Kollam Co-operative Agricultural and Rural Development Bank Ltd. v. State of Kerala and E.K. Nazarulla

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ``` THE HONOURABLE MR.JUSTICE C.S.DIAS ``` ``` TUESDAY, THE 10[TH] DAY OF OCTOBER 2023 / 18TH ASWINA, 1945 ``` ``` CRL.A NO. 215 OF 2011 ``` ``` AGAINST THE ORDER/JUDGMENT ST 65/2009 OF JUDICIAL MAGISTRATE OF FIRST CLASS - III, KOLLAM Crl.L.P. 66/2011 OF HIGH COURT OF KERALA ``` ## **`APPELLANT/S:`** ``` THE KOLLAM CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK LTD.NO.Q-167,, KOLLAM REPRESENTED BY ITS SECRETARY, INDIRADEVI AMMA M.R., AGED 57 YEARS,, D/O. BHARATHI AMMA, SREEVALSAM PADA NORTH,, KARUNAGAPPALLY, KOLLAM. BY ADVS. SRI.T.R.HARIKUMAR SRI.ADITYA RAJEEV ``` ## **`RESPONDENT/S:`** ``` 1STATE OF KERALA PUBLIC PROSECUTOR, HIGH COURT OF KERALA,, ERNAKULAM KOCHI -31. 2E.K.NAZARULLA, DEPOT PURAYIDAM CONTONMENT SOUTH, KOLLAM - 691001. BY ADV ADV. AJIVASS V.A. (LEGAL AID COUNSEL) R2 ``` ## **`OTHER PRESENT:`** ``` SMT.SEETHA.S – PUBLIC PROSECUTOR - R1 SMT.PRIYA RANI SREEKUMAR, AMICUS CURIAE ``` ``` THIS CRIMINAL APPEAL HAVING COME UP FOR ADMISSION ON 10.10.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` 2 Crl.A. No.215 of 2011 ## **C. S. DIAS, J.** **------------------------Crl.A. No.215 of 2011 ------------------------Dated this the 10[th] day of October, 2023** ## **JUDGMENT** The appeal is filed questioning the correctness and legality of the judgment passed by the Court of the Judicial Magistrate of First Class-III, Kollam in S.T.No.65/2009, holding the second respondent/accused not guilty for the offence under Section 138 of the Negotiable Instruments Act (for brevity, “N.I.Act”) and consequentially acquitting him. The appellant was the complainant and the second respondent was the accused before the court below. For the sake of convenience, the parties are referred to as per their status before the Trial Court. 3 Crl.A. No.215 of 2011 ## **Factual matrix** 2. The complainant filed the complaint against the accused, inter alia, asserting that it is a bank registered under the Co-operative Societies Registration Act. The accused is one of its shareholders and had availed a business loan for Rs.1,00,000/-. The accused had defaulted in repaying the loan amount and in discharge of his liability had issued Ext P2 cheque dated 5.2.2007 for an amount of Rs.91,195/-. The cheque, on presentation to the bank for collection, got dishonoured by Ext.P3 memorandum due to ‘insufficient funds’ in the bank account of the accused. Despite the complainant issuing Ext P5 statutory lawyer notice, the accused failed to pay the demanded amount. Hence, the accused committed the above offence. 3. The learned Magistrate took cognizance of the offence and issued process to the accused. The accused 4 Crl.A. No.215 of 2011 denied the substance of accusation made against him. In the Trial, the Secretary of the complainant was examined as PW1 and Exts.P1 to P8 were marked in evidence. The accused denied the incriminating circumstances put against him in the statement under Section 313 of the Code of Criminal Procedure ( in short, Cr.P.C’). The accused produced and marked Exts D1 to D3 documents in evidence. ## **Trial Court Judgment** 4. The learned Magistrate, after appreciating the materials on record, by the impugned judgment, found the accused not guilty for the offence and consequentially acquitted him, principally on the ground that PW1 had in his oral testimony testified that only an amount of Rs.30,000/was due from the accused to the complainant/bank. 5. It is assailing the said judgment, the appeal is filed. 5 Crl.A. No.215 of 2011 6. Heard; Sri.Aditya Rajeev, the learned Counsel appearing for the appellant; Smt.Seetha.S, the learned Public Prosecutor appearing for the first respondent/State and Smt.Priya Rani Sreekumar, the learned Amicus Curiae appointed by this Court since there is no appearance for the second respondent. 7. It is well-settled in a plethora of precedents of the Hon’ble Supreme Court and this Court that the Appellate Court should be slow in interfering with an order of acquittal, unless the conclusion arrived at by the Trial Court is patently wrong and erroneous. 8. 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: 6 ## Crl.A. No.215 of 2011 ## “ _25. Scope of Appeal filed against the Acquittal:_ 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 considered 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. 9. Recently, in **Rupesh Manger (Thapa) vs. State of Sikkim** (MANU/SC/1014/2023), the 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 reappreciation of the evidence, the Appellate Court shall not disturb the finding of acquittal and substitute its findings to convict the accused. 7 Crl.A. No.215 of 2011 10. At the same time, it is trite, this Court has the power of re-appreciation of the materials on record while hearing an appeal against acquittal. 11. With the above observation in mind, I proceed to examine the materials on record. 12. The complainant's case is that the accused was a shareholder of the Bank and had availed a business loan for Rs.1,00,000/-. After paying a few installments, the accused defaulted in repaying the balance loan amount. In discharge of the said liability, the accused had issued Ext.P2 cheque for an amount of Rs.91,195/-, which on presentation to the Bank, got dishonoured due to 'insufficient funds’ in the account of the accused. Although Ext.P5 statutory lawyer notice was issued, the accused failed to pay the demanded amount. 