1 CC NI: 7285/2022
IN THE COURT OF THE VI JUDICIAL MAGISTRATE OF FIRST
CLASS :: HYDERABAD.
PRESENT: Sri. Mohd Abdul Khaleel, VI Judicial Magistrate of First Class, Hyderabad.
Monday, the 28th day of October, 2024.
CC NI. No. 7285 OF 2022
(Old CC.No. 4491/2021 of III Addl. Chief Metropolitan Magistrate, Hyderabad)
Between:
M/s Venkat Ventures LLP (Formerly Venkat Ventures Private Limited) Rep. By it’s designated partner (previously T Sridhar, S/o T Sathyanarayana) presently Smt. Sri Samhita Gadde w/o M. Sree Harsha, Age 29 years, R/o Plot no. 298/A, M.L.A. Colony, Road No. 12, Banjara Hills, Hyderabad.
Having it’s registered office at D.No. 6-3-347/4/A,Dwarakapuri Colony,
Panjagutta, Hyderabad. ...Complainant
AND
1.M/s Shrivalli Shipping & Transport Pvt. Ltd. Represented by it’s Directors Having it’s regd. Office at 23-22/21 2nd floor, Sivalayam Street, Near 1 Town Gandhi Statue, Vishakhapatnam.
2.Polina Babu Rao s/o Venkataratnam, Age: 63 yrs, Occ: Business, Director of M/s Srivalli Shipping &Transport Pvt. Ltd. R/o 58-21-7/1, APSEB Colony, Seetharamaraju Nagar, Butchiraju Palem, Vishakhapatnam.
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3. Mr. Polina Venkata Ravi Kiran, S/o Polina Babu Rao, Aged about 32 years, Occ: Business, Director of M/s Srivalli Shipping &Transport Pvt. Ltd. R/o 58-21-7/1, APSEB Colony, Seetharamaraju Nagar, Butchiraju Palem, Vishakhapatnam.
4. Mrs. Polina Srivallika Subrahmaneswari, W/o. Polina Babu Rao, Age about 58 years, Occ: Business, Director of M/s Srivalli Shipping &Transport Pvt. Ltd. R/o 58-21-7/1, APSEB Colony, Seetharamaraju Nagar, Butchiraju Palem, Vishakhapatnam. … Accused no.1 to 4
The case is coming before me for final hearing on 28-10- 2024 in presence of Sri Gurmeet Singh, Counsel for complainant and Sri. K.B. Ramanna Dora, Counsel for the accused, and hearing upon their arguments, and having stood over for consid- eration till this day, the Court delivered the following :-
-: J U D G M E N T:-
1. The brief facts of the complaint in nutshell are as follows:-
The complainant is a Private Limited Company and the accused A2 to A4 were having well acquaintance with the complainant through a common friend and relative and have been in better terms for the last so many years and out of that acquaintance the accused A1 in the month of February, 2014 3 CC NI: 7285/2022 requested the complainant for a hand loan of Rs.25,00,000/- for his company financial commitments of the accused A1 on behalf of A3 and A4 and promised to repay the same on or before 05/02/2015. Keeping in view of the friendly relationship and also to help the accused, the complainant has paid an amount of Rs.
25,00,000/- through RTGS and the same amount was credited into the account of the accused and in receipt of the said hand loan amount, the Accused No. 2 and A4 being the Managing
Director’s of Accused No.1 has executed an affidavit cum promissory note on 05/02/2014 in favor of the complainant. After completion of the promised time when the complainant has asked the accused to repay the amount on that the accused had executed another Affidavit cum promissory note on 14/07/2020 and promised to repay the loan amount but failed to keep up their promise to repay that amount within time and on the repeated demands of the complainant the accused no.2 had issued a A/c payee cheque bearing no. 171349 for Rs.
25,00,000/- dated 15/09/2020 drawn on Union Bank of India
Vishakhapatnam main branch from the account of the accused and as per the instructions of the accused when the complainant has presented that cheque with his banker i.e., Andhra Bank,
MLA Colony Branch, Hyderabad but the cheque was dishonored 4 CC NI: 7285/2022 for the reasons as “Exceeds Arrangement” which was informed to the complainant by his banker on 17/09/2020 through a cheque return memo on that the complainant tried to contact the accused to inform him about the dishonor of the cheque but the accused started avoiding the calls and dodge the issue of repayment of the hand loan on one pretext or the other on that the complainant got issued the legal notice dated 14/10/2020 which was received by the accused on 14/10/2020 which was not replied by the accused and not met with the payment as such being aggrieved the complainant knocked the doors of this Court by filling the present complaint on 27/11/2020.
2. After taking cognizance by the Court the accused was summoned to face trial for an offense U/Sec. 138 of NI Act.
3. On receipt of summons the accused entered into appearance and pleaded not guilty and claimed to be tried when they were tested by the Court U/Sec. 251 Cr.P.C examination.
4. On the substantive aspect of liability the defense of the accused culled out from their plea of defense and application
U/Sec. 145 (2) of NI Act is that the complainant has misused their cheques which were given as security cheques and with 5 CC NI: 7285/2022 malafide intention the complainant filed this complaint which is to be dismissed as prayed by them.
5. Hence the factual matrix, in nutshell is that the complainant alleges that the accused issued two cheques for the discharge of the hand loan taken by them from the complainant by having the knowledge of insufficient funds due to arrangement made with the bank are liable to be punished U/Sec. 138 NI Act.
6. As against this the accused denied their liability and alleged that in spite of payment of total due amount to the complainant the complainant filed this false case with ulterior motives by misusing the security cheques.
7. In support of their case the complainant through GPA holder (T. Sreedhar) got examined himself as PW1 and he filed documentary evidence under Ex.P1 to Ex.P9 and after the close of the complainant side evidence the accused denied the evidence of PW1 in their 313 Cr.P.C examination and did not examined any defense witnesses and did not marked any documents on their behalf in their defense.
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8. The arguments of counsel for the complainant are as follows:-
It is the arguments of learned counsel for the complainant that the case of the complainant is fairly proved by the complainant by examining PW1 clubbed with the documents filed under Ex. P1 to Ex.P9 and the evidence of PW1 prima facie proving the fact that in spite of having knowledge of legal enforceable debt as admitted by the accused A2 and A4 in their confirmation affidavit Ex.P3 the accused A2 had issued cheque which was subsequently not met with payments and the documents relied by the complainant more particularly the cheques contains the signature of the accused A2 which is not denied by the accused and the related documents clearly establishing the essential ingredients of Sec.138 NI Act as such by invoking the presumptions U/Sec.118, 139 NI Act the accused may be convicted since they failed to rebut the evidence adduced by the complainant.
9.The arguments of learned senior defense counsel are as follows:-
The learned defense counsel counter attacked the arguments of other side by arguing at length and also by filling 7 CC NI: 7285/2022 written arguments filed U/Sec. 314 of Cr.P.C. in which he mainly contends that that the evidence of PW1 is not corroborating in material aspects and the documents filed by the complainant are fabricated one and complainant not approached the Court with clean hands and suppressed so many facts and misused the blank signed security cheques of the accused and filed this false case with ulterior motives and there is no proper service of legal notice on the accused and the contractual obligations are violated by the complainant. He further argued that the affidavit filed by the complainant under Ex.P3 is a doctored document and the story of the complainant case is unbelievable story as such the case may be dismissed with costs.
10. Now in this case it is to be seen that whether the accused had been able to shake the version given by the complainant in his evidence and had the accused been able to point out discrepancies or contradictions which may throw doubt on his version. At the same time whether the complainant has succeeded in proving the ingredients of Sec. 138 NI Act . It is a well settled law that bare statements and story telling would not help the accused to rebut the presumption raised under Section 118 and 139 of NI Act.
