2001 Supreme(SC) 918

2001(5) Supreme 49
SUPREME COURT OF INDIA
(From Bombay High Court)
B.N. Kirpal, Mrs. Ruma Pal & Brijesh Kumar, JJ.
Hiten P. Dalal -Appellant
versus
Bratindranath Banerjee -Respondent
Criminal Appeal No. 688 of 1995
Decided on 11-7-2001
Counsel for the Parties :
For the Appellant : V.S. Kotwal, Sr. Advocate, P.S. Sudheer, Manish Parikh, P. Venugopal and K.J. John, Advocates.
For the Respondent : V.A. Bobde, Sr. Advocate, Tushad A. Cooper, K.R. Nambiar, Advocates.

VERY IMPORTANT POINT
Supreme Court upholds conviction under Section 138 of Negotiable Instruments Act, 1881 of stained stock broker Hiren Dalal by Mumbai Special Court for defrauding Standard Chartered Bank of over Rs. 78 crores by issuing four Andhra Bank cheques for purchasing shares of UTI during 91-92 returned on ground "not arranged for" and confirmed sentence of one year R.I. and fine of Rs. 1 lakh and, in default, R.I. for 3 months, dismissing Dalal s appeal with costs relating to 1991 securities scam of 1991 which was a major blow to the country s economy.

Headnote:(i) Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992-Section 3(2) r/w Section 7-Jurisdiction of Special Court-Meaning of "... any offences relating to transactions in securities after 1st day of April, 1991 and on and before 6.6.1992"-Does the period specified qualify the word "offence" or the word "transactions"? (the later) Minoo Mehta v. Shavak D. Mehta explained, clarified and affirmed.

       Held : The question is - does the period specified qualify the word "offence" or the word "transactions"? If it is the former, the jurisdiction of the Special Court would be, as contended by the appellant, limited to offences committed within the period specified whenever the transactions may have taken place. The respondent has however contended that the period qualifies the word `transactions and that this was not only clear from the language of the statutory provisions but also supported by authority. (Para 6)

       In our view the respondent s submission is correct and must be accepted. (Para 7)

       Held consequently, in these circumstances the inevitable conclusion is that the ambit of the Special Courts jurisdiction, whether in criminal proceedings or in civil disputes is in respect of the transactions in securities entered into after the 1st day of April 1991 and on or before 6th day of June, 1992. (Para 9)

       Held also : In our opinion the decision in Mino Mehta v. Shavak D. Mehta (supra), does not decide to the contrary. (Para 11)

       It is clear therefore that the summing up did not correctly reflect the acutal view of the Court. (Para 15)

       (ii) Negotiable Instruments Act, 1881-Sections 138-Dishonour of cheque for insufficient funds etc. an offence-Appellant gave four cheques on 24.12.1991 to 27.3.1992 drawn on Andhra Bank in favour of Standard Chartered Bank for 78 crore 25000 Rupees-For payment of loss sufferred by Standard Chartered Bank arising out of transactions in securities-All cheques dishonoured on ground "Not arranged for"-Notice of demand served under Section 138 NIA-The appellant did not pay in prescribed period-Complaint filed before Special Court-Preliminary objection-It was not within the jurisdiction of Special Court-Whether correct? (No).

       Held : The transactions as alleged being within the statutory period, the Special Court had the jurisdiction to entertain the complaint and the preliminary objection of the appellant is, in the circumstances, rejected. (Para 16)

       (iii) Negotiable Instruments Act, 1881-Section 138-Dishonour of cheques given for payment of transactions relating to securities between statutory period falling in jurisdiction of Special Court-Dishonoured on ground "not arranged for"-Notice of demand served and not complied with-Complaint filed before Special Court against drawer Mr. Dalal, Stock Broker-Special Court convicted under Section 138 in 1993 and sentenced to 1 year R.I. and fine of Rs. 1 lakh in default, R.I. of 3 months-Appeal against to Supreme Court-Whether on merits conviction and sentence be upheld? (Yes)-W.S. filed under Section 247 Cr.P.C.-Charges framed under Section 138 NIA-Presumption under Sections 118, 138 and 139 whether rightly pressed? (Yes) Evidence Act-Section 3.

