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2012 DIGILAW 452 (RAJ)

Ashok Leyland Finance Ltd. v. State of Rajasthan

2012-02-15

R.S.CHAUHAN

body2012
Hon'ble CHAUHAN, J.—The appellant, Ashok Leyland Finance Limited, is aggrieved by the judgment dated 10.8.2011 passed by Special Judicial Magistrate, N.I. Act Cases, No.2, Udaipur, whereby the learned Magistrate has acquitted Pratap Singh, respondent No.2, of offence under Section 138 of the N.I. Act ('the Act' for short). 2. Briefly, the facts of the case are that the appellant-company, was registered as financial institution to provide loan for buying vehicles. According to it, the accused-respondent took a loan of Rs. 8,60,000/- for buying a vehicle, registered as RJ-27-G-7121. The accused-respondent was required to pay a total amount of Rs. 10,89,630/- in thirty-five installments. However, as the accused-respondent failed to pay the said amount, the vehicle was repossessed by the appellant; subsequently, it was sold in auction. According to the appellant, the accused-respondent had given a cheque, cheque no. 743389 dated 9.2.2006 for amount of Rs. 2,84,521/-. But when the said cheque was submitted for encashment, it was dishonoured. Therefore, the appellant sent a registered notice to the accused-respondent. However, the said notice was returned with the noting that the accused-respondent no longer lives at the address. According to him, the cheque amount was never repaid by the accused-respondent. Therefore, the complaint under Section 138 of the Act. 3. In order to buttress its case, the appellant examined K.Shriniwasan (P.W.1), and submitted nine documents. Although the accused-respondent did not examine any witness, but he did submit four documents. After going through the oral and documentary evidence, vide judgment dated 10.8.2011 the learned Magistrate acquitted the accused-respondent. Hence, this criminal leave to appeal before this Court. 4. Mr. Davendra Mahlana, the learned counsel for the appellant, has vehemently contended that the learned Judge has failed to see the difference between a wind-up of a company, and a merger of the company. Although, Ashok Leyland Finance Limited had merged with the Indusind Bank, as the division of the bank, but the finding given by the learned Magistrate that after its merger in Indusind Bank, it stopped existing as a legal entity, is misplaced. Moreover, the power of attorney was given as far back as in 1998. K. Sriniwasan (PW1) was an authorised person to file the complaint against the accused respondent. Hence, the conclusion drawn by the Magistrate that K. Sriniwasan (PW1) was not a duly authorised person is without any basis. Moreover, the power of attorney was given as far back as in 1998. K. Sriniwasan (PW1) was an authorised person to file the complaint against the accused respondent. Hence, the conclusion drawn by the Magistrate that K. Sriniwasan (PW1) was not a duly authorised person is without any basis. Furthermore, even if the company had not submitted its statement of account, it was obvious from the testimony of K.Sriniwasan (PW1), that the cheque amount was with regard to the discharge of the loan taken by the accused respondent. Lastly, learned Magistrate has failed to invoke the presumption u/S. 139 of the Act against the accused respondent. Hence, the learned Magi-strate has committed grave illegality in acquitting the accused respondent. 5. Heard the learned counsel for the appellant, and perused the impugned judgment. 6. The first contention raised by the learned counsel is highly misplaced. Since it was the case of the appellant itself that the Ashok Leyland Finance Ltd had merged with the Indusind Bank, there was no need for the learned judge to distinguish between windingup of a company, and an amalgamation of a company. Moreover, in the cases of General Radio and Appliances Co. Ltd. vs. M.A. Khader ( (1986) 2 SCC 656 ) and in Saraswati Industrial Syndicate Ltd. vs. CIT, (1990 Supp SCC 675) the Hon’ble Supreme Court has held that “The true effect and character of the amalgamation largely depends on the terms of the scheme of merger. But there cannot be any doubt that when two companies amalgamate and merge into one the transferor company loses its entity as it ceases to have its business. However, their respective rights or liabilities are determined under the scheme of amalgamation but the corporate entity of the transferor company ceases to exist with effect from the date the amalgamation is made effective.” The appellant has not produced any evidence to show the exact scheme of merger to make out a case that it continued to have a separate existence from Indusind Bank even after the merger of the two companies. Therefore, the learned Judge was justified in concluding that the appellant company ceased to exist from the date of merger with the Indusind Bank in 2004. Thus, it did not have the locus standi to file the complaint. 7. Therefore, the learned Judge was justified in concluding that the appellant company ceased to exist from the date of merger with the Indusind Bank in 2004. Thus, it did not have the locus standi to file the complaint. 7. The appellant has also tried to justify its filing of the complaint through K. Sriniwasan (PW1) ostensibly on the ground that he was the power of attorney holder on behalf of S. Nagrajan, a Director of Ashok Leyland Finance Ltd. However, even this argument is meritless. Firstly, it is an admitted fact that S. Nagrajan was a Director of the erstwhile Ashok Leyland Finance Ltd - a company which had merged with Indusind Bank in 2004. Therefore, the appellant company no longer existed after the merger. Secondly, once the appellant company ceased to exist, obviously, any power of attorney given by S. Nagrajan, when the appellant company was in existence, also came to an end. Therefore, the power of attorney could not empower K. Sriniwasn (PW1) beyond the life of the appellant company. Thirdly, at the time of filing of the complaint, S. Nagrajan was not a Director of Indusind Bank. Therefore, he could not have authorized K. Sriniwasan to file a complaint through the power of attorney. Hence, the learned Judge was certainly justified in concluding that the complainant did not have the locus standi to file the complaint. 