Bangalore District Court
Mr.K.V.Prakash vs Mr.Nagaraj P on 15 March, 2022
IN THE COURT OF XX ADDL.CHIEF METROPOLITAN
MAGISTRATE AT BENGALURU CITY
PRESENT: BHOLA PANDIT,
B.Com.,LL.M.,
XX ADDL. C.M.M.
Bengaluru.
Dated this the 15th day of March 2022
C.C.No.33527/2018
Complainant : Mr.K.V.Prakash,
Age 52 years,
R/at.No.13, GM Cottege,
Doddabidarakallu Ward,
Bengaluru- 560 073
{ By Sri.L.Ramesh Babu - Advocate }
Vs.
Accused : Mr.Nagaraj P
R/at.No.269, Brahmeswara Nilaya,
6th Crosss, Ravi Kirloskar Layout,
Chikkabiderakallu,
Bengaluru- 560 073.
{ By Sri.K.M.Manjunath - Advocate }
Offence complained : U/S. 138 of N.I. Act.,
2 C.C.33527/2018
Plea of accused : Pleaded not guilty
Final Order : Accused is Convicted
Date of Order : 15-03-2022
JUDGMENT
The present complaint is filed under section 2(d) read with section 200 of code of criminal procedure against the accused seeking to punish him for the offence punishable under section 138 of the Negotiable Instruments Act ( in short referred as "N.I. Act").
02. The factual matrix of the complaint is summarized as under;
It is averred in the complaint that, the accused being well known and friend of the complainant has obtained hand loan of Rs.6,50,000/- on 10.06.2017 from the complainant and agreed to repay the said loan amount 3 C.C.33527/2018 within one year together with interest at the rate of 1.50 ( One rupee fifty paise) per month. It is further averred that, to discharge his liability, the accused has issued a cheque bearing No.078478 dated 22.10.2018 for a sum of Rs.6,50,000/- drawn on Punjab National Bank, Peenya Industrial Estate Branch, Bengaluru in favour of the complainant. On the same day, the complainant has presented the said cheque for encashment through his banker, but it returned unpaid with banker's endorsement dated 22.10.2018 as "Funds Insufficient". On 29.10.2018, legal notice has been issued to the accused by RPAD demanding for repayment for payment of cheque amount and the said notice was served on the accused on 05.11.2018. In spite of service of demand notice, the accused has failed to pay the cheque amount. The accused has given reply on 02.12.2018 denied the transaction. On these grounds, it is sought to convict the accused for the offence punishable under section 138 of NI Act and grant 4 C.C.33527/2018 compensation as per section 357 of Code of Criminal Procedure.
03. On presentation of complaint, this court has verified the averments of complaint along with records and thereby had taken cognizance for the offence punishable under section 138 of NI Act. Thereby, as per the verdict of the Hon'ble Apex court reported in AIR 2014 SC 2528 in the case of Indian Bank Association and others V/s Union of India and others, the sworn statement of the complainant has been recorded as PW.1 and got exhibited five documents at Ex.P.01 to 05. Having been made out the prima-facie case, the complaint has been registered in Register No. III and issued process against the accused.
04. In response to the summons, the accused put his appearance before the court through his counsel and filed bail application under section 436 of Code of Criminal 5 C.C.33527/2018 Procedure, the accused has been enlarged on bail. The substance of accusation has been recorded and read over to the accused, he pleaded not guilty and intends to put forth his defense. On filing application by the complainant under section 145(1) of NI Act, sworn statement of the complainant has been treated as examination in chief. Similarly, on filing application under section 145(2) of NI Act, the accused has been permitted to cross examine PW.1. On completion of the trial of the complainant's side, the statement of accused under section 313 of Code of Criminal Procedure has been recorded and read over to the accused, the incriminating material found in the trial of the case of the complainant. The accused has denied the same in toto and gave explanation stating that, in the year 2014, the accused has issued a cheque to the complainant in- connection with chit transaction and the same has been misutilized in this case. The accused also wants to lead his defense evidence and filed his evidence in the form of 6 C.C.33527/2018 affidavit. As per the judgment of the Hon'ble High Court of Karnataka, in Cr.Pet.No.9331/2017 dated 02.07.2019 in the case of Vittal Sambrekar Vs. Manjunath, the accused is permitted to lead his defense evidence by way of affidavit. The accused has entered in the witness box and adduced the defense as DW.1 and got marked his reply notice by confronting to PW.1 as Ex.D.1. Similarly, in support of his defense, witness by name G.R.Shanthakumarappa has filed evidence in the form of affidavit. The said witness has entered in the witness box and adduced his evidence as DW.2 and closed defense side evidence.
