Karnataka High Court
Lingaraj S/O Murgeppa Sakri vs Babu Narayan Shetty on 28 August, 2013
Author: Anand Byrareddy
Bench: Anand Byrareddy
1
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 28TH DAY OF AUGUST, 2013
BEFORE
THE HON'BLE MR. JUSTICE ANAND BYRAREDDY
CRIMINAL APPEAL No.2541 OF 2008
BETWEEN:
Lingaraj,
S/o. Murgeppa Sakri,
Aged 40 years, Occupation: Business,
Resident of Channabasava Nilaya,
Old Income Tax Office Road,
Vidyanagar,
Hubli-580 028.
...APPELLANT
(By Sri. Mahesh Wodeyar, Advocate)
AND:
Babu Narayan Shetty,
Pradeep Canteen,
Old Income Tax Office Road,
Vidyanagar,
Hubli-580 028. ...RESPONDENT
(By Sri. Dinesh M. Kulkarni, Advocate)
---
This appeal is filed under Section 378(4) of the Code of
Criminal Procedure, 1973 praying to call for the records and set
aside the order of acquittal dated 21-07-2008 passed by the
2
JMFC-II at Hubli in C.C.No.1969/2006 and consequently
convict the respondent / accused for the offence punishable
under Section 138 of the Negotiable Instruments Act.
This appeal coming on for final hearing this day, the
Court delivered the following:
JUDGMENT
Heard the learned counsel for the appellant and the learned counsel for the respondent.
2. The appellant was the complainant before the Trial Court alleging an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'the NI Act', for brevity). It is the case of the appellant that the respondent had borrowed money as a hand loan on several occasions and had duly repaid the same. It transpires that at a point of time, he had totally borrowed a sum of Rs.3,00,000/- and when the demand was made for repayment, the respondent had issued a cheque for a sum of Rs.3,00,000/- drawn on Arya- Vaishya Co-operative Bank Limited, Hubli, dated 25-02-2006 in the name of the complainant. When the same was presented 3 for collection, it was returned dishonoured for the reason that the account had been closed as per memo dated 27-02-2006. It is in this background that the appellant had issued a legal notice as required under Section 138 of the NI Act and though the respondent had issued a reply denying the obligation and liability, since there was no compliance with the demand, a complaint was lodged. On his being served with the summons of the complaint, the respondent had entered appearance and contested the matter. The court below had addressed the point whether the complainant proved beyond all reasonable doubt that the accused had committed an offence punishable under Section 138 of the NI Act and answered the same in the negative and acquitted the accused - respondent. It is that which is under challenge in the present appeal.
3. The learned counsel for the appellant would contend that the defence set up by the respondent was to the effect that the cheque in question was a blank signed cheque, no doubt 4 issued by the respondent on an account which he held with his banker in the year 2003. It was given to the appellant as security for due repayment of a sum of Rs.1,00,000/- which he had borrowed earlier and the said amount having been repaid, the cheque in question had been retained by the appellant and was sought to be misused three years later when the Account itself had been closed in the year 2003. Therefore, there was no legal liability in respect of which the cheque was issued and it was for the appellant to establish that he had the money which had been lent to the respondent and that the cheque had been issued for due repayment of the same. In this regard, the respondent had questioned the source of income of the appellant and the lack of proof of having lent any such money. The court below has readily accepted the defence of the respondent and has held that though the initial burden was on the respondent to establish that the cheque was not issued for a legal liability, if once a tenable defence was set up, then the burden shifted on the appellant to establish that the cheque was 5 issued in discharge of a legal liability. Except for the cheque leaf, there was no other independent material to establish the loan transaction and therefore, the appellant had miserably failed to prove that the cheque had been issued for discharge of a legal liability and has accordingly, acquitted the respondent.
