The present complaint u/s 138 Negotiable Instruments Act, 1881 (herein referred to as NI Act) has been filed by Shri Sarvesh, authorized representative of the complainant company (herein referred to as the 'complainant') against M/s Platinum Clubs & Inns Pvt Ltd i.e. accused no. 1, Shri Madho Prakash Somani i.e. accused no. 2 and Shri Sanjeev Aeren i.e. accused no.

4. (herein referred to as the 'accused').

2. Briefly stated, the case of the complainant is that the complainant invested his money in the accused group company to which the accused had assured to compensate the complainant. In order to discharge this legal liability, the accused had issued a cheque bearing no. 898479 dated 30.09.2016 in the sum of Rs.10,20,970/- drawn on Yes Bank, Nehru Place branch, New Delhi in favour of the complainant.

Upon presentation of the said cheque, it got dishonoured with the same remarks 'Signature not as per the mandate' vide return memo dated 23.11.2016. The legal demand notice dated 09.12.2016 was duly sent by the complainant to the accused by Case No. 3066/2017 Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

post on 09.12.2016. The accused failed to make the payment of amount mentioned in the cheque within the statutory period. Hence, the present complaint under Section 138 of Negotiable Instruments Act, 1881 (hereinafter referred to as ' NI Act ') was filed.

3. On issuance of summons, the accused persons entered appearance in the present matter for the first time on 08.05.2017 and were admitted to bail. Notice u/s 251 Cr.P.C was served upon the accused persons on 13.07.2018, 16.11.2017 and 25.01.2018, to which they pleaded not guilty and claimed trial. Their plea of defence was also recorded. Thereafter, accused no. 4 was allowed to cross examine the complaint u/s 145(2) NI Act. Thereafter, the complainant evidence was closed vide order dated 05.10.2018 and the matter was fixed for recording of statement of the accused persons u/s 313 Cr.P.C and the same was recorded on 04.01.2019 and 04.07.2019. In their defence, the accused persons examined DW-1 Shri Nidish Kumar Singh, Senior Technical Assistant, office of Registrar of Companies, and DW-2 Shri Ganga Prasad, Field Officer, Yes Bank. Thereafter, matter was fixed for final arguments.

upon various documents such as:

Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

APPLICABLE LAW:-

Now, Section 138 Negotiable Instrument Act provides as under:

12/251, DBOD AMLBCNo. 47/19.01.0062011/12,dated 04.11.2011) from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, 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 thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation -- for the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability. It is well settled position of law that to constitute an offence under S.138 N.I. Act, the following ingredients are required to be fulfilled:

demanding payment of the cheque amount, (5) failure of the drawer to make payment to the payee or the holder in due course of the cheque, of the amount covered by the cheque within 15 days of the receipt of the notice.

Being cumulative, it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the N I Act.

The Act raises two presumptions in favour of the holder of the cheque i.e. Complainant in the present case; firstly, in regard to the passing of consideration as contained in Section 118 (a) therein and, secondly, a presumption under Section 139 , that the holder of cheque receiving the same of the nature referred to in Section 138 for discharge, in whole or in part, of any debt or other liability. Analysing all the concerned provisions of law and various pronouncements in this regard, the Hon'ble Apex Court in Basalingappa v. Mudibasappa , AIR 2019 SC 1983, noted at para 23 as follows [ Bharat Barrel and Drum Manufacturing Company v. Amin Chand Pyarelal , (1999) 3 SCC 35; M.S. Narayana Menon alias Mani v. State of Kerala and another , (2006) 6 SCC 39; Krishna Janardhan Bhat v. Dattatraya G. Hegde , (2008) 4 SCC 54; Kumar Exports v. Sharma Carpets , (2009) 2 SCC 513; Rangappa v. Sri Mohan , (2010) 11 SCC 441 referred]:

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 they rely.

(iv) That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposes an evidentiary burden and not a persuasive burden.

(v) It is not necessary for the accused to come in the witness box to support his defence.

To put in nutshell, the law regarding the presumption for the offence under Section 138 N.I. Act,is that the presumptions under Sections 118(a) and 139 have to be compulsorily raised as soon as execution of cheque by the accused is admitted or proved by the complainant and thereafter burden is shifted upon the accused to prove otherwise. These presumptions shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability etc. The onus to prove the issuance of the cheque lies upon the complainant, and the same has to be proved beyond reasonable doubt, unless the accused admits the Case No. 3066/2017 Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

same. Once the issuance of cheque is established, either by admission or by positive evidence, the presumption under Section 139 of the Negotiable Instruments Act, 1881 arises. We can summarize the general principles in the following way:

Judge Bench of hon'ble Supreme Court in Rangappa Vs. Sri Mohan , (2010) 11 SCC 441 has held that:

Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

10. In the present case, the accused no. 4 has not denied his signatures on the cheque Ex.CW1/1. Thus, the factum of signatures on the cheque is not disputed and has been acknowledged.

