TaxTMI 
TaxTMI 
2018 (3) TMI 1968
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.....2002. It is the case of the complainant that he belongs to village Parbatpura, situated at Taluka Mansa, District Gandhinagar, whereas the respondent No.2 is the resident of village Jamda, District Taluka Kalol, District Gandhinagar. Since both the villages are at a distance of about two kilometers, the complainant shared fairly good acquaintance and relationship with the respondent-original accused. Brother-in-law of the complainant and the respondent No.2, worked as agents under one Development Officer Shri Kachrabhai Patel in L.I.C. Office; that is how the complainant had met the respondent No.2 and they had developed notable social relationship which had led to their entering into the said transaction. 3. It is the case of the prosecution as revealed in the complaint that the respondent had taken the complainant into confidence by impressing upon him that he had a big name in the office of L.I.C. He also had a side businesses of real estate and land; a process house in the name of S.B. Fabric. Under the pretext that he needed to initiate a business in partnership, he had shown the need of Rs.36 lakh. While promising partnership to the appellant in the new business with equal ....
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....e below Exh.3 taking the defense that on the date of issuance of the cheque, the account of the respondent whether was operating or not, deserves to be established firstly. The request for discharge was made on 13.4.2004, which was rejected by the Court on 13.4.2004 itself. His case was numbered subsequently as Criminal Case No.590 of 2004, since the cases above the sum of Rs.10 lakh were to be tried by the Court other than the Court which was conducting the matter. Subsequently, when the Special Court was constituted to try the case under the N.I. Act, it was numbered being Criminal Case No.1829 of 2010 and once again thereafter, it was transferred to the Court No.2 and numbered as Criminal Case No.521 of 2011 on 28.4.2011. It was thereafter transferred to the Court conducting matters under the N.I. Act specially, being Court No.28, and the criminal case number remained the same i.e Criminal Case No.521 of 2017. 10. After allowing the parties to adduce oral evidence as well as documentary evidence, the further statement of the accused on the evidence adduced came to be recorded where the defense raised in his further statement under section 313 of the Code, is that of denial of a....
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....d by way of an amendment under section 138 of the N.I. Act with effect from 6.2.2003 and hence, it cannot be made applicable as this case has been registered in December, 2002 and substantive provision under the criminal prosecution cannot be made retrospectively effective. He has taken this Court through various depositions and other evidences to urge that the Appellate Court has rightly quashed and set aside the judgment and order of the trial Court by giving detailed judgment on each point. There will not be any requirement of the interference at the end of this Court. It is further his case that the appellant has failed to prove as to how he could give loan of huge amount i.e. Rs.36 lakh to the present respondent. 15. He has also sought to rely upon the following judgments in his support : 1. T. Vasanthakumar Versus Vijaykumari reported in (2015) 8 SCC 378; 2. Sabitha Ramamurthy Versus R.B.S. Channabasavaradhya reported in Laws (SC) 2006-9-26 decided on September 13, 2006; 3. Amarnath Baijnath Gupta Versus Mohini Organics Pvt. Ltd. reported in Laws (BOM) 2008-12-79 decided on December 11, 2008; 4. Arun Tikekar Versus Sanatan Santha reported in LAWS (BOM)2009-640 decid....
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....of proving legally enforceable debt by the complainant is concerned, the law has been laid down by the three Judges Bench of the Hon'ble Apex Court in case of Rangappa Versus Sri Mohan, reported in (2010) 11 SCC 441, wherein it is held that presumption mandated by Section 139 of the Act include the existence of legally enforceable debt or liability and this being a rebuttal presumption, of course, such presumption can be rebutted by the accused by raising the defence and on contesting liability. 20. It, of course, is in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, what can be undoubtedly said is that there is an initial presumption that favours the complainant and Section 139 is an example of a reverse onus clause, which has been included in furtherance of the legitimate objection of improving the credibility of the negotiable instruments. To that extent the Apex Court held that the observations made in case of 'Krishna Janardhan Bhatt Vs. Dattatraya G. Hedge, AIR 2008 SC 1325 would not be correct. The relevant observations read as under: "7.....
