NIA - Judgements

MANU/DE/2779/2009

Equivalent Citation: I(2010)BC8

IN THE HIGH COURT OF DELHI

Crl. M.C. 1869/2007, Crl. M.A. Nos. 6479 and 12998/2007

Decided On: 26.10.2009

Appellants: Prajan Kumar JainVs.

Respondent: Ravi Malhotra

Hon'ble Judges: Indermeet Kaur, J.

Counsels: For Appellant/Petitioner/Plaintiff: R.P. Sharma and Amit Punj, Advs

For Respondents/Defendant: M.L. Mahajan and Gaurav Mahajan, Advs.

Subject: Banking

Subject: Criminal

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instruments Act - Sections 138, 139 and 142; Indian Penal Code - Section 420; Limitation Act - Section 18; Criminal Procedure Code (CrPC) - Section 482

Cases Referred: Sh. Ravi Malhotra v. Sh. Prajan Kumar Jain Complaint No. 1535/1; Vijay Polymers Pvt. Ltd. and Anr. v. Vinnay Aggarwal 162 (2009) DLT 23; Sasseriyil Joseph v. Devassia 2001 Crl.LJ 24;Krishna Janardhan Bhat v. Dattatraya G. Hegde (2008) 4 SCC 54; A.V. Murthy v. B.S. Nagabasavanna (2002) 2 SCC 642; MMTC Ltd. and Anr. v. Medical Chemicals and Pharma (P) Ltd. and Anr. IV (2001) CCR 316 (SC); Woods and Ors. v. State and Anr. 121 (2005) DLT 314; Bishan Dayal v. Dinesh Kumar Singal 2007 (2) DCR 161

Citing Reference:

Sh. Ravi Malhotra v. Sh. Prajan Kumar Jain Mentioned

Vijay Polymers Pvt. Ltd. and Anr. v. Vinnay Aggarwal Distinguished

Sasseriyil Joseph v. Devassia Distinguished

Krishna Janardhan Bhat v. Dattatraya G. Hegde Distinguished

A.V. Murthy v. B.S. Nagabasavanna Discussed

MMTC Ltd. and Anr. v. Medical Chemicals and Pharma (P) Ltd. and Anr. Distinguished

Woods and Ors. v. State and Anr. Distinguished

Bishan Dayal v. Dinesh Kumar Singal Distinguished

Case Note:Criminal Procedure Code, 1973 - Section 482 - Negotiable Instruments Act, 1881 - Section 138 & 142 - Quashing of the complaint - Cheques issued in lieu of a time barred debt - Agreement to purchase agricultural land - Acknowledgment after the statutory period of three years not valid - Complaint and all proceedings, quashed.

JUDGMENT

Indermeet Kaur, J.

1. This petition seeks quashing of the Complaint No. 1535/1 titled as Sh. Ravi Malhotra v. Sh.Prajan Kumar Jain filed under Sections 138/142 of the Negotiable Instruments Act (hereinafter referred to as NI Act) read with Section 420 of the Indian Penal Code. Complainant is Ravi Malhotra. Prajan Kumar Jain has been arrayed as the accused.

2. The short point raised in this petition is that the two cheques i.e. cheque No. 7375535 dated 25.3.2005 for Rs. 5 lakhs and cheque No. 7375536 dated 30.4.2005 for Rs. 5 lakhs do not come within the ambit of a 'legally enforceable debt'. The said cheques had been issued for the discharge of a liability arising out of an agreement dated 14.6.2000; and having been issued on 25.3.2005 and 30.4.2005 were for the discharge of debt which had become time barred. The complaint is thus liable to be quashed.

3. To appreciate this submission salient paragraphs of the complaint filed by Ravi Malhotra are reproduced.:

2. That by an agreement dated 14.06.2000, entered into by the complainant with the accused and his brother, Shri Vijay Kumar Jain, to purchase the agricultural land measuring 12 Bighas and 03 Biswas, bearing Mustatil No. 54, Killa No. 14/2 (3-12), 17 (2-19), 7 (4-17), 14/1 (0-15), situated at village Bharthal, Tehsil Vasant Vihar, New Delhi, for the consideration of rupees 2 Crores 30 Lakhs. The complainant paid a sum of rupees 30 Lakhs to the accused and his brother Shri Vijay Kumar Jain, who were jointly maintained as Party No. 1 in the said agreement.

3. That after sometimes the parties agreed to terminate the agreement and the accused alongwith his brother, Shri Vijay Kumar Jain, promised to return the advance money of rupees 30 Lakhs paid by the complainant to the accused and his brother. This settlement took place on 26.01.2005, whereby the accused and his brother acknowledged to pay the balance amount in short time and the agreement was terminated.

4. That in the discharge of his liability of debt arising out of the agreement dated 14.6.2000 between the accused and his brother, Shri Vijay Kumar Jain on the one hand and the complainant on the other, the accued agreed to pay a sum of Rs. 10,00,000/- (Rupees ten lakhs) and in lieu thereof the accued issued two post dated cheques drawn on the Jammu & Kashmir Bank Ltd., Sector-3, Krishna Complex, Trikuta Nagar, Jammu in favour of the complainant. The details whereof are as under:

1. 7375535 dated 25.3.2005 for Rs. 5,00,000/-.

1. 7375536 dated 30.4.2005 for Rs. 5,00,000/-.

4. Learned Counsel for the petitioner has placed reliance upon a judgment reported in Vijay Polymers Pvt. Ltd. and Anr. v. Vinnay Aggarwal 162 (2009) DLT 23 to support his submission that the cheques issued in lieu of a time barred debt does not come within the definition of a 'legally enforceable debt' as is contained in the Explanation of Section 138 of the NI Act. Cheques issued for the discharge of such a time barred debt cannot become the subject matter of a complaint under Section 138 of the NI Act; the agreement in this case having terminated on 14.6.2000 and cheques having been issued almost five years later i.e. on 25.3.2005 and 30.4.2005, there being no enlargement of period of limitation, it is clear that at this point of time the liability, if any, qua the accused had become time barred.

Reliance has also been placed upon Sasseriyil Joseph v. Devassia MANU/KE/0674/2000 : 2001 Crl.LJ 24 to support this submission. It is further submitted that the presumption which is contained in Section 139 of the NI Act only raises a presumption that the said cheque has been issued for the discharge of a debt or liability and the existence of a legally recoverable debt is not a matter of presumption under the aforestated provision of law. For this proposition reliance has been placed upon Krishna Janardhan Bhat v. Dattatraya G. Hegde MANU/SC/0503/2008 : (2008) 4 SCC 54.

5. These submissions have countered by the learned Counsel for the complainant. It is submitted that it is not in dispute that the parties had entered into an agreement dated 14.6.2000 which had fizzled out and they had agreed to terminate the agreement. This settlement had taken place on 26.1.2005 whereby the accused and his brother had acknowledged to pay the balance amount within a short time; thereafter the aforesaid two cheques dated 25.3.2005 and 30.4.2005 for Rs. 5 lakhs each had been issued. It is submitted that this acknowledgment to pay the balance amount would constitute a fresh period of limitation and even otherwise these are disputed questions of facts and being a matter of trial, cannot become the subject matter of a quashing petition; if there is documentary evidence which might amount to an acknowledgment reviving the period of limitation such a question can only be agitated before the Magistrate by way of a defence of the respondent. Reliance has been placed upon A.V. Murthy v. B.S. Nagabasavanna MANU/SC/0089/2002 : (2002) 2 SCC 642 as also MMTC Ltd. and Anr. v. Medical Chemicals and Pharma (P) Ltd. and Anr. IV (2001) CCR 316 (SC) to support this argument. There is also no specific requirement that the complainant must specifically allege in the complaint that there was a subsisting liability; burden of proving that there was no such existing debt or liability is on the respondents which they have to discharge at the stage of trial. It is submitted that in Woods and Ors. v. State and Anr. MANU/DE/0847/2005 : 121 (2005) DLT 314 it has been held that where there is no inherent defect in a complaint under Section 138 of the NI Act, a petition under Section 482 of the Cr.PC would not be maintainable. Reliance has also been placed upon Bishan Dayal v. Dinesh Kumar Singal 2007 (2) DCR 161 to support the argument that the question whether a legally enforceable debt exists or not should not be pre-judged by the High Court and the invocation of powers by the High Court in such circumstances under Section 482 Cr.PC would not be justified.

6. The record has been perused and the submissions have been noted.

7. To better appreciate the contentions of the parties, the provisions of Section 138 of the Negotiable Instruments Act are reproduced hereunder:

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 provision 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) ....

(b) ....

(c) ....

Explanation. - For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.

8. At this juncture, it would also be appropriate to take note of Section 18 of the Limitation Act which inter alia reads as follows:

18. Effect of acknowledgement in writing-(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.

....

9. Perusal of the complaint shows that an agreement dated 14.6.2000 had been entered into between the complainant and the accused and his brother Vijay Kumar Jain to purchase agricultural land for a consideration of Rs. 2.30 crores. A sum of Rs. 30 lakhs was accordingly paid by the complainant to the accused and his brother. Complaint further recites that after sometime the parties had agreed to terminate this agreement and the accused and his brother Vijay Kumar Jain promised to return the sum of Rs. 30 lakhs paid by the complainant to him. This settlement took place on 26.1.2005 on which date the accused and his brother had acknowledged to pay the balance amount in a short time. Further part of the complaint states that in discharge of this liability of the debt arising out of the agreement dated 14.6.2000 the accused agreed to pay a sum of Rs. 10 lakhs vide two post-dated cheques dated 25.3.2005 and 30.4.2005 of Rs. 5 lakhs each.

10. The facts as detailed in the complaint show that the agreement between the parties was dated 14.6.2000. Pursuant to this agreement, the complainant had paid Rs. 30 lakhs to the accused which the accused had agreed to repay as the agreement had terminated. On 26.1.2005 i.e. four and half years after the termination of this agreement, the accused and his brother acknowledged to pay the balance amount in a short time. This acknowledgment even as per the complaint was much after the statutory period of three years which is the prescribed period of limitation for the recovery of an outstanding amount. An acknowledgment to be encompassed within the ambit of Section 18 of the Limitation Act has to be an acknowledgment in writing as also within the prescribed period of limitation. These are the twin requirements which have to be fulfilled in order to be a valid acknowledgment under Section 18 of the Limitation Act which is admittedly not so in the instant case. In this case this acknowledgment to pay the balance amount was in terms of the settlement dated 26.1.2005 i.e. much after the statutory period of three years; it also does not speak of the acknowledgement being in writing. It was thus not a valid acknowledgment. Cheques issued on 25.3.2005 and 30.4.2005 were clearly outside the period of limitation.

11. In Vijay Polymers Pvt. Ltd. and Anr.(supra), relying upon the judgment of Hon'ble Supreme Court in Sasseriyil Joseph (supra) a coordinate bench of this Court had held that cheques issued on a time barred debt would not fall within the definition of 'legally enforceable debt' which is the essential requirement for a complaint under Section 138 of NI Act; the extended meaning of debt or liability has been explained in the Explanation to the Section which means a legally enforceable debt or liability. The existence of a legally recoverable debt is also not a matter of presumption as has been held by the Supreme Court in Krishna Janardhan Bhat (supra).

12. The judgments relied upon by the learned defence counsel are distinct on their facts. In the case of A.V. Murthy (supra), the hon'ble Supreme Court had held that the question of an acknowledgment reviving the period of limitation could be agitated before the Magistrate, in a case where there was documentary evidence; in the said case the balance sheet of the respondent had acknowledged his liability; there is no such documentary evidence in this case.

13. The judgments of MMTC Ltd. and Anr. (supra) as also the subsequent judgments of Woods and Ors. (supra) and Bishan Dayal (supra) do not relate to the issue as to whether the transaction had become time barred or not; the facts of the said cases would be inapplicable.

14. In the instant case, the two cheques which are the subject matter of this complaint were for the discharge of a liability of a debt arising out of the agreement dated 14.6.2000 which debt had become time barred. This debt was not a legally enforceable debt within the meaning of Section 138 Explanation of the NI Act. Complaint and all proceedings emanating there from are accordingly quashed.

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MANU/MH/0924/2009

Equivalent Citation: I(2010)BC398

IN THE HIGH COURT OF BOMBAY AT GOA

Criminal Appeal No. 26 of 2007


Appellants: Priya BhobeVs.

Respondent: Speer Finance Pvt. Ltd. registered Company under Companies Act, 1956, Mr. Shrikant Gawda S/o. Shanker Gawda, Mrs. Manisha Gawda

w/o. Shrikant Gawda and State

Hon'ble Judges: N.A. Britto, J.

Counsels: For Appellant/Petitioner/Plaintiff: S.G. Bhobe, Adv.

For Respondents/Defendant: Ryan Menezes, S. Samant, Advs. for Respondents Nos. 1 to 3 and Winnie Coutinho, Public Prosecutor for Respondent No. 4

Subject: Banking

Subject: Criminal

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instruments Act, 1881 - Sections 138 and 139

Cases Referred: Ashwini Bhat 2005 (5) BomC.R. 9

Disposition: Appeal dismissed

JUDGMENT

N.A. Britto, J.

1. This is complainant's appeal and is directed against Judgment dated 16.10.2006 of the Learned Additional Sessions Judge, Panaji, acquitting the accused under Section 138 of the Negotiable Instruments Act, 1881.

2. Heard Shri S.G. Bhobe, Learned Counsel on behalf of the complainant. The complaint was filed with the allegation that accused No. 1 is a company of which accused Nos. 2 and 3 were Directors who were in overall control of accused No. 1-company and were jointly and severally liable for the liabilities of the company. The complainant had stated that the accused owed to the complainant a sum of Rs. 3,40,000/and towards the payment of the same the accused had given to the complainant the subject cheque dated 3.8.01 in the sum of Rs. 3,40,000/drawn on the Mapusa Urban Co-operative Bank Ltd. which cheque when presented by the complainant for payment was returned dishonoured on the ground of insufficient funds. The complainant sent a notice to the accused dated 13.8.01 calling upon the

accused to make the payment of the said amount of Rs. 3,40,000/- within fifteen days which was received by the accused but was not complied with and as such the complaint came to be filed against the accused on 21.9.01 and the complainant examined herself in support of the same.

3. None of the accused stepped in the witness box and it was their case taken in cross examination, that the subject cheque was stolen by the complainant as the complainant was occupying the office premises of the accused and moreover it was further stated that the signature of accused No. 3 was forged by the complainant.

