T.P. MURUGAN (DEAD) THR. LRS. versus BOJAN
[2018] 9 S.C.R. 355, Supreme Court of India, 2018
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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T.P. MURUGAN (DEAD) THR. LRS.
v.
BOJAN
AND
POSA NANDHI REP. THR. POA HOLDER, T.P. MURUGAN
v.
BOJAN
(Criminal Appeal Nos. 950-951 of 2018)
JULY 31, 2018
[R. F. NARIMAN AND INDU MALHOTRA, JJ.]
Negotiable Instruments Act, 1881 – s.139 – Statutory
presumption under –Operation of – Appellants after being inducted
as Directors in respondent’s company  infused capital  therein by
way of deposits and shares – Subsequently, they resigned from the
company and demanded re-payment of their dues – Respondent
issued a promissory note and two cheques in favour of appellants
for discharge of their liability – Cheques dishonoured – Trial court
convicted respondent u/s.138 – Conviction affirmed by District and
Sessions Court – High Court reversed the conviction – On appeal,
held: Once a cheque has been signed and issued in favour of the
holder, there is statutory presumption that it is issued in discharge
of a legally enforceable debt or liability – This presumption is a
rebuttable one, if the issuer of the cheque is able to discharge the
burden that it was issued for some other purpose like security for a
loan – In the present case, the respondent has failed to produce
any credible evidence to rebut the statutory presumption –
Appellants have proved their case by over-whelming evidence to
establish that the two cheques were issued towards the discharge of
an existing liability and legally enforceable debt – Respondent
having admitted that the cheques and Pronote were
signed by him,
the presumption u/s.139 would operate – Impugned order set aside
– Order of conviction passed by the trial court, restored.
Allowing the appeals, the Court
HELD: 1.1 Under Section 139 of the Negotiable
Instruments Act, 1881 once a cheque has been signed and
  [2018] 9 S.C.R. 355
  355
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issued in favour of the holder, there is statutory presumption
that it is issued in discharge of a legally enforceable debt or
liability. This presumption is a rebuttable one, if the issuer of the
cheque is able to discharge the burden that it was issued for some
other purpose like security for a loan. In the present case, the
respondent has failed to produce any credible evidence to rebut
the statutory presumption. [Para 8] [360-G-H; 361-A]
1.2 The appellants have proved their case by
over-whelming evidence to establish that the two cheques were
issued towards the discharge of an existing liability and legally
enforceable debt. The respondent having admitted that the
cheques and Pronote were signed by him, the presumption under
Section 139, NI Act would operate.  The respondent failed to
rebut the presumption by adducing any cogent or credible
evidence.  [Para 9] [361-G-H]
Rangappa v. Shrimohan (2010) 11 SCC 441 : [2010] 6
SCR 507 ; K.N. Beena v. Muniyappan and Anr.
(2001) 8 SCC 458 : [2001] 4 Suppl. SCR 374 ;
T. Vasanthakumar v. Vijayakumari (2015) 8 SCC 378 :
[2015] 5 SCR 342– referred to.
Case Law Reference
[2010] 6 SCR 507
    referred to
Para 6
[2001] 4 Suppl. SCR 374  referred to
Para 6
[2015] 5 SCR 342
    referred to
Para 6
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
Nos. 950-951 of 2018.
 From the Judgment and Order dated 27.09.2013 of the High Court
of Judicature at Madras in Crl. Rev. Case Nos. 1658
& 1657 of
2008.
Mrs. V. Mohana, Sr. Adv., Ms. Kashvi Dutta, Anup Kumar, Advs.
for the Appellants.
R. Basant, Sr. Adv.,  B. Raghunath, Arockiaraj, Vijay Kumar,
Advs. for the Respondent.
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The Judgment of the Court was delivered by
INDU MALHOTRA, J.  1. The present Special Leave Petitions
have been filed against the common judgment and order dated 27.09.2013
passed by the High Court of Judicature at Madras in Criminal Revision
Case Nos. 1657 and 1658 of 2008. That after issuance of notice, Special
Leave Petitions were heard finally.
 Leave granted.
1.1 These Appeals arise out of two complaints filed under S.138 of
the Negotiable Instruments Act (“the N.I. Act”) filed by the
appellants against the respondent for dishonour of two cheques
of Rs.37,00,000/- and Rs.14,00,000/- respectively.
2.   The facts of the case briefly stated are as under: -
2.1 The appellants submit that they were inducted in Maanihada Tea
Produce Company Pvt. Ltd. being run by the respondent to
infuse capital by way of deposits and shares.
2.2 On 24.11.1998, the appellants resigned as Directors of the
Company after which the respondent and his son, DW-3,
remained incharge of the Company.
