Allowed

Mr. Ashfaq Rasheed Shaik v. Smt. Meena Ullas

Karnataka HC27 Jan 2022CRL.A/1471/2018

Case brief

AI extract

What is this about?

Dishonoured cheques concerned repayment of funds transferred to the drawer and her husband. The court held that statutory presumptions remained unrebutted and Section 138 covered another person's liability. It allowed all six appeals, set aside the acquittals, convicted the drawer, and imposed fines with default imprisonment and compensation.

What did the court decide?

All six acquittals set aside; respondent convicted under Section 138 NI Act, fined with one month's simple imprisonment in default in each case; compensation directed.

Mr. Ashfaq Rasheed Shaik Vs Smt. Meena Ullas — Cheque Dishonour | Karnataka HC (2022)

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CRL.A.No.1470/2018 C/W Crl.A.Nos. 1471/2018, 1472/2018, 1473/2018, 1474/2018, 1475/2018

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 27^TH DAY OF JANUARY 2022

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BEFORE

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THE HON’BLE MRS. JUSTICE K.S.MUDAGAL

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CRIMINAL APPEAL NO.1470/2018

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C/W

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CRIMINAL APPEAL Nos.1471/2018, 1472/2018, 1473/2018, 1474/2018, 1475/2018

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BETWEEN:

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MR.ASHFAQ RASHEED SHAIK AGED ABOUT 39 YEARS S/O ABDUL RASHEED SHAIK RESIDING AT SNN RAJ SERENITY D3 BLOCK, FLAT NO.701 BEGUR MAIN ROAD BANGALORE – 560 068

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... APPELLANT (COMMON)

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(BY SRI.H.SUNIL KUMAR, ADVOCATE)

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AND:

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SMT.MEENA ULLAS W/O ULLAS K AGED ABOUT 39 YEARS RESIDING AT SOLITAIRE NO.218, ANNAPOORNESHWARI INDUSTRIAL AREA DODDAKALLASANDRA KANAKAPURA MAIN ROAD BANGALORE – 560 062 ... RESPONDENT (COMMON)

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CRL.A.No.1470/2018 C/W Crl.A.Nos. 1471/2018, 1472/2018, 1473/2018, 1474/2018, 1475/2018

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(BY SRI.M.ASHOK KUMAR, ADVOCATE)

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THESE CRIMINAL APPEALS ARE FILED UNDER SECTION 378(4) CR.P.C PRAYING TO SET ASIDE THE JUDGMENT OF ACQUITTAL DATED 07.06.2018 PASSED BY THE VI ADDITIONAL SMALL CAUSES JUDGE AND XXXI ADDL.C.M.M., BENGALURU IN C.C.NOS.11652/2017, 12227/2017, 13040/2017, 12629/2017, 13047/2017, 12527/2017 ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT. THESE CRIMINAL APPEALS COMING ON FOR FURTHER HEARING THIS DAY, THE COURT THROUGH VIDEO CONFERENCE DELIVERED THE FOLLOWING:

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JUDGMENT

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Since these appeals arise out of common order passed by the trial Court in C.C.Nos.11652/2017, 12227/2017, 13040/2017, 12629/2017, 13047/2017, 12527/2017, they are taken up together for disposal by this common judgment.

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By the impugned order the trial Court has acquitted the respondent-accused of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (‘NI Act’ for short).

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The brief facts of the case are as follows:

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The respondent is the wife of one Ullas K. Appellant hails from Mangaluru city. He was working in UAE since about 18 years. He presented 6 cheques mentioned in the table below drawn on the account of the respondent for various amounts. The said cheques were dishonoured with the endorsement “insufficient funds”. He got issued statutory notices under Section 138 of the NI Act to the respondent calling upon the respondent to pay the cheque amounts. As per the postal acknowledgment, the said notices were served on the respondent.

