Karnataka High Court

Sri K T Nagaraj vs Sri Bettaswamy Gowda on 15 December, 2023

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                                       CRL.A No. 128 of 2020


  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 15TH DAY OF DECEMBER, 2023

                           BEFORE

          THE HON'BLE MR. JUSTICE S RACHAIAH

           CRIMINAL APPEAL NO. 128 OF 2020

BETWEEN:
SRI K.T. NAGARAJ,
S/O. K. THIMMEGOWDA,
AGED ABOUT 42 YEARS,
R/AT NO.85, 9TH MAIN,
1ST C CROSS, NEAR S.L.V. PARTY HALL,
BYATARAYANAPURA NEW EXTENSION,
MYSORE ROAD,
BENGALURU-560 026.
                                                    ...APPELLANT
(SRI RAJANNA M.V., ADVOCATE)

AND:

SRI BETTASWAMY GOWDA,
AGED ABOUT 50 YEARS,
R/AT NO. 1416, NANJUNDESHWARA NILAYA,
8TH MAIN, NEAR WATER TANK,
BANASHANKARI I STAGE,
II BLOCK, HANUMANTHNAGAR,
BENGALURU-560 050.
                                                  ...RESPONDENT
(BY SRI B.J. KRISHNA, ADVOCATE)

      THIS CRL.A FILED U/S.378(4) OF CR.P.C PRAYING TO SET
ASIDE THE JUDGMENT OF ACQUITTAL DATED 29.08.2019 PASSED
BY THE VI ADDITIONAL JUDGE, COURT OF SMALL CAUSES AND
A.C.M.M, BENGALURU IN C.C.NO.2197/2018 ACQUITTING THE
RESPONDENT / ACCUSED FOR THE OFFENCE P/U/S 138 OF N.I ACT.

     THIS CRIMINAL APPEAL HAVING BEEN HEARD THROUGH
PHYSICAL HEARING / VIDEO CONFERENCING HEARING AND
RESERVED ON 19.09.2023 BEFORE THE PRINCIPAL BENCH AT
BENGALURU BENCH, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT, BEFORE THE DHARWAD BENCH, THROUGH VIDEO
CONFERENCING, THIS DAY, THE COURT DELIVERED THE
FOLLOWING:
                                -2-
                                      CRL.A No. 128 of 2020


                            ORDER

1. This appeal is filed by the complainant/appellant being

aggrieved by the judgment and order of acquittal dated

29.08.2019 passed in C.C.No.2197/2018 on the file of VI

Additional Judge, Court of Small Causes and Additional

Chief Metropolitan Magistrate, Bengaluru City, wherein,

the Trial Court acquitted the accused/respondent for the

offence punishable under Section 138 of the Negotiable

Instruments Act (for short 'N.I. Act').

2. The rank of the parties in the Trial Court henceforth will

be considered accordingly for convenience.

Brief facts of the case:

3. It is the case of the complainant that the accused was

working as Scooter mechanic and he used to come to the

Chicken centre of the complainant. Both the accused and

the complainant were known to each other for the past 8

to 10 years. Taking advantage of the friendship, the

accused in the month of July 2016 had approached the

complainant for hand loan of Rs.3,00,000/- promising to

repay the same within a short period. The complainant

has lent a sum of Rs.3,00,000/- on 14.08.2016. The

complainant in the year 2017 demanded to repay the

amount. The accused issued post dated cheque dated

26.12.2017 and asked the complainant to present it for

encashment. The accused on presentation, received

message from the bank that the cheque got dishonoured

as 'funds insufficient' on 02.01.2018. Thereafter, a legal

notice came to be issued on 06.01.2018 through RPAD.

Inspite of notice having been served to the accused, the

accused has failed to repay the amount nor replied to the

said notice. Therefore, the complainant has filed a

complaint before the jurisdictional Magistrate.

4. The complainant in order to prove his case examined

himself as PW.1 and got marked four documents as

Exs.P1 to P4. On the other hand, the accused examined

himself as DW.1 and got marked two documents as

Exs.D1 and D2. The Trial Court after appreciating the

oral and documentary evidence on record opined that the

complainant has failed to establish his case and also

failed to prove the legally enforceable debt or liability and

further the complainant has failed to establish the

financial capacity. Being aggrieved by the same, the

complainant/appellant has preferred this appeal.

