsement.--Subject to the provisions of section 58, a promissory note, bill of exchange or cheque payable to order, is negotiable by the holder by indorsement and delivery thereof.

50. Effect of indorsement.--The indorsement of a negotiable instrument followed by delivery transfers to the indorsee the property therein with the right of further negotiation; but the indorsement may, by express words, restrict or exclude such right, or may merely constitute the indorsee an agent to indorse the instrument, or to receive its contents for the indorser, or for some other specified person.

38 CRI. APPEAL.382-2022 JUDGMENT.odt

56. Indorsement for part of sum due.--No writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such amount has been partly paid, a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance."

A conjoint reading of the provisions of Sections 14, 15,

48, 50 and 56 of the N.I. Act, would indicate that it is permissible for

the holder of the negotiable instrument, upon receipt of a part

payment of the negotiable instrument, to make an 'indorsement' of

the balance amount due and payable, on the back/reverse of the

negotiable instrument or on a separate slip annexed to the cheque,

and then to negotiate (Section 14) the negotiable instrument, so

'indorsed', for the balance amount. There is no reason whatsoever,

why such a course of action cannot be followed for in respect of a

cheque, of which a part payment has been received, before its

presentation, on such an indorsement being made, the cheque would

not be valid for the original amount mentioned therein, but for the

indorsed amount and as such can be presented for claiming the

lesser amount as 'indorsed' therein, for otherwise, the holder of the

cheque, would be deprived of the remedy under Section 138 of the 39 CRI. APPEAL.382-2022 JUDGMENT.odt

N.I. Act, as he would not be entitled to present the cheque for the

original amount as that would not be the liability or debt due, on the

date of its presentation, the holder, already having received a part

thereof, before its presentation. Thus when the provisions of the N.I.

Act, themselves contemplate the receipt of part payment, its

'indorsement' on the negotiable instrument and negotiation of the

same for the lesser amount, of a negotiable instrument, which can

then be presented by the transferee, such a course of action, must be

held to be permissible for the holder of the cheque too, as what is

permissible for a transferee of a negotiable instrument, would always

be permissible for the holder of the Cheque/negotiable instrument

too, who is the original holder of the cheque/negotiable instrument.

In such a case, in my considered opinion the correct course of action

would be to make an 'indorsement' on the reverse of the cheque, of

the amount received and the balance due thereafter and the cheque

can then be presented for the balance due as 'indorsed'. Such a

course of action would be in consonance with Section 56 of the N.I.

Act, which permits such a note to be 'indorsed' upon the negotiable

instrument, which is then to be negotiated for the balance due as

'indorsed' thereupon, for the negotiable instrument, upon such

indorsement will become a negotiable instrument of such lesser

amount as 'indorsed'. A notice in pursuance to dishonor of such a 40 CRI. APPEAL.382-2022 JUDGMENT.odt

'note indorsed' negotiable instrument will have to mention the

original amount of the cheque; the amount received, including the

mode/manner of its receipt; the amount 'indorsed' by a note as per

Section 56 of the N.I. Act; and a demand of the 'indorsed' amount,

not the original amount, in which case the presentation, dishonor

and the notice of demand will be considered as legal and valid, so as

to base a prosecution under Section 138 of the N.I. Act, thereupon.

The above position is supported by Joseph Sartho

(supra) in which the learned Division Bench of the Kerala High

Court, in the context of Section 15 and 56 of the N.I. Act, has held as

under :

"11. The above Section envisages any number of indorsement on the reverse of the cheque and if there is not sufficient space to make further indorsement, a slip of paper can be annexed to it, to get over the said difficulty. Section 56 of the Act, which is very relevant in this case, reads as follows:

"Indorsement for part of sum due:-- No writing on a negotiable instrument is valid for the purpose of negotiation is such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such amount has been partly paid a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance"

(Emphasis supplied) 41 CRI. APPEAL.382-2022 JUDGMENT.odt

12. In this case, admittedly, a portion of the amount covered by the cheque was repaid. The same was not indorsed by the drawee on the cheque. In view of the above position, the appellant could not have negotiated that cheque for the full amount. For the very same reason, he also could not have presented it for collection of the full amount. He was entitled to get only the balance amount. Therefore, he must have made an indorsement of the amount received and presented the cheque, to collect the balance amount due.

