IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MRS. JUSTICE K.HEMA TUESDAY, THE 4TH AUGUST 2009 / 13TH SRAVANA 1931 Crl.Rev.Pet.No. 788 of 2001() ----------------------------- CRA.8/2001 of SESSIONS COURT, ERNAKULAM CC.615/1994 of ADDL.CHIEF JUDICIAL MAGISTRATE, ERNAKULAM .................... PETITIONER/APPELLANT/ACCUSED: ------------------------------------- C.K. CHAMUNNI, PROPRIETOR C.K.C.B AGENCIES, VADAKKENCHERRY, PALAKKAD. BY ADV. SRI.P.V.CHANDRA MOHAN SRI.T.VENUGOPALAN RESPONDENT/RESPONDENT/COMPLAINANT: ------------------------------------------------ 1. KELTRON REPRESENTED BY RAJAGOPAL, POWER OF ATTORNEY HOLDER, ASST. MANAGER, COCHIN AREA SALES OFFICE, KOCHI – 682 015. 2. STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR. ADV. SRI.T.P.KELU NAMBIAR, SENIOR ADVOCATE SRI.M.GOPIKRISHNAN NAMBIAR FOR R1 PUBLIC PROSECUTOR SRI.B.JAYASURYA THIS CRIMINAL REVISION PETITION HAVING BEEN FINALLY HEARD ON 4/8/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: K.HEMA, J. ------------------------------------------- Crl.R.P.No.788 of 2001 ------------------------------------------- Dated this the 4th August, 2009 O R D E R Revision petitioner was convicted and sentenced by the Judicial Magistrate of First Class to undergo simple imprisonment for 6 months under Section 138 of the Negotiable Instruments Act. He was also directed to pay a sum of Rs.3,50,000/- to the complainant by way of compensation under Section 357(3) of the Code of Criminal Procedure. 2. In appeal, the learned Sessions Judge allowed the appeal in part. The conviction was confirmed, but the sentence was modified and reduced. The petitioner was sentenced to undergo imprisonment till rising of court and to pay a fine of Rs.3,70,000/- and in default of payment of fine, to undergo simple imprisonment for a period three months. If the fine is realised, an amount of Rs.3,65,000/- was ordered to be paid to the complainant and the balance to be credited to the State as compensation for the loss suffered by the State in terms of judicial time and resources spent for the resolution of the controversy between parties. The said conviction and sentence Crl.RP.788/01 2 are challenged in this revision. 3. The first respondent filed a complaint against the petitioner before Magistrate Court alleging offence under Section 138 of the N.I Act. As per the averments in the complaint, complainant (KELTRON) is engaged in manufacture of electric goods, such as, T.V sets etc. The said goods were sold to the dealers of a company on the security of post-dated cheques, in accordance with the policies formulated and modified from time to time by the company. The petitioner was a dealer in the Palakkad district (C.K.C.B Agencies) and it is a proprietory concern, under the ownership of the petitioner. He was a regular defaulter and cheques given by him used to be dishonoured. But, he used to clear the liability on intimation of bouncing of cheques. 4. It is further alleged in the complaint that after 1991, some restrictions were imposed on the supply of goods on credit and petitioner was requested to clear off Rs.4,01,918.01 being the outstanding liability. The petitioner had started business during the year 1988-89 under the name and stile 'Prince Trade Links'. The amount towards the balance in the account of such establishment was Rs.1,64,568.63. It is alleged Crl.RP.788/01 3 in the complaint that the Prince Trade Links made a proposal for transfer of its outstanding dues to the account of M/s.C.K.C.B Agencies and this proposal was accepted by the latter. The total balance amount due from M/s.C.K.C.B Agencies is Rs.5,66,484.64. The petitioner is also liable to pay interest at the rate of 20% per annum from 1.4.1991. 5. The complainant-respondent further alleged in the complaint that series of discussion were held with the petitioner, who is the proprietor of M/s.C.K.C.B Agencies and the petitioner agreed to clear off the debt on instalment basis. Thereupon, he entrusted five cheques with the complainant for an amount of Rs.5,81,909.75 to be presented on various debts. He also agreed to give more cheques for the balance amount due towards interest on clearing cheques already issued. The complainant presented Exhibit P2 cheque for covering an amount of Rs.3,50,000/- drawn on the State Bank of Travancore dated 1.9.1992, with notice to the accused on 15.9.1992. 6. The petitioner allegedly undertook to arrange money to encash the cheque at the time of presentation. But, the bankers were informed to stop payment and cheque was Crl.RP.788/01 4 returned. On getting the intimation from the bank regarding the return of the cheque on 9.10.1992, the complainant issued a letter on 13.10.1992 to settle the payment against the bounced cheque within 15 days. The letter was received by the accused on 16.10.1992. In a reply dated 24.10.1992, he admitted that there was no amount in the bank account, but the bank committed a mistake in returning the cheque with the endorsement “stop payment”. The accused undertook to discharge the liability on dishonour of the cheque Exhibit P2. But, he did not pay the amount. Therefore, he committed an offence under Section 138 of the N.I Act and hence, a complaint was filed against the petitioner. 