2014 (5) TMI 1088 - HC - Indian Laws

Negotiable Instruments Act 1881 - whether the cheques in question were issued as advance for supply of goods which were never supplied or they were issued towards payment of the goods which were purchased by the firm and were duly supplied to it.- Held that - The accused has not been able to rebut the statutory presumption raised under Sections 138(a) and 139 of the Negotiable Instruments Act and the cheques in question were issued for consideration i.e. towards price of the goods purchased by the accused firm from the appellant/complainant Company. As held in M.S. Narayana Menon case 2006 (7) TMI 576 - SUPREME COURT an accused need not enter into witness box and examine other witnesses in support of his defence and that the standard of proof required from an accused is preponderance of probability which can be drawn not only from the material on record but also by reference to the circumstances upon which the accused relies. However in the facts & circumstances of the case the accused before this Court has not been able to discharge the onus placed on him from the material brought on record by the complainant nor has he been able to show existence of circumstances from which it may be inferred that the cheques in question were without consideration. the firm was not arrayed as an accused and only Mr. Sumit Seth was the sole person prosecuted by the complainant/appellant Company. In fact the averment made in the complaint is that Mr. Sumit Seth was the Proprietor of M/s. Tarun Engineering Syndicate. Admittedly M/s. Tarun Engineering Syndicate is a partnership firm and Mr. Sumit Seth is its partner and not its proprietor. Despite his being a partner of the firm Mr. Sumit Seth cannot be convicted in the aforesaid complaint because the firm was not made an accused along with Mr. Sumit Seth. A firm is a Company within the meaning of Section 141 of the Negotiable Instruments Act and therefore the partner of a firm is only vicariously liable where an offence under Section 138 of the Act is committed by the firm provided he was the person in charge of and responsible to the firm for conduct of its business at the relevant time. Unless the firm is prosecuted and convicted a partner cannot be convicted with the aid of Section 141 of the Act. Thus appeal against Shri Sumit Sethi is dismissed. and M/s. Tarun Engineering Syndicate is convicted under Section 138 of the Negotiable Instruments Act. The accused firm is fined of Rs. 16.00 lakh Rs. 16.00 lakh Rs. 19.00 lakh and Rs. 16.00 lakh respectively in the complaints

Summary

Issues Involved:

1. Whether the cheques in question were issued as advance for supply of goods or towards payment of goods already supplied.
2. Whether the statutory presumption under Sections 118(a) and 139 of the Negotiable Instruments Act was rebutted by the accused.
3. The admissibility and authenticity of the statement of accounts and C-Forms.
4. The legal implications of not prosecuting the partnership firm along with its partner.

Issue-wise Detailed Analysis:

1. Whether the cheques in question were issued as advance for supply of goods or towards payment of goods already supplied:

The primary issue is whether the cheques were issued as advance payment for goods that were never supplied or as payment for goods already purchased by the firm. The appellant/complainant presented evidence, including the statement of accounts and C-Forms, indicating that the cheques were issued towards the payment of goods supplied. The accused claimed that the cheques were issued as advance payment for goods that were not delivered. However, the court found that the evidence on record, including the statement of accounts and the C-Forms, supported the appellant's claim that the cheques were issued for goods already supplied.

2. Whether the statutory presumption under Sections 118(a) and 139 of the Negotiable Instruments Act was rebutted by the accused:

Sections 118(a) and 139 of the Negotiable Instruments Act create a statutory presumption that a cheque was issued for consideration and towards discharge of a debt or liability. The accused argued that the cheques were issued as advance payment and not for an existing debt. However, the court noted that the accused did not lead any evidence to rebut the statutory presumption. The court held that the accused failed to bring on record compelling facts or circumstances to shift the burden back to the complainant. Therefore, the statutory presumption was not rebutted, and the cheques were presumed to have been issued for consideration.

3. The admissibility and authenticity of the statement of accounts and C-Forms:

The appellant/complainant presented a statement of accounts and C-Forms as evidence. The court found that the statement of accounts was maintained in electronic form and was supported by a certificate under Section 65B of the Indian Evidence Act. The court also noted that the accused did not produce any evidence to rebut the statement of accounts or challenge its authenticity. Regarding the C-Forms, the court dismissed the discrepancies pointed out by the accused, such as typographical errors and the placement of the Oath Commissioner's seal, as insufficient to prove forgery. The court held that the C-Forms were genuine and supported the appellant's claim.

4. The legal implications of not prosecuting the partnership firm along with its partner:

In the complaints relevant to Crl. A. Nos.1433/2013, 1434/2013, 1435/2013, and 1436/2013, only the partnership firm was prosecuted, and not its partner, Mr. Sumit Seth. The court noted that Mr. Sumit Seth had no opportunity to defend himself as an accused and could only defend the firm as its partner. Therefore, only the partnership firm could be convicted. In the complaint relevant to Crl. A. No.1432/2013, only Mr. Sumit Seth was prosecuted as the proprietor of the firm, which was incorrect since the firm was a partnership. The court held that a partner could not be convicted unless the firm was also prosecuted and convicted. Thus, the court dismissed the complaint against Mr. Sumit Seth and convicted the partnership firm in the other complaints.

Conclusion:

The court concluded that the accused failed to rebut the statutory presumption under Sections 118(a) and 139 of the Negotiable Instruments Act. The cheques were issued for consideration towards the payment of goods already supplied. The statement of accounts and C-Forms presented by the appellant were found to be genuine and admissible. The court convicted the partnership firm under Section 138 of the Negotiable Instruments Act and imposed fines. The complaint against Mr. Sumit Seth was dismissed due to the legal requirement of prosecuting the firm along with its partner. The appeals were disposed of accordingly.