1 IN THE COURT OF SH [ENTITY] : METROPOLITAN MAGISTRATE - 03 SOUTH : SAKET COURT : NEW DELHI [ENTITY] vs GIS food Pvt Ltd CC No 582/1 U/[SECTION] [ACT] JUDGMENT
(1) Serial number of the case : 582/1 (2) Name of the complainant : [ENTITY] (3) Name of the accused, : 1. GIS Food Pvt Ltd parentage & residential address Through its Managing Director F1/89, Savitri Nagar, Near Malviya Nagar, New Delhi17 2. [ENTITY], Director GIS Food Pvt Ltd, F1/89, Savitri Nagar, Near Malviya Nagar, New Delhi17 (4) Offence complained of or proved : 138 [ACT] (5) Plea of the accused : Pleaded not guilty (6) Final Order : Acquitted (7) Date of Institution : 14/08/2007 (8) Date on which reserved for judgment : 24/11/2011 (9) Date of Judgment : 25/11/2011 BRIEF STATEMENT OF THE REASONS FOR THE DECISION:
1. The material facts as carved out from the complaint are that complainant carries on the business of trading and accused no.1 is in the business of bread manufacturing. Complainant had transferred his equity shares vide agreement dated 21/05/2007 and the payment in respect of the same was paid to him. During the course of business, accused no. 1 raised a loan of Rs.8,01,980/ from complainant for business needs. Accused nos. 1 & 2 had assured the repayment of outstanding loan to the complainant at the time of agreement dated 21/05/2007. Accused issued a cheque no. 859152 dated 22/05/2007 for Rs.6,60,000/ drawn on Punjab National Bank, Barakhamba Road, New Delhi favouring complainant towards part payment of the loan amount to be repaid by accused to the complainant. The complainant presented the said cheque with his banker Vijaya Bank, Malviya Nagar, New Delhi but the same was returned dishonoured with the remarks "Exceeds Arrangements"
vide memo dated 27/06/2007. The complainant made a demand for payment of the said amount of money by giving a Demand Notice dated 16/07/2007 to accused.
Statutory notice of demand was duly served upon accused but he failed to make the payment of the said amount to complainant within stipulated time. Thereafter, the complainant has filed this complaint U/[SECTION] of [ACT] (hereinafter "the Act") against the accused.
2. On 14.08.2007 after being satisfied that the complainant has a prima facie case against the accused, the court summoned the accused for offence U/[SECTION] of the Act.
3. Accused appeared pursuant to the process issued by the court. It is relevant to mention here that accused no. 1 company was represented by accused no. 2 during the trial. The particulars of the offence were read over and explained to the accused, to which he pleaded not guilty and claimed trial.
4. In order to substantiate its case, the complainant examined two witnesses in his evidence. CW1 is complainant himself and CW2 is [ENTITY].
5. All the circumstances appearing in the evidence against the accused were put in order to enable him to offer his explanation. In his statement U/[SECTION] [ACT] recorded on 20/04/2011, accused stated that he was innocent and falsely implicated in this case. Accused further stated that there was no liability of the company.
6. Accused examined two witnesses in his defence evidence. DW1 is [ENTITY] and DW2 is accused himself.
7. Arguments have been advanced by both the parties at length. It has been argued by Ld. counsel for the complainant that from evidence, complainant has proved that the cheque in question was issued on behalf of accused no. 1 which was dishonoured and despite service of legal notice, accused did not make payment. It is argued that during cross examination of witnesses, nothing material has come out and the complainant has been able to prove his case to the hilt. It is argued that accused has failed to discharge the burden cast upon him to rebut the presumption in favour of complainant under the provisions of [ACT].
8. Per contra, for knocking down the edifice of complainant case, it has been argued with vehemence by Ld. counsel for defence that no case is made out against any of the accused persons. It has been argued that accused no. 2 did not issue the cheque in question and there was no liability of company also as claimed by complainant as all the issues pertaining to debt and liability of accused no. 1 company were settled at the time when transfer of shares took place on 21/05/2007. It has been argued by Ld. Counsel for accused that accused has been able to discharge his burden in the present case successfully.
