Full Order Text
Final Order 1 · 06 May 2024 · CNR MHMM190036452018
Order Details: Copy of Judgment Pdf Text: 1 C. C. No.1421/SS/2018 Filed on : 16/03/2018 Registered on : 16/03/2018 Decided on : 06/05/2024 Duration : 06 Y. 01 M. 20 D IN THE COURT OF METROPOLITAN MAGISTRATE 48TH COURT ANDHERI MUMBAI (Presided over by K. G. Sawant) Case No. 1421/SS/2018 CNR: MHMM19-003645-2018 Exh. No. M/s. Dhaval Engg. Co. having their address at 9/14, Juhu Gaurav, Gulmohar Cross Road, No.11, J.V.P.D. Scheme, Juhu, Mumbai-400049 through the Constituted Attorney Mr. Bhupendra N. Damania …Complainant Versus 1. M/s. Amritlal & Associates Sun Industrial Estate, 117, 1st Floor, Sun Mill Compound, Lower Parel, Mumbai-400 013. 2. Mr. Hiralal (Pappu) Mistry (Process not issued) 3. Mr. Manoj Mistry of M/s. Amritlal & Associates Sun Industrial Estate, 117, 1st Floor, Sun Mill Compound, Lower Parel, Mumbai-400 013. 4. Mr. Devendra Mistry (Process not issued) ...Accused -- 1 of 16 -- 2 C. C. No.1421/SS/2018 Offence punishable U/s. 138 of Negotiable Instruments Act Advocate – Smt. Leena Fernandes for the complainant Advocate – Shri. Divakar Gond for accused. JUDGMENT JUDGMENT (Delivered on 06/05/2024) Accused is mired in the trial, for having committed an offence punishable U/s. 138 of the Negotiable Instruments Act, 1881. (Hereinafter it is referred as 'N.I.Act' in short.) Bonsai facts of the complaint are as under : 2] It is the case of complainant that, complainant is a private limited company filed this complaint through constituted attorney namely Bhupendra Damania. Accused no. 1 had undertaken interior decoration work and used to place the orders with the complainant as per his requirement. Accordingly, complainant carried out entire work for total amount of Rs. 18,08,518/-. In order to pay said amount, accused issued 6 cheques for total amount of Rs. 14,45,000/- and same were cleared. For balance amount, accused issued following three cheques for an amount of Rs.3,78,381/-: Sr. No. Cheque No. Date Amount Drawn on 1 023461 16/12/2017 Rs.1,26,127/- Dena Bank 2 023462 26/12/2017 Rs.1,26,127/- Dena Bank 3 023463 10/01/2018 Rs.1,26,127/- Dena Bank 3] Complainant presented these cheques for clearance with its banker. However, all three cheques returned unpaid with remark -- 2 of 16 -- 3 C. C. No.1421/SS/2018 “Exceeds arrangement norms” vide memo dated 11/01/2018. 4] After dishonor of cheques, complainant issued statutory demand notice to accused on 01/02/2018 by RPAD, calling upon accused to pay the cheque amount, within stipulated time. Notice was duly served upon accused. As amount claimed in notice, was not paid by the accused, complainant left with no other option than to knock the door of the court seeking justice and ipso Jure case came before this court, which was filed on 16/03/2018. 5] After issuance of process, accused appeared and thereafter substance of accusation was read over to the accused to which accused pleaded not guilty and opt for trial. 6] In order to prove guilt of accused, complainant examined his representative Bhupendra Damania (C.W. 1) by filing his affidavit in lieu of examination-in-chief at Exh. 15, vide section 145 of the Negotiable Instrument Act. Besides oral evidence, complainant has relied upon following documentary evidence that includes: Description of documents Exh. No. Power of Attorney Exh.23 Quotation placed by Complainant through email and work done details filed at Serial Nos.2 to 8 Article-A collectively Original Cheques Exh.24 & 25 Cheque returned memos Exh.26 & 27 Request letter dated 28/07/2017 Exh.28 Summary of bill raised dated 17/05/2017 Exh.29 -- 3 of 16 -- 4 C. C. No.1421/SS/2018 Xerox copy of cheque issued by accused to the complainant Article-B Ledger Account Exh.30 Tax invoice Exh.31 to 34 Total 10 tax invoices filed at Serial No.22 Article-C Collectively Original disputed Cheques Exh.35 to 37 Cheque returned memos Exh.38 Office copy of notice Exh.39 Postal Receipt Exh.40 to 43 7] After completion of complainant's evidence, statement of accused U/s. 313 of Cr.P.C. was recorded at Exh. No. 53, wherein accused has denied his liability to pay cheque amount. 8] Heard Ld. Advocate for both parties at length. In view of accusation and argument of both parties, following points arise for my determination and I have recorded my findings thereon as follows:- Sr. No. Points Findings 1. Does complainant prove that disputed cheques were issued by the accused, in favour of complainant for discharging legal enforceable liability? …. In the Negative 2. Does complainant prove that cheques were returned unpaid for reason “Exceeds arrangement norms”? …. In the Affirmative -- 4 of 16 -- 5 C. C. No.1421/SS/2018 3. Does complainant further prove that he had issued statutory demand notice to the accused within limitation demanding cheque amount ? …. In the Affirmative 4. Does complainant further prove that demand notice is valid, legal and is inconformity with Section 138 of Negotiable Instruments Act ? In the Negative 5. Does complainant further prove that inspite of service of notice accused has failed to pay cheque amount to complainant within statutory limit? …. In the Negative 6. Whether complaint is filed within period of limitation? …. In the Negative 7. What order ? …. Accused