Dishonour of Cheque; K.K. Divakaran Vs. State [Kerala High Court, 09-09-2016]

Negotiable Instruments Act, 1881 – Section 138 – Dishonor of Cheque – Notice – Neither the nature, nor the date of the transaction between the parties nor the date of issuance of the cheque was disclosed – Suppression of these material facts in the statutory notice and in the subsequent complaint is fatal.

Negotiable Instruments Act, 1881 – Section 138 – Suppression of material facts relating to the alleged transaction in the notice issued before filing the suit or the complaint is an artifice used by certain litigants, the intention of which is very clear. They want to develop a story after knowing the defence that may be set up by the opposite party. The doors of the court should be closed to such fortune seekers.

Negotiable Instruments Act, 1881 – Section 142 – In a criminal case the accused should be informed before the trial not only of the nature of the offence but also the particulars of the transaction which are necessary for him to effectively meet the case against him. But unscrupulous complainants refuse to do so with the object of denying the accused a fair trial, which is a right guaranteed under Article 21 of the Constitution. An accused in a complaint case filed under Section 142 of the Act also is entitled to know before the trial the particulars of the accusation against him. Suppression of these particulars in the complaint alone is sufficient to order his acquittal.

# Cheque

IN THE HIGH COURT OF KERALA AT ERNAKULAM

K.ABRAHAM MATHEW, J.

Crl.R.P.No.1689 OF 2009

Dated this the 9 th day of September, 2016

AGAINST THE JUDGMENT IN CRA 627/2005 OF THE SESSIONS COURT, KOTTAYAM AGAINST THE ORDER IN C.C.NO.282 OF 1999 OF JUDICIAL FIRST CALSS MAGISTRATE COURT-1, KOTTAYAM

REVISION PETITIONER/APPELLENT/ACCUSED

K.K.DIVAKARAN, PALA.

BY ADVS.SRI.P.BABU KUMAR SRI.P.YADHU KUMAR

RESPONDENTS/COMPLAINANTS/COMPLAINANTS

1. STATE OF KERALA REP. BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM. 2. LALITHA RAVI, SULATHALAYAM, MEENADAM.P.O.,PAMPADY,KOTTAYAM DIST. R, BY ADV. PUBLIC PROSECUTOR SMT.MANJU.V R,R2 BY ADV. SRI.LIJI.J.VADAKEDOM THIS CRIMINAL REVISION PETITION HAVING BEEN FINALLY HEARD ON 09-09-2016, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

ORDER

At the trial that took place on a complaint filed by the mother in-law of his son under

# Section 142 of the Negotiable Instruments Act

(hereinafter called the Act) the revision petitioner was convicted of the offence under Section 138 of the Act and sentenced to undergo simple imprisonment for six months. He was also directed to pay the second respondent/complainant Rs.2,55,000/- as compensation and in default of payment of the amount to undergo simple imprisonment for a further period of two months. In the appeal filed by him the order of conviction was upheld, but the sentence was modified; he was ordered to undergo imprisonment till the rising of the court. The direction to pay the compensation and to undergo imprisonment in case the amount was not paid was not modified. The order of conviction and the sentence are assailed on the ground that both courts failed to analyse the evidence, and to apply the law laid down by the Supreme Court as to how the presumptions under Sections 118(a) and 139 of the Act may be rebutted. It is submitted that both courts failed to examine whether the evidence available in the case was sufficient to prove the contention of the revision petitioner that the cheque in question was a signed blank cheque leaf given to the husband of the second respondent as a security for the loan of Rs.50,000/- taken by Pradeep, son of the former and son in law of the second respondent.

2. A perusal of the judgments of the courts below reveals that there is much substance in the submission of the learned counsel for the revision petitioner. The trial court in its judgment gave a summary of the evidence of each witness, which is not expected to be given in a judgment. The court should consider each relevant fact and discuss and analyse only the evidence given by the witnesses who have deposed to it. If the summary of the testimony of the witnesses is discarded, nothing much remains in the judgment of the trial court. The second respondent relied on Ext P8 which is said to be a document executed by the revision petitioner acknowledging his liability, admitting issuance of the cheque and undertaking to pay the amount. The contention of the latter is that Ext P8 was a signed blank paper he gave the husband of the second respondent along with the signed blank cheque. The trial court in its judgment has observed:

“Moreover as per Ext P8 agreement the accused admitted his liability to the complainant.”

