Cross examination
Santosh S. Avhad
(Querist) 09 January 2012
This query is : Resolved
I say that the complainant deposed before the court at time of cross examination on question put by the accused advocate that what security was taken by your company at time of disbursed of loan? then complainant first deposed that one post dated cheque and immediately he deposed that being corrected that one undated cheque.
how much affect on such type of deposition on case of the complainant. undated cheque is valid or not? any judgement related about the said subject.
Arun Kumar Bhagat
(Expert) 09 January 2012
For Cheque issued as security no case under N.I.Act lies. Undated cheque is only a leaf not a cheque.
C. P. CHUGH
(Expert) 09 January 2012
Dear Arun,
What exactly you mean that undated cheque is only a leaf not a cheque ? Does this mean that no complaints lies against issuance of a undated bounced cheque, date of which was admittely written by the complainant himself without the consent and knowledge of accused. Also please provide relevant citations if any ?
Thanks
prabhakar singh
(Expert) 09 January 2012
I confirm the opinion of Mr.Arun kumar Bhagat.
The case law desired is cited below:
M/S. Balaji Seafoods Exports ... vs Mac Industries Ltd, S. Pichalah, ... on 13 October, 1998
Equivalent citations: 1999 (1) CTC 6
Bench: A Raman
ORDER
1. This application is filed to quash the proceedings initiated under Section 138 of the Negotiable Instruments Act, pending before the IX Metropolitan Magistrate, Saidapet, Chennai, in C.O. No. 6629 of 1997.
2. The case of the complainant is that the complainant paid an advance of Rs. 35,00,000 to the accused. The accused had agreed that he will clear the advance amount of Rs. 35 lakhs within thirty days from the date of receipt of advance and also handed over a post dated cheque for a sum of Rs. 35 lakhs signed by the 2nd accused for and on behalf of the 1st accused. The transactions between the complainant and the accused came to an end in September 1996 and as on 15.7.1997 towards the outstanding balance, the accused owe to the complainant along with interest is a sum of Rs. 39,43,405. When the cheque was presented for collection, it was returned on the ground that 'funds not arranged for'. A notice issued also did not evoke any response except a payment of a sum of Rs.2,00,000. Hence, the complaint.
3. Learned counsel for the petitioner submitted that the cheque in this case was not issued in discharge of any liability but was handed over only as a security and therefore, the provisions of section 138 of the Negotiable Instruments Act is not attracted. Learned counsel for the petitioner referred to the xerox copy of the agreements entered into between the parties. The xerox copy of the agreements produced along with the petition were also served on the counsel for the respondent. He also referred to the same. Therefore, it can be taken that the xerox copy of the agreement can be relied upon for the purpose of the disposal of this petition. There are two agreements. The first agreement was entered into on 27.12.1995. The second agreement was entered into on 1.4.1996. learned counsel for the petitioner would rely upon Clause (5) of the agreement, which reads as follows:
"MI i.e., the complainant, will be releasing at the request of the Processor need based advances and the outstanding advance at any time shall not exceed Rs. 35 Lakhs. The processor agreed to give a cheque for Rs. 35 lakhs to MI as security for the advance received from MI. No advance shall remain unadjusted for a period of more than 30 days from the date of payment by MI and any overdue on this account shall be deemed to be a breach of this Agreement by the processor. It is further agreed by the processor that in the event of breach as above, MI shall be at "liberty to encash such cheques in settlement of the amounts due from the processor and initiate appropriate further proceedings including action under section 138 of the Negotiable Instruments Act, 1881."
4. In pursuance of the agreement, the petitioner herein gave a post dated cheque for Rs. 35 lakhs. According to the petitioner's counsel, it was an undated cheque. The second agreement also refers to a similar clause under Clause 5. It is not the case that any fresh cheque was issued towards security as mentioned in clause 5. Therefore, the fact remains that only one cheque was issued on 27.12.1995 as security for the advance of Rs. 35 Lakhs received by the processor from the complainant. The 1st agreement does not contain the period during which the agreement will be in force. The 2nd agreement also does not contain any reference to the period of agreement. From the admitted case of the parties, it is clear that the cheque that was issued by the petitioner was as security for the advance received. According to the terms of the agreement, the said advance of Rs. 35 lakhs will be adjusted against the profits made by the accused in the transaction. Even according to the complaint, the supply should be completed on or before 31.3.1997. Therefore, it cannot be accepted that the petitioner handed over a cheque for Rs. 35 lakhs dated 17.7.1997. Since the cheque was issued at the time when the 1st agreement was entered into, the cheque must be post dated so as to coincide with the expiry of the period of the 1st agreement or coincide with the expiry of the 2nd agreement. The agreements and the complaint would show that the supply shall be completed by the accused on or before 31.3.1997. If that is the allegation, on its face value, one would expect the petitioner to give a post dated cheque dating it as 31.3.1997 or 1.4.1997, as the case may be. Therefore, to say that the accused handed over a cheque dated 17.7.97 even on the date when he entered into the 1st agreement on 27.12.1995, is rather odd. For the contention of the accused is that the complainant hurriedly filled up the date of his choice and what was handed over was an undated cheque.
