Allowed

K Prakash Bhat S/O K Govind Bhat v. Balawant Shripad Kulkarni

Karnataka HC7 Dec 2020CRL.A/2564/2011

Case brief

AI extract

What is this about?

In a criminal appeal under Section 378 Cr.P.C., the High Court of Karnataka allowed the appeal against an acquittal in a cheque dishonor case. The court held that the legal notice was duly served by post and the accused failed to rebut the legal presumption of debt, thereby convicting him under Section 138 NI Act.

What did the court decide?

The judgment of acquittal was set aside, the respondent was convicted under Section 138 NI Act, and ordered to pay a fine equal to double the cheque amount.

K Prakash Bhat S/O K Govind Bhat Vs Balawant Shripad… — Cheque Dishonour | Karnataka HC (2020)

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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH

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DATED THIS THE 7^TH DAY OF DECEMBER 2020

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BEFORE

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THE HON’BLE MR. JUSTICE PRADEEP SINGH YERUR

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VISHAL NPATTIHAL CRIMINAL APPEAL NO.2564/2011Digitallysigned byVISHAL NPATTIHALDate:2020.12.1518:26:01+0530

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BETWEEN :

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SHRI K.PRAKASH BHAT, S/O.K.GOVIND BHAT, AGE : ABOUT 44 YEARS, OCC : BUSINESS, R/O.NOW 6^TH CROSS, R.K.MARGA, HINDWADI, BELGAUM.

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…..APPELLANT

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(BY SRI SANJAY S.KATAGERI, ADVCOATE)

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AND :

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SHRI BALAWANT SHRIPAD KULKARNI, AGED ABOUT 55 YEARS, OCC : F.D.C. IN RTO OFFICE, BELGAUM, R/O.PLOT NO.708, SMITA BUILDING, 2^ND STAGE, RANI CHANNAMMA NAGAR, TILAKWADI, BELGAUM-6.

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…….RESPONDENT

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(BY SMT GIRIJA S.HIREMATH, ADVOCATE)

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THIS APPEAL IS FILED UNDER SECTION 378(4) OF CR.P.C. AND PRAYED TO SET ASIDE THE JUDGMENT AND ORDER OF ACQUITTAL DATED 06.12.2010 PASSED BY THE J.M.F.C.-III, BELGAUM IN CRIMINAL CASE NO.931/2006, BY ALLOWING THIS APPEAL AND CONVICT THE RESPONDENT HEREIN UNDER SECTION 138 OF N.I.ACT, IN THE INTEREST OF JUSTICE AND EQUITY.

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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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This appeal is preferred by complainant being aggrieved by the Judgment of acquittal passed by Court of J.M.F.C.-III, Belgaum in Criminal Case No.931/2006 dated 06.12.2010.

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For the sake of convenience, parties herein shall be referred to as per their status before the trial Court.

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Brief facts leading to filing of this case is as

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under :

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It is the case of complainant that accused is known to him and very well acquainted. Accused was in the habit of taking hand loan from complainant. In the month of April-2003, accused approached the complainant with a request for hand loan of Rs.50,000/-, which was paid by complainant by cash. Further, in the month of July-2003, accused again approached for hand loan of Rs.50,000/-, with a promise to repay the same

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within a short time. Thereafter, in the month of September-2003, again accused requested for further amount loan of Rs.50,000/- with a promise to repay the same in the month January-2004. In the month of January-2004, accused approached the complainant stating that he is expected to receive more than Rs.5,00,000/in the month of March-2004 and accordingly, he requires another loan amount of Rs.50,000/-, which was paid by complainant in cash in January-2004. On all these occasions, accused gave receipt for having received an amount of Rs.2,00,000/from complainant.

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In the last week of March-2004, accused approached the complainant once again along with a bond paper of Rs.100/- and requested the complainant to advance an additional amount of Rs.1,60,000/-, which was required for him to settle his property deal and stated that he would execute an agreement on a bond paper for having received total amount of Rs.3,60,000/-. Considering the request of accused, complainant paid a sum of Rs.1,60,000/- in cash to

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accused on 30.03.2004 and accused executed receiptcum-undertaking on the bond paper in the presence of witnesses for having received Rs.3,60,000/- from complainant and took back four receipts, which were issued by accused on four different occasions for having collected the loan amount. Further, on the same day, accused got issued a postdated cheque bearing No.009689 drawn on State Bank of India, Government Estate Branch, Belgaum for a sum of Rs.3,60,000/- in favour of complainant by putting the date as 21.07.2004.