05. Complainant side oral argument taken as not advanced giving liberty to file written argument. Heard the defense side argument. Perused the materials available on record.
7 C.C.33527/2018
06. The following points that arise for my consideration are as under;
POINTS
1. Does the complainant proves beyond reasonable doubts that, the accused has issued a cheque bearing No.078478 dated 22.10.2018 for a sum of Rs.6,50,000/- towards the discharge of his lawful liability of the complainant and when the said cheque was presented for encashment, it was returned unpaid due to "Funds Insufficient" in the account of the drawer as per banker's memo and inspite of issuance of demand notice , the accused has failed to pay the cheque amount, thereby has committed the offence punishable under section 138 of NI Act?
2. What Order or sentence ?
07. My findings to the above points is as follows;
1. Point No.1: In the affirmative
2. Point No.2: As per final order for the following;
8 C.C.33527/2018REASONS
08. POINT No.1: It is the specific case of the complainant that, the accused had borrowed hand loan of Rs.6,50,000/- from the complainant to meet his family necessities and towards discharge of the said hand loan amount, the accused has issued the disputed cheque and when the said cheque was presented for encashment, it returned unpaid due to "Funds Insufficient" in the account of the drawer and inspite of receipt of demand notice, the accused has failed to make the payment of the cheque amount.
09. To substantiate and establish this fact before the court beyond reasonable doubts as per the verdict of the Hon'ble Apex court in the case of Indian Bank Association and others V/s Union of India and others, the sworn statement of the complainant has been treated as affidavit evidence. In his affidavit evidence, PW.1 has replicated the 9 C.C.33527/2018 averments of the complainant. To corroborate the evidence of PW.1, the complainant has placed on record in all five documents i.e., Ex.P.1 to 5. Ex.P.1 is the disputed cheque dated 22.10.2018, Ex.P.1 (a) is the signature of accused, Ex.P.2 is the banker's memo dated 22.10.2018, which shows the reasons for the return of the cheque at Ex.P.1 for unpaid is as "Funds Insufficient", Ex.P.3 is the legal notice dated 29.10.2018 demanding for payment of cheque amount by replicating the averments of complaint, which was duly served to the accused on 05.11.2018. Ex.P.4 is the the postal receipt about sending legal notice at Ex.P.3, Ex.P.5 is the postal acknowledgement about receipt of the demand notice. PW.1 has been substantially cross examined by the counsel of accused.
10. To disprove the case of the complainant and also to rebut the mandatory presumptions which could be drawn under section 139 of NI Act, the accused entered in the 10 C.C.33527/2018 witness box and adduced his evidence by way of affidavit as DW.1. Wherein, he denied the entire assertion of the complaint about his borrowing loan amount from the complainant and also issuance of cheque towards the discharge of alleged hand loan amount. It is the plea and defense of the accused in his evidence that, from 2013 to 2015, the complainant was conducting a chit group/chit transaction and he was one of the chit subscribers in one of the chit groups headed by the complainant. He also introduced two other members by name Shanthakumarappa and Mr. Joseph in one of the chit groups, wherein he was a subscriber under the complainant. Himself had received chit bid amount in the year 2014 and while releasing the chit amount, the complainant took two signed blank cheques and blank e- stamp paper from him towards security for the bid amount. He states that, he had paid the chit amount in installments as per chit release of the complainant. Due to 11 C.C.33527/2018 the differences arose between him and the complainant, he stopped further transaction with the complainant and also not chosen to demand the complainant to return his signed cheques and documents even after completion of said chit transaction, but the complainant used to demand additional amount from him even after completion of the chit transaction with an intention to get more profit out of it. When he has flatly refused to pay additional amount and due to differences arose between them, after the lapse of 3 years, the complainant had misutilized his above signed blank cheques and has presented to the bank and thereby after getting memo from the bank has filed present false complaint. He further deposed that, he has given reply to the complainant, the same is marked as per Ex.D.1. He strongly stated that, when the complainant himself was in financial crunch, during the said period due to his house construction, how could the complainant advanced the 12 C.C.33527/2018 disputed loan to him. Accordingly, he has sought to acquit him from the case by dismissing the complaint.
