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Karnataka High Court Upholds Lower Courts’ Decision on Section 138 of Negotiable Instruments Act 1881 in Cheque Dishonor Case

Case title: MR. B H SHIVANANDA VS MR S SATHISH CHAWLA

Case no.: CRIMINAL REVISION PETITION NO. 824 OF 2016

Dated on: 28^th May 2024

Quorum:  Hon’ble. MR JUSTICE S RACHAIAH

FACTS OF THE CASE

It is the case of the complainant that the accused is an absolute owner of the property situated at Mudhugurki Village, Vijipura Hobli, Devanahalli Taluk, Bengaluru Rural District and he intended to sell it to the complainant. The complainant on negotiation, paid a sum of Rs.2,96,000/- and got the sale agreement executed. Due to some misunderstanding, the said sale agreement needed to be cancelled and the accused agreed to return the amount which he had received towards the sale agreement. Accordingly, a cheque for a sum of Rs.3,16,000/- was issued to the complainant. The cheque was presented on 04.01.2010 by the complainant for encashment, however, it came to be dishonoured with an endorsement as ‘payment stopped’. The complainant issued a legal notice calling upon the accused to repay the amount. Despite the notice being served, the accused failed to repay the amount. Hence, the complaint came to be filed before the Jurisdictional Magistrate. To prove the case of the complainant, he himself examined as P.W.1 and got marked 16 documents as Exs.P1 to P16. On the other hand, the accused did not choose to examine any witnesses.

 ISSUES

1. Whether the accused issued the cheque in question to the complainant for the discharge of a legally enforceable debt or liability?
2. Whether the dishonor of the cheque with the endorsement ‘payment stopped’ constitutes an offence under Section 138 of the Negotiable Instruments Act?
3. Whether the accused successfully rebutted the presumption that the cheque was issued for the discharge of a debt or liability?
4. Whether the complainant proved the existence of the sale agreement and the transaction leading to the issuance of the cheque?

LEGAL PROVISIONS

Section: 397 of CR.P.C: The High Court or any Sessions Judge may call for and examine the record of any proceeding before any inferior Criminal Court situate within its or his local jurisdiction for the purpose of satisfying itself or himself as to the correctness, legality or propriety of any finding.

Section: 401 CR.P.C: Where under this Code an appeal lies but an application for revision has been made to the High Court by any person and the High Court is satisfied that such application was made under the erroneous belief that no appeal lies thereto and that it is necessary in the interests of justice so to do, the High Court may treat.

SECTION 138 OF NEGOTIABLE INSTRUMENTS ACT: It states that returning of a cheque unpaid constitutes an offence only if such return is due to want of funds. Where the cheque is returned by the bank for want of full signature of the drawer, it does not constitute an offence U/S 138.

CONTENTIONS OF THE APPELLANT

It is the submission of learned counsel for petitioner that the findings of the Courts below in recording the conviction are not proper, therefore, the findings are required to be set aside. It is further submitted that the complainant contended that the accused was intending to sell the property and entered into an agreement of sale, therefore, he paid the amount. However, the said agreement stood cancelled due to some unavoidable circumstances and the accused agreed to repay the amount and issued the cheque. In fact, the complainant did not produce the said sale agreement. In the absence of the sale agreement, the liability to repay the amount would not arise. However, the Courts below failed to consider the said aspect and recorded the conviction, which is against the evidence on record. It is further submitted that even though the accused contended that he did not enter into any contract or any agreement with the complainant, the said contention was not considered by the Courts below. Further, the accused contended that he had no account in the ICICI Bank and the cheque did not belong to him, the said contention was also not considered by the Courts below. As a result, the impugned judgments have been passed and the same is liable to be set aside. It is further submitted that the complainant must have established that the cheque belonged to the accused, when the specific contention was taken by the accused that it did not belong to him. However, the complainant has not made any efforts to prove that the cheque belongs to the accused. The said contention of the accused has been uncontroverted. However, the Courts below failed to consider the said contention and passed the impugned judgments. Therefore, the said findings of conviction are required to be set aside. Making such submission, the learned counsel for petitioner prays to allow the petition.

