Karnataka High Court

L R Gangadharaiah vs Nanjundaiah on 7 February, 2024

                           -1-
                                      CRL.A.No.457 of 2013


IN THE HIGH COURT OF KARNATAKA AT BENGALURU

   DATED THIS THE 7TH DAY OF FEBRUARY, 2024

                         BEFORE
        THE HON'BLE MR JUSTICE ANIL B KATTI
         CRIMINAL APPEAL No.457 OF 2013 (A)
BETWEEN:

L.R.GANGADHARAIAH
S/O.PATEL RAMACHANDRAIAH,
AGED ABOUT 56 YEARS,
3RD DIVISION, 3RD CROSS,
B.H.ROAD, CHIKKANAYAKANAHALLY TOWN.
                                               ...APPELLANT
(BY SRI. M.R.NAGABHUSHAN, ADVOCATE)

AND:

NANJUNDAIAH
S/O.NANJAPPA
AGED ABOUT 70 YEARS
RETIRED VILLAGE ACCOUNTANT
BEHIND N.G.O'S CLUB
1ST DIVISION
CHIKKANAYAKANAHALLY TOWN
                                             ...RESPONDENT
(BY SRI. M.MUNEGOWDA, ADVOCATE FOR
    SRI. C.S.NAGENDRA, ADVOCATE)

       THIS APPEAL IS FILED UNDER SECTION 378(4) CR.P.C,
PRAYING TO SET ASIDE THE ORDER DATED: 12.03.2012 PASSED
BY THE PRL. CIVIL JUDGE AND JMFC, CHIKKANAYAKANAHALLI IN
C.C.NO.178/2000- ACQUITTING THE RESPONDENT/ACCUSED FOR
THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT.

       THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
29.01.2024, COMING ON FOR PRONOUNCEMENT OF JUDGMENT
THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:
                                   -2-
                                              CRL.A.No.457 of 2013




                            JUDGMENT

Appellant/complainant feeling aggrieved by

judgment of Trial Court on the file of Principal Civil Judge

and JMFC, Chikkanayakanahalli in C.C.NO.178/2000 dated

12.03.2012 preferred this appeal.

2. Parties to the appeal are referred with their

ranks as assigned in the Trial Court for the sake of

convenience.

3. Heard the arguments of both sides.

4. After hearing arguments of both sides and on

perusal of Trial Court records, the following points arise for

consideration:

1) Whether the impugned judgment under appeal passed by Trial Court for the offence punishable under Section 138 of N.I.Act is perverse, capricious and legally not sustainable?

2) Whether interference of this Court is required?

5. On careful perusal of oral and documentary

evidence placed on record, it would go to show that

accused is a close associate of complainant and for family

necessity borrowed amount of Rs.80,000/- from the

complainant. Accused in order to discharge the said debt

issued cheque Ex.P.1 bearing No.0729857 dated

25.12.1999 drawn on Karnataka Bank, Tiptur Branch for

an amount of Rs.80,000/-. Complainant presented the

said cheque through his banker, Canara Bank, C.N.Halli

Branch, and the same was dishonoured as "account

closed" on 1.3.2000 vide Bank endorsement Ex.P.3 which

was intimated by the complainant by communication of

the Canara Bank dated 3.3.2000 Ex.P.2. Complainant

issued demand notice dated 10.3.2000 Ex.P.4 through

RPAD and under certificate of posting. The receipt for

having sent the demand notice through UCP Ex.P.6, postal

receipt sent through RPAD Ex.P.7 and acknowledgement

card is produced at Ex.P.5.

6. Complainant has also examined PW.2 Keshav

Embrandi, Manager of Canara Bank and PW.3 Krishna

Prasad Acharya K, Manager of Karnataka Bank, Tiptur.

The evidence of these two witnesses would go to show

that the cheque Ex.P.1 was returned as "account closed"

vide bank endorsement Ex.P.3. The said fact is not

disputed by the accused during the cross-examination of

PW.1. Accused, in spite of due service of demand notice

sent through RPAD dated 21.3.2000 Ex.P.5, neither paid

the amount covered under the cheque nor replied to the

demand notice. Therefore, complaint came to be filed on

6.4.2000.

