Case BriefsDistrict Court

Saket Courts, Delhi: Swati Gupta, Metropolitan Magistrate (South) NI Act, convicted the accused for an offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881. While delivering the judgment, the Court reiterated the well-settled position of law and discarded various defence taken by the accused.

Factual Matrix

The accused approached the complainant since he needed funds to expand his business. The complainant granted a loan of Rs 76.24 lakhs to the accused and the parties executed a memorandum of understanding (MoU) in that respect. Later, in order to discharge his liability, the accused issued a cheque of Rs 5 lakhs. On presenting for encashment, the cheque was returned unpaid by the bank with the remark “funds insufficient”. Thereafter, the complainant sent a legal notice to the accused but he did not pay the amount of dishonoured cheque. Hence, the complainant moved the Court with a complaint under Section 138 of NI Act. The accused disputed his liability.

Law, Analysis and Decision

Ingredients of the offence

Before delving into the facts, the Court discussed the settled position of law applicable to the proceedings under Section 138 of NI Act. It was reiterated that to establish the offence under Section 138, the complainant must prove:

(i) the accused issued a cheque on an account maintained by him with a bank;

(ii) the said cheque has been issued in discharge, in whole or in part, of any legal debt or other liability, which is legally enforceable;

(iii) the said cheque has been presented to the bank within a period of three months from the date of cheque or within the period of its validity;

(iv) the aforesaid cheque, when presented for encashment, was returned unpaid/dishonoured;

(v) the payee of the cheque issued a legal notice of demand to the drawer within 30 days from the receipt of information by him from the bank regarding the return of the cheque;

(vi) the drawer of the cheque failed to make the payment within 15 days of the receipt of the aforesaid legal notice of demand.

The Court was of the opinion that the complainant discharged his initial burden and established the ingredients of the offence under Section 138 against the accused. In his statement under Section 313 CrPC, the accused admitted receiving the demand notice on his permanent address.

Not filling details in the cheque

The accused had admitted his signatures on the cheque but disputed filling any details of the cheque. The Court was of the opinion that such plea, even if true, had no bearing on the presumption against him. Reliance was placed on the Supreme Court decision in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197, wherein it was held that filling of persons by any person other than the accused would not invalidate the cheque and shall attract the presumption under Section 139 of NI Act.

Rebutting the presumption

On rebuttal of mandatory presumption, the Court noted that the presumption under Section 139 cannot be rebutted upon a mere denial. It can be rebutted by the accused only be leading cogent evidence. Reliance was placed on K.N. Beena v. Muniyappan, (2001) 8 SCC 458. It was observed:

“the presumptions may be rebutted by the accused either by leading direct evidence and in exceptional cases, from the case set out by the complainant himself i.e. from the averments in his complaint, in the statutory notice and even the evidence adduced by the complainant during the trial.”

The Court also noted that the burden of proof is to be discharged by the accused on preponderance of probabilities.

Cheque given as ‘security’

In his defence, the accused claimed that the cheque was given as security and whatever amount was invested by the complainant, he took away assets of the business of the accused against the same and as such there was no liability towards the complainant.

The Court observed it to be a settled law that:

“handing over of cheques by way of security per se does not extricate the accused from the discharge of liability arising from such cheques.”

Even otherwise, the Court found that the accused did not led any cogent evidence to prove such plea.

Contradictions in complainant’s testimony

The accused averred that the complainant’s case was not believable as there were contradictions in his testimony. He contended that during cross-examination, the complainant stated that the loan was given for the purpose of business while in his affidavit, he termed the loan as a friendly loan.

The Court found that the complainant consistently stated that the loan was given for the purpose of investment in business of the accused. It was considered opinion of the Court that mere terming of the loan as friendly in one sentence of his testimony was not a contradiction so material as to discredit the entire case of the complainant.

Loan amount disputed

The accused disputed the loan amount claiming that it was not Rs 76.24 lakhs but much less. The Court was of the opinion that the accused was not able to prove this plea. He admitted the execution of MoU which specified the loan amount as Rs 76.24 lakhs. Thus, there being a written document to that effect, the accused could not be allowed to verbally contradict or vary the terms of the same in light of Section 92 of the Evidence Act, 1872.

Non-filing of ITR by the complainant

The accused contended that the complainant did not file his Income Tax Return along with the complaint which rendered the fact of alleged loan transaction improbable.

The Court found that during complainant’s cross-examination, no suggestion was put to him on the aspect of non-filing of ITR or to question if the loan was disclosed in the ITR or not or to challenge the transaction of loan on the basis of the same. The complainant duly placed on record the MoU executed between the parties, which was admitted by the accused. Thus, the Court held that non-filing of ITR by the complainant was of no consequence.

Financial capacity of the complainant

The accused contended that the statement of account of complainant’s business during the relevant period when the loan was allegedly given, showed a balance of about Rs 6800, which showed that the complainant had no financial capacity to extend a loan of Rs 76.24 lakhs.

On this, the Court found that the complainant was running two businesses and the financial capacity of the complainant could not be held to be questionable only because balance in one of his business accounts was less. Further, during cross-examination of the complainant, the accused never questioned his source of funds or financial capacity. Thus, a mere allegation that financial capacity of the complainant was not adequate as one of his business accounts had low balance did not hold water.

