Malthesh vs Ranganayakalu

G. Narendra, J.—Heard Sri. Syed R.H., learned counsel appearing for the appellant - complainant and Sri. Srinivas B. Naik, learned counsel appearing for the respondent - accused.

The case of the appellant is that the respondent and the complainant were working as co-workers in Maruti Petro Kemp Company and that he was employed as an Accounts Officer drawing a salary about Rs. 9,180/-.

It is further submitted on behalf of the appellant that the accused represented to the complainant/appellant that he was in urgent requirement of funds for the purpose of financing the Gas Agency, which he proposed to start in the name of his son and towards that he required a sum of Rs. 2,00,000/- and he requested the appellant to advance him Rs. 2,00,000/- as hand loan.

It is stated by the appellant that he gave a sum of Rs. 2,00,000/- to the accused respondent on 05.01.2008 and that the respondent accused issued the said subject cheque bearing No. 113719 dated 07.04.2008 for repayment of the hand loan dated 05.01.2008. The said cheque was drawn on the State Bank of India, Hospet branch and it was presented for encashment on 08.04.2008 to the complainant''s bankers and the same was returned dishonoured by the respondents bankers along with memo dated 09.04.2008 with the endorsement that the special cheque has been returned for ''want of insufficient funds in the account of the accused''.

Upon dishonour of the cheque, the appellant got issued a legal notice (Ex. P-4) on 16.04.2008. The same came to be served on the accused respondent herein on 17.04.2008. The accused did not deem it or necessary to effect a reply and set out his defence as against the claim by the complainant. A perusal of the records reveal that the appellant has presented his complaint on 31.05.2008 and on 07.07.2008 the trial Court has been pleased to record the statement of the complainant and thereafter being satisfied a case is made out for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881, and was pleased to take cognizance and direct issue of process to the accused. Thereafter, the accused has entered appearance and the matter came to be heard on several dates. One date of relevance is 02.02.2009 on which day the wife of accused appeared in the Court and is said to have paid a sum of Rs. 10,000/- to the complainant and on the proposed settlement the matter came to be adjourned for reporting settlement or for accused defence evidence on 19.02.2009.

It is seen that on appearance, the plea of the accused was recorded on 22.11.2008 and the plea of the complainant was put to the accused and upon which he claimed to be tried and accordingly he was sent up for trial by the Court. The plea recorded on 22.11.2008 is as follows -

"It is alleged that you above named accused to discharge the debt, had issued a cheque to the complainant dated 05.01.2008 for Rs. 2,00,000/- drawn on the State Bank of India, Hospet Branch, in bearing No. 113719 which on presentation came to be dishonoured vide memo dated 09.04.2008 for "Funds Insufficient", and on issuance of legal notice dated 16.04.2008 was caused to you and inspite of receipt of the same, you have failed to repay the cheque amount within the prescribed time and thereby you have committed an offence punishable U/S. 138 of N.I. Act.

Q1. Have you understood the contents of plea read over and explained to you?

Ans. Yes.

Q2. Do you plead guilty or claim for trial?

Ans. Not pleaded guilty charge to be tried.

(Certified that the above plea of the accused is recorded by me in the open court on personal hearing and the said record contains the full and clear account of the statement made by the said accused.)"

Thereafter the statement of accused was recorded under Section 313 of Cr.P.C. on 09.01.2009 and the statement of the accused is as follows -

"STATEMENT OF ACCUSED RECORDED U/S. 313 CR.P.C

Q1. P. W. 1 deposes that you the accused had borrowed a sum of Rs. 2,00,000/-from him and to discharge the said liability issued Ex. P-1 cheque bearing No. 113719 drawn on State Bank of India, Hospet, dated 07.04.2008. Do you wish to say anything?

Ans: False.

Q2. P. W. 1 deposes that on presentation, said cheque came to be dishonoured as per Ex. P-3 as Funds Insufficient. Do you wish to say anything?

Ans: False.

Q3. P.W.1 deposes that he got issued legal notice as per Ex. P-4 dated 16.04.2008 by RPAD. Do you wish to say anything?

Ans: False.

