M/S. Investor Plaza vs Vijay Sachdeva & Ors.
2010 Latest Caselaw 5303 Del

     IN THE HIGH COURT OF DELHI AT NEW DELHI

                 Crl. A. NO. 118/2005

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Judgment delivered on: 23.11.2010

M/s. Investor Plaza ..... Appellant

Through: Mr.S. Khan, Adv.

                        Versus

Vijay Sachdeva & Ors.                        ..... Respondent
                        Through:   Nemo

CORAM:
HON'BLE MR. JUSTICE KAILASH GAMBHIR,

1. Whether the Reporters of local papers may be allowed to see the judgment? Yes

2. To be referred to Reporter or not? Yes

3. Whether the judgment should be reported in the Digest? Yes

KAILASH GAMBHIR, J. Oral:

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1. By this criminal revision filed under Section 397

r/w Section 401 and 482 of Cr.P.C., 1973, which was directed

to be treated as an appeal pursuant to an order dated

4.2.2005 passed by this court, the appellant seeks to

challenge the order dated 8.10.2003, passed by the

Additional District Judge, whereby the complaint case filed by

the appellant under Section 138 of the Negotiable Instruments

Act, 1881, was dismissed.

2. The brief facts of the case relevant for deciding the

present petition are as under:-

The case of the appellant is that the accused

respondent Shri Vijay Sachdeva was the client of the

appellant firm and had been placing orders for the purchase

and sale of shares and debentures and other securities in his

name through the appellant firm. The appellant runs an

account no. 250 with Oriental Bank of Commerce, Branch

Office at G.T. Karnal Road, Delhi and the respondent was

running an account no. 55437 with Punjab National Bank,

Branch Office, Subzi Mandi, Delhi. The respondent issued a

cheque bearing no. 503386 dated 28.6.2001 for Rs.1,55,000/-

drawn on Punjab National Bank, Branch Office, Subzi Mandi,

Delhi being part payment of his total liability in favour of the

appellant. On 26.7.2001 the appellant deposited the said

cheque with its banker i.e. Oriental Bank of Commerce,

Branch Office at G.T. Karnal Road, Delhi for encashment. On

27.7.2001,Punjab National Bank, received the said cheque

through Oriental Bank of Commerce and the cheque was

dishonoured on account of ‗insufficiency of funds' and also

because of ‗signature of drawer differing'. The appellant

served a legal notice dated 31.7.2001 on the respondent

asking for the payment of the bounced cheque amount but

the respondent did not make the said payment within the

stipulated period hence the appellant filed a complaint before

the competent court. The learned trial court after

appreciating evidence on record acquitted the respondent

with the observation that Section 138 of Negotiable

Instruments Act, 1881 will not be attracted in case the cheque

is returned unpaid on account of difference in signature of

drawer and further held that the offence under Section 138

N.I. Act is not proved in the instant case. Feeling aggrieved

with the same, the appellant has preferred the present

appeal.

3. Vide order dated 3.8.2010, notice of default was

sent to both the counsel representing the parties and even

despite service of notice, counsel for the respondent did not

choose to appear in the matter. This matter was heard by this

court on 18.11.2009 and the matter thereafter was reserved

for orders. Both the parties have also filed their written

synopsis.

4. Mr. Khan, counsel for the appellant, states that as

undertaken by him he had informed about this date to Mr.

Ajay Bir Singh Jain, counsel who has been representing the

respondent. Mr. Khan also states that the matter may be

decided by this court based on the written submissions filed

by both the parties. Accordingly, I proceed to decide this

appeal based on the written submissions placed on record by

the parties.

5. Counsel for the appellant, submits that the

impugned judgment passed by the learned Trial Court is ex-

facie illegal as the learned Trial Court, without there being any

evidence on record, had assumed that the ground of

―insufficient funds‖ for the return of the cheque in the bank

memo had been added subsequently and the main ground for

return of the cheque was the difference of signatures of the

drawer. Drawing attention of this Court to the deposition of

bank witness produced by the respondent, counsel submitted

that DW1 Shri Rakesh Kumar Jain in his examination-in-chief

clearly stated that the accused did not operate his account

since 1999 and that no such instructions were received by

the bank from the drawer of the cheque to stop payment of

the cheque on the ground of loss of the same. Counsel

further submits that the respondent failed to rebut the

presumption as arising in favour of the appellant under

Section 139 and 118 of the Negotiable Instruments Act read

with Section 114 of the Evidence Act as the respondent failed

to lead any evidence to show that the said cheque was

returned on account of difference in signatures. Counsel

further submits that even the respondent accused did not

place any material on record to show that there were

sufficient funds in his account to clear the amount of the

cheque issued by him. Counsel thus submits that if the bank

has given the reasons that the cheque was dishonoured on

account of insufficient funds then the appellant has a remedy

to file the complaint under Section 138 of the Negotiable

Instruments Act and the Court need not look into other

grounds given in the memo. The contention raised by the

counsel for the appellant is that in the bank memo one of the

reasons disclosed was ―insufficient funds‖ for the return of the

cheque and this ground was sufficient to invoke Section 138

of the Negotiable Instruments Act. Counsel further submits

that the main defense raised by the respondent was that he

lost the cheque in question and the appellant had filled up

the cheque in question and presented the same with his

name. Counsel further submits that the appellant had

successfully proved his case before the learned Trial Court,

but the respondent did not lead any positive evidence to rebut

the presumption which arose in favour of the appellant.

