Bangalore District Court
Issued Legal Notice On 05.02.2020. It ... vs Appeared Through Her Learned Counsel ... on 18 April, 2023
1 CC.9897/2020( J)
KABC030422382020
Presented on : 15-09-2020
Registered on : 15-09-2020
Decided on : 18-04-2023
Duration : 2 years, 7 months, 3 days
IN THE COURT OF THE XV ADDL CHIEF METROPOLITAN
MAGISTRATE AT BENGALURU CITY.
Dated this the 18th Day of April-2023
Present: Lokesh Dhanapal Havale. B.A.L.L.B.,
XV Addl.C.M.M., Bengaluru.
Judgment U/s.355 of the Cr.P.C. 1973.
1.Sl.No.of the case CC.No.9897/2020
2.Name of the Complainant: Sri. Amit Shankarlal,
S/o Shankarlal. H
Aged about 39 years,
R/at No.29, Abshot Layout,
Sankey Road Cross,
Bangalore-560 052.
3.Name of the accused: M/s Lakshmi Garments
No.14, 2nd A Main Road,
2 CC.9897/2020( J)
Gandhigrama,
Bangalore- 560 021.
Rep by its Proprietrix,
Smt. Lakshmi.
4.The offence complained of : U/s.138 of Negotiable Instruments
Act.
5.Plea of the accused: Pleaded not guilty.
6.Final Order: Acting U/s.255(2) Cr.P.C., accused
is Convicted.
7.Date of final Order 18.04.2023.
* * *
This complaint is filed U/Sec.200 of Cr.P.C. against the
accused for the offence punishable U/Sec.138 of the Negotiable
Instruments Act, 1881.
2. The facts of the complaint in brief are as under:
The accused is proprietorship concern represented by its
Proprietrix. The accused borrowed a sum of Rs.3,00,000/- as hand
loan from the complainant by way of RTGS on 16.07.2019 (debited
from complainant's account on 18.07.2019) to meet their urgent
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business necessities. The accused executed on demand promissory
note and consideration receipt in favour of the complainant. The
accused repaid Rs.30,000/- on 17.07.2019, Rs.30,000/- on
23.08.2019 and Rs.30,000/- on 21.09.2019 and balance payable
amount was Rs.2,10,000/-. Further the accused also paid a sum of
Rs.25,000/- on 20.07.2019 towards the compensation payable to
the complainant as agreed and promised by him at the time of
availing the said loan. When the complainant approached and
demanded the accused to repay the said remaining hand loan
amount, the accused have issued 7 cheques bearing Nos.(1)594418
dated 08.11.2019, (2)594420 dated 15.11.209, (3)594420 dated
22.11.2019, (4)594421 dated 29.11.2019, (5)594422 dated
13.12.2019, (6)594423 dated 20.12.2019 and (7)594426 dated
27.12.2019 each for Rs.30,000/- drawn on State Bank of India,
Gayathrinagar, Bengaluru. On presentation of the said cheques for
encashment, they were dishonoured for the reasons 'Funds
Insufficient' on 24.01.2020 and 30.01.2020 respectively. The
complainant issued legal notice on 05.02.2020. It was served on
the accused on 07.02.2020. The accused did not pay the amount
even after the expiry of 15 days. The accused thereby committed
an offence punishable U/s.138 of the N.I.Act.
3. After the institution of the complaint, the cognizance
was taken and it has been registered as PCR No.3065/2020. The
sworn statement of the complainant has been recorded and on the
basis of sworn statement and other materials on hand, the criminal
case has been registered against the accused and summons was
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issued to accused. In response to the service of summons, the
accused appeared through her learned counsel and got enlarged
on bail. The prosecution papers were supplied to the accused and
the substance of the accusation was read over and explained to
the accused in the language known to her. She pleaded not guilty
and claimed to be tried.
4. During trial the complainant examined himself as PW-1
and got marked Ex.P1 to P18. During the cross examination of
PW.1, the counsel for the accused confronted and got marked
Ex.D1 to D3. The statement of the accused U/s. 313 of Cr.P.C.
was recorded. The accused examined herself as DW.1 and Sri.
Srinivas examined as DW.2.
5. Heard the arguments. On perusal of the entire
materials on record, the points that arise for my consideration are
as under;
1. Whether the complainant proves that the
accused issued 7 cheques bearing Nos.
(1)594418 dated 08.11.2019, (2)594420 dated
15.11.209, (3)594420 dated 22.11.2019,
(4)594421 dated 29.11.2019, (5)594422 dated
13.12.2019, (6)594423 dated 20.12.2019 and
(7)594426 dated 27.12.2019 each for
Rs.30,000/- all cheques drawn on State Bank
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of India, Gayathrinagar, Bengaluru towards
the discharge of legally enforceable
debt/liability and on their presentation for
encashment, they were dishonored with an
endorsement "Funds Insufficient" and even
after the service of legal notice, the accused
has not paid the amount within 15 days and
thereby accused committed an offence
punishable U/Sec.138 of N.I. Act, 1881?
2. Whether the accused rebuts the
presumption U/s.139 of the N.I.Act?
3. What order?
6. My answers on the above points for consideration are
as under:
Point No.1 : Affirmative
Point No.2 : Negative
Point No.3 : As per final order for the following;
REASONS
7. Point No.1 and 2 :- The points are taken together for
the common discussion to avoid repetition of facts and evidence. It
is necessary to discus the provisions U/s. 118(a) and 139 of the
Act., 1881 at this stage.
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"118. Presumptions as to negotiable
instruments. - Until the contrary is
proved, the following presumptions shall
be made:-
(a) of consideration - that every
negotiable instrument was made or drawn
for consideration, and that every such
instrument, when it has been accepted,
indorsed, negotiated or transferred, was
accepted, indorsed, negotiated or
transferred for consideration;"
"139. Presumption in favour of
holder.- It shall be presumed, unless the
contrary is proved, that the holder of a
cheque received the cheque of the nature
referred to in section 138 for the
discharge, in whole or in part, of any
debt or other liability."
8. On plain perusal of the provision U/s. 118(a) and 139
of the N.I.Act., it can be seen that initially the presumptions
constituted under these two provisions are in favour of the
complainant. However the presumptions are rebuttable and it is
open to an accused to raise a defence to rebut the statutory
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presumptions. An accused can raise a defence, wherein the
existence of legally enforceable debt or liability can be contested.
9. It is also well established that an accused need not
examine himself for discharging the burden of proof placed upon
him under a statute. He may discharge his burden on the basis of
the materials already brought on record. An accused has
constitutional rights to remain silent. The standard of proof on
part of the accused and that of the prosecution in a Criminal Case
is different. The prosecution must prove the guilt of an accused
beyond all reasonable doubts, the standard of proof so as to prove
a defence on the part of an accused is preponderance of
probabilities.
10. Under the light of position of the law, I have perused
the complaint and the evidence placed on record. The complainant
in support of his claim made in the complaint has adduced
evidence by examining himself as PW-1 and he got marked Ex.P1
to 18. PW-1 filed his evidence affidavit on oath and reiterated
the complaint averments. Ex.P1, 3, 5, 7, 9, 11 and 13 are the
cheques bearing Nos.(1)594418 dated 08.11.2019, (2)594420 dated
15.11.209, (3)594420 dated 22.11.2019, (4)594421 dated
29.11.2019, (5)594422 dated 13.12.2019, (6)594423 dated
20.12.2019 and (7)594426 dated 27.12.2019 each for Rs.30,000/-
drawn on State Bank of India, Gayathrinagar, Bengaluru in favour
of the complainant. Ex.P1(a) 3(a), 5(a), 7(a), 9(a), 11(a) and 13(a)
are the signatures of the accused. Ex.P2, 4, 6, 8, 10, 12 & 14 are
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the bank return memos dated 24.01.2020 and 30.01.2020
respectively with shara "Funds Insufficient". Ex.P15 is the office
copy of Legal Notice dated 05.02.2020 issued by the complainant
to the accused demanding repayment of the cheque amount.
