Madras High Court
M/S.Arrow Fashions vs Md.A.Tajudeen on 19 June, 2023
Crl.R.C(MD)No.670 of 2018
BEFORE THE MADURAI BENGH OF MADRAS HIGH COURT
DATED : 19.06.2023
CORAM
THE HONOURABLE MR. JUSTICE G.K.ILANTHIRAIYAN
Crl.R.C(MD)No.670 of 2018
1. M/s.Arrow Fashions
Rep.by its Managing Partner
A.Joseph Gnanarajan Arivarasu
No.8/2A, Sengunthapuram, 6th Cross
Karur-2
2.A.Joseph Gnanarajan Arivarasu ....Petitioners
Vs.
Md.A.Tajudeen ... Respondent
PRAYER: Criminal Revision Case filed under Section 397 read with Section
401 of the Code of Criminal Procedure, to set aside the order of judgment of
conviction and sentence imposed upon the appellants by the Mahalir
Neethimandram(Fast Track Mahila Court) Karur in Criminal Appeal No. 92 of
2017 dated 27.07.2018, whereby convicting and sentencing the first
appellant to pay a fine of Rs.1000/- and sentencing the second appellant to
undergo six months simple imprisonment by reversing the order of acquittal
passed by the learned Judicial Magistrate, Fast Track Court at Magisterial Level
, Karur in STC No.1048 of 2011 dated 21.07.2015.
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Crl.R.C(MD)No.670 of 2018
For Petitioners : Mr.K.Suresh
For Respondent : Mr.K.Suyambulinga Bharathi
for Mr.R.Tamilvanan
ORDER
This revision has been filed to set aside the order of judgment
of conviction and sentence imposed upon the appellants by the learned
Additional Sessions Judge, Fast Track Mahila Court, Karur in Criminal Appeal
No. 92 of 2017 dated 27.07.2018 reversing the order of acquittal passed by
the learned Judicial Magistrate, Fast Track Court (Magisterial Level) , Karur in
STC No.1048 of 2011 dated 21.07.2015.
2. The petitioners herein were arrayed as A1 and A2 in the complaint
lodged by the respondent herein for the offence under section 138 of the
Negotiable Instrument Act.
3. The crux of the complaint is that, the respondent is the proprietor of
Aathikaa Textiles and doing business in handloom, textile and other
businesses incidental thereto. The first appellant is a registered partnership
firm doing textile business and the second appellant being Managing Partner
of the firm and doing business along with one another and they involved in
day to day business affairs and the management of the first accused firm.
During the course of business transaction, the first accused firm is liable to
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Crl.R.C(MD)No.670 of 2018
pay a sum of Rs.7,77,529/- as on 31.12.2008 to the complainant. In order to
settle the above said dues, the first appellant issued two post dated cheques
dated 18.02.2009 for a sum of Rs.7,77,529/-. Both the cheques were
presented for collection on 08.05.2009. However, it was returned having
dishonoured, for the reason 'insufficient funds'. After causing statutory
notice, the respondent filed the complaint.
4. On the side of the respondent, he had examined three witnesses
and marked marked exhibits Exs.P.1 to P.16. On the side of the accused, he
was examined as D.W.1 and Court witnesses were also examined as Ex.X.1
to Ex.X.7.
5. On perusal of the oral and documentary evidence, the trial court
found the accused persons not guilty for the offence under section 138 of the
Negotiable Instrument Act and acquitted them. Aggrieved over the same, the
respondent filed an appeal and while allowing the appeal the appellate court
had convicted the first accused and directed the second accused to pay a
fine of Rs.1000/- on behalf of the first accused in default of payment of which
the second accused shall undergo simple imprisonment for one month and
the second and third accused are convicted and sented to undergo simple
imprisonment for a period of six months and to pay a fine of Rs.1000/- each
in default of payment of which they shall undergo simple imprisonment for a
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Crl.R.C(MD)No.670 of 2018
further one month. Aggrieved over the same, the present revision has been
filed by the first and second accused alone. The third accused did not file any
revision so far. At the same time, the respondent did not take any steps to
execute the order of the first appellate court as against the third accused.