The learned Magistrate did not examine the contention of the revision petitioner. He further observed:

“There is no evidence adduced by the accused to rebut the presumption under Section 139 of the NI Act. There is no reason to reject the testimony of PWs 1 to 3”.

It has become a practice of some courts not to even consider whether the accused has been able to rebut the presumptions under Sections 118 and 139 of the NI Act. This case is a classic example of it. The judgment of the appellate court is not better than that of the trial court. There is no discussion or analysis of the evidence. It held:

“Therefore, it is the duty of the appellant to prove that he has issued Ext P1 cheque not in discharge of a debt or liability. A close scrutiny of the evidence of the first respondent shows that the defence story put forward by the appellant is only to be discarded.”

The learned Sessions Judge reached this conclusion without examining whether the materials available in the case are sufficient to rebut the presumption. I have no doubt that the failure of the courts below to discharge their duties properly have resulted in miscarriage of justice. This makes it necessary for this court to discuss and analyse the evidence adduced by either side with regard to the execution of Ext P1 cheque as well as the evidence regarding the contention of the revision petitioner that is not supported by consideration and that it was a signed blank cheque leaf given to the husband of the second respondent.

3. The allegation in the complaint is that to discharge a debt the revision petitioner on 14.9.1998 issued at Pampadi Ext P1 cheque bearing the date 11.1.1999 and when it was presented the bank returned it as there was no sufficient funds in his account and in spite of demand by notice, he failed to pay the amount and thus he committed the offence under Section 138 of the Act.

4. The effect of admission of signing a blank paper by a party to a proceedings came up for consideration in

# A. Pathu and others v, Katheesa Umma, 1990 (2) KLJ 115

the learned judge held:

“ Normally, when execution of a document is either admitted or proved and when no disabling factor or vitiating circumstance is alleged or proved, admission of proof of signature with the necessary formalities, if any, will be proof of execution with knowledge of the contents atleast, prima facie, for the purpose of shifting the burden. If a person denies the execution of a document which contains his signature, he must first explain how the signature happened to be there without actual execution. That may be by getting the signature in a blank paper or under other circumstances which disclose that there was no conscious of voluntary execution. When a person’s signature appears at the place where the executant would normally sign, the signature may be accepted prima facie as having been put in token of execution. There is the presumption under Section 114 of the Evidence Act that a person only puts signature in a document in token of execution.”

5. A division bench of this court in

# Velayudhan v. Valayudhan, 2001 (1) KLT 392

also had occasion to consider it. The division bench held:

“The plaintiff may give evidence regarding the execution of the document. If the fact of thumb impression or signature is admitted, that will give more reliability to the plaintiff’s evidence. If such evidence adduced by the plaintiff is reliable and if the plaintiff is able to discharge his burden sufficiently, then onus will shift on the defendant to show that he had not executed the document. We only say that the plaintiff cannot succeed in the case without giving evidence.”

6. In

# Joseph v. Gladis Sasi, 2010 (3) KLT 379

# Santhi C v. Mary Sherly and another, 2011 (3) KHC 22

and

# Purushothaman Nair P v. Sreekandan Nair, 2013 (4) KLJ 256

this court held that admission of a person that he signed a blank cheque leaf does not amount to execution of the cheque.

7. Though the revision petitioner admits to have put his signature in the cheque leaf, the first respondent has to prove execution of the cheque as the admission of the former does not amount to execution of the cheque. If the evidence adduced by the first respondent to discharge his initial burden is not satisfactory, the revision petitioner has no duty to prove that what he signed was only a blank cheque leaf.

8. Sections 118 and 139 NI Act which create presumptions are relevant in the context of this case. Section 118 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, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration;…..

(b to g omitted)

Section 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.

9. The expression used in Section 118 is ‘until the contrary is proved’ while the expression used in Section 138 is ‘unless the contrary proved’ which do not make any difference. Both are rebuttable presumptions.

10. In

# Kundanlal Rallaram v. Custodian Evacuee Property, Bombay, AIR 1961 SC 1316

a three judge bench of the Supreme Court considered how the burden under Section 118 of the Act may be rebutted. It has held:

“The defendant may adduce direct evidence to prove that the promissory note was not supported by consideration, and, if he adduced acceptable evidence, the burden again shifts to the plaintiff, and so on. The defendant may also rely upon circumstantial evidence and, if the circumstances so relied upon are compelling, the burden may likewise shift again to the plaintiff. He may also rely upon presumptions of fact, for instance those mentioned in S.114 and other sections of the Evidence Act.”

