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Delhi High Court Upholds Dishonoured Cheque Conviction : Cited Lack of Merit in the Contentions of the Appellant

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Case Title – Rajesh Kumar Jain Vs. J.C. Trading

Case Number – CRL. REV. P. 222/2024

Dated on – 14th May, 2024

Quorum – Justice Anoop Kumar Mendiratta

FACTS OF THE CASE
In the case of Rajesh Kumar Jain Vs. J.C. Trading, the Respondent J.C. Trading supplied “paper and board” to Rajesh Kumar, the Appellant in the case, via a bill dated 12th of August, 2014 for Rs. 5,26,728/-. The Appellant issued a cheque dated 9th of September, 2014 for Rs. 5,26,785/- to J.C. Trading in discharge of the liability for the goods supplied. The same cheque was dishonoured upon the presentation due to the “insufficient funds” as indicated by the bank return memo dated 10th of September, 2014. The Respondent, sent a legal notice dated 7th of October, 2014 to the Appellant in the case, demanding the payment. Despite the service of the notice, the Appellant failed to make the payment. Due to the non-payment, the Respondent instituted a complaint under Section 138 of the Negotiable Instruments Act, 1881, dealing with the dishonour of the cheques for the insufficiency of funds or if it exceeds the amount arranged to be paid from that account. On dated 8th of July, 2022, Rajesh Kumar Jain, the Appellant in the case was convicted and further on the 23rd of July, 2022, the Appellant was sentenced to four months of simple imprisonment and a fine of Rs. 8,50,000/-. In default of payment of the fine, he was to undergo an additional two months of simple imprisonment. The entire amount was directed to be paid to the Respondent.

ISSUES
The main issue of the case whirled around whether the cheque dated 9th of September,2014 was issued by the Appellant in discharge of a legally enforceable debt or liability towards the Respondent?
Whether the goods supplied by the Respondent to the Appellant were defective and whether they were returned by the Appellant, thus nullifying any liability under the cheque?
Whether the legal notice dated 7th of August, 2014, sent by the Respondent to the Appellant demanding for the payment, was duly served and whether the non-receipt of the legal notice could be valid reason for the Appellant?
Whether the presumption under Section 139 of the Negotiable Instruments Act, 1881, that the cheque was issued for the discharge of any debt or liability, was effectively rebutted by the Appellant?
Whether the Trial Court and the Appellate Court rightfully acknowledged the evidences and applied the legal principles in convicting the Appellant and upholding the sentence?
Whether the ledger produced by the Respondent, which was maintained in the electronic form, could be relied upon to prove the supply of goods and the existence of the liability?
Whether the contention of the Appellant regarding the cheque being issued as an advance payment and did not discharge of an existing liability holds merit under the circumstances of the case?
Whether there was any error concerning the Procedure or Jurisdiction in the findings and conclusions of the Trial Court and the Appellate Court that would warrant the intervention by the High Court in its revisional jurisdiction?

LEGAL PROVISIONS
Section 138 of the Negotiable Instruments Act, 1881 prescribes the Dishonour of Cheque for insufficiency, etc., of funds in the account
Section 139 of the Negotiable Instruments Act, 1881 prescribes the Presumption in favour of holder
Section 118(a) the Negotiable Instruments Act, 1881 prescribes the Presumption as to negotiable instruments of consideration
Section 251 of the Criminal Procedure Code, 1973 prescribes the Substance of accusation to be stated
Section 313 of the Criminal Procedure Code, 1973 prescribes the Power to examine the accused
Section 397 of the Criminal Procedure Code, 1973 prescribes the Calling for records to exercise powers to revision
Section 401 of the Criminal Procedure Code, 1973 prescribes the Power of High Court for revision
Section 65 of the Indian Evidence Act, 1872 prescribes the Cases in which secondary evidence relating to documents may be given
Section 27 of the General Clauses Act, 1897 prescribes the Meaning of Service by Post

CONTENTIONS OF THE APPELLANT
The Appellant, through their counsel, in the said case contented that the cheque was not issued in discharge of a legally enforceable debt or liability and that the goods supplied by the Respondent turned out to be defective and were returned, thus nullifying any liability.
It was asserted that the material supplied by the Respondent was defective and was returned through a goods return Challan dated 8th of September, 2014 and that there was no outstanding liability necessitating the issuance of the cheque.
Further it was contented that the Appellant acknowledged the cheque bearing his signature but contented that the particulars were filled in by the clerical staff of the firm of the Respondent and that the Appellant did not authorize the same.
The Appellant, asserted that they did not receive the legal notice dated 7th of October, 2014 sent by the Respondent, challenging the presumption of the due service of notice under Section 27 of the General Clauses Act, 1897 and that the presumption under the Section 139 of the Negotiable Instruments Act, 1881, was effectively rebutted by the presentation of a probable defence and that there was no outstanding debt as contented through relying on the testimonies and documentary evidences, inclusive of the goods return challan and the bank letter.
Moreover it was contented that the Respondent failed to furnish adequate the evidences to prove that the goods were not defective or that they were not returned and that was failure to examine the transporter, Mr. Kalim, who allegedly handled the return of goods.
Further the Appellants questioned the reliability of the ledger produced by the Respondent, asserting that it was maintained in the electronic form and not substantiated by other documentary evidences or corroborating testimony and that it was open to him to rely on the evidence led by the complainant to raise a probable defense and that he was not required to prove his defense beyond a reasonable doubt and that the burden or proof for rebutting the presumption under Section 139 of the Negotiable Instruments Act, 1881 was on the preponderance of probabilities.
The Appellants, through their counsel, in the said case relied on various precedents inclusive of the M/s. Indus Airways Pvt. Ltd. & Ors. Vs. M/s. Magnum Aviation Pvt. Ltd. & Anr. To contend that a cheque issued as an advance payment for goods not ultimately supplied or defective does not constitute a legally enforceable debt.

