TaxTMI 
TaxTMI 
2022 (8) TMI 821
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....ount of Rs.3,90,000/- was recovered by the complainant prior to the issuance of cheque by the accused which is claimed to have been admitted in his evidence, he was not entitled to present the cheque, but was liable to return it and take a fresh cheque for the balance amount and present it thereafter (para 10 page 19/20). The complainant having not so done it was held that the presumption under Section 139 of the N.I. Act stood rebutted and therefore, the accused was entitled to an acquittal which was so ordered. 3. The factual matrix is as under : (i) The complainant is a dealer, who deals in sale of tractors. On 19.09.2009 an agreement came to be entered between the complainant and the accused, (Exh.34 page 86), under the terms of which the accused had agreed to sell tractors and take a commission for such sale. It was further agreed that the commission would not be included in the price of the tractors but would be separately chargeable and receivable by the accused directly from the purchaser and price of the tractor would be remitted by the accused to the complainant. (ii) It is in pursuance to this agreement dated 19.09.2009 at Exh.34, that the accused ma....
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....tion and has stated that upon the customer giving the margin money to the dealer, which was then intimated to the company, the process of financing of the tractor, to the purchaser was completed and the balance amount was credited directly to the account of the dealer (complainant) or cheque was issued in the name of dealer. (xi) The learned trial Court by the judgment dated 18.01.2018 (page 30 to 51) held the accused guilty and convicted him for the offence under Section 138 of the N.I. Act and sentenced him as indicated above. A fine of Rs.10,50,000/- was imposed considering the amounts of Rs.40,500/- and Rs.3,90,000/- claimed to have been recovered by the complainant from third parties which he had debited to the account of the accused. (xii) In appeal, the learned Appellant Court noting that the amount of Rs.3,90,000/- was received by the complainant prior to the issuance of the cheque by the appellant/accused, held that there was suppression on behalf of the complainant and since the cheque amount was not recoverable on account of the aforesaid amount having already been received, set aside the judgment of conviction by the learned Magistrate, dated 18.01.201....
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.... a third party. He therefore submits that there is absolutely no suppression whatsoever and the conduct of the complaint has been fair throughout. (ix) The ingredients of Section 138 of the N.I. Act having being fulfilled, the learned Magistrate was fully justified in convicting the accused and passing the sentence imposed. (x) The learned Sessions Court was not justified to draw the inference as is indicated in para 10 of his judgment as the same, ran contrary to the evidence and material on record. If this was the case, it was permissible for the accused to lead evidence in defence, by examining the said Pramod Sakhare whose tractor was seized and sold by the complainant recovering Rs.3,90,000/- as sale proceeds, and getting appropriate documents on record regarding the date, time and recovery, which having not been so done, the admission by the complainant in his cross-examination of recovery of Rs.3,90,000/- cannot be related to a point of time prior to the issuance of the cheque and the finding in that regard is clearly unjustified and without any basis whatsoever. The reversal having been done only on that basis, the same is liable to be set aside and the ju....
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....Cri.) 3073, (para 8), (d) Joseph Sartho Vs. G. Gopinathan & Anr., (2008) 3 KLJ 784, (para 21), (e) Ramkrishna Urban Co-operative Credit Society Ltd., Vs. Shri Rajendra Bhagchand Warma, Cri. Appln. No. 898/2009, decided on 16.02.2010, (para 11, 20, 21), (f) Ranjit Singh Sethi Vs. Abdul Jalil Shaikh Abdulla, 2013 ALL MR (Cri) 2885, (para 16, 17, 18), (g) Shiju K. Vs. Nalini & Anr., 2016 (2) KLT 517, (para 10, 11, 12), (h) Lyca Finance Ltd. Vs. State & Anr., 2016 ACD 875, (para 4, 5), (i) Sundaravadanan Proprietor M/s. S.V.M. Auto Products Vs. M/s. Innoventive Industries Ltd., 2017 (2) MadWN (Cri) 59, (para 5, 6), (j) M/s. Industrial Fuel Consultants Vs. Shri Laxman Sharma, 2022 (1) AIR Bom.R (Cri) 34, (para 8, 9, 10), (k) Triyambak S. Hegde Vs. Sripad, 2022 (1) SCC 742, (para 20, 21). 6. Mr. Badhe, learned counsel for the appellant/complainant in rebuttal invites my attention, to the finding rendered by the learned Magistrate to the effect that the amount of Rs.3,90,000/- was received after filing of the complaint, which according to him, is based upon a correct appreciation of the evidence on record and witho....
