Guru Finance Corporation vs Mohammed Arifulla

Anand Byrareddy, J.—Heard the learned Counsel for the appellant and the learned Counsel for the respondent.

The appellant was the complainant before the court below alleging an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (Hereinafter referred to as the ''NI Act'', for brevity).

It was the case of the complainant that the respondent-accused had borrowed a sum of Rs. 50,000/- on 11.9.2006 for his personal expenses, agreeing to return the same by 11.10.2006 and to ensure due repayment, had issued a cheque bearing No. 708010 for a sum of Rs. 50,000/- dated 11.10.2006. Thereafter, when the respondent had failed to repay the amount, the cheque had been presented for encashment, but it was returned by the respondent''s banker with an endorsement that the ''funds were insufficient'' and therefore, a legal notice was issued on 30.12.2006 by registered post, which was duly served on the respondent on 3.1.2007 and since the accused had failed to comply with the demand, he had filed a complaint for an offence punishable under Section 138 of the NI Act. The respondent had entered appearance and had pleaded not guilty and claimed to be tried and at the trial, the complainant has examined PWs. 1 to 3 and had got marked exhibits Ex. P1 to P.16. After hearing both sides, the trial court had framed the following point for its consideration:-

"1. Whether the complainant proves that accused on 11.9.2006 had borrowed sum of Rs. 50,000/- from the complainant and issued cheque bearing No. 708010 for the said amount dated 11.10.2006 and said cheque when presented before the cheque it was returned as fund insufficient and complainant issued legal notice dt. 30.12.2006 by RPAD and was received by accused person on 3.1.2007 and accused committed the offence punishable under section 138 of the Negotiable Instruments Act, 1881?"

The court below has answered the above point in the negative.

The defence set up by the respondent, was to the effect that there was no transaction pertaining to the year 2006 and that the complainant had misused a cheque of the year 1996, which was issued as security for due repayment of the loan borrowed/in the year 1996. This is evident from Exhibit. P-13, which is a statement in Form No. 6 by the complainant, which is a money lender, acknowledging that a particular transaction of the year 1996 was duly secured by a cheque and the respondent had also demonstrated that the cheque leaf in question was a series of cheques contained in the cheque book of the year 1996 and subsequent to the issuance of the said cheque book of the year 1996 and subsequent to the issuance of the said cheque book, there were 97 cheque books issued thereafter, which clearly demonstrated that the cheque leaf in question was of the year 1996 and could not possibly pertain to any transaction of the year 2006. The complainant has mischievously come into possession of the cheque, possibly on account of the respondent-accused''s brother, who was in need of money and wanted to borrow loan in the year 1996, had approached the respondent-accused and had expressed that the financiers are not inclined to grant loan unless he secures a signed cheque from a Government employee and also that the loan application should be in the name of a Government employee and it is only then that the finance would be extended and therefore, in order to help his brother, the accused is said to have executed a loan application duly signed by him in the year 1996 and had also given him a blank cheque, duly signed by him, to enable him to obtain finance and it was the belief of the accused that the said cheque was indeed the very cheque leaf, which was sought to be misused by the complainant and he had denied that there was any transaction between the complainant and the accused. The trial court has accepted this defence and has held that the burden was on the complainant to establish that the cheque was issued in discharge of a legal liability. For the presumption in favour of the holder of the cheque was adequately discharged by the accused having put-forward an acceptable defence and therefore, it was for the complainant to establish that the cheque, though of the year 1996, was indeed issued in the year 2006 and could be in respect of a valid legal transaction and therefore, has acquitted the accused. It is that which is under challenge in the present appeal.

The learned Counsel for the appellant would point out that the ingredients that make an offence punishable under Section 138 of the NI Act, are all present in the present case on hand, which is not denied by the accused. Though the cheque has been issued on the account of the accused and it is duly signed by him, the contention that the contents or the words and figures in the cheque have been filled in by some one else and not by him, would not be a valid defence to disown the cheque as long as the cheque is admittedly signed by him and issued on his account. The further circumstance that the cheque may be out of the cheque book of the year 1996 and could not have been issued in the year 2006, is again a contention that cannot be readily accepted, for it is open for an account holder to issue a cheque from out of an ancient cheque book and it cannot then be claimed that since the cheque leaf was of the cheque book of previous years, that the transaction could not be held to be valid. This is hardly a ground and the court could not have pronounced that the cheque was not in respect of a particular transaction. Further, the defence is sought to be bolstered by examining PW. 2, who is none other than the brother of the accused. It is pointed out that the complainant had claimed that there was absolutely no transaction between the complainant and the accused whereas, PW. 2 has clearly stated that he wanted a loan from the complainant and on being informed that he could avail of such loan only if he produce a signed blank cheque of a Government Employee alongwith the loan application by a Government Employee, that he had obtained the same from the complainant. This would indicate that the complainant was very much aware of the purpose for which the cheque was being utilised, even if it could be said that this was the line of defence. In any event, the cheque leaf having been admitted, though sought to be negated on the footing that it did not pertain to the transaction under which the appellant was claiming, it could not be said that the burden shifted on the appellant in establishing the several transactions. The learned Counsel, therefore, contends that merely proceeding on the basis that the accused had satisfied the trial court of the particular cheque leaf belonging to a cheque book of the year 1996 and the accused having utilised other cheque books thereafter, by itself, would demonstrate that the cheque leaf was being misused by the accused. It was necessary for the accused to demonstrate as to the manner in which the cheque leaf has come into the hands of the complainant. It is not the case of the accused that his brother, after having obtained the loan application and a blank signed cheque, had indeed obtained a loan and had discharged the entire loan, but the cheque leaf, which was also taken as security, was never returned. In the absence of any such evidence, on behalf of the accused, it could not be presumed that the presumption in favour of the holder of a cheque stood discharged merely by a claim made by the accused that there was a possible transaction by his brother of the year 1996, where the cheque had been issued to the complainant and the complainant had retained the same to misuse the very cheque leaf in the year 2006. The burden was clearly on the accused to establish this circumstance. Therefore, on a mere claim by the accused of the alleged transaction by his brother of the year 1996, it cannot be said that the burden had shifted on the appellant and that the appellant was required to establish that there was indeed genuine transaction of the year 2006.

The ingredients of an offence punishable under section 138 of the NI Act, would stop with the requisite particulars being furnished and established, namely, issuance of a cheque on the account of the accused and the cheque having been presented within the validity period and the same having been dishonoured for want of sufficient funds and a notice having been issued., demanding payment of the amount covered under the cheque. If these are established, the burden is clearly on the accused to establish that it was not issued in respect of a genuine transaction or that it was in respect of some other transaction. Merely claiming that there was some other transaction-would not be sufficient unless that transaction itself is established. In the present case on hand, though it was claimed that there was a transaction of the year 1996, pertaining to his brother, there was no further attempt to establish that the transaction had come to a close, but the complainant had mischievously retained the cheque and that was sought to be misused. The burden on this respect was on the accused and not on the complainant. The trial court was in error in foisting the burden on the complainant and holding that he had not discharged the same. Consequently, the judgment of the court below is set aside. The respondent is held guilty and is convicted for an offence punishable under Section 138 of the NI Act and he is sentenced to pay a fine of Rs. 60,000/-, out of which, Rs. 55,000/- shall be paid as compensation to the appellant within a period of three weeks. In default, the respondent is sentenced to undergo simple imprisonment for a period of one month.