5. Considering the above background of these facts, this submission appears to have force. Thus, what we find is that the cheque has been given as a security. It was not a post dated cheque, but it was a blank cheque. It was handed on the date when the 1st agreement was entered into in the month of December, 1995. Now, the point to be considered is as to whether such a cheque issued in 1995 as security can be brought under Section 138 of the Act.
6. Section 46 of the Negotiable Instruments Act speaks of delivery. It reads as follows"-
"The making, acceptance or endorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or constructive.
As between parties standing in immediate relation, delivery to be effectual must be made by the party making, accepting or endorsing the instrument, or by a person authorised by him in that behalf. As between such parties and any holder of the instrument other than a holder in due course, it may be shown that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring absolutely the property therein.
It is to be pointed out that on the date when the contract was entered into between the parties there was no subsisting liability or debt. That is why the contract itself makes it clear that the cheque has to be handed over as a security.
7. Section 138 of the Negotiable Instruments Act makes it clear that where the cheque drawn by a person on an account maintained by him with a banker for payment of any 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, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence under Section 138 of the Act. The explanation reads that for the purposes of this section, 'debt or other liability' means a legally enforceable debt or liability.
8. Therefore, on the date when the cheque was handed over, there was no legally enforceable debt or other liability. An undated cheque for Rs.35 lakhs was handed over as a security for the purpose of the contract. It was not handed over with the intention of making it as an instrument of immediate negotiation to discharge a subsisting liability or debt. Thus, this is a case where one of the parties to the contract had obtained a signed undated cheque for Rs. 35 lakhs as a security. As dispute arose between the parties, the cheque is now utilised by the complainant to resort to Sections 138 of the Act by filing in a date convenient to him.
9. There is yet another flaw in this matter. The agreement refers to the fact that a cheque for Rs. 35 lakhs shall be given as security for the advance received. Therefore, the cheque was issued for Rs. 35 lakhs. But the claim made in the notice was for Rs.39,43,508. Therefore, i am of the view that this is a case where the provisions under Section 138 of the act will not apply. A reading of the agreements between the parties does not lend support to such a view. Of course, the learned counsel for the respondent referred to the later part of Clause 5. The later part shows that MI shall be at liberty to encash such cheques in settlement of the amounts due from the processor. That cheque was given in pursuance of an earlier agreement and not the latter agreement. Therefore, obviously, it does not refer to the cheque received for Rs. 35 lakhs. It refer to cheques and not the cheque. The clause provides the parties or the 1st party to initiate further proceedings including action under section 138 of the Act in respect of cheques handed over and that too with not to later agreement.
10. Therefore, I am of the considered view that as an undated cheque having been given only as security, the provision of Section 138 of the Negotiable Instruments Act are not at all attracted and hence, the complaint against the accused under section 138 of the Negotiable Instruments Act cannot be maintained at all.
11. In the result, this petition is allowed, quashing the proceedings against the petitioners herein C.C.No. 6029 of 1997, pending on the file of the IX Metropolitan Magistrate, Saidapet, Chennai. In view of the order passed in the main petition, Crl.M.P.No. 6854 of 1997 shall stand closed.
prabhakar singh
(Expert) 09 January 2012
Another citation for you Mr. C.P.CHUGH!
In support of his contention, the learned counsel for the revision petitioner, drew the attention of this Court to the Bills, Ex.P.2 series, issued by the respondent/complainant, to the revision petitioner, wherein at page-22 of the typed set, Bill No.782 dated September 4th, 1998, the cheque has been referred as Vijaya bank cheque No.628595. Similarly, in cash bill No.798 dated September 9th, 1998, the same has been stated as Vijaya Bank, cheque No.628595. Further, the respondent/complainant in his evidence, during cross-examination, has clearly admitted that the aforesaid bills issued by the respondent dated 04.09.1998 and 09.09.1998 contains cheque No.628595. The learned counsel appearing for the respondent/complainant, has also not disputed the fact that the aforesaid cheque number available in the printed cash bills dated 04.09.1998 and 9.9.1998. The learned counsel for the petitioner, by handing over the signed cheque, the revision petitioner had authorised the respondent to fill it up and present the same for payment and therefore, he cannot question the same. On the other hand, the learned counsel appearing for the revision petitioner would contend that as per the Negotiable Instruments Act, a cheque has to be presented within a period of six months. Here in this case, as admitted by the respondent herein, the cheque was handed over on 09.09.1998 itself, but strangely after filled up the date as 28.03.2000, it was presented for payment after one year and six months. Therefore, according to the revision petitioner, the respondent cannot fix the criminal liability on the revision petitioner, after a lapse of one year and six months, after the issuance of the undated cheque.
