TMI Blog2015 (5) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... presented for payment. Whether the complaint of the appellant was maintainable under Section 138 of the NI Act since the cheques in question were security cheques ? - HELD THAT:- It has come in evidence that the cheques (Ex. CW-1/1, CW-1/2 CW-1/3) were all filled up in all respects by the accused at the time of their being delivered to the complainant, simultaneously with the execution of the MOU (Ex. CW-1/4). The said original cheques are placed on the Trial Court Record which has been summoned and perused, and it is clear to the naked eye that they had been filled by the same person, and in the same ink. It is not even the case of the accused that these cheques were blank when given to the complainant, or that the appellant/complainant had filled them up subsequently. Even otherwise, merely because the cheque may be blank in some or all respects (except that it bears the signatures of the drawer), and the blanks may have been filled in by the drawee subsequently, that by itself does not invalidate the cheque. It cannot be said that a complaint under Section 138 NI Act would not lie in respect of such a cheque, consequent upon its dishonor for reason of insufficient funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecution of the MOU (Ex. CW-1/4), the debt of Rs. 1.5 lacs was outstanding. The appellant was well within his rights to enforce the security in respect whereof the cheques in question were issued and to seek to recover the outstanding debt by encashment of the said cheques. Since the cheques in question were dishonoured upon presentation, the accused suffered all consequences as provided for in law and the appellant became entitled to invoke all his rights as created by law - the appellant was entitled to invoke Section 138 of the NI Act; issue the statutory notice of demand, and; upon failure of the accused to make payment in terms of notice of demand - to initiate the complaint under Section 138 of the NI Act. The learned Magistrate has returned findings of fact which are palpably wrong; its approach in dealing with evidence is patently illegal; its decision is based on an erroneous view of the law, and; the impugned judgment, if sustained, would lead to grave miscarriage of justice - the impugned judgment is set aside - accused is convicted of the offence under Section 138 of the NI Act. - Crl. L.P. 706/2014 - - - Dated:- 14-5-2015 - Hon'ble Judges Vipin Sanghi, J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant/complainant admitted the receipt of Rs. 1.50 lakhs out of the aforesaid amount. Three cheques in respect thereof were returned to the accused when the said amount of Rs. 1.50 lakhs was returned in installments of Rs. 50,000/- each. The appellant/complainant claimed that the accused, in order to repay the remaining amount of Rs. 1.50 Lakhs issued three cheques of Rs. 50,000/- each, bearing Nos. 864160, 864161 864162 dated 15.01.2012, 15.02.2012 15.03.2012 respectively, drawn on Axis Bank, Preet Vihar Branch, Delhi, in favour of the appellant, which were exhibited as Ex. CW1/1, CW1/2 and CW1/3. The said cheques were presented and were dishonoured upon presentation on account of insufficient funds. After issuance of the statutory notice dated 04.08.2012 under Section 138 NI Act, since the accused did not make payment, the complaint was preferred. The accused admitted, while making his statement under Section 251 Cr.P.C., that he was liable to make payment to the appellant/complainant of Rs. 60,000/-, but denied that the liability was Rs. 1,50,000/-. 7. The submission of learned counsel for the appellant is that the learned Magistrate, while acquitting the accused, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accused that the outstanding liability was only to the tune of Rs. 60,000/- and not Rs. 1.50 lakhs, was his mere ipse dixit, which was not shown to be even probably true. The same did not dislodge the presumption under Section 118 and 139 of the NI Act, which arose on account of the in disputed position that the cheques Ex. CW1/1, CW1/2 and CW1/3 had been issued/signed by the accused drawn from the bank account maintained by him. 10. On the other hand, the submission of learned counsel for the accused supports the impugned judgment. He submits that the appellant could not establish the availability of monetary liquidity with him, to show that he had advanced any loan, and that Rs. 3 Lakhs was outstanding. The claim made by the appellant/complainant, that he had earlier too advanced a loan of Rs. 3 Lakhs, out of which only Rs. 2 Lakhs had been returned was not believable, as there was no reason for the petitioner to invest a further amount in the business of the accused - when the initially invested amount had not been fully returned. He further submits that the petitioner had admitted during his cross-examination that the cheques in question had been given as security cheques. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that First party will return full amount of Rs. 3,00,000/- (Rs. Three Lakhs only) to Second Party Sh. Suresh Chandra Goyal in six instalment of Rs. 50,000.00 (Rs. Fifty thousand only) by way of six monthly cheque starting from December, 2011................ . Thus, the factum of the debt of Rs. 3 Lakhs being owed by the accused to the appellant/complainant stands duly proved and established by the MOU (Ex. CW-1/4). 