Bangalore District Court
Sri. Neelakanta A vs Sri. Satish R on 7 September, 2022
KABC020115002021
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.3360/2021
Dated this the 07th day of September 2022
COMPLAINANT : Sri. Neelakanta A
S/o Late Aruvaiah,
Aged about 43 years,
No.34, 4th Cross, 3rd Main,
Adarshanagar,
Nagarbhavi 1st stage,
Bangalore-560 072.
(By Advocate Sri. D. S. Girish)
V/s
ACCUSED Sri. Satish R
S/o Late G. Rajanna,
Aged about 38 years,
No.58, 3rd Main, 8th Cross,
C.C. No. 3360 / 2021
Gururaghavendra Nagar,
Puttenahalli, J. P. Nagar 7th Phase,
Bangalore-560 078.
(By Advocate Sri. I. Devananda)
* * *
-: 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 and availed a credit facility to the tune
of Rs.20,00,000/- in the year 2017. The complainant
borrowed a loan of Rs.15,00,000/- from one Shri. P.L.
Rama Sharama and Rs.2,00,000/- from one Smt. R.
Nagamani to give the loan to the accused. The accused
assured that he will return the said amount within short
period. The accused issued the undated cheque bearing
C.C. No. 3360 / 2021
785306 drawn on State Bank of Mysore, Magadi
Branch. It is further alleged that the accused has
executed the pro-note and also consideration in favour of
complainant. Subsequently for repayment of the said
amount the accused issued two cheques i.e., cheque
bearing No. 172270 dated 09-09-2020 for a sum of
Rs. 9,95,000/- and another cheque bearing No. 172271
dated 09-09-2020 for a sum of Rs. 9,95,000/- drawn on
State Bank of India, Puttenahalli Branch, Bengaluru.
Thereafter, the cheque was presented for collection in
the account of the complainant and impugned cheque
was dishonored by the said Bank on 11-09-2020 on the
ground that 'Payment stopped by drawer'.
3. Thereafter, the complainant issued a statutory
notice dated 21-09-2020 under section 138 of the
Negotiable Instrument Act, to the accused. The accused
has knowledge about the issuance of the notice. The
accused did not pay the cheque amount to him. Since
C.C. No. 3360 / 2021
the said notice was not complied with, the above said
complaint is preferred by the complainant.
4. In his pre-summoning evidence, complainant
was examined on affidavit. He reiterated the contents of
complainant and got marked thirteen documents as per
Ex. P-1 to Ex. P-13. 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. The complainant i.e, CW-1
was duly cross examined by the accused and he closed
C.C. No. 3360 / 2021
his evidence. Thereafter, the accused led evidence as
DW-1. He relied on Ex. D-1 to Ex. D-10.
6. I have heard the arguments on both sides.
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
taken the hand loan of Rs. 20,00,000/- from
him in the year 2017 two cheques i.e., cheque
bearing No. 172270 dated 09-09-2020 for
a sum of Rs. 9,95,000/- and another cheque
bearing No. 172271 dated 09-09-2020 for a
sum of Rs. 9,95,000/- drawn on State Bank
of India, Puttenahali Branch, Bengaluru and
when the complainant presented the cheque
for encashment and it was dishonoured due to
"Funds Insufficient", for which the
complainant has issued a legal notice through
RPAD and the same was served, but the
C.C. No. 3360 / 2021
accused has not repaid the said amount and
thereby the accused has committed the offence
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.20,00,000/- to the accused,
issuance of the cheques, dishonour of cheques, issuance
of legal notice and failure of the accused to pay the
cheque amount. The complainant has produced the
two cheques i.e., cheque bearing No.172270 dated 09-
C.C. No. 3360 / 2021
09-2020 for a sum of Rs.9,95,000/- and another cheque
bearing No. 172271 dated 09-09-2020 for a sum of Rs.
9,90,000/- drawn on State Bank of India, Puttenahali
Branch, Bengaluru alleged to be issued by the accused in
favour of the complainant. Ex. P-1 and Ex. P-2 stand in
the name of the complainant. Ex. P-3 and Ex. P-4 are
the Banker's endorsement, which shows that "payment
stopped by drawer". Ex. P-5 is the office copy of the
legal notice, which is dated 21-09-2020. Ex. P-6 is the
postal receipts. Ex. P-7 and Ex. P-8 are the unserved
postal cover and postal acknowledgement. Ex. P-9 is the
pro-note and consideration receipt alleged to be executed
by the accused in favour of complainant. Ex. P-10 is the
pro-note and consideration receipt alleged to be executed
by the complainant in favour of P. L. Rama Sharma.