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On presentation of the said cheque through his bank namely Canara Bank, the cheque came to be dishonored for the reasons “fund insufficient”. Thereafter, complainant got issued a legal notice to accused on 31.07.2004 calling upon accused to make the payment towards dishonored cheque. The said legal notice was sent through registered post and notice was also sent through certificate of posting. Despite receipt of notice, accused has failed to pay the dishonored cheque amount and neither he has replied to the same.

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Left with no other alternative, a complaint came to be filed for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short ‘the N.I.Act’) against the accused.

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On cognizance being taken, accused was summoned before the Court and enlarged on bail. The plea of accused was recorded, where he pleaded not guilty and claimed to be tried accordingly, he was tried.

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In order to prove the guilt of accused, complainant got himself examined as P.W.1 and got marked Exs.P.1 to 7 and closed his side. Thereafter, the statement of accused was recorded under Section 313 of Cr.P.C., where the accused denied all the incriminating evidence against him. Accused did not lead any evidence on his behalf neither did he produce any documents in his favour.

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After considering the entire materials on record, both oral and documentary, trial Court came to the conclusion that complainant has not proved his case beyond reasonable doubt and that the burden was on

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the complainant to establish his case, which has not been done in accordance to provision of Section 138 of the N.I.Act. Further, the trial Court held that the service of notice to accused is not complied, as accused was not residing in the said address in which the notice was issued by complainant. Trial Court further held that complainant could not have shifted the burden upon the accused and forced the accused to prove his case, as the accused had raised a preponderance of probabilities, the same came to be accepted; accordingly the trial Court acquitted the accused for the offence punishable under Section 138 of the N.I.Act.

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Heard Sri Sanjay S.Katageri learned counsel for appellant/complainant and Smt.Girija S.Hiremath, learned counsel for respondent/accused. It is contended by learned counsel for appellant that the Judgment of acquittal passed by trial Court is against known legal principles and material evidence on record and hence the same requires to be set aside and reversed. Learned counsel further contends that the trial Court has committed an error in acquitting the accused as the trial

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Court has failed to consider the presumption in law infavour of complainant. He further contends that the trial Court has committed grave error in coming to a conclusion that the burden of proof is on the complainant to prove his case. Whereas, as per Section 139 of the N.I.Act the presumption in law is infavour of complainant and it is for accused to rebut the said presumption. He further contends that the legal notice issued under certificate of posting is received by accused and so also the registered post has been returned to the sender, the complainant herein with an endorsement

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“not claimed returned to sender”, which amounts to deemed service of notice. He further contends that accused has merely denied the transaction, but has not stepped into the witness box to disprove the case of complainant neither has he elicited any worthwhile evidence in the cross-examination to rebut the presumption in favour of complainant.

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Learned counsel further contends that the

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trial Court has committed an error in not considering Ex.P.7 which is receipt-cum-undertaking agreement

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executed by accused for the cheque amount. He further contends that the trial court has committed an error in holding that the complainant did not have the source of income and capacity to pay the loan and has not produced any document to substantiate the case, whereas, Ex.P.1 cheque itself is a proof of repayment towards the legal recoverable debt and Ex.P.7 fortifies payment of loan and issuance of cheque. Therefore, the non-consideration of Ex.P.7 has caused miscarriage of justice to complainant. Learned counsel further contends that the trial Court has committed an error in holding that non-production of other documents to substantiate the loan and issuance of cheque, an adverse inference is drawn is erroneous in law.

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It is further contended by learned counsel that the theory of accused that cheque was given to one Rudraraj Kulkarni and same has been misused by complainant, is not well founded as no cogent material evidence is produced neither examined any witness to that effect by accused. He further contends that the entire approach of trial Court is erroneous and the trial

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Court has misdirected itself in understanding proviso to Section 138 of the N.I.Act and presumption under Section 139 of the N.I.Act. He further contends that the trial Court has not applied its mind in appreciating the facts of the case that the law and the precedent of the Hon’ble Supreme Court and this Court. On these grounds, he contends that viewed from any angle the Judgment of acquittal passed by trial Court is perverse, illegal and the same deserves to be set aside and reversed. Hence, he seeks to allow the appeal.