14. Going by the above provision, a cheque must be for payment of any amount of money to another person for discharging in whole or in part of any debt or other liability. In this case, once part payment was received, the cheque no longer was one for payment of money for discharging in whole or in part of any debt or other liability. In fact, the amount covered by the cheque was admittedly larger than the amount of debt or liability. The whole amount of debt or liability was lesser than the amount represented by the cheque. So, if the cheque for such as amount was dishonoured, the same will not be an offence under Section 138 of the Act. Normally, a penal law has to be interpreted strictly. If there is any vagueness in the law, the benefit of the same should go to the accused. The Apex Court in NEPC Nicon Ltd. v. Magma Leasing Ltd. (supra) and Dalmia Cement (Bharat) Ltd. v. Galaxy Traders and Agencies Ltd. (supra) has not stated anything against the above general principle. What was stated in the facts of those cases was that though Section 138 is a penal statute, the court 42 CRI. APPEAL.382-2022 JUDGMENT.odt

should interpret it, taking into account the legislative intent and purpose, so as to suppress the mischief and advance the remedy. But, in "Rahul Builders" ((2008) 2 SCC 321), the Hon'ble Supreme Court re-stated the settled principle of penal law that a penal provision like Section 138 should be interpreted strictly. In this case, we fee that there is not much scope for interpreting the provisions in the statute.. Going by the plain words of the Section, the cheque presented for encashment should be one for payment in full or part of the debt due. In this case, admittedly, the cheque was for an amount higher than the amount due on the date it was presented for encashment. The law contemplates making of an indorsement by the drawee on the back of the cheque regarding the part payment received. So, we are of the view that the 1st respondent cannot be found guilty of the offence under Section 13 8 of the Act, for not making arrangement to honour the cheque for an amount more than what is due from him. If he had made arrangement for honouring the cheque, he would have to go after the appellant to get back the substantial amount paid by him earlier. Therefore, we find it difficult to subscribe to the view that the accused has committed the offence, as he failed to pay the balance amount, on issuance of notice by the appellant.

19. In India, attachment of a slip of paper to the cheque is statutorily recognized in Section 15 of the Act.

20. The attempt of the appellant to encash the cheque without indorsing the amount already received is perilously bordering dishonesty. It appears, the appellant 43 CRI. APPEAL.382-2022 JUDGMENT.odt

thinks, if some indorsement is made on the reverse of the cheque, it may become invalid. Under this mis - apprehension, the appellant has contended that the drawer of the cheque, by making some payment to the drawee, can make the cheque invalid. With great respect, we may point out that the learned Judge also fell into the very same error in R. Gopikuttan Pillai (supra), while dealing with the contention that part payment will bar the remedy under Section 138. So, the action of the appellant in this case, of presenting the cheque claiming the entire amount, is plainly illegal and the same cannot be the spring board for an action against the 1 st respondent/accused under Section 138 of the Act.

21. We are not referring in detail the other decisions cited, as they are not strictly relevant on the facts of this case. As mentioned earlier, we have no doubt in our mind that for the bouncing of a cheque, which did not represent the amount or part of the amount due to the appellant, the accused cannot be made liable. The reasons given by the learned Judge for taking the contrary view in "R. Gopikuttan Pillai" and the apprehensions voiced by the learned counsel for the appellant concerning part payment, cannot be accepted, in view of the provisions contained in Section 56 read with Section 15 of the Act. If the drawee made indorsement regarding the part payment on the cheque and claimed only the balance amount and if it bounced, the offence under Section 138 would have been made out and the 1st respondent accused would have been liable for punishment. In the absence of any vagueness 44 CRI. APPEAL.382-2022 JUDGMENT.odt

in the provision, we find it difficult to accept any other view. In the result, we overrule the decisions in R. Gopikuttan Pillai v. Sankara Narayanan Nair (Crl.A.No. 270/1997) and Thekkan & Go. v. Anitha (2003 (3) KLT

870). We find nothing wrong with the judgment of the trial court acquitting the 1st respondent. Accordingly, the Criminal Appeal is dismissed. No costs.

