M/S. KALAMANI TEX & ANR versus P. BALASUBRAMANIAN on 10 February 2021

668

SUPREME COURT REPORTS

[2021] 1 S.C.R.

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M/S. KALAMANI TEX & ANR

v.

P. BALASUBRAMANIAN

(Criminal Appeal No. 123 of 2021)

BFEBRUARY 10, 2021

[N.V. RAMANA, SURYA KANT ANDANIRUDDHA BOSE, JJ.]

Negotiable Instruments Act, 1881: ss. 118 and 139 –Presumption as to negotiable instruments – Presumption in favourCof holder – Held: Once the signature of an accused on the cheque/negotiable instrument are established, then the ‘reverse onus’ clausesbecome operative – In such a situation, the obligation shifts uponthe accused to discharge the presumption imposed upon him –Presumptions raised u/ss. 118, 139 are rebuttable in nature – ADprobable defence needs to be raised, which must meet the standardof “preponderance of probability”, and not mere possibility – Onfacts, trial court overlooked the provisions and failed to appreciatethe statutory presumption drawn u/ss. 118 and 139, and dismissedthe complaint u/s. 138 of the NI Act – Once the appellant-accusedadmitted his signatures on the cheque and the Deed, the trial courtEought to have presumed that the cheque was issued as considerationfor a legally enforceable debt – Trial court erred in calling uponthe complainant to explain the circumstances under which theappellants were liable to pay – Since it is admitted that there hasbeen business relationship between the parties, the defence raisedFby the appellants does not meet the standard of ‘preponderance ofprobability’ – Thus, the High Court right in discarding the appellants’defence and upholding the onus imposed upon them in terms of ss.118 and 139 – High Court justified in setting aside the findings ofthe trial court in exercise of its power u/s. 378 CrPC.

Compensation: Claim of, in cases pertaining to dishonor ofGcheque – On facts, the respondent neither sought for compensationbefore the High Court nor did he challenged the High Court’sjudgment – Held: Since the respondent has accepted the HighCourt’s verdict, his claim for compensation stands impliedlyoverturned.H

Sentence/sentencing: Reduction/modification of sentence –Commission of offence u/s. 138 of the NI Act – In appeal before theSupreme Court, appellants-accused deposited the cheque amountwith the Registry of this Court – In view of dismissal of appeal,appellant No.2 liable to undergo the sentence of simple imprisonmentas awarded by the High Court – However, since the appellant no 2volunteered and thereafter deposited the cheque amount with theRegistry of this Court, a lenient view is taken – Appellant No.2 notrequired to undergo the awarded sentence – Negotiable InstrumentsAct, 1881.

Dismissing the appeal, the Court

HELD: 1.1 The trial court completely overlooked theprovisions and failed to appreciate the statutory presumptiondrawn under Section 118 and Section 139 of NegotiableInstruments Act, 1881. The Statute mandates that once thesignature(s) of an accused on the cheque/negotiable instrumentare established, then these ‘reverse onus’ clauses becomeoperative. In such a situation, the obligation shifts upon theaccused to discharge the presumption imposed upon him.[Para 14][676-B-D]

Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18SCC 106– Referred to 1.2 Once the 2nd Appellant had admitted his signatures onthe cheque and the Deed, the trial court ought to have presumedthat the cheque was issued as consideration for a legallyenforceable debt. The trial court fell in error when it called uponthe complainant-respondent to explain the circumstances underwhich the appellants were liable to pay. Such approach of the trialcourt was directly in the teeth of the established legal positionand amounts to a patent error of law. [Para 15][676-F-H]

1.3 The presumptions raised under Section 118 and Section139 are rebuttable in nature. A probable defence needs tobe raised, which must meet the standard of “preponderanceof probability”, and not mere possibility. A bare denial ofpassing of consideration would not aid the case of the accused.[Para 16][677-A-B]

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A1.4 The appellants have banked upon the evidence of DW-1 to dispute the existence of any recoverable debt. However, hisdeposition merely highlights that the respondent had an overextended credit facility with the bank and his failure to updatehis account led to debt recovery proceedings. Such evidence doesnot disprove the appellants’ liability and has a little bearing onBthe merits of the respondent’s complaint. Similarly, the appellants’mere bald denial regarding genuineness of the Deed ofUndertaking dated 07.11.2000, despite admitting the signaturesof Appellant No. 2 thereupon, does not cast any doubt on thegenuineness of the said document. [Para 17][677-C-D]C