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11.The Hon’ble Apex Court in Rajesh Jain V/s Ajay Singh
reported in 2023 SCC OnLine SC 1275 decided on 09-10-
2023 analysis of the Court is that the legal burden of proof which remains constant through out a trial. On the other hand, the providential burden may shift from one party to another as the trial progress, according to the balance of evidence given at any particular stage. After taking the note of Sec.130 of the NI Act the
Court said that in all trials concerning dishonor of cheque, the
Courts are called upon to consider whether the ingredients of the offense enumerated in Sec. 138 of the Act have been met and if so, whether the accused was able to rebut the statutory presumption contemplated by Sec. 139 of the Act. Further it said that Sec. 139 is a reverse onus clause and requires the accused to prove the non-existence of the presumed i.e., that cheque was not issued in discharge of a debt/liability.
12.Legal frame work for the ingredients of Sec. 138 NI
Act :-
Hon’ble Apex Court in Kusum ingots and Alloys limited
and others Vs. K Pennar Peterson Securities Ltd., and
others (2000) 2 SCC 745 has clearly stipulated that the ingredients which are to be satisfied for making out a case under 9 CC NI: 7285/2022 the provision are as follows:
(i). A person must have drawn a cheque on account maintained by him in a bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability.
(ii). That cheque has been presented in the bank within a period of six months from the date on which it is drawn or within the period of it’s validity whichever is earlier.
(iii). That cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honor the cheque or that it exceeds the amount arranged to be paid from the account by an agreement made with the bank.
(iv). The payee or holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.
10 CC NI: 7285/2022
(v). The drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 30 days of the receipt of the said notice.
If the afore mentioned ingredients are satisfied then the person who has drawn the cheque shall be deemed to have committed an offense.
13.Being cumulative, it is only when all the afore mentioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offense U/Sec.
138 NI Act. This is the legal bench mark to be satisfied in order for a prosecution U/Sec. 138 of the NI Act to succeed.
14. In M/s Dalmia Cement (Bharat) Ltd Vs M/s Galaxy
Traders and Agencies and others AIR 2001 SC 676.
The Hon’ble Apex Court held that to make out an offense
U/Sec.138 of NI Act the complainant has to prove the ingredients of the offense. A statutory obligation is imposed on the payee to issue a demand notice to the drawer. Mere giving this notice in writing will have no effect at all. The notice so issued should be by the drawer of the cheque. Only upon such receipt of the 11 CC NI: 7285/2022 notice and upon the same is acknowledged but the drawer failed to pay the cheque amount, the cause of action arises to initiate the proceedings against the drawer whose cheque is dishonored.
Keeping these ingredients in back ground, let me discuss the evidence of both sides held in the case.
15. The evidence of witnesses on behalf of the complainant is as follows:
PW1 (T.Sreedhar) by way of chief affidavit filed U/Sec.
145(1) N.I. Act he reiterated the facts of his complaint and he stated that the complainant is running a Private Limited Company and the accused A1 to A4 are having well acquaintance with the him through a common friend and relative and have been in better terms for the last so many years and out of that acquaintance the accused A2 in the month of February, 2014 requested him for a hand loan of Rs.25,00,000/- for his company financial commitments of the accused A1 and promised to repay the same within a period of 180 days. Keeping in view of the friendly relationship and to help the accused, he has paid an amount of Rs. 25,00,000/- through RTGS and the same amount was credited into the account of the accused and in receipt of the said hand loan amount, the Accused No. 2 and A4 being the 12 CC NI: 7285/2022
Managing Director’s of Accused No.1 has executed an affidavit cum promissory note on 05/02/2014 in favor of the complainant.
After completion of the promised time when he has asked the accused to repay the amount on that the accused A2 and A4 had executed another Affidavit cum promissory note on 14/07/2020 and promised to repay the loan amount by 10/09/2020 but failed to keep up their promise to repay that amount within time and on the repeated demands of the complainant the accused A2 had issued a account payee cheque bearing no.171349 for Rs. 25,00,000/- dated 15/09/2020 drawn on Union Bank of India Vishakhapatnam main branch from the account of the accused and as per the instructions of the accused when he has presented that cheque with his banker i.e.,
Andhra Bank MLA Colony Branch, the cheque was dishonored for the reasons as “Exceeds Arrangement” which was informed to him by his banker on 17/09/2020 through a cheque return memo on that he tried to contact the accused to inform him about the dishonor of the cheques but the accused started avoiding the calls and dodge the issue of repayment of the hand loan on one pretext or the other on that he got issued the legal notice
dated 14/10/2020 which was received by the accused on
14/10/2020 which was not replied by the accused as such being 13 CC NI: 7285/2022 aggrieved he knocked the doors of this Court by filling the present complaint on 27/11/2020.
16.The evidence of PW1 to pro ve of ingredient no. 1 :
The evidence of PW1 clubbed with Ex.P3 affidavit proves that the said affidavit dated 14/07/2020 which was signed and by the accused A2 and A4 which is binding on the accused and in token of that debt A2 had issued the cheque Ex.P1 bearing no. 171349 dated 15/09/2020 issued for Rs. 25,00,000/- and that cheque was issued by the accused A2 from his bank account maintained by the accused vide A/C No. 328905010519052 towards the discharge of the debt amount and it is to be seen at this stage that the accused A2 did not denied his signature on that cheque and also his signature on Ex.P3 declaration nor he denied the A/c no. mentioned on that cheque, as the signature on that cheque is admitted to be that of the accused, the presumption envisaged in Sec. 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Sec. 139 of the Act enjoins on the Court to presume that the holder of the cheque issued it for the discharge of any debt or liability. The burden was on the accused to rebut the afore said presumption.
14 CC NI: 7285/2022
17.In the cross examination of PW1 and also in the examination U/Sec. 313 Cr.P.C. the accused took the defense that the complainant has misused his cheques kept for security purpose and the learned defense counsel contended that the security cheques are misused by the complainant as such those cheques do not comes under the purview of Sec. 138 of N.I. Act.
18. The plea of Security Cheque:-
It is a common plea in most of the cheque dishonor cases that the cheque in question was issued as a security cheque.
However, let me point out that the word “Security Cheque” do not necessarily disprove the case against the accused. The expression security cheque is not a statutorily defined expression in the Act. Moreover the Act does not per se carve out an exception in respect of a “Security Cheques”.
19. In ICDS Ltd., Vs Beena Shabbir and another reported in
AIR 2002 SC 3014 the Hon’ble Apex Court has observed as follows :-
The commencement of the Section stands with the words “Where any cheque”. The noted three words are of extreme significance, in particular by reasons of the user of the word “ any” the first three words suggest that in fact for what ever 15 CC NI: 7285/2022 reason if a cheque is drawn on account maintained by him with a banker in favor of another persons for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Sec. 138 leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record that it was issued not only to discharge in whole or in part of any debt but the same includes other liability as well. Thus, even if the dishonored cheques in question were issued as a security cheque, it will still come under the ambit of
Sec. 138 of the Act. The only condition is that the cheque must be backed by some form of legally enforceable debt or liability towards the holder.
20.In another decision of the Hon’ble Apex Court reported in
AIR 2006 SC 3366 between M.S Narayana Menon @ Mani Vs
State of Kerala it is held that if the cheque is given for security purpose then Sec. 138 is not attracted. However, the later view of the Hon’ble Apex Court is that if the accused issued post dated cheques as security for payment of loan, installments and such cheques are dishonored, as there is legal liability, Sec. 138 is attracted.
