TaxTMI 
TaxTMI 
2026 (5) TMI 633
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.... the Indian Companies Act, 1956 carrying on the business of Information and Technology products and services. It also had its business in distribution of software and hardware. 2.2 It is further found from complaint averments that second accused being the Managing Director and third accused being the Director of the accused No. 1/Company, viz., Apara Enterprise Solutions Private Limited had the business transaction with the complainant. 2.3 Accused No. 2 issued a cheque towards the repayment of the amount outstanding to the complainant. There was a business transaction of purchase orders and invoices to the tune of Rs. 4,84,27,931/-. When the same was demanded repeatedly, payment was postponed. Ultimately second accused being the Managing Director of the first accused Company issued an acknowledgment of debt on 16.03.2011 and agreed to pay the amount with 15% interest calculated upto 31.01.2011 which works out to Rs. 72,95,708/-. 2.4 Towards the repayment, fifteen cheques were issued. Out of those cheques, cheque No. 853204 dated 20.04.2012 was to the tune of Rs. 72,95,710/- and cheque No. 853205 dated 20.05.2012 was a sum of Rs. 76,595/- drawn on State Bank of India, Beng....
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....fault sentence from three months to one year inter alia, holding in paragraph Nos. 24 to 31 as under: "24. In this case, issuance of Cheques is admitted by the accused and the signature on Cheques Exs.P2 and P3 are also admitted, but denies that said Cheques have been issued for discharge of liability. On the other hand, according to them cheques were issued as security. It is pertinent to note that when the Cheques has been issued as security and when the repayment is not made as agreed, holder in due course has got every right to present the Cheque for encashment. When the accused themselves admitted regarding issuance of Cheques as security, now they cannot claim that there is no liability. 25. Another contention taken by the accused that Exs.P67 and 68 are issued by mistake of fact. On perusal of Ex. P67 it reflects that on 10.3.2011 accused discloses that they are desirous to settle the matter and willing to extend cooperation. Further agreed by the arrangement to restructure the debt and settle the matter by making payments in installments, wherein they admitted that they are having balance of Rs. 4,38,90,544/. Further, they agreed to pay by the end of March....
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.... as per Exs.P67 and 68, not bothered to come forward to clear outstanding and to settle the matter. So, in my opinion, the accused failed to rebut the presumption available u/S. 138 of N.I. Act in favour of complainant. Further failed to establish that the Cheques not issued for discharge of debt or liability. On the other hand, complainant had produced sufficient material evidence before this Court to show that accused had issued cheques as per Exs.P2 and P3 for discharge of debt and when the Cheques has been presented for encashment, it has been dishonoured for the reason 'funds insufficient' and in spite of service of notice, accused not bothered to comply the demand made in the notice. When the accused failed to rebut the presumption and failed to establish their defence, I am of the opinion that the Court has no hesitation to hold that complainant proved the guilt of the accused. 29. The accused No. 1 is a Company and accused No. 2 is Director having control over the accused No. 1 Company. The Company does not have a physical body. In the event of conviction when the default is committed by the Company and the Company's responsible persons for the affairs ....
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....ed in ignoring abundant rebuttal evidence available on record by drawing assumption and presumption inadmissible in law. • Both the courts below have failed to observe that, not only there are abundant materials available in the form of documents but also material elicited in the cross examination of the PW-1 to rebut the presumption under Sec.139 of N.I. Act. • Both the courts below have failed to observe that, there was tripartite between the agreement complainant/respondent the petitioners and one Yahoo.com company and as per the contract, the respondent has agreed to supply the goods to Yahoo on the basis of purchase orders by the petitioners to the respondent only on the conditions that, Yahoo Company shall make the payment by depositing the invoice amount directly to the "ESCROW ACCOUNT" of the Respondent and petitioners wherein, the Respondent is the sole beneficiary. And in-fact, the said contract/agreement was acted upon by the Respondent and the Yahoo Company, respect of supplying the good to yahoo and receiving payments through the ESCROW ACCOUNT. • Both the courts below have failed to observe that, as per the respondent, goods were....
