Vijay Power Generators Ltd. vs Sumit Seth
2014 Latest Caselaw 2354 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                             Reserved on: 08.05.2014
                                                         Date of Decision: 09.05.2014

+                                 CRL. A. No.1432 of 2013

VIJAY POWER GENERATORS LTD.                                        .... Appellant
             Through: Mr. B.K. Pandey, Adv.

                                               Versus

SUMIT SETH                                                         ..... Respondent
                         Through:          Mr. Rakesh Tiku, Sr. Adv. with
                                           Mr. Prakash Gautam & Mr. Vivek Ojha,
                                           Advs.

+       CRL. A. No.1433 of 2013; CRL. A. No.1434 of 2013;
        CRL. A. No.1435 of 2013; & CRL. A. No.1436 of 2013;

VIJAY POWER GENERATORS LTD.                                        .... Appellant
             Through: Mr. B.K. Pandey, Adv.

                                               Versus

TARUN ENGINEERING SYNDICATE                    ..... Respondent
              Through: Mr. Rakesh Tiku, Sr. Adv. with
                        Mr. Prakash Gautam & Mr. Vivek Ojha,
                        Advs.
CORAM:
HON'BLE MR. JUSTICE V.K. JAIN

                                              JUDGEMENT

V.K. JAIN, J.

The appellant before this Court is a Company engaged in the business

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

of selling power generators and related equipments. The case of the

appellant/complainant is that M/s. Tarun Engineering Syndicate, which is a

partnership firm, purchased goods from it and issued cheques from time to

time towards payment of those goods. The cheques, when presented to the

bank were dishonoured with the endorsement "Account Closed/Payment

Stopped". After serving demand notice upon the firm, as many as six

complaints were filed by the appellant/complainant, five against the firm

through its partner Shri Sumit Seth and one against Shri Sumit Seth,

describing him as the proprietor of M/s. Tarun Engineering Syndicate.

2. In the complaint relevant to Crl. A. No.1432/2013, a cheque dated

10.10.1997 was issued by Shri Sumit Seth for a sum of Rs.4,59,704/-; in the

complaint relevant to Crl. A. No.1433/2013 a cheque dated 1.8.1997 was

issued for Rs.5.00 lakh; in the complaint relevant to Crl. A. No.1434/2013 a

cheque dated 25.7.1997 was issued for Rs.8.00 lakh; in the complaint

relevant to Crl. A. No.1435/2013 a cheque dated 22.7.1997 was issued for

Rs.9,79,151/- and in the complaint relevant to Crl. A. No.1436/2013 a

cheque dated 15.7.1997 was issued for Rs.8.00 lakh by Mr. Sumit Seth as

partner of M/s. Tarun Engineering Syndicate. Two cheques dated 3.8.1997

- one for Rs.6,56,633/- and the other for Rs.4.00 lakh were subject matter of

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

the complaint in Crl. A. No.1431/2013 but since the payment against those

cheques have already been made to the appellant/complainant Company,

Crl. A. No.1431/2013, arising out of the decisionof the trial court, was

withdrawn by the appellant on 7.5.2014.

3. The complainant Company examined three witnesses in support of its

case. CW1 is an official from Syndicate Bank who deposed with respect to

dishonour of two (2) cheques - one of Rs.6.56,633/- and the other of Rs.4.00

lakh. His testimony is not relevant for the purpose of deciding the

controversy involved in these appeals.

CW2 Shri G.K. Pachauri in his affidavit by way of evidence stated

that the accused purchased goods/material from the complainant Company

and issued cheques in question which, on being presented to its bank were

dishonoured. He also deposed with respect to issue of the demand notice

and service of the said notice. He stated that the accused had failed to make

payment of the dishonoured cheques.

CW3 Shri Kishore Kumar inter alia stated that the accused firm had been

purchasing material from the complainant Company and making payment on

account basis. He further stated that against the purchases made by it, the

accused had also issued Sales Tax Forms and C-Forms and that the cheques

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

in question were issued as part payment of that material. He proved the

Sales Tax Forms and C-Forms Ex.CW3/3 (Colly). He also proved the

statement of account Ex.CW3/4(Colly) and stated that the said account was

maintained in due course and all the payments made through

cheques/cash/by way of adjustments were duly entered in the said account.

