Mr. Mohd. Rashid with Mr. Shivam Sharma, Advocates v. SHREE LAKSHMI VENKATESH CARGO MOVERS CONSULTANTS

APPELLANT’S SUBMISSIONS 4. Mr. Mohd. Rashid, learned counsel appearing on behalf of the appellant (complainant in the criminal complaints) submits, that the case concerns 02 cheques bearing No.167953 dated 08.11.1997 for Rs. 20 lacs and No.167954 dated 10.11.1997 for Rs.10 lacs issued by the respondent to the appellant in discharge of certain debts owed against cement that was supplied by the appellant through the respondent, who (latter) was the appellant‟s Carrying & Forwarding („C&F‟) Agent.

5. Mr. Rashid submits, that a perusal of the impugned judgment would show that the learned Magistrate records that the respondent had admitted that they had issued the said cheques; but, after dealing with the various defences raised on behalf of the respondent, the learned Magistrate proceeds to dismiss the complaints on an incorrect application of the principles of law. It is submitted, that having first correctly enunciated the position of law, the learned Magistrate has subsequently proceeded on the basis that it was the appellant who was Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 2 of 21 required to prove that there was a legally recoverable debt from the respondent, and in doing so, the learned Magistrate has completely misinterpreted and misapplied the statutory presumption contained in sections 118 and 139 of the NI Act.

6. Learned counsel draws attention to the following portion of the impugned judgment where the learned Magistrate has correctly articulated the statutory presumption in favour of the appellant : “16. In the present case, the accused has admitted that the cheque in question (Ex.CW1/13) is his cheque and bears his signature. It was dishonoured for reason “Funds Insufficient” vide cheque returning memo (Ex.CW1/15). As per record, the legal demand notice had been sent to the accused within 15 days from receipt of intimation of dishonor of the cheque in question. The legal demand notice sent by the complainant was duly replied to on behalf of the accused. The same confirms the service of legal demand notice upon the accused. Despite service of notice, payment of cheque amount had not been made by the accused to the complainant within 15 days of receipt of legal demand notice. Hence, all requirements for filing a complaint under Section 138 of NI Act have been complied with in the present case and the complaint has been filed within limitation. * * * * * raises Instruments Act “18. The Negotiable presumptions in favour of the holder of the cheque i.e. complainant in the present case; firstly, with regard to passing of consideration as contained in Section 118(a) and, secondly, a presumption under Section 139, that the holder of cheque receiving the same of the nature referred to in Section 138 for discharge, in whole or in part, of any debt or other liability. These presumptions under Sections 118(a) and 139 have to be compulsorily raised as soon as execution of cheque by accused is admitted or proved by the complainant and thereafter burden is shifted upon the accused to prove otherwise. Once the issuance of cheque is established, either by admission or by positive evidence, the presumption under Section 139 of the Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 3 of 21 Negotiable Instruments Act, 1881 arises. In the present case, the accused has admitted his signature on the cheque in question. Hence, the presumptions under Sections 118(a) and 139 of NI Act have been raised in favour of the complainant. The onus then shifted upon the accused to rebut the said presumption. The standard of proof to be discharged by the accused is „preponderance of probabilities‟.”

