Bangalore District Court
Champions vs Thrishla Minerals on 26 December, 2024
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CC NO.9472/2014
KABC030264702014
Presented on : 19-04-2014
Registered on : 19-04-2014
Decided on : 26-12-2024
Duration : 10 years, 8 months, 7 days
IN THE COURT OF XX ADDITIONAL CHIEF JUDICIAL
MAGISTRATE, BENGALURU
Present : Sri. Shrishail Bhimashen Bagadi
B.Com.LL.B(Spl)
XX Additional Chief Judicial Magistrate,
Bengaluru
Dated this the 26th Day of December 2024
CC NO.9472/2014
Complainant : M/s Champions
A partnership Firm, represented by its
authorized partner by name V. Arun
Kumar, R/o No.1048,
20th Main Road, 5th Block, Rajajinagara
Bengaluru
By Sri. Prakash Shetty - Advocate
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CC NO.9472/2014
Versus
Accused : M/s Thrishla Minerals
Above Indian Overseas Bank
Landlinks Township, Derebail, Konchady
Mangalore-57 represented by its proprietor
by name Sri.Krishnaraja Mayya
(By Sri.P.P.Hegde.,Advocate)
Date of Institution of the : 13.03.2014
Complaint
Offenses complained : Under Section 138 of the
Negotiable Instruments Act
Date of commencement of : 16.04.2014
recording
of the evidence
Opinion of the Magistrate : Accused found guilty
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JUDGMENT
The complainant has filed this complaint under section
138 of the negotiable instrument act.
2. The brief facts of the complainant’s case are as
under:
The complainant firm engaged in trading and other
contract business running in the name and style of M/s
Champions. One Arun Kumar is one of the partners of the
firm and is representing as an authorised partner of the firm.
The complainant and the accused are well-known to each
other. The complainant had a business relationship with the
accused between 3rd February 2010 and 7th April 2010. In
between these dates, the complainant had paid a sum of Rs.
1,60,00,000/- in cash and a sum of Rs. 87,00,000 through
bank account transfer in favour of the accused for iron ore
trading. The accused agreed to share the profits that he gets
with the complainant. Later on, between 24th April 2010 and
5th January 2011, the complainant and accused entered
into 9 memorandum of understanding, under which the
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complainant agreed to finance the accused for iron trading,
and in turn, the accused had agreed to share profit in
different ways with the complainant. Acting upon the said
memorandum of understanding and based upon the oral
agreements and promises made by the accused between
February 2010 to December 2012, the complaint had paid a
total sum of rupees 19,96,05,000/- to the accused through
cash and bank account transfer. The accused was duty-
bound to trade iron ore and also to share the profit with the
complainant as agreed, but he failed to share the profit as
agreed by him. The complainant further submits that the
accused, towards the payment of the amount mentioned
above, had issued post-dated cheques in favour of the
partnership firm; the particulars of the posted cheques are
mentioned here under the memorandum.
Cheque particulars
1 Cheque bearing no.162070 dated 27.06.2013 for
Rs.3,10,000/-
2 Cheque bearing no.162527 dated 27.06.2013 for
Rs.3,00,000/-
3 Cheque bearing no.162526 dated 27.06.2013 for
Rs.3,00,000/-
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4 Cheque bearing no.162526 dated 27.06.2013 for
Rs.2,50,0000/-.
5 Cheque bearing no.162527 dated 27.06.2013 for Rs.
2,50,0000
6 Cheque bearing no.162528 dated 27.06.2013 for
Rs.2,30,,000/-
7 cheque bearing no.163805 dated 27.06.2013 for
Rs.1,00,000/-
8 cheque bearing no.163806 dated 27.06.2013 for
Rs.1,00,000/-
9 cheque bearing no.163868 dated 27.06.2013 for
Rs70,00,000/-
10 cheque bearing no.162069 dated 27.06.2013 for
Rs.50,00,000/-
The abovementioned cheques are drawn on Indian
Overseas Bank, Deraballi Branch, Mangalore. Apart from
that, the accused has filed a false complaint against the
complainant and its partners to escape from the payment of
dues as mentioned above before the Hon’ble CJM Court
Mangalore under PCR No. 12/2013. In anticipation of their
arrest, all the partners obtained anticipatory bail from the
Hon’ble High Court of Karnataka, Bangalore. Thereafter, the
accused started sending some unknown persons to the place
of the complainant and started threatening its partners to
return the cheques, unless the cheques are returned to them
and unless the complainant agrees not to claim further
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CC NO.9472/2014
amounts from the accused, the accused will not only pursue
the aforesaid complaint filed against the complainant but will
also file false complaints against the complainant. The
accused threatened the complainant that he had high
contact with some former ministers and police officers and
also threatened to take their lives. On 25.06.2013, at about 2
PM, some four unknown persons came to the office of the
complainant and threatened the complainant to return the
cheques within three days; otherwise, they would kill the
parterners of the complainant firm. The complainant was in
fear of death and injury to commit extortion by the accused,
so he filed a private complaint before 9 th ACMM Bangalore
against the accused for the offence punishable under
sections 389, 386, 506, and 420 of IPC. The said complaint is
still pending for adjudication. After the filing of the complaint
against the accused, he approached the complainant for an
amicable settlement through Mr Sukumar and Sridhar, and
after negotiation held on the 3rd week of November 2013
between the complainant and the accused, the accused has
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agreed to repay the amount of Rs.18,41,33,000. After
negotiations were held between the complaint and the
accused in the presence of Mr Sukumar and Sridhar, the
accused issued two cheques, bearing no. 171829 dated
30.12.2013 for 9,00,00,000 and another cheque bearing no.