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21.We can fined the same observation in the case held between Sampally Satyanarayana Rao Vs Indian Renewable
Energy Development Agency Ltd. (2016) 10 SCC 458 (earlier
decision in the case of Narayana Menon has not been
referred to) and the latest decision on this aspect is found in the case of T.P Murugan (Dead) through LRS Vs Bojan (2018)8
SCC 469 wherein, the Hon’ble Apex Court has reiterated the aspect of security and evidence required to rebut the presumption the same view was also taken by Hon’ble Apex
Court in the case of Shree Daneshwari Traders Vs Sanjay Jain (2019) 16 SCC 83.
22.In another authority of Hon’ble Apex Court held in between
Sunil Todi and othrs Vs State of Gujarath and others Crl.
Appeal no. 1446 and 1447 of 2021 in which the Hon’ble Apex
Court discussed about the cheques issued as security.
In para (28) the Hon’ble Apex Court held that in our opinion, the High Court has muddled the entire issue, the averments in the complaint does indicate that the signed cheques were handed over by the accused to the complainant. The cheques were given by way of security, is a matter of defense. Further, it was not for the discharge of any debt or any liability is also a 17 CC NI: 7285/2022 matter of defense. The relevant facts to countenance the defense will have to be proved that such security could not be treated as debt or other liability of the accused. That would be a triable issue we say so because, handing over of the cheques by way of security per se would not extricate the accused from the discharge of liability arising from such cheques.
23.In view of the above observation on the perusal of the evidence of PW1 it was prima facie proved that the accused A2 and A4 in his presence admitted their liability under Ex.P3 which was signed and prepared by the accused A2 and A4 binds them and in token of that liability the accused A2 had issued that cheque and the cheque return memo Ex.P2 clearly shows that the cheque was returned unpaid due to exceeds arrangements and the accused had not disproved the contents of these documents in the cross examination of PW1 but in his defense the accused A2 took a defense that he signed on a blank Rs.100
NJ stamp paper by putting his seals and this defense of the accused is not believable since on perusal of the contents of that document under Ex.P3 it is not possible to manipulate or insert the contents before putting seal on it since it was got scribed with the help of one computer and the wording in the last para of that document shows that it is binding on the accused A2 and A4 and 18 CC NI: 7285/2022 it is nothing but a promissory note since the contents of that document shows that the accused has made the promise and also assured to honor the contents of that document so it is binding on them since the contents of that documents are rightly proved by the evidence of the complainant and since it is prepared on a Rs.100/- NJ stamp paper as such it is sufficiently stamped and the conditions laid down in that document is fitting in the definition of pronote defined U/Sec.4 of N.I. Act.
Moreover the plea of the accused A2 that he gave that cheque as security also does not rescues him from his liability since in this case the stamp paper on which the affidavit under Ex.P3 was prepared was purchased by himself from one stamp vendor
Sub Registrar Ex Offico stamp vendor SRO Lankelapalem and in that affidavit it was admitted by the accused that owing to their financial difficulties they could not paid that loan amount and there is no mention of any security cheques in that affidavit and the accused except giving suggestions about it’s manipulation they did not made any efforts to disprove the contents of that affidavit which is binding on them. So the ingredient no. 1 that the accused A2 on behalf of other accused had given that cheque from his bank account and that cheque was issued by the accused A2 to discharge their legal enforceable liability is 19 CC NI: 7285/2022 proved by the complainant against the accused in a fair manner.
24.In Crl. Appeal No. 230 – 231 / 2019. between Bir Singh
Vs Mukesh Kumar the Hon’ble Apex Court observed as follows:
If a signed blank cheque is voluntarily presented to a payee, towards some payment the payee may fill up the amount and other particulars this in itself would not invalid the cheque.
25.The cheque a meaningful reading of the provision of NI Act in particular Sec.20, Sec.87 and Sec.139 makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduced evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability.
26.It is immaterial that the cheque may have been filled by any person other than the drawer as alleged by the accused in this case. If the cheque is duly signed by the drawer and if the cheque is otherwise valid the penal provision of Sec.138 NI Act would be attracted. Whether if any alteration is done and what type of alteration amounts to material alteration and whether that type of alteration is permitted in the Act is to be seen.
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27.The word Material Alteration discussed in the Act from Sec.
87 to 89 and according to Act the following alterations are permitted. They are :-
a).Conversion of blank endorsement into an endorsement in full. (Sec.49).
b).Filling blank in an inchoate instrument. (Sec. 20).
c).Crossing of cheque, (Sec. 125).
d).Qualifying an acceptance. (Sec. 86).
28.In such a case the instrument does not become void these are the alterations permitted by NI Act and have specific legal consequences mentioned in the Act itself. But the following are the instances of material alterations which are not permissible.
They are :- i. Change of date.
ii. Change in amount payable.
iii. Change in rate of interest.
iv. Change in place of payment.
If these alteration are made without consent of both parties they are fatal.
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29.In this case there appears no such alteration on the face of the Ex.P1 cheque issued by the accused. Even though the accused took one of the defense that the complainant himself filled their blank signed security cheques but that was not proved by them in their defense whereas the evidence of PW1 shows that the accused has has filled the entries on Ex.P1 cheque and even otherwise as per Sec 49 any other person can also fill the contents of the cheque which does not invalidate that cheque.
30. The learned defense counsel contended that the complainant has put dates and filled the contents without the authority of the accused. But the learned counsel for the complainant contends that the same was denied by PW1.
31.In one authority reported in Crl. Appeal No. 1630 and
1631 of 2011 between Mk Bharath & Company v/s Anil
Ramarao Naik in which their Lord'ship held that the complainant unilaterally has put dates on the cheques without the authority of the accused and even by not informing him which amounts to material alteration but in this case the complainant has stated that he received the cheque from the accused in a written form.
On perusal of the cheque the contents are filled with pen and signature was put with another ink pen. It is the contention of 22 CC NI: 7285/2022 the learned defense counsel that filling of the date with another ink amounts to material alteration which makes the cheuqe as invalid but that contention is not sustained in law since there is no admission of PW1 that he himself has filled the contents of that cheque as such the said cheque is a perfect and valid cheque in view of Sec. 49 of the Act. With regard to use of two different type of inks in filling the cheque the law is settled by the
Hon’ble Apex Court in (2002)7 SCC 150 between P.K.
Manmadhan Kartha v/s Sanjeev Raj and another wherein it was clarified that use of two different inks and different writings on cheques do not rebut the statutory presumptions under
Section 139 and Sec.118 of N.I. Act. Moreover there is no such guidelines prescribed by R.B.I. also about the use of different types of ink on cheques. So in view of that authority the subject matter cheque even though contains two different types of inks is a perfect cheque under the eyes of law.
32. Proof of ingredient no. 2 and 3:-
The cheque under Ex.P1 bears the date as 15/09/2020 and as per the evidence of PW1 he presented that cheque on the said date in Andhra Bank, M.L.A. Colony branch but that cheque was returned unpaid due to exceeds arrangement reasons and he was informed by his banker about dishonor on 17/09/2020 23 CC NI: 7285/2022 under cheque return memos Ex.P2 which is signed by the bank officials and the seals of the bank also affixed on that memo to show it’s authenticity. Since the signatures are admitted by the accused and it is proved that the accused A2 with a malafide intention issued that cheque with an intention to cause loss to the complainant. Since the presentation of that cheque in the bank within it’s validity period and it’s dishonor due to exceeding the arrangements with the bank prima facie proved by the evidence of PW1 which shows that the accused A2 had firm belief that
Ex.P1 cheque will not be honored due to the arrangements made with the bank by him and by having that knowledge he issued that cheque to cheat the complainant and the evidence of PW1 clubbed with the original cheque under Ex.P1 supported by the cheque return memo Ex.P2 prima facie proves the second and third ingredients that the cheque was dishonored due to exceeds arrangement reasons were also fairly proved by the complainant.