11. Section 118(a) of the Act came up for consideration before the Supreme Court in

# Bharat Barrel and Drum Manufacturing Company v. Amin Chand Pyarelal, AIR 1999 SC 1008

the court held:

“The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that it did not exist.”

12. The last two judgments of the Supreme Court were rendered in civil cases. But the rule of evidence contained in Section 118(a) is equally applicable to criminal cases also. The following observation of the Supreme Court in

# M.S. Narayana Menon @ Mani v. State of Kerala and another, AIR 2006 SC 3366

is relevant.

“If for the purpose of a civil litigation, the defendant may not adduce any evidence to discharge the initial burden placed on him, a ‘fortiori’ even an accused need not enter into the witness box and examine other witnesses in support of his defence.”

13. In

# Hiten P Dala v. Bratindranath Banerji, AIR 2001 SC 3897

the apex court held:

“ Therefore, the rebuttal does not have to be conclusively established but such must be adduced before the court in support of the defence that the court must either believe the defence to exists or consider its existence to be reasonably probable, the standard reasonability being that of the prudent man.”

14. In

# M.S.Narayana Menon @ Mani v. State of Kerala and another, AIR 2006 SC 3366

which was a case arising from a complaint filed under Section 142 NI Act the Supreme Court observed:

“For rebutting such presumption what is needed is to raise a probable defence. Even for the said purpose the evidence adduced on behalf of the complainant could be relied upon.”

“ The standard of proof evidently is of preponderance of probabilities. Inference of preponderance can be drawn not only from the materials on records but also by reference to the circumstances upon which he relies.”

15. The manner in which the presumption under Section 118(a) may be rebutted was considered by the Supreme Court in

# Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm, AIR 2008 SC 2898

wherein it is observed :

“It is also settled position that the initial burden in this regard lies on the defendant to prove the non existence of consideration by bringing on record such facts and circumstances which would lead the court to believe the non existence of the consideration either by direct evidence or by preponderance of probabilities showing that the existence of consideration was improbable, doubtful or illegal…………………”.

16. After considering its earlier decisions including those referred to above a three judge bench of the Supreme Court in

# Rangappa v. Mohan, AIR 2010 SC 1898

held:

“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 standards or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of ‘preponderance of probabilities’ ”.

17. Neither the trial court nor the appellate court took notice of the above decisions of the apex court, which is the reason why they failed even to examine whether the materials available on record are sufficient to rebut the presumptions under Sections 118(a) and 139 of the Act. 18. Before she filed the complaint the second respondent sent Ext P4 statutory notice to the revision petitioner informing him about the dishonour of the cheque and demanding payment of the amount covered by it. Neither the nature, nor the date of the transaction between the parties nor the date of issuance of the cheque was disclosed in it. There was only a bald statement that the revision petitioner issued a cheque bearing the date 11.1.1999 for Rs.2,55,000/- in discharge of a debt. There is no explanation why these material facts were not disclosed in the statutory notice. Suppression of material facts relating to the alleged transaction in the notice issued before filing the suit or the complaint is an artifice used by certain litigants, the intention of which is very clear. They want to develop a story after knowing the defence that may be set up by the opposite party. The doors of the court should be closed to such fortune seekers.

19. In the complaint also neither the nature, nor the date of the transaction between the parties is mentioned. The only addition made in the complaint is that the date of issuance of cheque is 14.9.1998. For the first time it was in her evidence the 2 nd respondent (PW1) disclosed that the transaction between the parties was a loan of Rs.1,95,000/-. In answer to a leading question put in the examination in chief she stated that the transaction was after the marriage between her daughter Sulatha and the revision petitioner’s son Pradeep, which was solemnised on 23.1.1998. She testified that the revision petitioner requested for a loan of Rs. 3 lakh one week after the marriage of Sulatha and Pradeep and she paid him Rs.1 ½ lakh on 9.4.1998 and Rs.45,000/- on 8.5.1998. The amount mentioned in the cheque is Rs.2,55,000/- though the loan amount was only Rs.1,95,000/- Rs.60,000/- is said to be interest. How the interest was calculated will be considered later. Her story is that in August 1998 she made a demand for repayment of the amount and then the revision petitioner undertook to pay the amount in January 1999; the 2 nd respondent insisted on getting a cheque and a document from the revision petitioner; on 14.9.1998 at her residence at Pampadi the revision petitioner executed Ext P1 cheque and Ext P8 undertaking.

