Financial Credits and Chits Company (P) Ltd. v. O.H. Sidhique, Rajula W/o Osaruveettil Sidhique, and The State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE C.S.DIAS** **FRIDAY, THE 13[TH] DAY OF OCTOBER 2023 / 21ST ASWINA, 1945** **CRL.A NO. 1332 OF 2011** **AGAINST THE ORDER/JUDGMENT CRA 204/2010 OF ADDITIONAL DISTRICT COURT (ADHOC), THRISSUR Crl.L.P. 413/2011 OF HIGH COURT OF KERALA** ## **APPELLANT/S:** FINANCIAL CREDITS AND CHITS COMPANY(P)LT (PVT) LTD., GANDHI NAGAR, WEST NADA,, GURUVAYOOR (PO), REPRESENTED BY ITS MANAGING, DIRECTOR, V.R.PRAVEEN, S/O.RAGHAVAN,, VALLIKKATTIRI HOUSE, CHERUVATHANI, ANJOOR (PO),, KUNNAMKULAM (VIA), THRISSU BY ADV SRI.P.RAMACHANDRAN ## **RESPONDENT/S:** 1 O.H.SIDHIQUE , S/O.OSARUVEETTIL MUHAMMED, KARIANTHADAM DESOM, ANJOOR VILLAGE,, KOCHANNOOR (PO), THALAPPILLY TALUK,, THRISSUR DISTRICT-679 562. 2 RAJULA WO.OSARUVEETTIL SIDHIQUE,KARIANTHADAM DESOM, ANJOOR VILLAGE,, KOCHANNOOR (PO), THALAPPILLY TALUK,, THRISSUR DISTRICT-679 562. 3 THE STATE OF KERALA, REPRESENTED BY THE PUBLIC PROSECUTOR,, HIGH COURT OF KERALA, ERNAKULAM-682 031. BY ADV SRI.P.JAYARAM ## **OTHER PRESENT:** PP SRI SANAL S RAJ THIS CRIMINAL APPEAL HAVING COME UP FOR ADMISSION ON 13.10.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: CRL.APPEAL NO. 1332 OF 2011 2 (Dated this the 13[th] day of October, 2023) ## **ORDER** The appeal is filed questioning the legality and correctness of the judgment in Criminal Appeal No.204/2010 passed by the Court of the Additional Sessions Judge, Fast Track Court No.I, Thrissur (Appellate Court), reversing the judgment in C.C.No.422/2007 of the Court of the Judicial First Class Magistrate, Chavakkad (Trial Court), and holding the respondents 1 and 2 (accused) not guilty for the offence under Section 138 of the Negotiable Instruments Act (in short, 'N.I.Act'). For the sake of convenience, the parties are, referred to as per the status before the Trial Court. 2. The complainant had filed the above complaint against the accused. The complainant's case is that it is a company doing business in money lending. The accused had borrowed an amount of Rs.12,000/- from the complainant on the basis of Ext.P10 promissory CRL.APPEAL NO. 1332 OF 2011 3 note. In discharge of the said liability, the accused jointly issued Ext.P1 cheque for an amount of Rs.12,780/- in favour of the complainant. The cheque on presentation to the bank for collection got dishonoured by Ext.P2 memorandum due to insufficiency of funds in the bank account of the accused. Despite issuing Ext.P4 statutory lawyer notice to the accused and they receiving the same, they failed to pay the demanded amount. Hence, the accused committed the offence under Section 138 of the N.I.Act. 3. The learned Magistrate took cognizance of the offence. The accused denied the substance of accusation leveled against them. In the trial, the representative of the complainant was examined as PW1 and Exts.P1 to P13 were marked in evidence. The accused denied the incriminating circumstances put against them in the questioning under Section 313 of the Code of Criminal Procedure ( in short, 'Cr.P.C'). The 2[nd] accused and the Manager of the drawer's bank were CRL.APPEAL NO. 1332 OF 2011 4 examined as DWs 1 and 2 and Exts.D1 and D2 were marked through DW2 in evidence. ## Trial Court Judgment 4. The learned Magistrate, after analysing the materials on record, found the accused guilty and convicted them for the offence under Section 138 of the N.I.Act and sentenced them to undergo simple imprisonment for a period of three months and directed them to jointly pay an amount of Rs.12,780/- as compensation to the complainant under Section 357(3) of the Cr.P.C., and in default to undergo simple imprisonment for a further period of three months. 5. Aggrieved by the said judgment, the accused filed Criminal Appeal No.204/2010 before the Appellate Court. ## Appellate Court judgment 6. The Appellate Court, after re-appreciating the materials placed on record, by the impugned judgment, CRL.APPEAL NO. 1332 OF 2011 5 arrived at a conclusion that, as Exts.P9 and P10 documents were forged and notwithstanding the fact that the drawer's signature on Ext.P1 tallying with Ext.B1 document, the accused are not guilty for the offence under Section 138 of the N.I.Act. Consequentially, the Appellate Court set aside the judgment of the Trial Court and acquitted the accused. 