Sree Gokulam Chit and Finance Company Pvt Ltd v. Reji Joseph

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH** **TUESDAY, THE 27TH DAY OF APRIL 2021 / 7TH VAISAKHA, 1943** ## **CRL.A.No.402 OF 2011(A)** **AGAINST THE JUDGMENT IN ST 681/2008 DATED 11-05-2009 OF JUDICIAL MAGISTRATE OF FIRST CLASS V, KOTTAYAM** ## **APPELLANT/COMPLAINANT:** **SREE GOKULAM CHIT AND FINANCE COMPANY PVT LTD CENTRAL OFFICE AT NO.66, ARCOT ROAD, KODAMPAKKAM, CHENNAI BY ITS BRANCH OFFICE AT, PRAKKAT BUILDING,CENTRAL JUNCTION,KOTTAYAM REP.BY, ITS POWER OF ATTORNEY HOLDER, REJEESH K.N, S/O MR. KARUNAKARAN, LEGAL ASSISTANT, SREE GOKULAM CHIT AND FINANCE COMPANY PVT LTD, BRANCH OFFICE, PRAKKAT BUILDING, 1ST FLOOR, CENTRAL JUNCTION, KOTTAYAM.** **BY ADVS. SRI.K.S.BABU SMT.N.SUDHA** **RESPONDENTS/ACCUSED & STATE:** - **1 REJI JOSEPH KUNNEL HOUSE, VILAKKUMADAM, POOVARANI P.O.,, ERATTUPETTA, KOTTAYAM DISTRICT-686 577.** - **2 STATE OF KERALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.682031** **R2 BY PUBLIC PROSECUTOR SMT. MAYA M.N** **THIS CRIMINAL APPEAL HAVING BEEN FINALLY HEARD ON 2403-2021, THE COURT ON 27-04-2021 DELIVERED THE FOLLOWING:** Crl.Appeal No.402/2011 -:2:- ## **J U D G M E N T** Dated this the 27[th] day of April, 2021 This is an appeal filed against acquittal u/s 378(4) of Cr.P.C in a proceedings initiated u/s 138 of the Negotiable Instruments Act (for short N.I.Act) in ST No.681/2008 on the file of the Judicial First Class Magistrate Court-V, Kottayam. 2. The parties are referred to in this judgment as they were referred to in the judgment of the court below, i.e., the complainant and the accused. 3. The complaint was filed for prosecuting the accused for an offence u/s 138 of the NI Act. It was alleged that Ext.P8 cheque for an amount of `1,07,430/- was issued by the accused in favour of the complainant company towards the chit amount due, that cheque on presentation was dishonoured for want of sufficient funds, that Ext.P10 notice demanding payment was not heeded to and therefore the accused committed an offence punishable u/s 138 of the NI Act. 4. PW1 was examined on behalf of the complainant and Crl.Appeal No.402/2011 -:3:- Exts.P1 to P12 were marked. On the side of the defence, Exts.D1 to D3 were marked. 5. The Court below on appreciation of evidence found that the complainant failed to prove the execution of Ext.P8 cheque and, hence, no offence u/s 138 of the NI Act was made out. Accordingly, the accused was found not guilty and he was acquitted as per the impugned judgment. Challenging the judgment, the complainant preferred this appeal. 6. Even though notice has been served to the 1[st] respondent, there is no appearance. Heard the learned counsel for the appellant. 7. The learned counsel for the appellant submitted that the complainant has succeeded in proving the execution of Ext.P8 cheque by examining PW1 and, hence, presumption under Sections 118 and 139 of the NI Act would come into play and the accused has failed to rebut the said presumption. The Court below went wrong and committed illegality in acquitting the accused, argued the counsel. 8. The complainant admittedly is a Public Limited Company incorporated under the Companies Act engaged in the Crl.Appeal No.402/2011 -:4:- chit business. It is also not in dispute that the accused was a subscriber of chit conducted by the complainant. The case of the complainant is that as on 24/11/2004, an amount of `1,07,430/was due by the accused to it towards the chitty arrears with interest and towards the discharge of the amount due, the cheque in question was issued. In order to prove the transaction as well as the issuance and execution of the cheque, one witness was examined on the side of the complainant as PW1. PW1 is the power of attorney holder of the complainant company. He gave evidence in tune with the pleadings in the complaint. He deposed that the accused subscribed two chits under Nos.GHB 57/12 and GHB 57/13 for sala value of `5,00,000/- each and the accused auctioned chitty No.GHB 57/13 on 4/10/2002. He further deposed that chitty No.GHB 57/12 was pledged in as security for the amount auctioned. He also deposed that towards the discharge of the debt due in chit No.GHB 57/13, the accused issued Ext.P8 cheque. He specifically deposed that Ext.P8 was