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....held that: "6. Once the cheque relates to the account of the accused and he accepts and admits the signatures on the said cheque, then initial presumption as contemplated under Section 139 of the Negotiable Instruments Act has to be raised by the Court in favour of the complainant. The presumption referred to in Section 139 of the N.I. Act is a mandatory presumption and not a general presumption, but the accused is entitled to rebut the said presumption. What is required to be established by the accused in order to rebut the presumption is different from each case under given circumstances. But the fact remains that a mere plausible explanation is not expected from the accused and it must be more than a plausible explanation by way of rebuttal evidence. In other words, the defence raised by way of rebuttal evidence must be probable and capable of being accepted by the Court. The defence raised by the accused was that a blank cheque was lost by him, which was made use of by the complainant. Unless this barrier is crossed by the accused, the other defence raised by him whether the cheque was issued towards the hand loan or towards the amount spent by the complainant need not be co....
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....wer 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. 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. 9. Ordinarily in cheque bouncing cases, what the courts have to consider is whether the ingredients of the offence enumerated in Section 138 of the Act have been met and if so, whether the accused was able to rebut the statutory presumption contemplated by Section 13 9 of the Act. With respect to the facts of the present case, it must be clarified that contrary to the trial court's finding, Section 138 of the Act can indeed be attracted when a cheque is dishonoured on account of `stop payment' instructions sent by the accused to his bank in respect of a postdated cheque, irrespective ....
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....xpenditure incurred during the construction of the accused's house, the existence of a legally enforceable debt or liability had not been shown, thereby creating a probable defence for the accused. Counsel appearing for the appellantaccused has relied on a decision given by a division bench of this Court in Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54, the operative observations from which are reproduced below (S.B. Sinha, J. at Paras. 2932, 34 and 45): "29. Section 138 of the Act has three ingredients viz.: (i) that there is a legally enforceable debt (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and (iii) that the cheque so issued had been returned due to insufficiency of funds. 30. The proviso appended to the said section provides for compliance with legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act....
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....atrix of each case, the materials brought on record and having regard to legal principles governing the same." (emphasis supplied) 11. With respect to the decision cited above, counsel appearing for the respondent-claimant has submitted that the observations to the effect that the `existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act' and that `it merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability' [See Para. 30 in Krishna Janardhan Bhat (supra)] are in conflict with the statutory provisions as well as an established line of precedents of this Court. It will thus be necessary to examine some of the extracts cited by the respondentclaimant. For instance, in Hiten P. Dalal v. Bratindranath Banerjee , (2001) 6 SCC 16, it was held (Ruma Pal, J. at Paras. 2223): "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, ..., it is obligatory on the Court to raise this presumption in every case where the factual basis for the ra....
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....he existence of consideration was improbable, doubtful or illegal. ..." This decision then proceeded to cite an extract from the earlier decision in Bharat Barrel & Drum Manufacturing Company v. Ami n Chand Pyarelal, (1993) 3 SCC 35 (Para. 12): "Upon consideration of various judgments as noted here-in-above, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbably or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the nonexistence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon whic....
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....that the burden of so proving would be on the accused. ..." (emphasis supplied) 14. In light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. (emphasis supplied) Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebutt....
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....ossibility of the complainant having spent his own money for the same purpose. As per the record of the case, there was a slight discrepancy in the complainant's version, in so far as it was not clear whether the accused had asked for a hand loan to meet the constructionrelated expenses or whether the complainant had incurred the said expenditure over a period of time. Either way, the complaint discloses the prima facie existence of a legally enforceable debt or liability since the complainant has maintained that his money was used for the constructionexpenses. Since the accused did admit that the signature on the cheque was his, the statutory presumption comes into play and the same has not been rebutted even with regard to the materials submitted by the complainant." (emphasis supplied) 21. Apt would be also to refer to the Chapter 13 of the NI Act under the heading 'Special Rules of Evidence' which provides for the Presumptions available under Section 118 of the NI Act, until the contrary is proved, certain presumptions are made available under this Section 118 of the NI Act which reads thus: "118. Presumptions as to negotiable instruments. (a) of consideration; ....
