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Judgment
By this appeal, the appellant (original complainant) has challenged judgment and order dated 29.06.2016 passed by the Court of Judicial Magistrate
First Class, Seloo (trial Court) in Summary Criminal Case No.754 of 2012, whereby the respondent (original accused) has been acquitted for offence
punishable under Section 138 of the Negotiable Instruments Act, 1881.
The complainant came to the Court with a case that being a Multi State Co-operative Society, it had advanced loan of Rs.3,15,000/- to the
respondent for 11 months carrying an interest @ 14.50 % P.A. In that regard, the respondent had pledged Tur Dal weighing 98.98 quintals in 101 bags
with the appellant society, which was kept in the warehouse of the appellant.
According to the appellant, the respondent defaulted in repayment of the loan amount due to which the appellant was constrained to auction the
aforesaid Tur Dal on 26.11.2011 at Seloo, from which an amount of Rs.3,07,170/- was recovered and it was adjusted towards the loan account of the
respondent. According to the appellant, there was still an amount of Rs.1,09,609/- outstanding on the said loan account against the respondent, for
which the appellant made attempts to pursue the respondent to repay the same. It was the case of the appellant that in order to repay the said
outstanding amount, the respondent issued cheque bearing No. 222137 dated 9.2.2012 for an amount of Rs.1,09,609/-. But, on the said cheque being
deposited, it was dishonoured for the reason of “insufficient fundsâ€.
On receiving memo from the Bank dated 22.03.2012 about dishonor of the cheque for the said reason, the appellant issued notice to the respondent,
to which there was no reply from the respondent. As a consequence, the appellant was constrained to file complaint before the trial Court bearing
Summary Criminal Case No. 754 of 2012. This complaint was filed on behalf of the appellant by its authorized representative, one Rahul Deshpande.
The said authorized representative also appeared as a witness in support of the case of the appellant before the trial Court. He was crossexamined on
behalf of the appellant.
The appellant placed on record documentary evidence in the form of copy of resolution authorizing the said Rahul Deshpande to represent the
appellant before the trial Court (Exh.28), the disputed cheque (Exh.29), the memo issued by the petitioner (Exh.31), notice dated 19.04.2012 issued by
the appellant (Exh.32) along with acknowledgment (Exh.33), loan account statement of the respondent (Exh.35) and document to show that the
respondent had agreed to auction of pledged Tur Dal in case of default in repayment of loan. The said authorized representative appeared as witness
for the appellant. On the basis of such oral and documentary evidence on record, the appellant claimed that the respondent was liable to be punished
for offence punishable under Section 138 of the aforesaid Act.
The respondent did not send any reply to the notice sent by the appellant after dishonor of cheque. No evidence was led on behalf of the respondent
in support of his defence. The respondent essentially relied upon cross-examination of the witness who appeared on behalf of the appellant. The
defence of the respondent was that the disputed cheque had been issued by way of security when the loan was disbursed. An objection was also
raised in respect of the authority of the said Rahul Deshpande to file the complaint on behalf of the appellant and to pursue the case before the trial
Court.
By the impugned judgment and order, the trial Court held that the appellant had failed to demonstrate proper authorization in favour of the said
Rahul Deshpande and it was held that the complaint itself was liable to be rejected on the ground that a legally authorized person had not filed the
complaint on behalf of the appellant. On the question of the cheque being issued for discharge of legal debt or liability, it was held that the appellant
had indulged in violation of proper procedure while auctioning the said Tur Dal and that, therefore, there was insufficient evidence to hold that the
cheque in question had been issued for discharge of legal debt or liability. In other words, the trial Court accepted that the said cheque was issued by
way of security and on this basis, the complaint filed by the appellant was dismissed and the respondent stood acquitted.