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Learned counsel relies on the Judgment of Hon’ble Apex Court in the case of C.C.Alavi Haji v. Palepetty Muhammed and Another , reported in (2007) 6 SCC 555 in support of his case.

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Per Contra , learned counsel for respondent/ accused vehemently contends that the Judgment of acquittal passed by trial Court is on the basis of material evidence both oral and documentary and hence, it is in accordance with law and the same does not call for any interference by this Court.

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Learned counsel further contends that

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complainant has not specifically stated the exact amount and exact date of payment of loan to accused. Though several times loan has been advanced, as per complainant, no specific date has been mentioned for having parted amount to accused. Learned counsel further contends that as per the version of complainant, four times loan has been granted with a condition that each time accused would repay within a short period. Despite the loan not being repaid, further grant of loan by complainant to accused cannot be believed, as no prudent man would part with loan once again when the previous amount has not been paid. Therefore the theory of complainant cannot be believed and rightfully trial Court has not accepted the same and hence acquitted the accused.

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Learned counsel for accused further contends that complainant has not produced any material to show that he had sufficient source of income and capacity to make payment of loan and no such

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document has been produced to show that he had necessary source of income to part with such huge amount of loan.

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Learned counsel further contends that complaint itself is not maintainable in view of the fact that there is no compliance of provisions of section 138(b) of Negotiable Instruments Act, as legal notice has not been served on accused. Learned counsel further contends that it is not mere ‘issuance’ of legal notice that has to be taken into account but it is ‘service’ of notice that is to be considered and in the present case there is no service of notice to accused. Therefore on this ground also complaint deserves to be rejected and rightfully trial Court has acquitted the accused.

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Learned counsel further contends that even

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in cross-examination of PW.1 he has admitted that he has no other document to show that he has advanced loan to accused and further, non production of any books of accounts and income tax returns to prove the fact of extending loan is fatal to the case of complainant.

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She further contends that though complainant has stated that he has no impediment to produce any of these documents, non production of the same will have to be held adverse to the case of complainant, which is rightly held by trial Court. She further contends that it is for complainant to prove existence of legally recoverable debt and only thereafter burden will shift to accused to rebut the presumption. Therefore trial Court has rightly come to a conclusion that complainant has not proved existence of legally recoverable debt and accused has raised a probable defence creating a doubt in the mind of Court which has been appreciated and trial Court has rightfully acquitted the accused. On these submissions she contends that appeal deserves to be dismissed and judgment of acquittal requires to be affirmed.

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Having heard learned counsel for appellant/complainant and learned counsel for accused, points that would arise for consideration before this Court are:

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(i) Whether complainant has fulfilled

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necessary requirements under section 138 of Negotiable Instruments Act?

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(ii) Whether accused has rebutted the presumption cast in favour of

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complainant?

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(iii) Whether judgment of acquittal passed by trial Court deserves to be reversed?

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In order to answer the above, let us have a

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cursory look at the facts of the case. It is the case of complainant that he has given loan on several occasions from April 2003 till March 2004 and in all paid a sum of Rs.3,60,000/- to accused as loan. For repayment of said loan, accused has issued a cheque bearing No.009689 for a sum of Rs.3,60,000/- in favour of complainant. Since the said cheque came to be dishonoured, complainant got issued a legal notice on 31.7.2004 by way of registered post as per Ex.P.3. Postal acknowledgement is produced as Ex.P.4. Legal notice

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was also served through certificate of posting. Since accused did not repay the amount despite service of legal notice, a complaint came to be registered by complainant for the offence punishable under section 138 of Negotiable Instruments Act.

