Bangalore District Court
Eureka Enterprises vs R. P. R. Enterprises on 19 May, 2023
KABC020137262022
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.6566/2022
Dated this the 19th day of May 2023
COMPLAINANT : Eureka Enterprises
No.20, 6th Cross,
Pampa Extension, Kempapura,
Hebbala, Bengaluru-560 024.
Rep. By its Authorized Signatory,
Sri Satish B. S.
(By Advocate Shri. A. C.
Sathisha)
V/s
ACCUSED : R. P. R. Enterprises,
No.1003, 16th Main,
15th Cross, Stage-2,
B. T. M II Stage,
C.C. No. 6566 /2022
Bengaluru-560 076.
Rep. By its Proprietor
Mr. Shashishekha
and also R/at
Shashi Shekher Kumar Rai
S/o Rajendra Rai,
At No.29-C, 10th Main,
14th Cross, BTM II Stage,
Bannerughatta Road,
Bengaluru-560 076.
(By Advocate Shri. S. A. Sami)
* * *
-: 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 is
proprietor of R.P.R Enterprises. The accused has
purchased the paper covers and meat covers on the credit
basis. The accused has due a sum of 6,88,170/- as on
C.C. No. 6566 /2022
July 2021. He assured that he will return the said
amount within a short period. Subsequently for
repayment of the said amount the accused issued two
cheques i.e., cheque bearing No. 002636 dated 04-02-
2022 for a sum of Rs. 2,26,539/- and another cheque
bearing No. 002635 dated 21-02-2022 for a sum of Rs.
4,61,631/- drawn on ICICI Bank, BTM Layout Branch,
Bengaluru. Thereafter, the cheques were presented for
collection in the account of the complainant and
impugned cheques were dishonored by the said Bank on
the ground that there was insufficient fund in the account
of the accused.
3. Thereafter, the complainant issued a statutory
notice dated 04-03-2022 under section 138 of the
Negotiable Instrument Act, to the accused. The said
notice returned with an endorsement that 'left the
address'. The accused did not pay the cheque amount to
him. Since the said notice was not complied with, the
above said complaint is preferred by the complainant.
C.C. No. 6566 /2022
4. In his pre-summoning evidence, complainant
was examined on affidavit. He reiterated the contents of
complaint and got marked seven documents as per Ex.
P-1 to Ex. P-7. Upon appreciation of pre-summoning
evidence, accused was summoned for an offence
punishable under section 138 of the Negotiable
Instrument Act. After receipt of summons, the accused
appeared before this Court through his counsel and she
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
her evidence. Thereafter, the accused has not led evidence
nor produced the documents.
6. I have heard the arguments on both sides.
C.C. No. 6566 /2022
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 is liable
to pay the amount of Rs. 6,88,170/- to him as
on the date of complaint?
2. Whether the complainant proves beyond all
the reasonable doubt that for repayment of
said amount the accused issued two cheques
i.e., cheque bearing No. 002636 dated 04-02-
2022 for a sum of Rs. 2,26,539/- and another
cheque bearing No. 002635 dated 21-02-2022
for a sum of Rs. 4,61,631/- drawn on ICICI
Bank, BTM Layout Branch, Bengaluru and
when the complainant presented the cheques
for encashment and cheques were dishonoured
due to "Funds Insufficient", for which the
complainant has issued a legal notice through
RPAD and the same was served, but the
accused has not repaid the said amount and
C.C. No. 6566 /2022
thereby the accused has committed the offence
punishable under section 138 of Negotiable
Instruments Act?
3. What order ?
8. My answers to the above points are as follows :
Point No.1 : In the Negative,
Point No.2 : In the Negative,
Point No.3 : As per final order,
for the following:
-: R E A S O N S :-
POINT Nos.1 and 2 :-
9. The complainant has filed his affidavit in lieu of
his oral chief examination. In his affidavit he has testified
regarding the purchase of the goods on credit basis by 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. 002636 dated 04-
C.C. No. 6566 /2022
02-2022 for a sum of Rs. 2,26,539/- and another cheque
bearing No. 002635 dated 21-02-2022 for a sum of Rs.
4,61,631/- drawn on ICICI Bank, BTM Layout 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
endorsements, which show that "Funds Insufficient",
Ex. P-5 is the office copy of the legal notice, which is
dated 04-03-2022. Ex. P-6 is the postal receipt. Ex. P-7
is the unserved postal cover.
10. 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 cheque was with the complainant. He has also
contended that the benefit of presumption under Sections
118 and 139 of Negotiable Instruments Act is in favour
of the complainant, and therefore the accused has failed
C.C. No. 6566 /2022
to rebut the presumption. Hence, the accused is liable to
be convicted.