Ex.P16 is the postal receipt for having sent the legal notice to the
accused. Ex.P17 is the postal acknowledgment for having served
the notice to the accused on 07.02.2020. Ex.P18 is the promissory
note and consideration receipt. It discloses that the accused
acknowledged the receipt of Rs.3,00,000/- and promised to repay
the same.
11. On perusal of the documents, it is clear that the
cheques at Ex.P1, 3, 5, 7, 9, 11, and 13 bearing Nos.(1)594418
dated 08.11.2019, (2)594420 dated 15.11.209, (3)594420 dated
22.11.2019, (4)594421 dated 29.11.2019, (5)594422 dated
13.12.2019, (6)594423 dated 20.12.2019 and (7)594426 dated
27.12.2019 each for Rs.30,000/- all cheques drawn on State Bank
of India, Gayathrinagar, Bengaluru in favour of the complainant
were presented within their validity. Ex.P2, 4, 6, 8, 10, 12 & 14
are the the bank return memos dated 24.01.2020 and 30.01.2020
with shara "Funds Insufficient". The office copy of Legal Notice
dated 05.02.2020 at Ex.P15 was served on the accused on
07.02.2020 as per Ex.P.17. The accused admitted the service of
notice. The complaint was filed on 25.02.2020, which is within
limitation. The cheques and the signatures in the cheques are
admitted. Therefore, the documents on record clearly show that
the complainant has complied the ingredients of Section 138(a) to
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(c) of the N.I.Act. Therefore the presumptions U/s.118 and 139 of
the N.I.Act arise in favour of the complainant. The presumptions
are rebuttable and the burden is on the accused to rebut the
presumptions. The accused can rebut the presumption by raising
probable defence and proving it relying on the evidence of the
complainant or by leading his direct evidence.
12. In the following judgments of the Hon'ble Supreme
Court the aspect of presumptions and burden of proof have been
settled.
(a) The Hon'ble Supreme Court in the case of M.S.
Narayana Menon Vs. State of Kerala - (2006) 6 Supreme
Court Cases 39, held as under:-
"30. Applying the said definitions of 'proved' or 'disproved'
to principle behind Section 118(a) of the Act, the Court shall
presume a negotiable instrument to be for consideration
unless and until after considering the matter before it, it
either believes that the consideration does not exist or
considers the non-existence of the consideration so probable
that a prudent man ought, under the circumstances of the
particular case, to act upon the supposition that the
consideration does not exist. For rebutting such presumption,
what is needed is to raise a probable defence. Even for the
said purpose, the evidence adduced on behalf of the
complainant could be relied upon.
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31. A Division Bench of this Court in Bharat Barrel &
Drum Manufacturing Company v. Amin Chand Payrelal
reported in (1999) 3 SCC 35 albeit in a civil case laid
down the law in the following terms:
"12. Upon consideration of various judgments as noted
hereinabove, the position of law which emerges is that
once execution of the promissory note is admitted, the
presumption under Section 118(a) would arise that it is
supported by a consideration. Such a presumption is
rebuttable. The defendant can prove the non-existence
of a consideration by raising a probable defence. If the
defendant is proved to have discharged the initial onus
of proof showing that the existence of consideration
was improbable or doubtful or the same was illegal,
the onus would shift to the plaintiff who will be
obliged to prove it as a matter of fact and upon its
failure to prove would disentitle him to the grant of
relief on the basis of the negotiable instrument. The
burden upon the defendant of proving the non-
existence of the consideration can be either direct or
by bringing on record the preponderance of
probabilities by reference to the circumstances upon
which he relies. In such an event, the plaintiff is
entitled under law to rely upon all the evidence led in
the case including that of the plaintiff as well. In case,
where the defendant fails to discharge the initial onus
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of proof by showing the non- existence of the
consideration, the plaintiff would invariably be held
entitled to the benefit of presumption arising under
Section 118(a) in his favour. The court may not insist
upon the defendant to disprove the existence of
consideration by leading direct evidence as the
existence of negative evidence is neither possible nor
contemplated and even if led, is to be seen with a
doubt."
This Court, therefore, clearly opined that it is not
necessary for the defendant to disprove the existence of
consideration by way of direct evidence.
32. 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 he relies.
33. Presumption drawn under a statute has only an
evidentiary value. Presumptions are raised in terms of the
Evidence Act. Presumption drawn in respect of one fact may
be an evidence even for the purpose of drawing presumption
under another."
12 CC.9897/2020( J)
(b) The Hon'ble Supreme Court in Kumar Exports Vs.
Sharma carpets reported in (2009) 2 SCC 513, held as
under;
"20. The accused in a trial under Section 138 of the Act has
two options. He can either show that consideration and debt
did not exist or that under the particular circumstances of
the case the non-existence of consideration and debt is so
probable that a prudent man ought to suppose that no
consideration and debt existed. To rebut the statutory
presumptions an accused is not expected to prove his
defence beyond reasonable doubt as is expected of the
complainant in a criminal trial. The accused may adduce
direct evidence to prove that the note in question was not
supported by consideration and that there was no debt or
liability to be discharged by him. However, the court need
not insist in every case that the accused should disprove the
non- existence of consideration and debt by leading direct
evidence because the existence of negative evidence is
neither possible nor contemplated. At the same time, it is
clear that bare denial of the passing of the consideration and
existence of debt, apparently would not serve the purpose of
the accused. Something which is probable has to be brought
on record for getting the burden of proof shifted to the
complainant. To disprove the presumptions, the accused
should bring on record such facts and circumstances, upon
consideration of which, the court may either believe that the
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consideration and debt did not exist or their non-existence
was so probable that a prudent man would under the
circumstances of the case, act upon the plea that they did
not exist. Apart from adducing direct evidence to prove that
the note in question was not supported by consideration or
that he had not incurred any debt or liability, the accused
may also rely upon circumstantial evidence and if the
circumstances so relied upon are compelling, the burden
may likewise shift again on to the complainant. The accused
may also rely upon presumptions of fact, for instance, those
mentioned in Section 114 of the Evidence Act to rebut the
presumptions arising under Sections 118 and 139 of the Act.
21. The accused has also an option to prove the non-
existence of consideration and debt or liability either by
letting in evidence or in some clear and exceptional cases,
from the case set out by the complainant, that is, the
averments in the complaint, the case set out in the statutory
notice and evidence adduced by the complainant during the
trial. Once such rebuttal evidence is adduced and accepted
by the court, having regard to all the circumstances of the
case and the preponderance of probabilities, the evidential
burden shifts back to the complainant and, thereafter, the
presumptions under Sections 118 and 139 of the Act will not
again come to the complainant's rescue.
14 CC.9897/2020( J)
(c) The Hon'ble Supreme Court in Rangappa Vs. Mohan
reported in (2010)11 SCC 441 held as under:
26. 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 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.
27. 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
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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.
28. In the absence of compelling justifications,
reverse onus clauses usually impose an evidentiary burden
and not a persuasive burden. Keeping 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.
(d) The the Hon'ble Supreme Court in Basalingappa Vs.
Mudibasappa reported in (2019) 5 SCC 418 held as
under:-
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"25. We having noticed the ratio laid down by this Court in
the above cases on Sections 118 (a) and 139, we now
summarise the principles enumerated by this Court in
following manner:
25.1. Once the execution of cheque is admitted Section
139 of the Act mandates a presumption that the
cheque was for the discharge of any debt or other
liability.