4. Initially, the accused appear to have been sentenced by the Learned trial Court to simple imprisonment of a period of six months under Section 138 of the said Act and also were directed to pay to the complainant a sum of Rs. 6,80,000/- by way of compensation being twice the amount of the cheque and in default were directed to undergo simple imprisonment for a period of six months. In fact it appears that the Learned J.M.F.C who convicted and sentenced the accused aforesaid did not even notice that the accused No. 1 was a company which could not be sentenced to imprisonment.

5. Be that as it may, the accused filed an appeal before the Court of Sessions and the Learned Additional Sessions Judge, was pleased to allow the appeal by the impugned Judgment and in allowing the said appeal, the Learned Additional Sessions Judge came to the conclusion that the complainant had miserably failed to establish the transaction itself between the complainant and the other accused. The Learned Additional Sessions Judge further held that the accused having taken a stand/plea that the cheque was not issued for the discharge of a legally enforceable debt or liability, it was upon the complainant to prove the circumstances under which the cheque was given in her favour and the same was issued in discharge of a legally enforceable debt, and, therefore unless this initial burden was discharged by the complainant, presumptions available under Section 139 of the Act could not be made use against the respondents. The Learned Additional Sessions Judge also noted that the Learned trial Court while appreciating the evidence of the complainant did not take into consideration the admissions of the complainant and failure of the complainant in crossing the first hurdle in establishing that there was any transaction between the complainant and the accused as averred in the complaint and the complainant having failed to establish the said transaction there could not be any presumption under Section 139 of the Act.

6. Be that as it may, Shri Bhobe, Learned Counsel, appearing on behalf of the complainant, submits that both the defences taken by the accused that the subject cheque was stolen by the complainant from their office and that the signature thereon was forged having not been proved, there was no other option but to raise the presumptions available to the complainant in terms of the relevant provisions of the Act and on the basis of the same, held the accused guilty under Section 138 of the Act as was done by the Learned Magistrate. Learned Counsel has further submitted that the accused had also not given reply to the demand notice sent by the complainant and therefore that fact also ought to have been considered by the Learned Additional Sessions Judge.

7. Admittedly, the cheque in question, was signed by A-3 on behalf of A-1. Admittedly also, the accused did not reply to the notice and that is one of the circumstance against the accused, but there are far too many against the complainant. By cross examination of the complainant, the accused had by ample measure discharged the initial burden that consideration was not only improbable but there was none.

8. The complainant filed the complaint with the allegations that it is the accused-company which owed a sum of Rs. 3,40,000/- to the complainant and towards payment of the same that the subject cheque was given by the accused i.e. the company. The complainant filed the complaint against the accused Nos. 2 and 3 because according to the complainant they were in overall control of the accused No. 1-company, and, it was certainly not the case of the complainant that it is accused No. 3 who was liable to pay the said sum of Rs. 3,40,000/- to the complainant and on that count, accused No. 3 had issued the subject cheque on behalf of the accused No. 1-company.

9. However, in cross examination, the complainant stated that she had not joined accused Nos. 2 and 3 as Directors of accused No. 1company and further stated that

the subject cheque was issued by the accused No. 2 (it ought to have been accused No. 3) and that the complaint was filed by the complainant because she had given the some money to the accused Nos. 2 and 3. When the complainant was further questioned as to whether she had any proof to show that the sum of Rs. 3,40,000/was advanced to accused No. 1, she replied stating that she had paid the amount of Rs. 2,50,000/- to accused No. 1 by a cross cheque dated 27.10.95 and Rs. 90,000/- to accused No. 1 in cash on 23.5.97 and she had documentary evidence to support the said statement. In support of the said statements she produced a xerox copy, without producing the original bank pass book, which showed that the sum of Rs. 2,50,000/was paid to accused No. 3 on or about 4.11.95 and a Fixed Deposit Receipt in the name of her father-in-law Damodar A. Bhobe in the sum of Rs. 90,000/-. First of all, it must be observed, that the said xerox copy in the absence of production of the pass book, was clearly inadmissible in evidence.

10. Learned Counsel on behalf of the complainant, fairly concedes, that there is some prevarication in evidence of the complainant as compared to the complaint originally filed. In my view, there is no way in which the complainant could have succeeded. A reading of paras 2 and 3 of the com plaint clearly shows that it is A-1, the company, which owed to her a sum of Rs. 3.40 lacs and towards payment of the same that the cheque was issued. That was her case in affidavit in evidence as well. However, in cross examination, the complainant stated that the legal liability towards the cheque was that of A-2 (should be A-3) and tried to prove the same by production of the xerox copy of the passbook and the fixed deposit receipt. It is a well settled preposition of criminal law that a complainant cannot be allowed to reconstruct a story different from the one propounded or pleaded in the complaint and that is exactly what the complainant was found doing in the evidence produced by her and on that count alone, her case ought to have been rejected. In other words, the case in the complaint was that the money was advanced to A-1, the company which has its own distinct identity and on whose behalfs the cheque was issued. In the evidence, the complainant has tried to depose that the liability was that of A-3 Smt.Gawda.

11. That apart, the accused in cross examination, were able to create a doubt as to the existence of consideration that it was improbable and therefore it was for the complainant to prove that the subject cheque was issued towards debt or liability which either of the accused had towards her, which the complainant had failed to prove. As already sated, the xerox copy of bank passbook, was clearly inadmissible. Rs. 90,000/- were paid by her father-in-law for which he was issued a F.D.R. Further, the complainant had admitted that the liability was of the year 1995 and there was no written acknowledgment from that year. If that was so, the cheque given in the year 2001, was given towards a time barred debt and therefore the accused had not committed any offence (See Ashwini Bhat 2005 (5) Bom C.R. 9).

12. In the light of the above discussion, acquittal of the accused by the Learned Additional Sessions Judge, could not be faulted. There is no merit in this appeal and consequently the same is hereby dismissed.


MANU/DE/0486/2009

Equivalent Citation: 162(2009)DLT23, (2009)156PLR1

IN THE HIGH COURT OF DELHI

Crl. M.C. 1682/2008 and Crl. M.A. Nos. 6167 and 12878/2008


Appellants: Vijay Polymers Pvt. Ltd. and Anr.Vs.

Respondent: Vinnay Aggarwal

Hon'ble Judges: Mool Chand Garg, J.

Counsels: For Appellant/Petitioner/Plaintiff:P.D. Gupta Kamal Gupta an Abhishek Gupta, Advs

For Respondents/Defendant: Balwinder Ralhan, Adv.

Subject: Banking

Subject: Criminal

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instruments Act - Sections 138 and 141; Contract Act - Section 25; Limitation Act - Section 18; Indian Evidence Act, 1872

Cases Referred: Sasseriyil Joseph v. Devassia SLP (Crl.) 1785/2001; Smt. Ashwini Satish Bhat v. Shri Jeevan Divakar Lolienkar and Anr. 2000 (5) Bom CR 9; Girdhari Lal Rathi v. P.T.V. Ramanujachari and Anr. 1998 Bank J. 127 : 2000 Do Ch. (A.P.) 420

Citing Reference:

Sasseriyil Joseph v. Devassia SLP (Crl.) Discussed

Smt. Ashwini Satish Bhat v. Shri Jeevan Divakar Lolienkar and Anr. Discussed

Girdhari Lal Rathi v. P.T.V. Ramanujachari and Anr. Mentioned


Case Note:Negotiable Instruments Act, 1881 - Section 138 - Limitation Act, 1963 - Section 18 - Dishonor of cheque - Complaint - Cheques issued in lieu of a debt which was not legally recoverable - Acknowledgement, if any, must be there before period of limitation is over - Magistrate was right in coming to the conclusion that it had not been proved that the dishonoured cheque was in relation to a legally enforceable debt or liability in law -

Dishonoured cheque admittedly was issued after 5 years - Debt was not legally enforceable at the time of issuance of cheque - Proceedings not maintainable.

JUDGMENT

Mool Chand Garg, J.

1. The basis issues which involved in this case are:

(i) Whether the complaint dated 13.12.2007 (Annexure P-4) filed under Section 138 of the Negotiable Instruments Act (for short “the N.I. Act”) by respondent against the petitioner is not maintainable in law inasmuch as, it is pleaded, that the same is based upon the dishonor of a cheque which was issued by petitioner No. 2 in lieu of a debt which was not legally recoverable as alleged at the time of issuance of the said cheque?

(ii) Whether the summoning order is sustainable in the facts of this case in view of the judgment of Apex Court delivered in Special Leave to Appeal being SLP (Crl.) 1785/2001 decided on 10.9.2001?

2. This petition has been filed by the accused persons who were summoned to face the trial in this case of a charge under Section 138/141 of the N.I. Act vide order dated 21.01.2008, which order was passed by the trial court taking note of the averments made in the complaint which was filed in support of the complaint. The same reads as under:

Complainant examined by way of affidavit. Documents filed along with complaint perused. Material on record prima facie discloses commissionof an offence under Section 138 N.I. Act by accused. Let accused be summoned on filing of PF/RC, approved courier, dasti for 25.03.08. Steps be taken within a week.

3. To appreciate the factual matrix of this case, it would be necessary to take note of some of the paragraphs of the complaint which are reproduced hereunder:

2. That the accused No. 2 in the month of Jan 2002 approached and asked from the complainant for a sum of Rs. 6,00,000/- (Rs. Six Lakhs Only) for the personal needs/friendly loan as the accused was facing some financial crises. On the accused’s request the complainant gave you a sum of Rs. 6,00,000/- (Rs. Six Lakhs Only) through cheque No. 340787 drawn on Punjab National Bank, Lawrence Road Branch, to the accused No. 2 as friendly loan. The said cheque was issued in favour of noticee No. 1 and was debited in the account of the complainant on 01-02-2002.

3. That thereafter the complainant waited for some time as the accused had promised to repay the friendly loan after six months but he failed to do so. After considerable persuasion from the complainant the accused No. 2 in lieu of the above mentioned friendly loan, issued two cheques bearing No. 817758 dated 27-04-2006 and another bearing No. 817760 dated 31-05-2006 each for a sum of Rs. 50,000/- (Fifty Thousand Only) each, each drawn on Bank of India Rajendra Place Delhi, Branch in favour of the complainant towards the part payment against the outstanding dues towards the accused. The said cheques were however enchased on presentation.

4. That thereafter the complainant again waited for some time and after considerable persuasion from the complainant the accused No. 1, again in lieu of above mentioned friendly loan, issued two cheques bearing nos.817772 dated 14-08-2006 and another cheque bearing No. 817773 dated 30-08-2006 each for a sum of Rs. 50,000/- (Fifty Thousand Only) each, each drawn on Bank of India Rajendra Place Delhi, Branch in favour of the complainant towards the part payment against the outstanding dues towards the accused. The said cheques were dishonored on presentation but however the complainant did not take any action on the request of the accused that the entire payment will be cleared very shortly.

5. That again after great persuasion from the complainant the accused No. 2 issued one cheque bearing No. 350562 dated 05-05-2007 drawn on ICICI Bank Limited, Punjabi Bagh branch, New Delhi for a sum of Rs. 50,000/- towards the part payment against the outstanding dues towards the accused. That the complainant presented

the said cheque with the banker but the same was returned unpaid by the accused banker with the remarks “Funds Insufficient” vide memo dated 07-05-2007. The complainant contacted the accused and the accused requested the complainant to present the same after some time. The complainant again presented the above cheque with his banker but the same was again returned unpaid by the accused’s banker with the remarks “Funds Insufficient” as per memo dated 09-10-2007 of the accused bank and as per memo dated 12-10-2007 the complainant’s bank which was received by the complainant on 15-10-2007.

6. That the above said cheque bearing No. 350562 dated 05-05-2007 drawn on ICICI Bank Limited, Punjabi Bagh branch, New Delhi for a sum of Rs. 50,000/- was issued by the accused No. 2 to the complainant with the clear understanding that the same will be encashed on presentation.

7. That upon return of the said cheques, the Complainant issued a notice dated 12-11-2007 i.e. within a stipulated period from the date of dishonoured cheques having been handed over by the Complainant’s banker to her. The said notice was duly serve duly served upon the Accused/Respondent. However, the Accused/Respondent neither complied with the terms of the said notice nor replied the same.

4. A perusal of the affidavit annexed with the complaint which has been relied upon by the Metropolitan Magistrate while passing the impugned order also shows that only the averments made in the complaint have been reiterated by the deponent.

5. One thing which is important and can be taken note of is that neither in the complaint nor in the notice nor in the affidavit it has been stated that the debt which became time barred i.e. the amount of Rs. 6 lakhs which was paid by the complainant to petitioner No. 1 at the asking of petitioner No. 2 on 1.2.2002 was ever acknowledged within the period of limitation so as to keep the liability alive.

6. A perusal of the complaint and other documents as referred to above goes to show that the complainant had paid a sum of Rs. 6 lakhs by way of cheque to petitioner No. 1 at the asking of petitioner No. 2 somewhere in January, 2002 and the said cheque was credited in the account of petitioner No. 1 on 1.2.2002 and was payable after six months and was not paid within three years from 31.8.2002 that is the period within which it was under limitation and as such the loan became time barred as on 31.8.2002. A perusal of the complaint also clarified that first two cheques which stated to have been paid to the complainant by the petitioners were paid on 27.4.2006 and 31.5.2006. Thus those cheques were paid after three years of the friendly loan having became time barred. Similarly, the cheques issued in lieu of the original cheque i.e. a cheque of Rs. 50,000/- bearing No. 817773 dated 30-08-2006 and another cheque bearing No. 350562 dated 05-05-2007.

7. It is submitted on behalf of learned Counsel for the petitioners that in view of provisions of Section 138 of the N.I. Act and if the same read along with explanation, it is apparent that the offence under Section 138 of the N.I. Act as per the scheme of the Act can be fastened on an accused only if he commits a default in repayment of the dishonoured cheque which was issued in discharge of a legally recoverable debt.

8. Counsel for the petitioners relies upon a judgment delivered by the Apex Court in SLP (Crl.) 1785/2001 reported in Sasseriyil Joseph v. Devassia decided on 10.09.2001. The same is reproduced hereunder:

We have heard learned Counsel for the petitioner. We have perused the judgment of the High Court of Kerala in Criminal Appeal No. 161 of 1994 confirming the judgment/order of acquittal passed by the Addl. Sessions Judge, Thalassery in Criminal Appeal No. 212 of 1992 holding inter alia that the cheque in question having been issued by the accused for due which was barred by limitation the penal provision under Section 138 of the Negotiable Instrument Act is not attracted in the case. On the facts of the case as available on the records and the clear and unambiguous provision in the explanation to Section 138 of the Negotiable Instrument Act the judgment of the lower appellate court as confirmed by the High Court is unassailed. Therefore, the special leave petition is dismissed.