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....r of the cheque and while discussing the presumption under Section 139 of the NI Act, it noticed that the Court below had convicted the defendant for dishonour of cheque of Rs.5 lakh given as consideration of a land given to him by the complainant. The High Court had acquitted the defendant on the ground that the appellantoriginal complainant had not proved legally enforceable debt or liability. The Apex Court held that the High Court was misplaced in not considering the presumption in favour of the complainant as provided under Section139 of the Act, the burden had shifted on the accused, which she failed to discharge. The signature of the cheque had been accepted by the accused-respondent. The Apex Court held that the presumption under Section 139 of the NI Act would operate and it is irrelevant that the complainant had withdrawn the amount of Rs.5 lakh two days prior to the giving of the cheque, which he failed to bring on record, such withdrawal of money from the bank. The story of the accused was that the cheque was given to the complainant long back in the year 1999 and the loan was repaid. However, the complainant did not return the cheque and the same was misused by him to ....
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....t did not return the security cheque. According to the accused, it was that very cheque used by the complainant to implicate the accused. However, it may be noted that the cheque was dishonoured because the payment was stopped and not for any other reason. This implies that the accused had knowledge of the cheque being presented to the bank, or else how would the accused have instructed her banker to stop the payment. Thus, the story brought out by the accused is unworthy of credit, apart from being unsupported by any evidence." 26. The ratio laid down in case of Vijay Vs. Laxman and Another, (2013) 3 SCC 86, at this juncture would be necessary to reproduce, where the Apex Court has held that When cheque is issued by a person who has signed on the cheque and the complainant reasonably discharges the burden that the cheque had been issued towards a lawful payment, it is for the accused to discharge the burden under Section 118 and 139 of the N.I. Act that the cheque had not been issued towards discharge of a legal debt, but, was issued by way of security or any other reason on account of same business transaction as was obtained unlawfully. Profitable it would be to reproduce the ....
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....ument/cheque had been obtained from its lawful owner or from any person in lawful custody thereof by means of an offence or fraud or had been obtained from the maker or acceptor thereof by means of an offence or fraud or for unlawful consideration, the burden of disproving that the holder is a holder in due course lies upon him. Hence, this Court observed therein, that indisputably, the initial burden was on the complainant but the presumption raised in favour of the holder of the cheque must be kept confined to the matters covered thereby. Thereafter, the presumption raised does not extend to the extent that the cheque was not issued for the discharge of any debt or liability which is not required to be proved by the complainant as this is essentially a question of fact and it is the defence which has to prove that the cheque was not issued towards discharge of a lawful debt. 12. Applying the ratio of the aforesaid case as also the case of K.N. Beena vs. Muniyappan And Anr. (supra), when we examine the facts of this case, we have noticed that although the respondent might have failed to discharge the burden that the cheque which the respondent had issued was not signed by him, ....
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....mplainantdairy owner for which a case also had been lodged by the respondentaccused against the complainants father/dairy owner, missing of the date on which loan was advanced and the date on which complaint was lodged, casts a serious doubt on the complainants plea. It is, therefore, difficult to appreciate as to why the cheque which even as per the case of the complainant was towards repayment of loan which was meant to be encashed within two months, was deposited on the date of issuance itself." 27. In wake of settled position of law as to how to appreciate the duly signed cheque in the hands of holder in due course or a drawee, on adverting to the facts of the instant case, the question needs to be addressed as to whether proof of existence of legally enforceable debt, could be established by the Appellant? 28. In the examinationinchief, the complainant has given all the details which have been specified in the complaint itself, which may not be required to be reiterated. The case of the prosecution, in sum and substance, as emerged in oral evidence is that an amount of Rs.36 lakh had been advanced to the respondent which he needed for his business, which was to be set up an....
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....vanced amount in the month of December, 2001. Since, the demand of the respondent No.2 was of cash, accordingly, it was managed. It is the case of the complainant that it was under the pretext of carrying out the partnership that he had asked for advanced sum of Rs.36 lakh. He, of course, was unable to give exact dates of advancement of money, but according to him, periodically such amount had been given and a promissory note was issued by the respondent. 32. The source of amount of Rs.36 lakh has been questioned seriously by the learned advocate for the respondent, and a consistent reply of the complainant was that the same was earned from the agricultural income of his relatives. The complainant collected the said amount from various relatives, the details whereof are as under : Sr. No. Source of fund from : Amount 1 His agricultural income Rs.3.50 Lakh 2 His maternal uncle (Masa) Madhabhai Ramanbhai Rs.4 Lakh 3 Dashrathbhai Madhabhai (maternal cousins) (Masi's son) Rs.4 Lakh 4 Ramanbhai Madhabhai Shankardas (Cousin brother) Rs.4 Lakh 5 Dwarkadas Madhavlal Shankardas Patel (cousin and brother of Ramanbhai) Rs.3 Lakh 6 Bhikhabhai Hathidas Patel @ Gandabhai....