25.2. The presumption under Section 139 is a
rebuttable presumption and the onus is on the accused
to raise the probable defence. The standard of proof
for rebutting the presumption is that of preponderance
of probabilities.
25.3. To rebut the presumption, it is open for the
accused to rely on evidence led by him or the accused
can also rely on the materials submitted by the
complainant in order to raise a probable defence.
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 they rely.
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25.4. That it is not necessary for the accused to come
in the witness box in support of his defence, Section
139 imposed an evidentiary burden and not a
persuasive burden.
25.5. It is not necessary for the accused to come in
the witness box to support his defence.
(e) The Hon'ble Supreme Court of India in the case of
A.P.S Forex Services Pvt Ltd Vs. Shakthi Internatonal
Fashion Linkers & Others reported in 2020 STPL 5773
SC, held at para No.7 as under:
7. Coming back to the facts in the present case and
considering the fact that the accused has admitted the
issuance of the cheques and his signature on the cheque and
that the cheque in question was issued for the second time,
after the earlier cheques were dishonoured and that even
according to the accused some amount was due and
payable, there is a presumption under Section 139 of the
N.I. Act that there exists a legally enforceable debt or
liability. Of course such presumption is rebuttable in nature.
However, to rebut the presumption the accused was required
to lead the evidence that full amount due and payable to
the complainant has been paid. In the present case, no such
evidence has been led by the accused. The story put forward
by the accused that the cheques were given by way of
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security is not believable in absence of further evidence to
rebut the presumption and more particularly the cheque in
question was issued for the second time, after the earlier
cheques were dishonoured. Therefore, both the courts below
have materially erred in not properly appreciating and
considering the presumption in favour of the complainant
that there exists legally enforceable debt or liability as per
Section 139 of the N.I. Act. It appears that both, the
Learned Trial Court as well as the High Court, have
committed error in shifting the burden upon the complainant
to prove the debt or liability, without appreciating the
presumption under Section 139 of N.I. Act. As observed
above, Section 139 of the Act is an example of reverse onus
clause and therefore once the issuance of the cheque has
been admitted and even the signature on the cheque has
been admitted, there is always a presumption in favour of
the complainant that there exists legally enforceable debt or
liability and thereafter it is for the accused to rebut such
presumption by leading evidence.
(f) The Hon'ble Supreme Court of India in the case of
Thriyambak S Hegade Vs. Sripad reported in 2021 STPL
10270 SC, held at para No.11 & 12 as under:
11. From the facts arising in this case and the
nature of the rival contentions, the record would disclose
that the signature on the documents at Exhibits P-6 and P-2
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is not disputed. Exhibit P-2 is the dishonoured cheque based
on which the complaint was filed. From the evidence
tendered before the JMFC, it is clear that the respondent
has not disputed the signature on the cheque. If that be the
position, as noted by the courts below a presumption would
arise under Section 139 in favour of the appellant who was
the holder of the cheque. Section 139 of the N.I. Act reads
as hereunder: "139. Presumption in favour of holder- It
shall be presumed, unless the contrary is proved, that the
holder of a cheque received the cheque of the nature
referred to in section 138 for the discharge, in whole or in
part, of any debt or other liability."
12. Insofar as the payment of the amount by the
appellant in the context of the cheque having been signed
by the respondent, the presumption for passing of the
consideration would arise as provided under Section 118(a)
of N.I. Act which reads as hereunder:- "118. Presumptions
as to negotiable instruments - Until the contrary is proved,
the following presumptions shall be made: -
(a) of consideration - that every negotiable instrument
was made or drawn for consideration, and that every such
instrument, when it has been accepted, indorsed, negotiated
or transferred, was accepted, indorsed, negotiated or
transferred for consideration."
20 CC.9897/2020( J)
(g) The Hon'ble Supreme Court of India in the case of
M/s. Kalamani Tex v. P. Balasubramanian reported in
2021 STPL 1056 observed at para No.14 to 18 as under:-
14. Adverting to the case in hand, we find on a
plain reading of its Judgment that the trial Court completely
overlooked the provisions and failed to appreciate the
statutory presumption drawn under Section 118 and Section
139 of NIA. The Statute mandates that once the signature(s)
of an accused on the cheque/negotiable instrument are
established, then these 'reverse onus' clauses become
operative. In such a situation, the obligation shifts upon the
accused to discharge the presumption imposed upon him.
This point of law has been crystalized by this Court in
Rohitbhai Jivanlal Patel Vs. State of Gujarat, (2019) 18 SCC
106 in the following words:
"In the case at hand, even after purportedly drawing
the presumption under Section 139 of the NI Act, the trial
Court proceeded to question the want of evidence on the
part of the complainant as regards the source of funds for
advancing loan to the accused and want of examination of
relevant witnesses who allegedly extended him money for
advancing it to the accused. This approach of the Trial
Court had been at variance with the principles of
presumption in law. After such presumption, the onus
shifted to the accused and unless the accused had discharged
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the onus by bringing on record such facts and circumstances
as to show the preponderance of probabilities tilting in his
favour, any doubt on the complainant's case could not have
been raised for want of evidence regarding the source of
funds for advancing loan to the appellant-accused....."
15. Once the 2nd Appellant had admitted his
signatures on the cheque and the Deed, the trial Court
ought to have presumed that the cheque was issued as
consideration for a legally enforceable debt. The trial Court
fell in error when it called upon the Complainant-
Respondent to explain the circumstances under which the
appellants were liable to pay. Such approach of the Trial
Court was directly in the teeth of the established legal
position as discussed above, and amounts to a patent error
of law.
16. No doubt, and as correctly argued by senior
Counsel for the appellants, the presumptions raised under
Section 118 and Section 139 are rebuttable in nature. As
held in M.S.Narayana Menon Vs. State of Kerala, (2006) 6
SCC 39, which was relied upon in Basalingappa (supra), a
probable defence needs to be raised, which must meet the
standard of "preponderance of probability", and not mere
possibility. These principles were also affirmed in the case
of Kumar Exports (supra), wherein it was further held that a
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bare denial of passing of consideration would not aid the
case of accused.
17. Even if we take the arguments raised by the
appellants at face value that only a blank cheque and signed
blank stamp papers were given to the respondent, yet the
statutory presumption cannot be obliterated. It is useful to
cite Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197, 36
where this court held that:
"Even a blank cheque leaf, voluntarily signed and
handed over by the accused, which is towards
some payment, would attract presumption under
Section 139 of the Negotiable Instruments Act, in
the absence of any cogent evidence to show that
the cheque was not issued in discharge of a
debt."
18. Considering the fact that there has been an
admitted business relationship between the parties, we are of
the opinion that the defence raised by the appellants does
not inspire confidence or meet the standard of
'preponderance of probability'. In the absence of any other
relevant material, it appears to us that the High Court did
not err in discarding the appellants' defence and upholding
the onus imposed upon them in terms of Section 118 and
Section 139 of the NIA.
23 CC.9897/2020( J)
h) The Hon'ble Supreme Court of India in its latest case of
Jain P Jose v/s Santhosh reported in SLP Crl.5241/2016
dated 10.11.2022 observed by referring to its earlier
Judgments in Vasanth Kumar v/s Vijaya Kumari, Rangappa
v/s Mohan and Kalamani Tex and Another v/s P.
Balasubramanian that the complainant is entitled to the
benefit of presumption u/sec.139 of N.I Act that the cheque
was issued for discharge of legally enforceable debt or
liability.