signed in his presence by the accused and handed over to him directly. Ext.P2, the chit payment receipt, would show that the accused auctioned the chit bearing No.GHB 57/13 on 4/10/2002 and received the Crl.Appeal No.402/2011 -:5:- chit amount. Exts.P3 and P4 would show that the accused has pledged chitty No.GHB 57/12 as security for the chit amount auctioned in Chit No.GHB 57/13. Ext.P5 is the ledger extract of the chit No.GHB 57/12 and Ext.P6 is the ledger extract of the chit No.GHB 57/13. Ext.P7 is the account statement of Chit No.GHB 57/13. The Court below on appreciation of evidence found that the evidence of PW1 is insufficient to prove the transaction and execution of the cheque. The Court below further found that Exts.P5 to P7 cannot be relied upon. 9. A negotiable instrument including a cheque carries presumption of consideration in terms of S.118(a) and under S.139 of the Act. S.118(a) and S.139 read as under: _"_ _**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_ Crl.Appeal No.402/2011 -:6:- _S.138 for the discharge, in whole or in part, of any debt or other liability."_ 10. The presumption under S.139 of the Negotiable Instruments Act is a presumption of law, as distinguished from presumption of facts. The obligation on the prosecution may be discharged with the help of presumptions of law and presumptions of fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact. There is the mandate of presumption of consideration in terms of the provisions of the Act. The onus shifts to the accused on proof of issuance of cheque to rebut the presumption that the cheque was issued not for discharge of any debt or liability in terms of S.138. 11. The Supreme Court of India in _**Hiten P. Dalal v. Bratindranath Banerjee**_ [(2001) 6 SCC 16] and in _**Rangappa v. Sri Mohan**_ [(2010) 11 SCC 441] held that the cheque shall be presumed to be for consideration unless and until, the Court forms a belief that the consideration does not exist or considers the non-existence of consideration was so probable that a prudent man would under no circumstances of the case, act upon the plea that the consideration does not exist. In _**Uttam Ram v.**_ Crl.Appeal No.402/2011 -:7:- _**Devinder Singh Hudan and Another**_ [2019 (5) KHC 179], it was held that when a cheque is issued, it is presumed that the cheque was drawn for consideration and the holder of cheque received the same in discharge of an existing debt. It was further observed that: “ _A dishonour of cheque carries a statutory presumption of consideration. The holder of cheque in due course is required to prove that the cheque was issued by the accused and that when the same presented, it was not honoured. Since there is a statutory presumption of consideration, the burden is on the accused to rebut the presumption that the cheque was issued not for any debt or other liability_ ”. In _**Kumar Exports v. Sharma Carpets**_ [(2009) 2 SCC 513], the Supreme Court held that “ _bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the Court may either believe that the consideration and debt did not exist or their non-existence was so probable that a_ Crl.Appeal No.402/2011 -:8:- _prudent man would under the circumstances of the case, act upon the plea that they did not exist_ ”. In _**Bir Singh v. Mukesh Kumar**_ (AIR 2019 SC 2446), it was held that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It was further held that it is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. It was also held that even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under S.139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt. Recently in _**Kalamani Tex and Another v. P. Balasubramanian**_ (2021 (2) KHC 517), the Supreme Court again held that once signature of an accused on cheque is established, then ‘reverse onus’ clause becomes operative, and in such a situation, obligation shifts upon the accused to discharge presumption imposed upon him. 12. Coming to the facts of the case, though the execution Crl.Appeal No.402/2011 -:9:- of Ext.P8 cheque is denied by the accused, he did not dispute his signature therein. The defence taken by the accused is that the blank cheque entrusted to the complainant company by him in an early cheque transaction as security was misused and a false