Mrs. Sonali Gadhawe, learned counsel appearing on behalf of the appellant submitted that the impugned judgment and order passed by the trial
Court was unsustainable on both counts, firstly regarding lack of proper authorization in favour of the said Rahul Deshpande for filing the complaint
and secondly that the disputed cheque was not issued in discharge of legal debt or liability. It was submitted that the appellant had placed on record
copy of resolution passed by the appellant society authorizing the said Rahul Deshpande to file the complaint on behalf of the appellant. This copy of
resolution was marked at Exh.28, which gave the resolution number and also the names of office bearers who had proposed the resolution and
seconded the same. This document at Exh.28 was placed on record with the signature and stamp of the Executive Director of the appellant society
and it also carried a seal of the head office of the appellant society. It was submitted that this was sufficient to show that the said Rahul Deshpande
was indeed an authorized person to file the complaint and the finding rendered by the trial Court was unsustainable.
The learned counsel further submitted that the appellant had placed on record sufficient oral and documentary evidence to show that the disputed
cheque was issued for a specific amount of Rs.1,09,609/-, which was found to be outstanding loan amount recoverable from the respondent after Tur
Dal pledged by him had been auctioned, as he had defaulted in repayment of the loan amount. The respondent had failed to rebut the presumptions
that arose under Sections 118 and 139 of the said Act and that the trial Court committed an error in commenting on the procedure adopted in
auctioning of the Tur Dal in coming to conclusions in favour of the respondent. It was submitted that the respondent had been wrongly acquitted in the
present case. Reliance was placed on the judgments of the Hon’ble Supreme Court in the case of M/s M/s N.M.T.C. Ltd. And another .vs. M/s
Medchi Chemicals and Pharma Pvt. Ltd.- AIR 2002 SC 182, T. Vasanthakumar .vs. Vijaykumari - AIR 2015 SC 2240, and Sampelly Satyanarayana
Rao .vs. Indian Renewable Energy Development Agency Ltd.- (2016) 10 Supreme Court Cases 458 and judgment of the Madras High Court in the
case of K.E. Ramesh .vs. M/s Salona Cotspin Ltd. -2015 (3) Crimes 425 (Mad) and judgment of the Karnataka High Court in the case of S.
Parameshwarappa and another .vs. S. Choodappa- 2007 Cri. L.J. 586.
On the other hand, Mrs. Jyoti Dharmadhikari, learned counsel appearing on behalf of the respondent submitted, that the findings rendered by the
trial Court in the present case were based on proper appreciation of the evidence and material on record, as also the position of law in respect of
offence under Section 138 of the said Act. It was submitted that the disputed cheque was issued by way of security by the respondent when loan was
disbursed and that it had been misused by the appellant, in order to falsely claim that an offence under Section 138 of the Act had been committed by
the respondent. It was submitted that the trial Court was justified in holding that the auction of Tur Dal in the present case was without any notice to
the respondent and that, therefore, the whole basis of arriving at alleged balance amount due from the respondent, was not supported by evidence on
record. It was submitted that, therefore, there was no legal debt or liability in respect of which the disputed cheque was issued. It was further
submitted that the said Rahul Deshpande was not properly authorized to represent the appellant, in order to file the complaint and pursue the same
before the trial Court. It was submitted that the trial court had taken a possible view of the matter and that, therefore, the appeal deserved to be
dismissed.
Heard counsel for the parties. Perused the record.
There are two issues that arise for consideration in this appeal, firstly, whether the said Rahul Deshpande could be said to be properly authorized
as per law to file the complaint before the trial Court on behalf of the appellant and secondly, whether the disputed cheque could be said to have been
issued in discharge of legal debt or liability, in the facts and circumstances of the present case.
As regards the first issue, the appellant placed on record a document at Exh.28. A perusal of the same shows that it was a copy of a resolution
passed by the appellant society authorizing the said Rahul Deshpande to take appropriate action in respect of dishonor of cheques with reference to
Section 138 of the aforesaid Act. The said document shows that the resolution no.25 authorising Rahul Deshpande was proposed by one office bearer
and it was seconded by another. This document bears the signature of the Executive Director of the appellant society with rubber stamp and a seal of
the head office of the appellant society. The trial Court has taken into consideration the said document and it has found that the same was not
sufficient to show that said Rahul Deshpande was validly authorized to file the complaint and pursue the same before the trial Court on behalf of the
appellant. It was found by the trial Court that the authorization did not show that the entire Board of Directors of the appellant society had indeed
given such authority and further that the two persons who had proposed and seconded the said resolution could not be said to be members of the
Board of the appellant society.