13. Therefore on perusal of the Judgments, it is clear that
an accused need not examine himself for discharging the burden of
proof placed upon him under a statute. He may discharge his
burden on the basis of the materials already brought on record.
An accused has constitutional rights to remain silent. The standard
of proof on part of the accused and that of the prosecution in a
Criminal Case is different. The prosecution must prove the guilt of
an accused beyond all reasonable doubt and the standard of proof
so as to prove a defence on the part of an accused is
preponderance of probabilities. If the cheque and signature are
admitted, the presumption arises that the cheque was issued for
legally enforceable debt/liability. The presumption is rebuttable.
The accused has to raise a probable defence and prove it by
adducing evidence, which must meet the standard of
preponderance of probabilities. Unless the same has been done,
doubt can not be raised on the case of the complainant. The
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presumption raised in favour of the complainant u/sec.139 of N.I
Act operates until rebutted by the accused by proving probable
defence. As per the settled law that unless and until the accused
rebuts the presumption U/sec.139 of N.I Act, the onus does not
shift on the complainant to prove his case.
14. It is the defence of the accused that the complainant is
not known to her. Herself and her husband were running garment
factory since 2011. They were doing the business of garments. The
business was in her name but her husband used to look after the
entire business. She used to go to the factory whenever she gets
the time. She had no knowledge of the business. As the business
was in her name, the bank account was in her name. She used to
give the signed blank cheques to her husband for the purpose of
business. She did not know the person with whom her husband
had the transactions. When she received the notice, she inquired
her husband and he told her that he obtained the loan and repaid
it and small balance amount is left. Her husband told her that he
would talk to the complainant and resolve the matter. She did not
know anything else. She has no liability to pay any amount to the
complainant and she has not issued any cheques to the
complainant for discharge of debt.
15. The accused also got examined one witness by name
Srinivas S/o Venkataramanappa, who is her husband, as DW.2. He
deposed that he knew the complainant. They were doing garments
business since 2011. The said business was in the name of the
25 CC.9897/2020( J)
accused but he used to look after the business. The person by
name Balaji was doing the business with him. One broker came in
contact with him through Balaji and he obtained loan of
Rs.3,00,000/- from the complainant through the broker. At that
time the complainant took interest at the rate of 2% amounting to
Rs.60,000/-, out of which Rs.25,000/- was paid by way of cheque
and Rs.35,000/- was paid by way of cash. The said amount was
the advance interest amount for 10 months and the complainant
lent the loan after receiving it. He repaid the loan in installments
of Rs.30,000/- per month. The complainant used to ask him to
repay the loan in cash. Therefore he repaid the amount by way
of cash and whenever he was out of station, he transferred the
amount through bank. He repaid Rs.2,50,000/- by way of bank
transfer and cash. He paid Rs.25,000/- to the complainant after
receipt of notice and Rs.25,000/- after filing of the complaint by
way of cash. There is no legal enforceable debt. When he
borrowed the loan from the complainant, he issued 15 cheques.
He asked for the return of the cheques while paying Rs.25,000/-
after receipt of the notice but the complainant told him that he
would return the cheques after payment of entire amount. He
again asked for return of cheques while paying Rs.25,000/- after
filing of the case, but the complainant told him that the cheques
are with the counsel and he would give them later. He had
document to show that he transferred the amount to the
complainant, but there are no documents for repayment of loan by
way of cash.
26 CC.9897/2020( J)
16. The counsel for the complainant cross examined DW.1
and it was elicited in her cross examination that she is MCA
graduate. She admitted that whenever she used to sign the
document during the course of business she signed them after
reading and understanding. She voluntarily stated she issued
signed blank cheques to her husband as he was looking after the
business. She admitted the seal and signatures in Ex.P18, which is
the On Demand Promissory Note. The signatures of the accused
are at ExP.18(a) and (b). When she was asked that Rs.3,00,000/-
loan was obtained as per Ex.P18, she stated that her husband took
the signature on Ex.P18 and she did not know about the
transaction. Her husband did not inform her about obtaining of
loan of Rs.2,00,000/- as per Ex.P18. But later she admitted that
herself and her husband are residing together since 2019 and she
can not refute all the acts done by her husband on her behalf
during the course of business. She stated that she admits all the
transactions done by her husband on her behalf during the course
of business. She voluntarily stated that when she received the
notice as asked her husband, her husband told her about the
transaction as per Ex.P18. She admitted that she came to know
about the loan of Rs.3,00,000/- obtained by her husband as per
Ex.P18 and Rs.3,00,000/- was credited to her account and the said
amount was used for the business of Lakshmi Garments, which is
the proprietary concern in her name. She admitted the cheques
and signatures in the cheques. She did not issue reply notice to
the notice of the complainant. The counsel for the complainant
cross examined DW.2 and it was elicited in the cross examination
27 CC.9897/2020( J)
of DW.2 that he did not use to keep the receipts for having done
the transaction by way of cash during the course of his business.
He admitted that he obtained the loan by agreeing to pay
Rs.25,000/- as interest. He voluntarily stated that he paid
Rs.35,000/- by way of cash as interest on 18.07.2019. He did not
obtained the receipt for having paid the amount by way of cash.
He voluntarily stated that when he asked for the receipt the
complainant refused to give it. He had no hurdle to transfer the
amount of Rs.35,000/- by way of bank transfer. He voluntarily
stated that the complainant insisted for cash payment. He paid 3
installments of Rs.30,000/- by way of bank transfer. He had no
documents to show that he paid amount by way of cash. He had
no hurdle to take the receipts for having repaid the loan amount
by way of cash. He had no hurdle to transfer the remaining
installment by way of bank transfer as that of through three
installments. He denied that he had not paid any amount to the
complainant by way of cash. He voluntarily stated that he had
document to show that he withdrew the amount from the bank.
17. On perusal of the documents and the oral evidence, it
is clear that the loan of Rs.3,00,000/- is admitted. DW.2 stated
that he repaid Rs.90,000/- by way of cheques. The complainant
also admitted the same. The dispute is only with respect to the
balance amount of Rs.2,10,000/-. The defence of the accused is
that DW.2 repaid the amount by way of cash. DW.2 himself stated
in his evidence that he had no documents to show that he repaid
the amount by way of cash. He has not obtained any receipts
28 CC.9897/2020( J)
from the complainant for having paid the amount by way of cash.
He stated that he had no hurdle to receive the receipts. He
voluntarily stated that he has the bank statement for having
withdrawn the amount from the bank. However he did not
produce the same to substantiate that he withdrew the amounts
from the accounts at relevant point of times to pay it to the
complainant by way of cash. DW.2 withheld the document.
Therefore inference has to be drawn that he has no such document
or if such document is produced, it would go against him. DW.1
admitted that she did not pay Rs.2,10,000/-, which is the total
amount of the cheques, after receipt of notice. She voluntarily
stated that the amount to the said extent was not due and her
husband told her that only Rs.50,000/- is due. She stated that she
has produced the documents to show that the loan amount was
repaid and Rs. Rs.50,000/- is only the balance. However there are
no documents on record to prove that the amount was repaid by
way of cash. Therefore the accused failed to prove the repayment
of loan by way of cash. Further DW.1 had no hurdle to issue
reply notice taking the said contentions. DW.2 also stated that
when the accused received the notice, there was balance of
Rs.50,000/- only. He had no hurdle to issue reply notice to the
complainant stating that he is ready to pay balance amount of
Rs.50,000/- and asking the complainant to return the cheques. He
had no hurdle to issue separate notice asking for return of the
cheques. He voluntarily stated that he asked the complainant
orally to return the cheques but the complainant did not return
the cheques. He had no hurdle to issue 'stop payment' instructions
29 CC.9897/2020( J)
to the bank when the complainant did not return the cheques. He
has not filed any complaint against the complainant stating that
the complainant is illegally claiming more amount. He voluntarily
stated that he went to the police station but he did not gave the
complaint. This makes it clear that the DW.1 and DW.2 have
neither issued reply notice nor issued stop payment instructions or
took any legal action against the complainant as there was due
amount as alleged in the complaint. If at all there was no liability
why would they kept quiet. No prudent man would keep quiet.
