Kerala High Court

Salim A vs State Of Kerala on 13 September, 2024

Crl.R.P.No.1149 of 2018              1


                                                      2024:KER:70322
                IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                    PRESENT

             THE HONOURABLE MRS. JUSTICE M.B. SNEHALATHA

   FRIDAY, THE 13TH DAY OF SEPTEMBER 2024 / 22ND BHADRA, 1946

                          CRL.REV.PET NO. 1149 OF 2018

      AGAINST THE JUDGMENT IN CRL.A NO.219 OF 2016 OF
ADDITIONAL SESSIONS COURT II, THIRUVANANTHAPURAM ARISING OUT OF
THE JUDGMENT IN CC NO.346 OF 2014 OF JUDICIAL MAGISTRATE OF
FIRST CLASS IV (MOBILE), THIRUVANANTHAPURAM.
REVISION PETITIONER/APPELLANT/ACCUSED:

              SALIM A.,
              S/O.ASSAN BAVA, UDAYAM HOUSE, HOUSE NO.180, P.T.P.
              NAGAR, THIRUVANANTHAPURAM - 38, NOW RESIDING AT
              T.C.19/1284, METHOTTUKUZHI VEEDU, KUNCHALUMMOODU,
              KARAMANA P.O., THIRUVANANTHAPURAM.


RESPONDENTS/RESPONDENTS/STATE & COMPLAINANT:

      1       STATE OF KERALA
              REPRESENTED BY THE PUBLIC PROSECUTOR,
              HIGH COURT OF KERALA, ERNAKULAM.

      2       S. PURUSHOTHAMAN NAIR,
              VIJAYA VILASOM, PANGAPPARA P.O.,
              THIRUVANANTHAPURAM , 695581

              BY ADVS.
              SRI.POOVAPPALLY M.RAMACHANDRAN NAIR
              K.RAJESH KANNAN
              A.S.SHAMMY RAJ(K/1153/2002)
              MAYA M.N.-PUBLIC PROSECUTOR


       THIS CRIMINAL REVISION PETITION HAVING COME UP FOR HEARING
ON 04.09.2024, THE COURT ON 13.9.2024 DELIVERED THE FOLLOWING:
 Crl.R.P.No.1149 of 2018               2


                                                               2024:KER:70322
                                                                       CR
                           M.B.SNEHALATHA, J
                 -------------------------------------------
                          Crl.R.P.No.1149 of 2018
                 -------------------------------------------
           Dated this the 13th day of September, 2024


                                   ORDER

Revision Petitioner is the accused in C.C.No.346/2014 on the file

of Judicial First Class Magistrate Court-IV (Mobile Court),

Thiruvananthapuram. He assails the judgment in Crl.A No.219/2016

of Additional Sessions Court-II, Thiruvananthapuram which

confirmed the conviction and sentence against him in C.C

No.346/2014 for the offence punishable under Section 138 of

Negotiable Instrument Act, 1881 (hereinafter referred to as 'NI Act').

2. The parties shall be referred to as complainant and

accused.

3. The case of the complainant in brief is that Ext.P1 cheque

issued by the accused in discharge of the liability of the accused to

pay an amount of ₹3 lakhs was bounced stating the reason "payment

stopped by the drawer". In spite of receipt of Ext.P4 lawyer notice,

2024:KER:70322 accused neither sent any reply nor paid the amount covered by

Ext.P1 cheque. Accused thereby committed the offence punishable

under Section 138 of N.I Act.

4. Accused pleaded not guilty to the accusation and denied

issuance of Ext.P1 cheque in discharge of any debt or liability. His

defence was that complainant, who was an employee in his shop,

misused one of the signed blank cheques entrusted in connection

with his business.

5. Before the trial court, PWs 1 to 3 were examined on the

side of the complainant and Exts.P1 to P15 were marked. Accused

got himself examined as DW1. DW2 was examined on his side.