(Emphasis supplied)

20.3. In case any part amounts are received post the dishonor,

but prior to the notice of demand, the course contemplated by

Section 56 of the N.I. Act, not being available, the prudent course

would be to secure a fresh negotiable instrument for the balance and

present it for realisation. However, many a times that does not

happen, leaving the payee/holder of the cheque with the original

cheque. Such part payment, at times, could also be mischievous with

the intent to thwart the initiation of legal proceedings on the basis of

the original cheque. In such an eventuality it would be appropriate if

the receipt of the part amounts, post dishonor, is acknowledged in

the notice of demand under Section 138(b) of the N.I. Act, and a

demand for the balance is made and base the complaint thereupon,

coupled with the original cheque, for otherwise, the intent of the

Legislature behind enacting Section 138 of the N.I. Act, would stand

frustrated, if such mischief's are permitted. [for intent and purpose 45 CRI. APPEAL.382-2022 JUDGMENT.odt

of Section 138 of the N.I. Act [see : Electronics Trade & Technology

Development Corpn. Ltd., Secunderabad Vs. Indian Technologists &

Engineers (Electronics) (P) Ltd. and another (1996) 2 SCC 739;

Dalmia Cement (Bharat) Ltd. Vs. Galaxy Traders & Agencies Ltd. and

others (2001) 6 SCC 463 (para 3); Goa Plast (P) Ltd. Vs. Chico

Ursula D'souza (2004) 2 SCC 235; Indian Bank Association and

others Vs. Union of India and others (2014) 5 SCC 590 and Sicagen

India Limited Vs. Mahindra Vadineni and others (2019) 4 SCC 271].

20.4. In case part payment/s is made after the filing of the

complaint, since the offence already stands completed in terms of

Section 138(c) of the N.I. Act, [see : Indian Bank Association para 18

(supra)] and the proceedings have to go on, it would be appropriate,

in case of conviction, for the learned Special Court, to direct

compensation payable after taking into consideration, amounts

received by the payee/holder of the cheque, till that time [which is

what has been done by the learned Magistrate in the instant matter].

20.5. The source of repayment, either full or in part, though

Section 138 (c) of the N.I. Act, uses the expression 'drawer of such

cheque', should be immaterial, for the reason that what is necessary,

is for the amount of the cheque, in full or in part, to come into the 46 CRI. APPEAL.382-2022 JUDGMENT.odt

coffers of the complainant, in discharge of the legal debt or liability,

as the entire purpose is recovery of money, maybe through

enforcement by way of legal proceedings.

21. Angu Parameshwari Textiles (supra) relied upon by Mr.

Agrawal, learned Counsel for the respondent, was a case in which

the cheque was for Rs.4,68,581/-, dated 25.03.2000 and before its

presentation an amount of Rs.2,00,000/- was received by a demand

draft on 02.05.2000 and the balance was only Rs.2,68,581/-, on non

payment of which the cheque for the entire amount was presented

on 30.08.2000, which was dishonoured. It was in this background it

was held that since on the date of presentation of the cheque, the

amount mentioned therein, was not due and liable to be paid,

Section 138 of the N.I. Act was not attracted. The fact situation in

the instant matter is quite dissimilar, as is apparent from the

narration above, as no amount stood paid before the presentation of

the cheque and therefore this judgment is not of any assistance to the

learned Counsel for respondent.