The amount under the cheques is Rs.2,10,000/- and it is not a
small amount. DW.2 stated to have paid Rs.25,000/- after the
notice and Rs.25,000/- after filing of the complaint. This version is
not at all believable. When the notice was issued as per ExP.15
demanding the amount under the cheques amounting to
Rs.2,10,000/-, why would complainant agree that due amount is
only Rs.50,000 and agree to receive the same. If at all there were
talks between DW.2 and complainant, at least he would have
received the receipt for payment of Rs.25,000 after the notice and
Rs.25,000/- after filing of the complaint or he would have paid
the said amount by way of bank transfer. Nothing has been done.
Further while taking the specific defence of repayment, the
accused would have mentioned the details of payments i.e. amount
paid, date of payment. The same has not been done. DW.1 has
not stated anything about the cheques but DW.2 stated that he
gave 15 signed blank cheques as security at the time of obtaining
the loan. But he failed to give the details of the cheques and he
also failed to prove that the same were issued at the time of
30 CC.9897/2020( J)
taking loan by adducing cogent evidence. He would have at least
produced the cheque record slip. There is nothing on record to
substantiate the defence. Therefore the defence of the accused that
the amount is repaid by way of cash is not at all believable and
acceptable and the defence is no probable one.
18. The counsel for the accused cross examined PW.1 in
respect of the transaction and it was elicited that the accused
sought for loan of Rs.5,00,000/- and he lent loan of Rs.3,00,000/-.
He did not mention the same in the complaint. She executed
promissory note at the time of lending the loan. The cheques were
not given at the time of loan, the accused issued 3 cheques for
first time after one month and thereafter lapse of 2-3 months the
accused issued remaining cheques but he did not remember the
month. Nothing worth was elicited in the cross examination of
PW.1 to disbelieve the case of the complainant. It is pertinent to
note that the loan, execution of pronote at ExP.18 and credit of
loan to her account by way of RTGS are admitted. The cheques
and signatures are admitted and it is admitted that the cheques
are issued in favour of the complainant. The presumptions U/s.
139 and 118 of NI Act arise in favour of the complainant and
operate until rebutted. Such being the case, the burden is on the
accused to prove his defence. The accused took defence of
repayment of loan by way of cash but failed to prove the same. It
is the defense of the accused that there is no liability as alleged in
the complaint and the complainant misused the security cheques.
The counsel for the accused made several suggestions but the
31 CC.9897/2020( J)
suggestions are denied by the complainant. Mere suggestions are
not sufficient. On perusal of the entire cross examination of PW.1
nothing was elicited in support of the defence of the accused. The
drawer's signature on the cheque attracts the ratio laid down by
the Hon'ble Supreme Court of India in its decisions reported in
2011 (11) SCC - 441 - Rangappa V/s.Sri.Mohan and SCC 2015 (8)
Page No.378 - T.Vasanthakumar V/s.Vijayakumari and the recent
Judgment delivered in Crl. Appeal No.508/2019 - Rohit Bhai
Jeevanlal Patel V/s. State of Gujarath and another. The ratio is
that the cheque shall be presumed to be for consideration unless
and until the court forms a belief that the consideration does not
exist or considers the non-existence of consideration was tenable
that a prudent man would under no circumstances act upon the
plea that the consideration does not exist.
19. It is the defence of the accused that he issued signed
blank cheques as security at the time of loan. On perusal of
cheques, it is found that the signatures and the contents are
written with same ink. However even if the blank signed cheque
was given and it was filled up later, it attracts the ingredients
u/sec.138 of N.I Act. As per Section 20 of the N.I.Act, if the
person signs and delivers Negotiable Instrument and it is left
incomplete and thereby he authorizes the holder to complete the
Negotiable Instrument and thereby he is liable for the amount
mentioned in the Negotiable Instrument. In the Judgment rendered
by the Hon'ble Supreme Court of India in Bir Singh V/s.Mukesh
Kumar reported in AIR 2019 SC 2446, it was held by the
32 CC.9897/2020( J)
Hon'ble Apex Court that "If a signed blank cheque is voluntarily
presented to a payee, towards some payment, the payee may fill
up the amount and other particulars. This in itself would not
invalidate the cheque. The onus would still be on the accused to
prove that the cheque was not in discharge of a debt or liability
by adducing evidence. Even a blank cheque leaf, voluntarily
singed and handed over by the accused, which is towards some
payment, would attract presumption under Section 139 of the
Negotiable Instruments Act, in the absence of any cogent evidence
to show that the cheque was not issued in discharge of a debt."
Therefore the blank signed cheques also attract the provision
U/s.138 of NI Act, if some amount due is shown. In the case on
hand the loan is admitted. The complainant admitted repayment of
Rs.90,000/- but the accused failed to prove repayment of
remaining amount by way of cash. Hence there is due amount and
the accused is liable. Therefore the defence of the accused is not
tenable.
20. The accused/DW.1 did not depose anything about the
interest. DW2, who is the husband of DW.1, deposed that he
obtained loan of Rs.3,00,000/- from the complainant and at that
time, the complainant took interest at the rate of 2% amounting to
Rs.60,000/-, out of which Rs.25,000/- was paid by way of cheque
and Rs.35,000/- was paid by way of cash. The said amount was
the advance interest amount for 10 months and the complainant
lent the loan after receiving it. The counsel for the accused cross
examined PW.1 and it was elicited that he is not doing money
33 CC.9897/2020( J)
lending business. He did not lend the amount for interest. He
voluntarily stated that himself and accused negotiated and the
accused agreed to pay Rs.25,000/- as compensation for utilization
of the loan lent by him. The counsel for the complainant cross
examined DW.1 and it was elicited that she did not know about
the interest and she did not ask DW.2 in respect of the interest of
the loan. The counsel for the complainant cross examined DW.2
and DW.2 admitted that he obtained the loan by agreeing to pay
Rs.25,000/- as interest. He voluntarily stated that he paid
Rs.35,000/- by way of cash as interest on 18.07.2019. He did not
obtain the receipt for having paid the amount by way of cash. He
voluntarily stated that when he asked for the receipt the
complainant refused to give it. He had no hurdle to transfer the
amount of Rs.35,000/- by way of bank transfer. He voluntarily
stated that the complainant insisted for cash payment. Therefore
on going through the evidence of PW.1 and DW.2, it is clear that
the amount was lent for interest of Rs.25,000/-. DW.1 and 2 failed
to prove that they paid Rs.60,000/- interest to the complainant.
21. The counsel for the accused argued that the
complainant is doing money lending business without licence and
therefore there is no legally enforceable debt. The counsel for the
accused cross examined PW.1 and during the course of cross
examination PW.1 admitted the documents for having filed cases
against others for dishonour of cheque. The said documents are at
Ex.D1 to Ex.D3. Ex.D1 is the certified copy of the judgment in
CC.No.19401/2019 filed by the complainant against the Maruthi
34 CC.9897/2020( J)
Fabtech for dishonour of cheques for total amount of
Rs.2,80,000/-. On perusal of Ex.D1, it discloses that complainant
lent Rs.7,00,000/- as hand loan to Maruthi Fabtech by way of
RTGS on 27.08.2018 and received compensation of Rs.1,20,000/-
from Maruthi Fabtech for lending the loan. Ex.D2 is the certified
copy of the judgment in CC.No.5376/2019 filed by the complainant
against the Mehak Chawla for dishonour of cheques for total
amount of Rs.4,00,000/-. On perusal of Ex.D2, it discloses that he
lent Rs.5,00,000/- by way of cash on 27.09.2017. Ex.D3 is the
certified copy of the complaint filed against M/s Soundarya Digital
Silk Process, for dishonour of cheques for total amount of
Rs.4,00,000/-. On perusal of Ex.D3, it discloses that he lent
Rs.5,00,000/- by way of RTGS on 18.03.2021 and received
Rs.50,000/- from M/s. Soundarya Digital Silk Process for lending
the loan.
