M/S. KALAMANI TEX & ANR versus P. BALASUBRAMANIAN
[2021] 1 S.C.R. 668, Supreme Court of India, 2021
Outcome: Dismissed (Dismissed)
Segment: Facts
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M/S. KALAMANI TEX & ANR
v.
P. BALASUBRAMANIAN
(Criminal Appeal No. 123 of 2021)
FEBRUARY 10, 2021
[N.V. RAMANA, SURYA KANT AND
ANIRUDDHA BOSE, JJ.]
Negotiable Instruments Act, 1881: ss. 118 and 139 –
Presumption as to negotiable instruments – Presumption in favour
of holder – Held: Once the signature of an accused on the cheque/
negotiable instrument are established, then the ‘reverse onus’ clauses
become operative – In such a situation, the obligation shifts upon
the accused to discharge the presumption imposed upon him –
Presumptions raised u/ss. 118, 139 are rebuttable in nature – A
probable defence needs to be raised, which must meet the standard
of “preponderance of probability”, and not mere possibility – On
facts, trial court overlooked the provisions and failed to appreciate
the statutory presumption drawn u/ss. 118 and 139, and dismissed
the complaint u/s. 138 of the NI Act – Once the appellant-accused
admitted his signatures on the cheque and the Deed, the trial court
ought to have presumed that the cheque was issued as consideration
for a legally enforceable debt – Trial court erred in calling upon
the complainant to explain the circumstances under which the
appellants were liable to pay – Since it is admitted that there has
been business relationship between the parties, the defence raised
by the appellants does not meet the standard of ‘preponderance of
probability’ – Thus, the
High Court right in discarding the appellants’
defence and upholding the onus imposed upon them in terms of ss.
118 and 139 – High Court justified in setting aside the findings of
the trial court in exercise of its power u/s. 378 CrPC.
Compensation: Claim of, in cases pertaining to dishonor of
cheque – On facts, the respondent neither sought for compensation
before the High Court nor did he challenged the High Court’s
judgment – Held: Since the respondent has accepted the High
Court’s verdict, his claim for compensation stands impliedly
overturned.
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Sentence/sentencing: Reduction/modification of sentence –
Commission of offence u/s. 138 of the NI Act – In appeal before the
Supreme Court, appellants-accused deposited the cheque amount
with the Registry of this Court – In view of dismissal of appeal,
appellant No.2 liable to undergo the sentence of simple imprisonment
as awarded by the High Court – However, since the appellant no 2
volunteered and thereafter deposited the cheque amount with the
Registry of this Court, a lenient view is taken – Appellant No.2 not
required to undergo the awarded sentence – Negotiable Instruments
Act, 1881.
Dismissing the appeal, the Court
HELD: 1.1 The trial court completely overlooked the
provisions and failed to appreciate the statutory presumption
drawn under Section 118 and Section 139 of Negotiable
Instruments Act, 1881. The Statute mandates that once the
signature(s) of an accused on the cheque/negotiable instrument
are established, then these ‘reverse onus’ clauses become
operative. In such a situation, the obligation shifts upon the
accused to discharge the presumption imposed upon him.
[Para 14][676-B-D]
Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18
SCC 106– Referred to
1.2 Once the 2nd Appellant had admitted his signatures on
the cheque and the Deed, the trial court ought to have presumed
that the cheque was issued as consideration for a legally
enforceable debt. The trial court fell in error when it called upon
the complainant-respondent to explain
the circumstances under
which the appellants were liable to pay. Such approach of the trial
court was directly in the teeth of the established legal position
and amounts to a patent error of law. [Para 15][676-F-H]
1.3 The presumptions raised under Section 118 and Section
139 are rebuttable in nature. A probable defence needs to
be raised, which must meet the standard of “preponderance
of probability”, and not mere possibility. A bare denial of
passing of consideration would not aid the case of the accused.
[Para 16][677-A-B]
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1.4 The appellants have banked upon the evidence of DW-
1 to dispute the existence of any recoverable debt. However, his
deposition merely highlights that the respondent had an over
extended credit facility with the bank and his failure to update
his account led to debt recovery proceedings. Such evidence does
not disprove the appellants’ liability and has a little bearing on
the merits of the respondent’s complaint. Similarly, the appellants’
mere bald denial regarding genuineness of the Deed of
Undertaking dated 07.11.2000, despite admitting the signatures
of Appellant No. 2 thereupon, does not cast any doubt on the
genuineness of the said document. [Para 17][677-C-D]
1.5 Even if the arguments raised by the appellants are taken
at face value that only a blank cheque and signed blank stamp
papers were given to the respondent, yet the statutory
presumption cannot be obliterated. Considering the fact that there
has been an admitted business relationship between the parties,
the defence raised by the appellants does not inspire confidence
or meet the standard of ‘preponderance of probability’. In the
absence of any other relevant material, it appears that the High
Court did not err in discarding the appellants’ defence and
upholding the onus imposed upon them in terms of Section 118
and Section 139 of the NIA. [Para 18-19][677-D-H]
Basalingappa v. Mudibasapp (2019) 5 SCC 418 :
[2019] 6 SCR 555; Kumar Exports v. Sharma
Carpets
(2009) 2 SCC 513 : [2008] 17 SCR 572; MS Narayana
Menon v. State of Kerela (2006) 6 SCC 39 : [2006] 3
Suppl. SCR 124; Bir Singh v. Mukesh Kumar (2019) 4
SCC 197 : [2019] 2 SCR 24 – referred to
1.6 The object of Chapter XVII of the NIA is not only
punitive but also compensatory and restitutive. The provisions
of NIA envision a single window for criminal liability for dishonour
of cheque as well as civil liability for realisation of the cheque
amount. It is also well settled that there needs to be a consistent
approach towards awarding compensation and unless there exist
special circumstances, the Courts should uniformly levy fine up
to twice the cheque amount along with simple interest at the rate
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of 9% per annum. The respondent, nevertheless, cannot take
advantage of the above cited principles so as to seek
compensation. The record indicates that neither did the
respondent ask for compensation before the High Court nor has
he chosen to challenge the High Court’s judgment. Since, he has
accepted the High Court’s verdict, his claim for compensation
stands impliedly overturned. The respondent, in any case, is
entitled to receive the cheque amount of Rs.11.20 lakhs which
the appellant has already deposited with the Registry of this Court.