21.1. In Laxmikant D. Naik Karmali (supra) the complainant,

had claimed entitlement to the cheque amount on the plea that the

same was on account of consultancy fees payable by the accused @ 47 CRI. APPEAL.382-2022 JUDGMENT.odt

15% of the amount of award. As the letter produced by the

complainant on record, indicated 20% consultancy fees and there

appeared to be a contradiction in that regard, it was held that the

cheque amount on the own showing of the complainant was not due

and payable, considering which Section 138 of the N.I. Act was held

to be not attracted.

21.2. Karekar Finance Pvt. Ltd. (supra) was a case in which as

per the own statement produced by the complainant, the accused did

not owe to the complainant, the cheque amount as the cheque

amount on 25.04.2001, the date of its issuance was Rs.4,17,274/- as

against which the statement produced by the complainant showed

that on 25.04.2001 an amount less than 3,84,330/- was due and

payable, in which situation it was held that the cheque could not be

for a debt or liability due and payable.

21.3. In Joseph Sartho (supra) the cheque was for

Rs.4,61,400/- dated 04.06.1999. The complainant received an

amount of Rs.2,26,400/- as part payment on 09.06.1999. As the

balance was not being paid, the complainant presented the original

cheque for the full amount on 30.11.1999. It was thus a case of part

payment being received before presentation of the cheque, which is 48 CRI. APPEAL.382-2022 JUDGMENT.odt

not the factual position in the instant case.

21.4. Ramkrishna Urban Co-operative Credit Society Ltd.

(supra) was a case in which a finding was rendered that blank

cheques were given as security prior to the disbursement of loan as a

collateral security on 18.10.2000 and the date put on the cheque was

24.01.2008, eight years later, in which contextual background it was

held that the amount inserted in the cheque, was not something

which was due and payable when it was delivered and the cheques

were given for security and therefore Section 138 of the N.I. Act was

not attracted. This is not the position extant in the instant matter.

21.5. Ranjit Singh Sethi (supra) was a case in which it was

found that an amount of Rs.25,300/- stood paid by the accused to

the complainant, as per the entries in the bank pass book of the

accused, the last such entry being dated 04.10.2001, prior to the

cheque which was dated 08.11.2001, which was not explained by the

complainant, in which situation it was held that a legitimate

inference that the real transaction had not taken place on

08.08.2001- the date of the promissory note under which the cheque

in question was issued, but before that could be drawn and

therefore an offence under Section 138 of the N.I. Act was not made 49 CRI. APPEAL.382-2022 JUDGMENT.odt

out.

21.6. Shiju K. s/o Dr.K. Haridasan (supra) though records that

the cheque amount was Rs.1,17,500/- and a sum of Rs.25,000/-

stood paid on 02.11.1998 and Rs.10,000/- on 29.12.1998, which

was admitted by the complainant in his cross-examination, leaving a

balance of Rs.72,500/- and in the lawyers notice an amount of

Rs.82,500/- was claimed, in absence of the date of the cheque in the

judgment, it is not possible to ascertain, whether the amounts were

received prior to the presentation of the cheque or later and thus is

not of much assistance.

21.7. M/s Industrial Fuel Consultants (supra) is a case in

which it was claimed that the cheque in question was issued on

account of supply of coal, however, neither the balance sheets were

produced, nor any documentary evidence was produced to support

the contention that the cheque was issued on account of supply of

coal, in which context it was held that a legal debt or liability was

not proved, which in light of Ex.42 in the instant matter is clearly not

attracted.

21.8. Basalingappa Vs. Mudibasappa, (2019) 5 SCC 50 CRI. APPEAL.382-2022 JUDGMENT.odt

418 para 25.1., is also relied upon by Mr. Agrawal, learned counsel

for the appellant, to contend that whereas prosecution must prove

the guilt of an accused beyond all reasonable doubt, the standard of

proof so as to prove a defence on the part of an accused is

preponderence of probabilities, inference in respect of which can be

drawn not only from materials brought on record by the parties but

also by reference to the circumstances upon which accused relies

(para 25.3). There cannot be any dispute with the above

propositions, however the position on record would indicate, that the

presumption under Section 139 of the N.I. Act, which is attracted in

the present matter is due to the admission by the accused in his reply

admitting the issuance of the cheque and his signature upon the

same, which ought to have been rebutted by the accused. As pointed

out above, the presumption can be rebutted either by effective cross-

examination thereby eliciting from the complainant material

admissions or by leading defence evidence. In the instant matter as

indicated above, no defence evidence has been led. The admissions

claimed to have been given by the complainant during the course of

his cross-examination, have also been discussed above which indicate

that the presumption is not rebutted.

