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IN THE HIGH COURT OF KERALA AT ERNAKULAM
C.S. Sudha, J.
Sree Gokulam Chit And Finance Co.(P) Ltd – Petitioner
Versus
C.K.Sadanandan and ors. – Respondent
CRL.A NO. 2249 of 2007
Decided On : 24-03-2025
(A) Negotiable Instruments Act, 1881 - Section 138 - Criminal Procedure Code, 1973 - Section 378(4) - Appeal against acquittal - The complainant, a finance company, alleged dishonor of a cheque issued by the accused for an amount due from two chits - The trial court convicted the accused, but the appellate court acquitted him, leading to this appeal - The court found that the complainant failed to prove the debt owed by the accused, as the power of attorney holder lacked direct knowledge of the transaction and did not produce necessary documents - The presumptions under Sections 118 and 139 of the N.I. Act were not attracted due to the complainant's failure to discharge the burden of proof. (Paras 1 - 10 )
(B) Burden of Proof - In cases under Section 138 of the N.I. Act, the burden lies on the complainant to prove the existence of a legally enforceable debt, which must be established before the burden shifts to the accused. (Paras 7 - 10 )
Facts of the case:
The complainant alleged that the accused issued a cheque for ₹67,212/- which was dishonored due to insufficient funds. The trial court found the accused guilty, but the appellate court acquitted him, leading to this appeal.
Findings of Court:
The appellate court's acquittal was upheld as the complainant did not prove the debt owed by the accused.
Issues: Whether the appellate court's acquittal of the accused was justified.
Ratio Decidendi: The court ruled that the complainant failed to establish the debt, and thus the presumptions under the N.I. Act did not apply.
Result: Appeal dismissed.
This appeal under Section 378(4) Cr.P.C. challenges the appellate court's acquittal of the accused in a Section 138 N.I. Act case. (!) [2][5] The complainant, a finance company, alleged that the accused owed Rs.67,212/- as balance due from two chits (GL.37/7: Rs.8,357/- and GL.67/7: Rs.58,855/-), and issued a cheque dated 04/07/1995, which was dishonored on presentment due to insufficient funds. (!) Despite notice, the amount was not paid. (!) The trial court convicted the accused, sentencing him to 6 months' simple imprisonment and compensation of Rs.67,212/- under Section 357(3) Cr.P.C.[4] The first appellate court acquitted him.[5]
The complainant argued that issuance/execution of the cheque was proved (admitted signature), attracting presumptions under Sections 118/139 N.I. Act, which were unrebutted; accused admitted subscribing to both chits and auctioning GL.37/7, but failed to produce GL.67/7 passbook.[7] Per contra, the accused contended PW1 (complainant's power of attorney holder) lacked direct knowledge of the transaction, and complainant failed to prove the debt (especially accused's auction/bid amount receipt for GL.67/7), so presumptions did not apply. (!)
The court held PW1 had only hearsay knowledge (from unexamined cashier), and no documents proved accused received bid amount for GL.67/7 (e.g., alleged account payee cheque not produced).[8][9] Though accused admitted subscribing to both chits and auctioning/receiving for GL.37/7, the dispute over GL.67/7 required complainant to first prove legally enforceable debt before presumptions arose or burden shifted; accused need only show preponderance of probabilities (denied debt via reply notice, testimony).[8][9] (!) (!) (!) [10] Notice and reply did not specify chit details, underscoring complainant's proof burden.[9][10] Trial court erred; appellate acquittal upheld.[10]
Appeal dismissed. (!)
JUDGMENT :
C.S. SUDHA, J.
This is an appeal under Section 378(4) Cr.P.C . filed by the complainant against the judgment dated 08/01/2007 in Crl.A. No.31/2001 on the file of the Court of Session, Thalassery, aggrieved by the acquittal of the accused under Section 255(1) Cr.P.C . of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (the N.I. Act).