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The CC numbers, dates of the cheques, the

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amount of the cheques, drawee bank, date of dishonour and the date of statutory legal notice are set out in the

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table below:

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Crl.A.No	C.C.No.	Amount Of cheque	Date & No. Of cheque	Date of dishonour	Date of Notice	Drawee Bank
1470/18	11652/17	15,00,000	28.02.2017 042128	10.03.2017	21.03.2017	Syndicate Bank
1471/18	12227/17	40,00,000	17.03.2017 830838	18.03.2017	25.03.2017	Canara Bank
1472/18	13040/17	25,00,000	25.03.2017 042131	28.03.2017	05.04.2017	Syndicate Bank
1473/18	12629/17	40,00,000	20.03.2017 830840	21.03l2017	30.03.2017	Canara bank

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1474/18	13047/17	25,00,000	30.03.2017 042142	31.03.2017	10.04.2017	Syndicate bank
1475/18	12527/17	40,00,000	18.03.2017 830839	20.03.2017	25.03.2017	Canara Bank

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The appellant filed complaints against the respondent before the trial Court seeking prosecution of the respondent for the offence punishable under Section 138 of the NI Act. The trial Court on taking cognizance of the offence registered the said cases in the C.C.numbers mentioned in the above table.

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6. Appellant claimed that he was well acquainted

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with the respondent and her husband since 15 years. He further claimed that the respondent inducing him of partnership in her business ventures between 2014 and 2016 received a sum of Rs.2 crores on different occasions by way of bank transfer to her account and account of her husband. He further alleged that the respondent neither made him her business partner nor returned the money. He alleged that when he insisted for return of money, she issued subject cheques towards discharge of her legally recoverable liability and they were dishonoured on

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presentation for realization. He claimed that despite receiving the statutory notice, the respondent did not pay the money thereby cheated him.

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The respondent on her appearance disputed the accusations. To substantiate his case the appellant got examined himself in all the cases as PW.1 and got marked Exs.P1 to P5. After her examination under Section 313 of Cr.P.C. the respondent did not lead any defence evidence. Her defence in the cross examination of the appellant was that her husband and the appellant were together doing business and they suffered losses in the business. It was her further contention that her husband has collected the blank signed cheques and misused them. It was her contention that since the appellant was not able to recover the money from her husband, he has falsely implicated her in the cases.

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The trial Court on hearing the parties by the impugned judgment acquitted the respondent on the following grounds:

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i) The genuineness of the alleged transaction of

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the appellant and respondent is doubtful as he has not obtained any documentary proof for alleged payment of Rs.2 crores.

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ii) Existence of legally recoverable debt is not a matter of presumption under Section 139 of the NI Act.

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iii) The appellant has failed to establish that the respondent has issued the cheques for legally recoverable debt.

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iv) As per the evidence, major part of the amount was transferred to the account of the husband of the respondent. She is not liable to be dealt with for the amount paid to the husband.

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Submissions of Sri H.Sunil Kumar, learned counsel for the appellant assailing the impugned judgment and order :

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The moment the respondent admits the signature on the cheque and that cheques were drawn on her account, the presumption under Sections 118 and 139

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of the NI Act arises. The respondent did not rebut that presumption by placing any probable material before the Court. She did not choose to enter the witness box and give an opportunity to the appellant to cross examine her to demonstrate his case. The trial Court overlooked such suppression of material evidence by the respondent. The observation of the trial Court that Section 139 of the NI Act does not raise the presumption regarding legally recoverable debt is contrary to the said section as well as the judgments of the Supreme Court. The respondent did not probabilise her defence by producing any acceptable material before the Court. The impugned order is wholly unsustainable.

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In support of his submissions, he relies on the following judgments:

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i) Kishan Rao vs. Shankargouda¹ ii) T.P.Murugan vs. Bojan² iii) Rohitbhai Jivanlal Patel vs. State of Gujarat and another³

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1 (2018)8 SCC 165

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2 (2018)8 SCC 469

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3 (2019)18 SCC 106

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iv) Triyambak S.Hegde vs. Sripad⁴

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v) Ruby Infralogistics Pvt.Ltd. vs. Rashmi Enterprises (Pvt) Ltd. And another⁵

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vi) M/s.Jammu & Kashmir Bank vs. Abhishek Mittal⁶

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vii) Honavar Taluka Primary Co-operative Agricultural & Rural Development Bank, Honavar vs.Ganesh⁷

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viii) M.Jaishankar and another vs. Sree Gokulam Chits and Finance Corporation Pvt. Ltd.⁸

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ix) ICDS Ltd vs. Beena Shabeer and another⁹

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x) Basalingappa vs. Mudibasappa¹⁰

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Submissions of Sri M.Ashok Kumar, learned counsel for the respondent justifying the impugned order of acquittal :

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Admittedly Rs.1,06,70,000/- was remitted to

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the account of husband of the respondent. But the cheques

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were purportedly issued for Rs.1 crore 85 lakhs which exceeded the sum allegedly paid to the husband of the

