Source: https://www.azaadandcompany.com/judgement/credential_leasing_credits_ltd_vs_shruti_investments_anr
Timestamp: 2019-04-21 02:36:54+00:00

Document:
Through: Mr. Arun Sukhija, Advocate.
1. After hearing learned counsel, leave granted.
2. Let the appeal be registered and numbered.
3. I heard learned counsel finally at the admission stage with their consent and reserved judgment. Accordingly, I now proceed to dispose of the appeal.
4. The present appeal is directed against the judgment and order dated 26.05.2014 passed by Sh. Vikram, MM-03, South-West District, Dwarka Courts, Delhi in CC No.1798/2014 under Section 138 of Negotiable Instruments Act (NI Act). The respondent/accused was acquitted by the impugned judgment and the complaint preferred by the appellant has been dismissed.
5. The case of the complainant, as set out in the complaint is that the complainant is a member of the National Stock Exchange (NSE) of India, dealing in capital market. Accused No. 1 is the name of a business enterprise of a Hindu Undivided Family (HUF), dealing in capital markets, through accused no. 2, its Karta. The complainant claims that at the request of accused no. 1 through accused no. 2, and in consideration of issuance of a cheque bearing No. 501416 dated 22.6.96 for Rs. 14 Lacs drawn on Oriental Bank of Commerce, Tagore Garden Branch, New Delhi – 110 027, and deposit of certain shares with the complainant as security, the accused were allowed to conduct the sale and purchase of shares on credit basis with the complainant, with the understanding that the aforesaid shares and cheque can be encashed by the complainant, in case of failure of the accused to meet its liability if and when it arises due to the share transactions undertaken by the accused through the complainant. The accused conducted several transactions of shares with the complainant as per the detailed bills and statement of Accounts placed on record, and more than Rs. 14 Lacs were found payable and outstanding against the accused. Hence as per the request of the Accused, the complainant presented the said cheque for encashment to its bank, i.e. the Bank of India, Rajouri Garden, New Delhi (J-2/1, B.K.Dutta Market), New Delhi – 27 on 25.7.96 and the said cheque was dishonoured and returned unpaid due to „Insufficient Fund‟ by the Accused‟s Banker Oriental Bank of Commerce, Tagore Garden Branch, New Delhi – 110 027. An intimation in this regard vide Bank advice dated 27.7.96 along with cheque Return memo and said cheque were received by the complainant through its Bank on 27.7.96.
6. On their failure to pay the outstanding amount, a statutory notice dated 08.08.1996 was served upon the accused. The accused failed to pay the amount of the cheque within the prescribed statutory period. Accordingly, the complainant preferred the complaint under Section 138 NI Act through Sh. Dilip Kumar Agarwal, a Director duly authorised by its Board of Directors. The complainant had claimed that the security cheque of Rs.14 lacs was given to meet the liability which was likely to arise in future, and on the date of presentation there was a liability of more than Rs.14 lacs. The complainant claimed that the cheque was presented with prior notice to the accused.
7. Upon being summoned, the accused entered appearance. The accused was served with the notice on 08.10.1998 under Section 251 CrPC for the offence punishable under Section 138 NI Act, to which the accused pleaded not guilty, and claimed trial. The parties led their respective evidence.
8. Sh. Dilip Kumar Agarwal examined himself as CW-1 and Sita Ram Pratap was examined as CW-2. The statement of accused no. 2 was recorded under Section 313 Cr PC. He denied all the incriminating evidence. He stated that the cheque was not issued to discharge any liability and that the complaint was false. He claimed that a blank cheque had been issued to the complainant. The accused opted to lead defence evidence. The accused summoned Gautam Gupta, Asstt. Manager of NSE as DW-1 and accused No.2 examined himself as DW-2.
10. Learned Counsel for the Petitioner submits that the Trial Court has wrongly placed reliance on Indus Airways (supra), as the facts of that case were very different and the observations of the Supreme Court have to be viewed in the light of the background facts of the case. In that case, the purchase order had been cancelled by the drawer of the cheque given as advance, who was also the purchaser. The supply of goods had not been effected by the seller/ holder of the cheque. Therefore, there was no existing ascertained liability or debt against the accused on the date the cheque was presented for encashment to the Bank. Learned counsel submits that, in contrast, in the present case, on the date of presentation of the aforesaid cheque, there was an ascertained legal liability existing against the accused no. 1/ HUF. The liability was for an amount which was more than Rs. 14 Lakhs. Since the said liability was existing, the complainant was entitled to enforce the security furnished by the accused, on the strength of which the accused were permitted to transact the share purchase/ sale business by the complainant.
