IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH THURSDAY, THE 20TH AUGUST 2009 / 29TH SRAVANA 1931 Crl.Rev.Pet.No. 28 of 2009() ---------------------------- CRA.541/2007 of ADDL.SESSIONS COURT (ADHOC-II) ERNAKULAM CC.986/2004 of JUDL.MAGISTRATE OF FIRST CLASS-I, ERNAKULAM .................... REVN. PETITIONER(S): APPELLANTS/ACCUSED --------------------------------------- 1. STAR TRADING REPRESENTED BY ITS MANAGING PARTNER ALI, CRESCENT HOUSE, ATHIRAMPUZHA P.O. KOTTAYAM. 2. ALI, S/O.UMMER, CRESCENT HOUSE, ATHIRAMPUZHA P.O. KOTTAYAM. 3. MYMOONATH BEEVI, W/O.ALI CRESCENT HOUSE, ATHIRAMPUZHA P.O. KOTTAYAM. BY ADV. SRI.PHILIP T.VARGHESE SRI.THOMAS T.VARGHESE RESPONDENT(S): RESPONDENTS/STATE AND COMPLAINANT ------------------------------------------------ 1. STATE OF KERALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM 2. INTERNATIONAL TRADE LINKS, G 211, MAIN AVENUE ROAD, PANAMPALLY NAGAR P.O. OKOCHI-36, REPRESENTED BY ITS PROPRIETOR M.A.K. AZAD. PUBLIC PROSECUTOR SHRI JAYAKRISHNAN FOR R1 ADV. SRI.VARGHESE C.KURIAKOSE FOR R2 THIS CRIMINAL REVISION PETITION HAVING BEEN FINALLY HEARD ON 20/08/2009, ALONG WITH CRL.R.P.NO.19/2009 AND CONNECTED CASES THE COURT ON THE SAME DAY PASSED THE FOLLOWING: THOMAS P. JOSEPH, J. -------------------------------------- Crl.R.P.Nos.19, 28, 29, 30, 31, 32, 33 and 34 of 2009 -------------------------------------- Dated this the 20th day of August, 2009. ORDER In these revisions arising from common judgment of learned Additional Sessions Judge (Adhoc-II), Ernakulam in Crl.Appeal Nos. 537 of 2007, 541 of 2007, 543 of 2007, 538 of 2007, 540 of 2007, 542 of 2007, 539 of 2007 and 544 of 2007 which in turn arise from common judgment of learned Judicial First Class Magistrate-I, Ernakulam in C.C.Nos. 1071 of 2004, 986 of 2004, 989 of 2004, 1073 of 2004, 1070 of 2004, 987 of 2004, 988 of 2004 and 1072 of 2004 respectively, the questions arising for a decision are whether due execution of the cheques for discharge of a legally enforceable debt/liability is proved and whether accused No.3 is liable for the offence punishable under Section 138 of the Negotiable Instruments Act (for short, “the Act”). Parties are referred as complainant and accused, as in the trial court for convenience. 2. C.C.Nos.986 of 2004, 987 of 2004, 988 of 2004, 1089 of 2004 and 1070 of 2004 are filed by M/s.International Trade Links, represented by its proprietor, M.A.K.Azad (PW1). C.C.Nos.1071 of 2004, 1072 of 2004 and 1073 of 2004 are filed by the said M.A.K.Azad. In all these cases accused No.1 is M/s.Star Trading, a partnership firm of which accused No.2 is the managing parter and accused No.3 is the wife of accused No.2 and a partner. Complainant is engaged in the business of supply of wheat and other food grains. Accused Crl.R.P.No.19/2009 & connected cases. 2 No.1 is engaged in the sale of wheat, maida, etc. In C.C.No.986 of 2004 case of the complainant as stated in the complaint is that accused No.1, the firm is indebted to the complainant for a sum of Rupees five lakhs out of business transactions for meeting liabilities of accused No.1, namely, inland letter of credit facility (for short, “LC facility”) towards various banks. To discharge that liability to the complainant accused No.1 issued cheque dated 1.3.2004 for the said amount. On similar occasion, it is stated in C.C.No.987 of 2004 that accused No.2 issued cheque dated 1.3.2004 for Rupees five lakhs. In C.C.Nos.988 of 2004 and 989 of 2004 it is stated that accused No.1, the firm is indebted to the complainant for Rupees three lakhs and Rupees five lakhs, respectively in respect of the business transactions and issued cheques dated 1.3.2004 for those amounts. In C.C.Nos.1070 of 2004, 1071 of 2004, 1072 of 2004 and 1073 of 2004 it is contended that accused No.1 borrowed Rupees ten lakhs, Rupees two lakhs, Rs.1,35,000/- and Rs.1,50,000/-, respectively and for discharge of that liability accused No.2 issued cheques dated 1.3.2004, 23.2.2004, 25.2.2004 and 20.2.2004, respectively. These cheques, it is not disputed are dishonoured either for insufficiency of funds or as account was closed. It is also not disputed that statutory notice was issued to accused Nos.1 to 3 intimating dishonour and demanding repayment of the respective amounts and the notices are returned as unclaimed. Proprietor of the complainant gave Crl.R.P.No.19/2009 & connected cases. 