THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Criminal Revision Case No.605 of 2009 Dated:30th October, 2009. Between: D.Atchyutha Reddy ….Petitioner and 1.The State of Andhra Pradesh through Public Prosecutor, High Court of A.P., Hyderabad & Anr. …Respondents **** THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Criminal Revision Case No.605 of 2009 JUDGMENT: This Criminal Revision Case is directed against the judgment dated 30.03.2009 passed in Criminal Appeal No.339 of 2008 on the file of II Additional Metropolitan Sessions Judge, Hyderabad, whereby and whereunder the learned Additional Metropolitan Sessions Judge confirmed the conviction and sentence of accused D.Atchyutha Reddy for the offence under Section 138 of the Negotiable Instruments Act passed in C.C.No.709 of 2006 on the file of VII Additional Chief Metropolitan Magistrate, Hyderabad. 2. Background facts in a nutshell leading to filing of this Criminal Revision Case by the accused in C.C.No.709 of 2006 on the file of VII Additional Chief Metropolitan Magistrate, Hyderabad, are: a) Accused D.Atchyutha Reddy is a film producer and director. According to the complainant-N.Ratan Babu, he and the accused got acquaintance with each other for the past several years and they were family friends. The complainant contends that the accused borrowed Rs.2.50 Lakhs in January, 2003 in the presence of one M.Dayakar, who is known to both of them, promising to repay the same by the end of May, 2003. When the complainant approached the accused and demanded for repayment in the month of May, 2003, the accused expressed his inability and requested breathing time and issued a postdated cheque bearing No.412225 dated 10.07.2004 for Rs.2,50,000/- drawn on Andhra Bank, Nampally Branch, Hyderabad, assuring that he would arrange funds by the date of cheque, in the presence of M.Dayakar and N.Rajesh Babu. The said Rajesh Babu, who is the son of the complainant, filled the blanks in the cheque. The complainant presented the said cheque for collection on 12.07.2004 and the same came to be returned with an endorsement ‘account closed’. The complainant got issued a statutory notice dated 25.07.2004 as provided under Section 138(b) of the Negotiable Instruments Act, 1881, (for short, ‘the N.I.Act’) and the said notice returned with an endorsement ‘not claimed’ on 06.08.2004. Ex.P1 is the cheque bearing No.412225, dated 10.07.2004. Ex.P2 is the cheque return memo dated 14.07.2004. Ex.P3 is the notice dated 25.07.2004. Ex.P4 is the postal cover dated 06.08.2004. The complainant presented a complaint on 11.08.2004 before the Additional Chief Metropolitan Magistrate, Hyderabad, under Sections 190 and 200 Cr.P.C. for the offence under Section 138 of the N.I. Act. The learned Additional Chief Metropolitan Magistrate took cognizance of the offence under Section 138 of the N.I. Act and registered the case as C.C.No.709 of 2006. b) On appearance of the accused and on furnishing copies of documents, the learned Magistrate examined the accused under Section 251 Cr.P.C. putting the substance of accusations levelled against him. The accused pleaded not guilty and claimed to be tried. c) The complainant got himself examined as PW.1, besides examining M.Dayakar as PW.2 and Alapati Trinadha Rao as PW.3. PW.2 M.Dayakar claims to be present on the date of borrowing and also on the date, on which the cheque in question came to be issued by the accused. N.Rajesh Babu, who is the son of the complainant, is stated to have filled the contents of the cheque. According to the complainant, the accused read the contents of the cheque and confirmed the contents therein as correct and signed thereon and handed over the same to him with instructions to deposit the cheque on the date mentioned thereon. PW.3 is the Deputy Manager of Andhra Bank, Nampally Branch, wherein the accused maintained the account bearing No.ASB 500009. According to him, the accused closed the account on 24.01.2003. Whereas, the complainant/PW.1 presented Ex.P1 cheque after closure of the account. Ex.P2 is the cheque return memo. Ex.P3 is the copy of registered notice dated 25.07.2004. Ex.P4 is postal cover. Exs.P5 and P6 are the copies of bank statements of account of the accused. d) It is the plea of accused that the complainant took blank undated promissory notes and cheques and made use of the blank promissory notes and cheques and filed various suits against him by the complainant, his wife-Rajeswari and his son-Rajesh Babu and that there did not exist relationship of debtor and creditor between him and the complaiannt. He did not choose to adduce either oral or documentary evidence on his behalf. e) The learned Magistrate, considering the material brought on record and on hearing the counsel appearing for the parties, found the accused guilty for the offence under Section 138 of the Negotiable Instruments Act and convicted him accordingly and