Bangalore District Court
Smt. Shantha S N vs Mr. Ananda on 30 April, 2022
KABC020154702019
IN THE COURT OF ADDL. CHIEF METROPOLITAN
MAGISTRATE, BENGALURU CITY.
SCCH-6
PRESENT: SMT. K. LAKSHMI, B.A.L, LL.B.,
IV Addl., Small Cause Judge &
ACMM, Court of Small Causes,
BENGALURU.
C.C. No.3286/2019
Dated this the 30th day of April 2022
COMPLAINANT : Smt. Shantha S N
W/o Narayana K H,
Aged about 48 years,
Residing at D. No.254,
Vivekananda Block,
7th cross Road,
Dattathreya Temple Road,
Pipeline, Malleshwaram,
Bangalore-560 003.
(By Advocate Shri. Mahesh Shetty)
V/s
ACCUSED Mr. Ananda
S/o Jayaram,
C.C. No. 3286 / 2019
Aged Major,
Door No.55, Ground Floor,
2nd Main Road, 3rd Cross,
Lakshmana Nagara,
Bengaluru.
(By Advocate Shri.Honnappa S)
****
-: J U D G M E N T :-
The complainant has filed the present complaint
against the accused under section 200 of Cr.P.C for the
offence punishable under section 138 of Negotiable
Instrument Act.
2. According to the Complainant, the accused
approached him for financial assistance. The accused has
borrowed a loan to the tune of Rs. 5,00,000/- from the
complainant on 21-07-2015. It is further alleged that the
complainant has paid a sum of Rs. 1,40,000/- to the
accused through cheque and also Rs. 3,60,000/- to the
C.C. No. 3286 / 2019
accused by way of cash. The complainant borrowed a loan
by pledging the gold ornaments. Subsequently for
repayment of the said amount the impugned cheque
bearing No. 000003 dated 22-03-2019 for a sum Rs.
5,00,000/- drawn on Kotak Mahindra Bank, Jakkasandra
Branch, Bengaluru. Thereafter, the cheque was
presented for collection in the account of the complainant
and the cheque was dishonored by the said Bank on 28-
03-2019 on the ground that the "account closed".
3. Thereafter, the complainant issued a statutory
notice dated 02-04-2019 under section 138 of the
Negotiable Instrument Act, to the accused. The accused
did not pay the cheque amount to the complainant. The
accused has knowledge about the issuance of notice by the
complainant. The accused did not even sent any reply to
the said statutory notice. Since the said notice was not
complied with, the above said complaint is preferred by
the complainant.
C.C. No. 3286 / 2019
4. In her pre-summoning evidence, complainant was
examined on affidavit. She reiterated the contents of
complainant and got marked seven documents as per Ex.
P-1 to Ex. P-7. Upon appreciation of pre-summoning
evidence, accused was summoned for an offence punishable
under section 138 of the Negotiable Instrument Act. After
receipt of summons, the accused appeared before this
Court through his counsel and he was enlarged on bail.
Plea of accusation has been read over and explained to the
accused and he pleads not guilty and claims to be tried.
The accused was examined u/Sec.313 of Cr.P.C. He
totally denied the entire case of the complainant.
5. The accused moved an application to cross
examine the complainant and said application came to be
allowed. The sufficient opportunity has given to the
accused to cross examine the complainant. The accused has
cross examined the complainant. On the other hand, the
accused has led evidence as DW-1 and Ex. D-1 got
C.C. No. 3286 / 2019
marked on his behalf. Thereafter, the case is posted for
arguments.
6. Heard the arguments.
7. On the basis of the above facts, the following
points arise for my consideration :-
1. Whether the complainant proves beyond all the
reasonable doubt that, the accused has
borrowed a loan of Rs. 5,00,000/- from her
and issued a cheque bearing No. 000003 dated
22-03-2019 for a sum Rs. 5,00,000/- drawn
on Kotak Mahindra Bank, Jakkasandra Branch,
Bengaluru and when the complainant presented
the cheque for encashment and the cheque was
dishonored due to "account closed", for which
the complainant has issued a legal notice
through RPAD and the same was served, but
the accused has not repaid the said amount and
thereby the accused has committed the offence
C.C. No. 3286 / 2019
punishable under section 138 of Negotiable
Instruments Act?
2. What order ?
8. My answers to the above points are as follows :
Point No.1 : In the Negative,
Point No.2 : As per final order,
for the following:
-: R E A S O N S :-
POINT No.1 :-
9. The complainant has filed his affidavit in lieu of
his oral chief examination. In his affidavit he has testified
regarding lending of Rs.5,00,000/- to the accused, issuance
of the cheque, its dishonour, issuance of legal notice and
failure of the accused to pay the cheque amount. The
complainant has produced the cheque bearing No. 000003
dated 22-03-2019 for a sum Rs.5,00,000/- drawn on
Kotak Mahindra Bank, Jakkasandra Branch, Bengaluru
C.C. No. 3286 / 2019
alleged to be issued by the accused in favour of the
complainant. Ex. P-1 stands in the name of the
complainant for 5,00,000/-. Ex. P-2 is the Banker's
endorsement. Ex. P-3 is the office copy of the legal notice,
which is dated 11-04-2019. Ex. P- 4 and Ex. P-5 are the
postal receipts. Ex. P-6 and Ex. P-7 are the postal cover
and returned with an endorsement 'no such person' and
'addressee left'.