To corroborate the oral testimony of DW.1, another witness by name G.R.Shanthakumarappa has been examined as DW.2. DW.2 stated in his affidavit evidence that, he knows the accused since 2012. the complainant is a financier, who conducted chit group business in the year 2013 to 2015 and he was one of the subscriber of the said chit group and he had joined the said chit group. The accused Nagaraj, who used to collect chit subscription money from him on behalf of the complainant. He further stated that, the accused Nagaraj has issued cheques and signed blank papers in favour of the the complainant on behalf of the chit subscribers, who had joined the chit group / under him and accordingly, Mr. Nagaraj, who used to collect and hand over the chit money to the complainant. He further testified that, he did not know the arrangement between complainant and accused. He came to know that, 13 C.C.33527/2018 there was a dispute between the complainant and accused in-connection to the chit group transaction headed few years back and he recently came to know about the present case. The Learned counsel for the complainant has substantially cross examined DW.1 & 2. The accused got marked his reply notice by confronting to PW.1 as Ex.D.1.
11. In spite of giving opportunity, the complainant side not advanced the oral agreement. The learned defense counsel advanced his oral argument strenuously contended that, the complainant not produced any documents to show about lending Rs.6,50,000/- to the accused as hand loan. Further argued that, the date of issuance of cheque not pleaded in the complaint. The complainant has failed to establish before the court, the alleged transaction of advancing hand loan of Rs.6,50,000/-. Therefore, it is sought to acquit the accused.
14 C.C.33527/2018
12. Before to appreciate the oral and documentary evidence relied by the complainant and accused , it is necessary to know as to whether the present complaint is filed in consonance with the provisions of section 138 of NI Act. The present complaint is filed on 19.12.2018 and on perusal of the cheque at Ex.P.1 , banker's memo at Ex.P.2, demand notice at Ex.P.3, postal receipt at Ex.P.4, postal acknowledgement at Ex.P.5 and also reply notice Ex.D.1, it appears that, the present complaint filed in compliance of section 138 (a) to (c) of NI Act.
13. Section 118(a) & 139 of NI Act are two important provisions and they provides for raising mandatory presumptions in favour of the complainant until the contrary is proved by the accused. Even in the catena of decisions i.e., in the case of Rangappa Vs. Mohan reported in 2010(11) SCC 441, in the case of Bir Singh Vs. Mukesh Kumar reported in 2019(4) SCC 197, in the case of APS 15 C.C.33527/2018 Forex Services (P) Ltd., Vs.Shakthi International Fashion Linkers reported in 2020(12) SCC 724, in the case of Rajeshbai Muljibhai Patel Vs. State of Gujarat, reported in 2020(3) SCC 794, in the case of Triyambak S. Hegde Vs. Sripad reported in Live Law 2021 SC 492 and in the relied judgments of the complainant, a precedent is laid down that, " Once the issuance of cheque and the signature thereon is admitted by the accused, the court is required to raise presumption in favour of the the complainant stating that, the accused has issued the cheque for some consideration towards discharge of his legal debt or liability of the complainant and that the complainant is the due holder of the said cheque. The burden or reverse onus shifts on the accused to rebut the statutory presumptions under sections 118(a) & 139 of NI Act." Now, it is well established law that, the presumption mandated by section 139 of NI Act, thus indeed includes the existence of legally enforceable debt or liability and it is 16 C.C.33527/2018 open for the accused to raise a probable defense wherein the existence of legally enforceable debt or liability can be contested and he shall prove before the court on preponderance of probabilities, only thereupon a statutory presumption raised in favour of the complainant stands rebutted.
14. In the instant case, on perusal of the reply notice of the accused at Ex.D.1 and also the oral evidence of accused as DW.1, the defense of the accused is that, from the year 2013 to 21015, the complainant was running chit business and the accused along with his two friends by name Shanthakumarappa, who is DW.2 and one Joseph were the members of the said chit transaction. It is further defense of the accused that, the complainant took from him 2 signed blank cheques undated and also took signed blank e-stamp papers as security document for the repayment of the chit amount and thereafter, even after 17 C.C.33527/2018 making the payment of chit amount by monthly installments of Rs.5,000/-, the complainant instead of returning the security cheques, has misutilized the same and filed the present complaint. By seeing this defense of the accused, it clearly appears that, the accused is admitting the issuance of cheque at Ex.P.1 from his account and also admitting the signature on Ex.P.1(a). Therefore, as a rule, the statutory presumptions under section 139 of NI Act shall be drawn in favour of the complainant that, the accused has issued the cheque at Ex.P.1 for some consideration towards the discharge of his legal debt and that the complainant is the due holder of the said cheque. In the land mark judgment of the Hon'ble Apex Court reported in AIR 2019 SC 1983, in the case of Basalingappa Vs. Mudibasappa in para No.19, the top court of the country held that;
"Applying the rule of the word 'proved' under section 3 of Evidence Act, it became evident that in a trial under section 138, a 18 C.C.33527/2018 prosecution will have to be made out every negotiable instrument was made or drawn for consideration and that it was extended for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges burden to prove that instrument was executed by the accused, the rules of presumptions under section 118 & 139 help him to shift the burden on the accused.