In order to examine whether the said approach of the trial Court was justified, it would be necessary to refer to the position of law enunciated by
the Hon’ble Supreme Court in this regard in its judgment in the case of M/s N.M.T.C. Ltd. And another .vs. M/s Medchi Chemicals and Pharma
Pvt. Ltd. (supra). In the said case, a similar question arose as to whether Senior Manager of a Company was duly authorized to file complaint on
behalf of the company for an offence punishable under Section 138 of the said Act. The Hon’ble Supreme court quoted the finding of the trial
Court and while reversing the same, held as followsâ€-
“It is held that the Manager or the Deputy General Manager were mere paid employees of the Company. It is then held as follows:
Therefore, it is clear that the legal position as crystallised by the rulings is to the effect that a complaint under Section 138 of the Negotiable
Instruments Act can be filed for and on behalf of a Body such as Corporation, who has only artificial existence through a particular mode and when
that mode is not followed, any proceedings initiated or any complaint filed will be vitiated from its very inception. In my opinion, here, the complaint is
signed and presented by a person, who is neither an authorised agent nor a person empowered under the articles of Association or by any resolution of
the Board to do so. Hence, the complaint is not maintainable. The taking cognizance of such a complaint is legally not acceptable. Hence, these two
complaints filed for and on behalf of MMTC Limited against the Petitioners herein, which were taken on file in C. C. Nos. 3324 of 1995 and 3325 of
1995 are not maintainable at all and that cognizance of the said complaints ought not to have been taken by the Magistrate.
In our view the reasoning given above cannot be sustained. Section 142 of the Negotiable Instruments Act provides that a complaint under Section
138 can be made by the payee or the holder in due course of the said cheque. The two complaints, in question, are by the appellant Company who is
the payee of the two cheques.
This Court has, as far back as, in the case of Vishwa Mitter v. O. P. Poddar reported in (1983) 4 SCC 701, held that it is clear that anyone can set
the criminal law in motion by filing a complaint of facts constituting an offence before a Magistrate entitled to take cognizance. It has been held that
no court can decline to take cognizance on the sole ground that the complainant was not competent to file the complaint. It has been held that if any
special statute prescribes offences and makes any special provision for taking cognizance of such offences under the statute, then the complaint
requesting the Magistrate to take cognizance of the offence must satisfy the eligibility criterion prescribed by the statute. In the present case, the only
eligibility criteria prescribed by Section 142 is that the complaint must be by the payee or the holder in due course. This criteria is satisfied as the
complaint is in the name and on behalf of the appellant Company.â€
The said judgment of the Hon’ble Supreme Court was followed by the Madras High Court in the case of K.E. Ramesh .vs. M/s Salona Cotspin
Ltd. (supra). The ratio of the said judgment of the Hon’ble Supreme Court shows that a Court cannot decline to take cognizance of the offence
only on the ground that the complainant was not competent to file the complaint. In this regard, reliance was placed on earlier judgment of the
Hon’ble Supreme Court which laid down that any one can set the criminal law in motion by filing the complaint. In the present case, it cannot be
said that there was no material to show that the said Rahul Deshpande was authorized by the appellant to file the complaint. The manner in which the
trial court has analysed Exh.28 (copy of resolution) and held that it could not be relied upon, is not only against the said position of law laid down by the
Hon’ble Supreme Court, but it amounts to hair splitting and placing unnecessarily heavy burden on the complainant who has approached the Court
with a grievance pertaining to dischonour of the cheque issued by the accused. Hence, the said finding of the trial Court about the said Rahul
Deshpande not being properly authorized to file the complaint on behalf of the appellant, deserves to be set aside. It is held that the said Rahul
Deshpande was indeed authorized to file the complaint and that the said complaint was validly filed on behalf of the appellant before the trial Court.
As regards the second issue pertaining to the question as to whether the disputed cheque was issued in discharge of legal debt or liability, signature
on the said cheque is not disputed and it is also not disputed as to how the cheque came in the custody of the appellant. In the complaint filed before
the trial Court, the appellant specifically placed its case against the respondent in paragraphs 3 and 4 as follows:-
“3. That after availing loan facility, accused committed defaults in payment of loan instalments resulting in heavy outstanding against him.
