Allowed

Jayalal C.D. @ Chandran v. State of Kerala and Another

Kerala HC10 Oct 2023CRL.A/560/2011

Case brief

AI extract

What is this about?

In Crl.A. No. 560/2011, Kerala HC allowed an appeal against acquittal in a cheque bounce case. The court held that issuing a cheque six years after the underlying transaction constitutes a fresh promise to pay a debt barred by limitation under Section 25(3) of the Indian Contract Act, thereby invoking statutory presumptions under the Negotiable Instruments Act.

What did the court decide?

Impugned acquittal set aside; accused convicted under Section 138 NI Act; sentenced to one day's imprisonment and fine of Rs. 1,00,000/-.

Jayalal C.D. @ Chandran Vs State of Kerala and Another — Cheque Dishonour | Kerala HC (2023)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE C.S.DIAS

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TUESDAY, THE 10TH DAY OF OCTOBER 2023 / 18TH ASWINA, 1945

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CRL.A NO. 560 OF 2011

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AGAINST THE JUDGMENT DATED 30.06.2010 IN CRA 341/2009 OF
ADDITIONAL DISTRICT COURT (ADHOC), KOTTAYAM

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AGAINST THE JUDGMENT DATED 30.06.209 IN ST.1936/2008 OF THE
JUDICIAL FIRST CLASS MAGISTRATE COURT-II (MOBILE), KOTTAYAM

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CRL.L.P. 108/2011 OF HIGH COURT OF KERALA

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APPELLANT/RESPONDENT/COMPLAINANT:

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JAYALAL C.D. @ CHANDRAN,

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CHAMAPARA HOUSE, MOOLAVATTOM PO,

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DIVANPURAM, NATTAKOM VILLAGE, KOTTAYAM.

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BY ADVS.SRI.PHILIP T.VARGHESE
SRI.THOMAS KACHIRAMATTOM

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RESPONDENTS/ APPELLANT/ STATE & ACCUSED:

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1STATE OF KERALA REPRESENTED BY THE
PUBLIC PROSECUTOR, HIGH COURT OF KERALA,
ERNAKULAM, PIN-682031.

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2M.S.PRASAD,
MADATHILPARAMBIL HOUSE,
KODIMATHA PO, KOTTAYAM
PIN 686001.

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BY ADV SRI.M.P.MADHAVANKUTTY
SRI.ANANTHAKRISHNAN A. KARTHA

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OTHER PRESENT:

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SR PP SMT PUSHPALATHA M K

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THIS CRIMINAL APPEAL HAVING COME UP FOR ADMISSION ON
10.10.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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Crl.A.No.560/2011

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Dated this the 10^th day of October, 2023

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J U D G M E N T

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This appeal is filed questioning the correctness

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and legality of the judgment passed by the Additional Sessions Court, Kottayam (Appellate Court) in Crl.A. No.341/2009, setting aside the conviction and sentence passed by the Judicial First Class Magistrate-II (Mobile), Kottayam (Trial Court), in S.T.No.1936/2008 of the second respondent for the offence under Section

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138 of the Negotiable Instruments Act, 1988 (for brevity, ‘N.I. Act’). The appellant was the complainant and the second respondent was the accused before the Trial Court. For convenience, the parties are referred to as per the status before the Trial Court

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Factual narrative:

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The complainant had filed S.T.No.1936/2008

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before the Trial Court, alleging that the accused had committed the offence under Section 138 of the N.I.

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Crl.A.No.560/2011

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Act. He alleged that the accused was conducting a chitty named ‘Madathiparambil Chitty Funds’. The complainant had joined a chitty in the year 1999 for a sala of Rs.1,00,000/-. The complainant had remitted the entire chitty amount. But, the accused failed to pay the chitty amount. Subsequently, the complainant and the accused jointly fixed the amount at Rs.1,00,000/and in discharge of the said liability, the accused had issued Ext P1 cheque dated 06.08.2007. The cheque, on presentation to the Bank for collection, got returned by Ext P2 memorandum for the reason “refer to drawer”. Even though the complainant had issued Ext P3 statutory lawyer notice to the accused, he failed to pay the demanded amount. Hence, he committed the offence.

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The learned Magistrate took cognizance of the offence against the accused. The accused had pleaded not guilty to the accusation made against him. In the trial,

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the complainant got himself examined as PW1 and Exts P1 to P7 were marked in evidence. The accused examined himself as DW1 and marked Ext D1 – ledger extract.

