Slncjj^ v. Nandkishore Agrawal

Smt. Kiran Agrawal VERSUS Respondent Nandkishore Agrawal SPECIAL LEAVE TO APPEAL UNDER SECTION 378^ OF THE CODE QF CRIMINAL PROCEDURE. 1973 SB: Hon'ble Shri Goutam Bhaduri. J. Present: Shri Sumesh Bajaj, Advocate for the appellants. Shri Y.C.Sharma, Advocate for the respondents. JUDGMENT (Passed on 10thday ofDecember, 2013)

1. All the four appeals are heard together as the common question of law arises for adjudication. :2: These are the appeals against the judgment dated 27.11.2008, passed by the Third Additional Sessions Judge, Raipur, in Criminal Appeal Nos. 61, 62, 63 & 64 of 2008, whereby the appeal preferred by the ~p^^-—===^^ respondent accused was allowed andthe order dated 07.04.2008 passed by the Judicial Magistrate Fjret Class. whereby therespondent accused was convicted under Section 138 of Negotiable Instrumehts Act, 1881 and was sentenced 1 year R.l. and fine of Rs.1000/- was set aside.

3. The brief facts of the appellant's case is that the respondent took a loan of Rs. 20 Lacs from the appellant/complainant in the year 2000 and for ensure payment of it, four post dated cheques of Rs. 5 Lacs were duly handed over to the appellanVcomplainant by the respondent. The cheques were dated 21.09.2000, 24.09.2002, 25.09.2002 & 26.09.2002 bearing Nos. 050310, 050311, 050312 & 050313 respectively. All the cheques were for an amount of Rs.5 Lacs each. The said cheques were presented with the Banker of the appellant State Bank Saurashtra on

23.09.2002, 25.09.2002, 26.09.2002 & 26.09.2002. The said cheques when were presented for paymentwere dishonored by the Banker ofthe respondent, namely Union of India with an endorsement of "insufficiency of fund". The banker of the appellant i.e. State Bank of Saurashtra, informed the appellant about such dishonour of cheques. This fact*1s also not in dispute that the appellant/complainant sent a notice to the respondent within the specified time on 01.10.2002, which was received by the respondent on 04.10.2002. Thereafter, the respondent/ accused did not pay the amount within the stipulated period oftime after notice under Section 138 of the Negotiable Instruments Act and thereby, the complaints were filed before the concerned Magistrate, Raipur, within the specified period of one month.

4. The complainant during the course of evidence stated that respondent/accused had been to his house and requested for Rs.20 Lacs by way of Joah. The complainant further stated that, at that time, the loan of Rs.20 Lacs was advanced to the accused. It was the case of ^' ^. '-A ^>; -^ Page3 the complainant was fclSter that in order to secure such payment, four chequespf Union of India of Rs. 5 Lacs each were handed over to the complainant. The said cheques were post dated for 21.09.2002,

24.09.2002, 25.09.2002 and 26.09.2002. This fact is also undisputed. According to the complainant, the said cheques were dishonoured and thereafter, the notices were served and after a specific period of.notice when the demand was not made good, different complaints were filed for each dishonour of cheques. The respondent accused during the course under Section 138 of the Negotiable Instruments Act during cross-examination of the complainant tried to develop a defence to demolish the story of loan transaction and tried to prove that the property of complainant was mortgaged to Central Bank of India, as she stood a Guarantor for accused in a loan transaction. Therefore, effort was made to substantiate that the cheques were handed over in lieu of mortgage as security. It was also suggested since the loan transaction became bad whtoh led to recovery proceedings before Debt Recovery Tribunal- Jabalpur (forshort "DRT"). It was therefore suggested that the complainant had also received a notice from DRT. It was also suggested that the respondent/accused was made a party before the DRT for the fact she stood as a Guarantor in loan, which was availed by the respondent/accused. She was also given a suggestion that the property of this complainanVappellant was mortgaged before the Central Bank of India to secure the loan, which was availed by the accused. All these suggestions were not answered in affirmative bythe complainant.