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It is the contention of accused that legal notice was served on accused and hence there is no compliance of section 138(b) of Negotiable Instruments Act. In order to see whether there is compliance of legal notice as contemplated under section 138(b) of Negotiable Instruments Act, it is necessary to see whether there is any denial of address so mentioned in the legal notice got issued by complainant. Admittedly there is no denial of address mentioned in legal notice to be that of accused. Except stating that he is not the resident of address, in cross-examination, there is no other piece of evidence produced by accused to show that he does not reside in the address as mentioned in the legal notice. In fact it is interesting to see Ex.P.7 which is executed by accused on 30.3.2004, which is prior to issuance of cheque, wherein address of accused

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is shown as Plot No.708, Smita Building, 2^nd Stage, R.C.Nagar, Tilakwadi, Belgaum. The date of cheque is 21.7.2004. Legal notice is issued on 31.7.2004. Therefore Ex.P.7 is prior in time compared to the date of cheque and issuance of legal notice which bears the address as mentioned in the legal notice. Legal notice has been sent through registered post with acknowledgement due card. Postal receipt is produced as Ex.P.4 for having sent legal notice to the address mentioned therein. There is no denial to the fact that legal notice has been sent to the address shown in legal notice and in the complaint. However accused denies having received the notice. In this view of matter it is necessary to go through section 27 of General Clauses Act, 1897, which reads as under:

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27. Meaning of service by post. —Where

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any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression “serve” or either of the expressions “give” or “send” or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by

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properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.

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Section 138 of Negotiable Instruments Act

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reads as under:

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138. Dishonour of cheque for insufficiency, etc., of funds in the accounts

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Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with

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fine which may extend to twice the amount of the cheque, or with both:

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PROVIDED that nothing contained in this section shall apply unless—

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(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

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(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

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(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

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Explanation: For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability.

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On going through the above provisions, the requirement under section 138(b) of Negotiable Instruments Act that a demand has to be made for payment of dishonoured cheque amount by giving a notice in writing to the drawer of cheque. In the present case a notice has been sent to the address of accused. The expression service of notice has been clearly explained in section 27 of General Clauses Act, wherein it shows a service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. In the present case service of notice is complete as the same is addressed to proper address of accused and though it is denied. There is no proper explanation or cogent evidence to substantiate the same. Hence, it is deemed as served. In addition to registered post, complainant has also got issued similar notice under certificate of posting which is also been delivered to accused. Under these circumstances, it

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cannot be said that service of notice is incomplete and the same would not be fatal to the case of complainant as held by trial Court.

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On fulfillment of proviso (a) to (c) to Section 138 of Negotiable Instruments Act, technically the offence under section 138 of the Act is made out. Therefore I answer point No.1 in the affirmative with regard to fulfillment of necessary mandatory requirements as contemplated under section 138 of Negotiable Instruments Act by complainant.

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On presentation of complaint before the Court, the provisions of section 139 of Negotiable Instruments Act comes into play in favour of complainant which is a presumption in law. Section 139 of the Act reads as under:

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139. Presumption in favour of

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holder

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It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature

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referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.

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No doubt the said presumption is a rebuttable presumption. It is for accused to rebut the presumption cast in favour of complainant to prove to the contrary that there never existed any legally recoverable debt or liability. This rebuttal of presumption has to be made by accused not by merely putting vague suggestions and denials in cross-examination. Accused will have to do something more than just mere denials either by producing cogent material evidence or by eliciting in cross-examination of PW.1 with regard to loan amount having been repaid or non-existence of any legally recoverable debt. It is only when such rebuttal is made, with cogent material evidence to the satisfaction of Court, burden would shift to complainant to satisfy such rebuttal. Unless such cogent evidence is produced, or elicited in cross-examination of complainant/PW.1, burden would not shift to complainant and thereby the presumption would act in favour of complainant.

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In the present case on hand, apart from mere denial and suggestions in cross-examination, no worthwhile evidence has been adduced and no cogent material has been produced or confronted to PW.1 complainant. Therefore the rebuttal as made by accused is no rebuttal in law or on facts of the case and presumption of law in favour of complainant has not been proved to the contrary by accused. Hence I answer point No.2 in the negative.

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It is seen from the judgment of trial Court that trial Court is impressed by arguments of accused with regard to non service of notice which is erroneous in law and facts of the case as stated in detail in the above paragraph. Further, trial Court has laid entire burden of proof on complainant to prove advancement of loan and issuance of cheque. In the evidence of PW.1, it is clearly stated that on several dates on which complainant advanced loan, right from April 2003 till March 2004 and for repayment of which accused has got issued Ex.P.1 cheque, complainant has also produced Ex.P.7 which is prior in time than issuance of cheque.