11. Ld. Counsel for Petitioner relies on I.C.D.S. Ltd. vs. Beena Shabeer, 2002 (2) SCC 426. He submits that in Beena Shabeer (supra), the Supreme Court held that security cheques would fall within the purview of Section 138 NI Act, and a person cannot escape his liability. As such, when there is an existing liability on the date of presentation of the cheque, and the „security cheques‟ issued are be dishonoured, the accused will be liable under Section 138 NI Act. He submits that while making the above quoted observations in Indus Airways (supra) – which are obiter dicta, as they were not necessary for a decision of the case under consideration before the Supreme Court, the earlier decision in Beena Shabeer (supra) was not brought to the notice of the Supreme Court.
12. On the other hand, learned Counsel for the Respondent has placed reliance on Collage Culture vs. Apparel Export Promotion Council, 2007 (99) DRJ 251to submit that Courts have recognised the distinction between the two kinds of cheques – one, issued in discharge of a debt in presenti, but payable in future, and the other issued in respect of a debt which comes into existence on occurrence of a contingent event, and is not in existence on the date of issue of the cheque. The latter cheque would be by way of security cheque, and would not be covered by Section 138 of the NI Act.
13. He further submits that in Collage Culture (supra), this Court defined the word „due‟ as „outstanding on the relevant date‟. This court held that debt has to be in „existence‟ as a crystallized demand akin to liquidated damages, and not a demand which may, or may not, come into existence.
14. Ld. Counsel for Respondent submits that the cheque in the present case is a security cheque as no liability existed on the date of its issuance, and the liability allegedly came into existence subsequently on account of alleged transactions undertaken by the accused. Since the liability depended on a contingency, the aforesaid cheque – issued as security, will not be covered under Section 138 of NI Act.
“Protection; assurance; Indemnification. The term is usually applied to an obligation, pledge, mortgage, deposit, lien, etc., given by a debtor in order to assure the payment or performance of his debt, by furnishing the creditor with a resource to be used in case of failure in the principal obligation. Collateral given by debtor to secure loan. Document that indicates evidence of indebtedness. The name is also sometimes given to one who becomes surety or guarantor for another”.
“Property etc. deposited or pledged by or on behalf of a person as a guarantee of the fulfillment of an obligation (as an appearance in court or the payment of a debt) and liable to forfeit in the event of default”.
59. Thus, when one party gives a security to the other, implicit in the said transaction is the understanding that in case of failure of the principal obligation, the security may be enforced.
“The term “security” signifies that which makes secure or certain. It makes the money more assured in its payment or more readily recoverable as distinguished from, as for example, a mere IOU, which is only evidence of a debt, and the word is not confined to a document which gives a charge on specific property, but includes personal securities for money. (See Chetumal Bulchand v. Noorbhoy Jafeerji, AIR 1928 Sind 89). It is a word of general import signifying an assurance”.
Thus, the view taken by the Kerala High Court in Sreenivasan (supra) was clearly not approved by the Supreme Court. The Supreme Court rejected the wide proposition that the dishonour of a security cheque issued by a guarantor from his account would not attract Section 138 of the NI Act.
40. I may take note of a decision of the Karnataka High Court in M/s. Klen & Marshalls Manufacturers & Fertilisers Ltd. v. M/s Shri Ishar Alloy Steels Ltd., Crl A No.1610/2001 decided on 26.07.2006. The accused A-6 issued a hundi in favour of the accused A-1 towards supply of certain materials. Under an agreement between A-1 and the complainant, the complainant discounted the hundi and paid an amount of Rs.50 lacs to A-1. In addition to the discounted hundi, A-1 also issued a cheque as security to bind himself, in case A-6 does not pay the hundi amount on the due date. Eventually, the hundi was not paid by A-6 and the cheque issued by A-1 was presented for encashment, but was dishonoured. Consequently, after issuance of statutory notice under Section 138 of NI Act, the complainant preferred the complaint. The accused raised several defences, including the defence that the cheque in question was a security cheque. In this regard, the accused relied on the judgment in Sreenivasan (supra). By referring to an earlier decision in the case of Smt. Umaswamy v. K.N. Ramanath, 2006 (5) AIR Kar R 171, wherein a contrary view had been taken, reliance on Sreenivasan (supra) was rejected. In Umaswamy (supra), the Karnataka High Court had taken the view that the cheque issued either for discharge of debt or as a security makes little distinction in law. Dishonour of cheque in both the situations attracts valid prosecution under Section 138 of N.I. Act. Criminal Appeal No.1842/2008 from the judgment of the Karnataka High Court in M/s Klen & Marshalls (supra) was dismissed by the Supreme Court on 17.08.2010 by observing that “Having heard learned counsel for the parties and perused the record, we find no infirmity in the impugned order”. Thus, the view of the Karnataka High Court in M/s. Klen & Marshalls (supra) was affirmed.