6. The other witness on behalf of the complainant was the husband of the complainant who had acted on behalf of the complainant under a power of attorney. He was also cross-examined in detail. It was suggested by the accused that the prpperty of her wife (complainant) was mortgaged Page4 with the Central Bank of India and in lieu of that by way of security, the cheques were given. To this suggestion this witness No.3 had denied the suggestions. This witness had also denied the suggestions that the cheques were handed over by way of a security. He was alsp given a suggestion that before the DRT, the orders have been passed and againstthat, the appeal has been filed. This suggestion was admitted by the witness that before the DRT, the orders of recovery has been made against her wife too. The accused respondent had also adduced his evidence and had com^ out with the defence that a loan was availed by the accused ^ Nandkishore Agrawal in name of Puja Floor Mill of Rs. 35 Lacs, on

17.06.2000. The evidence has also came to this effect by the Manager ofthe Central Bank of India as DW-1, who has stated that in suchloan Smt. Kiran Agrawal, the complainant, stood as a Guarantor to secure repayment. It is further been stated by DW-1 that Kiran Agrawal had mortgaged a land bearing khasra No. 165/5 situated at Tikrapara, Raipur, in favour ofthe Bank to secure the repayment.

8. The respondent, Nandkishore Agrawal, has examined himself as DW-4. He has stated that he had avaited a loan of Rs.35 Lacs from the Central Bank of India, Fafadih, Raipur. He has further stated that sihce he knew the complajnant, as such, on his request, wife of complainant stood as a Guarantor and indemnified the Bank and created mortgage of properties in favour of the Bank. The witness has further stated that since by deposit of title deed, equ'rtable mortgage was created, as such, by way of security, at the request of the complainant, the borrower Nandkishore Agrawal had given a cheque of Rs. 5 Lacs each numbering into four to the complainant. He further has stated that the cheques were without any date. He had further stated that he has not availed any loan from Kiran Agrawal or Murari Agrawal. He has further stated that when •tK. '>^s^ Page5 he defaulted in repayment then he received a notice from the financing Bank, whereby the loan was recalled and they were asked to repay the ambunt. At that time, it is deposed by the accused the complainant had deposited the said four cheques and got it dishonoured by one by one. He had further submitted that for non-payment of the loan availed by hjm, notices were received from DRT, wherein the respondent as also the complainant are the party being borrower and the guarantor.

9. The respondent therefore had raised a defence that he had not availed ^ any loan from the appellanVcomplainant and the cheques which were given by the respondent/accused of Rs.5 Lacs each to complainant were meant for security of the Bank transaction. The Bank transaction denotes security and consequently, the cheques were not against any liability. The defence, therefore, was confined to the issue that since there was no liability was incurred in lieu of the cheque, as such, the same cannot be enforced by invoking Section 138 of the Negotiable Instruments Act. ;

10. Learned,Court of Judicial Magistrate First Class while adjudicating the case has held that no evidence has come on record to substantiate the defence and accordingly has held that when the cheque of Rs. 5 Lacs was dishonoured for want of necessary funds, the offence under Section 138 of Negotiable InstrumentsAct was made out. Against this finding, the respondent had filed an appeal wherein the learned appellate Court has not disputed the facts. The learned appellate Court has held that the complainant/appellant stood as Guarantor for the loan, whichwas availed by the accused from the Central Bank of India. It was further held that the land of the complainant was mortgaged to secure repayment. It was further held that the accused had defaulted in repayment of loan. Therefore, the financing Bank had proceeded to recover the dues by way of coercive process. Page6

11. The learned appellate Court while evaluating the cross-examination of complainant has further held that since there are material contradiction in the statement of complainant has held that no loan was given to the accused and has further held that cheques were given in lieu ofsecurity for mortgage of land which was created in favour ofthe Central Bank. So it was held that the cheques when given for a security, the-same cannot attract the provisionsof Section 138 of Negotiable Instruments Act.

12. I have heard learned counsel for both the parties at length and peruse'd the respective records in detail. ; ^

13. Learned counsel for the appellant submits that the defence which was raised by the accused has not been substantiated, in as much as all the suggestions which were given to the witness of the complainant, they were denied. He further submits that the suggestions, which were denied by the witness cannot form a defence in absence of any admission to it. He has further submitted that even for the sake of argument, if it is admitted that the cheques were given in lieu of thfe security for the mortgage created, it will also fall within the term liability as envisaged under Section 138 of Negotiable Instruments Act. He further submitted that the presumption under Section 139 of Negotiable Instmments Act leans in favour of holder of cheque namely the appellant. He submits that nothing is on record, which connect the fact that the cheques were given not against any liabjlity but were by way of security. It was submitted that the statutory presumption will be that cheques were given in discharge ofa liability.

14. Per contra, the learned counsel .appearing for the respondent submits that as per the statement ofthe DW's, this fact is proved that no amount was received by the accused and only while the loan was being availed .1 r 1 ':-• ^ Page7 by the accused from the Central Bank of India, the complainant stood as a Guarantor for the same. He further submits that since the complainant stood as a Guarantor and the land was mortgaged in order to secure the same, by way of security, cheques of Rs. 5 Lacs each denomination numbering into four were handed over to the complainant. He therefore submits that since the cheques were issued as a security, as such, it will not fall within the ambit of Section 138 of the Negotiable Instruments Act. ?

