IN THE COURT OF Ms. T. PRIYADARSHINI, MM-01 (NEGOTIABLE INSTRUMENTS ACT) WEST DISTRICT, TIS HAZARI COURTS, DELHI Sh. P.S. Kohli Proprietor M/s Kolson Advertising and Marketing Office at 28/2, Jail Road Tilak Nagar, New Delhi 110018 Complainant vs. Sh. [ENTITY] S/o Sh. G.S. Chawla Proprietor M/s Emerald Advertising 3rd Floor, 32/20, East Patel Nagar New Delhi 110008 Also at: 1310, Hemkunt House Rajinder Place New Delhi 110001 JUDGMENT
Complainant Case No. : 16384/2016 Date of institution : 03.09.2003 Offence alleged : Under [SECTION] [ACT] Plea of the accused : Not pleaded guilty Final order : Acquittal Date of Decision : 13.07.2018 BRIEF STATEMENT OF REASONS
1. The instant complaint is in respect of an offence punishable under [SECTION] of the [ACT] (hereinafter "the [ACT]").
[CASE NUMBER] page no.1/17
2. Brief facts alleged by the complainant is set out below:
a) The complainant is sole proprietor of M/s Kolson Advertising and Marketing which is an advertising agency. The complainant and accused had business relations and the complainant had published advertisements on behalf of the accused in various newspapers. The complainant maintains a running account of the accused.
b) The accused had issued cheque bearing no.803885 dated 03.06.2003 for an amount of Rs.50,00,000 drawn on Canara Bank, East Patel Nagar, New Delhi in favour of the complainant firm towards part liquidation of the outstanding liability (hereinafter "the cheque in question")
c) The cheque in question were returned as unpaid / dishonored for the reason "FUNDS INSUFFICIENT" vide cheque return memo dated 18.06.2003.
d) On 07.07.2003, the complainant sent legal demand through his counsel and called upon the accused to make the payment of the amount of the cheque in question within 15 days of receipt of legal notice. The accused failed to make the payment amount involved despite service of notice and therefore, according to the complainant, the accused is liable for the offence under [SECTION] of the [ACT]. Hence, the present complaint is filed.
3. To prove his case, the complainant examined himself as CW1 by way of affidavit Ex. CW1/A and has relied on the following documents:
a) Certified copy of cheque in question Ex. CW1/A1 b) Return memo issued by Canara Bank dated 03.06.2003 Ex. CW 1/B-C [CASE NUMBER] page no.2/17 c) Return slip issued by Punjab and Sind Bank dated 19.06.2003 Ex. CW1/3; d) Legal notice dated 17.07.2003 which is Ex. CW1/4; and e) Postal receipts and AD cards which are Ex. CW1/5,
4. On finding a prima facie case against the accused, he was summoned for 23.02.2004. Thereafter, notice of accusation under [SECTION] of [ACT] (hereinafter "the Code") was served upon the accused on 19.04.2004. The accused pleaded not guilty and claimed trial.
5. After framing of notice, the complainant was asked to lead evidence to prove his case. In his evidence, the complainant deposed as CW-1 and filed his evidence by way of affidavit. In his affidavit he has fully corroborated the averments made by him in the complaint. The complainant was cross-examined by the Learned counsel for accused. Sh. [ENTITY], Assistant Ahlmand of ADJ Central - 13 was examined as CW2, Sh. [ENTITY], Manager, Punjab and Sind Bank was examined as CW3, Sh. [ENTITY], Officer, Canara Bank was examined as CW4. Subsequently, complainant evidence was closed vide order dated 19.01.2013.
6. Statement of accused was recorded under [SECTION] read with [SECTION] of the Code on 28.02.2013. The accused submitted that valid debt did not exist in favor of the complainant at the time of presentment of the cheque and it was presented by the complainant for encashment without his consent. He also submitted that the cheque in question was given as advance cheques for work to be done by the complainant. He stated that as the work was not satisfactory, there was nothing due / outstanding from him to the complainant. Then the matter was listed for DE. The accused was examined as DW-1 and he was duly cross-examined by the complainant.
[CASE NUMBER] page no.3/17
7. Thereafter, arguments were made by the Learned Counsels for both the parties. The matter was then reserved for judgment. The submissions made on behalf of both the parties and the judgments relied on by both the parties have been considered and the record of the case has been thoroughly perused.
