M/S. Kalamani Tex & Anr vs P. Balasubramanian

Surya Kant, J

Leave Granted.

M/s. Kalamani Tex (Appellant No.1) and its managing partnerâ€"B. Subramanian (Appellant No.2) are in appeal challenging the judgment dated

09.11.2017 passed by the High Court of Judicature at Madras, whereby the order of acquittal of the Judicial Magistrate, Tiruppur was reversed and

the appellants have been convicted under Section 138 of the Negotiable Instruments Act, 1881 (in short, ‘NIA’). Consequently, Appellant No.2

has been sentenced to undergo three months Simple Imprisonment and a fine of Rs. 5,000/Â​.

Facts

The instant proceedings have originated out of a complaint preferred by P. Balasubramanian (ComplainantÂRespondent) against the appellants.

The respondent is the proprietor of a garment company named and styled as ‘Growell International’, which along with Appellant No.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, Appellant No.2 issued a cheque

on behalf of Appellant No. 1 bearing no.897993 dated 07.11.2000 in favour of the respondent and also executed a Deed of Undertaking on the same

day wherein Appellant No.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 it was returned with an endorsement that there were insufficient funds in the

account of appellants. In wake of the cheque being dishonoured, the respondent issued a notice dated 08.01.2001 asking the appellants to pay the

amount within 15 days. The appellants in their reply dated 27.01.2001 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.

The respondent then lodged a private complaint under section 138 and 142 of the NIA read with Section 200 of the Code of Criminal Procedure,

1973 (in short ‘CrPC’) before the Judicial Magistrate, Tiruppur. In order to substantiate his claim, the respondent himself entered the witness

box and produced documentary evidence such as the cheque issued by Appellant No.2. The respondent in his chief examination initially contended

that the subject amount had been received by the appellants from the foreign buyer. However, when recalled on a later date, the respondent produced

the Deed of Undertaking dated 07.11.2000, whereunder, the 2nd Appellant had acknowledged the liability towards respondent. One PS Shanmugham

(PWÂ​2) who was working as Manager in State Bank of India, Tiruppur Overseas Branch, was also examined by the respondent.

Appellant No.2 in his statement under Section 313 CrPC plainly denied the allegations and disputed the existence of any liability towards the

respondent. The appellants also examined one V. Rajagopal (DWÂ1) who at the relevant time was working as Assistant Manager in State Bank of

India, Tiruppur Overseas Branch. DWÂ1 mainly deposed on the inability of the respondent to pay back the credit that was advanced to him, and the

subsequent debt recovery proceedings initiated against him. The appellants did not lead any documentary evidence in their defence.

The trial Court disbelieved the respondent’s claim and observed that he had failed to establish a legally enforceable liability on the date of issue

of cheque. The Court held that since the basic ingredients of an offence under Section 138 of the NIA were not satisfied, the complaint was liable to

be dismissed.

Discontented with the order of the trial Court, the respondent preferred a criminal appeal before the High Court, wherein, the Court noted that

Appellant No.2 had admitted his signatures on both the Cheque and the Deed of Undertaking and had thus acknowledged the appellants’ liability.

The High Court therefore vide impugned judgment allowed the criminal appeal and convicted both the appellants under Section 138 of NIA. Appellant

No. 2 was awarded a sentence of three months simple imprisonment with a fine of Rs. 5,000/Â (or 20 days simple imprisonment in lieu thereof).

Additionally, Appellant No.1 was directed to pay a fine of Rs. 5,000/Â, in default of which, Appellant No. 2 would undergo another oneÂmonth simple

imprisonment.

The aggrieved appellants are now before this Court. It may be mentioned at the outset that when the SLP came up for hearing on 12.03.2018, their

learned Counsel agreed to deposit the entire amount in dispute and in deference thereto, the appellants have on 11.04.2018 deposited a sum of Rs.

11.20 lakhs with the Registry of this Court.

CONTENTIONS

Learned Senior Counsel for the appellants, nonetheless, desired to argue the case on merits and contended that there was no legally enforceable

liability on the date of issuance of the cheque and that blank stamp papers signed by Appellant No.2 were misused by the respondent to forge the

Deed of Undertaking dated 07.11.2000. Placing reliance on Murugesan v. State Through Inspector of Police (2012) 10 SCC 383, ¶ 32, he urged that

the view taken by the trial Court was a possible view, and the High Court committed patent illegality and exceeded its jurisdiction in reversing the

acquittal. Learned Senior Counsel also cited Reena Hazarika v. State of Assam (2019) 13 SCC 289, ¶ 20 to argue that the High Court did not take

notice of the defence raised by the appellants which has caused serious prejudice to  them. He passionately put forth the principles laid down in

Basalingappa v. Mudibasapp (2019) 5 SCC 418 and Kumar Exports v. Sharma Carpets (2009) 2 SCC 513, and submitted that the presumption drawn

against an accused under Section 118 and Section 139 of the NIA is rebuttable through a standard of “preponderance of probabilityâ€, which has

been successfully met by the appellants in the present case.

On the other hand, learned Counsel for the respondent  maintained that the decision of the High Court is well reasoned and founded upon due

consideration of all relevant factors of the case. Laying stress on the undisputed signatures on the cheque and the Deed of Undertaking dated

07.11.2000, he asserted that the appellants have admitted their existing liability of Rs.11.20 lakhs. Lastly, while pointing out the financial loss suffered

by the respondent and the adverse impact on his business, learned Counsel prayed for suitable compensation.

ANALYSIS

The short question which falls for our consideration is whether the High Court erred in reversing the findings of the trial Court in exercise of its

powers under Section 378 of CrPC?