10. On the other hand, the accused led evidence as
DW-1. He deposed that the cheque in issue was not issued
in favour of complainant. He never borrowed a loan from
the complainant. The demand notice issued by the
complainant has not been served on him. The complainant
has not come to the Court with clean hands. He is not
liable to pay the cheque amount to the complainant.
11. Learned counsel for the complainant argued that
the complainant has discharged her initial burden of
proving the case by her oral as well as documentary
C.C. No. 3286 / 2019
evidence. It is also contention of the complainant that the
accused has not initiated the legal action against the
complainant to recover the disputed cheque. The accused
was aware of the fact that the disputed cheque was with
the complainant. He has also contended that the benefit of
presumption under Sections 118 and 139 of Negotiable
Instruments Act is in favour of the complainant, and
therefore the accused has failed to rebut the presumption.
Hence, the accused is liable to be convicted.
12. To counter these submissions, learned defence
Counsel argued that there was no transaction between the
complainant and the accused, and the accused never
borrowed a loan of Rs. 5,00,000/- from the complainant.
The impugned cheque was not issued in favour of
complainant. It is also contented that the complainant has
no financial capacity to lend such huge amount to the
accused. The notice was not served on him. The
complainant has misused the impugned cheque. It is
further contended that though there is presumption under
C.C. No. 3286 / 2019
Sec.118 and 139 of Negotiable Instruments Act, existence
of legally enforceable debt is not a matter of presumption
u/Sec.139 of Negotiable Instruments Act. In support of
his contention, he relied on the following citations:-
1. Crl.O.P(MD). No. 4035/2009:
Baskaran Vs. Sathiamoorthy, on 21
September 2015 (Madras High Court,
Madurai Bench).
2. Criminal Petition No.8247/2014: C.
N. Shankarappa Vs. T. G. Krishna
Shetty, on 7th January 2015
(Karnataka High court, at Bangalore).
3. Criminal Misc. petition (CRLMP)
No.3909/2016: Pankaj Ladda Vs.
State of Rajasthan and another, on 2
January 2017, (The High court of
Judicature for Rajasthan at Jodhpur).
4. Criminal Misc. Petition No.
2834/2019: Arun prakash Dubey Vs.
State of Jharkhand & Sathyanarayana
C.C. No. 3286 / 2019
Upadhyaya, on 8th February 2021
(Jharakhand High Court).
5. Criminal Appeal No. 486-487/2009,
Sethuraman Vs. Rajmanickam, on 18th
March 2009.
13. In view of rival contentions raised by the parties,
it is necessary to consider the statutory provisions in this
regard and also proposition of law.
Section 118 of Negotiable Instrument Act lays
down that:
"Until the contrary is proved, it
shall be presumed that every
Negotiable instrument was made or
drawn for consideration."
Section 139 of N.I. Act contemplates that :
" Unless the contrary is proved, it
shall presume that holder of the
cheque receive the cheque of the
nature referred to section 138 of
the N.I. Act for the discharge, in
C.C. No. 3286 / 2019
whole or in part, of any debt or
other liability."
14. The presumption mandated by Section 139 of
Negotiable Instrument Act does indeed show the existence
of legally enforceable debt or liability. It is a rebuttal
presumption. It is open to raise the defence, wherein the
existence of legally enforceable debt or liability can be
contested. For rebutting presumption accused is not
required to adduce evidence with unduly high standard of
proof, but the standard of proof for doing so is that
preponderance of probability. If the accused is able to
raise probable defence, which creates doubt about the
existence of legally enforceable debt or liability, then the
onus shift back to the complainant. It is also clear that for
rebutting the presumption accused can rely on the material
submitted by the complainant or his cross examination
and he need not necessarily adduce his defence evidence in
all the cases.
C.C. No. 3286 / 2019
15. The specific case of the complainant is that, the
accused has borrowed a loan of Rs. 5,00,000/- from him.
The accused issued the disputed cheque for discharging of
debt and the said disputed cheque was dishonored.
Thereafter a legal notice was issued and then he filed
complaint. It is further contended that once the cheque
relates to the account of the accused and the signature is
admitted on the cheque, then initial presumption as
contemplated u/Sec.139 of N.I. Act has to be raised by
the court in favour of the complainant.
16. The position of law which emerges is that once
issuance of cheque is admitted, the presumption under
Section 118 (a) of Negotiable Instrument Act would arise
that it is supported by a consideration. Such a
presumption is rebuttal. The accused can prove the non-
existence of a consideration by raising a probable defence.
If the accused is proved to have discharged the initial onus
of proof showing that the existence of debt was
improbable or doubtful or the same was illegal, the onus
C.C. No. 3286 / 2019
would shift to the complainant who will be obliged to
prove it as a matter of fact and upon it failure to prove
would dis-entitle him to grant of relief on the basis of the
negotiable instrument. The burden upon the accused of
proving the non-existence of the consideration can be
either direct or by bringing on record the preponderance
of probability by reference to the circumstances upon
which he relies. In such event, the complainant is entitled
under law to rely upon all the evidence led in the case. In
case, where the accused fails to discharge the initial onus
of proof by showing the non-existence of the
consideration, the complainant would invariably be held
entitled to the benefit of presumption arising under
Section 118 (a) of Negotiable Instrument Act in his
favour. The Court may not insist upon the accused to
disprove the existence of consideration by leading direct
evidence as the existence of negative evidence. It is neither
possible not contemplated and even of led, is to be seen
with a doubt. The standard of proof evidently is
preponderance of probabilities. Inference of
C.C. No. 3286 / 2019
preponderance of probabilities can be drawn not only
from the materials on records, but also by reference to the
circumstances upon which relies.
