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TMI Blog2017 (1) TMI 1702X X X X Extracts X X X X X X X X Extracts X X X X ..... ility. If this aspect is not mentioned in the complaint, then, it is a fatal one - In fact, as per definition Section2(n) of the Criminal Procedure Code, the term 'offence' includes not only the doing of possible act, but by omitting to do something as well. Undoubtedly, the burden is on the Appellant/Complainant's side to prove that the cheque was signed by 'Drawee' in discharge of Legally Enforceable Debt. Also that, the 'cause of action' under the Negotiable Instruments Act, 1881 will arise not on mere presentation of a cheque nor just dishonour of cheque alone. The real cause of action is the non payment of sum cheque or non compliance of demand through notice by a 'Drawer' within the statutory period. The entire subject matter in issue is remanded back to the trial Court for fresh disposal in the manner known to Law and in accordance with Law. Liberty is granted to the respective parties to raise all factual and legal pleas as per Law. The trial Court is to provide adequate opportunities to the Appellant/Complainant to examine further witnesses on its side and to file necessary documents - Appeal allowed by way of remand. - CRL.A. NO. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an oral and documentary evidence to show that the Respondent/Accused had issued three cheques and cheated the Appellant/Company, ultimately found the Respondent/Accused not guilty and allowed the Appeal. 5. Earlier, the trial Court, in its Judgment in S.T.C.No.823 of 2010 dated 27.12.2012, had, inter alia, observed that for the 'Legally Enforceable Debt' as seen under Section 138 of the Negotiable Instruments Act, the Respondent/Accused had issued Ex.P5 to P7 -Cheques and when they were deposited in the bank account, the said cheques were dishonoured owing to insufficient funds and when a notice was issued at the proper time, the same was received by the Respondent/Accused and when the cheques amount was not paid, the case was proved on behalf of the Complainant as per Section 138 of the N.I. Act. There was no rebuttal evidence adduced on the side of the Respondent/Accused and finally, held that the Respondent/Accused was guilty under Section 138 of the Negotiable Instruments Act, since he had not paid the cheques amount in due time and for the said offence, a simple imprisonment one year was imposed on the Respondent/Accused and also directed the compensation amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in this regard. Unfortunately, the First Appellate Court had failed to appreciate the same. 12. The Learned Counsel for the Appellant submits that the First Appellate Court had failed to note that the Reserve Bank of India Amendment Act, 2006 was passed to legitimise the 'Contracts in Derivatives' with retrospective effect with introduction of Chapter III-D. Section 45-U (a) of RBI Act, which defined 'Derivative'. 13. Advancing his arguments, the Learned Counsel for the Appellant contends that the Respondent/Accused had entered into an agreement with the Appellant/Company in the year 2006 and for more than two years was doing business and only in the year 2008, there arose a dispute when the Respondent/Accused started loosing money on shares and could not be able to make payments to the Appellant. 14. Expatiating his submission, the Learned Counsel for the Appellant takes a forceful stand that the Respondent/Accused had not examined any witness to adduce prima facie evidence to prove his defence and further he had not filed any document to exhibit that the amount reflected in Ex.P4 statement of accounts produced by the Appellant/Company was a false one. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the losses involved in the scheme of 'Trading'. That apart, it was also stated that if the prices of shares move against him, he may loose a part or whole margin of the principal invested during a short span of time. 22. The Learned Counsel for the Appellant contends that the Clauses 1.3.6, 1.3.8, 1.3.10 speak of the remedies available to the Respondent/Accused if there is any discrepancy in the statement of form. Indeed, the transaction between the Respondent/Accused and the Appellant do stand over a period of two years commencing from the year 2006 till the arising of dispute in the year 2008. 23. It is the clear cut stand of the Appellant that the Respondent/Accused was having a credit balance in the Accounts and in regard to the credit balance, he issued cheques, being the subject matter of the complaint. As a matter of fact, the cheques were issued for the purposes of maintaining the margin sum with the Appellant/Complainant. Apart from that, the Appellant comes out with a plea that since the shares of the scrips which the Respondent/Accused purchased started falling, had resulted in the adjustment of the margin amount on the cheques given to the Respondent/Accus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, it is only legal and logical that the year of the cheque was changed from 2000 to 2008. Moreover, the fact that the year was changed from 2000 to 2008 does not affect the rights or liabilities of the parties. 