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Saturday, January 10, 2015

CRIMINAL APPEAL NO. 2402 OF 2014 [ Arising out of SLP (Crl.) No.6197 of 2014] K. Subramani … Appellant(s) versus K. Damodara Naidu … Respondent(s)


                        IN THE SUPREME COURT OF INDIA


                     CRIMINAL APPEAL NO.  2402  OF 2014
[ Arising out of  SLP (Crl.) No.6197 of 2014]

K. Subramani                            …     Appellant(s)


K. Damodara Naidu                   …    Respondent(s)

                               J U D G M E N T


Leave granted.

This appeal is preferred against judgment and order dated 10.10.2013  passed
by the High Court of Karnataka at Bangalore in  Criminal  Appeal  No.368  of
2009   wherein the High Court set aside the judgment  of  acquittal  of  the
trial court and remanded the case to the trial court for retrial.


The respondent herein/complainant and the appellant/accused were working  as
lecturers  in  a  Government  College  at  Bangalore.   The  case   of   the
complainant is that the accused borrowed a loan of Rs.14 lakhs  in  cash  on
1.12.1997 from him to start granite business, promising to  repay  the  same
with 3%  interest per month on demand and  issued  post-dated  cheque  dated
30.11.2000 for sum of Rs.29,12,000/- which included principal  and  interest
and few days prior to presentation of the cheque on its  due  date  to  bank
for encashment, the accused requested him not to  present  the  cheque   and
took extension of time of another three  years  for  repayment  and  finally
issued a cheque dated 16.08.2005 for a sum of Rs.73,83,552/- which  included
principal and interest. The complainant presented the  cheque  on  19.8.2005
for encashment to his banker and  it  was  dishonored  with  an  endorsement
‘fund  insufficient’ and the complainant issued legal  notice  on  12.9.2005
demanding  repayment within 15 days from the date  of  its  receipt  thereof
and accused  sent reply but  failed  to  comply  with  the  demand  and  the
complainant lodged complaint under Section 138 of the Negotiable  Instrument
Act, against the accused.

In the trial the complainant examined himself as PW1 and examined  CWs1  and
2 on his side and marked documents Exh. P1 to  P23.   The  accused  examined
himself as DW1 and marked documents Exhs. D1 to D5.  The  trial  court  held
that the complainant had no source of income to lend a sum  of  Rs.14  lakhs
to the accused and he failed to prove  that  there  is  legally  recoverable
debt payable by the accused to him and that in discharge of  said  liability
he issued the cheque and accordingly acquitted the accused  for the  alleged
offence  under  Section  138  of  N.I.  Act.   Aggrieved  by  the  same  the
complainant preferred appeal in the High Court in Criminal Appeal No.368  of
2009, and the High Court heard the appeal along  with  9  other  appeals  by
framing two legal issues which are as under:

“  i) Whether an action under Section 138 of the N.I. Act  for  dishonor  of
cheque is the complainant required to establish his  financial  capacity  to
lend money?

ii) Will not presumption under Section 139 of the N.I. Act  accrues  to  the
benefit of the complainant unless the accused rebuts that presumption?”

Relying on the ratio laid down by this Court in  the  decision  in  Rangappa
vs. Sri Mohan  [(2010) 11 SCC 441] the High Court answered the  first  issue
in the negative and the second issue in the affirmative.   It  further  held
that the orders of acquittal recorded by the trial court in all the  appeals
 suffer from legal infirmity as the prosecution has  been   undone  only  on
the ground that complainant had not proved his capacity to  lend  money  and
hence those orders are liable to be set aside.  Accordingly it  allowed  the
appeals and set aside the respective judgments  of  acquittal  and  remanded
the cases to courts concerned directing  retrial.   The  present  appeal  is
preferred challenging the said judgment.

The learned counsel appearing for the  appellant/respondent  contended  that
the High Court erroneously clubbed a  batch  of  10  criminal  appeals   and
formulated two questions of  law  and  insofar  as  the  present  appeal  is
concerned  the trial court  never  proceeded  on  the  assumption  that  the
presumption under Section 139 of the N.I. Act would enure to the benefit  of
the complainant only  if  he  proves  his  financial  capacity  and  on  the
contrary the trial court had for reasons recorded  found  that  the  accused
has rebutted the presumption by placing cogent evidence that  there  was  no
legally recoverable debt or liability and the complainant  had  no  capacity
to  lend  huge  amount  of  Rs.14  lakhs  and,  accordingly,  dismissed  the
complaint by acquitting the accused.  It is his further contention that  the
High Court without going into the merits proceeded  to  remand  the  present
case to the trial court for being retried and it has caused great  prejudice
to the appellant herein and hence the impugned judgment is liable to be  set

Learned counsel for  the  respondent/complainant  submitted  that  the  High
Court answered the legal issues involved and has remanded the  case  to  the
trial court for fresh consideration and no exception can  be  taken  to  the
impugned judgment.