13. The Secretary of the complainant was examined as PW1 and Exts P1 to P8 were marked through him. Ext.P8 8 Crl.A. No.215 of 2011 statement of account substantiates that as on 28.9.2006, the outstanding amount was Rs.85,163/-. 14. Admittedly, the accused did not send any reply notice or did he let in any defence evidence. In the statement recorded under Sec.313 of the Cr.P.C, he denied all the incriminating circumstances that were put against him. He produced Exts.D1 to D3 receipts to prove that he had made certain payments before the issuance of Ext.P2 cheque. 15. The learned Magistrate, without adverting to Ext.P8 statement and the oral testimony of PW1 in toto, picked a solitary statement from the oral testimony of PW1 that, as on 5.2.2007, the overdue amount was only Rs.30,000/-, and concluded that since Ext.P1 cheque was drawn for an amount of Rs.91,195/- the same cannot be said to be issued towards a legally enforceable debt. Accordingly, the learned Magistrate passed the impugned judgment. 9 Crl.A. No.215 of 2011 16. 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: “ **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”. 17. 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 10 Crl.A. No.215 of 2011 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 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. 18. 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: 11 Crl.A. No.215 of 2011 “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 crystalized by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat (2019 (2) KHC 243).” 19. Indisputably, the accused has admitted the execution of Ext.P2 cheque. He has not sent any reply notice to Ext.P5 statutory lawyer notice or let in defence evidence. 20. On the contrary, the complainant had discharged the initial onus of proof by proving the five concomitants under Sec.138 of the N.I.Act. On doing the same, the reverse onus of proof had shifted to the accused under Sec.139 of the N.I Act as laid down in **Rangappa** and **Kalamani Tex** (supra). In the statement recorded under 313 of the Cr.P.C, the accused bluntly denied the incriminating circumstances that were put against him, but has not rebutted the reverse onus of proof that had shifted to his shoulders. 12 Crl.A. No.215 of 2011 21. On a re-appreciation of the oral testimony of DW1 read with Ext.P8 statement of account, it is quite evident that as on 28.9.2006, the outstanding amount was Rs.85,163/with future interest and Ext.P2 cheque was issued on 5.2.2007. The learned Magistrate has, without a probable defence being set up by the accused to discharge the reverse onus of proof cast on him under Sec.139 of the N.I Act, picked the solitary statement in the oral testimony of PW1 and discarded the prosecution case, which according to me is perverse and unsustainable in law. 22. The finding of the learned Magistrate that Ext P1 was issued for a higher amount than what is actually due from the accused is no one's case. Thus, I conclude that the finding of the learned Magistrate is untenable and is liable to be set aside. Hence, I hold that the second respondent/accused guilty for the offence under Sec.138 of the N.I Act and convict him for the same. 13 Crl.A. No.215 of 2011 23. Now coming to the question of sentence. 24. It is well settled that an offence under Sec.138 of the N.I.Act is quasi criminal in nature. The intention of the legislation is to provide credibility to commercial transactions and compensate the complainant by way of compensatory reliefs rather than incarcerating the accused, which will not benefit the complainant. Thus, I am of the view that, complete justice will be done by ordering the second respondent/accused to undergo imprisonment for one day (till the rising of the Court) and pay a fine of Rs.1,00,000/- and in default to undergo simple imprisonment for a period of three months, and if the fine amount is realised, the same to be paid to the complainant as compensation under Sec.357(1)(b) of the Cr.P.C. 25. In the result, ## (i) The appeal is allowed; 14 Crl.A. No.215 of 2011 (ii) The impugned judgment is set aside; (iii) The second respondent/accused is found guilty and is convicted for the offence under Sec.138 of the N.I Act; (iv) The second respondent/accused is sentenced to undergo simple imprisonment for a day (till the rising of Court) and to pay a fine of Rs.1,00,000/- within sixty days from today and in default to undergo simple imprisonment for a further period of three months; (v) The second respondent/accused is directed to appear before the learned Magistrate on or before 10.12.2023 to undergo the sentence and pay the fine amount and in default to undergo the default sentence; (vi) In case of failure of the second respondent/accused fails to appear before the learned Magistrate, to undergo sentence and pay the fine amount, the learned Magistrate shall 15 Crl.A. No.215 of 2011 execute the sentence and recover the fine amount, failing which to implement the default sentence; (vii) The execution of sentence shall stand deferred till 10.12.2023; (viii) If the fine amount is realised, the same shall be released to the appellant/complainant as compensation; (ix) The Registry is directed to forthwith forward a copy of the judgment to the Trial Court for compliance; (x) This Court places on record its appreciation for the assistance rendered by the learned Amicus Curiae. SD/- **C.S.DIAS** sks/10.10.23 **JUDGE**