The learned counsel would submit that the mere defence sought to be set up without further material in support of such a contention, could not have been sustained. He would point out that the basis of the defence was that a cheque for a sum of Rs.1,00,000/- was intended to be issued, but however, the cheque was a blank cheque, duly signed by the respondent. That itself cannot be accepted. If once it is admitted by the respondent that the cheque has been issued on the account of the respondent and duly signed by the respondent, the further contention that it was intended for a particular amount though the amount was not indicated on the cheque leaf, is not a tenable contention that could be entertained. The fact that the cheque was for a sum of Rs.3,00,000/- as indicated on the face 6 of it, cannot be dislodged by a contention that it was a blank cheque issued earlier in point of time in respect of some other transaction. The contents of the cheque would speak for itself and cannot be wished away as sought to be contended by the respondent. Further, it was for the respondent to establish that there was an earlier transaction wherein a sum of Rs.1,00,000/- had been borrowed by the respondent and that it was duly repaid, but a cheque which was issued as security for due repayment, was not returned by the appellant and it was sought to be misused in the manner as set out in the complaint, was to be established by the respondent by leading evidence in this regard, in the absence of which it cannot be said that the initial burden of establishing that there was no legal liability in respect of which the cheque had been issued stood discharged and that the burden shifted on the appellant and hence, he would contend that a mere defence sought to be raised, by itself cannot be accepted in holding that the appellant was bound to establish that the cheque was issued in discharge of a legal liability and 7 therefore, would contend that the offence punishable under Section 138 of the NI Act was established on the face of it and the defence set up by the respondent was not tenable.
4. On the other hand, the learned counsel for the respondent would vehemently canvass the argument that the settled legal position has been applied by the Trial Court and as held by the Trial Court, initially, the burden of establishing that there was no legal liability in respect of which the cheque could have been issued was soundly established by the respondent. In this regard, he would place reliance on the observations made in the three-judge bench decision of Rangappa vs. Mohan, 2010 SC 1898, wherein the opinion expressed by the Apex Court in Krishna Janardhan Bhat vs. Dattatraya G Hegde, AIR 2008 SC 1325, has been held to be no longer good law. But has proceeded to observe as follows:
14. In light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To 8 that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested.
However, there can be no doubt that there is an initial presumption which favours the complainant. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/defendant cannot be expected to discharge an unduly high standard or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping 9 this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of `preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."
Hence, the learned counsel would contend that when an accused has to rebut the presumption under Section 139 of the NI Act, the standard of proof for doing so is that of preponderance of probabilities and hence, the accused in this case having raised a probable defence which created doubts about the existence of a legally enforceable debt, the prosecution should certainly fail and therefore, when the respondent had raised the defence that the appellant was not in a position to lend Rs.3,00,000/- as he had no known source of income, it was for the appellant to have met that contention by 10 leading evidence. This is the effect of a tenable defence being raised which was required to be met by the complainant and it is in that sense that the court below has found that the burden had shifted on the appellant in establishing that there was a legally enforceable debt. This coupled with the circumstance that the cheque was issued on an account that was closed in the year 2003, whereas the cheque was of the year 2006, is also an indication that it was probably issued in respect of a transaction of the year 2003 as sought to be claimed by the respondent. Therefore, the defence in that regard cannot be said to be improbable and on this preponderance of probability namely that there was no such source of income by which the appellant could have lent a substantial sum of Rs.3,00,000/- and that the cheque was issued not at the point of time which is sought to be claimed but in respect of an earlier transaction, required the appellant to establish his case by tendering cogent evidence in support of his contention and hence, he would submit that the Trial Court was justified in holding that an offence punishable 11 under Section 138 was not established as having been committed. He would also place reliance on a decision of this court in the case of Veerayya vs. G.K. Madivalar 2012 (3) KCCR 2057, wherein in identical circumstances, the complainant claiming that he had lent a sum of Rs.2,00,000/- to the accused and a cheque had been issued in due repayment of the same, this court had held that except the cheque leaf, there was no other document in support of the transaction and in the absence of any such other document, the ability of the complainant to have lent such a substantial amount of money was in serious doubt and therefore, has held that the burden was on the complainant to establish that the cheque was issued in discharge of a legal liability and the same was not established in the absence of any cogent evidence in that regard and hence, the learned counsel would submit that the same would apply on all fours to the present case on hand.