28) was given only as a security will not enable him to escape from the clutches of law”.
“9. Even if blank cheque has been given towards liability or even as security, when the liability is assessed and quantified, if the cheque is filled up and presented to the bank, the person who had drawn the cheque cannot avoid the criminal liability arising out of Section 138 of the Negotiable Instruments Act”.
Thus, the myth that the dishonour of a cheque given as a security, cannot be the subject matter of a compliant under Section 138 NI Act was busted in this decision as well.
55. I may refer to another decision of this Court in Haryana Petrochemicals Ltd. & Anr. v. Indian Petrochemicals Ltd. & Anr., 2015 (1) JCC (NI) 11. The petitioner, Haryana Petrochemicals had issued cheques in lieu of supply of chemicals by the respondent Indian Petrochemicals, which had been dishonoured upon presentation. The learned Magistrate had convicted the petitioners under Section 138 of NI Act. The said judgment was endorsed by the learned Sessions Judge. Consequently, a revision has been preferred before the High Court. The primary submission of the petitioner was that the cheques in question were security cheques, as it was a regular trade practice that after the goods had been received by the petitioner company, fresh cheques in lieu of the security cheques were issued by the petitioners. It was argued that the security cheques, by themselves, would not constitute a legal debt or liability of the petitioner towards the complainant. The Court observed that the manner in which the parties transacted their business was, that the complainant company would send the goods along with the invoices as per the value of the goods. The petitioner/purchaser enjoyed a credit facility, i.e. the payment was not to be made immediately upon receipt of goods. For this reason, the security cheques were issued by the petitioner at the time of taking delivery of the goods. However, they were to be returned upon receipt of payment by the respondent/seller. In case payment was not forthcoming, the security cheques were considered as consideration towards supply of goods, and the respondent would bank the cheques. The cheques in question had similarly been banked since payment was not otherwise made by the petitioner/accused on the expiry of the credit period.
“50. In Indus Airways Pvt. Ltd. & Ors. v. Magnum Aviation Pvt. Ltd., IV (2014) SLT 321, the question that arose for consideration before the Supreme Court was, whether the post dated cheques issued by the appellants (purchasers) as an advance payment in respect of purchase orders could be considered in discharge of a legally enforceable debt or other liability and, if so, whether the dishonour of such cheques amount to an offence under Section 138 of NI Act. The appellants before the Supreme Court were the purchasers who had placed purchase orders and issued post dated cheques in favour of the respondent towards advance payment. One of the terms and conditions of the contract was that the entire payment would be made to the supplier in advance. The supplier claimed that the advance payment had to be made, as it had to procure the parts from abroad. The cheques were dishonoured upon presentation on the ground that the purchasers had stopped payment. Thereafter, the purchasers cancelled the purchase orders and requested for return of the cheques. The respondent/seller insisted on collecting payment and initiated a complaint under Section 138 of NI Act after sending a demand notice.
51. This Court, following its decision in Moji Engineering Systems Ltd. & Ors. v. A.B. Sugars Ltd., 154 (2008) DLT 579, held that the issuance of a cheque at the time of signing such a contract has to be considered against a liability, as the amount written in the cheque is payable by the person on the date mentioned in the cheque.
“…. …. …. If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be considered as subsisting liability and dishonour of such cheque amounts to an offence under Section 138 of the N.I. Act.
In what we have discussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability.
“… Explanation to Section 138 of the Negotiable Instruments Act clearly makes it clear that the cheque shall be relateable to an enforceable liability or debt and as on the date of the issuing of the cheque there was no existing liability in the sense that the title in the property had not passed on to the accused since the goods were not delivered….
15. The Gujarat High Court in Shanku Concretes Pvt. Ltd. and Ors. v. State of Gujarat and Anr., 2000 Cri.L.J. 1988 (Guj.) dealing with Section 138 of the N.I. Act held that to attract Section 138 of the N.I. Act, there must be subsisting liability or debt on the date when the cheque was delivered. The very fact that the payment was agreed to some future date and there was no debt or liability on the date of delivery of the cheques would take the case out of the purview of Section 138 of the N.I. Act. While holding so, Gujarat High Court followed a decision of the Madras High Court in Balaji Seafoods Exports (India) Ltd. and Anr. v. Mac Industries Ltd. 1999 (1) CTC 6″.