22. The counsel for accused relied on the following
judgments in support of his arguments:
1. The judgment of Hon'ble High Court of Andhra Pradesh
in the case of M/s Krishnam Raju Finances, Hyderabad
v/s Abida Sulthana & Another reported in 2004 Crl.L.J
4019 wherein it was held that the said Section contemplates
as to existence of debt or other liability, which is legally
enforceable. What is illegal under one Act cannot be legal
under any other Act or for any other purpose. Therefore,
once the complainant stated to be a money lender and does
35 CC.9897/2020( J)
not have licence for such business, it could not have
maintain a legally enforceable right for recovery of the
amount by filing a suit. Hence, even if Ex.P4 promissory
note is executed by the respondent read with Ex.P5
confirmation letter, it is not a legally enforceable and as
such, the amounts under cheques dishonured connected to
Exs.P4 and P5 cannot be realized. Further, for what purpose
Ex.P4 was executed is not forthcoming.
2. In the judgment of Hon'ble Bombay High Court in the
case of Anil Baburao v/s Purshottam Prabhakar Kawane
reported in 2010 Crl.L.J.1217 wherein it was held that
Here, I may refer to the provisions of the Bombay Money
Lenders Act, 1946, Section 5 of the said Act lays down that
no money lender shall carry on business of money lending
except in the area for which he has been granted a licence
and except in accordance with the terms and conditions of
such licence. It is not the case of the present applicant-
complainant that he has any money lending licence. Section
10 of the Act lays down that no court shall pass a decree
in favour of a money - lender in any suit to which said Act
applies unless the court satisfied that at the time when the
loan or any part thereof, to which the suit relates was
advanced, the moneylender held a valid licence, and if the
court is satisfied that the moneylender did not hold a valid
licence, it shall dismiss the suit. In other words, carrying on
money lending business without licence debars a pereson
36 CC.9897/2020( J)
from doing money lending and recovering the amount
through court. As per explanation to Section 138 of the
Negotiable Instruments Act "debt or other liability" means a
legally enforceable debt or other liability. So, a loan
advanced by a money lender who is doing business of
money lending without licence is not a debt or other
liability and provisions of section 138 of the Act will knot
apply to such transaction. In the light of above, it cannot be
said that in the present case, that the cheque issued by the
respondent in favour of the applicant was for the liability
enforceable in law.
3. In the case of Mrs. Monica Sunit Ujjain V/s Sanchu M.
Menon reported in Crl.R.Appl.394/2015 wherein it was
held that I have perused the order dated 26.06.2015 which
is impugned in this proceedings. The learned Sessions Judge
while allowing the revision application preferred by
respondent Nos.1 and 2 has observed that the contract
which is forbidden by law is void contract. In cases of
money lending business without licence, the provisions under
Section 138 of Negotiable Instrument Act are not attracted.
According to the complainant huge amount of Rs.4,50,000/-
was parted to the accused. There was a Memorandum of
Understanding (for short "MOU") dated 22.02.2014 between
M/s Monika Sumit Ujjain as the lender and M/s Saga Infra
as the borrowers. As per the MOU it can be gathered that
the transactions was without licence. Post dated cheques
37 CC.9897/2020( J)
were given by way of security. I have perused the MOU and
the other documents on record considering the factual
matrix of this case I do not find any reason to interfere with
the impugned order.
4. In the decision of Hon'ble Bombay High Court in the case
of Smt. Nanda Dharam Nandanwar v/s Nandkrishor
Talakram Thaokar reported in AIR 2010 (NOC) 874
(BOM) wherein it was held that where the compliant is filed
by money lender against her borrower without production of
valid and operative money lending license covering period of
transaction, the complaint is not maintainable.
23. The counsel for complainant relied on the following
judgment in support of his arguments:
In the decision of Hon'ble High Court of Karnataka in the
case of S. Pamameshwarappa and Anr v/s S. Choodappa
reported in ILR 2006 KAR 4287 wherein it was held that
even in respect of the contention taken by the petitioners
that is is a monetary transaction by way of money lending
by the complainant and that he did not have the money
lending licence, the answer would be this Court has already
held in so far as the transaction of this nature, the question
of the complainant having a money lending license with him
does not arise. May be true that this Court in respect of the
money lending as a matter of obligation on the part of the
38 CC.9897/2020( J)
plaintiff in a suit for recovery of money, would insist, as a
condition precedent, to have a money lending house. This is
not a suit for recovery of money rather, the complainant is
exercising the special powers provided under the Negotiable
Instruments Act for non-payment and dishonour of cheque
which is more in a quasi civil & criminal in nature.
24. On perusal of the judgments relied upon by the
counsel for the accused, it is clear that if the complainant is doing
money lending business without licence then the loan lent could
not be considered as legally enforceable debt as contemplated
under explanation to section 138 of N.I Act. On perusal of the
judgment relied upon by the counsel for the complainant, it is
clear that the Court can insist production of money lending licence
as condition precedent in suit filed by the plaintiff for recovery of
money but the complaint under sec.138 of N.I Act is not a suit for
recovery of money.
25. At this juncture it is necessary to go through the
provisions of Karnataka Money Lenders Act 1961.
Sec.2(9) of the Karnataka Money Lenders Act, 1961 provides
that loan means an advance of interest whether of money or in
kind or includes any transaction which the Court finds in
substance to amount to such an advance.
Sec.2(6) provides that interest include the return to be made
over and above what was actually lent.
39 CC.9897/2020( J)
Sec.2(7) provides that license means a license granted under
this Act.
Sec.2(10) provides that Money Lender means
(i) an individual or
(ii) or individual in the family or
(iii) a company or
(iv) an unincorporated body of individual who are which
(a) carries on the business of money lending in the State or
(b) has his or its principal place of such business in the
financial institution which the State Government may, by
notification specify in this behalf.
Sec.5 of the Karnataka Money Lenders Act provides that "No
person shall carry on the business of money lending in the State
except under and in accordance with the terms and conditions of
license and after the commencement of the Karnataka Money
Lenders Amendment Act, 1985, except on payment of security
deposit as provided in Section 7A."
26. In the decision of Hon'ble High Court of Karnataka in
the case of M.N. Radhamma -v/s- M.N. Venkatanarayanappa,
reported in ILR 1979 KAR 2138 wherein it has held that in
order that a person to be a lender, he or she must carry on
business in money lending in the State. To regard an activity as
business, there must be a course of dealings carried on with a
profit motive. Thus, it must be established that the person carried
on the activity on money lending as a business with a profit
motive. The expression 'carries on the business of money lending'
40 CC.9897/2020( J)
occurring in Section 2(10) of the Act makes it clear that a mere
stray instance of lending money cannot be taken as a proof of
establishment of the fact of carrying on the business of money
lending. In other words, the money lending must be carried on as
a profession.
