High Court dismissed appeal against acquittal in cheque bounce case. Court held accused did not take over third party debt liability without written assignment. Presumption under Section 139 NI Act reversed due to lack of legal debt nexus.
Appeal dismissed; acquittal of accused affirmed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
Digitally signed by CHITRA CHITRA SANJAY SANJAY SONAWANE SONAWANE Date: 2023.11.10 Chitra Sonawane. 19:39:34 901-Appeal-91-2012.doc +0530
IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION
Criminal Appeal No.91 of 2012
M/s. IVY Jewellery Pvt Ltd
Through its authorised representative
Shri Arnab Roy, having its office
At Royal Star Arcade, Plot No 8,
Western Industrial estate,
Opposite SEEPZ gate No 1, MIDC,
Andheri (E) Mumbai 400 93
…Applicants/Appellants
(Original complainant)
Versus
1. Shri Chandresh Sampat Residing at Flat No 116, Jai Ambe co-operative Hsg; Society Ltd, carter Road No 5, Borivale (E) Mumbai 400 066 …Respondents
(Original Accused)
2. The State of Maharashtra …Respondents
Coram: R. N. Laddha, J.
Reserved on: 8 September 2023
Pronounced on : 10 November 2023.
Mr Rishi Ashok i/by M/s. Bekay Legal, for the Appellant.
Mr Vinay Bhanushali a/w Mr Sanmit Vaze i/by J.G. Bhanushali,
for Respondent No.1.
Mr HJ Dedhia, APP for respondent No.2-State.
Judgment :-
The legality, propriety and correctness of the Judgment
and Order dated 25 August 2011 passed by the learned
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Metropolitan Magistrate, 48th Court, Andheri, Mumbai, in
Criminal Case No.512/SS/2010, whereby respondent No.1/
accused came to be acquitted of the offence punishable under
Section 138 of the Negotiable Instruments Act, 1881 (for
short ‘NI Act’), is assailed in this Appeal.
2.The appellant/complainant is a private limited company
dealing in the trade of diamonds. M/s D. B. Diamonds, a
proprietorship of Mr Dhaval Bhatt, placed an order with the
complainant for purchasing diamond jewellery for
Rs.22,74,240/-. The complainant supplied diamond jewellery
to M/s. D. B. Diamonds and raised nine invoices totalling
Rs.22,74,240/- out of which Mr Dhaval Bhatt paid
Rs.12,71,260/-; and Rs.10,02,980/- remained to be paid to
the complainant.
3.It is alleged that respondent No.1/ accused, the brother-
in-law of Mr Dhaval Bhatt, took over the liability of Mr
Dhaval Bhatt to pay the outstanding amount of
Rs.10,02,980/- to the complainant. In pursuance of this
arrangement, the accused issued a post-dated cheque bearing
No.015847 (‘said cheque’) dated 18 November 2009, drawn
on HDFC Bank Ltd., Malad (West) Branch, Mumbai, for
Rs.10,02,980/-.
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4.The complainant deposited the said cheque with his
banker for realisation; however, the same was returned to the
appellant on 18 November 2009 with the remark ‘stop
payment’. Subsequently, the complainant, through its
Advocate, addressed a notice dated 9 December 2009 to the
accused, calling upon him to pay the cheque amount of
Rs.10,02,980/- within 15 days from the receipt of the notice,
failing which proceedings would be initiated under section
138 of the NI Act. The accused personally accepted the
service of this notice on 11 December 2009. On non-receipt
of any reply from the accused and his failure to pay the
cheque amount, the complainant was constrained to file a
complaint bearing No.512/SS/2010 before the learned
Metropolitan Magistrate, 48th Court, Andheri, Mumbai,
under section 138 of the NI Act.
5.The learned Magistrate took cognisance of the offence
and summoned the accused. On entering appearance, the
particulars of the offence were read over and explained to the
accused. The accused abjured guilt and claimed trial.
6.During the course of the trial, the learned Magistrate
recorded the evidence of Arnab Roy (PW-1), the authorised
representative of the complainant, and Kamlesh Singh (PW-2),
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the erstwhile Assistant Manager of the complainant. Various
documents were tendered on behalf of the complainant. The
statement of the accused under Section 313 of the Code of
Criminal Procedure, 1973 (‘CrPC’) came to be recorded. In
his defence, the accused examined a witness, Habib Zaidi
(DW-1), the operation Manager of HDFC Bank, Malad
Branch, Mumbai.
7.After appraisal of the evidence and perusal of the
documents tendered, the learned Magistrate acquitted the
accused. Being aggrieved thereby, the complainant filed the
present Appeal.
