Karnataka High Court

Thimma Reddy vs Farooq Shariff on 16 February, 2022

Bench: Rajendra Badamikar

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 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

    DATED THIS THE 16TH DAY OF FEBRUARY, 2022

                       BEFORE

  THE HON'BLE MR. JUSTICE RAJENDRA BADAMIKAR

           CRIMINAL APPEAL No. 358/2011

BETWEEN:

THIMMA REDDY S/O D.B. SHIVANNA
AGED ABOUT 34 YEARS
OCC: BANANA MERCHANT
R/O.1ST STAGE, II CROSS
VINOBANAGAR, SHIVAMOGGA
                                         ....APPELLANT

(BY SRI. NATARAJ D., ADVOCATE FOR
    SRI. PRUTHVI WODEYAR, ADVOCATE)

AND:

FAROOQ SHARIFF
S/O ABDUL JABBAR
AGED ABOUT 57 YEARS
R/O MASAUHA
BEHIND KANAKA VIDYA SAMSTHE
RAM MANOHARA LOHIYA NAGAR
SHIVAMOGGA
                                      .... RESPONDENT

(BY SRI. SIRAJIN BASHA, ADVOCATE)

      THIS APPEAL IS FILED UNDER SECTION 378(4) OF
CR.P.C. PRAYING TO SET ASIDE THE ORDER DT: 26.02.2011
PASSED BY THE II ADDL. CIVIL JUDGE AND JMFC,
SHIVAMOGGA IN C.C.NO.1743/09 - ACQUITTING THE
RESPONDENT/ACCUSED FOR THE OFFENCE P/U/S 138 OF
N.I. ACT.
                                2

     THIS APPEAL HAVING BEEN HEARD AND RESERVED
FOR JUDGMENT ON 09.02.2022, COMING ON FOR
'PRONOUNCEMENT OF JUDGMENT' THIS DAY, THE COURT
DELIVERED THE FOLLOWING:

                     JUDGMENT

This appeal is filed by the complainant/appellant

herein challenging the judgment of acquittal dated

26.02.2011 passed by the II Additional Civil Judge and

JMFC, Shivamogga, in CC No.1743/2009, whereby the

learned Magistrate has acquitted the

accused/respondent herein for the offence punishable

under Section 138 of the Negotiable Instruments Act,

1881 ( 'NI Act' for short).

2. For the sake of convenience, the parties

herein are referred with the original ranks occupied by

them before the trial Court.

3. The brief facts of the case are that, the

accused had borrowed the hand-loan of Rs.1,00,000/- in

cash from the complainant on 01.05.2004 for his

Almairah business, assuring to repay the same within

one month. When the complainant demanded the said

amount, on 10.07.2004, the accused has issued a post-

dated cheque bearing No.0410446 dated 15.07.2004

drawn on State Bank of Mysore, Shivamogga, in favour

of the complainant towards repayment of the said loan

amount. When the said cheque was presented by the

complainant, it was dishonoured on 20.07.2004 for

'Insufficient Funds'. Then the complainant has got

issued a legal notice dated 31.07.2004 under Registered

Post Acknowledgement Due ('RPAD' for short) as well as

under Certificate of Posting ('COP' for short), calling

upon the accused to pay the cheque amount within 15

days from the date of receipt of notice. The notice

issued under RPAD was avoided intentionally by the

accused. But, notice under COP came to be served on

the accused 02.08.2004. He did not comply with the

legal notice and hence the complainant alleges that the

accused with an intention to cheat the complainant has

issued a cheque having knowledge that he had no

sufficient funds in his account and thereby committed an

offence under Section 138 of the N.I. Act. Therefore, he

has filed a private complaint under Section 200 of

Cr.P.C. and the learned Magistrate, after recording the

sworn statement, has taken cognizance of the offence

and issued process against the accused.

4. The accused has appeared through his

counsel and was enlarged on bail. The plea under

Section 138 of the N.I. Act was recorded and the

accused has denied the substance of accusation.

5. The complainant examined himself as PW.1

and two witnesses were examined as PW.2 (Sri.C.

Shashidhara) and PW.3 (Sri. Sadhu Shetty). He has also

placed reliance on nine documents marked at Exs.P1 to

P9.

6. After completion of the evidence of the

complainant, the statement of accused under Section

313 of Cr.P.C. was recorded to enable him to explain

the incriminating evidence appearing against him in the

case of the prosecution. The case of the accused is of

total denial. Further, the accused has got examined

himself as DW.1 and one witness was examined on his

behalf as DW.2 (Sri. Mohamed Azgar). However, he did

not choose to produce any documents.