9. I have heard both the parties at length and perused the record. Before entering into factual matrix of the present case, I deem it fit to discuss certain statutory provisions of [ACT]. [SECTION] of [ACT] provides for presumptions regarding consideration for a Negotiable Instrument. It reads as under :
"That every negotiable instrument was made or drawn for consideration and that every such instrument when it has been accepted, endorsed, negotiated or transferred was accepted, endorsed, negotiated or transferred for consideration".
10. [SECTION] of the [ACT] provides for presumption in favour of a holder. It reads as under :
"It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in [SECTION] for the discharge, in whole or in part, or any debt or other liability".
11. In [PRECEDENT], Hon'ble Supreme Court observed that the defence submission that the cheques were not drawn for the discharge in whole or in the part of any debt or other liability is answered by the third presumption available to the banks U/[SECTION] of the [ACT]. This section provides 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 [SECTION] for the discharge, in whole or in part, of any debt or other liability". The effect of these presumptions is to place the evidential burden on the defence of proving that the cheque was not received by the bank towards the discharge of any liability.
12. Apex Court in [PRECEDENT] has held as follows :
"23. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different".
13. In [PRECEDENT] it has been held at para 20 : "The accused in a trial under [SECTION] of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the nonexistence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances upon consideration of which, the court may either believe that the consideration and debt did not exist or their non existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist ".
14. I shall now appreciate the testimonies brought on record to adjudicate whether the accused has been able to discharge the burden of mandatory presumption or whether his guilt has been proved beyond reasonable doubt.
15. Complainant examined himself as CW1 who in his examination in chief (conducted by way of affidavit) reiterated the averments as made by him in his complaint. The cheques in question was exhibited as Ex.C1, return memo was exhibited as Ex.C2, demand notice dated 14/07/2007 was exhibited as Ex.C3 and the speed post receipt & UPC were exhibited as Ex.C4 & Ex.C5 respectively. Reply dated 26/07/2007 sent by accused was Ex.C6, the balance sheet of accused company was Ex.C7 and the agreement regarding transfer of shares was Ex.C8.
16. Complainant was duly cross examined at length by the Ld. Counsel for accused. During cross examination, it was deposed by the complainant that there was no written requisition made to the person to advance loan to the company because it was his company and the company was in need, therefore, he deposited the money in the company. The complainant further deposed that he issued the cheque in favour of the company and it was with his signatures that the money was deposited in the account of the company. CW1 further deposed that at the time of agreement when shares were transferred, the accused persons to whom his shares were transferred issued a cheque of Rs.6,60,000/ for repayment as part payment of the loan amount. Complainant further deposed that a person who issues the cheque, signs it and the cheque Ex.C1 was signed by him and bears his signatures at point X. CW1 further deposed that the cheque does not bear the signature of accused no. 2 [ENTITY] but bears the signatures of his son at point Y. CW1 further deposed that at the time when loan was raised, accused no. 2 [ENTITY] was not the Director of the company and he had no concern with the company. It was further deposed by CW1 that when he resigned from the Directorship of the company, accused no. 2 promised repayment of loan amount to him in the presence of Chartered Accountant, his father and Sh [ENTITY].
17. CW2 is [ENTITY] who was examined in chief by way of affidavit ExCW2/A. He was also cross examined by ld. counsel for the accused. In his cross examination, CW2 deposed that he was not aware whether any resolution was passed by Board of Directors seeking the loan for the company but he knew that a loan was taken by the accused company. CW2 further deposed that the cheque in question was issued by the accused company and he was not aware as to who were the signatories of the cheque in question. CW2 further deposed that his son [ENTITY], [ENTITY] & [ENTITY] were the shareholders of the accused company.
18. Accused has examined two witnesses in his defence. DW1 is [ENTITY] who in his cross examination deposed that no cheque was issued by either [ENTITY] or GIS Food to [ENTITY] at the time of said transaction i.e. regarding transfer of shares of accused no. 1 company by complainant to accused no. 2.