Counsel while referring to question No. 13 of the statement of

the respondent under Section 313 Cr.P.C. submits that the

respondent has taken a stand that his wife had sent a request

to the bank regarding missing of the cheque but no such

request was produced on record by the respondent and the

said stand taken by the respondent is otherwise in

contradiction to the stand taken by DW1 wherein he stated

that no such request was ever received by the bank to stop

the payment of the cheque on account of loss of the said

cheque. The contention of the appellant is that the said

statement of DW-1 clearly shows that no intimation was sent

by the respondent to the bank about loss of the said

cheque. Counsel further refers to the deposition of another

bank witness PW-3 who also made a categorical deposition

that the cheque was dishonored on account of both the

grounds, then, how the court in the absence of any material

could assume that the cheque was dishonored only on

account of difference in signature. In support of his

arguments, counsel for the appellant placed reliance on the

following judgments:-

1) K.N. Beena Vs. Muniyappan & Anr. -2001 Cri L. J. 4745 (SC)

2) Hiten P. Dalal Vs. Bratindranath Banerjee - AIR 2001 SC 3897

3) M/s P.V. Constructions Vs. Sh. K.J. Augusty - 2007 CrLJ 154 (Bom.)

4) NEPC Micon Ltd. & Ors. Vs. Magma Leasing Ltd. - 1999 Crl. L.J. 2883 (SC)

5) K. Bhaskaran Vs. Shankaran Vaidhyan Balan & Anr. AIR 1999 SC 3762

6) Abdul Rehman M. Mulgand, Civil Contractor Vs. Sh. Mohammad Hashan Mulgand & State through Public Prosecutor - 2006 Cri L.J. 1159 (Bom)

7) T. Kalavathy Vs. Veera Exports - 2001 (1) ALT (Crl.) 465(Mad)

8) Ramesh Chandra Rajnikant Kothari Vs. Gunvantlal Shivlal Shah And Anr. - (1998) 94 Comp Cas 549 (Guj)

9) Om Prakash Bhojraj Maniyar Vs. Swati Girish Bhide & Ors Vs. 1992 (2) BomCR 106

10) G.Venkataramaniah Vs. Sillakollu Venkateswarilu& Anr. 1999 Cri LJ 1219 (A.P.)

11) Canbank Financial Services Ltd. Vs. Gitanjali Motors Ltd. & Ors--1995 Crl. LJ 1222 (Del)

6. The stand of the respondent is that admittedly

there was a structural defect in the negotiable instrument

because of the difference in the signatures as indicated by the

bank in the bank memo in terms of clause 12. The contention

of the respondent is that if the cheque is returned on account

of the structural defect then the bank is not supposed to give

any other reason in the bank memo and if any other ground is

given that cannot be considered because the negotiable

instrument itself was defective due to the structural defect.

The respondent has submitted that it was incumbent upon the

complainant to establish a clear case to prove the fact that

the cheque was dishonored on account of insufficient funds

and not for the reason of difference in signature. The

respondent has further submitted that it was proved on record

that his bank account no. 55437 with Punjab National Bank,

Branch Office, Subzi Mandi, Delhi was an inoperative

account. Respondent further submitted that in fact the

respondent had never accepted that any such cheque was

issued by him and rather the stand of the respondent in his

defence is that the cheuqe was lost by his wife for which even

the bank was duly apprised of. The respondent has thus

submitted that he has successfully rebutted the presumption

and, therefore, the learned Trial Court has rightly dismissed

the complaint filed by the appellant. In support of his case,

counsel for the respondent has placed reliance on the

following judgments :-

1. Shri Babulal Nainmal Jain Vs. Sh. Khinji Ratansha

Dedhia & Ors. - 1998 CriLJ 4750 (Bom) and

2. Rejikumar Vs. Sukumaran 2002 CriLJ 3255(Ker)

7. I have heard learned counsel for the parties and

perused the records.

