B.V Rangam v. B. Govinda Reddy And Another

1. This appeal is filed being aggrieved by the Judgment dated 19-1-1998 in C.C.No. 364 of 1996 on the file of the Court of V Metropolitan Magistrate, Hyderabad wherein the respondent-accused was acquitted under Section 255(1) of Cr.P.C., for the offence under Section 138 of the Negotiable Instruments Act, 1881 (for short 'the Act').

2. The case of the complainant was that he purchased a flat at Yellareddyguda from the accused i.e., Managing Director of M/s. Bhavanam Estates Private Limited and paid a sum of Rs. 3,15,000/- towards sale consideration. The accused neither fulfilled the agreement nor returned the amount and thereby he was constrained to file a criminal complaint, which was registered as Cr.No. 328/95 of Banjara Hills Police Station, Hyderabad under Section 420 IPC and also moved a petition before the State Consumers' Forum claiming compensation for Rs. 6.00 lakhs. Thereafter, the accused approached him for compromise and accordingly, the matter was compromised pending the said criminal proceedings and the accused agreed to pay the amount in instalments and accordingly, issued four cheques, i.e. three cheques for Rs. 75,000/- each, which were encashed, and another cheque bearing No. 959950 dated 8-3-1996 for Rs. 25,000/-, which was dishonoured on the ground of insufficient funds. However, at the instance of the accused, the said cheque was presented for the second time and it was dishonoured on the same ground and thereby, he was constrained to issue Ex.P3-legal notice dated 22-3-1996 calling upon the accused to pay the cheque amount. In spite of receiving the legal notice, the accused neither paid the amount nor given any reply. Hence, the complaint.

3. Before the trial Court, the complainant examined himself as P.W.1 and got examined P.W.2 and marked Exs.P1 to P5. On behalf of the accused, none was examined, but Ex.D1 - copy of the agreement - was marked. On a detailed consideration of the evidence placed before it, the trial Court came to the conclusion that the accused was not guilty of the offence under Section 138 of the Act and acquitted him under Section 255(1) Cr.P.C. Aggrieved by the same, the present appeal is filed by the complainant.

4. Learned counsel for the appellant-complainant submitted that the Court below erroneously held that the cheque in question was not issued in discharge of any debt or liability and as such, there was no legally enforceable debt as required under Section 138 of the Act. He further submitted that in view of the legal presumption under Section 139 of the Act, the learned Magistrate erred in throwing the burden on the complainant. The Court below also came to an erroneous conclusion that non-impleading of the company was fatal to the prosecution, overlooking the provision of Section 141 of the Act. He also submitted that it is in the evidence of P.W.1 that there were criminal proceedings and the consumer case between the parties in this regard and they ended in compromise.

5. I have gone through the entire evidence on record and also the impugned Judgment.

6. Now, it requires to be seen whether the complainant has discharged the initial burden of connecting the cheque in question to any legally enforceable debt or liability as required under Section 138 of the Act, whether under Section 139 of the Act, in view of the legal presumption, it is for the respondent-accused to prove that the cheque was not issued by him against any legally enforceable debt or liability and whether the non-impleadment of the Company as a party to the case would vitiate the proceedings under Section 138 of the Act.

7. To answer the said questions, it is necessary to examine Sections 138 and 139 of the Act, which read as under:

"SECTION 138 Dishonour of cheque for insufficiency, etc., of funds in the account- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both :

Provided that nothing contained in this section shall apply unless-

(a) the cheque has been presented to the bank within a period of six months from the date on which it was drawn or within the period of its validity, whichever is earlier.

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or. as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.

SECTION 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."

8. In the light of the above provisions, to examine whether there was any legally enforceable debt or liability against the accused-respondent, it may be necessary to look into the evidence of P.W.1. He categorically asserted in his deposition that he had paid an amount of Rs. 3,15,000/- to the accused, who agreed to construct a flat at Yellareddyguda and handover the same to him, but he could not keep up his promise and, therefore, he was constrained to file a criminal complaint which was registered as Crime No. 328/95 of Banjara Hills Police Station, Hyderabad under Section 420 IPC. He had also stated that he moved a petition before the State Consumers' Forum claiming compensation of Rs. 6,00,000/-. Thereafter, the accused approached him for compromise and accordingly, the matter was compromised pending the criminal proceedings. In fact, in view of the compromise, the accused had issued four cheques. Three cheques for Rs. 75,000/- each and another cheque in question bearing No. 959950, dated 8-3-1996 for Rs. 25,000/-. The said three cheques were encashed, but the last cheque for Rs. 25,000/- was dishonoured with an endorsement 'insufficient funds'. Though P.W.1 gave all the details of cheques drawn by him earlier under Ex.P3, they were not stated in the oral evidence. In Ex.P3, he had furnished each and every detail as to the number, date, drawer of the cheque etc.