8. In order to ascertain whether the accused has committed the offence under [SECTION] of the [ACT], it is deemed fit to examine separately as to whether all the indispensable ingredients constituting the offence have been proved by the complainant. The offence under [SECTION] of [ACT] has the following ingredients:-
a) Person has drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
b) The cheque is issued for the discharge, in whole or in part, of any existing valid and enforceable debt or other liability;
c) That 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;
d) 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 honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;
e) The payee or the 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, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as [CASE NUMBER] page no.4/17 unpaid; and
f) 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 15 days of the receipt of the said notice.
9. Issuance of the cheque in question by the accused, presentation of the cheque in question for encashment by the complainant and return of the cheque unpaid by the bank for the reason "Insufficient Funds" have been proved on record vide cheque return memo dated 18.06.2003 which is Ex.CW1/2. Therefore, it is a matter of record and has been proved that the cheque was presented within its validity period and dishonoured by the banker of the accused. It is also not disputed that the impugned cheques were signed by the accused.
10. Much energy has been spent by both the parties during the proceedings in establishing / contesting the dispatch and receipt of legal notice. However, the accused himself has made contradictory statements in relation to the notice. In his statement recorded under [SECTION] read with [SECTION] of the Code and cross- examination dated 13.12.2017, the accused admitted receipt of legal notice. However, in his cross-examination dated 12.03.2014, the accused denied receiving the legal notice. Moreover, it is a matter of record that the demand notice has been sent by the complainant on the correct address of the accused. Therefore, a presumption of due service is drawn under [SECTION] of [ACT] which provides that where notice is sent to the correct address, the same shall be presumed to have been duly served. In [PRECEDENT], the court held that a presumption of service of notice is to be drawn where the notice is sent through registered post as well as UPC on correct address. In light of the above, the legal demand notice is deemed to have been served upon the accused. Therefore, as such, the legal notice stood served [CASE NUMBER] page no.5/17 upon the accused but no payment was made despite the service.
11. It is the admitted position of accused that he is the signatory of the cheque in question drawn on the account of accused firm. He has also admitted that he is the sole proprietor of the accused firm. The only question remaining for determination is whether a legally valid and enforceable debt existed qua the complainant and the cheque in question was issued in discharge of said liability / debt. Under the [ACT], once issuance of the cheque has been admitted or stands proved, a presumption arises in favour of the holder of the cheque that he had received the cheque of the nature referred to under [SECTION] of the [ACT] for the discharge, in whole or in part of any debt or any other liability. This presumption arises in favour of the holder under [SECTION] of the [ACT] which envisages that it shall be presumed unless the contrary is proved that the holder of a cheque received the cheque of the nature referred to under [SECTION] of the [ACT] for discharge, in whole or in part of any debt or any other liability. Accordingly, a presumption arises in favour of the complainant and against accused that the cheque had been issued in discharge of any debt or other liability.
12. In the case of [PRECEDENT], it was observed as follows:
"Thus in complaints under [SECTION], the Court has to presume that the cheque had been issued for a debt or liability. This presumption is rebuttable. However, the burden of proving that a cheque had not been issued for a debt or liability is on the accused. This Court in the case of [PRECEDENT] has also taken an identical view."
[CASE NUMBER] page no.6/17
13. The Hon'ble Supreme Court, in the case of [PRECEDENT], observed as follows:
"Because both [SECTION] and [SECTION] require that the Court "shall presume" the liability of the drawer of the cheques for the amounts for which the cheques are drawn, as noted in [PRECEDENT], it is obligatory on the Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. It introduced an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused" (ibid).
14. Also, in the case of [PRECEDENT], it has been held by the Hon'ble Supreme Court as under:
"As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in [SECTION] of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. [SECTION] of the Act enjoins on the court to presume that the holder of the cheque received it for the discharge of any debt or liability."
15. Further, it is a settled position that when an accused has to rebut the presumption under [SECTION], the standard of proof for doing so is that of "preponderance of probabilities". In [PRECEDENT], the Hon'ble Supreme Court has observed:
"Keeping this in view, it is a settled position that when an accused has to rebut the presumption under [SECTION], the standard of proof for doing so is that of "preponderance of probabilities".
Therefore, if the accused is able to raise a probable defence which [CASE NUMBER] page no.7/17 creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."