7. Then after hearing the arguments, the

learned Magistrate has come to a conclusion that the

complainant has failed to establish that the cheque was

issued towards legally enforceable debt and further

observed that the legal notice was not at all served and

hence, acquitted the accused. Being aggrieved by this

judgment of acquittal, the complainant has filed this

appeal under Section 378(4) of Cr.P.C.

8. Heard the arguments addressed by both the

Counsels and perused the records of trial Court.

9. Learned counsel for the appellant would

contend that the trial Court has erred in acquitting the

accused without properly appreciating the oral and

documentary evidence. He would also contend that,

Ex.P1 is not properly appreciated by the trial Court, as

the facts that the cheque belongs to the accused and it

bears his signature, are undisputed and without drawing

presumption in favour of the complainant, the trial Court

has proceeded on hypothetical presumption. He would

also contend that the trial Court has erred in observing

that the notice issued under RPAD is un-served, without

considering the fact that the notice was issued to a

proper address and there is an attempt on the part of

the accused to avoid service of notice. He would also

contend that the trial Court has also erred in holding

that the appellant had no capacity to lend Rs.1,00,000/-

without appreciating the evidence that the financial

capacity itself is not challenged and earlier transactions

were also not disputed. The trial Court has failed to

properly appreciate the defence set-up by the accused

that he has issued the cheque in question to one Sri.

Shantha Raju, which has been misused and he has not

led any evidence regarding he having chit transaction

with the said Sri. Shantha Raju and the trial Court has

erroneously observed that the said Shantha Raju was

not examined. The evidence of DWs. 1 & 2 regarding

issuance of cheque is being inconsistent and contrary,

without appreciating the evidence in proper way and

without considering the provisions of Section 27 of

General Clauses Act, the trial Court has committed error

in acquitting the accused without drawing presumption

in favour of the complainant. Hence, he would contend

that the judgment of the trial Court is erroneous and

sought for setting aside the impugned judgment and

prayed for convicting the accused.

10. Per contra, learned counsel for the

respondent/accused would support impugned judgment

and contend that there is no material to show that, the

notice came to be served on the accused/respondent

herein. He would also contend that the accused has

disputed the address and no evidence is led by the

complainant to establish that the address to which notice

under RPAD is issued, is a proper address and since

there is no service of legal notice, the provisions of

Section 138 of the N.I. Act are not attracted and he

would also contend that, the capacity of the complainant

to lend Rs.1,00,000/- is also came to be challenged.

Hence, he would contend that the trial Court is justified

in acquitting the accused and prayed for dismissal of the

appeal by confirming the impugned judgment.

11. Having heard the arguments and perusing the

records, now the following point would arise for my

consideration:

Whether the judgment of acquittal passed by the trial Court is perverse, erroneous and arbitrary so as to call for interference by this Court?

12. The trial Court has acquitted the accused

mainly on the ground of non-service of notice issued

under RPAD. According to the complainant, he had

advanced hand loan of Rs.1,00,000/- to the accused on

01.05.2004 and in discharge of the said loan amount, on

10.07.2004, a cheque dated 15.07.2004 under Ex.P1

came to be issued, which was bounced for 'Insufficiency

of Funds". It is important to note here that, the facts of

presentation of the cheque, bouncing of cheque and

issuance of legal notice within the stipulated period etc.

are undisputed. It is also an undisputed fact that, the

cheque belongs to accused. Further, accused has also

not disputed his signature on the cheque marked at

Ex.P1 and the signature of the accused on Ex.P1 is

marked at EXP1(a). Hence, when the signature is

admitted by the accused and when the complainant is

the holder of the cheque in due course, the presumption

under Section 139 of the N.I. Act is required to be

drawn. Section 139 of the N.I.Act reads as under:-

              "S.139-Presumption          in   favour   of
    holder.--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."

13. In this context, learned counsel for appellant

has placed reliance on a decision of the Hon'ble Supreme

Court in Criminal Appeal No.230-231/2019 (Bir

Singh Vs. Mukesh Kumar) arising out of SLP (CRL)

Nos. 9334-35/2018), wherein the Hon'ble Supreme

Court had an occasion to deal with this issue and the

Hon'ble Supreme Court by placing reliance on the

decisions reported in (2009)2 SCC 513 [Kumar

Exports Vs. Sharma Carpets]: (2001)8 SCC 458

[K.N. Beena Vs. Muniyappan and Another] and

(2012)13 SCC 317 [Laxmi Dyechem Vs. State of

Gujarat & Others] has clearly held that, when

issuance of cheque and signature on cheque stands

admitted, it is mandatory for the Court to draw a

presumption in favour of complainant. It is further

observed that the said presumption is a rebuttable

presumption and burden of rebuttal would be on the

accused and the accused is required to prove the

contrary. In the instant case, admittedly the

complainant is the holder of the cheque in due course.