29. The Learned Counsel for the Appellant/Complainant cites the following decisions: (i) In the Judgment of the Hon'ble Supreme Court in between Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd. [2016] 138 SCL 73 at paragraph 16 to 20, it is observed and held as follows: 16. We are in respectful agreement with the above observations. In the present case, reference to the complaint (a copy of which is Annexures P-7) shows that as per the case of the complainant, the cheques which were subject matter of the said complaint were towards the partial repayment of the dues under the loan agreement (para 5 of the complaint) 17. As is clear from the above observations of this Court, it is well settled that while dealing with a quashing petition, the Court has ordinarily to proceed on the basis of averments in the complaint. The defence of the accused cannot be considered at this stage. The court considering the prayer for qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent/accused is guilty for offence under Section 138 of Negotiable Instruments Act beyond reasonable doubt. Therefore, the judgment of the acquittal passed by the trial Court is perverse and it is liable to be set aside and it is hereby set aside. (iv) In the decision Durairaj Mills Ltd. v. Siruvanee Clothing Co. 2013-2-L.W. (Crl.) 640 at special page 650, at paragraphs 39 to 41, it is observed as under: 39. It is to be noted that an alteration of a Negotiable Instrument is material, if it might easily affect a person's substantial right whether such result really follows or not and even though the change is abandoned by the person in whose favour it was intended to operate. Moreover, an alteration made before a Bill is completely issued, eg. the alteration by the drawer of a purported place of drawing inserted by an acceptor, who has accepted a Bill before it being signed by the drawer is not 'Material Alteration'. A formal alteration, which is insignificant or superfluous would not affect the instrument in any manner in the considered opinion of this Court. 40. After all, a 'Material Alteration' is one which varies the rights and liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This they have to discharge in the trial. 30. Appellant's Citations: (i) In the decision R. Elango v. K. Dhanasekaran [2008] 8 MLJ 299, it is held as under: If a party to a suit seeks opinion of the handwriting expert, before commencement of trial, the same shall be accorded, Party can suggest his choice of expert. Expert opinion is of weak evidentiary value and can be considered along with other evidence. An expert never supplants the view of the Court. Original documents should not be sent out of the custody of the Court. Expert can be summoned to take photographs for comparison. (ii) In the decision Rajshree Sugars Chemicals Ltd., Rep. By its Director and Chief Operating officer Mr.R. Varadaraj, Coimbatore v. Axis Bank Ltd., formerly known UTI Bank Limited, rep. By its Assistant Vice President, Chennai and another, [2008] 8 MLJ 261 at special page 263, it is observed and held as under: I. In simple terms, derivatives are financial instruments whose values depend on the value of other underlying financial instruments. A derivative is a financial instrument: (a) whose value changes in response to the change in a specified interest rate, security pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o appended to the said provision, however, restricts the application of the main provision by laying down the conditions which are required to be complied with before any order taking cognizance can be passed which are: (i)that the cheque must be presented within a period of six months from the date on which it is drawn; (ii)on the cheque being returned un-paid by the banker, a notice has to be issued within thirty days form the date of receipt of information by him from the bank regarding the cheque being unpaid; (iii) in the event, drawer of the cheque fails to make payment of the said amount of money to be paid within 15 days from the receipt thereof, a complaint petition can be filed within the period prescribed in terms of Section 142 thereof. (iv) in the decision Marothi Chits (P.) Ltd. v. N.S. Ramakrishnan [2006] 2 M.L.J. (Crl.) 705, it is observed that 'A cheque so issued at the time of receiving the chit amount is not only for the purpose of security, but is also in discharge of a liability, if the successful bidder fails to pay the amount, the cheque can be used to collect the money from him, the liability that has arisen under chit transaction'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . M. Mal Reddy [Crl. O.P. No. 603 of 1999, dated 25-1-1999], it is held as follows: Sec.139 of the Negotiable Instruments Act would provide that it shall be presumed, unless the contrary is proved, that the complainant received the cheque from the accused for the discharge of the debt or liability. Therefore, the accused cannot escape by merely saying that the cheque was given only as a security and that on the date of issuance of the cheque, there was no existing liability, it is for the accused to rebut the presumption contained in Sec. 139 of the Act. Respondent's Submissions: 31. In response, it is the submission of the Learned Counsel for the Respondent that Ex.P2 dated 18.12.2006 is the Client Enrolment Form wherein the name of the Respondent finds a place and Ex.P3 is the Risk Disclosure Document and that P.W.1 (serving as Executive (Operations) in Appellant/Company), in his cross examination, had admitted that the Contract Note purportedly given to the Respondent/Accused was not produced into Court and in respect of purchase/sale of share, the same is supported by a Contract Note and in fact, P.W.1 had also agreed to a suggestion that in the year 2008 at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar, Coimbatore and others) reported in CDJ 2016 MHC 6310, wherein at paragraphs 25 to 27, it is observed as follows: 25. The ingredients of section 138 of the Act are (1) that there is a legally enforceable debt; (2) that the cheque was drawn from the account of bank for discharge in entirety or in part of any debt or other liability which presupposes a legally enforceable debt; and (3) that the cheque was issued and was returned because of 'insufficiency of funds'. 