7. If the above mentioned documents and the

evidence of PWs.1 to 3 are perused, then it would go to

show that the cheque issued by accused Ex.P.1 was

dishonoured with bank endorsement as "account closed"

Ex.P.3. Complainant has complied necessary legal

requirement in terms of Section 138(a) to (c) of

Negotiable Instruments, Act, 1881(herein after for brevity

referred to as "N.I.Act"). Thereafter, complaint is filed on

6.4.2000 within a period of one month in terms of Section

142(1)(b) of N.I.Act. Therefore, statutory presumption in

terms of Section 118 and 139 of the N.I. Act will have to

be drawn in favour of the complainant.

8. In this context of the matter, it is useful to refer

the judgment of Hon'ble Apex Court in APS Forex

Services Pvt. Ltd. Vs. Shakti International Fashion

Linkers and others reported in AIR 2020 SC 945,

wherein it has been observed and held that once the

issuance of cheque with signature on cheque is admitted,

there is always a presumption in favour of complainant

that there exist legally enforceable debt or liability. Plea

by accused that cheque was given by view of security and

same has been misused by complainant is not tenable.

It also profitable to refer another judgment of

Hon'ble Apex Court in P. Rasiya vs. Abdul Nazer and

another reported in 2022 SCC OnLine SC 1131,

wherein it has been observed and held that:-

" Once the initial burden is discharged by the complainant that the cheque was issued by the accused and signature of accused on the cheque is not disputed, then in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for discharge

of any debt or other liability. The presumption under Section 139 of N.I. Act is statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt or other liability which is in favour of the complainant/holder of the cheque, in that case it is for the accused to prove the contrary."

In view of the principles enunciated in the

aforementioned two judgments of Hon'ble Apex Court, it is

evident that when once issuance of cheque with signature

of accused on the account maintained by him is admitted

or proved then statutory presumption in terms of Section

118 and 139 of N.I. Act will have to be drawn.

9. It is now up to the accused to place rebuttal

evidence to displace the statutory presumption available in

favour of the complainant. In this context of the matter, it

is useful to refer the judgment of Hon'ble Apex Court in

Basalingappa Vs. Mudibasappa reported in 2019 Cr.R.

page No. 639 (SC), wherein it has been observed and

held that:

"Presumption under Section 139 is rebuttable presumption and onus is on accused to raise probable defence. Standard of proof for rebutting presumption is that of preponderance of probabilities. To rebut presumption, it is open for accused to rely on evidence laid by him or accused can also rely on materials submitted by complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from materials brought on record by parties, but also by reference to circumstances upon which they rely. It is not necessary for accused to come in witness box in support of his defence. Section 139 imposed an evidentiary burden and not a presumptive burden".

The Hon'ble Apex Court in its latest judgment in

Rajesh Jain v/s Ajay Singh reported in 2023 SCC

OnLine SC 1275, wherein it has been observed and held

that, once issuance of cheque with signature of accused is

either admitted or proved then, statutory presumption will

have to be drawn in favour of the complainant. The

burden of proving non-existence of legally enforceable

debt is on the accused.

In view of the principles enunciated in both the

aforementioned judgments of Hon'ble Apex Court, it is

evident that the accused to probabilise his defence can

rely on his own evidence or also can rely on material

submitted by complainant. It is not necessary for the

accused to step into witness box to probabilise his

defence.

10. Learned counsel for the complainant has argued

that accused has not made any basic foundation of his

defence on the first available opportunity by replying to

the demand notice. The demand notice is duly served to

the accused on 21.03.2000 Ex.P.5. However, the accused

has not replied to the demand notice by making

foundation of his defence. In support of such contention,

reliance is placed on the judgment of the Hon'ble Apex

Court in Tedhi Singh Vs. Narayan Dass Mahant reported

in (2022) 6 SCC 435 wherein it has been observed and

held in paragraph 9 of the judgment as under :

"9. xxxx The proceedings under Section 138 of the N.I. Act is not a civil suit. At the time, when the complaint gives his evidence, unless a case is set up in the reply notice to the statutory notice sent, that the complainant did not have the wherewithal, it cannot be expected of the complainant to initially lead evidence to show that he had the financial capacity. To that extent the Courts in our view were right in holding on those lines."