6. The learned counsel for the appellants would submit that admittedly
the first accused had business transaction with the respondent with regard to
the textile business. As per Ex.P.12 and 13, the accused were having
outstanding liability to the tune of Rs.7,83,121/-, whereas, two cheques
were issued for a total sum of Rs.7,77,529/-. If at all, there is liability on the
part of the accused, they would have issued single cheque, whereas, both
cheques were given for security at the time of commencement of business
transaction between them. Even after presentation of the alleged cheques,
the accused had issued another cheque for a sum of Rs.2 lakhs and the same
was honoured on 18.03.2009 itself. Another cheque was also issued for a
sum of Rs.2,10,000/- and the same was returned as dishonoured. Thereafter,
the statutory notice had been issued and the same amount was also settled
by the second petitioner herein. Even then the said amount was not
deducted by way of specific endorsement, as contemplated under section 56
of the Negotiable Instrument Act. Therefore, without making any
endorsement to the subsequent payment made, the respondent initiated
proceedings under section 138 of the Negotiable Instrument Act. As such,
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Crl.R.C(MD)No.670 of 2018
conviction cannot be sustained as against the petitioners. In support of his
contention, he relied on the judgment of the Hon'ble Supreme Court, in the
case of Dashrathabhai Trikambahi patel .vs. Hitesh Mahendrabhai
patel and another in Criminal Appeal No.1497 of 2022.
7. Per Contra, the learned counsel for the respondent contended that
the respondent, discharged his initial burden as contemplated under section
138 of the Negotiable Instrument Act. The petitioners categorically admitted
their signatures found in the cheques and issuance of cheques. Therefore, the
petitioners ought to have rebutted the presumption as contemplated under
section 118 and 139 of the Negotiable Instrument Act in the manner known
to law. However, they failed to rebut the presumption. As such, the trial
Court convicted them and it does not require any interference by this Court.
He further submitted that before the court below, A1 and A2 engaged
separate counsel and A3 engaged separate counsel due to the dispute
between them. However, during cross examination, the third accused
explained about the subsequent payment made by him, in respect of
separate transaction and not any amount under Ex.Ps.12 and 13. It is not a
case of the petitioners that they paid part amount due, under Exps.12 and 13.
All along during the cross examination, it is the contention of the respondent
that the cheques were issued for security purpose and there is no legally
enforceable debt and therefore, the judgements cited by the learned counsel
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Crl.R.C(MD)No.670 of 2018
for the petitioners is not applicable to the case on hand. He further submitted
that a sum of Rs.2,10,000/- was settled only after lodging of the complaint
under section 138 of the Negotiable Instrument Act in respect of cheque No.
368363. Therefore, there is no question of endorsement required as
contemplated under section 56 of the Negotiable Instrument Act. In respect
of cheque no.368362 is concerned, a sum of Rs.2 lakhs which was encashed
on 18.03.2009 which pertains to some other transaction and the same was
categorically admitted by the respondent during the course of cross
examination. Though the petitioners cross examined to that effect that both
the cheques were issued and settled for a sum of Rs.4,00,000/- they had not
chosen to put any question with regard to those payments which were made
under Exps.12 and 13. Therefore, it is not their case that, the amount were
settled towards part of liability, under Exps.12 and 13. After admitting the
signature and cheques issued under Ex.P3 & P4, there is presumption under
sections 118 and 139 of the Negotiable Instrument Act and as such the
appellate court rightly convicted the petitioners and it does not warrant any
interference by this Court. In support of his contention, he relied on the
judgement of the Hon'ble Apex Court in the case of Kalamani Tex and Anr
-vs – P. Balasubramanian in Crl. A.No.123 of 2021, wherein it is held as
follows:
“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
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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
crystalized by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat10 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 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…..”
15. Once the 2nd Appellant had admitted his signatures on the cheque
and the Deed, the trial Court ought to have presumed that the cheque was
issued as consideration for a legally enforceable debt. The trial Court fell in error
when it called upon the Complainant- Respondent to explain the circumstances
under which the appellants were liable to pay. Such approach of the trial Court
was directly in the teeth of the established legal position as discussed above,
and amounts to a patent error of law. ....
8. Heard both sides and persued the materials available on record.
9. The petitioners were arrayed as A1 and A2 in the complaint lodged
by the respondent for the offence under section 138 of the Negotiable
Instrument Act. The trial court acquitted all the accused persons on the
ground that the accused categorically rebutted the presumption by
preponderance of probabilities. The specific case of the respondent is that the
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Crl.R.C(MD)No.670 of 2018
accused persons are liable to pay a sum of Rs.7,83,151/- and towards the said
liability they issued two cheques bearing Nos.368328 and 368335, which
were marked as Exs.P3 and P4, dated 18.02.2009 for a sum of Rs.7,00,000/-
and Rs.72,529/- respectively whereas, the total liability is Rs.7,83,151/- The
specific case of the appellant is that, both the cheques were issued for
security purpose at the time of commencement of business transaction.
Even before the date of presentation of cheques, the accused issued another
two cheques vide ref.No.368362 and 368363 for a sum of Rs.2,00,000/- and
Rs.10,000/-respectively, in which, the first cheque was honoured by the
accused and the second cheque was only returned as dishonoured.