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....dence of PW-2 Vijay in the other case filed by the Respondent in respect of 6 cheques in C.C.NO. 26017/2012 that, Yahoo Company has not denied the liability which goes to the root of the case and which is clear from the above facts that, the petitioners are no where benefited in the transactions. • Both the courts below have failed to observe that, One Mr. Vijay examined as PW-2 in connected case above who has the fullest knowledge of the transactions between the parties has not been examined in the instant case as such, and adverse inference should have been drawn against the prosecution more particularly due to the fact that he has admitted in cross examination in that case that, the cheques have been issued as a security and Yahoo.com company is alone liable to pay etc.. • Both the courts below have failed to observe that, the complainant has taken a definite and consistent stand that, goods were supplied to Yahoo company and they are liable to pay and there is no demand by the respondent/complainant asking the petitioners to pay the amount defaulted by Yahoo company. • There is nothing on record to show that, the Respondent/Complainant acc....
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....laid any claim in respect of the invoices above against which the cheques are issued in the civil suit leading to the inference that, nothing is due in respect of these invoices and consequently dishonour of the cheques does not amount to the offence under the N.I. Act, since, "THERE IS NO LEGALLY ENFORCEABLE DEBT". • It is humbly submitted that, the judgment has been passed during the pendency of the civil suit and the civil suit has been concluded and the matter in the alternative deserves to be re-tried. Since, the suit has been decreed not only against Yahoo but, the decree is in respect of invoices not shown in Ex.P.68. and the total liability is the decreed amount only. • Both the courts below failed to observe that there is no evidence as against the petitioner No. 3 except alleging that she is a director and she is not a signatory to any of the documents including Ex. P.68 and cheques in question. • Both the courts below failed to observe that petitioner No. 3 cannot be held liable for the wrong acknowledgment of debt and issuance of cheque by petitioner No. 2 for a sum not due by the company. • Both the courts below faile....
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....d notice was admitted by P.W-1, in his cross-examination said notice was marked as Exhibit D-1. 17. He also brings to the notice of the Court that P.W-1 has admitted that a Company Petition came to be filed by the complainant against Yahoo Limited before the High Court of Judicature, Mumbai. There is an admission by PW-1 that as per Exhibit P-68, acknowledgment of debt is not mentioned. 18. Sri Jairaj also pointed out that there is a suit pending in O.S No.5466/2012 wherein accused and Yahoo Limited are party defendants. 19. According to Sri Jairaj, there is one more case filed in C.C No. 26107/2012 in respect of Exhibits P-19 to P-24 invoices and acknowledgment of debt vide Exhibit P-68. 20. Therefore, cheques in question were issued as security which has not been properly appreciated by both the Courts and recorded an order of conviction has thus resulted in miscarriage of justice and sought for allowing the revision petition. 21. In support of his arguments, Sri Jairaj, placed reliance on the judgment of the High Court of Kerala at Ernakulam in the case of Mr.Danikutti Philip vs. Mr. Johnykutty J, passed in Criminal Appeal No. 1965/2025 dated 26.03.2026, wherein i....
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....of rupees twenty lakhs represented on the cheque was not the 'legally enforceable debt' on the date of maturity. Thus, the first respondent cannot be deemed to have committed an offence under S. 138 of the Act when the cheque was dishonoured for insufficient funds; and (v) The notice demanding the payment of the 'said amount of money has been interpreted by judgments of this Court to mean the cheque amount. The conditions stipulated in the provisos to S. 138 need to be fulfilled in addition to the ingredients in the substantive part of S. 138. Since in this case, the first respondent has not committed an offence under S. 138, the validity of the form of the notice need not be decided." 11. Thus the law emerges is that, when a part of the sum covered by the cheque is paid during the period between the date on which the cheque is drawn and its encashment upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque. Further, when a part, or the whole of the sum represented in a cheque is paid by the drawer, the same must be indorsed on the cheque as prescribed under Section 56 of the NI Act. Then the....