The remaining defence taken by the accused was also discarded by the Court as either not proved or not relevant.

In such a view of the matter, the Court concluded that the accused miserably failed to rebut the mandatory presumptions under Section 118(a) and Section 139 of NI Act even on a preponderance of probabilities, while the complainant succeeded in proving his case beyond a reasonable doubt. Accordingly, the accused was held guilty and was convicted for the offence under Section 138 of the Negotiable Instruments Act. [Zikrur Rahman Khan v. Anwar Ahmad, Complaint Case No. 470901 of 2016, dated 11-11-2021]

Case BriefsDistrict Court

Additional Chief Metropolitan Magistrate, Mayo Hall Unit, Bengaluru: Vani A. Shetty, XVII Additional Judge, Court of Small Causes & ACMM, addressed a matter with respect to the liability of the accused in a case of dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881.

In the present case, the accused was tried for the offence punishable under Section 138 of the Negotiable Instruments Act.

Factual Background

Complainant with an intention to have a South Africa trip paid Rs 24 lakhs to the accused to book the tickets. But the accused failed to book the tickets and repaid a sum of Rs 14.5 lakhs to the complainant and sought time for the payment of balance amount of Rs 9.5 lakhs. Towards the discharge of the said liability, the accused issued a cheque for Rs 4,50,000 assuring that the cheque would be honoured if presented for payment.

But the cheque came to be dishonoured on the grounds of ‘payment stopped by drawer’. Thereafter the complainant got issued a legal notice demanding repayment of the cheque amount within 15 days. Due to no response from the accused, an instant complaint was filed.

In view of sufficient ground to proceed further, a criminal case was registered against the accused, and she was summoned.

Question for Consideration:

Whether the complainant proved that the accused has committed an offence punishable under Section 138 of the NI Act, 1881?

Analysis, Law and Decision

While analyzing the matter, Bench stated that in order to constitute an offence under Section 138 NI Act, the cheque shall be presented to the bank within a period of 3 months from its date. On dishonour of cheque, the drawer or holder of the cheque may cause demand notice within 30 days from the date of dishonour, demanding to repay within 15 days from the date of service of the notice.

“If the drawer of the cheque fails to repay the amount within 15 days from the date of service of notice, the cause of action arises for filing the complaint.”

In the present matter, the complainant had complied with all the mandatory requirements of Section 138 and 142 of the NI Act.

Section 118 of the NI Act lays down that until the contrary Is proved, it shall be presumed that every Negotiable Instrument was made or drawn for consideration.

Section 139 NI Act contemplated that unless the contrary is proved, it shall be presumed that the holder of the cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole of any debt or liability.

In a catena of decisions, it has been repeatedly observed that in the proceeding under Section 138 of NI Act, the complainant is not required to establish either the legality or the enforceability of the debt or liability since he can avail the benefit of presumption under Sections 118 and 139 of the NI Act in his favour.

Further, it was observed that by virtue of the presumptions, accused had to establish that the cheque in question was not issued towards any legally enforceable debt or liability.

Later in the year 2006, the Supreme Court in the decision of M.S. Narayan Menon v. State of Kerala, (2006 SAR Crl. 616), has held that the presumption available under Section 118 and 139 of N.I. Act can be rebutted by raising a probable defence and the onus cast upon the accused is not as heavy as that of the prosecution.

Further, in the Supreme Court decision of Krishna Janarshana Bhat v. Dattatreya G. Hegde, (2008 Vo.II SCC Crl.166), the Supreme Court held that the existence of legally recoverable debt was not a presumption under Section 138 NI Act and the accused has a constitutional right to maintain silence and therefore, the doctrine of reverse burden introduced by Section 139 of the NI Act should be delicately balanced.

Bench, in conclusion, observed that the presumption mandated by Section 139 of NI Act does indeed include the existence of legally enforceable debt or liability, it is a rebuttable presumption, open to the accused to raise defence wherein the existence of the legally enforceable debt or liability can be contested.

If the accused is able to raise a probable defence, which creates doubt about the existence of legally enforceable debt or liability, the onus shifts back to the complainant.

Court stated that if the accused was able to probabalise that the disputed cheque was issued due to the intervention and pressure of the police, it may not be justified to draw the presumption contemplated under Section 139 NI Act.

It was added that if the police would have really interfered, the accused could have produced some evidence to show the intervention of the police. But there was absolutely no evidence on record to show that cheque was issued either due to pressure of police or due to some other compulsion.

In Court’s opinion, the Court was required to draw the presumption under Section 139 NI Act in favour of the complainant.

Court noted that in the present matter, accused at no point in time asked the complainant to pay the balance amount. Instead, she had kept quiet by enjoying the huge amount of Rs 24 lakhs which clearly indicated that the non-purchase of the ticket was not on account of the non-payment of the remaining amount. Further, there was no forfeiture clause.

For the above, Bench stated that in the absence of the forfeiture clause, the accused could not have retained the amount of the complainant with her, the said was barred by the doctrine of unlawful enrichment under Section 70 of the Indian Contract Act, 1872.

Hence, even if it was held that the complainant was a defaulter in respect of the payment of the remaining amount, the accused was legally liable to repay the amount received by her from the complainant.

