Dismissed

M/S Coldspot,Rep.by Its Sole Proprietor Shri Amin Patel, Panaji Goa v. M/S Naik Hotels through Its Managing Partner Shri Sunil a. Naik and 2 Ors.

Bombay HC7 Feb 2008CRIA/73/2005

Case brief

AI extract

What is this about?

In an appeal against acquittal under Section 138 NI Act, the High Court upheld the lower court's decision confiscating green cards for employers. The court held that the respondents successfully rebutted the statutory presumption of debt by showing the agreement was terminated and liability was disputed in civil court.

What did the court decide?

Criminal Appeal dismissed; no order as to costs.

M/S Coldspot,Rep.by Its Sole Proprietor Shri Amin Patel… — Cheque Dishonour | Bombay HC (2008)

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IN THE HIGH COURT OF BOMBAY AT GOA

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CRIMINAL APPEAL NO.73/2005

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M/s. Coldspot, represented by its sole proprietor Shri Amin Patel, residing at 4T-1, Kamat Estate, Tonca, Caranzalem, Panaji, Goa. .......... Appellant.

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V/s. 1. M/s. Naik Hotels through its Managing Partner Shri Sunil A. Naik, Dada Vaidya Road, Panaji, Goa 403 001. 2. M/s. Hotel Samrat through its Partner Shri Sunil A. Naik Dada Vaidya Road, Panaji, Goa. 3. Shri Sunil A. Naik, Hotel Samrat, Dada Vaidya Road, Panaji, Goa. .......... Respondents. Ms. S. Linhares, Advocate for the appellant. Mr. Valmiki Menezes, Advocate for the respondents.

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CORAM : R.M.S. KHANDEPARKAR, J. DATE : FEBRUARY 07, 2008.

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ORAL JUDGMENT :

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Heard. This appeal arises from the Judgment and Order dated 9.9.05, passed by the Judicial Magistrate, First Class, Panaji in Criminal Case No.799/OA/2001/D.

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By the impugned Judgment, the complaint filed under Section 138 of the Negotiable Instruments Act (“the Act”, for short) has been disposed of by acquitting the respondents-accused of the offence punishable under the said section. The challenge to the impugned Judgment is essentially on the ground that the trial Court failed to consider that the cheques in question were issued towards the payment of rentals from February, 2001 onwards and considering the fact that such payment was made by way of cheques, there was presumption about existence of liability of the drawer of the cheques on the day when the cheques were issued. The trial Court having ignored this aspect of the matter, as well as the the presumption arising under Section 139 of the said Act in relation to the said cheques in favour of the appellant, the impugned order needs to be quashed and set aside and the respondents be held guilty of the offence punishable under section 138 of the Act.

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A complaint came to be filed in the Court of J.M.F.C., Panaji on 11.10.01, alleging that 3 cheques dated 6^th June, 6^th July and 6^th August, all of

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the year 2001 issued by the respondents-accused in favour of the appellant, each worth Rs.1200/- were dishonoured for insufficient funds to the account of the accused in the Bank on which the said cheques were drawn and that, therefore, the respondents were liable to be prosecuted and punished for the offence punishable under section 138 of the Act. The complaint discloses that some air conditioners of the appellant were rented to the respondents for installation thereof in the hotel premises of the respondents No.1 and 2 and the rental charges of the said air conditions remained unpaid on 20.8.01 and hence, a legal notice dated 3.9.01 was issued, which was received by the respondent on 4.9.01. However, the respondents failed and neglected to reply to the said notice, as well as to pay the amount equivalent to one payable under the dishonoured cheques, within 15 days from the date of receipt of the notice. Evidence in the form of affidavits was filed by the appellant on 7.8.03 and the appellant was subjected to cross examination on 20.1.05 by the Advocate for the respondents. In the course of the recording of evidence, the appellant produced Return Memo, issued by the Bank and copy of the demand notice with an acknowledgment receipt in support of his case. In the course of the cross examination, a letter dated 25.5.01 sent by the appellant to the respondents, as also a copy of the legal notice dated 1.10.01 issued by the appellant and a copy of the plaint in the suit stated to have been filed by the appellant against the respondents in the Court of Civil Judge, Sr. Division, at

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Panaji, were also produced on record. The respondents did not adduce any evidence. The trial Court, after hearing the arguments, by the impugned Judgment, acquitted the respondents.