9. Counsel for the complainant/respondent on the other hand tried to suggest that in view of Section 25 of the Contract Act, once the cheque was issued by the

petitioners in lieu of their admitted liability, the dishonor of a cheque issued by them and non-payment thereof despite receipt of the notice makes out a case against them under Section 138 of the N.I. Act and therefore, the complaint filed by the complainant was maintainable in accordance with law.

10. To appreciate the contentions of parties, the provisions contained under Section 138 of the N.I. Act are reproduced hereunder:

Section 138 - Dishonour of cheque for insufficiency, etc., of funds in the account

Where any cheque drawn by a person on an account maintained by hi m 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 sh all be deemed to have committed an offence and sh all, 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 been presented to the bank within a period of six months from the date on which it is dr awn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 2 [within thirty days] of the receipt of information by hi m from the bank regarding the return of the cheque as unpaid; and (c) the drawer 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.]

11. At this juncture, it would also be appropriate to take note of Section 18 of the Limitation Act which deals with acknowledgement and explanation of limitation which reads as under:

Section 18 - Effect of acknowledgment in writing( limitation act)(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received. Explanation.--For the purposes of this section,-- (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right; (b) the word "signed" means signed either personally or by an agent duly authorised in this behalf; and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.

12. A perusal of the aforesaid provision clearly goes to show that for analyzing the limitation of a civil liability beyond a period of three years, the acknowledgement, if any, must be there before period of limitation is over, which is not the case.

13. It may also be relevant to take note of the judgment delivered by the Bombay High Court in Smt. Ashwini Satish Bhat v. Shri Jeevan Divakar Lolienkar and Anr.

MANU/MH/0487/2000 : 2000(5)BomCR9 , wherein also in a similar case when a cheque was dishonoured which issued beyond the period of limitation the appeal filed by the complainant was dismissed. The relevant observations made in this regard in the aforesaid judgment are reproduced hereunder:

3. On the other hand, learned Advocate Shri C.A. Ferreira, appearing for the respondent, submitted before me that the dishonoured cheque in question was not in respect of a legally enforceable debt and in view of Explanation to Section 138 of the said Act, the Magistrate has rightly acquitted the respondent on the said count as well as on the ground that there was doubt as to whether the amount mentioned in the said cheque was in the handwriting of the respondent as the defence of the respondent is that he had handed over to the appellant a blank cheque. In support of his submission that the dishonoured cheque in question is not in connection with any legally enforceable debt, reliance was placed by him on Girdhari Lal Rathi v. P.T.V. Ramanujachari and Anr. 1998 B J. 127 : 2000 DC. (A.P.) 420. He, therefore, submits that there is no case for interference with the acquittal.

4. The complainant, respondent and one Shankar Prabhudessai had entered into partnership vide Partnership Deed Exhibit P.W. 1/D on 24th August 1990. This partnership was dissolved on 13th June 1991 after an agreement was executed between the parties under which the respondent agreed to pay a sum of Rs. 1,53,724 to the appellant/complainant within 12 months and in case he fails to make the said payment during the said period, the said amount was to carry bank interest from the date of the agreement. The case of the complainant further is that the respondent did not pay the amount as agreed under the said Agreement dated 13th June, 1991, but on 19th July, 1996 the respondent issued cheque for Rs. 3,87,500/- and this cheque has bounced.

5. The defence had taken the stand that the dishonoured cheque was not in relation to any legally enforceable debt and, as such, the respondent could not be held guilty under Section 138 of the said Act. The contention of learned Advocate for the appellant is that this cheque dated 19th July 1996 itself is an acknowledgement of debt and, as such, there is no merit in the submission of the defence that the liability under dishonoured cheque is not on account of legally enforceable debt. Insofar as the dishonoured cheque is concerned, the stand taken by the respondent is that the cheque was not written by him and it is not in his handwriting and that he had, in fact, issued a blank cheque in favour of the appellant for certain purpose. This stand was specifically taken by the respondent in the course of the trial and, as such, it was necessary for the complainant to have sought the opinion of handwriting expert in case her case was that the cheque in question was in the handwriting of the respondent, so as to rebut the theory of blank cheque taken by the respondent. It is in these circumstances that the Magistrate had come to the conclusion that the dishonoured cheque in question cannot be treated as acknowledgement under Section 18 of the Limitation Act, since the acknowledgement should be before the period of limitation is over and that it should be in writing. In view of this position, the Magistrate was right in coming to the conclusion that it had not been proved that the dishonoured cheque was in relation to a legally enforceable debt or liability in law. The dishonoured cheque admittedly was issued after 5 years of the said Agreement dated 13th June 1991.

6. The ruling upon which reliance has been placed by the learned advocate for the respondent is applicable on all fours. In that case loan was advanced in the year 1985 and the cheque was issued in the year 1990. By the time the cheque was issued, the debt was barred by limitation because no acknowledgement was obtained before the expiry of 3 years from the date of loan. In these circumstances, it was held there that the debt was not legally enforceable at the time of issuance of cheque and the accused could not be punished under Section 138 of the said Act. In the light of Explanation to the said section, it was further held therein that in case a cheque is issued for time barred debt and it is dishonoured, the accused cannot be convicted under Section 138 on the ground that the said debt was not legally recoverable.

7. For the aforesaid reasons, I do not find any merit in this appeal and the appeal is liable to be dismissed. The appeal is accordingly dismissed.

14. No contrary judgment has been cited on behalf of the complainant/respondent. Accordingly the petition is allowed. The complaint dated 13.12.2007 and all the

proceedings emanating therefrom are hereby quashed. Crl. M.A. Nos. 6167/2008 and 12878/2008 In view of the orders passed, applications are disposed of.


MANU/TN/0250/2008

Equivalent Citation:

IN THE HIGH COURT OF MADRAS

Criminal Appeal No. 1296 of 2002


Appellants: Emirates Finance (P) Ltd. rep. by its Accountant KrishnanVs.

Respondent: V. Harikrishnan

Hon'ble Judges: P.R. Shivakumar, J.

Counsels: For Appellant/Petitioner/Plaintiff: Walter Solomon, Adv.

For Respondents/Defendant: A.C. Jayalakshmi, Legal Aid Counsel

Subject: Criminal

Subject: Banking

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instruments Act, 1983 - Section 138; Criminal Procedure Code (CrPC) - Sections 200 and 313


JUDGMENT

P.R. Shivakumar, J.

1. This Criminal Appeal has been filed against the judgment of the learned XVIII Metropolitan Magistrate, Saidapet, Chennai, made in CC No. 411 of 1999 dated 8.5.2002 thereby acquitting the accused.

2. The above said Calendar Case was taken on file by the learned XVIII Metropolitan Magistrate based on the complaint of the appellant herein preferred under Section 200 Cr.P.C. alleging that the respondent herein had committed an offence punishable under Section 138 of the Negotiable Instruments Act, 1983.

3. According to the appellant/complainant, the respondent obtained a loan of Rs. 3 lakhs promising to repay the same with interest @ 36% per annum and in discharge of the said debt and a cheque dated 11.9.1998 was issued by the respondent for the above said amount. When the said cheque was presented for encashment on 14.9.1998 through the appellant's banker, the same was returned on 15.9.1998 with an endorsement "insufficient funds". The statutory notice issued thereafter on 22.9.1998 was received by the respondent on 23.9.1998. Even after the receipt of the said notice, the respondent did not make payment of the amount covered by the cheque within the statutory period, but chose to issue a reply notice. Hence, the

complaint was preferred for prosecuting him for the offence under Section 138 of the Negotiable Instruments Act.

4. The respondent, who appeared before the trial court on receipt of process, pleaded not guilty and denied the allegations found in the complaint. During trial, three witnesses were examined and 10 documents were marked on the side of the appellant/complainant. When the incriminating part of the evidence adduced on the side of the complainant was pointed out and the respondent/accused was examined under Section 313 Cr.P.C., besides denying such incriminating evidence, the respondent has taken a specific stand that the cheque was not issued for the discharge of a legally recoverable debt. The learned Magistrate, after meticulously examining the evidence adduced in this case, came to the conclusion that the appellant/complainant failed to prove that the cheque was issued for the discharge of a legally recoverable debt or other liability and in line with the said finding, the learned Magistrate acquitted the respondent/accused by her judgment dated 8.4.2002. Challenging the correctness and the legality of the said judgment of acquittal, the present appeal has been preferred on the file of this Court.

5. The arguments advance on behalf of the appellant and the respondent have been heard. The materials available on record were also perused by this Court.

6. The unsuccessful complainant before the trial court is the appellant in this appeal, which has been filed against the acquittal of the accused in C.C. No. 411 of 1999 on the file of the learned XVIII Metropolitan Magistrate, Saidapet, Chennai. The respondent herein stood charged for committing an offence punishable under Section 138 of the Negotiable Instruments Act. Upon perusing the records and re-appraising the evidence in the light of the arguments advanced by the learned Counsel appearing on either side, this Court is not able to find out any discrepancy or infirmity in the approach of the learned Magistrate and the decision made by the said Magistrate holding the respondent/accused not guilty of the offence with which he stood charged. Though the appellant/complainant had stated in its complaint that the cheque was issued in discharge of the debt due to the appellant/complainant to the tune of Rs. 3 lakhs, there are no details regarding the date on which the amount was borrowed and the documents executed for the same. Though the details of the cheque has been furnished in the complaint, the language of the complaint has been couched in such a way that one going through the complaint would be guessing as to what could be the date on which the cheque was actually issued. Such an ingenious method of drafting the complaint has been adopted. Learned Counsel for the respondent, pointing out the said fact, has contended that in fact, the blank cheque without date was handed over as an additional security for the loan advanced by the appellant/complainant and that the same was subsequently filled up by putting a date in 1998 and used by the appellant in this case.

7. In support of the said contention, the learned Counsel has taken this Court through the evidence of PW1, who during cross-examination, has candidly admitted that the loan was advanced in 1993, a pronote as well as the blank cheque was obtained in 1993 and the cheque was presented for collection in 1998, on the instructions of the respondent/accused. The implication of the said admission is twofold. They are : (i) the admission that the cheque was issued as a security for the loan and not for the discharge of the loan is to be used in support of the case of the respondent/accused that the cheque was not issued for the discharge of a debt or other liability as provided under Section 138 of the Negotiable Instruments Act. The said admission itself will be enough to rebut the presumption provided under Section 139 of the Negotiable Instruments Act. (ii) The second implication of the said admission is that the debt which was incurred by the respondent/accused in the year 1993 was time barred even before the date of the cheque. Hence, the cheque could not be construed as one issued in discharge of a legally recoverable debt or other liability. It is not the case of the appellant/complainant that the debt incurred in the year 1993 was subsequently acknowledged giving a new start of limitation. It is also not the case of the appellant/complainant that a fresh promise was made for the payment of the time barred debt and the time barred debt itself proved to be the consideration for such a fresh promise.

8. The learned Magistrate has marshalled the evidence in this regard properly and has come to the correct conclusion that the appellant/complainant failed to prove the charge against the respondent/accused beyond reasonable doubt and that the respondent accused was entitled to be acquitted, holding him not guilty of the

offence for which he stood charged. There is no merit in this appeal as no scope whatsoever is found to interfere with the well considered judgment of the trial court. The judgment of the trial court deserves to be confirmed.

9. Accordingly, the criminal appeal is dismissed. The remuneration of the learned Counsel for the respondent shall be paid in accordance with the schedule of fee applicable to the Legal Aid Counsel.


MANU/KA/1143/2006

Equivalent Citation: [2007]138CompCas816(Kar), 2007(1)KarLJ238

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

Criminal Appeal No. 377/2002


Appellants: H. Narasimha Rao S/o Sri S.R. Hanumantha RaoVs.

Respondent: Venkataram R. S/o Sri T.C. Ramakrishnaiah

Hon'ble Judges: K. Bhakthavatsala, J.

Counsels: For Appellant/Petitioner/Plaintiff: H.T. Nataraja, Adv.

For Respondents/Defendant: B.C. Rajanna, Adv.

Subject: Criminal

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instruments Act - Section 118, 138, 139; Code of Criminal Procedure (Crpc) - Section 378(4); Indian Contract, 1972 - Section 25(3)

Cases Referred: A.V. Murthy v. B.S. Nagabasavanna 2002 AIR SCW 694; Ramakrishnan v. Parthasaradhy 2003 (3) Indian Civil Cases 662; Hawkers v. Saunders (1782) 98 ER 1091

Disposition: Appeal allowed

Citing Reference:

A.V. Murthy v. B.S. Nagabasavanna Discussed

Ramakrishnan v. Parthasaradhy Mentioned

Hawkers v. Saunders Discussed

Case Note:Banking — Dishonour of Cheque — Time-barred debt — Section 138 of Negotiable Instruments Act, 1881 (the ‘Act’) — Complainant granted loan to Accused on condition of repayment within short period — Accused issued two cheques in favour of Complainant towards discharge of loan — On presentation, cheques were bounced — Complainant issued demand notice, the receipt of which was acknowledged by Accused but untenable reply was sent along with — Therefore, Complainant had filed complaint under Section 138 of the Act against Accused — Magistrate, however,

acquitted Accused on ground that Accused could not be held liable to pay any time barred debt — Hence, present appeal — Held, there was no legal bar for debtor agreeing to pay time barred debt — No fresh consideration was required for debtor’s promise to pay time barred debt — Moreover, undisputed signatures on cheques by Accused constitute agreement to pay time barred debt — Offence under Section 138 made out — Appeal allowed

JUDGMENT

K. Bhakthavatsala, J.

1. The short question that arises for consideration in this appeal is:

Whether the dishonoured cheques issued towards repayment of time barred debt does not constitute an offence under Section 138 of the N.I. Act?

2. Heard Sri H.T. Nataraja, learned Counsel for the appellant/complainant and Sri B.C. Rajanna, learned Counsel for the respondent/accused.

3. For the purpose of convenience, the appellant and the respondent herein are referred to as 'the complainant' and 'the accused', respectively.