More over the banker’s slips and memo are prima facie evidence
U/Sec. 146 of NI Act.
33.Proof of ingredient no. 4 and 5 (legal Notice):
In K Bhaskaran Vs Shankaran Vaidhyan Balan AIR 1999
SC 3762 wherein it was held by Hon’ble Apex Court with
regard to meaning of giving notice – as the Section contains the 24 CC NI: 7285/2022 word “within fifteen days of receipt of notice, given notice under the Section is not same as receipt of notice wherein, giving is a process of which receipt is the accomplishment once the payee dispatches the notice, his part of the obligation is done with, and further consequences depend upon what the drawer does in any case Court should not adopt an interpretation in this context which helps the dishonest drawer, because the payee is presumed to be the loser, his interest has to be safeguarded.
34. In view of the above observation on perusal of the documents filed by the complainant in this case it was proved that complainant has intimation from the bank about dishonor of cheque under cheque return memo Ex.P2 on 17/09/2020 and he got issued Ex.P4 legal notice on 14/10/2020. So the notice was also issued within 30 days from the knowledge of the dishonor of the cheque that is what required to prove this ingredient.
35.In KR Indira Vs Dr. G. Adinarayana AIR 2003 SC 4689
TheHon’ble Apex Court held that the notice of demand
U/Sec. 138 NI Act is a statutory notice. The Section requires it to be in writing and it has to be issued within 30 days of the receipt of information from the bank about the dishonor of cheque by the payee. The Section though requires a notice to give rise cause 25 CC NI: 7285/2022 of action, it seldom mentions any form, nor does it mention the basic requirements of a valid notice. Therefore, great precaution has to be taken while effecting such a statutory notice.
36.All these essential requirements are appearing in legal notice and even the amount mentioned in it is the same amount due by the accused. The cheque number is also rightly mentioned even though the accused took a defense that the cheque number was wrongly mentioned in the case records but on perusal of the contents of the cheque the number of the cheque was rightly mentioned since the first two digits of the cheque need not be mentioned and there is a demand to repay the debt amount, the address of the accused is rightly mentioned so the legal notice under Ex.P4 is a perfect notice to prove the ingredient no. 4. Further to support it Ex.P5 the postal receipt and Ex.P6 the postal acknowledgments shows that the notice addressed to the accused is received by the A4 on behalf of others on the correct address of the accused which prima facie proves that notice was rightly sent on correct address.
37.Commenting on the issue of deemed service, the Hon’ble
Supreme Court in CC Alavi Haji Vs Pala Patty Mohammed and another reported in (2007) 6 SCC 555 held as follows:- 26 CC NI: 7285/2022 “According to Sec. 114 of IE Act read with illustration (f) there under, when it appears to the Court that the common course of business renders it probable that a thing would happen. The Court may draw presumption that the thing would have happened unless there are circumstances in a particular case to show that the common course of business was not followed. Thus, Sec. 114 enables the Court to presume the existence of any fact which it thinks likely to have happened regard being had to the common course of natural events, human conduct and public and private business in their relation to the facts of the particular case. Consequently the Court can presume that the common course of business has been followed in particular cases.
38.When applied to communications sent by post, Sec. 114 enables the Court to presume that in the common course of natural events, the communication would have been delivered at the address of the addressee. But the presumption that is raised
U/Sec. 27 of the General Clause Act 1897 Act, is a far stronger presumption. So Sec. 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post.
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39.Further the Hon’ble Apex Court held that a person who does not pay within 15 days of the receipt of summons along with copy of complaint U/Sec. 138 NI Act cannot obviously contend that there was no proper service of notice as required U/Sec. 138 of the Act. So, the evidence of PW1 clubbed with the legal notice
Ex.P4, postal receipts under Ex.P5, postal acknowledgments under Ex.P6 prima facie proves that the said legal notice was rightly sent to the accused within 30 days of stipulated time mentioned in the Act and in view of the above authorities discussed above it can be safely said that the presumption of deemed service is also rightly proved by the complainant against the accused as such the 4th and 5th ingredients also proved in a fair manner in favor of the complainant against the accused.
40.On the presumption in favor of the holder of the cheque is provided U/Sec. 139 NI Act is a presumption of Law.
Relying on the decision in Hiten P. Dalal Vs Bartindranath
Benerjee (2001) 6 SCC 16 and also in Laxmi Dye–Chem Vs
State of Gujarath and others (2012) 13 SCC 375 and also in
Kumar Exports Vs Sharma Carpets (2009) 2 SCC 513 and
also in KN Beena Vs Muniyappan and another (2001) 8 SCC
458 and also in Vijay Vs Laxman (2013) 3 SCC 86 the Court 28 CC NI: 7285/2022 revisited the settled Law that the onus of proving that the cheque issued was not in discharge of any debt or liability is on the accused drawer of the cheque. It is obligatory on the Courts to raise the presumption provided U/Sec. 139 NI Act and the said presumption is rebuttable one and it can be rebutted by the accused by proving the contrary by leading cogent evidence that there was no debt or liability.
41.Further in Crl. Appeal No. 230–231/2019 between Bir
Singh Vs Mukesh Kumar the Hon’ble Apex Court has observed as follows:
If a signed blank cheque is voluntarily presented to a payee, towards some payment the payee may fill up the amount and other particulars. This in itself would not invalid the said cheque. The cheque a meaningful reading of the provision of NI
Act in particular Sec. 20, Sec.87 and Sec.139 makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduced evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled by any person other than the drawer. If the cheque is duly signed by the drawer and if the cheque is 29 CC NI: 7285/2022 otherwise valid the penal provision of Sec. 138 NI Act would be attract.
42.The Hon’ble Apex Court in Dashrath Bhai Trikambhai
Patel Vs Hitesh Mahender Bhai Patel and another in Crl.
Appeal no 1497/2022 alsoin another authority reported in Crl.
Appeal no. 1545/2019 between Uttam Ram Vs Devindar
Singh Hudan and others in para (21) of the authority their
Lord’ship observed that there is the mandate of presumption of consideration in terms of the provisions of the Act. The onus shifts to the accused on proof of issuance of cheque to rebut the presumption that the cheque was issued not for the discharge of any debt or liability in terms of Sec. 138 NI Act.
43.In another judgment reported in AIR 2008 Supreme Court
1325 between Krishna Janardhan Bhat Vs Dattatreya G.
Hegde wherein it was held that in the case of presumption of rebuttable the duty of Court is to see presumption of innocence as human rights and doctrine of reverse burden introduced by
Section 139 NI Act should be delicately balanced it largely depends on factual matrix of each case.
30 CC NI: 7285/2022
44.The Hon’ble High Court of Telangana in a case held in between Omprakash v/s L.Sunitha reported in 2016(1) ALD (Crl) 81 in which their Lord’ship held that under Sec. 139 reverse burden will be on the accused to establish that the cheque was not issued in discharge of any legally enforceable debt or no such debt existed.
45. In G Ashok Kumar Goud Vs T Anjali Bai and another 2012 (2) ALD Crl. 126 AP.
It was held that presumption U/Sec. 139 NI Act rebuttable by the accused need not be by adducing any positive evidence it is eloped on his part to show circumstances in his favor from material available on record. Standard of proof is that of preponderance of probabilities.
46.Similarly in Vijay Vs Lakshman and another (2013) (3)
Supreme Court Cases 86 wherein,
It was held that presumption in favor of holder of cheque as to consideration having been paid by holder and cheque having been received for discharge of debt owed to holder and the scope of rebuttable presumption.
