Cri. A. No.199 of 2009

16th April, 2009

Petitioner Counsel: K. T. VASUDEV IYENGER

Cases Cited:
S.T.P. Limited, Bangalore Vs. Usha Paints and Decorators, Bangalore, 2006 ALL MR (Cri) JOURNAL 280=2006(5) Kar L.J. 323 [Para 5,6]
Dr. B. V. Sampathkumar Vs. K.G.V. Lakshmi, ILR 2006 Kar 1730 [Para 5,7]
Krishna Janardhan Bhat Vs. Dattatreya G. Hegde, 2008 ALL MR (Cri) 1164 (S.C.)=AIR 2008 SC 1325 [Para 10]
M. S. Narayana Menon alias Mani Vs. State of Kerala, 2006(5) ALL MR 33 (S.C.)=AIR 2006 SC 3366 [Para 11]

JUDGMENT

-The appellant herein being complainant in C. C. No.29722/2005, as has challenged the legality and correctness of the judgment and order of acquittal dated 30-1-2009 passed in the said case by the XIII Additional Chief Metropolitan Magistrate, Bangalore, (hereinafter referred to as the "Trial Court"), acquitting the accused therein (respondent herein) of the offence under Section 138 of the Negotiable Instruments Act.

2. Though this matter is listed today for admission, it is taken for final disposal by consent of the learned counsel for the appellant and his arguments on merits are heard. Perused the impugned judgment and order of acquittal and also copies of depositions of PW-1 the complainant and DW1 - the accused which are made available by the learned counsel for the appellant.

3. Stated in brief the case of the complainant is that the accused, who is known to the complainant since the past six years, borrowed from the complainant a hand loan of Rs.36,000/- on 10-1-2005 for meeting her urgent necessities thereafter on 31-7-2005 when the complainant demanded repayment of the said loan amount, the accused issued the cheque for the said amount of Rs.36,000/- and said cheque, on being presented to the Bank came returned dishonoured with an endorsement as 'Funds insufficient' and therefore, the complainant issued to the accused the statutory notice dated 3-8-2005. Further case of the complainant is that since the accused failed to comply with the said statutory notice despite receiving the same on 15-3-2005, the complainant lodged her said complaint against the accused.

4. Sri Vasudev, the learned counsel appearing for the appellant strongly contended that the Trial Court has not justified in acquitting the accused on the ground that the complainant, who was examined herself as PW-1, has stated in her cross-examination that she had obtained a pronote from the accused for having lent the loan amount of Rs.36,000/- and she returned the same to the accused and obtained from her the cheque in question 'as security' towards repayment of the said loan amount. He further urged that in view of the settled principle that even if the cheque issued as security towards repayment of a loan is dishonoured, an offence under Section 138 of N.I. Act would be made out, the Trial Court committed error in holding that since the said cheque was obtained by the complainant from the accused as security towards repayment of the loan obtained by the accused from the complainant, the same was not issued by the accused to the complainant towards discharge of any existing debt and as such no offence under Section 138 of the N.I. Act was made out against the accused.

5. As to the liability of the accused for the offence under Section 138 of N.I. Act in respect of a cheque issued by him to the complainant as security towards repayment of debt borrowed by him from the complainant there are two decisions of this Court and they are-

(i) 2006(5) Kar L.J. 323 : [2006 ALL MR (Cri) JOURNAL 280] (S.T.P. Limited, Bangalore Vs. Usha Paints and Decorators, Bangalore and another).

(ii) ILR 2006 Kar 1730 (Dr. B. V. Sampathkumar Vs. K.G.V. Lakshmi).

6. I have gone through both the said decisions. In first of them i.e. in 2006(5) Kar. L.J. 323 : [2006 ALL MR (Cri) JOURNAL 280] (S.T.P. Limited, Bangalore Vs. Usha Paints and Decorators, Bangalore and another), it is observed that there can be no distinction between the cheque 'issued for repayment' and the one 'issued as security for repayment'. It is further observed at para No.3 of the judgment as :

"unlike the other securities, the cheque, even if it is issued as security for repayment it terms a negotiable instrument and with implied instructions for deferred presentation on further date, if the debt is unpaid as per the agreed terms, the cheque upon default of the terms if presented and dishonoured, it very much amounts to an offence under Section 138 of N.I. Act. In that view, the acquittal of the accused is bad in law."

On careful reading of these observations it is clear that for enforcing liability of the accused in respect of a cheque 'issued as security' the complainant has to establish that the debt due to him by the accused remained unpaid as per the agreed terms and there were implied instructions for deferred presentation of the cheque on future date. In the instant case, it is not established that there was a debt existing as on the date of the said cheque in question and the said debt remained unpaid as per the agreed terms and therefore, the complainant presented the said cheque to the Bank for its encashment. Besides this, issuing of cheque by the accused to the complainant in the said case was not in dispute. But the very factum of issuing of the cheque in question by the accused to the complainant is seriously disputed by the accused in the instant case. This being so, I am of the considered opinion that the observations made by this Court in the said case are of no help to the complainant in the present case.