Therefore, time to time representative of complainant requested accused to repay the loan amount along with up to date interest, rent and he assured
to repay the same. However, accused failed to pay the loan amount along with up to date interest as well rent of wear house. Therefore, after
following due procedure of law, complainant auctioned the Tur on 26.11.2011 at Seloo and receiving auction price of Rs.3,07,170/- adjusted the same
in the loan account and wear house rent amount of accused. However, inspite of the same an amount of Rs.1,09,609/- is still outstanding against
accused. Complainant through their representative time to time requested accused to repay the outstanding amount and accused was assuring
complainant that he would pay the same within short time.
After constant persuasion, accused with a view to discharge the liability of payment of outstanding amount has issued cheque bearing No. 222137,
dated 09.02.2012 of Rs.1,09,609/- drawn on Wardha Nagari Sahakari Adhikosh (Bank) Maryadit Wardha, Branch Seloo. At the time of issuance of
said cheque, accused has undertaken and promised complainant that on presentation of said cheque, it would be honoured.â€
This was exactly the case of the appellant in the notice issued to the respondent upon dischonour of the disputed cheque. Admittedly, the
respondent did not send any reply to the said notice. In this situation, when the appellant filed complaint before the trial Court, presumptions under
Sections 118 and 139 of the aforesaid Act operated in full force against the respondent.
Such presumptions are certainly rebuttable on the touchstone of preponderance of probabilities. As per law, the accused (respondent herein) can
rebut the presumption either by adducing evidence before the trial Court or by discrediting the evidence and the material placed on record on behalf of
the complainant (appellant herein). The evidence and material on record needs to be analysed to examine whether the findings rendered by the trial
Court in favour of the respondent were justified.
The appellant supported its case by placing on record the above mentioned documents and the said authorized representative Rahul Deshpande
appeared as a witness before the trial Court. In his examination-in-chief, he essentially repeated the claims made by the appellant in its complaint. In
cross-examination, this witness did admit that evidence or material was not brought on record as regards any specific notice to the respondent or a
public notice in respect of auction of Tur Dal, in order to recover the outstanding loan amount from the respondent. The documentary evidence on
record was in the form of loan account statement at Exh.35 showing that amount of Rs.3,07,170/- was recovered upon sale of Tur Dal pledged by the
respondent with the appellant and yet an amount of Rs.1,09,609/- was due from the respondent. This loan account statement at Exh.35 was a
document prepared in the ordinary course of business of the appellant society and it was placed on record in support of the claims of the appellant. It
was claimed that the disputed cheque dated 9.2.2012 was issued for the aforesaid specific remaining outstanding amount of Rs.1,09,609/- as
evidenced by the loan account statement at Exh.35. This was supported by the said witness who appeared on behalf of the appellant. This material
was put forward by the appellant in support of its case along with the said presumptions that operated in its favour under Sections 118 and 139 of the
aforesaid Act.
On the other hand, the respondent not only failed to respond to the notice issued by the appellant on dishonor of the disputed cheque, but he failed
to place on record any documentary or oral evidence in support of his defence. The defence that was articulated before the trial Court on behalf of
the respondent was that the disputed cheque had been issued by way of security towards loan amount that was disbursed by the appellant. It was
claimed that it was a blank signed undated cheque which was taken by the appellant by way of security. In support of the said contention, reliance
was placed on the material brought on record by the appellant itself, to show that such signed documents and cheque were indeed obtained by the
appellant at the time of disbursing of loan. Much emphasis was placed on the fact that there was a document on record showing that the respondent
had received the pledged Tur Dal in proper condition from the appellant. It was contended that this was a document bearing signature of the
respondent and it was prepared later by the appellant. It was in direct conflict with the claim of the appellant that the pledged Tur Dal had been
auctioned and that a certain amount was recovered. It was contended that a blank paper and blank undated cheques were got signed by the appellant
from the respondent at the time of the disbursal of the loan and that the appellant had later on put date and amount on the disputed cheque, which
could, therefore, not become the basis for filing of complaint against the respondent under the provisions of the said Act. The manner in which the
auction of the Tur Dal was conducted without notice to the respondent was also contended to have been an illegal step undertaken by the appellant.