In view of the above reasons, guilt of the accused was proved under Section 138 NI Act. [Srinivas Builders and Developers v. Shyalaja, CC No. 57792 of 2018, decided on 13-10-201]


Advocates before the Court:

For the Complainant: V.N.R., Advocate

For the Accused: J.R., Advocate

Case BriefsDistrict Court

Patiala House Courts, New Delhi: Prayank Nayak, MM-01 acquitted the accused of offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1885, holding that the accused successfully dislodged the statutory presumption.

In the present matter, complaint was filed under Section 138 of the Negotiable Instruments Act, 1881 for the dishonour of cheque for an amount of Rs 6,82,000 and failure to pay the said amount despite legal demand notice.

Path Paving to this Matter

Complainant had given a loan of Rs 6,82,000 to the accused in cash and later the accused had issued a cheque for the repayment of the loan. Though the same was dishonored upon its presentation and no payment was made despite the receipt of legal demand notice.

Analysis, Law and Decision

Offence under Section 138 of the Negotiable Instruments Act consists of the following ingredients:

  1. The cheque was drawn by drawer on an account maintained by him with the banker for payment of any amount of money out of that account.
  2. The said payment was made for discharge of any debt for other liability in whole or in part.
  3. The said cheque was returned unpaid by the bank.
  4. The cheque was presented to the bank within a period of 3 months from the date on which it was drawn or within the period of its validity whichever is earlier.
  5. The payee or the Holder in due course of the cheque as the case may be makes a demand for the payment of the said amount of money by giving the notice in writing to the drawer of the cheque within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.
  6. The drawer of the cheque fails to make the payment of the said amount of money to the payee or as the case may be the Holder in due course of the cheque within 15 days of the receipt of the said notice.
  7. The payee or the Holder in due course of the cheque shall make a complaint in writing within one month of the date on which the Cause of Action arises i.e., 15 days from the receipt of the notice by the drawer.

In the present matter, it was noted that the receipt of legal notice was accepted and the duly replied and the dishonour memo issued by the bank was also placed on record.

Court stated that by virtue of Section 146 of NI Act, the dishonour of cheque in question had to be presumed.

Onus to prove

As per Section 118 (g) of NI Act, the holder of the cheque is presumed to be holder in due course, hence the accused has to prove that the cheque was not issued to the complainant.

Accused had admitted the signature on the cheque, thus presumption under Section 118(a) of the NI Act and Section 139 of NI Act will be drawn.

Delhi High Court’s decision in Devender Kumar v. Khem Chand,2015 SCC OnLine Del 12578, it was held that:

“However, in Rangappa v. Sri Mohan, (2010) 11 SCC 441, a three judges’ bench of the Supreme Court held that Section 138 of the N.I. Act includes the presumption enforceable debt or liability and that the holder of the cheque is presumed to have received the same in discharge of such debt or liability……. without doubt, the initial presumption is in favour of the complainant.” (Para 20).

Whether the accused has been able to dislodge the presumption of liability as well as issuance on the basis of cross-examination of complainant and the evidence led by him?

In the instant matter, it is very pertinent to note that there is no written/documentary proof of loan and the complainant has also not mentioned any date of giving loan amount.

Due to the above-stated observation, Bench stated that as there was absence of documentary proof as well as the date of giving loan, the whole case seems to be doubtful.

What all makes this case doubtful?

Court noted that complainant despite having friendly relations and extending friendly loan of large amount to the accused is not even aware about the name of wife of the accused nor could tell whether accused is having kids or not. Though it has been claimed by him that he knows the accused of around 5 years, but he has never gone inside the house of the accused.

The above stated makes it doubtful for the Court to believe that the relations between the parties were such that the complainant would lend the stated sum to the accused that too without any documentary evidence.

Discrepancy in complainant’s oral testimony and bank statement was found along with discrepancy in photocopy of his Balance-Sheet and certified copy of the same.

The above-stated discrepancies strike the root of the complainant’s case.

Complainant in his cross-examination admitted that he had to pay loans to various persons and institutions, this fact leads the Bench to the question of why a person himself being liable to pay loan to various persons would advance loan of more than Rs 6 lakhs to some other person.

Therefore, accused dislodged the presumption in favour of the complainant by impeaching his credit during cross-examination and due to the absence of documentary proof.

Complainant did not examine any witnesses to prove the loan transaction and the above discussion cast doubt over the complainant’s version that he had given loan to the accused.

In Delhi High Court’s decision, Kulvinder Singh v. Kafeel Ahmad, 2014 (2) JCC (NI) 100 it was observed that,

“The basis principle in Criminal law is that the guilt of respondent/accused must be proved beyond reasonable doubt and if there is slightest doubt about commission of an offence then the benefit has to accrue to him”.

 “…Benefit of doubt has to accrue to the accused.”

 Court acquitted the accused for the offence under Section 138 NI Act. [Balwant Singh v. Angad Makol, R. No. 55576 of 2016, decided on 5-10-2021]

Case BriefsDistrict Court

Tis Hazari Courts, New Delhi: Devanshu Sajlan, MM NI Act-05, while noting the ingredients of Section 138 of the Negotiable Instruments Act, 1881 acquitted a person charged for offence punishable under Section 138 NI Act.

