T.P. MURUGAN (DEAD) THR. LRS. versus BOJAN on 31 July 2018

[2018] 9 S.C.R. 355

T.P. MURUGAN (DEAD) THR. LRS.

BOJAN

AND

POSA NANDHI REP. THR. POA HOLDER, T.P. MURUGAN

v.

BOJAN

(Criminal Appeal Nos. 950-951 of 2018)

JULY 31, 2018

[R. F. NARIMAN AND INDU MALHOTRA, JJ.]

Negotiable Instruments Act, 1881 – s.139 – Statutorypresumption under –Operation of – Appellants after being inductedas Directors in respondent’s company infused capital therein byway of deposits and shares – Subsequently, they resigned from thecompany and demanded re-payment of their dues – Respondentissued a promissory note and two cheques in favour of appellantsfor discharge of their liability – Cheques dishonoured – Trial courtconvicted respondent u/s.138 – Conviction affirmed by District andSessions Court – High Court reversed the conviction – On appeal,held: Once a cheque has been signed and issued in favour of theholder, there is statutory presumption that it is issued in dischargeof a legally enforceable debt or liability – This presumption is arebuttable one, if the issuer of the cheque is able to discharge theburden that it was issued for some other purpose like security for aloan – In the present case, the respondent has failed to produceany credible evidence to rebut the statutory presumption –Appellants have proved their case by over-whelming evidence toestablish that the two cheques were issued towards the discharge ofan existing liability and legally enforceable debt – Respondenthaving admitted that the cheques and Pronote were signed by him,the presumption u/s.139 would operate – Impugned order set aside– Order of conviction passed by the trial court, restored.

Allowing the appeals, the Court

HELD: 1.1 Under Section 139 of the NegotiableInstruments Act, 1881 once a cheque has been signed and 355

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Aissued in favour of the holder, there is statutory presumptionthat it is issued in discharge of a legally enforceable debt orliability. This presumption is a rebuttable one, if the issuer of thecheque is able to discharge the burden that it was issued for someother purpose like security for a loan. In the present case, therespondent has failed to produce any credible evidence to rebutBthe statutory presumption. [Para 8] [360-G-H; 361-A]

1.2 The appellants have proved their case byover-whelming evidence to establish that the two cheques wereissued towards the discharge of an existing liability and legallyenforceable debt. The respondent having admitted that theCcheques and Pronote were signed by him, the presumption underSection 139, NI Act would operate. The respondent failed torebut the presumption by adducing any cogent or credibleevidence. [Para 9] [361-G-H]

Rangappa v. Shrimohan (2010) 11 SCC 441 : [2010] 6DSCR 507 ; K.N. Beena v. Muniyappan and Anr.(2001) 8 SCC 458 : [2001] 4 Suppl. SCR 374 ;T. Vasanthakumar v. Vijayakumari (2015) 8 SCC 378 :[2015] 5 SCR 342– referred to.

Case Law Reference

FCRIMINAL APPELLATE JURISDICTION : Criminal AppealNos. 950-951 of 2018.

From the Judgment and Order dated 27.09.2013 of the High Courtof Judicature at Madras in Crl. Rev. Case Nos. 1658 & 1657 of2008.G

Mrs. V. Mohana, Sr. Adv., Ms. Kashvi Dutta, Anup Kumar, Advs.for the Appellants.

R. Basant, Sr. Adv., B. Raghunath, Arockiaraj, Vijay Kumar,Advs. for the Respondent.

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The Judgment of the Court was delivered by INDU MALHOTRA, J. 1. The present Special Leave Petitionshave been filed against the common judgment and order dated 27.09.2013passed by the High Court of Judicature at Madras in Criminal RevisionCase Nos. 1657 and 1658 of 2008. That after issuance of notice, SpecialLeave Petitions were heard finally.

Leave granted.

1.1 These Appeals arise out of two complaints filed under S.138 ofthe Negotiable Instruments Act (“the N.I. Act”) filed by theappellants against the respondent for dishonour of two chequesof Rs.37,00,000/- and Rs.14,00,000/- respectively.

2. The facts of the case briefly stated are as under: -

2.1 The appellants submit that they were inducted in Maanihada TeaProduce Company Pvt. Ltd. being run by the respondent toinfuse capital by way of deposits and shares.

2.2 On 24.11.1998, the appellants resigned as Directors of theCompany after which the respondent and his son, DW-3,remained incharge of the Company.

The appellants submitted that the respondent failed to return their share in the company. The appellants made demands for re-payment of their dues.