4. The complainant and the accused were friends and colleagues in the then Karnataka Electricity Board. When the accused was about to retire, he approached the complainant for a loan of Rs. 60,000/- and agreed to repay the same within a short period. The complainant advanced a sum of Rs. 60,000/- to the accused in this way that a sum of Rs. 200/- was paid in cash and the balance amount of Rs. 59,800/- was paid by three cheques. The accused has encashed the cheques. Though the loan amount was repayable within a short period, the accused took undue advantage of friendship with the complainant and agreed to repay the loan within six months with interest at the rate of 8% p.a., but the accused failed to keep up his promise. On complainant's persistent demand, the accused issued two cheques, one bearing No. 152400 dated 15.5.1999 for a sum of Rs. 50, 000/- and another cheque bearing No. 152921 dated 25.5.1999 for a sum of Rs. 10, 000/- both drawn on the Bangalore City Co-operative Bank Limited, Bangalore, in favour of the complainant towards discharge of the loan amount stating that the cheques would be honoured on presentation to the Banker. But when the cheques were presented, they were bounced and returned on 1.6.1999 with an endorsement "funds insufficient". The complainant issued a demand notice dated 10.6.1999 calling upon the accused to pay the amount of dishonoured cheques within 15 days. The accused acknowledged the receipt of the same but sent an untenable reply dated 24.6.1999. Therefore, the complainant filed a private complainant against the accused for the offence under Section 138 of the Negotiable Instruments Act (in short, 'the Act'). The accused denied the accusation. The complainant has got him examined as P.W-1 and got marked Exs.P-1 to P-10. In rebuttal, the accused has got him examined as D.W-1 besides examining one Khalandar Baigh as D.W-2.

5. The learned Magistrate has accepted the evidence of the complainant and held that in the year 1994, the complainant gave loan of Rs. 60,000/- to the accused, but rejected the complainant on the ground that the accused had issued the cheques in the month of May 1999 as against time barred debt, and there was no evidence to show that the accused had acknowledged the debt within 3 years of loan. Therefore, the trial court recorded an order of acquittal in favour of the accused. This is impugned in this appeal.

6. The learned Counsel for the complainant submitted that the learned Magistrate committed an error in dismissing the complaint. He cited the following decisions reported in:

(i) AIR 2002 SCW 694 ( A.V. Murthy v. B.S. Nagabasavanna) and

(ii) 2003 (3) Ind Cas 662 (Ramakrishnan v. Parthasaradhy).

7. The learned Counsel for the respondent/accused submitted that there is no illegality or infirmity in the impugned judgment.

8. The complainant has produced pass books at Exs.P-8 and P-9. As per Exs.P-8 and P-9, the pass books of the complainant, issued by Union Bank of India and Syndicate Bank, it is crystal clear that the accused has drawn in all amounting to Rs. 59,800/- between 31.5.1994 and 12.6.1994, A sum of Rs. 200/- was paid in cash by the complainant to the accused. The learned Trial Judge rejected the contention of the accused that he drew the amounts and paid the complainant and held that the complainant had advanced hand loan of Rs. 60,000/- to the accused in the year 1994.

9. Section 138 of the Act, which was inserted by Amendment Act, 1988, and came into force from 1.4.1989 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 provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:


(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer 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 purpose of this section, "debt or other liability" means a legally enforceable debt or other liability.

10. Admittedly, the loan transaction took place in the month of May, 1994. The accused issued two cheques one cheque dated 15.5.1999 for a sum of Rs. 50,000/- and another cheque dated 25.5.1999 for a sum of Rs. 10,000/- (both drawn on Bangalore City Cooperative Bank Limited, Bangalore,) in favour of the complainant towards discharge of the loan amount. As on 12.6.1997, the entire debt of Rs. 60,000/- had become time barred, but there is no legal bar for the debtor agreeing to pay the time barred debt. No fresh consideration is required for debtor's promise to pay the time barred debt. There is moral obligation on the accused, who is none other than the friend of the complainant, to refund the loan amount. It would be useful to refer to the observation made by Lord Mansfield, in Hawkers v. Saunders (1782) 98 ER 1091, which reads as under:

Where a man is under a legal or equitable obligation to pay, the law implies a promise, though none was ever actually made. A fortiori, a legal or equitable duty is a sufficient consideration for an actual promise. Where a man is under a moral obligation, which no Court of Law or Equity can enforce, and promises, the honesty and rectitude of the thing is a consideration. As if a man promises, to pay a just debt, the recovery of which is barred by the Statute of Limitations: or, if a man, after he comes of age, promises to pay a meritorious debt contracted during his minority, but not for necessaries; or if a bankrupt, in affluent circumstances after his certificate, promises to pay the whole of his debts; or if a man promises to perform a secret trust, or a trust void for want of writing, by the Statute of Frauds.

In such and many other instances, though the promise gives a compulsory remedy, where there was none before either in law or equity; yet as the promise is only to

do what an honest man ought to do, the ties of conscience upon an upright mind are a sufficient consideration.

11. The Hon'ble Apex Court in A.V. Murthy v. B.S. Nagabasavanna, supra, has made an observation in para-5 of the judgment as under:

...Under Section 118 of the Act, there is a presumption that until the contrary is proved, every negotiable instruments was drawn for consideration. Even under Section 139 of the Act, it is specifically stated that it shall be presumed, unless the contrary is proved that, the holder of a cheque received the cheque of the nature referred to in Section138 of discharge, in whole or in part, of any debt or other liability. It is also pertinent to note that under Sub-section (3) of Section 25 of the Indian Contract, 1972, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract....

12. The Division Bench of the Kerala High Court in Ramakrishnan case, supra, following the ratio laid down in the A.V. Murthy's case, supra, held that when a person writes, signs and delivers a cheque to another it is an acknowledgment of a legally enforceable liability and therefore, if the cheque is dishonoured such a person shall not be entitled to plead that at the time of his writing the cheque the claim had become barred by limitation and thus, he is not liable to be punished under Section 138 of the Act.

13. The complainant has not disputed his signature on the dishonoured cheques in question. Therefore, they constitute an agreement or promise by the debtor to pay the time barred debt. Since the accused has not paid the cheque amounts inspite of demand made by the complainant the accused has committed an offence under Section 138 of the Act. The learned Magistrate has committed an error in dismissing the complaint and recording an order of acquittal in favour of the accused.

14. For the foregoing reasons, I answer the point formulated for my consideration in the negative.

In the result, the Appeal is allowed and the impugned judgment dated 20.11.2001 made in CC No. 35100/1999 on the file of XVI Addl. Chief Metropolitan Magistrate at Bangalore, is set aside and the respondent/accused is convicted for the offence under Section 138 of the Act and sentenced to pay a sum of Rs. 1,00,000/-, failing which the accused shall undergo SI for six months. If the fine amount is recovered, the appellant/complainant shall be paid a sum of Rs. 90,000/-, as compensation.


MANU/KA/0046/2009


IN THE HIGH COURT OF KARNATAKA AT BANGALORE



Appellants: Prabhakar K. Prabhu, S/o. Late K.S. PrabhuVs.

Respondent: Ganapathi A. Prabhu S/o. Late. A.A. Prabhu

Hon'ble Judges: K. Ramanna, J.

Counsels: For Appellant/Petitioner/Plaintiff: I. Taranath Poojary, Adv.

For Respondents/Defendant: S. Vishwajith Shetty, Adv.

Subject: Criminal

Subject: Banking

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instument Act - Sections 118, 138 and 139; Criminal Procedure Code (CrPC) - Section 378(4)

Cases Referred: A.V. Murthy v. B.S. Nagabasavanna ILR 2002 SC 985; Modi Cements Ltd. v. Kuchil Kumar Nandi 1998 Crl.L.J 1397; K.N. Beena v. Muniyappan and Anr. 2001 CRL.L.J 4745; Hiteh P. Dalal v. Bratindranath Banerjee AIR 2001 SC 3897

JUDGMENT

K. Ramanna, J.

1. This appeal is filed by appellant-complainant under Section 378[4] of Cr.P.C to set aside the judgment and order of dismissal of C.C. No. 51/2000 passed by the JMFC [IV Court) Mangalore, dated 22-8-2000 praying to convict the respondent for an offence punishable under Section 138 of N.I. Act.

2. The case of the appellant in nutshell is that the respondent has issued the post dated cheque-Ex. P.2 dated 31-3-1998 for Rs. 21,800 drawn on Canara Bank, Mazagaon, Mumbai, when it was presented for encashment it came to be dishonoured on the ground that payment stopped by the drawer, to that effect the banker of the appellant had issued endorsement dated 16-4-1998, therefore he got issued demand notice, inspite of service of notice he neither paid the amount nor sent any reply therefore, a private complaint came to be filed. In pursuance to the summons issued, respondent appeared through counsel. To prove his case appellant was examined himself as P.W.1 and also examined one M. Panduranga Kamath as P.W.2, where as the respondent examined himself as D.W.1 and got marked two documents, Certified copy of the order in S.C. 3093/1971 and the

decree passed therein, as Ex.D.1 and D.2 respectively. After recording 313 statement and considering the evidence of both parties, trial court dismissed the complaint filed against the respondent, on the ground that amount covered under the cheque is time barred and that issuance of cheque will not save the limitation unless there is an acknowledgment of the debt. Hence this appeal.

3. Heard the arguments of the learned Counsel appearing on both sides and perused the documents placed on record.

4. It is contended by counsel for appellant that though the notice was duty served on the respondent be has failed to comply with the demand made in the same, the endorsement issued by the banker marked at Ex.P.3 that the respondent himself issued the letter stop payment letter therefore the banker did not encashed the cheque. It is argued that there is no specific reply sent by the respondent and he has taken the defence only during trial. It is argued that the defence taken during the trial court that he lost the cheque therefore he has sent a letter to stop payment. The respondent did not dispute his liability to make payment as covered under the cheque the conclusion arrived by the trial court without taking into consideration the admissions made by the respondent and the finding recorded by the trial court that it is a time barred debt is totally incorrect, perverse and illegal. Hence it is prayed to allow the appeal.

5. While arguing the case the learned Counsel for the appellant has relied on the number of decision namely

In case of A.V. Murthy v. B.S. Nagabasavanna ILR 2002 SC 985 it has been held thus:

Dishonour of cheque - Complaint alleging that cheque was drawn to pay back amount advanced by complainant 4 years back -Dismissal at threshold on ground that as amount was advanced 4 years prior there was no legally enforceable debt - Not proper -Consideration for cheque is presumed under Sections 118, 139 - Moreover drawer in his balance sheet prepared for every year, had shown the amount as deposits from friend - This may amount to acknowledgement - Dismissal complaint on ground that cheque drawn was in respect of a debt or liability, which was not legally enforceable - Is illegal and erroneous.

In case of Modi Cements Ltd. v. Kuchil Kumar Nandi MANU/SC/0171/1998 : 1998CriLJ1397 it has been held thus:

Dishnour of cheque - Presumption under Section 139 in favour of holder is followed once -Cheque is issued by drawer - Notice by drawer to drawee or to bank for stoppage of payment -Would not preclude action under Section 138 by drawee.

In case of K.N. Beena v. Muniyappan and Anr. MANU/SC/0661/2001 : 2001CriLJ4745 wherein, it has been held thus:

Cheque dishonour complaint - Burden of proving that cheque had not been issued for any debt or liability - Is on the accused -Denial/averments in reply by accused are not sufficient in shift burden of proof onto the complainant - Accused has to prove in trial by leading cogent evidence that there was no debt or liability - Setting aside of conviction on basis of some formal evidence led by accused - Not proper.

In case of Hiteh P. Dalal v. Bratindranath Banerjee MANU/SC/0359/2001 : 2001CriLJ4647 it has been held thus: -

Presumption that cheque was drawn for discharge of liability of drawer - Is presumption of law - Ought to be raised by Court in every case - Rebuttal evidence - Nature - Mere plausible explanation is not sufficient - Proof of explanation is necessary.

6. It is submitted that liability to pay royalty is a continuous liability therefore the question of limitation does not arise. Therefore, the judgment and order of dismissal of complaint and acquitting the respondent for the offence under Section 138 of N.I. Act is liable to be set aside and he be convicted for the same.

7. As against this the learned Counsel for respondent submitted that the royalty to be payable to the appellant-complainant by the respondent as a managing partner of JAGANNIVASA RESTAURANT, since the appellant was a shareholder therefore the royalty to be payable to him cannot become a debt to attract the provision of Section 138 of N.I. Act. Therefore the trial court rightly come to the conclusion that it is a time barred debt. The payment if any made by way of cheque cannot be considered as a cheque. It is argued that as per the evidence of P.W.1 he is entitled to get monthly royalty at Rs. 200/- per month, but the same does not corroborate with the cheque-Ex. P.2. Even otherwise the appellant is entitled to recover at the rate of Rs. 200/- p.m for the period of 3 years. There is no acknowledgment as such made by the respondent to recover such a debt. Therefore he prays for dismissal of appeal.

8. Having heard the arguments for counsel for both parties the point that arises for consideration is whether the trial court is justified in holding that amount covered under the cheque Ex. P.2 is not legally enforceable and the same is time barred?

9. Admittedly respondent is the cousin of the appellant. The cheque Ex.P-2 belong to the respondent. The same came to be dishonoured when presented for encashment with shara 'payment stopped by the drawer'. The signature and the amount found in the cheque is not in dispute. According to appellant, the respondent issued the said cheque towards payment of share of appellant and his brother out of the amount collected by respondent as royalty of Jagan Nivas restaurant, Bombay. However, the respondent disputes the same and he claimed that the cheque in question was lost when the same was kept signed in his house and that the appellant who is the relative of respondent and frequently coming to his house has stolen the said cheque and filed false complaint against him. The respondent had not sent any reply to the demand notice sent by the appellant in spite of service of the same. Even in examination-in-chief before the Court, respondent has not stated anything about theft, of the cheque in question. Only during cross examination, he has come up with the theory that the cheque has been stolen. The respondent does not dispute his liability to pay appellant his share in the royalty collected by him in respect of Jagan Nivas Restaurant situated in Bombay, which was originally owned by the fathers of appellant and respondent According to appellant, from the year 1960, the father of appellant was paying royalty of Rs. 200/- to the appellant; that the father of appellant died during 1952, father of respondent died during 1990. Thereafter, the respondent being the Managing partner, was receiving royally from 1990. The trial Court though come to the conclusion that the cheque in question came to be issued by respondent to the appellant towards payment of his share in the royalty, dismissed the complaint holding that since respondent is entitled to a sum of Rs. 200/- per month towards his share in the royalty, the amount covered in the cheque would come over to 9 years and 1 month and that appellant cannot recover from the respondent any amount more than 3 years prior to date of cheque and thus held that amount covered in the cheque is partly barred by limitation and the appellant cannot recover the same. Thus, come to the conclusion that there is no legally enforceable debt or liability under the cheque Ex.P-2.