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The learned Advocate appearing for the appellant, while placing reliance in the case of K.N. Beena vs. Muniyappan and another, reported in 2001 Cri. L.J. 4745 and Hiten P. Dalal vs. Bratindranath Banerjee, reported in (2001) 6 SCC 16, and taking me through the evidence recorded before the trial Court, submitted that the letter dated 3.9.01 clearly discloses that the cheques in question were in relation to the rental dues. However, this aspect has been totally ignored by the trial Court while acquitting the respondents. She further submitted that Section 138 of the Act relates to matters pertaining to dishonour of cheques and Section 139 of the Act speaks of the presumption that the holder of the cheque had received the cheque, in whole or in part of any debt or other liability of the drawer towards the holder, unless contrary is proved by the drawer. The trial Court has totally ignored these provisions of law while acquitting the respondents of the offence punishable under Section 138 of the Act. She further submitted that the respondents had not led any evidence to discharge the presumption arising under Section 139 of the said Act. Considering the law laid down by the Apex Court, the trial Court ought not to have acquitted the respondents.

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The learned Advocate appearing for the respondents, on the other hand, drawing my attention to the letter dated 25.5.01 and the letter dated 3.9.01, submitted that the letter dated 25.5.01 clearly discloses that the agreement relating to the hire of the air conditioners was put to an end by the appellant and consequently, there was no liability of the respondents to pay any rental charges as such, after termination of the said agreement. It is also not the case of the appellant that on the date of issuance of the letter dated 25.5.01, the respondents had issued any post-dated cheques towards the arrears of any rental charges. As against this, the letter dated 3.9.01 specifically states that the three cheques related to the rental charges. Apparently, there was no liability to pay rental charges in relation to the air conditioners after May, 2001 and there were no post-dated cheques issued prior to 25.5.01 in relation to any rental charges as such, and therefore the presumption arising in favour of the appellant in relation to the said cheques was sufficiently discharged by the respondent and it was thus for the appellant to establish that the cheques were issued for valid consideration which the appellant has utterly failed to prove and, therefore, no fault can be found with the impugned judgment.

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It is not in dispute that the cheques in question, were issued by the respondents. Being so, undoubtedly, the presumption under Section 139 of

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the Act would arise in relation to the said cheques. Undisputedly, in the matter in hand, the proceedings were initiated under Section 138 of the Act. The Advocate for the appellant, therefore, is perfectly justified in contending that the presumption arises in favour of the appellant in relation to the liability by the respondents under the said cheques in favour of the appellant. The point, therefore, which requires to be considered is whether the respondents have been able to rebut the presumption which arises in the matter.

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Perusal of the letter dated 3.9.01 which was issued by the Advocate for the appellant and addressed to the respondents, clearly discloses that certain air conditioners were installed at the hotel premises of the respondents by the appellant and towards the payment of rental charges, three post-dated cheques were drawn by the respondents on Women's Co-operative Bank Ltd., Panaji dated 6^th June, 7^th June, and 8^th June, 2001 for Rs.1200/each and on presentation for encashment, they were returned with the endorsement “Not arranged for” on 20.8.01. At the same time, the letter dated 25.5.01 discloses that the agreement of hire in relation to the air conditioners was terminated in the month of May, 2001 itself and that the rental charges in terms of the agreement which were payable were Rs.20/per day for a A.C. Room in the hotel of the respondents. A copy of the plaint,

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in relation to the suit filed by the appellant against the respondents ex facie discloses the dispute regarding quantum of liability of the respondents towards the claim of charges after termination of the agreement.

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In the background of these materials on record, it is clear that the cheques in question were in fact not relating to any rental charges, as was sought to be contended on behalf of the appellant. And, at the same time, it is not the contention of the appellant that apart from the rental charges, there were any dues payable to the appellant by the respondents. On the contrary, as regards charges, if any, payable by the respondents to the appellant, after termination of the agreement, there is a dispute between the parties and the Civil Court is seized with the matter in relation thereof. In the background of all these facts, there is hardly any scope to contend that the respondents have not been able to rebut the presumption arising under Section 139 of the said Act in relation to the cheques in question.