17. The complainant shall make clear to Court, each
of the circumstances which is relied upon by him, to
establish drawing of the cheque by accused. The mere fact
that the cheque produce in Court came from possession of
complainant alone will not sufficient to prove execution,
even though it may be one of the circumstances. No law
allows a Court to presume that the cheque which is
produced and marked in Court was handed over or
delivered to complainant by accused. The Court, at best,
can say that the cheque was in possession of complainant.
But, under what circumstances it came to his possession is
to be stated by complainant. In the absence of such
statement, Court cannot proceed on any assumption that
it was handed over to complainant by the accused. The
Court shall consider whether each of the circumstances is
proved by complainant, as per law and whether each of
C.C. No. 3286 / 2019
the circumstances lead to an irresistible conclusion that the
cheque was drawn by the accused, as alleged by
complainant. In case in which only circumstantial evidence
is produced before the Court to prove drawing of cheque,
Court shall follow the mode adopted for appreciation of
circumstantial evidence, to enter finding whether cheque is
drawn by accused, as alleged by complainant. If any
circumstance or circumstances proved in the case can be
explained on any hypothesis which is inconsistence with
the assertion of drawing of cheque by accused, accused
cannot be said to have drawn the cheque.
18. Whether the cheque was handed over or
delivered to complainant by accused and whether it was
drawn by accused are independent facts, which requires
independent proof. The mere production of the cheque in
Court will not prove either of the above fact. The Court
must be satisfied from the allegations in the complaint and
from the evidence adduced that the cheque was made,
prepared or created by accused. The factum of drawing or
C.C. No. 3286 / 2019
execution of cheque has to be proved by evidence of
person or persons who can vouchsafe for the truth of the
facts in issue. It can be proved by direct or circumstantial
evidence, which is admissible in law.
19. Thus, this Court has to consider whether the
complainant has to prove the existence of legally
recoverable debt. From the statement of the complainant
reveals that the accused has received the amount of Rs.
5,00,000/- and disputed cheque was issued in favour of
complainant. The accused has denied the issuance of
cheque in favour of complainant. It is specific defence of
the accused that the complainant has no financial capacity
to lend such amount to the accused and accused never
borrowed a loan from the complainant. From the
evidence of complainant reveals that the alleged amount
of Rs. 5,00,000/- given to the accused on 21-07-2015.
Admittedly, the impugned cheque is dated 22-03-2019.
As per the evidence of complainant that the impugned
cheque was obtained after three years of lending the
C.C. No. 3286 / 2019
alleged amount to the accused. In this case, no evidence
has been adduced by the complainant to prove the
transaction which had been categorically denied by the
accused. Further, the complainant has not placed any
material to prove her financial capacity. No presumption
can be drawn that the complainant has capacity to lend to
the tune of Rs. 5,00,000/- merely on the basis of self
serving statement of the complainant without the proof of
income of the complainant. There is a major contradiction
in the evidence of complainant. The statement of
complainant not corroborated by the material available on
the record. Hence, the contention of complainant that
the accused borrowed a loan of Rs. 5,00,000/- cannot be
accepted.
20. In this case, the complainant has stated in her
complaint that she borrowed money by pleading her gold
ornaments. It is pertinent to note that the allege loan is
claimed to have been disbursed in the year 2015 to the
accused without interest. From the statement of the
C.C. No. 3286 / 2019
complainant reveals that the complainant borrowed a loan
from the financier. Even according to the complainant the
alleged loan of Rs. 5,00,000/- is claimed to have been
disbursed in the year 2015 and disputed cheque was issued
by the accused in the 2019. Admittedly, the complainant
did not take any document from the accused at the time of
alleged loan transaction. No prudent man would borrow
a loan from the financial institution with interest and lend
substantial amount of Rs. 5,00,000/- without charging
interest. In such an event, it is difficult to accept the
version of the complainant. During the cross-examination
of the complainant, the accused put across questions to the
complainant relating to the financial capacity of the
complainant. The complainant stated that at the relevant
time, she sold the property. She also voluntarily stated
that she had not borrowed the loan by pledging her gold
ornaments. This definitely hampers the case of the
complainant especially in light of the fact that no other
evidence has been forthcoming in support of the loan
transaction. Considering the evidence on record, it does
C.C. No. 3286 / 2019
appear improbable that a loan of Rs. 5,00,000/- was given
in cash to the accused without any interest or execution of
written document. Further, no proof of solvency has been
placed on record by the complainant The Hon'ble High
Court of Delhi in catena of decisions including Satish
Kumar vs. NCT of Delhi and another [2013 (204) DLT
289] and Kulvinder Singh vs. Kafeel Ahmed [2013 (2)
AD (Delhi)] has in the context of friendly loans given
importance to the financial capacity of the complainant as
well as the source of the loan. In both these decisions, the
Hon'ble High Court deemed it appropriate to acquit the
accused where the complainant was unable to show his
capability of advancing the loan.