31 CC NI: 7285/2022
47.Since to prove the ingredients of Sec. 138 NI Act all the ingredients are to be proved cumulatively and even one ingredient not proved then the entire case will be defeated.
Hon’ble Apex Court in Rangappa Vs Sri Mohan (2010) 11 SCC
441 and also in Bharath Barrel and Durms Mfg. Co. Vs Amin
Chand Pyarelal 1999 (3) SCC 35 it was observed by their
Lord’ship as follows:
It has been held time and again the said presumption
U/Sec. 139 NI Act is a rebuttable one and only effect is to shift the initial burden of proof on the accused it is also well settled that in order to rebut the presumption and shift back the burden of proof on the complainant, the accused is only required to raise a probable defense and he cannot be expected to discharge on unduly high standard of proof i.e., standard of proof for rebutting the presumption raised U/Sec. 139 NI Act is “preponderance of probabilities”. It is also well settled that the accused can rebut the said presumption either directly or by bringing on record preponderance of probabilities by reference to the circumstances upon which he relies. The accused, for this purpose is also entitled under law to rely upon all the evidence lead in the case including that of the complainant as well.
32 CC NI: 7285/2022
48.Similarly in another case reported in AIR 1961 SC 1316 between Kundan Lal Rallaram Vs. Custodian Evacuee
Property, Bombay wherein, in para (5) of the authority the
Hon’ble Apex Court held as :
The Sec. 118 NI Act is a special rule of evidence the presumption is one of Law and there under a Court shall presume that the negotiable instrument or the endorsement was made or endorsed for consideration it was discussed by their
Lord’ship that the burden of proof has two meanings one the burden of proof as a matter of law and pleading and the other the burden of establishing a case. The former is fixed as a question of law on the basis of the pleadings and is unchanged during the entire trial, whereas the later is not constant but shifts as soon as party adduces sufficient evidence to raise a presumption in his favor. The evidence required to shift the burden need not necessarily be direct evidence, i.e., oral or documentary evidence or admissions made by opposite party, it may comprise circumstantial evidence or presumption of law or fact.
In para (7) their lord’ship also discussed the authority of
Rameshwar Singh Vs Bajit Lal AIR 1929 PC 95 and also
Bishambar Das Vs Ismail AIR 1933 Lahore 1029 and accepted 33 CC NI: 7285/2022 the correctness of the observation that “not merely can the Court base it’s conclusion on the effect of the evidence taken as a whole but it may also draw adverse inference against a party who being in a position to adduce better evidence deliberately abstain from doing so.
49.In view of the authorities cited above let me see the evidence of PW1 again since PW1 clearly stated that the accused fell due of cheque amount and they admits their liability under Ex.P3 and the accused A2 voluntarily issued the cheque under Ex.P1 which was returned back due to exceeds arrangement reasons and if we apply the above said authority it can be safely said that on the side of complainant he succeeded in proving the legal enforceable debt on the accused by placing the affidavit of the confirmation of the loan given by the accused and the original cheque signed by the accused no.2 which was dishonored and those facts are not rebutted by accused U/Sec.
139 NI Act.
50. In this case the complainant rightly proved his case by examining himself as PW1 and the documents filed under Ex.P1 to Ex.P9 prima facie proves his burden U/Sec. 118 of N.I.Act whereas the accused no where discharged their burden and the 34 CC NI: 7285/2022 presumption raised by the complainant is not rebutted by the accused U/Sec. 139 of N.I.Act.
51.In another case reported in (2007) 5 Supreme Court
Cases 264 held in between Kamala S Vs Vidyadaran MJ and another wherein their Lord’ship discussed Sec. 139, 118 (c) and 138 and presumption U/Sec.139 and 118 (a) is rebuttable whether the said presumption is rebutted or not would depend upon facts and circumstances of each case and the burden is on the accused to rebut the presumption and it can be discharged by preponderance of probabilities court can draw inference from the material brought on record as well as circumstances relied upon by the accused.
52.The Hon’ble Apex Court inBasalingappa V/s
Mudibasappa (2019) 5 SCC 418 their lord'ship held that to rebut the presumption and prove to the contrary, it is open to the accused to raise a probable defense, wherein the existence of a legally enforceable debt or liability can be contested. The words ‘until the contrary is proved’ occurring in Sec. 139 do not mean that the accused must necessarily prove the negative that the instrument is not issued in discharge of any debt/ liability, but the accused has two options. The first option is to prove that the 35 CC NI: 7285/2022 debt/ liability does not exist- and conclusively establish with certainty that the cheque was not issued in discharge of a debt/liability. The second option is to prove the non-existence of debt/ liability by a preponderance of probabilities by referring to the circumstances of the case. But the accused did not followed that observation in this case since they failed to prove that they did not issued that cheque in partial payment of the debt and there was no liability on them and surprisingly A2 even did not denied the signature and the writings on that Ex.P1 cheque.
53. The Hon’ble Apex Court in another judgment reported in
AIR 2008 Supreme Court 1325 between Krishna Janardhan
Bhat Vs Dattatreya G Hegde wherein it was held that in the presumption of rebuttable the duty of Court is to see the presumption of innocence as human rights and doctrine of reverse burden introduced by Section 139 NI Act should be delicately balanced it largely depends on factual matrix of each case. In this case the accused failed to rebut the presumption
U/Sec. 139 of N.I. Act and the reverse burden was not satisfied by the accused since the complainant successfully proved the presumption U/Sec. 118 of N.I. Act.
36 CC NI: 7285/2022
54.In the authority of Hon’ble Supreme Court held in between
Vijay V/s Laxman and another reported in 2014 (1) ALT (CRL)
(SC) 342 (D.B.) where in it was held by their Lord’ship that presumptions under Sections 118 (a) and 139 of N.I. Act are rebuttable in nature and the standard of proof required for such rebuttal is preponderance of probabilities and not proof beyond reasonable doubt. In view of that authority if we compare the evidence held in this case on the complainant side he succeeded in proving the initial presumption that the accused had issued that cheque in discharge of their liability and that probable evidence is not disproved by the accused who simply by giving some suggestion to the complainant which were denied by him nothing was placed by the accused to reverse that presumption as such that authority is very much supporting the case of the complainant.
55.In Roshan Lal V/s Kishori Lal AIR Online 2022 HP 176 it was held that when there is no denial of the accused regarding the issuance of the cheque and signature there upon it can be said that the complainant proved that the cheque was issued by the accused in their favor for discharge of lawful liability but the same was returned on account of insufficient funds presumption
U/Sec.118 and 139 existed in favor of complainant.
37 CC NI: 7285/2022
56. Similarly in a case held between G Ashok Kumar Goud
Vs T Anjali Bai and another reported in 2012 (2) ALD (Crl.)
126 AP. It was held that presumption U/Sec.139 NI Act rebuttable by the accused need not be by adducing any positive evidence it is eloped on his part to show circumstances in his favor from material available on record. Standard of proof is that of preponderance of probabilities.
57.Similarly in another case held in between Vijay Vs
Lakshman and another reported in (2013) (3) Supreme Court
Cases 86 It was held that presumption in favor of holder of cheque as to consideration having been paid by holder and cheque having been received for discharge of debt owed to holder and the scope of rebuttable presumption.
58. The defense evidence of the accused to rebut the presumption raised by the complainant is as follows:
In this case the accused has not examined themselves in their defense and they did not got examined any other defense witnesses but took the defense in the cross of PW1 in which they took the defense that the complainant had misused the security cheques and filed this false case against them and even that 38 CC NI: 7285/2022 defense was not proved by them in their rebuttal evidence U/Sec.
139 of N.I. Act.
