IN THE COURT OF SH. [ENTITY], Judge, Small Causes Court -cum- Addl. Senior Civil Judge -cum- Guardian Judge -cum- Metropolitan Magistrate (New Delhi), Patiala House Courts, New Delhi CC No. 100/13 Unique Case ID No. Date of Institution: 20.04.2004 [OLDEST] Date of reserving judgement: 20.09.2014 Date of pronouncement: 14.10.2014 In re: Commissioner of Customs ICD, TKD, New Delhi Complainant versus A-1) M/s. Lokesh Garments Pvt. Ltd. 315, FIE Patparganj Industrial Area, Delhi A-2) Sh. [ENTITY] Director, M/s. Lokesh Garments Pvt. Ltd. 315, FIE Patparganj Industrial Area, Delhi Accused persons JUDGMENT:
1.The present complaint under [SECTION] of the [ACT] has been filed by the complainant with respect to dishonour of cheques no. 764472 and 764473 dated 25.11.2003 and 05.12.2003 respectively, for a sum of Rs. 50 lakhs each, drawn on Punjab National Bank, Barakhamba Road, New Delhi, in favour of the complainant Commissioner of Custom (Export) by the the accused no. 2 [ENTITY], Director of the accused no. 1 company M/s. Lokesh Garments Pvt. Ltd. The cheques got dishonoured due to insufficiency of funds vide memos dated 12/13.02.2004.
2.The initial complaint was filed against seven accused persons but the court had summoned only the accused no. 1 company and its Director accused no. 2 (signatory). As per the complaint, the accused no. 2 was controlling the day to day business and activities of the accused no. 1 company as well as of proprietorship concerns accused no. 4 to 7 (sic: 3 to 7) namely M/s. Puja Hi Fashion, M/s. Kapil Impex and M/s. Chopco Fashion. Accused no. 3 and 4 were also stated to be the Directors of the accused no. 1 company. It had been alleged that the Directorate of Revenue Intelligence (DRI) had been investigating into the exports of ready-made garments made by the accused persons and during the course of investigation, it observed that the said company and business concerns had availed undue duty drawback / export benefits in respect of the goods whose sale proceeds had not been realized within the stipulated period. As per the investigations, the said company and concerns had availed undue duty drawback / export benefits fraudulently to the tune of Rs. 2,51,06,277/- in aggregate. This fact was admitted by the accused no. 2 in his voluntary statement dated 15.10.2003 tendered under [SECTION] of the [ACT]. It is informed that the accused no. 2 had voluntarily tendered six cheques (including the cheques in question) worth Rs. 2.5 crores for repayment of wrongly availed drawback and export benefits. The accused no. 2 and 3 further undertook that they would produce drafts in lieu of the said cheques and if they failed to do so, then the cheques may be presented to the bank for encashment. When the accused persons failed to tender the drafts despite lapse of three months, the complainant presented the cheques for encashment. However, the cheques were returned dishonoured with the remarks "insufficient funds" vide memo dated 12/13.02.2004. Legal notice dated 05.03.2004 was sent to the accused persons but despite service, no payment was made, though a reply dated 16.03.2004 was given. Hence, the present complaint was filed in the court.
3.Pre-summoning evidence was lead and the accused no. 1 and 2 only were summoned by the court vide order dated 26.08.2004. The accused no. 1 company never participated at the trial and notice of accusation under [SECTION] [ACT] for the offence punishable under [SECTION] [ACT] was framed against the accused no. 2 vide order dated 05.07.2005. The accused pleaded not guilty and claimed trial.
4.At the trial, the complainant examined three witnesses in its support. CW-2 Sh. [ENTITY], CW-3 Ms. [ENTITY] and CW-4 Sh. [ENTITY] were examined (it is to be noted that no CW-1 was examined by the complainant and the witnesses have been numbered incorrectly).
5.CW-3 Ms. [ENTITY], Superintendent, Central Excise, tendered her affidavit Ex. CW-3/1 and reiterated the contents of her complaint filed in discharge of her official duties. She proved on record the original cheques, the cheque return memos, legal notice, postal receipts as well as the photocopy of the statement of accused no. 2 made under [SECTION] of the [ACT]. She was duly cross-examined by the Ld. Defence Counsel wherein she admitted that no authorization in her favour has been filed on record. She accepted that the cheques were not handed over to her and the case pertains to DRI which was sent to her for prosecution. According to her, she had no personal knowledge of the matter and did not know as to how the cheque amount was computed, stating that she was deposing only on the basis of available record.
6.CW-2 Sh. [ENTITY] and CW-4 Sh. [ENTITY] were bank officials from Punjab National Bank, Barahkhamba Road, New Delhi and Punjab National Bank, IG Airport, New Delhi, respectively, who produced the summoned bank records and registers pertaining to the cheques in question.
7.Statement of the accused no. 2 was recorded under [SECTION] [ACT] on 07.12.2012, wherein he denied the averments and pleaded innocence. He claimed that the statement of under [SECTION] of the [ACT] was taken under threat and force and that he never issued the cheques voluntarily. He took stands that the officials of the complainant had detained him and took his signatures forcibly and claimed that he had no liability against the cheques in question. No evidence in defence was however led by the accused.