Factual Matrix

Present complaint was filed under Section 138 of the Negotiable Instruments Act, 1881.

Complainant had granted a friendly loan of Rs 21,00,000 to the accused for two months for some urgent need of the accused.

To discharge the legal liability, the accused issued two cheques in favour of the complainant firm, but the same were returned by the bank as no balance was available in the account. Thereafter, Complainant sent a legal notice but the accused allegedly failed to pay the cheque amount and hence, the complainant filed the present complaint.

Accused denied having taken a loan of Rs 21,00,000 from the complainant and instead stated that he took a loan of Rs 5,00,000 and had already paid the same. He added that he had given three blank signed cheques as security cheques which were misused by the complainant.

Discussion

In the present matter, the complainant proved the original cheques that the accused had not disputed as being drawn on the account of the accused.

Court stated that giving a blank signed cheque does not erase the liability under the NI Act. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may subsequently fill up the amount and other particulars (Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197, ¶ 34).). The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability.

Legal Notice

It is settled law that an accused who claims that she/he did not receive the legal notice, can, within 15 days of receipt of summons from the court, make payment of the cheque amount, and an accused who does not make such payment cannot contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the General Clauses Act and Section 114 of the Evidence Act [C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555).

Maintainability | Complainant is an unregistered partnership firm

It was contended that the present complaint was barred under Section 69(2) of the Indian Partnership Act. The firm was unregistered and hence the complaint was barred under the stated section.

A simpliciter reading of Section 69(2) would show that it is intended to apply to only suits, and that it would have no application to a criminal complaint.

Hence, the bar imposed on unregistered firms under Section 69(2) of the Indian Partnership Act does not apply to a criminal complaint under Section 138 NI Act.

Non-Existence of Debt

Complainant is required to prove that the cheque in question was drawn by the drawer for discharging a legally enforceable debt.

Court stated that as per the NI Act, once the accused admits signature in the cheque in question, certain presumptions are drawn, which result in shifting of onus on the accused and in the present matter, the issuance of cheques was not denied.

The combined effect of Section 118(a) NI Act and Section 139 of the NI Act is that a presumption exists that the cheque was drawn for consideration and given by the accused of the discharge of debt or other liability.

Rebuttal

  • Misuse of the security cheque

Bench stated that it is immaterial whether the cheque had been filled by the complainant once the cheque has been admitted being duly signed by the drawer-accused.

  • Complainant did not have the financial capacity to grant the alleged loan

It is a settled position of law that in case of cash transaction, showcasing that complainant did not have the adequate financial capacity to lend money to the accused amounts to a probable defense and can help in rebutting the presumption that is accrued to the benefit of the complainant in cheque dishonor cases.

In Basalingappa v. Mudibasappa, (2019) 5 SCC 418, the Supreme Court has observed as follows:

During his cross-examination, when financial capacity to pay Rs. 6 lakhs to the accused was questioned, there was no satisfactory reply given by the complainant. The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the burden on the complainant to prove his financial capacity and other facts.

(emphasis added)

Hence, the Court stated that in cases in which the underlying debt transaction is a cash transaction, the accused can raise a probable defense by questioning the financial capacity of the complainant, and once the said question is raised, the onus shifts on the complainant to prove his financial capacity.

Bench on perusal of the record of the present case, agreed with the submission of the counsel of the accused, since the record created adequate doubts over the financial capacity of the complainant to advance the loan in question.

Conclusion

Hence, Court opined that the complainant failed to establish that it had the financial capacity to advance a loan of Rs 21,00,000 to the accused.

Therefore, accused successfully rebutted the presumption under Section 139 NI Act and the complainant failed to discharge the shifted onus.

“…even if the cheque presented by the complainant was returned unpaid by the bank, the complainant cannot prosecute the accused, as the requirement of the existence of legal liability has not been satisfied in the present case, since the accused has been able to establish a probable defence by creating a credible doubt over the existence of the alleged loan transaction.”

Concluding the matter, Bench held that complainant failed to prove the case beyond a reasonable doubt, hence the accused was acquitted from the charge of offence punishable under Section 138 of the NI Act. [S.S. Auto Gallery v. Vaneet Singh, 21636 of 2016, decided on 9-10-2021]


Advocates before the Court:

Manjeet Singh, counsel for the complainant.

D.K Ahuja, for the accused.

Case BriefsDistrict Court

South-East District, Saket Courts, New Delhi: Bhanu Pratap Singh, MM (N.I. Act) found the accused guilty of an offence under Section 138 of the Negotiable Instruments Act, where the accused had admitted signatures on the cheque and also failed to make the payment within 15 days of receipt of summons.

Background

Accused took a loan of Rs 2,50,000 from the complainant through cross payee cheque drawn on ICICI Bank in his favour for a period of 6 months and the accused executed acknowledgment and promissory note under his signatures and the said amount carried interest at the rate of 18% p.a. from the date of payment till realization.

Complainant time and again demanded the said loan amount together with interest however, accused showed her inability to repay the said loan amount and always insisted to extend the time for repayment of the said loan amount along with interest.

In the discharge of her part legal liability, the accused issued a cheque for the amount of Rs 2,50,000 under her signature in favour of the complainant leaving the interest part on the said loan amount apart.

