K. Subramani v. K. Damodara Naidu

Case Details & Bench

Court: High Court
Hon'ble Judges: V. Gopala Gowda
C. Nagappan
Judgment Date: 2014-11-13
Court Decision / Holding: Appeal allowed. The impugned judgment insofar as the appellant is concerned is set aside and the judgment of acquittal passed by the trial court is restored.
Final Disposition: Appeal allowed; acquittal restored; remand order set aside.

Parties to the Case

Appellants / Petitioners

K. Subramani

Respondents

K. Damodara Naidu

Legal Representation & Advocates

Counsels for Petitioners

• Girish Ananthamurthy
• Vaijayanthi Girish

Counsels for Respondents

• Anand Sanjay M.
• Nuli & Nuli

Case Synopsis & Summary

This appeal concerns a case under Section 138 of the Negotiable Instruments Act, 1881. The complainant alleged that the accused borrowed Rs 14 lakhs in cash in 1997 to start a granite business, promising repayment with interest, and issued post-dated cheques which were dishonored on presentation. The trial court acquitted the accused finding that the complainant failed to prove a legally recoverable debt and lacked a credible source of income to lend such an amount. The High Court of Karnataka, in a batch of appeals, framed two legal issues: (i) whether an action under Section 138 requires the complainant to establish his financial capacity to lend money; and (ii) whether the presumption under Section 139 accrues to the benefit of the complainant unless rebutted. Relying on Rangappa v. Sri Mohan, the High Court held that the presumption under Section 139 exists and is rebuttable, and it remanded the cases for retrial. The Supreme Court, however, held that the trial court’s conclusion—based on entire oral and documentary evidence—that the complainant had no source of income to lend Rs 14 lakhs and that there was no legally recoverable debt was properly reasoned. The remand was unsustainable; the appellate judgment was set aside and the trial court’s acquittal restored. The decision clarifies the correct application of Sections 139 and 138 NI Act and limits remand when merits do not support retrial.

Provisions of Law Cited

Negotiable Instruments Act, 1881 s. 138Negotiable Instruments Act, 1881 s. 139

Legal Doctrines & Maxims

Rebuttable presumption under Section 139 NI Act that there exists a legally enforceable debt or liability; the accused can raise a defense challenging the existence of such debt.

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellant argues that the trial court’s acquittal was proper because the complainant failed to establish his financial capacity to lend Rs 14 lakhs and failed to prove the existence of a legally recoverable debt. It contends that the High Court erred in clubbing multiple appeals and remanding for retrial based on the presumption under Section 139 NI Act, which is rebuttable and does not automatically compel retrial. The appellant asserts that the admitted lack of credible income and absence of documentary proof of the alleged loan or sale proceeds undermines the prosecution’s case and that remand prejudices the appellant by re-evaluating facts that the trial court already weighed.

Contentions of Respondents

The respondents contend that the High Court correctly framed two legal issues and relied on Rangappa v. Sri Mohan to hold that Section 139 creates a rebuttable presumption in favor of the complainant, which can be rebutted. They argue that remand for retrial was warranted to consider the merits on revamped evidence and ensure proper application of the presumption, given the factual complexity of the case. They submit that the trial court may have misread evidence and that a retrial would enable a proper adjudication of the debt question.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Rangappa v. Sri Mohan	2010 (11) SCC 441	Positive	Three-judge bench held that the presumption under Section 139 NI Act includes a rebuttable presumption of a legally enforceable debt, which the accused may challenge.

Extracted Judgment Text

Exact text extracted from official judgment records.