171828 dated 31.12.2013 for Rs. 9,38,83,000. Both cheques
are drawn on Indian Overseas Bank, Derebali Branch,
Mangalore. Furthermore, the accused has also agreed to
deposit Rs. 2,50,000/- to the bank account of one of the
partners of the complainant firm towards the payment of
legally recoverable debt. The accused transferred a sum of
rupees 1,25,000 from his coastal housing account
maintained in the Karnataka Bank on 03.12.2013 and also
transferred a sum of rupees 1,25,000 on 16.12.2013.
Reposing confidence in the accused, the complainant
presented the above-mentioned cheques for collection
through his banker the Karur Vyasa Bank Ltd, Rajajinagar
Branch, Bengaluru on 31.12.2013, but both cheques were
returned unpaid due to payment stopped by the accused,
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CC NO.9472/2014
thereafter the complainant had issued a legal notice dated
31.01.2014 to the accused calling upon him to pay the
cheque amount, despite of service of notice the accused
failed to pay the cheque amount within the stipulated period;
instead of making payment of the cheque amount, he had
issued an evasive reply to the legal notice to the complainant,
which constrained him to file this complaint against the
accused.
3. The complainant, to prove the material allegations
made against the accused in the complaint, examined one of
the partners as PW.1 and got marked documents as per
Ex.P.1 to P.22, based on complaint averments and sworn
statements and documents. The court took cognisance of the
offence punishable under section 138 of the Negotiable
Instrument Act and registered the top-noted case and also
issued a summons against the accused. On receipt of the
summons, the accused appeared before the court through
his counsel and got enlarged on bail. Copies of the complaint
and other relevant documents were furnished to the accused.
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4. The substance of the accusation was read over and
explained to the accused in the language known to him. The
accused did not plead guilty and claimed to have tried. The
authorised partners of the complaint firm examined PW.2
and PW.3 and got marked as per Ex.P.24 to 35 and P.38 to 44
and got marked documents as per Ex.P.36 and 37 by
confronting the accused during his cross-examination. After
the death of PW. 2, another partner of the complainant firm
was examined as PW3 and got certain documents marked in
his examination chief. After the completion of the
complainant side evidence, the incriminating circumstances
available in the complainant evidence read over and
explained to the accused in the language known to him, the
accused has denied the entire evidence of the complainant,
and to prove his defence, he examined himself on oath as
DW.1 and got marked documents as per Ex.D.1 to D.3; the
chartered accountant of the accused examined as DW.2 and
got marked documents as per Ex.D.4 to D.8, subject to the
objection of the learned counsel for the complainant.
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5. The learned counsel for the complainant has
submitted his written argument and also canvassed oral
arguments and brought important aspects of the case to the
knowledge of the Court. The learned counsel for the accused
has partly argued the matter and took time to file a written
argument. Despite giving sufficient opportunity, neither the
accused nor his counsel appeared before the court to submit
their written arguments and canvass further reply argument
on merits; consequently, further reply argument of the
accused counsel was taken as heard.
Points for consideration
1. Whether the accused successfully
rebuts the presumption available under section
139 of the negotiable instrument act beyond
the preponderance of probabilities ?
2 Whether the complainant has complied
with the mandatory requirements of section
138 of the negotiable instrument act?
3. What order ?
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6. On perusal of the written arguments, and evidence
led by complainant and the accused my answers to the above
said points are as under.
Point No.1 In the negative
Point No.2 In the affirmative
Point No.3 As per the final order for the
following
REASONS
Point No.1 and 2 :
7. These points are interconnected with each other,
hence to avoid repetition of facts and appreciation of
evidence, both points are taken together for common
discussion.