           The appellants submitted that the respondent failed to return
their share in the company. The appellants made demands for re-
payment of their dues.
           On 07.08.2002, the respondent issued a Promissory Note for
Rs.51,00,000/- in favour of K.Posa Nandhi – the appellant in the
Second Appeal. The Promissory Note records that it was being
issued against a loan. The respondent also issued two cheques
on the same date, one for Rs.37,00,000/- in favour of K.Posa
Nandhi, and
the other for Rs. 14,00,000/- in favour of
T.P.Murugan, towards discharge of their liability for the
investments made in M/s.Maanihada Tea Produce Company.
2.3 The cheques were presented for encashment on 03.02.2003 by
the appellants, which were dishonoured due to “Stop Payment”
instructions issued by the respondent.
2.4 The appellants issued the statutory notices under S.138 of the
N.I. Act calling upon the respondent to discharge their
debt/liability and clear their dues.
T.P. MURUGAN (DEAD) THR. LRS. v. BOJAN
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2.5   The respondent vide his reply dated 17.02.2003 refuted the claim
of the appellants.
2.6  The appellants filed two complaints under S. 138 of the N.I. Act
before the Court of Judicial Magistrate II, Coimbatore.
2.7  The respondent contended that the signed blank Promissory Note
was issued by him in favour of N.R.R. Finances Investments
Pvt. Ltd. under a hire-purchase agreement for purchasing a lorry
on loan basis.  The said Promissory Note was not issued in favour
of the appellant-complainants. The Promissory Note was filled
up by DW.2 Mahesh, an employee of N.R.R. Investments, after
the signatures of the respondent were obtained on the same.
             With respect to the two cheques which were dishonoured,
the respondent contended that these were amongst 10 blank
cheques signed and handed over to the appellant-K.Posa Nandhi
as  security, when he borrowed Rs.5,00,000/- in 1995.  That even
though this loan was re-paid in 1996 with interest, the cheques
were not returned. The respondent further contended that he
had issued a letter on 09.11.2002 asking the appellants to return
the 10 blank cheques.
 3.  The Trial Court found that the respondent had admitted his
signatures both on the Pronote and also on the two cheques for
Rs. 37,00,000/- and Rs.14,00,000/- respectively. The respondent
also admitted that the appellant had invested capital in their
concern viz. M/s. Maanihada Tea Factory.
              The Court
disbelieved the version of the respondent with
respect to the 10 blank cheques issued to the appellant in 1995.
The respondent failed to place any material on record to show
that he had ever asked for return of the 10 blank cheques,
allegedly given by him to the respondent, for seven years.
                That after going through the detailed evidence adduced by
the parties, the Trial Court held that the Cheques and Pronote
were issued for repayment/discharge of a lawful debt. The
respondent was found guilty under S. 138 of the N.I. Act, and
sentenced him to undergo R.I. for six months and Fine of
Rs.5000/-, failing which, he shall undergo one month’s R.I.
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4.   Aggrieved by the said judgment, the respondent-accused filed
Criminal Appeal Nos. 437-438 of 2006 before the District and
Sessions Judge, Fast Track Court No. III, Coimbatore. The
District and Sessions Judge held that the presumption under
Sections 118 and 139 of the N.I. Act was not rebutted by the
respondent.  It was proved by the complainants that there were
insufficient funds in the bank account of the respondent at the
time of issuance of the cheques. The respondent had with mala
fide intention issued “Stop Payment” instructions.  The
respondent failed to give any explanation as to how the Pronote
came into possession of the appellant. Furthermore, the Sessions
Court discarded the evidence adduced by the accused, of DW.2
Mahesh, as being an interested witness, who had falsely stated
that he was an employee of N.R.R. Finances. This was rebutted
by two witnesses viz. PW.2 and PW.4, who were Directors of
N.R.R. Finances who deposed that DW.2 was never employed
by this Company. The District and Sessions Court affirmed the
conviction and sentence awarded by the Trial Court.
5.     Aggrieved by the judgment and order dated 26.11.2008 passed by
the District and Sessions Judge, Fast Track Court No. III,
Coimbatore, the respondent-accused filed two Criminal Revision
Nos. 1657-1658 of 2008 before the Madras High Court. That
even though the appellants herein- complainants had initially
participated in the proceedings, the present appellant was
unrepresented during the final hearing.  The hearing of the Criminal
Revision Petitions proceeded ex parte.
            The High Court recorded that the respondent-accused had
not denied either the issuance of the cheques, or his signatures
on the Pronote and cheques.The denial was only with regard to
the circumstances, the manner and the period during which the
cheques were issued. The High Court took the view that the
burden cast on the respondent-accused was only to raise a doubt
in the mind of the Court about the nature of the transaction. The
Ld. Single Judge accepted the contention of the respondent that
since the cheques and the Pronote were issued on the same date,
it could only be treated as a security, and was not towards any
T.P. MURUGAN (DEAD) THR. LRS. v. BOJAN
[INDU MALHOTRA, J.]