The signature of the accused on the cheque is admitted.

Hence, the presumption under Sections 139 and 118 of

the N.I. Act are required to be drawn in favour of the

complainant, that the cheque came to be issued towards

a legally enforceable debt and it is for the accused to

rebut the presumption.

14. In the instant case, the accused has set-up a

defence that he had a chit transaction with one Sri.

Shantha Raju and the cheque was issued to him towards

chit transaction and he paid the said amount to Sri.

Shantha Raju. Hence, he would further contend that as

he had paid the entire amount to Sri. Shantha Raju,

hence, claims that the presumption is rebutted. But, the

presumption under Section 139 of the N.I. Act is

required to be rebutted on the basis of preponderance

of probability. Merely by setting up a defence does not

amount to rebuttal of presumption. The accused need

not to enter the witness box, but he is required to lead

material evidence in this regard. In this context, the

learned counsel for the appellant has placed reliance on

a decision reported in (2019) 10 SCC 287 [Uttam

Ram Vs. Devinder Singh Hudan and Another]

(Head Note-B), wherein the Hon'ble Apex Court has

observed as under:

"B. Debt, Financial and Monetary Laws- Negotiable Instruments Act, 1881- Ss. 139, 118 and 138-Dihonour of cheque- Presumption under Ss.. 118 and 139 - Matters to be established by complainant for said statutory presumption to arise - Approach of courts below, as if complainant is to prove a debt before civil court wherein plaintiff is required to prove his claim on evidence to be laid in support of his claim for recovery of the amount due, held, completely erroneous."

15. Further, in Para No.25 of the said decision,

the Hon'ble Apex Court referring to a decision in

Rohitbhai Jivanlal Patel Vs. State of Gujarat

reported in (2019) 18 SCC 106, has reiterated the

facts holding that, on the aspects relating to

preponderance of probabilities, accused has to bring on

record such facts and such circumstances, which may

lead the Court to conclude either the consideration did

not exist or that its non-existence was so probable that a

prudent man would, under the circumstances of the

case, act upon the plea that the consideration did not

exist. But, in the instant case, no such evidence is

forthcoming. The accused has simply set-up a defence

that, he had issued a cheque to one Sri. Shantha Raju

and it was in respect of a chit transaction and that has

been misused. But, very interestingly the accused has

not produced any material document to show that, he

had any chit transactions with one Sri. Shantha Raju.

Further, he had not made any attempt to examine Sri.

Shantha Raju and quite contrarily the accused has

placed reliance on the evidence of DW.2, who was

working under accused, who also claims that, he was

having chit transaction with one Shatha Raju. But, his

evidence is completely contrary to the defence set-up by

the accused. According to him, when he received the

chit fund, he was required to issue a cheque and as he

had no bank account, and the accused being his

employer, has given a cheque as security on his behalf.

It is not the defence of the accused that the cheque was

given to one Shantha Raju on behalf of DW.2 as security

for his chit transaction. On the contrary, all along his

defence is that, he has issued cheque to one Shatha

Raju towards his chit transaction. But, DW.2 in his

examination-in-Chief itself has given a different version

in this regard. Hence, the defence set-up by the

accused is not at all acceptable. Apart from that, the

accused has not taken any steps against the

complainant for having misused the said cheque. Hence,

prima facie, it is evident that accused has not discharged

the liability of rebutting presumption available in favour

of the complainant.

16. The other contention raised is regarding

financial status of the complainant. But, in the cross-

examination of PW.1, the financial status of the

complainant was not at all challenged. On the contrary,

the complainant in his cross-examination at Page No.6 in

Para No.4 has specifically deposed that, earlier also,

there were financial transactions of Rs.10,000/- to

Rs.20,000/- between himself and accused, and the said

transactions were not disputed and quite contrarily,

accused has now taken-up a defence that he do not

know the complainant himself. Further, the complainant

in his examination-in-chief, has specifically asserted

that, he was doing Banana wholesale business and he

was also possessing agricultural lands and as such, he

had agricultural income. This statement is also not

denied and when the accused has not disputed that

complainant is doing Banana vending business and owns

agricultural lands and having agricultural income, the

trial Court has unnecessarily casted burden on the

complainant to establish this aspect, when it is not

challenged by accused himself.