As per the instructions of the accused, the complainant presented the above-mentioned cheque for encashment and the same was dishonoured vide bank memo dated 04.12.2014 with remarks ‘Funds Insufficient’.

Thereafter, complainant sent a legal notice under Section 138 NI Act, calling upon the accused to make the payment within 15 days of the receipt of the legal notice as prescribed under Section 138 of the NI Act. Even after the expiry of 15 days stipulated period, the accused did not make the payment, therefore, the accused committed offence under Section 138 of NI Act and the present case was filed by the complainant.

Analysis, Law and Decision

Accused admitted her signatures on the cheque on question in her statement under Sections 251 and 313 CrPC.

In Supreme Court’s decision of Kalamani Tex v. P. Balasubramanian, (2021) 5 SCC 283  , it was held that:

The Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are established, then the ‘reverse onus’ clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him.

Court stated that once the accused had admitted her signatures on the cheque in question, presumption under Section 118 and 139 of the NI Act was drawn in favour of the complainant. Hence, it was upon the accused to rebut the presumption under Section 139 NI Act by raising a probable defence in his favour on a scale of preponderance of probabilities.

Accused took the defence in her statement under Section 251 CrPC that she does not know whether she received the legal notice.

The above plea of the accused was not tenable by virtue of the Supreme Court decision in CC Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555, wherein it was held that:

“Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint u/s. 138 of the Act, make payment of the cheque amount and submit to the court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the court along-with the copy of the complaint u/s. 138 of the Act, cannot obviously contend that there was no proper service of notice as required u/s. 138, by ignoring statutory presumption to the contrary u/s. 27 of the General Clauses Act and Section 114 of the Evidence Act”.

Therefore, the accused failed to raise a probable defence in his favour on a scale of preponderance of probabilities and consequently, the presumption under Section 118(a) and 139 of NI Act drawn in favour of complainant had not been rebutted and complainant proved the ingredients of Section 138 NI Act beyond reasonable doubt.

Hence, accused was found guilty for the offence punishable under Section 138 NI Act. [Om Avtar (HUF) v. Shashi Jindal, CC No. 631088 of 2016, decided on 5-10-2021]

Case BriefsHigh Courts

Delhi High Court: Subramonium Prasad, J., addressed a matter with regard to offences under Section 138 of Negotiable Instruments Act, 1881.

Instant revision petition was filed against the decision passed by the Additional Sessions Judge dismissing the appeal filed by the petitioner and affirming the Judgment of Metropolitan Magistrate convicting petitioner for offences under Section 138 of Negotiable instruments Act.

Respondent 2 instituted a complaint against the petitioner for an offence punishable under Section 138 NI Act.

Petitioner submitted that he was to procure material for assembling the computers for supply to the complainant and the cheque was given as a security for the loan which was to be arranged by the complainant from other parties.

Analysis, Law and Decision

Bench noted that the acknowledged receipt stated that the petitioner had taken a loan of Rs 15,00,000 and in lieu of the loan he issued a cheque. The said receipt was signed by the petitioner.

Court for the above-stated decided that the fact that there was no witnesses and the fact that it does not state as to from whom the loan was being taken doesn’t persuade the Court to disbelieve the document.

The said cheque was returned with endorsement “Insufficient Funds”.

Receipt along with cheque made out a case under Section 138 NI Act. Presumption under Section 139 of the N.I. Act, therefore, arises in favour of the holder of the cheque i.e. the complainant and unless the contrary is proved, that the complainant has received the cheque for discharge, in whole or in part, of any debt or other liability.

Bench stated that the petitioner couldn’t rebut the presumption under Section 139 NI Act. He didn’t deny his signatures on the cheque and did not deny the fact that the receipt was given by him which acknowledged a sum of Rs 15,00,000 taken as a loan.

Further, it was also added that the mere ipse dixit of the petitioner and the statement in defence under Section 313 CrPC without any material does not rebut the presumption cast on the petitioner under Section 139 of the N.I. Act.

The fact that the loan was given in violation of Section 269 SS of IT Act does not mean that the Court cannot look into the documents at all.

Offence Section 269 SS IT Act at best makes an offence under Section 271 D of the IT Act but it does not mean that the loan of Rs.15,00,000/- has not been given by the complainant to the petitioner herein. 

High Court agreed with the Courts below that the initial burden cast against the petitioner had not been discharged.

In view of the above revision, the petition was dismissed. [Barun Kumar v. State of NCT of Delhi, 2021 SCC OnLine Del 3498, decided 25-06-2021]


Advocates before the Court:

For the Petitioner: Mr. Dheeraj Malhotra and Mr.Gaurav Gupta, Advocates

For the Respondents: Mr Hirein Sharma, APP for the State Mr. Shakeel Sarwar Wani and Mr. Himanshu Garg for respondents No.2 to 4

Case BriefsSupreme Court

Supreme Court: The 3-Judge Bench comprising of N.V. Ramana, Surya Kant* and Aniruddha Bose, JJ., upheld the judgement of High Court of Judicature at Madras, whereby the order of acquittal of the Judicial Magistrate was reversed and the appellants had been convicted under Section 138 of the NIA, 1881. The Bench expressed,

“Once the appellant 2 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.”

