TaxTMI 
TaxTMI 
2024 (5) TMI 518
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....e parties. That is to say, fulfillment of promises depends upon fulfillment by other parties. If, one of them, fails to fulfill his promises, it affects fulfillment of the promises by other two parties. In some cases, one of the parties is a formal party, that is to say, though his presence is important, but fulfillment of the promises in between other two parties does not depend upon the fulfillment of the promise by the First-Party. In the Appeals before this Court, similar issue has cropped up. Parties in this litigation 2. There are three parties involved. They are :- (a) Hewlett Packard (H.P. Company) Manufacturing Printers and Computer Peripheral Items. (b) Kores (India) Ltd., Distributors who distribute/ sell those products to retailers/Sub distributors. (Complainant/ Appellant). (c) M/s. Ambitious Marketing Retailer whose proprietor is Abhishek Ahuja. (sub distributor/Accused/Respondent). 3. There were two 'Memorandum of Understandings' ("hereinafter, "MoU") executed in between these parties and referred by them. They are:- (a) MoU dated 1st May 2001 between H.P. and Ambitious Marketing (Accused) And (b) MoU bet....
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.... 2004. Pre-notice correspondence 6. Prior to this statutory notice, there were two correspondence made on behalf of Ambitious Marketing. They are as follows:- (a) Letter dated 1st August, 2003 - sent by Ashish Ahuja to the Complainant Kores (India) Ltd., asking them 'not to deposit the cheque till he will inform' and letter of same date issued to "Oriental Bank of Commerce to stop the payment of the cheques" And (b) Letter dated 22nd September, 2003 by Ashish Ahuja to Kores (India) Ltd., informing 'to start fresh chapter and assurance was given to clear pending payments at the earliest'. Filing of complaints 7. When 6 (Six) complaints were filed by Kores (India) Ltd., for an offence under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter "NI Act") before the Court of JMFC - Thane, the Complainant made several submissions thereby pointing out contrary stands taken by Ambitious. That is to say, writing a plain letter on one occasion and on subsequent occasion, raising certain grievances which are not raised on earlier occasion. As the payment has not come forward for all 16 (Sixteen) cheques, Kores (India) Ltd., filed 6 (Six) sepa....
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.... 27/06/2003: Rs. 4,31,050/- (xvii) 23/06/2003: Rs. 2,80,050/- (xviii)23/06/2003: Rs. 2,49,800/- (xix) 23/06/2003: Rs. 68,500/- (xx) 19/06/2003: Rs. 2,89,250/- (xxi) 18/06/2003: Rs. 1,28,550/- (xxii)18/06/2003: Rs. 4,05,575/- (xxiii)17/06/2003: Rs. 2,13,900/- (xxiv)16/06/2003: Rs. 1,30,800/- (xxv)16/06/2003: Rs. 1,68,790/- (xxvi)14/06/2003: Rs. 2,61,600/- (xxvii)14/06/2003: Rs. 3,28,100/- (xxviii)12/06/2003: Rs. 3,74,220/ (xxix)07/06/2003: Rs. 2,43,360/- (xxx)05/06/2003: Rs. 2,05,500/- 615359 (i) 26/06/2003 (i) 23/06/2003: Rs. 2,80,050/- 180568 180569 180570 (i) 17/06/2003 (i) 17/06/2003: Rs. 2,13,900/- (ii) 18/06/2003: Rs. 4,05,575/- 180563 180566 180558 Nil (i) 12/06/2003 180556 180553 180559 Nil (i) 18/06/2003 180564 180565 180567 The details of memo and demand notice are as follows :- Details of Memo Demand Notice Oriental Bank of Commerce dated 09/01/2004 : "Payment stopped by drawer" 27/01/2004 Oriental Bank of Commerce dated 09/01/2004 : "Payment stopped by drawer" 27/01/2004 Three memos of Oriental Bank of Commerce dated 09/01/2004 : "Paym....