10. After initiation of complaint under 138 of the N.I.Act, the said
amount (the dishonoured cheque amount) was also settled by the accused
persons in favour of the respondent herein. Therefore, they had paid in total
a sum of Rs.4,10,000/-. In other words, part of the amount was settled out
of the total amount due ie., Rs.7,83,121/-. However, the respondent without
taking into account the amount paid, presented the cheques for the entire
amount. The respondent ought to have deducted the amount which was
received by them and ought to have made endorsement under section 56 of
the NI Act and ought to have presented the cheque for only the remaining
amount
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Crl.R.C(MD)No.670 of 2018
11. The only point raised in this revision is that the appellants have
established the part payment of Rs.4,10,000/- made by them as part of the
liability after issuance of Exps. 3 and 4. On perusal of the deposition of PW.1
it is clear that the accused issued postdated cheque Exps.3 and 4 for a sum
of Rs.7,77,529/- dated 18.02.2009. Both the cheques were returned unpaid
for the reason insufficient funds, on the same day. In the meanwhile, the
accused was issued another two cheques bearing No.368362 for the sum of
Rs.2 lakhs dated 18.02.2009 and another cheque no.368363, dated
24.03.2009 for a sum of Rs.10,000/- in favour of the complainant. The first
cheque was duly signed by the respondent and realized and encashed and
the second cheque returned dishonoured. After causing statutory notice, the
respondent initiated complaint under section 138 of the N.I.Act. However, it
was returned for some reason and while representing the said complaint, the
cheque amount was also settled by the accused person in favour of the
respondent. Thereafter, the respondent did not proceed further under
section 138 of the N.I.Act as against the accused persons. The first cheque
was presented for collection on 18.02.2009 i.e., before presentation of Exps.
3 and 4. The second cheque was presented for collection on 24.03.2009 and
the same was returned as dishonoured. Again it was re-presented on
08.05.2009 namely, at the time of presentation of Exps.3 and 4., while
pending complaint, the said amount was also settled by the accused persons.
Therefore, there is no need for deducting the amount of Rs.2,10,000/- from
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Crl.R.C(MD)No.670 of 2018
Exps.3 and 4 whereas, even before presentation of Exps.3 and 4, a sum of
Rs.2 lakhs was encashed by the respondent and the same was not deducted
while presenting Exs.3 and 4, as contemplated under section 56 of the NI
Act.
12. It is relevant to extract the provisions of section 56 of the N.I.Act
which reads as follows:
“No writing on a negotiable instrument is valid for the purpose of
negotiation if such writing purports to transfer only a part of the amount
appearing to be due on the instrument; but where such amount has been partly
paid a note to that effect may be indorsed on the instrument, which may then be
negotiated for the balance”
which stipulates that, if there is an endorsement on a negotiable instrument,
that a part of the sum mentioned in the cheque has been paid, then the
instrument may be negotiated for the balance.
13.The learned counsel for the petitioner relied on the judgement of
the Hon'ble Apex Court in the case of Dashrathnhai Trikambhal Patel
-vs Hiteh Mahendrabhai Patel and another in Criminal Appeal No.
1497 of 2022, wherein it is held as follows:
“28. A Division Bench of the Kerala High Court has held in
Joseph Sartho v. Gopinathan12 that since the representation in the
cheque was for a sum higher than the amount that was due on the
date that it was presented for encashment, the drawer of the cheque
cannot be convicted for the offence under Section 138 of the Act. The
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High Court of Delhi addressed the same issue in Alliance Infrastructure
Project Ltd. v. Vinay Mittal13. The High Court observed that when part
payment is made after the cheque is drawn, the payee has the option
of either taking a new cheque for the reduced amount or by making an
endorsement on the cheque acknowledging that a part payment was
made according to the provisions of Section 56 of the Act. It was also
held that the notice of demand which requires the drawer of the
cheque to make payment of the whole amount represented in the
cheque despite receiving part repayment against the sum, before the
issue of notice, cannot be valid under Section 138(b) of the Act. A
similar view was taken by the High Court of Gujarat in Shree
Corporation v. Anilbhai Puranbhai Bansal14.
29. Under Section 56 read with Section 15 of the Act, an endorsement
may be made by recording the part-payment of the debt in the cheque
or in a note appended to the cheque. When such an endorsement is
made, the instrument could still be used to negotiate the balance
amount. If the endorsed cheque when presented for encashment of the
balance amount is dishonoured, then the drawee can take recourse to
the provisions of Section 138. Thus, when a part- payment of the debt
is made after the cheque was drawn but before the cheque is
encashed, such payment must be endorsed on the cheque under
Section 56 of the Act. The cheque cannot be presented for encashment
without recording the part payment. If the unendorsed cheque is
dishonoured on presentation, the offence under Section 138 would not
be attracted since the cheque does not represent a legally enforceable
debt at the time of encashment.
