Dated: - 12-03-2025
LEGAL OPINION
To,
Sh. Tarun Kaushik
R/o B-116, Piyush Heights
Sector-89, Faridabad, Haryana
Subject: Legal Opinion on Ongoing Cases Under Section 138 of the
Negotiable Instruments Act, 1881
Dear Mr. Tarun Kaushik,
I am providing this legal opinion concerning the pending cases
against you under Section 138 of the Negotiable Instruments Act, 1881
("NI Act"). After reviewing the facts of the case and relevant legal
provisions, I present the following analysis and potential defences:
1. Brief Summary of the Case:
Details of the dishonored cheque(s) (bearing cheque no.
307110, Rs. 18,50,000/-, dated 30/12/2020, drawn on Vijaya Bank,
Old Faridabad Branch) presented to Bank of India, Branch
Nachauli, Faridabad for encashment.
Complainant’s allegations.
The facts culled out from the complaint are that as per the request
and demand of the notices invoice the complainant was providing
the goods i.e. corrugated paper/roll etc from time to time to the
accused on credit basis and had supplied the above said goods by
tax invoices/bills which are as follows:
Bill No. Dated Amount
755 12.03.2016 Rs. 76,218.96/-
759 16.03.2016 Rs. 41,654.29/-
760 16.03.2016 Rs. 53,498.65/-
762 17.03.2016 Rs. 34,258.06/-
792 24.06.2016 Rs. 26,446.18/-
824 9.9.2016 Rs. 67,125.36/-
825 12.09.2016 Rs. 61,356.61/-
846 13.10.2016 Rs. 1,16,563.05/-
849 14.10.2016 Rs. 48,558.51/-
884 2.12.2016 Rs. 1,20,105.60/-
895 23.12.2016 Rs. 20,958.48/-
898 30.12.2016 Rs. 88,294.32/-
902 4.1.2017 Rs. 2,28,153.58/-
907 17.01.2017 Rs. 41,690.83/-
908 17.1.2017 Rs. 37,756.33/-
915 30.01.2017 Rs. 43,310.10/-
925 14.02.2017 Rs. 22,185.64/-
932 28.2.2017 Rs. 98,971.83/-
939 10.3.2017 Rs. 1,61,311/-
944 17.3.2017 Rs. 26,606.66/-
948 25.3.2017 Rs. 28,859.55/-
950 25.3.2017 Rs. 29,869.95/-
963 07.4.2017 Rs. 30, 049.92
971 14.04.2017 Rs. 46,599.43/-
1008 24.06.2017 Rs. 2,03,048.30/-
1009 26.06.2017 Rs. 1,29,882.71/-
1010 29.06.2017 Rs. 81,764.51/-
Total Amount Rs. 18,63,485.42/-
As per the above-mentioned invoices the complainant had
supplied the good w.r.t to the said invoices and which were duly
received by the accused and the complainant was also maintaining
the ledger books of account. That the amount of Rs. 18,
63,485.42/- is pending against the accused. However, some little
amount was paid, meanwhile by the accused had retained a huge
amount of the complainant.
Present status of the case.
As per the information received from the accused that the stage of
proceedings is for the final arguments. Moreover, it has been
transpired from the availability of material record that all the
necessary stage of proceedings is completed i.e. the preliminary
evidence, statement of accused u/s 263(g) of the Criminal
Procedure Code, 1973, prosecution evidence and defence
evidence as well.
2. Legal Framework:
Section 138 of the NI Act criminalizes the dishonor of a cheque due to
insufficient funds or other reasons, provided that:
1. The cheque was presented within its validity period.
2. A legal notice demanding payment was issued within 30 days of
dishonor.
3. The accused failed to make payment within 15 days from the
receipt of the notice.
All the above-mentioned legal framework and compliances were
done within the statutory period as mandated by the NI Act.
3. Potential Defences Available:
Based on the facts and circumstances, you may consider the following
defences:
a) Dispute on the Existence of Legally Enforceable Debt
I. The complainant must prove that the cheque was issued
towards a legally enforceable debt or liability. As this is
the statutory requirement that only on the legally enforceable
debt or liability the cheques can be issued. As the
complainant and accused were having the business
relationship doing business with each other since long. The
accused gave a blank cheque as a security to the
complainant but the complainant misused the cheque by
mentioning higher amount without taking accused consent
and without intimating about the same that the cheque is
being presented in the bank for honour. Further the
complainant has mentioned the higher amount without
calculation of total amount as per the ledger account. The
complainant did not mention in his testimony during the
cross examination the legally enforceable debt/liability which
is necessary requirement to prove the dishonour of cheque.
Furthermore the complainant has raised the frivolous
invoices in the name of accused as theses invoices has
never been accepted by the accused company.
