1 IN THE HIGH COURT OF BOMBAY AT GOA CRIMINAL APPEAL NO. 13 OF 2004 Goa Han dicr afts, Rural & Small Scale Ind u stries Develop m e n t Corporatio n Ltd., having its Registered and Head Office at Crafts Com plex, Neugin agar, Pan aji Santa Cruz Road, Pan aji, Goa 403 001 ... Appellants versus 1. M/s Samu d r a Ropes Pvt. Ltd., a com p a n y incor p o r ate d under the Comp a ni es Act, 1956 and having its registered office at Naik Building, 1st floor, Marian o Gracias Road, Margao- Goa 403 601. 2. Shri Narayan P. Naik, aged abo u t 47 years, busin ess m a n , residing at H. No. 3, Costa Com plex, Near Venusta Classic, Aquem- Alto, Margao- Goa, Managing Director of Respo n d e n t No. 1. 3. State of Goa. ... Respo n d e n t s Mr. V. A. Lawan d e, Advocate for the Appellant. Mr. S. D. Lotlikar, Senior Advocate with Ms. Pooja Bharne, Advocate for Respo n d e n t Nos. 1 and 2. 2 Mr. S. N. Sardessai, Public Prosecut or for the State. CORAM : V. M. KANADE, J. DATE : 29TH JUNE, 2005. ORAL JUDGMENT The Appellant herein is the Original Com plaina n t. He is challenging the Judgme n t and Order passed by the Ist Additional Sessions Judge, Panaji, who by his Order dated 5- 9- 2003 acquitted the Respo n d e n t /Acc us e d for an offence punish a ble unde r Section 138 of the Negotiable Instru m e n t s Act, 1881(Act, for short) and who by his Judgme n t an d Order was pleased to set aside the Order passe d by the Judicial Magistrate, First Class, Panaji, who had convicted the Accused under Section 138 of the said Act. 2. The brief facts which are relevant for the purp os e of deciding this Criminal Appeal are as under:- The Com plain a nt is a Compa ny registered under the Comp a n ies Act and its registered Office is at Panaji, Goa. The Accused No. 1 is also a Private Limited Com pa ny having its Office at Margao, Goa and the Accused No. 2 is the Managing Director of Accused No. 1 which admitte dly is under the contr ol of Respo n d e n t No.2 and its day to day ma nage m e n t . The Accused had issue d a post dated chequ e date d 29- 12- 1999 for an amo u n t of 3 Rs.10,00,000 /- in favour of the Complaina n t draw n on Saraswat Co- operative Bank Ltd. towards the discharge of liabilities of Accusd No. 1 in respect 3 of the materials taken by the m on credit from the Complaina n t. This cheq ue was deposited by the Complain a n t with their bankers. However, the said cheq ue was retur n e d by the said Bank with an endors e m e n t "exceeds arrange m e n t ". The Com plaina n t thereafter issued a legal statutory notice dated 16- 3- 2000. However, the Accused did not give any reply to the said notice nor payme n t was made by the Accused within 15 days from the receipt of the said notice. The Complain a n t, therefore, filed a com plai nt unde r Section 138 of the said Act. Process was issued by the Magistrate on the said com plai nt after the state me n t of Sadashiv Shirodkar was recor de d in verificatio n of the com plai nt. The trial Court convicted the Respo n d e n t /Acc u s e d un de r Section 138 of the said Act and sente n ce d him to un d e rgo imprison m e n t till rising of the Court and further directed him to pay com pe n s a tio n of Rs.10,00,000/- and in default of pay me n t of com pe n s atio n to undergo 6 mo nt hs Simple Impriso n m e n t. Against the said Order, the Accused preferred an Appeal before the Sessions Court being Criminal Appeal No. 78 of 2002. The Additional Sessions Judge, Panaji, by his Judg me n t and Order dated 5- 9-2003 set aside the Order passe d by the Magistrate and allowed the Appeal and acquitted the Accused of the offence pu nis h a ble under Section 138 of the said 4 Act. Against the said Order, the Original Complaina nt has filed this Appeal against acquittal. 