This is a complaint filed by the complainant based on
the dishonour of cheques issued by the accused to pay the
legally recoverable debt. The cause of action to file this
complaint arose when the accused failed to make payment of
the cheque amount within 15 days from the date of receipt of
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CC NO.9472/2014
the legal notice. Herein, in this case, the accused had issued
a reply notice stating that he had paid the amount that was
due from him, payable to the complainant. One of the
partners of the complainant’s firm came to Mangalore and
stayed in the house of the accused. At that time, the partner
of the complainant firm by name Umashankar Reddy had
obtained blank signed cheques and also signatures on the
blank bond papers from the accused; thereafter, the accused
had filed a private complaint before the CJM Court at
Mangalore, and the said complaint was referred to the
concerned police station with a direction to investigate the
case and to file the final report. The concerned police, after
completion of the investigation, filed the charge sheet against
the partners of the complainant firm with an allegation that
the partners of the complainant firm had abused the accused
with filthy language and also gave dire consequences. But
the police dropped other charges levelled against the
complainant and its partners, so it is clear that the
complainant firm and its partners have not obtained the
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cheques from the accused forcibly. The accused and
complainant firm have transacted their business and also
made payment towards the outstanding amount; the same is
reflected in the account statements produced by both
parties. Apart from that, both parties have furnished their
income tax returns, wherein it can be seen that the
complainant and the accused have sufficient sources of
income to enter into business dealings with each other.
8. The complainant firm, to prove its case, examined
one of its partners as PW.1, but he did not tender himself for
cross-examination. Thereafter, another partner of the
complainant firm was examined as PW.2 and got marked
certain documents. After his cross-examination and during
the pendency of the case, PW.2 died; another partner was
examined as PW.3 and got marked documents. Apart from
oral evidence, the complainant firm has produced the
documents to substantiate its case. The said documents are
marked as exhibits P1 to P44. Among these documents,
Ex.P.1 and P-2 are the original cheques issued by the
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accused. Ex.P.3 and P.4 are the cheque return memos. On
perusal of the bank endorsement/cheque return memos, it
was noticed that the cheque issued by the accused came to
be dishonoured due to payment stopped by the accused.
Ex.P5 is the office copy of the legal notice issued to the
accused calling upon him to pay the cheque amount; the said
legal notice was duly served to him. The accused gave a reply
to the legal notice issued by the complainant, contending
that one of the partners of the complainant’s firm was
residing in his house in Mangalore, and while leaving the
house, he obtained certain cheques from the accused by
putting police force. The cheques issued by the accused
indeed came to be returned unpaid due to payment stopped
by the accused, and it is well within the knowledge of the
accused that the cheques are in the custody of the
complainant. The complainant has produced the
memorandum of understanding entered into between
himself and the accused, and those memorandum of
understanding were executed in Mangluru. It is stated in the
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memorandum of understanding that the complainant has to
finance to the business of the accused; in return, the
accused has to pay profit to the complainant. The accused
has not denied execution of the memorandum of
understanding, and he has not taken any steps to challenge
its validity.
9. The accused is not the ordinary person or the
prudent man to presume that he did not have the required
knowledge to understand the consequences of putting a
signature on the blank papers on each occasion. The
accused put his signature on the memorandum of
understanding by admitting the terms mentioned therein,
under such circumstances, the entire burden is on the
accused to prove before the court for what purpose he had
issued the cheques in favour of the complainant and for what
reason he had executed the memorandum of understanding
with the complainant. Furthermore, to prepare the
memorandum of understanding, all the stamp papers were
purchased in Mangalore and Shivmogga, and in all the
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memorandum of understanding, the accused subscribed his
signatures by accepting the terms of the memorandum of
understanding.
10. The accused had filed a civil suit under OS
No.619/2014 before the Principal Civil Judge and JMFC,
Mangalore, against the complainant firm and its partners for
seeking the relief of mandatory injunction and permanent
injunction to restrain the complainant from initiating any
legal action against him and also to hand over the blank
signed cheque and bond paper. After contesting, the suit
came to be dismissed. In his evidence in the original suit , he
categorically admitted the issuance of a cheque and signing
the memorandum of understanding. The decision rendered
in the civil suit filed by the acccused indicates that the
complainant had not obtained the cheques and bond papers
forcibly, and he did not commit the forgery against the
accused. Apart from the afore mentioned civil suit, the
accused had filed a private complaint no. 12/2013 before the
Principal Civil Judge and JMFC, Mangalore. The complaint
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was referred to the Barke Police Station. In the said
complaint, the accused has made an allegation that the
complainant and its partners have cheated the accused and
also took blank signed cheques and bonds forcibly and
committed forgery against him, and one of the partners of the
complaint firm abused him in a filthy language and also
assaulted him. Initially, the police registered the FIR for the
offence punishable under sections 406, 420, 500, 504, and
448 read with section 34 of the Indian Penal Code. After
investigation, the police dropped the charges under sections
406, 420, 500, and section 34 of the IPC. The accused did not
challenge the chargesheet. The police have filed the
chargesheet only against the partner of the complainant firm
by name, Umashankar Reddy, and left out other partners as
there was insufficient evidence to proceed against them. The
police, after due investigation, concluded that the allegations
of cheating, criminal breach of trust, and defamation were
groundless. Against the filing of a charge sheet for a few
sections, the accused had not filed a protest petition, which
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means he admits that the allegations of cheating, criminal
breach of trust, and defamation are false allegations. Every
time the accused puts his signature on the MOU, two more
persons put their signature as witnesses, and they are
known persons to both the complainant and the accused. If
there was any illegality or pressure on the accused while
signing the MOU, he could have filed a police complaint
against the complainant firm and its partners.