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....e possibility of settlement. However, for some reason or other, parties could not move in that direction. Trial Court emphasized on various lacunae in the evidence adduced on behalf of Complainant. Findings by the trial Court 13. The trial Court concluded "presumption under Section 139 of NI Act was rebutted by the Accused". It resulted into acquittal of the Accused in all 6 (Six) Complaints. The findings of trial Court can be summarized as follows:- (a) Not producing MoU in between Kores and H.P., and adverse inference was drawn that it was unfavourable to the Complainant. (Para No. 10). (b) PW No. 1 and PW No. 2 are giving different versions about this MoU. According to PW No. 1, this MoU is not relevant, whereas, PW No. 2 considers it as confidential. (Para No. 10). (c) PW No. 1 gave different versions about signing the cheques by Accused. In chief-examination, he says cheques are signed in his presence, whereas, in cross-examination, he says it is not. (Para No. 11). (d) Admission by PW No. 1 about not working as Commercial Manager in the month of July-2003 and he never used to visit the parties to collect the payments. Further admissio....
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....during the evidence of PW No. 1, it can be considered as substantial improvement in the entire evidence of Complainant. (Para No. 20). Conclusions drawn are as follows (a) Both the witnesses are giving different versions about issuance of cheque and writing the cheques. (b) Agreement between Kores and H.P., was withheld. Both the witnesses are giving different versions (c) Agreement in between H.P. and Ambitious was not provided for inspection by the Complainant. (Para No. 21). (d) There was a dispute between H.P on one hand and the Ambitious/accused on other hand and it was pending before High Court of Delhi. As such the Kores (India) could not prove existence of debt/liability and the accused has rebutted the presumption. My opinion on these findings is :-- a. Trial Court lost sight of the fact that roles/participation of two witnesses for the complainant is different. As such variances are bound to occur. b. Trial Court had fallen in to the trap laid by the accused. In fact, the MoU between H.P. and Kores has no connection with the dispute between Kores and Ambitious. c. The dispute raised by the accused in fac....
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....ue. Whereas, rebuttal evidence proves non-existence of contract in between the Complainant and the Accused. (Para No. 34). 19. The trial Court commented on letter dated 22nd September, 2003 sent by Accused to Complainant at Exhibit-34. It talks about start of a new chapter. However, the trial Court opined business was not restarted for want of consent from H.P. (Para No. 35). There was no reply from the Complainant to the said offer. Cheques were in blank condition. (Para No. 36). These are the reasoning given by the trial Court. Scope of enquiry in an Appeal against acquittal 20. It is true that there is a presumption of innocence in criminal trial. It is also true that this presumption of innocence is reinforced when trial results into acquittal. It is also true that Appellate Court should be slow in interfering the judgment of acquittal. The Appellate Court is not justified in reversing the judgment of acquittal just because a view different from the view expressed by the trial Court is permissible. Whereas, Mr. Bhadbhade relied upon the observations in case of Central Bureau of Investigation v/s. Shyam Bihari and Others 2023 SCC OnLine SC 844. In this case, a specia....
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....of the Complainant ? (c) What is the evidentiary value of evidence of PW No. 1 individually and that of PW No. 2 individually. (d) Whether the MoU in between H.P. and Kores (India) Ltd., is relevant for deciding the dispute raised by Ambitious Marketing ? (e) Whether the trial Court committed a wrong in deciding that issue against the Complainant ? (f) Whether the Complainant has proved foundational facts for drawing of presumption under Section 139 of NI Act on the basis of available documents ? (g) Whether the Accused has taken different stands in defending himself in various correspondence which are brought on record and it has got effect in damaging his plea as to rebuttal of presumption ? (h) Whether the trial Court has committed a wrong in concluding that the Accused has rebutted the presumption under Section 139 of NI Act ? (i) Whether it can be said that cheques are issued not towards discharge of liability but by way of security ? Variance in between evidence of P.W. 1 and P.W. 2 24. Trial Court at various places in the impugned judgment has emphasized on this variance i.e. to say "facts deposed by P.W. 2....