On 07.08.2002, the respondent issued a Promissory Note for Rs.51,00,000/- in favour of K.Posa Nandhi – the appellant in theSecond Appeal. The Promissory Note records that it was beingissued against a loan. The respondent also issued two chequeson the same date, one for Rs.37,00,000/- in favour of K.PosaNandhi, and the other for Rs. 14,00,000/- in favour ofT.P.Murugan, towards discharge of their liability for theinvestments made in M/s.Maanihada Tea Produce Company.

2.3 The cheques were presented for encashment on 03.02.2003 bythe appellants, which were dishonoured due to “Stop Payment”instructions issued by the respondent.

2.4 The appellants issued the statutory notices under S.138 of theN.I. Act calling upon the respondent to discharge theirdebt/liability and clear their dues.

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A2.5 The respondent vide his reply dated 17.02.2003 refuted the claimof the appellants.

2.6 The appellants filed two complaints under S. 138 of the N.I. Actbefore the Court of Judicial Magistrate II, Coimbatore.

2.7 The respondent contended that the signed blank Promissory NoteBwas issued by him in favour of N.R.R. Finances InvestmentsPvt. Ltd. under a hire-purchase agreement for purchasing a lorryon loan basis. The said Promissory Note was not issued in favourof the appellant-complainants. The Promissory Note was filledup by DW.2 Mahesh, an employee of N.R.R. Investments, afterCthe signatures of the respondent were obtained on the same.

With respect to the two cheques which were dishonoured, the respondent contended that these were amongst 10 blankcheques signed and handed over to the appellant-K.Posa Nandhias security, when he borrowed Rs.5,00,000/- in 1995. That evenDthough this loan was re-paid in 1996 with interest, the chequeswere not returned. The respondent further contended that hehad issued a letter on 09.11.2002 asking the appellants to returnthe 10 blank cheques.

3. The Trial Court found that the respondent had admitted hisEsignatures both on the Pronote and also on the two cheques forRs. 37,00,000/- and Rs.14,00,000/- respectively. The respondentalso admitted that the appellant had invested capital in theirconcern viz. M/s. Maanihada Tea Factory.

The Court disbelieved the version of the respondent with respect to the 10 blank cheques issued to the appellant in 1995.FThe respondent failed to place any material on record to showthat he had ever asked for return of the 10 blank cheques,allegedly given by him to the respondent, for seven years.

That after going through the detailed evidence adduced by the parties, the Trial Court held that the Cheques and Pronotewere issued for repayment/discharge of a lawful debt. Therespondent was found guilty under S. 138 of the N.I. Act, andsentenced him to undergo R.I. for six months and Fine ofRs.5000/-, failing which, he shall undergo one month’s R.I.

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4. Aggrieved by the said judgment, the respondent-accused filedCriminal Appeal Nos. 437-438 of 2006 before the District andSessions Judge, Fast Track Court No. III, Coimbatore. TheDistrict and Sessions Judge held that the presumption underSections 118 and 139 of the N.I. Act was not rebutted by therespondent. It was proved by the complainants that there wereinsufficient funds in the bank account of the respondent at thetime of issuance of the cheques. The respondent had with malafide intention issued “Stop Payment” instructions. Therespondent failed to give any explanation as to how the Pronotecame into possession of the appellant. Furthermore, the SessionsCourt discarded the evidence adduced by the accused, of DW.2Mahesh, as being an interested witness, who had falsely statedthat he was an employee of N.R.R. Finances. This was rebuttedby two witnesses viz. PW.2 and PW.4, who were Directors ofN.R.R. Finances who deposed that DW.2 was never employedby this Company. The District and Sessions Court affirmed theconviction and sentence awarded by the Trial Court.

5. Aggrieved by the judgment and order dated 26.11.2008 passed bythe District and Sessions Judge, Fast Track Court No. III,Coimbatore, the respondent-accused filed two Criminal RevisionNos. 1657-1658 of 2008 before the Madras High Court. Thateven though the appellants herein- complainants had initiallyparticipated in the proceedings, the present appellant wasunrepresented during the final hearing. The hearing of the CriminalRevision Petitions proceeded ex parte.