2. The case of the complainant is as follows:
The appellant/complainant is a finance Company registered under the Companies Act, 1956. The respondent/accused owed an amount Rs.67,212/-, which is the balance amount in two chit payments made by the Company, that is, in GL.37/7 - Rs.8,357/- and GL.67/7 - Rs.58,855/-. Though the appellant/complainant approached the respondent/accused several times to clear the amount, the respondent/accused failed to do so. Finally on 01/07/1995, the respondent/accused issued Ext.P1 cheque dated 04/07/1995 drawn on the Canara Bank, Kannur Main Branch, for the amount due to the appellant/complainant. When the cheque was issued, the appellant/complainant was made to believe that the respondent/accused would make necessary arrangements to honour the cheque. However, when the cheque was presented by the appellant/complainant before the Nedungadi Bank Ltd, Kannur Branch, for collection on 04/07/1995, the cheque was dishonored due to insufficient funds in the account of the respondent/accused. The appellant/complainant was informed of the dishonour by the bank on 04/07/1995. Pursuant to the same, the appellant/complainant caused to issue Ext.P3 lawyer notice dated 13/07/1995 calling upon the respondent/accused to pay the entire cheque amount within a period of 15 days of receipt of the notice. Though the notice was received by the respondent/accused on 19/07/1995 which is evidenced by Ext.P5 acknowledgment card, the respondent/accused has neither replied nor cleared the cheque amount. Hence, the complaint.
3. Before the trial court, the complainant examined himself as PW1 and Exts.P1 to P10(a) were marked on his side. DW1 and DW2 were examined and Exts.D1 to D4 were marked on the side of the accused.
4. On consideration of the oral and documentary evidence and after hearing both sides, the trial court by judgment dated 04/01/2001, found the accused guilty of the offence punishable under Section 138 of the N.I. Act and hence sentenced him to undergo simple imprisonment for 6 months and was directed to pay compensation of Rs.67,212/- to the complainant under Section 357(3) Cr.P.C . Aggrieved, the accused filed Crl.A. No.31/2001 before the Court of Session, Thalassery. The appellate court by the impugned judgment dated 08/01/2007 reversed the judgment of the trial court and acquitted the accused under Section 255(1) Cr.P.C . Aggrieved, the complainant has come up in appeal.
5. The only point that arises for consideration in this appeal is whether the finding of acquittal of the accused by the appellate court requires any interference by this Court.
6. Heard both sides.
7. It was submitted by the learned counsel for the appellant/complainant that the fact that Ext.P1 cheque was issued from the account of the respondent/accused and the signature in Ext.P1 is admitted. Therefore, the issuance and execution of the cheque is proved. When the issuance and execution is proved, the presumptions available under Sections 118 and 139 of the NI Act are attracted. The presumptions have not been rebutted by the respondent/accused. The respondent/accused admits that he had subscribed to two chits, that is, GL.37/7 and GL.67/7. After subscribing the chitties, he had auctioned the two chitties and received the bid amount. When the amounts were received, necessary entries were made in the passbooks that were issued to the accused. The accused disputes only with regard to the payment in GL.67/7. The accused has produced the passbook of GL.37/7, but has not produced the passbook of GL.67/7. If the accused had not received the bid amount in GL.67/7, he could have
The burden of proof in a Section 138 N.I. Act case lies with the complainant to establish the existence of a legally enforceable debt, which was not met in this case.
An appellate court may not reverse a trial court's acquittal unless the trial court's findings are perverse, illegal, or grossly unjust, particularly when the evidence does not unequivocally prove gu....
The court affirmed that the presumption under Section 139 of the NI Act can be rebutted, and the burden remains on the complainant to substantiate the existence of a legally enforceable debt, failing....
The complainant must prove the existence of a legally enforceable debt in a Section 138 NI Act case, and discrepancies in testimony can undermine the presumption of consideration.
In acquittal appeals, the appellate court respects the presumption of innocence and can only overturn a trial court's acquittal if it is perverse or based on a misreading of evidence.
The cheque must represent a legally enforceable debt at the time of encashment; the burden to rebut the presumption of liability lies with the accused.
Presumption under Section 139 NI Act that cheque is for debt discharge holds unless rebutted by preponderance of probabilities; trial acquittal reversed for perversely ignoring defence witness confir....
The court reaffirmed that the burden of proof lies on the accused to disprove the presumption of liability under Section 139 of the Negotiable Instruments Act.
The presumption of debt under Section 139 of the Negotiable Instruments Act is not rebutted by mere denial; the accused must provide credible evidence to support their defense.
The burden of proof, legal presumptions, and the accused's admission of debt in the issuance of the cheque are crucial in determining liability under the Negotiable Instrument Act.
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