The witness was questioned in detail about in all 14 cheques
received from the respondents against particular invoices and he
admitted. Thus, there were questions in respect of the contents of the said
document i.e., letter dated 8.3.2004. The learned Magistrate ought to have exhibited the said document. In respect of the reading this document and exhibition of this document in evidence, at the appellate stage, the learned Counsel for the respondents has argued that this document was not exhibited because it was not signed by anybody. However, it is a fact that the said document was brought by the witness, the employee of the complainant but was called by the complainant. Therefore, in fact, he was a witness of the accused though he was giving evidence for the prosecution.
This particular letter was brought at the instance of the
accused and, therefore, the respondent ought not to have objected to the exhibition of the said document. The learned Counsel for the appellant
has also submitted that at the relevant time, the document was objected
as it was not signed. However, after going through the evidence of the
witnesses and the questions put to the witness in the cross-examination,
this document ought to have been exhibited and read in the evidence.
The learned Counsel obviously wanted this document to be exhibited
because the document discloses a chart divided under the five heads in
five columns i.e., cheque numbers stating the numbers of all 14 cheques,
dates of issuance of cheques, amount of the documents, name of the
bank on which the cheque is drawn, the bill numbers i.e., against which
the particular cheque was drawn. Thus, obviously, the learned Counsel
for the appellant now wants to rely on this document to show that the issuance of the cheque by the respondents was against bill to bill and it was not as a part of running account.
I am of the view that the learned Magistrate has committed an error in not accepting these documents when the document was relied and
brought on record as the document was brought by the accused in the
cross-examination, the document was written on the letterhead of
Garware Synthetics and it was received by the other party. After all,
exhibition of document is a ministerial act of the Court. The stamp on the
document was shown and accepted and the witness was fully aware of
the contents of the document and the transaction and, therefore, when
questions were allowed on the contents of the document and no objection
was raised at the relevant time in respect of bringing the contents of the
document on record, the learned Magistrate ought to have admitted the
said document in the evidence and should have taken it on record by
exhibiting it. Thus, when the contents in the document are brought on
record then the document is required to be exhibited and read as a whole to find out facts and ultimately to reach to the truth. Therefore, I am of the view that this particular document can be read as a whole, as submitted by Mr.Laddha, leaned Counsel for the applicant. Hence, the document is to be read in the evidence but it cannot be read partially, it is to be read as a whole, in appeal.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION NO.230 OF 2012
M/s.K.M. Enterprises Vs. M/s.Garware Synthetics Ltd. & Ors.
CORAM: MRS.MRIDULA BHATKAR, J.
DATE: SEPTEMBER 26, 2014
Citation; 2015 ALLMR(cri)38
M/s.K.M. Enterprises Vs. M/s.Garware Synthetics Ltd. & Ors.
CORAM: MRS.MRIDULA BHATKAR, J.
DATE: SEPTEMBER 26, 2014
Citation; 2015 ALLMR(cri)38
Applications for leave to appeal are allowed.
Admit appeals.
Appeals to be numbered accordingly. By consent, the appeals are called
out forthwith and heard finally, at the stage of admission
2.
In all these 13 appeals, the parties are same with same status i.e.,
the appellant company is the original complainant and the respondents
are the original accused. All these criminal cases were filed under section
138 of the Negotiable Instruments Act as the cheques issued by the
respondents in favour of the complainant were dishonoured. Out of these
13 cases, 9 cases are decided by the learned Metropolitan Magistrate, 30th
Court, Kurla, Mumbai by the judgement and order dated 29.11.2011 and
the other four matters are decided by the learned Metropolitan Magistrate,
33rd Court, Ballard Pier, Mumbai by judgment and order dated 9.1.2014.
In all these criminal cases, the respondents are acquitted and, therefore,
these appeals are preferred by the original complainant challenging these
judgments and orders of acquittal against the respondents.
3.
The complainant is a partnership firm and is in the business of
manufacturing of plastic granules and Respondent No.1 is a registered
company. They are in the business of manufacturing plastic yarn. The
complainant is a supplier of the raw material to the respondent company.
138 of the Negotiable Instruments Act as the cheques issued by the
respondents in favour of the complainant were dishonoured. Out of these
13 cases, 9 cases are decided by the learned Metropolitan Magistrate, 30th
Court, Kurla, Mumbai by the judgement and order dated 29.11.2011 and
the other four matters are decided by the learned Metropolitan Magistrate,
33rd Court, Ballard Pier, Mumbai by judgment and order dated 9.1.2014.
In all these criminal cases, the respondents are acquitted and, therefore,
these appeals are preferred by the original complainant challenging these
judgments and orders of acquittal against the respondents.
3.
The complainant is a partnership firm and is in the business of
manufacturing of plastic granules and Respondent No.1 is a registered
company. They are in the business of manufacturing plastic yarn. The
complainant is a supplier of the raw material to the respondent company.
During the period from 2003 to 2004, a number of cheques were issued by
the respondent company in favour of the complainant firm after receiving
raw material. However, on presentation of those cheques, they all were
dishonoured for want of insufficient funds and thereafter the complainant
firm issued notices against the dishonour of all these cheques. However,
the respondent company did not respond positively and refused to pay
and therefore these 13 cases were filed by the complainant firm against
the respondent company under section 138 of the Negotiable Instruments
the respondent company in favour of the complainant firm after receiving
raw material. However, on presentation of those cheques, they all were
dishonoured for want of insufficient funds and thereafter the complainant
firm issued notices against the dishonour of all these cheques. However,
the respondent company did not respond positively and refused to pay
and therefore these 13 cases were filed by the complainant firm against
the respondent company under section 138 of the Negotiable Instruments
Act. All the complaints were dismissed as the complainant could not
prove its case on the point that the respondents were liable to pay legally
dischargeable debt and, therefore, all these appeals were filed by the
4.
complainant firm.
Mr.Laddha, learned Counsel appearing for the appellants, has
submitted that the orders passed by the learned Metropolitan Magistrate,
Kurla in the nine cases and the orders passed by the learned Metropolitan
Magistrate, Ballard Pier, are erroneous, illegal and ought to be set aside.
He submitted that the learned Metropolitan Magistrates have believed that
all the cheques were issued in favour of the complainant. The respondents
have also not denied that the cheques were issued by Santosh Borkar or
Sunder Mollya and Mr.S.D. Barve on behalf of the company of the
respondents. He submitted that when the learned Judge believed that the
cheques were issued by the respondents, then, he should have relied on
prove its case on the point that the respondents were liable to pay legally
dischargeable debt and, therefore, all these appeals were filed by the
4.
complainant firm.
Mr.Laddha, learned Counsel appearing for the appellants, has
submitted that the orders passed by the learned Metropolitan Magistrate,
Kurla in the nine cases and the orders passed by the learned Metropolitan
Magistrate, Ballard Pier, are erroneous, illegal and ought to be set aside.
He submitted that the learned Metropolitan Magistrates have believed that
all the cheques were issued in favour of the complainant. The respondents
have also not denied that the cheques were issued by Santosh Borkar or
Sunder Mollya and Mr.S.D. Barve on behalf of the company of the
respondents. He submitted that when the learned Judge believed that the
cheques were issued by the respondents, then, he should have relied on
the presumption under section 118 of the Negotiable Instruments Act and
The
also under section 139 of the Negotiable Instruments Act.
presumption is to be first read under section 118 independently and then,
should have been alongwith the presumption under section 139 of the
Negotiable Instruments Act as it is a special provision supporting the
object of section 138 of the Negotiable Instruments Act.
The learned
Metropolitan Magistrate, Kurla has rejected the case of the complainant
mainly on two grounds: one that Santosh Borkar is not an authorised
The learned Magistrate, Kurla held that as per the
complaints.
The
also under section 139 of the Negotiable Instruments Act.
presumption is to be first read under section 118 independently and then,
should have been alongwith the presumption under section 139 of the
Negotiable Instruments Act as it is a special provision supporting the
object of section 138 of the Negotiable Instruments Act.
The learned
Metropolitan Magistrate, Kurla has rejected the case of the complainant
mainly on two grounds: one that Santosh Borkar is not an authorised
The learned Magistrate, Kurla held that as per the
complaints.
signatory so, he should have been made an accused in the original
requirement of section 138, a person who is a signatory, is to be held
responsible for dishonour of the cheque. He submitted that the view taken
by the learned Metropolitan Magistrate, Kurla that as Santosh Borkar was
not an authorised signatory, the case should fail on this count, is not
consistent with the settled position of law, especially the ratio laid down in
the case of Laxmi Dyechem vs. State of Gujarat1.
He submitted that
substitution of new authorised signatories is also cannot be a ground to
justify dismissal of the complaints. The Hon'ble Supreme Court has held
that this amounts to constituting offence under section 138 of the
Negotiable Instruments Act.
He further submitted that as once it is
accepted that the cheques were issued and they were bounced for want of
1 2012 (12) JT 65
requirement of section 138, a person who is a signatory, is to be held
responsible for dishonour of the cheque. He submitted that the view taken
by the learned Metropolitan Magistrate, Kurla that as Santosh Borkar was
not an authorised signatory, the case should fail on this count, is not
consistent with the settled position of law, especially the ratio laid down in
the case of Laxmi Dyechem vs. State of Gujarat1.
He submitted that
substitution of new authorised signatories is also cannot be a ground to
justify dismissal of the complaints. The Hon'ble Supreme Court has held
that this amounts to constituting offence under section 138 of the
Negotiable Instruments Act.
He further submitted that as once it is
accepted that the cheques were issued and they were bounced for want of
1 2012 (12) JT 65
insufficient funds or stop payment instructions without any explanation by
the drawer, then, the Courts ought to have been completely relied on
In
presumption under section 138 of the Negotiable Instruments Act.
support of this, he relied on Rangappa vs. Mohan & anr,2 Vinod Tanna &
Ors. vs. Zahir Siddiqui3 (paragraph 2 thereof).
5.
He further submitted that secondly the learned Metropolitan
Magistrate, Kurla, held that no ledger account has been produced by the
the drawer, then, the Courts ought to have been completely relied on
In
presumption under section 138 of the Negotiable Instruments Act.
support of this, he relied on Rangappa vs. Mohan & anr,2 Vinod Tanna &
Ors. vs. Zahir Siddiqui3 (paragraph 2 thereof).
5.
He further submitted that secondly the learned Metropolitan
Magistrate, Kurla, held that no ledger account has been produced by the
complainant i.e., the appellant and, therefore, the complainant did not
prove that it was a legally dischargeable liability. The complainant in the
cross-examination was questioned that if he could produce ledger
account, then, he should have produced it on the next date. However, he
did not produce the same. The finding of the learned Judge while
assessing this evidence that the cheques issued by the accused were
not against the amounts which were claimed in the respective invoices is
erroneous. The learned Counsel submitted that this finding of the learned
Metropolitan Magistrate is contrary to the facts and law.
The learned
Metropolitan Magistrate should have accepted that there is a running
account due to the business between the complainant and the accused
and, therefore, the amounts which were paid and which were accepted by
the complainant in the cross-examination where the amounts for the
supply of goods which were different than the goods against which the
2 (2010) 11 SCC 441
3 (2002) 7 SCC 541
prove that it was a legally dischargeable liability. The complainant in the
cross-examination was questioned that if he could produce ledger
account, then, he should have produced it on the next date. However, he
did not produce the same. The finding of the learned Judge while
assessing this evidence that the cheques issued by the accused were
not against the amounts which were claimed in the respective invoices is
erroneous. The learned Counsel submitted that this finding of the learned
Metropolitan Magistrate is contrary to the facts and law.