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....not presented within that time but were presented in January 2004. g. Witness is aware about reason for dishonour of cheque being "stop payment". Witness was aware one of the cheque was issued against balance payment whereas other cheques were issued against invoices. (para 1) h. As invoices were issued from Delhi office and prepared by store in-charge Mr. N.K. Sharma, P.W. 2 has identified them. Witness was aware about the manner of issuing the invoices. When one copy is given to the accused and he has given acknowledgment it is by way of acceptance of the goods. i. He is aware about issuance of two legal notices dated 27th January 2004 and 30th January 2004. He is also aware about giving reply by the accused through his counsel. 27. He was cross-examined on certain aspects. He had given following answers:- (i) He is aware about appointment of Ambitious as supplier by HP and HP has given to them a list of registered suppliers (RSR). (ii) According to him, agreement in between Kores & HP is confidential and as such not having any concern to the transaction between Kores and Ambitious. (iii) He knows difference between confide....
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....ence and that of P.W. 2 being inconsistent). iv. He does not look after supply but goods were supplied by Delhi office to Ambitious. v. Their officer Sanjay Malhotra - P.W. 2 has received the order from Ambitious (P.W. 2 has also deposed on that aspect. Trial Court has not considered this factor as corroborating evidence of these two witnesses). vi. The attention of this witness was drawn towards some interpolation in the date on invoice dated 16th June 2003 at Exhibit-27. vii. About signing this document though initially the witness kept mum later on says that it was initialed by our go down people. (Trial Court has laid emphasis on this conduct). 29. This witness has admitted about absence of knowledge regarding supply to accused as he is working at Bombay office (witness could have also said that he is aware of the transaction, however, he has not done that because he has specifically stated that he was looking after the accounts department). Can this answer be considered to the detriment to this witness? The witness is working as Commercial Manager since August 2003. In July 2003, he was not Commercial Manager. In the month of July, cheque....
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....an be drawn is cheques were not signed in his presence. If this answer is coupled with the facts stated by him about collection of cheques by Delhi office, the evidence of P.W. 1 can be said to be truthful. 33. If he could have reiterated in cross-examination that cheques were signed in his presence, then it could have doubted his veracity. However, trial Court has taken hyper-technical approach and trial Court has forgotten the difference in between the inquiry of offence under Section 138 of N.I. Act and trial of offence under Penal Code. About notices 34. He has also clarified about issuance of notice by him on the instructions of the management. He has also clarified why complaint was filed only against one person whereas notices were issued to three persons. In fact, P.W. 2 has also reiterated same fact. While appreciating evidence of P.W. 1 on one hand and P.W. 2 on the other hand, trial Court has considered only the areas of inconsistency but not considered areas of consistency. 35. He admits about receiving letter from accused Ashish not to present cheque for encashment. He also admits that inspite of those instructions he deposited the cheques for encashment. H....
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....h these witnesses during cross-examination. Answers given by P.W. 1 a. The agreement was not executed in his presence. b. When asked, why this agreement is not produced, he answered "As it is not important, so I did not produce". Answers given by P.W. 2 He gave the answer "The agreement between our company & HP Company has no concern with the transaction in question entered into with accused. It is confidential document which was entered with them and HP". 41. P.W1 said "the agreement is not important". Whereas, P.W. 2 partly said "It has no concern with the transaction in question". Whether these answers are inconsistent? They gave the same answer but in different words. P.W. 2 added one explanation as "It is confidential". Observations of Trial Court 42. Trial Court observed:- "It must be taken into consideration the authorised representative of the same company are giving two different versions for the importance of the same document. One witness is saying that said agreement not important, hence, it is not necessary to produce it. At the same time the another witness for the same company replying in the different way that the said do....
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....s was requested by Ambitious not to present cheques until next information letter dated 1st August 2003 (Exh. 33). (Appellant's contention - Letter does not mention the reason why cheques should not be presented. The grievances raised later-on are afterthought. (b) Stop payment instructions given by Ambitious to their banker O.B.C. dated 1st August 2003 (payment to be deferred till issues are resolved - there is reference of 3 parties. One is Kores India Ltd. and two others - not clear about their connection). (c) Ambitious has expressed gratitude towards Kores vide letter dated 22nd September 2003. He has expressed desire to restart the business and accused to clear pending payments (Exh. 34). (d) Vide letter dated 20th October 2003 Ambitious through the Advocates sent to HP raised grievance about policies of HP being contrary to Section 23 of Indian Contract Act, unilateral execution of MoU, non-inclusion of commission or incentive clause, insistence on issuing blank cheques. Damages of Rs. 2,04,32,945/- is claimed and H.P. was instructed not to deposit cheques (Exh. 32 844/2010). (e) Statutory notice dated 27th January 2004 and 30th January 20....