9. As contended by the learned counsel for the revision petitioner, Ex.P.3 cheque was not a post dated cheque. On the other hand, it was an undated cheque handed over on 09.09.1998 itself. It is seen that the date on the cheque was not filled up by pen, though the name of payee, amount in figures and words were written by pen. Strangely a rubber date stamp has been used to affix for the date 28.03.1999. Even in the judgments of the trial court, as well as the first appellate court, it has been held that the disputed document is an undated cheque and not a post dated cheque. Therefore, it has to be decided in the revision, as to whether a complaint dated 24.05.2004 under Section 138 of the Negotiable Instruments Act, based on an undated cheque that was handed over by the revision petitioner, on 09.09.1998 would be legally maintainable?
10. In order to enlighten this Court on the legal aspect, the following decisions were cited: i. Angu Parameswari Textiles (P) Ltd., and others v. Sri Rajam And Co. (2001-Vol.105 Company Cases -105) ii. M.S.Narayana Menon alias Mani v. State of Kerala and another (2006 AIR SCW 4652)
iii. Y.Sreelatha @ Roja Vs. Mukanchand Bothra (2002-1- LW(Crl.)271)
iv. M/s. Cement Agencies rep. By its Managing Partner, Vijayawada v. Vijaya Babu and Another (1997(4)Crimes 273) v. Narayana Menon Alias Mani Vs. State of Kerala and another (2006(6) SCC 39)
vi. ShriIshar Alloys Steels Ltd., v. Jayaswals NECO Ltd., (AIR 2001 SC 1161)
11. In addition to the aforesaid arguments, the learned counsel for the revision petitioner would contend that as per the findings of the trial Court, as confirmed by the appellate court, the total amount payable by the respondent was Rs.1,14,471/- and under Ex.P.2, Rs.55,907/- has been paid to the respondent/complainant and the balance would be Rs.58,564/- and therefore, the cheque for Rs.83,407/- would certainly be for a higher amount, due and payable on the alleged dated, 09.09.1998.
12. In support of his contention, the learned counsel for the revision petitioner has cited the decision reported in Angu Parameswari Textiles (P) Ltd., and others v. Sri Rajam And Co. (2001-Vol.105 Company Cases -105), wherein this Court has held that cheque must be issued towards discharge of whole or part of the debt and if a cheque is issued for a higher amount, then the amount due or payable, due to the dishonour, the cheque would not create any cause of action under Section 138 of the Negotiable Instruments Act. Here in this case, as found by the courts below, the amount due and payable would be less than the amount specified in the dishonoured cheque as contended by the learned counsel for the revision petitioner.
13. The learned counsel for the respondent has cited a decision of this Court reported in Y.Sreelatha @ Roja Vs. Mukanchand Bothra (2002-1-LW(Crl.)271), wherein this Court has held thus:
"As per Section 118, 138 and 139 of the Negotiable Instruments Act, the Court "shall presume" the liability of the drawer of the cheque for the amount for which it was drawn on accepting the consideration."
"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, endorsed, negotiated or transferred, was accepted, endorsed, negotiated for transferred for consideration."
Here in this case the revision petitioner himself has not examined himself as a witness, but in support of his contention, he examined the Manager of Vijaya Bank and the Manager of bank of Rajasthan in order to substantiate that the amounts were realised by the respondent, through the said banks by producing Exs.D.1 and D.2, statements of accounts relating to the banks.
14. The Honourable Supreme Court of India has held in the decision reported in M.S.Narayana Menon alias Mani v. State of Kerala and another (2006 AIR SCW 4652) that if the accused has discharged his initial burden, the burden is reverted back to the prosecution and on the failure of the respondent to discharge the burden so shifted on him, and in view of the same, the conviction of accused was set aside by the Honourable Apex Court. In the said case, the cheque was issued for the purpose of discounting which appeared to be probable and that the accused had discharge his initial burden, and the court held in such circumstances, that the burden is shifted on the complainant and failure to discharge the burden so shifted on the complainant, resulted the conviction of the accused, being set aside.
