IN THE COURT OF MS. SUSHEEL BALA DAGAR, METROPOLITAN MAGISTRATE, DWARKA DISTRICT COURTS, DELHI [CASE NUMBER] PS : Subzi Mandi U/[SECTION] [ACT] Barclays Investments & Loans (INDIA) Ltd. having its registered office at (Formerly known as Rank Investments & Credit {INDIA} Ltd. 11-B/8, IIIrd Floor, Tewari House, Pusa Road Rajinder Nagar, New Delhi - 110 008 Complainant Versus [ENTITY] E-212/S, 2nd Floor Shaheen Bagh, Jamia Nagar Okhla New Delhi 110 025 Accused Date of Institution : 4th May, 2010 Plea of accused : Pleaded not guilty Date on which judgment was reserved : 9th March, 2011 Order : Acquitted Date of decision : 22nd March, 2011 JUDGMENT:
1. The case of the complainant is that the accused was provided personal loan facility by the complainant vide Loan Agreement no. LC012111005988819. The above mentioned loan was to be paid with interest in equated monthly installments. The accused had issued cheque no. 440089, dt. 17.02.2010 drawn on Jamia Cooperative Bank Ltd, Jamia Nagar, New Delhi in favour of complainant for an amount of Rs. 1,66,330/- towards discharge of legally enforceable debt and/or liability arising out of the above mentioned loan agreement. The said cheque was returned unpaid with the remarks "Funds Insufficient"
vide return memo dt. 23.02.2010. The complainant issued a legal demand notice dt. 20.03.2010 to the accused and the same was duly served upon the accused. Accused did not pay the cheque amount within statutory period.
2. In the background of above facts, complainant has filed this case. The complainant led its presummoning evidence by way of affidavit and summons were issued against the accused vide order dt. 01.07.2010 for the offence under [SECTION] [ACT] after known as 'the Act'). On appearance of the accused a notice under [SECTION] [ACT] dt 08.10.2010 was served on the accused for the offence u/[SECTION] of the Act to which he pleaded not guilty and claimed trial.
3. In order to prove its case the authorized representative of the complainant got himself examined as CW1 and reiterated the contents of the complaint on oath before the Court and filed an affidavit in evidence which is Ex. CW-1/1. He proved Power of Attorney in his favour whereby he was authorized to file the complaint and depose in Court as Exhibit CW1/1, Cheque in question as Exhibit CW1/2, Cheque returning memo as Exhibit CW1/3, Legal notice of demand as Exhibit Ex. CW1/4, Postal Receipt as Exhibit CW1/5, Complaint as Exhibit CW1/6.
4. The statement of accused was recorded under [SECTION] CrPC in which all the incriminating evidence was put to the accused, [ENTITY]. In reply of the said incriminating evidence the accused submitted that at the time of agreement some blank cheques were taken by the complainant and the accused was told that these cheques were for security purpose. The cheque in question had been issued for the purpose of security and the same was endorsed at the back of the cheque "not for use just for security purpose." The complainant has not given any prior notice to the accused before presenting the alleged cheque in the bank. He denied receiving any legal notice from the complainant bank.
5. In his defence, accused examined himself as DW1 and reiterated the statement made by him u/[SECTION] [ACT] on oath. During cross examination he admitted that the loan was to be repaid through ECS in 60 installments approx. of around Rs. 3,000/- each. He paid only 2-3 installments to the complainant bank and there was outstanding towards the loan. He had made the endorsement "not for use just for security purpose" on the blank signed cheques at the suggestion of his friend, before the sanction of the loan in front of the complainant / bank officials. He endorsed it so that the cheque will not be misused. He was told by the complainant that the blank security cheque will not be used without informing the accused.
6. The matter was listed for final arguments. I have heard Sh. [ENTITY], Ld. Counsel for the complainant and Sh. [ENTITY], Ld. Counsel for the accused.
7. The main ingredient of [SECTION] of the Act are as follows:-
The accused issued cheque on an account maintained by him with a bank.
The said cheque has been issued in discharge of any legal debt or other liability. As per the explanation given in [SECTION] of the Act, debt or other liability means a legally enforceable debt or other liability.
The cheque has been presented to the bank within the period of six months from the date of the cheque or within the period of its validity. When the aforesaid cheque was presented for encashment, the same was returned unpaid / dishonored.
The payee of the cheque issued a legal notice of demand within 30 days from the receipt of information by him from the bank regarding the return of the cheque.
The Drawer of the cheque failed to make the payment within 15 days of the receipt of the aforesaid legal notice of demand.
If the aforesaid ingredients are satisfied then the drawer of the cheque shall be deemed to have committed an offence punishable u/[SECTION] of the Act. Keeping in mind the above stated ingredients, appreciation of evidence and material on record is required.
8. In this case it is admitted case of both the parties that cheque in question was signed by the accused. It is further admitted case that accused had entered into an agreement for grant of loan with the complainant. Thus, the initial onus for raising presumption u/[SECTION] of the Act is discharged by the complainant. Now it is for the accused to rebut the said presumption by leading direct evidence or by showing preponderance of probabilities in his favour. Accused has raised a specific defence that the cheque in question was issued for security purpose and not given by the accused against any consideration. He has relied on the endorsement made at the back of the cheque Ex. CW1/2 to prove the same.
9. Complainant has not furnished any documentary evidence in this regard except asserting that cheque in question were not security cheque. Even though CW1 in his evidence by way of affidavit deposed that he is well aware and conversant with the fact of the case and competent to swear the affidavit but he did not know whether any cheque was taken by the complainant bank from the accused at the time of agreement. He also denied having any knowledge whether the loan was to be repaid in installments or in lump sum. CW1 had no knowledge about the date on which legal notice was served and about the mode of service.