Q4. P. W. 1 further deposes that inspite of service of notice you failed to repay the cheque amount. Do you wish to say anything?

Ans: False

Q5. Have you got any defence evidence to lead?

Ans: No

Q6. Have you got anything to say more before the court?

Ans: No.

(Certified that the above statement of the accused is recorded by me in the open court on my personal hearing and the said record contains the full and clear account of the statement made by the accused.)"

On this plea and statement of the complaint, the parties went to trial. After recording of the plea, the accused subjected the complainant to cross-examination on 02.01.2009. in the course of the cross-examination, it was suggested that he was not paying any property tax and in reply the complainant has answered that as no property was standing in his name he is not liable to pay any property tax. The said portion of the cross-examination is extracted as below -

It is further suggested to the complainant that the balance in his bank account never exceeded Rs. 1,00,000/- during the period between 2007-08. The suggestion is bald.

To a question by the accused regarding the capability of the complainant to pay Rs. 2,00,000/- it has been replied that the source for the loan was the sale consideration received by him in respect of vacant site previously owned and sold by him. In this background of the chief examination and cross-examination of the complainant the statement of the accused was recorded on 09.01.2009.

It is seen from the statement under Section 313 of Cr.P.C, that the accused has merely stated ''False'' or ''No'' to all the questions and in fact he has stated that the receipt of notice by him is also false. He has further stated that he has no evidence to lead in defence.

The appellant''s counsel would strenuously submit that the judgment dated 16.04.2009 rendered by the trial Court suffers from serious illegalities and is vitiated and is contrary to the provision of Section 139 of the N.I. Act. He would submit that Section 139 read with Section 118 of the N.I. Act draws a statutory presumption in favour of the complainant and against the accused in respect of consideration, date, time of acceptance, time of transfer and that the holder is a holder in due course. He would submit that the trial Court has given a complete go-by to the provisions and has initiated its own investigation which is impermissible in law. He would submit that the trial Court has proceeded to hold that the signatures of the accused on the cheque Ex. P-1 on the statement under Section 313 of Cr.P.C. and the record of plea are all different and that the entries in Ex. P-1 are different. He would draw the attention of this Court to the plea recorded by the trial Court on 02.01.2009 and the statement recorded on 09.01.2009, wherein he would point out it was never the case of the accused and he would also point out that there was not even a suggestion by the accused in this regard in the course of cross-examination of the complainant and he would suggest that it is a plea in defence that is being made out by this Court on behalf of the accused and that too without there being material nor is any evidence led in that behalf

He would submit that the trial Court erred in arriving at such a conclusion even without referring Ex. P-1 to a hand writing expert or without obtaining any expert opinion on the said aspect of the matter. He would also submit that the finding of the Court below is unsubstantiated and that no document is produced before the Court to prove or demonstrate the claim. The assertion of the complainant during the course of cross-examination that the loan amount advanced was out of the sale proceeds of the site sold by the complainant. He would submit that this is not even an argument of the accused and he would submit that the complainant having prima facie established the existence of a legal debt. The Court ought not to have entered upon an enquiry as the onus of adducing evidence in rebuttal was on the accused and the accused having failed to discharge the said burden the Court ought to have presumed the existence of a legal debt and ought to have convicted the accused, more so, when the accused has not denied the issuance of the cheque or the entries in the cheque. He further submits that the Court below erred in holding that the complainant has to prove before the Court, that he had capacity to pay a huge amount of Rs. 2,00,000/- to the accused on the said date. Thus, his submission is in contravention of the presumption drawn under the provisions of Section 139 of 118 of the N.I. Act and prays that the appeal be allowed and matter be allowed and the accused be convicted for the offence under the provision of Section 138 of the N.I. Act.

Per contra, the learned counsel Sri Sreenivas B. Naik would submit that it is not mandatory upon the accused to rebut the evidence of the complainant only after adducing defence evidence. He would submit that the accused can take advantage and rely on the material produced by the complainant and raise a defence and in this regard he would rely on a judgement of the Hon''ble Apex Court rendered in Crl. A. No. 1020/2010 dated 07.05.2010 (Rangappa versus Sri Mohan). He would draw the attention of this Court to the contents of para 14 of the said judgment, which reads as follows -

"15. In light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability To that extent, the impugned observations in Krishna Janardhan Mat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/defendant cannot be expected to discharge an unduly high standard or proof In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of preponderance of probabilities''. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."