The learned
Metropolitan Magistrate should have accepted that there is a running
account due to the business between the complainant and the accused
and, therefore, the amounts which were paid and which were accepted by
the complainant in the cross-examination where the amounts for the
supply of goods which were different than the goods against which the
2 (2010) 11 SCC 441
3 (2002) 7 SCC 541
impugned bills were placed. The fact that due to the running account, the
amounts were paid time to time and therefore, the complainant gave
admission or the payment of those amounts by the company of the
accused to the complainant company. However, it was never against the
invoices/bills which were the subject matter of the respective criminal
cases. In support of his submissions, he relied on the notices issued by
him and the reply given by the respondents to the notices. He submitted in
the reply, neither there is mention of sufficient funds nor there is an
amounts were paid time to time and therefore, the complainant gave
admission or the payment of those amounts by the company of the
accused to the complainant company. However, it was never against the
invoices/bills which were the subject matter of the respective criminal
cases. In support of his submissions, he relied on the notices issued by
him and the reply given by the respondents to the notices. He submitted in
the reply, neither there is mention of sufficient funds nor there is an
explanation as to why the cheques were issued. Further, no reasons were
given for the stop payment. Non cancellation of cheques is the most
important fact. He argued that in the statement of the accused under
section 313 also, the accused had an opportunity to explain about the stop
payment, but, there is no whisper of the reasons of stop-payment or about
insufficient funds. Under such circumstances, the learned Judges ought to
have accepted the case of the complainant. He further submitted that all
the admissions of the payments are given by the complainant in the cross-
examination in respect of payment made in 2003.
However, all the
cheques were issued in the year 2004. The value of the goods supplied,
as per the bills, in all the 9 cases before the learned Metropolitan
Magistrate, Kurla was Rs.52,73,128/- and the value of cheques issued is
Rs.50,50,690/-; and in the cases before the learned Metropolitan
Magistrate, Ballard Pier, the value of the goods supplied was
given for the stop payment. Non cancellation of cheques is the most
important fact. He argued that in the statement of the accused under
section 313 also, the accused had an opportunity to explain about the stop
payment, but, there is no whisper of the reasons of stop-payment or about
insufficient funds. Under such circumstances, the learned Judges ought to
have accepted the case of the complainant. He further submitted that all
the admissions of the payments are given by the complainant in the cross-
examination in respect of payment made in 2003.
However, all the
cheques were issued in the year 2004. The value of the goods supplied,
as per the bills, in all the 9 cases before the learned Metropolitan
Magistrate, Kurla was Rs.52,73,128/- and the value of cheques issued is
Rs.50,50,690/-; and in the cases before the learned Metropolitan
Magistrate, Ballard Pier, the value of the goods supplied was
Rs.30,82,701/- and the value of the cheques which were issued and
dishonoured was Rs.31,32,581/- approximately. Thus, approximately, the
value of the total amounts in the cheques is Rs.81,83,271/-. He further
submitted that the test of pre-ponderance of probability is that whether
anything is elicited in the cross-examination to arrive at a pre-ponderance
of probabilities. However, considering the cross-examination of the
complainant, no such material has come on record and moreover, the
accused himself did not enter the box and offer any explanation to that
dishonoured was Rs.31,32,581/- approximately. Thus, approximately, the
value of the total amounts in the cheques is Rs.81,83,271/-. He further
submitted that the test of pre-ponderance of probability is that whether
anything is elicited in the cross-examination to arrive at a pre-ponderance
of probabilities. However, considering the cross-examination of the
complainant, no such material has come on record and moreover, the
accused himself did not enter the box and offer any explanation to that
effect and, therefore, the defence of pre-ponderance of probability failed.
There was no rebuttal of presumption under section 138 of Negotiable
Instruments Act and, therefore, the judgment should have been set aside.
Mr.Kyadiguppi, learned Counsel for the respondents, submitted that
6.
as per the case of the complainant the cheque payment was made bill to
bill and, therefore, all the cases were filed against a particular bill and the
bouncing of the said particular cheque issued against it. The case of the
complainant from the beginning is not based on a running account but was
on bill to bill payment. However, the complainant changed his stand and it
was argued that the complainant and the accused were having running
account and, therefore, the cheque was issued against the outstanding
amount.
In the affidavit, the complainant has stated about a running
account. The cross-examination in Appeal No.237 of 2012, he pointed
out, was completed on 21.6.2007 and the complainant gave admission
There was no rebuttal of presumption under section 138 of Negotiable
Instruments Act and, therefore, the judgment should have been set aside.
Mr.Kyadiguppi, learned Counsel for the respondents, submitted that
6.
as per the case of the complainant the cheque payment was made bill to
bill and, therefore, all the cases were filed against a particular bill and the
bouncing of the said particular cheque issued against it. The case of the
complainant from the beginning is not based on a running account but was
on bill to bill payment. However, the complainant changed his stand and it
was argued that the complainant and the accused were having running
account and, therefore, the cheque was issued against the outstanding
amount.
In the affidavit, the complainant has stated about a running
account. The cross-examination in Appeal No.237 of 2012, he pointed
out, was completed on 21.6.2007 and the complainant gave admission
that still their business relations continued and were in existence. It is the
case of the complainant that bills were raised within 30 to 40 days.
However, as per the case of the complainant, there is a delay in payment
for more than 12 months. The complainant gave admission that amounts
in cash were accepted so also the amounts were paid by cash or cheques
in the accounts of the complainant company directly by the accused. Thus,
these accommodation cheques were kept upto the expiry date of the
cheques and then fresh cheques were issued. This arrangement was
case of the complainant that bills were raised within 30 to 40 days.
However, as per the case of the complainant, there is a delay in payment
for more than 12 months. The complainant gave admission that amounts
in cash were accepted so also the amounts were paid by cash or cheques
in the accounts of the complainant company directly by the accused. Thus,
these accommodation cheques were kept upto the expiry date of the
cheques and then fresh cheques were issued. This arrangement was
agreed between the parties. He submitted that as it was an adjustment
between the parties, it was immaterial as to who signed the cheque and,
therefore, the cheques were signed by Santosh Borkar. In such an event,
he pointed out that Santosh Borkar was a necessary person as an
accused. He referred the cheques on which Mr.Barve and Mr.Mollya had
signed.
However, Mr.Mollya is made an accused but Mr.Barve is not
made an accused like Mr.Borkar. He submitted that when the signatories
are not accused and the present respondents being non-signatory, cannot
be convicted.
He submitted that the complainant had admitted in the
cross-examination in each case about various payments received by him
from the applicant/accused in his accounts. Therefore, it was necessary
on the part of the complainant to prove the balance amount in the account.
Every year, there was no confirmation of the accounts and in the cases
before the learned Metropolitan Magistrate, Kurla, the applicant/accused
between the parties, it was immaterial as to who signed the cheque and,
therefore, the cheques were signed by Santosh Borkar. In such an event,
he pointed out that Santosh Borkar was a necessary person as an
accused. He referred the cheques on which Mr.Barve and Mr.Mollya had
signed.
However, Mr.Mollya is made an accused but Mr.Barve is not
made an accused like Mr.Borkar. He submitted that when the signatories
are not accused and the present respondents being non-signatory, cannot
be convicted.
He submitted that the complainant had admitted in the
cross-examination in each case about various payments received by him
from the applicant/accused in his accounts. Therefore, it was necessary
on the part of the complainant to prove the balance amount in the account.
Every year, there was no confirmation of the accounts and in the cases
before the learned Metropolitan Magistrate, Kurla, the applicant/accused
did not produce ledger accounts. The cheques were rotation cheques and
In support of his submissions, he relied on two documents, i.e.,
7.
it was a practice.
letters written by the complainant company to the accused dated
17.3.2004 and 7.4.2004 in criminal Appeal No.236 of 2012 by which the
expired cheques were returned by the complainant to the accused. He
also relied on a letter dated 25.8.2004 sent by the lawyer of the accused
In support of his submissions, he relied on two documents, i.e.,
7.
it was a practice.
letters written by the complainant company to the accused dated
17.3.2004 and 7.4.2004 in criminal Appeal No.236 of 2012 by which the
expired cheques were returned by the complainant to the accused. He
also relied on a letter dated 25.8.2004 sent by the lawyer of the accused
to Mr.Amit Ghag, the lawyer of the complainant suggesting settlement,
after receiving notice. He submitted that it was not an admission of the
debt or the payment as claimed but it was just a suggestion for amicable
settlement. He submitted that the mode of payment was by way of post
dated cheques. He differentiated the four cases decided by the learned
Metropolitan Magistrate, Ballard Pier in Application No.130 of 2014 and
other connected cases. He submitted that if the complainant's liability is
based on running account, then the case collapses. He further submitted
that the deviation from complaints is permissible but not entirely to the
extent of making out altogether different case and so the theory of running
account is an after-thought and on this count alone, the appeals of the
complainant are to be dismissed.
Both the learned Magistrates have
rightly held the judgment in favour of the accused and have dismissed the
cases and acquitted the respondents from all the charges under section
138 of the Negotiable Instruments Act.
after receiving notice. He submitted that it was not an admission of the
debt or the payment as claimed but it was just a suggestion for amicable
settlement. He submitted that the mode of payment was by way of post
dated cheques. He differentiated the four cases decided by the learned
Metropolitan Magistrate, Ballard Pier in Application No.130 of 2014 and
other connected cases. He submitted that if the complainant's liability is
based on running account, then the case collapses. He further submitted
that the deviation from complaints is permissible but not entirely to the
extent of making out altogether different case and so the theory of running
account is an after-thought and on this count alone, the appeals of the
complainant are to be dismissed.
Both the learned Magistrates have
rightly held the judgment in favour of the accused and have dismissed the
cases and acquitted the respondents from all the charges under section
138 of the Negotiable Instruments Act.
All these appeals are heard together as common issues are
8.
involved and are decided by common reasoning. The criminal cases which
were decided by the learned Metropolitan Magistrate, Kurla were
dismissed mainly on two counts - one, that there is no proper authorisation
and the complainant failed to prove that it is a legally dischargeable
liability. However, the learned Metropolitan Magistrate, 30 th Court, Ballard
Pier, Mumbai has rejected the cases of the complainant only on the
8.
involved and are decided by common reasoning. The criminal cases which
were decided by the learned Metropolitan Magistrate, Kurla were
dismissed mainly on two counts - one, that there is no proper authorisation
and the complainant failed to prove that it is a legally dischargeable
liability. However, the learned Metropolitan Magistrate, 30 th Court, Ballard
Pier, Mumbai has rejected the cases of the complainant only on the
second count that the complainant has failed to prove that there is a
legally dischargeable liability.
The learned Metropolitan Magistrate,
Ballard Pier, Mumbai has held that the cheques were signed by the
persons other than the accused, so that is a valid ground to reject the
case of the complainant.
For example, in the cases before the
Metropolitan Magistrate, Kurla, some cheques were signed by Santosh
Borkar alone and some cheques were signed by Santosh Borkar and
Sunder Mollya and S.D. Barve of the respondent company. In the cases
at Ballard Pier Court, one cheque was signed only by Mollya and Barve.
Thus, it is to be noted that in all these cases, though Santosh Borkar and
Barve, were the signatories of some of the cheques, are not made
accused by the complainant. The explanation given by the complainant is
simple and can be accepted that those persons who have signed the
cheques, were in employment of the respondent-company and so they
were authorised to sign. However, as the accused persons, who are the
legally dischargeable liability.
The learned Metropolitan Magistrate,
Ballard Pier, Mumbai has held that the cheques were signed by the
persons other than the accused, so that is a valid ground to reject the
case of the complainant.
For example, in the cases before the
Metropolitan Magistrate, Kurla, some cheques were signed by Santosh
Borkar alone and some cheques were signed by Santosh Borkar and
Sunder Mollya and S.D. Barve of the respondent company. In the cases
at Ballard Pier Court, one cheque was signed only by Mollya and Barve.