9. Learned counsel for the respondent-accused stated that as found by the Court below, it is for the complainant to prove that the amount under the cheque is part of the legally enforceable debt on the part of the accused and simply relying upon Section 139 of the Act, the complainant cannot say that he had discharged the initial burden, since he is the holder of the cheque and it is for the respondent to prove that it was not issued for any legally enforceable debt. The contention of the complainant that the burden is on the accused to prove was not correct.

BURDEN OF PROOF

10. Insofar as the burden of proof is concerned, learned counsel for the appellant drawn attention of this Court to Section 139 of the Act and submitted that such a presumption as contemplated under the above provision is not a factual presumption and is a legal presumption. Once the cheque is in possession of a complainant, it must be deemed that he had discharged the initial burden as to legally enforceable debt and as such, it is for the accused-respondent to prove that the said cheque was not issued for the purpose of any legally enforceable debt or liability. In this regard, learned counsel for the appellant drawn attention of the Court to a decision of the apex Court in HITEN P. DALAL v. BRATINDRANATH BANERJEE, in which it was held as under:

"21. The appellant's submission that the cheques were not drawn for the "discharge in whole or in part of any debt or other liability" is answered by the third presumption available to the Bank under Section 139 of the Negotiable Instruments Act. This section provides that:

"139. 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."

The effect of these presumptions is to place the evidential burden on the appellant of proving that the cheque was not received by the Bank towards the discharge of any liability.

23. In other words, provided the facts required to form the basis of a presumption of law exist, no discretion is left with the court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, "after considering the matters before it, the court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists". Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the court in support of the defence that the court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the "prudent man".

38. The burden was on the appellant to disapprove (sic disprove) the presumptions under Sections 138 and 139, a burden which he failed to discharge at all. The averment in the written statement of the appellant was not enough. Incidentally, the defence in the written statement that the four cheques were given for intended transactions was not the answer given by the appellant to the notice under Section 138. Then he had said that the cheques were given to assist the Bank for restructuring (Ext. H). It was necessary for the appellant at least to show on the basis of acceptable evidence either that his explanation in the written statement was so probable that a prudent man ought to accept it or to establish that the effect of the material brought on the record, in its totality, rendered the existence of the fact presumed, improbable. (Vide Trilok Chand Jain v. State of Delhi, .) The appellant has done neither. In the absence of any such proof the presumptions under Sections 138 and 139 must prevail." and submitted that a statutory presumption under Section 138 of the Act is made out by the appellant-complainant and discharged his initial burden since the issuance of the cheque was not disputed.

11. Even in the cross-examination of P.W.1, it was suggested that the cheque was issued for some other purpose. The accused has not led any evidence and on the other hand, the case of the complainant was supported by cross-examining P.W.1. In the cross-examination, P.W.1 denied the suggestion that the cheque was issued under threat of reputation of Bhavanam Estates of case in Cr.No. 328/95. He also denied the suggestion that the cheque was issued as a collateral security to cancel the agreement in his personal name. This itself shows that even it is not the case of the accused that such cheque was not issued by him. Therefore, by drawing the statutory presumption under Section 139 of the Act, the appellant-complainant has discharged his initial burden and the burden to prove that the said cheque was not issued against a legally enforceable debt lies with the respondent-accused in view of the decision of the apex Court referred to supra. Therefore, the finding of the Court below that the appellant has not discharged his initial burden as to the legally enforceable debt or liability against the accused cannot be sustained.

IMPLEADMENT OF COMPANY AS A PARTY

12. On this point, the Court below held that since the accused was impleaded in his personal capacity as a Managing Director of the Company and the Company itself was not made a party, the complaint under Section 138 of the Act was not maintainable. The said finding is incorrect in view of the proposition laid down in the decisions reported in KRISHNA BHOOPAL v. SANAM JHANSI DEVI, 2002(1) ALD (Crl.) 817 and K.R. TIRUVANGADAM v. DHAVARACHETTY COTTON COMPANY, 2002(2) ALD (Crl.) 340.

13. In KRISHNA BHOOPAL's case (2 supra), this Court held as under:

"Section 141 of the Act lays down that the person, who has drawn the cheque as well as the company will be liable for the offence under Section 138 of the Act. Therefore, from Section 141 of the Act, it is clear that apart from the company, the person who has drawn the cheque also is liable for punishment under Section 138 of the Act. So merely because the company in which the petitioner was a Director is not shown as an accused in the complaint, it cannot be said that the complaint against the petitioner is not maintainable."

14. In TIRUVANGADAM's case (3 supra), a learned single Judge of this Court held that the complaint is maintainable against the Directors and prosecution of a company is not a sine qua non. I am in complete agreement with the propositions laid down in the above cases, which are based on the Judgment of the apex Court in Anil Hada v. Indian Acrylic Ltd.., 2001(1) ALD (Crl.) 25 (Supreme Court).

15. For the aforementioned reasons, the appeal is allowed and the respondent-accused is found guilty of the charge under Section 138 of the Act. He is sentenced to pay a fine of Rs. 2,000/- in default, to suffer simple imprisonment for two months and pay compensation of Rs. 50,000/- to the appellant-complainant.