A • ## [2014] 11 S.C.R. 169 ## K. SUBRAMANI _v._ ## K. DAMODARA NAIDU (Criminal Appeal No. 2402 of 2014) ## NOVEMBER 13, 2014 B ## [V. GOPALA GOWDA AND C. NAGAPPAN, JJ.] - - _Negotiable Instruments Act, 1881 s. 138 Complaint_ - - _under Acquittal by trial court High Court remanded the_ C - _matter for retrial Held: Trial court rightly acquitted the accused holding that the complainant failed to prove that there was legally recoverable debt payable to the accused_ - _Therefore, order of High Court remanding the case for retrial is unsustainable._ D ## Allowing the appeal, the Court HELD: On a consideration of entire oral and documentary evidence the trial court came to the conclusion that the complainant had no source of income E to lend a sum of Rs.14 lakhs to the accused and he failed to prove that there is legally recoverable debt payable by the accused to him. The said conclusion of the trial court has been arrived at on proper appreciation of material evidence on record. The impugned judgment of remand F made by the High Court is unsustainable and liable to be set aside. [para 9-1 OJ [173-F-H] _Rangappa VS. sri mohan_ 2010 (11) sec 441: 2010 (6) SCR 507 - referred to. G Case Law Reference: 2010 (6) SCR 507 referred to Para 5 169 H 170 SUPREME COURT REPORTS A CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 2402 of 2014. From the Judgment & Order dated 10.10.2013 of the High Court of Karnataka at Bangalore in Crl. Appeal No. 368 of B 2009 . . Girish Ananthamurthy, Vaijayanthi Girish for the Appellant. Anand Sanjay M., Nuli & Nuli for the Respondent. c • The Judgment of the Court was delivered by **C. NAGAPPAN, J.** 1. Leave granted. 2. This appeal is preferred against judgment and order dated 10.10.2013 passed by the High Court of Karnataka at o Bangalore in Criminal Appeal No.368 of 2009 wherein the High Court set aside the judgment of acquittal of the trial court and remanded the case to the trial court for retrial. 3. The respondent herein/complainant and the appellant/ accused y.tere working as lecturers in a Government College E at Bangalore. The case of the complainant is that the accused borrowed a loan of Rs.14 lakhs in cash on 1.12.1997 from him to start granite business, promising to repay the same with 3% interest per month on demand and issued post-dated cheque dated 30.11.2000 for sum of Rs.29, 12,000/- which included F principal and interest and few days prior to presentation of the cheque on its due date to bank for encashment, the accused requested him not to present the cheque and took extension of time of another three years for repayment and finally issued a cheque dated 16.08.2005 for a sum of Rs,i'.3,83,552/- which G included principal and interest. The complainant presented 'the cheque on 19.8.2005 for encashment to his banker and it was dishonored with an endorsement 'fund insufficient' and the complainant issued legal notice on 12.9.2005 demanding repayment within 15 days from the date of its receipt thereof H and accused sent reply but failed to comply with the demand K. SUBRAMANI _v._ K. DAMODARA NAIDU 171 • [C. NAGAPPAN, J.] and the complainant lodged complaint under Section 138 of the A Negotiable Instrument Act, against the accused. 4. In the trial the complainant examined himself as PW1 and examined CWs1 and 2 on his side and marked documents Exh. P1 to P23. The accused examined himself as DW1 and marked documents Exhs. 01 to 05. The trial court held that the complainant had no source of income to lend a sum of Rs.14 lakhs to the accused and he failed to prove that there is legally recoverable debt payable by the accused to him and that in discharge of said liability he issued the cheque and accordingly acquitted the accused for the alleged offence under Section 138 of N.I. Act. Aggrieved by the same the complainant preferred appeal in the High Court in Criminal Appeal No.368 of 2009, and the High Court heard the appeal along with 9 other appeals by framing two legal issues which are as under: B C D " i) Whether an action under Section 138 of the N. I. Act for dishonor of cheque is the complainant required to establish his financial capacity to lend money? ii) \/Viii not presumption under Section 139 of the N.1. Act accrues to the benefit of the complainant unless the accused rebuts that presumption?" E 5. Relying on the ratio laid down by this. Court in the decision in **Rangappa** vs. **Sri Mohan** [(2010) 11 SCC 441] the High Court answered the first issue in the negative and the second issue in the affirmative. It further held that the orders of acquittal recorded by the trial court in all the appeals suffer from legal infirmity as the prosecution has been undone only on the ground that complainant had not proved his capacity to lend money and hence those orders are liable to be set