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....id not exist. This Court has, time and again, emphasised that though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfil the requirements of rebuttal as envisaged under Sections 118 and 139 of the NI Act. This Court stated the principles in Kumar Exports [Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513 : (2009) 1 SCC (Civ) 629 : (2009) 1 SCC (Cri) 823] as follows : (SCC pp. 520-21, paras 2021). "20. 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 nonexistence 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 in....
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....ayee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted." ***** "36. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt. " Thus, what is necessary is to show that a) the cheque was issued for a legal debt or liability; b) the cheque was presented during the period of its validity [sec.138(a)]; c) on such presentation it was dishonored; d) a notice of demand was issued within the statutory period as provided in Section 138 (b) e) upon service of notice, the demand was not met with or paid with the time stipulated in Section 138(c). 8. In the instant matter, the....
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....accused had taken in all 26 tractors from the complainant for the purpose of selling them on commission, all of which were sold and payment of 12 tractors was made and on account of balance value of 14 tractors sold by the accused and other counts as indicated therein, the aforesaid cheque was being issued. The complainant in his evidence being the recipient of this letter dated 15.06.2011, has proved the same as Exh. 42. 11. A perusal of the evidence of the complainant, indicates that in the cross-examination (page 76) a mere suggestion in respect of Exh. 42 was given that the signature on Exh. 42 was different from the signature of the accused on Exh. 33, which has been denied. Apart from that, there is no serious cross-examination of the complainant vis-a-vis the letter at Exh. 42. 12. The letter dated 15.06.2011 at Exh. 42, by the accused is preceded by the demand in that regard as indicated by the communication addressed by the complainant to the accused dated 27.05.2011 Exh. 37 (page 89). The commercial relationship between the complainant and the accused, is further reflected from the letter dated 26.02.2010 Exh. 38 (page 90) which has been addressed to the complainant....
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....s fact in my evidence also. It is true to say that I have not mentioned this fact in my complaint." Insofar as the first statement is concerned, a copy of the plaint in Special Civil Suit No.2/2014, M/s. Sai Auto Agencies Vs. Shri Nitin Manikrao Deshmukh and another, filed on 02/01/2014, in which the accused is the defendant no.2, has been placed on record before the learned Special Court, at Ex.147 (pg.213 of record of Trial Court), in which the averments as against the accused are as under : "6) That the defendant No.2 sold in all 26 Tractors to various customers. That out of these, the defendant No.2 duly deposited an amount to the tune of Rs.56,34,259/- to the plaintiff by duly calculating all the expenses including VAT, Finance etc. towards the sale of 12 Tractors, and in this regard, there is no dispute or grudge amongst the plaintiff, and the defendant No.2. That for other remaining 14 Tractors, the customers cost was of Rs.70,57,000/-, and the cost for the agent was of Rs.65,91,147/-. As the amount of consideration was not paid in time, therefore the amount of the interest charged as per the terms and conditions of these agreements, was to the tune of Rs.2,44,27....
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....he plaintiff, that he is availing the loan facility from Bank/finance company, and as he is in dire need, the tractor be delivered to him, and therefore considering the demand of the said customer and the request and recommendation from the defendant No.2, the plaintiff allowed the defendant No.2 to hand over the tractor to the said customer Shri Pramod Aniruddha Sakhare. That after the receipt of delivery of said Tractor, the said Shri Pramod Aniruddha Sakhare did not exert to get the loan sanctioned from any of the Bank or Finance company, and thereby the Tractor delivered to said Shri Pramod Aniruddha Sakhare was seized, and further sold to some other person, and thereby an amount to the tune of Rs.3,90,000/- was credited to the account of defendant No.2. That as such, because of subsequent changes, the plaintiff is in all entitled to recover an amount to the tune of Rs.10,42,299/- from the defendant No.2, and the defendant No.2 is liable to pay an amount to the tune of Rs.10,42,299/- to plaintiff. 7) That it is also necessary to state here that, while working as per the agreements dtd. 10/09/09 & 19/09/09, when the defendants were practically facing the diffic....
