Case Note & Summary
The appellant, CREF Finance Limited, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, alleging that the respondent, Sree Shanthi Homes Private Limited and its Managing Director K.C. Chandrashekar Raju, issued a cheque for Rs. 5,00,000/- dated 25.10.1999 drawn on Canara Bank, Bangalore, in favour of the appellant. The cheque was presented for encashment but was returned dishonoured with the endorsement 'Account Closed' on 29.10.1999. The appellant issued a legal notice on 5.11.1999 demanding payment, which was received by the respondents, but they failed to pay the amount within the statutory period. Consequently, the appellant filed a complaint before the XX ACMM & XXII ASCJ, Bangalore, which was numbered as C.C. No. 26918/2000. The trial court, after trial, acquitted the respondents by judgment dated 27.5.2006, holding that the appellant failed to prove the existence of a legally enforceable debt or liability. The appellant challenged the acquittal before the High Court of Karnataka under Section 378(4) Cr.P.C. The High Court framed the issue of whether the trial court was justified in acquitting the accused despite the presumption under Section 139 of the N.I. Act. The appellant argued that the trial court erred in not drawing the presumption under Section 139 and that the accused failed to rebut the same. The respondents contended that the cheque was not issued for any debt or liability and that the signature on the cheque was not admitted. The High Court, after reappreciating the evidence, held that the presumption under Section 139 of the N.I. Act is in favour of the holder of the cheque and the accused must rebut the same with probable evidence. The court found that the accused merely denied the transaction and signature without adducing any evidence to rebut the presumption. The trial court's findings were perverse and based on no evidence. The High Court allowed the appeal, set aside the acquittal, and convicted the respondents for the offence under Section 138 of the N.I. Act. The respondents were sentenced to pay a fine of Rs. 5,50,000/- each, in default to undergo simple imprisonment for six months. Out of the fine amount, Rs. 5,00,000/- was ordered to be paid as compensation to the appellant.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Presumption under Section 139 - Rebuttal - The complainant issued a cheque for Rs. 5,00,000/- which was dishonoured. The accused denied the transaction and signature. The trial court acquitted the accused. On appeal, the High Court held that the presumption under Section 139 of the N.I. Act is in favour of the holder of the cheque and the accused must rebut the same with probable evidence. Mere denial is not sufficient. The accused failed to rebut the presumption. The acquittal was set aside and the accused was convicted. (Paras 1-10) B) Criminal Procedure Code - Appeal against Acquittal - Section 378(4) - Scope - The High Court, in an appeal against acquittal under Section 378(4) Cr.P.C., can reappreciate evidence and interfere if the trial court's findings are perverse or based on no evidence. The trial court's judgment was found to be erroneous and perverse, warranting interference. (Paras 1-10)
Issue of Consideration
Whether the trial court was justified in acquitting the accused for the offence under Section 138 of the Negotiable Instruments Act, 1881, despite the presumption under Section 139 of the Act and the evidence on record.
Final Decision
Appeal allowed. Judgment and order of acquittal dated 27.5.2006 in C.C. No.26918/2000 passed by the XX ACMM & XXII ASCJ, Bangalore, is set aside. Respondents are convicted for the offence under Section 138 of the Negotiable Instruments Act, 1881. Each respondent is sentenced to pay a fine of Rs.5,50,000/- (Rupees Five Lakh Fifty Thousand only), in default to undergo simple imprisonment for six months. Out of the fine amount, Rs.5,00,000/- (Rupees Five Lakhs only) shall be paid as compensation to the appellant.
Law Points
- Presumption under Section 139 of Negotiable Instruments Act
- 1881
- Rebuttal of presumption
- Dishonour of cheque
- Section 138 of Negotiable Instruments Act
- Section 378(4) of Code of Criminal Procedure
- 1973