II. Further the complainant has exhibited its documents from C1
to C7 wherein Ex. C1 is the Original Cheque, Ex. C2 is the
original return memo, Ex. C3 is the legal notice dated
11.01.2021, Ex. C4, C5, C6 is the postal receipts and Ex. C7
is the ledger of the accused company maintained by the
complainant. After considering the above-mentioned
exhibited documents of the complainant, he has failed to
exhibit the affidavit under section 65 B of the Indian Evidence
Act and the invoices in original as the invoices contains the
relevant and material information about the goods sold,
amount, name of the company to which accounts were
delivered, and at the time of delivery who has accepted and
signed the invoice. Acceptable of delivery of goods is must in
fulfilling the business dealing and mandated by the Sales of
Goods Act. These kinds of information are not mentioned
in the ledger sheet and the ledger sheet can be forged
and manipulated as the ledger sheets are only an entry
to maintain the records. But the invoice/bills contained
relevant data and once they are generated are subject to the
entries in the appropriate Government authorities and can be
verified. Further the ledger sheet of the complainant does not
depict the invoice no./voucher no. against the goods sold.
This reflects that the conduct of the complainant has
malafide intention to grab the hard earn money of the
accused and to prosecute and implicate him falsely under
section 138 of the NI Act.
III. The cheque was issued as security, but the complainant
fraudulently filled the higher amount just to prosecute the
accused without any basis. Further it is pertinent to mention
that the accused is running 3 companies which are as
follows:
1. PNC Packaging
2. Maruti Packaging Solution
3. Jai Packaging
The accused is the signatory authority in all these three companies
and maintains all the relevant records of the company in its
custody. The complainant was dealing with the accused in all
these three companies so there is no requirement of authority
letter to be produced in court for making any statement or
producing any document. Rather the accused wants to get the
payment due from the complainant on behalf of Maruti Packaging
Solution. This can be a strong defence to get the complaint
dismiss.
To get the better understanding of the accounts, payment
paid/payment due the comparison of all three firms is as
follows:
PNC Packaging Purchase Material Payment Paid to Balance (A) due
dealing with Jai shri Rs. 17,20,342.80/- Jai Shri ram towards Jai Shri Ram
Ram Packaging Packaging packaging from PNC
1-Feb-2016 to 30 Rs. 3,44,939.00/- Packaging
Nov 2017 Rs. 13,75,403.80/-
Maruti packaging Sale Material Payment Received Balance (B) due BALANCE (A-B) = AB
Solutions dealing Rs. 1,21,83,531.00/- from Jai Shri Ram towards Maruti Rs. 1,08,08127.20/-
with jai Shri ram packaging packaging solutions
1-sep-2017 to 31- NIL from Jai Shri ram
March-2018 Packaging
Rs. 1,21,83,531.00/-
Jai Packaging Purchase Material Payment Paid to Balance Balance (AB-C)
dealing with Shri Rs. 1,14,31,547.88/- Jai Shri Ram Rs. 1,04,22,943.88/- Rs. 3,85,183.32/-
Ram Packaging Packaging
1-Oct-2017 to 30 Rs. 10,08,604.00/-
July 2021
Case Law:
Basalingappa v. Mudibasappa (2019) 5 SCC 418 – The Supreme
Court held that the presumption under Section 139 is rebuttable,
and the accused can establish that there was no enforceable debt
or liability.
b) Testimony of the complainant
There are various anomalies in the testimony of the complainant
as the complainant on one pretext to another keep on telling lie
and making false and frivolous assertions against the accused.
The testimony of the complainant is factually incorrect which
leads to dismissal of the complaint. The defence which can be
culled out from the testimony and can lead to contradiction are:
i. The complainant in his testimony himself has agreed that
he do not know English language but can read it only. It is
advised that the accused can take defence on it that “Who
has filled the details of cheque in English if he doesn’t
know English language.”
ii. The complainants in his testimony himself has agreed that
he has 5 years of business relationship with the accused
and from 2016 to 2021 both were in business dealings.
Further the complainant has admitted that he has supplied
the goods till 2017 in this firm i.e. “PNC Packaging” and
has supplied the goods total amounting to Rs. 21, 63,000/-
till 2017. It is advised that the accused can take defence on
it “if the business dealing was terminated in the year 2017
then why did he present the cheque for honour in the year
2020. This shows that the complainant has mala fide
intention. If somebody is in business, one cannot leave his
money for more than 3 years. Between 2017 and the
cheque presented date i.e.30.12.2020 there was no
communication exchanges between the complainant and
accused regarding the legally enforceable debt of Rs. 18,
50,000/- because the accused have three companies and
the complainant was dealing with the accused till 2021 and
the payments were paid and received by the accused and
the complainant (respectively) from three other companies
of accused.”
iii. Further the complainant has himself admitted that the
payment terms plan after delivery of goods is 60 to 90 days.
Further more he has admitted that he does not take cheque
as security. If he does not take cheque as security then why
did he supply goods to the accused without any security?
