Basavaraju vs Sunilkumar R

J.M. Khazi, J

In this appeal filed under Section 378 (4) of Cr.P.C, appellant who is complainant has challenged the impugned judgment and order passed by the trial Court, acquitting the accused for the offence punishable under Section 138 of Negotiable Instruments Act, 1881 (for short 'N.I.Act').

For the sake of convenience, parties are referred to by their rank before the trial Court.

It is the case of complainant that he and accused are well acquainted with each other. Accused borrowed a sum of Rs.1,14,000/- from the complainant for establishing a TV showroom at Channapatna agreeing to repay the same within three months. On the date of loan he issued a post dated 20.12.2007 cheque for Rs.1,14,000/- by way of security. He instructed the complainant to re-present the cheque on 20.12.2007. However, when complainant presented it for encashment on 24.12.2007, it was returned with endorsement "Funds insufficient". When complainant personally approached the accused and informed him about the dishonour of cheque, he did not care to pay the amount due from him. Therefore, complainant got issued legal notice. It is returned with endorsement "Absent during delivery time". Accused has deliberately avoided service of notice, and hence, the complaint.

Before the trial Court, accused appeared through counsel and contested the case by pleading not guilty.

In order to bring home guilt to the accused, complainant examined himself as PW-1 and got marked Ex.P1 to 13.

During the course of his statement under Section 313 Cr.P.C, the accused has denied incriminating evidence led by the complainant.

In fact, he has also led the defence evidence by examining himself as DW-1 and relied upon Ex.D1 to 3.

Vide the impugned judgment and order the trial Court acquitted the accused.

Being aggrieved by the same, complainant has filed this appeal, contending that the trial Court has totally misread the entire case and passed the impugned erroneous judgment. It has not appreciated the case of complainant in proper perspective so far as legally enforceable debt is concerned. Having regard to the fact that accused has not disputed the issue of cheque, presumption is operating in favour of the complainant placing the initial burden on the accused. This fact is not appreciated by the trial court. Merely because the subject cheque was termed as issued by way of security would not take away its character as an negotiable instrument issued towards legally recoverable debt or liability. Viewed from any angle the impugned judgment and order is not tenable and pray to allow the appeal, convict the accused and sentence him in accordance with law.

In support of his arguments, the learned counsel for complainant has relied upon the following decisions:

(i) K.Narayana Nayak Vs. M.Shivarama Shetty (K.Narayana Nayak) 2008 Crl.L.J 3411

(ii) Lale Patel Vs. Sharanbasappa (Lale Patel) 2012 Supreme (Kar) 1192: 2015 1 KCCR 235

(i) Dashrathbhai Trikambhai Patel V. Hitesh Mahendrabhai Patel and Anr.

(Dashrathbhai Trikambhai Patel) AIR 2022 SC 4961

On the other hand, learned counsel for accused has submitted that complainant is an LIC agent, and when he pressed the accused to take a policy, he got a policy in the name of his sister. When she failed to pay the premium, on the insistence of complainant, accused issued a blank cheque as the amount due towards premium was uncertain. Utilizing the same, the complainant has filed a false complaint. He would further submit that accused never borrowed any loan from the complainant and in fact, complainant has no financial capacity to pay the alleged hand loan and at the trial, he has failed to prove his financial capacity. He would further submit that intentionally the complainant has sent the legal notice to a wrong address in order to see that it should not reach the accused and that he should not send any reply. In the cheque, except the signature, the rest of the writing is not in the hand of accused. Considering all these aspects the trial Court has rightly acquitted the accused and sought for dismissal of the appeal.

Heard elaborate arguments of both sides and perused the record.

At the out set the accused has taken up a specific defence that the legal notice is not sent to his correct address and therefore it is not served on him. In this regard during his cross-examination, the accused has confronted complainant with his election ID card and suggested that the address mentioned therein is the correct address of accused. Complainant has admitted the same. It is marked as Ex.D1. The election ID of the accused also bear the same address as in the legal notice. It is also the address mentioned in the complaint. The summons sent to him to the said address is returned with endorsement "refused". Therefore, the trial Court has issued Non-billable warrant to the accused, after which he has appeared through counsel and secured bail. Therefore, the defence of the accused that the legal notice was not sent to his correct address is not acceptable. It is also relevant to note that the legal notice is returned with endorsement that the address was not available during service and therefore it is returned to the sender. It is not returned with an endorsement that the addressee is not staying in the said address.