7. Mr. Rashid submits that thereafter, the learned Magistrate proceeds to deal with the various defences raised by the respondent in the following manner : 7.1. That M/s Gujarat Ambuja Cements Ltd. had no authority to prosecute the respondent : Learned counsel submits that this issue was raised since the respondent had had dealings with M/s. DLF Cements Limited, which company was the original complainant, but the name of that company was subsequently changed to M/s. Ambuja Cement Rajasthan Ltd.; and the latter company then amalgamated with M/s. Gujarat Ambuja Cements Ltd. This issue was decided by the learned Magistrate against the respondent, with the following observations : “Perusal of record reveals that vide order dated 29.08.2000, an application seeking change of name of complainant company (DLF Cement Ltd.) to „Ambuja Cement Rajasthan Ltd.‟, filed on behalf of the complainant, was allowed. As such, simple name change of complainant does not affect the rights and liabilities of the parties. Further, since application had already been allowed and the said order attained finality, the court is not inclined nullify the locus of the complainant at this stage. Thereafter, vide order dated 09.08.2004, an application seeking amendment in the name of complainant company due to its Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 4 of 21 amalgamation with „Gujarat Ambuja Cements Ltd.‟, filed on behalf of the complainant, was allowed. Copy of order of BIFR (Mark R) had been filed on behalf of the complainant along with the same. No objection was raised on behalf of the accused qua the order. As per the general law of amalgamation, rights and liabilities of transferor company are vested in transferee company as per the scheme of amalgamation. No inference can be drawn from the documents filed that right to prosecute the accused had been foregone on behalf of the complainant. Further, since application had already been allowed and the said order attained finality, the court is not inclined nullify the locus of the complainant at this stage. Lastly, on 31.08.2007, an application seeking change of name of complainant company complainant, was kept pending to be decided at the time of final hearing. However, certified copy of Certificate of Incorporation issued by Registrar of companies for the said name change had not been filed on behalf of the complainant the original the said application. Even along with certificate/certified copy of certificate was not seen and returned. In such a case, application seeking name change of the complainant to „Ambuja Cements Ltd.‟ cannot be allowed at this stage. Accordingly, complainant in the present case continues to be „Gujarat Ambuja Cements Ltd.‟. However, since the entity has remained the same, there is no material infirmity for pronouncement of judgment.” „Ambuja Cements Ltd.‟, filed on behalf of (emphasis supplied)

7.2 That the authorized representative of the complainant did not have the requisite authorization and knowledge to prosecute the criminal complaints : Next, learned counsel points-out, that the learned Magistrate has dealt with this issue with the following observations : Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 5 of 21 “Challenge to authorization of AR of the complainant had also been raised on behalf of the accused. It had been contended that original AR Sh. Pulin Kumar had only filed a General Power of Attorney and not a specific one. Also, he had no knowledge of the transactions and hence, could not give the best evidence in the case. Perusal of copy of POA (Mark A) of the first AR of the original complaint reveals that necessary averments have been mentioned in the same for pursuing the present complaint (ref. A. C. Narayanan v. State of Maharasthra & Anr. (2014) 11 SCC 790). Further, it had been mentioned in the evidence affidavit that knowledge about the present case had been derived on the basis of records maintained by the complainant. Considering the same, there is no material infirmity in the authorization of the AR to pursue the complaint case.” (emphasis supplied)

7.3 That the respondent was not liable for any legally enforceable debt : Mr. Rashid submits that the learned Magistrate has dealt with this issue, namely the legal liability of the respondent in relation to the cheques in question, which is central to the present appeal, in the following manner : “II. There is no legal liability upon the accused qua the cheque in question. Ld. Counsel for the accused has argued that accounts of the accused were never settled by the complainant. As per the agreement dated 21.01.1997 (Ex.CW1/10), no intimation was given to the accused to entail any liability upon him. The account statement (Ex.CW1/12) is not the original statement of account, is not a finalized one and had not been filed along with the complaint. Accordingly, the cheque in question could not have been issued to the complainant for discharge of any legal liability or part thereof. Per contra, Ld. Counsel for the Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 6 of 21 complainant has argued that Minutes of Meeting dated 17.10.1997 (Mark X) show that the accused was intimated about his liability. His signatures are the same. Further, accused had available on acknowledged his dues towards the complainant vide letter dated 08.11.1997 (Ex.CW1/11). Hence, no further document was required to prove his liability. Since there is an admission of liability of the accused by the accused himself and the cheque in question having been issued in pursuance of the same, the ingredients of Section 138 of NI Act stand duly proved. specific liability of “ Firstly, reliance cannot be placed on either of the aforementioned two documents to establish conclusive or final liability of the accused. The Minutes of Meeting dated 17.10.1997 (Mark X) mentions about liability of Indore Depot and targets for various periods in future. There is no mention of the accused. No acknowledgment of any payment to be made by the accused has been mentioned in the said document. Even DW-2 Sh. Sharad C. Aggarwal (the then Vice President of the original complainant and one of the signatories on the MoM) admitted that the said document was not the concluding document regarding liability of the accused. Hence, the said document insufficient, impose/clarify/declare the final liability of accused, the same cannot even serve as an intimation of liability as no liability has been finalized in the same. Further, letter dated 08.11.1997 (Ex.CW1/11) also falls short to establish/clarify the final liability of the accused. Even if version of the complainant is to be relied upon and it is to be believed that the said document had been voluntarily written by accused to acknowledge his outstanding towards the original complainant, the same does not establish itself, Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 7 of 21 any final liability towards which cheques in both the connected complaint cases could have been said to have been issued to the complainant. The reason behind the same is that document Ex.CW1/11 does not mention any total liability, is not commensurate with the figures mentioned in the statement of accounts filed on behalf of the complainant and the total of figures mentioned on the same is much lesser than the total amount of cheques in question in the further positive two complaint cases. Hence, evidence was required at the end of the complainant to establish the legal liability of the accused against the cheque in question. “Secondly, reliance cannot also be placed upon the statement of accounts filed on behalf of the complainant. Despite the original complainant being a Limited Company, no audited statement of accounts had been filed on behalf of the complainant to prove the liability of the accused. Adverse inference has to be drawn against the complainant for the same. Further, the account statements filed on behalf of the complainant are computerized documents and yet, no certificate under Section 65 B of Indian Evidence Act has been filed along with the same. AR of the complainant is neither the author of the same nor was able to answer any question regarding the entries on the same. Furthermore, the figures mentioned on the said statements do no corroborate with the Mark X and Ex.CW1/11. Even the same are not the finalized statements or pertain to settled accounts as the words “TO BE the same. RECONCILED” are mentioned on Accordingly, the said statements cannot be used to establish/prove any liability upon the accused. * * * * * “Coming to the mode of imposing liability upon the accused, the same could have been imposed Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 8 of 21 agreement Admittedly,