CONTENTIONS OF THE RESPONDENTS

The learned counsel for respondent vehemently justified that the accused being an owner of the property was intending to sell the property. Accordingly executed the sale agreement after having received the part of sale consideration. Ex. P8 is an affidavit executed by the accused herein has admitted that he had sold four sites to the complainant. Similarly, the accused admitted that the complainant had paid part payment by way of cheque as well as cash. When the transaction is admitted by the accused and the affidavit executed to that effect, it can be said that the complainant has proved the transaction. It is further submitted that since the accused had admitted the transaction regarding the sale of sites, the issuance of the cheque after cancelling the said sale transaction cannot be denied at a later stage. Moreover, when the cheque was presented for encashment, the complainant received an endorsement as ‘payment stopped’. If the cheque did not belong to the accused, the banker would have issued an endorsement either as the signature differs or does not belong to the signatory. In the absence of this endorsement, the burden obviously lies on the accused to prove that the cheque did not belong to him. However, the accused had not made any efforts to prove that the cheque did not belong to him. In the absence of proof regarding the cheque which did not belong to him, the inference could be drawn that the cheque belongs to the accused. It is further submitted that the Courts below after appreciating the oral and documentary evidence on record, recorded the conviction which appears to be appropriate and relevant. Therefore, there are neither infirmities nor errors in the findings of the Courts below. Hence, it is not required to be interfered with the findings. Making such submission, the learned counsel for the respondent prays to dismiss the petition.

COURT’S ANALYSIS AND JUDGEMENT

THIS CRL.RP IS FILED U/S. 397 R/W 401 CR.P.C PRAYING TO SET ASIDE THE ORDER OF CONVICTION AND SENTENCE PASSED BY THE XIV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE BENGALURU, IN C.C.NO.26550/2011 DATED 01-03-2014 FOR THE OFFENCES PUNISHABLE UNDER SECTION 138 OF NEGOTIABLE INSTRUMENTS ACT. After having heard the learned counsel for the respective parties and also perused the findings of the Courts below, it is necessary to have a cursory look upon the evidence of P.W.1. According to P.W.1, the accused intended to sell the property. After negotiation, the complainant paid the amount to the accused as a part payment and got the sale agreement executed in respect of the property. However, due to some unavoidable circumstances, the sale agreement had to be cancelled. Further, P.W.1 stated that in lieu of the said cancellation, the accused stated to have issued a cheque for a sum of Rs.3,16,000/-. When it was presented it for encashment, it came to be dishonored as ‘payment stopped’. Before adverting to the facts of the case, it is necessary to refer the proposition of law regarding the Negotiable Instruments Act and also dictum of the Hon’ble Supreme Court on the said law. It is the settled principle of law that once the execution of the cheque is admitted by the accused, the Court has to raise a presumption that the said cheque has been issued for the discharge of debt or liability. The said presumption is rebuttable in nature, it can be rebutted by raising a probable defence by the accused. In the present case, the accused denied the issuance of the cheque and its execution, however, he has not made any efforts to prove that the cheque did not belong to him and he has not issued the cheque for any transaction with the complainant. It is also settled principle of law that mere denial of the transaction and issuance of the cheque is not sufficient to rebut the presumption. The accused except denial, he has not made any efforts to substantiate and prove the said denial. Therefore, I am of the considered opinion that the accused did not rebut the presumption. Moreover, the complainant produced several documents and got them marked to substantiate the transaction. When the accused failed to rebut the presumption, it is necessary to draw the adverse inference that the cheque has been issued for the purpose of discharge of legally recoverable debt or liability. In such a way, it can be conferred that the Courts below rightly appreciated the evidence and recorded the conviction. Therefore, interference with the said findings did not arise. Hence, I decline to interfere with said findings. The Criminal Revision Petition is dismissed.

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Judgement Reviewed by – HARIRAGHAVA JP

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