The Commissioner of Income Tax (Exemptions) vs. Sri Sivani Educational Society

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/CRIMINAL APPEAL NO. 484 of 2016

FOR APPROVAL AND SIGNATURE:

HONOURABLE MS. JUSTICE NISHA M. THAKORE

========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== VALLABHBHAI RAMJIBHAI KHAGAD Versus STATE OF GUJARAT & 1 other(s) ========================================================== Appearance: MR ADIL R MIRZA(2488) for the Appellant(s) No. 1 MR MANAV MEHTA ADDL. PUBLIC PROSECUTOR for the Opponent(s)/Respondent(s) No. 1 RICHA SHAH(7541) for the Opponent(s)/Respondent(s) No. 2 ========================================================== CORAM:HONOURABLE MS. JUSTICE NISHA M. THAKORE

Date : 22/04/2022

ORAL JUDGMENT 1. This is an appeal directed against the judgment and order dated 07.12.2015 passed by the 2nd Additional Chief Judicial Magistrate, Valsad, in Criminal Case No.3262 of 2013. By the aforesaid judgment and order, the Trial Court has acquitted the Page 1 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 respondent No.2 herein-original accused for the offence punishable under Section 138 of the Negotiable Instrument Act, 1881(for short ‘the Act’). Being aggrieved and dissatisfied with the said judgment and order of acquittal, the appellant herein-original complainant is here before this Court by way of present appeal under Section 378(4) of Code of Criminal Procedure. 2. The gist of the complaint is that: 2.1 The complainant and the accused are known to eachother and way back in the month of April, 2013, the respondent No.2-original accused had approached complainant seeking financial help for running his business. He had requested for an amount of Rs.6.50 lac. It is the case of the complainant that on 18.04.2013, an amount of Rs.6.50 lac was handed over to the original accused on a condition that he would return such amount. On 08.08.2013, one cheque bearing No.605101 of Axis Bank, Valsad Branch, signed by the original accused, was handed over to the complainant for an amount of Rs.6.50 lac. 2.2 It is the case of the complainant that on the same day i.e. Page 2 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 08.08.2013, he had presented the said cheque, signed by the original accused, before the State Bank of India, Valsad Branch. However, on 10.08.2013, it was returned by the Bank along with the memo wherein the reason cited was “insufficient funds”. Thus, in absence of realisation of the outstanding dues, the cause of action arose for the original complainant to proceed against the respondent No.2-original accused. This led to the issuance of statutory legal Notice dated 22.08.2013 prescribed under the Act by the original complainant. 2.3 It is the case of the complainant that such legal notice dated 22.08.2013 was issued on the known address of the accused. However, the said legal Notice was returned back by the postal department on 28.08.2013 with an endorsement on the envelop cover that the respondent No.2-original accused is out of town. On the other hand, since the original accused had failed to fulfill the legal liability which he had incurred on failure of non realisation of such amount, as the cheque having being bounced, the complainant proceeded to register the complaint before the 2nd Additional Chief Judicial Magistrate, Valsad, by filing the complaint under Section 138 of the Act. Page 3 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 The same was registered as Criminal Case No.3262 of 2013. 3. On presentation of such complaint, the verification of original complainant was recorded and prima facie, the Court having being satisfied proceeded to issue summons upon the accused. This Court takes notice that in the original memo of the aforesaid complaint, the complainant had choose to mention three different addresses of the accused which include village : Sankarda at Rajasthan followed by the residential address at Boisar, Maharashtra and the Office address at GIDC, Vapi, Valsad. However, for some reasons, the summons could not be served. 4. In such circumstances, the original complainant had preferred an application vide Exh.4 seeking permission of the Court to directly serve the summons upon the respondent No.2-original accused. The record reveals that vide order dated 30.10.2013, the Trial Court allowed such application and permitted the original complainant to effect service of summons directly upon the accused. In response to such summons, the original accused appeared before the Trial Court on 04.02.2023. Page 4 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 5. The record and the Rozkam reveals that the original accused having entered appearance through the Lawyer, had also presented notarized affidavit dated 04.12.2013 wherein he had undertaken to repay the amount in dispute within short time. However, subsequently, the case of the complainant that even after issuance of Court’s summons the plea of accused was recorded whereby he had denied commission of any offence as alleged. Such plea was recorded vide Exh.7 on 11.06.2014. The original accused choose not to deposit any amount as alleged by the original complainant towards the legal liability. 6. Thus, the Trial Court proceeded with summary trial as prescribed under the provisions of Section 138 of the Act. During the course of trial, the original complainant had entered into witness box and has been examined as sole witness i.e. PW1 vide Exh.10. Apart from the aforesaid oral evidence, the original complainant has placed on record six different documents, which came to exhibited and admitted as evidence which mainly includes original bounce cheque (Exh.11), cheque return memo dated 17.12.2013 (Exh.12), legal notice issued by the original complainant (Exh.13), original RPAD slip Page 5 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 (Exh.14), original envelop cover with endorsement (Exh.15) and the closing pursis given by the complainant (Exh.25). Further, statement of the accused was recorded as provided under Section 313 of the Code of Criminal Procedure where the accused had raised specific defence that though he has signed the cheque but, his signature was taken by the complainant on the blank cheque. He has further contended that so far as other details in the cheque are concerned, the same were filled up by the original complainant. He also refused to have been served with any legal notice. With such defence, the accused has disputed the amount outstanding towards legal liability. He further tried to explain that infact two blank cheques, signed by the accused, were taken away by the original complainant whereby one of the blank cheques, signed by the accused, has been misused by the original complainant by filling up false details. He therefore, prayed to not to entertain the complaint. 