7. PW1 and PW2 were examined and Exhibits P1 to P11 were marked on the side of the prosecution. The accused examined DW1 and DW2 and marked Exhibits D1 to D13 on his side. The accused took up a contention that Exhibit P2 cheque was not drawn by him for discharge of a legally enforceable debt or liability. According to him, the said cheque was handed over as a blank cheque as security for the amount, which is actually due and payable to the complainant. Though there was some existing liability, it is not quantified by the Crl.RP.788/01 5 complainant in spite of request made, but the complainant arbitrarily filled up the cheque handed over as security and presented the same to the bank. Various documents were also produced by petitioner to show that Exhibit P2 was only a blank cheque leaf signed by the accused and handed over to the complainant, as a security for the amount due, even without ascertaining and confirming the amount which is actually due from the accused to the complainant. 8. Learned counsel for petitioner contended that a blank cheque leaf was handed over to the complainant at the time of delivery of goods as security for the amount due and liable to be paid by the accused to the petitioner, but there was some dispute regarding the actual amount payable. The dispute was not settled and the amount, which is due, was not quantified., but before that blank cheque was filled up by the complainant and presented to the bank, it is submitted. The averments in the complaint show that as per the business dealings, post dated blank cheques were issued as security to the complainant and Exhibits P1, D13, D4, D8, D2 D11 and D9 series will also prove these facts, it is submitted. Therefore, the presentation of the cheque, Exhibit P2, even before Crl.RP.788/01 6 quantifying the amount of liability was not proper and based on such cheque, accused could not have been convicted for offence under Section 138 of the N.I Act, it is submitted. 9. Learned counsel for complainant-respondent, however, argued that the actual dues were quantified after a discussion between the revision petitioner and the complainant's delegates. Exhibit D4 would establish that it was to discharge the said liability that cheques were issued and a reference is made to Exhibit P2 cheque in Exhibit D4. A reference was made to Exhibit P11 letter dated 9.9.1992 to argue that the accused has offered to send Demand Draft for the cheque returned on 30.9.1992 and he also promised to come to the complainant in person with the Demand Draft. In Exhibit P7 reply also, there are indications that the liabilities are admitted. 10. In earlier occasions also, cheques were dishonoured and the accused used to come to the complainant with Demand Drafts and discharge the debt and in Exhibit D13, there is an assertion that accused owed money and that he would discharge the same by sending Demand Drafts, it is argued. It is also submitted that presumption under Sections 118 and Crl.RP.788/01 7 139 of the Negotiable Instruments Act can be drawn in favour of the complainant and the conviction and sentence passed against the appellant are only sustainable. 11. On hearing both sides and on going through the judgment, I find that both sides are mooting on the question whether there is a liability for the accused in favour of the complainant. On the strength of the various communications sent, the complainant would argue that there is evidence to show that the accused was liable to make payment. But the accused would contend that the liability is not confirmed or quantified. The courts below proceeded to consider whether the accused had any debt or liability in favour of the complainant. 12. In the light of the submissions made on both sides, I have gone through the judgments and the records in detail. On going through the same, I find that the courts below have committed a serious error in not entering any finding regarding the most vital ingredient of offence under Section 138 of the N.I Act. A reading of Section 138 of N.I Act clearly shows that one of the most important ingredients of the offence is whether the accused has drawn the cheque which Crl.RP.788/01 8 was dishonoured. 13. The accused denied execution of cheque. He only stated that a signed blank cheque leaf was handed over to complainant at a time when he had business dealing with complainant. In the complaint, it is alleged “the manufactured goods were sold to the dealers of the company on the security of post dated cheques in accordance with the policies formulated etc”. The appellate court also found that there is a dispute regarding the execution of the cheque (vide paragraph 5 of the judgment). The appellate court also found that the short question which arises is only whether Exhibit P2 cheque was issued for the discharge of a legally enforceable debt/liability or whether it was issued merely as a security. 14. Even though such a question was raised and the appellate court found that it is a question to be considered and decided, a reading of the judgment will show that learned Judge did not enter any finding on the abovesaid fact. It is clear from the observations made by the lower appellate court in the judgment in paragraphs 14 and 15 that the complainant has a case that accused filled up cheque and handed over the same to the complainant, but there is no specific documentary Crl.RP.788/01 9 evidence to support the said case. But the court below did not consider whether oral evidence of the complainant or witnesses would establish that accused had filled up the cheque and handed over the same to the complainant. 