Allowed

Chandrashekhar v. Smt Prathiba

Karnataka HC6 Sept 2013CRL.A/2563/2008

Case brief

AI extract

What is this about?

The High Court of Karnataka allowed a criminal appeal filed under Section 378 CrPC against a conviction for cheque dishonor under Section 138 NI Act. The High Court set aside the trial court's acquittal, holding that the statutory presumption under Section 139 NI Act regarding the issue of a cheque for a legally enforceable debt was not rebutted by the defense, rejecting arguments about the nature

What did the court decide?

Judgment of the court below set aside; Respondent convicted and ordered to pay a fine of Rs.90,000/- as compensation. In default, respondent shall suffer simple imprisonment of two months.

Chandrashekhar Vs Smt Prathiba — Cheque Dishonour | Karnataka HC (2013)

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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH

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DATED THIS THE 6^TH DAY OF SEPTEMBER, 2013

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BEFORE

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THE HON’BLE MR. JUSTICE ANAND BYRAREDDY

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CRIMINAL APPEAL No.2563 OF 2008

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BETWEEN:

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Chandrashekhar, S/o. Yallappa Madanageri, Aged about 62 years, Retired, Resident of House No.28, Murarji Nagar, Gokul Road, Hubli. …APPELLANT (By Shri Mahesh Wodeyar, Advocate)

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AND:

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Smt. Prathiba, W/o. Shankar Belgavi, Major, Near Amrut Theatre, Opposite to Ghanti Hospital, Vidyanagar, Hubli. …RESPONDENT (By Shri G.I. Gachchinamath, Advocate)

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This appeal is filed under Section 378 of the Code of Criminal Procedure, 1973 praying to call for the records and to set aside the judgment and order of acquittal dated 14.7.2008 passed by the learned JMFC I Court, Hubli in C.C.No.3436/2006 and consequently convict the accused / respondent for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

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This appeal coming on for final hearing this day, the Court delivered the following:

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JUDGMENT

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Heard the learned counsel for the appellant the learned

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counsel for the respondent.

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The appellant was the complainant before the Trial Court alleging an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'N.I.Act', for brevity). It was the complainant’s case that in the month of April 2005, the accused – respondent had approached the complainant seeking a loan of Rs.70,000/-. The appellant had raised the amount by borrowing the same and had lent it to the respondent. The appellant had thereafter made a demand for repayment of the amount. The respondent postponed

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repayment. Ultimately, she issued a cheque bearing No.262220 dated 5.10.2005 for Rs.50,000/- drawn on Corporation Bank, NCM Branch, Hubli, and when the same was presented for encashment to the appellant’s banker, the same was returned dishonoured with an endorsement that the funds were insufficient as per the memo dated 5.11.2005. The appellant thereafter had issued a legal notice making a demand for payment. The notice was returned unserved and thereafter, the complaint was lodged. The same was contested. The respondent denied that there was any transaction and that the cheque had been issued in discharge of any legal liability. On the basis of the defence placed, the court below had framed the following points for consideration:

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“(1) Whether the complainant proves that towards part payment of the amount due to him, the Accused has issued a cheque bearing No.262220, dated 05-10-2005, for a sum of Rs.50,000/- drawn on the Corporation Bank, NCM

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Branch, Hubli, and that when the said cheque was presented for encashment, the same has been returned unpaid for want of sufficient funds in the Account of the accused?

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(2) Whether the complainant further proves that he has issued notice to the accused to her address and that the accused has refused to receive the said notice and that therefore the accused was duly served with the notice and that the accused has not paid the amount due under the cheque?

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(3) What order?”

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The appellant had tendered evidence and the defendant had also tendered evidence contending that there was no transaction whatsoever between the appellant and the respondent. There were however certain transactions between the husband of the respondent and the son-in-law of the appellant and that the cheque was never intended to be issued to the appellant and the same may have been issued in yet another

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transaction and was not endorsed in favour of the appellant. The same has been misused while filling in the details, as is evident from a bare perusal of the cheque in question, which clearly is in two different hands and two different inks and further, it is also evident that even according to the legal notice issued, the cheque is claimed to have been in the possession of the complainant even before the money was lent and therefore, there is an indication that the cheque was not issued in discharge of any legal liability and hence, no offence under Section 138 of the NI Act could be made out.

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The court below has accepted the defence raised and has acquitted the respondent – accused and it is that which is under challenge in the present appeal.