21.01.1997 (Ex.CW1/10) as admittedly, cement was not sold to personal accused consumption/use/purpose. complainant has not filed on record any document to show how many dealers were concerned with the accused as their C&F Agent, how much material (cement) was sold to such dealers and what was their outstanding against supply, how many of them defaulted in payment and how much was the total defaulted amount, what steps were taken by the complainant to recover the amount from dealers, when was the defaulted liability of those dealers shifted onto the accused, when was the accused intimated about the liability (if any) and when the accounts were settled with the accused. Hence, as per the agreement dated 21.01.1997 (Ex.CW1/10), no liability of the accused has been established against him by the complainant in the present case. “In light of the above discussion, no document has been brought in evidence by the complainant to establish the liability of the accused. Accordingly, the cheque in question cannot be said to be of the nature of cheque under Section 138 of NI Act and cannot be said to be issued against any legally enforceable liability.” (emphasis supplied)

7.4 That the cheques in question were „blank signed‟ cheques, issued as „security‟ and could not have been used towards discharge of any liability : Thereafter, learned counsel points- out, that the learned Magistrate has dealt-with another issue raised in the course of trial, namely that the cheques in question were „blank‟ though „signed‟ and had been issued in advance as „security‟; and could therefore not have been used towards Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 9 of 21 discharge of any liability. In this behalf, the learned Magistrate has observed as follows : “Ld. Counsel for the accused has argued that the cheque in question in both the complaint cases had been given to the complainant as blank signed security cheques, along with few other cheques, in light of the policy of the original complainant to secure themselves against bad debts. Initially four blank cheques were given and later a fifth cheque had been demanded on behalf of the complainant. The said facts have been proved by both DW-1 and DW-3 through their testimonies and by proving circular Mark X (this is the second document bearing identification Mark X). Two of those cheques have been misused in the present connected complaints. Further, if it were to be believed that the cheque in question were issued pursuant to letter dated 08.11.1997 (Ex.CW1/11 and also Ex.CW1/D), then how come the said fact of issuance of cheques finds no mention in the said document. This clearly shows that the cheques were not issued on 08.11.1997. Per contra, Ld. Counsel for the complainant has argued that as per agreement dated 21.01.1997 (Ex.CW1/10), security of Rs. 6 lakhs had been taken from the accused and as such, the company did not require any further security from him. Hence, there was no question of taking any blank cheque from the accused. Further, the circular Mark X and other such circulars, relied upon by the accused, mention only about security cheques to be taken from dealers and not from C&F agents. Hence, the defence of the accused with respect to possession of cheques being with the complainant by way of security and having been given prior in time, is a sham defence. * * * * * “… … Furthermore, a consistent defence has been taken by the accused in his reply to legal demand notice, cross-examination of the AR of the complainant, statement under Section 313 Cr.P.C. and his own evidence. Accused has deposed that the cheque in question was issued as Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 10 of 21 security cheque along with other cheques on demand of the management of the original complainant. The same have been misused in the two connected matters without any settlement of account. Accused has not contested the trial by taking various or inconsistent defences and has not tried to settle the matter on any other ground. Reliance can be placed upon his testimony lead in defence evidence. In the considered opinion of the court, the accused has been able to rebut the presumption and raise a probable defence in his favour qua the possession of cheque in question with the complainant and the absence of a legal liability upon him.” (emphasis supplied)