CONTENTIONS OF THE RESPONDENT
The Respondent, through their counsel, in the said case contented that the cheque dated 9th of September, 2014 was issued by the Appellant in discharge of a legally enforceable debt for the supply of goods (paper and board) as per the bill dated 12th August, 2014.
Further it was contented that the goods were duly supplied to and accepted by the Appellant without any immediate complaint about their quality or any defects.
Thus, on the presumption under Section 139 of the Negotiable Instruments Act, 1881, which mandates that the cheque was issued for the discharge of a debt or liability unless proven otherwise by the accused.
It was asserted by the Respondent that there were no credible evidences to prove that the goods were returned and that the goods return challan produced by the appellant was not substantiated by examining the transporter, Mr. Kalim, or any other corroborative evidence and that the legal notice dated 7th of October, was duly sent to the address of the Appellant and service could be presumed under Section 27 of the General Clauses Act, 1897 and that the claim of the Appellant was insufficient to rebut this presumption.
Moreover, it was contended that if the goods were indeed defective and returned, the Appellant should have taken steps to stop the payment of the cheque and that the failure to do so and the subsequent dishonour of the cheque for ‘insufficient funds’ indicated that the debt was acknowledged and that the cheque was issued in good faith.
The Respondent defended the reliability of their ledger, which was maintained in the electronic form, as per standard business practices and that the ledger corroborated the transaction and the outstanding liability and that the inconsistencies in the defense of the Appellant, inclusive of the claim that only ‘board’ was supplied instead of ‘paper and board’ and that in VAT coding, ‘paper and board’ are categorized under one code, and the bill reflected this coding practice.
The Respondent, through their counsel, in the said case contented that the Appellant failed to rebut the presumption under Section 139 of the Negotiable Instruments Act, 1881 and that the defense of the Appellant was not substantiated by credible evidences, and his failure to act prudently undermined his claims.

COURT ANALYSIS AND JUDGMENT
The court in the case of Rajesh Kumar Jain Vs. J.C. Trading, reaffirmed that under Section 139 of the Negotiable Instruments Act, 1881, once the execution cheque is admitted, there is a statutory presumption that the cheque was issued for the discharge of a debt or other liability and that this presumption is rebuttable, and the burden of proof lies on the accused to present a probable defense to rebut this presumption. The court observed that the Appellant failed to provide the sufficient evidence to rebut the presumption that the cheque was issued for a legally enforceable debt and that the defense of the Appellant that the goods were supplied were defective and returned was not supported by any credible evidences, especially, the Appellant did not present the transporter who allegedly returned the goods as a witness, nor did the Appellant provide any documentary evidence of the return. The court stated that the cheque issued by the Appellant was dishonoured due to insufficient balance and that the Appellant did not stop the payment of the cheque, which he could have done if the goods were really defective and returned and that the Appellant, additionally, did not respond to the legal notice sent by the Respondent. The court in this case noted that the ‘goods return challan’ presented by the Appellant lacked verification, and that the transporter involved in this process was not examined in the court. The court, thus, dismissed the criminal revision petition instituted by the Appellant as the court did not find any merits in the contentions of the Appellant and upheld the concurrent findings of the Trial Court and the Appellate Court. The court, in this case, upheld the conviction of the Appellant under Section 138 of the Negotiable Instruments Act, 1881 and the Appellant was directed to undergo the sentence imposed by the Trial Court, inclusive of four months of simple imprisonment, two additional month of simple imprisonment and a fine of Rs. 8,50,000. The court, in this case, directed that a copy of the order be forwarded to the Trial Court and the Superintendent of Jail for information and compliance with the order on the sentence as passed by the Trial Court.

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Judgement Reviewed by – Sruti Sikha Maharana

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“Imposing a penalty greater than the one in force at the time of the commission of the offence has no application”: Supreme Court

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Case title: Pernod Ricard India (P) Ltd. v. The State of Madhya Pradesh & Ors.