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The learned counsel for the appellant would contend that in the absence of any dispute as to the cheque having been issued on the account of the respondent and the signature of the respondent also not being disputed, the mere contention raised

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in the evidence of the respondent could not have been held to have cast the burden on the appellant to establish that there was a legal liability in respect of which the cheque had been issued. The court below has completely given a go-by to the express provision of law as contained in Section 139 of the NI Act. The learned counsel would urge that the presumption as to the cheque having been issued in discharge of a legal liability, is in favour of the holder of the cheque. The initial burden of establishing that the cheque was not issued in respect of a legal liability therefore, would be on the respondent and not on the appellant. The court however has proceeded on the basis that the burden was on the appellant merely because the respondent had taken a contention as to there being no transaction in respect of which the cheque had been issued and on the assertion that a blank cheque which was no doubt issued in yet another transaction as between the respondent and another has been misutilized in seeking to make out a case for an offence punishable under Section 138 and would submit that on that

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short ground, the judgment of the court be set aside and the respondent be convicted.

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On the other hand, the learned counsel for the respondent would seek to justify the judgment of the court below at length. Firstly, it is pointed out that the notice issued under Section 138 was not at all addressed to the respondent at the address at which the respondent was residing, but was sent to an address which was not the actual address of the respondent. Secondly, the demand under the notice was for a sum of Rs.70,000/-, whereas the cheque in question was for a sum of Rs.50,000/-. Therefore, in the absence of indicating the manner in which a sum of Rs.70,000/- was arrived by indicating the heads under which such a claim was being made, the notice issued was defective and could not be attributed or related to the cheque in question. It is also pointed out that the glaring circumstance of the respondent and her husband being well to do and being possessed of adequate sources of income and not being in need of funds, was established by producing

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cogent evidence in this regard, including the income tax returns and the funds available in the hands of the respondent and her husband. There was therefore no need for the respondent or her husband to have borrowed any money from a retired employee such as the appellant, who admittedly did not possess the means to lend a substantial sum of Rs.70,000/-. Even according to the appellant, the money was borrowed from others and therefore, the respondents having raised a valid defence as to there being no such transaction and having established the assertion, the burden was on the appellant to establish that there was a loan transaction, in discharge of which the cheque had been issued. The appellant had miserably failed to substantiate the same and if admittedly the monies were borrowed from others, it is incumbent on the appellant to have tendered evidence of those persons from whom money had been borrowed to lend it to the respondent, in the absence of which, notwithstanding the presumption under Section 139, if once the initial burden is discharged by the accused, it was the complainant who had to

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establish that there was a legal liability in discharge of which the cheque had been issued. Therefore, the reasoning of the court below on the basis of the pleadings and evidence tendered, cannot be faulted and it is in line with the settled legal position as spelt out in the decision of the Apex Court in the case of Rangappa vs. Mohan, 2010 SC 1898. It is further contended that the respondent was a housewife and had no transactions involving monies. The only reason that there was a bank account jointly with her husband, was on account of the fact that the respondent’s husband had failing eye sight and hence, it was necessary for the respondent to issue cheques on his behalf. And it is in that circumstance that there was an account jointly in the name of the respondent and her husband and a cheque on that account has been misused by the complainant. It is further pointed out that the entries made in the cheque as regards the name, the amount involved in words and the signature are all in different inks and the handwriting which would indicate that the instrument has been tampered

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with and such an instrument cannot be accepted and a duty is cast on the court in the light of the glaring discrepancies in the cheque leaf to take into account the defence raised as regards the cheque not being issued in discharge of a legal liability or there being no such transaction in respect of which the cheque could have been issued.

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The court below has extensively dealt with the pleadings and the defence taken and there are reasoned findings as seen from Paragraph 26 of the judgment, whereby the court below has appreciated the evidence tendered on behalf of the respondent in support of her defence, which shifted the burden of establishing that there was a legally enforceable debt in respect of which the cheque had been issued and therefore, the learned counsel would submit that the court below was justified in acquitting the accused.

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In the light of the above contentions and on an

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examination of the record and more particularly, the findings of

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the court below, the point for consideration by this court is, whether the Trial Court was justified in holding that the respondent has established that there was no legal liability in respect of which the cheque in question had been issued.

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By way of reply, the learned counsel for the appellant

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would contend that insofar as the contention of the notice issued under Section 138 having been served to the incorrect address, the address to which the notice was issued is the address shown in this complaint. Since that is not disputed, it cannot lie in the mouth of the complainant to claim that the address to which the notice was sent was not the correct address. In any event, even if notice was not served on the respondent, on service of summons of the complaint if the respondent had appeared before the court and tendered the amount covered under the cheque, then the complaint would have to be disposed of as no such offence would be made out. Therefore, assuming that there was non-service of notice on account of an incorrect address having been shown, would not

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invalidate the proceedings and would submit that the reasoning of the court below that the burden was on the appellant to establish that there was a legally enforceable debt, is on an incorrect interpretation of the evidence tendered by the parties. The mere assertion on the part of the respondent that there was no financial need for the respondent or her husband to have borrowed money, is not a defence that can be accepted. Therefore, to claim that it was incumbent on the appellant to have established that the appellant had borrowed money from third parties to lend the same to the respondent, was extraneous and irrelevant aspect and hence would submit that the appeal be allowed.