According to him a sum of Rs.1,09,71,948.02 was due from the accused on

31.3.1999. The certificate under Section 65B of the Indian Evidence Act is

also part of Ex.CW3/4 (Colly).

4. When Shri Sumit Seth was examined under Section 313 of Cr.P.C., he

admitted that the cheques in question were drawn on the bank account of his

partnership firm Tarun Engineering Syndicate and bears his signature. He

claimed that the aforesaid cheques were issued to the complainant Company

as advance payment for supply of material but no material was supplied

against the cheques. He also claimed that they had issued reminders to the

complainant but that was of no avail. He denied having received any notice

from the complainant but admitted that the address appearing on the legal

notice and postal articles was the correct address of the firm. No witness

was examined by the accused.

5. The learned Metropolitan Magistrate vide impugned common

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

judgement dated 8.4.2013 accepted the defence taken by the accused and

accordingly dismissed the complaints. Being aggrieved from dismissal of

the complaints and acquittal of the accused, the appellant/complainant

Company is before this Court by way of these appeals.

The primary issue involved in these cases is as to whether the cheques

in question were issued as advance for supply of goods which were never

supplied or they were issued towards payment of the goods which were

purchased by the firm and were duly supplied to it.

6. There is a statutory rebuttable presumption under Section 118 (a) of

the Negotiable Instruments Act, 1881, that every negotiable instrument was

made or drawn for consideration. Section 139 of the said Act also 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, or any debt or other liability.

In Hiten P. Dalal Vs. Bratindranath Banerjee (2001) 6 SCC 16, the

Apex Court inter alia observed that the statutory presumption does not

preclude the person against whom the presumption is drawn from rebutting

it and proving to the contrary, but such evidence must be adduced before the

court in support of the defence that the court must either believe the defence

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

to exist or consider its existence to be reasonably probable, the standard of

reasonability being that of the prudent man.

In Kumar Exports Vs. Sharma Carpets (2009) 2 SCC 513, the

Hon'ble Supreme Court, in this regard held as under:

"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 non-existence 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 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

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

Act."

In M.S. Narayana Menon Vs. State of Kerala (2006) 6 SCC 39,

the Apex Court dealing with the statutory presumption under Section 118(a)

and 139 of the N.I. Act inter alia held as under:

"30. ....the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.

xx xx xx xx

32. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies.

xx xx xx xx

41...Therefore, the rebuttal does not have to be conculsively 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'."

7. Since the accused did not lead any evidence at all, the question which

arises for consideration is as to whether it has been able to bring on record

such facts & circumstances which would impel the Court to believe that the

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

consideration did not exist or that its non-existence was so probable that a

prudent man would in the facts & circumstances of the case accept the plea

that the consideration did not exist. In a case where no evidence is led by

him the accused is required to show existence of circumstances which are so

compelling as to shift the burden again on the complainant. Of course the

accused is not required to prove his defence beyond reasonable doubt and he

can discharge the onus placed on him by establishing, the proof required

from him, on the standard of being preponderance of probabilities.

8. Ex.CW3/3/A which forms part of Ex.CW3/3 (Colly) is a CST Form

purporting to be issued by Tarun Engineering Syndicate to the

appellant/complainant Vijay Power Generation Limited. On the backside of

this C-Form, Ex.CW3/3/A1, details of various bills making a total sum of

Rs.1,74,43,178/- have been given. The genuineness of the C-Form was

challenged by the learned counsel for the accused/respondent pointing out

that (i) on some of the photocopies filed by the appellant the seal of the Oath

Commissioner is on the right top side whereas on some of them it is in the

middle of the document; (ii) the amount of bill Nos.1026 and 1040 as per

details Ex.CW3/3/A1 is Rs.13,50,934/- and Rs.8,87,210/- respectively

whereas the amount of the same bills given in Ex.CW3/3/A2 is

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

Rs.2,72,078/- (against bill No.1040) and Rs.9,94,438/- (against bill

No.1026); (iii) Ex.CW3/3A bears 2.1.1992 as the date of issue whereas the

accused firm was registered only on 11.8.1995 as indicated by the

registration number given on the document; (iv) the C-Form is issued for

one financial year, and the said year is not indicated on Ex.CW3/3/A.

