In the Court of Sh. [ENTITY]: Senior Civil Judgecum Metropolitan Magistrate of New Delhi District at Patiala House Courts, New Delhi [CASE NUMBER] Unique ID No. 02403R0200712005 In the matter of: [ENTITY] Complainant VERSUS 1. M/s. Maxcare Securities Systems Pvt. Ltd. No. 20 (Old No.15), Nathamuni Street, Shenoy Nagar, Chennai 600 030. 2. Mr. [ENTITY], Managing Director, M/s. Maxcare Securities Systems Pvt. Ltd. No. 20 (Old No.15), Nathamuni Street, Shenoy Nagar, Chennai 600 030. Accused Date of Institution : 02.05.2013 Date of Arguments: 25.04.2013 Date of Judgment : 02.05.2013 [CASE NUMBER] Page no. 1 of 13 COMPLAINT UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881 JUDGMENT :
This complaint under [SECTION] of the [ACT] (in short the Act) is made by the complainant company Media Video Ltd. against accused [ENTITY], Managing Director of M/s. Maxcare Securities Systems Pvt. Ltd. It is averred that the complainant is a company incorporated under the [ACT] and the present complaint is instituted through its authorised representative Mr. [ENTITY] who was duly authorised vide resolution dated 29.03.2005; that the complainant is engaged in the business of manufacture and sale of electronics consumer goods and the accused is its distributor in Chennai. It is further averred that the accused persons in the ordinary course of business placed various orders from time to time and the electronic goods were supplied to them. However, the accused were not prompting payment of the outstanding of the complainant and Rs. 1,49,057/ was payable towards them at the time of filing the present complaint. It is further stated in the complaint that towards the part discharge of the contractual liability / debt, accused no.2 who is Managing Director of accused no.1 has issued two cheques bearing no. 536552 dated 11.02.2005 amounting to Rs. 50,000/ and cheque bearing no. 536374 dated 11.02.2005 for Rs.
[CASE NUMBER] Page no. 2 of 13 1,00,000/ drawn on Punjab National Bank, Anna Salai, Chennai; that the complainant presented the cheques in question within the period of their validity with its banker for encashment but the same were returned unpaid for the reason "stop payment" vide memo dated 23.02.2005. 2 It is further submitted that the real reason for the dishonour of the cheques were insufficient of funds in the account of the accused; that the complainant issued a legal notice dated 18.03.2005 by a registered AD post as well as UPC but the accused fail to make the payment of the cheques in question within the stipulated period of 15 days. It is further stated in the complaint that the accused be summoned, tried and punished for having committed offence punishable under [SECTION] of the Act in respect of the cheques in question.
3 The present complaint was filed on 2.5.2005. Vide order dated 2.5.2005 after considering the complainant under [SECTION] of the [ACT] ([ACT]), affidavit of the complainant and the documents filed by the complainant, my learned predecessor had passed an order under [SECTION] of [ACT] summoned the accused to face accusation under [SECTION] of the Act 26 in respect of cheques in question.
4 On appearance accused no. 2 was admitted to bail. On 03.08.2009 a notice of accusation under [SECTION] of [ACT] was framed whereby the accused 2 being the MD of accused no. 1 was charged with the [CASE NUMBER] Page no. 3 of 13 commission of offence punishable under [SECTION] of the Act in respect of cheques in question. The notice of accusation was read over and explained to the accused to which he did not plead guilty and claimed trial. 5 In support of its case the complainant has examined CW1 Sh [ENTITY], who during his examination in chief tendered his affidavit Ex. C1 alongwith documents Ex. CW1/1 to Ex. CW1/10. CW1 was cross examined by counsel for the accused and thereafter, complainant evidence was closed and the accused was examined under [SECTION] of [ACT]
6 The accused in his examination under [SECTION] of [ACT] stated that the accused no.1 and he himself did not owe any liability to the complainant against both the cheques which were given as security. Service of legal notice is not denied. The statement of account Ex. CW1/10 was disputed by the accused. Stop payment instructions were issued as the accused no. 1 did not owe any liability to the complainant against the cheques in question. It is further stated by the accused no. 2 in his statement u/[SECTION] [ACT] that the complainant company had shut down its Chennai Branch in January, 2005 and the complainant company did not repair or replace the defective goods returned to the complainant and the same had resulted loss to the accused company to the tune of Rs.1,17,360/. Various letters were written by accused no. 2 to the complainant company in this regard, however, there was no response from the side of the complainant [CASE NUMBER] Page no. 4 of 13 company. The complainant had not given credit note of Rs.1,00,000/ as agreed in the meeting held on 26.10.2004. Accused no. 2 has also relied upon twelve documents filed during his statement u/[SECTION] [ACT] However, no defence evidence was led by the accused.
