Karnataka High Court
L R Gangadharaiah vs Nanjundaiah on 7 February, 2024
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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:
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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?-3- CRL.A.No.457 of 2013
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 -4- CRL.A.No.457 of 2013 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 -5- CRL.A.No.457 of 2013 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 -6- CRL.A.No.457 of 2013 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:
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"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 -8- CRL.A.No.457 of 2013 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- CRL.A.No.457 of 2013
"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
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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;
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CRL.A.No.457 of 2013
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
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CRL.A.No.457 of 2013withdrawal 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.
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CRL.A.No.457 of 2013
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.
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CRL.A.No.457 of 2013
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
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CRL.A.No.457 of 2013Appeal 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
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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
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CRL.A.No.457 of 2013PW.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
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CRL.A.No.457 of 2013to 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.
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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.
Accused is convicted for the offence under Section 138 of N.I. Act and sentenced to pay a fine of Rs.90,000/-
and in default of payment of fine to undergo S.I. for 3 months.
In exercise of power under Section 357 of Cr.P.C. out of the fine amount, Rs.85,000/- is ordered to be given to the complainant as compensation and remaining Rs.5,000/- is ordered to be defrayed as prosecution expenses.
Registry to send back the records to Trial Court with a copy of this order.
Sd/-
JUDGE rs