59. Amalgamation of Andhra Bank into Union Bank of India:
It is one of the defense of the accused that the credibility of the cheque return memo is doubtful in this case since Ex.P2 cheque return memo was issued by Andhra Bank on 17/09/2020 and as on that day the said bank was not in existence since it was amalgamated under Union Bank.
60.On search of the official data on this point the central government in exercise of the powers conferred by Sec. 9 of the
Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1970/1980 after consultation with the Reserve Bank of India has notified the Amalgamation of Andhra Bank and Corporation
Bank into Union Bank of India Scheme 2020 vide gazette notification dated March 4, 2020 and it shall come into force on
April 1, 2020. The old cheque books from Andhra Bank and
Corporation banks are valid only till June 30, 2021. As per RBI directives all the old cheque books issued by branches of the erst while Andhra Bank and Corporation Bank would not be effective in usage from July,1 2021.
39 CC NI: 7285/2022
61.In a recent authority it was held that dishonored cheques from a bank that has undergone a merger cannot attract liability
U/Sec. 138 of N.I. Act. But at the same time a cheque return memo issued by a merged bank is valid if the procedural requirements of N.I. Act are met. The focus should be on the account’s operational status and compliance with statutory provisions.
62.So after merger of Andhra Bank into Union Bank of India on
July, 1, 2021 any cheque presented in the Union Bank of India is returned with cheque return memo in the name of Andhra Bank is valid till 01/07/2021. Since in this case the cheque return memo was issued in the name of Andhra Bank under Ex.P2 is valid since it was issued on 17/09/2020 and it will be valid till 01/07/2021. So the defense of the accused that the cheque return memo under Ex.P2 is not valid is incorrect and on the other hand it is prima facie evidence U/Sec. 146 of N.I. Act.
63. The accused took another defense that since the complainant failed to prove his financial capacity to lend that amount to the accused and and moreover it was admitted that at the time of alleged money transaction the annual turn over of the accused company was about Rs. 400 crores then what is the 40 CC NI: 7285/2022 necessity of the accused to take a meager loan from the complainant is not clarified and moreover the complainant failed to disclosed the sources of securing that amount and he also did not shown that amount in IT returns as such that amount is a unaccountable amount and it cannot be recovered under N.I. Act but in a recent authority of Hon’ble Apex Court between Naveen
Kalyan v/s Rameesh Upreti in para 11their Lord'ship observed that the contravention of Sec.269 SS though visited with stiff penalty on the person taking the loan or deposit nevertheless, the rigor of Sec. 271 D is whittled down by Section 273 B, on proof of bonafides. It cannot therefore be said that the transaction could be declared illegal, void, and unenforceable.
From the reading of observations made in that judgment it is evidence that violation of Sec. 269 SS IT Act in no way comes in the way of recovery of debt given in it’s contravention.
64.It is one of the defense of the accused that during March, 2020 there was national lock down for covid 19 how can it be believed that Ex.P3 was prepared at Hyderabad in the covid period. It is to be noted here that India under complete lock down for 21 days starting from March 25,2020. As such the preparation of Ex.P3 which is prepared on 14/07/2020 and at that time no such covid restrictions in Hyderabad. Further more if it is 41 CC NI: 7285/2022 believed that there was total lockdown at that time then how the accused no.2 himself has purchased that Rs. 100 NJ stamp from the sub-registrar office SRO Lankelapalem on 13-07-2020. So this defense of the accused is having no force in it.
65.It is another defense of the accused that the contents of
Ex.P3 the affidavit are not proved by the complainant as such issuing of the cheque in view of Ex.P3 is not believable. It is also contended that as per the contents of Ex.P3 the claimed amount has to be returned by 10/09/2020 whereas the affidavit was prepared on 14/07/2020 and the date of the cheque is 15/09/2020 as such the debt is time barred and it can not be claimed under N.I. Act.
66.On this point the Hon'ble Apex Court in S. Natarajan V/s
Sama Dharman &Anr (2021) 6 SCC 413 wherein it was held that with regard to the payment of time barred debt, there must be a distinct promise to pay either whole or in part the debt; that the promise must be in writing either signed by the person concerned or by his duly appointed agent. Their Lord'ship then observed that unless a specific direction in the form of novation is created with regard to the payment of the time-barred debt,
Section 25(3) of the Contract Act cannot be invoked. Their 42 CC NI: 7285/2022
Lord'ship then went into the question whether issuance of cheque itself is a promise to pay time barred debt and referred to
Sec. 4 and 6 of NI Act and after referring to certain judgments on the question of legally enforceable debt, the Hon'ble Court stated that for the purpose of invoking Sec. 138 r/w 142 of NI Act the cheque in question must be issued in respect of legally enforceable debt or other liability.
67.The Hon'ble Apex Court in K. Hymavathi V/s State of A.P.
and Anr in Crl. Appeal No. 2743 of 2023 discussed the above judgment along with other judgment and held that the provision would indicate that in respect of a promissory note payable at a fixed time, the period of limitation being three years would begin to run when the fixed time expires. Therefore in the instant case the time would begin to run from 10/09/2020 and the period of limitation would expire at the end of three years thereto ie., 10/09/2023. In that light, the cheque issued for Rs. 25,00,000/- which is the subject matter herein is dated 15/09/2020 which is well within the period of limitation.
68.By applying the said authorities to this case on hand on the perusal of the contents of the Affidavit which is nothing but a pronote since the contents of that affidavit is fully fitting in the 43 CC NI: 7285/2022 definition of pronote defined U/Sec. 4 of N.I. Act in which it was mentioned that the amount should be paid on of before 10/09/2020. As per the Article 34 of Limitation Act the period of limitation for promissory notes payable at a fixed time is three years when the fixed time expires. So the accused has to pay the amount within 10/09/2020 for the amount covered under the
Ex.P3 and they have to pay the amounts on or before 10/09/2020 but they failed to pay that amount and issued the cheque pertaining to the year 2020 as such that cheque is valid cheque since the fresh limitation starts from the date of acknowledgment and as per Sec.18 of Limitation Act an acknowledgment of liability is made in writing signed by the party a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. Since Ex.P3 the acknowledgment was signed by the accused on14/07/2020 and the subject cheque was issued in the year 2020 as such the said cheque is a valid cheque and does not suffers from any bar of limitation as alleged by the accused.
69.The accused has relied on the authority of the Hon'ble
Apex Court in Crl. Appeal No. 3257 of 2024 held in between
Sri Dattratreya V/s Sharanappa ( Para 21 to 24 and 26, 27and
29) wherein it was held by their lord'ship that the appellant was 44 CC NI: 7285/2022 not able to plead even a valid existence of a legally recoverable debt as the very issuance of cheque is dubious based on the fallacies and contradictions in the evidence adduced by the parties. Furthermore, the fact that the respondent has inscribed his signature on the agreement drawn on a white paper and not on a stamp paper as presented by the appellant creates another set of doubts in the case. Since the accused has been able to cast a shadow of doubt on the case presented by the appellant he has therefore successfully rebutted the presumption stipulated by Sec. 139 of N.I. Act. But with great respect to the said authority which is more supporting the case of the complainant and not the defense of the accused since in this case except some small contradictions which do not throws any doubt of the case of the complainant he fully corroborates his evidence and successfully proved his case to raise presumption U/Sec. 118 of
N.I. Act which was not rebutted by the accused U/Sec. 139 of
N.I. Act.
