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Legal Examination of Signature Forgery In Cheque Dishonor: Delhi High Court.

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Case Title: ISHWAR SINGH versus VIDYA SHRI DEVI

Case No.: CRL.L.P. 1/2024, CRL.M.A. 18/2024

Dated on: FEBRUARY 29, 2024

Coram: HON’BLE MR. JUSTICE MANOJ KUMAR OHRI

Facts:

In this case, Ishwar Singh filed a complaint under Section 138 of the Negotiable Instruments Act (NI Act) in 2016, alleging that Vidya Shri Devi, representing M/s Safemax Industries, issued a cheque for Rs. 3,26,729 as a refund for a failed construction project. The cheque was dishonored due to insufficient funds. Despite issuing a demand notice, no payment was made, leading to the filing of the complaint. The trial court convicted Vidya Shri Devi, but the appellate court acquitted her, accepting her defense that the cheque was stolen and her signature was forged, as supported by an FSL report. Ishwar Singh’s petition for leave to appeal the acquittal was dismissed by the High Court.

Issues framed by the Court:

  • Whether the delay of 54 days in filing the petition should be condoned.
  • Whether the respondent, Vidya Shri Devi, issued the cheque in question and whether the signatures on the cheque were genuine.
  • Whether the respondent successfully rebutted the presumption that the cheque was issued for discharge of a legally enforceable debt or liability.
  • Whether the evidence, including the FSL report and testimonies, sufficiently supports the respondent’s defense that the cheque was stolen and not issued by her.
  • Whether the petitioner, Ishwar Singh, provided adequate evidence to prove that the cheque was issued by the respondent and to counter the respondent’s claims and the FSL report.
  • Whether the appellate court’s decision to acquit the respondent was justified.

Legal Provisions:

Section 5 of the Limitation Act: Extension of prescribed period in certain cases.

Section 138 NI Act: It states about the offence of dishonoring a cheque for insufficiency of funds or exceeding the arranged amount.

Contentions of the Appellant:

The appellant, contended that the trial court had rightly convicted the respondent, Vidya Shri Devi, under Section 138 of the NI Act, as she had issued a cheque that was dishonored due to insufficient funds. He argued that the presumption under Section 139 of the NI Act, which assumes the cheque was issued for a discharge of liability and was not adequately rebutted by the respondent. Ishwar Singh challenged the respondent’s defense that the cheque was stolen and her signature was forged, asserting that this claim was not proven during the trial. He also contended that the FSL report, which indicated that the signatures on the cheque did not match the respondent’s specimen signatures, should not be considered conclusive. He emphasized that the respondent’s consistent denial and the corroborative testimonies were insufficient to outweigh the statutory presumption in his favor.

Contentions of the Respondent:

The respondent, Vidya Shri Devi, contended that she did not issue the cheque in question and that her signatures on the cheque were forged. She maintained that the cheque, along with several others, was stolen by an employee. To support her defense, she presented the testimony of her husband and a bank witness, as well as an FSL report which concluded that the signatures on the cheque did not match her specimen signatures. She argued that the cheque was dishonored due to insufficient funds rather than signature mismatch, and highlighted the lack of evidence from the petitioner to prove the cheque was issued by her.

Court’s Analysis & Judgement:

The court analyzed whether the respondent, Vidya Shri Devi, successfully rebutted the presumption under Section 139 of the NI Act that the cheque was issued for a valid liability. The court noted that the respondent consistently maintained that the cheque was stolen, supported by an FSL report indicating the signatures did not match her sample signatures. The petitioner, Ishwar Singh, failed to contest the FSL report or cross-examine the relevant witnesses. The court found that mere assertions by the petitioner were insufficient to override the respondent’s evidence and expert opinion. Citing the principle that an appellate court should be cautious in overturning an acquittal unless the trial court’s decision is perverse or irrational, the court upheld the appellate court’s acquittal of the respondent. Consequently, the petition for leave to appeal was dismissed.

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Judgement Reviewed By- Shramana Sengupta

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License Agreement Dispute: Delhi HC Upholds Arbitration Ruling on NIIT Education Center Termination

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Case Name: Maj. Pankaj Rai v. M/S NIIT LTD.

 Case Number: O.M.P. (COMM) 55/2024 & I.A. 2137/2024

 Dated on: 29th February, 2024

 Quorum: Hon’ble Mr. Justice Prateek Jalan

 FACTS OF THE CASE

An agreement titled “NIIT License Agreement (Urban)” was signed on December 30, 2015, between Maj. Pankaj Rai (petitioner) and M/S NIIT Ltd. (respondent). The agreement allowed Rai to use NIIT’s trade names, designs, copyrights, technical knowhow, and course materials to set up a computer education centre in A.S. Rao Nagar, Hyderabad. Following the agreement, Rai incorporated a limited company to establish the education centre. Disputes arose, leading Rai to invoke arbitration on July 26, 2017. The Arbitral Tribunal was constituted by an order of the Delhi High Court on March 4, 2022. Rai claimed Rs. 99.43 lakhs for losses, Rs. 35.42 lakhs as an assured amount by NIIT, interest, and costs. His claims included issues of unfair courseware pricing, improper GST rounding, territory restrictions, student poaching, and non-disclosure of adverse orders against NIIT. NIIT Ltd. contested the claims, arguing that Rai’s claims were not maintainable as the agreement was intended for Rai’s company. NIIT denied any breach of terms and disputed providing any assured returns. Rai was the sole witness for his case, while NIIT produced two witnesses who were cross-examined. Rai’s additional witnesses were not produced for cross-examination. An email from Rai on June 27, 2018, acknowledged the receipt of Rs. 297810.39 as a final settlement. The Arbitral Tribunal found no breach of contract or proof of losses as claimed by Rai.