It is a case of reverse onus and the burden of rebutting the presumption under Section 139 of the N.I. Act is by ''preponderance of probabilities'' and that the accused has successfully demonstrated the same based on the material produced by the complainant. He would also rely on the judgment rendered by the Hon''ble Apex Court in the case of John K. Abraham v. Simon C. Abraham and Another in Crl. A. 2043/2013 dated 05.12.2013. He would rely on the finding at para 9 of the said judgment, wherein it is held that the burden was on the complainant to show that the required fund for having advanced the money to the accused under the issuance of cheque.

It is seen from the above material on record and after hearing the submissions by the learned counsels that the trial Court had exceeded its jurisdiction by making out a non-existent case in favour of the accused. It is no doubt true that the trial Court has arrived at a finding that the endorsements on the cheque are on different dates. It has arrived at such a finding firstly without the aid of any expert opinion. Secondly without referring to the cheque to any handwriting expert and thirdly, it has not rendered a finding of interpolation, but has merely observed that the cheque has been filled up with different dates. It was never the case of the accused that the cheque has been vitiated by interpolation or that he did not fill up the cheque or that he denied the issuance of cheque. The reliance of the trial Court on the variance in signatures alleged to have been demonstrated by the accused during the course of cross-examination by comparison with the signatures on the plea and statement under Section 313 of Cr.P.C. is again to say the least is obnoxious. Assuming that the same is true, the accused has signed differently on the record of plea and the statement recorded under Section 313 of Cr.P.C. and the vakalat filed before the court.

That being the case, the trial court ought to have disbelieved the accused and ought to have rejected the said submission. It is also seen that the case made out on behalf of the accused is not on the basis of the material that has been placed by the complainant before the Court, but is based on the inferences drawn by the Court and that too without any aid of any experts or expert opinion. Hence, the conclusions of the trial court is based on the inferences and surmises and is liable be set aside. As with regard to the capacity of the complainant to pay the said amount or the source of funds to lend the amount to the accused, he has clearly asserted that the source for the funds were the sale proceeds of the site sold by him. In this regard the counsel for respondent - accused would point out that the complainant has admitted that he has not paid any property tax or wealth tax or Income Tax. It is inconceivable as to how non-payment of taxes can be proof of lack of resources, payment of tax will only demonstrate the uprightness of a citizen and nothing more and tax becomes liable not in all cases and it has not been demonstrated by the accused that he was required to pay tax and the complainant has failed to pay the tax. That being so, this Court does not see any material forthcoming from the cross-examination which would falsify the assertion of the complainant that the funds were sourced out of the sale proceeds and the same were paid to the accused. That being the case, this Court is of the opinion that the complainant has complied with the parameters that has been laid down by the Hon''ble Apex Court in the case of John K. Abraham v. Simon C. Abraham and Another stated (supra).

The complainant has also submitted that he is an employee and earning about Rs. 10,000/- per month. It is seen that the trial Court has proceeded in a manner, which is whimsical. It has arrived at a conclusion which is not based upon any material. It has arrived at a finding that the complainant has failed to prove his lending of the loan amount when it has not even been denied by the accused that he issued the cheque. Even the accused has failed to explain under what circumstances the cheque was issued, and hence, this Court is of the considered opinion that the judgment of the trial court requires to be set aside and is accordingly set aside. But keeping in view the sketchy evidence that has been placed by the parties, this Court is of the opinion that it would serve the interest of justice if the matter is remanded back to the trial Court for reappraisal by trial Court with a direction to dispose off the same within a period of four months from the date of receipt of the copy of the order of the records and after permitting the parties to adduce evidence afresh. Accordingly, the appeal is allowed. The judgment of the trial Court is set aside and remanded back for consideration afresh. The trial Court shall positively dispose off the matter within a period of four months.