8. Section 138 of the Negotiable Instruments Act was

incorporated with a specific object of enacting a special

provision to impose a strict liability so far as the negotiable

instruments are concerned. The law relating to negotiable

instruments is the law of commercial world legislated to

facilitate the activities in trade and commerce making

provision of giving sanctity to the instruments of credit which

could be deemed to be convertible into money and easily

passable from one person to another. In the absence of such

instruments, the trade and commerce activities in the present

day world are likely to be adversely affected as it is

impracticable for the trading community to carry on with the

bulk of the currency in force.

9. Coming to Section 138 of the Negotiable

Instruments Act, In Dalmia Cement (Bharat) Ltd. v.

Galaxy Traders & Agencies Ltd.,(2001) 6 SCC 463, the

offence is explained in the following words:

"4. Section 138 of the Act makes a civil transaction to be an offence by fiction of law. 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 is returned by the bank unpaid either because of the amount or money standing to the credit of that person being insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account, such person, subject to the other conditions, shall be deemed to have committed an offence under the section and be punished for a term which may extend to one year or with fine which may extend to twice the amount of cheque or with both. To make the dishonour of the cheque as an offence, the aggrieved party is required to present the cheque to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier and the payee or the holder in due course of the cheque makes a demand for payment of the cheque amount by giving a notice in writing to the drawer of the cheque within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid and drawer of such cheque fails to make the payment of the amount within 15 days of the receipt of the said notice. Section 139 refers to presumption that unless the contrary is proved, the holder received the cheque of the nature referred to under Section 138 for the discharge in whole or in part or of any debt or other liability. Section 140 restricts the defence in any prosecution under Section 138 of the Act and Section 141 refers to such offence committed by the companies. Section 142 provides that, notwithstanding anything contained in the Code of Criminal Procedure, no court shall take cognizance of an offence under the section except upon a complaint in writing made by the payee or, as the case may be, the holder of the cheque and that such complaint is made within one month of the date on which the cause of action arose under clause

(c) of proviso to Section 138 of the Act."

10. In Kusum Ingots & Alloys Ltd. v. Pennar

Peterson Securities Ltd., (2000) 2 SCC 745, the Hon'ble

Apex Court explained the ingredients of the offence under S.

138 N.I. Act as under:

10. On a reading of the provisions of Section 138 of the NI Act it is clear that the ingredients which are to be satisfied for making out a case under the provision are:

(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability;

(ii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(iii) that cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;

(iv) the payee or the holder in due course of the cheque 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 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;

(v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice."

11. It is a well settled legal position that the

presumption u/s. 118 and 139 N.I. Act is a rebuttable

presumption and the burden lies on the accused to prove that

he had no liability/debt on the date of issue of the cheque. It is

also a settled principle of law that to bring home an offence

under any of the penal provisions, it is essential to prove the

case beyond reasonable doubt and the ingredients of the

offence should be satisfied. It would be relevant to refer to the

judgment of the Apex Court in the case of Hiten P.Dalal v.

Brantindranath Banerjee AIR 2001 SC 3897, where it was

held that:

"The appellant's submission that the cheques were not drawn for the 'discharge in whole or in part of any debt or other liability' is answered by the third presumption available to the Bank under Section 139 of the Negotiable Instruments Act. This section provides that "it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability". The effect of these presumptions is to place the evidential burden on the appellant of proving that the cheque was not received by the Bank towards the discharge of any liability.

22. Because both Sections 138 and 139 require that the Court "shall presume" the liability of the drawer of the cheques for the amounts for which the cheques are drawn, as noted in State of Madras vs. A. Vaidvanatha Iyer: 1958CriLJ232 : 1958CriLJ232, it is obligatory on the Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. "It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused" (ibid). Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court "may presume" a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces

evidence showing the reasonable possibility of the non- existence of the presumed fact.

23. In other words, provided the facts required to form the basis of a presumption of law exists, the discretion is left with the Court but the draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, "after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists". therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the 'prudent man'.

24. Judicial statements have differed as to the quantum of rebutting evidence required. In Kundan Lal Rallaram vs Custodian, Evacuee Property, Bombay AIR 1961 SC 1316, this Court held that the presumption of law under Section 118 of Negotiable Instruments Act could be rebutted in certain circumstances, by a presumption of fact raised under Section 114 of the Evidence Act. The decision must be limited to the facts of that case. The more authoritative view has been laid down in the subsequent decision of the Constitution Bench in Dhanvantrai Balwantrai Desai vs State of Maharashtra : 1964CriLJ437 : 1964CriLJ437, where this Court reiterated the principle enunciated in State of Madras vs Vaidyanath Iyer (Supra) and clarified that the distinction between the two kinds of presumption lay not only in the mandate to the Court, but also in the nature of evidence required to rebut the two. In the case of a discretionary presumption the presumption if drawn may be rebutted by an explanation which "might reasonably be true and which is consistent with the innocence" of the accused. On the other hand in the case of a mandatory presumption "the burden resting on the accused person in such a case would not be as light as it is where a presumption is raised under S. 114 of the Evidence Act and cannot be held to be discharged merely by reason of the fact that the explanation offered by the accused is reasonable and probable. It must further be shown that the explanation is a true one. The words 'unless the contrary is proved' which occur in this provision make it clear that the presumption has to be rebutted by 'proof' and not by a

bare explanation which is merely plausible. A fact is said to be proved when its existence is directly established or when upon the material before it the Court finds its existence to be so probable that a reasonable man would act on the supposition that it exists. Unless, therefore, the explanation is supported by proof, the presumption created by the provision cannot be said to be rebutted..."

