Choudhary Piara Singh vs Kuldeep Singh

M A Chowdhary, J

This appeal by the appellant [“the complainant”] is directed against the judgment dated 28.09.2017 passed by the learned Special Railway Magistrate, Jammu [“the trial Court”], in Complaint No.77/Comp titled ‘Choudhary Piara Singh v. Kuldeep Singh’, whereby the complaint filed by the complainant was dismissed and the respondent/accused was acquitted of the charge of offence punishable under section 138 of NI Act.

Before the grounds of challenge urged by appellant to assail the impugned judgment are adverted to, it is necessary to first allude to case set up by the appellant-complainant in the complaint filed under Section 138 of Negotiable Instruments Act, against respondent/accused.

As per the appellant-complainant, the respondent-accused took a loan from the complainant’s Corporation, namely, M/S Good Luck Finance Corporation, Hire Purchase Financer, 8-B, Nehru Market, Jammu, for purchase of a vehicle (Truck) bearing Registration No.DL1G-3203. The respondent failed to repay the loan amount and as such, issued cheque No.132481 for an amount of Rs.1,52,781/- in favour of M/S Good Luck Finance Corporation on 31.01.2007 drawn at Citizens Cooperative Bank Limited, Warehouse, Jammu. The aforesaid cheque was presented by the complainant for clearance through Jammu and Kashmir Bank Limited, Branch Nehru Market, Jammu but the same was dishonored and returned on 11.04.2007 with the memo ‘insufficient funds’. Legal notice was sent to the respondent-accused through registered postal service, but the same was returned with the remarks “addressee refused redirected to sender”. The appellant-complainant contended that despite service of notice, accused failed to make payment, which constrained him to file the complaint.

Notice of the complaint was issued to the respondent-accused, who caused his appearance and was examined by the Trial Court, with regard to the accusation, under Section 242 CrPC on 12.11.2007. The respondent-accused pleaded ‘not guilty’ to all the allegations leveled in the complaint and sought trial.

The complainant, besides himself appearing in the witness box, examined Madan Lal Postman and S. Balbinder Singh, Manager, J&K Bank Limited Branch Nehru Market in support of his complaint, whereas respondent-accused examined Kudeep Singh, Romesh Kapoor, Vakil Singh and Krishan Lal, as his witnesses in defense.

The Trial Court, after appreciating the evidence and having regard to the settled legal position, held that the accused raised a probable defence, which creates doubt about the existence of a legally enforceable debt or liability and dismissed the complaint of the appellant vide judgment dated 28th September, 2017. It is this judgment of the trial Court which is impugned in this appeal.

The judgment impugned is assailed on the following grounds:-

i) That the impugned judgment is perverse and is against law and facts of the case;

ii) Since the respondent has admitted issuance of the cheque and his signatures on it, presumption under Section 118 of Negotiable Instruments Act was to be drawn in favour of the appellant for the purpose of consideration but the trial Court has failed to appreciate this legal position;

iii) That the learned trial Court has misdirected itself in appreciating the evidence on record;

iv) That the conclusion arrived at by the learned trial Court that the respondent has raised a probable defence regarding the existence of legally enforceable debt and liability is against the facts of the case;

v) That the observation of the learned trial Court that the accused has issued a blank cheque, therefore, same cannot be taken as a cheque legally issued and, as such, no legally enforceable debt is against the settled legal position; and

vi) That the trial Court has given undue weightage to the statement of Kuldip Singh and his father Vakil Singh, ignoring the fact that these defence witnesses were partisan and interested witnesses.

Learned counsel for the appellant has placed reliance on Nita Kanoi @ Bansal v. Paridhi and others, 2015(4) Cr. CC 690, Shivani Tiyagi v. State of U.P., 2017(1) All LJ 552 and General Auto Sales v. Vijaylakshmi 2005 CriLJ 1454.

Per contra, learned counsel for the respondent-accused while supporting the judgment impugned has submitted that the findings returned by the trial Court are absolutely correct and in terms of the settled legal position, therefore, needs no interference in appeal and prayed for dismissal of the appeal.

Heard learned counsel for the parties and perused the material available on record.

