Dismissed

N.v.Venkatraman v. Ananda Valli

Madras HC7 Aug 2014CRL OP/5869/2010

Case brief

AI extract

What is this about?

This Division Bench quashed a reference regarding a single Judge's observation on cheques issued as security. The Court held that a subsequent cheque on a prior promissory note prima facie discharges a subsisting liability. The quash petitions in cheque dishonour cases were dismissed as they did not meet conditions for quashing under Section 482 Cr.P.C.

What did the court decide?

Quash petitions dismissed; trial directed to be completed within six weeks of receipt of the order.

N.v.Venkatraman Vs Ananda Valli — Cheque Dishonour | Madras HC (2014)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED 07.08.2014

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CORAM

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THE HONOURABLE MR. JUSTICE S.RAJESWARAN AND THE HONOURABLE MR. JUSTICE P.N.PRAKASH Crl.O.P.Nos.5869 to 5873 of 2010 and M.P.Nos.1 of 2010 [5 M.Ps.] and M.P.Nos.1 of 2011 [5 M.Ps.] N.V.Venkatraman ...Petitioner in Crl.O.P.Nos.5869 to 5871/2010 G.Radhakrishnan ...Petitioner in Crl.O.P.Nos. 5872 & 5873/2010 Versus Ananda Valli ...Respondent in all Crl.O.Ps.

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Criminal Original Petitions filed under Section 482 Cr.P.C. to call for the entire records relating to the case in C.C.Nos.8, 9, 10, 39 and 40 of 2007 respectively, pending on the file of the Hon'ble Judicial Magistrate No.IV at Vellore and quash the same.

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For Petitioners : Mr.S.Xavier Felix For Respondent : Mr.R.Nalliyappan

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Since the issue involved in these cases is common, they are decided by this common order.

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This batch of criminal original petitions have been filed by the accused challenging the prosecutions launched by the respondent/complainant for offence under Section 138 of the Negotiable Instruments Act.

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It is the case of the complainant that the accused had borrowed various amounts on the dates specified in each of the complaint, for which he had executed promissory notes in favour of the complainant. When the complainant demanded repayment of the money, the accused had issued cheques on various dates for various amounts, which, when presented were dishonoured by the Bank. After the dishonour of the cheques, the complainant had issued statutory notices as required under the Negotiable Instruments Act. As there was neither reply nor repayment as demanded in the statutory notice, complaints were lodged before the jurisdictional Court against the accused. On receipt of the summons, the accused appeared before the Court and he was furnished with a copy of the complaint. Challenging the complaints, the accused has preferred these quash petitions on various grounds before this Court.

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When the quash petition came up for admission before a learned single Judge of this Court, a judgment of a single Judge of this Court [Hon'ble Mrs. Justice R.Banumathi, as she then was] reported in 2004 (2) MWN (Cr.) DCC 14 (Mad.) [M/s Sarathy Enterprises, by its Manager, Rajendran v. Selvaraj] was relied upon by the learned counsel for the petitioner.

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The learned single Judge, on perusal of the said judgment felt that the law laid therein requires re-consideration and hence, the matter was placed before The Hon'ble, The Chief Justice. On the orders of the Hon'ble Chief Justice, the matter was referred to this Division Bench. The reference that was made by the learned Judge runs as under:

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"In the decision of C.A.No.816/1996 dated 09.02.2004 the learned Judge of this Court, while dealing with a case u/s 138 of the Negotiable Instruments Act, inter alia has observed as follows:

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"9. Admittedly, the loan transaction between the Complainant/Appellant and Sheela, wife of Jayaraman was in the year 1993, i.e. on 19.06.1993. The said Sheela is said to have borrowed a sum of Rs.60,000/-. According to the complainant, the accused had given the cheque for that debt payable by Sheela. In the complaint, absolutely there is no allegation in what capacity and for what purpose the accused issued Ex.A1

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cheque. In the complaint only vague averments are made that "the accused explaining the position. The accused later accepting the situation issued his cheque No.792017...." Ex.A1 cheque is said to have been issued by the accused on 08.07.1994, i.e., nearly ten months after the loan transaction. Obviously, Ex.A1 cheque was not issued at the time of borrowal of the loan. In his evidence, P.W.1 has stated that the accused had signed in the promissory note while Sheela borrowed the amount. If that be so, only the promissory note said to have been signed by the Accused could form a security and certainly not Ex.A1 cheque. When Ex.A1 cheque was not issued as a collateral security for the loan, there cannot be said to be debt or subsisting liability by the Accused towards the Complainant. When the Accused is neither proved to be the guarantor nor Ex.A1 cheque is proved to have been issued as a collateral security for the loan transaction, it cannot be said that Ex.A1 cheque was issued to discharge the subsisting liability."

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I am of humble opinion that the matter would require reconsideration since the very existence of a promissory note or prior date would prima facie be proof of liability and the subsequent issue of cheque towards effecting repayment would be towards meeting a subsisting liability.

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Matter may please be placed before the Hon'ble Chief Justice for decision on posting before a Division Bench."