20. In a criminal case the accused should be informed before the trial not only of the nature of the offence but also the particulars of the transaction which are necessary for him to effectively meet the case against him. But unscrupulous complainants refuse to do so with the object of denying the accused a fair trial, which is a right guaranteed under Article 21 of the Constitution. An accused in a complaint case filed under Section 142 of the Act also is entitled to know before the trial the particulars of the accusation against him. Suppression of these particulars in the complaint alone is sufficient to order his acquittal.

21. A similar case came up for consideration before the Supreme Court in

# Vijay v. Laxman and another, (2013) 3 SCC 86

The allegation of the complainant in that case was the liability of the accused which arose from a loan transaction. But the former did not produce many materials to prove the transaction; he did not even mention in the complaint the date on which the loan was advanced. The Supreme Court observed:

“The High Court has rightly accepted the version given by the respondent-accused herein. We say so for reasons more than one. In the first place the story of the complainant that he advanced a loan to the respondent-accused is unsupported by any material leave alone any documentary evidence that any such loan transaction had ever taken place. So much so, the complaint does not even indicate the date on which the loan was demanded and advanced. It is blissfully silent about these aspects thereby making the entire story suspect. We are not unmindful of the fact that there is a presumption that the issue of a cheque is for consideration. Sections 118 and 139 of the Negotiable Instruments Act make that abundantly clear. That presumption is, however, rebuttable in nature. What is most important is that the standard of proof required for rebutting any such presumption is not as high as that required of the prosecution. So long as the accused can make his version reasonably probable, the burden of rebutting the presumption would stand discharged. Whether or not it is so in a given case depends upon the facts and circumstances of that case. It is trite that the courts can take into consideration the circumstances appearing in the evidence to determine whether the presumptions should be held to be sufficiently rebutted. The legal position regarding the standard of proof required for rebutting a presumption is fairly well settled by a long line of decisions of this Court.”

The court further observed:

“……………………..the absence of any details of the date on which the loan was advanced as also the absence of any documentary or other evidence to show that any such loan transaction had indeed taken place between the parties is a significant circumstance.”

It held that the High Court was perfectly justified in its conclusion that the prosecution failed to make out the case against the accused and in acquitting him of the charge.

22. Suppression of the material facts in Ext P4 statutory notice and in the subsequent complaint filed by the 2 nd respondent is fatal to her.

23. It was brought out in the evidence of the 2 nd respondent (PW1) that Ext P1 cheque was signed by the revision petitioner at her residence at Pampadi on 14.9.1998. On the very same date Ext P8 undertaking also was allegedly executed by the revision petitioner. I shall first consider the evidence regarding execution of Ext P8 undertaking. It is on a 50 rupee (Rs.40+10) stamp paper. PW1 deposed that when she wanted the revision petitioner to execute a document in her favour apart from a cheque, he went out to purchase stamp paper and came back with the stamp paper on which Ext P8 is written. She claimed to have seen the revision petitioner signing the document. She denied the suggestion that the signature of the revision petitioner was obtained on blank stamp paper. Her evidence that the revision petitioner went out to buy stamp paper and he came back with it is false. It is seen from the endorsement on the stamp papers (40+10) that they were purchased from a vendor at Pampadi on 9.9.1998, five days prior to 14.9.1998 on which date the revision petitioner is shown to have executed it. Much space has been left blank at the top of the second sheet of Ext P8, which was necessary to accommodate the contents on it just above the signature of the revision petitioner. It is a sure indication that it was written up on a signed blank paper.

24. Ext P8 had not been produced along with the complaint. It was produced only on the date on which the first respondent was examined as a witness. The revision petitioner had no prior notice of its production. A party to a proceedings has every right to know in advance about the documents which would be tendered in evidence unless they are sought to be used under Section 145 of the Evidence Act. Principles of natural justice demands giving him sufficient time before the document is tendered in evidence. The learned Magistrate should not have allowed the first respondent to tender Ext P8 in evidence. Admitting it is evidence without giving sufficient notice to the revision petition caused much prejudice to him.