       Held : On the merits of the case also, we do not find any reason to interfere with the decision of the Special Court. (Para 17)

       That the four cheques were executed by the appellant in favour of the Standard Chartered Bank (hereafter referred to as the Bank), has not been denied nor was it in dispute that the cheques were dishonoured because of insufficient funds in the Appellant s account with the drawee, viz. Andhra Bank. Because of the admitted execution of the four cheques by the appellant, the Bank was entitled to and did in fact rely upon three presumptions in support of its case, namely, under Sections 118, 138 and 139 of the Negotiable Instruments Act. Section 118 provides, inter alia, that until the contrary is proved it shall be presumed that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration. The presumption which arises under Section 138 provides more specifically that where any cheque drawn by a person on an account for payment of any amount of money for the discharge in whole or in part of any debt or other liability, is returned by the drawee bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque, such persons shall be deemed to have committed an offence and shall be punished with imprisonment for a term which may extend to twice the amount of the cheque, or with both. The nature of the presumption under Section 138 is subject to the three conditions specified relating to presentation, giving of the notice and the non payment after receipt of notice by the drawer of the cheque. All three conditions have not been denied in this case. (Para 19)

       The appellant s submission that the cheques were not drawn for the discharge in whole or in part of any debt or other liability is answered by the third presumption available to the Bank under Section 139 of the Negotiable Instruments Act. This section 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". The effect of these presumptions is to place the evidential burden on the appellant of proving that the cheque was not received by the Bank towards the discharge of any liability. (Para 20)

       Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court "may presume" a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact. In other words, provided the facts required to form the basis of a presumption of law exists, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, "after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists"**. Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the `prudent man . (Paras 21 and 22)

       The words `unless the contrary is proved which occur in this provision make it clear that the presumption has to be rebutted by `proof and not by a bare explanation which is merely plausible. A fact is said to be proved when its existence is directly established or when upon the material before it the Court finds its existence to be so probable that a reasonable man would act on the supposition that it exists. Unless, therefore, the explanation is supported by proof, the presumption created by the provision cannot be said to be rebutted ..." (Para 23)

       We will therefore have to consider whether in the case before us, the appellant had supported his defence by any proof sufficient to rebut the presumption drawn against him. (Para 24)

       The brunt of the evidence given by the appellant s witnesses was as to the nature of the transactions between the appellant and the Bank. However, not one of the defence witnesses gave any evidence in support of the only defence of the Appellant, namely that the four cheques in question had been given towards intended transactions which did not take place. No one said why the appellant had executed and delivered the particular cheques to the Bank or that the appellant had not given the four cheques to discharge his debts to the Bank. Nor did any defence witness claim that the cheques were given on account of any ready forward transactions. In fact, DW 1 in cross-examination admitted that it was not the practice of a purchasing party to hand over cheques in advance. The appellant alone could have said why he had admittedly executed the four cheques, handed them over to the Bank and never asked for their return. He did not choose to do so. (Para 35)

       The burden was on the appellant to disapprove the presumptions under Sections 138 and 139 a burden which he failed to discharge at all. The averment in the written statement of the appellant was not enough. Incidentally, the defence in the written statement that the four cheques were given for intended transactions was not the answer given by the Appellant to the notice under Section 138. Then he had said that the cheques were given to assist the Bank for restructing (Ex.H). It was necessary for the appellant at least to show on the basis of acceptable evidence either that his explanation in the written statement was so probable that a prudent man ought to accept it or to establish that the effect of the material brought on the record, in its totality, rendered the existence of the fact presumed, improbable. (Vide Trilok Chand Jain v. State of Delhi, 1975(4) SCC 761. The appellant has done neither. In the absence of any such proof the presumptions under Sections 138 and 139 must prevail. (Para 37)

       Held also : We may also mention here that in proceedings initiated by the Bank to recover monies from the appellant in connection with the first area of fraud mentioned by B. Banerjee (PW3), this Court in Standard Chartered Bank v. Custodian, 2000(6) SCC 427 upholding the decision of the Special Court, found that the appellant was liable to pay the Bank a sum of Rs. 280.00 crores which is several times the amount covered by the four cheques in question. The argument of the Appellant before the Special Court that no offence under Section 138 had in fact been committed because he could not have paid within the period of 15 days after receipt of the notice even if he wanted to, was rightly rejected. The appellant s submission was based on the fact that he had been notified by the Custodian under Section 3 of the Act and all his properties had consequently stood attached. But, as observed by the Learned Special Court, the Special Court had before it a number of applications by a number of parties asking for permission to fulfill their obligations under contracts. In some cases the Court had granted them. There was nothing which prevented the Appellant from applying to the Special Court for permission to fulfill his obligations or to pay off his debts under the cheques Exs. B, C, D & E. No attempt had been made by the Appellant to make any payment towards the dishonoured cheques. The appellant would not have paid even if he could have. This is clear not only from the correspondence, and the appellant s conduct but also from his defence of total denial of liability. The argument was therefore wholly academic. The Special Court found the appellant s defence improbable and the evidence adduced at his instance flawed and unbelievable. After meticulously scanning both the oral and documentary evidence and ultimately drawing on the presumptions statutorily provided under Sections 118, 138 and 139 of the Negotiable Instruments Act, the appellant was found guilty. For the reasons stated earlier, there is no ground for us to decide differently and to differ from the view taken by the Special Court in holding the appellant guilty of the offence with which he was charged. We therefore affirm the conviction and sentence imposed on the appellant by the Special Court and dismiss the appeal with costs assessed at Rs. 10,000/-. (Paras 38, 39 and 40)