7. It is aggrieved by the said judgment, the present appeal is filed. 8. Heard; Sri.P.Ramachandran, the learned Counsel appearing for the appellant/complainant; Sri.P.Jayaram, the learned Counsel appearing for the respondents 1 and 2/accused and Smt.Seetha S., the learned Public Prosecutor appearing for the 3[rd] respondent. 9. The question is whether there is any irregularity or error in the judgment passed by the Appellate Court. CRL.APPEAL NO. 1332 OF 2011 6 10. It is well settled that the Appellate Court should be slow in interfering with an order of acquittal. It is only when the conclusions arrived at by the court below is patently erroneous and perverse, the Appellate Court should interfere with an order of acquittal because an order of acquittal adds to the presumption of innocence in favour of the accused. 11. Keeping in mind the above principles, this Court proceeds to examine the criminal appeal. 12. The complainant's case is that, the accused has availed a loan from the complainant after executing Exts.P9 loan application, P10 promissory note and P11 voucher. As the accused failed to pay the loan amount, they jointly issued Ext.P1 cheque for an amount of Rs.12,780/-, which got dishonoured on presentation to the bank for collection due to insufficiency of funds in the account of the accused. Despite issuing a statutory demand notice, the accused failed to pay the amount. Hence, they committed the above offence. CRL.APPEAL NO. 1332 OF 2011 7 13. Indisputably, the accused did not send any reply notice. In the questioning under Section 313 of the Code, the accused denied the incriminating circumstances appearing against them in the evidence. 14. In the defense evidence, the 2[nd] accused got herself examined as DW1 and she bluntly denied the execution of Exts.P9 to P11 and Ext.P1 cheque. Surprisingly, in her cross examination, she even went to the extent of denying her signature on the bail bond and vakalath executed before the Trial Court. At the instance of DW1, she examined DW2, the Branch Manager of her own bank. The Branch Manager testified that the accused had a bank account in his bank and the signature of the accused was tallying with Ext.D1 opening form. However, he testified that there was a slight difference in the signature and the writings on Ext.P1 cheque. 15. The learned Magistrate, after comparing the signatures on Ext.P1 cheque with other materials on CRL.APPEAL NO. 1332 OF 2011 8 record invoking his powers under Section 73 of the Indian Evidence Act, concluded that the accused had executed and issued Ext.P1 cheque. Accordingly, the accused were convicted and sentenced for the offence under Section 138 of the N.I.Act. 16. In the appeal, although the learned Sessions Judge found that the signatures of the accused on Ext.P1 tallied with Ext.D1 account opening form, found that Exts.P9 loan application and P10 pro-notes were forged and, therefore, the defense of the accused was more probable and that they are entitled to the benefit of doubt. Consequentially, the Appellate Court reversed the findings of the learned Magistrate and found the accused not guilty for the offence under Section 138 of the N.I.Act. 17. A negotiable instrument, which includes a cheque, carries the presumption of consideration under Secs.118(a) and 139 of the N.I Act. It is profitable to extract the said relevant provisions: CRL.APPEAL NO. 1332 OF 2011 9 “118. Presumptions as to negotiable instruments – Until the contrary is proved, the following presumptions shall be made;- (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; 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”. 18. A three-Judge Bench of the Hon’ble Supreme Court in **Rangappa vs. Sri.Mohan** [2010 KHC 4325], while dealing with Sec.139 of the N.I Act has conceptualised the doctrine of ‘reverse onus’, by ## holding thus: “ 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 CRL.APPEAL NO. 1332 OF 2011 10 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 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. 