And further that why the complainant presented the
cheque after 3 years for encashment. This is the grave
question to be decided by the Hon’ble Court.
iv. The most significant point on the disputed cheque is that
the cheque bear the name of the bank is Vijaya Bank and
the Vijaya bank was merged in Bank of Baroda on 1st April
2019. Consequently, the entire cheque book after the
merger was changed and the bank directed its customer to
change the cheque book as the same would not be
applicable after 1st July 2021. For the time being if we think
that the accused had issued the cheque bearing dated
30.12.2020 and the dealing of the complainant with the
accused was terminated in the year 2017 then why would
the accused issue the cheque of Vijaya Bank in the year
2020. This indicates that the cheque was given as a
security not for the legally enforceable debt. The same has
been fraudulently misused by the complainant. The accused
has each and every record to prove every transaction as
the same has been transferred through bank only.
v. Further the complainant in his testimony recorded the false
statement that the other details were filled by the employee
of the accused company. It is advised that the accused can
take defence “the above statement is unacceptable and
beyond thinking and factually incorrect as the signatory
authority who has signed the cheque can fill the details also
and further as per the ledger the complainant it depicts
anomalies as the amount which has been transferred to the
complainant bank account does not reflect as an entry in
the ledger sheet. Ledger sheet indicates that the amount is
pending tune of Rs. 18,63,485.42/- and the complainant has
filled the amount in cheque tune of Rs. 18,50,000/-.
Whereby as per the records maintained by the accused in
its company it emerged that Rs. 3,85,183.32/- is pending for
payment towards the complainant himself.”
vi. Further that the complainant has himself submitted in his
cross examination that he did not know as to when the last
payment was done by the accused and despite this the
complainant was sending the material and goods to the
accused on regular basis as the complainant was aware
about the other three companies of accused and was
dealing with the accused in those other companies. It is
advised that the accused can take defence against the
“complainant has made a false statement that he has not
dealt with the accused in other three companies but he was
full acquainted with the other companies of accused as he
was dealing therein.” Further it is advised that to take the
defence that the complainant has dealt with the accused till
30 July 2021 from one of the other companies of the
accused i.e. (Jai Packaging). Where in the accused
purchased the material from the complainant tune of Rs.
1,14,31,547.88 and payment of Rs. 10,08,604 was paid to
the complainant and the balance of Rs. 1,04,22,943 was
due towards the accused but the accused had sold the
material to complainant company from his one of the other
companies (Maruti Packaging solutions) tune of Rs.
1,21,83,531.00/- the no payment was done by the
complainant so the final balance of Rs 3,85,183.32/- is
pending towards the complainant.
c) Dispute regarding Ledger exhibited by the complainant
The ledger which has been exhibited as Ex. C7 by the
complainant in his preliminary evidence is totally vague,
vexatious, forged and manipulated as the entries in the
ledger can be altered at any instance by the record keeper.
It is advised that the accused can tale defence of “Ledger
alone cannot be the sole basis for determination of the legal
enforceability debt/discharge as the same has to be
substantiated by some concrete or substantial proof such as
invoices/bills, receiving on bills, GST return, sale tax
return (prior to implementation of GST before 1st July
2017) or bank statement, balance sheet where the debt
is acknowledged in income tax return etc.”
d) Material Alteration, defect, or Forgery
It is advised that there is material defect on the cheque, as the
particulars of date, amount in figures and words all were filled by
the complainant himself without the consent of the accused and it
can be a ground for dismissal reason being the cheque was for the
security not for any legally enforceable debt/liability.
Case Law:
Kumar Exports v. Sharma Carpets (2009) 2 SCC 513 – The
Supreme Court held that once the accused rebuts the presumption
of legal liability, the burden shifts to the complainant to prove the
existence of the debt.
c) Cheque Issued Under Coercion or Misuse
If you can prove that the cheque was obtained through fraud,
coercion, or misuse of a signed blank cheque, it may be a valid
defence.
Case Law:
M.S. Narayana Menon v. State of Kerala (2006) 6 SCC 39 – The
Supreme Court ruled that the burden of proof on the accused is
not as stringent as on the complainant and can be discharged by
showing probable doubt.
d) Non-Compliance with Legal Notice Requirement
If the complainant failed to send a proper demand notice or served
it at an incorrect address, the complaint may be dismissed.
Case Law:
K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 –
The Supreme Court emphasized that proper service of notice is a
mandatory requirement for invoking Section 138.
4. Suggested Legal Strategy for arguments:
Gather documentary evidence proving no enforceable debt
existed.
Challenge the ledger of the complainant which has been exhibited
as C-7.
Request the complainant to produce bank records, invoices/bills,
ITR’s, Balance sheet and ledger entries supporting their claim.
Contradict the version of the complainant effectively to highlight
contradictions.
Prove your bank transactions, payments, Sale Tax return/GST
Return etc. which is in favour of your defence.
Challenge the handwriting in disputed cheque.
Support your arguments with the help of case laws.
5. Conclusion & Way Forward:
Based on the above analysis, I recommend the above legal strategy to
challenge the case at the stage of arguments. Additionally, if required,
we may explore the possibility of settlement discussions to resolve the
matter amicably.
Please review this opinion and let me know how you wish to proceed. I
remain available for further discussion and clarification.
Yours Sincerely,
Pooja
Advocate
Delhi High Court
