Dilip Chawla vs Ravinder Kumar & Anr.
2017 Latest Caselaw 4040 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                            Reserved on: 03.08.2017
                                             Delivered on:10.08.2017
+        CRL.REV.P.607/2016

DILIP CHAWLA                                       ..... Petitioner

                           versus

RAVINDER KUMAR & ANR.                              ..... Respondents

Advocates who appeared in this case:
For the Appellant      : Mr.Rajiv Wadhwa with Mr.Himanshu &
                         Mr.Bhupinder Singh.
For the Respondent No.1 : Mr.Pradeep Kumar Arya with
                          Mr.L.K.Dahiya and Mr.Raj Karan Sharma.
For the Respondent No.2 : Ms.Neelam Sharma, APP.

CORAM:-
HON'BLE MR JUSTICE ASHUTOSH KUMAR

                             JUDGMENT

ASHUTOSH KUMAR, J

1. Dilip Chawla was tried and convicted under Section 138 of the Negotiable Instruments Act, 1881 vide judgment dated 26.08.2014, passed by the learned Metropolitan Magistrate in CC No.142-1/2 and was sentenced vide order dated 24.02.2016 to undergo SI for six months, to pay a compensation of Rs.6,00,000/- (Rs.6 lakhs) within two months of passing of the order failing which to suffer SI for 10 months.

2. The petitioner challenged the aforesaid judgment of the Trial Court before the learned District & Sessions Judge (West), Delhi in Crl.Appeal No.54314/2016, which too was dismissed vide judgment dated 27.08.2016.

3. The present revision petition is directed against both the concurrent judgments of the Courts below.

4. Respondent No.1, Ravinder Kumar had advanced a loan of Rs.4 lakhs to the petitioner which was promised to be returned by him with simple interest of 24% before May, 2012. When money was demanded by the respondent No.1, it was refused. Later, in June 2012 the petitioner is said to have issued a cheque dated 23.07.2012 of Rs.4 lakhs bearing No.282146, drawn on ICICI Bank, C-Block, Janakpuri branch. It was promised by the petitioner that the interest would be paid later. The aforesaid cheque, on presentation in bank, was dishonoured for insufficiency of funds. A notice was sent in writing to the petitioner on 08.08.2012 demanding a sum of Rs.4 lakhs but no payment was made. Hence, the complaint was lodged against the petitioner.

5. Learned counsel appearing for the petitioner has drawn the attention of this Court to the averments made in the complaint which reflect that even though respondent No.1 was aware of the fact that the petitioner was under heavy debts, but still agreed to pay an amount of Rs.4 lakhs at the rate of 24% per annum. It was further pointed out that during trial, the respondent No.1/complainant also deposed that his relatives and well wishers had advised him to execute an

agreement with the petitioner regarding the loan transaction but since an assurance was made by the petitioner that the loan amount would be returned within three months, the respondent No.1/complainant did not care for executing any agreement.

6. It has thus been submitted that the case made out in the complaint and in the evidence of respondent No.1 is not plausible and cannot be believed that any loan was given to the petitioner and that the petitioner was under an obligation to repay the debt.

7. During the cross examination, respondent No.1 is said to have stated that he is a property dealer by profession and that he knew one Jaspreet Singh Bhatia for about one year. He further submitted that no written agreement was prepared and no receipt also was taken from the petitioner. Even though the respondent No.1/complainant is an Income Tax assessee, he has admitted that in the year 2007, he did not show the transaction of loan in his returns.

8. It has, therefore, been argued on behalf of the petitioner that in the absence of any written agreement with the complainant regarding grant of loan and no receipt regarding such payment, it was difficult to believe that such an amount was advanced to the petitioner. It has further been urged that in this background, if the Income Tax return for the year 2007 does not show any loan transaction, it cannot be believed that the loan was given to the petitioner.

9. The petitioner did not lead any evidence at the trial.

10. The petitioner, in his statement recorded under Section 313 of the Code of Criminal Procedure has stated that his tenant Jaspreet

owed some money to the respondent No.1/complainant and he gave the aforesaid cheque to bail out his tenant Jaspreet from the trouble.