11. To counter these submission, the learned
counsel for the accused argued that the accused has not
issued the cheque in dispute in favour of the complainant
towards the discharge of debt. It is also contention of the
defence Counsel that the accused paid a sum of Rs.
2,22,535 in the September 2021. The accused is liable to
pay a sum of Rs. 4,76,635/-. The complainant has
secured the impugned cheque along with other cheques
for the security purpose. The accused is not liable to pay
the cheque amount. The complainant has not approached
the Court with clean hands. The notice not served on the
accused. The contents of the cheque are not in the
handwriting of accused. The accused has not given
authority to fill the contents of cheque to the
complainant. It is further contended that though there is
presumption under Sec.118 and 139 of Negotiable
Instruments Act, existence of legally enforceable debt is
C.C. No. 6566 /2022
not a matter of presumption u/Sec.139 of Negotiable
Instruments Act. In support of his contention, he relied
on the following citations :-
1. ILR 2007 Kar 2709 : M.
Senguttuvan Vs. Mahadevaswamy.
2. ILR 2008 Kar 4629 : Shiva
Murthy Vs. Amruthraj.
3. ILR 2009 Kar 172 : A. Viswanatha
Pai Vs. Sri. Vivekananda S. Bhat.
4. AIR 2003 SC 182 : C. Antony Vs. K.
G. Raghavan Nair.
12. In view of rival contentions raised by the
parties, it is necessary to consider the statutory provisions
in this regard and also proposition of law.
Section 118 of Negotiable Instrument Act lays
down that:
"Until the contrary is proved, it
shall be presumed that every
Negotiable instrument was made or
drawn for consideration."
C.C. No. 6566 /2022
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."
13. 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 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
C.C. No. 6566 /2022
and he need not necessarily adduce his defence evidence
in all the cases.
14. The specific case of the complainant is that, the
accused has purchased the materials from him on the
credit basis. The accused issued the disputed cheques for
discharging of debt and the said cheques were dishonored.
Thereafter a legal notice was issued and then she filed
complaint. It is further contended that once the cheque
relates to the account of the accused and the signature is
admitted on the cheque, then initial presumption as
contemplated u/Sec.139 of N.I. Act has to be raised by
the court in favour of the complainant. On the contrary,
the accused has taken a defence that the contents of the
cheque are not in his handwriting. It is also contention of
the accused that he has not issued the disputed cheques in
favour of the complainant towards discharge of debt. The
notice not served on the accused. He has paid a sum of
Rs. 2,11,535/- to the complainant in the September
C.C. No. 6566 /2022
2021. The accused is not liable to pay the cheque amount
to the complainant.
15. 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 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.
C.C. No. 6566 /2022
16. It is specific defence of the accused that the
complainant has not produced the statement of accounts
and invoices. Non production of the said documents fatal
to the case of the complainant. On the other hand, the
learned Counsel for the complainant argued that the
complainant has produced the documents to prove his
case. 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
C.C. No. 6566 /2022
either direct or by bringing on record the preponderance
of probability by reference to the circumstances upon
which he relies. In such event, the complainant is entitled
under law to rely upon all the evidence led in the case.
In case, where the accused fails to discharge the initial
onus of proof by showing the non-existence of the
consideration, the complainant would invariably be held
entitled to the benefit of presumption arising under
Section 118 (a) of Negotiable Instrument Act in his
favour. The Court may not insist upon the accused to
disprove the existence of consideration by leading direct
evidence as the existence of negative evidence. It is
neither possible not contemplated and even of led, is to
be seen with a doubt. The standard of proof evidently is
preponderance of probabilities. Inference of
preponderance of probabilities can be drawn not only
from the materials on records, but also by reference to
the circumstances upon which relies.
C.C. No. 6566 /2022
17. The complainant shall make clear to Court,
each of the circumstances which is relied upon by him to
establish drawing of the cheque by accused. The mere
fact that the cheque produce in Court came from
possession of complainant alone will not sufficient to
prove execution, even though it may be one of the
circumstances. No law allows a Court to presume that
the cheque which is produced and marked in Court was
handed over or delivered to complainant by accused.
The Court, at best, can say that the cheque was in
possession of complainant. But, under what
circumstances it came to his possession is to be stated by
complainant. In the absence of such statement, court
cannot proceed on any assumption that it was handed
over to complainant by the accused. The Court shall
consider whether each of the circumstances is proved by
complainant, as per law and whether each of 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
C.C. No. 6566 /2022
evidence is produced before the Court to prove drawing
of cheque, court shall follow the mode adopted for
appreciation of circumstantial evidence, to enter finding
whether cheque is drawn by accused, as alleged by
complainant. If any circumstance or circumstances
proved in the case can be explained on any hypothesis
which is inconsistence with the assertion of drawing of
cheque by accused, accused cannot be said to have drawn
the cheque.