Exts.D1 to D6 were also marked.

6. After trial, the learned Magistrate found the accused guilty

under Section 138 N.I Act and he was convicted and sentenced to

undergo imprisonment till rising of the court and to pay a

compensation of ₹3 lakhs to the complainant under Section 357(3)

Cr.P.C with a stipulation that in default of payment of compensation,

accused shall undergo simple imprisonment for three months. The

appeal preferred by the accused as Crl.A.No.219/2016 was dismissed

by the Sessions Court by confirming the conviction and sentence.

2024:KER:70322

7. Admittedly, Ext.P1 is a cheque issued from the account

maintained by the accused with the Corporation Bank,

Vellayambalam Branch, Thiruvananthapuram. The accused would

also admit his signature in Ext.P1 cheque. Exts.P2 is the memo

issued from the Bank. Ext.P2 would show that Ext.P1 cheque was

dishonoured for the reason "payment stopped by the drawer".

Ext.P4 would reveal that upon receipt of Ext.P2 memo from the

Bank, the complainant caused to issue lawyer notice to the accused

intimating the factum of dishonour of Ext.P1 cheque and demanding

the amount covered by Ext.P1 cheque.

8. The version of the complainant who was examined as PW1

is that on 26.01.2013, accused borrowed ₹3 lakhs from him to meet

the marriage expenses of the daughter of accused and in discharge

of the said debt, accused issued a cheque dated 28.01.2013 drawn

on Vijaya Bank. Though he presented the said cheque for collection,

it was bounced due to 'insufficient funds' in the account of the

accused. Ext.P3 is the memo received from the bank. His further

version is that when he intimated the factum of dishonour of the said

cheque, the accused issued another cheque namely Ext.P1 cheque

dated 15.2.2013 drawn on Corporation Bank, Vellayambalam Branch,

2024:KER:70322 Thiruvananthapuram. According to PW1, though he presented

Ext.P1 cheque for collection, it was also returned dishonoured stating

the reason "Payment Stopped by the Drawer". Ext.P2 is the memo

received from the Bank.

9. Per contra, the defence canvassed by the accused is that

complainant was an employee in 'Bismillah Cold Storage' run by him;

that he had entrusted signed blank cheques with the complainant

and one such blank signed cheque was misused by the complainant.

His case is that there was a property transaction between himself

and the complainant whereby, he purchased the property of the

complainant for a sale consideration of ₹20 lakhs. Subsequent to the

execution of the said sale deed, complainant demanded an additional

sale consideration of ₹3 lakhs by saying that the property would

fetch more price. When the accused refused to oblige to the said

demand for additional sum, complainant misused one of the blank

signed cheques entrusted with him in connection with the business

purpose.

10. To substantiate his defence, accused got himself examined

as DW1. DW2 was also examined on his side. Exts.D1 to D6 were

also marked.

2024:KER:70322

11. Ext.P14 would reveal that there was a property

transaction between the complainant and the accused whereby the

accused purchased the property owned by the complainant for a sale

consideration of ₹20 lakhs. According to the complainant, he

received the entire sale consideration of ₹20 lakhs.