17. Further, PW.1 was cross-examined at length

regarding his transactions and defence. The accused

was examined as DW.1 and in his cross-examination he

disputed certain defences set-up by the counsel for

accused during cross-examination of PW.1 claiming that

he has not given such an instructions for cross-

examination of PW.1. That clearly discloses that the

cross-examination was based on hypothecation only.

18. The last and important point urged is

regarding non-service of notice. Admittedly, legal notice

under Ex.P5 was issued under RPAD as well as COP,

which is evident from Ex.P7 and Ex.P8. Both the notices

were issued to the same address and notice issued

under RPAD was retuned with an endorsement that.

"Addressee was not found in the House" when the

concerned Postman went for service of notice. It is also

important to note here that the notice was not un-served

on the ground that no such person is residing in given

address. But, the notice was returned only with an

endorsement that, 'addressee was not found in the given

address at the time of delivery" and there is no such

endorsement that 'address is wrong or addressee is not

residing in the given address'. All along the learned

counsel for respondent/accused has contended that the

notice is issued to the wrong address. But it is relevant

to note here, the address given by the accused

when he was examined as DW.1, as resident of Kini

Layout, Ram Manohar Lohia Nagara, Shivamogga City.

The address given in the complaint is 'Farroq Shariff,

S/o. Abdul Jabbar Shariff, R/o. 'Masauha', Behind

Kanaka Vidya Samsthe, Ram Manohar Lohia Nagara,

Shivamogga.

19. It is contended that in Mohammadan, the

name of the house would not be 'Masauha". But, very

interestingly, the address given by the accused and the

address referred in the complaint and on the legal notice

is pertaining to Ram Manohar Lohia Nagara,

Shivamogga. On the contrary, in the address given in

the complaint, a specific location was also referred.

Apart from that, though accused all along asserted that

the address was not proper, he did not disclose his

proper address all along. He has not produced any

documents to show as to what was his correct and

proper address. On the contrary, in cross-examination,

he has admitted that, when he received summons, he

was residing in his house itself, wherein he was residing

all along. Apart from that, the notice in criminal case as

well as in this appeal was served on the same address

only. The accused has not produced any material to

show that address referred is wrong. When the accused

has failed to establish that the notice was issued to a

wrong address, the presumption is required to be drawn

in respect of proper address. In this context, the

learned counsel for the appellant has placed reliance on

a decision reported in 2007 (6) SCC 555 [C.C. Alavi

Haji Vs. Palapetty Muhammed and Another] (Head

Note: A& B), wherein it is observed as under:-

A. Negotiable Instruments Act, 1881 - S. 138 provisos (b) & (c) - Compliance with requirement of giving a notice under-Notice sent by registered post returning "unserved"-Presumption as to service of notice in such a case-Raising of- Condition for - Necessity of making averments in the complaint that the service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved- Held, there is no need to make such averments in the complaint for raising presumption as to service of notice in the said situation as in view of S.27, General Clauses Act and S. 114, Evidence Act, once the notice is sent by registered post by correctly addressing the drawer of the cheque,

the service of notice is deemed to have been effected-But complaint must contain basic facts regarding the mode and manner of the issuance of notice to the drawer-Mandatory requirement of issue of notice in terms of S.138 proviso (b) stand complied with when the notice sent in the said manner-However, the drawer can rebut the presumption of service of notice by showing that he had no knowledge that the notice was brought to his address or the address mentioned on the cover was incorrect or the letter was never tendered or the report of the postman was incorrect-Such interpretation would effectuate the object and purpose for which the proviso to s.138 was enacted-In present case, complainant issuing lawyer's notice to accused intimating him of the dishonour of cheque-Said notice returned un-served with an endorsement that the accused was out of station-No averment in complaint that the notice was sent to the correct address of the drawer of cheque by registered post, acknowledgment due-But, returned envelope annexed to complaint showed the said fact-Hence held, the mandatory requirements of S.138 had been sufficiently complied with-Evidence Act, 1872, S. 114 III. (f)-General Clauses Act, 1897, S.27-Interpretation of Statutes-Basic rules- Purposive construction-Application of

B. Negotiable Instruments Act, 1881 - S. 138 provisos (b) & (C)-Course open to drawer where he claims not to have received the notice sent by post but received copy of the complaint with the summons-Held, he can within 15 days of the receipt of the summons make payment of the cheque amount and on that basis submit to the court that the complaint be rejected-He then cannot contend that there was no proper service of notice."