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4 2021 SCC Online SC 788

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5 2021 SCC Online Cal 3070

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6 Crl.A.No.294/2011 (DD 26.05.2011 Delhi High Court)

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7 Crl.A.No.2535/2010 (D.D.14.03.2018)

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8 2020 SCC Online Mad 5550

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9 (2002)6 SCC 426

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10 (2019)5 SCC 418

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respondent. On that count itself, the amount was not legally recoverable liability. When the issuance of the cheque itself was not established, the question of presumption under Section 139 of the NI Act does not arise. The initial burden of proving issuance of cheque was on the appellant which he failed to discharge. The defence of the respondent was established in the cross examination of the appellant himself. Therefore, there was no need for her to enter the witness box. The respondent was not liable to be dealt with under Section 138 of the NI Act for discharge of liability of her husband. Therefore, the trial Court rightly acquitted her.

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In support of his submissions he relied on the

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following judgments:

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i) Hiten Sagar and another vs. IMC Ltd and anr¹¹

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ii) Anant Bondre vs. Alfred David and anr¹²

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iii) Krishna Janardhan Bhat vs. Dattatraya G.Hegde¹³

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11 2001 Crl.L.J.4311

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12 2014(2) Crimes 33 (Bom)

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13 AIR 2008 SC 1325

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iv) A.Viswanatha Pai vs. Sri Vivekananda S. Bhat¹⁴

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v) M/s.Kumar Exports vs. M/s Sharma Carpets¹⁵

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vi) Nagisetty Nagaiah vs. State of A.P.& anr¹⁶ vii) Devender Kumar vs. Khem Chand¹⁷

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Having regard to the rival submissions, the

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question that arises for consideration is,

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“ whether the impugned order of acquittal passed by

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the trial Court is sustainable in law ?”.

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As per Section 138 of the NI Act, a person can be prosecuted and convicted for the offence of cheating, if any cheque drawn by him towards the discharge of any debt or any other liability is returned unpaid for want of sufficient funds and if he fails to pay the said amount within 15 days from the date of receipt of notice contemplated under Section 138(b).

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14 ILR 2009 Kar 172

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15 AIR 2009 SC 1518

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16 2004 Crl.L.J.4107

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17 Crl.R.P.679/2012 D.D.06.10.2015

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Though both side relied on host of judgments referred above, the ratio in the said judgments is that as per Section 118 of the NI Act until the contrary is proved, the presumption shall be that the cheque or negotiable instrument was drawn for consideration. It was further held that as per Section 139 of the NI Act, unless the contrary is proved it shall be presumed that the holder of the cheque received the same for discharge of any debt or any other liability.

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The initial burden of establishing the issuance

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of the cheque is on the complainant. Once such burden is discharged, then burden shifts to the accused to show that there was no legally recoverable debt for the cheque issued or consideration was not received. If the accused discharged that burden, then onus reverses to the complainant to establish that there was legally recoverable debt or other liability. It is held that the burden on the accused is not as strict as on the complainant. But, he has to probabilise his defence.

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In para 11 of the judgment in M/s Kumar

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Exports’ case, it was discussed how the accused has to probabilise his defence to rebut the presumption under Section 118 and 139 of the NI Act. The said paragraph reads as follows:

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“11. The use of the phrase “until the contrary is proved” in Section 118 of the Act and use of the words “unless the contrary is proved” in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no

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consideration and debt existed . To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt

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or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act. The accused has also an option to prove the nonexistence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases , from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue."

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(Emphasis supplied)

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The reading of the above paragraph shows that bare denial of existence of debt would not serve the

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purpose of the accused in rebutting the presumption. He has to bring on record something probable for getting the burden of proof shifted to the complainant. The accused should bring on record such facts and circumstances which persuade the Court to believe that the consideration or debt did not exist or non-existence of the same was so probable that a prudent man would under the circumstances believe the non-existence of the debt or liability. Therefore the test contemplated is the test of belief of a prudent man.

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No doubt it was held that the accused may rely upon circumstantial evidence. But it was held that the circumstances relied on by the accused should be so compelling to shift the burden against the complainant. Though it was held that the accused has an option to prove non-existence of consideration and debt or liability without letting in his evidence, it was held that only in clear exceptional cases , the accused can do so from the case set out by the complainant himself. Therefore, the other

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test is whether there was exceptional or clear case for the respondent to prove the non- existence of the liability from the evidence of the complainant himself.