Having given our thoughtful consideration to the rival submissions, we do not find any valid ground to interfere with the impugned judgment. 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. [CK Dasegowda and Others v. State of Karnatak, (2014) 13 SCC 119 ¶14.] Nonetheless, there are numerous

decisions of this Court, justifying the invocation of powers by the High Court under Section 378 CrPC, if the trial Court had, inter alia, committed a

patent error of law or grave miscarriage of justice or it arrived at a perverse finding of fact. [State of UP v. Banne, (2009) 4 SCC 271,¶ 27; Ghurey

Lal v. State of U.P., (2008) 10 SCC 450, ¶70]

On a similar analogy, the powers of this Court under Article 136 of the Constitution also do not encompass the reÂappreciation of entirety of

record merely on the premise that the High Court has convicted the appellants for the first time in exercise of its appellate jurisdiction. This Court in

Ram Jag v. State of UP (1974) 4 SCC 201, ¶ 14., Rohtas v. State of Haryana (2019) 10 SCC 554, ¶ 12. and Raveen Kumar v. State of Himachal

Pradesh 2020 SCC Online SC 869, ¶ 14, evolved its own limitations on the exercise of powers under Article 136 of the Constitution and has

reiterated that while entertaining an appeal by way of special leave, there shall not ordinarily be an attempt to reÂappreciate the evidence on record

unless the decision(s) under challenge are shown to have committed a manifest error of law or procedure or the conclusion reached is exÂfacie

perverse.

Adverting to the case in hand, we find on a plain reading of its judgment that the trial Court completely overlooked the provisions and failed to

appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA. 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. In  such a situation, the

obligation shifts upon the accused to discharge the presumption imposed upon him. This point of law has been crystalized by this Court in Rohitbhai

Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106, ¶ 18 in the following words:

“In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to

question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of

examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had

been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused

had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his

favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing

loan to the appellantÂ​accused…..â€​

Once the 2nd Appellant 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. The trial Court fell in error when it called upon the Complainant Respondent to explain the

circumstances under which the appellants were liable to pay. Such approach of the trial Court was directly in the teeth of the established legal position

as discussed above, and amounts to a patent error of law.

No doubt, and as correctly argued by senior counsel for the appellants, the presumptions raised under Section 118 and Section 139 are rebuttable

in nature. As held in MS Narayana Menon v. State of Kerela (2006) 6 SCC 39, ¶ 32, which was relied upon in Basalingappa (supra), a probable

defence needs to be raised, which must meet the standard of “preponderance of probabilityâ€, and not mere possibility. These principles were also

affirmed in the case of Kumar Exports (supra), wherein it was further held that a bare denial of passing of consideration would not aid the case of

accused.

The appellants have banked upon the evidence of DWÂ1 to dispute the existence of any recoverable debt. However, his deposition merely

highlights that the respondent had an overÂextended credit facility with the bank and his failure to update his account led to debt recovery

proceedings. Such evidence does not disprove the appellants’ liability and has a little bearing on the merits of the respondent’s complaint.

Similarly, the appellants’ mere bald denial regarding genuineness of the Deed of Undertaking dated 07.11.2000, despite admitting the signatures of

Appellant No. 2 thereupon, does not cast any doubt on the genuineness of the said document.

Even if we take the arguments raised by the appellants at face value that only a blank cheque and signed blank stamp papers were given to the

respondent, yet the statutory presumption cannot be obliterated. It is useful to cite Bir Singh v. Mukesh Kumar (2019) 4 SCC 197, ¶ 36., where this

court held that:

“Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract

presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not

issued in discharge of a debt.â€​

Considering the fact that there has been an admitted business relationship between the parties, we are of the opinion that the defence raised by the

appellants does not inspire confidence or meet the standard of ‘preponderance of probability’. In the absence of any other relevant material, it

appears to us that 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.

As regard to the claim of compensation raised on behalf of the respondent, we are conscious of the settled principles that the object of Chapter

XVII of the NIA is not only punitive but also compensatory and restitutive. The provisions of NIA envision a single window for criminal liability for

dishonour of cheque as well as civil liability for realisation of the cheque amount. It is also well settled that there needs to be a consistent approach

towards awarding compensation and unless there exist special circumstances, the Courts should uniformly levy fine up to twice the cheque amount

along with simple interest at the rate of 9% per annum. [R. Vijian v. Baby, (2012) 1 SCC 260 ¶20.]

The respondent, nevertheless, cannot take advantage of the above cited principles so as to seek compensation. The record indicates that neither

did the respondent ask for compensation before the High Court nor has he chosen to challenge the High Court’s judgment. Since, he has accepted

the High Court’s verdict, his claim for compensation stands impliedly overturned. The respondent, in any case, is entitled to receive the cheque

amount of Rs.11.20 lakhs which the appellant has already deposited with the Registry of this Court.

CONCLUSION:

For the reasons stated above, the present appeal is liable to be dismissed. We order accordingly. Ordinarily and as a necessary sequel thereto,

Appellant No.2 would be liable to undergo the sentence of simple imprisonment as awarded by the High Court. However, given the peculiar facts and

circumstances of the case, namely, that the appellants volunteered and thereafter have deposited the cheque amount with the Registry of this Court in

the year 2018, we are inclined to take a lenient view. The impugned judgment of the High Court dated 09Â11Â2017 is thus modified, and it is directed

that Appellant No.2 shall not be required to undergo the awarded sentence.

The registry of this Court is directed to transfer the amount of Rs.11.20 lakhs along with interest accrued thereupon to the respondent within two

weeks.