ISSUES

  • Whether the petitioner, in his capacity as ‘Indemnifier’ under the Licence Agreement, can maintain the present arbitration proceedings.
  • Whether the arbitration agreement as well as the Licence Agreement stand discharged and extinguished.
  • Whether the petitioner is entitled to the claims raised in the Statement of Claim.

LEGAL PROVISIONS

Arbitration and Conciliation Act, 1996 (the Act):

  • Section 34: This section deals with the application for setting aside an arbitral award. The petitioner invoked this section to seek the setting aside of the Arbitral Award dated 19.10.2023.

Consumer Protection Act, 1986:

  • Section 2(1)(r): This section defines “unfair trade practice.” The petitioner referenced this provision to argue that the agreement was one-sided and constituted an unfair trade practice.

CONTENTIONS OF THE APPELLANT

The appellant argued that the learned Arbitrator wrongly implemented a one-sided Agreement and erroneously applied the principle of caveat emptor. He contended that had he been aware of the full facts, including the respondent’s antecedents and price differences for metro and non-metro cities, he would not have entered into the Agreement. He relied on Supreme Court judgments, such as IREO Grace Realtech (P) Ltd. v. Abhishek Khanna & Others and Mrs. Manju Bhatia & Anr. v. New Delhi Municipal Council & Anr., to support his claim. The appellant contended that his consent to enter into the Agreement was vitiated by the respondent’s failure to disclose certain adverse orders from the Monopolies and Restrictive Trade Practices Commission (MRTPC) and the National Consumer Disputes Redressal Commission (NCDRC). He argued that this lack of disclosure constituted a material misrepresentation, which should render the Agreement void. The appellant claimed that he was unable to realise the assured profits indicated by the respondent, amounting to Rs. 35.42 lakhs over three years. He argued that the respondent had provided assurances of fixed returns prior to signing the Licence Agreement, which were not fulfilled. The appellant alleged that the respondent sold courseware to him at a higher rate than that sold to a licensee in a neighbouring area and engaged in “petty cheating” by rounding off amounts payable on account of GST. He claimed these actions resulted in significant financial losses. The appellant argued that the respondent did not permit him to approach institutes within his territory or offer discounts from his share of earnings. He also alleged that the respondent poached his students by operating a portal (NIIT.tv) that provided free pre-recorded videos to students, undermining his business.

CONTENTIONS OF THE RESPONDENT

The respondent took a preliminary objection against the maintainability of the claims at the instance of the petitioner. They argued that the Agreement contemplated the establishment of the education centre by the petitioner’s company, not the petitioner himself. Thus, the petitioner did not have the standing to bring these claims. The respondent disputed any breach of the terms and conditions of the Agreement. They denied allegations of overcharging for courseware, engaging in petty cheating by rounding off GST amounts, and preventing the petitioner from approaching institutes or offering discounts. They asserted that all actions taken were in compliance with the Agreement. The respondent denied providing any assurance of fixed returns or profits to the petitioner. They contended that the Agreement did not include any clause guaranteeing assured profits, and the claims of assured profits were unfounded.The respondent argued that the petitioner’s claims were fully and finally settled, as evidenced by an email dated 27.06.2018, where the petitioner acknowledged receipt of a sum towards final settlement. They asserted that this settlement discharged all claims under the Agreement. The respondent alleged that the petitioner had instituted numerous litigations against them before various forums and had started a campaign of defamation against the respondent. In response, the respondent had filed a suit before the High Court, which resulted in a consent decree dated 03.09.2019, restraining the petitioner from making defamatory statements.The respondent maintained that the claims brought by the petitioner were outside the scope of the Agreement and that the Arbitral Tribunal had no jurisdiction over matters not arising directly from the contractual terms. They also contended that the issues raised by the petitioner had already been settled through prior legal proceedings.

COURT’S ANALYSIS AND JUDGEMENT

The court first addressed the issue of full and final settlement, noting the petitioner’s acknowledgment of receipt of a sum as final settlement in an email dated 27.06.2018. This acknowledgment, coupled with the petitioner’s admission in the petition, led the court to agree with the Arbitrator’s conclusion that the petitioner’s claims were fully discharged. Regarding the petitioner’s contention of the Agreement being one-sided, the court explained that the context of the cited Supreme Court case, IREO Grace Realtech, under the Consumer Protection Act, did not apply here. The court upheld the Arbitrator’s decision to adjudicate the case within the contractual framework. The application of the caveat emptor principle was also examined, with the court finding no error in the Arbitrator’s application, given the petitioner’s obligation to conduct due diligence before entering the Agreement.