are Acquitted. REASONS AS TO POINT NO. 1: 9] The accused are roped in the offence punishable u/s. 138 of the N.I. Act. Upon perusal of relevant provision it is manifest that to constitute offence punishable U/s. 138 of N.I. Act following ingredients are to be fulfilled which are mandatory in nature. A person must have drawn a cheque on an account maintained by him in a bank for the payment of certain amount of money to another person from out of that account for the discharge in whole or in part, of any debt or other liability. That the cheque has been presented to the bank within a period of Three months from the date, on which it is drawn or within -- 5 of 16 -- 6 C. C. No.1421/SS/2018 period of its validity, whichever is earlier. That the cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the account, is insufficient to honour the cheque or that exceeds and amount arranged to be paid from that account by an agreement made with the bank. The payee or the holder in due course of the cheque makes a demand for the payment of said amount of money by giving a notice in writing, to the drawer of the cheque, within 30 days of the receipt of the information by him from the bank regarding dishonor of the cheque as unpaid. The drawer of the said cheque fails to make payment of said amount of money to the payee or holder in due course of the cheque within 15 days from the receipt of the said notice. The payee or holder in due course lodged written complaint in the court within 30 days thereafter. The drawer of the said cheque failed to rebut the presumption u/s. 118 and 139 of the N.I. Act. 10] Before going further, it is necessary to mention here that, as per Section 139 of N.I. Act, there is a presumption in favour of holder of cheque. So also as per Section 118 of the Said Act, there is a presumption that said cheque was issued for certain consideration. For ready reference Section 118 and 139 of the said act are quoted below:- Sec. 118-Presumptions as to negotiable instruments.- Until the contrary is proved, the following presumptions shall be made:- a) of consideration.- that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred -- 6 of 16 -- 7 C. C. No.1421/SS/2018 for consideration; b) as to date.- that every negotiable instrument bearing a date was made or drawn on such date; c) as to time of acceptance.- that every accepted bill of exchange was accepted within a responsible time after its date and before its maturity; d) as to time of transfer .- that every transfer of a negotiable instrument was made before its maturity; e) as to order of indorsements.- that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon; f) as to stamp.- that a lost promissory note, bill of exchange or cheque was duly stamped; g) that holder is a holder in due course.- that the holder of a negotiable instrument is a holder in due course: Provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him. Section 139. Presumption in favour of holder.- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138, for the discharge, in whole or in part, of any debt or other liability. -- 7 of 16 -- 8 C. C. No.1421/SS/2018 11] Being cumulative, it is only when all above mentioned ingredients are satisfied then the person who had drawn the cheque can be deemed to have been committed an offence u/s .138 of the Act. For the purpose of section 138, debt or other liability means a legally enforceable debt or other liability. To understand the spirt of provisions contemplated vide section 138 to 141 of Negotiable Instrument Act, Section 139 of the said act plays significant role. In view of express provision of section 139 of N.I. Act a presumption shall be drawn that the holder of cheque, received the cheque, of the nature referred to in Section 138 for the discharge of any debt or other liability unless contrary is proved. Thus, it gives power to court to presume unless contrary is proved that the holder of cheque received the cheque for discharge in whole or in part of any debt or other liability. The word “shall presume” as per Section 4 of Indian Evidence Act means whenever it is directed by this act, that the court shall presume a fact, it shall regard such fact as a proved unless and until it is disproved. Thus, the burden of proof as to cheque has not been issued as a legal debt or liability is always on accused and it is for him to rebut said presumption. A useful guidance on the said point can be taken from the verdict delivered by Hon'ble Supreme Court in the case of Goa Plast Pvt. Ltd. V/s .Chico D'souza (2004 SCC (cri) 499) wherein the court has considered the object behind section 138 and 139 of the N.I. Act and held that the entire burden is on accused to show that cheque was not issued for any debt or liability as mentioned in the complaint. Hon'ble Court has further held that presumption u/s. 139 is a rebuttable and it can be rebutted on the basis of evidence brought by the complainant or by leading his own evidence. The standard of proof for rebutting the presumption is preponderance of probabilities which is a standard -- 8 of 16 -- 9 C. C. No.1421/SS/2018 applicable to the accused whenever accused is required to prove a fact. 12] In order to prove their case, complainant examined their representative Bhupendra