9. Undisputedly the seal of the Oath Commissioner is not required on

the C-Form. It appears that since the appellant/complainant had to file

original C-Form in one case and their photocopies in other cases, the

photocopies were got attested from an Oath Commissioner and at that time,

either inadvertently or otherwise he also put his seal on the original C-Form

and that is why, on some of the photocopies it appears in the middle of the

document and in some of them it appears on the top right side of the

document.

As regards discrepancy in the amount of bill Nos.1026 & 1040,

according to CW3 Shri Kishore Kumar the discrepancy in the amount of

bills mentioned in the C-Forms could be a typographical error, the same

having been issued by the purchaser and taken by Excise MODVAT,

thereby suggesting that the accused had claimed MODVAT against the

purchases and that explains the difference in the amount.

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

10. Ex.CW3/4 (Colly) is the statement of account maintained by the

appellant/complainant Company in respect of the accused Tarun

Engineering Syndicate. This account has been maintained in electronic form

the year 1996-1997 onwards. A certificate under Section 65B of the

Evidence Act is also annexed to the said statement. CW3 Shri Kishore

Kumar has vouched the correctness of the said statement on oath. On the

other hand the respondent has not produced any witness to rebut the sworn

statement of Shri Kishore Kumar nor has it produced its own account books

or its account in respect of the transaction with the complainant/appellant.