14. The approach of the learned Magistrate in doubting the existence of the debt, and in going behind MOU (Ex. CW-1/4) is clearly misdirected. No further inquiry was called for on the said aspect since the MOU (Ex. CW-1/4) was not even challenged by the accused, and the exercise undertaken by the learned Magistrate was even barred by law. 15. The endeavour of the learned Magistrate to go behind the MOU (Ex. CW-1/4) was not permissible, in view of Sections 91 92 of the Evidence Act. When the terms of a contract have been reduced to the form of a document, no evidence could be given in proof of terms of such contract, except the document itself. The two exceptions and three explanations to Section 91 of the Evidence Act do not come into play in the facts of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing debt. The accused has also not led any evidence to show that the outstanding liability was Rs. 60,000/-, and not Rs. 1.5 lakhs. The accused, to rebut the presumption under Section 139 read with Section 118 of the NI Act, has to set up at least a probable defence. The defence cannot be frivolous or moonshine. It cannot be merely a possible defence. 20. This Court in V.S. Yadav v. Reena, 172 (2010) DLT 561, commented on the obligation of the accused while setting up a defence to repulse the presumption created by virtue of Section 118 and 139 of the NI Act as follows: 5. It must be borne in mind that the statement of accused under Section 281 Cr.P.C. or under Section 313 Cr.P.C. is not the evidence of the accused and it cannot be read as part of evidence. The accused has an option to examine himself as a witness. Where the accused does not examine himself as a witness, his statement under Section 281 Cr.P.C. or 313 Cr.P.C. cannot be read as evidence of the accused and it has to be looked into only as an explanation of the incriminating circumstance and not as evidence. There is no presumption of law that explanation given by the accused was truthful. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and asked the cheques to be returned and if still cheques were not returned, he would have served a notice as complainant. Nothing was proved in this case . 22. The accused did not lead any evidence to show that apart from the amount of Rs. 1.5 lakhs, admittedly returned to the appellant/complainant after the execution of the MOU (Ex. CW-1/4), a further sum of Rs. 90,000/- was returned by the accused to the complainant. The accused did not step into the witness box to stand by his defence in this respect. He did not produce any documentary evidence in the form of an acknowledgment or receipt nor claimed that one had been, issued by the complainant, to show that the said amount, i.e. Rs. 90,000/- had been paid to the complainant over and above the amount of Rs. 1.5 lakhs admitted and acknowledged by the complainant. He did not produce any other person as a witness in whose presence the amount may have been returned. 23. The parties, admittedly, recorded the outstanding liability of the accused, existing on the date of the execution of the MOU (Ex. CW-1/4). In this light, it does not stand to reason as to why they would not record the repayment of the amount of Rs. 90,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court. It is, therefore, evident that the transaction between the parties was that at the time of execution of the MOU (Ex. CW-1/4) six post-dated monthly cheques of Rs. 50,000/- each towards security were delivered by the accused to the complainant/accused. These cheques were issued in respect of a crystallized and admitted debt of Rs. 3 Lakhs. The accused returned Rs. 1.50 Lakhs to the complainant in cash, in three installments of Rs. 50,000/- each and on each such occasion, the complainant returned one cheque of Rs. 50,000/-. According to the complainant, the remaining amount of Rs. 1.50 Lakhs was not returned and, thus, the appellant proceeded to enforce the security by presenting the three security cheques (Ex. CW-1/1, CW-1/2 CW-1/3), which were dishonoured. 25. It has come in evidence that the cheques (Ex. CW-1/1, CW-1/2 CW-1/3) were all filled up in all respects by the accused at the time of their being delivered to the complainant, simultaneously with the execution of the MOU (Ex. CW-1/4). The said original cheques are placed on the Trial Court Record which has been summoned and perused, and it is clear to the naked eye that they had been filled by the same perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of situations that the Courts have dealt with from time to time, and the manner in which the defence of security cheque , or that the cheque was given as a security, set up by the accused, has been dealt with. 30. In ICDS Ltd. Vs. Beena Shabeer Anr . (2002) 6 SCC 426, the cheque in question had been issued by the guarantor (wife) of the principal debtor (husband) in respect of a hire purchase agreement entered into by the principal debtor with the complainant for purchase of a car. The cheque in question was issued by the guarantor towards part payment to the appellant/complainant. The same was returned unpaid on account of insufficient funds. The issue raised before the Supreme Court was whether a complaint under Section 138 of the NI Act was maintainable in respect of the said cheque. The High