TaxTMI 
TaxTMI 
2023 (8) TMI 649
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.... Act, 1881, summoning order dated 24.10.2013 (Annexure P-3) passed by the Court of Judicial Magistrate, 1st Class, Amloh, District Fatehgarh Sahib, the accusation order dated 06.08.2014 (Annexure P-2) along with all subsequent proceedings arising therefrom. 3. The brief facts as emanating from the pleadings are that the accused/petitioners purportedly availed a loan from the complainant/ respondent for the purposes of business of their firm accused No.1. The accused agreed and assured to repay the said loan amount along with interest @ 12 % per annum to the complainant/respondent. As per the assurance given by the accused, the complainant advanced a loan to the accused @ 12 % per annum. The total loan availed by the accused was Rs.15,00,000/- vide Cheque no.3162767 dated 03.08.2011 for an amount of Rs.7,00,000/- and Cheque no.592801 dated 08.08.2011 for an amount of Rs.8,00,000/-. Over a period of time, the accused are stated to have paid back some part of the loan advanced along with interest to the complainant/respondent after deducting TDS and the records of the same were entered into the account books of the accused and the complainant. After adjusting the account between....
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....een returned/dishonoured for the first time on account of cancellation/alteration in the cheque and the same required the full signatures of the drawer. As per the report dated 05.09.2014 (Annexure P-5) of the Handwriting Expert, the cheque in question was forged and fabricated. It is therefore, the case of the petitioner (CRM-M-23251-2015) that as the cheque was forged and fabricated, no offence under Section 138 was made out. With respect to the case of Sudha Mittal (petitioner in CRMM- 36782-2014), it is in addition, pleaded that she was only the mother of accused No.2 (Sachin Mittal). She was neither a partner nor a proprietor of the said firm M/s Anil Agro Industries and as such the complaint was not maintainable against her. 6. The respective replies have been filed by the respondent/complainant in both these petitions. As per the reply dated 11.12.2015 in CRM-M- 23251-2015, petitioner No.2-Sachin Mittal was the sole proprietor of petitioner No.1 proprietorship firm. The petitioner No.2 Sachin Mittal along with his mother Sudha Mittal (petitioner in CRM-M- 36782-2014) were actively involved in the business and daily functioning of the accused concern. Though, the cheque....
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....refers to the subsequent dishonour which was on account of the fact that the account was closed. The complainant would never accept a materially altered and forged cheque from the accused. In fact, nothing prevented the complainant from asking the accused to provide a fresh cheque. So far as Sudha Mittal (petitioner in CRM-M-36782-2014) is concerned, she is neither a partner nor a proprietor of M/s Anil Agro Industries, accused No.1. She is also not the drawer of the cheque. Her purported signatures on the alterations cannot affix any liability upon her. 8. The learned counsel for the respondent/complainant on the other hand vehemently contends that whether there was material alteration with consent or not was a disputed question of fact. It was the case of the complainant that the cheque had been handed over with the alterations, though, he admits that there is no such averment in the complaint. Since Sudha Mittal was a co-signatory and authorized to sign cheques in terms of the Special Power of Attorney (Annexure R2/1), her signatures on the material alterations would make the cheque a valid tender thereby entitling the complainant to initiate proceedings under Section 138 ....
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....ee, discharges his indorser from all liability to him in respect of the consideration thereof. The provisions of this section are subject to those of sections 20, 49, 86 and 125. Section 138 of the Negotiable Instruments, reads as under:- 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 [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....
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....(amount in words), fresh cheque form should be used by customers. This would help banks to identify and control fraudulent transactions." 9. In rebuttal of this argument, learned counsel for the opposite party no. 2 has drawn attention to the paragraph 10 of the same guidelines in which Sub-clause 10 (iii)(iv) stipulates as follows:- (iii) Will be applicable only for cheques cleared under the image-based Cheque Truncation System (CTS). Collecting banks should ensure, ab-initio, that such cheques are not accepted for presentment in CTS. (iv) Is not applicable to cheques cleared under other clearing arrangements such as MICR clearing, non-MICR clearing, over the counter collection (for cash payment) or direct collection of cheques outside the Clearing House arrangement." 10. In Central Bank of India (supra), the Hon'ble Apex Court has held that R.B.I. Circulars have statutory force and it is on this interpretation that the learned counsel for the applicant has relied upon that this would make the guidelines mentioned above to be binding and any violation of the same would render the impugned cheque to be not a valid instrument. 11. The....
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....n condition when the amount in question was huge. 13. Attention may also be drawn to section 87 of the N.I. Act which provides as under:- "87. Effect of material alteration.-Any material alteration of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties; Alteration by indorsee.-And any such alteration, if made by an endorsee, discharges his indorser from all liability to him in respect of the consideration thereof. The provisions of this section are subject to those of sections 20, 49, 86 and 125." 14. In view of above provision, I find that this would fall in the category of material alteration of the impunged cheque. 15. Learned counsel for the applicant has relied upon Fragrant Leasing & Finance Company Ltd. & Anr. v. Jagdish Katuriya & Anr., 2007 CRI.L.J. 3880. In this case, accused took loan of Rs. 11,00,000/- from complainant no. 1 and in order to repay the loan, issued two cheques of Rs. 6,00,000/- and 5,00,000/- respectively, (total 11 lacs), which were....