3. Submissio n s: The learn e d Counsel appe ari ng on behalf of the Appellant has sub mitte d that the Additional Sessions Judge has erred in comi ng to the conclusion that there was no existing debt or liability and had further erred in relying on a Judgme n t in the case of R. Sreenivasan v. State of Kerala and anothe r (2002 Vol. II Comp a ny cases) and in the case of Shri Taherr Khambati v. M/s Vinayak Enterprises (1995 Cr. L. J. 560) and the same had bee n overruled by subseq ue n t Judgme n t of the Supre me Court. He sub mitte d that the lower appellate Court had failed to take into consider atio n that the Complaina nt in his cross- examin atio n had clearly admitted that there was an existing debt and liability payable to the Complainant and that the cheque was issued for discharging the said liability. He submitted that, therefore, the findings of the Sessions Court was perverse to the extent that he did not take into consideration the specific admission given by the Accused in his cross- examination. He further submitted that the Sessions Court had clearly erred in coming to the conclusion that the trial Court had only considered the point whether the said cheque was isued by way of security. He submitted that the trial Court in fact had considered the evidence adduced by the Complainant and the admissions which were 5 given by the Accused in its totality and thereafter had given a specific finding that the cheque was issued towards the existing debt and legally enforceable liability. The learned Counsel appearing on behalf of the Appellant further invited my attention to a number of Judgments of the Supreme Court and to Judgments of this Court and various other High Courts in support of his submissions firstly on the point that even if the cheque was issued under security even then it would attract the liability under Section 138 of the said Act. In support of this submission, he relied on a Judgment of the Supreme Court in the case of ICDS Ltd. v. Beena Shabeer and another ((2002) 6 SCC 426) . He also relied on a Judgment of the Kerala High Court in the case of Gopi, s/o Vasudevan v. Sudarsanan, s/o Chackrapani and another (2002 CRI, L. J. 4194). He also relied on a Judgment of the Madras High Court in the case of Palraj v. Lalchandh ((2001) 103 Com. Cases 527) and on a Judgment of the Madras High Court in the case of M/s. Alsa Constructions and Housing Limited and another v. M. Mal Reddy (1999 CRI. L. J. 2743). He further submitted that even if the amount mentioned in the cheque was larger than the liability even then the penal provisions under Section 138 of the said Act were attracted. In support of the said submissions he relied on a Judgment in the case of Kochayippa v. Suprasidhan (2002 CRI. L. J. 4803) and in the case of Andhra Engineering Corporation v. TCI Finance Ltd. (1999 DCR 130). He also relied on another Judgment of the Kerala High Court in the case of R. Gopikuttan Pillai v. Sankara Narayanan Nair (2004 (1) DCR 222). The learned Counsel also sought to distinguish the Judgments on which reliance was placed by the Additional Sessions Judge. 6 He further submitted that it was the burden of rebutting the presumption which is raised under Section 139 of the said Act which was squarely on the Accused and the said burden had to be discharged by leading cogent evidence. In support of the said submission, he relied on a Judgment of the Supreme Court in the case of K. N. Beena v. Muniyappan and another ((2001) 8 SCC 458). He further submitted that a mere disability of the Accused to pay the amount would not absolve him from his liability under Section 138 of the said Act. In support of the said submission he relied on a Judgment of the Supreme Court in the case of Punkaj Mehra v. State of Maharashtra (2000 (2) SCC 756). He further submitted that pendency of the proceedings before the BIFR did not in ex post facto file a complaint under Section 138 of the said Act. In support of the said submission, he relied on a Judgment of the Supreme Court in the case of Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd. and others ((2000) 2 SCC 745). He further submitted that the provisions of Section 138 to Section 142 had to be construed in such a manner that the mischief which was sought to be remedied by the said provisions would not render. In support of the said submission regarding the object of Section 138 to Section 142 he relied on a Judgment of the Supreme Court in the case of Modi Cements Ltd. v. Kuchil Kumar Nandi ((1998) 3 SCC 249) and also in the case of Dalmia Cement (Bharat) Ltd. v. Galaxy Traders & Agencies Ltd. and others ((2001) 6 SCC 463) and also in the case of Goa Plast(P) Ltd. v. Chico Ursula D'Souza ((2004) 2 SCC 235) and in the case of M/s. Alsa Constructions and Housing Limited and another v. M. Mal Reddy (1999 CRI. L. J. 2743). He further relied on two recent 7 Judgments of the Kerala High Court in the case of M/s. General Auto Sales v. D. Vijayalakshmi (2005(3) ALL MR (JOURNAL) 6) and in another case in Assoo Hajee v. K. I. Abdul Latheef and another(2005(3) ALL MR (JOURNAL) 21) and in another in support of his submission that the prosecution for the dishonour of the cheque was maintainable eventhough the cheque was given by way of security. 