15. Here in this case, admittedly the undated cheque was signed and handed over on 09.09.1998, to the respondent/complainant. It is not in dispute that a cheque should be presented in the bank for collection, as per the Negotiable Instruments Act, within a period of six months from the date of issuance of the cheque. As contended by the learned counsel for the respondent, the date of the cheque has to be considered for computing the period of limitation. Here in this case, it is not a post dated cheque, but only an undated cheque and as per the evidence, it had been handed over on 09.09.1998 itself, but presented nearly after one year and six months from the aforesaid date by filling up the date as 28.03.2000, by way of affixing rubber stamp.
16. In support of his contention, the learned counsel for the revision petitioner has cited a decision reported in M/s.Cement Agencies rep. By its managing partner, Vijayawada vs. Vijaya Babu and Another (1997(4) Crimes 273) rendered by the Andra Pradesh High Court, wherein the Honourable High court of Andra Pradesh has held as follows: "If time barred cheques can be encashed even after the expiry of the specified time, it will create so many anomalous situations which are likely to be used by unscrupulous litigants. For all these reasons, the appeal fails and it is accordingly dismissed."
17. As per the Negotiable Instruments Act, limitation has been prescribed and as such, though a signed cheque would lead to the presumption of authorising the drawee to fill it up, and present it for payment, the limitation of six months prescribed under the Act, cannot be altered by way of an undated cheque being filled up after one year and six months. In this case, it has been proved that the undated cheque was handed over on 09.09.1998 to one year and six months prior to the date available in the cheque, and therefore, it cannot be legally presumed that the revision petitioner had authorised the respondent to fill it up and present it at any time even after the statutory period of limitation, according to his convenience. This Court is of the considered view that filling up an undated cheque against the limitation prescribed under the Negotiable Instruments Act would be against the legislative mandate of the said Act and would create an anomalous situation likely to be misused by unscrupulous litigants. Therefore, I am of the view that the undated cheque issued and handed over on 09.09.1998 would not create the presumption that the revision petitioner had authorised the respondent to fill up the date as 28.03.2000, one and half years after the same was handed over to be presented for payment, and therefore, the alleged cause of action based on Ex.P.3 is not sustainable to maintain the criminal complaint against the revision petitioner.
18. Under Section 138 of the Negotiable Instruments Act, as the validity of a cheque is only for 6 months from the date of issuance, the implied authorisation for filling up the cheque should certainly be within the limitation of six months and not more than the period of limitation. As it has been proved that the undated cheque was handed over one year and six months prior to the date of the cheque, I am of the considered view that the dishonour of the same would not create any criminal liability on the revision petitioner/accused. The courts below without considering the legal aspect under the Negotiable Instruments Act and also the factual circumstances, have given the concurrent finding which has to be construed as a manifest error of law and to meet the ends of justice, it warrants the interference of this Court. Accordingly, I find it reasonable to allow this criminal revision petition.
19. In the result, without prejudice to the civil right, if any available to the respondent, the criminal revision petition is allowed and accordingly the conviction and sentence imposed by the Courts below are set aside and the amount of Rs.25,000/- deposited by the revision petitioner is ordered to be refunded to him. ksr
To
1.The XV Metropolitan Magistrate,
Chennai
2.The Additional Sessions Judge
and Fast Track Judge No.V,
ajay sethi
(Expert) 09 January 2012
agree with MR prbahakar singh .
Ravikant Soni
(Expert) 09 January 2012
Yes, Prabhakar sir rightly opined.
DEFENSE ADVOCATE.-firmaction@g
(Expert) 10 January 2012
The trial court normally do not consider such finer points so in all cheque cases the defense must put efforts to cover as many points of defense as possible.
WINNING ANY CHEQUE CASE IS SURE, SIMPLE AND EASY.
Deepak Nair
(Expert) 10 January 2012
Rightly and sifficiently advised by experts. Particularly Mr.Singh
V R SHROFF
(Expert) 10 January 2012
Good efforts by Prabhakarji, Thanks for Citations
Devajyoti Barman
(Expert) 10 January 2012
Good efforts indeed as it takes lot of time which I can hardly afford.
Rajeev Kumar
(Expert) 11 January 2012
Indeed a handy work of Prabhakar sir
Shonee Kapoor
(Expert) 13 January 2012
rightly stated.
Regards,
Shonee Kapoor
harassed.by.498a@gmail.com
C. P. CHUGH
(Expert) 17 January 2012
Thanks a lot MR Prabhakar Sir.
I would help me in one of my personal matter.