In C.C. Alavi Haji vs Palapetty Muhammed & Anr (Alavi Haji) (2007) 6 SCC 555, it is held that the object and purpose of issue of legal notice is to enable a prompt drawer of the cheque to make payment within the specified time and thereby avoid prosecution. It is not the case of the accused that had he come to know the dishonour of cheques, he would have paid the amount due under them and the non-service of notice has prejudiced him. Of course, in the present case the complainant has proved that the notice is duly served on the accused.

Accused has not taken up a defence that had the notice was served on him, he would have paid the amount due. In Alavi Haji, the Hon'ble Supreme Court further held that the object of issuing legal notice is to avoid unnecessary prosecution of an honest drawer and give him an opportunity to make amends and thus avoid unnecessary hardship to him. Where the accused claim that the legal notice is not served on him, but he has received the summons along with copy of the complaint, if his contention that had he received the notice he would have paid the amount due, he can within 15 days of receipt of the summons make payment of the cheque amount and on that basis submit to the Court that complaint to be rejected - he then cannot content that there was no proper service of notice. It is not the case of the accused. The legal notice is sent to his correct address. As evident from the endorsement on the envelope, the postman has went to the address on five dates and finding him absent on all the five dates, he has returned the same after delivering information. Therefore, it is not open to the accused to content that one of the essential requirements of Section 138 of N.I Act is not complied with and therefore complaint is not maintainable.

Having regard to the fact that the cheque in question belongs to accused, drawn on his account maintained with his banker and it bears his signature, presumption under Section 139 of the N.I Act is operating in favour of the complainant, placing the initial burden on the accused to prove that the cheque was not issued towards repayment of any debt or liability and on the other hand to establish the circumstances in which the cheque has reached the hands of the complainant.

In John K.Abraham Vs. Simon C. Abraham & Anr (John K.Abraham) (2014) 2 SCC 236, the Hon'ble Supreme Court held that in order to draw presumption under Sections 118 and 139 of N.I Act, the burden lies on the complainant to show that:

(i) She had the requisite funds for advancing the sum of money/loan in question to accused.

(ii) The issuance of cheque by accused in support of repayment of money advanced was true and

(iii) The accused was bound to make payment as had been agreed while issuing cheque in favour of the complainant.

As held by the Hon'ble Supreme Court in Tedhi Singh Vs Narayan Das Mahant (Tedhi Singh) 2022 SCC OnLine SC 302, where the accused has failed to send reply to the legal notice, challenging the financial capacity of the complainant, at the first instance, complainant need not prove his financial capacity. However, at the trial if the financial capacity of complainant is challenged, then it is for the complainant to prove the same.

In APS Forex vs Shakti International Fashion Linkers Pvt. Ltd (APS Forex) (2020) 12 SCC 724, the Hon'ble Supreme Court held that when accused raises issue of financial capacity of complainant, in support of his probable defence, despite presumption operating in favour of complainant regarding legally enforceable debt under Section 139 of N.I. Act, onus shifts again on the complainant to prove his financial capacity by leading evidence, more particularly when it is a case of giving loan by cash and thereafter issue of cheque.

In Vijay Vs. Laxman and Anr (Vijay) (2013) 3 SCC 86, K.Subramani Vs. K.Damadara Naidu (K.Subramani) (2015) 1 SCC 99 and K.Prakashan Vs. P.K.Surenderan (K.Prakashan) (2008) 1 SCC 258 , also the Hon'ble Supreme Court held that the presumption under Section 139 of N.I. Act, is a rebuttable presumption and when accused rebut the same by preponderance of probabilities, it is for the complainant to prove his case beyond reasonable doubt including the financial capacity.