Case no.: Civil Appeal Nos. 5062-5099 of 2024 Arising out of SLP (C) Nos. 26571-26608 of 2017

Dated on: 19th April 2024

Quorum: Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar

FACTS OF THE CASE

The appellant is a sub-licensee under the M.P. Excise Act, 1915 for manufacture, import and sale of Foreign Liquor, regulated under the Madhya Pradesh Foreign Liquor Rules, 1996. Sub-licensees importing Foreign Liquor are granted transit permits in which the origin, quality, quantity and point of delivery of the imported liquor are recorded. At the point of destination, the consignment is verified for quality and quantity, and a certificate under Rule 13 is granted. Rule 16 prescribes the permissible limits of loss of liquor in transit due to leakage, evaporation, wastage etc. The purpose and object of this Rule is to prevent illegal diversion of liquor for unlawful sale and also to prevent evasion of excise duty. If the permissible limits of loss of liquor are exceeded, the 1996 Rules prescribe imposition of penalty. Rule 19 providing for penalty that could be imposed during the relevant license period of 2009-2010 was about four times the maximum duty payable on foreign liquor. Facts reveal that no action was initiated during the license year of 2009-2010. On 29.03.2011, Rule 19 was substituted by an amendment.

Despite this amendment, a demand notice dated 22.11.2011 was issued, directing payment of penalty for violations that occurred during the license year of 2009-2010, under the old, more stringent rule. The appellant contested this, arguing that the substituted rule should apply as it was in force when the demand notice was issued.

CONTENTIONS OF THE APPELLANT

Mr. Pratap Venugopal, Ld. Senior Advocate, appearing on behalf of the appellant argued that the effect of substitution is to repeal the existing provision from the statute book in its entirety and to enforce the newly substituted provision. He would further submit that even for incidents which took place when the old Rule was in force, it is the substituted Rule that would be applicable, and therefore, the demand notice dated 22.11.2011 seeking payment of penalties under old Rule is illegal.

In Koteswar Vittal Kamath v. K. Rangappa Baliga & Co., this Court brought out the distinction between supersession of a rule and substitution of a rule, and held that the process of substitution consists of two steps – first, the old rule is repealed, and next, a new rule is brought into existence in its place.

In Zile Singh v. State of Haryana, Court referred to the legislative practice of an amendment by substitution and held that substitution would have the effect of amending the operation of law during the period in which it was in force.

CONTENTIONS OF THE RESPONDENTS

The state authorities argued that the penalty should be imposed according to the rule in force during the license year in question, i.e., the old rule that existed when the violation occurred.

Mr. Saurabh Mishra, learned A.A.G. for the State, came up with an attractive argument that the State of M.P. can continue to apply the repealed Rule for the transaction of 2009-2010 by virtue of specific provisions under the Madhya Pradesh General Clauses Act, 1957.

He brought to our notice Section 10 of the Act which is as follows – Effect of Repeal. Where any Madhya Pradesh Act repeals any enactment then, unless a different intention appears, the repeal shall not – (c) affect any right, privilege, obligation or liability, acquired, accrued or incurred under any enactment so repealed;

LEGAL PROVISIONS

The M.P. Excise Act, 1915, Rule 16. Permissible limits of losses – An allowance shall be made for the actual loss of spirit by leakage, evaporation etc., and of bottled foreign liquor by breakage caused by loading, unloading, handling etc. in transit, at the rate mentioned hereinafter. The total quantity of bottled foreign liquor transported or exported shall be the basis for computation of permissible losses.

The M.P. Excise Act, 1915, Rule 19 providing for Penalty that could be imposed during the relevant license period of 2009-2010 was about four times the maximum duty payable on foreign liquor.

licensee shall be liable to pay penalty at a rate exceeding three times but not exceeding four times the maximum duty payable on foreign liquor at that time.

Rule 19 was substituted by an amendment. The relevant portion of substituted provision is as follows: Licensee shall be liable to pay penalty at a rate not exceeding the duty payable on foreign liquor at that time.

ISSUE –

  • Applicability of the relevant rule for imposition of penalty: Whether it is the rule that existed when the violation occurred during the license period of 2009-10 or the rule that was substituted in 2011 when proceedings for penalty were initiated.
  • Whether the substituted rule can be given retrospective effect.
  • Interpretation of statutory provisions regarding repeal and substitution.

COURT’S ANALYSIS AND JUDGEMENT

The Supreme Court accepted the appellant’s contention that the substituted rule should apply to pending proceedings. It determined that the purpose of the amendment was to achieve a proper balance between the offense and penalty. Therefore, the Court directed that the substituted rule alone would apply to pending proceedings.

The Court rejected the arguments of both the single judge and the Division Bench of the High Court. It clarified that the substituted penalty only mitigated the severity of the law by reducing the penalty, and therefore, the bar of imposing a penalty greater than the one in force at the time of the offense did not apply. The Court emphasized the importance of a plain and simple understanding of laws and their processes, in line with their purpose and objectives.

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Judgement Reviewed by – Chiraag K A

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