10. Counsel for the accused submitted that in the present case, a specific case of the accused is that there was no existing debt and liability towards the Complainant and that the said cheque which is issued by the accused is only as a security and the cheque was not meant to be acted upon. Further, Counsel for the accused has argued that the complainant has not placed on record any loan agreement and no notice was given before presenting the cheque which was a security purpose only. He has also challenged that it is nowhere mentioned in the legal notice, how many installments have been paid by the accused and how much was due against him.
11. Counsel for the accused argued that there is no Board of resolution placed on record with the power of attorney. He had submitted that only on the ground that there is outstanding loan against the accused doesn't attract provision of [SECTION] of the Act. The purpose for which the cheque in question has been issued has to be seen i.e., whether it is issued against any liability or only for security.
12. Counsel for the accused has relied on Judgments ie.
[PRECEDENT], [PRECEDENT]; Manjit Singh Obhan v. State Of
Maharashtra 2008(2)DR622; [PRECEDENT] [PRECEDENT]. L. J. 1971. He submitted that the Accused had rebutted the presumption which is raised under [SECTION] of the Act by examining himself.
13. The learned Counsel appearing on behalf of the complainant has relied on a judgment of the Supreme Court and other High Courts in support of his contention that even though a cheque was given under security even then the liability under [SECTION] was irresistible in such cases. He relied on a judgment of the Supreme Court in [PRECEDENT]. In this case, the husband of the respondent had purchased a car under a hire purchase agreement and the respondent No. 1 had acted as a guarantor for her husband and towards part-payment in respect of the transaction the Respondent No. 1 had issued a cheque to the Finance Company which was subsequently dishonoured. The question which was raised in this case was whether a guarantor would be liable under the provisions of [SECTION] particular when there was no individual liability of the guarantor towards the Complainant and as such whether it could be said that the guarantor had issued a cheque for the purpose of discharging his debt or liability.
14. In the said case, the Supreme Court while considering the two questions "any cheque" and "other liability" occurring in [SECTION] observed that a case of guarantor would fall within the meaning of the term II "other liability" and held that a guarantor was one who issued a cheque in order to make payment of the debt of the principal borrower would also be liable. There cannot be any dispute in the ratio laid down of these judgments. However, the said ratio in my view will not be applicable to the facts of the present case. It is a case of the accused that the cheque in question was issued in favour of the Complainant on a specific understanding that it will not be acted upon by the Complainant. The cheque, therefore, had not been issued by the accused as a guarantor as was done by the respondent in the case of ICDS Ltd (supra).
15. Further, in the case of [PRECEDENT], which is cited by the counsel for the complainant, it is clearly stated that :-
" the offence made punishable by [SECTION] can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused / defendant cannot be expected to discharge an unduly high standard or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. 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'. 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. It is not the case of the complainant that it had informed the accused before presenting the cheque in question. The accused had already submitted that he was not informed by the complainant before presenting the cheque in question. Neither it is the case of the complainant that the loan was recalled and the cheque was presented with the consent of the accused. Nor any documentary evidence in this regard is placed on record by the complainant. Further, there is clear endorsement on the cheque in question Ex. CW1/2 that it is issued for security purpose and not for use. The complainant has nowhere explain how and why such endorsement was made on the cheque. It is cardinal principle of law that "one who asserts must prove his case".
17. Even though not referred to by the parties the Court relies on the judgment of Delhi High Court M/s [PRECEDENT], where in it has been held :-
" A post dated cheque may be issued under 2 circumstances. Under circumstance one, it may be issued for a debt in present but payable in future. Under second circumstance it may be issued for a debt which may become payable in future upon the occurrence of a contingent event.
The difference in the two kinds of post-dated cheques would be that the cheque issued under first circumstance would be for a debt due, only payment begin postponed. The latter cheque would be by way of a security.
The word 'due' means 'outstanding at the relevant date'. The debt has to be in existence as a crystallized demand akin to a liquidated damages and not a demand which may or may not come into existence; coming into existence being contingent upon the happening of an event
It would be relevant to note that the statue does not refer to the debt being payable, meaning thereby, a post dated cheque for a debt due but payment postponed at a future date would attract [SECTION] of the Act. But the cheque issued not for an existing due, but issued by way of a security would not attract [SECTION] of the Act, for it has not been issued for a debt which has come into in existence "
18. Further, looking to the precedent, I find that in the decision reported as M.S. Narayana Menon@ Mani v. State of Kerala 2006(2) JCC (NT) 198, it was observed as under:-
" If the defence is acceptable as probable the cheque therefore cannot be held to 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 " .
19. Keeping in view the case laws and discussion above made, the complainant has failed to prove the ingredients of [SECTION] of the Act. The accused has clearly establish that the cheque in question was a security cheque issued at the time of disbursement of the loan as a collateral security and the complainant had not informed him before presenting the same.
20. In these circumstances and for the above said reasons, the cheque is not supported by consideration. Hence, there is no question of [SECTION] of the Act being attracted. Accused is acquitted. Personal bond of the accused cancelled. Surety discharged. Documents, if any, be returned to the accused after cancellation of endorsements. File be consigned to record room after necessary compliance.
Announced in the open Court [ENTITY] on this 22nd March, 2011 Metropolitan Magistrate Dwarka Courts, Delhi. All pages signed.