1. Negotiable instrument dispute — Cheque dishonour due to account closure — Conviction under Section 138, NI Act. (Para 1 , 2 , 3 , 4 , 5 )
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2024 Supreme(Online)(Kar) 44253
KARNATAKA HIGH COURT
J.M. Khazi, J
Purushotham – Appellant
Versus
Thapasi Yel Em Chits Pvt Ltd – Respondent
CRIMINAL REVISION PETITION NO.698 OF 2020
Advocates:
For the Appellants/Petitioners: Manjunatha H
For the Appellants/Petitioners: Manjunatha H
The return of a cheque as 'Account Closed' attracts liability under Section 138 of the N.I. Act. To rebut the statutory presumptions under Sections 118 and 139, the accused must lead positive evidence, such as testifying in the witness box, rather than relying solely on cross-examination.
Headnote:(A) Negotiable Instruments Act, 1881 - Sections 118, 138, and 139 - Code of Criminal Procedure, 1973 - Sections 200, 313, 397, and 401 - Dishonour of cheque - Account closed - Presumption of liability - When a cheque is returned unpaid with the endorsement "Account Closed", it attracts the provisions of Section 138 of the N.I. Act (Para 21) - The statutory presumptions under Sections 118 and 139 of the N.I. Act shift the initial burden to the accused to rebut the presumption of a legally recoverable debt (Para 20).
(B) Evidence and Rebuttal - To rebut the statutory presumption, it is insufficient for the accused to merely make suggestions during the cross-examination of the complainant's witness; the accused must step into the witness box to lead evidence (Para 19, 20).
(C) Service of Notice - If a legal notice is sent to the last known address and is returned with the endorsement "addressee absent and information delivered", and the accused fails to prove residence at any other address, a presumption is drawn that the accused intentionally failed to receive the notice (Para 17).
Facts of the case:
The complainant, a chit fund company, initiated arbitration against the accused and his wife for unpaid balances of successfully bid chits. An ex-parte award was passed. The accused subsequently issued a cheque for Rs. 21,77,000 towards the award amount, which was dishonoured as "Account Closed". The accused contested the conviction on grounds of lack of personal knowledge of the GPA holder, non-service of notice, and that the cheque was given as security.
Findings of Court:
The court found that the notice was sent to the correct address and the accused failed to provide proof of any different residence. The accused also failed to enter the witness box to prove his defense regarding the nature of the cheque. The GPA holder's testimony was held competent as the case was primarily based on documents.
Issues: Whether the account closure exempts the accused from liability under Section 138 of the N.I. Act and whether the accused successfully rebutted the statutory presumptions of liability.
Ratio Decidendi: The court ruled that "Account Closed" status attracts Section 138 of the N.I. Act unless the accused proves the account was closed by operation of law rather than the drawer's intent. Since the accused failed to lead evidence by entering the witness box, the presumptions under Sections 118 and 139 remain unrebutted.
Result: Petition dismissed.
Legal Category Hierarchy
Table of Contents
2. GPA holder lacked personal knowledge — Complainant failed to prove debt — Cheques taken as security not towards liability. (Para 11 , 12 )
3. Presumption under Sections 118 and 139 NI Act not rebutted — Accused failed to enter witness box or prove defence. (Para 17 , 18 , 19 , 20 )
4. Accused must rebut statutory presumption by entering witness box and proving contrary, else conviction under Section 138 NI Act is sustainable. (Para 20 , 22 )
5. Petition dismissed — Conviction and sentence under Section 138 NI Act confirmed by both lower courts upheld. (Para 22 )
6. Can a GPA holder with no personal knowledge competently depose in a cheque dishonour case?
Yes, as the case is based on documents, a GPA holder can give evidence that the cheque was issued towards legally recoverable debt. (Para 20 )
7. Does dishonour of a cheque on ground of account closure attract Section 138 NI Act?
Yes, unless the account was closed by operation of law not at the drawer's instruction; the accused must prove the reason for closure. (Para 21 )
8. Can a blank cheque taken as security be used for prosecution under Section 138 NI Act?
Yes, the accused must prove the cheque was taken as security by entering the witness box and adducing evidence. (Para 18 , 19 )