11. The next aspect is that the accused had paid a sum
of Rs. 6,08,00,000/- to the complainant, but he did not
remember on which dates he borrowed the money and on
which dates he repaid the amount, and there is no cogent
evidence available before the court to believe his story. Both
parties have produced their income tax returns, but in this
case, there is no dispute regarding financial capacity to lend
money and borrow money from each other.
12. The accused is a reputed businessman and has
crores of transactions. Such an intelligent person could not
sign the documents without reading and understanding their
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content. On perusal of Ex.P.12 to P.20/Memorandum of
Understanding, it is evident that the complainant had agreed
to lend money to finance the accused to run his business; if
the said facts are untrue, then what was the necessity for the
accused to put his signatures on the memorandum of
understanding?
13. The accused in his notice dated 25.02.2013
marked as Ex.D.1 has clearly admitted that he had given
certain cheques to the complainant as security for availing a
loan, as per settled principles of law and precedents, even if
the cheques are issued as security would attract the offence
under section 138 of the Negotiable Instruments Act. Both
complainant and accused transacted financial business
worth rupees more than 20 crores; if the alleged financial
transaction is false, then certainly the accused could have
informed the CBI or other investigation agency; but he did
not take any action therefore, it is not justifiable to disbelieve
the case of the complainant.
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14. Now coming to income tax returns, businessmen
and financiers usually do their business only through bank
account transfers or by issuing a cheque or other negotiable
instruments, and all the transactions will be under the
scrutiny of income tax authorities. Some of the transactions
are made by way of cash; such transactions will not be under
the surveillance of the income tax authorities. In this case,
also, the transaction made by the complainant and accused
was an unaccounted transaction. That does not mean that
the complainant is not entitled to recover the cheque
amount. If the accused issued the cheque to pay a certain
amount that was payable to the complainant, and if the said
cheques were dishonoured; certainly, the accused is liable to
face the prosecution; in case the accused borrowed the
money from the complainant to do certain illegal activities
with the knowledge of the complainant, then the offence
under section 138 of the Negotiable Instruments Act would
not attract. In this case, both the complainant and the
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accused have transacted to meet their business
commitments.
15. The initial burden is on the accused to prove that
he had not issued the cheques to pay the legally recoverable
debt. In this regard, it is relevant to see the evidence of the
accused, which is reproduced hereunder.
” I was doing iron ore business, and I have
known the complainant since 2009. I
borrowed money from the complainant on
various dates for my business. Till 2013, I
took a sum of Rs. 5,60,00,000/- from the
complainant, and I repaid the amount of
Rs. 6,08,00,000/- to the complainant in
February 2013. After repayment of the loan,
I asked the complainant to return the blank
signed cheques and stamp paper, but the
complainant did not return the same
because he demanded more money from
me; for that reason, he did not return the
cheques and stamp papers. On 25.02.2013
I gave a letter to the concerned bank to stop
the payment of the cheque to be presented
by the complainant and gave a notice to the
22CC NO.9472/2014
complainant to return the cheques and
bond papers; for that, the complainant gave
a reply notice; thereafter, in June 2013 the
complainant presented the said cheques for
collection. I did not do any other business
except building construction and iron ore
business. I do not remember on which
dates I borrowed the money from the
complainant. I took money from the
complainant several times, but I could not
tell how many times I took money from the
complainant. Whenever the complainant
offered to give money, I used to give cheques
and bond papers by putting my signature. I
used to give cheques and bonds before
giving a loan to me because I could not
anticipate the quantum of the loan being
paid by the complainant, and he filed a
private complaint against the complainant
regarding the misuse of the cheques. The
police investigated the case and filed a
charge-sheet as per Ex.P.37, and there was
no problem for me to mention in Ex.D.1
regarding the return of the cheques and
bond papers from the complainant.
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16. On careful analysis of the evidence of the accused
as mentioned above, it is clear that the accused had issued
the cheques towards payment of money payable to the
complainant, though he had given a notice to the bank to
stop payment, but he did not speak anything about what
purpose he had given the cheque and how much amount he
had received from the complainant.