5. Heard Sri.Rajanna M.V, learned counsel for the appellant

and Sri.B.J.Krishna, learned counsel for the respondent.

6. It is the submission of learned counsel for the

complainant/appellant that the Trial Court committed

error in recording the acquittal stating that the

complainant has to prove the case beyond all reasonable

doubt even in the absence of rebuttable evidence by the

accused which is against the settled principle of law and

therefore, the same has to be considered and the

judgment and order of acquittal passed by the Trial Court

needs to be set aside.

7. It is further submitted that the complainant has proved

that he has lent amount of Rs.3.00 lakhs. The signature

and the cheque have been admitted by the accused.

However, the Trial Court has failed to raise the

presumption as stipulated under Section 139 of N.I.Act.

Hence, the judgment and order of acquittal is liable to be

set aside.

8. It is further submitted that the accused has not issued

reply notice and in the cross-examination of PW.1 nothing

has been elicited to substantiate to rebut the

presumption. Therefore, the impugned judgment is

required to be set aside. Making such submission, the

learned counsel for the appellant prays to allow the

appeal.

9. Per contra, the learned counsel for the respondent

vehemently justified the judgment and order of acquittal

and submitted that the accused had not borrowed any

money from the complainant at any point of time and he

had not issued cheque for the repayment of the said loan.

In fact, the accused was working as agent at Equinox

Infratech Limited. The accused has introduced the

complainant to the said company. The complainant was

asked to invest the money in the said company.

However, the complainant had asked cheque as a security

to invest the amount from the accused. Due to some

financial loss and constraint, the company had not repaid

the amount deposited by the complainant. The

complainant in turn filed a false case by misusing the

cheque which was given as a security by the accused.

10. It is further submitted that the Trial Court rightly held

that the complainant has not proved the legally

enforceable debt or liability and recorded the acquittal

which requires no interference. Making such submission,

the learned counsel for the respondent prays to dismiss

the appeal.

11. After having heard the learned counsel for the respective

parties and also perused the findings of the Trial Court in

recording the acquittal, the points which would arise for

my consideration are:-

i. Whether the finding of the Trial Court in

recording the acquittal for the offence

punishable under Section 138 of N.I Act is

justified?

ii. Whether the appellant has made out grounds to

interfere with the said findings?

12. This Court being a First Appellate Court, of course, has to

re-appreciate both facts and law, however, in a case of

appeal against the acquittal interference by the Appellate

Court is restricted and the Appellate Court can interfere

only where it is noticed that the findings of the Trial Court

in recording the acquittal appears to be perverse and

illegal.

13. Before adverting to the facts of the case, it is relevant to

refer to the preposition of law in respect of Negotiable

Instruments Act. In the case of KISHAN RAO v.

SHANKARGOUDA1, paragraph Nos. 18 to 22 read thus:

"18. Section 139 of the 1881 Act provides for drawing the presumption in favour of holder. Section 139 is to the following effect:

"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.

19. This Court in Kumar Exports v. Sharma Carpets, had considered the provisions of the Negotiable Instruments Act as well the Evidence Act. Referring to Section 139, this Court laid down the following in paras 14, 15, 18 and 19: (SCC pp. 519-20)

"14. Section 139 of the Act 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.

15. Presumptions are devices by use of which the courts are enabled and entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence. Under the Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) "may presume"

(rebuttable), (2) "shall presume" (rebuttable),

(2018) 8 SCC 165

and (3) "conclusive presumptions" (irrebuttable).

The term "presumption" is used to designate an inference, affirmative or disaffirmative of the existence of a fact, conveniently called the "presumed fact" drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumption literally means "taking as true without examination or proof".

18. Applying the definition of the word "proved" in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.

19. The use of the phrase "until the contrary is proved" in Section 118 of the Act and use of the words "unless the contrary is proved"

in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that

the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over."

20. This Court held that the accused may adduce evidence to rebut the presumption, but mere denial regarding existence of debt shall not serve any purpose. Following was held in paragraph 20 (Kumar Exports v. Sharma Carpets):

"20....The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non- existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non- existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist..."