16. Thus, as laid down in catena of decisions, it is an established law that onus lies upon the accused to rebut the presumption and to establish that the cheque in question was not given in respect of any debt or liability, with the standard of proof being preponderance of probabilities. Therefore, it becomes critical to examine whether the explanation of the accused coupled with the evidence on record is sufficient to dislodge the presumptions envisaged by [SECTION] and [SECTION] of the [ACT].
17. The defence of the accused is two fold. Firstly, that there was no subsisting debt or liability at the time of presentment of the cheque as the advertisement services provided by the accused were deficient. Secondly, the complaint is liable to be dismissed as the complainant is no longer associated with M/s Kolson Advertising and therefore, he had no right to prosecute the complaint on behalf of M/s Kolson Advertising. I will discuss both these defences separately.
Whether the accused has raised a probable defence in relation to non- existence of valid and subsisting debt or liability?
18. It is an admitted fact that the complainant firm and the accused firm were engaged in the business of newspaper advertising and the accused firm used to place orders to the complainant firm for publication of advertisements in specified [CASE NUMBER] page no.8/17 newspapers. The averment of the accused is that the complainant firm did not publish advertisements of its clients as per the specifications specified by his clients and therefore, clients did not make payments to the accused firm. It is averred that due to deficient services, the accused firm also did not make payment to the complainant firm.
19. It is also argued that the accused worked on a couple of occasions for the the complainant firm and he exhibited bills which are Ex. CW1/X1 and Ex. CW1/X2. The accused submits that on the basis of these bills, the accused was to recover an amount of Rs. 1,50,444. The complainant has argued that these documents are forged / self created as there is no acknowledgment of the complainant or the accused in the said bills.
20. The accused also placed on record statement of account maintained by the accused firm in relation to the complainant which is Ex. DW1/4. The complainant waived objecton as to mode of proof, however, disputed the contents of the said statement. As per the statement, no amounts were due from the accused firm to the complainant. The accused submitted that the accounts were settled by him with Mr. [ENTITY] and Mr. [ENTITY] in the presence of the complainant.
21. There are certain deficiencies in the version of the accused. Firstly, the accused did not place any record or evidence in relation to the deficiency in advertisement and neither did he examine any of his clients who could have testified about the faulty advertisements. It appears rather strange that the accused did not issue any written communication to the complainant firm in relation to deficient services. Secondly, the accused did not place on record any settlement that he had entered into with [ENTITY] and [ENTITY], partners of M/s Kolson Advertising. The [CASE NUMBER] page no.9/17 accused also did not clarify as to when the settlement took place and what were its terms. Similarly, there are certain aspects of the complainant's version which leave much to be desired as well. Where it is admitted by both the parties that they were engaged in business with each other, it was the responsibility of the complainant to file upto date statement of accounts. Further, the veracity and genuineness of the statement of account filed by the accused could have been tarnished by the complainant by placing on record its statement. The complainant has miserably failed to show that liability to the tune of the cheque amount existed against the complainant. The complainant has failed to establish that the accused used to make bill to bill payments. In the absence of any such averment or proof, it is probable that a running account was maintained by the parties and therein the onus was on the complainant to prove that the cheque was issued for an existant debt. Further, the complainant could have established that settlement did not take place between partners of M/s Kolson Advertising and the accused by bringing them as witnesses. For reasons best known to him, he has not made any efforts to call them as witnesses.
22. Except for the cheque in question, there is no iota of material in support of the complainant's case that the cheque was issued for a valid liability. It gravely prejudices the complainant that even the bills / invoices raised on the accused have not been placed on record. It is crucial to note that the Hon'ble Madhya Pradesh High Court in [PRECEDENT] has affirmed that where the accused has denied his debt/liability towards the complainant and the complainant has specifically mentioned in the complaint about the existence of accounts books maintained in ordinary course of business, therefore the complainant was required to furnish the account books so that the liability of the accused towards the complainant could have ascertained by the Court. The fact that the complainant did not furnish any account books or ledger books maintained in ordinary course of [CASE NUMBER] page no.10/17 business further raises doubt over the complainant's version. Further, the Hon'ble Supreme Court of India in [PRECEDENT] held that "In case of dishonour of a cheque (alleged to be issued towards outstanding dues) in business dealing, if account books not produced by the complainant, the contention of accused that cheque was issued as security can be believed and the conviction can be set aside."