4. The learned Counsel also invited my attention to the evidence adduced by the Complainant and the Accused had admitted in the correspondence between the parties that the amount was due and payable to the Complainant. He further invited my attention to the correspondence which was brought on record in the cross- examination of the Complainant and also the correspondence which was brougtht on record by the Accused which clearly indicated that the Accused had admitted his liability towards the Complainant and had asked for time to make the payment of the said liability. The learned Counsel submitted that neither the Accused had discharged the burden which was imposed by virtue of Section 139 of the said Act nor had shifted the burden by leading evidence which was raised by Section 139 of the said Act. 5. He also submitted that the Apex Court had held that if compensation was not paid the trial Court could impose a sentence in default of payment of compensation. In support of the said submission he relied on a Judgment of the Supreme Court in the case of Hari Singh v. Sukhbir Singh and others ((1988) 4 SCC 551) which was followed by 8 the Supreme Court Judgment in the case of Suganthi Suresh Kumar v. Jagdeeshan (AIR 2002 SC 681). He also relied on a Judgment in the case of K. Bhaskaran v. Sankaran Vaidhyan Balan and another ((1999) 7 SCC 510 and also followed by the Madras High Court in the case of Y. Sreelatha @ Roja v. Mukanchand Bothra (2002 (2) Crimes 19). 6. The learned Counsel appearing on behalf of the Respondents submitted that the scope for interference by the High Court while exercising its jurisdiction under Section 378 of the Code of Criminal Procedure was very limited. He submitted that it is a settled law that if two views are possible and the lower appellate Court has taken a particular view the High Court should not substitute its own view to the view taken by the lower appellate Court in an Appeal against acquittal. He further submitted that only in cases where it is shown that the Judgment and Order of the lower appellate Court acquitting the Accused was perverse or unreasonable the finding in such cases may be interfered with by the High Court. He submitted that in the present case, a specific case of the Accused was that there was no existing debt and liability towards the Complainant and that the said cheque which was issued by the Accused was only as a security and the cheque was not meant to be acted upon. He submitted that the Accused had rebutted the presumption which was raised under Section 139 of the said Act by bringing on record various documents by corresponding the Complainant and also had examined himself and had proved and rebutted the presumption which was raised under Section 139. He submitted that the presumption which 9 was raised under Section 139 was not a presumption which had to be rebutted beyond reasonable doubt but was required to be rebutted on the touchstone of preponderance of probability. He submitetd that the Accused had by bringing the evidence on record rebutted the presumption on preponderance of probability. He submitted that the offence under Section 138 was in a sense a technical offence and if the Accused was in a position to rebut the presumption regarding the existing debt or liability he was entitled to be acquitted. He further submitted that what was envisaged by the provisions of Section 138 of the said Act was that a cheque which was issued in respect of a debt for an amount mentioned in the cheque if had returned dishonoured that alone would attract the given provision as envisaged under Section 138 of the said Act. He also invited my attention to the cross- examination of P.W.1, Sadashiv Shirodkar and also the documents which were admitted by the prosecution witness which clearly supported the case of the Accused that the arrangement between the Accused and the Complainant was that the cheque would be given by way of security and subsequently the amount given and payable to the Complainant or its Principle, namely the ICPL would be paid by Demand Drafts and the cheque would be returned to the Accused by the Complainant and if the amount due was not paid by the Accused during the period of validity of the cheque a fresh cheque in the place of the old cheque which was issued would be handed over to the Complainant by the Accused. He submitted that at no point of time prior to the issuance of the cheque in question any payment had been made by the Accused by cheque. 