20. It is the observation made by the Supreme Court in Indus Airways (supra) – that the dishonoured cheque should be in relation to a debt or other liability subsisting on the date of drawal of the cheque, to be able to maintain a complaint under Section 138 of the NI Act, which is the cornerstone of the legal submission of the respondents/ accused.
24. As noticed above, in Indus Airways (supra) the Supreme Court was considering the fact situation wherein the purchase order was not executed with supply of the contracted goods and, thus, the cheque issued by the purchaser towards advance payment was held as not covered by Section 138 of NI Act. But what happens, where the purchaser while placing the purchase order issues in advance a post-dated cheque; goods/ services are supplied in terms of the contract, and; the post-dated cheque upon presentation on the due date gets dishonoured. The Supreme Court was not dealing with such a fact situation. Could it be said that, because there was no pre-existing or pre-determined debt or other liability on the date of issue of the cheque by the purchaser (as the goods/ services were supplied only after the issuance of the post-dated cheque), a complaint under Section 138 NI Act would not lie?
27. Thus, the “debt or other liability” has to be a legally enforceable debt or other liability. Neither the main provision of Section 138, nor the explanation suggest that the debt or other liability should be in existence on the date of issuance of the cheque, i.e. on the date of its delivery to the drawee or someone on his behalf or, on the date that the cheque bears. The only reference to time in the Section, is the point of time when the cheque is returned unpaid by the drawers bank.
28. In my view, therefore, the scope of Section 138 NI Act would cover cases where the ascertained and crystallised debt or other liability exists on the date that the cheque is presented, and not only to case where the debt or other liability exists on the date on which it was delivered to the seller as a post-dated cheque, or as a current cheque with credit period. The liability, though, should be in relation to the transaction in respect whereof the cheque is given, and cannot relate to some other independent liability. If, on the date that the cheque is presented, the ascertained and crystallised debt or other liability relatable to the dishonoured cheque exists, the dishonor of the cheque would invite action under Section 138 NI Act. There could be situations where, for example, an issue may be raised with regard to the quality, quantity, deficiency, specifications, etc. of the goods/services supplied, or accounting. It would have to be examined on a case to case basis, whether an ascertained or crystallised debt or other liability exists, which could be enforced by resort to Section 138 NI Act, or not.
29. The decision in Collage Culture (supra) is premised entirely on the decision of the Supreme Court in M.S. Narayana Menon (supra). It appears that the decision in Beena Shabeer (supra) was not cited before the Court. In the light of the aforesaid discussion, I am of the view that this decision does not come to the aid of the accused.
30. Thus, I am of the considered view that there is no merit in the legal submission of the respondent accused that only on account of the fact that the cheque in question was issued as security in respect of a contingent liability, the complaint under Section 138 of the NI Act would not be maintainable. At the same time, I may add that it would need examination on a case to case basis as to whether, on the date of presentation of the dishonoured cheque the ascertained and crystallised debt or other liability did not exist. The onus to raise a probable defence would lie on the accused, as the law raises a presumption in favour of the holder of the cheque that the dishonoured cheque was issued in respect of a debt or other liability. As settled by the Supreme Court, the said onus obliges the accused to raise a defence – either by picking holes in the case of the complainant and/ or by positively leading defence evidence which leads the Court to believe that there is a probable defence raised by the accused to the claim of the complainant with regard to the existence of the debt or other liability. The said onus does not cast as stringent an obligation on the accused, as it casts on the complainant, who has to prove beyond reasonable doubt the guilt of the accused.
31. Therefore, I now turn to the facts of the present case to examine as to whether, or not, the accused has been able to raise a probable defence to cast a doubt on the claim made by the complainant with regard to the existence of an ascertained and crystallised debt or other liability in relation to the transactions in respect whereof the cheque in question had been issued as security.
32. The complainant has produced the daily sauda confirmation (Ex. CW1/10 to 15) and the cash difference bills (Ex. CW-1/16) in respect of the share transactions recorded in Ex.CW-1/10 to Ex.CW-1/15, on record to substantiate its claim. The cash difference bills (Ex. CW-1/16) are for the period of 02.07.1996 to 16.07.1996. CW-1, Dilip Kumar Aggarwal in his examination-in-chief stated that “He allowed the transaction on line and detail of the transaction are Exhibited Ex CW1/10 to Ex CW1/15 and the difference bills are collectly Exhibited Ex CW1/16 (Page 17 to 37)”.