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....nders the said cheque to be void under the provisions of section 87 of the N.I. Act, as has been discussed by me above and hence, the subsequent proceedings in opinion of this Court would not serve any purpose, hence in view of this peculiar situation in this case, I consider it appropriate to quash the impugned order. (emphasis supplied) In M/s Goyal Enterprises Versus State of Jharkhand, 2012(3) R.C.R. (Criminal) 110, the Court held that change of date on the cheque amounted to material alteration in the absence of the signature of the drawer. The relevant paras of the said judgment held as under:- 11. After hearing learned counsels for both the sides and upon going through the materials on record, I find that the cheques which have been proved in this case clearly show that there are material alterations in the same in as much as, the date 15.4.2000 in both the cheques have been altered as 15.9.2000 and there is no endorsement or signature thereon of the drawer of the cheques. Section 87 of the Negotiable Instruments Act reads as under : "87. Effect of material alteration. - Any material alteration of a negotiable instrument renders the same void as....
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....f an alteration (by erasure, interlineation, or otherwise) is made in a material part of a deed, after its execution, by or with the consent of any party thereto or person entitled thereunder, but without the consent of the party or parties liable thereunder, the deed is thereby made void. The avoidance, however, is not ab initio, or so as to nullify any conveyancing effect which the deed has already had; but only operates as from the time of such alteration, and so as to prevent the person, who has made or authorised the alteration, and those claiming under him, from putting the deed in suit to enforce against any party bound thereby, who did not consent to the alteration, any obligation, covenant, or promise thereby undertaken or made." 6. The law is not otherwise in India. The above said rule is quoted with approval in several Indian decisions. section 87 of the Negotiable Instruments Act statutorily adopts the said rule. Section 87 is so far as it is relevant is in the following terms :- "Any material alteration of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent ....
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....under it should remove the suspicion. It is true that it is not on every occasion that a party tendering an instrument in evidence is bound to explain any material alteration that appears upon its face. He must, however, explain when he is seeking to enforce it. It is plain that when the alteration appears to have been made contemporaneously with the document, or if it is made at some subsequent period with the privity of the parties charged and there is no fraud, it does not affect the validity of the instrument. 9. It is thus evident that where the instrument appears to be altered it is incumbent upon the holder, that is, the plaintiff, to show that the alteration is not improperly made. It is now fairly settled that in case of negotiable instrument the presumption is that the alteration was made subsequent to the issue of instrument. What must follow is that when a promissory note appeal's to have been altered or there are marks of erasures on it, the party seeking to enforce the promissory note is bound to satisfy the Court that alteration does not avoid the promissory note by explaining how the alteration has been effected. If it falls under any one of the excepti....
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....ars to be materially altered. In the absence of any explanation on behalf of the plaintiff who seeks the enforcement of the document, it is obvious that the plaintiff must fail, as the onus was on him to show that the material alteration was made either with the consent of the parties or in order to effectuate the common intention of the parries. In the absence of any such plea the presumption, as stated earlier, is that the material alteration was made subsequent to the execution of the document. In view of that presumption the irresistible conclusion is that the suit promissory note is void under section 87 of the Negotiable Instruments Act and it cannot, therefore, be enforced in a Court of law. In, Herman v. Dickinson, (1828) 130 ER 1031, it was held as follows :- ". . . . . . . . . where an alteration appeal's upon the face of a Bill the party producing it must show that the alteration was made with consent of the parties, or before issuing the bill." To the same effect is C.S. Pillay v. K.K. Konar, AIR 1935 Rangoon 131. I am therefore, satisfied that the plaintiff has failed to offer any explanation, and also failed to prove that the material alteration ....
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....show that the cheque had not been issued for the discharge of a debt or liability. If the cheque was otherwise valid, the penal provisions would be attracted. In NEPC Micon Ltd. & others Versus Magma Leasing Ltd., (1999) 4 SCC 253, the Hon'ble Supreme Court held that where the cheque had been dishonoured because the account had been closed, the same would attract liability under Section 138 of the Negotiable Instruments Act. 12. Coming back to the facts of the present case, the complaint does not disclose that the cheque was materially altered or that it was dishonoured first time due to a material alteration or as to how and at what stage did Sudha Mittal purportedly sign/counter-sign the material alterations. A perusal of the CTS Cheque (Annexure P-4) would reveal cutting on the name of the beneficiary and the amount in words. There appears to be an overwriting on the amount in figures as well. Therefore, in terms of the RBI Guidelines dated 22.02.2010 (Annexure P-4/A) which have statutory force, read with Section 87 of the Negotiable Instruments Act, the cheque was not valid tender and could never have been presented for encashment even assuming that the material altera....