10. According to appellant, the respondent was collecting the royalty as a Managing partner and he issued the cheque Ex.P-2 towards payment of share of himself and his brothers. Though respondent has put his defence, that he has lost the cheque-Ex. P. 2, he has not filed any police complaint to that effect. As such, his theory cannot be believed. When once the signature and contents of the cheque is not disputed, burden is on the respondent to prove under what circumstances he issued the said cheque. There is always a presumption available in favour of the holder of the cheque that the drawer of the said cheque issued the same towards payment of legally recoverable debt or liability. In the instant case, the respondent though put his defence has not substantiated the same by producing documentary evidence to that effect. Mere denial of the case of the appellant and putting forward a new case will not constitute rebuttal of appellant's evidence. The trial Court without carefully scrutinising the material evidence placed on record, come to the conclusion that respondent had rebutted the presumption available in favour of appellant-complainant Of course, the Jagan Nivas Restaurant was sold during December 2000 and the safe proceeds have been divided among appellant, respondent and others. But the cheque in question is prior to the said date. The respondent has failed to rebut the evidence of appellant that there is legally recoverable debt under the said cheque. The amount covered under the cheque is the share of the appellant and his brothers, out of the royalty collected by the respondent in respect of Jagan Nivas Restaurant, it is not a loan lent or debt which was covered under the said cheque.

The share of the royalty which was accumulated and was with the respondent who was the managing partner of Jagan Nivas Restaurant, to which appellant was also a partner was given to appellant which cannot be termed as time barred debt, though it relates to periods more than 3 years from the date of issuance of the cheque. The amount accrued to the share of appellant is a recurring amount and it does not require any subsequent acknowledgment as that of a debt Therefore, the trial Court erred in holding that the amount covered under the cheque-Ex.P-2 is partly time barred. Thus, the order of acquittal passed by the trial Court is liable to be set aside.

11. Therefore, this appeal is allowed in part. The judgment and order of acquittal passed by trial Court is hereby set aside. The respondent is convicted for the offence punishable under Section 138 of N.I. Act and is sentenced to pay a fine of Rs. 30,000/-, in default, to undergo simple imprisonment for three months. After deposit of the fine amount Rs. 28,000/- shall be payable to the appellant as compensation and the balance of Rs. 2,000/- shall be credited to the state exchequer.


MANU/KA/8433/2006

Equivalent Citation: 2007CriLJ583

IN THE HIGH COURT OF KARNATAKA



Appellants: H. Narasimha RaoVs.

Respondent: R. Venkataram

Hon'ble Judges: K. Bhakthavatsala, J.

Counsels: For Appellant/Petitioner/Plaintiff: H.T. Nataraja, Adv.

For Respondents/Defendant: B.C. Rajanna, Adv.

Subject: Criminal

Subject: Banking

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instrument Act, 1881 - Sections 118, 138 and 139; Negotiable Instrument (Amendment) Act, 1988; Indian Contract Act, 1972 - Section 25(3)

Cases Referred: A.V. Murthy v. B.S. Nagabasavanna 2002 AIR SCW 694; Ramakrishnan v. Parthasaradhy 2003 (3) Indian Civil Cases 662; Hawkers v. Saunders 1782 98 ER 1091

Disposition: Appeal allowed

Case Note: NEGOTIABLE INSTRUMENTS ACT, 1881 (AMENDMENT ACT, 1988) - SECTION 138--offence under-repayment of time barred debt-issue of cheque-whether constitute an offence--HELD, Since no fresh consideration is required to pay the time barred debt, and there is no legal bar for the debtor agreeing to pay the time barred debt, the dishonoured cheques issued towards repayment of time barred debt does constitute an offence under Section 138 of the Act--Order of acquittal is set aside.

Appeal is allowed.

JUDGMENT

K. Bhakthavatsala, J.

1. The short question that arises for consideration in this appeal is:

Whether the dishonoured cheques issued towards repayment of time barred debt does not constitute an offence under Section 138 of the N.I. Act?

2. Heard Sri H.T. Nataraja, learned Counsel for the appellant/complainant and Sri B.C. Rajanna, learned Counsel for the respondent/accused.

3. For the purpose of convenience, the appellant and the respondent herein are referred to as 'the complainant' and 'the accused', respectively.

4. The complainant and the accused were friends and colleagues in the then Karnataka Electricity Board. When the accused was about to retire, he approached the complainant for a loan of Rs. 60,0007 and agreed to repay the same within a short period. The complainant advanced a sum of Rs. 60,0007 to the accused in this way that a sum of Rs. 2007 was paid in cash and the balance amount of Rs. 59,8007- was paid by three cheques. The accused has encashed the cheques. Though the loan amount was repayable within a short period, the accused took undue advantage of friendship with the complainant and agreed to repay the loan within six months with interest at the rate of 8% p.a., but the accused failed to keep up his promise. On complainant's persistent demand, the accused issued two cheques, one bearing No. 152400 dated 15.5.1999 for a sum of Rs. 50,000/- and another cheque bearing No. 152921 dated 25.5.1999 for a sum of Rs. 10,0007- both drawn on the Bangalore City Co-operative Bank Limited, Bangalore, in favour of the complainant towards discharge of the loan amount stating that the cheques would be honoured on presentation to the Banker. But when the cheques were presented, they were bounced and returned on 1.6.1999 with an endorsement "funds insufficient". The complainant issued a demand notice dated 10.6.1999 calling upon the accused to pay the amount of dishonoured cheques within 15 days. The accused acknowledged the receipt of the same but sent an untenable reply dated 24.6.1999. Therefore, the complainant filed a private complaint against the accused for the offence under Section 138 of the Negotiable Instruments Act (in short, 'the Act'). The accused denied the accusation. The complainant has got him examined as P.W-1 and got marked Exs. P-1 to P-10. In rebuttal, the accused has got him examined as D.W-1 besides examining one Khalandar Baigh as D.W-2.

5. The Learned Magistrate has accepted the evidence of the complainant and held that in the year 1994, the complainant gave loan of Rs. 60,0007- to the accused, but rejected the complainant on the ground that the accused had issued the cheques in the month of May 1999 as against time barred debt, and there was no evidence to show that the accused had acknowledged the debt within 3 years of loan. Therefore, the Trial Court recorded an order of acquittal in favour of the accused. This is impugned in this appeal.

6. The learned Counsel for the complainant submitted that the Learned Magistrate committed an error in dismissing the complaint. He cited the following decisions reported in:

(i) A.V. MURTHY v. B.S. NAGABASAVANNA AIR 2002 SCW 694

(ii) RAMAKRISHNAN v. PARTHASARADHT 2003 (3) Ind Cas 662

7. The learned Counsel for the respondent/accused submitted that there is no illegality or infirmity in the impugned judgment.

8. The complainant has produced pass books at Exs. P-8 and P-9. As per Exs. P-8 and P-9, the pass books of the complainant, issued by Union Bank of India and Syndicate Bank, it is crystal clear that the accused has drawn in all amounting to Rs. 59,800/- between 31.5.1994 and 12.6.1994. A sum of Rs. 200/ - was paid in cash by complainant to the accused. The learned Trial Judge rejected the contention of the accused that he drew the amounts and paid the complainant and held that the complainant had advanced hand loan of Rs. 60,000/- to the accused in the year 1994.

9. Section 138 of the Act, which was inserted by Amendment Act, 1988, and came into force form 1.4.1989 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 provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:


(a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) The drawer 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 purpose of this section, "debt or other liability" means a legally enforceable debt or other liability.

12. Admittedly, the loan transaction took place in the month of May, 1994. The accused issued two cheques one cheque dated 15.5.1999 for a sum of Rs. 50,000/- and another cheque dated 25.5.1999 for a sum of Rs. 10,000/-(both drawn on Bangalore City Co-operative Bank Limited, Bangalore,) in favour of the complainant towards discharge of the loan amount. As on 12.6.1997, the entire debt of Rs. 60,000/- had become time barred, but there is no legal bar for the debtor agreeing to pay the time barred debt. No fresh consideration is required for debtor's promise to pay the time barred debt. There is moral obligation on the accused, who is none other than the friend of the complainant, to refund the loan amount. It would be useful to refer to the observation made by Lord Mansfield, in Hawkers v. Saunders (1782) 98 ER 1091 which reads as under:

Where a man is under a legal or equitable obligation to pay, the law implies a promise, though none was ever actually made. A fortiori, a legal or equitable duty is a sufficient consideration for an actual promise. Where a man is under a moral obligation, which no Court of Law or Equity can enforce, and promises, the honesty and rectitude of the thing is a consideration. As if a man promises, to pay a just debt, the recovery of which is barred by the Statute of Limitations; or, if a man, after he comes of age, promises to pay a meritorious debt contracted during his minority, but not for necessaries; or if a bankrupt, in affluent circumstances after his certificate, promises to pay the whole of his debts; or if a man promises to perform a secret trust, or a trust void for want of writing, by the Statute of Frauds.

In such and many other instances, though the promise gives a compulsory remedy, where there was none before either in law or equity; yet as the promise is only to do what an honest man ought to do, the ties of conscience upon an upright mind are a sufficient consideration.

11. The Hon'ble Apex Court in A.V. Murthy v. B.S. Nagabasavanna, supra, has made an observation in para-5 of the judgment as under:

...Under Section 118 of the Act, there is a presumption (hat until the contrary is proved, every negotiable instruments was drawn for consideration. Even under Section 139 of the Act, it is specifically stated that it shall be presumed, unless the contrary is proved that, the holder of a cheque received the cheque of the nature referred to in Section138 of discharge, in whole or in part, of any debt or other liability. It is also pertinent to note that under Sub-section (3) of Section 25 of the Indian Contract, 1872, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf,

to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract....

12. The Division Bench of the Kerala High Court in Ramakrishnan case, supra, following the ratio laid down in the A. V. Murthy's case, supra, held that when a person writes, signs and delivers a cheque to another it is an acknowledgement of a legally enforceable liability and therefore, if the cheque is dishonoured such a person shall not be entitled to plead that at the time of his writing the cheque the claim had become barred by limitation and thus, he is not liable to be punished under Section 138 of the Act.

13. The complainant has not disputed his signature on the dishonoured cheques in question. Therefore, they constitute an agreement or promise by the debtor to pay the time barred debt, Since the accused has not paid the cheque amounts inspite of demand made by the complainant the accused has committed an offence under Section 138 of the Act. The learned Magistrate has committed an error in dismissing the complaint and recording and order of acquittal in favour of the accused.

14. For the foregoing reaons, I answer the point formulated for my consideration in the negative.

In the result, the Appeal is allowed and the impugned judgment dated 20.11.2001 made in C.C.No. 35100/1999 on the file of XVI Addl. Chief Metropolitan Magistrate at Bangalore, is set aside and the respondent/accused is convicted for the offence under Section 138 of the Act and sentenced to pay a sum of Rs 1,00,000/-, failing which the accused shall undergo S1 for six months. If the fine amount is recovered, the appellant/complainant shall be paid a sum of Rs. 90,000/-, as compensation.


MANU/AP/1242/2006

Equivalent Citation: III(2007)BC5

IN THE HIGH COURT OF ANDHRA PRADESH

Crl. P. Nos. 4294 and 4295 of 2002


Appellants: Satish Kumar MorVs.

Respondent: M.V. Rajeswara Rao and Anr.

Hon'ble Judges: P. Swaroop Reddy, J.

Counsels: For Appellant/Petitioner/Plaintiff: Sharad Sanghi, Adv.

For Respondents/Defendant: Public Prosecutor for Respondent No. 2

Subject: Banking

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instruments Act, 1881 - Sections 138 and 142

Cases Referred: SIL Import, USA v. Exim Aides Silk Exporters III (1999) CCR 15 (SC) : I (2000) BC 668 (SC) : AIR 1999 SC 1609; Pennar Steel Ltd. v. S. Ansari I (2004) BC 11 : IV (2003) CCR 94 : 2003(2) LS 120

Disposition: Petition allowed

JUDGMENT

P. Swaroop Reddy, J.

1. In both these petitions, the question raised for consideration and the petitioner is one and the same. First respondent in Crl. P. No. 4294 of 2002 is the father and in Crl.P. No. 4295 of 2002, it is his son. As the question raised for consideration is one and the same both the petitions are heard together and disposed of by this common order.

2. Both these petitions are filed by the petitioner-accused for quashing the proceedings in C.C. Nos. 105 and 106 of 2000 on the file of the learned XVII Metropolitan Magistrate, Hyderabad.

3. The facts of the case are as follows: The petitioner-accused has borrowed a sum of Rs. 50,000.00 from the first respondent in each case. The cheques issued by him towards repayment of the same, were dishonoured. As such after giving statutory notice the de facto complainants filed private complaints under Section 138 of the Negotiable Instruments Act.

4. The petitioner herein filed the present petitions for quashing the proceedings on two grounds-(1) The complaints are filed for recovery of time-barred debt and as such there is no legally enforceable debt; and (2) The complaints are filed after the period of limitation contemplated under Section 142 of the Negotiable Instruments Act.

5. Now, the point for consideration is whether there are any grounds for allowing these petitions.

6. In Crl.P. No. 4294 of 2002, arising out of C.C. No. 105 of 2000, in the Xerox copy of the Promissory Note filed, the date is mentioned as 3.11.1992 and at the place of signature the date is again put as 3.11.1997. This 3.11.1997 is obviously put subsequently, as there is no column provided for date there and the handwriting there is also different. Further in Crl.P. No. 4295 of 2002. arising out of C.C. No. 106 of 2000, the Promissory Note is dated 3.11.1992 and at no other place the date is put. In this case receipt is also filed, which shows the date as 3.11.1992.

7. The contention of the learned Counsel for the first respondent in both the petitions is that for 3.11.1997, the strokes for writing "7" after "9" is put differently and on account of that instead of "7" it is appearing like "2" and actually the date is "7" only. It is impossible to accept this contention. It is possible that at one place there can be a mistake, but not at all the places. Apart from that, in the statutory notice issued also, the second respondent de facto complainant has not stated the date of the Promissory Note and has simply stated that vow have under the Promissory Note borrowed a sum of Rs. 50,000.00 from me. Obviously, deliberately, avoiding the date.

