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SUPREME COURT OF INDIA
C. Nagappan, J
K. Subramani – Appellant
Versus
K. Damodara Naidu – Respondent
CRIMINAL APPEAL NO. 2402 OF 2014 | SLP (Crl.) No.6197 of 2014
VAIJAYANTHI GIRISH
While S.139 of the N.I. Act creates a rebuttable presumption of legally enforceable debt, this presumption can be rebutted by demonstrating the complainant's lack of financial capacity to lend the alleged amount, especially when evidence on record contradicts the claim of funds.
Headnote:The case pertains to a complaint filed under S.138 of the Negotiable Instruments Act regarding the dishonor of a cheque. The complainant alleged that a loan of Rs.14 lakhs was provided in cash, for which a cheque was issued and subsequently dishonored. The trial court acquitted the accused, finding that the complainant failed to prove his financial capacity to lend the amount and the existence of a legally recoverable debt. The primary issues framed by the High Court were whether a complainant under S.138 of the N.I. Act is required to establish financial capacity and whether the presumption under S.139 accrues unless rebutted. While the High Court remanded the case for retrial based on the ratio in Rangappa vs. Sri Mohan, the court observed that the trial court had correctly appreciated the evidence, noting the absence of bank statements, discrepancies in income tax returns, and non-compliance with Government Servants’ Conduct Rules. 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.
| Table of Content |
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| 1. procedural history and facts regarding the alleged cash loan and cheque dishonor under s.138 n.i. act. (Para 1 , 2 , 3 , 4) |
| 2. legal analysis of the presumption under section 139 and the high court's decision to remand for retrial. (Para 5 , 6 , 7 , 8) |
| 3. rebuttal of presumption through evidence of financial incapacity and non-compliance with service conduct rules. (Para 9 , 10) |
| 4. restoration of the acquittal order due to proper appreciation of evidence by the trial court. (Para 11) |
REPORTABLE
J U D G M E N T
C. NAGAPPAN, J.
1. Leave granted.
2. 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.
3. 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.
4. 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?”
5. 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.
6. The learned counsel appearing for the appellant/respondent contended that the High Court erroneously clubbed a batch of 10 criminal appeals and formulated t