Background

The respondent was the proprietor of a garment company named and styled as ‘Growell International’, which along with the appellant 1 was engaged in a business arrangement, whereby they agreed to jointly export garments to France. Certain issues arose regarding delays in shipment and payment from the buyer, due to which, the appellants had to pay the respondent a sum of Rs 11.20 lakhs. To that end, the appellant 2 had issued a cheque on behalf of appellant 1 bearing No. 897993 dated 07-11-2000 in favour of the respondent and also executed a Deed of Undertaking wherein appellant 2 personally undertook to pay the respondent in lieu of the initial expenditure incurred by the latter.

The respondent presented the said cheque to the bank on 29-12-2000 for collection but the cheque was dishonoured due to insufficient funds in the account of appellants. Pursuant to which the respondent issued a notice asking the appellants to pay the amount within 15 days.

The appellants in their reply denied their liability and claimed that blank cheques and signed blank stamp papers were issued to help the respondent in some debt recovery proceedings, and not because of any legally enforceable debt. It was contended by the appellants that the said documents were misused by the respondent to forge the Deed of Undertaking and the High Court had committed patent illegality and exceeded its jurisdiction in reversing the acquittal.

Analysis

The Bench noticed that the Trial Court had completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NI Act. 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. Similarly,

“Mere bald denial by the appellants regarding genuineness of the Deed of Undertaking dated 07-11-2000, despite admitting the signatures, did not cast any doubt on the genuineness of the said document.”

In the light of Rohtas v. State of Haryana, (2019) 10 SCC 554, the Bench evaluated its own limitations and observed that the Court under Article 136 of the Constitution did not encompass the re-appreciation of entirety of record merely on the premise that the High Court had convicted the appellants for the first time in exercise of its appellate jurisdiction.

The Bench, while citing CK Dasegowda and Others v. State of Karnataka, (2014) 13 SCC 119, expressed,

“It is true that the High Court would not reverse an order of acquittal merely on formation of an opinion different than that of the trial Court. It is also trite in law that the High Court ought to have compelling reasons to tinker with an order of acquittal and no such interference would be warranted when there were to be two possible conclusions.”

Noticing that the defence raised by the appellants did not inspire confidence or meet the standard of “preponderance of probability” the Bench stated that in the absence of any other relevant material, 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.

Decision

It was held that though the provisions of NI Act envision a single window for criminal liability for dishonour of cheque as well as civil liability for realisation of the cheque amount, since the appellant had accepted the High Court’s verdict; he was entitled to receive only the cheque amount of Rs.11.20 lakhs.

Hence, the impugned order was upheld. Considering the appellants volunteered and thereafter deposited the cheque amount with the Registry of the Court, the Bench had taken a lenient view and held that the appellants should not be required to undergo three months imprisonment as awarded by the High Court.

[Kalamani Tex v. P. Balasubramanian, 2021 SCC OnLine SC 75 , decided on 10-02-2021]


Kamini Sharma. Editorial Assistant has put this report together 

*Judgment by: Justice Surya Kant

Know Thy Judge | Justice Surya Kant

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., reversed the acquittal of the respondent-accused holding him guilty of having committed an offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

Facts on record

The complainant had come with a case wherein he stated he had friendly relations with the accused. Since the accused was in need of money to purchase immovable property, therefore he requested the complainant to extend the amount of Rs 15,00,000 and Rs 6,00,00 which was extended by the complainant.

In regard to the above legal enforceable debt or liability, two cheques were issued.

On depositing the above cheques, both were dishonoured for the reason “refer to drawer”.

In light of the above circumstances, the complainant filed two separate complaints and Magistrate on taking into consideration the above said facts, acquitted the accused.

In view of the above, the present appeal has been filed.

Advocate for the complainant relied on the decision of Vijay v. Laxman, 2013 STPL (DC) 679 SC, wherein it was held that:

“The burden of proving the consideration for dishonour of cheque is on the complainant, but the burden of proving that a cheque had not been issued for discharge of a legally enforceable debt or liability is on the accused. If he fails to discharge the said burden he is liable to be convicted.”

In view of the above decision, Complainant’s Counsel submitted that trial judge committed illegality and the decision was in view of the legal position and therefore the appeal deserved to be allowed.

Analysis, Law and Decision

Whether the complainant has discharged the initial burden to prove that he had advanced loan to the accused?

With regard to the amount of Rs 15,00,000, it was held that as regards the said amount, the complainant discharged the initial burden of proof that he has advanced loan to the accused.

In his statement under Section 313 of the CrPC, accused did not state that he was holding such account, on which the cheque was issued by the complainant and he did not specifically state that he had not received the amount through the said account.

Bench stated that the complainant had proved that it was legally enforceable debt or liability, which was to the extent of Rs 15,00,000 as against the accused.

As regards the other disputed cheque i.e. amount of Rs 6,00,000, complainant stated he had given the said amount by cash.

In this case, also it can be said that the complainant has discharged the initial burden of proof that he had advanced amount of Rs 6,00,000 as a loan to the accused.

In the instant case, the accused did not deny his signature on the disputed cheques. Though he came with a defence, as to how those cheques went into the possession of the complainant, but as aforesaid that defence is unbelievable.