21. The complainant has not examined any third
person who would have knowledge of the loan
transaction. It is a well settled principle of law that
prosecution has to stand on its own leg and prove its case
beyond reasonable doubt. Also it has been held by
Hon'ble Supreme Court in Rahul Builders vs. Arihant
C.C. No. 3286 / 2019
Fertilizers and Chemicals and another [(2008) 2 SCC
321], NI Act envisages application of the penal provisions
which needs to be construed strictly. Therefore, even if
two views in the matter are possible, the Court should
lean in favour of the view which is beneficial to the
accused. This is more so, when such a view will also
advance the legislative intent, behind enactment of this
criminal liability.
22. In Ashok Baugh vs. Kamal Baugh and another
[2015 (4) JCC (NI) 269], the Hon'ble High Court of
Delhi held that the respondent has rebutted the
presumption under Section 139 of the NI Act of the
existence of a legally enforceable debt by establishing that
there was no receipt of the loan, such advance was not
shown in the ITR of the petitioner complainant and
paying capacity of the complainant being doubtful.
Similarly, in Kashyap and another [2017 (4) JCC (NI)
225], the Hon'ble High Court of Delhi held that the
absence of any evidence to show the solvency of the
C.C. No. 3286 / 2019
respondent for him to have advances loan to the petitioner
leads to the presumption that there was no existing debt.
The Hon'ble High Court also observed that it is difficult
to accept the proposition that such amount of loan would
be paid on oral agreement. These precedents are squarely
applicable to the case in hand. Despite various deficiencies
in the version of the accused, I am unable to overlook the
fact that the loan transaction itself is uncorroborated and
unproved. The complainant has failed to prove his case
beyond all the reasonable doubts and he has failed to fulfill
all the ingredients of offence under section 138 NI Act
against the accused. The accused has been able to rebut the
presumption in favour of the complainant as the standard
of proof so as to prove a defence on the part of the accused
is only 'preponderance of probabilities' and inference of
preponderance of probabilities can be drawn not only
from the materials brought on record by the parties but
also by reference to the circumstances upon which he
relies as the same was held by Hon'ble Supreme Court in
M/s Indus Airways Private Limited and others vs. M/s
C.C. No. 3286 / 2019
Magnum Aviation Private Limited and another [CA
No.830 of 2014]. In the light of the above discussions
and observations, this Court has no hitch to hold that the
complainant has failed in proving his case beyond the
shadow of reasonable doubts. This court exonerates the
accused for the offence punishable under Section 138 of
Negotiable Instrument Act.
23. To attract liability under Section 138 of the
Negotiable Instrument Act, cheque should have been
drawn to discharge of liability. In other words if a cheque
has been given not for a legally enforceable debt or
liability, the Court cannot come to the conclusion that
the drawer of cheque has committed an offence. There can
be acknowledgment for a time barred debt, but drawing of
a cheque itself is not an acknowledgement for a time
barred debt, but drawing of a cheque itself is not an
acknowledgement unless the debt was enforceable on the
date of issuance of a cheque. In the case of A. V. Murthy
-Vs- B. S. Nagabasavanna, 2002 (2) SCC 642, our
C.C. No. 3286 / 2019
Hon'ble Apex Court held that the cheque was drawn in
respect of a debt or liability payable under a wagering
contract, it could have been said that the debt or liability
is not legally enforceable as is is a claim, which is
prohibited under law. In the case of Giridhari Lal Rathi
-Vs- P.T.V. Ramanjuahari and another, 1997 (2)
Crimes 658, it is held that by issuance of the cheque, the
limitation for realizing the loan amount cannot be taken as
extended, because at the time of issuance of the cheque, a
cheque should be for a legally enforceable debt. Further,
in Criminal Appeal No. 545 / 2010, Hon'ble High
Court of Karnataka in case of K. V.Subba Reddy -Vs
N. Ragava Reddy as held that the time barred debt is not
legally enforceable debt so the cheque issued for
repayment of time barred does not attract Section 138 of
Negotiable Instrument Act.
24. Further in the case of Janardhan Bhat -Vs-
Dattatraya G Hegde, 2008 (4) SCC 54, wherein our
Hon'ble Apex Court held that as here under :-
C.C. No. 3286 / 2019
" Thus, for the purpose of falling
within the ambit of Section 138 of the
Act, one of the ingredients which is
required to be satisfied is that there is
legally enforceable debt. In the facts of
the present case, as earlier, the amount
s in question had been paid during the
period 1991 to 1997, under the
circumstances, the period of limitation
which is three years clearly expired by
the the end of the year 2000.
Therefore, the cheques which were
issued in the 2002, evidently were
issued in respect of time barred-debts.
In view of the explanation to Section
138 of the Act, a debt or liability
referred to in Section 138 of the Act
means a legally enforceable debt.
Under the circumstances, even if the
case of the complainant is accepted that
such cheques had in fact, been issued
by the accused towards a debt of Rs.
5,00,000/, even then, the same would
be relatable to a time barred-debt and,
therefore, cannot be said to have been
issued in respect of a legally enforceable
debt. The provisions of Section 138 of
the Act would, therefore, not be
attracted in the facts of the present case.
C.C. No. 3286 / 2019
25. In the case of N. Ethirajulu Naidu -Vs- K. R.
Chinnikrishnana Chettair, AIR 1975 Madras 333,
2008 SCC online Bom 1590, wherein our Hon'ble
Madras High Court held that as here under :-
" if the cheque is issued in discharge of
a legally enforceable debt or other
liability that Section 138 of the Act is
attracted but if a cheque is issued for
the discharge of a time barred-debt and
it is dishonored, the accused cannot be
convicted under Section 138 of the Act.