17. The accused has given a letter as per Ex.D.2 to the
bank to stop payment of cheques issued in favour of the
complainant. In the said letter, the accused stated that he
had issued the cheques to the complainant as security for
availing a loan, and he repaid the entire loan to the
complainant. The accused has produced the email sent from
his company to the accused along with a ledger statement
marked as Ex.D.9, but the said documents are not
accompanied by a certificate under section 65(b) of the
Indian Evidence Act, because the said document is
computer-generated documents; without there being valid
authentication, the said document cannot be considered as
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an admissible document. The accused has produced the
certificate given by his chartered accountant as per Ex.D.4,
wherein it is stated that the accused had borrowed a sum of
Rs.60,00,000/- from the complainant in the year 2009-10
and repaid a sum of Rs.19,00,000/-, with the balance
amount payable is Rs.41,00,000/-, and also a sum of
Rs.5,01,50,000/- from the complainant in the year 2010-11,
and he repaid a sum of Rs.1,89,84,800 by cash and
Rs.6,72,77,438 pad through kind, and the balance amount
receivable from the complainant is Rs.3,20,12,238/-, and in
the year 2011-12 the accused repaid a sum of
Rs.55,00,000/- to the complainant, and the amount received
through kind is Rs.3,75,23,647/-,and the balance amount
payable to the complainant is Rs. 11,409/-, and in the year
2012-13 the accused had repaid a sum of Rs. 29,15,000/- to
the complainant, and the balance amount receivable from
the complainant is Rs. 29,03,591/-, and it is also mentioned
in the certificate that a sum of Rs. 1,03,00,650/- is towards
the purchase of goods, but in the cross-examination of Dw. 1
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he has stated that, except for building construction and iron
ore, he has not done any business,then for what purpose has
the accused paid a sum of Rs. 1,03,00,650/- towards the
purchase of goods? Furthermore, the certificate issued by
the chartered accountant as per Ex.D.4 is not supported
with relevant bank transactions and corresponding entries in
the ledger account; therefore, the Ex.D.4 document is not
admissible in evidence unless it is accompanied by relevant
documents.
18. The accused has not disputed the issuance of the
cheque as per Ex.P.2 and P.3, and also the signature
appeared on the cheques. Though he stopped the payment,
he has not explained how he had made payment of the loan
to the complainant and for what purpose he had issued 10
post-dated cheques to the complainant and also not
explained for what purpose he had executed the
memorandum of understanding as per Ex.P.12 to P.20.
Furthermore, the police have not filed a chargesheet against
the complainant for the offences punishable under sections
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406 and 420 of the Indian Penal Code. If the police filed the
chargesheet for the said offence, then the court can believe
that the cheques in question were obtained by the
complainant forcibly to commit criminal breach of trust and
cheating against the accused. Further, the original suit filed
by the accused under OS No.619/2014 before the Principal
Civil Judge and JMFC, Mangalore, came to be dismissed;
therefore, the allegation of the accused that the complainant
had received the cheques forcibly from the accused and
misused the same for illegal enrichment appears to be false.
Therefore, the allegation of cheating and criminal breach of
trust has not been proved by the accused with cogent
evidence.
19. The learned counsel for the accused, in her
arguments, took up the contention that the complainant has
not produced the partnership deed to show the existence of
the complainant firm. This question is irrelevant because the
accused himself has stated in the MOU and in the private
complaint that the complainant firm is a partnership firm;
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under such circumstances, there is no need to produce the
partnership deed. The next contention is that the
complainant did not have the financial capacity to lend
money, as per Ex.P.12 to P.20, and also as per Ex.D.4, the
complainant has a financial capacity to lend money.
20. It is a settled proposition of law that, once the
issuance of the cheque and signature appeared on the
cheque admitted by the accused, then it is to be presumed
that the said cheque was issued by the accused towards the
payment of a legally enforceable debt; the burden is on the
accused to prove that he had not issued the cheque to pay
the legally recoverable debt; in this regard it is useful to refer
to the decision of the Hon’ble Supreme Court of India
reported in 2022 SCCOnline SC 1131 between P.Rasiya Vs
Abdul Nazir, in this case the Hon’ble Supreme Court of India
has held that,
” In this case the Hon’ble Supreme Court of India
has held that, the presumption of under Section
138 of N.I.Act itself be presumed that unless the
contrary is proved that the holder of a cheque
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received the cheque of the nature referred under
Section 138 in discharge in any whole or part of the
debt or other liability therefore once the initial
burden is discharged to the complainant that the
cheque was issued by the accuse and the signature
and issuance of the cheque is not disputed by the
accused in that case onus will shift upon the
accused to prove the contrary that the cheque was
not issued for any debt of other liability the
presumption under Section 139 of the act is a
statutory presumption and thereafter once it is
presumed that the cheque is issued in whole or
any part of the debt or other liability which is in
favour of complainant or holder of the cheque, in
that case, it is for the accused to prove the
contrary.”