12. Coming to the facts of the case at hand, the

complaint under Section 138 of the Negotiable Instruments

Act was filed by the appellant mainly on the allegation that

the respondent had issued a cheque bearing No. 503386 in

favour of the appellant and the said cheque on presentation

by the appellant was returned by the drawee bank with the

reasons ―insufficient funds‖ and ―signature differs‖. The

appellant served a legal notice dated 31.7.2001 upon the

respondent but despite receipt of the said legal notice, the

respondent did not come forward to make payment of the

said dishonoured cheque within the stipulated period. The

appellant examined three witnesses in support of his

complaint case, i.e., PW-1, proprietor of the appellant firm,

while PW-2 and PW-3 were the bank witnesses. On the other

hand, the respondent examined only one witness in his

defense i.e. DW-1 Shri Rakesh Kumar Jain, clerk of Punjab

National Bank. The appellant in his evidence duly proved its

statement of account as Ex.PW2/A and the bank memo as Ex.

PW2/C. Statement of account of the respondent was also

proved on record as Ex.DW1/A to DW1/D. The respondent in

his statement recorded under Section 313, Code of Criminal

Procedure took a stand that the cheque in question had been

lost and his wife had sent a request to the bank regarding

missing of the said cheque. The learned trial court after

taking into consideration the evidence produced on record by

both the parties came to the conclusion that the ground of

‗insufficient funds' on the bank memo was added

subsequently by the appellant while the main ground for

return of the cheque was difference of signatures. The

court thus took the position that Section 138 of the

Negotiable Instruments Act will not be attracted in a case

where the cheque was returned on account of difference in

signatures.

13. The finding of the learned trial court is perverse

and irrational on the very face of it. This court is not able to

find as to how the said finding was arrived at by the learned

trial court. In the bank memo proved on record as Ex. PW2/C,

the ground at serial no. 7 i.e. insufficient funds was circled

while the ground at serial no. 12 was tick marked. The

witness PW-2 and PW-3 in their depositions clearly deposed

that the said cheque was returned as dishonored on account

of ‗insufficient funds' and also because of the ‗difference in

the signature'. PW-2 Davender Kumar, in his cross-

examination affirmed the fact that the said memo besides

containing the ground of insufficient funds also contained

another ground i.e. difference in signature of the drawer.

Once the bank witnesses had taken a position that the said

cheque was dishonoured on account of the abovesaid two

grounds, then how did the learned trial court assume that

the ground of insufficiency of funds was added later on in the

said bank memo. The finding of the learned trial court is thus

ex-facie illegal and perverse. The respondent also failed to

substantiate his defense to prove that the said cheque was

lost by him. The bank witness DW-1 nowhere stated that any

intimation was received by the bank with regard to the loss of

the said cheque.

14. The judgment of the Bombay High Court in the

case of Shri Babulal Nainmal (supra) cited by the respondent

would be of no help as in the said case there was no mention

of insufficiency of funds in the account and the bank memo

only mentioned ‗refer to drawer' as the ground for returning

the cheque as it was not in proper form. Hence it is clearly

distinguishable on facts from the present case. The other

judgment of the Kerala High court cited by the respondent in

the case of Rejikumar (supra) would also not help the case of

the respondent as in the said case the issuance of cheque

could not be proved and therefore liability under Section 138

could not be fastened on the accused, which is not the

situation in the present case.

15. In the light of the aforesaid discussion, this court is

of the considered view that the appellant has successfully

proved the ingredients of Section 138 of the Negotiable

Instruments Act based on the said dishonored cheque which

was dishonored by the bank on account of two grounds and

one of the grounds being ‗insufficient funds'.

16. The impugned order 8.10.2003 is accordingly set

aside.

17. The respondent is hereby directed to pay the

cheque amount of Rs.1,55,000/- along with a fine of

Rs.1,55,000/- within a period of one month from the date of

this order and on failure to pay the said amount the

respondent shall undergo imprisonment for a period of three

months.

18. The appeal is allowed accordingly.

November 23, 2010                 KAILASH GAMBHIR, J