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....e trial Court observed:- "In the present case also the accused being the competent witness adduced the rebuttal evidence and explained the facts and circumstances about existence of triparty Agreement between the H.P. Ltd., Kores India Ltd. and Ambitious Marketing and the present complainant Kores India Ltd. was acting as a distributor for supplying cheque between the H.P. Ltd. and Ambitious Marketing when any ownership and authority over the material supplied by HP Ltd." (page 143 - last para of Appeal 840/2010.) 50. None of the party has put up a case of tripartite agreement. It is not clear on the basis of which materials, this inference was drawn by the trial Court? There is one more reason to infer about misunderstanding in the mind of learned trial Court Judge. Trial Court framed a question:- "Whether documents and rebuttal evidence of accused is sufficient enough to show that there was an agreement between H.P. Ltd. and accused and not a triparty agreement between H.P. Ltd., accused and complainant" (pg. 139). 51. The trial Court has framed the question properly. But it is wrong to refer about tripartite agreement. While answering this point trial Cou....
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....tion 114 are fulfilled. Section 114 mentions:- (a) Court may (b) presume (c) existence of fact (d) likely to have happened. For drawing presumption, Court has to consider:- (a) common course of natural events. (b) human conduct (c) public and private business AND their relation to the facts of particular case. 56. Here there are private business relationship in between:- (a) HP & Kores (b) HP & Ambitious (c) Kores & Ambitious. 57. What is the issue involved "whether there is legally enforceable debt/liability in between Kores & Ambitious. The grievance raised by Ambitious is :- (a) There is a dispute in between Ambitious & HP (the arrangement is unilateral in connection with commission paid to distributors). (b) That is why Ambitious does not owe an amount to HP. 58. Now there is no dispute in between HP & Kores. Letter at Exh. 32 dated 20th October 2003 sent by Ambitious to HP echoed grievances made against HP. This letter does not say any dispute in between Ambitious & Kores. Damages to the tune of Rs. 2,04,32,945/- is claimed from HP. There is....
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.... bears that signatures of representative of the accused. (d) PW-1 is cross-examined Accused in respect of invoice dated 16th June 2003 (Exh.27). He admits that date is interpolated. (e) PW-1 does not look after supply. But it is looked after by Delhi's office. (f) Sanjay Malhotra (PW-2) has received the orders. (g) Invoices are signed by godown keeper. (h) Mr. Jain invited my attention to copies of invoices and delivery challans (together by way of separate compilation for convenience purpose). (i) It is true that they are invoices/orders signed for Ambitious and corresponding delivery challans. Both are signed for and on behalf of Ambitious. (j) Mr. Jain invited my attention to the invoice having date 14th June 2003 filed in SCC No. 804 of 2003. Accused has pointed out interpolation in that date and trail Court uphold it. (k) when I have seen the date what is interpolation, only first date is earlier mentioned and there is overwriting and earlier digit from the figure is changed to 14. Trial Court accepted it interpolation. (l) It is not interpolation. But it is overwriting. At the same time there is ....
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....cused has purchased those goods. As such accused owes an amount of Rs. 44,90,270/- (total of all challans) to the Kores India. Issuance of cheques 66. Ambitious through proprietor Ashish Ahooja gave evidence. He has denied any financial relationship with Kores. He informed to Kores and Bank not to present the cheques for encashment. So about drawing of cheques and delivery of goods, he has not raised any dispute. The fact that he wrote letter to stop payment itself indicates cheques were issued. He has not raised dispute about non-receipt of goods. The dispute which is raised is with HP and not with Kores. Ashish Ahooja disputed the liability for the reason of dispute with HP. I have already rejected that contention. 67. C.W. No. 1 and C.W. No. 2 both have deposed about delivery of cheques on delivery of consignment, those 16 cheques were issued. The observations of the trial Court about "variance in between C.W. No. 1 and C.W. No. 2 on the aspect of signing" was disagreed by me. But both the witnesses are at consensus about delivery of cheques on delivery of consignment and they are to be deposited within 30 days. During cross-examination, Ashish has said about placing or....