3 evidence as PW1 and testified to his case. He proved Exts.P1 to P10. Accused No.2 gave evidence as DW6. He examined DWs 1 to 5 and proved Exts.D1 to D10 series. Learned magistrate found that the cheques in question (marked as Ext.P1 series) are issued for the discharge of a legally enforceable debt/liability, presumption under Section 139 of the Act is not rebutted by the accused and held all the accused liable. Accused No.1 is sentenced to payment of fine while accused Nos.2 and 3 are sentenced to imprisonment. There is also a direction to accused Nos.2 and 3 for payment of the entire cheque amount by way of compensation with a default sentence. Appellate court has confirmed the findings entered by learned magistrate. Hence these revisions. 3. It is contended by learned counsel for accused Nos.1 to 3 that due execution of the cheques in favour of complainant is not proved. The mere fact that the signature in Ext.P1 series is admitted by accused No.2 did not mean that due execution of the cheques is admitted or proved. According to the learned counsel, without proof of due execution of the cheques courts below could not and should not have relied on the presumption under Section 139 of the Act. It is the contention of the learned counsel that presumption under Section 139 of the Act could be rebutted not merely by direct evidence but also by relying on the circumstances proved in the case. It is also the contention of learned counsel that it is open to the court to draw adverse inference which also could rebut the Crl.R.P.No.19/2009 & connected cases. 4 presumption under Section 139 of the Act. Learned counsel contends that evidence on record would show that there was no loan transaction between complainant and the accused. There is no specific averment in the complaint and much less evidence that the transactions were by way of loan. On the other hand proved circumstances show that there was business transactions between complainant and the accused and the transfer of the money from the account of complainant to the account of accused No.1 relied on by complainant was only as part of the usual business transactions and that did not amount to any loan. Learned counsel contended that though accused had specifically requested the complainant to produce its account books, balance sheet and other documents where according to the complainant the factum of loan has been specifically mentioned, complainant has not cared to produce those documents. Learned counsel contends that from that conduct court could draw adverse inference against the complainant which itself is sufficient to rebut the presumption under Section 139 of the Act. Learned counsel has referred me to the evidence of PW1 and DWs 1 to 6 as well as the documents proved through them. Learned counsel has placed reliance on the decisions in Supply House v. Ullas [2006 (3) KLT 921], M.S.Narayana Menon v. State of Kerala [(2006) 6 SCC 39], V.K.Gemini v. Chandran & another [2007 (1) KLJ 453] and Krishna Janardhan Bhat v. Dattatraya G.Hegde Crl.R.P.No.19/2009 & connected cases. 5 [(2008) 4 SCC 54]. 4. In response it is contended by learned counsel for complainant that the due execution of the cheques (Ext.P1 series) is proved beyond reasonable doubt. Learned counsel contends that accused have no case that the cheques in question were given to the complainant as security for any purpose whatsoever, nor is it pleaded that complainant had stealthily taken custody of the cheques in question. Learned counsel points out that the contention raised by the accused is that complainant and accused had shady transactions by forging purchase bills as if there was sale of food grains to accused No.1 those bills were presented by complainant in its bank where the same were discounted, money payable on those bills was released from the bank to the complainant and thereafter those purchase bills were transmitted to the bank of the accused where, the accused had ninety days to clear the bills. The amount when collected by complainant, half percent of it went to the accused and rest of the amount was taken by the complainant. It is the further case of the accused that to facilitate such shady transactions accounts of accused No.1 in three banks, State Bank of Sourashtra, Karoor Vysya Bank and Canara Bank at Kottayam were actually operated by PW1 and accordingly entire cheque books and pass books of accused No.1 were in the custody of PW1 who, taking advantage of that misused the signed cheques by filling up the Crl.R.P.No.19/2009 & connected cases. 