In view of the principles enunciated in this judgment,

the complainant was not expected to initially lead evidence

that he had the financial capacity. The defence of accused

in challenging the financial capacity was not known to the

complainant and as such, the complainant was not

expected to give evidence of his financial capacity when he

led his evidence. However, in the very same paragraph,

the Hon'ble Apex Court has further held as under :

"However, the accused has the right to demonstrate that the complainant in a particular case did not have the capacity and therefore, the case of the accused is acceptable which he can do by producing independent materials, namely, by examining his witnesses and producing documents. It is also open to him to establish the very same aspect

- 10 -

by pointing to the materials produced by the complainant himself. He can further, more importantly, achieve this result through the cross examination of the witnesses of the complainant. Ultimately, it becomes the duty of the courts to consider carefully and appreciate the totality of the evidence and then come to a conclusion whether in the given case, the accused has shown that the case of the complainant is in peril for the reason that the accused has established a probable defence.

The Hon'ble Apex Court has held that though accused

has not replied to the demand notice, the accused has the

right to challenge the financial capacity during the cross-

examination of PW.1 and the witnesses relied by the

complainant. Therefore, it is open for the accused to

challenge the financial capacity of complainant in giving

loan amount covered under Ex.P.1.

11. The Trial Court on appreciation of evidence of

PW.1 and documents Exs.P.1 to P.11 has recorded the

following findings in acquitting the accused :

1) Complainant has not enquired the reason for accused availing loan;

- 11 -

2) Complainant has failed to prove the financial capacity;

3) Complainant has not produced any document evidencing the loan transaction claimed by the complainant;

4) Writings on the cheque Ex.P.1 are not of accused.

On these grounds, the Trial Court has held that

complainant has failed to prove that cheque in question

Ex.P.1 was issued for lawful discharge of debt by the

accused.

12. The evidence of PW.1 in the cross-examination

would go to show that accused is known to the

complainant. According to the complainant he has given

hand loan of Rs.80,000/- to the accused. Accused has not

availed the first available opportunity to deny the loan

transaction in spite of due service of demand notice to the

accused vide Ex.P.5. Learned counsel for the accused has

argued that complainant has not produced any documents

for giving loan to the accused and also bank account

statement of complainant is not produced to show the

- 12 -

withdrawal of money from the Bank. Complainant either

in the complaint averments or in his examination-in-chief

has never stated that he has withdrawn money from Bank

account and paid to the accused. In terms of Section

118(a) of N.I. Act 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 then, it will

have to be presumed that consideration is passed to the

accused covered under the cheque Ex.P.1. It is for the

accused to place rebuttal evidence that no consideration

amount has been passed under the cheque Ex.P.1. What

has been elicited in the cross-examination of PW.1 is only

with regard to civil and criminal cases filed by complainant

and cases are being filed by others against complainant.

The mere pendency of some civil or criminal cases against

the complainant cannot be a ground to hold that no any

consideration amount was passed under cheque Ex.P.1.

- 13 -

13. Learned counsel for accused has also contended

that accused was retired Government employee and has

received service benefits on his retirement and he was not

in need of any money to seek loan from the complainant.

Other than the suggestions made in paragraph 6 of the

cross-examination of PW.1 which has been denied by the

witness, no other material has been produced by the

accused. Otherwise also, even if it is to be accepted that

accused has received some retirement benefits, that does

not mean that there was no reason for the accused to take

loan from the complainant. Accused has never denied

financial capacity of complainant to lend money of

Rs.80,000/-. Complainant admittedly a Government

employee working in AG's office and there was no any

difficulty for the complainant to generate an amount of

Rs.80,000/- to pay the same to the accused as a hand

loan. There is nothing in the cross-examination of PW.1 to

discredit the evidence of PW.1 and to create any doubt

regarding issuance of cheque Ex.P.1 for lawful discharge of

debt.