Damania by filing his affidavit of examination-in-chief at Exh. 15, wherein he has reiterated case from the complaint. His evidence shows that, complainant company had done work for accused and raised invoices for total amount of Rs. 18,08,518/-. His evidence further shows that, finally an amount of Rs. 5,11,060/- was balance against accused and in order to pay said amount, disputed three cheques were issued by the accused. In support of his evidence, he has produced on record original cheques, tax invoices, ledger account etc. 13] Ld. Advocate for accused conducted cross-examination of complainant at length and taken following defences:- i) Mr. Manoj Mistri is not the partner of accused no.1 and hence he is not at all liable to pay cheque amount. ii) Entire transaction was taken place between complainant and one Hiralal Mistri. iii) Amount claimed in the demand notice is excess than the cheque amount and thus notice is bad in law. 14] Considering oral and documentary evidence on record it appears that, transaction has taken place between complainant and accused firm. It also appears that, accused firm was liable to pay cheque amount to the complainant. In cross-examination, accused has not denied transaction but entire cross-examination is on the point of liability of Mr. Manoj Mistri to pay the cheque amount. Complainant has admitted in cross-examination that, he has not produced any document to show that, who were the partners of accused no. 1. -- 9 of 16 -- 10 C. C. No.1421/SS/2018 According to complainant, accused no. 4 (no process issued against him.) used to issue cheques to the complainant company. He further admitted that, said work order was given to the complainant by Hiralal Mistri. He further stated that, entire transaction was taken place between him and Hiralal Mistri. He further admitted that, accused no. 2 Manoj Mistri was not the partner of accused no. 1 firm. It is necessary to note here that, process was issued against accused no. 1 and said Manoj Mistri only. However, as admitted by Mr. Bhupendra Damania (C.W.1), Mr. Manoj Mistri was not involved in this transaction and he was not the partner of accused no. 1. 15] Here, learned advocate for complainant argued that as per judgment passed by the Hon'ble Supreme Court in the case of Rangappa V/s. Sri Mohan [(2011)1 SCC (Cri.)184], burden is on accused to show that cheque was not issued for discharging legal enforceable liability. She further argued that accused was not the partner, it was for him to challenge the issue process order. She further argued that accused kept silence till cross-examination. At the time of filing of complaint, complainant had no knowledge that accused is not the partner. 16] On the other hand, learned advocate for accused argued that accused can prove his defence through cross-examination of complainant. He further stated that if accused is not at all involved in this transaction, he cannot be held guilty for offence under Section 138 of N.I. Act. 17] Having heard both parties at length and admission given by the complainant, it becomes clear that Mr. Manoj Mistry was not -- 10 of 16 -- 11 C. C. No.1421/SS/2018 involved in this transaction. Here learned advocate for accused has relied upon judgment passed by the Hon'ble Supreme Court in the case of S.P. Mani and Mohan Dairy V/s. Snehalata Elangovan [Decided in Criminal Appeal No.1586/2022] wherein in Para No.27 the Hon'ble Supreme Court has observed as under : 27. As for the requisite evidence, the burden upon the prosecution would be discharged under subsection (1) when a person is proved to be in charge of and responsible to the company in the conduct of its business and would shift upon the accused to prove that he was ignorant or diligent, if that be his defence; whereas under subsection (2) the prosecution would be required to allege and prove the consent, connivance or neglect and holding of the office by the accused. There is nothing to suggest that the same person cannot be made to face the prosecution either under subsection (1) or subsection (2) or both. A director or manager can be arraigned and proved to be guilty as the person in charge of and responsible to the company as well as the director of the company who, as such, might have consented to, connived at or been negligent in respect of the offence of dishonour of cheque, be logically deduced that a person can be arraigned in a complaint as the accused along with the company if it prima facie appears that he was in charge of and responsible to the company for the conduct of its business, although he may or may not be or may not have continued to be a director or other officer of the company, as mentioned in sub section (2). It would be sufficient if the complaint indicates that such person has been arraigned on the basis of averments which disclose him or her to be the person in charge of and responsible to the company in the conduct of its business at the time the offence was committed. Evidently, a person who signs the cheque or who has the authority to sign the cheque for and on behalf of the company, regardless of his office or capacity, can, prima facie, be assumed to be in charge of and responsible to the company in the conduct of its business. And, where such person is prosecuted, then, if it be his defence that the offence was committed without his or her knowledge or that he or she has exercised all due diligence to prevent the commission of such offence, the burden to prove that would be on him or her and can only be discharged at the stage of evidence. 