Karnataka High Court

Sri M Nagaraj vs Mr R Sridhar on 21 February, 2024

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                                   CRL.A.No.1055 of 2014


  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

      DATED THIS THE 21ST DAY OF FEBRUARY, 2024

                         BEFORE
        THE HON'BLE MR JUSTICE ANIL B KATTI
        CRIMINAL APPEAL NO. 1055 OF 2014 (A)


BETWEEN:

SRI M.NAGARAJ
S/O N.MUNIACHAR,
AGED ABOUT 50 YEARS,
R/AT NO.18, 1ST CROSS,
SIR,M.V. NAGAR,
KALKERE MAIN ROAD,
RAMAMURTHY NAGAR,
BANGALORE 560016.
                                             ...APPELLANT
(BY SRI.RAMACHANDRA G. BHAT, ADVOCATE)

AND

MR.R.SRIDHAR
S/O RAMAKRISHNA,
AGED ABOUT 45 YEARS,
R/AT NO.103, H. COLONY,
INDIRA NAGAR, 1ST STAGE,
MASJID ROAD,
BANGALORE 38
                                           ...RESPONDENT
(BY SRI. JEEVAN K., ADVOCATE)

     THIS CRL.A. IS FILED U/S.378 CR.P.C BY THE ADV., FOR
THE APPELLANT PRAYING TO SET ASIDE THE ORDER
DATED:25.10.2014 PASSED BY THE XXII ADDL. CHIEF
METROPOLITAN     MAGISTRATE,     BANGALORE     CITY,   IN
C.C.NO.22621/12-ACQUITTING THE RESPONDENT/ACCUSED
FOR THE OFFENCE P/U/S 138 OF N.I. ACT.

     THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
13.02.2024 COMING ON FOR PRONOUNCEMENT OF JUDGMENT
THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:
                                 -2-
                                             CRL.A.No.1055 of 2014




                            JUDGMENT

Appellant/complainant feeling aggrieved by judgment

of Trial Court on the file of XXII ACMM Bengaluru City in

C.C.No.22621/2012, dated 25.10.2014 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, so also the impugned

judgment under appeal, the following arise for

consideration:

1) Whether the impugned judgment of Trial Court in acquitting the accused 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

complainant is well known to accused from several years.

Accused approached complainant on 15.10.2011 and

requested for financial help to meet his domestic

problems. Complainant has given hand loan of

Rs.6,05,000/- and accused has issued post dated cheque

bearing No.007890 dated 23.07.2012 for Rs.3,05,000/-

drawn on ICICI Bank Indira Nagar branch, Bengaluru

Ex.P.1 and another cheque bearing No.256493 dated

23.07.2012 for Rs.3,00,000/- drawn on Andhra Bank,

Krishna Rajapuram Branch, Bengaluru Ex.P.2 for lawful

discharge of debt. Complainant has presented both

cheques to his banker through State Bank of Mysore and

the same were dishonoured as "Funds Insufficient" vide

bank endorsement Ex.P.4. Complainant issued demand

notice dated 04.08.2012 Ex.P.5 through registered post

and postal receipt is produced at Ex.P.5A. The demand

notice issued by complainant is duly served to accused

vide postal acknowledgement card Ex.P.5B on 06.08.2012.

If these documents are perused and appreciated with the

oral testimony of PW.1, then it would go to show that

complainant has complied all the necessary legal

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

Negotiable Instruments Act, 1881(hereinafter for brevity

referred to as "N.I.Act"). Thereafter, complainant has filed

the complaint on 21.09.2012 within a period of one month

from the date of accrual of cause of action in terms of

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

presumption in terms of Section 118 and 139 of N.I.Act

will have to be drawn in favour of complainant.

6. 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.

7. It is 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.

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

evidence to displace statutory presumption available in

favour of complainant. Accused in order to prove his

defence has chosen to rely on material produced by

complainant and the confronted documents Exs.D.1 and 2.

Whether the said material evidence placed on record by

accused would be sufficient rebuttal evidence to displace

the statutory presumption available in favour of

complainant or not has to be decided.

9. 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 it's 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.

10. In view of the principles enunciated in both the

aforementioned judgment, 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.

11. It is the defence of accused as could be made

out from the cross-examination of PW.1 that the demand

notice issued by complainant is not duly served to

accused. Secondly, complainant has no source of income

to pay a huge loan amount of Rs.6,05,000/- covered

under Exs.P.1 and 2. Thirdly, complainant has offered no

any explanation as to why accused has issued two cheques

and lastly complainant has filed another case against

accused. The burden of proving the above referred

defence brought on record in cross-examination of PW.1 is

on the accused.

