Dismissed

Smt Surekha Shetty v. Smt Lolakshi Bangera

Karnataka HC31 Oct 2023CRL.RP/559/2016

Case brief

AI extract

What is this about?

High Court of Karnataka dismissed a criminal revision petition under Cr.P.C. challenging convictions under Section 138 of the N.I. Act. The Court held that statutory presumptions under Sections 118 and 139 of the N.I. Act favoring the holder were correctly drawn, upheld by the trial and appellate courts, as the accused failed to provide cogent evidence to rebut the presumption of a legally enforce

What the court decided

AI extract

Smt Surekha Shetty Vs Smt Lolakshi Bangera — Cheque Dishonour | Karnataka HC (2023)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 31^ST DAY OF OCTOBER, 2023

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BEFORE

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THE HON'BLE MR JUSTICE VENKATESH NAIK T CRIMINAL REVISION PETITION NO.559 OF 2016

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BETWEEN:

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SMT. SUREKHA SHETTY AGED ABOUT 46 YEARS W/O. VISHWANATHA SHETTY RESIDING AT AIKALA KELAGINAMANE AIKALA POST MANGALURU, D.K. - 576 101.

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…PETITIONER

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(BY SRI NISHIT KUMAR SHETTY, ADVOCATE)

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AND:

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Digitally signed by VINUTHA M Location: HIGH COURT OF KARNATAKA

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SMT. LOLAKSHI BANGERA AGED ABOUT 50 YEARS W/O. GOPALA BANGERA RESIDING AT DEVIKRIPA SHANTHINAGAR ROAD, KINNIGOLI MANGALURU, D.K. - 575 101.

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(BY SRI NAVEEN S., ADVOCATE)

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…RESPONDENT

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THIS CRIMINAL REVISION PETITION IS FILED UNDER SECTION 397(2) READ WITH SECTION 401 OF THE CR.P.C. PRAYING TO SET ASIDE THE JUDGMENT AND ORDER OF CONVICTION DATED 25.07.2014 MADE IN C.C. NO.5812/2008 BY THE COURT OF J.M.F.C.(IV COURT), D.K., MANGALURU, AND THE JUDGMENT AND ORDER DATED 22.03.2016 MADE IN CRL.A. NO.191/2014 BY THE IV ADDITIONAL DISTRICT AND SESSIONS JUDGE, D.K., MANGALURU.

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THIS CRIMINAL REVISION PETITION IS COMING ON FOR HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:

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O R D E R

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The petitioner has filed this revision petition under Section 397(2) read with Section 401 of the Code of Criminal Procedure, 1973 (for short, 'Cr.P.C.') to set aside the judgment of conviction and order on sentence dated 25-7-2014 passed in Criminal Case No.5812 of 2008 by the IV Judicial Magistrate First Class, Mangaluru, and confirmed by the IV Additional District and Sessions Judge, Dakshina Kannada, Mangaluru, in Criminal Appeal No.191 of 2014 on 22-3-2016.

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For the sake of convenience, the parties are

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referred to as per their ranking before the trial Court. The petitioner is the accused and the respondent is the complainant.

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The brief facts of the complainant is that in order to repay the amount received by the accused, she issued a cheque-Ex.P1 dated 26-6-2007 for a sum of Rs.1.00 lakh drawn on State Bank of India, Kinnigoli Branch,

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Mangaluru. On being presentation of the cheque, the same was dishonoured for 'insufficient funds' in the account of the accused. Thus, the complainant issued notice on 14-7-2007 calling upon the accused to pay the amount due under the cheque. However, even after receipt of notice, the accused neither replied to the notice nor repaid the amount. Hence, the complainant filed a private complaint under Section 200 of the Cr.P.C. for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short, 'N.I. Act').

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Soon after registration of the complaint, the Magistrate took cognizance of the offence, recorded plea of the accused and in order to prove the case, the complainant examined herself as PW.1 and got marked twenty documents as per Exs.P1 to P20. Thereafter, the Magistrate recorded the statement of the accused under Section 313 of the Cr.P.C. The accused denied all the incriminating material against her and she examined herself as DW.1 and she examined one more witness as

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DW.2 and got marked four documents as per Exs.D1 to D4. Based on oral and documentary evidence on record, the trial Court convicted the accused for the offence punishable under Section 138 of the N.I. Act and sentenced her to pay a fine of Rs.1,05,000/- and in default of payment of fine, to undergo simple imprisonment for a period of one year.

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Aggrieved by the judgment of conviction passed by the trial Court, the accused preferred appeal. The First Appellate Court also confirmed the judgment. Hence, this petition.