Moving on to the merits of the claims, the court reviewed the Arbitrator’s findings. The petitioner’s allegations regarding overcharging for courseware, GST rounding off, restrictions on territory, and student poaching were all rejected by the Arbitrator based on evidence and contractual analysis. The petitioner’s claim of assurance of minimum revenues was also dismissed, with the Arbitrator finding no supporting evidence. The court emphasized the limited scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996, reaffirming the Supreme Court’s guidelines. Since the Arbitrator’s findings were based on a thorough analysis of evidence and contractual terms, the court found no grounds for interference and dismissed the petition, upholding the Arbitral Award.

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Judgement Reviewed by – Shruti Gattani

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Delhi High Court: Quashes Complaint under Section 138 of NI Act Due to Lack of Prima Facie Evidence

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Delhi High Court: Quashes Complaint under Section 138 of NI Act Due to Lack of Prima Facie Evidence

Case title:  GARHWAL JEMS AND JEWELLERY PVT. LTD. & ORS. VS RMI STEELS LTD.

Case no.:  CRL.M.C. 2452/2022 & CRL.M.A. 10307/2022

Dated on: 29th February 2024

Quorum:  Hon’ble. MR JUSTICE NAVIN CHAWLA

FACTS OF THE CASE

This petition has been filed under Section 482 of the Code of Criminal Procedure, 1973 (in short, ‘Cr.P.C.’) read with Article 227 of the Constitution of India, praying for quashing of the complaint filed by respondent under Sections 138 read with Section 142 of the Negotiable Instruments Act, 1881 (in short, ‘NI Act’), being CC No. 5840/2019, titled as M/s RMI Steels Ltd. v. M/s Garhwal Jems & Jewellery Pvt. Ltd. & Ors., pending before the Court of the learned Metropolitan Magistrate, NI Act-06, Central-District, Tis Hazari Courts, Delhi. The above complaint has been filed by the respondent alleging that the respondent entered into an Agreement to Sell dated 31.03.2018 with the petitioner no.1 for sale of its movables and immovable property of its factory situated at Plot No. A-1 and B-1 measuring 32926.20 sq. mtr. (Comprising 24406.73 sq mtr. of A-l and 8519.47 sq. mtr of B-1) at Village Dhalwala, Muni-ki-Reti Industrial Area, District Tehri Garhwal, Uttarakhand, for a total consideration of Rs.9.30 crores. That in terms of the said Agreement to Sell, the petitioners, after paying sale consideration to the tune of Rs.5,73,64,050/-, were liable to pay the balance sale consideration of Rs.3,47,05,950/-, which they undertook to pay in form of discharge of liabilities / dues of the respondent on or before 30.09.2018. The complaint further alleges that it was agreed between the parties that on failure on the part of the accused to discharge the said dues, it would entitle the respondent to recover the same from the petitioners / accused. In order to secure the payment of the aforesaid dues, a cheque bearing no.079173 for a sum of Rs.75,00,000/- drawn on the Punjab National Bank, Rishikesh, was issued by the petitioner in favour of the respondent as a security deposit. It is further alleged that the debt that the petitioners had undertaken to discharge, became due and payable in October 2018, however, as the petitioners failed to discharge the same, on 09.01.2019, an Addendum to the aforementioned Agreement to Sell was executed between the parties. It is further alleged that as the accused failed to discharge the debt by 29.04.2019 as well, in terms of the Addendum, the respondent presented the above-mentioned cheque, which was returned dishonored by the bank with the remarks ‘funds insufficient’. A legal Notice dated 30.04.2019 was sent by the respondent to the petitioners, to which the petitioners replied vide reply dated 18.05.2019, denying their liability to pay the said amount. The respondent, therefore, filed the above complaint.

 ISSUES

  • Whether the complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), discloses a prima facie case against the petitioners.
  • Whether the cheque in question was issued for the discharge of any debt or liability as defined under Section 138 of the NI Act.
  • Whether the respondent was forced to make any payment to its creditors due to the petitioners’ failure to discharge their liabilities.
  • Whether the complaint should be quashed under the inherent powers of the High Court under Section 482 of the Code of Criminal Procedure, 1973 (Cr.P.C.).
  • Whether the conditions specified in the Agreement to Sell and the Addendum for encashment of the security cheque were met.

LEGAL PROVISIONS

Code of Criminal Procedure, 1973 (Cr.P.C.)

Section 482: Saving of inherent powers of High Court

This section preserves the inherent powers of the High Court to make orders necessary to prevent the abuse of the process of any court or otherwise to secure the ends of justice. It is often invoked to quash criminal proceedings that do not disclose a prima facie case or are otherwise frivolous.