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Trial Court judgment:

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The learned Magistrate, after analysing the materials on record, found the accused guilty for the offence under Section 138 of the N.I. Act, and convicted and sentenced him to undergo imprisonment till the rising of the court and pay a fine of Rs.1,00,000/-, and in default to undergo simple imprisonment for a further period of two months. If the fine amount was realised, the same to be paid as compensation to the complainant.

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Aggrieved by the said judgment, the accused preferred Crl.A.No.341/2009 before the Appellate Court.

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Appellate Court judgment:

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The Appellate Court, after re-appreciating the

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materials placed on record, by the impugned judgment, set aside the order of conviction and sentence passed by the learned Magistrate, and held that the accused not guilty for the offence under Section 138 of the N.I. Act and consequentially, acquitted him.

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It is challenging the said judgment of acquittal, the present appeal is filed.

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Heard; Sri.Thomas Kachiramattom, the

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learned counsel appearing for the appellant; Smt. Pushpalatha M.K., the learned Senior Public Prosecutor appearing for the first respondent – State and Sri. Ananthakrishnan A. Kartha, the learned counsel appearing for the second respondent.

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Sri.Thomas Kachiramattom argued that the Appellate Court has erroneously held the accused not guilty for the offence under Section 138 of the N.I. Act

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without appreciating the presumption under Sections 118 & 139 of the N.I. Act. The Appellate Court has miserably failed to advert to the materials on record and the law laid down by this Court in Ramakrishnan v. Parthasaradhy [2003 KHC 462] and wrongly held that the transaction was time barred and Ext P1 cheque was not issued towards a legally enforceable debt. He also placed reliance on the decision of the Division Bench of this Court in Vathsan v. Japahari [2003 (3) KLT 972], to fortify the contention that the prosecution under Section 138 of the N.I. Act would apply, even if the bank account is closed. He prayed that the appeal be allowed and the impugned judgment be set aside.

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Sri. Ananthakrishnan A. Kartha vehemently resisted the submissions of the learned counsel for the appellant and supported the impugned judgment. He placed reliance on the decision of the Hon'ble Supreme Court in P. Mohanraj v. M/s Shah Brothers

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Ispat Pvt. Ltd. [(2021) 6 SCC 258], wherein it has been held that a debt or liability which is barred by the law of limitation would fall outside the scope of Section 138 of the N.I. Act. He further contended that since the transaction was of the year 1999 and PW1 admitting in his oral testimony that the chitty was closed in the year 2001, and the cheque being of the year 2007, the transaction was time barred. Hence, by virtue of Section 25 of the Indian Contract Act, 1872, read with Section 43 of the N.I. Act the purported agreement was void and, therefore, the statutory presumption under Sections 118 & 139 of the N.I. Act will not be attracted. The Appellate Court has rightly concluded that Ext P1 cheque was not issued towards a legally enforceable debt. He prayed that the appeal be dismissed.

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It is well settled in a host of precedents of the Hon'ble Supreme Court and this Court that the

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Appellate Court should be relatively slow and circumspect in interfering with an order of acquittal, unless the conclusions arrived by the court below are manifestly erroneous and unjustifiable.

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In Jafarudeen vs. State of Kerala [2022 KHC 6449], the Honourable Supreme Court, after referring to its earlier judgments, has laid down the broad principles to deal with appeals against orders of acquittal. It is apposite to refer to the relevant portion of the judgment, which reads as follows:

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“ 25. Scope of Appeal filed against the Acquittal:

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While dealing with an appeal against acquittal by invoking S.378 of the Cr.PC, the Appellate Court has to consider whether the Trial Court's view can be termed as a possible one, particularly when evidence on record has been analyzed. The reason is that an order of acquittal adds up to the presumption of innocence in favour of the accused. Thus, the Appellate Court has to be relatively slow in reversing the order of the Trial Court rendering acquittal. Therefore, the presumption in favour of the accused does not get weakened but only strengthened. Such a double presumption that enures in favour of the accused has to be disturbed only by thorough scrutiny on the accepted legal parameters.”

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Recently in Rupesh Manger (Thapa) vs.

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State of Sikkim (MANU/SC/1014/2023) the

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Honourable Supreme Court has observed that an Appellate Court may reverse an order of acquittal if it is so perverse and the conclusion is not plausible. Just because another view is possible, on re-appreciation of the evidence, the Appellate Court shall not disturb the finding of acquittal and substitute its findings to convict the accused.