This is not the case of the accused that it had no dealing with the

appellant/complainant at any point of time. In these circumstances there

would be no reason to reject the statement of accounts filed by the

appellant/complainant Company, which is admissible in evidence under

Section 34 of the Evidence Act. A perusal of the statement of accounts

would show that as on 1.4.1996 a sum of Rs.35,83,390.02 was due to the

appellant/complainant Company from the accused firm. Thereafter, there

have been several credit entries as well as debit entries. The statement

shows sale of goods to the accused firm on a number of dates including

23.5.1996, 5.11.1996, 13.11.1996, 26.11.1996, 27.11.1996, 28.11.1996,

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

11.12.1996, 12.3.1997, 28.3.1997, 18.4.1997, 25.4.1997, 26.4.1997,

3.5.1997, 7.5.1997, 15.5.1997, 16.5.1997, 21.5.1997, 13.6.1997, 14.6.1997,

16.6.1997, 18.6.1997, 19.6.1997, 14.7.1997, 17.3.1998, 5.8.1998. There are

also entries of purchases made by the complainant/appellant Company such

as local purchase on 6.8.1997 and 12.9.1997. The statement contains bill

numbers in respect of the sales purporting to have been made to the accused

firm. The statement also contains entries whenever cheques issued by the

accused firm were deposited in the account of the complainant/appellant

Company. This is not the case of the accused that the payments entered in

the aforesaid statement were not made by it to the complainant/appellant

Company. As per this statement two payments - one of Rs.6.00 lakh and

the other of Rs.1.40 lakh was received vide MR No.488 and 487

respectively through cheque No.055789 and 055788 respectively on

28.12.1996, amount of Rs.3.24 lakh was received vide MR No.490 through

cheque No.160367 on 30.12.1996, amount of Rs.5.40 lakh was received

vide MR No.004 through cheque No.055790 on 6.1.1997, amount of

Rs.13.05 lakh was received vide cheque No.219156 on 16.1.1997. Two

payments of Rs.5.50 lakh each was received on 24.1.1997 and one such

payment was received on 30.1.1997. There are several other payments

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

received from the accused by cheque including Rs.3.24 lakh received on

6.11.1996, Rs.7.00 lakh received on 12.11.1996, Rs.5.60 lakh received on

27.11.1996. When cheque No.083439 dated 28.3.1997 was deposited in the

account a credit entry was made on 29.3.1997 but when the said cheque

returned unpaid from the Bank a debit entry was made on 2.4.1997. When

the cheque was again present to the bank a credit entry was made on

3.4.1997. Similarly payment of Rs.25.00 lakh received on 23.4.1997;

Rs.15.00 on 29.4.1997 and Rs.9.93 lakh on 17.5.1997 were duly credited in

the account. When cheque Nos.092108, 092109, 192110 and 092111 of

Rs.1.64 lakh each and four cheques of Rs.1.68 lakh each were deposited in

the bank on 24.5.1997 credit entry was made in the account and when the

aforesaid cheques were returned unpaid on account of payment having been

stopped debit entries were made on 24.5.1997. When a cheque of Rs.13.78

lakh was received on 26.5.1997 a credit entry was made. The same was the

position with respect to two cheques of Rs.5.00 lakh each received on

30.5.1997 and 4.6.1997 and one cheque of Rs.5.00 lakh on 14.6.1997, one

cheque of Rs.5.00 lakh on 19.6.1997, two cheques of Rs.5.00 lakh each on

19.6.1997 and the other on 20.6.1997. There are several other entries made

in the statement of account. This was not the case of the accused either in

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

the statement under Section 313 of Cr.P.C. or during cross-examination of

the witnesses of the complainant that the aforesaid cheques were not issued

by it to the complainant/appellant Company. In these circumstances and

also considering that neither any oral evidence has been produced by the

accused nor has it produced its account books, I see no reason to reject the

statement of accounts filed by the appellant/complainant Company or to

doubt its authenticity. Considering that at the time cheques in question were

issued, the amount due from the accused firm was much more than the

amount of the cheques issued by it, it would be difficult to accept the

contention that the aforesaid cheques were issued as advance payment for

purchase of goods and not towards payments of the price of the goods which

the accused firm had purchased from the appellant/complainant Company.

11. The C-Forms filed by the complainant/appellant purport to be signed

by Smt. Mukta Seth, Partner of the accused firm. Neither Mrs. Mukta Seth

was produced in the witness box to prove that the aforesaid C-Forms did not

bear her signature nor did Shri Sumit Seth made such a specific claim in his

statement under Section 313 of Cr.P.C. Therefore, it would be difficult to

say that C-Forms filed by the appellant/complainant Company are forged

documents. Considering that C-Forms were issued by the accused firm it is

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

for them to explain the discrepancy in the amount of bill Nos.1026 & 1040

in Ex.CW3/3/A1 and CW3/3/A2 and it would not be appropriate to hold the

aforesaid C-Forms to be forged documents only on account of the said

discrepancy, in the documents which they supplied to the

appellant/complainant Company.

12. For the reasons stated hereinabove, I am of the considered view that

the accused has not been able to rebut the statutory presumption raised under

Sections 138(a) and 139 of the Negotiable Instruments Act and the cheques

in question were issued for consideration, i.e. towards price of the goods

purchased by the accused firm from the appellant/complainant Company.

13. The learned counsel for the accused relied upon M.S. Narayana

Menon (supra); K. Prakashan Vs. P.K. Surendran (2008) 1 SCC 258;

Krishna Janardhan Bhat Vs. Dattatraya G. Hegde (2008) 4 SCC 54 and

Criminal Apeal No.830/2014 titled Indus Airways Pvt. Ltd. & Ors. Vs.

Magnum Aviation Pvt. Ltd. & Anr. decided on 7.4.2014.

I have carefully perused the above-referred decisions and have not

been able to find any such legal proposition in them as would persuade me

to take a contrary view. In M.S. Narayana Menon (supra) the Apex Court

inter alia held that an accused need not enter into witness box and examine

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

other witnesses in support of his defence and that the standard of proof

required from an accused is preponderance of probability, which can be

drawn not only from the material on record but also by reference to the

circumstances upon which the accused relies. However, in the facts &

circumstances of the case the accused before this Court has not been able to

discharge the onus placed on him from the material brought on record by the

complainant nor has he been able to show existence of circumstances from

which it may be inferred that the cheques in question were without

consideration.

In K. Prakashan (supra), the Apex Court inter alia held that if two

views are possible, the appellate court shall not reverse a judgement of

acquittal only because another view is possible. There is no quarrel with the

aforesaid proposition of law but the facts & circumstances of the case leave

no scope for two view being possible in the matter and, therefore, the

aforesaid legal proposition would not apply to the case before this Court.