15. In order to decide the controversy, 1 have gone through the statement of the witnesses and examinethe documents on record. It would be relevant to quote Section 118 and Section 139 of Negotiable Instruments Act in thisjuncture: "118. Presumptions as to negotiable instruments following contrary proved, presumption shallbe 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 transferred consideration; (b) as to date-that every negotiable instrument ^iearing a date was made ordrawn on such date; (c) as to time of acceptance-that every accepted bill of exchange was accepted within a reasonable time afterits date andbeforeits maturity; (d) as to time of transfer-that every transfer of a negotiable instrument was made before its maturity; (e) endorsements order of endorsements-that appearing a negotiable instrument were made in the order in which they appear thereon; (f) as.to stamps-that a lost promissory note, bill of exchange orcheque was dulystamped; \ PageS that holder is a holder in due course-that (g) holder of a negotiable instrument is a holder in due course; provided that, where the instrument has been contained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereofby means ofan offence or the burden of fraud, or for unlawful consideration, proving that the holderis a holder in due course lies uponhim." "139. Presumption in favor of holder : presumed, unless the contrary holderofa cheque receivedthe cheque ofthe nature It shall be proved, 'is referred to in section 138 for the discharge, or in part, or any debt or other liability. in whole

16. The Hon'ble Supreme Court in case of Hiten P. Dalal v. Bratindranath Baneijee1 has held as under: "20. 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 underSection 139 This section the Negotiable Instruments Act. provides that contrary is proved, received the cheque, of the nature referred to in in whole or in part, of any debt or other 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 Section 138 for the discharge, liability". The effect of "it shall be presumed, unless the ' the holder of a cheque liability. :t

21. Because both Sections 138 and 139 require that the Court "shall presume"the liability ofthe drawerof the ch^ques for the amounts for which the cheques are drawn, as noted in State of Madras vs. A. 'AIR 2001 SC 3897 p H .^^ & Page9 a law, Such the raising of Vaidyanatha lyer AIR 1958 SC 61, it is obligatory on the Court to raise this presumption in every case where the factual basis for presumption had been established. "It introduces an exception to the general rule as to the burden of proofin crimlnal cases andshifts the onus on to the a accused" presumption (ibid). as distinguished from a presumption of presumption of fact which describes provisions by which the court "may presume" a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of law or fact unless the accused presumptions of adduces evidence showing the reasonable possibility ofthe non-existence ofthe presumed fact." innocence,

17. Further, the Hon'ble Supreme Court in K.N.Beena v. Muniyappan and another2 has held as under : ' "6. In our V'IQW the impugned Judgment cannot be sustained at all. The Judgment erroneously proceeds on the basis that the burden ofproving consideration for a dishonored cheque is on the complainant. appears that the leamed Judge had lost sight of It Sections 118 and 139 ofthe Negotiable Instruments Act. Under Section 118, unless the contrary was is to be presumed that the Negotiable proved, Instrument (including a cheque) had been made or drawn for consideration. Under Section 139 the Court has to presume, unless the contrary was that the holder of the cheque received the proved, cheque for discharge, in whole orin part. ofa debtor liability. Thus in complaints under Section 138, Court has to presume that the cheque had been issued for a debt or liability. This presumption is 2AIR 2001SC 2895 rebutable. However the burden of proving that a cheque had not been issued fdr a debt or liability is o/7 the accused. This Court in the case of Hiten P. Dalal vs. Bratindranath Banerjee reported in (2001) 6 S.C.C. 16 has also taken an identical view."

18. Similarly, the Hon'ble Supreme Court in K. Bhaskaran v. Sankaran Vaidhyan Balan and anothei3 has held as under: "9. As the signature in the cheque is admitted to be the presumption envisaged in that of the accused, Section 118 ofthe Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 ofthe Act enjoins on the Court to presume that the holder of the cheque received it for the discharge of any debt orliability. The burden was on the accused to rebut the aforesaid presumption. The Trial Court was not persuaded to rely on the interested testimony ofDW' 1 to rebut the presumption. The said finding was upheld by the High Court. It is not now open to the accused to contend differently on that aspect."