23. Considering all these facts and circumstances of the case in toto, I am of the view that the accused has been successful in elucidating sufficient material from the evidence of complaint to discharge the initial onus place upon him and accordingly the onus was shifted upon the complainant to prove his case beyond all shadows of reasonable doubt but, as discussed above, he failed to do so.
Whether the complaint is liable to be dismissed for non-prosecution by the complainant firm?
24. The central contention of the accused is that the cheque has been issued in favor of M/s Kolson Advertising and though at the time of institution the complainant could have filed the complaint on behalf of the firm as its proprietor, the complainant is not associated with the firm since 2004 - 2005 and therefore, he was not entitled to continue the prosecution. Complainant in his cross-examination admitted that the proprietorship firm was converted into partnership and subsequently, he quit the partnership firm M/s Kolson Advertising in 2004 - 2005. However, he has filed evidence by way of affidavit in the year 2005 (Ex. CW1/A) as well as an affidavit dated 25.09.2006 wherein he has sworn before the oath commissioner that he is the proprietor of M/s Kolson Advertising.
[CASE NUMBER] page no.11/17
25. To my mind, once the complainant admitted that he is no longer the proprietor of the proprietorship firm (i.e. Kolson Advertising), the onus shifted on him to prove that the debts had not been settled and that the partners have allowed him to continue prosecuting the instant complaint. Leave apart leading any evidence supporting his right to prosecute, the complainant has not even made an averment that the right to continue prosecution against the accused for the cheque in question vested on him.
26. It is crystal clear from the deposition of the complainant that he has nothing to do with the affairs of M/s Kolson Advertising and in fact, has admitted in his cross-examination dated 09.12.2010 that he presently has no concern with the firm. He also admitted that he does not have custody of the original ledgers as they have been handed over to the assignees/ new partners of the firm and in effect, no statement of account, income tax returns or ledgers have been filed on behalf of the complainant firm. Further, he has admitted that payments received by the complainant firm were duly accounted in the account statement, however, he has not placed them on record simply because he no longer possesses them nor exercises any control over them. In case the intent of the newly constituted partnership firm was for the complainant to pursue the instant complaint, they would have atleast handed over a copy of the statement of account of the firm maintained by M/s Kolson Advertising to the complainant. A case directly on point is [PRECEDENT] wherein the Hon'ble Gujarat High Court observed the following:
"[SECTION] of the Act provides that no Court shall take cognizance of any offence punishable under [SECTION] except upon a complaint made in writing by the payee. Thus, two requirements are that (a) the complaint should be made in writing (in contradistinction from an oral [CASE NUMBER] page no.12/17 complaint); and (b) the complainant should be the "payee" or the "holder in due course" where the payee has endorsed the cheque in favour of someone else.
The payee, in the present case, was the proprietary concern. As a "payee", the proprietary concern was competent to file the complaint and it did file the complaint. Once the complaint is in the name of the "payee" and is in writing, the requirements of [SECTION] are fulfilled. Who should represent the payee where the payee is a company, or how the payee should be represented where the "payee" is a sole proprietary concern, is not a matter that is governed by [SECTION], but by the general law. (See [PRECEDENT] (supra).) In my view, when the complaint was lodged in the year 2010 by the proprietary concern, the same was maintainable as the proprietary concern was the "payee" of the cheque. At a later stage for the purpose of business convenience, if the entire' business of the proprietary concern with all its rights and liabilities were taken over by a private limited company, then such private limited company can seek substitution as a complainant in the complaint so that the private limited company can pursue the complaint further in accordance with law."