Further in the case of Chander
Mohan Metha -Vs- Willian Rosario
Ferandes and another, 2008 SCC
online Bom 1590; "it has been held
that, cheques issued for a time barred-
debt would not fall within the
definition of 'legally enforceable debt',
which is the essential requirement for a
complaint under Section 138 of the
Negotiable Instrument Act."
C.C. No. 3286 / 2019
26. In this case, the alleged loan was advanced in the
year 2015 and the cheque was issued in the year 2019.
By the time the cheque was issued, the debt appears to
have been barred by limitation because no
acknowledgment is alleged to have been obtained by the
complainant from the accused before expiry of three years
from the date of loan. It is also not the case of
complainant that the disputed cheque was issued by the
accused for the acknowledgment of debt. Thus, it is
crystal clear that the debt was not legally enforceable at
the time of issuance of the cheque. Once an Act declares
that a particular transaction is illegal, it cannot be made
legal for the purpose of any other Act. The sheet anchor
of Section 138 of the Negotiable instrument Act is as to
legally enforceable liability against the accused, which is
conspicuously absent in the case on hand. It is an
everlasting principle of law that a person who institutes a
legal proceeding is bound to say that the same is within the
contour of limitation.
C.C. No. 3286 / 2019
27. It is an admitted fact that section 25 (3) of
Contract Act deals with time barred debt. From the close
reading of said section it is clear that with regard to
payment of time barred debt there must be distinct
promise to pay either wholly or in part of same. The
promise must be in writing either signed by the person
concerned or by his duly appointed agent. Under Section
18 of Limitation Act, the acknowledgment is required to
be made before the expiration period of limitation. In this
case,as per the admitted complaint averments before the
expiry of limitation period i.e., three years, no such
acknowledgement has been issued by the accused or the
cheque in question was issued. In this case, there is no
such promise has been made by the accused. On the date
of issuance of cheque, the debt mentioned in the
complaint become time barred and the cheque in question
has not been issued in respect of enforceable debt or other
liability for the purpose of invoking Section 138 R/w 142
of the Negotiable Instrument Act. Therefore, the
complaint under Section 138 of the Act is not
C.C. No. 3286 / 2019
maintainable. In view of the principles stated in the above
referred decisions and discussion, it is evident that the
penal provisions of Section 138 of Negotiable Instrument
Act is applicable only to the cheques which are issued for
the discharge in whole or in part, of any debt or other
liability, which according to Explanation must be a legally
enforceable debt or other liability. A cheque given in
discharge of time barred-debt will not constitute an
unconditional undertaking or promise in writing either
expressly or impliedly so as to attract the criminal
offence under Section 138 of Negotiable Instrument Act.
Mere issuance of cheque without corresponding legally
enforceable debt is not an offence. Therefore, there was
no legally enforceable liability. The complainant has not
established his case and no presumption arise in his favour.
28. Another contention of the defence counsel is
that the demand notice was not served to the accused.
The burden is on the complainant that the notice was
dispatched by post with correct address. Per contra,
C.C. No. 3286 / 2019
Learned Counsel for complainant argued that the notice
was duly served on the accused. Admittedly, the
requirements of Section 138 (b) of the Negotiable
Instrument Act is that notice should be sent to the drawer
of the cheque. Clause (b) of the proviso to Section 138 of
the Negotiable Instrument Act lays down that notice
regarding dishonor of the cheque should be sent to the
drawer of the cheque within 15 days of the receipt of
intimation regarding the dishonor of the cheque.
Considering the provision contained in Section 27 of the
General Clauses Act once the sender establishes the fact
that the notice was dispatched by post with correct address
written thereon, it should be deemed to have been served
on the sendee unless he establishes that it was not really
served and that he was not responsible for such non-
service.
29. The Statue stipulates that the holder of the
cheque makes a demand for the payment of money
covered by the cheque by issuing demand notice in writing
C.C. No. 3286 / 2019
to the drawer of within thirty days of the receipt of
information by him from the bank regarding the return
of the cheque as unpaid. Notice in writing, which is
required under Section 138 (b) of Negotiable Instrument
Act, need not necessarily be only by a registered post, and
it can as well be by a telegram or by a letter. Service of
notice of demand in Clause (b) of proviso t section 148 is
a condition precedent for filing a complaint under Section
138 of the Negotiable Instrument Act. Whether the
notice was served or not and how it was served and which
service was effected on the accused person namely,
whether by registered post, or by hand, or by courier, is
a matter imposes burden on the complainant to service of
demand notice upon the accused.
30. In the case of Harman Electronics (P) Ltd. v.
National Panasonic India (P) Ltd., AIR 2009 SC 1168
Hon'ble Apex Court held that as hereunder:-
' It is one thing to say that sending of a
notice is one of the ingredients for
C.C. No. 3286 / 2019
maintaining the complaint but it is
another thing to say that dishonour of a
cheque by itself constitutes an offence.
For the purpose of proving its case that
the accused had committed an offence
under Section 138 of the Negotiable
Instruments Act, the ingredients thereof
are required to be proved. What would
constitute an offence is stated in the main
provision. The proviso appended thereto,
however, imposes certain further
conditions which are required to be
fulfilled before cognizance of the offence
can be taken. If the ingredients for
constitution of the offence laid down in
provisos (a), (b) and (c) appended to
Section 138 of the Negotiable
Instruments Act are intended to be
applied in favour of the accused, there
cannot be any doubt that receipt of a
notice would ultimately give rise to the
cause of action for filing a complaint. As
it is only on receipt of the notice that the
accused at his own peril may refuse to pay
the amount. Clauses (b) and (c) of the
proviso to Section 138 therefore must be
read together. Issuance of notice would
not by itself give rise to a cause of action
but communication of the notice would.'