There is no dispute with regard to obtaining of loan by the respondent-accused from the appellant-complainant. Even delivery of cheque duly signed by the respondent has been admitted by the respondent. The only defence, as projected by the respondent-accused, before the trial Court was that the respondent-accused had liquidated the loan obtained by him from the appellant-complainant in the year 1997 against which cheque in question was given as security. Therefore, there is no legally enforceable debt or liability. In his defence, the respondent-accused has stated that after re-payment of entire loan amount, he approached the appellant for settlement of account to which complainant did not agree and instead seized the vehicle. The respondent-accused denied the second loan having been obtained by him from the appellant-complainant. The respondent has admitted issuance of cheque and his signatures on the cheque.

The complainant in his statement has deposed that the respondent obtained a loan of Rs.1,52,781/- from the appellant and issued cheque No.132481 for an amount of Rs.1,52,781/- drawn at Citizen’s Cooperative Bank Branch Warehouse, Jammu. The cheque was presented for clearance but was returned with a memo. As per the complainant, the cheque was issued after negotiation. After dishonor of the cheque, a legal notice was served upon respondent/accused, however, he did not make any payment. As per the complainant, respondent obtained a loan earlier also and after paying 2/3 installment, became defaulter.

The trial Court holding that the respondent/accused has been able to raise a probable defence which created doubts about the existence of a legally enforceable debt or liability, dismissed the complaint filed by the appellant/complainant and acquitted the respondent/accused. The trial Court has relied upon the plea of the respondent that the impugned cheque was obtained by the appellant in the year 1997 i.e. prior to the lending of the loan in the year 2001. According to the trial Court, the cheque in question being the first leaf of the cheque book obtained by the respondent while opening account in Citizens Cooperative Bank, Warehouse in the year 1997 was delivered to the appellant as ‘security’ against the loan secured by the respondent from appellant in the year 1997 and that loan stands liquidated, therefore, there is no legally enforceable debt.

If it is believed that the cheque in question was issued against the loan obtained by the respondent in the year 1997 and that loan stands liquidated then why the respondent has not demanded back the cheque from the appellant which was kept as security is not forthcoming. The respondent has not stated anything about the steps taken by him with regard to refund of cheque from the appellant. The respondent in his cross-examination before the trial Court has even denied the obtaining of second loan in the year 2001. However, father of the respondent in his statement has deposed that the vehicle was again financed in the year 2000-2001 and the appellant again obtained a cheque from the respondent.

To attract Section 138 of Negotiable Instruments Act, complainant has to only prove that:

(1) the accused has issued a cheque for discharge of legally recoverable debt;

(2) The same was presented through his banker;

(3) It was dishonoured on presentation;

(4) The notice in terms of the provisions was served on the accused; and

(5) Despite service of notice neither any payment was made nor other obligations, if any, were complied within 15 days from the date of receipt of notice.

In the instant case, issuance of cheque in discharge of legally enforceable debt is admitted by the respondent. The presentation of cheque for clearance through banker and its dishonor is also proved. Service of notice is also not denied. The only defence projected by the respondent is that the loan against which the cheque in question was given as ‘security’ to the appellant stands liquidated but he has not stated anything about demand to return the cheque and if refused what steps have been taken by him for recovery of the cheque. It has also come in the evidence that the vehicle against which the loan was got by the respondent in the year 1997 from the appellant was refinanced in the year 2001-2002. May be for this reason the respondent has not pressed for return of the cheque and agreed to keep the earlier cheque as security against the second loan also.

Hon’ble Supreme Court in the case of M/S M.M.T.C. Ltd. V. M/S Medchi Chemicals & Pharma (P) Ltd., (2002) 1 SCC 234 has observed as under:-

‘There is therefore no requirement that the complainant must specifically allege in the complaint that there was a subsisting liability. The burden of proving that there was no existing debt or liability was on the respondents. This they have to discharge in the trial. At this stage, merely on the basis of averments in the petition filed by them the High Court could not have concluded that there was no existing debt or liability.”

Section 139 of the Negotiable Instruments Act reads as under:-

“139. Presumption in favour of holder:- It shall be presumed, unless the contrary is proved that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.”

From a bare reading of Section 139 of the N.I. Act, it becomes clear that unless the contrary is proved, it is to be presumed that the holder of the cheque received the cheque for the discharge, in whole or in part, of any debt or other liability. True it is that the presumption contemplated under Section 139 of the Negotiable Instrument Act is rebuttable presumption, however, onus of proving by cogent evidence that cheque was not in discharge of any debt or other liability is on the accused-respondent.