Further in the decision of Hon'ble High Court of Karnataka in
the case of V. Sathyanarayana -v/s- Sandeep Enterprises,
reported in ILR 2004 KAR 4505 wherein it was held in para
No.16 and 17 as under:
16. It is true that the complainant - P.W. 1 has made the
above admission, but there is nothing in his evidence to
show that in the course of his business as a money lender,
he has lent/advanced the amount to the petitioner/accused.
That apart, though examined himself as D.W.I
petitioner/accused has not stated that the cheques in
question were in relation to any money lending business i.e.,
the cheque issued was in the course of money lending
business of the respondent/accused. Suggestion made to the
complainant - P.W.I, that the transaction was in the course
of money lending business, was denied. So, on denied
suggestion, it cannot be held that the transaction in question
was in the course of money lending business. Hence, Section
11 of the said Act does not come into picture in the present
case.
41 CC.9897/2020( J)
17. Even otherwise, if assumed that the cheques were issued
by the petitioner/accused in the course of money lending -
business, that itself does not attract the provisions contained
in Karnataka Money Lenders Act. This is because, under said
Act, money lender means "a person, who carried on the
business of money lending" and to say that one is a money
lender, he or she must carry on business in money lending
in the State and, to record an activity as business, there
must be a course of dealings carried with a profit motive. In
other words, money lending must be carried on as
profession. If the money lending was not with profit motive
or, not carried on as a profession, he or she does not
become a money lender under the Karnataka Money Lenders
Act, as held by this Court in the case of M.N. Radhamma
-v/s- M.N. Venkatanarayanappa, reported in ILR 1979
KAR 2138. So, a stray instance of lending money does not
show carrying on the business of money lending as
profession or with profit motive.
In the case on hand, it is not at all the defence of the
accused that the complainant is doing money lending business
without licence. It was suggested in the cross examination of PW.1
that he was doing money lending business but PW.1 denied the
said suggestion. It was not suggested to PW.1 during the course of
cross examination that he did not possess valid money lending
licence to lend the amount. Therefore under such circumstances, it
could not be considered that the complainant is the money lender
42 CC.9897/2020( J)
under the provisions of Karnataka Money Lenders Act as he is not
in the business of lending the loan.
27. In the recent decision of Hon'ble Bombay High Court
in the case of Ganga Tara Vazirani v/s Deepak Raheja in
Comm. Summary Suit No. 972 of 2019 dated 16.02.2021, it
was held as under:
11. The first contention raised by Mr. Bookwala is that the
present suit is barred by virtue of section 13(1) of the said
Act. I find no substance in this submission whatsoever.
Firstly, the present Summary Suit is filed on the basis of
dishonoured cheques and not on the antecedent transaction
of the loan. Section 2(13) defines the word "loan" to mean
an advance at interest whether of money or in kind, but
does not include inter alia an advance of any sum exceeding
rupees three lakhs made on the basis of a negotiable
instrument as defined in the Negotiable Instruments Act,
1881 (26 of 1881), other than a promissory note [see section
2(13)(j)]. In the present case, monies were advanced by the
plaintiff by cheque. For repaying the said advance (including
interest), the defendant issued 2 post-dated cheques, one for
Rs.5 Crores towards the principal amount and the other for
Rs.54 Lacs towards interest. Both these cheques were
dishonoured when presented for payment. Since the advance
made by the plaintiff cannot be termed as a "loan" [as it is
specifically excluded under section 2(13)(j)], the question of
43 CC.9897/2020( J)
the bar set out in section 13(1) cannot and does not arise.
This is for the simple reason because section 13(1) of the
Money Lenders Act clearly stipulates that, no Court shall
pass a decree in favour of a "money-lender" in any suit
unless the Court is satisfied that at the time when the
"loan" or any part thereof, to which the suit relates was
lent, the money lender held a valid license. If the Court is
satisfied that the money lender did not hold a valid license,
it shall dismiss the suit. On bare reading of section 13(1), it
is ex-facie clear that the bar applies when a money lender
seeks a decree in any suit with reference to recovery of a
loan or any part thereof. If the money advanced cannot be
termed as a "loan" under the Money Lenders Act, then the
question of the suit being barred as set out in section 13(1)
does not arise at all.
12. I must note that a similar issue came up before another
learned Single Judge of this Court in the case of Bipin
Vazirani Vs. V. Raheja Design Construction Pvt. Ltd. &
Anr. (Summons for Judgment No.101 of 2018 in Comm.
Summary Suit No. 424 of 2018, decided on 12th
December, 2018). In the facts of that case also there were
two cheques that were issued by the 1st defendant to the
plaintiff and which were dishonoured for the reason "Funds
Insufficient". There too, an argument with reference to
money lending was raised. Negating the contention of the
defendants in that case, this Court held as under :-
44 CC.9897/2020( J)
"7. In that decision I considered the settled law on the
subject including amendments to the Money Lending
Act and the interpretation of the expressions 'loan',
'money lender', 'business of money lending', and, in
particular how such a defence could be raised. In
paragraph 36 of the Base Industries Group decision I
culled out propositions that seemed to me to emerge
from that discussion:-
"36. From this discussion, the following propositions
emerge:
(a) Not every loan is axiomatically a money-lending
transaction for the purposes of the 1946 or the
2014 Acts. There is no such presumption in law.
(b) It is doing of the 'business of money-lending-
that attracts the provisions of the statute. In
interpreting the phrase, the correct emphasis is on
the word 'business', not 'money-lending'. It is the
word 'business' and not the expression 'money-
lending', that is determinative. Simply put, every
instance of lending money is not money-lending.
Not every lender is a Shylock.
(c) To constitute 'business', a single isolated
instance does not, and even several isolated stray
instances do not, constitute 'the business of money-
45 CC.9897/2020( J)
lending'. To be engaged in the 'business of money-
lending', the activity must be systematic, regular,
repetitive, and continuous, and must generate an
appreciable revenue. The fact that the borrower is
a stranger to the lender does not on its own make
the latter a 'money-lender'.
(d) A loan recovery action is not barred merely because
there is a loan. It has to be shown that the loan was
part of 'the business of money-lending'.
(e) A plaintiff seeking a recovery of a loan is not
required to show that his suit is not barred by the
Money Lenders Act. It is always for the defendant who
puts up money-lending as a defence to show that the
transaction is forbidden by the Money Lenders Act."
8. The transactions in question in Base Industries (and
also in case of Ashok Commercial Enterprises & Anr Vs.
Parekh Aluminex Ltd. to which I referred in Base
Industries) stand on a different footing from the present
suit. This action is altogether simpler because it is
focused narrowly on the dishonour of the two cheques
admittedly issued by the Defendant. That, as I have
held, is exempted from the purview of the Money
Lending Act, and therefore the bar of that Act cannot
apply to a transaction such as this."
46 CC.9897/2020( J)
(emphasis suppled)
13. Apart from the fact that the present suit is based on
two dishonoured cheques and hence would not attract
the rigours of the Money Lenders Act, even otherwise
there is nothing on record to establish that the present
suit would be barred under the provisions of the said
Act. As set out in the aforesaid judgment referred to
earlier, not every loan is axiomatically a money lending
transaction for the purposes of the Money Lenders Act.
There is no such presumption in law. It is doing the
business of money-lending that attracts the provisions of
the statute. In interpreting that phrase, the correct
emphasis is on the word 'business', not 'money-lending'.