Ex. P-11 to Ex. P-13 are cheques.
10. On the other hand, the accused led evidence as
DW-1. He has not borrowed a loan from the
complainant. He never issued the disputed cheque for
C.C. No. 3360 / 2021
discharging the debt. He gave disputed cheques and pro-
note to R. Harinath. The complainant is none another
than the brother of his mother. He further submits that
the complainant borrowed a loan of Rs. 8,00,000/-
from his mother. The complainant has issued the cheque
in favour of his brother's wife by name Smt. Jayashree.
The said Smt. Jayashree filed a criminal case against the
complainant in C.C. No. 4773 /2016. The accused and
his brother by name Jagadish filed a partition suit against
his another brother by name Yogesh at the instigation of
complainant. The complainant introduced the advocate
R. Harinath to him to file a partition suit against his
brother. The said R. Harinath secured the cheque
bearing No. 785306 towards advocate fee in order to file
partition suit against his brother. The said R. Harinath
collected the amount of Rs. 1,50,000/- towards advocate
fee from him in the year 2017.
11. He further alleged that the complainant against
instigated him and his brother by name Jagadish after
C.C. No. 3360 / 2021
death of his father to file a criminal case against his
another brother by name Yogesh. The accused again
met the advocate by name R. Harinath. The said
advocate suggested him to file private criminal complaint
against R. Yogesh and deadened the fees of 3,00,000/-.
Again the said R. Harinath collected two cheques i.e,
cheque bearing Nos. 172270 and 172271 drawn on State
Bank of India and also pro-note. He further submitted
that the partition suit came to be dismissed in the year
2016 and this fact was not disclosed by the said
advocate. He along with the complainant again met the
said advocate R. Harinath in the year 2019 to know
about the status of the suit and then the said advocate
admitted the fact that the said suit came to be dismissed.
Then, he demanded the advocate to return the file and
also documents. He also demanded to return the cheques
and pro-note, which were given for the security
purpose. He did not return the cheques and pro-notes.
He has misused the cheques and pro-notes through
complainant. The complainant has not approached the
C.C. No. 3360 / 2021
Court with clean hand. He is not liable to pay the
cheque amount to complainant.
12. Learned counsel for the complainant argued
that the complainant has discharged his initial burden of
proving the case by his oral as well as documentary
evidence. The accused was aware of the fact that the
disputed cheques were 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.
13. To counter these submission, the learned
counsel for the accused argued that, there was no
transaction between the complainant and the accused,
and the accused never borrowed a loan of Rs.
20,00,000/- from the complainant. It is also contended
that the accused has not issued the cheque in dispute in
C.C. No. 3360 / 2021
favour of the complainant towards the discharge of debt.
It is also contention of the defence Counsel that the
disputed cheques and pro-note were collected by R.
Harinath in order to prosecute the case on behalf of the
accused and he has misused the cheques and pro-note
through the complainant in order to make wrongful
gain from the accused. The complainant has no source
to lend the such huge amount to the accused. It is
further contended that though there is presumption
under 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.
14. 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
C.C. No. 3360 / 2021
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
whole or in part, of any debt or
other liability."
15. The presumption mandated by Section 139 of
N.I. 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
C.C. No. 3360 / 2021
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.
16. The specific case of the complainant is that,
the accused has borrowed a loan of Rs. 20,00,000/- It is
also alleged that the complainant borrowed a loan of Rs
15,00,000/- from one Shri. P.L. Rama Sharama and Rs.
2,00,000/- from one Smt. R. Nagamani to give the loan
to the accused. The accused assured that he will return
the said amount within short period. The accused issued
the disputed cheques for discharging of debt and the said
cheques were 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
C.C. No. 3360 / 2021
complainant. On the contrary, the accused has taken
a defence that the complainant has no financial capacity
to lend the amount. The alleged loan transaction itself is
the concocted story of the complainant. The
complainant has not lead evidence to show his financial
capacity to lend the such huge amount of Rs.