Thus, it is to be noted that in all these cases, though Santosh Borkar and
Barve, were the signatories of some of the cheques, are not made
accused by the complainant. The explanation given by the complainant is
simple and can be accepted that those persons who have signed the
cheques, were in employment of the respondent-company and so they
were authorised to sign. However, as the accused persons, who are the
Directors of the company are liable to pay as the complainant company
has claim against the respondent company and its Directors. The learned
Metropolitan Magistrate, Kurla, while dismissing the complaints, has
erroneously held that the cases should have been filed against Borkar or
Barve. As per the admission given by PW2, the bank employee, he was
not an authorised signatory to these cheques issued of the Sangli Urban
Cooperative bank.
The learned Metropolitan Magistrate, Kurla ought to
have appreciated that the bank memos, which were produced by the
has claim against the respondent company and its Directors. The learned
Metropolitan Magistrate, Kurla, while dismissing the complaints, has
erroneously held that the cases should have been filed against Borkar or
Barve. As per the admission given by PW2, the bank employee, he was
not an authorised signatory to these cheques issued of the Sangli Urban
Cooperative bank.
The learned Metropolitan Magistrate, Kurla ought to
have appreciated that the bank memos, which were produced by the
complainant, disclosing the reason for dishonouring the cheques were
either 'funds insufficient' or 'stop payment'. Nowhere it was mentioned that
the cheques were dishonoured because they were not signed by the
authorised signatory. That apart, the Supreme Court in the case of Laxmi
Dyechem (supra) has considered this issue at length. The instances of
giving different reasons of dishonour of the cheques are taken into
account extensively by the Supreme Court and it held that the reasons
which are given for insufficient funds or different terminologies which are
used by the bank at the time of dishonouring of the cheques are to be
considered cumulatively as the reason to dishonour the cheque is
insufficient funds and they are to be cumulatively considered that it is a
dishonour of cheque within the meaning of section 138 of the Negotiable
Instruments Act. The drawer in order to avoid the payment is likely to
change his signature or deliberately may commit some mistake and,
either 'funds insufficient' or 'stop payment'. Nowhere it was mentioned that
the cheques were dishonoured because they were not signed by the
authorised signatory. That apart, the Supreme Court in the case of Laxmi
Dyechem (supra) has considered this issue at length. The instances of
giving different reasons of dishonour of the cheques are taken into
account extensively by the Supreme Court and it held that the reasons
which are given for insufficient funds or different terminologies which are
used by the bank at the time of dishonouring of the cheques are to be
considered cumulatively as the reason to dishonour the cheque is
insufficient funds and they are to be cumulatively considered that it is a
dishonour of cheque within the meaning of section 138 of the Negotiable
Instruments Act. The drawer in order to avoid the payment is likely to
change his signature or deliberately may commit some mistake and,
therefore, the cheque can be bounced, when the funds are insufficient. In
paragraph 15 of the judgment in Laxmi Dyechem (supra), the Supreme
Court has observed thus:
“Just as dishonour of a cheque on the ground that the account has
been closed is a dishonour falling in the first contingency referred to
under section 138, so also dishonour on the ground that the
signatures do not match or that the image is not found, which too,
implies that the specimen signatures do not match with the
signatures on the cheque, would constitute a dishonour within the
meaning of section 138 of the Negotiable Instruments Act. .....”
paragraph 15 of the judgment in Laxmi Dyechem (supra), the Supreme
Court has observed thus:
“Just as dishonour of a cheque on the ground that the account has
been closed is a dishonour falling in the first contingency referred to
under section 138, so also dishonour on the ground that the
signatures do not match or that the image is not found, which too,
implies that the specimen signatures do not match with the
signatures on the cheque, would constitute a dishonour within the
meaning of section 138 of the Negotiable Instruments Act. .....”
“.....There is in our view, no qualitative difference between the
situation where the dishonour takes place on account of substitution
by a new set of authorised signatories resulting in the dishonour of
the cheques already issued and another situation in which the
drawer of the cheque changes his own signatures or closes the
account or issues instructions to the bank not to make payment.”
In the present cases, many cheques were signed by witness PW3
9.
Santosh Borkar, who was accounts executive of Garware Synthetics
Limited at Mira Road, Thane.
The cases decided by the learned
Metropolitan Magistrate, Kurla, Mumbai has held that the cheques were
not signed by the authorised signatory as Mr.Borkar was not authorised
signatory nor Mr.Borkar is made an accused. All the complaints fail as the
complainant could not bring the case under the ambit of section 138 of N.I.
Act.
On this point, the evidence of PW2 Bipin Mukundlal Shah and
evidence of Borkar is to be seen. Mr.Shah was working as an officer in
Sangli Cooperative Bank Limited, Fort branch, Mumbai. Garware Nylons
opened account No.1037 in the name of Garware Synthetics Limited on
situation where the dishonour takes place on account of substitution
by a new set of authorised signatories resulting in the dishonour of
the cheques already issued and another situation in which the
drawer of the cheque changes his own signatures or closes the
account or issues instructions to the bank not to make payment.”
In the present cases, many cheques were signed by witness PW3
9.
Santosh Borkar, who was accounts executive of Garware Synthetics
Limited at Mira Road, Thane.
The cases decided by the learned
Metropolitan Magistrate, Kurla, Mumbai has held that the cheques were
not signed by the authorised signatory as Mr.Borkar was not authorised
signatory nor Mr.Borkar is made an accused. All the complaints fail as the
complainant could not bring the case under the ambit of section 138 of N.I.
Act.
On this point, the evidence of PW2 Bipin Mukundlal Shah and
evidence of Borkar is to be seen. Mr.Shah was working as an officer in
Sangli Cooperative Bank Limited, Fort branch, Mumbai. Garware Nylons
opened account No.1037 in the name of Garware Synthetics Limited on
16.9.1999 and as per their record, Mr.Nihar Garware can singly operate
However, on 24.2.2003, Garware
account jointly either two of them.
the account and P.N. Murthy, Barve and Mollya have to operate the said
Synthetics informed change of operations of the said account and as per
their record, Mr.Borkar was not an authorised signatory for operating the
said account. He also said that the subject matter of the said cheques
when deposited for clearance, there was no sufficient balance in the
account of Garware Synthetics Limited and as it was found insufficient,
However, on 24.2.2003, Garware
account jointly either two of them.
the account and P.N. Murthy, Barve and Mollya have to operate the said
Synthetics informed change of operations of the said account and as per
their record, Mr.Borkar was not an authorised signatory for operating the
said account. He also said that the subject matter of the said cheques
when deposited for clearance, there was no sufficient balance in the
account of Garware Synthetics Limited and as it was found insufficient,
they did not verify further about the authorisation of the signature or
whether the signature differs. He has further submitted that if there is a
sufficient balance in the account of the drawer then the bank officers
further verify the signature of the cheques and as there were no sufficient
funds they did not verify the signatures. On this background, evidence of
Mr.Borkar, though is inconsistent, it cannot be said to be false.
He
admitted that he signed all those cheques. He said that he has mentioned
that he is an authorised signatory of Garware company. He has authority
to sign the cheques and issued the cheques and therefore he has signed
those cheques he was told. He deposed that he did not know whether
Garware company had informed the bank about his authorisation or not.
He is not aware whether there is any resolution in his name to operate the
bank account or not is passed or not? Thus, the evidence of the PW2 on
the authorisation of signatory is true and hence, reliable evidence of
whether the signature differs. He has further submitted that if there is a
sufficient balance in the account of the drawer then the bank officers
further verify the signature of the cheques and as there were no sufficient
funds they did not verify the signatures. On this background, evidence of
Mr.Borkar, though is inconsistent, it cannot be said to be false.
He
admitted that he signed all those cheques. He said that he has mentioned
that he is an authorised signatory of Garware company. He has authority
to sign the cheques and issued the cheques and therefore he has signed
those cheques he was told. He deposed that he did not know whether
Garware company had informed the bank about his authorisation or not.
He is not aware whether there is any resolution in his name to operate the
bank account or not is passed or not? Thus, the evidence of the PW2 on
the authorisation of signatory is true and hence, reliable evidence of
Mr.Borkar on that point that he was asked to issue the cheques and he
believed that he was authorised to sign and issue the cheques, cannot be
doubted. Mr.Borkar was instructed to sign the cheques and issue the
cheques. He has deposed that at one place, these being accommodation
cheques, he was asked to sign. Naturally, he was not aware about the
internal decisions of the Board of Directors of the company whether they
passed any resolution authorising him or not.
He had no knowledge.
Thus, he bonafide signed the cheques and issued them to the party i.e.,
believed that he was authorised to sign and issue the cheques, cannot be
doubted. Mr.Borkar was instructed to sign the cheques and issue the
cheques. He has deposed that at one place, these being accommodation
cheques, he was asked to sign. Naturally, he was not aware about the
internal decisions of the Board of Directors of the company whether they
passed any resolution authorising him or not.
He had no knowledge.
Thus, he bonafide signed the cheques and issued them to the party i.e.,
the complainant. Under such circumstances, when the employee of a
particular company is given an understanding that he is authorised to sign
and issue the cheques and he acts accordingly under the bonafide belief,
then, that cheque is to be considered, if bounced, as covered under the
requirement of section 138 of the NI Act. Considering the ratio laid down
by the Supreme Court in Laxmi Dychem (supra), if the cheques are
signed and issued under the instructions of the Board of Directors of the
company and if dishonoured for want of insufficient funds, then the
defence that signature differs is not available to the drawer of the cheques
in the proceedings under section 138 of the NI Act. It is unlikely on the
part of the drawee to have knowledge of the internal resolutions of the
accused company as to in whose favour they were passed giving
authorisation. The Supreme Court thus wanted to plug in this possible
mischief on the part of the drawer to escape the liability under section 138
particular company is given an understanding that he is authorised to sign
and issue the cheques and he acts accordingly under the bonafide belief,
then, that cheque is to be considered, if bounced, as covered under the
requirement of section 138 of the NI Act. Considering the ratio laid down
by the Supreme Court in Laxmi Dychem (supra), if the cheques are
signed and issued under the instructions of the Board of Directors of the
company and if dishonoured for want of insufficient funds, then the
defence that signature differs is not available to the drawer of the cheques
in the proceedings under section 138 of the NI Act. It is unlikely on the
part of the drawee to have knowledge of the internal resolutions of the
accused company as to in whose favour they were passed giving
authorisation. The Supreme Court thus wanted to plug in this possible
mischief on the part of the drawer to escape the liability under section 138
of the N.I. Act. The drawer can deliberately change his signature with a
view to avoid the liability to pay and postpone the payment and so also
immediate payment.
may direct any employee in his establishment to sign the cheques to avoid
Thus, in the present case, in a similar situation
where Mr.Borkar was not authorised to sign and issue the cheques on the
point of evidence of Mr.Borkar, cannot be said to be false.
The fact
remains that he was not an authorised signatory. The evidence of the bank
officer (PW2) is to be accepted on this point and the learned Metropolitan
view to avoid the liability to pay and postpone the payment and so also
immediate payment.
may direct any employee in his establishment to sign the cheques to avoid
Thus, in the present case, in a similar situation
where Mr.Borkar was not authorised to sign and issue the cheques on the
point of evidence of Mr.Borkar, cannot be said to be false.
The fact
remains that he was not an authorised signatory. The evidence of the bank
officer (PW2) is to be accepted on this point and the learned Metropolitan
Magistrate, Kurla, though has believed and held that Mr.Borkar was not
authorised signatory, he failed to appreciate that the cheques were
bounced for want of funds insufficient and therefore, such dishonouring of
the cheques was very much covered under section 138 of the Act.
LEGALLY DISCHARGEABLE LIABILITY
10.