The trial Court completely accepted the said contentions raised on behalf of the respondent. The trial Court went on to analyse the manner in
which the auction of Tur Dal had been undertaken without individual notice to the respondent. The trial Court also found that despite opportunity, the
appellant chose not to place on record copies of public notices issued for auction of the Tur Dal, thereby lending credence to the stand taken by the
respondent that proper price for the Tur Dal was not recovered and that, therefore, there was insufficient material to show that respondent was liable
to pay any outstanding amount towards the loan.
In the present case, the trial Court failed to appreciate that it was to examine whether an offence under Section 138 of the aforesaid Act had been
committed by the respondent. The validity of the auction process or the manner in which the pledged Tur Dal was put to auction was not the subject
matter of the proceedings before the trial Court. The limited enquiry that the trial Court was expected to conduct was, as to whether the disputed
cheque was indeed issued for discharge of legal debt or liability, or that it had been submitted only by way of security by the respondent at the time
when the loan was disbursed. In support of its case, the appellant had not only tendered oral evidence of its authorized representative, but a loan
account statement at Exh.35 was also placed on record. As opposed to this, the respondent failed to enter the witness box or to produce any other
direct or oral evidence in support of his stand.
If the case of the respondent was that the disputed cheque was deposited by way of security at the time when the loan was disbursed, the
respondent could have at least examined any official from his bank to show that the cheque or the cheque book from which it was issued, indeed
pertained to the time period when the loan was disbursed. In the absence of any such evidence placed on record by the respondent, it could not be
said that the presumptions that operated against him under Sections 118 and 139 of the aforesaid Act, stood rebutted. There is no doubt that the
accused has to merely show a probable defence to rebut the presumptions that arise in such cases. But in the present case, there was nothing on
record to show that a proper defence had been made out by the respondent. The said presumptions, therefore, deserved to be taken to their logical
conclusions. In the present case, apart from the presumptions, the appellant did place on record positive material to support its case.
In this regard, reliance placed by the learned counsel appearing on behalf of the appellant on judgments of the Hon’ble Supreme court in the
case of T. Vasanthakumar .vs. Vijayakumari and Sampelly Satyanarayana Rao .vs. Indian Renewable Energy Development Agency Limited (supra)
is appropriate. In these judgments the Hon’ble Supreme Court has considered defence of “security†taken by the accused in such cases and
the manner in which such a defence is to be proved. In respect of cheques issued for repayment of loan amount on instalment, in the case of Sampelly
Satyanarayana Rao .vs. Indian Renewable Energy Development Agency Limited (supra), the Hon’ble Supreme Court has held as follows:-
“9. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus
Airways (supra) with reference to the explanation to Section 138 of the Act and the expression “for discharge of any debt or other liabilityâ€
occurring in Section 138 of the Act. We are of the view that the question whether a post-dated cheque is for “discharge of debt or liabilityâ€
depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section
is attracted and not otherwise.
Reference to the facts of the present case clearly shows that though the word “security†is used in clause 3.1(iii) of the agreement, the said
expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is
advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the
cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques
would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.â€
The said position of law was sought to be supported by the learned counsel for the appellant by placing reliance on judgment of the Karnataka
High Court in the case of S. Parameshwarappa and another .vs. S. Choodappa (supra). The said judgment also pertains to a case of repayment of
loan disbursed by the complainant. The position of law that emerges from the said judgments, makes it clear that in the facts of the present case, the
disputed cheque issued by the respondent was indeed for discharge for legal debt in the form of outstanding loan amount of Rs.1,09,609/-. The
appellant had adequately supported its case, apart from the fact that the presumptions under Sections 118 and 139 of the aforesaid Act operated in its
favour, which the respondent failed to rebut.
In the light of the above, the instant appeal deserves to be allowed. Accordingly, it is allowed, the impugned judgment and order passed by the trial
Court is set aside and the respondent is directed to pay an amount of Rs.1,50,000/towards compensation under Section 357 (3) of the Code of Criminal
Procedure to the appellant within a period of two months from today, failing which the respondent shall undergo simple imprisonment for a period of
six months.