26. In this regard, this court pertinently points out that the presumption under section 139 of the Act extends only to the issuance of cheque towards discharge of legally enforceable debt or liability and it has to be raised only after the Complainant proves that such debt or liability, in fact, exists as on the date of cheque in question and that the cheque was given to him by the Accused. By now, the law is well settled that the 'Burden of Proof' for rebutting presumption is not the same for proving of a criminal charge. For rebuttal of presumption arising in favour of prosecution, the principle of 'preponderance of probability' clearly applies whereas to prove a 'Criminal Charge&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Counsel for the Respondent refers to the following Judgments: (i) In the Judgment in between Shree Sakthi Modern Rice Oil Mill, Erode v. R. Kalaimani [Crl. Appeal No. 509 of 2015, dated 14-11-2016], wherein at paragraphs 32 33, it is observed as follows: 32. At this juncture, a mere running of the eye over the contents of Section 138 of the Negotiable Instruments Act unerringly points out that a mere execution of the cheque is not sufficient to constitute an offence punishable under the Act. Unless it is established that the Debt or other Liability in question is a Legally Enforceable one, in the considered opinion of this Court. In short, the explanation to Section 138 of the Act clearly mentions that for the purpose of 'Debt' or Liability' means a 'Legally Enforceable Debt' or other 'Liability'. As a logical corollary, only a claim based on an Enforceable Debt or other Liability would constitute an offence under Section 138 of the Negotiable Instruments Act. 33. It cannot be gainsaid that as per Section 139 of the Negotiable Instruments Act, there is a presumption that the 'Holder of a Cheque' had received it for the 'Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... einforced, reaffirmed and strengthened by the trial court. (5) If two reasonable conclusions are possible on the basis of the evidence on record, the appellate court should not disturb the finding of acquittal recorded by the trial court. ' (iii) In the decision of the Hon'ble Supreme Court John K. John v. Tom Varghese [2007] 12 SCC 714, at special page 717 at paragraph 11, it is, among other things, observed as follows: 11.. Presumption raised in terms of Section 139 of the Act is rebuttable. If, upon analysis of the evidence brought on record by the parties, in a fact situation obtaining in the instant case, a finding of fact has been arrived at by the High Court that the cheques had not been issued by the respondent in discharge of any debt, in our opinion, the view of the High Court cannot be said to be perverse warranting interference by us in exercise of out discretionary jurisdiction under Article 136 of the Constitution. (iv) In the decision M.S. Narayana Menon v. State of Kerala [2006] 6 SCC 39, at special page 51, at paragraphs 32 to 36, it is observed as follows: 32. The standard of proof evidently is pre-ponderance of probabilities. Inference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to rebut the presumption arising under Section 118 of the Act stating: Briefly stated, the burden of proof may be shifted by presumptions of law or fact, and presumptions of law or presumptions of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact. We are not concerned here with irrebuttable presumptions of law. 48. In Kali Ram v. State of Himachal Pradesh [(1973) 2 SCC 808], Khanna, J., speaking for the 3-Judge Bench, held: One of the cardinal principles which has always to be kept in view in our system of administration of justice for criminal cases is that a person arraigned as an accused is presumed to be innocent unless that presumption is rebutted by the prosecution by production of evidence as may show him to be guilty of the offence with which he is charged. The burden of proving the guilt of the accused is upon the prosecution and unless it relieves itself of that burden, the courts cannot record a finding of the guilt of the accused. There are certain cases in which statutory presumptions arise regarding the guilt of the accused, but the burden even in those cases is upon the prosecution to prove the existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent/Accused calling upon him to pay a sum of ₹ 10,00,000/- towards the written cheques within 15 days and the same was received by the Respondent/Accused on 23.02.2008. That apart, 15 days time was elapsed on 09.03.2008. Since the Respondent/Accused had not made any payment, a complaint was filed before the trial Court against the Respondent/Accused in respect of an offence under Sections 138 to 142 of the Negotiable Instruments Act, 1881. 