It is useful to reproduce a chart with material details of the 9 cases,
as under:
(APPLICATION NO.230 OF 2012 i.e., CASE NO.611/SS/2004 (KURLA))
1. Case No.611/SS/2004 (KURLA)
No. Date Amount Cheq.No. Date Signed By Memo
Notice
Complaint
102 11/03/03 125321 737361 15/01/04 Santosh Borker 13/07/04 11/08/04 28/09/04
87 12/07/03 250641 737376 12/01/04 Santosh Borker 12/07/04 Sent on 11.8.2004
95 29/07/03 125321 737377 14/01/04 Santosh Borker 12/07/04
Cheq.No. Date Signed By Memo
16/07/04 16/08/04 28/09/04
2. Case No.612/SS/2004 (KURLA)
No. Date
Amount
81 10/07/03 125321 737380 20/01/04 Santosh Borker
103 02/08/03 125321 754801 22/01/04 Santosh Borker
Notice
Complaint
Sent on 16.8.2004
authorised signatory, he failed to appreciate that the cheques were
bounced for want of funds insufficient and therefore, such dishonouring of
the cheques was very much covered under section 138 of the Act.
LEGALLY DISCHARGEABLE LIABILITY
10.
It is useful to reproduce a chart with material details of the 9 cases,
as under:
(APPLICATION NO.230 OF 2012 i.e., CASE NO.611/SS/2004 (KURLA))
1. Case No.611/SS/2004 (KURLA)
No. Date Amount Cheq.No. Date Signed By Memo
Notice
Complaint
102 11/03/03 125321 737361 15/01/04 Santosh Borker 13/07/04 11/08/04 28/09/04
87 12/07/03 250641 737376 12/01/04 Santosh Borker 12/07/04 Sent on 11.8.2004
95 29/07/03 125321 737377 14/01/04 Santosh Borker 12/07/04
Cheq.No. Date Signed By Memo
16/07/04 16/08/04 28/09/04
2. Case No.612/SS/2004 (KURLA)
No. Date
Amount
81 10/07/03 125321 737380 20/01/04 Santosh Borker
103 02/08/03 125321 754801 22/01/04 Santosh Borker
Notice
Complaint
Sent on 16.8.2004
3. Case No.613/SS/2004 (KURLA)
Date Amount Cheq.No. Date Signed By Memo
503 11/03/03 125321 737362 19/01/04 Santosh Borker 16/07/04 16/08/04 28/09/04
73 03/07/03 250641 737379 19/01/04 Santosh Borker 72 03/07/03 250641 737378 16/01/04 Santosh Borker 28 17/05/03 250641 737370 03/03/04 Santosh Borker
41 30/05/03 125321 737371 08/03/04 Santosh Borker
5. Case No.770/SS/2004 (KURLA)
Date
Amount
256 17/01/04 250641
Cheq.No. Date Signed By
731411 20 10/05/04 125321
01/09/04 Sent on
Memo
Notice
Complaint
26/08/04 25/09/04 06/11/04
Sent on
25.9.2004
Cheq.No. Date Signed By Memo
737369 Santosh Borkar 26/08/04 25/09/04 6.11.2004
Sent on
25.9.2004
Cheq.No. Date Signed By Memo
737372 12/03/04 Santosh Borkar 09/09/04 07/10/04 24.11.2004
16/03/04 Santosh Borkar
Date Amount Cheq.No. Date Signed By Memo
503 11/03/03 125321 737362 19/01/04 Santosh Borker 16/07/04 16/08/04 28/09/04
73 03/07/03 250641 737379 19/01/04 Santosh Borker 72 03/07/03 250641 737378 16/01/04 Santosh Borker 28 17/05/03 250641 737370 03/03/04 Santosh Borker
41 30/05/03 125321 737371 08/03/04 Santosh Borker
5. Case No.770/SS/2004 (KURLA)
Date
Amount
256 17/01/04 250641
Cheq.No. Date Signed By
731411 20 10/05/04 125321
01/09/04 Sent on
Memo
Notice
Complaint
26/08/04 25/09/04 06/11/04
Sent on
25.9.2004
Cheq.No. Date Signed By Memo
737369 Santosh Borkar 26/08/04 25/09/04 6.11.2004
Sent on
25.9.2004
Cheq.No. Date Signed By Memo
737372 12/03/04 Santosh Borkar 09/09/04 07/10/04 24.11.2004
16/03/04 Santosh Borkar
Amount
28/02/04
Date
02/09/04 29/09/04 06/11/04
Sunder Mollya &
S.D. Barve
28/02/04
6. Case No.771/SS/2004 (KURLA)
No.
Sent on 16.8.2004
No.
Complaint
4. Case No.769/SS/2004 (KURLA)
Notice
No.
Notice
Complaint
7. Case No.784/SS/2004 (KURLA)
Date
Amount
43 30/05/04 250641
55 14/06/03 250641
No.
737373
Notice
Complaint
Sent on
9.10.2004
8. Case No.785/SS/2004 (KURLA)
Date
64 26/06/03 250641
No.
Amount
Cheq.No. Date Signed By Memo
737374 Santosh Borkar 22/09/04 19/10/04 24.11.2004
Sent on
20.10.2004
Cheq.No. Date Signed By Memo
710123 Sunder Mollya & 1153814 29/09/04 27/10/04
S.D. Barve /-
26/03/04
Notice
Complaint
9. Case No.783/SS/2004 (KURLA)
Date
521 No.
Amount
08/03/01 359815
517 22/03/03 187981
115 25/08/03 125321
125 01/09/03 112789
159 27/09/03 125321
178 29/10/03 125321
181 01/11/03
08/04/04
Notice
Complaint
Sent on
27.10.2004
Revalidated by Nihal Garware
125321
28/02/04
Date
02/09/04 29/09/04 06/11/04
Sunder Mollya &
S.D. Barve
28/02/04
6. Case No.771/SS/2004 (KURLA)
No.
Sent on 16.8.2004
No.
Complaint
4. Case No.769/SS/2004 (KURLA)
Notice
No.
Notice
Complaint
7. Case No.784/SS/2004 (KURLA)
Date
Amount
43 30/05/04 250641
55 14/06/03 250641
No.
737373
Notice
Complaint
Sent on
9.10.2004
8. Case No.785/SS/2004 (KURLA)
Date
64 26/06/03 250641
No.
Amount
Cheq.No. Date Signed By Memo
737374 Santosh Borkar 22/09/04 19/10/04 24.11.2004
Sent on
20.10.2004
Cheq.No. Date Signed By Memo
710123 Sunder Mollya & 1153814 29/09/04 27/10/04
S.D. Barve /-
26/03/04
Notice
Complaint
9. Case No.783/SS/2004 (KURLA)
Date
521 No.
Amount
08/03/01 359815
517 22/03/03 187981
115 25/08/03 125321
125 01/09/03 112789
159 27/09/03 125321
178 29/10/03 125321
181 01/11/03
08/04/04
Notice
Complaint
Sent on
27.10.2004
Revalidated by Nihal Garware
125321
Less Received 8028/-
1161869
21/02/01 297755 526 27/03/03 250641 S.D. Barve
94 29/07/03 250641 Revalidated by Nihal Garware
112 11/08/03 138 08/09/03 250641 158 21/09/03 250641
Total
710124
01/04/04
Sunder Mollya &
53965
1354284
Less Received
1139901 28/09/04
507
Total
214383/-
Out of these cases, for the purpose of arguing these appeals, the
learned Counsel for the Complainant and the respondents have relied on
the evidence of the complainant in 2 to 3 cases as the evidence in all the
cases is more or less on the same lines. The learned Counsel for the
respondent has also pointed out the admissions elicited in the cross-
examination of the complainant to buttress his submissions on the points
of rebuttal of presumption. Therefore, the evidence in a few cases is
referred herewith to get a clear idea.
11.
In case No.611/SS/2004 (Application No.230 of 2012), three
cheques dated 1.1.2004, 12.1.2004 and 14.1.2004 were bounced. The
three cheques were given against three invoices dated 11.3.2003,
12.7.2003 and 29.7.2003 respectively for amounts of Rs.1,25,321,
Rs.2,50,641 and Rs.1,25,321/-.
It is mentioned that for one tonne of
plastic granules, the rate was Rs.1,25,321/- and for two tonnes, the rate
was Rs.2,50,641/-. The complainant has filed affidavit in reply wherein he
has stated specifically that the cheques were given against the three
1161869
21/02/01 297755 526 27/03/03 250641 S.D. Barve
94 29/07/03 250641 Revalidated by Nihal Garware
112 11/08/03 138 08/09/03 250641 158 21/09/03 250641
Total
710124
01/04/04
Sunder Mollya &
53965
1354284
Less Received
1139901 28/09/04
507
Total
214383/-
Out of these cases, for the purpose of arguing these appeals, the
learned Counsel for the Complainant and the respondents have relied on
the evidence of the complainant in 2 to 3 cases as the evidence in all the
cases is more or less on the same lines. The learned Counsel for the
respondent has also pointed out the admissions elicited in the cross-
examination of the complainant to buttress his submissions on the points
of rebuttal of presumption. Therefore, the evidence in a few cases is
referred herewith to get a clear idea.
11.
In case No.611/SS/2004 (Application No.230 of 2012), three
cheques dated 1.1.2004, 12.1.2004 and 14.1.2004 were bounced. The
three cheques were given against three invoices dated 11.3.2003,
12.7.2003 and 29.7.2003 respectively for amounts of Rs.1,25,321,
Rs.2,50,641 and Rs.1,25,321/-.
It is mentioned that for one tonne of
plastic granules, the rate was Rs.1,25,321/- and for two tonnes, the rate
was Rs.2,50,641/-. The complainant has filed affidavit in reply wherein he
has stated specifically that the cheques were given against the three
invoices as the goods were delivered against the three challans. The case
of the complainant was that the cheques were given against specific
invoices. The notice of demand was sent, however, all the accused failed
to make the payment within 15 days of the receipt of the notice. Then in
the cross-examination, he deposed that the accused used to place order
orally and then, the goods were delivered by the complainant company
and thereafter the accused was supposed to make payment of the price of
the goods within 30 days. He has denied that the cheques were given as
collateral security against the transaction. He said that as soon as the
goods were delivered the accused used to issue cheques to the
complainant’s firm and on the back of the cheque, the complainant-
He gave
company used to write details of that particular invoice.
admission in the cross-examination that his firm was maintaining books of
accounts and he can produce the ledgers maintained by the firm regarding
the transaction in question.
12.
He deposed that the accused company was going through a
financial crisis and therefore, the accused company used to replace the
earlier cheques by giving the fresh cheques to the complainant firm. Then
the complainant company used to demand fresh cheques from the
accused before the expiry period of cheques. Thus, he agreed that there
was a practice of giving the cheques by way of adjustment and
of the complainant was that the cheques were given against specific
invoices. The notice of demand was sent, however, all the accused failed
to make the payment within 15 days of the receipt of the notice. Then in
the cross-examination, he deposed that the accused used to place order
orally and then, the goods were delivered by the complainant company
and thereafter the accused was supposed to make payment of the price of
the goods within 30 days. He has denied that the cheques were given as
collateral security against the transaction. He said that as soon as the
goods were delivered the accused used to issue cheques to the
complainant’s firm and on the back of the cheque, the complainant-
He gave
company used to write details of that particular invoice.
admission in the cross-examination that his firm was maintaining books of
accounts and he can produce the ledgers maintained by the firm regarding
the transaction in question.
12.
He deposed that the accused company was going through a
financial crisis and therefore, the accused company used to replace the
earlier cheques by giving the fresh cheques to the complainant firm. Then
the complainant company used to demand fresh cheques from the
accused before the expiry period of cheques. Thus, he agreed that there
was a practice of giving the cheques by way of adjustment and
subsequently the cheques were replaced by issuing fresh cheques. A
letter dated 17.3.2004, corroborating this practice, was taken on record,
marked exhibit D1. He has also stated that the accused used to issue
cheques in exchange for less or more amount than the amount of earlier
cheques. He has stated that he would have to verify to ascertain how
many cheques were replaced.
In the cross-examination, questions were put to the complainant in
13.
respect of payments made by the accused from time to time. He agreed
that his company received the payment in piecemeal as there was
continuous supply of goods or material to the accused and there was
continued repayment of bill amount on the part of the accused in
On this mode of repayment, the learned Counsel for the
piecemeal.
accused could seek very important admissions which are to be
reproduced as follows:
“I am not in a position to explain against which date I
have received the payments from the accused.