6 same. Learned counsel for complainant contended that, that being the case of accused, in the absence of evidence of any such shady transaction between accused and complainant contention of the accused that the cheques were not issued discharge of a liability should fail. 5. The due execution of the cheques when disputed is to be proved by the complainant and the question of drawing any presumption under Section 139 of the Act arise only when due execution of the cheque is either admitted or proved. It is also the settled position of law that presumption under Section 139 of the Act could be rebutted by adducing direct evidence or relying on circumstances emerging in the case. In appropriate cases, if adverse inference could be drawn against the complainant, that also may be used to rebut the presumption. Ext.P6 is a letter issued from State Bank of Sourashtra, Ernakulam stating that on 19.5.2000 a sum of Rs.35,25,000/- has been transferred from the account of complainant to the account of accused No.1 in the same bank. Though in Ext.P6, the date of transfer is stated as 19.5.2000 it is clarified by DW2, manager of that bank that the transfer was actually on 9.5.2000 and that the date mentioned in Ext.P6 as 19.5.2000 is a mistake. That, the said amount was credited in the account of accused No.1 is proved by Ext.D8. Ext.P1 series are of the year 2004, dated 20.2.2004, 23.3.2004, 25.2.2004 and 1.3.2004 for the aggregate sum of Rs.32,85,000/-. Crl.R.P.No.19/2009 & connected cases. 7 6. It is contended by learned counsel for accused that if the transaction was in the year 2000, the cheques were allegedly drawn in 2004, after the period of limitation for recovery of the amount by civil proceeding had expired. Learned counsel contended that in that situation there is no possibility of accused issuing cheques in respect of a time barred debt. It is also pointed out by learned counsel that even as per the evidence of PW1, landed properties belonging to the complainant has been mortgaged with two banks for the loan availed by accused No.1, that itself covered more than Rupees three crores and that even going by the evidence of PW1 he had offered the property as security in the year 1999 only for a period of three months. According to PW1, it was agreed that after three months the security will be replaced by accused No.1 but nothing of that sort happened. In such a situation it was unlikely that complainant would advance a loan of Rs.35,25,000/- to the accused in the year 2000 and at any rate, it was unlikely that accused could have issued cheques in favour of the complainant in the year 2004. It is also pointed out by the learned counsel for accused that even in the year 2001 complainant had been a guarantor for a loan raised by accused No.1. 7. It is seen from the evidence of DW1, manager of Canara Bank, Kottayam that accused No.1 had an account with that bank, Ext.D1 being the certified copy of the account. Evidence of DW2 shows that complainant had an Crl.R.P.No.19/2009 & connected cases. 8 account with his bank (State Bank of Sourashtra) the copy of the ledger extract of which is marked as Ext.D2. That account was started on 3.4.1998. Ext.D3 shows that the said account was converted as a loan account on 7.1.1998. Ext.D4 is the certified copy of the ledger extract of account of accused No.1 in the same bank opened on 23.6.1998 and Ext.D5 shows that the said account was converted as a loan account on 1.9.1998 and operated from 1.9.1998 to 30.3.2001. As per Ext.D5, the last cheque cleared in that account is cheque No.619994 on 14.3.2000. Four cheques among Ext.P1 series are issued from the bank of DW2. Going by the evidence of DW2 the last cleared in that account was on 14.3.2000. But DW2 stated that there was no complaint from accused at any point of time that any of those four cheques among Ext.P1 series were lost or misused by anybody and there was no request from accused No.1 to close the account. On the other hand, account was closed by the bank suo motu. DW3 is manager of State Bank of Sourashtra. He stated that accused No.1, M/s.Star Trading and M/s.Standard Trade Links, complainant in C.C.Nos.986 of 2004, 987 of 2004, 988 of 2004, 1070 of 2004 and 1089 of 2004 had accounts in his bank. Accused No.1 opened its account on 23.6.1998. Ext.D8 is the ledger extract for the period from 22.11.1999 to 31.3.2004. The cheque book containing some of the cheque leaves in Ext.P1 series were given to accused No.1 on 27.4.1999 and 27.10.1999. He stated that on 9.5.2000, Crl.R.P.No.19/2009 & connected cases. 9 Rs.35,25,000/- was transferred to the account of accused No.1 and it came by transfer from the account of the complainant in the same bank. DW5 is manager of Asset Recovery Management Section of Punjab National Bank with which Nedungadi Bank got amalgamated. He stated that LC facility was given to the complainant. Accused No.2 was examined as DW6 and gave evidence regarding the alleged shady transaction between himself and PW1. He stated that bogus bills for sale and bogus transit bills were prepared by PW1 as if food grains were supplied to accused No.1. Those bills were presented by complainant in his bank, discounted the same and thereafter the bills were transmitted to the bank of accused No.1. The bank of accused No.1 will pay the amount to the bank of complainant which has already released the amount to the complainant. Accused No.1 would get ninety days' time to pay the amount in its bank. According to DW6 (accused No.2) 2, of the amount, half percent will be given to accused No.2 and the rest will be appropriated by the complainant. 