18] Thus, from perusal of above observation it becomes clear that the person signs the cheque, it can be presumed that he was incharge and responsible for the business of company. It is further observed by the court that, if it is the defence taken by such person that, offence was committed without his/ her knowledge or that he / she has exercised all due diligence to prevent the commission of such offence, -- 11 of 16 -- 12 C. C. No.1421/SS/2018 the burden to prove that would be on him or her and can only be discharged at the stage of evidence. 19] He also relied upon judgment passed by the Hon'ble Supreme Court in the case of Dilip Hariramani V/s. Bank of Baroda [Decided in Criminal Appeal No.767/2022 dated 09/05/2022] wherein in Para-8 to 12 the Hon'ble Supreme Court as under : 8. Sub-section (2) to Section 141 of the NI Act states that notwithstanding anything contained in sub-section (1), where a company has committed any offence under the Act, and it is proved that such an offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officers of the company, then such director, manager, secretary or other officers of the 9 S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another, (2005) 8 SCC 89, para 4 and 9. company shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Sub-section (2) to Section 141 of the NI Act does not state that the persons enumerated, which can include an officer of the company, can be prosecuted and punished merely because of their status or position as a director, manager, secretary or any other officer, unless the offence in question was committed with their consent or connivance or is attributable to any neglect on their part. The onus under sub-section (2) to Section 141 of the NI Act is on the prosecution and not on the person being prosecuted. 9. In Pratap Chand (supra), specific reference was made to the Explanation to Section 34 of the Drugs and Cosmetics Act, which states that for Section 34, a ‘company’ means a body corporate and includes a firm or association of individuals, and a ‘director’ in relation to a firm means a partner in the firm. Thereafter, the conviction of the second respondent, one of the partners in the firm therein, was quashed on the ground that he cannot be convicted merely because he has the right to participate in the firm's business in terms of the partnership deed. Thus, notwithstanding the legal position that a firm is not a juristic person, a partner is not vicariously liable for an offence committed by the firm, unless one of the twin requirements are satisfied and established by the prosecution. This Court gave the following reasoning: “7. It is seen that the partner of a firm is also liable to be convicted for an offence committed by the firm if he was in charge of, and was responsible to, the firm for the conduct of the business of the firm or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any neglect on the part of the partner concerned. In the present case the second respondent was sought to be made liable on the ground that he along with the first respondent was in charge of the conduct of the business of the firm. Section 23-C of the Foreign Exchange Regulation Act, 1947 which was identically the same as Section 34 of the -- 12 of 16 -- 13 C. C. No.1421/SS/2018 Drugs and Cosmetics Act came up for interpretation in G.L. Gupta v. D.H. Mehta, (1971) 3 SCC 189 where it was observed as follows: “What then does the expression ‘a person in- charge and responsible for the conduct of the affair of a company’ means? It will be noticed that the word ‘company’ includes a firm or other association, and the same test must apply to a director in-charge and a partner of a firm in-charge of a business. It seems to us that in the context a person ‘in-charge’ must mean that the person should be in overall control of the day to day business of the company or firm. This inference follows from the wording of Section 23-C(2). It mentions director, who may be a party to the policy being followed by a company and yet not be in- charge of the business of the company. Further it mentions manager, who usually is in charge of the business but not in overall charge. Similarly the other officers may be in charge of only some part of business.” 10. We would also refer to the summarisation of law on Section 141 by this Court in National Small Industries Corporation Limited v. Harmeet Singh Paintal and Another,10 to the following effect: “39. From the above discussion, the following principles emerge: (i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.” 11. In the present case, we have reproduced the contents of the complaint -- 13 of 16 -- 14 C. C. No.1421/SS/2018 and the deposition of PW-1. It is an admitted case of the respondent Bank that the appellant had not issued any of the three cheques, which had been dishonoured, in his personal capacity or otherwise as a partner. In the absence of any evidence led by the prosecution to show and establish that the appellant was in charge of and responsible for the conduct of the affairs of the firm, an expression interpreted by this Court in Girdhari Lal Gupta v. D.H. Mehta and Another11 to mean ‘a person in overall control of the day- to-day business of the company or the firm’, the conviction of the appellant has to be set aside. 