20,00,000/- to the accused. It is also contention of the
accused that the accused has not issued the disputed
cheques in favour of the complainant towards discharge
of debt. The disputed cheques were given to one R.
Harinath and he has misused the said disputed cheques
through complainant in order to make wrongful gain.
The accused is not liable to pay the cheque amount to
the complainant.
17. Section 20 of Negotiable Instrument Act,
1881, states that when a person signs and delivers blank
cheque to another, he thereby gives prima facie
authority to holder thereof to make or complete it for
any amount specified therein and not exceeding the
C.C. No. 3360 / 2021
amount covered by stamp. After combined reading of
said section 20 and 138 of Negotiable Instrument Act, it
appears that to made out an offence in question against
the accused, the necessary ingredient is that the cheque
should be drawn on the account of the drawer and it is
immaterial the contents therein are in whose
handwriting as per section 20 of the Negotiable
Instruments Act. After perusal of said section 20, it
appears that the drawer of a cheque can issue blank
cheque to other person and by his said act he gives an
authority to said concern person to fill up it contents. It
enables the holder of the cheque to fill up the
incomplete cheque.
18. It is specific defence of the accused that the
complainant has no financial capacity to lend such huge
amount and the complainant has not produced the
document to prove the same. On the other hand, the
learned Counsel for the complainant argued that the
complainant has not produced the documents to prove
C.C. No. 3360 / 2021
his financial capability. 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 rebuttable. 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 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
C.C. No. 3360 / 2021
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
preponderance of probabilities can be drawn not only
from the materials on records, but also by reference to
the circumstances upon which relies.
19. 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
C.C. No. 3360 / 2021
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 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
C.C. No. 3360 / 2021
which is inconsistence with the assertion of drawing of
cheque by accused, accused cannot be said to have drawn
the cheque.
20. 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 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. Thus, this Court has to consider
whether the complainant has to prove her financial
capacity to lend such huge amount of Rs.20,00,000/- to
the accused. According to the accused disputed cheque
C.C. No. 3360 / 2021
was not issued in favour of complainant. The
complainant has no financial capacity to lend such huge
amount to the accused. The accused has produced the
i.e., Ex. D-1 & Ex. D-2. Ex. D-1 & Ex. D-2 are the
certified copies of complaint under Section 200 of Cr.
P.C and these documents reveal that the complainant
filed a cheque bounce case against one M. Ranganath.
As per these documents the amount of Rs. 10,00,000/-
was availed by the complainant from the accused in
order to facilitate the said M. Rangantha. In this case, it
is pertinent to note that the complainant has not placed
any material to show that the said amount was returned
to the accused. It is also not the case of complainant
that the contents mentioned in the said cases are
incorrect. As per these documents the complainant lend
the amount to other people other than the accused.
According to the complainant, he has borrowed a loan
from P. L Rama Sharma of Rs. 18,00,000/- and also
amount of Rs. 2,00,000/- from one Smt. R. Nagamani
in order to facilitate the accused. The complainant has
C.C. No. 3360 / 2021
produced the pro-note and cheque which were alleged to
be given to them. Mere production and marking of a
document as exhibit by the Court cannot be held to be a
due proof of its contents. The complainant has not made
any attempt to examine the said persons to prove his
contention. Non-examination of said witnesses fatal to
the case of complainant.
21. The accused has denied the financial capacity of
the complainant. On the contrary, the complainant has
not produced any other documents to prove his financial
capacity. 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, he had arranged the loan amount from friends.
The complainant has not examined them. Admittedly,
the complainant except denying that he had no financial
capability to lend, has not produced any documents or
corroborative evidence to show that he had such a huge
C.C. No. 3360 / 2021
balance in his bank account and that he had withdrawn
the same and kept the cash is his house. He has not even
produced any evidence to show that without drawing
the amount from his bank account also, he had retained
a huge cash in his house. Thus, it is hard to believe as
to why and for what reason complainant retained such a
huge amount in cash in his house when there was no
anticipation of the lending said money to the
complainant or keeping that money with him for any
particular purpose. Though, the complainant has stated
that he had a sum of Rs.3,00,000/- with him, but
admittedly he has not produced any document in that
regard. Even according to the documents i.e., Ex. D1
and Ex. D-2, he has borrowed a loan from the accused
in the ear 2015, then what was the necessity for the
complainant lend amount of Rs.10,00,000/- to the
accused that too in the cash is not forthcoming in this
case. It is not case of the complainant that the said was
repaid to the accused. This definitely hampers the case of
the complainant especially in light of the fact that no
C.C. No. 3360 / 2021
other evidence has been forthcoming in support of the
loan transaction. Considering the evidence on record, it
does appear improbable that a loan of Rs. 20,00,000/-
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
in the form of bank statements. 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.