21. The accused has not raised a defense in his reply
notice dated 07.02.2014 marked as Ex.P.11 that the
complainant did not have the financial capacity to lend
money; under such circumstances, it is not possible to
anticipate that the accused would raise such a defense
during the cross-examination of the complainant; therefore,
the complainant need not establish his financial capacity
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unless the accused has taken such a defense in his reply
notice; in this regard, I have relied upon the judgment
reported. In 2022(6) SCC 735 between Tedhi Sing versus
Narayan Mahanth, in this case the Hon’ble Supreme Court of
India has held that,
” the presumption under Section 139 of the act
that the holder of the cheque received the cheque
of the nature referred in Section 139 for the
discharge in whole or in part of debt or liability,
however, is expressively made subject to the
possession being proved to the contrary, in other
words, it is open to the accused to establish reverse
onus the accused is not expected to discharge as
an unduly high standard of proof, accordingly that
the principle has developed that which the accused
needs to establish is probable defence as to
whether the probable defence has been established
is the matter to be decided by the facts every case
on the conspectus evidence and circumstantial
evidence. The pursuance under Section 138 of
N.I.Act is not of a civil suit and at the time when the
complainant is gives his evidence unless the case
is setup in reply notice to the statutory notice sent
that the complainant did not have financial
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capacity it cannot be expected of the complainant
to initially lead evidence to show that he had
financial capacity to that extent the Court in our
opinion were right to holding that those lines
however the accused has to the right to
demonstrate that the complainant in a particular
case did not have capacity and therefore the case of
the accused is acceptable which he can do by
producing independent materials namely
examining case witnesses producing documents it
is also upon to him to establish a very same aspect
by pointing out to the material produced by the
complainant himself he can further more
importantly achieve this result through cross
examination of the witnesses of the complainant
ultimately it becomes duty of the Court to consider
carefully and appreciate of the evidence and then
come to the conclusion that whether in a given
case the accused has shown that the case of the
complainant is in peril for the reasons that the
accused has establish the probable defense, and
held that if the accused fail to give reply notice then
it is to be presumed that she admits the case of
complainant and she did not establish the
financial capacity, it is not expected to the
complainant to prove the financial capacity before
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the Court. reply notice took up the contention that
the complainant had not financial capacity then it
is possible for the complainant to produce
sustainable document or evidence to prove the
financial capacity therefore the decisions relied
upon by the learned counsel for accused is not
applicable to the case on hand because in this case
the accused has fail to give reply notice and she
has not disclose her defense by issuing reply notice
under such circumstances it is not expected to the
complainant to prove the financial capacity before
the Court.”
22. The accused has not taken any specific defense in
his evidence, and he did not take any steps to declare that
the memorandum of understandings/Ex/P/12 to P.20
documents is null and void and not binding upon him. The
accused is a reputed businessman in Mangalore, and having
the knowledge to sign the particular documents, it is
presumed that he had signed the memorandum of
understanding by knowing its contents; therefore, he cannot
take the defence that he signed the documents under
pressure. If the accused admits the issuance of the cheque,
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then he has to establish before the court that he had not
issued the cheques to pay the legally recoverable debt; the
court can’t give its finding on the presumption under section
139 of the Negotiable Instruments Act unless there is cogent
evidence of the accused to disprove the said presumption. In
this regard, I have relied upon the decision reported in 2023
SCC Online SC 1275 between Rajesh Jain Vs Ajay Singh, in
this case the Hon’ble Supreme Court of India has held that,
” the legal burden is the burden of proof which
remains constant throughout a trial. On the other
hand, the evidential burden may shift from one
party to another as the trial progresses, according
to the balance of evidence given at any particular
stage. In all trials concerning dishonour of cheque,
the court are called upon to consider whether the
ingredients of the offence enumerated in section
138 of the Act have been met and if so, whether the
accused was able to rebut the statutory
presumption contemplated by section 139 of the
Act, further, it said that section 139 is a reverse
onus clause and requires the accused to prove the
non-existence of the presumed fact, I,e that cheque
was not issued in discharge of a debt/ liability.
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Further held that, the NI Act provides for two
presumptions, one under section 118 of the Act,
which directs that it shall be presumed, until the
contrary is proved, that every negotiable
instrument was made or drawn for consideration.
Further, under section 139, which stipulates that
unless the contrary is proved, it shall be presumed
that the holder of the cheque received the cheque
for the discharge of, whole or part of any debt or
liability. The ‘presumed fact’ directly relates to one
of the crucial ingredients necessary to sustain a
conviction under section 138 of the NI Act. Further
held that, section 139 of the NI Act, which takes
the form of a ‘shall presume’ clause is illustrative of
a presumption of law. It is obligatory for the court
to raise this presumption has been established.