8. In the course of trial accused filed C.M.P.No.2971 of 2006 to direct the complainant to produce its day book, ledger and sales tax/income tax returns with the balance sheet for the relevant period. That petition was filed on the basis of a statement made by PW1 while in the box that the transfer of Rs.35,25,000/- from the account of complainant to the account of accused No.1 Crl.R.P.No.19/2009 & connected cases. 10 by way of loan has been shown in the books of account and balance sheet of complainant. To that petition complainant replied that the said documents are not relevant for adjudication and that attempt of the accused is to somehow protract the litigation. Accordingly that petition was closed. Accused then filed C.M.P.No.3006 of 2006 to direct production of sales tax returns with balance sheet of M/s.South Asia Trade Links, another concern of PW1. To that petition also complainant replied that those documents are not relevant for enquiry. It is on account of non-production of those documents that learned counsel for accused contended that adverse inference has to be drawn against complainant. 9. No doubt, when a material document in the custody of a party to the litigation is not produced whether or not its production is ordered by the court, court is entitled to draw appropriate inferences for such non-production. But it is not the rule that whenever there is non-production of a document, adverse inference has to be drawn. It the case of the party not producing the document is proved by other evidence; then, drawing of adverse inference for non-production of document is not warranted. It is true that the day book, ledger, balance sheet and sales tax and income tax returns of complainant as requested in C.M.P.No.2971 of 2006 have not been produced by the complainant. But, for that reason court cannot draw any adverse inference if the case of complainant Crl.R.P.No.19/2009 & connected cases. 11 is proved by other evidence. So far as non-production of documents covered by C.M.P.No.3006 of 2006 is concerned, those concerns are not directly connected with Ext.P1 series and the case set up by complainant. Therefore, for non- production of documents referred to in C.M.P.No.3006 of 2006, no adverse inference could be drawn. 10. It is true that as requested in C.M.P.No.2971 of 2006, the account books or balance sheet are not produced. So far as the contention of the complainant that the sum of Rs.35,25,000/- was transferred to the account of accused No.1 is by way of loan is concerned, there is the evidence of PW1. It is true that the evidence of DWs 1 to 5 and Exhibits proved through them show that even prior to the transfer of the sum of Rs.35,25,000/- on 9.5.2000 and thereafter, there had been business dealings between complainant and accused No.1, there being transfer of amounts from the account of complainant and vice versa. Unlike in other cases where there may be no evidence of transfer of money and the complainant is banking upon the alleged execution of the cheque alone for payment of loan to the accused where non-production of the relevant documents may loom large on his case, this is a case where transfer of Rs.35,25,000/- from the account of complainant to the account of accused No.1 is admitted and proved by Exts.P6 and D8. Then the question is only whether the said transfer was by way of loan or in the circumstances pleaded by the Crl.R.P.No.19/2009 & connected cases. 12 accused. At this juncture, it has to be borne in mind that the transfer of the said amount from the account of complainant to the account of accused No.1 was not part of any real business transaction even according to the accused. According to the accused, it was part of a shady transaction. 11. It has come in evidence that in the year 1999-2000 complainant had offered its property as security for the loan raised by accused No.1, according to PW1 for a short period of three months on an understanding that after the said period the security will be replaced by accused but that did not happen. If that be so by the time the sum of Rs.35,25,000/- was given to accused No.1 allegedly by way of loan the said period fixed for replacement of security must have been over. From that alone, it is not possible to say that there was no loan transaction between complainant and accused No.1 for, transfer of the sum of Rs.35,25,000/- on 9.5.2000 is admitted and proved and what remained for consideration is only whether it was by way of loan or as part of shady transaction. Therefore failure of accused No.1 to replace the security for loan within three months in the year, 1999 as contended by accused No.1 cannot mean that there could not have been any loan transaction as claimed by complainant on 9.5.2000. It is a fact that in the year 2001 also complainant had given his property as security and he stood as guarantor but, it has to be borne- in-mind that until presentation of Ext.P1 series and its dishonour, there is no Crl.R.P.No.19/2009 & connected cases. 