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As already pointed out, the respondent did not dispute her signatures on the cheques and that the cheques pertain to her account. She did not even dispute that she was running the business. She herself suggested to PW.1 in the cross examination that only Rs.62,00,000/was credited to her account from the account of the appellant. Ex.P5 is the bank account statement of the appellant. In para 3 of the cross examination of the appellant the particulars of the amount transferred from the account of the appellant to the account of the accused and her husband are elicited. The total amount transferred from the appellant’s account to respondent’s account is Rs.62,00,000/- In his cross examination the said entries or the payments are not impeached. Similarly in para No.2 of the cross examination of PW.1, the particulars of the amounts transferred from the account of

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the appellant to the account of the husband of the respondent are elicited. That shows the transfer of Rs.1,06,70,000/-. Even those entries were not disputed.

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As against that, it was her specific case that the appellant has paid the amount to her husband, therefore, she is not liable to be dealt with under Section 138 of the NI Act for the liability of her husband. She herself states that from the account of her husband a sum of 24,30,000/- was transferred to the account of the appellant. During the course of cross examination the transaction under Ex.P5 was not impeached. If there was no transaction between the appellant and the respondent, why an amount of Rs.62,00,000/- was transferred to her account, was not explained by the respondent.

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Under section 114 illustration (f) of the Indian Evidence Act, there is a presumption that common course of business has been followed in particular case. The account statement Ex.P5 is maintained and issued in the common course of business of the bank. There was no

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reason to disbelieve the entries in the said document. Thereby by oral evidence of PW.1 and the entries in Ex.P5 coupled with the admission of signatures of accused on the cheques and in view of Section 118 and 139 of the NI Act, the appellant discharged his initial burden that the cheques were issued towards the discharge of liability of the respondent.

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The next question is whether the respondent rebutted the presumption. Much was argued relying on the judgments in Janardan and Mudibasappa’ s cases that the accused need not enter the witness box and she has the right of silence. It was even argued that there is no presumption under Section 139 of the NI Act about legally recoverable debt or liability.

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The larger bench of the Hon’ble Supreme Court in para 14 of the judgment in Triyambak Hegde ’s case referred to supra after referring to its several other earlier judgments held that it is clear that signatures on the cheque having been admitted, a presumption shall be

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raised under Section 139 that the cheque was issued in discharge of debt or liability. It was further held that the question to be looked into is as to whether any probable defence was raised by the accused. In para 16 of the said judgment it was held that the legal position relating to presumption arising under Sections 118 and 139 of the NI Act has been reitereated in Basalingappa ’s case. Therefore, whether there is rebuttal or not depends on the facts of each case.

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In the light of the said judgments, this Court

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has to examine whether on the facts and circumstances of this case, the presumption was rebutted. The defence of

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the accused was that her husband and appellant were doing business. It is her further case that her husband has misused her cheques and passed them to the appellant to falsely implicate her. She means that her husband has colluded with the appellant. If that is the case, the reaction or response of a person of ordinary prudence when he receives notice claiming that the cheques were

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issued for discharge of liability is to deny the same and put forth such defence.

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So far as the service of notice, only bald denial was made in the cross examination of PW.1 which he denied. The notice was issued to the respondent to the address mentioned in the complaint itself. The summons was served on the respondent in the said address. As per Section 27 of the General Clauses Act as well as Section 114 illustration (f) of the Indian Evidence Act once a letter is posted under the Registered Post Acknowledgment Due, the service is effected by properly addressing, pre-paying and posting the registered post to the ordinary residence of the addressee, the presumption is that the letter is delivered.

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Such presumption stands rebutted only when the addressee enters the witness box and disputes the delivery of the letter. That does not stand rebutted by mere denial in the cross examination of PW1. If once the service is imputed to the respondent, the contents of the

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notice also stand imputed. As already pointed out, at the first instance, if there was no liability and cheques were not issued for discharge of liability, as a person of ordinary prudence, she would have denied the same by issuing reply notices.

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Further if the appellant or husband of the respondent misused the cheques or he facilitated the appellant for false implication, the response of a person of ordinary prudence is to file complaints against them to the Police and bank authorities. She has not taken any such steps. Nothing was placed to show that herself and her husband have fallen out or residing separately. There were not even such suggestions to PW.1 in his cross examination. No legal proceedings between them were brought on record. Therefore, it is clear that it is only a connivance between husband and wife to evade the liability.