Bench stated that even if for the sake of arguments we admit that the disputed cheques were blank cheques; yet, when accused admits his/her signatures on the disputed cheques, then the legal position on this point is also clear that the complainant would get an authority under Section 20 of Negotiable Instruments Act to complete the incomplete cheque.

When now the position stands that the complainant has discharged the initial burden, accused admits his signature on the disputed cheques; then presumption under Section 139 of the Negotiable Instruments Act definitely gets attracted in favour of the complainant.

The complainant was the ‘holder of cheques’ and therefore, was entitled to present the same for encashment. Both the cheques were dishonoured.

Statutory notices issued by the complainant were complied with, and therefore, Court held that the accused is guilty of committing the offence punishable under Section 138 of the Negotiable Instruments Act.

Magistrate did not scan the evidence properly with sound legal principles and therefore, interference of this Court was required.

Bench relied on the Supreme Court’s decision in Govindaraju v. State, (2012) 4 SCC 722, with regard to the powers of the Appellate Court, wherein it was observed that:

“The law is well-settled that an appeal against an order of acquittal is also an appeal under the Code of Criminal Procedure, 1973 and an appellate Court has every power to re-appreciate, review and reconsider the evidence before it, as a whole. It is no doubt true that there is presumption of innocence in favour of the accused and that presumption is reinforced by an order of acquittal recorded by the trial Court. But that is the end of the matter. It is for the Appellate Court to keep in view the relevant principles of law to re-appreciate and reweigh the evidence as a whole and to come to its own conclusion on such evidence, in consonance with the principles of criminal jurisprudence”.

Honest drawers’ interest who issue cheques is safeguarded in the Act itself.

In Dalmia Cement (Bharat) Ltd v. Galaxy Traders & Agencies Ltd., (2001) 6 SCC 463, the Supreme Court has explained the scope of offence under Section 138 of the NI Act.

In R. Vijayan v. Baby, (2012) 1 SCC 260, Supreme Court held that while awarding compensation in matters under Section 138 NI Act, interest can be awarded @9% p.a.

Court stated that in view of the above decisions, awarding jail sentence to the respondent/accused may not be in the interest of justice.

Bench also added to its decision that the appellant would also be interested in getting his amount back. Therefore, payment of compensation under Section 357 of the Code of Criminal Procedure to the complainant would be in the interest of justice.

The punishment that can be awarded for an offence under Section 138 of Negotiable Instruments Act is “ imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or both” (stress supplied by me).

Since the complaint was filed in 2013 after the statutory notice. The amount became due to complainant after the date of the notice.

Some amount needs to be given to complainant above the cheque amount towards interest.

Since the rate of interest in banks has gone down nowadays, and therefore, the said rate cannot be equal to the rate granted in R. Vijayan’s case.

After taking into consideration all the above pronouncements it would be in the interest of both the parties to impose fine of Rs 18,00,000 and Rs 8,00,000 in respective cases and to direct the amount of Rs 17,50,000 and Rs 7,50,000 to be paid to complainant as compensation under Section 357(1) of the Code of Criminal Procedure. Deposit time will not be extended. [Kiran Rameshlal Bhandari v. Narayan Purushottam Sarada, 2020 SCC OnLine Bom 3562, decided on 07-12-2020]


Advocates who appeared for the matter:

Shyam C. Arora, Advocate for the appellant
Amol Kakade, Advocate h/f C.D. Fernandes, Advocate for respondent

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., observed that,

“The practice of pronouncing Judgments in appeal against conviction in absence of the accused, thereby dismissing the appeal and then directing the trial Court to issue warrant, requires to be deprecated.”

The instant application was filed by the original accused for suspension of substantive sentence, during the pendency of revision imposed against him by Judicial Magistrate after holding him guilty of committing an offence punishable under Section 138 of the Negotiable Instruments Act.

Bench stated that at first it is required to be seen, as to whether before admitting the revision and while dealing with the present application whether it is necessary first to direct the applicant to surrender himself.

It appears that the Appellate Court in the present case pronounced the Judgment on 04-05-2019 in absence of the appellant-accused.

Section 387 of CrPC deals with Judgment of subordinate Appellate Court and it provides that the rule contained in Chapter XXVII as to the judgment of a Criminal Court of original jurisdiction shall apply, so far as may be practicable, to the judgment in appeal of a Court of Session or Chief Judicial Magistrate.

“…if directions/ order is passed by the Appellate Court for exemption of the accused, then only the Judgment can be pronounced in absence of the accused; otherwise his presence should be secured before the Judgment is pronounced.”

No doubt, sub section (7) of Section 353 of the Code provides, that no judgment delivered by any Criminal Court shall be deemed to be invalid by the reason only in absence of any party, however, the Appellate Court cannot insist upon invoking sub section (7) of Section 353 of the Code if there was no endeavour on its part to secure the presence of the accused.

Court stated that it is the Appellate Court’s duty to see that the Judgment in an appeal against conviction should be pronounced in presence of the accused (only exception as enumerated in Section 353 (6) of the Code) and to take such appellant in custody upon the confirmation of the conviction.

Coming to the question of whether in the present case, Court could direct the revision applicant to surrender himself before the Appellate Court and then take up revision for hearing, Bench stated that the answer for the said question was in the Supreme Court’s decision of Bihari Prasad Singh v. State of Bihar, (2000) 10 SCC 346.