19. DW2 is [ENTITY] i.e accused no. 2 whose examination in chief was also conducted by way of affidavit ExDW2/A. In his affidavit he deposed that he had purchased for valuable consideration, the equity shares held by complainant in accused no. 1 company on 21/05/2007. It was further deposed by accused that even after 21/05/2007, the complainant continued as Managing Director of accused no. 1 company for 45 days and it was complainant who issued the cheque in question under his signatures. It was further deposed by accused that on 21/05/2007, everything was settled and thereafter, no encumbrance remained on the company. DW2 was cross examined by ld. counsel for the complainant at length. In his cross examination, the witness deposed that on 21/05/2007, he was inducted as Director. However, the witness thereafter again said that on 21/05/2007, the transaction of sale/purchase took place and he became a Director of company later on. The witness denied the suggestion that he had issued cheque in question for Rs.6,60,000/. The witness further deposed that complainant kept on working for the company after 21/05/2007 for some time as Director. The witness admitted that complainant was Director of accused no. 1 company after 21/05/2007 for some time.
20. On 24.11.2011, during the course of hearing, the complainant was examined by this court under [SECTION] [ACT] r/w [SECTION] [ACT] wherein it was deposed by the complainant that he resigned from the Directorship of accused no. 1 company on 23.05.2007 and accused no.2 joined the accused no. 1 company as a Director on 17.02.2007. The documents regarding the same were exhibited as Ex. CW1/Y (colly).
21. I have carefully gone through the record of the case and evidence brought on record. The allegations made against accused no. 2 in the present complaint are that he is the Director of accused no. 1 company and had reassured the repayment of outstanding loan to the complainant at the time of agreement dated 21.05.07. It has also been alleged in the complaint that accused issued the cheque in question. The same averments have been reiterated by the complainant in his affidavit of evidence. It would be appropriate at this stage to reproduce relevant portion of [SECTION] of [ACT] which reads as under : "141.Offences by companies.(1.) If the person committing an offence under [SECTION] is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly"
22. Apex Court in [PRECEDENT], the Hon'ble Supreme Court, inter alia, held as under : "5. To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable."
23. Therefore, what has clearly been held by Apex Court in [PRECEDENT] (supra) case that clear and unambiguous allegations should be there as to how directors are incharge and responsible for the conduct of the business of the company. However, in the present complaint only allegation against accused no. 2 is that he is the Director of accused no. 1 company. There is no iota of allegation or evidence suggesting that accused no. 2 was incharge and responsible for the conduct of the business of accused no. 1 company. Rather during cross examination, it has been deposed by complainant that at the time when loan was raised, accused no. 2 [ENTITY] was not the director of the company and had no concern with the company. In cross examination of complainant, it has been deposed by him that the cheque in question does not bear the signature of accused no. 2.
24. Therefore it is clear that accused no. 2 is neither the signatory of cheque nor there is any allegation against him that he was incharge and responsible for the conduct of the business of accused no. 1 company. Apex Court in [PRECEDENT] has held at para 16 (iii) that : "(iii) In the case of a Director, Secretary or Manager (as defined in [SECTION] of the [ACT]) or a person referred to in [SECTION] of [ACT], an averment in the complaint that he was in charge of , and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under [SECTION]. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under [SECTION] by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that Subsection".
25. In view of the above discussion, no vicarious liability can be attributed to accused no. 2 in terms of [SECTION] [ACT] and case of complainant against accused no. 2 has failed and latter deserves acquittal in the present case.