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....ncy of evidence for rebuttal of presumption. It is not sufficient when the drawer has offered some explanation. If drawer adduces evidence to prove that holder of the cheque has not received the cheque for discharge of liability the presumption is said to be rebutted. In other words, issuance of cheque has to be preceded by passing of some consideration. In this case, goods are sold to Ambitious and they owe an amount to Kores. Cheques are issued towards discharge of that liability. It cannot be said that cheques were issued as a security. Already goods were delivered, so, the liability in between Ambitious and Kores is created. If introductory facts are proved, presumption has to be drawn. It has happened in this case. The issue of raising a presumption when blank cheques are given was answered by the Supreme Court in case of Kalamani Tex and Another v/s. P. Balasubramanian (2021) 5 Supreme Court Cases 283. It was held permissible. Whereas, in case of Bir Singh v/s. Mukesh Kumar (2019) 4 Supreme Court Cases 197 the object for inserting Section 138 in the statute book was reiterated. It is for infusing credibility to negotiable instruments and to have deterrent effect on the breach....
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....heshwar Tigga v/s. State of Jharkhand (2020) 10 Supreme Court Cases 108 (ii) Khushvinder Singh v/s. State of Punjab 2013 SCC OnLine P&H 2023 Mr.Jain relied upon following judgments:- (i) State of Punjab v/s. Swaran Singh (2005) 6 Supreme Court Cases 101 (ii) Nar Singh v/s. State of Haryana (2015) 1 Supreme Court Cases 496 76. I have perused the statement of Ashish Kumar Ahuja recorded under Section 313 of the Code. In all, 9 questions were framed. It is true that there is a reference of witness No. 1 and witness No. 2 in question No. 1. All other questions were put without referring the name of the witness. There is a definite purpose for recording the statement under Section 313 of the Code. It consists of two parts. They are as follows:- (a) Court can put question to the Accused at any stage of the proceeding and there is no need to intimate him about putting of this question. (Section 313(1)(a) of the Code). (b) Once the witnesses for the Complainant are over, it is mandatory for the Court to put questions to the Accused on the basis of facts deposed by the witnesses and what has come in evidence. (Section 313(1)(b) of the Code.....
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....erial to the Accused in 313 was considered. (Para No. 17). 80. There cannot be any dispute about this proposition of law. Whereas, according to Mr. Jain, it is not necessary that questions should be framed in such a manner that there should be a reference of each and every witness examined by the Complainant. Even if summary of facts deposed by both the witnesses is put to the Accused, it is a sufficient compliance. According to him, that is the affair in between the Court and the Accused. A particular Judge may put questions in a particular manner whereas, another Judge may put questions in different manner. 81. According to me, if such an issue is raised before the Appellate Court, it needs to be seen whether circumstances are put to the Accused or not. He invited my attention to the question No. 1 wherein there is a reference of both the witnesses. The Accused replied:- "he has heard their evidence and understood the same". 82. It is true that the role of both the witnesses are different. The CW No. 1 is related to maintaining the accounts, issuance of notice, deposit of cheques and reasons for dishonour and filing of complaint, whereas, CW No. 2 is concerned w....
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....erlooked the basic facts about the roles played by CW No. 1 and CW No. 2. The trial Court scrutinized their evidence by presuming that they are the witness to prove a particular fact only but in fact, they are the witness in respect of the facts forming transaction right from placing of the orders till filing of complaint. The trial Court overlooked the fact that the Complainant is not a natural person but an artificial entity working through natural persons and that too, in the office situated at different places. The trial Court decided the complaint as if the trial of bodily offences is being conducted. 87. The complaint under Section 138 of NI Act is based on the documents and proved by giving oral evidence. On some occasion, these complaints involve business transactions. It involves the correspondence in between the parties made in usual course. Such correspondence throws light on the intention of the parties. The trial Court overlooked the difference in relationship in between the H.P., and Kores, Kores and Ambitious and Ambitious and H.P., and Ambitious. 88. No doubt, Kores on behalf of H.P., was selling the products to the Sub-distributors. It is true that the MoU in....