The presumptions will live, exists & survive & shall and only when the contrary is proved by the accused, that is the cheque was not issued for consideration and in discharge of any debt or liability. A presumption itself is not evidence, but only makes a prima-facie case for a party to whose benefits it exists.
The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insists in every case the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated, but bare denial of the passing of consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is possible has to be brought on record for getting the burden of proof shifted to the 19 C.C.33527/2018 complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration & debt did not exists or their non- existence was so probable, that a prudent man would under the circumstances of the case act upon the plea that they did not exists."
As per the verdict of the above relied judgment, once the presumption is drawn in favour of the complainant, the burden lies on the accused to rebut the statutory presumptions under sections 118(a) & 139 of NI Act by raising probable defense and also providing evidence before the court to the touch stone of preponderance of probabilities. It is further held that, while raising a probable defense, if the accused disputed the very financial capacity of the complainant to advance the huge loan amount as a hand loan, the onus shifts on the complainant to establish before the court his financial capacity to advance the disputed loan amount as a hand loan. 20 C.C.33527/2018
15. By referring to the precedent in the case of Basalingappa Vs. Mudibasappa reported in AIR 2019 SC 1983, in a latest judgment in the case of Tedhi Singh Vs. Narayan Das Mahant, in Crl.Appeal No.362/2022 reported in 2022 Live Law (SC) 275, in para No.9, it is held that;
" At the time, when the complainant gives his evidence , unless a case is setup in the reply notice to the statutory notice sent, that the complainant did not have the wherewithal cannot be expected of the complainant to initially load evidence to show that he had the financial capacity -
However, the accused has a 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 by pointing to the materials produced by the complainant himself or through the cross examination of the witnesses of the complainant."
As per the ratio laid down in the recent judgment of the Hon'ble Apex Court, now it is well settled law that, the initial burden is not on the complainant to establish his 21 C.C.33527/2018 financial capacity before the court. Unless, in his reply notice , the accused set up a case and demonstrate that, the complainant did not have the capacity to advance the huge loan amount by producing independent material evidence, such as, examining his witness and producing documents by himself or eliciting material evidence from the mouth of complainant's side during the cross examination.
16. In the light of the above precedent of the Hon'ble Apex Court, now I would like to scrutinize the defense put forth by the accused and material evidence produced by him in support of his defense. Though, the complainant not produced from his side, the reply notice given by the accused, but PW.1 has admitted in his cross examination about the issuance of reply notice by the accused and thereafter the same has been got marked on behalf of the accused as DW.1. On perusal of the reply notice at 22 C.C.33527/2018 Ex.D.1, wherein the accused has specifically denied the loan transaction as asserted by the complainant. In his reply notice by giving para wise reply and thereafter in para No.7 it is stated that, the disputed cheque was given by the accused in a chit transaction. In support of this defense, the accused himself adduced his evidence by way of affidavit as DW.1, stating that, from 2013 to 2015, the complainant was conducting the chit transaction, for which, the accused and his other 2 friends by name Shanthakumaprappa and Joseph were the members and in the year 2014, the accused received the bid amount and while disbursing the chit amount, the complainant had taken 2 signed blank cheques and signed blank e-stamp paper from him as a security documents. Even, the accused has also adducing the oral evidence of one witness by name G.R.Shanthakumarappa as DW.2. he deposed in his affidavit evidence that, from 2013 to 2015, he was also a member of the chit transaction runned by the 23 C.C.33527/2018 complainant and he also received bid amount and he further deposed that, the accused Nagaraj had issued cheques and signed blank papers in favour of the the complainant on behalf of the chit subscribers, who had joined the chit group through him. As such, the accused Nagaraj was used to collect and handed over the chit money to the complainant - K.V.Prakash. The Learned counsel for the complainant has cross examined the DW.1 & 2. In the reply notice at Ex.D.1, only a stray sentence is added in para No.7 stating that, the disputed cheque was given by the accused in chit