18. Whether the cheque was handed over or
delivered to complainant by accused and whether it was
drawn by accused are independent facts, which requires
independent proof. The mere production of the cheque
in Court will not prove either of the above fact. The
Court must be satisfied from the allegations in the
complaint and from the evidence adduced that the cheque
was made, prepared or created by accused. The factum
of drawing or execution of cheque has to be proved by
evidence of person or persons who can vouchsafe for the
C.C. No. 6566 /2022
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 his entitlement of cheque amount and
notice was served to the accused. In this regard it is
relevant to extract the relevant portion of the cross-
examination of the PW-1. It is suggested to PW-1 as
hereunder :
"ಪಪತ ಇನನಯಯ ಗ ಸಸಬಸಧಪಟಟಸತ ಪ ಪತತತಕವದ
ಚಕಗಳನನ
ನ ಕಕಟಟರನತತರ ಎಸದರ ಸಕಯನ ಸರ
ಎನನ
ನ ತತರ. ಸಕಯನ ಪನನ ಪ ಪತ ಇನನಯಯ ಗ ಚಕ
ಗಳನನ
ನ ಕಕಟಟರನವದಲಲ, ಇನನಯಯ ನಲ ನಮಕದನ
ಮಡರನವ ಮತತಕಕ ಸಸಬಸಧ ಪಟಟಸತ ಚಕ ಗಳನನ
ನ
ಕಕಟಟರನತತರ ಎನನ
ನ ತತರ. ಆಪದತರನ ಕಕಟಟಸತ ಚಕ
ಹಗಕ ಅದನ ನಗಧತಕರಣ ಆಗದದಕಕ ಸಸಬಸಧ ಪಟಟಸತ
ನಮಮ ಸಟತಟಮಸಟ ಆಫ ಅಕಸಟಯ ನಲ ನಮಕದನ
ಮಡಲಗನತತದ ಎಸದರ ಸರ. ಆಪದತರ ಕಸಪನಗ
ಸಸಬಸಧ ಪಟಟಸತ ಸಟತಟ ಮಸಟ ಆಫ ಅಕಸಟಯ ಅನನ
ನ
ಹಜರನಪಡಸಲನ ತಕಸದರ ಇರನವದಲಲ....
C.C. No. 6566 /2022
It is further suggested to PW-1 as hereunder :-
ನನನ ಕಕಟಟಸತ ನಕತಟತಸ ಆಪದತರಗ
ಜರಯಗರನವದಲಲ ಎಸದರ ಸಕಯನ ನನಗ
ಗಕತತರನವದಲಲ ಎನನ
ನ ತತರ. ನ.ಪ-7 ಅಸಚ ಲಕಕತಟಯಲ
ವಳಸವನನ
ನ ಖಲ ಮಡರನತತರ ಎಸಬ
ಹಸಬರಹದಕಸದಗ ವಪಸಆಗರನತತದ ಎಸದರ ಸಕಯನ
ನನಗ ಗಕತತರನವದಲಲ ಎನನ
ನ ತತರ. ನಕತಟತಸ
ಜರಯದ ಬಗಗ ವಕತಲರನನ
ನ ಕತಳದರ ಎಸದರ
ಸಕಯನ ವಕತಲರನ ಮತಕತಸದನ ನಕತಟತಸ ಅನನ
ನ
ಕಳನಹಸಬತಕಸದನ ಹತಳರನತತರ, ಆದರ ನನನ ಯವ
ಕರಣಕಕಗ ಎಸದನ ಕತಳರನವದಲಲ. ವಕತಲರನ ಪನನ
ನಕತಟತಸಅನನ
ನ ಕಕಡಲನ ಹತಳದಗ ಆಪದತರನ ಎಲ
ವಸವದರ ಎಸದನ ಪರಶತಲನ ಮಡದರ ಎಸದರ
ಸಕಯನ ಆಪದತರನ ಎಲರನತತರ ಎಸದನ ನನಗ
ಗಕತತರನವದಲಲ."