12. The first contention of accused is that demand

notice is not duly served to accused. Complainant has

issued demand notice dated 04.08.2012 Ex.P.5. The postal

receipt is produced at Ex.P.5A and the acknowledgement

card for having served the demand notice is produced at

Ex.P.5B. It is suggested to PW.1 in the cross-examination

that the signature appearing on the acknowledgement

card Ex.P.5B is not that of accused and as such the

demand notice is not served to accused, the same has

been denied by PW.1. Accused has not challenged the

correctness of his residential address as shown in the

cause title of the complaint. In the present case the

summons was ordered to be issued to accused on

20.03.2013. The same is duly served to accused and the

police report is accordingly filed on the very same address

shown in the complaint. Accused has not placed any

contrary evidence to disbelieve the above referred

evidence placed on record.

13. Learned counsel for complainant in support of

his contention when the demand notice is addressed to

correct address of accused, then it will have to be held

that there is also service of demand notice relied on the

judgment of Hon'ble Apex Court in K. Bhaskaran Vs.

Sankaran Vaidhyan Balan and another reported in

(1999) 7 SCC 510, wherein it has been observed and

held in para No.21 and 20 as under:

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"The context envisaged in Section 138 of the Act invites a liberal interpretation for the person who has the statutory obligation to give notice because he is presumed to be the loser in the transaction and it is for his interest the very provision is made by the legislature. The words in clause (b) of the proviso to Section 138 of the Act show that the payee has the statutory obligation to "make a demand" by giving notice. The thrust in the clause is on the need to "make a demand". It is only the mode for making such demand which the legislature has prescribed. A payee can send the notice for doing his part for giving the notice. Once it is despatched his part is over and the next depends on what the sendee does.

20. If a strict interpretation is given that the drawer should have actually received the notice for the period of 15 days to start running no matter that the payee sent the notice on the correct address, a trickster cheque drawer would get the premium to avoid receiving the notice by different strategies and he could escape from the legal consequences of Section 138 of the Act. It must be borne in mind that the court should not adopt an interpretation which helps a dishonest evader and clips an honest payee as that would defeat the very legislative measure."

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14. Learned counsel for complainant also relied on

another judgment of Hon'ble Apex Court in C.C.Alavi Haji

Vs. Palapetty Muhammed and Another reported in

(2007) 6 SCC 555, where in it has been observed and

held in para 15 as under:

"15. Insofar as the question of disclosure of necessary particulars with regard to the issue of notice in terms of proviso (b) of Section 138 of the Act, in order to enable the Court to draw presumption or inference either under Section 27 of the G.C. Act or Section 114 of the Evidence Act, is concerned, there is no material difference between the two provisions. In our opinion, therefore, when the notice is sent by registered post by correctly addressing the drawer of the cheque, the mandatory requirement of issue of notice in terms of Clause (b) of proviso to Section 138 of the Act stands complied with. It is needless to emphasise that the complaint must contain basic facts regarding the mode and manner of the issuance of notice to the drawer of the cheque. It is well settled that at the time of taking cognizance of the complaint under Section 138 of the Act, the Court is required to be prima facie satisfied that a case under the said Section is made out and the aforenoted mandatory statutory procedural requirements have been complied with. It is then

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for the drawer to rebut the presumption about the service of notice and show that he had no knowledge that the notice was brought to his address or that the address mentioned on the cover was incorrect or that the letter was never tendered or that the report of the postman was incorrect. In our opinion, this interpretation of the provision would effectuate the object and purpose for which proviso to Section 138 was enacted, namely, to avoid unnecessary hardship to an honest drawer of a cheque and to provide him an opportunity to make amends".

In view of the aforementioned two judgments of

Hon'ble Apex Court when the demand notice is sent to the

correct address of accused, then it will have to be held

that there is deemed service of notice. Therefore, the first

contention of accused that there is no service of demand

notice cannot be legally sustained.

15. The second contention of accused is that

complainant has no source of income. Accused in spite of

due service of demand notice has not chosen to give any

reply to the demand notice of complainant. Therefore,

accused has lost the first available opportunity to put

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forth his defence in challenging the financial capacity of

the complainant. However, in spite of it is open for

accused to challenge the financial capacity of the

complainant to lend money covered under two cheques

Exs.P.1 and 2. In this context of the matter it is useful to

refer the judgment of 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

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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 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

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challenge the financial capacity of complainant in giving

loan amount covered under Ex.P.1.