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....d sold, resulting in the recovery of Rs.3,90,000/- from such sale. The letter at Ex.35 dated 27/5/2011 shows an outstanding amount of Rs.4,14,667 from Pramod Sakhare, whose name figures at serial number 8 in the said letter. This would indicate that the cheque amount, minus the amount of Rs.40,500/as received on 3.8.2011 was receivable from the accused on the date of filing of the complaint. The said admission thus can be construed to mean that Rs.14,72,791/- was not outstanding, but something less was outstanding, on account of the recovery of Rs.40,500/- and/or Rs.3,90,000/-. The very fact, that the complainant was prosecuting the compliant, in spite of having filed civil proceedings against the said two persons, would indicate, that amounts were recoverable. 15. The judgment of the learned Special Court, in para 9 (page 35) though indicates, recognition of the fact that the complainant had also filed Special Civil Suit No.2/2014 against the accused for recovery of the outstanding amount, which itself would indicate, that the liability of the accused was in existence, however neither the learned Special Court nor the Appellate Court, have gone into the averments in Special Civ....
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....ccused. There is nothing of that sort in the entire cross-examination of the complainant. As to how this observation has been made, and on what basis, is not spelt out. The only admission in this regard is what has been quoted above and does not indicate the date of recovery of the aforesaid amount. In this context, since the name of the person from whom the same was recovered, namely Mr. Pramod Sakhare, was known, it was open and permissible for the accused to have called him as a defense witness with the relevant documents, so as to substantiate his contention that the amount of Rs.3,90,000/- was recovered, prior to presentation of the cheque, however for reasons best known to the accused, this has not been done. This being the position, there was absolutely no justification, for the learned Appellate Court to have arrived at such a finding and on its basis attribute malafides to the complainant and dismiss the complaint by acquitting the accused on that count. In fact a comparision of the averments in the complaint which was filed on 29.3.2011 and that of the plaint in Special Civil Suit No.2/2014, filed on 02.1.2014, would indicate that the aforesaid admission quoted above, wou....
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....ccused, was that of the accused, such payment to be made within 30 days of the sale. Read in the context of Exh.34, the communication at Exh.35 dated 27.05.2011, merely states that the amount of Rs.14,72,799/- for sale of the tractors by the accused to the persons as detailed therein and on other counts was recoverable from the accused. The communication at Exh. 42, (page 94) is dated 15.06.2011, nearly 18 days after Exh.35, and acknowledges the liability of the accused to pay the amount of Rs.14,72,799/- for sale of the tractors by the accused and other amounts, such as advance paid for purchase of battery (Ex.39, dt.30/11/2009); rent paid of the Daryapur shop of the accused to the landlord Shri Shridhar Naik of Rs.24,000/- by cheque (Ex.40, dt.18/8/2010); bill of spares of Santosh Abhyankar to the account of the accused of Rs.1867/(Ex.41, dt.24/6/2010), as stated therein and therefore Exh.35, does not have any bearing whatsoever upon Exh.42, on which date the accused acknowledging his liability has issued the cheque in question. In fact in the reply by the accused at Exh.53, the accused admits to have sold 63 tractors. The evidence of PW-2, merely indicates that the persons named....
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....ovisions as contained in Section 20 of the N.I. Act which mandates that in such a case the drawer gives a prima facie authority to the holder thereof to make or complete, as the case may be, upon it, a negotiable instrument, in view of which, in a given case the holder of the cheque, would be entitled to fill it and present it for encashment. That however, in the instant matter does not appear to be so in light of Exh.42. 20. The contention by Mr. Agrawal, learned counsel for the appellant, that since some amounts were recovered by the complainant, the cheque amount could not have been said to be the amount due and payable and therefore, would not be something towards the discharge of the debt or liability, relying upon M/s. Alliance Infrastructure Project Pvt. Ltd. (supra), is clearly misconceived for the reason that the question which fell for consideration therein was as to what the expression "amount of money" means in a case where the admitted liability of the drawer of the cheque gets reduced on account of part payment made by him after issuing but before the presentation of the cheque in question. In the instant case, firstly: the payment has not been made by the accused ....
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.... presentation. 20.2. What should then be the course of action to be followed by the holder of the cheque ? Certain provisions of the N.I. Act, being material are reproduced as under : "14. Negotiation.-When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute the person the holder thereof, the instrument is said to be negotiated. 15. Indorsement.-When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to indorse the same, and is called the "indorser". 20. Inchoate stamped instruments.-Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amou....
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....ct, as he would not be entitled to present the cheque for the original amount as that would not be the liability or debt due, on the date of its presentation, the holder, already having received a part thereof, before its presentation. Thus when the provisions of the N.I. Act, themselves contemplate the receipt of part payment, its 'indorsement' on the negotiable instrument and negotiation of the same for the lesser amount, of a negotiable instrument, which can then be presented by the transferee, such a course of action, must be held to be permissible for the holder of the cheque too, as what is permissible for a transferee of a negotiable instrument, would always be permissible for the holder of the Cheque/negotiable instrument too, who is the original holder of the cheque/negotiable instrument. In such a case, in my considered opinion the correct course of action would be to make an 'indorsement' on the reverse of the cheque, of the amount received and the balance due thereafter and the cheque can then be presented for the balance due as 'indorsed'. Such a course of action would be in consonance with Section 56 of the N.I. Act, which permits such a note to be 'indorsed' upon the....