- 14 -

14. The main contention of accused is that

complainant being public servant cannot lend money to

accused without prior permission from the competent

authority. The accused has taken no any such defence

during the cross-examination of PW.1. When the

complainant had no any opportunity of answering the

claim of accused, cannot be allowed to raise such

contention in the appeal without there being basic

foundation regarding lending of loan without permission

from the competent authority.

15. The cheque issued by accused was dishnoured

with the bank endorsement as "account closed" dated

1.2.2000 vide bank endorsement Ex.P.3. The closure of

account by the accused after issuance of cheque with an

intention to defraud the complainant to receive the

proceeds under the cheque Ex.P.1 also attract penal action

under Section 138 of N.I Act.

16. Learned counsel for the complainant relied on

the judgment of the Hon'ble Apex Court in M/s.Kalamani

Tex & Another Vs. P.Balasubramanian in Criminal

- 15 -

Appeal No.123 of 2021 dated:10.02.2021 reported in

(2021) 5 SCC 283, wherein it has been observed and

held at paragraph (14) as under :

"14. Adverting to the case in hand, we find on a plain reading of its judgment that the trial court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA. The Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these 'reverse onus' clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. This point of law has been crystallized by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat reported in (2019) 18 SCC 106 in the following words:

"In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to

- 16 -

show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant-accused..."

The Hon'ble Apex Court having so observed has held

that the approach of the Trial Court was directly in the

teeth of the established legal position as discussed above

and amounts to patent error of law, confirmed the

judgment of the High Court in reversing the judgment of

Trial Court and convicting the accused for the offence

under Section 138 of the N.I Act.

17. Therefore, in view of the principles enunciated in

this decision, the Trial Court has not properly appreciated

the evidence on record and has committed serious error in

holding that complainant has failed to prove that cheque in

question Ex.P.1 was issued for lawful discharge of debt.

The said finding being contrary to the said evidence on

record cannot be legally sustained.

18. The Trial Court without there being any requisite

evidence brought on record in the cross-examination of

- 17 -

PW.1 has drawn it's own presumption and held that

complainant has not proved the fact that the cheque

Ex.P.1 was issued for lawful discharge of debt. In view of

the principles enunciated in the aforementioned judgments

of the Hon'ble Apex court, when the issuance of cheque

with signature of accused is proved by the complainant,

then statutory presumption under Section 118 and 139 of

the N.I. Act will have to be drawn. The onus shifts on the

accused to prove that Ex.P.1 cheque was not issued for

lawful discharge of debt. The accused by virtue of cross-

examination of PW.1 has not brought any material

evidence on record or the circumstances to displace the

statutory presumption available in favour of the

complainant.

19. When the accused has failed to place rebuttal

evidence to displace the statutory presumption available in

favour of the complainant, then the statutory presumption

in favour of the complainant under Section 118 and 139 of

the N.I. Act will continue to operate. The evidence of PWs.

1 to 3 and the documents at Exhibits P.1 to P.5 would go

- 18 -

to show that accused has issued cheque in question Ex.P.1

for lawful discharge of debt. Accused has failed to

probabilise his defence. Therefore, it will have to be held

that complainant has proved that accused has committed

offence under Section 138 of N.I. Act.

20. The question now remains is regarding

imposition of sentence. The Court while imposing sentence

should keep in mind the nature of transaction, evidence

placed on record and the other attending circumstances

leading to the issuance of cheque Ex.P.1. If these things

are kept in mind, in view of facts and circumstances of the

case, then if the accused is sentenced to pay a fine of

Rs.90,000/- and in default of payment of fine to undergo

S.I. for 3 months is ordered, will meet the ends of justice.

Consequently, proceed to pass the following :

ORDER

The appeal filed by the appellant/complainant is

hereby allowed.

- 19 -

The judgment of the Trial Court on the file of

Principal Civil Judge and JMFC, Chikkanayakanahalli in

C.C.No.178/2000, dated: 12.03.2012 is hereby set aside.