8.It is in these circumstance, that the Ld. Counsel for complainant has argued that the complainant had been able to prove its case against the accused persons. Ld. Counsel has relied upon the testimony of CWs together with the statement of the accused made under [SECTION] of the [ACT], coupled with the presumption of law in its favour. It is submitted that such statement of the accused under [SECTION] of the [ACT] is admissible in evidence and taking into account the presumptions in favour of the complainant, the burden would shift upon to the accused to establish otherwise. It is argued that the accused has failed to establish any defence in his favour and has failed to lead any evidence in defence.
9.On the other hand, the Ld. Defence Counsel has filed written submissions and has contended that no case is made out against the accused. It is submitted that there is no authorization in favour of the witnesses to depose on behalf of the complainant and that no liability to the tune of the cheque amount has been proved on record. It is submitted that the accused is not required to step into the witness box to rebut the presumptions and he can point out the infirmities in the evidence of the complainant to rebut the same. It is submitted that the cheques taken from the accused under force and threat would not be covered under the offence punishable under [SECTION] [ACT].
10.I have heard the arguments advanced by both the sides and have carefully perused the material available on record.
11.The law with respect to offences punishable under [SECTION] of the Act is well settled. The law has been laid down by the Hon'ble Supreme Court of India, in the precedent titled as [PRECEDENT], wherein it has been held that:
"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 non-existence 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. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in [SECTION] of the [ACT] to rebut the presumptions arising under [SECTION] and [SECTION] of the Act. The accused has also an option to prove the non-existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under [SECTION] and [SECTION] of the Act will not again come to the complainant's rescue".
12.Keeping these principles in mind, it is seen that the accused has not disputed the factum of the cheques in question to have been issued by him or bearing his signatures. He has never denied the fact that the cheques had been drawn on a bank account maintained by him with the Punjab National Bank, New Delhi. He has also not denied that the cheques were filled by him in favour of the complainant and for this particular amount, though he claims that the same were got filled by him under threat and force. It is not the defence of the accused that the cheques did not bear his signatures or that his signatures had been forged or that they were issued blank or were otherwise materially altered or modified. The genuineness of these cheques has not been disputed by him.
13.Similarly, the accused has not questioned the genuineness of the cheque returning memos or the factum of the dishonour of the cheques due to the reason as mentioned on this memo. It is not the case of the accused that the funds in his bank account were sufficient to honour these cheques. As such, it is clear that the cheques in question got dishonoured due to insufficiency of funds in his bank account.
14.The accused has never denied the receipt of the legal demand notice. He rather replied to that notice. He admitted receipt of the notice in his statement under [SECTION] [ACT]. It is also not denied by the accused that he did not make the payment despite expiry of fifteen days from such service of legal demand notice.
15.Once these facts are proved, the court has to see if there existed a debt or other liability towards discharge of which the cheques in question might have been issued.
16.In this regard, the court has nothing material before it except the testimony of CW-3 Ms. [ENTITY], as the CW-2 and CW-4 are only formal witnesses who had only produced the bank records. During her evidence, she admitted that the cheques were not given to her by the accused. It is apparent that the cheques had been received by the complainant through the DRI officials who had investigated into the alleged duty drawback / export benefits by the accused, his company and various other business concerns. Admittedly, she was not a witness to the circumstances under which the cheques had been issued by the accused. The DRI officials who had carried out the investigation and to whom the cheques had been given have not been examined by the complainant. And precisely on this ground that she was not present at the time of such proceedings, the CW-3 could not answer material questions as to the existence and extent of the liability of the accused when the cheques had been given. She categorically stated that she had no personal knowledge of the matter and was deposing only on the basis of record given to her by the DRI for prosecution. Thus, she could not depose as to what was the liability assessed against the accused. Apparently, no cause notice had been issued by the complainant to the accused assessing his liability. Since she was not present at the time of handing over the cheques, she could not have admitted or denied if the cheques were obtained under threat or force.
17.In this position, it is clear that there is nothing on record to show that any such duty drawback / export benefits existed on the day when the cheques were issued by the accused. It is apparent that no such duty or benefit had been ever assessed by any department against the accused. There was no basis as to how the amount of Rs. 2,51,06,277/- was calculated or assessed as narrated in the complaint. It is well settled that for the purposes of offence under [SECTION] [ACT], the debt or liability has to be an existing liability and not future liability. The complainant has to show that a definite liability up to the cheque amount (or more than the amount) existed when the cheque had been issued. Mere oral submission of a witness, who was otherwise not concerned with the investigation, that the such amount was to be paid by the accused, would not be sufficient to establish that there existed a legally recoverable debt or liability. There are no records to show how this amount was arrived at.