11. The Trial Court, therefore, held that the petitioner had failed to discharge the onus to rebut the presumptions against him as he had failed to raise a probable defence. Accordingly, the petitioner was convicted and sentenced as aforesaid.

12. Similar grounds were taken by the Appellate Court in affirming the conviction and sentence of the petitioner.

13. From the perusal of the records, the following facts emerge. There is a definite averment of the respondent No.1/complainant that he had advanced a loan of Rs.4 lakhs on the asking of the petitioner. The respondent No.1/complainant is an Income Tax assessee but such loan amount was not shown in his Income Tax return. There is no written agreement about the loan or any receipt executed by the petitioner. The petitioner admits of signing the cheque but not towards repayment of any debt. It was stated to have been issued only for the purposes of bailing out from difficulty one Jaspreet who was his tenant who owed some money to the respondent No.1/complainant.

14. In order to appreciate the rival contentions of the parties, it is necessary to examine the provisional Sections 118(a), 138 and 139 of the NI Act.

Section 118 - Presumptions as to negotiable instruments Until the contrary is proved, the following presumptions shall be made:--

(a) of consideration--that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed,

negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;

* * * * *

Section 138 - Dishonour of cheque for insufficiency, etc., of funds in the account Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for 1[a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless--

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

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course

of the cheque, within fifteen days of the receipt of the said notice.

Explanation.-- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.

Section 139- Presumption in favour of holder 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.

15. For the application of provision of Section 138 of the NI Act, 3 ingredients are required to be satisfied, i.e.,

I. That there should be a legally enforceable debt; II. That the cheque should have been drawn from the account of the bank for discharge in whole or in part of any debt or other liability which pre-supposes a legally enforceable debt; and III. That the cheques so issued is dishonoured for insufficiency of funds.

16. Under Section 139 of NI Act, unless the contrary is proved, the holder of the cheque shall be presumed to have received the cheque in discharge of any debt or liability.

17. Sub-clause (a) of Section 118 of the NI Act, inter-alia, provides that unless the contrary is proved, the drawn up negotiable instrument, if accepted, has to be presumed to be for consideration.

18. In Goa Plast (P) Ltd. vs. Chico Ursula D'souza & Anr., (2003) 3 SCC 232, the Supreme Court has held that that the provisions of section 138 to 142 of the NI Act, is for the purpose of giving

credibility to negotiable instruments in business transactions. In view of section 139 of the NI Act, it had to be presumed that a cheque is always issued in discharge of any debt or other liability. The presumption could be rebutted by adducing evidence and the burden of proof is on the person who wants to rebut the presumption.

19. In Krishna Janardhan Bhat vs. Dattatraya G. Hegde, (2008) 4 SCC 54, the Supreme Court had the occasion to deal with the aforesaid provisions of the Act. In the aforesaid decision, the Supreme Court took the view that Section 139 of the NI Act merely raises a presumption in regard to the cheque having been issued in discharge of any debt or liability but not the existence perse of a legally recoverable debt.

20. However, in Rangappa vs. Sri Mohan, (2010) 11 SCC 441, a three judge bench of the Supreme Court held that Section 139 of the NI Act includes the presumption regarding the existence of a legally enforceable debt or liability and that the holder of a cheque is also presumed to have received the same in discharge of such debt or liability. It was clarified in the aforesaid decision that the presumption of the existence of a legally enforceable debt or liability is, of course, rebuttable and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. Without doubt, the initial presumption is in the favour of the complainant.

21. In Rangappa vs. Sri Mohan (Supra), section 139 of the NI Act is stated to be an example of a reverse onus clause which is in tune with the legislative intent of improving the credibility of negotiable

instruments. Section 138 of the NI Act provides for speedy remedy in a criminal forum, in relation to dishonour of cheques. Nonetheless, the Supreme Court cautions that the offence under Section 138 of the NI Act is at best a regulatory offence and largely falls in the arena of a civil wrong and therefore the test of proportionality ought to guide the interpretation of the reverse onus clause. An accused may not be expected to discharge an unduly high standard of proof. A reverse onus clause requires the accused to raise a probable defence for creating doubt about the existence of a legally enforceable debt or liability for thwarting the prosecution. The standard of proof for doing so would necessarily be on the basis of "preponderance of probabilities" and not "beyond shadow of any doubt".