Constitution of India

Article 227: Power of superintendence over all courts by the High Court

This article grants every High Court the power of superintendence over all courts and tribunals within its jurisdiction. The High Court can exercise this power to ensure that subordinate courts function within the bounds of their authority and to correct any gross errors of law or fact.

Negotiable Instruments Act, 1881 (NI Act)

Section 138: This section makes it an offence if a cheque is dishonored due to insufficiency of funds or if the amount exceeds the arrangement made with the bank, provided certain conditions are met the cheque must be presented within six months (or its validity period). A notice demanding the payment must be issued to the drawer within 30 days of the receipt of information of dishonor. The drawer must fail to make the payment within 15 days of receiving the notice.

Section 142: Cognizance of offences This section outlines the conditions under which courts can take cognizance of offences under Section 138, including the necessity of a written complaint by the payee or the holder in due course of the dishonored cheque.

Section 139: Presumption in favour of holder This section presumes that the cheque was issued for the discharge, in whole or in part, of any debt or other liability unless the contrary is proved. This presumption shifts the burden of proof to the accused to show that there was no liability or debt.

CONTENTIONS OF THE APPELLANT

The learned counsel for the petitioner, drawing my attention to the terms of the Agreement to Sell dated 31.03.2018 and the Addendum dated 09.01.2019 executed between the petitioner no.1 and the respondent, submits that the cheque of Rs.75 lakhs could be encashed by the respondent only when the petitioners fail to make the payment in discharge of the liabilities of the respondent and the respondent is forced to make the payment for the same. The learned counsel for the petitioners submits that in the present case, the complaint does not state that the respondent had to make any payment to its own debtors for discharge of the liability, therefore, to its own showing, there was no debt owed by the petitioners to the respondent for which the security cheque of Rs.75 lakhs could have been presented by the respondent for encashment. He submits that, in the absence of these averments in the complaint, the complaint is not maintainable and is liable to be dismissed. In rejoinder, the learned counsel for the petitioner submits that the plea of the respondent that the lease deed has been obtained by misrepresentation is totally false and, in fact, it is the respondent who is trying to make an unjustified gain by encashing the cheque.

 CONTENTIONS OF THE RESPONDENTS

The learned counsel for the respondent submits that the plea raised by the petitioner is a disputed question of fact, which can be best determined by the learned Trial Court on evidence being led by the parties. She submits that the petitioners have also obtained a Lease Deed from SIDCUL based on misrepresentations.  Further submits that the Agreement to Sell and the Addendum were executed by the petitioners only to discharge its liabilities owed to such institutions and others, as is also recorded in the Agreement to Sell. She submits that the petitioners failed to make the payment of the dues to such institutions and others, thereby entitling the respondent to present the cheque for encashment. She submits that in any case, these are matters to be considered by the learned Trial Court and cannot be a ground for quashing the complaint at this stage.

COURT’S ANALYSIS AND JUDGEMENT

I have considered the submissions made by the learned counsels for the parties. A reading of the above averments would show that the respondent claims that the liability for which the cheque has been presented is under the Agreement to Sell dated 31.03.2018 read with the Addendum dated 09.01.2019, and that the cheque had been presented for encashment as the petitioners failed to discharge their debt by 29.03.2019. In the Complaint, there is no averment that the respondent had to pay the debt due to the default of the petitioners. A reading of the above terms/clauses would clearly show that it is only where the petitioners, as a purchaser, fail to pay the dues owed to the workers, the State Industrial Development Corporation of Uttarakhand Limited (SIDCUL), Service Tax dues, and the VAT dues, owed by the respondent, and the respondent, as a seller, has to pay the same, that the respondent would debit the account of the petitioner/purchaser, making the petitioner liable to pay the said amount, and thereafter proceed to encash the security cheque of Rs.75 lakhs. For the liability to arise for the presentation of the cheque for encashment, therefore, it is essential that the respondent is forced to make the payment to the workers/above-mentioned authorities, which liability, otherwise, the petitioners had undertaken to pay in terms of the Agreement to Sell and the Addendum. In the present case, the Complaint does not state that the respondent had to make any payment to any of the above-mentioned workers/authorities. Therefore, the liability for which the cheque of Rs.75 lakhs was given by the petitioners as security to the respondent, had not arisen and the cheque could not have been presented for encashment by the respondent. One of the conditions which has to be satisfied by the complainant for making out an offence under Section 138 of the NI Act against the drawer of the cheque, is that the cheque in question has been issued for the discharge, in whole or in part, of any debt or any liability of the accused. In the present case, as the debt or liability in terms of the Agreement to Sell and/or the Addendum itself had not arisen, Section 138 of the NI Act was not attracted and the ingredients of the offence were not satisfied. Though, the learned counsel for the respondent has placed reliance on Section 139 of the NI Act to submit that there shall be a presumption that a cheque issued is for discharge of any debt or other liability, however, the presumption in the present case stands negated by the very terms of the Agreement to Sell and the Addendum. Though the power under Section 482 of the Cr.P.C. is to be exercised sparingly and in the rarest of rare cases, at the same time, where, from a bare reading of the complaint, the offence is not made out, the power must be exercised to quash such a complaint. Applying the abovementioned principles enunciated by the Supreme Court to the facts of the present case, as the Complaint filed by the respondent lacks the necessary averments that would give rise to the debt and/or liability of the petitioners for which the cheque had been issued, the complaint filed by the respondent deserves to be quashed. Accordingly, the petition is allowed. Complaint, being CC No. 5840/2019, titled as M/s RMI Steels Ltd. v. M/s Garhwal Jems & Jewellery Pvt. Ltd. & Ors., pending before the Court of the learned Metropolitan Magistrate – 06, NI Act, Central District, Tis Hazari Courts, Delhi is hereby quashed. There shall be no order as to costs.