7. In second of the said decisions i.e., in ILR 2006 Kar 1730 (Dr. B. V. Sampathkumar Vs. K.G.V. Lakshmi), it is observed by this Court that 'a cheque whether issued for repayment of loan or as security makes little difference under Section 139 of the N.I. Act; in the event of its dishonour, legal consequences are same without distinction.' On careful reading of the judgment in the said case, it could be seen that the relevant facts in the said case are not forthcoming from the judgment. Further, the accused therein had not led any evidence rebutting the presumption raised under Section 139 of the N.I. Act. This being so, I am of the considered view that the observation made in the said case are not, applicable to the facts of the present case.

8. On careful reading of the evidence of PW-1 complainant, it could be seen, that the complainant has stated in her cross examination on her own and in clear terms, that she had obtained a demand pronote cum consideration receipt from the accused for having paid to the accused said loan amount and she (complainant) returned the said pronote to the accused and the accused issued the cheque in question as security towards the said loan amount. If a cheque which is admittedly issued towards discharge of any existing debt or liability, the same can be presented to the bank by the lender without any intimation to the borrower. But, where a cheque is taken by the lender from the borrower 'as security' towards repayment of the loan advanced by the former to the latter, such cheque cannot be said to have been issued by the borrower to the lender towards discharge of the existing debt unless there is any agreement between the lender and the borrower that in the event of failure on the part of the borrower to repay the loan amount on or before a specified date, the lender would be entitled to present the said cheque to the Bank for its encashment. In the absence of such an agreement, in order to enforce the liability of the borrower to repay the loan amount, the lender has to demand repayment of the loan from the borrower by issuing him a notice in writing or by making oral demand, duly intimating the borrower that if the loan amount, towards repayment of which the cheque was given by him (borrower) to the lender as security, is not repaid as agreed, the said cheque will be encashed by him (lender) by presenting it to the bank. If the borrower does not repay the loan amount to the lender despite such demand being made against him by the lender, then only the lender would become entitled to present the said cheque to the bank for its encashment. Further, if the said cheque is not honoured for want of funds in the account of the borrower or for any such other valid reason, and if the borrower further fails to comply with the statutory notice issued by the lender pursuant to dishonour of the said cheque, cause of action would accrue to the lender to prosecute the borrower for the offence u/S.138 of N.I. Act.

9. Further, there is no averment in the complaint that the accused had executed any pronote in favour of the complainant and the same was returned to the accused and the cheque in question was obtained by the complainant as security towards repayment of the said loan amount. On the other hand, it is the specific case of the complainant, against the accused, as alleged in the complaint that the accused borrowed Rs.36,000/- from the complainant and therefore she issued the cheque in question towards discharge of the said loan. It is only in her cross-examination, PW-1 complainant has volunteered to state that the said cheque was issued to her by the accused as security towards repayment of the said loan. Thus it is clear that this evidence of PW-1 is quite contrary to her case as alleged in the complaint. It is the settled principle that in a criminal case, the complainant has to establish. beyond reasonable doubt, his case against the accused therein as alleged in the complaint but not a case which is quite contrary to the one alleged in the complaint. Further, it is pertinent to note that it is not the defence of the accused that she gave the said cheque to the complainant as security towards repayment of the alleged loan of Rs.36,000/-. On the other hand. it is the case of the accused that she did not borrow the said amount from the complainant and she did not give the said cheque to the complainant either towards repayment or as security for the repayment of the alleged loan amount of Rs.36,000/-.

10. It is the settled principle, as laid down by the Hon'ble Supreme Court in the case of Krishna Janardhan Bhat Vs. Dattatreya G. Hegde reported in AIR 2008 SC 1325 : [2008 ALL MR (Cri) 1164 (S.C.)], that presumption under Section 139 of Negotiable Instruments Act does not extend to the existence of legally enforceable debt as on the date of the cheque and the existence of such debt is to be proved by the complainant beyond reasonable doubt like any other fact. On perusal of the averments in the complaint, the evidence of PW-1 and that of DW-1 it is clear that the complainant has failed to establish that she lent the said sum of Rs.36,000/- to the accused on 10-1-2005 and the accused issued the cheque in question either towards discharge of the said loan amount or as security for the repayment of it. The evidence of the complainant as PW-1 in this regard is quite contrary to her case as averred in her complaint. On the other hand, the defence of the accused as stated by her in her evidence as DW-1 that she did not borrow the said amount from the complainant and that there was transaction between the accused and the husband of the complainant and, in respect of the said transaction, the accused had issued some blank cheques and the same were misused by the accused appears to be plausible and probable. It is also settled principle that the accused in a criminal case need not prove his defence beyond reasonable doubt, but the complainant has to prove his case beyond reasonable doubt. Therefore, this defence is acceptable.

11. In the case of M. S. Narayana Menon alias Mani Vs. State of Kerala & Anr. reported in AIR 2006 SC 3366 : [2006(5) ALL MR 33 (S.C.)], Hon'ble Supreme Court has observed at paragraph No.57 of its judgment as under :-

"The appellant clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable as probable the cheque therefor cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act."

12. In view of all the facts and circumstances of the case as discussed supra and following, the above decision of Hon'ble Supreme Court, I am of the considered opinion that no offence u/S.138 of N.I. Act could be made out against the accused. Therefore, I do not find any reasons to interfere with the impugned judgment and order of acquittal.

13. Hence, the present appeal is dismissed as being devoid of merits. No order as to costs.

Appeal dismissed.