Admittedly, the complainant has stated in the cross-
examination that for each and ever transaction, he has
receipts and he maintained the statement of accounts for
each and ever transaction. Moreover the complainant has
not produced the said documents. The complainant
C.C. No. 6566 /2022
although he had admitted in the evidence that the amount
of Rs. 6,88,170/- due from the accused as on the date of
July 2021 and the accused paid a sum of Rs. 2,11,535/-
to him in the September 2021, but he had mentioned in
the complaint as well as in the notice that the accused has
to liable to pay a sum pf Rs, 6,88,170/-towards an
outstanding amount. Despite various deficiencies in the
version of the accused, I am unable to overlook the fact
that the transaction itself is uncorroborated and
unproved. The complainant has failed to prove his case
beyond all the reasonable doubts and he has failed to
fulfill all the ingredients of offence under Section 138 NI
Act against the accused. The accused has been able to
rebut the presumption in favour of the complainant as
the standard of proof so as to prove a defence on the part
of the accused is only 'preponderance of probabilities' and
inference of preponderance of probabilities can be drawn
not only from the materials brought on record by the
parties but also by reference to the circumstances upon
which he relies as the same was held by Hon'ble
C.C. No. 6566 /2022
Supreme Court in M/s Indus Airways Private Limited
and another -Vs- M/s Magnum Aviation Private
Limited and others [CA No.830 of 2014].
It is also settled law that the admission of signature
in a cheque leaf alone will not constitute admission of
execution of the cheque. It can be treated only as a
cheque containing admitted signature of cheque. The
mere production of a cheque or making same as an
exhibit in a case will not prove that the cheque is drawn
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 issued.
In this case, the statement of complainant not
corroborated by the material available on the record.
Mere production of the cheque is not sufficient to prove
the contents of the said documents. The testimony of
complainant merely prove the document, but the
contents of those documents were not proved. Thus, the
evidence available on record falsify the case of
C.C. No. 6566 /2022
complainant. Despite various deficiencies in the version
of the accused, I am unable to overlook the fact that the
loan transaction itself is uncorroborated and unproved.
The complainant has failed to prove his case beyond all
the reasonable doubts and he has failed to fulfill all the
ingredients of offence under section 138 NI Act against
the accused. The accused has been able to rebut the
presumption in favour of the complainant.
19. The main contention advanced by the defence
counsel is that payment of the debt amount under the
cheque was paid to the payee and he has not made any
endorsement of that payment in the complaint and no
offence under Section 138 of the N.I. Act will be
attracted even though no endorsement is made on the
back side of the cheque leaf an offence will attract against
the accused. It is evident from the material on record that
the accused has transferred the amount of Rs. 2,11,535/-
to the account of complainant before the presentation of
cheque, but in the complaint, it is not sated that the
C.C. No. 6566 /2022
accused has paid a sum of Rs.2,11,535/- to him. Even
though the complainant has stated that the said payment
made toward the earlier transaction , there is no mention
in the complaint that the said payment was made towards
earlier transaction. According to the accused, he has
transferred the said amount towards the payment of debt.
Admittedly. The complainant has not established the fact
that the accused has transferred the said amount towards
the earlier transaction. In the absence of the any
document and pleadings in respect of payment of amount
towards earlier transaction, then it is difficult to accept
the contention of the complainant that the alleged
payment made towards earlier transaction. Hence, it can
be taken into consideration that the said payment made
by the accused to the complainant towards debt. The
question that arise for consideration is that if the debt
amount is less than the cheque amount whether any
offence under Section 138 will be attracted against the
revision petitioner. According to Section 138 of the N.I.
Act, where any cheque drawn by a person on an account
C.C. No. 6566 /2022
maintained by him with a bank for payment of any
money to another person from, out of that account, for
the discharge of any debt or liability, in whole or in part
is returned by the bank, on the ground that the amount
in that account is insufficient to honor the cheque or it
exceeds the amount arranged to be paid from that
account by an agreement made with a bank, such person
shall be deemed to have committed an offence under
Section 138 of the N.I. Act. This deemed provision is
subject to the statutory condition that the cheque has to
be presented within the statutory period in which it is
drawn or within the period of its validity. Secondly, the
payee or holder in due course of the cheque makes a
demand for payment of such amount by giving a notice
in writing to the drawer of the cheque within 30 days on
receipt of information from the bank. If the drawer fails
to make payment of due amount within 15 days on
receipt of notice, the payee or the holder of the cheque
can file a complaint. The facts of the case show that the
amount covered by the cheque is bigger than the cheque
C.C. No. 6566 /2022
amount. A reading of the wordings of the Section shows
that the cheque should be given in discharge of a debt
either in whole or in part or any liability and if the
cheque amount is higher than the debt or liability,
Section 138 of the N.I. Act would not get attracted.
20. The position of part payment of the cheque
amount has been considered by the Division Bench of
Hon'ble High Court of Kerala in Joseph Sartho Vs.