30. In view of the discussion above, we summarise our findings below:
(i) For the commission of an offence under Section 138, the cheque
that is dishonoured must represent a legally enforceable debt on the
date of maturity or presentation;
(ii) If the drawer of the cheque pays a part or whole of the sum
between the period when the cheque is drawn and when it is encashed
upon maturity, then the legally enforceable debt on the date of maturity
would not be the sum represented on the cheque;
(iii) When a part or whole of the sum represented on the cheque is
paid by the drawer of the cheque, it must be endorsed on the cheque
as prescribed in Section 56 of the Act. The cheque endorsed with the
payment made may be used to negotiate the balance, if any. If the
cheque that is endorsed is dishonoured when it is sought to be
encashed upon maturity, then the offence under Section 138 will stand
attracted;
iv) The first respondent has made part-payments after the debt was
incurred and before the cheque was encashed upon maturity. The sum
of rupees twenty lakhs represented on the cheque was not the ‘legally
enforceable debt’ on the date of maturity. Thus, the first respondent
cannot be deemed to have committed an offence under Section 138 of
the Act when the cheque was dishonoured for insufficient funds; and
(v) The notice demanding the payment of the ‘said amount of money’
has been interpreted by judgments of this Court to mean the cheque
amount. The conditions stipulated in the provisos to Section 138 need
to be fulfilled in addition to the ingredients in the substantive part of
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Crl.R.C(MD)No.670 of 2018
Section 138. Since in this case, the first respondent has not committed
an offence under Section 138, the validity of the form of the notice
need not be decided.
14. Thus, it is clear that representation of the cheque was for a sum
higher than the amount that was due on the date it was presented for
encashment the drawer of cheque cannot be convicted for the offence under
section 138 of the Act. Further part payment is made after the cheque is
drawn the payee has the option of either taking a new cheque for the
reduced amount or by making an endorsement on the cheque acknowledging
that part payment was made according to the provisions of Section 56 of the
Act. Thus, it is clear that notice of demand which requires the drawer of the
cheque to make payment of the whole amount represented in the cheque
despite receiving part payment against the sum, before the issue of notice,
cannot be valid under section 138(b) of the Act.
15. In the case on hand, admittedly a sum of Rs.2,00,000/- was
encashed by the respondent before the presenting Ex.P.3 and 4, therefore,
conviction and sentence cannot be sustained and it is liable to be set aside.
16. The learned counsel for the respondent would submit that, the
petitioners admitted their signature found in Exs.P3 and P4 and the
issuance of Exs.P3 and P4. The respondent discharged the initial burdern as
contemplated under section 138 of the N.I.Act. When the accused failed to
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rebut the same by preponderance of probabilities, they are liable to be
convicted under section 138 of the N.I.Act.
17. No doubt it is settled law that, when the accused admits the
signature in the cheque, the trial Court ought to have presumed that, the
cheque was issued as a consideration for a legally enforceable debt. The
complainant discharged the initial burden as contemplated under section 138
of the N.I.Act. Statutory presumption drawn under section 118 and 139 of
the N.I.Act, However, this presumption are rebuttable in nature by probable
defence need to be raised, which must meet the standard of preponderance
of probability and not mere possibility.
18. In the case on hand as stated supra, the petitioner proved that
even before presentation of Exs.P3 and P4, they had paid a sum of Rs.
2,10,000/- on 18.03.2009 and while pending complaint they also paid
another sum of Rs.2,00,000/-, therefore, the petitioners rebutted the
presumption as contemplated under section 118 and 139 of the N.I.Act.
Hence, the burden once again shifted on the respondent, to prove that Exs.P.
3 and P4 were issued for legally enforceable debt. After examination of P.W.
1, to the effect that a sum of Rs.4,00,000/- was paid to the respondent, even
then, the respondent failed to prove that those payments were made for
separate transaction and not for any dues under Exs.P.1 and P.2. Therefore,
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Crl.R.C(MD)No.670 of 2018
the above judgements cited by the learned counsel for the respondent is not
helpful to the case on hand.
19. In view of the above discussions the appellate Court without
considering the above mechanically convicted the appellants which cannot be
sustained as against the respondent.
20. Accordingly this Criminal Revision is allowed and the conviction
and sentence imposed by the learned Judicial Magistrate, Fast Track Court at
Magisterial Level , Karur in STC No.1048 of 2011 dated 21.07.2015 is hereby
set aside.
19.06.2023
NCC : Yes/No
Index : Yes/No
Internet : Yes
aav
To
1. The Additional District and Sessions Court, Theni
2. The District Munsif, Theni
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Crl.R.C(MD)No.670 of 2018
G.K.ILANTHIRAIYAN, J.
aav
Order made in
Crl.R.C(MD)No.670 of 2018
19.06.2023
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