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Heard the learned counsel for the petitioners/accused and the learned counsel for the respondent/complainant.

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The learned counsel for the accused relied upon the judgment of the learned single Judge referred to above to drive home the point that, the cheque in this case was given much after the promissory note was executed and therefore, the cheque cannot be considered as one issued in discharge of a debt or liability. We also perused the judgment of the learned single Judge and found that, that was a case arising on an appeal from the acquittal of the accused for offence under Section 138 of the Negotiable Instruments Act. In that case, one Jayaraman and his wife Sheela borrowed money from the complainant and it appears that the accused had given the impugned cheques therein which were dishonourned. In that context, the learned Judge had held so in paragraph 9 of the judgment extracted above and that has been referred to by the learned

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Referring Judge. In support of his contention, Mr.Xavier Felix, learned counsel for the accused relied upon the judgment of the Supreme Court in

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M.S.Narayana Menon @ Mani vs. State of Kerala and another reported in 2006(3) CTC 730, wherein in para 56, it is said:

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"56. The Appellant clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable as probable the cheque therefor cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act. We have gone through the oral evidences. The Second Respondent has even failed to prove that the Appellant had paid to him a sum of Rs.5000 by cash."

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The facts that obtains in this case is totally different from the facts in M/s Sarathy Enterprises case referred to above. When we pointed out this to the learned counsel for the accused, he drew our attention to the following line in M/s Sarathy Enterprises case:

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"In his evidence, P.W.1 has stated that the accused had signed in the promissory note while Sheela borrowed the amount. If that be so, only the promissory note said to have been signed by the Accused could form a security and certainly not Ex.A1 cheque. "

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and contended that in his case also promissory notes were first executed and only thereafter, the impugned cheques were given and therefore, the prosecution under Section 138 of the Negotiable Instruments Act cannot be maintained.

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We are unable to fathom this argument, because it is not the case of the complainant that the cheques were issued as security. It is a straight case of the complainant that the cheques were issued by the accused towards the liability that arose on the promissory notes that were executed by the accused, when he borrowed monies from the complainant. Of course, the stray statement from M/s Sarathy Enterprises case which we have extracted above may seem to give ammunition for this argument, but in the subsequent lines, the learned Judge has clearly decided on facts that the impugned cheque Ex.A1 was neither given as a guarantee nor as a collateral security for the loan transaction. The learned Judge who framed the present reference, seems to have been persuaded by the aforesaid sentence in

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M/s Sarathy's case and had felt that it requires reconsideration.

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Promissory notes and cheques are negotiable instruments and are governed by the provisions of the Negotiable Instruments Act. If a person borrows money and executes a promissory note in favour of the lender, that is the prima facie proof of the existence of a debt. If the borrower issues a cheque to the lender subsequently, the prima facie inference that can be drawn is that, the cheque was issued in discharge of the liability.

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We agree with the Referring Judge and we hold that the very existence of a promissory note of prior date would prima facie be proof of liability and the subsequent issue of cheque towards effecting repayment would be towards meeting the subsisting liability. We accordingly answer the reference.

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Therefore, we find that the learned single Judge of this Court has not laid down an inexorable rule of law that, cheques issued as security cannot be the foundation for a prosecution under Section 138 of the Negotiable Instruments Act. The learned single Judge had appraised the evidence adduced by the parties and had in the context of the available evidence held so, in the facts and circumstances of that case. Whereas, in this case, the accused has approached this Court for quashing the prosecution straightway under Section 482 Cr.P.C. where no evidence has been adduced before the trial Court. Therefore, we are not in a position to apply either the judgment of the learned single Judge or the judgment of the Supreme Court cited supra for quashing the prosecution.

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In this case, on a careful perusal of the complaint filed by the complainant it is found that the complainant has stated that, the accused had borrowed money and had executed a promissory note in his favour. Thereafter, when the complainant started demanding money, the accused gave the impugned cheques, in discharge of the liability. It is not the case of the complainant here that the accused had given the cheque either as a guarantee or as a collateral security for the debt of another person. Therefore, we find that there are no points for invoking the inherent power of this Court under Section 482 Cr.P.C. for stifling the prosecution at the threshold. Hence, these quash petitions are dismissed as devoid of merits. It is left open to the accused to raise all these issues during the trial before the trial Court. Consequently, connected miscellaneous petitions are closed.

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As these cases are pending since 2010, the trial Court is directed to expedite the trial and complete the same within a period of six weeks from the date of receipt of a copy of this order. The parties are directed to co-operate for the same.

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Sd/-
Asst. Registrar (CS-III)
//True Copy//
Sub Asst. Registrar.
gms
To
The Judicial Magistrate No.IV
Vellore.
1CC to Mr.R.Nalliyappan, Advocate, SR 35640
Crl.O.P.Nos.5869 to 5873 of 2010
JSV [CO]
PSI 16/09/2014

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N.v.Venkatraman v. Ananda Valli

Case brief

What is this about?

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N.v.Venkatraman v. Ananda Valli

Case brief

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