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In the light of the above rival contentions and on an examination of the records and more particularly the findings of the Trial Court, the point that would arise for consideration is, whether the respondent had established before the Trial Court that there was no legally enforceable debt in respect of which the cheque in question had been issued. In this regard, the

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cheque in question is not denied as being issued on the account of the respondent or has the respondent denied her signature on the cheque. The contention that it was issued in some other transaction not in favour of the appellant in favour of the sonin-law of the appellant, is a contention that is not available to the respondent when the name of the appellant is apparent on the cheque. The presumption is certainly in favour of the holder of the cheque. The contention that the appellant cannot be considered as the holder in due course merely on the assertion of the respondent, is not tenable. The further contention that the respondent and her husband were well-to-do and there was no need for them to borrow any money, is again a self-serving claim. There is no rule or a law which declares that there should be a presumption in favour of a person who is well-to-do and that he would never borrow money notwithstanding that he has sufficient finances at hand. The further contention that the cheque is found to be filled up in different inks and in different hands, and therefore, was an

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invalid instrument, is also not tenable, as the banker of the respondent has not negated the instrument on that ground, for if this were indeed an acceptable argument, that would be the first ground on which the banker would negate the instrument. The cheque having been dishonoured for want of sufficient funds, leads to the direct consequence of bringing about cause of action for an offence punishable under Section 138. Therefore, a Banker would not normally issue such an endorsement when the cheque could have been dishonoured on a more serious objection that the cheque cannot be accepted, as it was found to be in different hands in different inks. In any event, the law does not prescribe that the instrument should be in the same hand and in the same ink. It is for this reason that the Bank has not taken any exception to the same. Therefore, it would not be a ground on which the respondent could claim that the cheque was found to have been tampered with. The document being tampered, is different from contending that the entries in cheque are made in different hands in different inks. There is no such

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bar in law of the cheque being entered by one person in one hand and the signatory being the account holder, for in cases where numerous number of cheques are issued, it may not be possible for the account holder on account of pressure of work or other reasons, from filling up the cheque in his own hand in the case of Heads of large Corporations, where the cheque would be filled in by his Assistants and by his attendant staff and only the mere signature is affixed by the Account holder. Therefore, on that principle, it cannot be the law that the same person should make the entries in the cheque and the same person should also affix his signature. Therefore, even if the cheque is found to be in two different inks and hands, there is no invalidity. Further, a negotiable instrument can also be endorsed in blank, meaning whereby, that the Act contemplates the issuance of a blank instrument duly signed and it is the privilege of the holder to endorse it in his favour and therefore, there cannot be any exception in the instrument being found to be in two different hands. This objection is also not tenable.

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The contention that a defence having been raised as to the appellant not being possessed of means and therefore, it was incumbent on the appellant to have examined the third parties from whom the money had been borrowed, to lend to the respondent, is not a contention that would shift the burden on the appellant. No doubt in the decision of the Apex Court in Rangappa vs. Mohan, the Apex Court has laid down that the presumption under Section 139 is a rebuttable presumption and this would be discharged if the accused could establish the same by tendering evidence expressly or even by relying on statements made or admissions made by the complainant without having to lead any evidence at all. However, from the evidence that is available on record in the present case on hand, cannot be said that merely by raising a defence, the burden would shift on the appellant. There is no such requirement under Section 138 for the appellant or the holder of a cheque to firstly establish that there was a transaction in respect of which the cheque had been issued. On the other hand, the pre-

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conditions do not contemplate any such requirement. The cheque having been issued by the respondent and the same having been duly signed and the cheque having been presented within the time prescribed, a notice having been issued within the time prescribed, making a demand and the complaint having been brought again within the prescribed time, is sufficient compliance of the requirement of Section 138 and the further contention that there ought to have been pleadings and proof of a subsisting transaction in respect of which the cheque had been issued, is not contemplated under Section 138. If on a reading of Section 139, this position is made even more certain that the presumption is already in favour of the holder of the cheque and the same having been issued in discharge of a legal liability. Therefore, the primary argument of the learned counsel for the respondent and the finding of the court below proceeding on that assumption, is not tenable form the appreciation of the evidence that was tendered.

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Therefore, the findings of the court below cannot be sustained. The decisions referred to are misinterpreted in arriving at the conclusions. Hence, the appeal is allowed. The judgment of the court below is set aside. An offence punishable under Section 138 stands established. The respondent is convicted to pay a fine of Rs.90,000/-, of which Rs.85,000/- shall be paid as compensation to the appellant, within four weeks. In default, the respondent shall suffer simple imprisonment of two months.

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Sd/JUDGE

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Chandrashekhar v. Smt Prathiba

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Chandrashekhar v. Smt Prathiba

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