9. What is the burden of proof on the accused to rebut presumption under Section 139 NI Act?
Accused must lead evidence, preferably by entering the witness box, to prove that the cheque was not issued for a legally enforceable debt. (Para 19 , 20 )
10. Can an arbitration award passed ex-parte be challenged in collateral proceedings like a cheque dishonour case?
No, the accused's failure to challenge the arbitration award precludes him from disputing service of notice in the cheque dishonour case. (Para 15 , 17 )
THIS CRL.RP IS FILED UNDER SECTION 397 R/W SECTION 401 OF CR.P.C PRAYING TO a) SET ASIDE THE JUDGMENT OF CONVICTION IN C.C.NO.19101/2014 DISPOSED BY THE XXII ADDITIONAL CHIEF METROPOLITAN MAGISTRATE DISPOSED OFF ON 03.02.2018 AND ALSO SET ASIDE THE JUDGMENT IN CRIMINAL APPEAL NO.349/2018 DISPOSED OFF BY THE LX ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU CITY (CCH-61) ON 11.08.2020 PRODUCED AS PER ANNEXURE-B; b) ALLOW THE REVISION PETITION ORDERING ACQUITTAL OF THE REVISION PETITIONER IN C.C.NO.19101/2014 DISPOSED BY THE XXII ADDITIONAL CHIEF METROPOLITAN MAGISTRATE DISPOSED OFF ON 03.02.2018 PRODUCED AS PER ANNEXURE-A; c) PASS / GRANT SUCH OTHER ORDER/S AS THIS HON'BLE COURT DEEMS FIT TO PASS/GRANT IN THE INTEREST OF JUSTICE.
THIS CRIMINAL REVISION PETITION HAVING BEEN HEARD AND RESERVED ON 10.11.2023, COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
In this petition filed under Section 397 r/w 401 of Cr.P.C, petitioner who is arraigned as accused has challenged his conviction and sentence imposed by the trial Court for the offence punishable under Section 138 of N.I Act, which came to be confirmed by the Session Court by dismissing the appeal filed by him.
2. For the sake of convenience, the parties are referred to by their rank before the trial Court.
3. Complainant, which is a private limited company dealing in chit fund business filed a complaint under Section 200 Cr.P.C against the accused alleging the offence punishable under Section 138 of N.I. Act. It is the case of the complainant that accused and his wife Smt Uma were subscribers to 4 chits of the value of Rs.15 lakhs, Rs.9 lakhs, Rs.3 lakhs and Rs.3 lakhs. They successfully bid for chits and received the money. They were required to pay the balance. However, on their failure to pay the balance amount, arbitration proceedings were initiated. Despite due service of notice, the accused and his wife failed to appear before the arbitrator. Therefore, the Arbitrator proceeded ex-parte and passed the award, determining the amount due from the accused and his wife and ordered to pay the same with interest at 3% p.m.
4. According to the complainant, after the fact of passing award was brought to the notice of the accused, he issued the subject cheque for a total sum of Rs.21,77,000/- which includes the amount due from his wife also. However, when the cheque was presented for realization, it was dishonoured on the ground "Account closed". Therefore, complainant got issued legal notice. The accused has failed to receive the notice despite information was delivered to him. Consequently, accused has failed to pay the amount due under the cheque. He has also not sent any reply. Without any alternate complaint is filed.
5. Accused appeared before the trial Court and contested the case. He has pleaded not guilty and claimed trial.
6. In order to bring home guilt to the accused, the GPA holder of the complainant company is examined as PW-1. Ex.P1 to 10 are marked.
7. During his statement under Section 313 Cr.P.C, the accused has denied the incriminating evidence led by the complainant.
8. The accused has not stepped into the witness box. But he has got marked a set of 28 receipts during the cross-examination of PW-1 as Ex.D1.
9. Vide the impugned judgment and order the trial Court accepted the contention of the complainant and convicted the accused and sentenced him to pay fine of Rs.21,82,000/-, in default to undergo simple imprisonment for three months.
10. The Session Court dismissed the appeal filed by the accused and thereby confirmed the judgment and order of the trial Court.
11. Being aggrieved by the same, the accused has filed this petition, contending that the GPA holder who is examined on behalf of complainant had no personal information and as such he was not competent to speak on behalf of the complainant and therefore with his evidence, the complainant has failed to prove the allegations against accused. The complainant h