complaint was filed against him. As stated already, now it is trite that once a signature in the cheque is admitted by the accused, the 'reverse onus' clause becomes operative and the obligation shifts upon the accused to discharge the presumption imposed by him. Thus, once the accused had admitted his signature in Ext.P8 cheque, the Court below ought to have presumed that the cheque was issued as consideration for a legally enforceable debt. That apart, the evidence given by PW1 coupled with Exts.P2 to P7 are sufficient to prove the transaction, execution and issuance of the cheque. PW1 has clearly stated that the cheque was signed in his presence by the accused and handed over to him. There is nothing to disbelieve the said version. The accused does not dispute the fact that he subscribed two chits conducted by the complainant company as chit Nos.GHB 57/12 and GHB 57/13. He has also admitted that he auctioned the chit bearing No.GHB 57/13 and received the amount. It is evident from Ext.P2. Crl.Appeal No.402/2011 -:10:- Exts.P3 and P4 would show that he has pledged the chit No.GHB 57/12 for the chit auctioned in GHB 57/13. It is true that it has come out in evidence that the accused has also subscribed another chit which has nothing to do with the two chits mentioned above. But the Court below unnecessarily mixed up the said chit with the above two chits. Ext.P6, the ledger extract of the chit No.GHB 57/13 would show that out of the total sala value of `5,00,000/-, the complainant remitted `4,21,296/-. The termination balance would come to `78,704/-. Ext.P7 would show that including the interest, the total amount due would come to the amount stated in Ext.P8 cheque. The Court below took the view that there is nothing on record to show the rate of interest claimed by the complainant company. When the subscriber defaulted the payment of the chit subscription, definitely, company is entitled for interest. Exts.P5 to P7 would clearly show that the amount covered by the cheque is due to the complainant company. There is no much challenge to Exts.P5 to P7. From the evidence of PW1 and Exts.P2 to P7, I am satisfied that the complainant has succeeded in proving the transaction as well as execution of Ext.P8 cheque. Crl.Appeal No.402/2011 -:11:- 13. As already stated, signature in Ext.P8 cheque is not in dispute. Once signature, execution and handing over of the cheque are satisfactorily proved, the presumption u/s 139 of the NI Act would come into play and remain in force until the accused discharges the burden. The complainant has successfully established the signature, execution and handing over of the cheque. There is absolutely no evidence adduced to rebut the said presumption available to the complainant u/s 139 of the NI Act. No evidence has been adduced by the accused to substantiate that the cheque in question was issued in blank as the security at the commencement of the business transaction between him and the complainant company. In spite of the receipt of the lawyer notice, the accused did not send any reply also. There is absolutely no evidence or circumstances probablising the defence set up by the accused. The Supreme Court of India in _**Ravi Kapur v. State of Rajastan**_ [(2012) 9 SCC 284] has held that once the trial Court has ignored the material piece of evidence and failed to appreciate the prosecution evidence in the correct perspective, then it would amount to failure of justice enabling the appellant to interfere Crl.Appeal No.402/2011 -:12:- with the judgment of acquittal. The impugned judgment of acquittal, thus, cannot be sustained and is liable to be set aside. 14. In the result:- (i) The appeal is allowed. (ii) The judgment of acquittal passed in ST No.681/2008 dated 11/5/2009 by the Judicial First Class Magistrate- V, Kottayam is hereby set aside. (iii) The accused is found guilty for the offence punishable u/s 138 of the NI Act and is convicted for the said offence. (iv) The accused is sentenced to pay a fine of `1,10,000/(Rupees One lakh ten thousand only), in default, to suffer simple imprisonment for four months. The entire fine amount, if realised, shall be paid to the complainant as compensation u/s 357(1) of Cr.P.C. **Sd/-** ## **DR. KAUSER EDAPPAGATH** Rp True Copy **JUDGE** PS to Judge