Whether offence of dishonour of cheque is made out if post dated cheque was issued as security for loan?

Reference to the facts of the present case clearly shows that though the word "security" is used in Clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall Under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.

12. Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract Under Section 138, which arises on account of dishonour of cheque issued was not by itself at par with criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of cheque issued for discharge of later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque there was a debt/liability in praesenti in terms of the loan agreement, as against the case of Indus Airways (supra) where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as advance for the purchase order which was cancelled. Keeping in mind this fine but real distinction, the said judgment cannot be applied to a case of present nature where the cheque was for repayment of loan installment which had fallen due though such deposit of cheques towards repayment of installments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of the cheque.

13. Crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability.

IN THE SUPREME COURT OF INDIA

Criminal Appeal No. 867 of 2016 

Decided On: 19.09.2016

Sampelly Satyanarayana Rao Vs.  Indian Renewable Energy Development Agency Limited

Hon'ble Judges/Coram:

Dipak Misra and A.K. Goel, JJ.

Citation: (2016) 10 SCC 458

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When land should not be treated as agricultural land even if revenue record shows that it is agricultural land?

 In the present case, security interest was created in respect of several parcels of land, which were meant to be a part of single unit i.e. the five star hotel in Goa. Some parcels of land now claimed as agricultural land were apparently purchased by the debtor from agriculturists and are entered as agricultural lands in the revenue records. The debtor applied to the revenue authorities for the conversion of these lands to non-agricultural lands which is pending till date due to policy decision.

40. It is undisputed that these lands were mortgaged in favour of the creditor under a deed dated 26.02.2010. Obviously, since no security interest can be created in respect of agricultural lands and yet it was so created, goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis. The undisputed position is that the total land on which the Goa Hotel was located admeasures 182225 sq. mtrs. Of these, 2335 sq. mtrs. are used for growing vegetables, fruits, shrubs and trees for captive consumption of the hotel. There is no substantial evidence about the growing of vegetables but what seems to be on the land are some trees bearing curry leaves and coconut. This amounts to about 12.8 % of the total area.

The mortgage is thus intended to cover the entire property of the Goa Hotel. Prima facie, apart from the fact that the parties themselves understood that the lands in question are not agricultural, it also appears that having regard to the use to which they are put and the purpose of such use, they are indeed not agricultural.

44. In 'Commissioner of Wealth Tax, Andhra Pradesh v. Officer-in-Charge (Court of Wards) Paigah MANU/SC/0232/1976 : (1976) 3 SCC 864, this Court interpreted the definition of the term 'Agricultural Land' with respect to Section 2(e) of the Wealth Tax Act, 1957 that excluded the said term from the definition of assets. This Court observed:

We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of "assets", but its actual condition and intended user which has to be seen for purposes of exemption from wealth-tax. One of the objects of the exemption seemed to be to encourage cultivation or actual utilisation of land for agricultural purposes. If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be "agricultural land" for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence.

Similarly, in the case of Kunjukutty Saheb v. State of Kerala MANU/SC/0634/1972 : (1972) 2 SCC 364, this Court held as follows:

We suppose that something or other can be, and often is, grown on any vacant land, but that would not necessarily make it agricultural land for our purposes. To give an example the possibility of cultivating, or even the actual cultivation of, what is essentially a building site in the heart of a town would not make it agricultural land. It is the purpose for which it is held that determines its character and the existence of a few coconut trees or a vegetable patch on the land cannot alter the fact that it is held for purposes of building and not for purposes of agriculture.

In any event, having regard to the character of the land and the purpose for which it is set apart, we are of the view that the land in question is not an agricultural land. The High Court mis-directed itself in holding that the land was an agricultural land merely because it stood as such in the revenue entries, even though the application made for such conversation lies pending till date.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 2928-2930 of 2018 

Decided On: 19.03.2018

 ITC Limited Vs.  Blue Coast Hotels Ltd. and Ors.

Hon'ble Judges/Coram:

S.A. Bobde and L. Nageswara Rao, JJ.

Citation: 2018(6) MHLJ 42

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Whether burden of proof will be on defendant if he takes plea of loan transaction?

Submissions of Mr. Thorat that when there is a registered document, then the sale is to be considered as a genuine, would have been accepted if the defendant would not have challenged the truth-fullness of the contents of the sale-deed and not contended that it is a sham document given as a security. The case of the defendant squarely falls under proviso Section 92 of the Indian Evidence Act, 1872. Obviously, the burden lies on the defendant to prove that the document executed was intended for something else than what is mentioned in the document.

IN THE HIGH COURT OF BOMBAY

Second Appeal No. 22 of 1990

Decided On: 31.10.2012

Shripati Ramchandra Choudhari

Vs.

Rajaram Bhau Shinde

Coram:

Mrs. Mridula Bhatkar, J.