But this does not preclude the person against
whom the presumption has been established. But
this does not preclude the person against whom
the presumption is drawn from rebutting it and
proving the contrary, as is clear from the use of the
phrase ‘ unless the contrary is proved’, after taking
note of Bir Singh Vs Mukesh Kumar (2019)4 SCC
197, wherein it was held that presumption takes
effect even in a situation where the accused
contends that ‘ a blank cheque leaf was voluntarily
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signed and handed over by him to the
complainant, without admitting the execution of
the entire contents in the cheque, is not sufficient
to trigger the presumption. Further held that, as
soon as the complainant discharges the burden to
prove that, the instrument was issued by the
accused for discharge of debt, the presumptive
device under section 139 of the Act, that helps to
shift the burden on the accused of proving that the
cheque was not received by the bank towards the
discharge of any liability. Until this evidential
burden is discharged by the accused, the
presumed fact will have to be taken to be true,
without expecting the complainant to do anything
further. In the case of Basalingappa Vs
Mudibasappa (2019) 5 SCC 418 held that, to rebut
the presumption and prove to the contrary, it is
open to the accused to raise a probable defence,
wherein the existence of a liability enforceable debt
or liability can be contested. The words ‘ until the
contrary is proved’ occurring in Section 139 do not
mean that accused must necessarily prove the
negative that the instrument is not issued in
discharge of any debt/liability, but the accused
has two options. The first option is to prove that
the debt/liability does not exist and conclusively
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establish the cheque was not issued in discharge
of a debt / liability. The second option is to prove
the non existence of debt / liability by a
preponderance of probabilities by referring to the
circumstances of the case. The nature of evidence
required to shift the evidential burden need not
necessarily be direct I,e oral or documentary
evidence or admissions made by the opposite party
; it may comprise circumstantial evidence or
presumption of law or fact.”
23.The accused has to rebut the presumption with
cogent evidence that he has not issued the cheque to pay the
legally recoverable debt; further, in the Ex.D.1/notice given
by the accused, there is no reference to the cheque numbers.
Under such circumstances, the complainant was not
knowing that the accused had stopped the payment of the
cheques, and it is stated in the notice that he had issued the
cheques as security for availing a loan from the complainant.
If the cheques are issued as security, then also the offence
under section 138 of the Negotiable Instrument Act would
attract, in this regard I have relied upon the judgment ILR
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2006 KAR 1730 (Dr.B.V. Sampathkumar V/s
Dr.K.G.V.Lakshmi) and ILR 2008 KAR 1883 (Latha .K. Nair
V/s M/s Gold Mohar Foods and Feeds Ltd.,) wherein the
Hon’ble High Court of Karnataka has held that
“the cheque issued as Security attracts under
Section 138 of Negotiable Instruments Act. Further
held that once issuance of cheque is proved a
presumption under Section 139 of the Act would
arise with regard to consideration”.
24.Therefore, the probable defense taken by the accused
is not supported by cogent documents. The complainant has
complied with mandatory requirements of section 138 of the
Negotiable Instruments Act, and to prove his case he has
produced documents as per Ex.P.1 to P.42, which include
the cheques Ex.P.2 and P.3, cheque return memos as per
Ex.P.4 and 5, and issuance of legal notice as per Ex.P.6.
service of notice through RPAD as per Ex.P.9 and P.10, in
turn the accused failed to establish his defense as taken in
the reply notice marked as Ex.P.11, further to prove the
existence of legally recoverable debt the complainant has
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produced the memorandum of understanding as per Ex.P.12
to P.20, the accused has admitted the issuance of the cheque
and signature appeared on the cheque, under such
circumstances, the court can infer that the complainant has
established his case with cogent evidence, in turn the
accused failed to rebut the presumption as available under
section 139 of the Negotiable Instruments Act. The accused
has admitted that, from 2009 to 2012, he had received an
amount from the complainant, and to repay the said loan, he
had issued the cheque; therefore, it is a fit case to convict the
accused; furthermore, not mentioning the lending of money
in the income tax returns is not fatal to the case of the
complainant. in view of the decision rendered by the Hon’ble
Bombay High Court in the case of Prakash Madhukarrao
Desai Vs Dattatraya Sheshrao Desai, decided in Criminal
Appeal no.795/2018 dated of disposal 19.08.2023, in this
case, the Hon’ble Bombay High Court has held that
Transaction not reflected in the books of accounts
and/ on in the Income Tax Returns of the holder of
the cheque is due course can be permitted to be
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enforced by instituting proceedings under section
138 of the Negotiable Instrument Act in view of the
presumption under section 139 of the N.I.Act, that
such cheque was issued by the drawer for the
discharge of any debt or other liability, execution of
the cheque being admitted. Violation of Sections
269-SS or Section 271-AAD of the Income Tax Act
would not render the transaction unenforceable
under section 138 of the Negotiable Instruments
Act.”