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Learned counsel for the petitioner has contended that the judgments passed by the trial Court as well as the First Appellate Court are not in accordance with law and the complainant has not produced any material to prove the debt. Hence, he prayed to allow the petition.

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Admittedly, the complainant filed a private complaint under Section 200 of the Cr.P.C. and in order to

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establish her claim, she examined herself as PW.1 and got marked twenty documents. Ex.P1 is the cheque, Exs.P2 and P3 are the bank memos, Ex.P4 is the legal notice, Ex.P5 is the postal acknowledgment, Ex.P6 is the UCP receipt, Ex.P7 is the postal receipt, Exs.P8 and P9 are the RPAD cover, Ex.P10 is the postal receipt, Ex.P11 is the RTC extract, Exs.P12 to P16 are the tax paid receipts, Exs.P17 & P18 are the rent agreements, Ex.P19 is the account opening form and Ex.P20 is the account statement.

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In the instant case, the accused has not disputed the issuance of the cheque, dishonour of the cheque, issuance of legal notice by the complainant. Therefore, the complainant has complied with the requirements of Section 138 of the N.I. Act. In order to establish this aspect, the complainant examined herself and produced Ex.P1-cheque, bank endorsement and legal notice. The initial burden casted upon the complainant is sufficiently

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discharged by her. Now, it is for the accused to disprove the case of the complainant.

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The accused has taken the contention that the cheque has been misutilised and the complainant had no capacity to lend the loan amount. Further, the accused has taken contention that the cheque was not issued for legally enforcement debt, but in order to satisfy the same, the accused has not produced any contra evidence to disprove the evidence of the complainant.

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Whenever execution of negotiable instruments is admitted, then the Court may draw presumption under Section 118 of the N.I. Act, which reads as under:

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" 118. Presumptions as to negotiable

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

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(a) of consideration — that every

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negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or

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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 indorsements — that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;

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(f) as to stamps — 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

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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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Thus, the Court shall draw presumption under

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Section 139 of the N.I. Act, which reads as under:

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" 139. Presumption in favour of holder .— It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."

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In the present case, the complainant has proved that the cheque was issued towards legally enforceable

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debt. In the case of DON AYENGIA v. STATE OF ASSAM

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AND ANOTHER reported in (2016) 3 SCC 1 , the Hon'ble Apex Court has clearly held that, if cheque issued towards discharge of any debt or other liability, it is to be called as legally enforceable debt within the meaning of Section 138 of the N.I. Act. As a matter of fact, the existence of debt

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or liability is disputed by the accused. However, no material is placed to support the defence of the accused. In the absence of such action against the complainant, it deems that, the accused issued the cheque in question in favour of the complainant towards discharge of legally recoverable debt.

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If the cheque was issued for security in relation to other transactions, it should be construed as the same was issued towards legally enforceable debt or liability. There is a presumption that, negotiable instruments is supported by consideration, and the cheque issued is in connection with discharge of liability.

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In the instant case, the complainant has proved that on the relevant date, she lent money to the accused and in consideration thereof, the accused issued Ex.P1cheque in favour of the complainant. Further, the accused has not placed any material before the trial Court to prove

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under what circumstances, she issued the cheque in favour of the complainant.

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The accused has clearly admitted her signature on Ex.P1-cheque. When one person signs and delivers to another a negotiable instrument, either it is wholly blank or having written thereon an incomplete negotiable instrument, she thereby gives prima-facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp, the person so signing shall be liable upon such instrument under Section 20 of the N.I. Act. Therefore, the holder of the cheque by invoking Section 20 of the N.I. Act, filled up the cheque and presents for encashment, but in the instant case, the accused admitted the contents of Ex.P1, however, the trial Court has not drawn presumption under Section 118 of the N.I. Act, so as to consideration, as to date, as to time of acceptance, as to time of transfer and

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as to order of endorsements, as to stamps and that holder

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is a holder in due course.

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Thereby, the complainant proved the transaction and requirements of Section 138 of the N.I. Act. Now, the burden lies on the accused to prove non-existence of consideration which would lead the Court to believe nonexistence of consideration either by direct evidence or by probable to show that the existence of consideration was improbable, doubtful or illegal. But, the accused has not produced any kind of evidence to show that existence of consideration was improbable, doubtful or illegal. Therefore, the trial Court ought to have drawn presumption that the cheque was issued for legally enforceable debt, until contrary is established.

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In the instant case, the complainant filed a private complaint under Section 200 of the Cr.P.C., for the offence punishable under Section 138 of the N.I. Act, and

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she fulfilled the ingredients as required under Section 138 of the N.I. Act.