22. It is not necessary that every loan transaction is required to be entered into after an agreement. True it is that if an agreement is executed for giving of loan and receipt is produced, it is a definite proof of the fact that loan has been given to an accused. Nonetheless this is not a statutory requirement.

23. The advancement of loan in cash may entail negative consequences for a party especially an Income Tax assessee as his having acted in breach of Section 269SS of Income Tax Act, 1961. Chapter XXB provides for the requirement as to the mode of acceptance, payment or repayment in certain cases to counteract evasion of tax. Section 269SS mandates that no person, after the cut off date shall take or accept from any other person any loan or deposit otherwise than by an account payee cheque or an account payee bank draft if the amount is more than Rs.10,000/-. Breach of Section 269SS

of the Income Tax Act provides penalty to which a person would be subjected to under Section 271D.

24. However, Section 271D does not provide that such transaction would be null and void. The payer of money in cash, in violation of Section 269SS of the Income Tax Act can always have the money recovered.

25. The Supreme Court in the case of Assistant Director of Inspection vs. A.B.Shanthi, (2002) 6 SCC 259 has held as follows:-

"The object of introducing S. 269 is to ensure that a tax payer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizure unaccounted money is unearthed and the tax payer would usually give the explanation that he had borrowed or received deposits from his relatives or friends sand it is easy for the so-called lender also to manipulate his records later to suit the plea of the tax-payer. The main object of S. 269-SS was to curb this menance.

7. In the light of the observations of the Apex Court, it cannot but be said that Sec. 269-SS only provided for the mode of acceptance payment or repayment in certain cases so as to counteract evasion of tax. Sec. 269-SS does not declare all transactions of loan, by cash in excess of Rs. 20,000/- as invalid, illegal or null and void, while as observed by the Apex Court, the main object of introducing the provision was to curb and unearth black money. To construe Sec. 269-SS as a competent enactment declaring as illegal and unenforceable all transactions of loan, by cash, beyond Rs. 20,000/-, in my opinion, cannot be countenanced.

8. Yet another reason for this opinion is Sec. 271 -D which reads thus:--

"271-D. Penalty for failure to comply with the provisions of Section 269-SS. (1) If a person takes or accepts any loan or deposit in contravention of the provisions of Section 269-SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted.

2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner."

In that if a person takes or accepts any loan or deposit in contravention of Sec. 269-SS is liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted, as may be imposed by the Joint Commissioner.

11. The contravention of Section 269 SS though visited with a stiff penalty on the person taking the loan or deposit, nevertheless, the rigor of Section 271D is whittled down by Section 273B, on proof of bonafides. It cannot therefore be said that the transaction of the nature brought before this court could be declared illegal, void, and unenforceable".

26. Thus from the complaint and the deposition of the complainant/respondent No.1 the factum of giving of loan stands established.

27. The petitioner did not lead any evidence. On the contrary, in his 313 statement he has taken a plea which is not at all convincing. It appears rather strange that he issued a cheque in the name of the complainant/respondent No.1 for the purposes of benefiting his tenant.

28. Thus, the presumption of a legally enforceable debt could not be rebutted by the petitioner.

29. Both the Courts below rightly held that the petitioner could not rebut the presumption under Section 139 of the Negotiable Instruments Act.

30. There is no reason to interfere with the concurrent judgments of the Courts below.

31. From the records of this revision petition, it appears that the petitioner has deposited Rs.6 lakhs with the Registrar General of this Court for suspension of the sentence during the pendency of the revision petition.

32. Keeping into account the aforesaid, this Court deems it appropriate that the sentence of the petitioner be reduced to the period which he has undergone in custody.

33. The amount of Rs.6 lakhs which has been deposited by the petitioner shall be released in favour of the complainant/respondent No.1 on the respondent No.1 appearing before the Registrar General after 30 days of passing of this order.

34. The revision petition is partly allowed with the aforesaid observations.

ASHUTOSH KUMAR, J AUGUST 10, 2017 k