70.The another authority relied by the accused is held in between Rajaram V/s Maruthachalam reported in 2023 Live
Law (SC) 46 where in the authority of Mudibasappa and summarized the principles that once the execution of cheque is admitted U/Sec.139 of Act mandates a presumption that the 45 CC NI: 7285/2022 cheque was for the discharge of any debt or other liability and it is a rebuttable presumption and the onus is on the accused to raise the probable defense. The standard of proof for rebutting the presumption is that of preponderance of probabilities. In spite of citing this authority the defense of the accused in the cross examination do not inspires the confidence of this court and it is safely said that the accused miserably failed to rebut the presumption U/Sec. 139 of N.I. Act.
71. So the suggestion given to PW1 which are denied by PW1 are not rescuing the accused from their liability in this case. So on comparing the evidence held by both sides the documents filed by the complainant under Ex.P1 to Ex.P9 are having more weight and since no documents are filed by the accused in their defense as such it can be safely said that the accused failed to rebut the evidence U/Sec. 139 of the N.I. Act.
72.Since the admission of the signatures of the accused on the cheque is prima facie proved as such principles of law laid down by the Hon’ble Apex Court are aptly applicable to the case on hand, since in this case also even though the accused has admitted cheque Ex.P1 belongs to their account and signature on that cheque in question are that of the signature of A2 but has 46 CC NI: 7285/2022 not produced any cogent and con vincible evidence by way of leading evidence to establish their defense set up by them. The accused has failed to explain as to how their cheques has come to the possession of the complainant this would also give rise to an adverse inference against them. This preposition of law finds support from the decisions of Hon’ble Apex Court in Crl. A.No.
664 of 2012 held in between M. Abbas Haji v/s T.M.
Chennakeshava in which it was held that the accused has to explain how the cheque entered into the hands of the complainant. Hence in the present case also the accused has failed to explain how the cheques in question were entered into the hands of the complainant since the accused failed to prove their defense.
73. Vicarious liability of the accused A3 and A4 in this case:
The main contention of the learned defense counsel that the complainant failed to prove that the accused A3 and A4 are the directors of A1 and they are active partners in the company and they are vicariously liable for the issuance of the cheque as such the accused A3 and A4 are no where liable to face the trial of this case since the entire evidence adduced by the complainant shows the involvement of the accused A2 only as 47 CC NI: 7285/2022 such there is no role played by the accused A3 and A4 herein who are the sleeping partner in the company which was actively run by A2 and the cheque contains the signatures of A2 only and there is no active role payed by the accused A3 and A4 in this case and they are falsely implicated by the complainant with ill intention to harass the accused.
74.In a recent case held between Dilip Hariramani V/s Bank of Baroda, 2022 SCC Online SC 579 Hon’ble Apex Court had discussed the vicarious liability of a partner in NI Act case as follows:
While Sec. 141 of NI Act extends vicarious criminal liability to the officers associated with the company or firm when of the twin requirements of Sec. 141 NI Act has been satisfied, which person(s) then, by deeming fiction, is made vicariously liable and punished. Such vicarious liability arises only when the company or firm commits the offense as the primary offender.
The Court explained that the provisions of Sec. 141 NI Act impose vicarious liability by deeming fiction which presupposes and requires the commission of the offense by the company or firm. Therefore, unless the company or firm has committed the offense as a principal accused, the persons mentioned in sub- 48 CC NI: 7285/2022 section (1) or (2) would not be liable and convicted as vicariously liable.
75.Sub Section (2) to Sec. 141 of the NI Act does not state that the persons enumerated, which can include an officer of the company, can be prosecuted and punished merely because of their status or position as a director, manager, secretary or any other officer, unless the offense in question was committed with their consent or connivance or is attributable to any neglect on their part. The onus under sub Section (2) to Sec. 141 of the NI
Act is on the prosecution and not on the persons being prosecuted.
76.It was further observed that the Partnership Act, 1932 creates civil liability, further, the guarantor’s liability under the
Contract Act is a civil liability. The partner may have civil liability and may also be liable under The Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 and the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002. However, vicarious liability in the criminal law in terms of Sec. 141 of NI Act cannot be fastened because of civil liability. Vicarious liability under sub Sec. (1) to Sec. 141 of the NI Act can be pinned when the person is in overall control of the day to day business of the 49 CC NI: 7285/2022 company or firm. Vicarious liability under subsection (2) to Sec.
141 can arise because of the director, manager, secretary, or other officer’s personal conduct, functional or transnational role, notwithstanding that the person was not in overall control of the day to day business of the company when the offense was committed. Vicarious liability under sub Sec. (2) is attracted when the offense is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company.
77.In case of partners arrayed as accused the complainant must prove with cogent evidence that all the partners are in full control of all the day to day business or affairs of the company and the meaning of the person in charge is clarified by the
Hon'ble Apex Court in Katta Sujata V/s Fertilizers Chem
Travencore Ltd. (2002) 7 SCC 655 wherein it was held by their lord'ship as follows:
For the purpose of Sec.138, the expression 'person-in- charge' should mean that such a person should be in control of all the day to day business or affairs of the company or the firm as the case may be. If the complaint does not attribute any act done on his own or with connivance of some other person of the company or firm which finally lead to filling of complaint, then 50 CC NI: 7285/2022 such person cannot be prosecuted.
78.In view of the above observations and their application to this case since in this case PW1 admitted that the accused A3 and A4 had not issued any cheque which had been dishonored in their personal capacity or otherwise as a directors. Hence in the absence of any evidence led by the complainant to show and established that the accused A3 and A4 were in charge of and responsible for the conduct of the affairs of the A1 company as such they cannot be convicted merely because they are the directors of the company which had taken the loan. In view of the above observations of the Hon'ble Apex Court and since in this case the evidence of PW1 is silent about the control of accused A3 and A4 in control of all the day to day business of the firm of A1 as such it can be safely said that the case against the accused A3 and A4 is not proved by the complainant.
Whereas the A2 is the signatory of the cheque and the complainant is the holder in due course and this case has to be decided in between them only.
79. In view of the aforesaid discussion, in my considered opinion, the complainant has been able to prove all the facts 51 CC NI: 7285/2022 required to be proved for the conviction of the accused A2 representing A1 for the offense U/Sec.138 of the NI Act beyond all reasonable doubts and not only on the basis of presumptions arising in his favor in terms of Section 118 and 139 of the NI Act, but also, on the basis of controverted oral and documentary evidence of the complainant and the accused has failed to rebut the presumptions arising in favor of the complainant and to controvert the evidence of the complainant even on the touchstone of preponderance of probabilities.
80. So the evidence of PW1 clubbed with Ex.P1 to Ex.P9 prima facie clearly proving all the ingredients of Sec. 138 NI Act and the accused failed to shake the evidence of PW1 as such the case against the accused A2 representing A1 under Section 138 NI
Act is proved by the complainant beyond all reasonable doubts and the accused A2 representing A1 is liable to pay the complainant the due amount covered under the cheque Ex.P1 towards his legal liability.
81. In the result, the Accused No. 3 and A4 are found not guilty for the offense U/Sec. 138 of N.I. Act accordingly they are acquitted U/Sec.255(1) Cr.P.C.
52 CC NI: 7285/2022
But the Accused A2 representing the Accused A1 is found guilty for the offense under Section 138 NI Act accordingly he is convicted U/Sec. 255(2) Cr.P.C.
82.Heard on the quantum of sentenced to be imposed on the accused and since this is not a fit case to apply PO Act but on seeing the length of the trial and also on seeing the circumstances of the case the accused deserves a lenient view in conviction.
83.Hon’ble Apex Court in a decision reported in (2015) 17
SCC 368 between Pukraj Vs D Parasmal observed that having regard to the length of trial it is necessary to award reasonable interest on the cheque amount.
84.In Harikishan Vs Sukhbir Singh (1988) 4 SCC 551 The
Hon’ble Apex Court held that the Court must exercise the power
and discretion to compensate the injury suffered by the complainant.