Before presenting all the subject cheques, I have not
settled accounts with the accused. I and accused did
not confirm the balance by the end of March of every
year. I have not made correspondence with the
accused in order to apprise the accused that such
and such a bill is pending and accused is liable to
pay the amount of said unpaid .... It is true that the
accused also used to make the payment of
outstanding amount by depositing the cheque as well
as some time by depositing cash in account of the
complainant firm”.
letter dated 17.3.2004, corroborating this practice, was taken on record,
marked exhibit D1. He has also stated that the accused used to issue
cheques in exchange for less or more amount than the amount of earlier
cheques. He has stated that he would have to verify to ascertain how
many cheques were replaced.
In the cross-examination, questions were put to the complainant in
13.
respect of payments made by the accused from time to time. He agreed
that his company received the payment in piecemeal as there was
continuous supply of goods or material to the accused and there was
continued repayment of bill amount on the part of the accused in
On this mode of repayment, the learned Counsel for the
piecemeal.
accused could seek very important admissions which are to be
reproduced as follows:
“I am not in a position to explain against which date I
have received the payments from the accused.
Before presenting all the subject cheques, I have not
settled accounts with the accused. I and accused did
not confirm the balance by the end of March of every
year. I have not made correspondence with the
accused in order to apprise the accused that such
and such a bill is pending and accused is liable to
pay the amount of said unpaid .... It is true that the
accused also used to make the payment of
outstanding amount by depositing the cheque as well
as some time by depositing cash in account of the
complainant firm”.
14.
In the present case, the issuance of cheques by the respondent-
company is not disputed. Indeed, the fact of issuance of the cheques by
the respondent-company is admitted. All the cheques were issued. It is
also admitted that they were issued against the due payment. Mr.Borkar
has given admission that the respondent-company has accepted the
financial liability. The only point is whether the cheques were issued for
and presentation or only as accommodation cheques or not. In other
words, the cheques were never intended to be presented to the bank
In the present case, the issuance of cheques by the respondent-
company is not disputed. Indeed, the fact of issuance of the cheques by
the respondent-company is admitted. All the cheques were issued. It is
also admitted that they were issued against the due payment. Mr.Borkar
has given admission that the respondent-company has accepted the
financial liability. The only point is whether the cheques were issued for
and presentation or only as accommodation cheques or not. In other
words, the cheques were never intended to be presented to the bank
because the company was undergoing financial crisis and there were no
funds. The complainant had knowledge of this financial position of the
respondent company and, therefore, replacement of the cheques after
expiry date was accepted as a part of the business by the company. This
is the defence. In short, whether this defence is probable and whether it is
to be accepted or not is a short question before the Court.
15.
In all these matters, which were tried by the Metropolitan Magistrate,
Kurla, the examination in Chief and cross-examination of all the witnesses
is more or less same. There is variation of facts depending on the number
of invoices and so also the date of the notice and reply. For example, in
Criminal Appeal No.234 of 2012, which is filed against the C.C.
No.770/SS/2004, invoice No.BO256 dated 17.1.2004 and against which
cheque bearing No.731411 dated 28.2.2004 was issued for Rs.2,50,641/-
drawn on Sangli Urban Cooperative Bank, Fort, Mumbai. It was
funds. The complainant had knowledge of this financial position of the
respondent company and, therefore, replacement of the cheques after
expiry date was accepted as a part of the business by the company. This
is the defence. In short, whether this defence is probable and whether it is
to be accepted or not is a short question before the Court.
15.
In all these matters, which were tried by the Metropolitan Magistrate,
Kurla, the examination in Chief and cross-examination of all the witnesses
is more or less same. There is variation of facts depending on the number
of invoices and so also the date of the notice and reply. For example, in
Criminal Appeal No.234 of 2012, which is filed against the C.C.
No.770/SS/2004, invoice No.BO256 dated 17.1.2004 and against which
cheque bearing No.731411 dated 28.2.2004 was issued for Rs.2,50,641/-
drawn on Sangli Urban Cooperative Bank, Fort, Mumbai. It was
dishonoured for the reason “payments stopped by the drawer”. While in
appeal No.230 of 2012, which was for “funds insufficient”. The following
chart will give an exact idea of the transactions between the complainant
and the accused in all the nine cases which are decided by learned
Metropolitan Magistrate’s Court at Kurla, and the 4 cases which were
decided by the learned Metropolitan Magistrate, Ballard Pier:
In the cross-examination in this appeal of PW1 i.e., the complainant
appeal No.230 of 2012, which was for “funds insufficient”. The following
chart will give an exact idea of the transactions between the complainant
and the accused in all the nine cases which are decided by learned
Metropolitan Magistrate’s Court at Kurla, and the 4 cases which were
decided by the learned Metropolitan Magistrate, Ballard Pier:
In the cross-examination in this appeal of PW1 i.e., the complainant
16.
Kirti Mansukhlal Turakhia, was asked about ledger before the Court and
he said that he could produce the ledger before the Court. He gave
admission that there was running business transaction between the
complainant and the accused. He also has admitted that whenever the
accused used to make payment in cash or by cheque, then the said
payment was adjusted against the old dues. He further admitted that there
was no correspondence with the accused that such and such bill was
pending. He was asked whether he had received payment of Rs.94,000/-
from the accused on 17.1.2004, he refused that it was a payment against
the bill No.BO256 dated 17.1.2004, i.e., exhibit P3. However, he could not
tell against which bill he had received the said payment of Rs.94,000/-
from the accused. He admitted that before presentation of the subject
cheque, he did not settle the accounts with the accused and he did not get
confirmation of the accounts from the accused at the end of every year.
he said that he could produce the ledger before the Court. He gave
admission that there was running business transaction between the
complainant and the accused. He also has admitted that whenever the
accused used to make payment in cash or by cheque, then the said
payment was adjusted against the old dues. He further admitted that there
was no correspondence with the accused that such and such bill was
pending. He was asked whether he had received payment of Rs.94,000/-
from the accused on 17.1.2004, he refused that it was a payment against
the bill No.BO256 dated 17.1.2004, i.e., exhibit P3. However, he could not
tell against which bill he had received the said payment of Rs.94,000/-
from the accused. He admitted that before presentation of the subject
cheque, he did not settle the accounts with the accused and he did not get
confirmation of the accounts from the accused at the end of every year.
He also gave admission that when the subject cheque was deposited for
clearance, at that time, he was not aware of the actual outstanding dues
against the accused.
clearance, at that time, he was not aware of the actual outstanding dues
against the accused.
17.
PW1 stated on oath that the goods were delivered to the accused
under invoice Nos.BO503 dated 11.3.2003, BO072 dated 3.7.2003 and
BO73 dated 3.7.2003, collectively marked as exhibit P2, against which 3
PW1 stated on oath that the goods were delivered to the accused
under invoice Nos.BO503 dated 11.3.2003, BO072 dated 3.7.2003 and
BO73 dated 3.7.2003, collectively marked as exhibit P2, against which 3
cheques were issued viz., 737362 dated 19.1.2004 for Rs.125,321/-,
cheque No.737378 dated 16.1.2004 for RS.250,641/- and cheque
No.73779 dated 19.1.2004 for Rs.250,641/-, which were all drawn on
Sangli Urban Cooperative Bank, Fort, Mumbai, which are marked as
exhibits P3, P4 and P5 respectively and the cheques were dishonoured for
the reason “funds insufficient”, as per the exhibit P6 memo. In the cross-
examination, he admitted that it was a general practice adopted between
the parties to exchange the earlier cheques after expiry of the validity
period of earlier cheques and the accused used to give new cheques to
the complainant. He admitted that on 10.7.2003, he had received
Rs.1,75,000/- but refused that it was given against the said transaction,
but he said that he had not settled the account with the accused at the end
of every year and he also admitted that he could not state against which
bill the complainant had received Rs.1,75,000/- from the accused on
cheque No.737378 dated 16.1.2004 for RS.250,641/- and cheque
No.73779 dated 19.1.2004 for Rs.250,641/-, which were all drawn on
Sangli Urban Cooperative Bank, Fort, Mumbai, which are marked as
exhibits P3, P4 and P5 respectively and the cheques were dishonoured for
the reason “funds insufficient”, as per the exhibit P6 memo. In the cross-
examination, he admitted that it was a general practice adopted between
the parties to exchange the earlier cheques after expiry of the validity
period of earlier cheques and the accused used to give new cheques to
the complainant. He admitted that on 10.7.2003, he had received
Rs.1,75,000/- but refused that it was given against the said transaction,
but he said that he had not settled the account with the accused at the end
of every year and he also admitted that he could not state against which
bill the complainant had received Rs.1,75,000/- from the accused on
He admitted that the accused used to randomly deposit
cheque or cash in the bank account of the complainant-firm.
10.7.2003.
cheque or cash in the bank account of the complainant-firm.
10.7.2003.
18.
It is to be noted that four appeals bearing Nos.129 of 2014 to 132 of
2014 were decided subsequent to the judgments in the nine cases which
were dismissed on merit by the learned Metropolitan Magistrate, Kurla.
The judgments in the cases by the learned Metropolitan Magistrate,
It is to be noted that four appeals bearing Nos.129 of 2014 to 132 of
2014 were decided subsequent to the judgments in the nine cases which
were dismissed on merit by the learned Metropolitan Magistrate, Kurla.
The judgments in the cases by the learned Metropolitan Magistrate,
Ballard Pier were passed on 9.1.2014. Thus, the parties were aware of
the view taken by the learned Metropolitan Magistrate, Kurla from
November, 2011. The evidence in the matters pending before the
Metropolitan Magistrate, Ballard Pier was recorded in 2009 i.e., prior to the
judgment in the cases by the Metropolitan Magistrate, Kurla. At the time
of recording of evidence before the learned Metropolitan Magistrate, Kurla,
8 invoices for the supply of products were from 10.2.2001 till 31.1.2004.
They are marked collectively P2 in the said case. As per the case, in
discharge of the said liability, he issued two cheques bearing Nos.754802
dated 6.2.2004 for Rs.13,34,259/- and another bearing No.754803 dated
9.2.204 for Rs.4,76,408/-
drawn on Sangli Bank. They were marked
collectively P3 and P4. They were bounced for reasons funds insufficient.
He admitted that the transactions between the two parties was going on
since 1992 till the date of the evidence i.e., 2009. The orders were placed
the view taken by the learned Metropolitan Magistrate, Kurla from
November, 2011. The evidence in the matters pending before the
Metropolitan Magistrate, Ballard Pier was recorded in 2009 i.e., prior to the
judgment in the cases by the Metropolitan Magistrate, Kurla. At the time
of recording of evidence before the learned Metropolitan Magistrate, Kurla,
8 invoices for the supply of products were from 10.2.2001 till 31.1.2004.
They are marked collectively P2 in the said case. As per the case, in
discharge of the said liability, he issued two cheques bearing Nos.754802
dated 6.2.2004 for Rs.13,34,259/- and another bearing No.754803 dated
9.2.204 for Rs.4,76,408/-
drawn on Sangli Bank. They were marked
collectively P3 and P4. They were bounced for reasons funds insufficient.