Gopinathan and Another (2008(4) KHC 463), where
it was held as follows;
"Question arose for consideration in this case
was whether, when part payment due under a
cheque was paid, an offence under S.138 of the
Act will be made out or not. There was
conflicting decisions of the High Court on this
point and thus the matter was referred to the
Division Bench for a finality. Court considered
certain key issues regarding making of part
payment due under a cheque. Court concluded
that, if the drawee makes an endorsement
regarding the part payment on the cheque and
claimed only the balance amount and if it is
dishonoured, the offence under S.138 will be
C.C. No. 6566 /2022
made out. Such a pragmatic view was taken,
because any person who makes a part payment
which may be very small compared to the
amount due under the cheque can escape from
the liability."
The accepted connotation of interpretation is that
penal statute should be considered strictly and in case of
doubt, the benefit will go to the accused. The
presumption of law is that a person is innocent until
proved guilty. This means that there is always a
presumption of innocence in favour of an accused and the
burden to prove the case is on the prosecution. That
presumption is available to an accused who is prosecuted
under Section 138 of the Negotiable Instruments Act,
simply because a cheque happened to be dishonoured
itself is not a ground to say that the accused has
committed an offence. There may be exceptional cases
out side the purview of the Section 138. A debt is a
liquidated amount of money owed and payable to
another in present or in future which is a pecuniary
C.C. No. 6566 /2022
liability recoverable by action in respect of money or
demand. Therefore, Section 138 of the N.I. Act shows
not only the debt, but also the liability. A cheque have
been issued in discharge of a debt wholly or in part or of
any liability.
21. The Hon'ble Apex court in NEPC MICON
Ltd., Vs Magna Leasing Ltd., AIR 1999 SC 1952 and
M/s Dlamia Cement (Bharat) Ltd., -Vs- M/s Galaxy
Traders and Agencies Ltd., AIR 2001 SC 676 has
explained the position of law regarding strict
interpretation of penal statute. Apex court reiterated that
even though Section 138 of the N.I. Act is a penal
statute, it should be interpreted taking into consideration,
the legislative intent. However, in Rahul Builders -Vs--
Arihant Fertilizers and Chemicals 2007(4) KLT 977
(SC) Hon'ble Apex court reiterated the principle and
held that the penal provision under Section 138 of the
N.I. Act ought to be interpreted strictly. Therefore the
C.C. No. 6566 /2022
penal statute must be interpreted strictly and in case of
doubt, the benefit should go to the accused.
22. The point that arises in this case is when a part
payment of the amount due under a cheque is paid and if
the payee or drawee fails to make an endorsement and
the holder claims the full cheque amount whether any
offence under Section 138 of the N.I. Act will be
attracted in this context. Normally, admissions are not
conclusive proof of the matters admitted, but they may
operate as estoppal and one can prove that it was made
under mistake of law or fact or under threat or
inducement. In the absence of such proof of threat or
inducement or mistake of law, admission made by
persons constitutes good evidence against the party
making it. Thus, when there was no material to show
that the admission made by the complainant is not in
another transaction such admission is valuable in
connection with the transaction in this case. In this
context, I have examined the evidence of PW1, who is
the complainant in this case. His evidence shows that Ex.
C.C. No. 6566 /2022
P-1 Ex. P-2 were issued in discharge of a debt of Rs.
6,88,170/-. When it was presented for encashment, it
was dishonoured for the reason of funds insufficient. Ex.
P-3 and Ex. P-4 are dishonour memo. During cross-
examination, PW1 admitted that before institution of the
complaint, he received Rs. 2,11,535/- from the accused.
In Ex. P-5 the statutory notice the amount claimed is Rs.
6,88,170/-. An admission is a voluntary acknowledgment
made by one party in legal interest of the existence of
certain facts which are relevant to the fact in issue in a
case. The important characteristic of this evidence is that
it is in the style of binding nature. When an admission is
made by a party during proceeding of a case, it is fully
binding on that party which is a judicial admission. An
indorsement on the back or face of the instrument is
valid under Section 15 of the N.I. Act, when the maker
or holder of a negotiable Instrument signs the same. If
the signature on the back side of the instrument or on the
face of the instrument is made by a third party, neither
the maker nor the holder made any indorsement within
C.C. No. 6566 /2022
the meaning of the Section. Section 15 of the N.I. Act
reads as follows;
"When the maker or holder of a negotiable
instrument signs the same, otherwise than
such as maker, for the purpose of negotiation,
on the back or face thereof or on a slip of
paper annexed thereto, or so signs for the same
purpose a stamped paper intended to be
completed as a negotiable instrument, he is
said to indorse the same, and is called the
"indorser".
Therefore, a promissory note, bill of exchange or a
cheque can be negotiated by making an indorsement
either on the instrument or on a separate paper annexed
to it.
23. The indorsement for part payment of the
cheque was explained under Section 56 of the N.I. Act.