8. Mr. Rashid argues, that as a sequitur of the foregoing discussion, the learned Magistrate has come to the following conclusion : “20. To rebut the presumption raised against him, the accused has challenged the averments in the complaint and the case of the complainant, broadly, on the grounds as mentioned below. After going through the entire record, this court is of the considered opinion that accused has successfully rebutted the presumption under Section 139 of NI Act raised in favour of the complainant. * * * * * “21. Considering the above facts and circumstances in toto, this court is of the considered opinion that the complainant has not been able to prove the transactions with the accused and his liability for the same. Accused has been able to rebut the presumption of legally enforceable debt to the amount of cheque in question. Thereafter, the onus had shifted back upon the complainant to prove the ingredients of the offence under Section 138 of NI Act against the accused beyond reasonable doubt. The complainant has failed to discharge the said onus and prove beyond reasonable doubt, the factum of a legally enforceable debt outstanding upon the accused and issuance of cheque by the accused of nature as contemplated under Section 138 of NI Act. Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 11 of 21 “22. In the light of above discussion, on account of the fact that the complainant has failed establish the ingredients of offence under Section 138 of NI Act against the accused beyond reasonable doubt, accused Vijay Bhutda, Proprietor of Shree Lakshmi Venkatesh Cargo Movers and Consultants, is hereby acquitted for the offence under section 138 NI Act. ... …” (emphasis supplied)

9. Learned counsel for the petitioner submits, that the criminal complaints came to be filed in relation to the subject cheques inter- alia based on Minutes of Meeting („MoM‟) dated 17.10.1997 signed between the appellant and the respondent, whereby the respondent had admitted to a total outstanding debt of approximately Rs.76,52,991.75 towards the Indore Depot after considering the pending bills upto 16.10.1997, with details as set-out in the said minutes of meeting; and the respondent had also accepted that further supply of cement to the Indore Depot would resume only after they clear the outstanding upto 30.09.1997.

10. Mr. Rashid submits, that it was in this backdrop that against a total outstanding debt of more than Rs. 76 lacs, the subject cheques, in the aggregate sum of Rs.30 lacs, were presented towards part-payment of the debt recoverable from the respondent.

11. It is argued, that as recorded in the impugned judgment, DW-2 who was formerly a Vice-President of the original complainant and the signatory to MoM dated 17.10.1997, had admitted that the said document was signed, though he had said that it was not the conclusive document of liability of the respondent, since the Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 12 of 21 respondent owed much more than what had been indicated in the said document.

12. Furthermore, it is pointed-out that while the MoM dealt with the case of „dealers‟, in a subsequent letter dated 08.11.1997 issued by the respondent to the appellant, they admitted to a further liability of the „institutional parties‟ in the sum of about Rs.18 lacs, which document was duly proved and acknowledged by the respondents as Ex. CW- 1/11.

13. Accordingly, it is submitted that the learned Magistrate has erred on the point of law by misconstruing the provision of sections 118 and 139 of the NI Act, whereby the onus of proving that there was no legally enforceable debt was on the respondent (accused) and not on the petitioner (complainant); and that the respondent had failed to discharge that onus.

14. On the other hand, Mr. Rajiv Mehra, learned counsel appearing on RESPONDENT’S SUBMISSIONS behalf of the respondent submits, that the subject cheques were issued by the respondent to M/s. DLF Cement Ltd., and not to the appellant under the terms of a Circular dated 11.01.1997, which expressly required that „blank‟ cheques were to be taken from all dealers and were to be sent to the head office of that company.

15. Mr. Mehra submits, that though the subject cheques were signed, they were „blank‟, both as to date and amount. Learned counsel further submits, that neither under MoM dated 17.10.1997 (relating to the dues of „dealers‟) nor under letter dated 08.11.1997 (relating to the dues of „institutional parties‟) had the respondent admitted to any Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 13 of 21 specific amount being owed to the appellant; and therefore the subject cheques could not have been presented for encashment.