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When once issuance of the cheque is proved, the presumption under Section 138 of the N.I. Act would arise with regard to consideration. But the accused has not discharged the burden casted on her. Whether the accused has issued the cheque in favour of the complainant in respect of other transactions or for repayment of loan or as security or it was handed over to some financial institution,

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make no difference under Section 138 of the N.I. Act and the legal consequences were same without distinction. Thus, the complainant proved the requirements of Section 138 of the N.I. Act.

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On perusal of the oral and documentary evidence of the parties, it appears that, the complainant has proved the transaction and the cheque in question has been issued by the accused and the debt in question is legally recoverable debt and its dishonour on being presentation,

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but the trial Court failed to draw presumption available under Section 118 of the N.I. Act. Therefore, the evidence of parties has been re-appreciated in the light of the following decisions.

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The Hon'ble Apex Court in the case of RAJARAM, S/O. SRIRAMULU NAIDU (SINCE DECEASED) THROUGH L.RS. v. MARUTHACHALAM (SINCE DECEASED) THROUGH L.RS. reported in 2023 LiveLaw (SC) 46 has held as under:

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"12. This Court in the case of Basalingappa v. Mudibasappa (supra) has summarized the principles on Sections 118(a) and 139 of the N.I. Act. It will be relevant to reproduce the same.

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“25. We having noticed the ratio laid down by this Court in the above cases on Sections 118(a) and 139, we now summarise the principles enumerated by this Court in following manner:

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25.1. Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.

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25.2. The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities.

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25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.

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25.4. That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden.

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25.5. It is not necessary for the accused to come in the witness box to support his defence.”

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13. It can thus be seen that this Court has held that once the execution of cheque is admitted, Section 139 of the N.I. Act mandates a presumption that the cheque was for the discharge of any debt or other liability. It has however been held that the presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. It has further been held that to rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. It has been held that inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.

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14. In the said case, i.e. Baslingappa v. Mudibasappa (supra), the learned Trial Court, after considering the evidence and material on record, held that the accused had raised a probable defence regarding the financial capacity of the complainant. The accused was, therefore, acquitted. Aggrieved thereby, the complainant preferred an appeal before the High Court. The High Court reversed the same and convicted the accused. This Court found that

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unless the High Court came to a finding that the finding of the learned Trial Court regarding financial capacity of the complainant was perverse, it was not permissible for the High Court to interfere with the same."

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The Hon'ble Apex Court in the case of

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P. RASIYA v. ABDUL NAZER AND ANOTHER in Criminal Appeal Nos.1233-1235 of 2022 disposed of on

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12-8-2022, has held as under:

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7. "xxx xxx As per Section 139 of the N.I. Act, it

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shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for discharge, in whole or in part, of any debt or other liability. Therefore, once the initial burden is discharged by the complainant that the cheque was issued by the accused and the signature and the issuance of the cheque is not disputed by the accused, in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for any debt or other liability. The presumption

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under Section 139 of the N.I. Act is a statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt or other liability which is in favour of the complainant/holder of the cheque, in that case, it

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is for the accused to prove the contrary."

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The Hon'ble Apex Court in the case of BASALINGAPPA v. MUDIBASAPPA reported in

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(2019) 5 SCC 418 has held as under:

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"22. Elaborating further, this Court in Rangappa case [(2010) 11 SCC 441] held that Section 139 of the Act is an example of a reverse onus and the test of proportionality should guide the construction and interpretation of reverse onus clauses on the defendant-accused and the defendant-accused cannot be expected to discharge an unduly high standard of proof. In paras 27 and 28, the following was laid down (Rangappa case, SCC pp.453-54):-

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“27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of

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the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof.

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28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that

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when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.”

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23. We may now notice the judgment relied on by the learned counsel for the complainant, i.e., judgment of this Court in Kishan Rao Vs. Shankargouda [(2018) 8 SCC 165]. This Court in the above case has examined Section 139 of the Act. In the above case, the only defence which was taken by the accused was that cheque was stolen by the appellant. The said defence was rejected by the trial court. In paras 21 to 23, the following was laid down:

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“21. In the present case, the trial court as well as the appellate court having

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found that cheque contained the signatures of the accused and it was given to the appellant to present in the Bank, the presumption under Section 139 was rightly raised which was not rebutted by the accused. The accused had not led any evidence to rebut the aforesaid presumption. The accused even did not come in the witness box to support his case. In the reply to the notice which was given by the appellant, the accused took the defence that the cheque was stolen by the appellant. The said defence was rejected by the trial court after considering the evidence on record with regard to which no contrary view has also been expressed by the High Court.