1.5 Even if the arguments raised by the appellants are takenat face value that only a blank cheque and signed blank stamppapers were given to the respondent, yet the statutorypresumption cannot be obliterated. Considering the fact that therehas been an admitted business relationship between the parties,Dthe defence raised by the appellants does not inspire confidenceor meet the standard of ‘preponderance of probability’. In theabsence of any other relevant material, it appears that the HighCourt did not err in discarding the appellants’ defence andupholding the onus imposed upon them in terms of Section 118and Section 139 of the NIA. [Para 18-19][677-D-H]E

Basalingappa v. Mudibasapp (2019) 5 SCC 418 :[2019] 6 SCR 555; Kumar Exports v. Sharma Carpets(2009) 2 SCC 513 : [2008] 17 SCR 572; MS NarayanaMenon v. State of Kerela (2006) 6 SCC 39 : [2006] 3Suppl. SCR 124; Bir Singh v. Mukesh Kumar (2019) 4FSCC 197 : [2019] 2 SCR 24 – referred to 1.6 The object of Chapter XVII of the NIA is not onlypunitive but also compensatory and restitutive. The provisionsof NIA envision a single window for criminal liability for dishonourof cheque as well as civil liability for realisation of the chequeGamount. It is also well settled that there needs to be a consistentapproach towards awarding compensation and unless there existspecial circumstances, the Courts should uniformly levy fine upto twice the cheque amount along with simple interest at the rate H

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of 9% per annum. The respondent, nevertheless, cannot takeadvantage of the above cited principles so as to seekcompensation. The record indicates that neither did therespondent ask for compensation before the High Court nor hashe chosen to challenge the High Court’s judgment. Since, he hasaccepted the High Court’s verdict, his claim for compensationstands impliedly overturned. The respondent, in any case, isentitled to receive the cheque amount of Rs.11.20 lakhs whichthe appellant has already deposited with the Registry of this Court.As regards award of sentence by the High Court, given thepeculiar facts and circumstances of the case, namely, that theappellants volunteered and thereafter have deposited the chequeamount with the Registry of this Court in the year 2018, a lenientview is taken. The impugned judgment of the High Court ismodified, and it is directed that Appellant No.2 would not berequired to undergo the awarded sentence. [Para 20-22][678-A-F]

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Ram Jag v. State of UP (1974) 4 SCC 201 : [1974] 3SCR 9; Rohtas v. State of Haryana (2019) 10 SCC 554;Raveen Kumar v. State of Himachal Pradesh 2020 SCCOnline SC 869; Murugesan v. State Through Inspectorof Police (2012) 10 SCC 383 : [2012] 13 SCR 1; ReenaHazarika v. State of Assam (2019) 13 SCC 289 : [2018]13 SCR 1108; CK Dasegowda and Others v. State ofKarnatak (2014) 13 SCC 119 : [2014] 8 SCR 295; Stateof UP v. Banne (2009) 4 SCC 271; Ghurey Lal v. Stateof U.P. (2008) 10 SCC 450 : [2008] 11 SCR 499; R.Vijian v. Baby (2012) 1 SCC 260 : [2011] 14SCR 712– referred to E

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CRIMINAL APPELLATE JURISDICTION : Criminal appealCNo.123 of 2021.

From the Judgment and Order dated 09.11.2017 of the High Courtof Judicature at Madras in Crl.A.No.447 of 2002.

S. Nagamuthu, Sr. Adv., M.P. Parthiban, A.S. Vairawan, ManiPrabhu, Santhosh, R. Sudhakaran, Advs. for the appellants.D

Rameshwar Prasad Goyal, Sumit Kumar, Adv. for the respondent.

The Judgment of the Court was delivered by SURYA KANT, J.

1. Leave Granted.E

2. M/s. Kalamani Tex (Appellant No.1) and its managing partner–B. Subramanian (Appellant No. 2) are in appeal challenging the judgmentdated 09.11.2017 passed by the High Court of Judicature at Madras,whereby the order of acquittal of the Judicial Magistrate, Tiruppur wasreversed and the appellants have been convicted under Section 138 ofFthe Negotiable Instruments Act, 1881 (in short, ‘NIA’). Consequently,Appellant No.2 has been sentenced to undergo three months SimpleImprisonment and a fine of Rs. 5,000/-.