In K. Prakashan vs. P.K. Surendran [2008 1 CC
No.1533/2016 page no.11/14 (SCC) 258], the
Supreme Court held that if a huge amount of money is
advanced as loan then the person who has purportedly
C.C. No. 3360 / 2021
advanced the loan must also show the solvency to the
extent of the loan either through the bank account or
through other means. In the case at hand, the accused
has been able to raise a suspicion as to the existence of
the loan by bringing to light the financial capacity of the
complainant. Moreover, the complainant has not been
able to remove the said suspicion.
22. It is specific contention of the complainant that
the accused executed the pro-note and consideration
receipt at the time of alleged transaction. It is also alleged
that the contents of the pro-note and consideration
receipt filled by the R. Harinath on the instruction of
the accused. If the accused has executed the pro-note and
consideration receipt in the presence of the said witness,
what prevented the complainant to examine the said
witness is not forthcoming in this case. Non-
examination of said witnesses fatal to the case of the
complainant. If the accused has executed the pro-note in
his favour, what prevented him to take action against the
C.C. No. 3360 / 2021
accused on the basis of said document is also not
forthcoming. He need not wait to secure the cheque
from the accused. He has every opportunity to take
action against the accused on the basis of the said pro-
note to recover the alleged amount. The complainant
cannot stand on the weakness of accused on the ground
that the accused has not taken the action against the
complainant. However, despite said weakness in the case
of the accused, I am inclined to dismiss the case of the
complainant as the version of the complainant appears
to be more unbelievable as compared to that of the
accused. In this case, the complainant has failed to
discharge his onus o show that he had financial capacity
to lend a huge amount of Rs. 20,00,000/- in cash to the
accused. As such, the evidence of complainant to the
alleged transaction proved to be not safe to believe. 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 Fertilizers
C.C. No. 3360 / 2021
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.
23. Further in the case of Ashok Baugh vs. Kamal
Baugh and another is more s [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 Sajidur
Rehman vs. Rajiv CC No.1533/2016 page no.13/14
Kashyap and another [2017 (4) JCC (NI) 225], the
C.C. No. 3360 / 2021
Hon'ble High Court of Delhi held that the absence of
any evidence to show the solvency of the 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 she 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
C.C. No. 3360 / 2021
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 Magnum Aviation Private Limited and another
[CA No.830 of 2014].
24. In this case, no evidence has been adduced by
the complainant to prove the transaction which had
been categorically denied by the accused. Further, no
presumption can be drawn that the complainant has
capacity to lend to the tune of Rs. 20,00,000/- merely
on the basis of self serving statement of the complainant.
Further, the complainant did not produce the bank
statement to substantiate his claim. The complainant has
also not made any efforts to examine the Sri. P. L. Rama
Sharma and Smt. Nagamani to prove his contention.
Non-examination of the said witnesses is fatal to the case
of complainant. The documents produced by the
complainant are not sufficient to hold that the
complainant has financial capacity to lend huge amount
C.C. No. 3360 / 2021
to the accused without other evidence prove the debt
and income of the complainant.
25. 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 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
C.C. No. 3360 / 2021
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.
26. 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 :-
" 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
C.C. No. 3360 / 2021
amounts 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.
27. In the case of N. Ethirajulu Naidu -Vs- K. R.
Chinnikrishnana Chettair, AIR 1975 Madras 333,
C.C. No. 3360 / 2021
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."
28. It is well settled law that the penal provision
of Section 138 of the Negotiable Instrument Act is
applicable only to the cheques are issued for the
discharge in whole or in part, of any debt or other
C.C. No. 3360 / 2021
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. A cheque given in discharge of a time barred-debt
will not constitute a promise in writhing not even an
implied promise so as to attract a criminal liability under
Section 138 of Negotiable Instrument Act.
29. In this case, the alleged loan was advanced on
10-06-2016 and the cheque was issued on 24-08-2020.
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
C.C. No. 3360 / 2021
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.