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....used No. 2. The escrow account agreement (Exhibit P-65) wherein there is an acknowledgment of debt. 23. As such, the contentions now urged before this Court cannot be countenanced in law, that too, having regard to the scope of revision where this Court cannot revisit into the factual aspects of the matter. 24. He would further invite the attention of this Court to the cross-examination of DW1(accused No. 2) wherein there is a clear admission that in Exhibit P-68 one of the cheque involved in the present case bearing No. 853204 is mentioned. 25. He also points out that the witness has put in his appearance before this First Appellate Court in respect of the order of acquittal vide Exhibit D-8 and thus sought for dismissal of the petition. 26. Having heard the arguments of both sides, this Court bestowed its attention to the material on record meticulously. 27. As could be seen from the material on record, cheques marked at Exhibits P-2 and P-3 does belong to accused No. 1 Company. Signature found in Exhibits P-2 and P-3 is that of accused No. 2. 28. Admittedly, cheques were dishonoured with an endorsement of insufficient funds. Legal notice was issued vide Exhibit....
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....h the terms of this notice, our client has instructed us to initiate appropriate legal action against you including winding up proceedings under Section 433 of the Companies Act, 1956, for which all costs and consequences you will be liable. Further our client also reserves liberty to initiate appropriate legal action including both civil and criminal against you and your Directors and all the officials who are involved in the said transactions without further notice to you." 35. It is the case of the accused that another case filed by the complainant is dismissed and therefore, in the present case there could not have been any conviction. Likewise, certified copy of the Company Petition filed before the High Court of Judicature, Mumbai Company Petition No. 425/2012 is also placed on record and marked as an Exhibit. 36. In other words, all that the accused wanted to impress upon the Trial Court is that cheques marked at Exhibits P-2 and P-3 are issued as security cheques by the accused Company and the same has been misused by the complainant to foist a false case against the accused as no liability was existing to pay any money under Exhibits P-2 and P-3 by the accused to the....
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....be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceeding initiated under Section 138 of the NI Act. Therefore, there cannot be a hard-and-fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an "on demand promissory note" and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as "security" the consequence flowing ther....
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....aid cheque in discharge of a legally enforceable debt or liability arise against the accused. It is pertinent to mention that observations to the contrary by a two-judge Bench in Krishna Janardhan Bhat v. Dattatraya G. Hegde [(2008) 141 Comp Cas 665 (SC); (2008) 4 SCC 54; (2008) 2 SCC (Cri) 166; 2008 SCC OnLine SC 106.] have been set aside by a three-judge Bench in Rangappa v. Sri Mohan [(2010) 11 SCC 441; (2010) 4 SCC (Civ) 477; (2011) 1 SCC (Cri) 184; 2010 SCC OnLine SC 583.] 16. This court is further of the view that by creating this presumption, the law reinforces the reliability of cheques as a mode of payment in commercial transactions. 17. Needless to mention that the presumption contemplated under section 139 of the Negotiable Instruments Act, is a rebuttable presumption. However, the initial onus of proving that the cheque is not in discharge of any debt or other liability is on the accused/drawer of the cheque (see : Bir Singh v. Mukesh Kumar [(2019) 5 Comp Cas-OL 560 (SC); (2019) 4 SCC 197; (2019) 2 SCC (Cri) 40; (2019) 2 SCC (Civ) 309; 2019 SCC OnLine SC 138.]. 18. The judgment of this court in APS Forex Services P. Ltd. v. Shakti Internationa....
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....s not, in the absence of perversity, upset concurrent factual findings (see : Bir Singh v. Mukesh Kumar [(2019) 4 SCC 197]). This court is of the view that it is not for the revisional court to re-analyse and re-interpret the evidence on record. As held by this court in Southern Sales and Services v. Sauermilch Design and Handels GmbH [(2008) 14 SCC 457], it is a well-established principle of law that the revisional court will not interfere, even if a wrong order is passed by a court having jurisdiction, in the absence of a jurisdictional error." 52. Further, no material is available on record to establish the fact that entire liability of accused was taken over by Yahoo Limited. Further, filing of the Company Petition by the complainant Company against the Yahoo Company does not debar the complainant to initiate criminal action against the accused company. 53. Furthermore, pendency of civil suit is also of no consequence in adjudicating the criminal proceedings which can run parallelly. 54. At the most, if any amount is paid by the accused pursuant to the Order passed by learned Trial Magistrate confirmed by the learned Judge in the First Appellate Court, same shall be gi....