25. Therefore, not mentioning financial transactions in
the books of accounts and the income tax return is not fatal
to the case of the complainant. The accused has failed to
prove his defense to rebut the presumption under section
139 of the Negotiable Instruments Act. The accused has not
made timely payment to the complainant; hence the accused
is liable to pay the additional compensation amount of Rs.
2,00,000/- along with the cheque amount and also liable to
pay litigation expenses of Rs. 20,000/- to the complainant;
therefore, the complainant has proved its case with cogent
evidence, and the accused failed to rebut the presumption
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under section 139 of the Negotiable Instruments Act,
accordingly I answer point no.1 in the negative and point
no.2 in the affirmative.
Point No.3:
26. For the above said reasons and discussions, I proceed
to pass the following.
ORDER
Acting under Section 255(2) of Cr.P.C. the
accused is hereby convicted for the offense
punishable under Section 138 of the
Negotiable Instrument Act.
The accused shall pay a fine of Rs.
18,41,08,000/-(Eighteen Crore Forty one lakh
eight thousand rupees only) in default he shall
undergo simple imprisonment for six (6)
months for the offense punishable under
Section 138 of the Negotiable Instrument Act.
As per Section 357 of Cr.P.C. out of the
total fine amount Rs.18,41,03,000/-(Eighteen
Crore Forty one lakh three thousand) (which
includes cheque amount plus additional
compensation amount plus litigation expenses
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) is to be paid to the complainant as
compensation and the balance amount Rs.
5,000/-is to be remitted to the state
government.
Bail bond and surety bond of the accused
shall stand canceled.
Further, in exercise of power conferred
under section 424(1)(a) of Cr.P.C the accused
is permitted to pay/deposit the fine amount of
Rs.18,41,08,000/- within 30 days from this
order and execution of sentence passed
against him in view of the above permission
stands suspended for a period of 30 days from
today.
Supply free copy of the judgment to the
accused.
(Directly typed by me on my laptop, corrected by me and pronounced the judgment in the open
court on this 26th day of December 2024)
(Shrishail Bhimashen Bagadi)
XX Additional Chief Judicial
Magistrate, Bengaluru
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ANNEXURES
1. List of witnesses examined on behalf of the complainant :
PW.1 : Sri.V.Arun Kumar S/o Velayudhan
PW.2 : Sri.Umashankar Reddy S/o Late Dhamodhar
PW.3 : Sri.S.Ramesh S/o Late Subbanna
2. List of documents marked as exhibits on behalf of the
complainant :
Ex.P.1 : Copy of the minutes
Ex.P.2& P.3 : Original cheques issued by the
accused
Ex.P.2(a)& 3(a) : Signatures of the accused
Ex.P.4 & P.5 : Bank endorsements
Ex.P.6 : Office copy of the legal notice
Ex.P.7 & P.8 : Postal receipts
Ex.P.9 and P.10 : Postal Acknowledgments
Ex.P.11 : Reply notice dated 07.02.2014
issued by the accused
Ex.P.12 to P.20 : Memorandum of understandings
Ex.P.21 : Bank Statement
Ex.P.22 : Private complaint
Ex.P.23 : Authorization letter
Ex.P.24 to P.26 : Bank account statements of the
complainant
Ex.P.27 : Bank Account statement of Varaha
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Constructions
Ex.P.28 & P.29 : Bank Account statements of Arun
Kumar
Ex.P.30 : Bank Account statement of
Shanbugaham
Ex.P.31 : Bank Account statement
Ex.P.32 to P.35 : Bank Account statement of
Umashankar Reddy
Ex.P.36 : Certified copy of private complaint
marked through confrontation
Ex.P.37 : Certified copy of charge-sheet
marked through confrontation
Ex.P.38 : Authorization letter (wrongly marked
as Ex.P.36)
Ex.P.39 : Death certificate of P.Umashankar
Reddy (wrongly marked as Ex.P.37)
Ex.P.40 and P.41 : Income tax returns (Wrongly marked
as Ex.P.38 and P.39)
Ex.P.42 and P.43 : Authorization letter to produce
income tax returns (Wrongly marked
as Ex.P.40 and 41)
Ex.P.44 : Certificate under section 65(b) of the
Indian Evidence Act(Wrongly
marked as Ex.P.42)
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3. List of witnesses examined on behalf of the accused :
DW.1 : Sri.Krishnaraj Mayya S/o Keshav Mayya
DW.2 : Srivatsa N. Ballakuraya S/o Venkataraman
Ballakuraya
4. List of documents marked as exhibits on behalf of
the accused :
Ex.D.1 Office copy of legal notice dated
25.02.2013
Ex.D.2 Letter written to IOB Bank
Ex.D.3 Reply notice given by the complainant
Ex.D.4 Certificate given by chartered accountant
Ex.D.5 to D.8 Income Tax Returns(Shrishail Bhimashen Bagadi)
XX Additional Chief Judicial
Magistrate, Bengaluru