According to Section 56 of the Negotiable Instruments
Act,
"no writing on a negotiable instrument
is valid for the purpose of negotiation, if
such writing purports to transfer only a
part of the amount appearing to be due
C.C. No. 6566 /2022
on the instrument; but where such
amount has been partly paid , a note to
that effect may be indorsed on the
instrument, which may then be
negotiated for the balance."
The sections prohibit the transfer of an instrument
for a portion of the amount due under it. But the last
portion says that if the amount has been paid in part, the
fact of the part payment may be endorsed on the
instrument and negotiated for the balance amount. When
the maker of the payment makes a part payment, but
that amount is not endorsed and the note is fraudulently
negotiated by the payee without admitting the part
payment, the maker has to pay the full amount of the
instrument to the holder. When court considers part
payment due under a cheque and if drawee makes an
endorsement regarding the part payment on the
instrument and he claims the balance amount by
presenting the cheque for encashment through a bank
and if it is dishonoured, then an offence under Section
138 of the N.I. Act will be made out.
C.C. No. 6566 /2022
24. In Angu Parameshwari Textile (P) Ltd., and
others -Vs- Sri. Rajam and Co. 2001 Company Cases
Vol.(105) 186, the Hon'ble Madras High Court held
that;
"For the purposes of Section 138 of the
Negotiable Instruments Act, 1881, the
cheque should be towards the discharge
of either the whole debt or part of the
debt. If the cheque is for more than the
amount of the debt due, Section 138
cannot be attracted."
Here the portion of the cheque amount was repaid
and such payment is admitted by PW1 and no
endorsement was made on the back of the cheque or face
thereof and on prosecution complainant claimed cheque
amount, no offence under Section 138 of the N.I. Act is
made out. The evidence adduced in this case is not
sufficient to convict the accused under Section 138 of the
Negotiable Instrument Act.
C.C. No. 6566 /2022
25. Another contention of the defence counsel is
that the demand notice was not served to the accused.
The burden is on the complainant that the notice was
dispatched by post with correct address. Per contra,
Learned Counsel for complainant argued that the notice
was duly served on the accused. Admittedly, the
requirements of Section 138 (b) of the Negotiable
Instrument Act is that notice should be sent to the
drawer of the cheque. Clause (b) of the proviso to
Section 138 of the Negotiable Instrument Act lays down
that notice regarding dishonor of the cheque should be
sent to the drawer of the cheque within 15 days of the
receipt of intimation regarding the dishonor of the
cheque. Considering the provision contained in Section
27 of the General Clauses Act once the sender establishes
the fact that the notice was dispatched by post with
correct address written thereon, it should be deemed to
have been served on the sendee unless he establishes that
it was not really served and that he was not responsible
for such non-service.
C.C. No. 6566 /2022
26. 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
proviso t section 148 is a condition precedent for filing a
complaint under Section 138 of the Negotiable
Instrument Act. Whether the notice was severed 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.
C.C. No. 6566 /2022
27. 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
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
C.C. No. 6566 /2022
give rise to a cause of action but
communication of the notice would.'
28. 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 Apex court
in K.Bhaskaran v. Sankaran Vaidhyan Balan [(1999) 7
Supreme Court Cases 510] held that once notice has
been sent by a registered post with acknowledgment due
in the correct address, it must be presumed that the
service has been made effective. In V. Rajakumari v. P.
Subbarama Naidu [(2004) 8 Supreme 774] it was held
that statutory notice under Section 138(b) of the 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. Further in the
C.C. No. 6566 /2022
case of Dalmia Cement (Bharat) Ltd., Vs- Galaxy
Traders reported in AIR 2001 SC 676 and also in K.
Bhaskaran Vs Sankaran reported in [1999] 7 SCC
510 the Hon'ble Supreme Court held that to constitute
an offence under Section 138 of Negotiable Instrument
Act, the complainant is obliged to prove its ingredients
which includes the receipts of notice by the accused
under Section 138 of N. I. Act. The failure on the part
of the drawer to pay the amount should be within 15
days of the receipt of notice. It is, therefore, clear that
giving notice in the context is not the same as receipt of
notice. Giving is a process of which receipt is the
accomplishment. It is to be kept in mind that it is not the
giving of the notice which makes the offence but it the
receipt of the notice by the drawer which gives the cause
of action to the complaint to file the complaint
withdrawn the statutory period.
29. The provision under Sec.138 of the NI Act
shows that where a cheque issued by a drawer in
C.C. No. 6566 /2022
discharge of any debt or liability, in whole or in part, is
returned by the bank unpaid, because of the amount of
money standing to the credit of that account is
insufficient to honor 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
C.C. No. 6566 /2022
court shall take cognizance of an offence punishable
under Sec.138 of the NI Act upon receipt of a complaint
in writing by the payee or as the case may be, the holder
in due course of the cheque. Proviso to Sec.138(c) says
that such complaint must be made within one month of
the date on which the cause of action arises. However,
discretion has been given to the court to take cognizance
of the complaint after the expiry of the period of
limitation, if the complainant satisfies the court that he
had sufficient reason for not making the complaint
within the limitation period.