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31. The requirement of giving notice is mandatory
for maintaining a complaint, but there is no procedure
prescribed under Sec.138 of the Negotiable Instrument
Act for serving notice on the accused. Notice means notice
in writing and not a verbal demand to the drawer. The
Hon'ble Apex court in K.Bhaskaran v. Sankaran
Vaidhyan Balan [(1999) 7 Supreme Court Cases 510]
held that once notice has been sent by a registered post
with acknowledgment due in the correct address, it must
be presumed that the service has been made effective. In
V. Rajakumari v. P. Subbarama Naidu [(2004) 8
Supreme 774] it was held that statutory notice under
Section 138(b) of the Negotiable Instrument Act sent in
the correct address of the drawer but returned with
endorsement must be presumed to be served on the drawer
and the burden to show that accused/drawer had managed
to get an incorrect postal acknowledgment letter on the
complainant have to be considered during trial and on the
background facts of the case.
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32. The provision under Sec.138 of the Negotiable
Instrument Act shows that where a cheque issued by a
drawer in discharge of any debt or liability, in whole or in
part, is returned by the bank unpaid, because of the
amount of money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds the
amount arranged to be paid from that account, such
person shall be deemed to have committed an offence.
This is subject to the proviso to Section 138 that the
cheque should have been presented before the bank within
a period of three months from the date on which it is
drawn or within the period of its validity, whichever is
earlier. The payee must make a demand for the payment
of the said amount of money by giving a notice in writing,
to the drawer of the cheque, within thirty days of the
receipt of information by him from the bank regarding the
return of the cheque as unpaid. In spite of the demand, if
the drawer fails to make the payment of the said amount
of money to the payee within fifteen days of the receipt of
the notice, a cause of action would arise for prosecuting
C.C. No. 3286 / 2019
him under Section 138 of the Negotiable Instrument Act.
It is mentioned under Sec.142 of the Negotiable
Instrument Act that the court shall take cognizance of an
offence punishable under Sec.138 of the NI Act upon
receipt of a complaint in writing by the payee or as the
case may be, the holder in due course of the cheque.
Proviso to Sec.138(c) says that such complaint must be
made within one month of the date on which the cause of
action arises. However, discretion has been given to the
court to take cognizance of the complaint after the expiry
of the period of limitation, if the complainant satisfies the
court that he had sufficient reason for not making the
complaint within the limitation period.
33. A bare reading of Sec.138 of the Negotiable
Instruments Act shows that the purport of Sec.138 is to
punish the dishonest drawers of cheque who evade and
avoid their liability. As stated in Clause(b) of the proviso,
the payee or the holder of the cheque in due course is
necessarily required to serve a written notice on the
C.C. No. 3286 / 2019
drawer of the cheque within 15 days from the date of
intimation received from the bank about the dishonur of
the cheque. It is clear from Sec.27 of the General Clauses
Act, 1897 and Sec.114 of the Evidence Act, 1872, that
once a notice is sent by registered post by correctly
addressing to the drawer of the cheque, the service of
notice is deemed to have been completed. The
requirements under Sec.138(b) stand complied, if notice is
sent in the above prescribed manner. In this context, I
may refer an decision of the Hon'ble Apex court in M/s.
Dalmia Cement (Bharat) Ltd. v. M/s. Galaxy Traders
and Agencies Ltd. [AIR 2001 Supreme Court 676] in
which it was held that the presumption is rebuttable. But,
in the subsequent decision M/s. Harman Electronics (P)
Ltd. and Anr. v. M/s. National Panasonic India Ltd.
[AIR 2009 Supreme Court 1168] it was held that the
presumption in support of service of notice depends upon
the facts and circumstances of each case. In Jagdish Singh
v. Natthu Singh (1992) 1 SCC 647 , State of M.P. v.
Hiralal (1996) 7 SCC 523 , V. Rajkumari v. P.
C.C. No. 3286 / 2019
Subrama Naidu 2005 SCC (Cri) 393 Hon'ble Apex
court held that when a notice is sent by registered post
and is returned with postal endorsement "refused" or "not
available in the house" or "house locked" or "shop closed"
or "addressee not in station", due service has to be
presumed. However, the drawer is at liberty to rebut this
presumption either by adducing evidence or on the basis
of evidence produced by the complainant.
34. The Hon'ble Apex court in New India Sugar
Mills Ltd. v. CST [AIR 1963 SC 1207 ] held that the
interpretation of the statute should be based on the object
which the intended legislation has sought to achieve,
which reads as follows:
"It is a recognized rule of
interpretation of statutes that expressions
used therein should ordinarily be
understood in a sense in which they best
harmonise with the object of the statute,
and which effectuate the object of the
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Legislature. If an expression is susceptible
of a narrow or technical meaning, as well
as popular meaning, the Court would be
justified in assuming that the Legislature
used the expression in the sense which
would carry out its object and reject that
which renders exercise of its power
invalid."