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....que no longer was one for payment of money for discharging in whole or in part of any debt or other liability. In fact, the amount covered by the cheque was admittedly larger than the amount of debt or liability. The whole amount of debt or liability was lesser than the amount represented by the cheque. So, if the cheque for such as amount was dishonoured, the same will not be an offence under Section 138 of the Act. Normally, a penal law has to be interpreted strictly. If there is any vagueness in the law, the benefit of the same should go to the accused. The Apex Court in NEPC Nicon Ltd. v. Magma Leasing Ltd. (supra) and Dalmia Cement (Bharat) Ltd. v. Galaxy Traders and Agencies Ltd. (supra) has not stated anything against the above general principle. What was stated in the facts of those cases was that though Section 138 is a penal statute, the court should interpret it, taking into account the legislative intent and purpose, so as to suppress the mischief and advance the remedy. But, in "Rahul Builders" ((2008) 2 SCC 321), the Hon'ble Supreme Court re-stated the settled principle of penal law that a penal provision like Section 138 should be interpreted strictly. In this ca....
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....view in "R. Gopikuttan Pillai" and the apprehensions voiced by the learned counsel for the appellant concerning part payment, cannot be accepted, in view of the provisions contained in Section 56 read with Section 15 of the Act. If the drawee made indorsement regarding the part payment on the cheque and claimed only the balance amount and if it bounced, the offence under Section 138 would have been made out and the 1st respondent accused would have been liable for punishment. In the absence of any vagueness in the provision, we find it difficult to accept any other view. In the result, we overrule the decisions in R. Gopikuttan Pillai v. Sankara Narayanan Nair (Crl.A.No. 270/1997) and Thekkan & Go. v. Anitha (2003 (3) KLT 870). We find nothing wrong with the judgment of the trial court acquitting the 1st respondent. Accordingly, the Criminal Appeal is dismissed. No costs. (Emphasis supplied) 20.3. In case any part amounts are received post the dishonor, but prior to the notice of demand, the course contemplated by Section 56 of the N.I. Act, not being available, the prudent course would be to secure a fresh negotiable instrument for the balance and present it for realisation.....
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....fore its presentation an amount of Rs.2,00,000/- was received by a demand draft on 02.05.2000 and the balance was only Rs.2,68,581/-, on non payment of which the cheque for the entire amount was presented on 30.08.2000, which was dishonoured. It was in this background it was held that since on the date of presentation of the cheque, the amount mentioned therein, was not due and liable to be paid, Section 138 of the N.I. Act was not attracted. The fact situation in the instant matter is quite dissimilar, as is apparent from the narration above, as no amount stood paid before the presentation of the cheque and therefore this judgment is not of any assistance to the learned Counsel for respondent. 21.1. In Laxmikant D. Naik Karmali (supra) the complainant, had claimed entitlement to the cheque amount on the plea that the same was on account of consultancy fees payable by the accused @ 15% of the amount of award. As the letter produced by the complainant on record, indicated 20% consultancy fees and there appeared to be a contradiction in that regard, it was held that the cheque amount on the own showing of the complainant was not due and payable, considering which Section 138 of th....
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....d by the complainant in his cross-examination, leaving a balance of Rs.72,500/- and in the lawyers notice an amount of Rs.82,500/- was claimed, in absence of the date of the cheque in the judgment, it is not possible to ascertain, whether the amounts were received prior to the presentation of the cheque or later and thus is not of much assistance. 21.7. M/s Industrial Fuel Consultants (supra) is a case in which it was claimed that the cheque in question was issued on account of supply of coal, however, neither the balance sheets were produced, nor any documentary evidence was produced to support the contention that the cheque was issued on account of supply of coal, in which context it was held that a legal debt or liability was not proved, which in light of Ex.42 in the instant matter is clearly not attracted. 21.8. Basalingappa Vs. Mudibasappa, (2019) 5 SCC 418 para 25.1., is also relied upon by Mr. Agrawal, learned counsel for the appellant, to contend that whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is pre-ponderence of probabilities, inference in respect of wh....