transaction. But, there is no detail reply about the said chit transaction as to whether the said chit business was running by the complainant, who were the members and what was the chit amount. It is surprise to see that, even DW.1 also not deposed how much chit amount he had taken in the year 2014. During his cross examination, DW.1 stated that, the period of the said chit was 24 months. On the other hand, during his cross 24 C.C.33527/2018 examination, DW.2 stated that, the period of the said chit was 33 months. That apart, DW.2 being own witness of accused. He has stated that, he has not seen the issuance of the disputed cheque by the accused in favour of the complainant as security to the chit transaction. There is a material contradiction in the evidence of DW.1 & 2. Apart from that, DW.2 in his cross examination stated that, he had not issued any cheque to the complainant. When it is the evidence of DW.1 & 2 that, for the recovery of chit bid amount, the complainant was used to get signed blank cheques as security documents, then how the signed blank cheques from DW.2 was not collected by the complainant. This evidence of DW.2 raises doubt in the mind of the court and his evidence do not inspires my confidence. It is a common defense in all the cases that, the complaint has been lodged for advancing hand loan amount, but it is the defense of the accused that, the disputed cheque has been issued towards chit transaction 25 C.C.33527/2018 as a security. The evidence of DW.1 & 2 do not appears to be probable evidence to believe that, the disputed cheque at Ex.P.1 was issued by the accused as a security document of bid amount of the chit transaction. If at all, the story put forth by the accused is admitted as true, then as per his own version, when the said cheque was given in the year 2014, then the question would arises that, why he kept mum for almost more than 3 years without taking any legal action for the recovery of the signed blank cheques and signed e-stamp papers. Therefore, by the evidence of DW.1 & 2 coupled with the reply notice at Ex.D.1, it can be seen that, only just for the purpose of taking unacceptable defense, this story has been created and nothing else. Hence, the accused has failed to raise probable defense and also failed to bring on record the material evidence in support of his defense. On further scrutinizing the evidence of the PW.1 in the cross examination it appears that, nothing worth evidence is culled out from his mouth. 26 C.C.33527/2018 One fact is elicited from the mouth of PW.1 that, from the year 2016-2018, he took bank loan for the purpose of constructing his house, which does not mean that, the advancement of hand loan is doubtful. Moreover, this evidence is elicited would support the case of the accused only when after discharge of his burden. Hence, the question of shifting onus on the complainant about to prove his financial capacity does not arise at all. As such, the presumption under section 139 of NI Act also extends to raise a presumption that, the cheque has been issued towards the discharge of legal debt. Hence, I answered point No.1 in the affirmative.
17. POINT NO.2: In view of the reasons stated and discussed above, the complainant has proved the guilt of the accused punishable under section 138 of N.I. Act It is worth to note that, the offence is of the nature of civil wrong. Hence, it is proper to award sentence of fine, 27 C.C.33527/2018 instead of awarding sentence of imprisonment. Accordingly, this court proceed to pass the following;
ORDER
Acting under section 255 (2) of
Criminal Procedure Code, accused is
hereby convicted for the offence
punishable under section 138 of
Negotiable Instrument Act and
sentenced to pay fine of Rs.7,10,000/-
(Rupees Seven Lakhs Ten Thousand only). In default, he shall undergo simple imprisonment for 3 (Three) months.
Acting under section 357(1) of code of criminal procedure, it is ordered that an amount of Rs.7,00,000/- ( Rupees Seven Lakhs only), there from shall be paid to the complainant as a compensation, remaining fine amount of Rs.10,000/-
(Rupees Ten Thousand only) is 28 C.C.33527/2018 defrayed to the state for the expenses incurred in the prosecution.
The bail bond of accused stands canceled subject to appeal period.
Supply free copy of judgment to the accused.
{Dictated to the stenographer, transcribed and computerized by her, revised corrected and then pronounced in the open court on this 15 th day of March 2022}.
(BHOLA PANDIT) XX ACMM, Bengaluru.
ANNEXURE List of witnesses examined on behalf of complainant:
P.W.1 K.V.Prakash List of documents produced on behalf of complainant:
Ex.P.1 Cheque
Ex.P. 1(a) Signature of the accused
29 C.C.33527/2018
Ex.P. 2 Bank endorsement
Ex.P. 3 Copy of the legal notice
Ex.P. 4 Postal receipt
Ex.P. 5 Postal acknowledgement
List of witnesses examined on behalf of accused:
D.W.1 Nagaraj.P DW.2 G.R.Shanthakumarappa
List of documents produced on behalf of accused:
Ex.D.1 Reply notice
XX A.C.M.M.,
Bengaluru.