21. In the present case, the trial court as well as the Appellate Court having found that cheque contained the signatures of the accused and it was given to the appellant to present in the Bank of the presumption under Section 139 was rightly raised which was not rebutted by the accused. The accused had not led any evidence to rebut

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the aforesaid presumption. The accused even did not come in the witness box to support his case. In the reply to the notice which was given by the appellant the accused took the defence that the cheque was stolen by the appellant. The said defence was rejected by the trial court after considering the evidence on record with regard to which no contrary view has also been expressed by the High Court.

22. Another judgment which needs to be looked into is Rangappa vs. Sri Mohan, 2010 (11) SCC

441. A three Judge Bench of this Court had occasion to examine the presumption under Section 139 of the Act, 1881. This Court in the aforesaid case has held that in the event the accused is able to raise a probable defence which creates doubt with regard to the existence of a debt or liability, the presumption may fail. Following was laid down in paragraphs 26 and 27:

"26. In light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat, (2008) 4 SCC 54, may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.

27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of

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improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard or proof."

14. On careful reading of the above dictum of the Hon'ble

Supreme Court, it makes it clear that if the complainant

fulfills the ingredients of the Negotiable Instruments Act,

it is presumed that the holder of the cheque received the

cheque of the nature referred to in Section 138 of the N.I

Act, for discharge, in whole or in part of any debt or

other liability. The said presumption is rebuttable in

nature. The accused has to lead cogent evidence in

rebutting the said presumption. Unless, the contrary is

proved, it is presumed that the said cheque is issued for

discharge of legally enforceable debt or liability. In the

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present case, the accused has not issued reply notice in

respect of legal notice having been received.

15. It is well settled principle of law that initially accused has

to lead evidence to rebut the presumption. The accused

need not enter into witness box to lead the evidence to

rebut the presumption, however, the accused may rebut

the presumption by relying on the material brought by

the complainant and also by conducting the cross-

examination and elicit the contradictions in respect of

transaction.

16. In the present case, the accused himself has been

examined as DW.1 and he has contended that he has not

borrowed any loan from the complainant and the cheque

in question was not issued for the purpose of discharge

of any debt or liability. In the cross-examination, he has

admitted that he had not mentioned regarding the loan

in the Income Tax Returns.

17. The accused has successfully brought to the knowledge

of the Court that the complainant had invested in the

Equinox Infratech Limited by producing two documents

and those documents have been marked as Exs.D1 and

D2. Those documents indicate that the complainant had

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invested money in the Company. However, the accused

has not proved that he has issued a cheque relating to

the said deposit. The evidence of the complainant

indicates that the accused had borrowed loan of

Rs.3,00,000/- and issued a cheque for the repayment of

the said loan.

18. When the accused failed to rebut the presumption by

taking the defence and the said defence had not been

accepted by the Court, the presumption certainly

prevails and the complainant is protected by the

presumption. Once the presumption is extended and the

accused failed to rebut the presumption, the conviction

of the accused follows. The findings of the Trial Court in

recording the acquittal appears to be perverse and illegal

and the same deserves to be set aside.

19. In the light of the observations made above, the points

that arose for my consideration are answered as under:-

      Point No.(i)           - "Negative"

      Point No.(ii)          - "Affirmative"

20. Hence, I proceed to pass the following:-

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                                   ORDER

i)     The Criminal Appeal is allowed.

ii)    The    judgment         and       order        of   acquittal     dated

29.08.2019 passed in C.C No.2197/2018 by the VI

Additional Judge, Court of Small Causes and

Additional Chief Metropolitan Magistrate, Bengaluru

is set aside.

iii) The respondent / accused is convicted for the

offence punishable under Section 138 of N.I. Act

and he is sentenced to pay a fine of Rs.3,50,000/-

(Rupees Three lakhs fifty thousand only), in default

of payment of fine, he shall undergo simple

imprisonment for one year.


iv)    On deposit of fine amount, it is ordered that amount

       of    Rs.3,40,000/-        (Rupees             Three     lakhs    forty

       thousand        only)       to        be        payable     to      the

complainant/appellant as compensation in terms of

Section 357-A of the Code of Criminal Procedure

and the balance of Rs.10,000/- (Rupees Ten

thousand only) to be adjusted to the exchequer of

the State.

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v) The Registry is directed to send the record along

with the copy of the judgment to the Trial Court

forthwith.

vi) The Trial Court is directed to secure the presence of

the accused for execution of sentence imposed by

this Court in accordance with law.