25. PW2 was examined to prove that it was he wrote Ext P8 before it was signed by the revision petition at the residence of the first respondent. His name did not appear in the witness list appended to the complaint. He was shown as a witness only in the witness list filed 11 days after the examination of the first respondent. He was examined one month later. In the evidence of the first respondent there is not even a whisper that he is the scribe. Moreover in the crossexamination she made a categorical statement that the revision petitioner wrote the document: (രേഖ ആവശ്യപ്പെട്ടപ്പോൾ പ്രതി തന്നെ പോയി മുദ്രപത്രം വാങ്ങിക്കൊണ്ട് വന്ന് എഴുതി ഒപ്പിട്ടു തരികയായിരുന്നു.” i.e When I demanded execution of a document, the accused went out to purchase stamp paper, came back with it, wrote the document and signed it). The evidence of PW2 is false.

26. Coming to the execution of Ext P1 cheque, the definite case of the 2 nd respondent is that the cheque and Ext.P8 document were executed simultaneously. But PW2 who claims to have written Ext P8 did not see execution of the cheque, for which there is no explanation. The testimony of the second respondent (PW1) and her husband (DW1) that they do not know who made the entires in the cheque is very significant. Both of them would say that the revision petitioner issued a written up cheque.

27. A dishonest complainant who takes a signed blank cheque leaf from the accused or who misuses a signed blank cheque taken from the accused by someone else would naturally disown the liability to prove the identity of the person who entered the particulars in it stating that the accused brought to him a written up cheque and signed it in his presence. A judicial officer unless he has taken holidays of his common sense can easily see through this game.

28. The signature in Ext P1 cheque is in one ink and all other particulars in another ink, which suggests that the signature was put and the entries were made not simultaneously.

29. If it is proved that the 1 st respondent or her husband did not have the capacity to pay Rs.1,95,000/- at the relevant time, it will make improbable her case that she and her husband advanced that amount as loan to the revision petitioner. Neither the first respondent, nor her husband had a single rupee with them so that they could lend Rs.1,95,000/- to the revision petitioner. She (PW1) gave conflicting statements with regard to her source in her examination-in-chief and cross-examination. The situation was made worse by the answers given by PW1 in response to the leading questions put to her in the reexamination. It is crystal clear that her evidence as to the source of money is unbelievable. Her version that her husband borrowed Rs.1 lakh from someone for interest at 60% per annum and he took a loan of Rs.50,000/- from her provident fund account and borrowed Rs.45,000/- pledging her ornaments could have been easily proved by producing documents. But that was not done. The inference is that the evidence of the 1st respondent (PW1) and her husband (DW1) is false.

30. Though the amount covered by ExtP1 cheque is Rs.2,55,000/-, the amount allegedly paid to the revision petitioner was only Rs.1,95,000/-, out of which Rs. 1 ½ lakh was paid on 9.4.1998 and Rs.45,000/- on 8.5.1998. The excess amount of Rs.60,000/- is said to be the interest. PW1 has no consistent case as to how the interest was calculated. One of her versions is that Rs.60,000/- is the interest on Rs.1 lakh for 10 months calculated at the rate of 60% per annum. The first payment of Rs.1,50,000/- was made on 9.4.1998. The cheque is dated 11.1.1999. The period between these two dates is only 9 months. Her evidence that Rs.60,000/- is interest for 10 months is false. The testimony of her husband (DW1) that Rs.60,000/- was interest on Rs.1 lakh for one year calculated at 60% per annum also is equally false for the same reason. There is no explanation for showing the amount of Rs.2,55,000/- in Ext P1 cheque.

31. Each of the facts discussed above indicates that in all probability Ext P1 was a signed blank cheque leaf at the time of its delivery. Even if it is taken for granted that Ext.P1 is a cheque executed by the revision petitioner, any one of the facts and circumstances revealed in the evidence is sufficient to rebut the presumptions under Sections 118 and 139 NI Act. The courts below fell in error in convicting the revision petitioner. He is entitled to acquittal.

In the result, this Criminal Revision Petition is allowed. The order of conviction of the revision petitioner under Section 138 NI Act and the sentence imposed on him are set aside. He is acquitted of the said offence.

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