13 case or evidence that there was love lost between the parties. It is only after dishonour of the cheques and attempt on the part of complainant to realize the amount, that the parties went into logger-heads. 12. Then the question is whether accused No.2 would have issued a cheque on the dates Ext.P1 series bear. Concededly, that was in January, 2004. PW1 has an explanation that during that time, accused No.2 was in a financial crisis and wanted his help to canvass financial assistance from a marwadi and he offered to do so. He then wanted accused No.2 to discharge liability of complainant which accused No.2 agreed. It is accordingly that accused No.2 issued cheques in January, 2004. It is not disputed that Ext.P1 series contained signature of accused No.2 and those cheques are drawn on the account maintained by accused No.1. 13. It has come in evidence that to claim LC facility, complainant had to produce the purchase bills and transit bills in his bank. The food grain was to be transported from outside the State either by fleet owners recognized by the Indian Banks Association or through Indian Railways. The bills will be checked by the bank of complainant. It is difficult to think either that PW1 prepared all bogus bills and his bank without any enquiry accepted it or, that the bank officials and the fleet owners were party to the fraud along with PW1. There is no evidence in that line. Accused have a case that there was a raid by the Crl.R.P.No.19/2009 & connected cases. 14 sales tax authorities in the premises of PW1 when such printed bills were seized by the sales tax authorities. There is however, no evidence brought on record in that line. Though learned counsel for accused has referred me to an order passed by the Deputy Commissioner of Sales Tax, Kottayam referring to the search conducted by the sales tax authorities in the premises of complainant and seizure of records I find that the said order was not brought into evidence and hence the same cannot be considered for any purpose. 14. Unlike other cases where it is sufficient that the defence version is also probable, here is a case where a plea which amounted to fraudulent transaction which involved offence punishable under the Indian Penal Code is set up. If accepted, it would mean that the carriers who were purporting to transport food grains as per the purchase bills or transit bills in question or even the officials of the bank of complainant are involved in the alleged fraud. It is settled position and when fraud is set up there must be a high degree of evidence for that. Accused have not called for from the banks concerned the purchase bills, transit bills, etc. during the time when the sum of Rs.35,25,000/- was transferred from the account of complainant to the account of accused No.1 on 9.5.2000. Accused could have summoned those bills and examined persons who are said to have supplied/transported the food grains and shown that those bills are not issued by persons who purports to have issued it and thus, it is Crl.R.P.No.19/2009 & connected cases. 15 bogus. Regarding the alleged shady transaction what is available is only the evidence of accused No.2 as DW6. That evidence alone is not sufficient. 15. Then I shall refer to the contention of accused No.2 that the accounts of accused No.1 were operated by PW1 and the check leaves in the custody of PW1 were misused. Though accused have a contention that they had no control over the premises shown in their address given in their banks at Ernakulam there is no reliable evidence in that line. There is no evidence that accounts were opened in the name of accused No.1 showing the premises of complainant as its address. It is difficult to think that accused No.2 who is in the business field from 1974 onwards permitted, whatever be the reason thereof PW1 to operate his accounts and handle his signed blank cheque leaves as PW1 wished inspite of the fact that according to accused No.2, PW1 is involved in several criminal cases and even with accused No.2, PW1 was having shady transactions. If PW1 were of that character, a businessman like accused No.2 would not have