In the instant case, the complainant has pleaded that,

notice was issued under RPAD as well as 'COP'. No

evidence is produced by the accused to show that the

notice was issued to wrong address.

20. In the above decision, the Hon'ble Apex Court

has further observed that, the course open to the drawer

where he claims not to have received the notice sent by

post, but received copy of the complaint with the

summons, then he can within 15 days of the receipt of

the summons, make payment of the cheque amount and

in that view of matter, he has no right to contend that

there was no proper service.

21. In the instant case, the accused has

appeared through his counsel after service of summons.

But, no payment has been made. He is not even replied

to the notice sent under COP. Under such circumstances,

now it is not open to the accused to challenge on the

ground that there is no proper service, when he himself

has failed to establish his proper address. His evidence

in cross-examination reveals that he was residing in the

said address itself and he has not produced any

document to show the exact address. Further, the

postal endorsement does not disclose that, the

addressee was not residing in the given address. But, it

shows that, when the service of notice was attempted,

he was not found regularly. Hence, in view of the

decisions referred to supra, the presumption can be

drawn that the notice is duly served on the accused. In

this context itself, the learned counsel for appellant has

also placed reliance on an unreported decision of this

Court in Criminal Appeal No.338/2011 [M. Nagappa

Vs. Mohammad Aslam Savanur], wherein this Court

has clearly held that the address shown on the postal

cover and in the cause-title of the complaint are one

and the same and as such, there is deemed service. The

said principles are directly applicable to the case in hand.

22. Learned counsel for the respondent/accused

has placed reliance on a decision reported in 2019 (5)

SCC 418 [Basalingappa Vs. Mudibasappa] and

argued that the complainant is required to establish his

case beyond all reasonable doubt and the accused can

rebut the presumption on the basis of the cross-

examination also. Absolutely, there is no dispute

regarding the principles enunciated in the above said

decisions. But, as observed above, the accused has

taken a defence that the cheque was issued to one

Shantha Raju in respect of a chit transaction with him.

But, the evidence of DW.2 disclose that the accused has

issued a cheque on behalf of DW.2 towards a chit

transaction of DW.2. Their evidence is inconsistent and

contrary. Further, no material evidence is produced to

show the chit transaction between the accused and

Shantha Raju. Hence, the burden shifts on the accused

to rebut the presumption on the basis of preponderance

of probabilities and that was not done in the instant

case. As such, with due regard to their Lordships, the

principles enunciated in the above said decision cannot

be made applicable to the case in hand.

23. On analysis of the evidence placed on record,

the trial Court has erroneously held that the notice is not

duly served on the accused ignoring the material

evidence placed and provision under Section 27 of the

General Clauses Act, 1897. Further, the trial Court has

failed to consider that the defence of the accused is

inconsistent regarding issuance of cheque to one

Shantha Raju and hence, the presumption was not at all

rebutted. Hence, the judgment of the trial Court is

perverse, arbitrary and against the settled principles of

law. The trial Court has not even bothered to draw a

presumption in favour of the complainant under Section

139 of the N.I. Act, when the cheque is admittedly

belonged to the accused and it bears his signature,

which has resulted in miscarriage of justice. Hence, the

finding recorded by the trial Court regarding service of

notice and financial status of the complainant are

contrary to the records. In view of the ratio laid down

by the Hon'ble Apex Court as referred by the learned

counsel for the appellant, it is evident that the

complainant has discharged his burden of proving the

guilt of the accused beyond all reasonable doubt,

including service of notice on accused. The

respondent/accused has failed to rebut the presumption

by placing any cogent and convincing material evidence.

Hence, the finding of the trial Court is unsustainable

under law. Accordingly, I answer the point under

consideration in the affirmative.

24. For the foregoing reasons, I proceed to pass

the following:-

ORDER

i) The appeal is allowed. The impugned judgment and order of acquittal dated 26.02.2011 passed by the II Additional Civil

Judge and JMFC, Shivamogga, in CC No.1743/2009, is set aside.

ii) The respondent/accused is convicted for the offence punishable under Section 138 of the N.I. Act and he is sentenced to pay fine of Rs.2,00,000/-, in default, to undergo Simple Imprisonment for a period of three months.

iii) Out of fine amount, Rs.50,000/- shall be remitted to the State and remaining amount of Rs.1,50,000/- shall be paid as compensation to the complainant.