Citation: 2013(1) MHLJ 304

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Whether the court can permit defendant to plead contrary to registered Sale deed ?

Order 7 Rule 11, Order 12 Rule 6 - Evidence Act, 1872 - Section 91, 92 - Possession - Sale deed - Title - Rejection of counter-claim - Decree on admission - By way of a registered sale deed defendant transferred the suit property to the plaintiffs - Total consideration of Rs. 1,65,00,000 was paid - Sale deed was registered in the office of the Sub-Registrar - Right of possession of plaintiffs was recognized in the sale deed - Despite the receipt of the entire consideration and execution of the sale deed, the defendant has failed to handover the physical vacant possession of the suit property - Defendant claimed that the amounts received by him were towards loan, and not towards sale consideration - Defendant has not produced any document to show that amounts were received by way of loan - Defense set up by the defendant is barred under section 91 and 92 of the Evidence Act - Since the title of the plaintiffs in respect of the suit property stands established, suit of the plaintiff for possession has to succeed - Defendant has failed to establish any right or title in the suit Property - Defendant may have occupied the suit property as a licensee - License stands terminated - Cause of action pleaded by the defendant in the counter claim is the so-called oral agreement that the plaintiffs shall re-transfer - No cause of action has arisen to seek the cancellation of the sale deed - Counter claim of the defendant is rejected - Possession was never delivered to the plaintiff would not deprive the plaintiff to claim ownership on the basis of their title derived from the sale deed, and to claim possession of the suit property - Applications of the plaintiffs are allowed - Suit is decreed in respect of the relief of possession.

IN THE HIGH COURT OF DELHI

CS (OS) 1633/2012, CC 18/2013 and I.A. Nos. 10623 and 16134/2012

Decided On: 26.03.2014

 Karan Madaan and Others

Vs.

 Nageshwar Pandey

Hon'ble Judges/Coram:Vipin Sanghi, J.

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Whether court can permit defendant to lead oral evidence to find out nature of transaction?

In so far as the first submission of the learned counsel for the
plaintiff that the defendant no.1 could not have been permitted to lead
evidence to contradict the contents of the agreement to sale dated 17th
October 1995 in view of Sections 91 and 92 of the Indian Evidence Act,
1872 is concerned, in my view, the defendant no.1 had not led evidence
to contradict the contents of the said agreement for sale dated 17th
October 1995. The case of the defendants before the trial Court was that
the said transaction entered into between the parties was not to be acted

upon as the same was to be kept as a security in favour of the plaintiff
and was not to be acted upon as an agreement to sale. The defendant no.1
had disputed the entire transaction and thus could lead evidence in that
regard in view of Section 92 of the Indian Evidence Act, 1872. The first
appellate Court, in my view, has rightly adverted to the judgments of the
Supreme Court referred to aforesaid and has rightly rejected the
contention raised by the plaintiff. In my view, there is no substance in
this submission of the learned counsel for the plaintiff.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
SECOND APPEAL NO.144 OF 2016
along with
CIVIL APPLICATION NO.228 OF 2016

Manohar Pamandas Jani
 V
 Madhukar Trimbak Waychal
 CORAM : R.D. DHANUKA, J.
 DATE :  25th October 2016
Citation: 2017(1) ALLMR 102

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Whether Bar of S 92 Evidence Act will operate when document is sham and was not to be acted upon?

Relying upon the aforesaid judgements, the learned counsel would submit that the Trial Court erred in accepting the plea of the defendant that agreements are not intended to be acted upon but were executed only as security for a loan transaction and not otherwise. Per contra, Mr. N. Suresh, the learned counsel appearing for the respondent would submit that what is prohibited under Section 92 of the Evidence Act, is only the attempt to vary the terms of the contract and the defendant can always establish any invalidating circumstance, that would establish that the contract itself was a sham transaction. In support of his contention, the learned counsel rely upon a judgement of the Hon'ble Supreme Court in Ishwar Dass Jain v. Sohan Lal reported in MANU/SC/0747/1999 : AIR 2000 SC 426. The learned counsel draws my attention to para 16 of the judgement where the Hon'ble Supreme Court after referring the earlier decision in Gangabai v. Chhabubai reported in MANU/SC/0385/1981 : AIR 1982 SC 20 observed that it is permissible for a party to contend that the deed was not intended to be acted upon but was only a sham document. The bar arises only when the document is relied upon and its terms are sought to be varied and contradicted. He also invites my attention to the observations of the Division Bench in Kamireddi Sattiaraju v. Kandamurai Boolaeswari reported in MANU/TN/7611/2006 : 2007 1 MLJ 499. It was also a suit for specific performance with similar plea to the effect that agreement was not intended to be acted upon but was executed only as security for a loan transaction. After reviewing the entire case law, the Division Bench has held as follows:

"15. In the judgment, in paragraph 22, the Supreme Court has stated the legal position as regards the substantive part of Section 92 of the Indian Evidence Act in the following words:

22. This Court in Gangabai v. Chhabubai and Ishwar Dass Jain v. Sohan Lal with reference to Section 92(1) held that it is permissible to a party to a deed to contend that the deed was not intended to be acted upon but was only a sham document. The bar arises only when the document is relied upon and its terms are sought to be varied and contradicted. Oral evidence is admissible to show that document executed was never intended to operate as an agreement but that some other agreement altogether, not recorded in the document, was entered into between the parties.