7. At the end of the trial, the Court upon evaluation and appreciation of the evidence which has come on record as well as taking into consideration the submissions made by the learned advocates representing the respective parties mainly found that the original complainant has failed to comply with Page 6 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 the mandatory provisions as provided under clause – c of Section 138 of the Act. The Trial Court further found that the complainant has failed to discharge the burden of proof regards the legal liability by not placing on record any evidence to prove the financial ability of the complainant of lending such huge amount as alleged in the complaint. Thus, the Trial Court vide impugned judgment and order dated 07.12.2015 rejected the complaint and recorded acquittal of the original accused from the offence punishable under Section 138 of the Act. Hence, the present appeal before this Court. 8. Heard Mr. Adil Mirza, learned advocate appearing for the appellant-original complainant and Ms. Richa Shah, learned advocate appearing for the respondent No.2-original accused and Mr. Hardik Soni, learned Additional Public Prosecutor appearing for the respondent No.1-State of Gujarat. 9. The short issue which falls for the consideration of this Court in the present appeal is whether the Trial Court has committed any error of fact or in law while recording the order of acquittal of the original accused – respondent No.2 herein for the offence punishable under Section 138 of the Act. I have carefully gone through the impugned judgment and order of Page 7 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 acquittal. I have also perused the record of the Trial Court and have closely examined the documentary evidences as well as the sole oral evidence in the form of deposition of the original complainant. 10. In the facts of the case on hand, the specific defence has been raised by the original accused while cross examining the original complainant. First, the accused has questioned the amount of consideration vis-a-vis the legal liability wherein for the first time, the complainant in his cross has come out with a case by offering explanation of source of such consideration. It emerges from the record that the explanation of the source of an amount of Rs.6.50 lac has come on record for the first time in the cross examination of the original complainant. He has fairly admitted in his cross examination that such amount has never been reflected by way of any entry in the account book nor the same has been subjected to Income Tax. The complainant has further tried to offer an explanation as regards the amount of Rs.1.05 lac being borrowed from his friends namely Balvantbhai Rajpurohit and Ishwarbhai Patel and the same been handed over to the original accused for his business purpose. However, it was for the complainant to Page 8 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 discharge the burden by further leading evidence by offfering the two witnesses who had alleged to have given cash amount of Rs.1.05 lac to the original complainant, which was further alleged to have been lent to the accused. 11. This Court finds that except for such explanation being offered in the cross examination for the first time, the original complainant for the reasons best known to him has failed to lead any further corroborative evidence to substantiate the fact about source of income. This Court agrees with the findings recorded by the Trial Court that the original complainant has failed to examine the witnesses to establish the source of amount which otherwise being alleged to have been handed over to the original accused. Thus, in absence of such corroborative evidence being brought on record, the alleged transaction of handing over of cash amount of Rs.6.50 lac to the original accused becomes doubtful. It is true that Section 118 of the Act raises presumption as to execution of the negotiable instrument until the contrary is proved. On bare reading of provision i.e. Section 118 of the Act, it is evident that the presumption arises in favour of the complainant as regards the amount of consideration endorsed in the income, Page 9 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 as to the date, as to the time of acceptance, as to the time of transfer, as to the order of endorsements, as to stamp and the holder in due course. It is settled legal position that where the signature on the cheque is admitted to be that of accused, the presumption envisaged in Section 118 of the Act can legally be inferred that cheque was drawn for the consideration on the date which it bears. Thus, by virtue of aforesaid provision as well as Section 139 of the Act, it imputes obligation on the Court to presume that the holder of the cheque received it for the discharge of debt or liability and the burden is on the accused to rebute such presumption. 12. This Court notices that the explanation as regards the remaining amount of Rs.4.05 lac raises suspicious more particularly, when any prudent person would maintain entry of such amount in the accounts book and would such amount being liability of the Income Tax. In absence of such corroborative materials on record, this Court is of the view that the original complainant has failed to discharge burden of proof as regards the existence of legal liability of the accused. Page 10 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 13. So far as the second issue, which has been considered by the Trial Court while recording the order of acquittal is concerned, this Court finds that clause – c of Section 138 of the Act is mandatory provision. The interpretation of clause – c of the proviso of “of receipt of said notice” of Section 138 is in context envisaged in clause – (b) of proviso to Section 138 of the Act. Thus, before proceeding for registration of the complaint under the Act, it is mandatory that the drawer of the cheque is given 15 days from the date “of receipt of said notice” for making payment. The payee has to follow the procedure envisaged under the Act by sending the notice to the drawer at his correct address. 