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....arcel of land was valued at Rs.31,52,900/since the complainant also had agreed to take lesser value than the actual amount due. 34.4 The stamp paper has been purchased by his paternal cousin namely Mr. Bharatbhai Kachrabhai Patel, three to four days prior to the execution of the said writing dated 12.2.2002, the community leader had also met, since, there was no power of attorney executed pursuant to the amount lent to the respondent, which according to the complainant had been given by 23.12.2001, by way of his bonafide gesture, he had agreed to transfer him the part of his land. It is also the case of the complainant that the property of respondent was mortgaged with the bank and hence the sale deed could not be executed in favor of the complainant for a long time and hence, entire deal could not sail through and eventually, the respondent issued a cheque dated 13.10.2002 drawn on State Bank of India signed by the respondent himself and the cheque returned memo indicates that due to insufficient funds on 1.11.2002 the cheque could not be honored. 35. This Court notices that on the part of the appellant-original complainant, regard has been made to the promissory note averred to....
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....rt by way of Special Criminal Application No.3894 of 2013. 35.6 This Court (Coram : Honourable Mr. Justice G.R. Udhwani, J.) notices that such an application (Exh.66) was made after recording the statement of accused under Section 313 of the Criminal Procedure Code. It was also noted that the respondent No.2 had alleged of kidnapping and of his signatures having been obtained on an agreement for sale of his properties forcefully and he also alleged that the cheque was stolen from the office of his brother. The Court held that in the further statement recorded under section 313 if the allegations are made therein, the burden to make such allegations good is upon the accused. Therefore, the statement made under Section 313 of Cr.P.C. cannot be considered as independent evidence and there can not be any rebuttal of such statement. Referring to the decision of the Apex Court in the case of Natasha versus Central Investigation Bureau, reported in (2013) 5 SCC 741, the Court reiterated the principle in relation to the power under section 313 of the Cr.P.C. Furthermore, on the ground that the case under section 138 of the Negotiable Instruments Act, was tried in a summary way and the pe....
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....st is also produced consisting names of about 33 persons with amount, varying from Rs.1lakh to Rs.4.46crore. A request is made to the Police Officer to investigate into this economic offence. A copy of this also had been sent to the LIC, Branch Manager and the respondent, therefore, had addressed a communication to the presentRespondent, where, he was required to submits his explanation and on 04.07.2017, he had stated that he had no partnership nor any share in or directorship in the said S.B.Fabrics and if, any one has engaged and parked his money in S.B. Fabrics, he has nothing to do with the same. Because, this Company or the partnership is of his two sons, who are independently looking after the business and he, as a father, has no role to play. So far as the present complainant is concerned, whose letter had initiated this inquiry, he had stated that it was the complainant and others, who have invested their amounts in the Company. However, it is only to cause damage to his reputation, he had written such a letter to the LIC. One witness, namely Mukesh Shah, who was working as Asst. Director in the office of the LIC, Ahmedabad on 30.07.2012 had deposed on the basis of various....