8.I have heard Mr Rishi Ashok, the learned Counsel
appearing on behalf of the appellant; Mr Vinay Bhanushali,
the learned Counsel appearing on behalf of respondent No.1;
and Mr HJ Dedhia, the learned Counsel appearing on behalf
of respondent No.2-State and perused the impugned
judgment, grounds in the appeal memo, evidence and material
on record.
9.Mr Rishi Ashok, the learned Counsel for the
appellant/complainant, submitted that the learned trial Court
committed a manifest error in acquitting respondent No.1/
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accused. He further submitted that the learned trial Court
failed to appreciate that on receiving no response to the legal
notice, the case of the complainant stood unrebutted was
proved beyond reasonable doubt. His main contention is that
the learned trial Court ought to have concluded that the
accused issued the cheque towards the discharge of his legal
liability as a guarantor for Mr Dhaval Bhatt, as it is proved
that said cheque was dishonoured due to ‘stop payment’
instructions of the accused and the legal notice was duly
received by the accused, despite which the cheque amount
remained unpaid. He further submitted that the learned trial
Court failed to consider the presumption available to the
complainant under section 139 of the NI Act, especially when
the accused did not examine Mr Dhaval Bhatt to rebut that
presumption. To buttress his contentions, he relied upon the
following judgments:
a.Jain P. Jose v. Santosh & Anr. 1; and
b. Maharashtra State Seeds Corpn. Ltd. v. Nagorao Raghunath Jibhkate2 .
10. Mr Vinay Bhanushali, the learned Counsel for
respondent No.1/accused, supported the line of reasoning
1 Decided by the Hon’ble Supreme Court in SLP (Cri) No.5241 of 2016 on 10 November 2022 2 2012 SCC OnLine Bom 2115
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adopted by the trial Court to record the finding of acquittal.
He made various submissions countering the arguments put
forth on behalf of the appellant. He argued that there is no
evidence on record to show that the accused took over the
liability of his brother-in-law, Mr Dhaval Bhatt and that the
trial Court rightly acquitted the accused. To bolster this
argument and to contend that the accused had no role to play
in the transaction between the complainant and Mr Dhaval
Bhatt, the learned Counsel referred to the cross-examination
of Mr Arnab Roy (PW-1), the authorised representative of the
complainant, where he admitted that it was not the accused
but Mr Dhaval Bhatt who informed the complainant that the
payment of the outstanding amount of Rs.10,02,980/- would
be made by the accused and handed over to the complainant
five blank cheques signed by the accused, which included the
said cheque. He submitted that the said cheque was lost, and
the accused informed his banker to refuse its encashment. He
further submitted that in the absence of a written agreement
amongst Mr Dhaval Bhatt, the accused and the complainant
to transfer and assign the liability of Mr Dhaval Bhatt unto
the accused, the trial Court rightly found that the said cheque
was not issued by the accused to discharge the liability of Mr
Dhaval Bhatt which was allegedly assigned to the accused. To
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buttress his submissions, he relied upon the judgment of the
Hon’ble Supreme Court in Rangappa v. Sri Mohan3.
11. It is not in dispute that the tax invoices (Exh.12 to
Exh.20) were issued by the complainant on M/s D.B.
Diamonds for the sale of jewellery worth Rs.22,74,240/- to
Mr Dhaval Bhatt and that these invoices do not bear the
signature of the accused. It is also not disputed that an
amount of Rs.12,71,260/- was paid by Mr Dhaval Bhatt to the
complainant towards the total consideration of
Rs.22,74,240/- and an amount of Rs.10,02,980/- was
outstanding. The crux of the dispute between the parties is
with regard to the assignment of liability of Mr Dhaval Bhatt
unto the accused to pay the complainant the outstanding
amount of Rs.10,02,980/- and whether, in the absence of such
an assignment, the complainant can avail the benefit of
Section 139 of the NI Act.
12. On perusal of the cross-examination of Mr Arnab Roy
(PW-1), it transpires that the entire transaction of the
jewellery sale took place between the complainant and Mr
Dhaval Bhatt. Mr Arnab Roy (PW-1) admits that the accused
had no role to play till the delivery of the cheques to the
3 (2010) 11 SCC 441
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complainant, and Mr Dhaval Bhatt handed over blank
cheques with the signature of the accused to the complainant.
It is further admitted that there is no written document to
show that the accused had taken over the liability of Mr
Dhaval Bhatt. He further admits that the contents of the
cheque were filled at the instance of the complainant.
13. Further, the cross-examination of PW-1 reveals that it
was Mr Dhaval Bhatt who informed the complainant that the
outstanding amount of Rs.10,02,980/- would be paid by the
accused, pursuant to which Mr Dhaval Bhatt handed over the
cheques (including the cheque in question) to the
complainant. The record does not reveal that the accused at
any point in time had informed the complainant that he
would repay the debt of Mr Dhaval Bhatt for the purchase of
the jewellery from the complainant. In addition to the
deposition of PW-1, there is no documentary evidence on
record to indicate that the accused took over the liability of
Mr Dhaval Bhatt and issued the cheque for discharging his
liability towards the trade of jewellery with the complainant.