FACTS

G3. The instant proceedings have originated out of a complaintpreferred by P. Balasubramanian (Complainant-Respondent) against theappellants. The respondent is the proprietor of a garment company namedand styled as ‘Growell International’, which along with Appellant No.1was engaged in a business arrangement, whereby they agreed to jointlyexport garments to France. Certain issues arose regarding delays inH

shipment and payment from the buyer, due to which, the appellants hadto pay the respondent a sum of Rs 11.20 lakhs. To that end, AppellantNo.2 issued a cheque on behalf of Appellant No. 1 bearing no.897993dated 07.11.2000 in favour of the respondent and also executed a Deedof Undertaking on the same day wherein Appellant No.2 personallyundertook to pay the respondent in lieu of the initial expenditure incurredby the latter. The respondent presented the said cheque to the bank on29.12.2000 for collection but it was returned with an endorsement thatthere were insufficient funds in the account of appellants. In wake ofthe cheque being dishonoured, the respondent issued a notice dated08.01.2001 asking the appellants to pay the amount within 15 days. Theappellants in their reply dated 27.01.2001 denied their liability and claimedthat blank cheques and signed blank stamp papers were issued to helpthe respondent in some debt recovery proceedings, and not because ofany legally enforceable debt.

4. The respondent then lodged a private complaint under section138 and 142 of the NIA read with Section 200 of the Code of CriminalProcedure, 1973 (in short ‘CrPC’) before the Judicial Magistrate, Tiruppur.In order to substantiate his claim, the respondent himself entered thewitness box and produced documentary evidence such as the chequeissued by Appellant No.2. The respondent in his chief-examination initiallycontended that the subject amount had been received by the appellantsfrom the foreign buyer. However, when recalled on a later date, therespondent produced the Deed of Undertaking dated 07.11.2000,whereunder, the 2nd Appellant had acknowledged the liability towardsrespondent. One PS Shanmugham (PW-2) who was working as Managerin State Bank of India, Tiruppur Overseas Branch, was also examinedby the respondent.

5. Appellant No.2 in his statement under Section 313 CrPC plainlydenied the allegations and disputed the existence of any liability towardsthe respondent. The appellants also examined one V. Rajagopal (DW-1)who at the relevant time was working as Assistant Manager in StateBank of India, Tiruppur Overseas Branch. DW-1 mainly deposed on theinability of the respondent to pay back the credit that was advanced tohim, and the subsequent debt recovery proceedings initiated against him.The appellants did not lead any documentary evidence in their defence.

6. The trial Court disbelieved the respondent’s claim and observedthat he had failed to establish a legally enforceable liability on the date of AB

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Aissue of cheque. The Court held that since the basic ingredients of anoffence under Section 138 of the NIA were not satisfied, the complaintwas liable to be dismissed.

7. Discontented with the order of the trial Court, the respondentpreferred a criminal appeal before the High Court, wherein, the CourtBnoted that Appellant No.2 had admitted his signatures on both the Chequeand the Deed of Undertaking and had thus acknowledged the appellants’liability. The High Court therefore vide impugned judgment allowed thecriminal appeal and convicted both the appellants under Section 138 ofNIA. Appellant No. 2 was awarded a sentence of three months simpleimprisonment with a fine of Rs. 5,000/- (or 20 days simple imprisonmentCin lieu thereof). Additionally, Appellant No.1 was directed to pay a fineof Rs. 5,000/-, in default of which, Appellant No. 2 would undergo anotherone-month simple imprisonment.

8. The aggrieved appellants are now before this Court. It may bementioned at the outset that when the SLP came up for hearing onD12.03.2018, their learned Counsel agreed to deposit the entire amount indispute and in deference thereto, the appellants have on 11.04.2018deposited a sum of Rs. 11.20 lakhs with the Registry of this Court.

CONTENTIONS

E9. Learned Senior Counsel for the appellants, nonetheless, desiredto argue the case on merits and contended that there was no legallyenforceable liability on the date of issuance of the cheque and that blankstamp papers signed by Appellant No.2 were misused by the respondentto forge the Deed of Undertaking dated 07.11.2000. Placing reliance onMurugesan v. State Through Inspector of Police[1], he urged that theFview taken by the trial Court was a possible view, and the High Courtcommitted patent illegality and exceeded its jurisdiction in reversing theacquittal. Learned Senior Counsel also cited Reena Hazarika v. Stateof Assam[2]to argue that the High Court did not take notice of the defenceraised by the appellants which has caused serious prejudice to them. HeGpassionately put forth the principles laid down in Basalingappa v.Mudibasapp[3] and Kumar Exports v. Sharma Carpets[4],and submittedthatthe presumption drawn against an accused under Section 118 and 1 (2012) 10 SCC 383, ¶ 32.