16. It is argued that the learned Magistrate was therefore correct in having dismissed the criminal complaint under section 138 of the NI Act on the ground that the complainant had failed to establish a legally enforceable debt.

17. Learned counsel argues, that as recorded inter-alia in para 5 of the impugned judgment, the learned Magistrate has also noted that the authorized representative appearing on behalf for the appellant had clearly said in his post-summoning evidence that his knowledge about the case was derived only from the official records; that he was not working with the complainant at the relevant time; and that he was not aware of the records of M/s DLF Cement Ltd.

18. It is pointed-out, that the authorized representative of the complainant had also disclaimed any knowledge about the dealers and C&F Agents of M/s. DLF Cement Ltd. in the Indore Depot area at the relevant time; and had admitted that he could not give any specification of the goods supplied to them.

19. Learned counsel for the respondent also draws attention to what is narrated in para 5 of the criminal complaint filed by the appellant, which is extracted below : “... … The total outstanding balance as on that date was Rs.30,81,058.50. The accused vide cheque No.167953 Rs.20,00,000/- made part payment towards the outstanding amount in its account.” Mr. Mehra submits that therefore, there is discrepancy in the Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 14 of 21 amount alleged to be due from the respondent to the appellant and the amount comprised in the said two cheques.

20. Mr. Mehra argues, that as correctly recorded by the learned Magistrate in the impugned judgment, the complainant had failed to prove the exact amount claimed to be due from the respondent; and therefore the learned Magistrate had correctly dismissed the criminal complaint on that score. ANALYSIS & CONCLUSIONS

21. The court has considered the rival submissions made by learned counsel for the parties, in the context of the record before it.

22. At the outset, it must be observed that insofar as the issues (i) whether the criminal complaint filed by the present appellant, namely M/s Gujarat Ambuja Cements Ltd., was maintainable and (ii) whether the AR of the complainant was competent to depose in relation to the matter are concerned, those issues have been decided by the learned Magistrate in favour of the appellant and against the respondent. 23. Before delving into the other issues decided by the learned Magistrate, this court considers it necessary to remind itself of the provisions of section 118 and 139 of the NI Act, which read as under :

118. Presumptions as to negotiable instruments.— Until the contrary is proved, the following presumptions shall be made: (a) of consideration : every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, indorsed, negotiated or negotiated or transferred for consideration; transferred, was accepted, Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 15 of 21 (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 reasonable time after its date and before its maturity; (d) as to time of transfer : that every transfer of negotiable instrument was made before its maturity; (e) as to order of indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon; indorsement : (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, … … (emphasis supplied)

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. (emphasis supplied)

24. Clearly therefore, as per section 118(a) of the NI Act, a statutory presumption must be drawn in favour of a complainant that every negotiable instrument (such as a cheque) is made or drawn for consideration until the contrary is proved by the accused person. 25. Section 139 of the NI Act goes further to cast the onus on the accused of proving that a cheque was not received by a holder in discharge of a debt or other liability owed.

26. This position of law has been articulated by the Supreme Court in Signature Not Verified Signed By:ANJALI KAUSHIK Signing Date:22.02.2025 17:59:45 CRL.L.P. 166/2023 & CRL.L.P. 241/2023 Page 16 of 21 Rangappa vs. Sri Mohan, 1 and further re-articulated by a Co- ordinate Bench of this court in Satish Kumar vs. State NCT of Delhi. 2 Furthermore, this court also notices the decision of the Supreme Court in Bir Singh vs. Mukesh Kumar, 3 which has been cited with approval by the Supreme Court in its very recent order dated 09.12.2024 passed in K. Ramesh vs. K. Kothandaraman 4 in the following words : “5. In this regard our attention was drawn to paragraphs 32, 33, 34 and 36 of the judgment in Bir Singh, wherein it has been observed that even if a blank cheque leaf is voluntarily signed and handed over by the accused towards some payment would attract the presumption under Section 139 of the Act and in the absence of any cogent evidence to show that the cheque was not issued in discharge of the debt, the presumption would hold good. The said paragraphs are extracted below: “32. The proposition of law which emerges from the judgments referred to above is that the onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post-dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act.

33. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in