aside. Accordingly it allowed the appeals and set aside the respective judgments of acquittal and remanded the cases to courts concerned directing retrial. The present appeal is preferred challenging the said judgment. F G H _i_ 172 SUPREME COURT REPORTS [2014] 11 S.C.R. A 6. The learned counsel appearing for the appellant/ respondent contended that the High Court erroneously clubbed a batch of 10 criminal appeals and formulated two questions of law and insofar as the present appeal is concerned the trial court never proceeded on the assumption that the presumption B under Section 139 of the N.I. Act would enure to the benefit of the complainant only if he proves his financial capacity and on the contrary the trial court had for reasons recorded found that the accused has rebutted the presumption by placing cogent evidence that there was no legally recoverable debt or liability c and the complainant had no capacity to lend huge amount of Rs.14 lakhs and, accordingly, dismissed the complaint by acquitting the accused. It is his further contention that the High Court without going into the merits proceeded to remand the present case to the trial court for being retried and it has 0[caused great prejudice ][to ][the appellant herein ][and ][hence the ] impugned judgment is liable to be set aside. A 7. Learned counsel for the respondent/complainant submitted that the High Court answered the legal issues involved and has remanded the case to the trial court for fresh E consideration and no exception can be taken to the impugned judgment. 8. Three Judge Bench of this Court in the decision in **Rangappa** case (supra) laid down that the presumption F mandated by Section 139 of the N.I. Act includes a presumption that there exists a legally enforceable debt or liability and that is a rebuttable presumption and it is open to the accused to ratse a defence ~~herein the existence of a legally enforceable debt or liability can be contested. Relying on the said ratio the G High Court answered the two legal issues raised by it in the impugned judgment. Though the criminal appeals were preferred against the judgment of acquittal passed in all the cases arising under Section 138 of the N.I. Act, the factual matrix and the evidence adduced were different. The High H Court after answering the two legal issues did not consider the K. SUBRAMANI _v._ K. DAMODARA NAIDU 173 • [C. NAGAPPAN, J.] merits of each case individually and has simply remanded the matter to the trial court for fresh consideration. A 9. In the present case the complainant and the accused were working as Lecturers in a Government college at the relevant time and the alleged loan of Rs.14 lakhs is claimed to have been paid by cash and it is disputed. Both of them were governed by the Government Servants' Conduct Rules which prescribes the mode of lenaing and borrowing. There is nothing on record to show that the prescribed mode was followed. The source claimed by the complainant is savings from his salary and an amount of Rs.5 lakhs derived by him from sale of site No.45 belonging to him. Neither in the complaint nor in the chiefexamination of the complainant, there is any averment with regard to the sale price of site No.45. The concerned sale deed was also not produced. Though the complainant was an income-tax assessee he had admitted in his evidence that he tlad not shown the sale of site No.45 in his income-tax return. _/_ On the contrary the complainant has admitted in his evidence that in the year' 1997 he had obtained a loan of Rs.1,49,205/from L.l.C. It is pertinent to note that the alleged loan of Rs.14 lakhs is claimed to have been disbursed in the year 1997 to the accused. Further the complainant did not produce bank statement to substantiate his claim. The trial court took into . account the testimony of the wife of the complaint in another criminal case arising under Section 138 of the N.I. Act in which she has stated that the present appellant/accused had not taken any loan from her husband. On a consideration of entire oral and documentary evidence the trial court came to the conclusion that the complainant had no source of income to lend a sum of Rs.14 lakhs to the accused and he failed to prove that there is legally recoverable debt payable by the accused to him. B C D E F G 10. In our view the said conclusion of the trial court has been arrived at on proper appreciation of material evidence on record. The impugned judgment of remand made by the High Court in this case is unsustainable and liable to be set aside. H 174 SUPREME COURT REPORTS [2014] 11 S.CR. A 11. In the result this appeal is allowed and the impugned judgment insofar as the appellant is concerned is set aside and the judgment of acquittal passed by the trial court is restored. Kalpana K. Tripathy Appeal allowed.