2 (2019) 13 SCC 289, ¶ 20.3 (2019) 5 SCC 418.H4 (2009) 2 SCC 513.

Section 139 of the NIA is rebuttable through a standard of“preponderance of probability”, which has been successfully met bythe appellants in the present case.

10. On the other hand, learned Counsel for the respondentmaintained that the decision of the High Court is well reasoned andfounded upon due consideration of all relevant factors of the case. Layingstress on the undisputed signatures on the cheque and the Deed ofUndertaking dated 07.11.2000, he asserted that the appellants haveadmitted their existing liability of Rs.11.20 lakhs. Lastly, while pointingout the financial loss suffered by the respondent and the adverse impacton his business, learned Counsel prayed for suitable compensation.

ANALYSIS

11. The short question which falls for our consideration is whetherthe High Court erred in reversing the findings of the trial Court in exerciseof its powers under Section 378 of CrPC?

12. Having given our thoughtful consideration to the rivalsubmissions, we do not find any valid ground to interfere with theimpugned judgment. It is true that the High Court would not reverse anorder of acquittal merely on formation of an opinion different than thatof the trial Court. It is also trite in law that the High Court ought to havecompelling reasons to tinker with an order of acquittal and no suchinterference would be warranted when there were to be two possibleconclusions.[5] Nonetheless, there are numerous decisions of this Court,justifying the invocation of powers by the High Court under Section 378CrPC, if the trial Court had, inter alia, committed a patent error of law orgrave miscarriage of justice or it arrived at a perverse finding of fact.[6]

13. On a similar analogy, the powers of this Court under Article136 of the Constitution also do not encompass the re-appreciation ofentirety of record merely on the premise that the High Court has convictedthe appellants for the first time in exercise of its appellate jurisdiction.This Court in Ram Jag v. State of UP[7], Rohtas v. State of Haryana[8]andRaveen Kumar v. State of Himachal Pradesh[9], evolved its own 5 CK Dasegowda and Others v. State of Karnatak, (2014) 13 SCC 119 ¶ 14.

6 State of UP v. Banne, (2009) 4 SCC 271,¶ 27; Ghurey Lal v. State of U.P., (2008) 10SCC 450, ¶70.

7 (1974) 4 SCC 201, ¶ 14.

8 (2019) 10 SCC 554, ¶ 12.9 2020 SCC Online SC 869, ¶ 14.

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Alimitations on the exercise of powers under Article 136 of the Constitutionand has reiterated that while entertaining an appeal by way of specialleave, there shall not ordinarily be an attempt to re-appreciate the evidenceon record unless the decision(s) under challenge are shown to havecommitted a manifest error of law or procedure or the conclusion reachedis ex-facie perverse.B

14. Adverting to the case in hand, we find on a plain reading of itsjudgment that the trial Court completely overlooked the provisions andfailed to appreciate the statutory presumption drawn under Section 118and Section 139 of NIA.The Statute mandates that once the signature(s)of an accused on the cheque/negotiable instrument are established, thenCthese ‘reverse onus’ clauses become operative. In such a situation, theobligation shifts upon the accused to discharge the presumption imposedupon him. This point of law has been crystalized by this Court in RohitbhaiJivanlal Patel v. State of Gujarat[10] in the following words:

“In the case at hand, even after purportedly drawing theDpresumption under Section 139 of the NI Act, the trial courtproceeded to question the want of evidence on the part of thecomplainant as regards the source of funds for advancingloan to the accused and want of examination of relevantwitnesses who allegedly extended him money for advancingit to the accused. This approach of the trial court had been atEvariance with the principles of presumption in law. After suchpresumption, the onus shifted to the accused and unless theaccused had discharged the onus by bringing on record suchfacts and circumstances as to show the preponderance ofprobabilities tilting in his favour, any doubt on thecomplainant’s case could not have been raised for want ofFevidence regarding the source of funds for advancing loanto the appellant-accused…..”