30. 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
C.C. No. 3360 / 2021
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 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
C.C. No. 3360 / 2021
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.
31. Another contention of the defence counsel is
that the demand notice was not servedd to the accused.
The burden is on the complainant that the notice was
dispatched by post with correct address. Per contra,
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
C.C. No. 3360 / 2021
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.
32. 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 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
C.C. No. 3360 / 2021
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.
33. 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
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
C.C. No. 3360 / 2021
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.'
34. The requirement of giving notice is mandatory
for maintaining a complaint, but there is no procedure
prescribed under Sec.138 of the NI Act for serving
notice on the accused. Notice means notice in writing
and not a verbal demand to the drawer. The Hon'ble
C.C. No. 3360 / 2021
Apex court in K.Bhaskaran Vs. 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 Vs. P. Subbarama Naidu [(2004) 8
Supreme 774] it was held that statutory notice under
Section 138(b) of the NI 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.
35. The provision under Sec.138 of the NI 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
C.C. No. 3360 / 2021
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 him under Section
138 of the NI Act. It is mentioned under Sec.142 of the
NI 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
C.C. No. 3360 / 2021
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.
36. 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 drawer of the cheque within 15 days from the
date of intimation received from the bank about the
dishonor 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
C.C. No. 3360 / 2021
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. 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
C.C. No. 3360 / 2021
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.
37. 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
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."
C.C. No. 3360 / 2021
38. 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 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
C.C. No. 3360 / 2021
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
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.
39. 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
C.C. No. 3360 / 2021
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 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.
C.C. No. 3360 / 2021
40. 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 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
C.C. No. 3360 / 2021
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.
41. 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 NI 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 complainant issued
notice under Section 138(b) of the NI Act, he knew that
the accused is not available, 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
C.C. No. 3360 / 2021
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 "always door lock" and the complainant at
the time of issuance of notice knew that the accused is
residing in the second floor of building, 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
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
C.C. No. 3360 / 2021
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, it is
difficult for the court to accept that evidence for drawing
the above presumption.
42. 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
C.C. No. 3360 / 2021
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 Belliappa [(2006) 6 Supreme
Court Cases 456] is relevant.
43. 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
C.C. No. 3360 / 2021
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 severed
on accused cannot be acceptable.
44. 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
C.C. No. 3360 / 2021
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
notice 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 and also service of notice.
In this case, the complainant failed to prove the
existence of legally enforceable debt. Hence, I answer
point No.1 in the "Negative".
POINT No.2:-
45. 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
C.C. No. 3360 / 2021
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 his
financial capacity. 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.
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.
C.C. No. 3360 / 2021 The bail bond of accused stands cancelled and surety stands disbursed.
(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 07th day of September 2022.) (K. LAKSHMI) IV Addl. SCJ & ACMM, Bengaluru.
C.C. No. 3360 / 2021 ANNEXURE List of witnesses Examined for Prosecution:
PW.1. : Neelakanta List of documents marked for prosecution :
Exp.1 & 2 : Cheques
Exp.1(a) &: Signatures of accused
2(a)
Exp.3 & 4 : Banker's Endorsements
Exp.5 : Office copy of legal notice
Exp.6 : Postal Receipt
Exp.7 : RPAD Cover
Exp.8 : Postal Acknowledgement
Exp.9 &
10 : Pro-note and cash payment receipts
Exp.11-13 : Cheques
List of witnesses Examined for accused :
DW-1 : Sathish R List of documents marked for accused :
ExD.1&2 : C/c of complaints in PCR No.7478/2017 and 7480/2017 C.C. No. 3360 / 2021 ExD.3&4 : C/c of order sheet and plaint in O. S. No. 6291/2016 ExD.5 : C/c of complaint in PCR No.9231/2018 ExD.6 : List of witnesses ExD.7 : C/c of Vakalathnama ExD.8 : Requisition letter dtd: 21.08.2019 ExD.9&10 : C/c of order sheet and other documents in PCR No. 10830/2022 (K. LAKSHMI) IV Addl. SCJ & ACMM, Bengaluru.
C.C. No. 3360 / 2021 Dt: 07.09.2022 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.
C.C. No. 3360 / 2021 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.
C.C. No. 3360 / 2021 C.C. No. 3360 / 2021 C.C. No. 3360 / 2021 C.C. No. 3360 / 2021