16. Complainant was unaware about the defence of

accused at time of filing complaint and also while giving

his evidence before the Court. Therefore, when the

accused during cross-examination of PW.1 has challenged

financial capacity of accused in lending money covered

under cheque Exs.P.1 and 2. Complainant has led

additional evidence and produced lease agreement dated

04.10.2011 and has deposed to the effect that he has

received an amount of Rs.7,00,000/- as deposit and the

same does not carry any interest which is refundable at

the time of tenant vacating the premises. On the said

document PW.1 was subjected to cross-examination, but

nothing worth material has been brought on record to

discredit the evidence of PW.1 regarding the money

received by complainant as deposit under lease agreement

dated 04.10.2011. The transaction of loan in the present

case took place on 15.10.2011 within 11 days from the

date of lease agreement. Therefore, there is every reason

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to believe the evidence of PW.1 and the document of lease

agreement Ex.P.7 that complainant possessed an amount

of Rs.7,00,000/- which he has received as lease deposit

on 04.10.2011 and out of the said amount given loan of

Rs.6,05,000/- to the accused. Accused has not lead any of

his evidence nor brought any worth material in the cross-

examination of PW.1 to discredit the source of income

acquired by complainant to give loan amount of

Rs.6,05,000/- to accused on 15.10.2011. Therefore, from

the said material evidence on record complainant has

proved that he had got sufficient source of income to give

money to accused as on 15.10.2011. Therefore, the

second contention of accused in challenging the financial

capacity of complainant to lend money also cannot be

legally sustained.

17. The third contention of accused is that

complainant has not offered any explanation as to why

two cheques Exs.P.1 and 2 are issued for one loan

transaction of Rs.6,05,000/-. Complainant is not under

legal obligation to offer explanation as to why accused

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issued two cheques Exs.P.1 and 2 for one loan transaction

of Rs.6,05,000/-. The burden is on the accused to prove

as to how complainant came in possession of cheque

Exs.P.1 and 2 and non existence of legally enforceable

debt. It is elicited in the cross-examination of PW.1 that

father of accused has deposited Rs.50,000/- to the bank

account of accused evidenced under Ex.D.1 to which

complainant admits. It is denied by PW.1 that accused has

issued cheque for the said transaction and by making use

of said cheque another case is also filed against accused.

The payment evidenced under the bank statement of

complainant under Ex.D.1 is on 19.02.2011 and the said

transaction was related to the father of accused. The

present transaction involved in the case is as on the

23.07.2012 with the accused. If at all the contention of

accused is to be accepted that he has issued signed

cheque to complainant for the loan of his father, then why

he kept quite from February 2011 till date of issuance of

cheque Exs.P.1 and 2 on 23.07.2012 has not been

explained by accused. It is true that PW.1 has admitted

that he has filed another case against accused and the

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said case is filed after service of summons of the present

case. Just because complainant has filed another case

against accused cannot be a ground to hold that

complainant has misused both the cheques covered under

Exs.P.1 and 2. Accused has not offered any explanation

regarding third cheque against which complainant has

filed case against accused. If at all the accused has given

the cheque for the loan of his father then he would have

very well examined his father. However for the reasons

best known to accused he has not chosen to examine his

father. Therefore, in the absence of any valid explanation

or evidence of accused, the contention of accused that he

has issued signed cheque for the loan of his father and the

same has been misused by complainant cannot be

accepted. Therefore, both the contentions of the accused

also cannot be legally sustained.

18. When the accused has failed to probabilise his

defence on the basis of the rebuttal evidence placed on

record or the rebuttal evidence cannot be legally

sustained, then in that event of the matter statutory

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presumption available in favour of complainant in terms of

Section 118 and 138 of N.I.Act continues to operate in his

favour. Complainant out of the above referred evidence

placed on record has proved that accused has issued

cheque Exs.P.1 and 2 for lawful discharge of debt and the

same were dishonoured for want of sufficient funds in the

account of accused and the accused has committed the

offence punishable under Section 138 of N.I.Act. The

contrary finding recorded by Trial Court on the defences

raised by accused in the cross-examination of PW.1 cannot

be legally sustained.

19. Now the question remains is imposition of

sentence. The Court while imposing the sentence must

take into consideration the offence committed by the

accused, nature of evidence on record, the circumstances

under which the cheque in question Exs.P.1 and 2 were

issued and other attending circumstances. If the said

factors are taken into consideration and the evidence on

record is appreciated, then if the accused is sentenced to

pay a fine of Rs.6,15,000/- and in default of payment of

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fine shall undergo Simple Imprisonment for a period of 6

months is ordered will meet the ends of justice.

Consequently, proceed to pass the following:

ORDER

Appeal filed by appellant/complainant is hereby

allowed.

The judgment of Trial Court on the file of XXII ACMM

Bengaluru City in C.C.No.22621/2012, dated 25.10.2014

is hereby set aside.

Accused is convicted for the offence punishable under

Section 138 of N.I.Act and sentenced to pay a fine of

Rs.6,15,000/- and in default of payment of fine shall

undergo Simple Imprisonment for a period of 6 months.