21.9. Sunil Todi and Ors. (supra) relied upon by Mr. Agrawal, 51 CRI. APPEAL.382-2022 JUDGMENT.odt

learned counsel for the appellant, is upon what is meant by "debt or

any other liability" and holds, that it means a legally enforceable

debt or liability. In the instant matter, Exh. 42 the communication

dated 15.06.2011 (page 94) clinches the issue in favour of the

complainant as the entire liability for the cheque amount, stands

admitted by the accused.

21.10. Triyambak Hegde (supra) by the Hon'ble Supreme Court

holds that gravity of complaint under N.I. Act cannot be equated

with offence under the provisions of the IPC or other criminal

offences, however that has been stated in the context of imposition

of appropriate sentence and not as a general proposition (para 21

thereof) and cannot have any applicability in the instant matter as an

argument as to the sentence was never put forth as to what would be

the appropriate sentence to be imposed, in case the judgment of the

Trial Court was to be restored.

22. The conduct of the complainant in disclosing recovery of

part cheque amount, in the notice of demand itself, is an indicature

of his bonafides and absence of malafides, for the reason that even

the reply of the accused, does not address the statement made in the

notice regarding recovery of Rs.40,500/- by the complainant, inspite 52 CRI. APPEAL.382-2022 JUDGMENT.odt

of being aware that the accused had not made payment by letting the

cheque be dishonored.

23. Vishnu Bhat (supra) relied upon by Mr. Badhe, learned

counsel for the complainant, was a case in which after filing of the

complaint, certain amounts were received by the complainant when

the case was fixed for settlement. The learned Magistrate held the

complainant to be not maintainable on account of the payments

received. The High Court in appeal, held that since the payment due

on the cheque was made subsequently, the accused was directed to

pay compensation and in default to undergo simple imprisonment

for three months. Vishnu Bhat (supra) however does not lay down

any proposition as to what should be the law in such circumstances.

Hazi Jahangir Molla (supra) considering Vishnu Bhat (supra) holds

that merely because a part payment was made after issuance of

statutory notice, that was not enough to take away the right of the

holder of the cheque to enforce the cause of action regarding

non-payment of the residue amount and in my considered opinion

rightly so, for the reason that the liability for which the cheque is

issued is for the entire amount as stated in the cheque and not for a

part of that amount and even if a part payment is made after

disclosing the same the cheque for the full amount can be used for 53 CRI. APPEAL.382-2022 JUDGMENT.odt

prosecuting the drawer, for the residue by making an indorsement

thereupon as discussed earlier. Taking a view otherwise, would

permit the doors to be opened for all sorts of unscrupulous elements

to make part payment of the cheque amount and then make the

holder of the cheque, run from pillar to post for the balance, which

cannot be permitted as the very intent of the enactment would then

stand defeated.

24. Thus, for the reasons stated above, the impugned

judgment of the learned Appellate Court dated 05.01.2022 in appeal

No.30/2018, is hereby quashed and set aside and the judgment

dated 18.01.2018 in Summary Criminal Case No.2816/2011, passed

by the learned Chief Judicial Magistrate is restored. If any amounts

are deposited by the accused, on account of compensation, in any

Courts, the same be paid to the complainant. The Criminal Appeal is

allowed and disposed of accordingly. Considering the circumstances,

there shall be no order as to costs.

A copy of this judgment be sent to the Trial Court, to

ensure enforcement of its judgment.

Signed By:SHRIKANT DAMODHAR BHIMTE (AVINASH G. GHAROTE, J.) Signing Date:19.08.2022 16:16 S.D.Bhimte