Court had come to the conclusion that when a cheque was issued as security, no complaint would lie under Section 138 of the NI Act, since the cheque issued could not be said to be for the purpose of discharging any debt or liability. The High Court held that the cheque must be for payment of money from out of the drawer's account. In the case of a cheque issued by a guarantor or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the true intent and purport of Section 138 of the Act. Thus, the view taken by the Kerala High Court in Sreenivasan (supra) was clearly not approved by the Supreme Court. The Supreme Court rejected the wide proposition that the dishonour of a security cheque issued by a guarantor from his account would not attract Section 138 of the NI Act. 32. The accused has placed reliance on M.S. Narayana Menon (supra). In this case, the cheque had been issued by the appellant - who was transacting shares with the share broker/second respondent/complainant. The appellant/accused disputed the statement of account relied upon by the complainant, on the basis whereof it was claimed that the cheque amount was due and outstanding. The Supreme Court examined the nature of the transactions undertaken between the parties in the light of the evidence before it. The Supreme Court held that the complainant had not been able to explain the discrepancies in his books of accounts. The complainant did not bring on record any material to show that the parties had transactions, other than those which had been entered into through the Cochin Stock Exchange. The Supreme Court held that the so called ack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A decision, it is trite, should not be read as a statute. 139. A decision is an authority for the questions of law determined by it. While applying the ratio, the court may not pick out a word or a sentence from the judgment divorced from the context in which the said question arose for consideration. A judgment as is well-known, must be read in its entirety and the observations made therein should receive consideration in the light of the questions raised before it. (See Haryana Financial Corporation and Anr. v. Jagdamba Oil Mills and Anr. , [2002] 1 SCR 621, Union of India and Ors. v. Dhanwanti Devi and Ors ., (1996) 6 SCC 44, Dr. Nalini Mahajan v. Director of Income Tax (Investigation) and Or s., [2002] 257 ITR 123 (Delhi), State of UP and Anr. v. Synthetics and Chemicals Ltd. and Anr. , 1991(4) SCC 139, A-One Granites v. State of U.P. and Ors ., AIR 2001 SCW 848 and Bhavnagar University v. Palitana Sugar Mill (P) Ltd. and Ors., (2003) 2 SCC 111. 140. Although, decisions are galore on this point, we may refer to a recent one in State of Gujarat and Ors. v. Akhil Gujarat Pravasi V.S. Mahamandal and Ors. , AIR 2004 SC 3894 wherein this Court held: ... It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NI Act would not be maintainable in respect of a security cheque or a cheque given as a security to assure the performance of another obligation. 40. I may take note of a decision of the Karnataka High Court in M/s. Klen Marshalls Manufacturers Fertilisers Ltd. v. M/s. Shri Ishar Alloy Steels Ltd., Crl. A. No. 1610/2001 decided on 26.07.2006. The accused A-6 issued a hundi in favour of the accused A-1 towards supply of certain materials. Under an agreement between A-1 and the complainant, the complainant discounted the hundi and paid an amount of Rs. 50 lacs to A-1. In addition to the discounted hundi, A-1 also issued a cheque as security to bind himself, in case A-6 does not pay the hundi amount on the due date. Eventually, the hundi was not paid by A-6 and the cheque issued by A-1 was presented for encashment, but was dishonoured. Consequently, after issuance of statutory notice under Section 138 of NI Act, the complainant preferred the complaint. The accused raised several defences, including the defence that the cheque in question was a security cheque. In this regard, the accused relied on the judgment in Sreenivasan (supra). By referring to an earlier decision in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of a debt or other liability, for the reason that the amount covered by the cheques, in terms of clause (v) of the collaboration agreement, was liable to be returned by the complainant to the accused company on the due performance of the agreement. 42. The petitioner had placed reliance on the decision of the Supreme Court in Narayana Menon (supra). This Court held that the expression, 'other liability' could not be construed as akin to 'debt'. It was held that the expression, 'other liability' could take its meaning and colour from the preceding word, 'debt', only if the rule of ejusdem generis is held to be applicable. The learned Judge held that the said rule could not be invoked because the expression, 'other liability' follows only one single expression i.e. 