The High Court recorded that the respondent-accused had not denied either the issuance of the cheques, or his signatureson the Pronote and cheques.The denial was only with regard tothe circumstances, the manner and the period during which thecheques were issued. The High Court took the view that theburden cast on the respondent-accused was only to raise a doubtin the mind of the Court about the nature of the transaction. TheLd. Single Judge accepted the contention of the respondent thatsince the cheques and the Pronote were issued on the same date,it could only be treated as a security, and was not towards any A

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debt or liability. By raising a doubt with respect to thecircumstances in which the Pronote and cheques were issued,the respondent had discharged the presumption under S. 139 ofthe N.I. Act. The High Court held that the Trial Court and theSessions Court erred in applying the legal principles of standardof proof for the complainant to prove their case.

The High Court, while exercising its revisional jurisdiction,reversed the concurrent findings of the Courts below, and setaside the judgment of conviction and sentence passed against theaccused.

6. Aggrieved by the judgment and order dated 27.09.2013 passed inCriminal Revision Nos. 1657-1658 of 2008, the appellant-complainants filed the present Special Leave Petitions.

Mrs. V. Mohana, Sr. Adv. represented the appellants, andDsubmitted that the respondent-accused has admitted hissignatures on the two dishonoured cheques and on the Pronote.The appellants-complainants had adduced sufficient evidence toprove their case. Reliance was placed by the Senior Counsel onthe decisions of this Court in Rangappa vs. Shrimohan [(2010) 11SCC 441], K.N. Beena vs. Muniyappan and Anr. [(2001) 8 SCCE458]; and T. Vasanthakumar vs. Vijayakumari [(2015) 8 SCC378] in support of her case.

7. Mr. R. Basanth, Sr. Counsel appeared on behalf of therespondent-accused, and contended inter alia that the chequeswere not issued towards discharge of a legally enforceable debt,Fbut as a security, and that the judgment under challenge requiredno interference.

8. We have heard Senior Counsel for both parties, and perused therecord. Under Section 139 of the N.I. Act, once a cheque hasGbeen signed and issued in favour of the holder, there is statutorypresumption that it is issued in discharge of a legally enforceabledebt or liability[1]. This presumption is a rebuttable one, if theissuer of the cheque is able to discharge the burden that it wasissued for some other purpose like security for a loan.

1 Refer to K.N. Beena Vs. Muniyappan and Another[(2001) 8 SCC 458; para 6] andHRangappa vs. Shrimohan [(2010) 11 SCC 441; para 26]

In the present case, the respondent has failed to produce anycredible evidence to rebut the statutory presumption. This wouldbe evident from the following circumstances:-

(i) The respondent-accused issued a Pronote for the amount coveredby the cheques, which clearly states that it was being issued fora loan;

(ii) The defence of the respondent that he had allegedly issued 10blank cheques in 1995 for repayment of a loan, has beendisbelieved both by the Trial Court and Sessions Court, on theground that the respondent did not ask for return of the chequesfor a period of seven years from 1995. This defence wasobviously a cover-up, and lacked credibility, and hence was rightlydiscarded.

(iii) The letter dated 09.11.2002 was addressed by the respondentafter he had issued two cheques on 07.08.2002 forRs.37,00,000/- and Rs.14,00,000/- knowing fully well that he didnot have sufficient funds in his account. The letter dated 09.11.2002was an after-thought, and was written to evade liability. Thisdefence also lacked credibility, as the appellants had never askedfor return of the alleged cheques for seven years.

(iv) The defence of the respondent that the Pronote dated 07.08.2002signed by him, was allegedly filled by one Mahesh-DW.2, anemployee of N.R.R. Finances, was rejected as being false. DW.2himself admitted in his cross-examination, that he did not file anydocument to prove that he was employed in N.R.R. Finances.On the contrary, the appellants - complainants produced PW.2and PW.4, Directors of N.R.R. Finances Investment Pvt. Ltd.,and PW.3, a Member of N.R.R. Chit funds, who deposed thatDW.2 was never employed in N.R.R. Finances.

9. The appellants have proved their case by over-whelming evidenceto establish that the two cheques were issued towards thedischarge of an existing liability and legally enforceable debt. Therespondent having admitted that the cheques and Pronote weresigned by him, the presumption under S.139 would operate. Therespondent failed to rebut the presumption by adducing any cogentor credible evidence. Hence, his defence is rejected.

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362SUPREME COURT REPORTS

[2018] 9 S.C.R.

A10. In view of the aforesaid facts and circumstances, the impugnedorder dated 27.09.2013 passed in Criminal Revision PetitionNos. 1657 and 1658 of 2008 is hereby set aside, and the order ofConviction and Fine passed by the Trial Court is restored.

11. The Appeals are allowed accordingly.

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Appeals allowed.

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