sentenced him to suffer Rigorous Imprisonment for two years and pay a fine of Rs.3,000/- in default to suffer simple imprisonment for three months, by judgment dated 20.10.2008. Assailing the judgment of conviction and sentence passed in C.C.No.709 of 2006, the accused filed Criminal Appeal No.339 of 2008 on the file of II Additional Metropolitan Sessions Judge at Hyderabad. The learned Additional Metropolitan Sessions Judge, on re-appraisal of the evidence brought on record and on hearing the counsel appearing for the parties, did not find any valid ground to interfere with the conviction and sentence of the accused for the offence under Section 138 of the Negotiable Instruments Act and accordingly, dismissed the appeal, by judgment dated 30.03.2009. Hence, this Criminal Revision Case by the accused. 3. Heard Sri.C.Padmanabha Reddy, learned Senior Counsel appearing for the petitioner/accused and the 2nd respondent- party in person. 4. Learned Senior counsel submits that the trial Court as well as the lower appellate Court misread the provisions of Sections 118 and 139 of the N.I. Act and thereby conclusions arrived at by both the Courts below are unsustainable. In elaborating his arguments, learned senior counsel contended that there is no presumption as to the existence of debt and therefore once the petitioner denies the very existence of debt, initial burden lies on the complainant to prove the existence of debt as on the date of issuance of the cheque in question. Learned Senior Counsel would also contend that as on the date of issuance of the cheque in question, there were various amounts totaling to Rs.15,00,000/- allegedly due to the son and wife of 2nd respondent-complainant and in which case the version of 2nd respondent-complainant that he had lent Rs.2,50,000/- as a hand loan in the month of January, 2003 is highly improbable and unbelievable. A further contention has been raised that P.W.2 is a stock witness on behalf of 2nd respondent-complainant in all the cases to speak of lending money by 2nd respondent-complainant as well as issuance of cheques by the petitioner-accused and therefore no credence could be given to his testimony and once his testimony is discarded there is no other evidence to support the version of 2nd respondent-complainant that he lent money to the petitioner-accused in the month of January, 2003. The lending of money by 2nd respondent-complainant to the petitioner-accused in the given facts and circumstances, is highly doubtful in which case the initial burden with regard to existence of debt stands unproved and the result of which makes the provisions of Sections 118 and 139 of the N.I.Act inapplicable. Even otherwise the presumptions under Sections 118 and 139 of the N.I.Act available in favour of the 2nd respondent-complainant have been rebutted by the petitioner-accused through several circumstances brought out in the evidence of P.Ws.1 and 2. 5. Learned Senior Counsel also contended that some of the suits filed by the wife and son of 2nd respondent ended in dismissal on the ground of the suit pro-notes being not supported by consideration and the dismissal of the said suits lends support to the circumstances brought out by the petitioner-accused in the evidence of P.Ws.1 and 2 and in which case the conviction and sentence of the petitioner under sections 138 of the N.I.Act is liable to be set aside. Learned Senior Counsel placed on record the photostat copies of the judgments passed in O.S.Nos.1535 of 2006, 1133 of 2005, 2378 of 2003, 1134 of 2005 and 2277 of 2003. 6. As seen from the photostat copies of the judgments, suits filed by N.Rajesh Babu, son of 2nd respondent in O.S.Nos.1535 of 2006, 1134 of 2005 and 2277 of 2003 and the suits filed by N.Rajeshwari, wife of 2nd respondent being O.S.Nos.1133 of 2005 and 2378 of 2003 on the file of VII Additional Senior Civil Judge, FTC, CCC, Hyderabad ended in dismissal. 7. Learned Senior counsel took me to the evidence of P.Ws.1 and 2 in great detail to convince that the presence of P.W.2 at the time of lending as well as issuance of the cheque is highly unbelievable. 8. The 2nd respondent contends that the trial Court as well as the appellate court considered the evidence brought on record in right perspective and found the petitioner guilty for the offence under Section 138 of the N.I.Act. He also contended that there is no consistency in the defence of the petitioner-accused and that itself is sufficient to infer that he failed to rebut the presumptions under Section 118 and 139 of the N.I.Act. The 2nd respondent took me to the plea advanced by the petitioner in the quash petitions and suggestions put to P.W.1 in the cross-examination and the statement of the petitioner under Section 313 Cr.P.C to convince that there is no consistency in the plea advanced by the petitioner. He also cited decisions of the Supreme Court, this Court and various other High Courts on the aspect of presumptions under Sections 118 and 139 of the N.I.Act. The decisions cited by the 2nd respondent-complainant are: 1) HITEN P.DALAL V. BRATINDRANATH BANERJEE[1] 2) K.N.BEENA V. MUNIYAPPAN AND ANOTHER[2] 3) K.BHASKARAN V. SANKARAN VAIDHYAN BALAN[3] 4) MARUTI UDYOG LTD. V. NARENDER AND OTH[4] 5) M/S OPTS MARKETING PRIVATE LTD. AND STATE OF A.P.