13. Mr. Adil Mirza, learned advocate appearing for the appellant – original complainant has relied upon the decision of the Supreme Court in the case of C.C. Alavi Haji vs Palapetty Muhammed & Anr reported in 2007 AIR SCW 3578. He has referred to the relevant observations as recorded by the Supreme Court in paragraph 17, which reads as under: “17. It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is no stipulation of giving of a notice before filing a Page 11 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 complaint. Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the Court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the Court along with the copy of the complaint under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the G.C. Act and Section 114 of the Evidence Act. In our view, any other interpretation of the proviso would defeat the very object of the legislation. As observed in Bhaskarans case (supra), if the giving of notice in the context of Clause (b) of the proviso was the same as the receipt of notice a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act.” 14. Mr. Mirza, by referring to the aforesaid observations, has submitted that the Trial Court has committed gross error in law by recording that the original complainant has failed to comply with clause -c of proviso to Section 138 of the Act. He further submitted that the Supreme Court in the aforesaid case has held that there is one more stage where the accused can offer or make payment of the cheque amount within a period of 15 days on receipt of summons i.e. receipt of copy of complaint along with the Court summons and in case if such amount is not paid then the presumption as envisaged under Section 118 read with Section 139 of the Act would come into play. He therefore submitted that the receipt of Court summons is as good as service of legal notice. He further submitted that the Page 12 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 intention of the legislation is to give notice to the person before proceeding under Section 138 of the Act. He therefore prayed that the impugned judgment and order of acquittal is required to be quashed and set aside. 15. In the facts of the present case, this Court notices that the complainant has tried to offer an explanation by placing on record the copy of the legal notice (Exh.13), RPAD Slip (Exh.14) and the envelop cover (Exh.15) that on bare perusal of the contents of the legal notice as well as RPAD slip and the envelop cover, the said legal notice is referred to the original accused which the complainant has tried to serve at his native place i.e. village : Sakarda, Taluka: Amet, District :Rajsamand, Rajasthan. Further, the postal endorsement on the cover mentions that the noticee is not known as well as the address of the noticee is also not found. It further appears that when the original complainant was cross examined on this aspect, he has fairly admitted that he was aware that the accused was residing at Mogarwadi. He has further tried to explain that he had inquired from the landlord at Mogarwadi address of the accused whereby he was able to collect the details of address of Boisar, Maharashtra. Page 13 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 16. This Court further finds that in the memo of the complaint, the original complainant has referred to three different addresses. Thus, it can safely be inferred that the original complainant could have served the accused at the known address. However, the original complainant choose to proceed with the registration of the complaint. Thus, in view of this Court, the original complainant has not complied with the mandatory requirement as envisaged under clause – c of proviso to Section 138 of the Act. 17. This Court is bound by the decision of the Supreme Court. It is settled legal position that Section 114 of the Evidence Act enables the Court to presume that in common course of natural events, the communication would have been delivered at the address of the addressee once sent by Registered Post at correct address of the nominee. At the same time, Section 27 of the General Clauses Act refers to specific presumption as regards the service of notice being effected when it is sent to the “correct address” by registered post. In the facts of the present case, this Court finds that the original complainant was cross exmained wherein specific question was put to him and the original complainant had fairly admitted of being aware Page 14 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 about the address of Mogarwadi. The fact that three different addresses were mentioned in the cause title of the memo original complaint itself draws inference against the original complainant as regards the knowledge of the correct address of the accused. The same is further fortified from the admission made by the complainant in his cross examination whereby he admitted that the address of Borsai, Maharashtra was provided by the landlord of the accused from his address at Mogarwadi. Again, the presumption as raised by virtue of Section 114 of the Evidence Act and Section 27 of the General Clauses Act and as relied upon by the Supreme Court in the case of C.C. Alavi Haji (Supra), the correct address is an essential requirement to raise such presumption. This Court further notice that on bare perusal of the contents of the original complaint, the original complainant has failed to even make reference to the attempt of service of notice being made on “correct address” of the accused. Thus, this Court is of the view that for the facts narrated above, the decision of the Supreme Court shall not be of any help to the appellant herein- original complainant. This Court agree with the view taken by the Trial Court recording the non compliance of the mandatory provision envisaged in clause – c of proviso to Section 138 of Page 15 of 16

R/CR.A/484/2016 JUDGMENT DATED: 22/04/2022 the Act. 18. Hence, the present appeal fails and is hereby dismissed. No order as to costs. (NISHA M. THAKORE,J) Y.N. VYAS Page 16 of 16