27. It is also pertinent to note that the Kerala High Court in the case of [PRECEDENT] held:
"The complaint was instituted by the firm and, except in the case of [CASE NUMBER] arising from [CASE NUMBER], the complainant firm was in, existence when the cheque was issued, presented for collection, when the statutory demand notice was issued and more importantly [CASE NUMBER] page no.13/17 when the complaint was instituted. The complainant was represented by a General Power of Attorney holder and the firm had executed the Power of Attorney in favour of the Power holder authorizing him to conduct the proceedings on behalf of the complainant firm. In all the aforementioned cases, there was no defect in the institution of the complaint as such. But during the pendency of the proceedings the complainant firm ceased to be in existence and as I mentioned above, the firm can cease to either by operation of law or by the voluntary act of the partners. It will tantamount to a case where the complainant is not in a position to thereafter appear before the Court and therefore, will have to be treated as a case where the complainant is absent from the Court. But obviously in most of such cases, a dissolution of the firm, whether it is by act of partners or otherwise, would be evidenced by a document and the erstwhile partners or the continuing partners as the case may be, will have to provide for the continuance of such cases as are existing as on the date of dissolution and the right to continue the proceedings will have to be vested in one of the erstwhile partners of the firm. Each partner is an agent of the firm and is an agent of each other and therefore, the partner, who is authorized to continue the proceedings on behalf of the firm, will be in a position to continue the prosecution of the complaint. But in a case where a dissolution of the firm takes place during the pendency of the proceedings before the trial Court, erstwhile partner, who is given the right to continue the proceedings, will have to approach the Court with an application under [SECTION] of [ACT] for a permission to continue the prosecution. Where the Deed of dissolution between the parties does not specifically provide that anyone of the partners may continue with the pending proceedings which the firm had actually instituted (or which the firm was defending as the case may be), then [CASE NUMBER] page no.14/17 each one of the erstwhile partners would have a right to approach the Court or the right to continue the proceedings notwithstanding the dissolution, on the premise that the continuance of the proceedings are necessary to wind up the affairs of the firm and to complete the transactions taken but unfinished at the time of dissolution ([SECTION] of the [ACT]). But once there is a dissolution of the firm, which figures as a complainant, during the pendency of the complaint, there has to be a motion at the instance of a competent person, competent to represent the interest of the erstwhile firm, seeking the permission of the Court to continue the prosecution in terms of [SECTION] of [ACT] Failure to do so would result in a situation where the Court would be perforce compelled to proceed under [SECTION] of the [ACT]"
28. It is pertinent to note that the Hon'ble Supreme Court in [PRECEDENT], at page 624] has held:
"If a person transferred to a partnership (of which he was also a partner), all his assets and liabilities of his proprietary concern, he would have no subsisting exclusive right to enforce any liability against the defendants since such rights as he had as the proprietor vested in the partnership and he could not therefore either file a suit or claim any relief in the suit filed by the partnership, asserting his right as the erstwhile proprietor."
29. Further, there is no clarity as to whether entire liability and assets of the proprietorship firm merged into the partnership firm. Again the complainant has not clarified whether a deed of partnership was entered into by the incoming partners with [CASE NUMBER] page no.15/17 the complainant and whether terms as to subsisting litigation in relation to the claims of the complainant firm were finalised. Therefore, in view of the discussion above, I am able to conclude without a scintilla of doubt that complainant, who is no longer associated with M/s Kolson Advertising, did not have any subsisting right to pursue this complaint against the accused and the instant complaint is bound to be dismissed on this ground alone.
30. On cumulative analysis of all the factors, it is clear that the accused has been able to probabilise his defence as well as establish deficiency in the complaint case itself. It is a well settled principle of law that prosecution has to stand on its own leg and prove its case beyond reasonable doubt. Also it has been held by Hon'ble Supreme Court in [PRECEDENT], [ACT] envisages application of the penal provisions which needs to be construed strictly. Therefore, even if two views in the matter are possible, the Court should lean in favour of the view which is beneficial to the accused. This is more so, when such a view will also advance the legislative intent, behind enactment of this criminal liability.
31. Hence in the light of above discussion, it comes out that the complainant has failed to prove his case beyond all the reasonable doubts and he has failed to fulfill all the ingredients of offence under [SECTION] [ACT] against the accused. Accused has been able to rebut the presumption in favour of the complainant as the standard of proof so as to prove a defence on the part of the accused is only 'preponderance of probabilities' and inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies as the same was held by Hon'ble Supreme Court in [PRECEDENT].
[CASE NUMBER] page no.16/17
32. In the light of the above discussions and observations, this court has no hitch to hold that the complainant has failed in proving his case beyond the shadow of reasonable doubts. This court exonerates the accused for the offence under [SECTION] of the [ACT]. The accused is hereby acquitted. Bail bonds are cancelled and surety stands discharged. Endorsement, if any, stands cancelled.
A copy of the order be sent to District Courts website.
PRIYADARSHINI THYAGARAJAN Announced in open court on [ENTITY] Date: 13.07.2018 MM-01(NI ACT)WEST/DELHI 2018.07.20 15:50:43 +0530 [CASE NUMBER] page no.17/17