12 The appellant cannot be convicted merely because he was a partner of the firm which had taken the loan or that he stood as a guarantor for such a loan. The Partnership Act, 1932 creates civil liability. Further, the guarantor's liability under the Indian Contract Act, 1872 is a civil liability. The appellant may have civil liability and may also be liable under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, vicarious liability in the criminal law in terms of Section 141 of the NI Act cannot be fastened because of the civil liability. Vicarious liability under sub-section (1) to Section 141 of the NI Act can be pinned when the person is in overall control of the day- to-day business of the company or firm. Vicarious liability under sub-section (2) to Section 141 of the NI Act can arise because of 11 (1971) 3 SCC 189 12 State of Karnataka v. Pratap Chand and Others, (1981) 2 SCC 335. the director, manager, secretary, or other officer's personal conduct, functional or transactional role, notwithstanding that the person was not in overall control of the day-to-day business of the company when the offence was committed. Vicarious liability under sub-section (2) is attracted when the offence is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company. 12. The demand notice issued on 04 th November 2015 by the Bank, through its Branch Manager, was served solely to Simaiya Hariramani, the authorised signatory of the Firm. The complaint dated 07th December 2015 under Section 138 of the NI Act before the Court of Judicial Magistrate, Balodabazar, Chhattisgarh, was made against Simaiya Hariramani and the appellant. Thus, in the present case, the Firm has not been made an accused or even summoned to be tried for the offence.” 20] From the perusal of above observation it becomes clear that in order to attract vicarious liability, such person should be responsible for day to day affairs of the firm. In this case, complainant clearly admitted that entire transaction was taken place between complainant and Hiralal Mistry and he also admitted that present accused Manoj Mistry is not the partner in the said firm. Therefore, it cannot be said that Mr. Manoj Mistry comes under Section 141 of N.I. -- 14 of 16 -- 15 C. C. No.1421/SS/2018 Act. In such circumstances, no vicarious liability will attract against Mr. Manoj Mistry U/s. 141 of N.I. Act. Therefore, it cannot be said that cheque was issued by accused No.3 for discharging liability. In result, point no.1 is answered in the Negative. AS TO POINT NO. 2 : 21] In order to prove that, cheques were returned unpaid complainant has produced on record cheque returned memo at Exh. 38, Said memo bears seal of the bank and signature of bank officer. Therefore, as per presumption u/s 146 of N.I. Act. It is to be presumed that, disputed cheques have been dishonoured for a reason “Exceed Arrangement”. In result, point no.2 is answered in the Affirmative. AS TO POINT NO.3 TO 6 : 22] It is a matter of record that, complainant has sent demand notice on 01/02/2018 which is within limitation. Admittedly, cheque amount of this case is Rs.3,78,381/- but demand notice was sent for an amount of Rs.5,11,060/-. In cross-examination, complainant has admitted that, through demand notice they called upon accused to pay an amount of Rs.5,11,060/-. Thus, amount claimed in the demand notice is excess than the cheque amount. Therefore, said notice cannot be termed as legally correct demand notice, but it is defective in the nature and not as per compliance of the provisions of N.I. Act. Therefore, it cannot be said that, there was proper demand notice on the part of complainant. Consequently, there was no question of having cause of action to file this complaint. Therefore, it cannot be said that, complainant has filed this complaint within limitation. In result, point nos. 3 answered in the affirmative while point Nos.4 to 6 are answered in the Negative. -- 15 of 16 -- 16 C. C. No.1421/SS/2018 AS TO POINT NO. 7: 23] Taking into consideration answer of points Nos.1 and 4 to 6, accused are entitled for acquittal. In result, I pass following order:- ORDER 1] Accused No.1 M/s.Amritlal & Associates and accused No.3 Mr. Manoj Mistry are hereby acquitted vide Section 255(1) of Criminal Procedure code for an offence punishable under Section 138 r/w.141 of the Negotiable Instruments Act. 2] Bail bond of accused No.3 stands canceled. 3] Accused No.3 shall execute P.R. Bond of Rs.15,000/-, to appear before the Higher Court as and when such court issues notice in respect of any appeal or petition filed against this judgment, vide section 437 (A) of the Code of Criminal Procedure. Said bail bonds shall be in force for Six Months. (Judgment is dictated and pronounced in open court.) Sd/- Mumbai (K. G. Sawant) Dt. 06/05/2024 Metropolitan Magistrate 48th Court, Andheri, Mumbai. Dictated On : 06/05/2024 Typed On : 06/05/2024 Signed On : 06/05/2024 -- 16 of 16 --