He admitted that the transactions between the two parties was going on
since 1992 till the date of the evidence i.e., 2009. The orders were placed
orally and the post dated cheques were given. The cross-examination of
the complainant in the cases decided by the learned Metropolitan
Magistrate, Ballard Pier, is more specific than the cross examination on
the cases before the learned Metropolitan Magistrate, Kurla. No such
ledger was produced before the Metropolitan Magistrate, Kurla. However,
in the cases before the Metropolitan Magistrate, Ballard Pier, statement of
account which is marked exhibit 31, in Application No.130 of 2014, was
It was pointed out that on 16.10.2003, invoice No.65288 was
produced.
the complainant in the cases decided by the learned Metropolitan
Magistrate, Ballard Pier, is more specific than the cross examination on
the cases before the learned Metropolitan Magistrate, Kurla. No such
ledger was produced before the Metropolitan Magistrate, Kurla. However,
in the cases before the Metropolitan Magistrate, Ballard Pier, statement of
account which is marked exhibit 31, in Application No.130 of 2014, was
It was pointed out that on 16.10.2003, invoice No.65288 was
produced.
raised. On 16.10.2003, amount of Rs.33,750/- was received by the
accused through HDFC bank. Then, the admissions in respect of receipt
of the amounts and the dates are as follows:
Amount (Rs.)
16/10/2003 16,250
17/10/2003 50,000
28/10/2003 3,75,000
29/10/2003 1,20,000
03/11/2003 1,68,750
06/11/203 962
01/12/2003 48,000
03/12/2003 65,000
60,000
05/12/2003 40,000
15/12/203 45,000
4,183
2,128
16/12/2003 16,000
17,540
Date of the cheque
accused through HDFC bank. Then, the admissions in respect of receipt
of the amounts and the dates are as follows:
Amount (Rs.)
16/10/2003 16,250
17/10/2003 50,000
28/10/2003 3,75,000
29/10/2003 1,20,000
03/11/2003 1,68,750
06/11/203 962
01/12/2003 48,000
03/12/2003 65,000
60,000
05/12/2003 40,000
15/12/203 45,000
4,183
2,128
16/12/2003 16,000
17,540
Date of the cheque
22/12/2003 1,50,642
321
03/02/2004 50,000
75,321
09/02/2004
1,25,321
12/02/2004
1,25,321
14/02/2004
1,00,000
21/02/2004
50,000
17/11/2003
95,000
55,000
45,000
ig
17/11/2003
Mr.Laddha has argued that the questions asked in the cross-
19.
1,25,000
18/12/2003
examination in respect of the payment made by the accused in the Ballard
Pier cases were all randomly asked; however, the cheques were issued
against specific invoices and, accordingly on the back of each cheque
details were written. These submissions cannot be appreciated especially
on the background of the admissions given by PW1 Mr.Turakhia in the
cross-examination. Though he admitted the payment, he could not specify
against which invoice the payments were made. In defence, under section
138, the accused has to make out a probable circumstance. The degree
of probability of the existence of the facts or the circumstances which is
required to be shown by the accused cannot be equated with the degree
of the proof of the facts and circumstances which is required to be
established by the prosecution or the complainant.
321
03/02/2004 50,000
75,321
09/02/2004
1,25,321
12/02/2004
1,25,321
14/02/2004
1,00,000
21/02/2004
50,000
17/11/2003
95,000
55,000
45,000
ig
17/11/2003
Mr.Laddha has argued that the questions asked in the cross-
19.
1,25,000
18/12/2003
examination in respect of the payment made by the accused in the Ballard
Pier cases were all randomly asked; however, the cheques were issued
against specific invoices and, accordingly on the back of each cheque
details were written. These submissions cannot be appreciated especially
on the background of the admissions given by PW1 Mr.Turakhia in the
cross-examination. Though he admitted the payment, he could not specify
against which invoice the payments were made. In defence, under section
138, the accused has to make out a probable circumstance. The degree
of probability of the existence of the facts or the circumstances which is
required to be shown by the accused cannot be equated with the degree
of the proof of the facts and circumstances which is required to be
established by the prosecution or the complainant.
At this stage, I would like to advert to the submissions of Mr.Laddha
in respect of non-exhibition of one important document.
Mr.Laddha
20.
submitted that a letter dated 8.3.2004 was sent by Garware Synthetics
Limited i.e., accused to the company of the complainant with K.M.
Enterprises. He relied on two other documents i.e., exhibit D1, in case
No.611/S/2004 dated 17.3.2004, a letter sent by the complainant company
to the respondent company and also another letter sent by the company of
the complainant to the respondent company dated 7.4.2004 marked
in respect of non-exhibition of one important document.
Mr.Laddha
20.
submitted that a letter dated 8.3.2004 was sent by Garware Synthetics
Limited i.e., accused to the company of the complainant with K.M.
Enterprises. He relied on two other documents i.e., exhibit D1, in case
No.611/S/2004 dated 17.3.2004, a letter sent by the complainant company
to the respondent company and also another letter sent by the company of
the complainant to the respondent company dated 7.4.2004 marked
exhibit D2 in C.C. No.611/S/2004. The learned Counsel submitted that the
letter dated 8.3.2004 also ought to have been exhibited by the learned
Metropolitan Magistrate, as this letter was brought in the cross-
examination and this letter disclosed the cheque numbers, their dates, the
amount so also on which bank the cheques were drawn and against which
bill number, the cheques were paid.
In order to substantiate his
submissions that the subject cheques were paid against a particular bill or
invoice, he said this document is very significant. The document fortifies
the case of the complainant i.e., payment was against a particular invoice
and it was not in the running account. He submitted that the learned
Magistrate has committed an error in not accepting the said document in
the evidence. He pointed out that though the document was not signed by
anybody, it was on the letterhead of the Garware Synthetics Limited and it
was relied on by the advocate for the accused at the time of the trial. The
letter dated 8.3.2004 also ought to have been exhibited by the learned
Metropolitan Magistrate, as this letter was brought in the cross-
examination and this letter disclosed the cheque numbers, their dates, the
amount so also on which bank the cheques were drawn and against which
bill number, the cheques were paid.
In order to substantiate his
submissions that the subject cheques were paid against a particular bill or
invoice, he said this document is very significant. The document fortifies
the case of the complainant i.e., payment was against a particular invoice
and it was not in the running account. He submitted that the learned
Magistrate has committed an error in not accepting the said document in
the evidence. He pointed out that though the document was not signed by
anybody, it was on the letterhead of the Garware Synthetics Limited and it
was relied on by the advocate for the accused at the time of the trial. The
learned Counsel for the respondents opposed these submissions and
argued that once the document is not exhibited in the criminal trial, it
21.
cannot be exhibited or cannot be looked into at the appellate stage.
The purpose of exhibiting a document is to make the parties aware
that this particular document is proved and the Court is going to read the
contents in the document in evidence. A party can rely on the contents of
the documents if the contents are favourable to a party and otherwise may
argued that once the document is not exhibited in the criminal trial, it
21.
cannot be exhibited or cannot be looked into at the appellate stage.
The purpose of exhibiting a document is to make the parties aware
that this particular document is proved and the Court is going to read the
contents in the document in evidence. A party can rely on the contents of
the documents if the contents are favourable to a party and otherwise may
explain and answer the contents if they are against the party. Sometimes,
mere exhibition of document may not amount to proof of the contents in
the document. The document may be exhibited subject to proof of the
contents, if the authorship of the contents is attributed to some other
person. The document is to be proved by following the procedure laid
down in the Evidence Act. The Evidence Act is not merely a procedural
law but also a substantive law. If the document is not proved or exhibited
by the trial Court, then, normally, it cannot be read in the evidence at the
appellate stage.
On the background of this position of law, the
submissions made by the learned Counsel in respect of reading the
document, i.e., a letter dated 8.3.2004 are to be tested.
22.
The witness was questioned in detail about in all 14 cheques
received from the respondents against particular invoices and he
admitted. Thus, there were questions in respect of the contents of the said
mere exhibition of document may not amount to proof of the contents in
the document. The document may be exhibited subject to proof of the
contents, if the authorship of the contents is attributed to some other
person. The document is to be proved by following the procedure laid
down in the Evidence Act. The Evidence Act is not merely a procedural
law but also a substantive law. If the document is not proved or exhibited
by the trial Court, then, normally, it cannot be read in the evidence at the
appellate stage.
On the background of this position of law, the
submissions made by the learned Counsel in respect of reading the
document, i.e., a letter dated 8.3.2004 are to be tested.
22.
The witness was questioned in detail about in all 14 cheques
received from the respondents against particular invoices and he
admitted. Thus, there were questions in respect of the contents of the said
document i.e., letter dated 8.3.2004. The learned Magistrate ought to have
exhibited the said document. In respect of the reading this document and
exhibition of this document in evidence, at the appellate stage, the learned
Counsel for the respondents has argued that this document was not
exhibited because it was not signed by anybody. However, it is a fact that
the said document was brought by the witness, the employee of the
complainant but was called by the complainant. Therefore, in fact, he was
This particular letter was brought at the instance of the
exhibited the said document. In respect of the reading this document and
exhibition of this document in evidence, at the appellate stage, the learned
Counsel for the respondents has argued that this document was not
exhibited because it was not signed by anybody. However, it is a fact that
the said document was brought by the witness, the employee of the
complainant but was called by the complainant. Therefore, in fact, he was
This particular letter was brought at the instance of the
prosecution.
a witness of the accused though he was giving evidence for the
accused and, therefore, the respondent ought not to have objected to the
exhibition of the said document. The learned Counsel for the appellant
has also submitted that at the relevant time, the document was objected
as it was not signed. However, after going through the evidence of the
witnesses and the questions put to the witness in the cross-examination,
this document ought to have been exhibited and read in the evidence.
The learned Counsel obviously wanted this document to be exhibited
because the document discloses a chart divided under the five heads in
five columns i.e., cheque numbers stating the numbers of all 14 cheques,
dates of issuance of cheques, amount of the documents, name of the
bank on which the cheque is drawn, the bill numbers i.e., against which
the particular cheque was drawn. Thus, obviously, the learned Counsel
for the appellant now wants to rely on this document to show that the
a witness of the accused though he was giving evidence for the
accused and, therefore, the respondent ought not to have objected to the
exhibition of the said document. The learned Counsel for the appellant
has also submitted that at the relevant time, the document was objected
as it was not signed. However, after going through the evidence of the
witnesses and the questions put to the witness in the cross-examination,
this document ought to have been exhibited and read in the evidence.
The learned Counsel obviously wanted this document to be exhibited
because the document discloses a chart divided under the five heads in
five columns i.e., cheque numbers stating the numbers of all 14 cheques,
dates of issuance of cheques, amount of the documents, name of the
bank on which the cheque is drawn, the bill numbers i.e., against which
the particular cheque was drawn. Thus, obviously, the learned Counsel
for the appellant now wants to rely on this document to show that the
issuance of the cheque by the respondents was against bill to bill and it
I am of the view that the learned Magistrate has committed an error
23.
was not as a part of running account.
in not accepting these documents when the document was relied and
brought on record as the document was brought by the accused in the
cross-examination, the document was written on the letterhead of
Garware Synthetics and it was received by the other party. After all,
I am of the view that the learned Magistrate has committed an error
23.
was not as a part of running account.
in not accepting these documents when the document was relied and
brought on record as the document was brought by the accused in the
cross-examination, the document was written on the letterhead of
Garware Synthetics and it was received by the other party. After all,
exhibition of document is a ministerial act of the Court. The stamp on the
document was shown and accepted and the witness was fully aware of
the contents of the document and the transaction and, therefore, when
questions were allowed on the contents of the document and no objection
was raised at the relevant time in respect of bringing the contents of the
document on record, the learned Magistrate ought to have admitted the
said document in the evidence and should have taken it on record by
exhibiting it. Thus, when the contents in the document are brought on
record then the document is required to be exhibited and read as a whole
to find out facts and ultimately to reach to the truth. Therefore, I am of the
view that this particular document can be read as a whole, as submitted
by Mr.Laddha, leaned Counsel for the applicant. Hence, the document is
to be read in the evidence but it cannot be read partially, it is to be read as
a whole, in appeal. The said document discloses that all those cheques
were accommodation cheques.
document was shown and accepted and the witness was fully aware of
the contents of the document and the transaction and, therefore, when
questions were allowed on the contents of the document and no objection
was raised at the relevant time in respect of bringing the contents of the
document on record, the learned Magistrate ought to have admitted the
said document in the evidence and should have taken it on record by
exhibiting it. Thus, when the contents in the document are brought on
record then the document is required to be exhibited and read as a whole
to find out facts and ultimately to reach to the truth. Therefore, I am of the
view that this particular document can be read as a whole, as submitted
by Mr.Laddha, leaned Counsel for the applicant. Hence, the document is
to be read in the evidence but it cannot be read partially, it is to be read as
a whole, in appeal. The said document discloses that all those cheques
were accommodation cheques.