30. 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
C.C. No. 6566 /2022
the cheque. It is clear from Sec.27 of the General Clauses
Act, 1897 and Sec.114 of the Evidence Act, 1872, that
once a notice is sent by registered post by correctly
addressing to the drawer of the cheque, the service of
notice is deemed to have been completed. The
requirements under Sec.138(b) stand complied, if notice
is sent in the above prescribed manner. In this context, I
may refer an decision of the Hon'ble Apex court in
M/s. Dalmia Cement (Bharat) Ltd. v. M/s. Galaxy
Traders and Agencies Ltd. [AIR 2001 Supreme Court
676] in which it was held that the presumption is
rebuttable. But, in the subsequent decision M/s.
Harman Electronics (P) Ltd. and Anr. v. M/s.
National Panasonic India Ltd. [AIR 2009 Supreme
Court 1168] it was held that the presumption in support
of service of notice depends upon the facts and
circumstances of each case. In Jagdish Singh v. Natthu
Singh (1992) 1 SCC 647 , State of M.P. v. Hiralal
(1996) 7 SCC 523 , V. Rajkumari v. P. Subrama
Naidu 2005 SCC (Cri) 393 Hon'ble Apex court held
C.C. No. 6566 /2022
that when a notice is sent by registered post and is
returned with postal endorsement "refused" or "not
available in the house" or "house locked" or "shop
closed" or "addressee not in station", due service has to
be presumed. However, the drawer is at liberty to rebut
this presumption either by adducing evidence or on the
basis of evidence produced by the complainant.
31. 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
C.C. No. 6566 /2022
used the expression in the sense which
would carry out its object and reject that
which renders exercise of its power
invalid."
32. 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. 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
C.C. No. 6566 /2022
time after issuing the cheque so that the
requisite statutory notice can never be
served upon him and consequently he can
never be prosecuted. There is good
authority to support the proposition that
once the complainant, the payee of the
cheque, issues notice to the drawer of the
cheque, the cause of action to file a
complaint arises on the expiry of the period
prescribed for payment by the drawer for
the cheque. If he does not file a complaint
within one month of the date on which the
cause of action arises under clause (c) of the
proviso to Section 138 of the Act, his
complaint gets barred by time. Thus, a
person who can dodge the postman for
about a month or two, or a person who can
get a fake endorsement made regarding his
non-availability can successfully avoid his
prosecution because the payee is bound to
issue notice to him within a period of 30
days from the date of receipt of
information from the bank 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.
C.C. No. 6566 /2022
33. We cannot also lose sight of the fact that the
drawer may by dubious means manage to get an incorrect
endorsement made on the envelope that the premises has
been found locked or that the addressee was not available
at the time when postman went for delivery of the letter.
It may be that the address is correct and even the
addressee is available but a wrong endorsement is
manipulated by the addressee. In such a case, if the facts
are proved, it may amount to refusal of the notice. If the
complainant is able to prove that the drawer of the
cheque knew about the notice and deliberately evaded
service and got a false endorsement made only to defeat
the process of law, the court shall presume service of
notice. This, however, is a matter of evidence and proof.
Thus even in a case where the notice is returned with the
endorsement that the premises has always been found
locked or the addressee 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
C.C. No. 6566 /2022
cheque, with the knowledge of the notice had
deliberately avoided to receive notice.
34. 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
C.C. No. 6566 /2022
Instrument Act. If complainant is able to prove that the
drawer of the cheque knew about the notice and
deliberately evaded from the premises making a false
endorsement, it will defeat the process of law and in such
situation the apex court held that the Court shall
presume that there was proper service of notice. This is
really a matter of evidence and proof. Therefore, if the
service of notice is fraudulently refused or avoided by the
accused in an unscrupulous manner, that is a matter of
evidence and that fact can be proved on the basis of
evidence.
35. In this case, the complainant knew that the
accused is not available in her 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 residing in the given address, the
C.C. No. 6566 /2022
question arises is whether the said service of notice in the
available address is sufficient for proper compliance of
Sec.138(b) of the Negotiable Instrument Act. If the
complainant is able to prove that the drawer of the
cheque deliberately evaded service, then the presumption
of service will attract. On the other hand, if the
registered notice as contemplated under Section 138(b) of
the Negotiable Instrument Act was issued by the
complainant but it was returned with endorsement
"addressee left" and the complainant at the time of
issuance of notice knew that the accused vacated the
premises 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
C.C. No. 6566 /2022
endorsement made by the postal authorities in the notice
itself is not sufficient to draw a presumption of service of
notice. An enquiry with regard to the knowledge of non
availability at the premises 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.