7 I have heard counsel for the parties and gone through the material on record.
8 Learned counsel for the complainant has argued that Rs. 1,49,057/ was outstanding against the accused towards the supply of electronic products and in the part discharge of the liability/debt, the accused no.2 who is Managing Director of accused no.1 has issued two cheques bearing no. 536552 dated 11.02.2005 amounting to Rs. 50,000/ and cheque bearing no. 536374 dated 11.02.2005 for Rs. 1,00,000/ drawn on Punjab National Bank, Anna Salai, Chennai and both these cheques when presented for encashment were returned unpaid for the reason "stop payment" vide memo dated 23.02.2005 but the actual reason for dishonour of the cheques is insufficient funds but the accused managed to get the cheques returned with remarks "stop payment"; that the accused also failed to make the payment of the cheques in question in spite of service of the legal notice dated 18.03.2005. It is further stated in the complaint that the accused be summoned, tried and punished for having committed offence punishable under [SECTION] of the Act in respect of the cheques in question.
[CASE NUMBER] Page no. 5 of 13 9 On the other hand learned counsel for the accused has argued
that the accused did not owe any liability to the complainant against both the cheques which were given as security and as such the instructions for stop payment were issued. It is further argued that the complainant company had shut down its Chennai Branch in January, 2005 and the complainant company did not repair or replace the defective goods returned to the complainant and this conduct of the complainant company had resulted loss to the accused company to the tune of Rs.1,17,360/. In support of his contention learned counsel for the accused has relied upon the judgment reported as [PRECEDENT].
10 I have given my thoughtful consideration to the submissions made on behalf of the parties.
11 [SECTION] of the Act which pertains to dishonour of cheque for insufficiency, etc., of funds in the account, at the relevant time, read as follows:
138. Dishonour of cheque for insufficiency, etc., of funds in the account Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be [CASE NUMBER] 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 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 purposes of this section, "debt or other liability"
means a legally enforceable debt or other liability.
12 In the judgment reported as [PRECEDENT] His Lordship after referring the decision in the case [PRECEDENT] referred the ingredients of the offence under [SECTION]. Paragraph 29 reads thus:
"29. [SECTION] of the Act has three ingredients viz.:
(i) that there is a legally enforceable debt;
(ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debut; and
(iii) that the cheque so issued had been returned due to insufficiency of funds."
13 From a reading of [SECTION] of the Act it can be discerned [CASE NUMBER] Page no. 7 of 13 that to render a drawer of a cheque liable under the said section it is essential that the cheque must be drawn to discharge a legally enforceable debt or liability. If such cheque is drawn not to discharge any legally enforceable debt or liability, the drawer of such cheque cannot be held liable for commission of offence punishable under [SECTION] of the Act. 14 Further the Hon'ble Court in [PRECEDENT]'s case (supra) in paragraphs 30 and 31 dealt with the presumption under [SECTION] of the said Act. Paragraphs 30 and 31 read thus:
"30. The proviso appended to the said section provides for compliance with legal requirements before a complaint petition can be acted upon by a court of law. [SECTION] of the Act merely raises a presumption in regard to the second aspect of the matter existence of legally recoverable debt is not a matter of presumption under [SECTION] of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability.
31. The courts below, as noticed hereinbefore, proceeded on the basis that [SECTION] raises a presumption in regard to existence of a debt also. The courts below, in our opinion, committed a serious error in proceeding on the basis that for proving the defence the accused is required to step into the witness box and unless he does so he would not be discharging his burden. Such an approach on the part of the courts, we feel, is not correct." (Emphasis added).
15 The complainant claimed that it had supplied electronics goods worth Rs. 1,49,057/ to the accused no. 1 and the accused no. 2 being [CASE NUMBER] Page no. 8 of 13 the MD of accused no. 1 has issued cheques Ex. CW1/3 and Ex. CW1/4 total amounting to Rs. 1,50,000/ towards the part discharge of the contractual liability/debt. No documentary evidence has been proved on record by the complainant to substantiate its claim though the regular transaction / dealing between the parties has been admitted. The complainant examined CW1 Mr. [ENTITY] in support of the allegations against the accused and it appears that the testimony of the witness was totally shattered during his cross examination and his testimony was based merely on hearsay. Though the witness claimed to be of the duly authorize to depose before this court but neither any resolution nor any minute book was produced or proved in support of his contention. The complainant further not produced or proved any cash book, ledger book or account books to prove the allegation as deposed during cross examination. The most of the answers by the witness during cross examination was that he is not aware regarding the concerned relevant fact, therefore, he cannot say. It appears that the witness has deposed as merely the cheque was received by the Accounts Department from the Marketing Division of the complainant. Infact the witness failed to depose categorically regarding any liability of the accused, the transactions and dealings etc. During further crossexamination by the accused CW1 showed his ignorance if any accounts were maintained by the Chennai Office. To quote from his crossexamination "I cannot say whether any [CASE NUMBER] Page no. 9 of 13 accounts were maintained by the Chennai Office, as he was never got posted in the said office".