12. Though the accused would contend that the complainant

was an employee of the Cold Storage and Meat Stall run by him,

there is no acceptable evidence to show that the complainant was an

employee under him. There is no acceptable evidence in support of

the defence canvassed by the accused that he had entrusted blank

cheque leaves with the accused for his business purposes and one

such cheque leaf was misused by the complainant. The testimony of

DW2 do not in any way help the accused in substantiating his

defence. On the other hand, the evidence adduced by the

complainant would reveal that the accused borrowed an amount of

₹3 lakhs from the complainant on 26.1.2013 and in discharge of the

said debt, he issued a cheque dated 28.1.2013 for ₹3 lakhs drawn on

Vijaya Bank, Vellayambalam Branch and on presentation, the said

cheque was bounced. Exts.P8 and P3 fortifies the version of the

complainant that the cheque dated 28.1.2013 drawn on Vijaya Bank,

2024:KER:70322 Vellayambalam Branch issued by the accused was dishonoured for

lack of funds in the account of accused. It has also come out in

evidence that when the accused was informed about the dishonour

of cheque dated 28.1.2013 drawn on Vijaya Bank, Vellayambalam

Branch, he issued another cheque namely Ext.P1 cheque dated

15.2.2013 for ₹3 lakhs drawn on Corporation Bank, Vellayabalam

Branch. Ext.P2 memo would show that Ext.P1 cheque issued by the

accused was also dishonoured upon presentation for the reason

'payment stopped by the drawer'.

13. The complainant has established the factual basis for

raising the presumption under Section 118(a) and 139 of N.I Act.

Of course, it is a rebuttable presumption. Accused has not succeeded

in rebutting the said presumption as rightly held by the learned

Magistrate and confirmed by the learned appellate court. It is

obligatory for the court to raise the presumption under Section 139

of N.I Act, which is a presumption of law. If there was no debt or

liability as contended by the accused, he could have sent a reply to

Ext.P4 lawyer notice. The conduct of the accused in not sending any

reply to Ext.P4 notice speaks volumes in the facts and circumstances

of the case.

2024:KER:70322

14. The object of Chapter XVII comprising Section 138 to 142

of the N.I. Act was aimed at inculcating faith in the efficacy of

banking operations and giving credibility to negotiable instruments in

business transactions. A negotiable instrument is a solemn

document which carries with it a representation to the holder in due

course of any such instrument but also a promise that the same shall

be honoured for payment. Section 139 of the Negotiable Instruments

Act mandates that unless the contrary is proved, it is to be presumed

that a holder of a cheque, received the cheque of the nature referred

to in Section 138 of N.I. Act for the discharge in whole or in part of

any debt or liability. The said presumption is a rebuttable one.

However, the onus of proving that the cheque was not in discharge of

any debt or other liability is on the accused/drawer of the cheque. It

is to be borne in mind that Section 138 of N.I Act while making

dishonour of a cheque an offence also provides for safeguards to

protect the drawers of such instrument where dishonour may take

place for the reasons other than those arising out of dishonest

intentions. It mandates service of a notice upon the drawer of the

cheque calling upon him to make the payment covered by the

cheque and permits prosecution only after the expiry of the statutory

2024:KER:70322 period and upon failure of the drawer to make the payment within

the said period.

15. A question arises as to whether the dishonour of the

cheque would constitute an offence only in two contingencies

referred to in Section 138 and none else. The two contingencies

referred to in Section 138 of N.I. Act are (i) whether the cheque was

returned by the bank unpaid because of the amount of money

standing to the credit of that account is insufficient to honour the

cheque (ii) that it exceeds the amount arranged to be paid from that

account by an agreement made with that bank.

16. Hence the question is, in a case where cheque is returned

by the bank unpaid on the ground that 'payment stopped by the

drawer', would it constitute an offence under Section 138 of N.I Act?

17. If the argument that dishonour of the cheque for the

reason 'payment stopped by the drawer' could not constitute an

offence under Section 138 N.I Act is accepted, it will make Section

138 of N.I Act redundant and in such a case by giving instruction to

the bank to stop payment immediately after issuing a cheque

against a debt or liability, the drawer can easily get rid of the penal

consequences envisaged therein. The drawer of a cheque may

2024:KER:70322 practice many ingenious methods of avoiding payment.