24.
The basic question why the cheques were issued if at all they were
not intended to be paid is answered by the respondents. The cheques
examination
has
also
admitted
that
the
were issued by way of an accommodation. The complainant in his cross-
cheques
issued
were
accommodation cheques. Some points need to be noted that the
complainant did not send a letter of intimation to the accused before
presentation of these accommodation cheques.
Secondly, there was
continuous business transactions going on even after the filing of these
The basic question why the cheques were issued if at all they were
not intended to be paid is answered by the respondents. The cheques
examination
has
also
admitted
that
the
were issued by way of an accommodation. The complainant in his cross-
cheques
issued
were
accommodation cheques. Some points need to be noted that the
complainant did not send a letter of intimation to the accused before
presentation of these accommodation cheques.
Secondly, there was
continuous business transactions going on even after the filing of these
cases till the evidence of the complainant was recorded and no civil suit
for money recovery is filed by the complainant. Therefore, even though
the respondents did not enter the box to give evidence, admissions given
by the complainant in respect of payments are sufficient to discharge the
burden of rebuttal.
25.
Learned Counsel for the appellant, the original complainant, on the
point of issuance of postdated cheques means accommodation cheques,
relied on Kamal Trading Company vs. State4, where the leaned Single
Judge of this Court at Aurangabad Bench, has held that difference in ink
and signature on the cheque is not legal when the defendant accused did
not dispute commercial transactions and issued postdated cheques to the
complainant. The learned Sessions Judge has unwarrantedly observed
that the ledger entries were not proved by the petitioner. Further it is not
4 2013 ALL MR (Cri) 2789
for money recovery is filed by the complainant. Therefore, even though
the respondents did not enter the box to give evidence, admissions given
by the complainant in respect of payments are sufficient to discharge the
burden of rebuttal.
25.
Learned Counsel for the appellant, the original complainant, on the
point of issuance of postdated cheques means accommodation cheques,
relied on Kamal Trading Company vs. State4, where the leaned Single
Judge of this Court at Aurangabad Bench, has held that difference in ink
and signature on the cheque is not legal when the defendant accused did
not dispute commercial transactions and issued postdated cheques to the
complainant. The learned Sessions Judge has unwarrantedly observed
that the ledger entries were not proved by the petitioner. Further it is not
4 2013 ALL MR (Cri) 2789
disputed by the accused that the postdated cheques were given to the
complainant for the goods purchased on credit of 30 days. In the case of
Vinod Tanna vs. Zaheer Siddiqui 5, the learned Judge of this Court has
held that if the issuance of the cheques in favour of the respondents is not
disputed. Then, the presumption under section 118 is to be invoked and
unless it is not rebutted, it will not be open for the petitioner to show that
section 138 is not attracted because the cheque was not issued for
discharge as a whole or in part, of any debt or other liability. In the case of
complainant for the goods purchased on credit of 30 days. In the case of
Vinod Tanna vs. Zaheer Siddiqui 5, the learned Judge of this Court has
held that if the issuance of the cheques in favour of the respondents is not
disputed. Then, the presumption under section 118 is to be invoked and
unless it is not rebutted, it will not be open for the petitioner to show that
section 138 is not attracted because the cheque was not issued for
discharge as a whole or in part, of any debt or other liability. In the case of
C.Keshava Murthy vs. H.K. Abdul Zabbar 6, the Hon’ble Supreme Court
vs. Shree Mohan8.
discussed the law laid down in K.J. Bhat vs. D.Hegde7 and Rangappa
It observed that the proposition in K.J. Bhat vs.
D.Hegde (supra) that the burden is always on the complainant to
establish not only issuing of cheque but existence of debt or legal liability,
is not correct, as held in para 26 of the judgment rendered by the 3 Judge
Bench in Rangappa vs. Shree Mohan (supra), wherein the Court held
that presumption under section 139 of the Negotiable Instruments Act
includes a presumption of existence at the legally enforceable debt or
liability.
In C. Keshavamurthy (supra), the Supreme Court had
confirmed that the presumption is required to be honoured if it is not so
done, the entire basis this enactment will be lost.
5
6
7
8
2001 Cr.L.J.2297
2013(3) DCR 2013 (SC) (DB)
(2008) 4 SCC 54
(2010) 11 SCC 441
vs. Shree Mohan8.
discussed the law laid down in K.J. Bhat vs. D.Hegde7 and Rangappa
It observed that the proposition in K.J. Bhat vs.
D.Hegde (supra) that the burden is always on the complainant to
establish not only issuing of cheque but existence of debt or legal liability,
is not correct, as held in para 26 of the judgment rendered by the 3 Judge
Bench in Rangappa vs. Shree Mohan (supra), wherein the Court held
that presumption under section 139 of the Negotiable Instruments Act
includes a presumption of existence at the legally enforceable debt or
liability.
In C. Keshavamurthy (supra), the Supreme Court had
confirmed that the presumption is required to be honoured if it is not so
done, the entire basis this enactment will be lost.
5
6
7
8
2001 Cr.L.J.2297
2013(3) DCR 2013 (SC) (DB)
(2008) 4 SCC 54
(2010) 11 SCC 441
Therefore, it has been held that it is for the accused to explain his
26.
case and defend it once the fact of cheque bouncing is established by the
The learned Counsel also relied on the judgment in
Vyomesh Jitendra Trivedi vs. State 9.
27.
complainant.
In Krishna Morajkar vs. Joe Ferrao10, a learned Single Judge of
this Court placed reliance on the judgment in the case of Rangappa
26.
case and defend it once the fact of cheque bouncing is established by the
The learned Counsel also relied on the judgment in
Vyomesh Jitendra Trivedi vs. State 9.
27.
complainant.
In Krishna Morajkar vs. Joe Ferrao10, a learned Single Judge of
this Court placed reliance on the judgment in the case of Rangappa
(supra) and has concluded thus:
“Before I conclude, with all humility at my command, it has to be noted
that even after noticing the object of enacting Section 138 of the
Negotiable Instruments Act, namely to enhance the acceptability of
cheques, Courts have been accepting virtually any argument advanced to
nullify the liability created, like ignoring or misreading presumption under
Section 139 of the Act, misreading provisions of Sections 269SS and
271D of the Income Tax Act, unmindful of the consequence that
unscrupulous individuals go on signing cheques irresponsibly. When a
person signs a cheque and delivers it, even if it is a blank cheque or a
post dated cheque, presumptions under section 118(b) and 139 of the
Negotiable Instruments Act would have to be raised and would have to be
rebutted by the aced, albeit by raising a probability. Unless the Courts
start discouraging flimsy defences, acceptability of cheques would not
increase. .....”
28.
On the point of running account, the complainant placed reliance on
the judgment in Ganesh Enterprises vs. D.R. Sarla w/o. Rajendran,
Proprietor, Priya Silk Sarees11. In the said case, the goods that is raw
silk and twisted yarn was purchased on credit and three cheques were
issued which were bounced.
However, the Court had acquitted the
9 2013 (3) DCR 661
10 (2013) 2 DCR 607
11 2007 (2) DCR 236
“Before I conclude, with all humility at my command, it has to be noted
that even after noticing the object of enacting Section 138 of the
Negotiable Instruments Act, namely to enhance the acceptability of
cheques, Courts have been accepting virtually any argument advanced to
nullify the liability created, like ignoring or misreading presumption under
Section 139 of the Act, misreading provisions of Sections 269SS and
271D of the Income Tax Act, unmindful of the consequence that
unscrupulous individuals go on signing cheques irresponsibly. When a
person signs a cheque and delivers it, even if it is a blank cheque or a
post dated cheque, presumptions under section 118(b) and 139 of the
Negotiable Instruments Act would have to be raised and would have to be
rebutted by the aced, albeit by raising a probability. Unless the Courts
start discouraging flimsy defences, acceptability of cheques would not
increase. .....”
28.
On the point of running account, the complainant placed reliance on
the judgment in Ganesh Enterprises vs. D.R. Sarla w/o. Rajendran,
Proprietor, Priya Silk Sarees11. In the said case, the goods that is raw
silk and twisted yarn was purchased on credit and three cheques were
issued which were bounced.
However, the Court had acquitted the
9 2013 (3) DCR 661
10 (2013) 2 DCR 607
11 2007 (2) DCR 236
respondents on a ground that the complainant did not produce a single
invoice or bill before the Court to show the purchase of silk. There was a
throughout business of purchase of raw silk and yarn by the respondent
accused from the appellant on credit basis and it was a running account.
In the said case, the respondent accused did not enter the witness box,
but her husband had offered as a witness. The appeal was allowed and
The learned Counsel also relied on the judgment in Voltas Ltd. vs.
invoice or bill before the Court to show the purchase of silk. There was a
throughout business of purchase of raw silk and yarn by the respondent
accused from the appellant on credit basis and it was a running account.
In the said case, the respondent accused did not enter the witness box,
but her husband had offered as a witness. The appeal was allowed and
The learned Counsel also relied on the judgment in Voltas Ltd. vs.
29.
the respondents were punished.
Vidarbha Vehicles Pvt. Ltd.12, the Andhra Pradesh High Court held that
the burden lies on the accused to prove that the cheque was not issued by
him and even if issued, it was not in lieu of a legally enforceable debt.
30.
The respondents in reply has relied on the judgment of the Supreme
Court in C.Anthony vs. K.G. Raghavan Nair13. In the said case, payment
was stopped by the drawer i.e., the accused as a blank cheque was given
to another and it was used by the respondents. The trial Court acquitted
the accused but the High Court set aside the acquittal wherein the
Supreme Court has held that the Court must express its reasons for
holding that the acquittal is not justified and if two conclusions are
available, then the finding of the trial Court is not to be disturbed. The
High Court should not re-appreciate the evidence and reverse the order of
12 2007 Cr.L.J. 596
13 (2003) 1 SCC 1
the respondents were punished.
Vidarbha Vehicles Pvt. Ltd.12, the Andhra Pradesh High Court held that
the burden lies on the accused to prove that the cheque was not issued by
him and even if issued, it was not in lieu of a legally enforceable debt.
30.
The respondents in reply has relied on the judgment of the Supreme
Court in C.Anthony vs. K.G. Raghavan Nair13. In the said case, payment
was stopped by the drawer i.e., the accused as a blank cheque was given
to another and it was used by the respondents. The trial Court acquitted
the accused but the High Court set aside the acquittal wherein the
Supreme Court has held that the Court must express its reasons for
holding that the acquittal is not justified and if two conclusions are
available, then the finding of the trial Court is not to be disturbed. The
High Court should not re-appreciate the evidence and reverse the order of
12 2007 Cr.L.J. 596
13 (2003) 1 SCC 1
acquittal in the said case and then the order passed by the High Court
Thus the ratio laid down by the Supreme Court and various High
31.
was set aside.
Courts on the point of presumption and the object of the Act is now settled
law and in view of this settled position of law, it is necessary to consider a
key issue in respect of rebuttal of the presumption in the facts of the
present case as the rebuttal of the presumption is always a matter of
Thus the ratio laid down by the Supreme Court and various High
31.
was set aside.
Courts on the point of presumption and the object of the Act is now settled
law and in view of this settled position of law, it is necessary to consider a
key issue in respect of rebuttal of the presumption in the facts of the
present case as the rebuttal of the presumption is always a matter of
evidence, circumstances and facts of each case. For this reason, the
32.
evidence in two to three cases is discussed to certain extent.