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The complainant alleged that he was a subscriber to the chitty conduced by the accused. Even though the accused had initially failed to pay the chitty amount, later on a bilateral consensus arrived at between the parties, the accused issued Ext P1 cheque for an amount of Rs.1,00,000/-. But, the cheque got dishonoured for the reason “refer to drawer”. Although the complainant had issued Ext P3 statutory lawyer notice, the accused refused to pay the demanded

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amount. Hence, he committed the offence.

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In Ext P3 statutory lawyer notice, the complainant has stated that the accused had issued Ext P1 cheque for the amount payable to the complainant. Admittedly, the accused did not send any reply notice to Ext P3 statutory lawyer notice. In the statement that was recorded under Section 313 of the Code of Criminal Procedure(in short, ‘Code’), the accused raised a contention that Ext P1 cheque was issued not towards a legally enforceable debt because the chitty was closed in the year 2001 and he had paid the entire amount to the complainant. The bank account was closed in the year 2003 and Ext P1 cheque was given to the complainant to purchase batteries. However, in his defence evidence, while being examined as DW1, he did not raise any of these contentions; but he marked Ext D1 ledger extract.

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The learned Magistrate, after appreciating the

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materials on record, concluded that the accused had failed to discharge the ‘reverse onus’ of proof under Section 139 of the N.I. Act and, therefore, Ext P1 cheque was issued towards a legally enforceable debt. Consequently, the accused was found guilty to have committed the above offence.

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In the appeal, the Appellate Court, after re-appreciating the materials on record, concluded that, as the cheque was dated 06.08.2007 and was issued for a transaction that took place six years back, the debt was barred by limitation. Therefore, the offence under Section 138 of the N.I. Act would not stand attracted. Accordingly, the impugned judgment was passed.

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The Division Bench of this Court in Vathsan v. Japahari (supra) has held that, even if a cheque is issued against an account which has been closed prior to the date of drawal of the cheque, the offence under

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Section 138 of the N.I. Act would stand attracted.

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The trump card of the defence was that, as PW1 has admitted that the chitty was closed in the year 2001 and the cheque being issued only on 06.08.2007, the claim put forth by the complainant is hopelessly time barred.

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In a case of an identical nature, the Division Bench of this Court in Ramakrishnan v. Parthasaradhy (supra) , after relying on Section 25(3) of the Indian Contract Act has held that the delivery of the cheque to the drawee creates a right to recover the money and on the cheque getting dishonoured, the drawer becomes liable for prosecution. The execution of a cheque is acknowledgment of a legally enforceable debt and if it is dishonoured, the consequence of prosecution and punishment follows.

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Section 25 of the Indian Contract Act, 1872, reads as follows:-

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“25. Agreement, if made, without consideration is void,

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Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.—

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An agreement made without consideration is void, unless—

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(1) it is expressed in writing and registered under the law for the time being in force for the registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other ; or unless

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(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless; (3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.

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In any of these cases, such an agreement is a contract.

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Explanation 1.—Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

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Explanation 2.—An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.”

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A reading of the above provision

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undoubtedly substantiates that an agreement without consideration is void, unless it is in writing or there is promise to pay a debt barred by limitation law.

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In addition to the law laid down in Ramakrishna (supra), in A.V. Murthy v B.S. Nagabasavanna [2002 KHC 1154], Natarajan S. V. Sama Dharman and Another [2021 KHC4882] and Hymavathi K. v. State of Andhra Pradesh [2023 (6) KHC 117], the Hon’ble Supreme Court held that a cheque itself is a promise to pay even if the debt is barred by time, in view of the provisions contained under Section 25(3) of the Indian Contract Act.

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Indisputably, the accused has not denied the date and execution of Ext P1 cheque. Section 118 of the N.I. Act specifically raises a presumption as regards consideration and date.

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Since the accused has failed to deny the date and execution of Ext P1 cheque, it is to be presumed

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that he consciously issued Ext P1 cheque on 06.08.2007. Therefore, the act of the accused in drawing Ext P1 clearly falls within the realm of Section 25(3) of the Indian Contract Act, especially when he does not have a case that Ext P1 cheque was issued under any vitiating circumstances.