Hon’ble Supreme Court with regard to the presumption provided under the Negotiable Instruments Act under Sections 20, 87 and 139 in a case titled Bir Singh v. Mukesh Kumar (2019) 4 SCC 197 has held in para 37 as under:

“37. meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.”

It has been further held in Para 38 that even if a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars which makes it the person, who had drawn the signed cheque, liable. Para 38 of the judgment is extracted as under:

“38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence.”

The Apex Court has further observed in para 42 of the judgment supra, which is applicable to the facts of the present case as under:

“42. In the absence of any finding that the cheque in question was not signed by the respondent-accused or not voluntarily made over to the payee and in the absence of any evidence with regard to the circumstances in which a blank signed cheque had been given to the appellant-complainant, it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent-accused being the drawer, at his request and/or with his acquiescence. The subsequent filling in of an unfilled signed cheque is not an alteration. There was no change in the amount of the cheque, its date or the name of the payee. The High Court ought not to have acquitted the respondent-accused of the charge under Section 138 of the Negotiable Instruments Act.”

The main thrust of the argument of the learned counsel for the respondent is that the cheque in question in the complaint before the Trial Court was just a ‘security cheque’ and it does not make the accused liable for any legal liability, however, such a contention in a case tilted General Auto Sales v. Vijayalakshmi, reported as 2005 CrlLJ 1454 by the Hon’ble Kerala High Court has been ruled out, by holding in para 8 which is extracted as below for ready reference:

“8. Even if a blank cheque has been given towards liability or even a 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.”

Similarly in a recent case tilted Amarjit Singh v. Mohinder Singh, reported as 2023 (1) RCR (Crl) 796, Hon’ble Punjab & Haryana High Court has also taken a similar view holding that even if the cheques were security cheque, same would not further the case of the petitioner. As such, a cheque can also be used towards discharging the liability of the drawer and no interference was made with the conviction recorded by the Trial Court.

Hon’ble Calcutta High Court in a case tilted ‘Nita Kanoi v. Paridhi and Ors. reported as 2015 (4) Crl.CC 690 in para 8 has held as under:

“8. In the case at hand the signatures in the cheque has not disputed by the petitioner as that of him, but he claimed that the name of the payee and the cheque amount was not filled up by him. The section 20 of the Negotiable Instrument Act defined such a cheque as “inchoate stamped instrument”. According to the said provision, where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instrument, either wholly blank or having written thereon, an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it, a negotiable instrument for any amount specified therein and not exceeding amount covered by the stamp. The provision further provides the person so signing shall be liable upon such instrument, in the capacity in which he signs the same, to any holder in due course for such amount: Provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.”

The respondent has not taken a plea that he had not issued the cheque rather he had taken a stand it was just a security cheque and that he had repaid the loan and had not raised any subsequent loan. However, during the trial before the Trial Court he could not prove the facts raised by him in his defence as the same were required to be proved by him being onus on him due to presumptions under the Act. So far the issuance of cheque as security cheque is concerned, the same has been authoritatively decided by the Apex Court and also by the High Courts in the judgments referred hereinabove and the same is no defence available to the respondent as an accused.

In view of the settled legal position and having regard to the evidence on record having been carefully examined, this court is of the opinion that the respondent had failed to raise a probably defence regarding existence of a legally enforceable debt or liability by leading cogent evidence.

The complainant by leading cogent evidence that the accused had issued a cheque against a liability to the complainant, which on presentation to the bank of the accused was dishonored for insufficient funds and despite issuance of legal notice; accused failed to make the payment, has proved the ingredients of the offence punishable U/S 138 of N.I. Act. More so coupled with the statutory presumption as discussed hereinabove, which accused failed to repudiate.

For the foregoing reasons and discussion made hereinabove, it is held that complainant has succeeded to prove against the accused the commission of offence punishable U/S 138 of N.I. Act. The Trial court has, thus, misdirected itself in appreciation of the evidence on record to record his acquittal. The impugned judgment is, thus, liable to be set aside being unsustainable.

Having regard to the facts and circumstances of the case and evidence on record, appeal is allowed. The impugned judgment is set aside. Accused is convicted for the commission of the offence punishable U/S a138 N.I. Act and is sentenced to the payment of fine of Rs.1,00,000/- (One lakh rupees). Trial Court record shall be sent down for follow up action and information.

Appeal is thus disposed of as allowed.