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The next contention was that under Section 138 of the NI Act, the respondent is liable to be prosecuted

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or punished only if the cheque covered her liability and not the liability of her husband. In that context, several judgments of Bombay High Court and Madras High Court were cited. But, the Hon’ble Supreme Court in para 9 to 11 of the judgment in ICDS limited’s case referred to supra while analyzing the provisions of Section 138 of the NI Act held that Section 138 not only includes the cheques issued towards the discharge of any debt, but other liability also. The Hon’ble Supreme Court stressed on the phrase ‘other liability’

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In para 10 and 11 of the judgment in ICDS Limited’ s case it was held as follows:

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“10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the Section stands with the words "Where any cheque". The above noted three words are of extreme significance, in particular, by reason of the user of the word " any " - the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in

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favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid . The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well . This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment.

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The issue as regards the co-extensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any discussion therein. The language of the Statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of

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application of the provisions of Section 138 of the Act: 'Any cheque' and 'other liability' are the two key expressions which stand as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. Any contrainterpretation would defeat the intent of the legislature . The High Court, it seems, got carried away by the issue of guarantee and guarantor's liability and thus has overlooked the true intent and purport of Section 138 of the Act. The judgments recorded in the order of the High Court do not have any relevance in the contextual facts and the same thus do not lend any assistance to the contentions raised by the respondents.”

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(Emphasis supplied)

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Reading of the above paragraphs shows that the Hon’ble Supreme Court interpreted that the term ‘other liability’ includes not only the liability of the drawer of the cheque, but the other liability also. In that judgment it was held that interpreting Section 138 of the NI Act only to include the drawer’s liability defeats the intention of the legislature.

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32. This Court in Honavar Taluka Primary Co-

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operative Agricultural and rural development Bank’s

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case referred to supra, in similar circumstances, held that the cheques issued towards the discharge of debt of the father is also covered under Section 138 of the NI Act.

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In the case on hand, the contention of the appellant was that the cheques were issued, the amount was transferred to the account of the husband of the respondent on her assurance that he will be made her business partner. Even otherwise, in the light of the entries in Ex.P5 there is a ring of truth that the cheques were issued towards the repayment of the amount transferred to the account of her husband. Therefore, the presumption under Sections 118 and 139 of the NI Act do arise.

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Under such circumstances, the respondent was

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bound to enter the witness box and explain the circumstances. To claim that she can maintain silence and

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need not enter the witness box, her case did not fall under the category of exceptional cases as contemplated under the judgment of the Hon’ble Supreme Court in Kumar Exports’ case. If everything was all right, her defence was so firm and sustainable, the respondent could have entered the witness box and exposed herself for the test of cross examination. By evading that she deprived the complainant of demonstrating his case by cross examining her. Under such circumstances, the appellant is entitled to the benefit of adverse inference as contemplated under Section 114 illustration (g) of the Indian Evidence Act.

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In the light of the aforesaid larger bench judgment of the Hon’ble Supreme Court and the judgment in Kumar Exports ’ case, the other judgments regarding rebuttal of the presumption relied on by the learned counsel for the respondent do not call for any further discussion.

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The trial Court failed to appreciate the principles of law on rebutting the presumption under

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CRL.A.No.1470/2018 C/W Crl.A.Nos. 1471/2018, 1472/2018, 1473/2018, 1474/2018, 1475/2018

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Sections 118 and 139 of the NI Act. Unfortunately the trial Court despite there being sound evidence of transfer of amount, went on to hold that the appellant has not produced any document, appellant should have taken some document for transfer of such huge amount, therefore, his case is doubtful. The impugned order of acquittal is wholly unsustainable. Therefore, the appeals are allowed.

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The impugned orders of acquittal are hereby set aside. The respondent is hereby convicted in C.C.Nos. 11652/2017, 12227/2017, 13040/2017, 12629/2017, 13047/2017, 12527/2017 for the offence punishable under Section 138 of the NI Act.

¶188

The respondent accused is hereby sentenced to pay double the cheque amounts in each case. In default to pay the fine amount, she shall undergo simple imprisonment of one month in each case.

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Out of the fine amount, a sum of Rs.25,000/- in each case shall be defrayed towards the cost of prosecution payable to the state. The balance amount shall be paid to

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CRL.A.No.1470/2018 C/W Crl.A.Nos. 1471/2018, 1472/2018, 1473/2018, 1474/2018, 1475/2018

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the appellant as compensation under Section 357 of

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Cr.P.C.

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Sd/JUDGE

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akc