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debt or liability. By raising a doubt with respect to the
circumstances in which the Pronote and cheques were issued,
the respondent had discharged the presumption under S. 139 of
the N.I. Act. The High Court held that the Trial Court and the
Sessions Court erred in applying the legal principles of standard
of proof for the complainant to prove their case.
    The High Court, while exercising its revisional jurisdiction,
reversed the concurrent findings of the Courts below, and set
aside the judgment of conviction and sentence passed against the
accused.
   6.  Aggrieved by the judgment and order dated 27.09.2013 passed in
Criminal Revision Nos. 1657-1658 of 2008, the appellant-
complainants filed the present Special Leave Petitions.
             Mrs. V. Mohana, Sr. Adv. represented the appellants, and
submitted that the respondent-accused has admitted his
signatures on the two dishonoured cheques and on the Pronote.
The appellants-complainants had adduced sufficient evidence to
prove their case. Reliance was placed by the Senior Counsel on
the decisions of this Court in Rangappa vs. Shrimohan [(2010) 11
SCC 441], K.N. Beena vs. Muniyappan and Anr. [(2001) 8 SCC
458]; and T. Vasanthakumar vs. Vijayakumari [(2015) 8 SCC
378] in support of her case.
7. Mr. R. Basanth, Sr. Counsel appeared on behalf of the
respondent-accused, and contended inter alia that the cheques
were not issued towards discharge of a legally
enforceable debt,
but as a security, and that the judgment under challenge required
no interference.
   8.  We have heard Senior Counsel for both parties, and perused the
record. Under Section 139 of the N.I. Act, once a cheque has
been signed and issued in favour of the holder, there is statutory
presumption that it is issued in discharge of a legally enforceable
debt or liability1. This presumption is a rebuttable one, if the
issuer of the cheque is able to discharge the burden that it was
issued for some other purpose like security for a loan.
 1 Refer to K.N. Beena Vs. Muniyappan and Another[(2001) 8 SCC 458; para 6] and
Rangappa vs. Shrimohan [(2010) 11 SCC 441; para 26]
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             In the present case, the respondent has failed to produce any
credible evidence to rebut the statutory presumption.  This would
be evident from the following circumstances:-
(i)   The respondent-accused issued a Pronote for the amount covered
by the cheques, which clearly states that it was being issued for
a loan;
(ii)  The defence of the respondent that he had allegedly issued 10
blank cheques in 1995 for repayment of a loan, has been
disbelieved both by the Trial Court and Sessions Court, on the
ground that the respondent did not ask for return of the cheques
for a period of seven years from 1995. This defence was
obviously a cover-up, and lacked credibility, and hence was rightly
discarded.
(iii)  The letter dated 09.11.2002 was addressed by the respondent
after he had issued two cheques on 07.08.2002 for
Rs.37,00,000/- and Rs.14,00,000/- knowing fully well that he did
not have sufficient funds in his account. The letter dated 09.11.2002
was an after-thought, and was written to evade liability. This
defence also lacked credibility, as the appellants had never asked
for return of the alleged cheques for seven years.
(iv)   The defence of the respondent that the Pronote dated 07.08.2002
signed by him, was allegedly filled by one Mahesh-DW.2, an
employee of N.R.R. Finances, was rejected as being false. DW.2
himself admitted in his cross-examination, that he did not file any
document to prove that he was employed in N.R.R. Finances.
On the
contrary, the appellants - complainants produced PW.2
and PW.4, Directors of N.R.R. Finances Investment Pvt. Ltd.,
and PW.3, a Member of N.R.R. Chit funds, who deposed that
DW.2 was never employed in N.R.R. Finances.
 9.     The appellants have proved their case by over-whelming evidence
to establish that the two cheques were issued towards the
discharge of an existing liability and legally enforceable debt.  The
respondent having admitted that the cheques and Pronote were
signed by him, the presumption under S.139 would operate. The
respondent failed to rebut the presumption by adducing any cogent
or credible evidence.  Hence, his defence is rejected.
T.P. MURUGAN (DEAD) THR. LRS. v. BOJAN
[INDU MALHOTRA, J.]

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10.   In view of the aforesaid facts and circumstances, the impugned
order dated 27.09.2013 passed in Criminal Revision Petition
Nos. 1657 and 1658 of 2008 is hereby set aside, and the order of
Conviction and Fine passed by the Trial Court is restored.
11.   The Appeals are allowed accordingly.
Divya Pandey
                               Appeals allowed.