It is the word 'business' and not the expression
'money-lending', that is determinative. Simply put, every
instance of lending money would not amount to a money-
lending transaction as contemplated under the Money
Lenders Act. To constitute 'business of money lending', a
single isolated instance does not, and even several isolated
stray instances do not, constitute 'the business of money-
lending'. To be engaged in the 'business of money-lending',
the activity must be systematic, regular, repetitive, and
continuous, and must generate an appreciable revenue. The
fact that the borrower is a stranger to the lender does not
on its own make the latter a 'money-lender'. A loan recovery
action is not barred merely because there is a loan. It has to
47 CC.9897/2020( J)
be shown that the loan was part of the 'business of money-
lending'. A plaintiff seeking a recovery of a loan is not
required to show that his suit is not barred by the Money
Lenders Act. It is always for the defendant who puts up
money- lending as a defence to show that the transaction is
forbidden by the Money Lenders Act. In the instant case, the
defendant has not been able to satisfy any of these tests. In
these circumstances, I find absolutely no substance in the
first argument canvassed by Mr. Bookwala.
13. In the present case, there is no evidence or
material on record to say that the respondent/complainant
carried/carry on money lending business and consequently
he comes within the meaning of the word "money lender"
as defined under the Karnataka Money Lenders Act. So,
admission or statement of respondent - PW.l that he does
not possess money lending licence does not come to the aid
of the petitioner/accused.
28. On perusal of the ExD.1 to 3 and the transaction in
the case, it is clear that the transaction in ExD.2 is of the year
2017, transaction in ExD.1 is of the year 2018, transaction in the
case on hand is of the year 2019 and the transaction in ExD.3 is
of the year 2021. Therefore it is clear that one loan transaction in
a year does not amount to money lending business. There is no
evidence on record to show that the complainant is money lender
doing money lending business without licence. During the course
48 CC.9897/2020( J)
of cross examination it was asked to PW.1 about his business and
he clearly answered that he is in the business of iron and steel.
No contrary evidence is placed on record. Therefore single isolated
instance or several stray instances would not money lending
business. Therefore the arguments of the counsel for the accused
are not at all tenable.
29. It is the defence of the accused that she issued signed
blank cheques as security. On perusal of cheques in question, it is
found that the signatures and the contents are written with same
ink and at the same time. However even if the blank signed
cheques was given and it was filled up later, it attracts the
ingredients u/sec.138 of N.I Act. As per Section 20 of the N.I.Act,
if the person signs and delivers Negotiable Instrument and it is left
incomplete and thereby he authorizes the holder to complete the
Negotiable Instrument and thereby he is liable for the amount
mentioned in the Negotiable Instrument. In the Judgment rendered
by the Hon'ble Supreme Court of India in Bir Singh V/s.Mukesh
Kumar reported in AIR 2019 SC 2446, it was held by the
Hon'ble Apex Court that "If a signed blank cheque is voluntarily
presented to a payee, towards some payment, the payee may fill
up the amount and other particulars. This in itself would not
invalidate the cheque. The onus would still be on the accused to
prove that the cheque was not in discharge of a debt or liability
by adducing evidence. Even a blank cheque leaf, voluntarily
singed and handed over by the accused, which is towards some
payment, would attract presumption under Section 139 of the
49 CC.9897/2020( J)
Negotiable Instruments Act, in the absence of any cogent evidence
to show that the cheque was not issued in discharge of a debt."
Therefore the the blank signed cheques issued towards some
payment also attract the provision U/s.138 of NI Act.
30. For the reasons mentioned herein above, it is
crystallized that the accused has utterly failed to prove that there
was no existence of legally enforceable debt/liability between her
and the complainant and she has not at all issued the instant
cheque towards the discharge of legally enforceable liability of
Rs.2,10,000/-. On the other hand, the complainant has proved that
the accused issued the cheques for the legally enforceable liability;
the cheques were dishonored due to the reason 'Funds Insufficient'
and the notice issued by him was served on the accused. The
complainant proved his case beyond all reasonable doubts. The
accused failed to rebut the statutory presumptions U/s.118(a) & (b)
and 139 of the N.I.Act. Accordingly the accused is found guilty for
the offence punishable U/s.138 of the N.I.Act. Hence, I proceed to
answer the Point No.1 in Affirmative and Point No.2 in the
Negative.
31. Point No.3 : In view of the reasons assigned in Point
No.1 and 2 and under the facts and circumstances of the present
case, I proceed to pass the following:-
50 CC.9897/2020( J)
ORDER
As per the provisions of Sec.255(2) Cr.P.C. the accused is hereby convicted for the offence punishable u/s.138 of NI Act, 1881 and sentenced to pay fine Rs.2,85,000/- (Rupees Two Lakhs Eight Five Thousand Only). On deposit of fine amount, the complainant is entitled for compensation of Rs.2,80,000/- (Rupees Two Lakhs Eighty Thousand Only). The remaining balance amount of Rs.5,000/- is to be forfeited to the State.
In default of payment of the fine amount accused shall undergo simple imprisonment for two months.
The personal bond executed by the accused is hereby stands cancelled and cash surety of Rs.2,000/- furnished by the accused shall be refunded to her after expiry of appeal period.
The copy of the judgment shall be furnished to the accused at free of cost.
(Dictated to the Stenographer, transcript thereof is computerized and printout taken by him, is verified and then pronounced by me in Open Court on this the 18th day of April-2023.) (Lokesh Dhanapal Havale) XV Addl. CMM., Bangalore.
51 CC.9897/2020( J) ANNEXURE Witnesses examined for the Complainant:-
PW.1 : Sri. Amit Shankarlal Documents marked for the Complainant:-
Ex.P1 : Cheque
Ex.P1(a) : Signature of the accused
Ex.P2 : Bank Endorsement
Ex.P3 : Cheque
Ex.P3(1) : Signature of the accused
Ex.P4 : Bank endorsement
Ex.P5 : Cheque
Ex.P5(a) : Signature of the accused
Ex.P6 : Bank endorsement
Ex.P7 : Cheque
Ex.P7(a) : Signature of the accused
Ex.P8 : Bank endorsement
Ex.P9 : Cheque
Ex.P9(a) : Signature of the accused
Ex.P10 : Bank endorsement
Ex.P11 : Cheque
Ex.P11(a) : Signature of the accused
Ex.P12 : Bank endorsement
Ex.P13 : Cheque
Ex.P13(a) : Signature of the accused
Ex.P14 : Bank endorsement
52 CC.9897/2020( J)
Ex.P15 : Office copy of the legal notice
Ex.P16 : Postal receipt
Ex.P17 : Postal acknowledgment
Ex.P18 : Promissory note
Ex.P18(a)&18(b) : Signatures Witnesses examined For Defence:-
DW.1 : Smt. Lakshmi
DW.2 : Sri. Srinivas
Documents marked for Defence:-
Ex.D1 : C/c of judgment in CC.No.19401/2019 Ex.D2 : C/c of judgment in CC.No.5376/2019 Ex.D3 : C/c of PCR No.21841/2021 (Lokesh Dhanapal Havale), XV Addl.CMM., Bengaluru.
53 CC.9897/2020( J) 18.04.2023 (Judgment Pronounced in the Open Court Vide Separate Order sheet) ORDER As per the provisions of Sec.255(2) Cr.P.C. the accused is hereby convicted for the offence punishable u/s.138 of NI Act, 1881 and sentenced to pay fine Rs.2,85,000/- (Rupees Two Lakhs Eight Five Thousand Only). On deposit of fine amount, the complainant is entitled for compensation of Rs.2,80,000/-
(Rupees Two Lakhs Eighty Thousand Only). The remaining balance amount of Rs.5,000/- is to be forfeited to the State.
In default of payment of the fine amount accused shall undergo simple imprisonment for two months.
The personal bond executed by the accused is hereby stands cancelled and cash surety of Rs.2,000/- furnished by the accused shall be refunded to her after expiry of appeal period.
54 CC.9897/2020( J) The copy of the judgment shall be furnished to the accused at free of cost.
XV Addl.CMM., Bengaluru.