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Judgement Reviewed by – HARIRAGHAVA JP

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Verizon Secures Permanent Injunction in Trademark Infringement Case Against VRIZON, Delhi High Court Rules  

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Verizon Secures Permanent Injunction in Trademark Infringement Case Against VRIZON, Delhi High Court Rules

 

Case title:  VERIZON TRADEMARK SERVICES LLC & ORS. VS VERIZON TRADEMARK SERVICES LLC & ORS.

Case no.:  CS(COMM) 407/2023 & I.A. 11201/2023

Dated on: 29th February 2024

Quorum:  Hon’ble. MR JUSTICE SANJEEV NARULA

FACTS OF THE CASE

The Plaintiff No. 1 (‘Verizon Trademark Services LLC’), an intellectual property holding company, is the proprietor of numerous trademarks consisting of/ incorporating the mark ‘VERIZON’. Plaintiff No. 1 granted exclusive licence to Plaintiff No. 2 (‘Verizon Licensing Company’) for use of the trademark ‘VERIZON’ as well as the ‘VERIZON’ logos. Plaintiff No.2 then further granted an exclusive sub-license to Plaintiff No. 3 (‘Verizon Communications India Private Ltd.’) in accordance with the terms of the license agreement entered into with Plaintiff No. 1. Plaintiffs are part of the Verizon group of companies, being among the world’s leading providers of, inter alia, communications, information technology and security products/ services. They own and operate one of the most expansive end-to-end global Internet Protocol networks serving more than 2,700 cities in over 150 countries worldwide, including India. Plaintiffs have coined and adopted the mark ‘VERIZON’, derived from the Latin word ‘Veritas’ (connoting certainty and reliability) and ‘Horizon’ (signifying forward looking and visionary), which is used as their trade name. Plaintiffs have filed the present suit for infringement and passing off in respect of their registered trademarks and logos – ‘VERIZON’, Plaintiffs have secured registrations in over 200 countries, with earliest registrations in India dating back to the year 2000. Details of Plaintiffs’ trademark registrations in India under various Classes have been set out at Paragraph No. 28 of the plaint. Plaintiff uses the VERIZON Trademarks for a wide range of products and services primarily in the telecommunications sector. The registrations also suggest that use of the VERIZON Trademarks is not limited to these areas, as the Plaintiffs continue to expand their services and products. Plaintiffs have been using the VERIZON Trademarks extensively, continuously and uninterruptedly since their adoption in and about the year 2000. Further, they have expended heavily towards advertisement and promotion of their goods/ services, details whereof have been delineated at Paragraph No. 16 of the plaint. Consequently, Plaintiffs have acquired substantial goodwill and reputation in their VERIZON Trademarks, which have become a source identifier solely and exclusively for the Plaintiffs’ goods and services. Plaintiffs are aggrieved by the Defendants’ dishonest adoption of the mark/ brand name ‘VRIZON’ [“Impugned Mark”], used in respect of inter alia various household and kitchenware goods. Pursuant to finding Defendants’ trademark application No. 4300781 for registration of the Impugned Mark on a ‘Proposed to be Used’ basis, Plaintiffs issued several cease-and-desist notices, however, no response was received despite attempts to follow up. In such circumstances, the Plaintiffs approached this Court asserting that the Impugned Mark is deceptively similar to their VERIZON Trademarks, thereby amounting to infringement under Section 29(4) of the Trade Marks Act, 1999 [“Act”].

 ISSUES

  • Whether the Plaintiffs’ “VERIZON” trademarks qualify as well-known trademarks under Section 2(1) (zg) and Section 11(6) of the Trade Marks Act, 1999?
  • Whether the Plaintiffs’ “VERIZON” trademarks qualify as well-known trademarks under Section 2(1) (zg) and Section 11(6) of the Trade Marks Act, 1999?

LEGAL PROVISIONS

Section 2(1) (zg) of the Trade Marks Act, 1999:

This section defines a well-known trademark as a mark that has become widely known to the relevant section of the public. This section is relevant in determining the reputation and recognition of the ‘VERIZON’ trademark in India.

Section 11(6) of the Trade Marks Act, 1999:

 It lists the factors that must be considered to decide whether a mark is well-known. These include knowledge of the trademark in relevant public sectors, the duration and geographical area of use, the extent of promotion, and the registration status of the trademark in various jurisdictions.