15. The lower appellate court held that there is satisfactory data presently available to show that whoever filled up the cheques had the authority to fill up the same and the cheque in question was and must certainly be presumed to be issued for the discharge of a legally enforceable debt/liability. This finding cannot be sustained at all. The complainant's case is that accused himself had filled up the cheques and handed over the same to the complainant. The complainant does not have a case either in the complaint or in the evidence that accused had given him the authority to fill up the cheque and present the same to the bank or that he filled up the same on implied authority. The accused also has no case that he had given any implied authority to fill up cheuqe which was handed over. 16. In such circumstances, it will be wrong for the court to make any conclusion that the cheque was filled up on an implied authority given by the accused to complainant. A Crl.RP.788/01 10 finding to the above effect in respect of the implied authority is based on surmises and conjectures in the total absence of any such allegation or evidence. The finding entered into by the lower court that there was an authority given by the accused to fill up the cheque is not based on any allegation in the complaint or even in the evidence adduced by the complainant. Even the accused did not have any such case. A close reading of Section 20 of N.I. Act will also show that the implied authority theory applies to stamped instruments and not cheques which do not require stamping. 17. On going through the judgment of the learned Sessions Judge, I find that the court below committed a grave error in proceeding to find out whether the accused rebutted the presumption under Section 139 of the N.I Act, even without holding that the cheque was drawn by the accused. In the absence of proof of drawing of the cheque by accused, which is one of the requisites in Section 139 of the N.I Act, the presumption under Section 139 of the N.I Act will not arise. If no presumption can be drawn under Section 139 of the N.I Act, the court shall not call upon the accused to rebut the same. Both the courts below have committed a serious Crl.RP.788/01 11 error in law in expecting the accused to rebut the presumption under Section 139 of the N.I Act in a case in which presumption did not arise for want of proof of execution of the cheque. 18. Learned counsel for petitioner also submitted that there was a civil suit in respect of the same cheque, which is involved in this case but petitioner was set ex parte and a decree was also passed, while petitioner was in the mental hospital. Steps are being taken to set aside the ex parte decree, since petitioner has recovered from his illness. Learned counsel for complainant submitted that this case may be sent to the Lok Adalath for settlement of the dispute between the parties. 19. In the light of the submissions made by learned counsel for petitioner that there is an ex parte decree and that the petitioner is proposing to take steps for setting aside the ex parte decree etc., I do not think that it is necessary to send this case to the Lok Adalath. The parties will get an opportunity to settle the issues before the Lok Adalath if such request is made in the civil court. But what is relevant in a suit for recovery of amount covered by cheque is different Crl.RP.788/01 12 from what is to be proved in a criminal proceedings under Section 138 of the N.I Act and no conviction can be entered against petitioner if execution of cheque is not proved. 20. It is however, seen from the records that accused is not denying his liability as such, but he is insisting upon the quantification of the actual amount which is due from the accused to the complainant which he is prepared to pay. This readiness and willingness to pay the amount which is actually due is what is reflected from the various documents referred to both sides stating that he will send the D.D and settle the matter etc. I am satisfied that this is a fit case where the case can be referred to the Lok Adalath in case a request is made by either of the parties before the civil court in appropriate proceedings. 21. On going through the records and judgments of the court below, I have no doubt that the liability alone will not make a person liable for offence under Section 138 of N.I. Act. The readiness and willingness of a person to pay the amount, if the liability being quantified cannot be made a ground to hold him liable for an offence. It must be proved that relevant cheque was drawn by accused, especially if accused disputed Crl.RP.788/01 13 such fact. Lower appellate court proceeded on surmises and vaguely held whoever had filled up the cheque had the authority to fill up etc. On the basis of such findings no person shall be convicted for offence under Section 138. The conviction is totally unsustainable. Hence, the following order is passed: (i) The conviction and sentence passed against the petitioner are set aside. (ii) Petitioner-accused is found not guilty of offence under Section 138 of the Negotiable Instruments Act and he is acquitted of the said offences. He is set at liberty forthwith. The Criminal Revision Petition is allowed. (Sd/- K.HEMA, JUDGE) vgs. /True copy/ P.A to Judge