15. Once the 2nd Appellant had admitted his signatures on thecheque and the Deed, the trial Court ought to have presumed that thecheque was issued as consideration for a legally enforceable debt. TheGtrial Court fell in error when it called upon the Complainant-Respondentto explain the circumstances under which the appellants were liable topay. Such approach of the trial Court was directly in the teeth of theestablished legal position as discussed above, and amounts to a patenterror of law.H10 (2019) 18 SCC 106, ¶ 18.

16. No doubt, and as correctly argued by senior counsel for theappellants, the presumptions raised under Section 118 and Section 139are rebuttable in nature. As held in MS Narayana Menon v. State ofKerela[11], which was relied upon in Basalingappa (supra),a probabledefence needs to be raised, which must meet the standard of“preponderance of probability”, and not mere possibility. Theseprinciples were also affirmed in the case of Kumar Exports (supra),wherein it was further held that a bare denial of passing of considerationwould not aid the case of accused.

17. The appellants have banked upon the evidence of DW-1 todispute the existence of any recoverable debt. However, his depositionmerely highlights that the respondent had an over-extended credit facilitywith the bank and his failure to update his account led to debt recoveryproceedings. Such evidence does not disprove the appellants’ liabilityand has a little bearing on the merits of the respondent’s complaint.Similarly, the appellants’ mere bald denial regarding genuineness of theDeed of Undertaking dated 07.11.2000, despite admitting the signaturesof Appellant No. 2 thereupon, does not cast any doubt on the genuinenessof the said document.

18. Even if we take the arguments raised by the appellants atface value that only a blank cheque and signed blank stamp papers weregiven to the respondent, yet the statutory presumption cannot beobliterated. It is useful to cite Bir Singh v. Mukesh Kumar[12], wherethis court held that:

“Even a blank cheque leaf, voluntarily signed and handedover by the accused, which is towards some payment, wouldattract presumption under Section 139 of the NegotiableInstruments Act, in the absence of any cogent evidence toshow that the cheque was not issued in discharge of a debt.”

19. Considering the fact that there has been an admitted businessrelationship between the parties, we are of the opinion that the defenceraised by the appellants does not inspire confidence or meet the standardof ‘preponderance of probability’. In the absence of any other relevantmaterial, it appears to us that the High Court did not err in discarding theappellants’ defence and upholding the onus imposed upon them in termsof Section 118 and Section 139 of the NIA.

11 (2006) 6 SCC 39, ¶ 32.

12 (2019) 4 SCC 197, ¶ 36.

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A20. As regard to the claim of compensation raised on behalf ofthe respondent, we are conscious of the settled principles that the objectof Chapter XVII of the NIA is not only punitive but also compensatoryand restitutive. The provisions of NIA envision a single window forcriminal liability for dishonour of cheque as well as civil liability forrealisation of the cheque amount. It is also well settled that there needsBto be a consistent approach towards awarding compensation and unlessthere exist special circumstances, the Courts should uniformly levy fineup to twice the cheque amount along with simple interest at the rate of9% per annum.[13]

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21. The respondent, nevertheless, cannot take advantage of theCabove cited principles so as to seek compensation. The record indicatesthat neither did the respondent ask for compensation before the HighCourt nor has he chosen to challenge the High Court’s judgment. Since,he has accepted the High Court’s verdict, his claim for compensationstands impliedly overturned. The respondent, in any case, is entitled toDreceive the cheque amount of Rs.11.20 lakhs which the appellant hasalready deposited with the Registry of this Court.

CONCLUSION:

CONCLUSION:

22. For the reasons stated above, the present appeal is liable to bedismissed. We order accordingly. Ordinarily and as a necessary sequelEthereto, Appellant No.2 would be liable to undergo the sentence of simpleimprisonment as awarded by the High Court. However, given the peculiarfacts and circumstances of the case, namely, that the appellantsvolunteered and thereafter have deposited the cheque amount with theRegistry of this Court in the year 2018, we are inclined to take a lenientFview. The impugned judgment of the High Court dated 09-11-2017 isthus modified, and it is directed that Appellant No.2 shall not be requiredto undergo the awarded sentence. The registry of this Court is directedto transfer the amount of Rs.11.20 lakhs along with interest accruedthereupon to the respondent within two weeks.GNidhi JainAppeal dismissed.

Appeal dismissed.

H13 R. Vijian v. Baby, (2012) 1 SCC 260 ¶ 20.