Section 29(4) of the Trade Marks Act, 1999:

This section deals with the infringement of trademarks that are well-known in India, regardless of whether the infringing mark is used for goods or services not similar to those for which the trademark is registered. Are identical with or similar to the registered trademark. Have no due cause. Take unfair advantage of or are detrimental to the distinctive character or repute of the registered trademark.

Order VIII Rule 10 of the Code of Civil Procedure, 1908:

Procedure when a Defendant Fails to File Written Statement: This provision allows the court to pronounce judgment against a defendant who fails to file a written statement within the prescribed time, allowing for ex-parte decisions when defendants do not respond to summons.

Order XIII-A of the Code of Civil Procedure, 1908:

This order permits courts to pass summary judgments without requiring a full trial if it finds that the defendant has no real prospect of defending the claim. This can expedite the resolution of cases with clear-cut issues.

Rule 27 of the Delhi High Court Intellectual Property Rights Division Rules, 2022:

Ex-Parte Proceedings and Remedies: This rule guides the court on handling intellectual property cases, including granting injunctions and other remedies, especially when proceedings are ex-parte due to the absence of the defendants.

CONTENTIONS OF THE APPELLANT

Ms. Vaishali Mittal, counsel for Plaintiffs, presses for an ex-parte summary decree in terms of Order VIII Rule 10 read with Order XIII-A of the Code of Civil Procedure, 1908 (CPC). In light of the above, the Court has proceeded to adjudicate the present matter by assessing the Plaintiffs’ case for infringement under Section 29(4) of the Act on the basis of the pleadings and documents on record. Plaintiffs have, through documents, established their ownership over the VERIZON Trademarks, which have been registered under various classes and such registrations continue to be valid and subsisting. Moreover, Ms. Mittal has pointed out that during the course of the present proceedings, a coordinate Bench of this Court, in Verizon Trademark Services LLC & Ors. and Vikash Kumar1, has held the mark ‘VERIZON’ to be a well-known trade mark within the meaning of Section 2(1) (zg) read with Section 11(6) of the Act. Considering the above, and given their significant revenue and marketing expenditure as noted above, Plaintiffs have established their substantial goodwill and reputation in the VERIZON Trademarks. Defendants do not have any registration in respect of the Impugned Mark. In fact, their trademark application No. 4300781, against which opposition was filed by the Plaintiffs, has since been abandoned, and is reflected as such on the Trademark Registry website. Further, Defendants have not received any authorization from the Plaintiffs for their adoption of the Impugned Mark to qualify as ‘permitted use’ in the course of trade. The Defendants’ trademark application seeks registration for ‘VRIZON’ under Class 21, which encompasses household and kitchenware items — a category distinctly separates from the Plaintiffs’ array of goods and services which primarily include communications, information technology, and security solutions. Moreover, the Defendants filed their application in the year 2019 on a ‘Proposed to be Used’ basis. Contrastingly, the Plaintiffs have shown that they have extensively and continuously utilized the VERIZON Trademarks since their inception in the year 2000, thereby affirming their status as the prior user of the mark. Plaintiffs have thus unequivocally established through their pleadings and documentary evidence that the present case meets all the criteria for infringement as outlined in Section 29(4) of the Act The “Identity or Similarity” criterion is conclusively satisfied, owing to the phonetic and visual similarities between Defendants’ Impugned Mark “VRIZON” and the Plaintiffs’ VERIZON Trademarks. The Defendants’ deployment of the Impugned Mark in course of trade, specifically targeting household and kitchenware under Class 21, substantiates the “Use of the Mark” requirement. This application distinctly diverges from the Plaintiffs’ focus on telecommunications and IT services, thus fulfilling the “Goods or Services Not Similar” criterion. 12.3. Moreover, the Defendants’ choice of the ‘VRIZON’ mark, devoid of any justifiable cause shown to the Court, is clearly an attempt to capitalize on the Plaintiffs’ well-established mark and take unfair advantage of the same.

CONTENTIONS OF THE RESPONDENTS

No Appearance Defendants did not appear or file a written statement despite being served with summons, leading to ex-parte proceedings. Trademark Abandonment The defendants’ application for the ‘VRIZON’ trademark was abandoned and listed as such on the Trademark Registry website.

