The legal principle established is that dishonour of a cheque under Section 138 of the Negotiable Instruments Act holds the drawer liable, regardless of the drawer's financial capacity or association with the payee's business.

K. SREEDHAR RAO, J.

( 1 ) THE appeal is filed against the judgment and order of the acquittal passed by the judicial magistrate of the first class, shimoga in c. c. No. 368 of 1993. The appellant is the complainant before the trial court had filed a complaint under Section 200 of the Criminal Procedure Code against the respondent-the accused before the trial court for committing an offence punishable under Section 138 of the negotiable instruments act. As per the complainant's version, the accused had borrowed a sum of Rs. 30,000/- on 10-2-1993 for his business purpose and towards the repayment of the said liability cheque, ex. P. 1, dated 20-8-1993 for Rs. 30,000/- was issued drawn on bank of india, shimoga branch. The complainant submitted the cheque through his banker for collection which was dishonoured with an endorsement 'there are no sufficient funds'. Consequently, a legal notice was issued as required under law intimating the dishonour and denying payment. The accused replied the legal notice disowning the liability contending that he has not issued any cheque and that the complainant was associated with the business of the accused carried under the style of "darshan prabha traders" dealing with confectioneries and on account of the mismanagement by the complainant and his brother-in-law, the accused has sustained loss in the business and that the complainant had also invested Rs. 22. 400/- on the condition that the complainant and the accused shall share the profits and loss equally. In that connection the complainant was allowed to freely deal with the books of accounts and bank accounts thus thereby misusing the opportunity, a false liability is concocted by manipulating the cheque.

( 2 ) A private complaint came to be lodged. The accused appeared before the trial court contested the case. In evidence, the complainant has examined himself and one witness who is bank manager of the bank of india. For the complainant five documents are marked. Ex. P. 1 is the cheque, ex. P. 2-endorsement given by the bank, ex. P. 3-copy of the notice issued by the complainant, ex. P. 4-postal acknowledgement, ex. P. 5-reply given by the accused. On behalf of the accused, no witness is examined. However, three documents are marked, ex. D. 1 is the ledger pertaining to the business of the accused, ex. D. 2 is the form No. 3 pertaining to sales tax, ex. D. 3 is the notebook which contains the handwriting of the complainant.

( 3 ) THE technical requirement of issuance of notice within the period stipulated and filing of the complaint within the time stipulated is not in dispute. The accused takes a substantial defence that the complainant is business associate and he was allowed to deal with the accounts and bank transactions and in that connection the complainant had issued cheque signed by him and the same is misutilised to fasten the false liability. In fact, the accused is not examined and the defence version is by and large indicated by the reply notice ex. P. 5 and the evidence in the cross-examination. The trial court comes to the conclusion that the accused is not guilty for the following reasons: (1) that the complainant failed to show that he had sufficient financial resources to have lent the amount as alleged, since as per the evidence in the cross-examination complainant says that he has a bank account for the past 15-20 years and that no documentary evidence is produced to show that the complainant did possess the required funds to have lent Rs. 30,000/ -. (2) the complainant admits in his cross-examination that towards the alleged liability, a pronote was executed and after the quarrel a cheque was issued and some of the writings of the cheque are admitted to be in different ink and therefore it was concluded that the cheque was not issued voluntarily for discharge of any debt or legal liability. (3) the trial court holds that the complainant was associated as a partner with the business of the accused and he was also writi

Click Here to Read the rest of this document