C.C. No. 6566 /2022
36. The offence under Sec.138 of the NI Act is not
a natural crime like hurt or other offence under the
Indian Penal Code, but, it is an offence created by a legal
fiction in the statute, transformed civil liability into
criminal liability. The onus of proving all the ingredients
of the offence in a criminal case is on the prosecution.
When an accused person is charged with having
committed an offence, it is for the prosecution to prove
all the ingredients of the offence. It is only when this
burden is discharged, the accused has to explain the
essential elements in the prosecution case which would
negative it. Even after the civil liability transformed into
criminal liability under restricted conditions by
amendment of the Negotiable Instrument Act, by
introducing the relevant provisions, the strict liability
provided for criminal cases has not changed. In this
context, the decision of the Hon'ble Apex court in D.
Vinod Sivappa v. Nanda Belliappa [(2006) 6 Supreme
Court Cases 456] is relevant.
C.C. No. 6566 /2022
37. Undoubtedly, the accused has a right to pay the
money within 15 days from the date of the service of
notice and only when it fails to pay, it is open for the
complainant to file a case under Section 138 of the
Negotiable Instruments Act. That being the position and
in the complaint itself having not been mentioned that
the notice has been served, on the assertions made in the
complaint itself is not maintainable. Absolutely, there
is no an iota of evidence on the record to show that legal
notice has been served on the accused. Admittedly, the
complainant has not examined the official of the Postal
Authorities to show that the notice was served on the
accused. Non-examination of postman is fatal to the case
of the complainant. Therefore, the contention of
complainant that the notice was served on accused
cannot be acceptable.
38. 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
C.C. No. 6566 /2022
contemplated u/Sec.139 of N.I. Act has to be raised by
the court in favour of the complainant. The presumption
referred to u/Sec.139 of N.I. Act is a mandatory
presumption and not a general presumption. But, the
accused is entitled to rebut the said presumption by
probable and acceptable evidence. Admittedly, in this
case, the accused had not taken any legal action against
the complainant after receipt of the summons to recover
the cheque in issue from him. Merely, the accused has
not taken legal action against the complainant is not
sufficient to draw the presumption against him, because
in this case, the complainant failed to prove and establish
his case beyond all reasonable doubt. 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 :-
39. Section 139 of N.I. Act creates presumption
that the cheque received in the nature referred to Section
C.C. No. 6566 /2022
138 of N.I. Act is always issued in discharge of debt or
other liability. For a successful prosecution of offence
under section 138 of the Act, complainant must allege
and prove that the cheque was drawn or executed by the
accused. In the absence of proof of lending loan to the
accused, presumption cannot be drawn in favour of the
complainant. In this case, the accused had a probable
defence and the complainant has miserably failed to show
his entailment of cheque amount from the accused.
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 him for the offence C.C. No. 6566 /2022 punishable under Section 138 of Negotiable Instruments Act.
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 19th day of May 2023) (K. LAKSHMI) IV Addl. SCJ & ACMM., Bengaluru.
C.C. No. 6566 /2022 ANNEXURE List of witnesses Examined for Prosecution:
PW.1 : Satish B. S List of documents marked for prosecution :
Exp.1&2 : Cheques Exp.1(a)& 2(a) : Signatures of accused Exp.3&4 : Banker's endorsements Exp.5 : Office copy of Legal notice Exp.6 : Postal receipt Exp.7 : Postal Cover List of witnesses examined for accused :
-Nil-
List of documents marked for accused :
-Nil-
(K. LAKSHMI) IV Addl. SCJ & ACMM., Bengaluru.
C.C. No. 6566 /2022 Dt: 25.04.2023 Due to rush of work C- Judgment not ready. A- For Judgment 19.05.2023. For Judgment IV ASCJ & ACMM Dt: 19.05.2023 C-
A-
For Judgment (Order pronounced in open court vide separate judgment) ORDER The accused is not found guilty of the offence punishable under Section 138 of Negotiable Instruments Act.
Hence, the accused is acquitted acting Under Section 255(1) of Cr.P.C of the charges leveled against him for the offence punishable under Section 138 of Negotiable Instruments Act.
C.C. No. 6566 /2022 The bail bond of accused stands cancelled and surety stands disbursed.
(K. LAKSHMI) IV Addl. SCJ & ACMM, Bengaluru.
C.C. No. 6566 /2022 C.C. No. 6566 /2022 C.C. No. 6566 /2022 C.C. No. 6566 /2022