COURT’S ANALYSIS AND JUDGEMENT

In view of the striking similarity between the competing marks, the Defendants’ use of ‘VRIZON’ is bound to mislead the public, thereby diluting the distinctive character and reputation of the Plaintiffs’ registered VERIZON Trademarks. Thus, Defendants’ adoption and use of ‘VRIZON’ also meets the “Unfair Advantage or Detriment” criterion. Plaintiffs have also thoroughly substantiated the reputation of the VERIZON Trademarks in India through their annual reports evidencing revenue generated and promotional expenses. Further, this Court has also affirmed the well-known status of the ‘VERIZON’ mark, reinforcing its significance and protection under the law. In light of the above, the Defendants’ intended use of the Impugned Mark ‘VRIZON’ for products unrelated to those associated with the VERIZON Trademarks renders them liable for infringement claims under Section 29(4) of the Act. Thus, the instant suit is liable to be decreed in favour of the Plaintiffs as per Order VIII Rule 10 read with Order XIII-A of the CPC, as applicable to commercial suits, and Rule 27 of the Delhi High Court Intellectual Property Rights Division Rules, 2022. Although Plaintiffs have also sought damages and legal costs in terms of prayers sought at Paragraphs No. 78 (v) and (vi) of the plaint, the Court does not find any reason to grant the same, in view of the fact that the Defendants’ now abandoned trademark application was filed on a ‘Proposed to be Used’ basis, and no evidence of actual use of the Impugned Mark has been placed on record other than a few screenshots of listings on third party e-commerce websites. The prayer for declaration of the VERIZON Trademarks as ‘well-known’ marks is also not being considered by the Court in the present case, given that an ex-parte decree is being passed with no contest by the Defendants. As regards the remaining prayers, Ms. Mittal states that the same are not being pressed in the present proceedings. Accordingly, a decree of permanent injunction is granted in favour of the Plaintiffs and against the Defendants in terms of the prayer sought at Paragraph No. 78(i) of the plaint. The present suit, along with pending applications, is disposed of.

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Judgement Reviewed by – HARIRAGHAVA JP

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Dishonored Cheques Case: Delhi HC Upholds Legal Precedent with Definitive Judicial Review

Blog, Delhi High Court , , ,

Case title:- Mrs. Santosh Rani Dhariwal vs. State (Govt. of NCT of Delhi) and Anr.

Case No. :- CRL.M.C. 6017 of 2023

Dated on:- March 28, 2024

Qoram:- Hon’ble Mr. Justice Manoj Kumar Ohri

FACTS OF THE CASE

Mrs. Santosh Rani Dhariwal’s involvement in a legal dispute stems from a loan her husband, Mr. Sandeep Singh Deswal, secured from M/s Sachdeva Land and Finance Pvt. Ltd., an NBFC. Mr. Deswal entered a loan agreement on 07.09.2015, seeking Rs. 1 crore for business purposes, with the petitioner also signing a Term Sheet and executing a surety bond on the same date. To secure the loan, the petitioner provided original property documents as collateral. Following her husband’s default, he issued a cheque for Rs. 60 lacs on 02.06.2018, which bounced due to insufficient funds. Despite a legal demand notice, repayment was not made, leading to a case under Section 138 NI Act. Subsequently, the petitioner issued a Rs. 25 lacs cheque from her account, which also bounced, resulting in a criminal complaint against her under the same Act. This sequence of events led to a summoning order from the Metropolitan Magistrate, Rohini Courts, Delhi, dated 18.09.2018.

 ISSUES

  • Whether Mrs. Santosh Rani Dhariwal can be held liable under Section 138 of the NI Act for a cheque issued as a guarantor for her husband’s loan.
  • Whether proceedings can continue against the petitioner without implicating her husband, the principal borrower, since she was only a guarantor.
  • Whether the presumption that a cheque was issued for discharging a debt or liability applies to the petitioner and if it can only be rebutted with evidence during a trial.

LEGAL PROVISIONS 

Section 138 of the Negotiable Instruments Act, 1881 (NI Act):

  • This section deals with the dishonour of cheques for insufficiency of funds or if it exceeds the amount arranged to be paid from that account. It specifies that such dishonour constitutes an offence, provided certain conditions are met:
    • The cheque is presented to the bank within six months from the date on which it is drawn or within its validity period, whichever is earlier.
    • The payee or holder in due course of the cheque gives a written notice to the drawer within 30 days of receiving information from the bank about the dishonour.
    • The drawer fails to make the payment of the cheque amount to the payee or holder in due course within 15 days of receiving the notice.

Section 139 of the Negotiable Instruments Act, 1881:

  • This section provides a presumption in favour of the holder that the cheque was issued for the discharge of any debt or other liability. It states:
    • “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.”

Section 482 of the Criminal Procedure Code (Cr.P.C.):

  • This section grants inherent powers to the High Court to make such orders as may be necessary to give effect to any order under Cr.P.C., to prevent abuse of the process of any court, or to secure the ends of justice. This provision is often invoked to quash criminal proceedings where the allegations do not disclose a prima facie case or are otherwise frivolous.