'debt' which is not a distinct genus. The learned Judge placed reliance on the judgment of the Supreme Court in Beena Shabeer (supra) to hold that the expression, 'other liability' must be given its ordinary and grammatical meaning. The learned Judge held that provisions and phrases used in Section 138 of the NI Act must be construed in the same sense, as people ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the cheque given as a security, if bounced, shall be the subject-matter of a prosecution under Section 138 of the Act. So, the contention of the accused that cheque (exhibit 28) was given only as a security will not enable him to escape from the clutches of law . (emphasis supplied) 45. The High Court further held as follows: 9. Even if blank cheque has been given towards liability or even as security, when the liability is assessed and quantified, if the cheque is filled up and presented to the bank, the person who had drawn the cheque cannot avoid the criminal liability arising out of Section 138 of the Negotiable Instruments Act . Thus, the myth that the dishonour of a cheque given as a security, cannot be the subject matter of a complaint under Section 138 NI Act was busted in this decision as well. 46. I may now deal with the decision in Ravi Kumar D (supra) relied upon by the respondent. In this case the petitioner preferred a petition under Section 482 Cr. P.C. to seek the quashing of the complaint filed against him under Section 138 of NI Act by respondent no. 2, on account of dishonour of three cheques of Rs. 25 lacs each. Respondent no. 2 placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reliance on Narayana Menon (supra) and in particular the extract of the said decision as quoted above in para 33, held that Section 138 of the NI Act is attracted only if the dishonoured cheque was issued in whole or in part payment of an existing debt or liability, and that the said section does not apply to a cheque issued to meet the future liability, which may arise on the happening of some contingency. It was held that a post dated cheque, if issued for discharge of a due debt, in event of dishonour, would attract Section 138 of NI Act, but a cheque issued not for an existing debt/liability, but issued by way of a security for meeting some future contingency, would not attract Section 138 of NI Act. 49. Firstly, I may observe that the present is a case where the post dated cheques in question were issued for discharge of a due debt, since the debt was existing at the time of execution of the MOU (Ex. PW-C1/4) between the parties. Secondly, what appears to have influenced the decision of the Court in Ravi Kumar D (supra) is the above quoted extract from Narayana Menon (supra), which does not appear to be the ratio of the said decision. The Court while deciding Ravi Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any reason, purchase order is not carried to its logical conclusion either because of its cancellation or otherwise, and the material or goods for which the purchase order was placed is not supplied, the cheque could not be held to have been drawn for an existing debt or liability. It was held that the payment made by a cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability. While disagreeing with the view of this Court, the Supreme Court held as follows: ............If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of the cheque, and then requested the complainant not to present the cheque as the goods had not been supplied. The Kerala High Court held that the said cheque could not be said to be one issued in discharge of a liability. 55. I may refer to another decision of this Court in Haryana Petrochemicals Ltd. Anr. v. Indian Petrochemicals Ltd. Anr., 2015 (1) JCC (NI) 11. The petitioner, Haryana Petrochemicals had issued cheques in lieu of supply of chemicals by the respondent Indian Petrochemicals, which had been dishonoured upon presentation. The learned Magistrate had convicted the petitioners under Section 138 of NI Act. The said judgment was endorsed by the learned Sessions Judge. Consequently, a revision has been preferred before the High Court. The primary submission of the petitioner was that the cheques in question were security cheques, as it was a regular trade practice that after the goods had been received by the petitioner company, fresh cheques in lieu of the security cheques were issued by the petitioners. It was argued that the security cheques, by themselves, would not constitute a legal debt or liability of the petitioner towards the complainant. The Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mean: Protection; assurance; Indemnification. The term is usually applied to an obligation, pledge, mortgage, deposit, lien, etc., given by a debtor in order to assure the payment or performance of his debt, by furnishing the creditor with a resource to be used in case of failure in the principal obligation. Collateral given by debtor to secure loan. Document that indicates evidence of indebtedness. The name is also sometimes given to one who becomes surety or guarantor for another . (Emphasis supplied) 58. Similarly, the word security is defined in the Shorter Oxford English Dictionary (5th edition), inter alia, to mean: Property etc. deposited or pledged by or on behalf of a person as a guarantee of the fulfillment of an obligation (as an appearance in court or the payment of a debt) and liable to forfeit in the event of default . (Emphasis supplied) 59. Thus, when one party gives a security to the other, implicit in the said transaction is the understanding that in case of failure of the principal obligation, the security may be enforced. 60. In V.K. Ashokan v. CCE, (2009) 14 SCC 85, the Supreme Court observed that: The term security sig ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