In the above-cited case, the following question was considered:

Whether the High Court while exercising its jurisdiction can refuse to hear or entertain the matter on the ground that the accused has not surrendered?

Following was observed:

“Under the provisions of the Criminal Procedure Code, there is no such requirement though many High Courts in this country have made such provision in the respective rules of the High Court. But it is stated to us that there is no such rule in the Patna High Court Rules. In that view of the matter the High Court was not justified in rejecting the application for revision solely on the ground that the accused has not surrendered.”

In view of the above discussion, Court held that the revision application cannot be rejected on the ground that the accused did not surrender and therefore, there was no bar on considering the present application.

What was the basic crux and background of the matter?

The complainant stated he had extended loan amount, from time to time, and the disputed cheque was given by the accused in the discharge of said legal debt or liability. Accused took a defence that he had already given certain cheques in possession of the complainant and one of the said cheques was misused. He led evidence and in his defence he tried to show, that the presumption under Section 139 of the Negotiable Instruments Act had been rebutted by him.

Court found the above to be an arguable case and hence held that the revision deserves to be admitted.

Bench directed for the suspension of the substantive part of the sentence till the revision was decided.[Fazal Khalil Ahemad Shaikh v. Nadkishor Ramnivasji Agrawal, Criminal Application No. 2743 of 2019, decided on 13-02-2020]

Case BriefsHigh Courts

Bombay High Court: K.R. Shriram, J., dismissed a criminal appeal filed against the order of the trial court whereby it had acquitted the accused of charges under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

As per the complainant, she had given a loan of Rs 4.5 lakhs to the accused, for repayment of which, he had issued a cheque in favour of the complainant. However, on presenting the cheque for encashment, it was dishonoured. Per contra, the accused took the stand that the cheque in question was given to one Sanjay, who was a former business partner of the accused. The cheque was given to Sanjay to be handed over to a third party to connect with a mutually agreed transaction. However, subsequently, disputes arose between the accused and Sanjay. It was submitted that the Sanjay and complainant were very close friends and lived in the same house. The accused submitted that Sanjay dishonestly handed over the blank cheque in question to the complainant and fraud was being played upon him.

The High Court perused Section 138 (dishonour of cheque) along with its Explanation and noted that the keyword “legally enforceable debt or other liability”. Similarly, discussing Section 139 (presumption in favour of the holder), the Court noted that the presumption is rebuttable and the onus is on the accused to raise a probable defence.

The Court then reproduced the principles summarised and enumerated by the Supreme Court in Basalingappa v. Mudibasappa, (2019) 5 SCC 418, and observed that the standard of proof for rebutting the presumption is that of the preponderance of probabilities and not beyond a reasonable doubt. It was also noted as settled law that Section 139 imposes an evidentiary burden and not a persuasive burden.

On the factual score, it was found that there was no evidence as to when the amount in question was handed over to the accused. No receipts were produced. Also, there was no evidence to show that the complainant had Rs 4.5 lakhs to give to the accused, and it was also admitted that she was not even paying income tax. Moreover, the fact of the dispute between Sanjay and the accused was also admitted. All this, according to the High Court went on to prove that the accused had raised a probable defence that the complainant had not proved that there was a legally enforceable debt or other liability.

Accordingly, finding no fault with the order of the trial court, the High Court dismissed the present appeal and upheld the acquittal of the accused. [Tasneem Murshedkar Mazhar v. Ramesh, 2020 SCC OnLine Bom 20, decided on 02-01-2020]

Case BriefsHigh Courts

Jammu & Kashmir High Court: A Single Judge Bench of Sanjay Kumar Gupta, J., dismissed a criminal revision petition filed against the order of the appellate court whereby petitioner’s application under Section 391 of Criminal Procedure Code, for recording additional evidence, was dismissed.

The main issue that arose before the Court was whether the appellate court had rightly rejected the application of the petitioner under Section 391 of CrPC.

The Court observed that from bare perusal of Section 391 of CrPC, it becomes clear that production of additional evidence can be permitted in case of failure of justice. However, this power conferred upon criminal court should be exercised sparingly and hence an application under Section 391 of CrPC should be decided objectively, just to cure the irregularity. This power cannot be exercised to fill the lacuna. Further, the Court also observed that as per Section 139 of the Negotiable Instruments Act (N.I. Act), the onus to prove that the cheque was not received by the bank in furtherance of discharging a liability rests upon the drawer of the cheque and not the payee. There is no law which prescribes that in the negotiable instrument, the entire body of the instrument shall be written only by the maker or drawer of the instrument, i.e. even if it is written by some other person and signed by the drawer, then that signature would be sufficient to hold the drawer liable under Section 138 of the N.I. Act in case if it is dishonoured.

The Court held that in the present case the petitioner had accepted the fact that it was his signature on the cheque and hence there was no need to send the cheque to a handwriting expert. Further, the onus of proving that the cheque was not given to the payee in the discharge of a liability, rested upon the petitioner and the petitioner failed to prove the same. Hence, the revision petition filed by the petitioner was dismissed and the order of the appellate court was upheld.[Davinder Singh v. Kiran Pargal,2018 SCC OnLine J&K 740, order dated 17-10-2018]