16. In the decision, the Supreme Court has held as under in paragraph 9:

An enquiry into reality of transaction is not excluded merely by availability of writing reciting the transaction. Tyagaraja Mudaliyar v. Vedathanni MANU/PR/0014/1935 : AIR 1936 PC 70 : 64 IA 126 is an authority for the proposition that the oral evidence in departure from the terms of a written deed is admissible to show that what is mentioned in the deed was not the real transaction between the parties but it was something different.

17. From the above ratio laid down by the Supreme Court, when we analyse the stand of the parties, according to the appellants, irrespective of the fact that Ex. A-1 came into being, it was contended that the deed was never intended to be acted upon and that it was a sham document. When the said stand is probed into further, as held by the Supreme Court, the bar under Section 92 of the Indian Evidence Act vis-à-vis Ex. A-1 would operate if only the appellants attempt to rely upon Ex. A-1 agreement and simultaneously sought to vary and contradict its terms. Such is not the case of the appellants. The appellants are not attempting to contend that the terms contained therein are to be varied or that the evidence let in on their side was to contradict the terms contained therein. According to the appellants, the entire evidence let in both oral and documentary, was only to demonstrate that inspite of existence of Ex. A-1, it will have to be held that the parties had a different contract altogether and Ex. A-1 was never intended to be acted upon. At the risk of repetition, we state that applying the ratio laid down by the Supreme Court, such a stand of the appellants was certainly not prohibited under Section 92 of the Indian Evidence Act."

12. The learned counsel would also draw my attention to the judgement of this Court in Pappammal @ T. Pappa v. P. Ramasamy reported in MANU/TN/1411/2012 : 2012 4 CTC 100 wherein also, the Hon'ble single judge had followed the Division Bench judgement referred to above and held that it is open to the defendant in the suit for specific performance to plead that the contract was not intended to be an agreement of sale. Recently in the judgement in Rajammal and another v. M. Senbagam reported in MANU/TN/2873/2016 : 2016 (6) CTC 225, this Court held that the plea to the effect that the agreement was not intended to be acted upon can be entertained by the Courts. I have examined the facts of the case on hand, in the light of the law laid down by the precedents referred to at the Bar. I have no hesitation in coming to the conclusion that the defendant cannot be precluded from taking the plea that the agreement was not intended to be acted upon as an agreement of sale, but it was executed for some other purposes namely, as security for loan transaction. Such plea would fall within the exceptions under Section 92 of the Evidence Act because, it is actually a invalidating circumstance which is pleaded before the Court of law and by pleading so, the defendant is not attempting to vary the terms of the contract. The actual attempt is to show that the contract is not one, which was intended to be acted upon. Therefore, in my considered opinion the argument that Section 92 of the Indian Evidence Act prevents the defendant from contending that the agreement was not intended to be acted upon cannot be countenanced, in view of the categorical judicial pronouncements referred to above.

IN THE HIGH COURT OF MADRAS

A.S. No. 34 of 2010

Decided On: 02.01.2017

P. Vaidyanathan Vs.  K. Sundaram

Coram:R. Subramanian, J.

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Dishonour of cheque-defence of issue of blank cheque as security for loan

That is how the cheque was issued and accepted. It is an afterthought to urge that the accused signed blank cheques and they were handed over to the agent as a security.

This is sought to be suggested only relying upon the endorsement "not above Rs.20 crores" on the cheque. If that was so, then there is no explanation forthcoming as to why there has been no grievance or complaint made disputing the liability or the correctness of the entries in the statement of account or questioning the act of selling the pledged securities. All this would not have taken place had the cheque handed over at the time of the issuance of the sanction letter or disbursal of the loan amount. In such circumstances, there is no question of blank cheque being handed over as that fact is belied by the line of cross-examination adopted by the accused himself. The suggestions given by him to the complainant's witnesses and their answers thereto would show that the cheque was handed over in December, 2010 and all the details therein were filled in by the applicant accused. In these circumstances, the trial Court did not commit any error in holding that the offence u/s 138 of the N.I. Act has been committed by the applicant accused.

Bombay High Court

 Mr.Vyomesh Jitendra Trivedi v  State of Maharashtra on 23 September, 2013

Bench: S.C. Dharmadhikari

Citation : 2013 ALL M R(cri)3783

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