[5] 6) K.S.ANTO V. UNION OF INDIA[6] 7) SATISHKUMAR V. KRISHNAGOPAL[7] 8) STATE OF RAJASTHAN V. M/S JAKTAB SYBDARAN CENEBT UBDYSTRUES LTD[8] 9) GORANTLA VENKATESWARA RAO V. KOLL VEERA RAGHAVA RAO[9] 10) SATISH JAYANTILAL SHAH V. PANKAJ MASHRUWALA[10] 11) P.S.A.THAMOTHARAN V. DALMIA CEMENTS(B) LTD[11] 12) P.K.MANMADHAN KARTHA V. SANJEEV RAJ AND ANR[12] 13) C.C.ALAVI HAJI V. PALAPETTY MUHAMMED AND ANR.[13] 14) JOSEPH JOSE V. J.BABY, PUTHUVAL PURAVIDOM POOTHOPPU AND ANOT[14] 15) M/S. M.M.T.C.Ltd. V. M/S.MEDCHAL CHEMICALS (P) LTD.[15] 16) VERALAXMI V. SYED KASIM HUSSAIN[16] 17) K.SUDERSANAM V. S.VENKATARAO[17] 18) MUNAGALA YADGIRI V. PITTALA VEERIAH[18] 19) RAJULADEVULA SRINU AND SRINIVAS V. STATE OF A.P.[19] 20) STATE OF A.P. V. KANDA GOPALUDU[20] 21) M.RAVI & ORS. V. ELUMALAI CHETTIAR[21] 22) ASHOK YESHWANT BADAVE V. SURENDRA MADHAVRAO NIGHOJAKAR AND ANOTHER[22] 23) BHOLA NATH ARORA AND ANOTHER V. STATE[23] 24) N.DEVINDRAPPA V. STATE OF KARNATAKA[24] 9. Section 138 of N.I.Act reads as under: S.138 Dishonour of cheque for insufficiency, etc., of funds in the account - Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both : Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within a period of six months from the date on which it was drawn or within the period of its validity, whichever is earlier. (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or. as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability. 10. Section 138 of the N.I. Act has three ingredients, viz., (i) that there is a legally enforceable debt; (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which pre-supposes a legally enforceable debt; and (iii) that the cheque so issued had been returned due to insufficiency of funds. The proviso appended to the said section provides for compliance of legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the N.I. Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability. An accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on records. An accused has a constitutional right to maintain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different. 11. The N.I. Act contains provisions raising presumptions as regards the negotiable instruments under section 118(a) of the Act as also under section 139 thereof. The said presumptions are rebuttable. Whether the presumption rebutted or not would depend upon the facts and circumstances of each case. The Supreme Court clearly laid down in catena of decisions that the standard of proof in discharge of the burden in terms of Sections 118 and 139 of the N.I.Act being the preponderance of a probability, the inference thereof can be drawn not only from the material brought on record but also from the reference to the circumstances upon which the accused relied upon. The burden to rebut the presumptions on the accused is not as high as that of the prosecution. 12. Under Section 118, unless the contrary is proved, it is to be presumed that the Negotiable Instrument (including a cheque) had been made or drawn for consideration. Under section 139 the Court has to presume, unless the contrary was proved, that the holder of the cheque received the cheque for discharge, in whole or in part of a debt or liability. Thus, in complaints under section 138, the Court has to presume that the cheque had been issued for a debt or liability. This presumption is rebuttable. However, the burden of proving that a cheque had not been issued for a debt or liability is on the accused. The Supreme Court in HITEN P.DALAL V. BRATINDRANATH BANERJEE (1 supra), while dealing with sections 138 and 139 of N.I.Act held that whenever a cheque was issued to the complainant for a specific amount there is a presumption that it is towards discharge of legally enforceable debt. In the event of dispute, the burden is on the accused to prove that there is no subsisting liability as on the date of issuing of cheque and the proof must be sufficient to rebut the presumption and mere explanation is not sufficient. The Supreme Court further held as follows: “( 20 ) THE appellant's submission that the cheques were not drawn for the 'discharge in whole or in part of any debt or other liability' is answered by the third presumption available to the Banks under Section 139 of the Negotiable Instruments Act. This section provides that "it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability. " The effect of these presumptions is to place the evidential burden on the appellant of proving that the cheque was not received by the Bank towards the discharge of any liability. ( 21 ) BECAUSE both Sections 138 and 139 require that the Court "shall presume" the liability of the drawer of the cheques for the amounts for which the cheques are drawn, as noted in State of Madras v. A. Vaidyanatha Iyer, AIR 1958 SC 61, it is obligatory on the Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. "it introduced an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused" (ibid ). Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the Court "may presume" a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact. ( 22 ) IN other words provided the facts required to form the basis of a presumption of law exists, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, "after considering the matters before it the Court either believes it to exist or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists". Section 3 : Evidence Act. Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the 'prudent man.” The above referred decision has been referred to by the Supreme Court in subsequent decision in K.N.BEENA V. MUNIYAPPAM (2 supra). 13. I do not wish to burden the judgment by referring to the propositions of law laid down in the cases cited by 2nd respondent- complainant. It is suffice to refer the judgment of the Supreme Court in KRISHNA JANARDHAN BHAT V. DATTATRAYA G.HEGDE[25] wherein after referring to various earlier judgments is observed as under: “( 33 ) WE are not oblivious of the fact that the said provision has been inserted to regulate the growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters and to safeguard the faith of the creditor in the drawer of the cheque which is essential to the economic life of a developing country like India. This, however, shall not mean that the courts shall put a blind eye to the ground realities. Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have rebutted. Other important principles of legal jurisprudence, namely presumption of innocence as human rights and the doctrine of reverse burden introduced by Section 139 should be delicately balanced. Such balancing acts, indisputably would largely depend upon the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same.” 14. There is obligation on the part of the Court to raise the presumptions under Sections 118 and 139 of the N.I.Act in every case where the factual basis for raising of the presumption had been established. 15. It is well settled that a notice returned with endorsement ‘unclaimed’ by the addressee can be presumed to have been served on him. In this connection, a reference to Sec.27 of the General Clauses Act will be useful. The section reads as under: “27. Meaning of service by post.- Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression "serve" or either of the expressions "give" or "send" or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. " A similar question came up for consideration before the Supreme Court in K.BHASKARAN V. SANKARAN VAIDHYAN BALAN (3 supra), wherein it has been held as under: “ ( 24 ) NO doubt Section 138 of the Act does not require that the notice should be given only by "post". Nonetheless the principle incorporated in Section 27 (quoted above) can profitably be imported in a case where the sender has despatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was not responsible for such non-service. Any other interpretation can lead to a very tenuous position as the drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice. ( 25 ) THUS when a notice is returned by the sendee as unclaimed such date would be the commencing date in reckoning the period of 15 days contemplated in Clause (d) to the proviso of Section 138 of the Act. Of course such reckoning would be without prejudice to the right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address. In the present case the accused did not even attempt to discharge the burden to rebut the aforesaid presumption.” 16. A question came up for consideration before this Court, whether the body of the cheque was required to be in the hand writing of the maker of it. In GORANTLA VENKATESWARA RAO’s case (9 supra), a learned single Judge of this Court after a detailed survey of various decisions of this court has held that the legal position on this aspect is very clear that the body of the cheque need not necessarily be written by the accused and it can be in the handwriting of anybody else or typed on a type machine, so long as the accused does not dispute the genuineness of the signature on the cheque. What is material is signature of drawer or maker and not the body writing, hence, the dispute relating to body writing has no significance. It is not mandatory and no law prescribes that the body of the cheque should also be written by the signatory to the cheque. A cheque could be filled up by anybody if it is signed by the account holder of the cheque. 17. In M/S. OPTS MARKETING PVT. LTD. V. STATE OF A.P (5