In the light of the ratio in the above decisions, it is necessary to examine whether the complainant has proved his financial capacity, only after which the burden would shift on the accused to prove his defence. The accused has extensively cross-examined complainant regarding his financial capacity to lend him hand loan of Rs.1,14,000/-. So far as his financial capacity is concerned, the complainant has stated that he is an agriculturist and also an LIC agent and so far he has made 1100 policies and out of the 75% are in force and for every policy gets 35% commission. He has specifically deposed that every month he gets Rs.30,000/- income from the policies. He is also having 4 acres of land and grows tomato, vegetables and other crops. He has also stated that he is having account in Federal Bank, Canara Bank and at present he is having account in State Bank of Mysuru (SBI) also. Normally, he keeps around 2 to 3 lakhs in his account and there is no impediment to produce documents to evidence the above facts. He is also an income tax assessee.

However, despite the accused challenging his financial capacity, the complainant has not chosen to produce any of the above documents, to show that at the relevant point of time, he was having capacity to lend Rs.1,14,000/- to the accused. Except his self-serving statement, the complainant has not produced any document or evidence on record to prove his financial capacity and consequently, the burden has not shifted on the accused to rebut the presumption.

In case the accused had sent reply to the legal notice, incidentally, he may come up with a specific defence as to how the cheque reached the hands of accused. However, not sending reply would not prevent the accused from taking any defence at the trial. As submitted by the learned counsel for the accused, at the trial, he has taken a defence that the cheque in question was issued by him blank towards payment of premium due from his sister in respect of LIC policy taken by her from the accused and misusing the same he has filed this complaint. During his examination-in-chief, the complainant has admitted that he has given a policy to the sister of accused and she was due to pay few instalments of premium. However, he has denied that the cheque in question was issued towards payment of the premium and he has misused it to file the present complaint.

However, as admitted by the complainant there is difference in the ink used for signing the cheque and the remaining details in the cheque. However, he has come up with an explanation that accused has got the cheque written by someone else and therefore there is difference in the ink. As deposed by him, accused is a B.Com Graduate. Consequently, there was no need for him to get the document written by someone else. The fact that his signature and remaining writing are in different ink, suppose the defence of the accused that it was blank when he issued it.

The accused has also disputed that he ever run a TV business. Complainant has denied the suggestion made to that effect and claimed that accused was running TV show room at Channapatna. However, he has not chosen to produce any documents to evidence this fact. Such document would have corroborated his case that the loan in question was taken by the accused to run TV business. Thus, the complainant has failed to prove his financial capacity. On the other hand, the accused has proved by preponderance of probabilities that the cheque in question was issued blank towards payment of premium due from his sister and misusing the same complainant has filed the complaint.

It is pertinent to note that in the complaint, the complainant has pleaded that accused borrowed hand loan of Rs.1,14,000/- and by way of security issued the subject cheque. Mainly concentrating on this aspect, the trial Court has held that the provisions of Section 138 is not attracted to a cheque which is issued by way of security and on that basis acquitted the accused. In K.Narayana Nayak and Lale Patel, Co-ordinate Bench of this Court held that for a cheque issued by way of security, Section 138 of N.I. Act is not attracted. However, this aspect is made clear by the Hon'ble Supreme Court in Sunil Todi Vs. State of Gujarath and Anr. (Sunil Todi) AIR 2022 SC 147, where it is held that merely labeling a cheque as a security would not obviate its character as instrument designed to meet legally enforceable debt or liability. Once agreement between parties provided for which money is due and payable, cheque furnished as a security is covered under the provisions of Section 138 of N.I Act. Therefore, the decisions in K.Narayana Nayak and Lale Patel are not good law. Consequently, the findings of the trial Court that cheque issued by way of security does not attract the provisions of Section 138 of N.I. Act is incorrect.

The decision in Dashrathbhai Trikambhai Patel, deals with effect of part payment and in case of part payment how the cheque is to be presented. It is not applicable to the case on hand.

Though the trial Court has wrongly dismissed the complaint on the ground that the cheque was issued by way of security, however, for the reasons that the complainant has failed to prove his financial capacity, the ultimate conclusions arrived at by the trial Court is correct. Consequently, the appeal filed by the complainant, challenging the dismissal of complaint filed by him fails and accordingly the following:

ORDER

(i) Appeal filed by the complainant under Section 378(4) of Cr.P.C. is dismissed.

(ii) The impugned judgment and order dated 23.01.2018 in C.C.No.1069/2008 on the file of Addl.Civil Judge and JMFC, Channapatna is hereby confirmed.

(iii) The Registry is directed to send back the trial Court records along with copy of this order forthwith.