11. It is pertinent to mention here that Sec. 139 only raises the presumption on fulfillment of its conditions that the cheque was issued for discharge of in whole or in part any debt or other liability but there is no presumption as to the existence of the debt or liabilty as such. In Rangappa (supra) it has been held that :

12. As regards the legal notice, the receipt of the same has not been admitted by the accused. However, as per postal receipts legal demand notice Ex.CW1/6 (colly) were duly sent to the accused at their correct addresses. As per provisions of Section 114 of Indian Evidence Act, 1872, read with Section 27 of General Clauses Act, the court may presume that legal notice duly addressed to the accused and dispatched to him by way of post was actually received by the accused, regard being had to common course of natural events. Reliance is also placed upon the case of C C Alavi Haji v. Palapetty Muhammed [2007 (6) SCC 555] wherein it was held by the Hon'ble Supreme Court that:

Hence, in my opinion, legal notice Ex.CW1/5 was duly served upon the accused.

13. As regards to the fact of dishonour of the cheque in question, the original return memo Ex.CW1/3 filed by the complainant clearly shows that the cheque in question Ex.CW1/1 was dishonoured for the reason 'Signature not as per the mandate'. In the case at hand, neither any argument has been raised on behalf of the accused to dispute the dishonor of the cheques nor this fact has been denied at any stage of the matter. Thus, taking into account that dishonour of cheque is not disputed, this fact, also stands proved.

14. Thus, the presentation of the cheque in question, its dishonour and service of legal notice is not under question. Consequently, the complainant has successfully raised a presumption under Section 139 NI Act.

Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

Accordingly, it is required to be presumed that the cheque in question was drawn for consideration and the holder of the cheque i.e., the Complainant received the same in discharge of an existing debt. The onus, therefore, shifts on the Accused to establish a probable defence so as to rebut such a presumption.

In the segment on legal framework, set out above, the legal proposition with respect to the burden of proof upon the Accused has already been discussed. Hence, it is now to be examined as to whether the Accused brought any material on record or pointed out glaring discrepancies in the material produced by the Complainant for dislodging the presumption which meets the standard of preponderance of probabilities.

15. In the present matter, the first defence of the accused is that the cheque in question was given as a security cheque to the complainant and not for the repayment. It is thereby submitted that provisions of Section 138 NI Act do not apply in the present matter. In this regard, it is noted that the Hon'ble High Court of Delhi in Suresh Chandra Goyal v. Amit Singhal, Crl . L.P, 706/2014 has succinctly observed that:

Therefore, the defence of the cheque being a security cheque Case No. 3066/2017 Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

does not by itself rebut the presumption. Here it is noted that if the observations in Suresh Chandra Case (supra) are considered, it appears that if on the date of presentment of cheque, liability of the accused existed towards the complainant, the same would fall under Section 138 NI Act, even if the same was issued as a security cheque; and hence, it is not relevant if the cheque in question was issued with the intent of being a security cheque. In fact, the Hon'ble Supreme Court in a recent judgment of the Sunil Todi Case (Supra), has held that the provisions of Section 138 NI Act apply to cheques issued on advance basis as well, if at the time of presentation of the same, liability exists. It was observed that:

Accordingly, this argument/defence of the accused, by itself, does not rebut the presumption u/s 139 NI Act.

16. Another argument raised on behalf of the accused is that the legal liability is not crystallized. It is the argument of the accused that the complainant had not made any investment in the accused company. It is further stated that the cheque in question Case No. 3066/2017 Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

was issued in pursuance of a proposed investment which the complainant was supposed to make in the accused company but never made. It is, thus, the case of the accused that as no investment was ever made by the complainant, no legal liability exists in favour of the complainant.

17. To bolster this argument, the accused has placed on record Mark A/1 (colly) which is the balance sheet of accused no. 1 for the year 2005-2006 which shows that no investment was ever made by the complainant in the accused company.

18. On the contrary, it is the case of the complainant that the investment was made in the group company named Third Reit belonging to the accused persons. The cheque in question was issued by the accused in pursuance of the above mentioned investment for the purpose of paying the assured return.

In order to prove the investment, the complainant has placed on record the document Mark D which is a receipt in sum of Rs. 10,00,100/- issued by Third Reit in favour of the complainant. Perusal of this document reveals that the said document is signed by the accused no. 4 who is also a signatory to the cheque in question. It is important to note that the existence of this receipt is not disputed by the accused when the same was placed on record by the complainant.

The complainant has also placed on record the Statement of Account for the year 2005-2006 Mark-E which shows that Rs. 10,00,100/- were transferred to Third Riet.

Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

In addition, the complainant alongwith the complaint has also placed on record a cover letter which is Ex.CW1/2 dated 22.06.2016 which is sent by accused no. 1 to the complainant. The document states "We are enclosing herewith a cheque bearing no. 898479 of Rs. 10,20,970/- dated 30.09.2016 drawn on Yes Bank, New Delhi, as an additional compensation against your investment with our group company. We assure you that the cheque would be treated on due date. This is our assurance to you". The cheque mentioned in the cover letter is the cheque in question in the present matter. This document clearly confirms that the accused acknowledges that the complainant had made investment in the group company.

In the light of which the argument that no investment was made cannot be sustained.

19. Now, the only question which remains to be decided is that as the cheque was given by accused no. 1 to discharge liability on behalf of its another group company, could the accused be made liable?

20. In order to decide this question, it is important to discuss the meaning of the words 'any debt or other liability' as mentioned in S. 138 of NI Act. The words 'debt' or 'liability' undoubtedly refers to a debt or liability which could be legally enforced. However, the important words which need interpretation are 'any' and 'other'.

Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

The question which arises here is/was the intent of the legislature only to include that liability which is owed specifically by the drawer of the cheque in favour of the payee?

Or Did the legislature intend to include within its purview any legal liability of debt which is legally enforceable, whether it was owed by the drawer or any other person/entity in relation to which the drawer intends to pay ?

21. In the present case, the cheque in question has been drawn by the accused for discharge of the legal liability which their group company owed in favour of the complainant. The first and foremost essential ingredient for attracting a liability under Section 138 NI Act is that the person who is to be made liable should be the drawer of the cheque and should have drawn the cheque on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for discharge, in whole or part, of any debt or other liability.

22. In Krishna Texport and Capital Markets Ltd. v. Ila A. Agrawal & Ors , (AIR 2015 SC 2091), Hon'ble Supreme Court has held as under:

23. In the present case, the Legal Demand Notice has been issued to the accused and they were given an opportunity to make the payment of cheque in question. The procedural requirements of Section 138 NI have been duly met by the Complainant. The objective of Section 138 of NI Act is to promote the efficiency of banking operations and to ensure credibility in transacting business through cheque as has been mentioned in the case of Modi Cements Ltd. v. Kuchil Kumar Nandi (1998) 3 SCC 249. What Section 138 is concerned with is that whether the cheque has been issued for 'any debt or other liability' or not.

Given the objective, it cannot be restricted that the legislature intended that the debt or liability has to be that of the drawer only.

24. Therefore, this court is not in agreement with the argument that though the accused issued the cheque for discharge of liability of another and having other requirements of Section 138 NI Act met with, they cannot be held liable.

25. It is a settled position that accused has to rebut the presumption raised under Section 139 and the standard of proof of which is 'preponderance of probabilities'. It is for the accused to raise a probable defence which creates a doubt on the version of the complainant. The accused, in the present matter has been unsuccessful in creating a doubt on the existence of the legal liability. The complainant on the other hand has proved his case Case No. 3066/2017 Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

beyond reasonable doubt.

CONCLUSION:-

26. On close scrutiny, this court has come to the conclusion on the basis of evidence brought on record by the Complainant that the version put forth by the complainant seems far more plausible in comparison to the version stated by the accused. Therefore, the court opines that cumulatively, the accused has not been able to rebut the presumption raised against them under section 139 NI Act.

27. Resultantly, the accused no. 1 stands convicted of the alleged offence under section 138 of NI act.

In relation to the liability of accused no. 2, the fact that the accused no. 2 is the director of accused no. 1 is undisputed. In statement u/s 313 Cr.P.C, the accused no. 2 has stated "I am only director and not Managing Director in accused no. 1 company. I was not involved in day to day management of accused no. 1 company." It is the argument on behalf of accused no. 2 that he was not involved in day to day affairs business of the company and therefore, he cannot be held liable.

However, perusal of statement of accused no. 2 u/s 313 Cr.P.C and Notice u/s 251 Cr.P.C framed upon him reveals that the accused had full knowledge of the transaction in dispute. It could clearly be stated that accused no. 2 was not a sleeping director. The accused has also not placed on record any evidence which Case No. 3066/2017 Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.

could support this contention. In the light of the above, this court finds that the accused no. 2 being aware of the transactions of the accused company with the complainant, was involved in day to day affairs business of the company. Hence, accused no. 2 also stands convicted.

In relation to liability of accused no. 4, it is undisputed that accused no. 4 is the director. The fact that accused no. 4 is the signatory to the cheque in question clearly points out that the accused no. 4 is involved in day to day affairs business of the company. Hence, accused no. 4 also stands convicted.

Announced in the open court today on 27.07.2022.

This judgment contains 19 pages all are signed by me. A copy of this judgment be placed on the official website of the District Court.

(ADITI RAO) Metropolitan Magistrate-03 (NI Act) South-East, Saket Courts, New Delhi Case No. 3066/2017 Jagdish Chand Gupta vs. M/s Platinum Clubs & Inns Pvt Ltd & Ors.