85. Similarly in R Vijayan Vs Baby AIR 2012 SC 528 and also in Suganti Suresh Kumar Vs. Jagadeeshan (2002) 2 SCC 420 the Hon’ble Apex Court held that the Court may consider granting of installment or time to pay such amount.
53 CC NI: 7285/2022
86.In K A Abbas Vs Sabu Joseph (2010) 6 SCC 230 and in R
Mohan Vs A K Vijay Kumar (2012) 8 SCC 721 the Hon’ble
Apex Court held that the Court may also consider to impose in default sentence on the accused in case of failure to pay compensation.
87.Considering all these aspects this Court proceed to pass the following order and acting under Section 255 (2) of Cr.P.C the accused A2 representing the accused A1 is hereby convicted for the offense U/Sec. 138 NI Act and he is sentenced to undergo Rigorous Imprisonment for period of Six months
and to pay a compensation of Rs.33,81,000/- (Rupees Thirty
Three Lakhs Eighty One Thousand Only) under Section
357(3) Cr.P.C. and in default of payment of compensation,
the accused shall suffer Simple Imprisonment for a period of
Two Months and there shall be no order as to payment of
fine by the accused.
88.Since there is no evidence to show that any subsequent payments was made by the accused to the complainant, or the complainant has realized the dues by filling a civil suit or otherwise as such acting under Sec.357(1)(b) of Cr.P.C. it is 54 CC NI: 7285/2022
ordered that Rs.33,81,000/- (Rupees Thirty Three Lakhs
Eighty One Thousand Only) shall be paid to the complainant
as compensation. The accused A2 representing A1 shall
pay the above compensation in a single installment within
one month from today.
The bail bonds of the accused canceled after expiry of Six months. The office is directed to supply the copy of the judgment to the accused on free of cost.
Directly typed to my dictation by the typist of this Court, corrected,and pronounced by me in open Court on this the 28 th day of October, 2024.
sd/-
VI JUDICIAL MAGISTRATE OF FIRST CLASS,
HYDERABAD.
55 CC NI: 7285/2022
APPENDIX OF EVIDENCE;
WITNESSES EXAMINED FOR COMPLAINANT;
PW1- T. Sreedhar.
FOR DEFENCE : Nil
EXHIBITS MARKED FOR COMPLAINANT:
Ex.P1-is the original A/c Payee cheque bearing no. 171349
dated 15/09/2020 for Rs.25,00,000/- drawn on Union
Bank of India, Vishakapatnam branch.
Ex.P2-is the cheque return memo issued by Andhra bank, MLA Colony,Hyderabad dated 17/09/2020.
Ex.P3-is the affidavit dated 14/07/2020.
Ex.P4- is the Office copy of legal notice dated 14/10/2020.
Ex.P5- are the postal receipts (4 in number) dated 15/10/2020.
Ex.P6- are the three postal acknowledgment cards.
Ex.P7-is the authorization letter issued by Venkat Ventures.
Ex.P8- is the certificate of registration of conversion.
Ex.P9- is the certificate issued U/Sec. 65 B of Indian Evidence Act.
EXHIBITS MARKED FOR DEFENCE: Nil.
sd/-
VI JUDICIAL MAGISTRATE OF FIRST CLASS,
HYDERABAD.
56 CC NI: 7285/2022
The following judgments are followed in this judgment :
1.The Hon’ble Apex Court in Rajesh Jain V/s Ajay Singh reported in 2023 SCC OnLine SC 1275 decided on 09-10-2023
2. Kusum ingots and Alloys limited and others Vs. K Pennar Peter son Securities Ltd., and others (2000) 2 SCC 745.
3.M/s Dalmia Cement (Bharat) Ltd Vs M/s Galaxy traders and agencies and others. AIR 2001 SC 676.
4. ICDS Ltd., Vs Beena Shabbir and another reported in AIR 2002 SC 3014.
5. M.S Narayana Menon @ Mani Vs State of Kerala reported in AIR 2006
SC 3366.
6. Sampally Satyanarayana Rao Vs Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458.
7. T.P.Murugan(Dead) through LRS Vs Bojan (2018)8 SCC 469.
8.Shree Daneshwari Traders Vs Sanjay Jain (2019) 16 SCC 83.
9. Supreme Court between Sunil Todi and othrs Vs State of Gujarath and others Crl. Appeal no. 1446 and 1447 of 2021.
10. Dashrath Bhai Trikambhai Patel V/s Hitesh Mahender Bhai Patel and another Crl. Appeal no 1497/2022
11. Crl. Appeal no. 1545/2019 between Uttam Ram V/s Devindar Singh Hudan.
12. K Bhaskaran Vs Shankaran Vaidhyan Balan AIR 1999 SC 3762.
13.In KR Indira Vs Dr G Adinarayana AIR 2003 SC 4689.
14. CC Alavi Haji Vs Pala Pattey Mohammed and another reported in (2007) 6 SCC 555.
15. Hiten P Dalal Vs Bartindranath Benerjee (2001) 6 SCC 16
16.Laxmi Dye – Chem Vs State of Gujarath and others (2012) 13 SCC 375.
17.Kumar Exports Vs Sharma Carpets (2009) 2 SCC 513
18.KN Beena Vs Muniyappan and another (2001) 8 SCC 458.
19.Vijay Vs Laxman (2013) 3 SCC 86.
20. Crl. Appeal No. 230 – 231/2019 between Bir Singh Vs Mukesh Kumar.
21. Crl. Appeal No. 1630 and 1631 of 2011 between Pinak Bharath & 57 CC NI: 7285/2022
Company v/s Anil Ramarao Naik.
22.Rangappa Vs Sri Mohan (2010) 11 SCC 441
23.Bharath Barrel and Durms Mfg. Co. Vs Amin Chand Pyarelal 1999 (3) SCC 35.
24.Kundan Lal Rallaram Vs. Custodian Evacuee Property, Bombay.
25.Rameshwar Singh Vs Bajit Lal AIR 1929 PC 95
26.Bishambar Das Vs Ismail AIR 1933 Lahore 1029
27. Basalingappa V/s Mudibasappa (2019) 5 SCC 418.
28.AIR 2008 Supreme Court 1325 between Krishna Janardhan Bhat Vs Dattatreya G Hegde.
29. In G Ashok Kumar Goud Vs T Anjali Bai and another 2012 (2) ALD
Crl. 126 AP.
30.Vijay Vs Lakshman and another (2013) (3) Supreme Court Cases 86.
31. 2017 (2) ALD Crl. 471 between R Chennakeshawa rao Vs P Lakshmi Narasaiah and another.
32. (2015) 8 SCC 378 between T. Vasanth Kumar v/s Vijayakumari.
33.(2015) 17 SCC 368 Pukraj Vs D Parasmal.
34.Harikishan Vs Sukhbir Singh (1988) 4 SCC 551.
35.R Vijayan Vs Baby AIR 2012 SC 528.
36. Suganti Suresh Kumar Vs. Jagadeeshan (2002) 2 SCC 420. .
37. K A Abbas Vs Sabu Joseph (2010) 6 SCC 230.
38.Crl. Appeal No. 3257 of 2024 held in between Sri DattratreyaV/s Sharanappa.
39.Rajaram V/s Maruthachalam reported in2023LiveLaw (SC)46.
40.Dilip Hariramani V/s Bank of Baroda, 2022 SCC Online579.
41.Katta Sujata V/s Fertilizers Chem Travencore Ltd.(2002) 7 SCC 655.
sd/-
VI JUDICIAL MAGISTRATE OF FIRST CLASS,
HYDERABAD.