18. In Electronics Trade and Technology Development

Corporation Ltd. Secunderabad v. Indian Technologists and

Engineers (Electronics) Pvt.Ltd. and another [1996(2) SCC 739], the

Apex Court held as follows:

"It would thus be clear that when a cheque is drawn by a person on an account maintained by him with the banker for payment of any amount of money to another person out of the account for the discharge of the debt in whole or in part or other liability is returned by the bank with the endorsement like (1) in this case, "I refer to the drawer"

(2) "instructions for stoppage of payment" and (3) "stamp exceeds arrangement", it amounts to dishonour within the meaning of Section 138 of the Act. On issuance of the notice by the payee or the holder in due course after dishonour, to the drawer demanding payment within 15 days from the date of the receipt of such a notice, if he does not pay the same, the statutory presumption of dishonest intention, subject to any other liability, stands satisfied."

19. In M/s.Modi Cements Ltd v. Shri.Kuchil Kumar Nandi

[(1998) 3 SCC 249] a question arose before the Apex Court as to

whether dishonour of a cheque on the ground that the drawer had

stopped payment was a dishonour punishable under Section 138 of

N.I. Act. The Apex Court held that if the proposition that dishonour

of cheque for the reason 'payment stopped by the drawer' could not

constitute an offence under Section 138 N.I Act is accepted, it will

make Section 138 N.I Act a dead letter, for, by giving instructions to

2024:KER:70322 the bank to stop payment immediately after issuing a cheque

against a debt or a liability the drawer can easily get rid of the penal

consequences notwithstanding the fact that a deemed offence was

committed.

20. In M.M.T.C Ltd. and another v. Medchl Chemicals and

Pharma (P) Ltd. and another [(2002) 1 SCC 234] the Apex Court

held that even in cases where the dishonour of the cheque was on

account of stop payment instruction of a drawer, a presumption

regarding a cheque being for consideration would arise under Section

139 of N.I Act and an offence under Section 138 N.I Act could still be

made out. The accused can establish that stop payment instructions

were not issued due to insufficiency or paucity of funds. If the

accused establishes that there were sufficient funds in his account to

clear the amount of the cheque at the time of presentation of cheque

for encashment at the drawer bank and that the stop payment notice

had been issued due to other valid reasons including that there was

no existing debt or liability at the time of presentation of cheque for

encashment, then the offence under Section 138 would not be made

out. The burden to prove such facts is on the accused. In Goaplast

(P) Ltd. v. Chico Ursula D'souza and another [(2003)3 SCC 232] the

2024:KER:70322 Hon'ble Apex Court held that stop payment instructions and

consequent dishonour of cheque attracts the offence under Section

138 N.I Act. The Apex Court observed as follows:

" This presumption coupled with the object of Chapter XVII of the Act which is to promote the efficacy of banking operation and to ensure credibility in business transactions through banks persuades us to take a view that by countermanding payment of post-dated cheque, a party should not be allowed to get away from the penal provision of Section 138 of the Act. A contrary view would render Section 138 a dead letter and will provide a handle to persons trying to avoid payment under legal obligations undertaken by them through their own acts which in other words can be said to be taking advantage of one's own wrong."

21. In Laxmi Dyechem vs. State of Gujarat and Ors.

(MANU/SC/1030/2012) the Hon'ble Apex Court held thus:

"The net effect is that dishonour on the ground that the payment has been stopped, regardless whether such stoppage is with or without notice to the drawer, and regardless whether the stoppage of payment is on the ground that the amount lying in the account was not sufficient to meet the requirement of the cheque, would attract the provisions of Section 138."

22. The evidence on record would show that Ext.P1 cheque

issued by the accused in discharge of his liability to pay an amount

of ₹3 lakhs to the complainant was dishonoured stating the reason

'payment stopped by the drawer'. Ext.P12 statement of account of

the accused would reveal that at the time when Ext.P1 cheque came

2024:KER:70322 for collection in the bank, there was no sufficient funds in the

account of the accused to honour Ext.P1 cheque.

23. The learned Magistrate and the learned Sessions Judge

have appreciated the evidence in its correct perspective and reached

at the right finding that the accused has committed the offence

under Section 138 N.I Act. Therefore, this Court finds no reason to

interfere with the finding of conviction and order of sentence passed