In Krishna Janardhan Bhat (supra) the Apex Court again noted that to

discharge the burden placed on him the accused need not examine himself

and he can discharge the same on the notice being issued to him. Since

there is no material on record which would show, even applying the standard

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

of preponderance of probabilities, that the cheques in questions were without

consideration, the aforesaid judgement is of no help to the accused.

In Indus Airways Pvt. Ltd. & Ors. (supra), it was an admitted position

that the cheques in question were issued while placing purchase orders for

supply of certain aircraft parts and were meant to be advance payment. It

was held by the Apex Court that for the purpose of Section 138 of the Act,

the drawl of the cheque should be in respect of the existing or past

adjudicated liability, if the cheque is issued as advance payment for

purchase of goods and for any reason purchase order is not carried to its

logical conclusion and the material or goods are not supplied the cheque

cannot be said to have been drawn for an existing debt or liability.

However, in the present case evidence on record does not indicate that the

cheques in question were issued towards advance payment. The evidence

rather clearly shows that they were issued towards payment of the price of

the goods which the accused firm had already purchased from the

appellant/complainant Company.

14. In the complaint relevant to Crl. A. Nos.1433/2013. 1434/2013;

1435/2013; 1436/2013 only M/s. Tarun Engineering Syndicate was

prosecuted. Though the firm was prosecuted through Mr. Tarun Seth, he

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

was not made an accused as a partner of the firm. Thus, he had no

opportunity to defend himself as an accused. He only defended the firm as

its partner. Therefore, it is only the partnership firm which is liable to be

convicted in the aforesaid four complaints.

In the complaint relevant to Crl.A. No.1432/2013, the firm was not

arrayed as an accused and only Mr. Sumit Seth was the sole person

prosecuted by the complainant/appellant Company. In fact the averment

made in the complaint is that Mr. Sumit Seth was the Proprietor of M/s.

Tarun Engineering Syndicate. Admittedly M/s. Tarun Engineering

Syndicate is a partnership firm and Mr. Sumit Seth is its partner and not its

proprietor. Despite his being a partner of the firm Mr. Sumit Seth cannot be

convicted in the aforesaid complaint because the firm was not made an

accused along with Mr. Sumit Seth. A firm is a Company within the

meaning of Section 141 of the Negotiable Instruments Act and, therefore,

the partner of a firm is only vicariously liable where an offence under

Section 138 of the Act is committed by the firm, provided he was the person

in charge of and responsible to the firm for conduct of its business at the

relevant time. Unless the firm is prosecuted and convicted, a partner cannot

be convicted with the aid of Section 141 of the Act. This legal proposition

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

was made more than clear by the Hon'ble Supreme Court in Aneeta Hada

Vs. Godfather Travels & Tours Pvt. Ltd. and connected matters (2012) 5

SCC 661. Settling the controversy in this regard, the three Judges Bench of

the Apex Court inter alia held as under:

"43. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh (supra) which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada (supra) is overruled with the qualifier as stated in paragraph 37. The decision in Modi Distilleries (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove."

15. For the reasons stated hereinabove, Crl. A. No.1432/2013, against

Shri Sumit Sethi is dismissed. Crl. A. Nos.1433/2013, 1434/2013,

1435/2013 & 1436/2013 are allowed and M/s. Tarun Engineering Syndicate

is convicted under Section 138 of the Negotiable Instruments Act. The

accused firm is fined of Rs.16.00 lakh Rs.16.00 lakh, Rs.19.00 lakh and

Rs.16.00 lakh respectively in the complaints relevant to Crl. A.

Nos.1433/2013, 1434/2013, 1435/2013 & 1436/2013. The accused firm is

granted four (4) weeks from today to deposit the amount of fine, failing

Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;

which it shall be open to the complainant/appellant Company to realize the

same in accordance with law.

The appeals stand disposed of accordingly.

The LCR be sent back along with a copy of this order.

MAY 09, 2014                                              V.K. JAIN, J.
b'nesh




Crl. A. Nos.1432 of 2013; 1433 of 2013; 1434 of 2013;