Yet another decision of the Apex Court in the case of John K. John vs. Tom Varghese & Another 2007 AIR SCW 12 6736, is relied upon to contend that personal transactions involving large amounts of money, would necessarily have to be established by reference to independent documents and in the absence of which, the burden was on the complainant to establish the legal liability in the absence of which the rebuttable presumption under Section 139 would not be applicable in favour of the complainant. In that, the mere circumstance of holding a cheque issued by the accused, cannot by itself be sustained and hence would submit that the appeal be dismissed.
5. In the above facts and circumstances and in the rival contentions, as observed by the Apex Court in Rangappa's case, it is not in serious dispute that the cheque in question is duly signed by the respondent and it is also issued on the account held by the respondent. However, it is sought to be contended that the account was closed in the year 2003 and that the cheque in question was not issued in respect of the alleged transaction claimed by the appellant but was issued in respect of one earlier 13 transaction. This is belied by the further circumstance that the so-called earlier transaction was in respect of a sum of Rs.1,00,000/-, whereas the cheque issued is for a sum of Rs.3,00,000/-. The contention that the cheque however was a blank cheque and therefore, has been filled up to the convenience of the appellant, is not a presumption that can be drawn against the appellant. If the cheque and the signature are not denied, the contents thereof cannot be presumed to have been forged by the appellant. The burden of proving any such allegation would be on the respondent - accused. The further contention that the account to which the cheque pertained was closed in the year 2003, is also a plea of convenience. There is no presumption that a cheque had been issued in the year 2003 which is sought to be misused by the appellant. On the other hand, it was quite possible for the respondent to have issued such a cheque to mislead and to derive benefit from the appellant. Hence, the contention that it was in respect of an earlier transaction that the cheque was issued and which has 14 been misused being raised as a defence, would not automatically shift the burden upon the appellant. The further contention that the source of income was challenged and it was incumbent on the appellant to have established his ability to lend such monies by producing independent proof of his income, is also not a tenable contention.
There is no law which requires such proof to be established when the ingredients of the offence under Section 138 is with reference to the dishonour of the cheque issued by the accused and not recovery of monies lent under the said cheque, as a complaint brought under Section 138 does not always result in the court directing payment of compensation out of the fine amount to reimburse the complainant in respect of the amount covered under the cheque. It would be wholly irrelevant for the complainant to establish his source of income in having lent the monies as if by virtue of any such punishment imposed, a loss would occasion to the accused in having to address that aspect of the matter. Therefore, it would be 15 irrelevant to inquire into the source of income of the complainant in allegedly having lent any monies in respect of which the cheque had been issued. Secondly, having regard to the scope of inquiry in a proceeding for an offence punishable under Section 138 of the NI Act, such a roving inquiry would be wholly out of place. Therefore, the fact whether the appellant had the source of income or whether he had filed his tax returns to establish that he had the capacity to lend such money, would be wholly irrelevant. The reliance placed on the decisions in Veerayya and John K. John to hold that the complainant was bound to establish the transaction by reference to documents other than the cheque itself, is with reference to the facts and circumstances of those particular cases that the courts were dealing with and cannot be a general principle laid down with reference to the manner in which the complainant is to establish a case for an offence punishable under Section 138 of the NI Act. Hence, in the opinion of this court, the court below was not justified in holding that the complainant had 16 failed to establish his case against the respondent. Consequently, it is held that the complainant - appellant has proved the commission of the offence punishable under Section 138 of the NI Act.
Accordingly, the appeal is allowed and the respondent is convicted and sentenced to pay a fine of Rs.5,10,000/- of which Rs.5,00,000/- shall be paid as compensation to the appellant in terms of Section 357 of the Code of Criminal Procedure, 1973, within a period of four weeks, in default of which, the respondent shall suffer simple imprisonment of six months for the offence punishable under Section 138 of the NI Act.
Sd/-
JUDGE KS