10 7. He submitted that the Additional Sessions Judge had correctly distinguished the Judgment in the case of ICDS Ltd. v. Beena Shabeer and another(supra) and had correctly relied on the two Judgments referred in para 8 of the Judgment of the Additional Sessions Judge. 8. Findings and Conclusion: In order to appreciate the rival contentions, it would be first essential to take into consideration the factual position. In the present case, the Complainant in para 3 of the complaint has averred that the Accused had issued a post dated cheque dated 29-12-1999 for an amount of Rs.10,00,000/- in favour of the Complainant towards the materials taken by the Accused on credit from the Complainant. The Complainant examined P.W.1, Sadashiv Shirodkar, who has given the details regarding the issuance of the cheque and thereafter the deposit of the said cheque by the Complainant and the subsequent dishonour of the cheque which was followed by the issuance of statutory notice and the filing of the complaint. P.W.1, Shirodkar, has been cross- examined at length by the Accused. In the cross-examination, P.W.1, Shirodkar, has stated that the Complainant is an authorised representative of IPCL which manufactured the raw materials. He has further admitted that the business transaction between the Accused and the Complainant were going on for a long time and that the Accused used to lift the materials from the Complainant and issue a cheque for the price of the said materials and in rare cases he used to give cheques as security and thereafter the Accused made 11 payment by way of Demand Draft and at that time the cheque was returned to the Accused. Further in cross- examination initially he has stated that the cheque was issued towards the payment of amounts due for the materials supplied vide Invoices dated 23-7-98, 1-1-99 and 3-2-99. Thereafter, this witness had admitted that the Accused had a running account with the Complainant and, therefore, he could not precisely say that the said cheque was issued towards the payment of these Invoices. The Invoices were thereafter brought on record through this witness. Thereafter, this witness was shown letter dated 29-5-1999 which he admitted was a letter which was issued by the Accused at the time of supply of the materials. In this letter, it is stated by the Complainant that the Accused had availed credit of Rs. 9, 95, 061/- and two cheques dated 28-12-1998 and 2-2-1999 drawn on Saraswat Co-operative Bank. It was further stated that the interest on the said amount was Rs.69,037.56 and, therefore, the Accused was directed to pay an amount of Rs. 10,64,098.56. Thereafter, a letter dated 25-8-1999 which was issued by the Complainant's Manager was shown to this witness in which the Accused was requested to pay an amount of Rs.11,15,168.00. P.W.1, Shirodkar, had thereafter admitted in his cross- examination that after this letter at Exh. 18 dated 25-8-1999 the Accused had made a payment of Rs. 2,50,000/- dated 8-9-1999 along with a covering letter dated 6-9-1999. Thereafter, this witness was shown letter dated 29-12-1999 issued by the Accused to the General Manager of the Complainant- Company. This witness admitted having received this letter and was exhibited as Exh. 19. The said letter reads as under:- 12 "Enclosed please find cheque bearing No. 127766 dated 29/12/99 drawn on The Saraswat Co-op. Bank Ltd., Margao for Rs. 10,00,000/- (Rupees Ten Lakhs only) to be kept with you as a security towards our outstanding bill amounting to Rs. 8,00,000/- (Rupoees Eight Lakhs only). As we are expecting fund any moment, we will clear your dues any moment". 