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22. Another judgment which needs to be looked into is Rangappa v. Sri Mohan. A three-Judge Bench of this Court had occasion to examine the presumption under Section 139 of the 1881 Act. This Court in the aforesaid case has held that in the event the accused is able to raise a probable defence which creates doubt with regard

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to the existence of a debt or liability, the presumption may fail. The following was laid down in paras 26 and 27:

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“26. In light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat [(2008) 4 SCC 54] may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt

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that there is an initial presumption which favours the complainant.

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27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such

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a scenario, the test of proportionality should guide the

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construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof.”

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23. No evidence was led by the accused. The defence taken in the reply to the notice that cheque was stolen having been rejected by the two courts below, we do not see any basis for the High Court coming to the conclusion that the accused has been successful in creating doubt in the mind of the Court with regard to the existence of the debt or liability. How the presumption under Section 139 can be rebutted on the evidence of PW1, himself has not been explained by the High Court."

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The Hon'ble Apex Court in the case of RANGAPPA v. SRI MOHAN reported in (2010) 11

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SCC 441 has held as under:

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"29. Coming back to the facts in the present case, we are in agreement with the High Court's view that the accused did not raise a probable defence. As noted earlier, the defence of the loss of a blank cheque was taken up belatedly and the accused had mentioned a different date in the `stop

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payment' instructions to his Bank. Furthermore, the instructions to `stop payment' had not even mentioned that the cheque had been lost. A perusal of the trial record also shows that the accused appeared to be aware of the fact that the cheque was with the complainant. Furthermore, the very fact that the accused had failed to reply to the statutory notice under Section 138 of the Act leads to the inference that there was merit in the complainant's version. Apart from not raising a probable defence, the appellant-accused was not able to contest the existence of a legally enforceable debt or liability."

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Adverting to the case on hand, the trial Court as well as the First Appellate Court rightly appreciated the evidence on record and statutory presumption drawn under Sections 118 and 139 of the N.I. Act. The statute mandates that once the signature of the accused on the cheque is established, then these ‘reverse onus’ clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon her. This point of law has been crystallized by the Hon'ble Apex Court in the case of ROHITBHAI JIVANLAL PATEL v. STATE OF GUJARAT AND

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ANOTHER reported in (2019) 18 SCC 106 in the following words:

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“18. 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 appellant-accused.”

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Once the accused admitted her signature on the cheque, the trial Court presumed that the cheque was issued as consideration for a legally enforceable debt.

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No doubt, as correctly argued by the learned counsel for the complainant, the presumptions raised under Sections 118 and 139 are rebuttable in nature. In M.S. NARAYANA MENON @ MANI v. STATE OF KERALA AND ANOTHER reported in (2006) 6 SCC 39 which is relied upon in Basalingappa's case ( supra ), a probable defence needs to be raised, which must meet the standard of “preponderance of probability”, and not mere possibility. It appears that, a bare denial of passing of consideration would not aid the case of the accused.

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Even if the arguments raised by the accused at

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face value that the cheque was issued for security to the complainant, even then also it would attract Section 138 of the N.I. Act. In the instant case, the issue of the cheque by the accused in favour of the complainant is not disputed, signature found on Ex.P1-cheque is not disputed, the legal notice issued by the complainant is not replied by the accused, and no complaint is lodged alleging that the cheque has been misused by the

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complainant. Admittedly, the accused did not enter the witness box to discredit the evidence of the complainant and her witnesses. On the contrary, the complainant is able to prove her case. Hence, the statutory presumptions can be raised. It is useful to cite the judgment in the case of BIR SINGH v. MUKESH KUMAR reported in (2019) 4 SCC 197 , wherein the Hon'ble Apex Court has held that:

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“36. 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.”

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If the cheque was issued for security in relation to

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other transactions, it should be construed as the same was issued towards legally enforceable debt or liability. There is a presumption that, the negotiable instruments is

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supported by consideration and the cheque was issued in connection with discharge of liability.

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In the instant case, the complainant has proved that on the relevant date, she lent money to the accused and in consideration thereof, the accused issued Ex.P1cheque in favour of the complainant. Further, the accused has not placed any material before the trial Court to prove under what circumstances she issued the cheque in favour of the complainant and her signature found in Ex.P1 before the trial Court.

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Thus, the trial Court as well as the First Appellate Court rightly appreciated the oral and documentary evidence and proceeded to convict the accused for the offence punishable under Section 138 of the N.I. Act. Therefore, there is no error or illegality committed by the Courts below to interfere by this Court. Accordingly, the petition is dismissed .

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Registry is directed to send back the trial Court record with a copy of this order, forthwith.

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Sd/JUDGE

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KVK List No.: 1 Sl No.: 1

Smt Surekha Shetty v. Smt Lolakshi Bangera

Case brief

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What the court decided

Smt Surekha Shetty v. Smt Lolakshi Bangera

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