JUDGMENT

J.M. PANCHAL, J. — 1. Leave granted.

2. The instant appeal is directed against judgment dated November 23, 2006, rendered by the learned Single Judge of Punjab and Haryana High Court, in Criminal Appeal No. 946 SBA of 2004, by which the judgment dated December 6, 2003, passed by the learned Judicial Magistrate I Class, Karnal, in Criminal Complaint No. 178 of 2001, acquitting the appellant under Section 138 of the Negotiable Instruments Act, 1881 ('the Act' for short), is set aside and after convicting the appellant under Section 138 of the Act the matter is remitted to the learned Magistrate to pass appropriate order of sentence.

3. Jai Bhagwan Sharma, proprietor of M/s. Sharma Carpets, the respondent herein, deals in carpets. Rajinder Kumar, proprietor of M/s. Kumar Exports, the appellant herein, is carrying on business at Panipat. It is the case of the respondent that the appellant purchased handtuffed woollen carpets from him on August 6, 1994, cost of which was Rs.1,90,348.39. According to the respondent, the appellant issued two cheques, i.e., one cheque bearing No. 052912 dated August 25, 1994 for a sum of Rs.1,00,000/- and another cheque bearing No. 052913 dated September 25, 1994 for an amount of Rs.90,348.39 drawn on Panipat branch of Union Bank of India, for discharge of his liability. The case of the respondent is that the cheques were deposited in the bank by him for encashment, but those cheques were received back unpaid with remarks "insufficient funds". It is the case of the respondent that the fact that the cheques were dishonoured for insufficient funds was brought to the notice of the appellant and on the request of the appellant, the cheques were again presented for encashment in the bank on January 5, 1995, but they were again dishonoured due to lack of funds in the account of the firm of the appellant. What is claimed by the respondent is that under the circumstances he had served statutory notice dated January 19, 1995 calling upon the appellant to make payment of the amount due but neither the appellant had replied the said notice nor made payment of the amount due. The respondent, therefore, filed Criminal Complaint No. 178 of 2001 in the Court of the learned Judicial Magistrate 1st Class, Karnal and prayed to convict the appellant under Section 138 of the Act.

4. On service of summons the appellant appeared before the Court. His defence was that the bill produced by the respondent indicating sale of woollen carpets was a fictitious one and that blank cheques with his signatures were taken from him by the respondent to enable the respondent to purchase the raw material for him. According to the appellant the cheques were in the form of advance payment for supply of carpets, but the respondent had failed to deliver the goods to him. The appellant alleged that the respondent had stopped manufacturing carpets and as the cheques were not issued in discharge of any liability, he was not liable to be convicted under Section 138 of the Act.

5. In order to prove his case the respondent examined himself as CW-3 and produced the cheques dishonoured at Ex. CW-2/A and CW-2/B, statutory notice at Ex. C-4, carbon copy of bill at CW-2/C, etc. He examined two witnesses to prove the presentation and dishonour of the cheques. No other witness was examined by him in support of his case pleaded in the complaint against the appellant. The appellant examined himself to substantiate his defence as DW-1. He also examined one Mr. Om Prakash, serving as a clerk in the Sales Tax Department, as DW-2, who stated before the Court that the respondent's firm had filed sales tax return for the Assessment Year 1994-95 declaring that no sale or purchase of woollen carpets had taken place and, therefore, no sales tax was deposited. The said witness also produced an affidavit filed by the respondent as Ex.D-1 wherein the respondent had stated on oath that no sale or purchase of woollen carpets had taken place during the A