33. CW-1 Dilip Kumar Agarwal also exhibited the letter dated 24.07.1996 of the accused as Ex. CW-1/17 along with which the accused tendered a cheque of Rs.50,000/- bearing no.412933 dated 24.07.1996 drawn on its Bank. In this letter, he inter alia, stated “I am giving this cheque towards my liabilities”. Pertinently, accused no.2 did not deny his signatures on the said letter. He only claimed that the said document was signed in blank and given as such to the complainant. This defence of the accused would be tested a little later. The aggregate of cash difference bills (Ex. CW-1/16) which consist of 21 pages, purports to project the liability of the accused as on 24.07.1996 to the tune of Rs. 14,42,789.50.
“It is correct that for becoming a sub-broker with a member of National Stock Exchange, a margin money has to be deposited. The said margin money has to be deposited by the interested person who wants to become sub-broker to the member of National Stock Exchange. No other security is required except the margin money for the purpose of becoming a sub-broker with the member of NSE. Margin money is kept by the member of NSE to secure himself from the fluctuation in the share prices. I did not pay any margin money to complainant company when I did formalities regarding the sub-brokership with the complainant company”.
35. The defence set up by the respondent/accused that accused no.2 had given blank signed papers to the appellant/complainant is unbelievable. Firstly, there is no contemporaneous record produced by the accused to show that the accused had delivered blank signed papers to the complainant for any purpose, much less for the purpose of becoming a sub-broker of the complainant. Secondly, a perusal of Ex. CW-1/10, 1/11, 1/13, 1/15 and 1/17 shows that the signatures of accused no.2 on the said documents are so positioned and placed as to rule out the possibility of the said documents being filled in later. Ex. CW-1/10, 1/11, 1/12, 1/13 and 1/15 are the daily sauda confirmation on a printed format. The signatures appear outside the printed area and are so placed as to suggest that they have been consciously engrossed on these documents close to the printed area. Ex. CW-1/17 is a hand written communication, and there is nothing to suggest that the writing in the said document is different from the signatures of DW-2, which he has admitted. Pertinently, Ex. CW-1/17 records that the accused issued a cheque of Rs.50,000/- towards his liabilities. The said letters along with the cheque were issued on the 24.07.1996, i.e. the same day on which the last of the cash difference bills were prepared. The cash difference bills, as noticed herein above, are premised on the daily sauda confirmation acknowledged by the accused.
36. While claiming that the complainant took his signatures on certain blank papers and “told me that the same were required as some formality with SEBI for making me as sub-broker”, the accused does not even disclose as to who in the organisation of the complainant had held out such a representation to him. While he admits that to become a sub-broker of a member of the NSE margin money has to be deposited to secure the broker/member of NSE, DW-2 states that he did not give any margin money to the appellant member of NSE to become a sub-broker. It is not explained by DW-2, as to why such a preferential treatment was meted out to the respondents by the appellant, and why the appellant exposed itself to such a risk qua the respondents share transactions. This information was within the personal knowledge of DW-2, and his failure to disclose the same raises an adverse inference against the accused. The defence of the accused is merely an ipsi dixi of the accused and appears to be too farfetched and sham. It cannot be construed as a probable defence. A defence would be considered to be probable if it appeals to the Court as probable and reasonable keeping in mind the natural course of conduct of a prudent human being of reasonable intelligence. Thus, the debt/other liability of the accused to the tune of Rs.14.42 lacs stood ascertained, crystallised and established from Ex. CW-1/16 – being the cash difference bills as on 24.07.1996. The cheque in question when presented was in respect of a crystallised outstanding debt owed by the accused. Consequently, its dishonour coupled with the non payment of the cheque amount despite statutory notice led to the commission of the offence under Section 138 of the NI Act.
37. The learned Magistrate founded the impugned judgment on a wrong premise of law, holding that merely because the cheque in question was issued as a security cheque and held that the same could not be the basis of a complaint under Section 138 of the NI Act. The learned Magistrate overlooked the legal position as discussed hereinabove, and in particular the judgment of the Supreme Court in Beena Shabeer (supra). Since the trial court has based its decision on an erroneous view of law, this Court is inclined to interfere with the judgment of acquittal in the light of the guidelines laid down by the Supreme Court in Ghurey Lal v. State of U.P., (2008) 10 SCC 450. The impugned judgment is, accordingly, set aside and the respondents/accused are held guilty and convicted of the offences under Section 138of the NI Act.

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