16 The accused did not deny the issuance of the cheque and receiving of the legal notice contending that the notice was duly replied and the cheques in question were issued on 30.04.2003 as security. This contention of the accused is further corroborated with the testimony of the CW1 during his cross examination as the witness has failed to depose regarding the letter mark A where it is categorically mentioned that the cheques in question have been given towards security. The accused denied the statement of the account relied by the complainant along with the denial that no amount was payable by the accused to the complainant. The accused has further stated that the transaction between the parties was completed at Chennai and rather the complainant has not done the needful whereby the accused suffered loses. These contentions of the accused are also fortified by the testimony of the witness during cross examination whereby the witness has admitted that the transaction was done at Chennai. The complainant even not produced the relevant officials who dealt with the accused to deny the contention of the accused nor the relevant witness was produced to substantiate the claim of the accused. The testimony of CW1, therefore, cannot be relied.
17 It is the case of the accused that cheques in question were given to the complainant as security. CW1 during his crossexamination [CASE NUMBER] Page no. 10 of 13 could not deny this fact and simply stated to the specific question of the accused that he cannot say whether the aforesaid two cheques were given as security by the accused and not towards any legally enforceable debt or liability. In his further crossexamination CW1 has categorically admitted that the legal liability of the accused was not Rs. 1.50,000/ even in February 2005. To quote from his crossexamination " It is correct that the legal liability of the accused was not Rs.1,50,000/ even in February 2005.". The complainant failed to explain as to when the liability of the accused was less than the amount of the cheques in question, what was the occasion for the accused to pay more. Even otherwise the claim of the complainant on this ground alone is liable to be rejected and prosecution story appears to be not reliable. From the testimony of the CW1 itself and the document mark A as well as non production of the relevant witness by the complainant, it is proved that the cheques in question were given to the complainant by the accused merely towards security. 18 I have gone through the judgment of Hon'ble High Court of Delhi reported as 2011 (3) LRC 210 (Del) titled [PRECEDENT] which is squarely applicable in the facts and circumstances of this case. The relevant paras 9, 10 and 11 are reproduced as under:
"9. Plain reading of the above provision of law shows that criminal liability under [SECTION] [ACT] is attracted only if the dishonoured cheque was issued for the discharge in [CASE NUMBER] Page no. 11 of 13 whole or in part of any existing debt or liability. The section does not apply to a cheque issued to meet future liability which may arise on happening of some contingency. Thus, it is clear that a postdated cheque, if issued for discharge of a debt due, in the event of dishonour, would attract [SECTION] of the [ACT] but a cheque issued not for an existing debt / liability but issued by way of security for meeting some future contingency would not attract [SECTION] of the [ACT].
10. In the matter of [PRECEDENT], the Supreme Court while dealing with the issue, inter alia, observed as under:
"52 If the defence is acceptable as probable the cheque therefore, cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of [SECTION] of the Act."
11. In the instant case also admittedly the cheques in question were issued by the petitioner from his personal account as a guarantee / security for the encashment of the cheque of Rs. 70 lakhs issued by M/s. Mother India Logistics & Minerals Pvt. Ltd. in favour of the respondent no.2 company. Those cheques were to be presented for encashment only in the event of the banker of the petitioner's company failing to honour the cheque for Rs. 70 lakhs issued by the aforesaid company in favour of the respondent no.2. Thus, it is clear that the above referred three cheques of Rs. 25 lakhs each were issued by the petitioner from his personal account only as a security, as such [SECTION] [ACT] is not attracted in respect of said three cheques.
[CASE NUMBER] Page no. 12 of 13 19 In view of the above discussion and for the reasons given
therein, this court is of the considered view that the complainant has failed to prove its case against the accused that the accused had issued cheques in question in favour of the complainant in discharge of his legally enforceable debt or liability. Accordingly the complaint is dismissed and the accused is acquitted of the allegations under [SECTION] of the [ACT]. File be sent to records.
Announced in the open court ([ENTITY]) on this 2nd day of May, 2013 Senior Civil JudgecumRent Controller, New Delhi [CASE NUMBER] Page no. 13 of 13