35. My attention has been drawn to the decision of
the Hon'ble Apex court reported in D. Vinod Shivappa
v. Nanda Belliappa [(2006) 6 Supreme Court Cases
456] which reads as follows:
"14. If a notice is issued and served
upon the drawer of the cheque, no
controversy arises. Similarly if the notice is
refused by the addressee, it may be
presumed to have been served. This is also
not disputed. This leaves us with the third
situation where the notice could not be
served on the addressee for one or the other
reason, such as his non-availability at the
time of delivery, or premises remaining
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locked on account of his having gone
elsewhere, etc. etc. If in each such case the
law is understood to mean that there has
been no service of notice, it would
completely defeat the very purpose of the
Act. It would then be very easy for an
unscrupulous and dishonest drawer of a
cheque to make himself scarce for some time
after issuing the cheque so that the requisite
statutory notice can never be served upon
him and consequently he can never be
prosecuted. There is good authority to
support the proposition that once the
complainant, the payee of the cheque, issues
notice to the drawer of the cheque, the cause
of action to file a complaint arises on the
expiry of the period prescribed for payment
by the drawer for the cheque. If he does not
file a complaint within one month of the
date on which the cause of action arises
under clause (c) of the proviso to Section
138 of the Act, his complaint gets barred by
time. Thus, a person who can dodge the
postman for about a month or two, or a
person who can get a fake endorsement
made regarding his non-availability can
successfully avoid his prosecution because
the payee is bound to issue notice to him
within a period of 30 days from the date of
receipt of information from the bank
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regarding the return of the cheque as
unpaid. He is, therefore, bound to issue the
legal notice which may be returned with an
endorsement that the addressee is not
available on the given address.
36. We cannot also lose sight of the fact that the
drawer may by dubious means manage to get an incorrect
endorsement made on the envelope that the premises has
been found locked or that the addressee was not available
at the time when postman went for delivery of the letter.
It may be that the address is correct and even the addressee
is available but a wrong endorsement is manipulated by
the addressee. In such a case, if the facts are proved, it may
amount to refusal of the notice. If the complainant is able
to prove that the drawer of the cheque knew about the
notice and deliberately evaded service and got a false
endorsement made only to defeat the process of law, the
court shall presume service of notice. This, however, is a
matter of evidence and proof. Thus even in a case where
the notice is returned with the endorsement that the
premises has always been found locked or the addressee
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was not available at the time of postal delivery, it will be
open to the complainant to prove at the trial by evidence
that the endorsement is not correct and that the addressee,
namely, the drawer of the cheque, with the knowledge of
the notice had deliberately avoided to receive notice.
37. In the above decision, it is held that each question
with regard to the service of notice has to be answered by
reference to the facts of the case and no rule of universal
application can be laid down in all cases when notice is not
served on account of non availability of the addressee in
the given address. If notice is served upon the drawer of
the cheque, no controversy arises. However, if the
addressee refuses the notice it may be presumed that the
notice have been properly served. Another situation is that
the notice could not be served on the addressee on the
ground of his non availability at the time of delivery or
the house is remaining locked on account of his non
availability in the station or in India or he has gone
elsewhere permanently etc., in each such cases it means
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that there has been no service of notice. If there is no
service of notice in the aforesaid grounds, it would
completely defeat the purpose of the Negotiable
Instrument Act. If complainant is able to prove that the
drawer of the cheque knew about the notice and
deliberately evaded from the premises making a false
endorsement, it will defeat the process of law and in such
situation the apex court held that the Court shall presume
that there was proper service of notice. This is really a
matter of evidence and proof. Therefore, if the service of
notice is fraudulently refused or avoided by the accused in
an unscrupulous manner, that is a matter of evidence and
that fact can be proved on the basis of evidence.
38. In this case, the complainant knew that the
accused is not available in his residence, even then, he
issued a notice under Sec.138(b) of the Negotiable
Instrument Act. The complainant has no case that the
accused deliberately evaded from his residence in order to
avoid service of notice. On the other hand, when
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complainant issued notice under Section 138(b) of the
Negotiable Instrument Act, he knew that the address
mentioned in the postal cover is not sufficient, the
question arises is whether the said service of notice in the
available address is sufficient for proper compliance of
Sec.138(b) of the Negotiable Instrument Act. If the
complainant is able to prove that the drawer of the cheque
deliberately evaded service, then the presumption of
service will attract. On the other hand, if the registered
notice as contemplated under Section 138(b) of the
Negotiable Instrument Act was issued by the complainant
but it was returned with endorsement 'addressee left' or
'address insufficient' and the complainant at the time of
issuance of notice knew that the address of accused
mentioned in the cover is not insufficient to deliver the
letter, then there is no deliberate avoidance of notice and
it is presumed that there is no notice under Section 138(b)
and no presumption of service can be drawn against the
drawer. In such a situation, prosecution under Section 138
of the Negotiable Instrument Act is not possible and the
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complainant will have every right to approach the civil
court for proper remedies. However, no evidence has been
adduced by the complainant with regard to the knowledge
of the accused about notice. Therefore, the endorsement
made by the postal authorities in the notice itself is not
sufficient to draw a presumption of service of notice. An
enquiry with regard to the knowledge of non availability
at the residence is necessary in this matter. The evidence
in a case can be given of fact in issue and relevant fact
alone. The court is bound to prevent admission of
inadmissible evidence. When the relation of a relevant fact
to the fact in issue is proximate it is called direct evidence
and is admissible. The credibility of a fact depend upon
various factors. If one witness has no knowledge of a fact
the evidence given by that witness is worthless. Section 27
of the General Clause Act gives a presumption of service
of notice sent by post and the dispatcher of the notice can
claim the benefit of presumption of service and it is a
rebuttable presumption. If the evidence of the witness
discloses his inability to speak about the service of notice,
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it is difficult for the court to accept that evidence for
drawing the above presumption.