9. The cheque in question was, therefore, sent along with this covering letter at Exh. 19. P.W.1, Shirodkar, further admitted in his cross- examination that after this letter was returned the Accused had made further payment of Rs. 1,25,000/- . He further admitted that the cheque in question dated 29-12-1999 was issued since the earlier cheque dated 8-7-1999 was likely to lapse as the validity period was to expire in the following month. P.W.1, Shirodkar, has admitted the contents of the letter dated 29-12-1999 at Exh. 19. This witness was thereafter shown letter dated 19-1-2000 which was issued by the Complainant in which it was stated that the amount which was due from the Accused was Rs.7,80,000/- . This witness was thereafter shown letter dated 9-2-2000 wherein the Accused had asked for time to make final payment and the said letter was marked Exh. 20. He was further shown letter dated 17-2-2000 issued by the Managing Director of the Complainant- Company which he admitted was issued by the Complainant and by the said letter time was granted to the Accused upto 29-2-2000. From the cross- examination of this witness, it can be seen that P.W.1, Shirodkar, 13 had admitted that the Accused had a running account in the Company and that it was the practice which was followed by the Complainant and the Accused that the Accused would issue a cheque to the Complainant- Company and the said cheque would be returned after the Demand Draft was issued by the Accused and that the cheques which were issued by the Accused would be returned. From this evidence, it can further be seen that the cheque in question for an amount of Rs. 10,00,000/- was not necessarily issued towards the payment of Invoices dated 23-7-1998, 1-1-1999 and 3-2-1999 which is clear from the admission given by P.W.1, Shirodkar in his cross- examination. Another aspect which is brought on record by the Accused in his cross- examination is that initially the Accused had issued a cheque dated 8-7-1999 for an amount of Rs. 10,64,098.56 and after the validity of the said cheque was going to expire a fresh cheque dated 29-12-1999 was issued by the Accused in lieu of the earlier cheque. Thus, from the evidence of P.W.1, Shirodkar and his admission in the cross- examination, it has been established by the Accused that the cheque dated 29-12-1999 was given to the Complainant and that there was a specific understanding that the said cheque was not meant to be deposited in the Bank. Further, from the evidence of P.W.1, Shirodkar, in his cross- examination it has been established by the Accused that after the said cheque was issued dated 29-12-1999 an amount of Rs.2,50,000/- and Rs. 1,25,000/- had been paid. This fact has been admitted by P.W.1, Shirodkar. Further from the covering letter dated 29-12-1999 which was issued along with the cheque it was clearly mentioned that the cheque was to be kept as a security towards the 14 outstanding payment amounting to Rs.8,00,000/- which subsequently was reduced to Rs.7,80,000/- as per letter at Exh. 19 AA. In my view, therefore, by virtue of the admissions given by P.W.1, Shirodkar, in his cross- examination it has been established by the Accused that the said cheque of Rs.10,00,000/- was not meant to be acted upon as on earlier occasions the cheques which were issued by the Accused were returned when payment was made by Demand Draft or by cash and amount of cheque did not represent the actual amount which was due and payable to the Complainant as on the date on which the cheque was issued in favour of the Complainant because the Accused had a running account with the Complainant and the amounts were paid from time to time and they were adjusted as per the amount which were due and payable at the foot of the account of the Accused and the cheque, therefore, was retained possibly with a clear understanding that it would never be deposited in the Bank. 10. The Accused in support of his case has examained himself as D.W.1. He has also reiterated the same state of affairs as has been stated by P.W.1, Shirodkar, in cross- examination. D.W.1, Naik, in his evidence has stated that the raw materials which were required by Accused No. 1/Company were purchased from the Complainant and they were manufactured by M/s IPCL and at the time of supply of the materials by the Complainant the Accused used to deposit cheques with the Complainant equivalent to the value of the raw materials supplied and thereafter the Accused used to submit Demand Draft of the value of the 15 materials supplied in the name of M/s IPCL and thereafter the Complainant used to return cheques deposited with them. He has further stated that the two cheques dated 20-12-1998 and 2-2-1999 were drawn in the name of the Complainant and they were deposited by the Accused with the Complainant as security till the Demand Draft equivalent