The document marked at exhibit No.D1 in C.C. No.611/SS/2004 (in
Application No.230 of 2012) dated 17.3.2004 shows that 7 cheques which
were expired, were returned by the complainant to the Garware Synthetics
Limited and a request was made to issue fresh cheques for the same
The exhibit D2 was from KM
immediately by letter dated 17.3.2014.
Enterprises addressed to Garware Synthetics Limited on 7.4.2014 wherein
2 cheques were enclosed which would be expired and same request was
made to issue fresh cheques for the same immediately. This shows that
the other cheques were replaced by the cheques which were going to be
expired. Thus, this is an accommodation.
The submissions of the
respondents that the term accommodation may not be available anywhere
in law or under the Negotiable Instruments Act, however, if it is a mutual
32.
evidence in two to three cases is discussed to certain extent.
The document marked at exhibit No.D1 in C.C. No.611/SS/2004 (in
Application No.230 of 2012) dated 17.3.2004 shows that 7 cheques which
were expired, were returned by the complainant to the Garware Synthetics
Limited and a request was made to issue fresh cheques for the same
The exhibit D2 was from KM
immediately by letter dated 17.3.2014.
Enterprises addressed to Garware Synthetics Limited on 7.4.2014 wherein
2 cheques were enclosed which would be expired and same request was
made to issue fresh cheques for the same immediately. This shows that
the other cheques were replaced by the cheques which were going to be
expired. Thus, this is an accommodation.
The submissions of the
respondents that the term accommodation may not be available anywhere
in law or under the Negotiable Instruments Act, however, if it is a mutual
arrangement between two parties which is not legally barred then, that
mode of adjustment of money is to be accepted as a valid agreement
between the two parties, are correct and therefore, a theory of the defence
that the respondent company used to issue accommodation cheques
number of times against the repayment of the due debt is found probable.
The word 'accommodation' is not synonym to the word 'security' but it
borrows the same colour of adjustment in the transaction. Therefore, it is
expected that the accommodation cheques were not to be presented
mode of adjustment of money is to be accepted as a valid agreement
between the two parties, are correct and therefore, a theory of the defence
that the respondent company used to issue accommodation cheques
number of times against the repayment of the due debt is found probable.
The word 'accommodation' is not synonym to the word 'security' but it
borrows the same colour of adjustment in the transaction. Therefore, it is
expected that the accommodation cheques were not to be presented
unless the drawer gave green signal for the presentation. The intention
behind the issuance of these cheques, which were used as a security, is
required to be proved by the respondents, if such defence is adopted.
However, once it is shown that the cheques were issued as an assurance
towards
liability
and
not
intended
to
be
acted
upon,
the
respondent/accused thus rebutted the presumption. Thus, the transaction
between the parties has to be understood accordingly. A drawee
accommodates the borrower by allowing to postpone the payment of the
debt with a view to give some breathing time to the borrower to collect
funds and repay the debt. Therefore, accommodation cheques can be
given in continuation as one, two or three, as the case may be. Issuing
post dated cheques may look like giving accommodation cheques. Every
accommodation cheque, in fact, is a postdated cheque, but every
postdated cheque not necessarily is an accommodation cheque. An each
behind the issuance of these cheques, which were used as a security, is
required to be proved by the respondents, if such defence is adopted.
However, once it is shown that the cheques were issued as an assurance
towards
liability
and
not
intended
to
be
acted
upon,
the
respondent/accused thus rebutted the presumption. Thus, the transaction
between the parties has to be understood accordingly. A drawee
accommodates the borrower by allowing to postpone the payment of the
debt with a view to give some breathing time to the borrower to collect
funds and repay the debt. Therefore, accommodation cheques can be
given in continuation as one, two or three, as the case may be. Issuing
post dated cheques may look like giving accommodation cheques. Every
accommodation cheque, in fact, is a postdated cheque, but every
postdated cheque not necessarily is an accommodation cheque. An each
postdated cheque falls due for payment on the date written on the cheque,
and to be presented before the bank. Often, post dated cheques are
given in day to day transactions – may be business, personal or for
payment of loan, etc. A shortage of money is the only reason for issuing
accommodation cheques; while post dated cheques are issued not only
because the funds are less but for various reasons viz., convenience,
accessibility of the parties, etc. This is the basic difference between the
as
accommodation
cheques.
and to be presented before the bank. Often, post dated cheques are
given in day to day transactions – may be business, personal or for
payment of loan, etc. A shortage of money is the only reason for issuing
accommodation cheques; while post dated cheques are issued not only
because the funds are less but for various reasons viz., convenience,
accessibility of the parties, etc. This is the basic difference between the
as
accommodation
cheques.
respondents
regular postdated cheques and the postdated cheques issued by the
Though
the
term
was used not only
accommodation is not a legal term, in the present transaction, the term
by the respondent / accused but also by the
Hence, the replacement of
complainant with mutual understanding.
further postdated cheques was demanded. As expressed earlier, a nature
of the transaction and the undercurrents therein between the parties
agreed and if the same is not illegal, then, has to be taken into account in
order to appreciate the defence raised by the respondents/accused. In all
the cases under section 138 of the Negotiable Instruments Act the
laudable object behind this enactment to enhance the acceptability and to
increase the credibility of the instrument, cannot be forgotten, yet, the
presumption is rebuttable depending on the facts and evidence in each
case. It appears that the replacement of cheques in the transaction
between the parties with new cheques before expiry of the previous
regular postdated cheques and the postdated cheques issued by the
Though
the
term
was used not only
accommodation is not a legal term, in the present transaction, the term
by the respondent / accused but also by the
Hence, the replacement of
complainant with mutual understanding.
further postdated cheques was demanded. As expressed earlier, a nature
of the transaction and the undercurrents therein between the parties
agreed and if the same is not illegal, then, has to be taken into account in
order to appreciate the defence raised by the respondents/accused. In all
the cases under section 138 of the Negotiable Instruments Act the
laudable object behind this enactment to enhance the acceptability and to
increase the credibility of the instrument, cannot be forgotten, yet, the
presumption is rebuttable depending on the facts and evidence in each
case. It appears that the replacement of cheques in the transaction
between the parties with new cheques before expiry of the previous
cheques or immediately after expiry of the previous cheques was an
accommodation or adjustment, whereby allowing some time to the
respondents to repay the debt and at the same time, it was an
acknowledgement of the liability by the respondents towards the
complainant. This is done because it was a running account and business
between these parties.
In M.S. Narayana Menon @ Mani vs. State of Kerala and anr 14,
33.
accommodation or adjustment, whereby allowing some time to the
respondents to repay the debt and at the same time, it was an
acknowledgement of the liability by the respondents towards the
complainant. This is done because it was a running account and business
between these parties.
In M.S. Narayana Menon @ Mani vs. State of Kerala and anr 14,
33.
the Supreme Court has held that the onus on the accused is not as heavy
as that of the prosecution. It may be compared with a defendant in a civil
proceeding. If the defence is acceptable as probable, the cheque cannot
be held to have been issued in discharge of the debt. If the cheque is
issued for security or for any other purpose, the same would not come
within the purview of section 138 of the Negotiable Instruments Act.
In Jayeshbhai vs. State15, the cheques were issued against the
34.
goods, but, against the purchase of cloth. However, it was found defective
and the cheques were subsequently dishonoured. In the said judgment,
the learned Single Judge of this Court has placed reliance on the case of
C.Anthony vs. K.G.R. Nair (supra) wherein it was stated that unless the
findings of the trial Court are perverse or contrary to the material on
record, the High Court cannot in an appeal substitute its findings merely
14 JT 2006(6) SC 72
15 Cr.Application NO.307 of 2008 decided on 5.5.2008
as that of the prosecution. It may be compared with a defendant in a civil
proceeding. If the defence is acceptable as probable, the cheque cannot
be held to have been issued in discharge of the debt. If the cheque is
issued for security or for any other purpose, the same would not come
within the purview of section 138 of the Negotiable Instruments Act.
In Jayeshbhai vs. State15, the cheques were issued against the
34.
goods, but, against the purchase of cloth. However, it was found defective
and the cheques were subsequently dishonoured. In the said judgment,
the learned Single Judge of this Court has placed reliance on the case of
C.Anthony vs. K.G.R. Nair (supra) wherein it was stated that unless the
findings of the trial Court are perverse or contrary to the material on
record, the High Court cannot in an appeal substitute its findings merely
14 JT 2006(6) SC 72
15 Cr.Application NO.307 of 2008 decided on 5.5.2008
because another contrary opinion was possible on the basis of the
Thus, the main contention of the complainant that there was always
35.
material on record.
bill to bill payment is doubtful as the respondents succeeded in pointing
out higher possibility that the cheques issued were in fact not intended for
presentation. The learned Judges of the Metropolitan Magistrate Courts
have observed that the yearly balance confirmation was not obtained by
Thus, the main contention of the complainant that there was always
35.
material on record.
bill to bill payment is doubtful as the respondents succeeded in pointing
out higher possibility that the cheques issued were in fact not intended for
presentation. The learned Judges of the Metropolitan Magistrate Courts
have observed that the yearly balance confirmation was not obtained by
the complainant. At the end of every financial year, verification of the
outstanding payment received is necessary to fix the amount of the dues.
However, it was not done. Though the complainant has denied that it is
not collateral security, but accepted that the cheques were given to
postpone the payment due to financial difficulty of the accused. Thus, it is
held that such replacement of cheques by post dated cheques was not
intended for the presentation or repayment but they were handed over to
give assurance of acknowledgement of the debt. General liability to pay
the debt and liability to pay a legally dischargeable debt under section 138
of the Negotiable Instruments Act is not one and the same but there is a
different between these two liabilities.
36.
In M.S. Total Finaelf India Ltd. vs. Rashmi Parnami16, a learned
Single Judge of the Delhi High Court held that when the appellant could
16 Criminal Appeal No.1239 of 2001 decided on 3.5.2013
outstanding payment received is necessary to fix the amount of the dues.
However, it was not done. Though the complainant has denied that it is
not collateral security, but accepted that the cheques were given to
postpone the payment due to financial difficulty of the accused. Thus, it is
held that such replacement of cheques by post dated cheques was not
intended for the presentation or repayment but they were handed over to
give assurance of acknowledgement of the debt. General liability to pay
the debt and liability to pay a legally dischargeable debt under section 138
of the Negotiable Instruments Act is not one and the same but there is a
different between these two liabilities.
36.
In M.S. Total Finaelf India Ltd. vs. Rashmi Parnami16, a learned
Single Judge of the Delhi High Court held that when the appellant could
16 Criminal Appeal No.1239 of 2001 decided on 3.5.2013
not prove the cheques in dispute were issued against any debt or liability,
mere liability of the respondents to pay her dues towards purchase of
goods is not enough to proceed under section 138 of the Negotiable
Instruments Act as the appellant has civil remedy to recover outstanding
dues and so no interference was called for in the reasoned order passed
by the trial Court.
Thus, there may be a general liability to pay which can be claimed
but not under section 138 of the Negotiable
mere liability of the respondents to pay her dues towards purchase of
goods is not enough to proceed under section 138 of the Negotiable
Instruments Act as the appellant has civil remedy to recover outstanding
dues and so no interference was called for in the reasoned order passed
by the trial Court.
Thus, there may be a general liability to pay which can be claimed
but not under section 138 of the Negotiable
pursuing civil litigation
37.
38.
Instruments Act, which is a strict and specific liability.
Hence, in view of this, I do not find any illegality in the judgments
and orders passed by the learned Magistrates and hence, no interference
is called for. All the Appeals are dismissed.
(MRS.MRIDULA BHATKAR, J.)
37.
38.
Instruments Act, which is a strict and specific liability.
Hence, in view of this, I do not find any illegality in the judgments
and orders passed by the learned Magistrates and hence, no interference
is called for. All the Appeals are dismissed.
(MRS.MRIDULA BHATKAR, J.)
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