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The decision, sought to be relied upon on behalf of the appellant, rather than assisting the appellant lends support to the conclusion as above. In K.N. Beena's case, the Apex Court held that Sections 118 and 139 of the Act are clearly attracted in the proceedings under Section 138 of the Act. In terms of Section 118, unless the contrary is proved, it is to be presumed that

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the negotiable instrument, including a cheque was made or drawn for consideration. In terms of Section 139 of the Act, the Court has to presume, unless the contrary is proved, that the holder of a cheque received the cheques of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability of the drawer towards the holder and, therefore, in a proceeding in relation to the complaint under Section 138 of the Act, the Court has to presume that the cheque had been issued in respect of debt or liability. However, this presumption is rebuttable. In that regard, the view taken by the Apex Court in its earlier decision in the matter of Hiten P. Dalal's case was also reiterated.

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In Hiten P. Dalal's case, the Apex Court while referring to Sections 138 and 139 of the Act and reiterating its earlier view in the matter of State of Madras v. Vaidyanatha Iyer , reported in AIR 1958 SC 61, held that both the Sections 138 and 139 require that the Court shall presume the liability of the drawer of the cheques for the amounts for which the cheques are drawn and it is obligatory on the court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. It was further observed that where the facts required to form the basis of a presumption of law, no discretion is left with the court, but to draw the statutory conclusion, but this would not preclude the person against

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whom the presumption is drawn from rebutting it and proving the contrary. The rebuttal would not have to be conclusively established, but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the prudent man. Referring to the facts of Hiten P. Dalal's case, the Apex Court held that the burden was on the Hiten Dalal to disprove the presumption under Sections 138 and 139 which he had failed to discharge and mere averments in the written statement filed therein, were not sufficient to discharge the said burden. The defence in the written statement was that the four cheques were given for intended transactions without establishing the same in any manner, and that was not the defence raised in answer to the notice under Section 138. It was also noted that the accused therein had said that the cheques were given to assist the Bank for restructuring and, therefore, it was observed that it was necessary for the accused at least to show on the basis of acceptable evidence either that his explanation in the written statement was so probable that a prudent man could accept it or to establish that the effect of the material brought on record, in its totality, rendered the existence of the fact presumed to be improbable.

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Bearing in mind the law laid down by the Apex Court and the

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presumption arising under Section 139 of the said Act and applying the same to the facts of the case in hand, it is difficult for any prudent man to accept the contention on behalf of the appellant that the cheques in question, related to the arrears of rent or the rental charges, when that was not the case of the appellant himself either in the complaint or in the notice of demand. Rather the notice of demand clearly discloses that the cheques were post-dated cheques; whereas the notice dated 25.5.01 clearly reveals that the contract was put to an end by the said notice and there was no liability to pay rental charges thereafter. As regards other liability, if any, subsequent to termination of the agreement, already there is a dispute pending before the Civil Court in this regard and the matter is under adjudication. In such circumstances, the respondents had sufficiently succeeded in rebutting the presumption arising under Section 139 of the Act. On such presumption being rebutted, admittedly, no further evidence was led by the appellant in support of the claim regarding the valuable consideration for the cheques in question. Being so, in the facts and circumstances of the case, no fault can be found with the findings arrived at by the trial Court regarding failure on the part of the appellant to establish the liability for which the cheques were issued by the respondent or that it was a subsisting liability on the day of demand by the appellant which could attract the provisions of Section 138 of the Act.

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For the reasons stated hereinabove, I find no infirmity in the

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impugned Judgment and it does not call for interference in appeal. Hence, the appeal fails and hereby dismissed, with no order as to costs.

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R.M.S. KHANDEPARKAR, J.

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ssm.

M/S Coldspot,Rep.by Its Sole Proprietor Shri Amin Patel, Panaji Goa v. M/S Naik Hotels through Its Managing Partner Shri Sunil a. Naik and 2 Ors.

Case brief

What is this about?

What did the court decide?

M/S Coldspot,Rep.by Its Sole Proprietor Shri Amin Patel, Panaji Goa v. M/S Naik Hotels through Its Managing Partner Shri Sunil a. Naik and 2 Ors.

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