18.Though there is no evidence lead by the accused to show that the cheques were obtained under any threat or force, yet it is clear that the material on record is not sufficient to ascertain the extent and existence of debt or liability against which the cheques might have been issued by him. Failure of the complainant to bring any evidence showing existence of legally recoverable debt or liability would make its case weak. There is nothing on record to show if any duty drawback / export benefits had been ever assessed by any department against which the cheques had been issued. If the cheque amount happens to be more than the assessed duty, no liability under [SECTION] [ACT] can be fastened against the accused. Similarly, if the cheques were given towards discharge of duty that was yet to be assessed in future, no offence under [SECTION] [ACT] would be made out in case of dishonour of such cheques. In such a case, the department would be entitled to proceed under the relevant laws against the accused, but as far as such cheques are concerned, they cannot be said to have been issued towards discharge of an existing debt or liability.
19.The statement under [SECTION] of the [ACT], as being relied upon by the complainant, has never been proved as record as per law. Only a photocopy of the said statement was placed on record, the contents of which are also not completely legible. The original statement was never brought on record and the investigating officer Sh. [ENTITY], before whom the said statement was made on 15.10.2003, was also not examined on record. Thus, the said photocopy of a statement cannot be considered as proved as per law. Such a photocopy is neither primary evidence nor secondary evidence, and is rather no evidence at all in the eyes of law. It cannot be relied upon to ascertain the liability of the accused in the manner sought by the complainant.
20.Further, there is no show cause notice ever issued to the accused showing any assessment of such duty on account of drawback or export benefits on his part. In the absence of any such assessment, it cannot be ascertained as to what was the liability against which the cheques had been issued. As already noticed, the accused is not required to lead evidence in defence to rebut the presumptions. In order to rebut the presumptions, he can point out the infirmities and deficiencies in the case of the complainant with or without leading evidence in defence. Thus, merely because no evidence in defence has been led by the accused, that would not give any benefit to the complainant. The evidence led by the complainant is not sufficient to prove the existence of debt or liability against the accused when the cheques had been issued.
21.The stand of the accused is squarely covered by the precedent relied upon by the Ld. Defence Counsel titled as [PRECEDENT], dated 23.03.2011) wherein the Hon'ble High Court of Delhi was pleased to quash the proceedings under [SECTION] [ACT] on the ground that the liability assessed by the Central Excise Department had not attained finality on the date when the cheques had been obtained. In the present case also, no such liability had assessed by the complainant on the date of obtaining the cheques and even thereafter. Apparently, there is no order, decree or adjudication of any competent authority assessing the liability of the accused. The accused has not yet been held liable to pay any sum of money for evasion of customs duty and there is nothing to show that he is liable to pay any quantified customs duty on the date when the cheques had been issued.
22.At this stage, it is also to be noted that as per the complaint, the accused persons had undertook to produce drafts in lieu of the cheques in question and had agreed that in case they failed to do so, the cheques might be presented for encashment. The cheques were therefore presented when the accused to failed to tender the drafts even after lapse of three months. It would be thus seen that the cheques in question had not been actually issued towards discharge of any existing debt or liability but only as security to ensure payment by drafts. The accused persons were required to pay the amount by way of drafts and it was only upon their failure to do so that the cheques could have been presented.
23.It is now well settled that dishonour of a cheque, if issued as security for repayment of any money, would not make out an offence punishable under [SECTION] [ACT]. In that case, the same would be civil liability and not a criminal liability under [SECTION] [ACT]. In recent precedent titled as [PRECEDENT] decided on 07.04.2014], the Hon'ble Supreme Court of India has held that to attract an offence under [SECTION], there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. Thus, drawal of the cheque in discharge of existing or past adjudicated liability is sine qua non for bringing an offence under [SECTION]. The Hon'ble Court held the law laid down in [PRECEDENT] to be a correct law. In the said case, the liability was to repay the advance amount after six months, and to ensure said repayment, the cheques were issued. Thus, the liability was held to be a future liability, that was yet to arise upon happening of an event, that is, non-payment of amount after six months. Similar was the view in [PRECEDENT]. Thus, if a post dated cheque is issued for discharging a future liability that was yet to arise upon happening of a contingent event and as a collateral security, would not attract the provisions of [SECTION] [ACT].
24.In the case in hand, the cheques were given as security only as they could have been presented on a future date when the accused would have failed to pay the duty amount through drafts in future. Thus, in such a case, when the cheques in question were delivered, there was no existing debt or liability. The same would have come into existence only upon happening of a future contingent event, that is, failure of the accused to make the payment by way of drafts at a future date, as stated by the complainant itself. Therefore, even from this angle, accused persons cannot be held criminally liable under [SECTION] [ACT] for dishonour of the cheques in question.
25.In view of the above discussion, the case of the complainant suffers a dent and is liable to fail. The complainant has not been able to establish that the cheques in question were issued towards discharge of existing debt or liability so as to make out the offence. The accused has been able to rebut the presumptions in favour of the complainant by raising a probable defence.
26.The accused persons are therefore acquitted of the charges. The bail bond of accused no. 2 shall however remain in force for the next six months in terms of [SECTION], [ACT].
27.File be consigned to the record room.
Announced in the open court this 14th day of October 2014 ([ENTITY]) JSCC/ASCJ/GJ/MM Patiala House Courts, New Delhi