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In addition to the above, in Ext P7, it is seen that the accused had issued the cheque in question and another cheque on 10.08.2007 and another five cheques on 11.08.2007, which are admittedly after the closing of the bank account on 19.04.2003. Therefore, it is clearer than the day light that Ext P1 cheque was voluntarily issued by the accused on the date it bears. Furthermore, Ext D1 ledger extract produced by the accused himself from his bank for the period from 01.10.2003 to 31.03.2004 shows that he had availed 13 cheque books for the said period and issued 23 stop memos during the said period. It is then, he closed his

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bank account on 19.04.2003. None of these aspects have been considered by the Appellate Court while passing the impugned judgment. Instead, the Appellate Court went on a tangent and found that, since the chitty was closed in the year 2001 and Ext P1 cheque being issued in the year 2007, the transaction was time barred debt.

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A negotiable instrument, which includes a cheque, carries the presumption of consideration under Sections 118(a) and 139 of the N.I Act. It is profitable to extract the said relevant provisions:

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“118. Presumptions as to negotiable instruments – 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,indorsed, negotiated or transferred, was accepted,indorsed, negotiated or transferred for consideration;

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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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A three-Judge Bench of the Hon’ble Supreme Court in Rangappa v. Sri.Mohan [2010 KHC 4325], while dealing with Section 139 of the N.I. Act has conceptualised the doctrine of ‘reverse onus’, by holding thus:

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“ 18. In light of these extracts, we are in agreement with the respondent - claimant that the presumption mandated by S.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 (supra) 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 that there is an initial presumption which favours the complainant. S.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 S.138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under S.139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by S.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 accused / defendant cannot be expected to discharge an unduly high standard or proof. In the

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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 when an accused has to rebut the presumption under S.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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Recently, a three-Judge Bench of the Hon’ble Supreme Court in Kalamani Tex and Anr v. P.

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Balasubramanian [2021 (2) KHC 517] has reiterated the legal position and doctrine of the reverse onus. It is apposite to extract the relevant paragraphs, which declares the law on the point in the following terms:

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“14. Adverting to the case in hand, we find on a plain reading of its judgment that the trial Court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA. The Statute mandates that once the signature (s) of an accused on the cheque/negotiable instrument are established, then these ‘reverse onus’ clauses become operative. In such a situation, the obligation shifts upon the accused to

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discharge the presumption imposed upon him. This point of law has been crystalized by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat (2019 (2) KHC 243).”

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Indisputably, the accused has admitted the execution of Ext P1 cheque. He has not sent any reply notice to Ext P3 statutory lawyer notice or let in defence evidence.

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On an appreciation of the materials on record, it can be seen that the accused had taken contradictory stands in his statement recorded under Section 313 of the Code and in the defence evidence. He had no answer regarding the execution and issuance of Ext P1 cheque on 06.08.2007. Thus, it is only to be inferred that the accused issued Ext P1 cheque on the subsequent understanding arrived at between him and the complainant and towards a legally enforceable debt. In view of Section 25(3) of the Contract Act, read with the law laid down in Ramakrishnan’s case and Hymavathi’s

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case (supra), I am of the definite view that Ext P1 cheque was issued towards the legally enforceable debt. Thus, I hold that the impugned judgment passed by the Appellate Court reversing the judgment of the learned Magistrate, is manifestly wrong and erroneous.

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Consequentially, I set aside the impugned judgment passed by the Appellate Court and restore the finding of guilt and conviction passed by the learned Magistrate in S.T. No.1936/2008.

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Now, coming to the question of sentence.

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It is well settled in a plethora of judgments that Section 138 of the N.I. Act is more quasi-criminal in nature. The objective and intention of the legislature is compensatory in nature to infuse the credibility in cheques being issued in commercial transactions. Thus, I am of the view that ends of justice would be met by sentencing the accused to undergo imprisonment for a day and pay a compensation of Rs.1,00,000/- and in

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default to undergo default sentence.

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In the result,

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(i) The appeal is allowed;

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(ii) The impugned judgment passed by the Appellate Court is set aside;

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(iii) The finding of guilt and conviction passed by the learned Magistrate holding the accused guilty for an offence under Section 138 of the N.I. Act is upheld;

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(iv) The second respondent/accused is sentenced to undergo imprisonment for a day (till the rising of the court), and to pay a fine of Rs.1,00,000/within 60 days from today, and in default to undergo imprisonment for a period of three months. If the fine amount is realised, the same to be paid as compensation to the appellant/ complainant as provided under Section 357(1) (b) of the Code;

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(v) The second respondent/ accused is directed to appear before the Trial Court on or before 10.12.2023 to undergo the sentence and pay

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the fine amount;

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(vi) In case of failure of the second respondent/accused to appear before the Trial Court to undergo the sentence and pay the fine amount, the Trial Court is directed to execute the sentence and recover the fine amount and also implement the default sentence.

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