39. The offence under Sec.138 of the NI Act is not a
natural crime like hurt or other offence under the Indian
Penal Code, but, it is an offence created by a legal fiction
in the statute, transformed civil liability into criminal
liability. The onus of proving all the ingredients of the
offence in a criminal case is on the prosecution. When an
accused person is charged with having committed an
offence, it is for the prosecution to prove all the
ingredients of the offence. It is only when this burden is
discharged, the accused has to explain the essential
elements in the prosecution case which would negative it.
Even after the civil liability transformed into criminal
liability under restricted conditions by amendment of the
Negotiable Instrument Act, by introducing the relevant
provisions, the strict liability provided for criminal cases
has not changed. In this context, the decision of the
Hon'ble Apex court in D. Vinod Sivappa v. Nanda
C.C. No. 3286 / 2019
Belliappa [(2006) 6 Supreme Court Cases 456] is
relevant.
40. Undoubtedly, the accused has a right to pay the
money within 15 days from the date of the service of
notice and only when it fails to pay, it is open for the
complainant to file a case under Section 138 of the
Negotiable Instruments Act. That being the position and
in the complaint itself having not been mentioned that the
notice has been served, on the assertions made in the
complaint itself is not maintainable. Absolutely, there is
no an iota of evidence on the record to show that legal
notice has been served on the accused. Admittedly, the
complainant has not examined the official of the Postal
Authorities to show that the notice was served on the
accused. Non-examination of postman is fatal to the case
of the complainant. Therefore, the contention of
complainant that the notice was served on accused cannot
be acceptable.
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41. Admittedly, once the cheque relates to the
account of the accused and he accepts and admits his
signature on the cheque, then initial presumption as
contemplated u/Sec.139 of N.I. Act has to be raised by
the court in favour of the complainant. The presumption
referred to u/Sec.139 of N.I. Act is a mandatory
presumption and not a general presumption. But, the
accused is entitled to rebut the said presumption by
probable and acceptable evidence. Admittedly, in this case,
the accused did not give the reply to the notice under
Sec.138 of N.I. Act and he had also not taken any legal
action against the complainant after receipt of the
summons to recover the cheque in issue from him.
Merely, the accused has not given reply to the notice is
not sufficient to draw the presumption against him,
because in this case, the complainant failed to prove and
establish his financial capacity. In this case, the
complainant also failed to prove the existence of legally
enforceable debt. Hence, I answer point No.1 in the
"Negative".
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POINT No.2:-
42. Section 139 of N.I. Act creates presumption that
the cheque received in the nature referred to Section 138
of N.I. Act is always issued in discharge of debt or other
liability. For a successful prosecution of offence under
section 138 of the Act, complainant must allege and prove
that the cheque was drawn or executed by the accused. In
the absence of proof of lending loan to the accused,
presumption cannot be drawn in favour of the
complainant. In this case, the accused had a probable
defence and complainant failed to prove and establish her
case and no presumption arise in her favour. Hence, the
benefit of doubt given to the accused. In view of my
findings to the above point, I proceed to pass the
following :
ORDER
The accused is not found guilty of the offence punishable under Section 138 of Negotiable Instruments Act.
C.C. No. 3286 / 2019 Hence, the accused is acquitted acting Under Section 255(1) of Cr.P.C of the charges leveled against her for the offence punishable under Section 138 of Negotiable Instruments Act.
Bail bond of accused is canceled and surety stands discharged.
(Dictated to the Stenographer, transcribed and typed on Lap-top, then corrected by me, Print out taken, signed and then pronounced by me in the open court on this the 30th day of April 2022) (K. LAKSHMI) IV Addl. SCJ & ACMM., Bengaluru.
C.C. No. 3286 / 2019 ANNEXURE List of witnesses Examined for Prosecution:
PW.1. : Smt. Shantha S N List of documents marked for prosecution :
Exp.1 : Cheque
Exp.1(a) : Signature of accused
Exp.2 : Banker's endorsement
Exp.3 : Office copy of Legal notice
Exp.4 & 5 : Postal receipts
Exp.6 & 7 : RPAD Covers
Exp.8 : Bank Pass Book
Exp.9 : Absolute Sale deed
dtd: 24.05.2014
Exp.10 : Promissory Note
Exp.11 : Receipt
List of witnesses examined for accused :
DW-1 : Anand C.C. No. 3286 / 2019 List of documents marked for accused :
ExD.1 : Bank Statement (K. LAKSHMI) IV Addl. SCJ & ACMM., Bengaluru.
C.C. No. 3286 / 2019 Dt: 30042022 C-
A-
For Judgment (Order pronounced in open court vide separate judgment) ORDER The accused is not found guilty of the offence punishable under Section 138 of Negotiable Instruments Act.
Hence, the accused is acquitted acting Under Section 255(1) of Cr.P.C of the charges leveled against her for the offence punishable under Section 138 of Negotiable Instruments Act.
Bail bond of accused is canceled and surety stands discharged.
(K. LAKSHMI) IV Addl. SCJ & ACMM, Bengaluru.
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