8. The learned Counsel for the first respondent further contends that the petitioner has not issued any reply notice stating that the date of Promissory Note was 3.11.1992 and not 3.11.1997 and on account of this, the contention of the petitioner cannot be accepted. I am not inclined to accept this contention of the first respondent, as the petitioner never received the notice and the notice was only returned and in the notice, the date of promissory note is not mentioned. As such he was not aware as to whether in the notice the date was put as 3.11.1992 or 3.11.1997. Further the document clearly shows the date as 3.11.1992 without any ambiguity as such there is no question of treating the dates of Promissory Notes as 3.11.1997. Thus, the first question has to be answered in favour of the petitioner. On account of this, it has to be held that both the complaints are filed for recovering time-barred debts and there are no legally enforceable debts.

9. Coming to the second question in both the petitions, the notices were returned on 30.12.1999 and the complaints were filed on 14.2.2000. As such the complaints are filed with a delay of one day, as fifteen days from 30.12.1999 would be over by 13.1.2000 and one month thereafter would be 13.2.2000. Therefore, the complaints filed on 14.2.2000 are barred by limitation.

10. The learned Counsel for the petitioner, in the support of his contention relied on a decision of the Hon' ble Supreme Court in SIL Import, USA v. Exim Aides Silk Exporters MANU/SC/0312/1999 : 1999CriLJ2276 , and also a decision of our High Court in Pennar Steel Ltd. v. S. Ansari 1 (2004) BC 11 : 4 (2003) CCR 94 : 2003(2) LS 120. In both the above decisions the position is clarified. Thus the second question also has to be answered in favour of the petitioner.

11. In view of the above findings both the petitions are liable to be allowed.

12. In the result both the Petitions are allowed. The proceedings against the petitioner-accused in C.C. Nos. 105 and 106 of 2000 pending on the file of the learned XVII Metropolitan Magistrate, Hyderabad are hereby quashed.


MANU/MP/0712/2006


IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR

Criminal Revision No. 1013 of 2005


Appellants: Kaptan Singh Thakur S/o Late B.S. Thakur, Chairman and Managing Director Abhimat Prakashan Private Ltd.

Vs.Respondent: Betwa Developers Ltd. through Shri Sudhir Namdeo

Hon'ble Judges: A.K. Shrivastava, J.

Counsels: For Appellant/Petitioner/Plaintiff: Kishore Shrivastava, Sr. Adv. and Kunal Thakre, Adv.

For Respondents/Defendant: G.S. Ahluwalia, Adv.

Subject: Criminal

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instrument Act, 1881 - Sections 138, 139, 140, 141 and 141(2); Indian Penal Code - Section 420; Companies Act, 1956 - Sections 291, 292, 293 and 294; Contract Act, 1872 - Section 25(3); Limitation Act, 1963 - Section 18; Criminal Procedure Code (CrPC) - Sections 138, 204 and 482

Cases Referred: Nibro Limited v. National Insurance Co. Ltd. AIR 1991 Delhi 25; Satish and Company v. S.R. Traders and Ors. 1998 CRI.L.J. 419; Andhra Pradesh High Court Girdhari Lal Rathi v. P.T.V. Ramanujachari and Anr. 1997 (2) Crimes 658; Kerala High Court in Joseph v. Devassia 2001 (3) Crimes 229; Anil Hada v. Indian Acrylic Ltd. AIR 2000 S.C. 145; S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalia and Anr. (2005) 8 SCC 89; K.P.G. Nair v. Jindal Menthol India Ltd. (2001) 10 SCC 218; Katta Sujatha (Smt) v. Fertilizers & Chemicals Travancore Ltd and Anr. (2002) 7 SCC 655; Monaben Ketanbhai Shah and Anr. v. State of Gujarat and Anr. (2004) 7 SCC 15; M.M.T.C. Ltd. and Anr. v. Medchl Chemicals and Pharma (P) Ltd. and Anr. AIR 2002 SC 182;Rajneesh Aggarwal v. Amit J. Bhalla AIR 2001 SC 518; Bilakchand Gyanchand Co. v. A. Chinnaswami AIR 1999 SC 2182; A.V. Murthy v. B.S. Nagabasavanna (2002) 2 SCC 642; K.N. Beena v. Mumiyappan and Anr. AIR 2001 SC 2895; Hiten P. Dalal v. Bratindranath Banerjee AIR 2001 SC 3897; Director of Settlements A.P. and Ors. v. M.R. Apparao and Ors. (2002) 4 SCC 638;Orient Paper and Industries Ltd. and Anr. etc. etc. v. State of Orissa and Ors. AIR 1991 SC 672; Common Cause v. Union of India and Ors. (2004) 5 SCC 222

Disposition: Revision dismissed

Case Note: Banking – Complaint – Section 482 of Code Criminal Procedure,1973(Cr.PC),Section 420 of Indian Penal Code,1860(IPC) and

Sections 138,139 and 141 of the Negotiable Instrument Act, 1881 – Respondent company filed complaint against petitioner under Section 138 read with 141 of Act and Section 420 of IPC - Petitioner earlier filed petition under Section 482 Cr.P.C. for quashment of complaint - High Court dismissed petition and directed that all grounds which raised by petitioner, can be raised before trial court itself and petitioner cannot be allowed to come directly – Against this order petitioner filed SLP before Apex Court – Dismissed – Thereafter petitioner raised objections at time of framing of charge before Trial Court - Trial court rejected all objections and framed charge under Section 138 of Act against petitioner – Hence, present petition – Held, sufficient material on record to frame charges under Section 138 of Act - Defence for petitioner always to be tested during trial and not at time of framing of charge - Therefore, defence of petitioner kept open for trial which may be decided after recording evidence in trial court at time of recording judgment - Apart from this, Section 139 of Act clearly contemplate legal presumption in favour of holder of cheque – According to Section 139 of Act, it shall be presumed unless contrary is proved that holder of cheque received cheque, of nature referred to it in Section 138 of Act for discharge, in whole or in part, of any debt or other liability - Thus, in order to prove contrary there should be trial in which contrary is required to be proved by accused in his defence - There is sufficient material to frame charge under Section 138 of Act against petitioner and trial court rightly framed the said charge - Resultantly, petition dismissed

ORDER

A.K. Shrivastava, J.

1. This revision petition has been filed by the petitioner/accused against the order dated 24.5.2005 passed by Additional Chief Judicial Magistrate, Bhopal in Case No. RT267/2004 rejecting the objections of petitioner in regard to framing of the charge against the applicant under Section 138 of the Negotiable Instrument Act, 1881 (in short 'the Act') and framing charge against him under Section 138 of the Act.

2. The respondent company filed a complaint against the petitioner under Section 138 read with Section 141 of the Act and Section 420 of IPC. The trial court registered the complaint and thereafter by the impugned order has framed the charge under Section 138 of the Act against the petitioner.

3. In brief the case of complainant as setforth in the complaint is that the complainant is a limited company registered under the Companies Act, 1956 having its registered office at the address mentioned in the complaint. In the meeting of the Board of Directors of complainant company held on 27th February, 2004, Mr. Sudhir Namdeo was appointed on behalf of the company to attend, appear and argue and sign the relevant papers on behalf of the company. The petitioner/accused is known to Mr. S.K. Jain who is the Director in the complainant company and on the request of the accused, Mr. S.K. Jain and other Director had given financial help to the accused and accused had always promised to pay back the outstanding amount. During such one meeting on 1.10.1999 the accused had given account statement figured Rs. 6,45,851/- as outstanding on the date and promised to pay the amount.

4. From the impugned order, it is also gathered that in the trading, profit and loss account of the year 200-2001 of M/s Abhimat Prakashan Pvt. Ltd. whose Managing Director is Kaptan Singh Thakur (accused) it has been shown that the loan has been obtained from the complainant.

5. The accused on 6.1.2004 assured the Director of the complainant that he will settle the outstanding amount which was calculated with interest as Rs. 13,09,852=00 and thus accused issued one cheque of Rs. 13,09,852=00 of Allahabad Bank in favour of the complainant company and assured Mr. S.K. Jain, the Director, to honour the said cheque. Copy of the cheque which is filed in the trial court has also been filed along with the revision petition. The complainant informed accused and presented the said cheque in his bank i.e. Union Bank of India, Arera Colony Branch, Bhopal on 15.1.2004 The Bank intimated that the said cheque is dishonoured due to "funds insufficient" on 16.1.2004. The said memo of the Bank has been placed in the trial court and the copies are also filed in this petition. Thus

the accused committed the offence under Section 138(b) read with Section 141 of the Act and also under Section 420IPC.

6. According to complainant after the receipt of the memorandum/information from his Bank, namely, Union Bank of India dated 16.1.2004, regarding return of the cheque as unpaid, the complainant sent one notice by registered A.D. post on 20.1.2004 to the accused which was duly received by the accused at his residence address on 22.1.2004 and thereafter the accused sent its reply on 3.2.2004 but did not make the payment of the outstanding amount mentioned in the notice. The accused was given 15 days' time from the date of receipt of the notice for making the payment of the said amount of the dishonoured cheque. However, the accused did not make the requisite payment and thus the complaint was filed praying therein to punish the accused as well as an order of payment double of the amount of the cheque of Rs. 13,09,852/-.

7. The petitioner/accused earlier filed a petition under Section 482 Cr.P.C. before this Court which was registered as M.Cr.C. No. 8448/2004, for the quashment of the complaint on the ground that debt or liability for which the cheque was issued is not legally enforceable because the complainant had not shown in the complaint that on what date the money was advanced and no valid acknowledgement of debt has been filed along with the complaint. The claim is barred by limitation. Though the cheque has been issued by the company but notice under Clause (b) of proviso to Section 138 of the Act was not served on the company and the same has been served on individual. This Court while dismissing the petition under Section482 Cr.P.C. on 9.11.2004 directed that all the grounds which were raised by the petitioner, can be raised before the trial court itself and the petitioner cannot be allowed to come directly.

8. The above said order was assailed by the petitioner before the Apex Court [379/2005 Special Leave to Appeal Criminal]. The Apex Court declined to interfere in the order passed by this Court dismissing the petition under Section 482 Cr.P.C. and the Special Leave Petition was dismissed. However, it was directed and the petitioner/accused was allowed to raise these objections before the Magistrate at appropriate time including the stage at which the charges, if any, are framed.

9. Thereafter, the accused raised following objections at the time of framing of the charge before the trial court:

(i) the complaint is silent that on which date the financial aid was provided ; therefore it cannot be said that any amount as required to be paid by the accused;

(ii) the debt or other liability should be legally enforceable and therefore it was necessary to mention in the complaint that when the amount was given to the accused and whether the said debt was in existence and could be legally recoverable on the date of the issuance of the impugned cheque. No acknowledgement of the accused has been filed along with the complaint;

(iii) third objection which was taken is that since the impugned cheque has been issued on behalf of the company as such the notice required under Sub-clause (b) of Section138 should have been sent to the company and not to the individual. Admittedly in the present case, no notice has been sent to the company and therefore the petitioner/accused who has been arrayed in the private capacity cannot be arrayed as an accused;

(iv) Under Section 291 and 292 of the Indian Companies Act, 1956, the power of a Company vests in the Board of Directors and the Company can act only upon the resolution of the Board of Directors. Unless and until the Board of Directors resolve on behalf of the Company to take some legal action, no action on behalf of the Company can be taken.

The trial court rejected all above said objections raised by the accused/petitioner by the impugned order and has framed thereafter a charge under Section 138 of the Act against the petitioner. Hence this petition has been filed by the petitioner/accused.

10. Shri Kishore Shrivastava, learned senior counsel, indeed, has raised all those objections in this revision again. According to learned senior counsel the complaint

has been filed by one Shri Sudhir Namdeo who has no authority to file complaint. In that regard he has invited my attention to the resolution passed in the meeting of the Board of Directors of the complainant company wherein Shri Sudhir Namdeo has not been authorized to file the complaint on behalf of the company. He has also submitted that the resolution dated 27.2.2004 is in past tense and therefore since the resolution is in past tense, therefore the complaint which was filed lateron for it, there is no resolution. Learned senior counsel has submitted that the said authorization is to sue the company M/s Abhimat Prakashan Pvt. Ltd. However, the company has not been arrayed as an accused, but, the complaint has been filed against the present petitioner Kaptan Singh. By inviting my attention to Section 293 and 294 of the Companies Act, it has been contended that the resolution should have been passed in the general meeting and there is no material on record in order to show that there was any such resolution. In support of his contention, learned Counsel has placed reliance on the decision of Nibro Limited v. National Insurance Co. Ltd. MANU/DE/0138/1991 : AIR1991Delhi25 . By taking the aid of the Division Bench decision of Andhra Pradesh High Court in the case of Satish and Company v. S.R. Traders and Ors. MANU/AP/0123/1996 , it has been contended that beyond the resolution Mr. Namdeo is not authorized to do anything and even if the resolution is stretched to the extent that Mr. Namdeo was authorized to file the complaint, then it was to the extent to file it against the company but there was no such authorization to file the complaint against Kaptan Singh.

11. It has been then submitted by learned Counsel that there are inherent contradictions in the complaint. The complaint has been filed on behalf of the company but there is nothing in the complaint in order to show that the loan was given by the company. By inviting my attention to Section 138(b) it has been contended that under this section, the payee or holder in due course of the cheque, should make a demand for the payment of the said amount of money by giving a notice in writing to the drawer of the cheque. But, the debt or the other liability should be for the payee or the holder of the cheque and the notice in writing should be given to the drawer of the cheque within 15 days of the receipt of the information received by the payee or the holder of the cheque from the Bank regarding the return of the cheque as unpaid. By inviting my attention to the averments made in the complaint, it has been contended that according to the complaint, Mr. Kaptan Singh Thakur is known to Mr. S.K. Jain, Director in the complainant company and on the request made by the accused to Mr. S.K. Jain and other Directors, the financial help was given to the accused and he promised to pay back the outstanding amount. Thus, according to the complaint, Mr. S.K. Jain who is one of the Director of the Company had given financial help to the accused and not the petitioner company and therefore since the complainant is not filed by Mr. S.K. Jain, the same is not maintainable.