Three Judge Bench of this Court in the decision  in  Rangappa  case  (supra)
laid down that the presumption mandated by  Section  139  of  the  N.I.  Act
includes a presumption that there exists   a  legally  enforceable  debt  or
liability and that is a  rebuttable  presumption  and  it  is  open  to  the
accused to raise a defence wherein the existence of  a  legally  enforceable
debt  or liability can be contested. Relying on  the  said  ratio  the  High
Court answered the two legal issues raised by it in the  impugned  judgment.
Though  the  criminal  appeals  were  preferred  against  the  judgment   of
acquittal passed in all the cases arising under  Section  138  of  the  N.I.
Act, the factual matrix and the evidence adduced were different.   The  High
Court after answering the two legal issues did not consider  the  merits  of
each case individually and has simply remanded   the  matter  to  the  trial
court for fresh consideration.

In the present  case  the  complainant  and  the  accused  were  working  as
Lecturers in a Government college at the relevant time and the alleged  loan
of Rs.14 lakhs is claimed to have been paid by  cash  and  it  is  disputed.
Both   of   them  were governed by the Government  Servants’  Conduct  Rules
which prescribes  the mode of lending and borrowing.  There  is  nothing  on
record to show that the prescribed mode was followed. The source claimed  by
the complainant is  savings from his salary and  an  amount  of  Rs.5  lakhs
derived by him from sale of site No.45 belonging to  him.   Neither  in  the
complaint nor in the chief-examination of  the  complainant,  there  is  any
averment with regard to the sale price of site No.45.   The  concerned  sale
deed was also  not  produced.  Though  the  complainant  was  an  income-tax
assessee he had admitted in his evidence that he had not shown the  sale  of
site No.45 in his income-tax return. On the  contrary  the  complainant  has
admitted in his evidence that in the year 1997 he had  obtained  a  loan  of
Rs.1,49,205/- from L.I.C. It is pertinent to note that the alleged  loan  of
Rs.14 lakhs is claimed to have been  disbursed  in  the  year  1997  to  the
accused.  Further  the  complainant  did  not  produce  bank  statement   to
substantiate his claim.  The trial court took into account the testimony  of
the wife of the complaint in another criminal  case  arising  under  Section
138  of  the  N.I.  Act  in  which  she  has   stated   that   the   present
appellant/accused  had  not  taken  any  loan  from  her  husband.    On   a
consideration of entire oral and documentary evidence  the trial court  came
to the conclusion that the complainant had no  source of income  to  lend  a
sum of Rs.14 lakhs to the accused and he  failed  to  prove  that  there  is
legally recoverable debt payable by the accused to him.

In our view the said conclusion of the trial court has been  arrived  at  on
proper appreciation of material evidence on record.  The  impugned  judgment
of remand made by the High Court in this case is  unsustainable  and  liable
to be set aside.

  In the result this appeal is allowed and the impugned judgment insofar  as
the appellant is concerned is  set  aside  and  the  judgment  of  acquittal
passed by the trial court is restored.

                                        (V. Gopala Gowda)

                                        (C. Nagappan)
New Delhi;
November  13, 2014
ITEM NO.1A-For Judgment    COURT NO.11               SECTION IIB

               S U P R E M E  C O U R T  O F  I N D I A

                             RECORD OF PROCEEDINGS

Criminal Appeal No. …..../2014 arising from SLP (Crl.)  No(s).  6197/2014

K SUBRAMANI                                        Appellant(s)


K DAMODARA NAIDU                                   Respondent(s)

Date : 13/11/2014 This petition was called on for JUDGMENT today.

For Petitioner(s)       Mrs. Vaijayanthi Girish,Adv.

For Respondent(s)       M/s. Nuli & Nuli

          UPON hearing the counsel the Court made the following

                             O R D E R

            Hon'ble Mr. Justice C. Nagappan pronounced the judgment  of  the
Bench comprising Hon'ble Mr. Justice V.Gopala Gowda and His Lordship.

            Leave granted.

            The appeal is allowed in terms of the signed order.

    (VINOD KUMAR)                               (MALA KUMARI SHARMA)
COURT MASTER                                 COURT MASTER

            (Signed Reportable judgment is placed on the file)

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