26. Now, I shall adjudicate whether the guilt of accused no. 1 company i.e. GIS Food Pvt Ltd has been proved beyond reasonable doubt by the complainant or not. In the facts and circumstances of the case and on the basis of the evidence brought on record, I am of the considered view that complainant has failed to prove its case against accused no. 1 also beyond reasonable doubt because of the following reasons : I. There are material contradictions in the testimony of the complainant. It has been averred in complaint (reiterated in examination in chief) that accused no. 1 and accused no. 2 had assured the repayment of outstanding loan to the complainant at the time of agreement dated 21/05/2007 for transfer of equity shares. However, during cross examination, it has been deposed by the complainant that when he resigned from directorship of the company, accused no. 2 promised the payment of loan amount to him in the presence of Chartered Accountant, his father and Sh [ENTITY]. During examination of complainant by this court and by ExCW1/Y (colly), it has already come on record that complainant had resigned from the Directorship of company on 23/05/2007. Therefore, on one hand complainant is deposing in his examination in chief that promise of repayment of loan was made on 21/05/2007 whereas on the other hand, in his cross examination, he has deposed that promise for repayment of loan was made when he resigned from the directorship of the company i.e. 23/05/2007.
II. As mentioned above, complainant has deposed in his cross examination that when he resigned from the directorship of the company, accused no. 2 promised repayment of loan amount to him i.e. on 23/05/2007 (ExCW1/Y (colly) meaning thereby that the cheque in question could have been issued only subsequent to 23/05/2007. However, the cheque is dated 22/05/2007 and no explanation has come forth from complainant as to how the cheque which is for repayment of loan amount is dated 22/05/2007 when the promise for repayment of loan amount was itself made on 23/05/2007.
III. During cross examination of complainant, it has come on record that the complainant had advanced loan to company by way of issuing c cheque, however details of such cheque were not brought on record by the complainant. Complainant also did not brought on record any board resolution authorizing advancement of loan by him to the company which is a statutory requirement. Therefore, the very factum of advancement of loan by the complainant to the accused no. 1 company has remained unproved.
IV. The very credibility of complainant is doubtful in view of his cross examination wherein he has deposed that at the time of agreement for transfer of shares, the accused persons to whom his shares were transferred issued the cheque in question as part payment of loan amount. The accused persons here can be none other than accused no. 2 [ENTITY], however, it has already come on record that the cheque in question was not issued by [ENTITY] which proves that complainant had deposed falsely during his cross examination.
V. The fact that cheque in question has been issued in favour of complainant and at the same time has been signed by complainant (apart from other signatory) as director/ authorized signatory of accused no. 1 company creates a very strong suspicion about the circumstances and the manner in which the cheque in question has been issued. Possibility cannot be ruled out that since complainant was the director and authorized signatory if accused no. 1 company before 23/05/2007, therefore, he might have been in possession of signed cheque of accused no. 1 company prior to date it bears.
27. Apex Court in [PRECEDENT]'s case (supra) has also held at para 25 that : "25. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is "preponderance of probabilities". Inference of preponderance of probabilities can be drawn not only from the materials brought on records by the parties but also by reference to the circumstances upon which he relies".
28. Therefore, what has been upheld by Apex Court in the above noted case is that accused can prove his defence by "preponderance of probabilities"
whereas prosecution has to prove the guilt of accused beyond all reasonable doubts.
It was also held by Apex Court in the said case that :
"26. A statutory presumption has an evidentiary value. The question as to whether the presumption whether stood rebutted or not, must, therefore, be determined keeping in view the other evidences on record. For the said purpose, stepping into the witness box by the appellant is not imperative. In the case of this nature, where the chances of false implication cannot be ruled out, the background fact and the conduct of the parties together with their legal requirements are required to be taken into consideration".
29. In view of the above discussion, I have no hesitation in holding that the complainant has failed to prove the guilt of accused nos. 1 & 2 beyond all reasonable doubt. Accordingly, accused no. 1 i.e. GIS Food Pvt Ltd and accused no. 2 i.e [ENTITY] stand acquitted of offence U/[SECTION] [ACT]. Bail bond & surety bond of accused [ENTITY] shall remain intact for a period of 06 months for the purpose of [SECTION] [ACT]. File be consigned to record room.
Announced in the open court on 25.11.2011 ([ENTITY]) Metropolitan Magistrate 03/[ACT]/South Saket Court/New Delhi Certified that this judgment contains 14 pages and each page bears my signature.
([ENTITY]) Metropolitan Magistrate 03/[ACT]/South Saket Court/New Delhi