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....CBI Tilak Road 31/10/02 Rs.7,00,000 Convicted and revision pending 10 Ranchod Motidas Patel At & Post Parbatpura, ansa, Gandhinagar Cousin Brother 16/12/02 Mansa Court 115663 Navnir man Bank Megha ninagar 08/11/02 Rs.10,00,000 Settled and withdrawn 11 Teja Baba Rabari Chandumana Patan Friend 20/12/02 Patan Court 222332 CBI Tilak Road, 30/10/02 Rs.2,00,000 Acquitted 12 Ishwar Baba Desai, D 3/9 Julie Apartment Shahibaug Ahmedabad Friend 27/11/02 Court No.2 028504 CBI Tilak Road 28/10/02 Rs.6,00,000 Dismissed for non prosecution 13 Mohan Keshav Lakhia Ramapur, Lathi, Dist. Amreli Friend 22/1/03 Lathi Court 028513 CBI Tilak Road 03/11/03 Rs.5,00,000 Withdrawn 14 Mukesh Becharbhai Patel, Bhargav Society, Kubernagar, Saijpur, Ahmedabad Friend Court No.12 Ahmeda bad 030974 Navnir man Bank Megha ninagr 03/10/01 Rs.8,75,000 Settled and withdrawn 15 Jagdish Kantibhai Patel C-3, Monrepause Apt, Opp. Chandralok Tower, Shahibaug Ahmedabad Friend Court No.7 A'bad (Rural) 240092 CBI 20.12.01 Rs.9,05,000 Settled and withdrawn 37.1 List of the cases, which is in a tabular form, thus gives the details of the cases, as shown above which includes....
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....ence, such petition was not entertained. These are some of the circumstances, which had been presented before the trial Court by the appellant, herein, to indicate the overall conduct and the antecedents of the respondent. Undoubtedly, on the main issue, as to whether, the appellant can establish the guilt of the respondent accused in committing the offence punishable under Section 138 of the N.I. Act is an area, where, over and above the deposition of the complainant, deposition of other witnesses, who have been examined by the complainant also are vital to be considered for establishing the required ingredients of proving the case under section 138 of NI Act. 37.4 This discussion in the opinion of this Court was essentially to point out that the complainant could establish his transactions with the respondent, where, he had furnished the details as to how he has collected the amount from his different relatives and eventually had shown the respondent having agreed to pay back the amount in the very year by transferring half of the portion of his land. Of course, he had to get the land cleared, which was mortgaged with the Bank, which since, he could not do, as stated in the exam....
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....d been dishonored. There is no reply by the respondent to the said notice. 43. It is since mandatory for any party to issue notice as provided under the provisions of the NI Act, before he prosecutes a person for dishonor of the cheque, a notice has been issued within a period of 30 days from the date of receipt of the information from the bank with regard to the return of the cheque, and thus, such requirement has been duly fulfilled by the present applicant. The drawer of the cheque being the respondent, herein, not only failed to make the payment of the said amount to the payeeappellant within a period of 15 days from the date of receipt of such notice, but, he also chose not to reply to the same. On expiry of the period of 30 days, the appellant preferred the criminal complaint before the trial Court concerned, the details of which have already been mentioned herein above. It is also not in dispute that the cheque had returned, as per the Bank memo on account of insufficient balance in the account of the drawer. The cheque bearing No.574147 for the sum of Rs.36 lakh had returned due to insufficient balance. 44. Considering the ratio, which has been laid down in the above refe....
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....believing that the complainant succeeded in discharging the burden that there exists a legally enforceable debt or liability, and thereafter, the legal presumption was required to be dislodged or rebutted by the accused-respondent, which he miserably failed to do with preponderance of probabilities, and therefore, findings and the conclusions arrived at by the Sessions Court deserve to be quashed and set aside. The judgment and order of the appellate Court, as can be seen from appreciation of evidence that the view taken by the Appellate Court is unsustainable being contrary to the well settled cannon of law on the subject as also established by various decisions of the Apex Court. 46. The respondent No.2 was required to discharge the burden under Section 118 and 139 of the N.I. Act that the cheque he issued of Rs.36 lakh was not issued towards discharge of legal debt but was issued in view of security or was obtained unlawfully or was issued otherwise, since the appellant succeeded in proving the initial burden reasonably existence of legal debt as was required under the law. 46.1 With no reply to the notice of demand initially and in absence of any complaint to the police or ot....
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....tion that it exists. 47. Apt it would be to reproduce the relevant findings and observations of the Apex Court in the case Hiten P. Dalal v. Bratindranath Banerjee, reported in (2001) 6 SCC 16, which have been quoted and considered by the Apex Court in the case of Rangappa (supra), which are as under : "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, ..., it is obligatory on the Court to raise this presumption in every case where the factual basis for the raising of the presumption has 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 (...). 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....