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Ex.P.7 is dated 30.3.2004 and this document has stated

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in detail the amount of loan having been received by accused on several dates and this has been duly signed by accused. Signature in Ex.P.1 and in Ex.P.7 has been admitted by accused. No cogent evidence has been adduced by accused to disprove either the document Ex.P.1 or his signatures in Ex.P.1(a) and P.7(a). A mere denial of the same, would not disprove the case of, complainant. Therefore, mere denial of signatures will not help accused to prove contrary to the presumption laid in section 139 of Negotiable Instruments Act as section 139 says that holder of cheque has received the cheque of nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability. It is also essential to have a look at section 118 of Negotiable Instruments Act, which reads as under:

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118. Presumptions as to negotiable

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instruments

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Until the contrary is proved, the following presumptions shall be made:—

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(a) of consideration —that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;

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(b) as to date —that every negotiable instrument bearing a date was made or drawn on such date;

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(c) as to time of acceptance —that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;

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(d) as to time of transfer —that every transfer of a negotiable instrument was made before its maturity;

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(e) as to order of endorsements —that the endorsements appearing upon a negotiable instrument were made in the order in which they appear then on;

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(f) as to stamp —that a lost promissory note, bill of exchange or cheque was duly stamped;

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(g) that holder is a holder in due course —that the holder of a negotiable instrument is a holder in due course:

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PROVIDED that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.

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Even according to section 118(a) of

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Negotiable Instruments Act, every negotiable instrument is presumed to be drawn for consideration when it is accepted, indorsed, negotiated or transferred is towards the consideration. Therefore when these presumption arise in favour of complainant, it is the duty of accused to rebut these presumptions to prove to the contrary that there never existed any legally recoverable debt and the burden of proof is on accused to rebut such presumption. It is only when such rebuttal is made, burden will shift on complainant to prove his other financial requirements and to satisfy the said rebuttal.

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In the present case non filing or production

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of books of accounts and income tax returns would not

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be fatal to the case of complainant as no rebuttal is made by accused, shifting the burden necessitating the complainant to produce these documents to prove the case. Therefore there cannot be any adverse inference drawn on complainant for non production of these documents of books of accounts and income tax returns. Even otherwise non production of income tax returns or even non mentioning of same in the said income tax returns would not by itself prove that there was no loan advanced for which accused has issued the cheque in question for the transaction in existence. Therefore in the present case when complainant has proved necessary ingredients as contemplated under section 138 of Negotiable Instruments Act and accused having not rebutted the presumption, question of creating any suspicious circumstances and giving benefit of doubt to accused would not arise.

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In the case of Section 138 of Negotiable Instruments Act, burden of proof is not on complainant as there is a presumption under section 139 of existence of debt which is issued in the nature of cheque towards

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the discharge, in whole or in part of the said debt. In the present case, accused has not produced any material to show preponderance of probabilities and has not made out any case for showing any suspicious circumstances and has not raised any reasonable doubt by way of any probable defence. Under these circumstances, the order of acquittal passed by trial Court is contrary to materials both oral and documentary and the same is required to be reversed. Hence, I answer point No.3 in the affirmative.

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It is seen that cheque is dated 21.7.2004 and in view of enormous delay in non payment of cheque amount, it is suitable in the present case to award compensation double the cheque amount to reasonably compensate the complainant. Hence, I pass the following order:

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ORDER

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i) Appeal is allowed.

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ii) The judgment of acquittal dated 06.12.2010,

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passed by the Court of JMFC-III, Belagavi, in C.C.No. 931/2006 is hereby set aside and reversed.

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iii) Accused is convicted for the offence punishable under section 138 of Negotiable Instruments Act and he is sentenced to pay a fine of double the amount of cheque (cheque amount being Rs.3,60,000/-) within a period of eight weeks from today and in default of payment of fine, accused shall undergo simple imprisonment for a period of one year.

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iv) Out of the fine amount, a sum of Rs.5,000/-

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shall be paid to the credit of State and remaining amount shall be paid to the complainant as compensation.

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Sd/-

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JUDGE

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CKK/Mrk/VK

K Prakash Bhat S/O K Govind Bhat v. Balawant Shripad Kulkarni

Case brief

What is this about?

What did the court decide?

K Prakash Bhat S/O K Govind Bhat v. Balawant Shripad Kulkarni

Case brief

What is this about?

What did the court decide?

What the court decided

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