41. At this stage, this Court pertinently points out that the prosecution under Section 138 of the Negotiable Instruments Act is attracted only when the cheque was issued in respect of current or past liabilities. In reality, a cheque issued in respect of uncertain future liabilities would not attract the ingredients of Section 138 of the Negotiable Instruments Act. There is no requirement on the part of the Respondent/Accused to adduce evidence in Law or to enter the witness box, if he can gainfully collect materials from the evidence of Complainant, of course in his favour. 42. It is to be remembered that a mere admission of signing a blank cheque would not amount to admission of due execution of cheque. By means of the Complainan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be issued either in respect of past or existing debt or other subsisting liability. A salient feature in respect of an offence under Section 138 of the Negotiable Instruments Act is that the cheque in question was drawn for discharge for entirety or part of liability. If this aspect is not mentioned in the complaint, then, it is a fatal one. 48. In fact, as per definition Section2(n) of the Criminal Procedure Code, the term 'offence' includes not only the doing of possible act, but by omitting to do something as well. Undoubtedly, the burden is on the Appellant/Complainant's side to prove that the cheque was signed by 'Drawee' in discharge of Legally Enforceable Debt. Also that, the 'cause of action' under the Negotiable Instruments Act, 1881 will arise not on mere presentation of a cheque nor just dishonour of cheque alone. The real cause of action is the non payment of sum cheque or non compliance of demand through notice by a 'Drawer' within the statutory period. 49. In the instant case, on the side of the Appellant, Contract Note [for the purchase/sale of share(s)] was not filed and marked as Exhibit. Furthermore, Ex.P4 - Clients ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not fetter in any way as to the nature of the material upon which a Court of Law may rely upon to support the statements in a 'Book of Accounts'. Such materials may be like Vouchers, Receipts or any other documentary evidence or of one's oral evidence. 52. Moreover, in the decision Mathilda Sice v. Fritz Gaebele AIR 1926 Mad. 955, it is held that the law requires not only the proof of account books but also of each entry therein. It must be established that the account books produced from lawful/proper custody. The account books are to be kept in the ordinary course of Business. If a person possessing personal knowledge of the facts in regard to the entries in the 'Account Books' to the effect that they were maintained regularly in the course of Business, then, the person who wrote the entries may be examined. The law simpliciter requires that competent person has to speak about the entries should be examined as a witness to show that the transaction in question was a real and honest one. 53. It is to be pointed out that Section 4(2) Cr.P.C. enjoins that all offences under any other Law, other than I.P.C. shall also be enquired into or tried and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 146 of the Negotiable Instruments Act, the Manager of the Bank need not be examined to speak about the written of three cheques etc., this Court is of the considered opinion that the Appellant/Complainant ought to examine the concerned Bank Manager to substantiate his version of the case. In fact, the evidence of the Bank Manager in favour of the Appellant/Complainant will strengthen its case. 57. Suffice it for this Court to point out that when the Respondent/Accused has taken a plea that the three cheques in question were given for the purpose of security, then, as per Section 106 of the Indian Evidence Act, 1872 the facts which are within his knowledge are to be spoken to by him as a witness, so that he will be subjected to cross examination. Even though under Section 138 of the Negotiable Instruments Act, the burden is on the Complainant to prove his case against the Respondent/Accused beyond all reasonable doubt, yet, nothing prevented the Respondent/Accused to have entered into a witness box and spoken about the facts which are special within his knowledge. In this regard, considering the fact Section 138 of the Negotiable Instruments Act creates a vicarious liability t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.T.C.No.823/2010 and set aside the same in furtherance of substantial cause of Justice. Consequently, the Criminal Appeal succeeds. Disposition: 60. In the result, the Criminal Appeal is allowed. The Judgment of the First Appellate Court in C.A.No.1/2013 and the Judgment of the trial Court in S.T.C.No.823/2010 are set aside for the reasons assigned in this Appeal. The entire subject matter in issue is remanded back to the trial Court for fresh disposal in the manner known to Law and in accordance with Law. Liberty is granted to the respective parties to raise all factual and legal pleas as per Law. The trial Court is to provide adequate opportunities to the Appellant/Complainant to examine further witnesses on its side and to file necessary documents. Further, the Respondent/Accused is to examine himself as a defence witness and to mark necessary documents so as to place the said materials before the trial Court for the purpose of an effective and efficacious adjudication and to prove his case and also examine additional witnesses, mark documents in the main case. It is made clear that the trial Court, in any event, shall dispose of the main case with a fair, free, unbiased ..... X X X X Extracts X X X X X X X X Extracts X X X X
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