CONTENTIONS OF THE APPELLANT

The appellant contended that the cheque she issued was not towards the discharge of any legal liability but was issued merely as a surety/security in her capacity as a guarantor for the loan taken by her husband, Mr. Sandeep Singh Deswal. She argued that issuing a cheque as security does not attract liability under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The appellant argued that the loan was taken by her husband in the name of his sole proprietorship firm, and she only stood as a guarantor. Therefore, legal proceedings under Section 138 NI Act should not proceed against her without also implicating her husband, the principal borrower. She asserted that her liability as a guarantor is secondary and contingent upon the default of the principal borrower. The appellant submitted that the presumption under Section 139 of the NI Act, which assumes that a cheque is issued for the discharge of any debt or other liability, should not apply in her case. She contended that this presumption can be rebutted by demonstrating that the cheque was issued as security and not for the payment of any debt. She argued that this rebuttal should be considered without necessitating a trial, as the cheque was not issued for any immediate legal obligation. In support of her contentions, the appellant relied on various judicial precedents, including: Pooja Ravinder Devidasani v. State of Maharashtra & Anr., which discusses the limitations of a guarantor’s liability under Section 138 NI Act. Dilip Hariramani v. Bank of Baroda, reinforcing the view that a guarantor cannot be held liable under Section 138 NI Act without clear evidence of involvement in the company’s day-to-day affairs. She emphasised that as a guarantor, her liability should not automatically translate to criminal liability under Section 138 NI Act unless there are specific allegations and evidence proving her active involvement in the transactions leading to the issuance of the cheque. The appellant also raised procedural objections, arguing that the proceedings were flawed as they did not properly account for her role as a guarantor. She contended that the complaint and the resulting summoning order did not adequately differentiate between the liabilities of the principal borrower and the guarantor, leading to an improper application of the law.

CONTENTIONS OF THE RESPONDENT

The respondent argued that Mrs. Santosh Rani Dhariwal is liable under Section 138 of the NI Act for the dishonour of the cheque she issued as a guarantor for her husband’s loan. They maintained that even though the cheque was issued as security, it still constitutes a valid instrument for discharging a liability under the NI Act. The respondent contended that the term ‘other liability’ under Section 138 NI Act includes the liabilities of a guarantor. They referenced the Supreme Court’s decision in ICDS Ltd. v. Beena Shabeer and Anr., which clarifies that a guarantor can be held liable for a dishonoured cheque issued in relation to the guaranteed debt. The respondent emphasised that there is a legal presumption under Section 139 NI Act that the cheque was issued for the discharge of a debt or liability. This presumption applies to the petitioner and can only be rebutted with evidence during a trial, not at the preliminary stage. The respondent asserted that the complaint and legal notice clearly stated that the petitioner issued the cheque to discharge her husband’s loan liability. They argued that the petitioner admitted the cheque’s issuance and dishonour, as well as the receipt of the legal notice, fulfilling the necessary conditions for action under Section 138 NI Act. The respondent argued that legal proceedings under Section 138 NI Act can proceed against the petitioner independently of her husband, the principal borrower. They noted that the petitioner issued a separate cheque from her personal account, creating an independent cause of action. The respondent cited precedents such as Four Seasons Energy Ventures Pvt. Ltd. & Ors. v. State of NCT of Delhi & Anr., supporting the view that a guarantor can be prosecuted under Section 138 NI Act for issuing a cheque in discharge of a guaranteed debt. The respondent highlighted that the petitioner did not dispute key facts such as the loan, her role as a guarantor, the issuance and dishonour of the cheque, and the receipt of the legal demand notice. These admissions, they argued, satisfy the conditions for an offence under Section 138 NI Act.

COURT’S ANALYSIS AND JUDGEMENT

The court meticulously examined the relevant legal provisions, specifically Sections 138 and 139 of the Negotiable Instruments Act, 1881 (NI Act). It highlighted that Section 138 imposes liability for dishonoring a cheque due to insufficient funds, while Section 139 establishes a legal presumption regarding the purpose of issuing the cheque. Additionally, the court considered precedents such as ICDS Ltd. v. Beena Shabeer and Anr. to interpret the term ‘other liability’ and its applicability to guarantors. Delving into the nature of a guarantor’s liability under the NI Act, the court acknowledged the petitioner’s argument that she acted solely as a guarantor, issuing the cheque as security for her husband’s loan. However, the court emphasized that the NI Act explicitly encompasses the liability of guarantors within the scope of ‘other liability’ under Section 138, thereby rejecting the petitioner’s contention.

Furthermore, the court affirmed the applicability of the legal presumption under Section 139 NI Act to the petitioner, reasoning that this presumption stands unless rebutted with evidence. Notably, the court underscored that the examination of the petitioner’s contentions regarding the cheque’s purpose must occur during trial, where evidence can be adequately assessed. Taking into account the petitioner’s admissions regarding the issuance and dishonor of the cheque, as well as the receipt of the legal demand notice, the court concluded that these admissions, coupled with the legal notice specifying the petitioner’s liability, fulfilled the basic requirements for proceeding under Section 138 NI Act.

Addressing the petitioner’s argument concerning the necessity of involving her husband, the principal borrower, the court clarified that legal proceedings against a guarantor can proceed independently of the principal borrower. Highlighting that the petitioner issued the cheque from her individual account, the court emphasized the creation of a distinct cause of action under the NI Act. Ultimately, after carefully balancing the legal provisions, precedents, and factual circumstances, the court upheld the lower court’s decision, dismissing the petitioner’s plea to set aside the summoning order. It emphasized that detailed appreciation of evidence and rebuttal of presumptions should occur during trial, reinforcing the continuation of legal proceedings against the petitioner under Section 138 NI Act.

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Judgement Reviewed by – Shruti Gattani

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