12. Learned senior counsel by inviting my attention to para 2 of the complaint has stated that according to complainant's own case during one meeting held on 1.10.1999 accused had given account statement figure of Rs. 6,45,851/- outstanding on that date and promised to pay the said amount, therefore, the date 6.1.2004 when the cheque was issued the alleged debt became time barred and could have been revived only by a fresh contract in terms of Section 25(3) of the Indian Contract Act, 1872 and for that there should be a written agreement signed by the person. Since there is no such written contract for the time barred debt, no complaint can be filed. In that regard my attention has also been drawn to the explanation to Section 138 of the Act wherein for the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability. By adverting my attention to Section 18 of the Indian Limitation Act, 1963, it has been contended by learned senior counsel that the acknowledgement should be before the expiration of the prescribed period and further it should be in writing and signed by the party. Since there is no acknowledgement in writing and signed by the accused, therefore, the complaint is not maintainable and charge under Section 138 of the Act cannot be framed. In support of his contention, learned Counsel has placed reliance on the decision of Andhra Pradesh High Court Girdhari Lal Rathi v. P.T.V. Ramanujachari and Anr. 1997 (2) Crimes 658 and the decision of Kerala High Court in Joseph v. Devassia 2001 (3) Crimes 229. Thus, according to learned senior counsel cheque must be issued for the debt and liability which is alive and but not for the debt or the liability which has become dead. It has been argued that the explanation to Section 138should be strictly construed.

13. It has been further canvassed by learned senior counsel that under the Act if the offender is a company then the company should also be prosecuted along with

the Director. In that regard much emphasis has been placed reliance by learned senior counsel on the term "as well as the company" embodied in Section 141 of the Act. Thus, according to learned Counsel where the company is to be prosecuted, the Director alone cannot be prosecuted. In that regard he has invited my attention to the decision of the Supreme Court Anil Hada v. Indian Acrylic Ltd. MANU/SC/0736/1999 : 2000CriLJ373 and also S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalia and Anr. MANU/SC/0622/2005 : 2005CriLJ4140 . According to learned senior counsel since the cheque has been issued on behalf of the company, the actual offender is the company. By inviting my attention to Section 204 Cr.P.C. it has been contended by learned senior counsel that the Magistrate taking cognizance of an offence should satisfy that there is sufficient ground for proceeding in the case and since there are serious infirmities in the complaint, the Magistrate should not have proceeded with the matter. It has been further propounded by learned senior counsel that if one has to be prosecuted with the aid of Section 141 of the Act, there should be strict compliance in regard to prosecuting the company along with the Directors. The learned Counsel in that regard has placed reliance on following decisions:

(i) K.P.G. Nair v. Jindal Menthol India Ltd. MANU/SC/2327/2000 : (2001)10SCC218

(ii) Katta Sujatha (Smt) v. Fertilizers & Chemicals Travancore Ltd and Anr. MANU/SC/0897/2002 : (2002)7SCC655

(III) Monaben Ketanbhai Shah and Anr. v. State of Gujarat and Anr. MANU/SC/0596/2004 : 2004CriLJ4249

Thus according to learned senior counsel since the company has not been prosecuted and the cheque has been said to be issued by the company, the present petitioner cannot be prosecuted.

14. Learned senior counsel has also invited my attention to the notice sent under Section 138 of the Act and has contended that the notice should go to the drawer of the cheque and since the drawer is the company, notice ought to have been sent to the company. Admittedly, the notice was not sent to the company but was sent to the accused. It has been further submitted by learned senior counsel that the complaint is silent in regard to the status of Kaptan Singh in the company. Whether he is Director, Managing Director or any officer in the company. On these premised submissions, it has been argued by learned senior counsel that the accused/petitioner cannot be charged under Section 138 of the Cr.P.C. and the impugned order framing charge be quashed.

15. Per contra, Shri G.S. Ahluwalia, learned Counsel appearing for the complainant/respondent has argued that if the resolution has not been happily worded, the question is whether at the threshold, the complaint should be thrown out? According to learned Counsel at the outset the complaint cannot be dismissed and in support of his contention he has placed reliance on the decision of Supreme Court M.M.T.C. Ltd. and Anr. v. Medchl Chemicals and Pharma (P) Ltd. and Anr. MANU/SC/0728/2001 : 2002CriLJ266 . It has been then contended by learned Counsel for respondent that even if no notice was sent to the company, the complaint cannot be dismissed and the same is still maintainable against the Director. In that regard he has invited my attention to two decisions of the Supreme Court, they are Rajneesh Aggarwal v. Amit J. Bhalla MANU/SC/1462/2001 : 2001CriLJ708 and Bilakchand Gyanchand Co. v. A. Chinnaswami MANU/SC/0201/1999 : 1999CriLJ3498 . By inviting my attention to the decision of Anil Hada (supra) which has been placed reliance by learned senior counsel for the petitioner, it has been contended by Shri Ahluwalia, learned Counsel for the respondent that not arraying the company as an accused would in itself is not fatal.

16. By replying the argument of learned senior counsel that the petitioner/accused is one of the Director of the Company, it has been contended by Shri Ahluwalia that in the cause title of the complaint the name of accused Mr. Kaptan Singh Thakur has been mentioned and it has been mentioned that he is the Chairman and the Managing Director of "M/s Abhimat Prakashan Pvt. Ltd." and in the body of the complaint the word "accused" is mentioned which would mean Kaptan Singh who is the Chairman and Managing Director of M/s Abhimat Prakashan Pvt. Ltd. Shri Ahluwalia, learned Counsel for respondent by placing reliance on the decision of the

Supreme Court S.M.S. Pharmaceuticals Ltd. (supra) has submitted that the three Judge Bench of the Supreme Court while answering the questions of references referred to it, if considered in proper perspective, and specially answer to question "c", it would reveal that the signatory of a cheque which is dishonoured is responsible for the incriminating Act and will be covered under Sub-section (2) of Section 141 of the Act. Since the petitioner/accused is a signatory of the cheque he cannot be escaped and the charge has been rightly framed.

17. By replying the argument of the objection in regard to legally recoverable debt raised by learned senior counsel for the petitioner, it has been contended by Shri Ahluwalia, learned Counsel for the respondent that in the impugned order there is a reference of the balance sheet of the company of the year 2001-2002 in which the accused is the Chairman and the Managing Director, and in the balance sheet it has been mentioned that there is an outstanding amount to be paid to the complainant company and if that is the position, the complaint which was filed on 5.3.2004 cannot be said to be a complaint for a demand of a time barred debt. In support of his contention learned Counsel has placed reliance on the decision of Supreme Court in the case of A.V. Murthy v. B.S. Nagabasavanna MANU/SC/0089/2002 : 2002CriLJ1479 . Shri Ahluwalia, learned Counsel by inviting my attention to legal presumption under Section 139 of the Act, has submitted that the statute has conferred a presumption in favour of the holder and it shall be presumed, unless the contrary is proved that a holder of the cheque received cheque, of the nature referred to in Section 138 for the discharge, in whole or in part of any debt or other liability. According to learned Counsel there is sufficient material in order to frame the charge and the trial court rightly framed the charge. In that regard learned Counsel placed reliance on the decision of the Supreme Court M.M.T.C. Ltd. (supra), K.N. Beena v. Mumiyappan and Anr. MANU/SC/0661/2001 : 2001CriLJ4745 and Hiten P. Dalal v. Bratindranath Banerjee MANU/SC/0359/2001 : 2001CriLJ4647 and has submitted that the burden of proof is on the accused to prove that it is a time barred debt and which can only be decided after recording the evidence.

18. In reply to the argument of Shri Ahluwalia learned Counsel for the respondent, it has been contended by learned senior counsel Shri Kishore Shrivastava that any observation of the Supreme Court cannot be stretched to the extent of precedent and in that regard he has placed reliance on three decisions they are Director of Settlements A.P. and Ors. v. M.R. Apparao and Ors. MANU/SC/0219/2002 : [2002]2SCR661 , Orient Paper and Industries Ltd. and Anr. etc. etc. v. State of Orissa and Ors. MANU/SC/0169/1991 : AIR1991SC672 andCommon Cause v. Union of India and Ors. : (2004)5SCC222 and thus according to learned senior counsel, the decision of A.V. Murthy (supra) cannot be said to be a precedent. It has also been vehemently submitted by learned senior counsel that in para 2 and 4 of the complaint it has been contended that accused had issued the cheque and there is no averment that he signed the cheque and thus, since there is no averment in the complaint that the accused/petitioner signed the cheque, on the contrary, there is averment that he has only issued the cheque, no criminal liability can be fastened on him.

19. After having heard learned Counsel for the parties, I am of the view that this petition deserves to be dismissed.

20. In the decision of S.M.S. Pharmaceuticals Ltd. (supra) , a larger Bench of the Supreme Court was constituted and the following questions were referred to it which reads thus:

(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company.

(b) Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary.

(c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or

joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against.

21. After considering several decisions, the questions of reference were answered in para 19 as under:

(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.

(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under Sub-section (2) of Section 141.

(emphasis supplied)

22. Thus, the larger Bench of the Supreme Court in S.M.S. Pharmaceuticals Ltd. (supra), by answering all the questions referred to it specifically held that so far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for incriminating act and will be covered under Sub-section (2) of Section 141 of the Act. In the present case there is specific averment in the complaint that the accused/petitioner issued a cheque of Rs. 13,09,852.00 of Allahabad Bank MCA, Habibganj Branch in favour of the complainant company. On bare perusal of the photocopy of the impugned cheque, it is gathered that it bears the signature of Kaptan Singh Thakur in between the specified space of the seal of Abhimat Prakashan Pvt. Ltd. On bare perusal one can read "K.S. Thakur Director". In the cause title of the complaint, where the description of accused has been mentioned, it is gathered that Kaptan Singh Thakur, Chairman and Managing Director M/s Abhimat Prakashan Pvt. Ltd. has been arrayed as accused and if for the convenience, in the body of complaint he has been denoted by the term "accused" it would mean that Kaptan Singh Thakur Chairman and Managing Director of M/s Abhimat Prakashan Pvt. Ltd. Thus, there is no force in the contention of learned senior counsel for the petitioner that in the complaint that nowhere it is mentioned that what is the status of Kaptan Singh. On being asked to him specifically that what is the status of Kaptan Singh in the company Abhimat Prakashan Pvt. Ltd, learned senior counsel did not specifically answer to the query but conveniently argued that it should have come in the complaint that what is the status of accused in the company. The word "accused" which has been used in the complaint would mean the person whose description has been given in the cause title of the complaint. Since there is averment in the complaint that the accused issued the cheque, rightly he has been prosecuted.

23. There is no merit in the contention of learned Counsel that because no where in the complaint it has been mentioned that the accused has signed the impugned cheque of Rs. 13,05,852/-, on the contrary there is an averment that the accused had only issued the cheque therefore it cannot be said that the accused has in fact signed the cheque. On bare perusal of the photocopy of the cheque clearly the signature of K.S. Thakur, Director, Abhimat Prakashan is appearing, therefore it cannot be said that the accused has not signed the cheque. Apart from this the

word "issue" cannot be construed in a narrower and it should be interpreted in comprehensive manner. In Section 140 of the Act also, where the legislature has disallowed certain type of the defence to be taken in the prosecution under Section 138, has clearly used the words "that he issued the cheque". Thus the word "issued" is comprehensive enough and would also include signature on the cheque. For better understanding, it would be condign to quote Section 140 of the Act which reads thus:

140. Defence which may not be allowed in any prosecution under Section 138. - It shall not be a defence in a prosecution for an offence under Section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section.

(emphasis supplied)

24. In the Act the word "issue" has not been defined. In the Advance Law Lexicon by P. Ramanatha Aiyer (3rd edition 2005) the expression "issued" is not to be used in the narrow sense of "sent". The dictionary meaning of the expression "issued" takes the entire process of sending the notice as well as the service thereof in the same manner the word "issued" used for the cheque should also be construed. In the same book the term "issued" as used in the issuance of a life insurance policy, means that when the policy is "made" and delivered in pursuance with the laws of the state legalizing such policies. According to Advance Lax Lexicon, the term "issue" would mean the original making of a negotiable instrument and first delivery to another person. Thus, if the word issued has been used by the complainant in the complaint, after reading the entire complaint, it would mean and also include signing of the cheque by the accused. Even otherwise, if the word "sign" is not used in para 2 and 4 of the complaint and instead the said word, word "issued" is used, it should be read in the context that it was signed by the accused.

25. So far as the objection in regard to the defective resolution of the complainant company is concerned, merely because the resolution is not happily worded, at the threshold, and that too at the time of framing of the charge, the complaint cannot be dismissed. The Supreme Court in the case of M.M.T.C. Ltd. (supra), has taken much care of it and has held that merely because complainant has signed and presented by a person who is neither as authorized agent nor a person empowered under the Articles of Association or by any resolution of the Board to do so, is no ground to quash the complaint. The Supreme Court has further held that it is open to the complainant company to seek permission of the court for sending any other person to represent the company in the court and therefore even presuming that initially there was no authority, still the company can at any stage, rectify that defect. Since sufficient light on the controversy has been thrown by the Supreme Court in this decision, therefore it is not necessary to discuss the decision of M/s Nibro Limited (supra) and M/s. Satish and Company (supra) which were placed reliance by learned senior counsel for the petitioner.

26. So far as the objection that the offence has been committed by the Company and the Company has not been arrayed as an accused and without arraying the company as well, the other person cannot be prosecuted under Section 141 of the Act is concerned, there is complete answer of this argument in the case of S.M.S. Pharmaceuticals Ltd. (supra) , which I have quoted hereinabove wherein it has been specifically mentioned that the so far as signatory of a cheque which is dishonoured is concerned he is clearly responsible for the incriminating act and he will be covered under Sub-section (2) of Section 141 of the Act. I have already held hereinabove that there is sufficient averment in the complaint that the accused/petitioner has issued the cheque and since he is the signatory of the cheque, rightly he has been arrayed as accused and rightly the charge has been framed. Even if the company is not prosecuted, it would not be fatal and a director of that company can be prosecuted. In that regard the decision of are Rajneesh Aggarwal (supra) and and M/s Bilakchand Gvanchand Co (supra) can be placed reliance.