19. Recently, a three-Judge Bench of the Hon’ble Supreme Court in **Kalamani Tex and Anr vs. P. Balasubramanian** [2021 (2) KHC 517] has reiterated the legal position and the doctrine of the reverse onus. It is apposite to extract the relevant paragraphs, which declares the law on the point in the following terms: “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, obligation shifts upon the accused to discharge the presumption imposed upon him. This point of law has been CRL.APPEAL NO. 1332 OF 2011 11 crystalized by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat (2019 (2) KHC 243).” ## 20. Likewise, in **Bir Singh vs. Mukesh Kumar** [2019 (1) KHC 744 SC] the Honourable Supreme Court has declared the law that, even if a signed blank cheque is voluntarily presented to a payee towards some payments and the payee fills the amount and particulars, the same does not invalidate the cheque. Still the onus of proof would be on the accused to prove that the cheque was not issued in discharge of a debt or liability. 21. In the instant case, indisputably the accused have not sent any reply notice. They have not produced any cogent materials to substantiate their defence. DW1 mounted the box and went on a denial mode, denying all the incriminating materials against her. 22. The learned Magistrate, invoking his powers under Section 73 of the Indian Evidence Act, compared the documents and found that Ext.P1 cheque was drawn and issued by the accused. Admittedly, the CRL.APPEAL NO. 1332 OF 2011 12 accused did not seek for an expert opinion. 23. Quite surprisingly, the Appellate Court on the finding that Ext.P9 loan application form and Ext.P10 promissory note were forged, concluded that Ext.P1 cheque, which was admittedly issued after Exts.P9 and P10, was not issued towards a legally enforceable debt. 24. The findings of the learned Sessions Judge are perverse and improper in view of the settled principles of law in the aforecited precedents. The accused have failed to rebut the reverse onus of proof cast on them under Section 139 of the N.I.Act. Consequentially, I set aside the impugned judgment and uphold the order of conviction passed by the learned Magistrate. 25. Now coming to the question of sentence. 26. In **Damodar S. Prabhu vs. Sayed Babalal** [2010 (5) SCC 663], the Honourable Supreme Court while dealing with the sentencing policy for an offence under Section 138 of the N.I.Act has held that, unlike CRL.APPEAL NO. 1332 OF 2011 13 other crimes, the punishment for the offence under Section 138 is not a means for seeking retribution; but is to ensure payment of money. The complainant's interest lies primarily in requiring the money than seeing the accused being incarcerated. The courts while passing an order of sentence has to keep the compensatory aspect in mind rather than giving priority to the punitive aspect. 27. In the light of the principles laid down in the afore-cited decisions, I am of the definite view that the substantive sentence imposed by the learned Magistrate can be modified and reduced by sentencing the revision petitioners/accused for one day (till the rising of the court) and direct them to pay compensation to the appellant/complainant, which would meet the ends of justice. In the result; (i) The appeal is allowed; CRL.APPEAL NO. 1332 OF 2011 14 - (ii) The impugned judgment of the Appellate Court is set aside; - (iii) The order of conviction passed by the learned Magistrate in C.C.422/2007 is upheld; - (iv) The respondents 1 and 2/accused are sentenced to undergo imprisonment for a day (till the rising of the Court) and jointly pay a fine of Rs.15,000/- within a period of 60 days from today, and in default to undergo simple imprisonment for a period of one month each; - (v) The respondents 1 and 2/accused are directed to appear before the learned Magistrate on or before 13.12.2023, to undergo the sentence and pay the fine amount and in default to undergo the default sentence; - (vi) In case of failure of the respondents 1 and 2/accused to appear before learned Magistrate as ordered above, the learned Magistrate shall execute the sentence and recover the fine amount, in accordance with CRL.APPEAL NO. 1332 OF 2011 15 law; - (vii) The execution of the sentence shall stand deferred till 13.12.2023; - (viii) If the fine amount is realised, the same shall be released to the appellant/complainant under Sec.357(1) (b) of the Cr.P.C. as compensation; - (ix) The Registry is directed to forthwith forward a copy of this order to the Trial Court for compliance. Sd/- **C.S.DIAS JUDGE** rkc/13.10.23