19. In the case in hand, despite the suggestions are given, no cog^nt evidence has come on record so as to bridge the defence of the accused with the defence that cheques were issued in lieu of the securify f6r creation of mortgage. The complainant has categorically maintained her stand that she had paid the amount by way of loan. During cross-examination. the defence has raised the issue that the cheques were given for the purpose of security since the land was mortgaged in favour of Central Bank, wherein the complainant stood a Guararitor. The perusal of evidence would reflect that the defence; that the cheques were issued by way of security has not been properly established in the cross-examination of either the complainant or their witness too. So the defence that cheques were only by way of security is 3AIR 1999 SC 3762 .y /r Pagell :^ ^:^' not connpcted to the evidence on record. So the finding arrived at by the learned Court below that cheques were handed over by way of security only is wrong and no evidence exists to come to such conclusion.

20. The evidence has come on record that the accused has defaulted in repayment for which the proceeding before the DRT is pending by the Central Bank. Therefore, even if, the version of the respondent are admitted, the facts which emerges out will lead to show that the legal liability has been incurredby Guarantor as Section 128 of Indian Contract Act mandates that the liability of Guarantor is co-extensive with that of borrower. Further, underthe Indian ContractAct, a surety is also protected for any payment or performance of any obligation. In other words, even if, the defence adduced by the accused are accepted, 1 am of the consjdered view, it will be covered within the definition of legal liability, as coercive methods of recovery was started by the Bank for recovery of its dues. _2l. The Hon'ble Supreme Courtin Rangappa v. Mohan4 in para 14 has held as under: l_ "14. In light of these extracts, we are in agreement with the respondent-claimant that the presumption manc^tecf by Section 139 of the Act does indeed ^iriclude the existence ofa legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is ofcourse in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence ofa legally enforceable debt orliability can jbe contested. However, there can be no doubt that "2010AIRSCW2946 Pa^ 12'. there is an initial presumption which favours the complainant. Section 139oftheActisanexample of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strohg crimihal remedy in relation to the dishonour of cheques, rebuttable presumption under Section 139 is a device fo prevent undue delay in the course of litigation. it must be remembered that the offence However, made punishable by Section 138 can be better described as a regulatory offence since the bouncing whose impact parties involved in commercial transactions. a scenario, ofa cheque is largely in the nature ofacivil wrong is usually confined to the private In such 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 standard or In the absence of compelling justifications, proof. reverse onus dauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof that of 'preponderance of probabiiities'. Therefore, the ^ ^^ accu^ed is able to raise a probable defence which ^creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."

22. The respondent/accused in this case has failed to establish that the consideration did not existed orthere was no liability to be discharged by him as the accused could not raise a probable defence by cross- / rBr ^•- ^..^- ^—^ examination of complainant. The reading of Section 139 of Negotiable Instruments Act will make Jt clear that it shall be presumed, ynless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, whole or jn part, or any debt or other liability. Since in the instant case, even if, the version of the accused are accepted under the given circumstances, the cheques which were given in lieu of creation of mortgage of the immovable property by the surety is enveloped within the definition 'other liability' under Section 138 & 139 ofthe Negotiable Instruments Act. Therefore, necessary presumption has to be drawn in such analogy.

23. In view of the above discussion, I amof the opinion that the Court of Additional Sessions Judge has committed a wrong by holding that no consideration was passed to the accused and the cheques were given for by way of security can not be sustained. The complainant and it's witnesses have maintained the stand the loan was given to the accused and the accused has failed to rebut such statement by way of cross- examination and suggestions. The accused has raised defence and made statement but nothing has been substantiated by the explanation given under S^Gtion 313. Therefore, the statement made by the complarnant in the complaint case cannot be shelved at the instance of the accused. The accused has miserably failed to prove the fact that there had been no consideration.

24. In view of foregoing discussion, 1 am of the view that the complainant has proved the case and necessary presumption has to be drawn under Section 139 read with Section 118 ofthe Negotiable Instruments Act.

25. Further, if the version of the accused are accepted that the cheques were given by way of security for creation of mortgage, in such eventuality too since the recovery process by the loanee Bank has started for recovery of amount by coerdve method before DRT in such eventuality, in given set offacts, the cheques so issued will fall within the ambit of 'legal liability' of a borrower towards its surety.

26. Accordingly, the judgment/order dated 27.11.2008, passed by the Third Additional Sessions Judge, Raipur, is set aside and the accysed/ respondent is convicted under Section 138 of the Negotiabfe Instruments Act and sentenced R.I. for 1 year and fine as was ordered for by the learned JMFC.

27. As a result, the appeals are allowed. Sd/- Goutam Bhaduri Judge