27. The next question for consideration is in regard to the "debt or other liability" whether it is legally enforceable debt or other liability. In this regard it would be profitable to read the explanation to Section 138 of the Act which postulates that for the purpose of Section 138 "debt or other liability" would mean a legally enforceable debt or other liability. The contention of Shri Kishore Shrivastava, learned Counsel is that as per the own showing in para 2 of its complaint it has

been mentioned that during one such meeting on 1.10.1999 the accused had given account statement figure of Rs. 6,45,851/- as outstanding on the date and promised to pay the amount and thus even if this date i.e. 1.10.1999 is taken to be the starting point of limitation, the debt became barred by time on 30.9.2002 and therefore if some cheque on 6.1.2004 has been issued by the accused for the settlement of the said debt, the said debt cannot be legally enforced by launching this type of prosecution since it had become time barred. It is no doubt true that if a time barred debt is to be legalized, there should be a written agreement in terms of Section 25(3) of the Contract Act and it should be signed by the person to be charged or by his agent jointly or substantially authorized in that behalf to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits he could not file the proceeding and that type of agreement would be a contract. In the present case, there is no agreement in writing signing by the accused. But, merely on this ground the point would not come to rest, in order to benefit the accused. The trial court has taken care of this aspect in its order and has mentioned in impugned order that trading, profit and loss account of the year 2001-02 of the Abhimat Prakashan Limited, there is an entry in regard to the taking of loan from the petitioner company and if that is the position, the view of this Court is that there is sufficient material on record to frame charge under Section 138 of the Act. I am straying my hands in giving my final opinion in that regard. At the most, this could be a defence for the petitioner/accused and the defence is always to be tested during the trial and not at the time of the framing of the charge. Therefore, this defence point of the accused/petitioner is kept open for the trial which may be decided after recording the evidence in the trial court at the time of recording the judgment. It has not been argued that there is no entry of the loan in the trading, profit and loss account of the year 2001-2002.

28. Apart from this, Section 139 of the Act clearly postulates a legal presumption in favour of the holder of the cheque. According to this Section it shall be presumed unless the contrary is proved that the holder of a cheque received a cheque, of the nature referred to it in Section 138 for the discharge, in whole or in part, of any debt or other liability. Thus, in order to prove contrary there should be a trial in which contrary is required to be proved by the accused in his defence. Thus, the impugned order passed by the trial court framing the charge under Section 138 of the Act cannot be said to be arbitrary or in contravention to any provision of the Act. The burden of proof to the contrary is on accused that there was no existing debt or liability. In that context the decision of M/s M.M.T.C. Ltd. (supra). K.N. Beena (supra) and Hiten P. Dalai (supra) may be taken into consideration.

29. On the basis of the larger Bench decision of the Supreme Court in S.M.S. Pharmaceuticals Ltd. (supra) and the law laid down in the said case the decision of Anil Hada (supra), K.P.G. Nair (supra), Katta Sujatha (Smt) (supra) and Monaben Ketanbhai Shah (supra) are distinguishable.

30. I have given my anxious and bestowed consideration to the reasonings assigned by the trial court framing the charge under Section 138 of the Act and rejecting the objections of the accused/petitioner, I find them to be quite cogent, by judging from all the angles. There is sufficient material to frame charge under Section 138 of the Act against the petitioner/accused and the trial court rightly framed the said charge.

31. Resultantly, this revision petition is found to be devoid of any substance and the same is hereby dismissed.


MANU/PH/0580/2005

Equivalent Citation: IV(2006)BC504, 2006CriLJ766, (2006)142PLR264

IN THE HIGH COURT OF PUNJAB AND HARYANA

Criminal Appeal No. 181-SBA of 2003


Appellants: Kiran Finance CompanyVs.

Respondent: Sukhdev Kishan

Hon'ble Judges: Pritam Pal, J.

Counsels: For Appellant/Petitioner/Plaintiff: K.S. Cheema, Adv.

For Respondents/Defendant: Arvind Kashyap, Adv.

Subject: Criminal

Subject: Limitation

Catch Words

Mentioned IN

Acts/Rules/Orders: Negotiable Instruments Act, 1881 - Section 138; Limitation Act, 1963 - Section 19; Limitation Act, 1908 - Section 20; Criminal Procedure Code (CrPC) - Section 313

Cases Referred: S. Krishnamurthy v. A.R. Rajan 1996 Crl. Law Journal 3552;Sant Lal Mahton v. Kamla Prasad and Ors. A.I.R. 1951 Supreme Court 477;Amit Desai v. Shine Enterprises 2000(3) R.C.R. (Criminal) 255

Citing Reference:

S. Krishnamurthy v. A.R. Rajan Discussed

Sant Lal Mahton v. Kamla Prasad and Ors. Discussed

Amit Desai v. Shine Enterprises Mentioned


Case Note:Criminal – Dishonor of Cheque – Time Barred Debt – Section 138 of Code of Criminal Procedure, 1973 (Cr.P.C.) – Respondent had purchased a Matador through Hire Purchase Agreement – Said amount was to be paid in 36 instalments – To discharge partial liability, respondent had issued a cheque to appellant/company – On presentation, cheque got dishonoured – Appellant through its Managing Partner, X filed complaint before Trial Court – Trial Court held that cheque was issued by respondent in favour of

appellant but same was issued when debt taken by respondent had already become time-barred and so, no liability could be fastened upon respondent under Section 138 of Act and as such, he was acquitted in Complaint case – Hence, aggrieved appellant filed present appeal – Held, it was bounden duty of appellant to establish its case by giving specific date and time regarding payment of installment of debt liability by respondent in order to show that claim of appellant was not time-barred when cheque was issued in name of appellant-company – Appellant has failed to produce any cogent and convincing evidence in that behalf – Hence, there is no merit in appeal and same is dismissed

JUDGMENT

Pritam Pal, J.

1. This appeal has been preferred by Kiran Finance Company, Hoshiarpur through its Managing Partner, Capt. Lakhwinder Singh Gill against order dated 26.2.2002 passed by learned Judicial Magistrate, 1st Class, Hoshiarpur, whereby respondent-Sukhdev Kishan was acquitted in a complaint case No. 9 of 18.11.1999 filed under Section 138 of the Negotiable Instruments Act, 1881 (for short, "the Act").

2. The case of the complainant shorn of details, is like this: Respondent-Sukhdev Kishan had purchased a Matador bearing registration No. HP-20-1444 vide Hire Purchase Agreement (Ex. DX) dated 20.5.1996 for an amount of Rs. 3,20,000/-. The said amount was to be paid in 36 installments. In the event of failure, 4% overdue charges were also agreed to be paid on the defaulted amount. To discharge his partial liability, respondent Sukhdev Kishan had issued a cheque No. 570893 dated 24.9.1999 worth Rs. 85,000/- to the complainant-appellant, but, the same was dis-honoured on account of insufficient funds. A legal notice dated 11.10.1999 (Ex.C6) was issued to the respondent to make payment but, of no avail. Ultimately, on these aforesaid allegations, complainant-appellant had filed a complaint under Section 138 of the Act. After recording the preliminary evidence, the respondent was summoned to face trial for commission of offence under Section 138 of the Act.

3. In order to prove its case, the appellant examined as many as three witnesses, namely CW-1 Lakhwinder Singh Gill, complainant, CW-2 Gurinderpal Singh, Special Assistant of the Oriental Bank of Commerce, Hoshiarpur and CW-3 Naresh Pal, Clerk-cum-Cashier, State Bank of Patiala, Una.

4. After closure of the evidence by the appellant, the respondent was examined in terms of Section 313 of the Code of Criminal Procedure wherein, he denied the incriminating evidence appearing against him. In answer to the last but one question, the respondent submitted that the cheque-in-dispute, bearing his signatures only, was handed over to the appellant as a security and it was never issued by him in order to discharge the liability.

5. Learned trial Magistrate after appraisal of the evidence and hearing learned counsel for the parties, came to the conclusion that the cheque (Ex. C2) dated 24.9.1999 worth Rs. 85,000/- was issued by the respondent in favour of the appellant but the same was issued when the debt taken by the respondent had already become time-barred. On this observation no liability could be fastened upon the respondent under Section 138 of the Act and as such, he was acquitted in the Complaint case. This is how feeling aggrieved, the appellant has come up in this appeal.

6. I have heard learned counsel for the parties and have also gone through the file carefully.

7. The only contention raised on behalf of the appellant is that under Section 19 of the Limitation Act, 1963, a fresh period of limitation shall be computed from the time, when the last payment was made by the respondent to discharge his liability. He then made a reference to the cross-examination of CW-1 Capt. Lakhwinder Singh Gill wherein he stated that the aforesaid Matador purchased by the respondent was returned to him (appellant) in September, 1999 and ultimately, the same vehicle was disposed of in an open auction on 18.10.2000 for a sum of Rs. 30,000/-. After making reference to the above given by the appellant in his cross-examination, learned counsel for the appellant also relied upon the decision in S. Krishnamurthy v. A.R. Rajan MANU/TN/0120/1996 and then contended that in the given

circumstances, the trial Court should have drawn an inference that the last payment was made on 18.10.2000 towards the debt liability and as such the cheque dated 24.9.1999 was issued well within the time and the complaint case was thus, also not time-barred though it is held to be time-barred by the trial court.

8. On the other hand, learned counsel for the respondent repelled the aforesaid point of argument raised on behalf of the appellant and contended that in a criminal case, the complainant has to prove his case beyond reasonable doubt for holding the accused guilty under any particular offence. Here, in the instant case, the appellant had all the records pertaining to details of payment and acknowledgement thereof in his custody, but the same was not produced for the reasons best known to it. In fact, had that records been brought on the file, the same would have gone against the appellant. In order to prove the payment of last installment, some receipt or acknowledgement or some writing in proof thereof, on behalf of the respondent should have been produced for the purpose of computing the period prescribed for limitation for filing the complaint case, but there is no such document on the file. At the last leg of his argument, learned counsel for the respondent also relied upon the Supreme Court judgment in Sant Lal Mahton v. Kamla Prasad and Ors. MANU/SC/0043/1951 : [1952]1SCR116 . In the alternative, he also relied upon the decision in Amit Desai v. Shine Enterprises 2000(3) R.C.R. 255 and then contended that here, in the instant case, partnership of Capt. Lakhwinder Singh Gill, complainant, as a Managing Partner in the appellant-Company is not proved and in such circumstances, criminal complaint filed by a person, who is not proved to be a partner in the registered firm or Companyjs not maintainable.

9. I have given my thoughtful consideration to the above rival contentions of the learned counsel for the parties and find no merit in the point raised on behalf of the appellant, inasmuch as, a perusal of the evidence brought on the file by the appellant goes a long way to show that there is not a iota of any positive evidence, which could give any date and time of the last payment, made by the respondent in favour of the appellant. According to the case of the respondent, he had paid the entire amount of debt, whereas, the case of the appellant is that only partial payment was made by the respondent. Admittedly, the entire record pertaining to the payment of installments and sale of the vehicle, which was returned to it in September, 1999, was with the appellant, but the same has been withheld for the reasons best known to the complainant-appellant-Company. Moreover, the auction of the said vehicle is stated to have taken place on 18.10.2000, but that cannot be taken to be the date of last payment on behalf of the respondent, inasmuch as, at that time, the vehicle was in the possession of the appellant. Moreover, on the said date i.e. 18.10.2000, the liability of discharging the debt had become time-barred. In this regard, it is pertinent to mention here that as per the Hire Purchase A greement ( Ex.DX), the e ntire debt amount to t he t une o f Rs. 3,20,000/- w as made payable in 36 monthly installments, with effect from 20.5.1996 and as such, the same had to be paid within three years i.e. on or before 20.5.1999. As stated above, the cheque dated 24.9.1999 was issued by the respondent when the debt liability had become time-barred. In S.Krishnamurthy's case (supra), relied upon by learned counsel for the appellant, it was proved that accused had paid the interest on various dates in respect of alleged time-barred pronotes and thereby the disputed pronotes had not become time-barred. But, here in the instant case, as discussed above, the appellant was miserably failed to give any specific date, either in his complaint or in his examination-in-chief in respect of the last payment of installment or interest so as to bring the claim of the appellant within time. On the other hand, under Section 19 of the Limitation Act, 1963 which corresponds to the earlier Section 20 of the Limitation Act, 1908, the payment has got to be proved in a particular way i.e. on the basis of some writing or signed acknowledgement. In this regard, it has been observed by their Lordships of the Apex Court in Sant Lal Mahton's case (supra) as under:-

It is the payment which really extends the period of limitation under Section 20 but the payment has got to be proved in a particular way and for reasons of policy the legislature insists on a written or signed acknowledgement as the only proof of payment and excludes oral testimony. Unless, therefore, there is acknowledgement in the required form, the payment by itself is of no avail. However, while the Section requires that the payment should be made within the period of limitation, it does not require that the acknowledgement should also be made within that period. But while it is not necessary that the written acknowledgement should be made prior to the expiry of the period of limitation, it is essential that such acknowledgement whether made before or after the period of limitation must be in existence prior to

the institution of the suit. Whether a suit is time barred or not has got to be determined exclusively with reference to the date on which the plaint is filed and the allegations made therein. To claim exemption under Section 20, the plaintiff must be in a position to allege and prove not only that there was payment of interest on a debt or part payment of the principal, but that such payment had been acknowledged in writing in the manner contemplated by that section. The ground of exemption is not complete without this second element and unless both these elements are proved to exist at the date of the plaint the suit would be held to be time barred. Where none of the payments were endorsed on the bond itself and there was no acknowledgement either in the handwritten of are or signed by the debtors prior to the institution of the suit, but in the written statement filed in the suit the defendants admitted the payments specified in the plaint as made on the respective dates and the written statement was signed by defendants it would not fulfill the requirements of a signed acknowledgement as is contemplated by the proviso to Section 20....

10. It is settled law that in a criminal case, prosecution has to stand upon its own legs and it c annot t aken the advantage of weak defence before holding the accused guilty. Thus, it was the bounden duty of the complainant to establish its case by giving specific date and time regarding the payment of installment of debt liability by the respondent in order to show that the claim of the complainant was not time-barred when the cheque (Ex.C2) dated 24.9.1999 was issued in the name of appellant-company of which Capt. Lakhwinder Singh Gill was the Managing Partner. But, as discussed above, he has failed to produce any cogent and convincing evidence in that behalf. Further, it is evident on the file that the respondent also took an objection when Capt. Lakhwinder Singh Gill had stated in his examination-in-chief that he was the Managing Partner of Kiran Finance Company. Even then, the appellant failed to prove that he was also a partner of the said company, which is stated to have been registered. A photocopy of Form 'C' has been placed on the file as Ex.Cl, but that too has not been attested by any competent authority and the same does not show Capt. Lakhwinder Singh Gill to be its Managing Partner. In such circumstances, the criminal complaint or the appeal filed on behalf of a company, by the appellant, who is not proved to be a partner of the registered Company/Firm, is held to be not maintainable.

11. In view of my foregoing discussion, I have no hesitation to hold that the appeal filed by Capt. Lakhwinder Singh Gill, complainant-appellant is devoid of any merit and as such, the same is hereby dismissed.