14. It is a settled position in law that for the purpose of the
prosecution under section 138 of the NI Act, an instrument
must be entered into by the person who owes a legally
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enforceable debt to another and such person who takes over
the liability of the former to discharge such debt in favour of
the latter. The party to whom such debt is owed must either
be made a party to such instrument or must be informed of
such assignment/transfer of liability. A mere statement that the
cheque was issued by a person to discharge the liability of
another is not sufficient to set the wheels of criminal
prosecution under section 138 of the NI Act in motion. A
reference in this regard can be made to the decisions of this
Court in Hiten Sagar v. IMC Ltd.4 and Nandkishore Mehra v.
Sudhir Transport Ltd5. Given the foregoing, the learned trial
Court rightly held that the accused did not take over the
liability of Mr Dhaval Bhatt.
15. Coming to the issue of whether Section 139 of the NI
Act would aid the complainant in the absence of an
instrument of assignment of debt, it would be necessary to
reproduce the said section. The section reads as follows :
“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
section138 for the discharge, in whole or in part, of any
debt or other liability.”
16. The record reveals that the liability to pay the
4 2001 SCC OnLine Bom 432
5 2008 SCC OnLine Bom 1598
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outstanding dues of the complainant was on Mr Dhaval Bhatt.
He did not assign this liability unto the accused, as evidenced
by the non-existence of a written instrument between the
parties for such assignment or transfer of debt and the
testimony of PW-1. Further, PW-1, in his evidence, admitted
that the contents of the blank cheque handed over by Mr
Dhaval Bhatt to the complainant were filled not by the
accused but by the complainant. The evidence of DW-1
reveals that the accused, using the telebanking services on 4
April 2009, informed his banker to stop the payment of the
said cheque. Accordingly, the accused’s banker issued a
confirmation certificate dated 6 April 2009 (Exh.28) and a
letter dated 18 January 2011 (Ex.29) stating that the payment
of the said cheque was stopped on the telephonic instructions
of the accused.
17. The presumption under section 139 of the NI Act is
rebuttable. The benefit under this section cannot be availed if
the accused raises a plausible defence, which creates doubts
about the existence of a legally enforceable debt or liability. To
create such doubt, the accused can rely on the materials
submitted by the complainant in order to raise such a defence,
and it is conceivable that in some cases, the accused may not
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need to adduce evidence of his/her own. This is highlighted in
the decision of Rangappa (supra).
18. In the present case, the cheque was not issued by the
accused towards the discharge of liability of the debt of Mr
Dhaval Bhatt owed by him to the complainant. If the cheque
had been issued by Mr Dhaval Bhatt for the outstanding
amount of Rs.10,02,980/-, the accused could have availed the
benefit of section 139 of the NI Act. However, in the absence
of the assignment of liability of Mr Dhaval Bhatt unto the
accused and there being no nexus between the issuance of the
said cheque and the liability of the accused to repay the
outstanding amount to the complainant, the trial Court
rightly concluded that the complainant failed to prove that
the dishonoured cheque was issued by the accused for
discharge of liability.
19. In such circumstances, in the considered opinion of this
Court, the trial Court has rightly acquitted the accused for the
offence punishable under section 138 of the NI Act.
20. As a result, this appeal fails and is hereby dismissed.
[ R. N. Laddha, J. ]
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3 issues framed by the court
Whether legal notice was duly served under Section 138 NI Act
Whether presumption under Section 139 NI Act applies when cheque issued by accused to discharge prior liability of another
Whether accused took over liability of third party without written agreement or assignment of debt
Colour shows how this judgement treated each authority
Jain P. Jose v. Santosh & Anr.Referred¶34
Jain P. Jose v. Santosh & Anr.
Maharashtra State Seeds Corpn. Ltd. v. Nagorao Raghunath JibhkateReferred¶36
Maharashtra State Seeds Corpn. Ltd. v. Nagorao Raghunath Jibhkate
Rangappa v. Sri MohanDistinguished¶384569
Rangappa v. Sri Mohan
Hiten Sagar v. IMC Ltd.Referred¶57
Hiten Sagar v. IMC Ltd.
Nandkishore Mehra v. Sudhir Transport LtdReferred¶57
Nandkishore Mehra v. Sudhir Transport Ltd
3 provisions across 2 enactments
M/s. IVY Jewellery Pvt Ltd
Shri Chandresh Sampat
The State of Maharashtra
R. N. Laddha
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court