8. In his testimony K. Sriniwasan (P.W.1) claimed that he was equally authorized by the Indusind Bank to file the complaint. However, he failed to produce any such authorization letter during the course of the trial. Since the appellant had withheld a material document from the perusal of the court, the learned Judge was, indeed, justified in drawing an adverse inference against the appellant. Thus, the learned Judge was justified in dismissing the complaint on the ground that it was presented by a person who did not have the legal competence to do so. 9. As far as the presumptions under Sections 118 and 139 of the Act are concerned, in the case of Kumar Exports v Sharma Carpets ( (2009) 2 SCC 513 ), the Apex Court has elaborately dealt with the concept of presumption, in general, and with the presumptions raised under the relevant provisions of the Act, in particular. 9. As far as the presumptions under Sections 118 and 139 of the Act are concerned, in the case of Kumar Exports v Sharma Carpets ( (2009) 2 SCC 513 ), the Apex Court has elaborately dealt with the concept of presumption, in general, and with the presumptions raised under the relevant provisions of the Act, in particular. It would, indeed, be beneficial to reproduce the relevant excerpts from the said judgment: “Presumptions are devices by use of which the courts are enabled and entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence. Under the Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) “may presume” (rebuttable), (2) “shall presume” (rebuttable), and (3) “conclusive presumptions” (irrebuttable) (sic). The term “presumption” is used to designate an inference, affirmative or disaffirmative (sic) of the existence of a fact, conveniently called the “presumed fact” drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumption literally means “taking as true without examination or proof”. Section 4 of the Evidence Act inter alia defines the words “may presume” and “shall presume” as follows: “4. ‘May presume’.—Whenever it is provided by this Act that the court may presume a fact, it may either regard such fact as proved, unless and until it is disproved, or may call for proof of it: ‘Shall presume’.—Whenever it is directed by this Act that the court shall presume a fact, it shall regard such fact as proved, unless and until it is disproved: In the former case, the court has an option to raise the presumption or not, but in the latter case, the court must necessarily raise the presumption. If in a case the court has an option to raise the presumption and raises the presumption, the distinction between the two categories of presumptions ceases and the fact is presumed, unless and until it is disproved. In order to determine the question whether offence punishable under Sec.138 of the Act is made out against the appellant, it will be necess-ary to examine the scope and ambit of presumptions to be raised as envisaged by the provisions of Secs. 118 and 139 of the Act. In order to determine the question whether offence punishable under Sec.138 of the Act is made out against the appellant, it will be necess-ary to examine the scope and ambit of presumptions to be raised as envisaged by the provisions of Secs. 118 and 139 of the Act. In a suit to enforce a simple contract, the plaintiff has to aver in his pleading that it was made for good consideration and must substantiate it by evid-ence. But to this rule, the negotiable instruments are an exception. In a significant departure from the general rule applicable to contracts, Section 118 of the Act provides certain presumptions to be raised. This section lays down some special rules of evidence relating to presumptions. The reason for these presumptions is that, negotiable instrument passes from hand to hand on endorsement and it would make trading very difficult and negotiability of the instrument impossible, unless certain presumptions are made. The presumption, therefore, is a matter of principle to facilitate negotiability as well as trade. Section 118 of the Act provides presumptions to be raised until the contrary is proved (i) as to consideration, (ii) as to date of instrument, (iii) as to time of acceptance, (iv) as to time of transfer, (v) as to order of indorsements, (vi) as to appropriate stamp, and (vii) as to holder being a holder in due course. Section 139 of the Act provides that 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 118 of the Act, inter alia, directs that it shall be presumed, until the contrary is proved, that every negotiable instrument was made or drawn for consideration. Section 139 of the Act stipulates that unless the contrary is proved, it shall be presumed, that the holder of the cheque received the cheque, for the discharge of whole or part of any debt or liability. Section 139 of the Act stipulates that unless the contrary is proved, it shall be presumed, that the holder of the cheque received the cheque, for the discharge of whole or part of any debt or liability. Applying the definition of the word “proved” in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists. The use of the phrase “until the contrary is proved” in Section 118 of the Act and use of the words “unless the contrary is proved” in Section 139 of the Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act. The accused has also an option to prove the non-existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Secs. 118 and 139 of the Act will not again come to the complainant's rescue. 10. In the case of Kundan Lal Rallaram vs. Custodian, Evacuee Property, Bombay ( AIR 1961 SC 1316 ) the Apex Court dealt with a case of Negotiable Instrument Act, 1881. The Hon’ble Supreme Court opined that if the material or the relevant evidence is withheld by a party, then the presumption raised against the opposite party stands rebutted. Similar view has also been expressed in the case of Kumar Exports (supra). 11. In the present case, K. Sriniwasan (P.W.1) claimed that the appellant company had the loan papers and the account statements in its possession. He further claimed that the cheque in dispute was for discharge of the loan amount. However, the appellant miserably failed to produce the loan agreement and the account statements. Since the appellant failed to produce the material and essential documentary evidence, the presumption against the respondent stands rebutted. 12. Lastly, the learned Judge has given cogent and convincing reasons for acquitting the respondent accused. Therefore, this court does not find the judgment either as perverse or as illegal. Thus, there is no merit in this criminal leave to appeal; it is, hereby, dismissed.