As regards award of sentence by the High Court, given the
peculiar facts and circumstances of the case, namely, that the
appellants volunteered and thereafter have deposited the cheque
amount with the Registry of this Court in the year 2018, a lenient
view is taken. The impugned judgment of the High Court is
modified, and it is directed that Appellant No.2 would not be
required to undergo the awarded sentence. [Para 20-22]
[678-A-F]
Ram Jag v. State of UP (1974) 4 SCC 201 : [1974] 3
SCR 9; Rohtas v. State of Haryana (2019) 10 SCC 554;
Raveen Kumar v. State of Himachal Pradesh 2020 SCC
Online SC 869; Murugesan v. State Through Inspector
of Police (2012) 10 SCC 383 : [2012] 13 SCR 1; Reena
Hazarika v. State of Assam (2019) 13 SCC 289 : [2018]
13 SCR 1108; CK Dasegowda and Others v. State of
Karnatak (2014) 13 SCC 119 : [2014] 8 SCR 295; State
of UP v. Banne (2009) 4 SCC 271; Ghurey Lal v. State
of U.P. (2008) 10 SCC
450 : [2008] 11 SCR 499; R.
Vijian v. Baby (2012) 1 SCC 260 : [2011] 14SCR 712
– referred to
Case Law Reference
[2012] 13 SCR 1
referred to
Para 9
[2018] 13 SCR 1108
referred to
Para 9
[2019] 6 SCR 555
referred to
Para 9
[2008] 17 SCR 572
referred to
Para 9
[2014] 8 SCR 295
referred to
Para 12
(2009) 4 SCC 271
referred to
Para 12
M/S. KALAMANI TEX & ANR v. P. BALASUBRAMANIAN
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[2008] 11 SCR 499
referred to
Para 12
[1974] 3 SCR 9
referred to
Para 13
(2019) 10 SCC 554
referred to
Para 13
(2019) 18 SCC 106
referred to
Para 14
[2006] 3 Suppl. SCR 124
referred to
Para 16
[2019] 2 SCR 24
referred to
Para 18
[2011] 14 SCR 712
referred to
Para 20
CRIMINAL APPELLATE JURISDICTION : Criminal appeal
No.123 of 2021.
From the Judgment and Order dated 09.11.2017 of the High Court
of Judicature at Madras in Crl.A.No.447 of 2002.
S. Nagamuthu, Sr. Adv., M.P. Parthiban, A.S. Vairawan, Mani
Prabhu, Santhosh, R. Sudhakaran, Advs. for the appellants.
Rameshwar Prasad Goyal, Sumit Kumar, Adv. for the respondent.
The Judgment of the Court was delivered by
SURYA KANT, J.
1. Leave Granted.
2. M/s. Kalamani Tex (Appellant No.1) and its managing partner–
B. Subramanian (Appellant No. 2) are in appeal challenging the judgment
dated 09.11.2017 passed by the High Court of Judicature at Madras,
whereby the order of acquittal of the Judicial Magistrate, Tiruppur was
reversed and the appellants have been convicted under Section 138 of
the Negotiable Instruments Act, 1881 (in short, ‘NIA’). Consequently,
Appellant No.2 has been sentenced to undergo three months Simple
Imprisonment and a fine of Rs. 5,000/-.
FACTS
3. The instant proceedings have originated out of a complaint
preferred by P. Balasubramanian (Complainant-Respondent) against the
appellants. The respondent is the proprietor of a garment company named
and styled
as ‘Growell International’, which along with Appellant No.1
was engaged in a business arrangement, whereby they agreed to jointly
export garments to France. Certain issues arose regarding delays in
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shipment and payment from the buyer, due to which, the appellants had
to pay the respondent a sum of Rs 11.20 lakhs. To that end, Appellant
No.2 issued a cheque on behalf of Appellant No. 1 bearing no.897993
dated 07.11.2000 in favour of the respondent and also executed a Deed
of Undertaking on the same day wherein Appellant No.2 personally
undertook to pay the respondent in lieu of the initial expenditure incurred
by the latter. The respondent presented the said cheque to the bank on
29.12.2000 for collection but it was returned with an endorsement that
there were insufficient funds in the account of appellants. In wake of
the cheque being dishonoured, the respondent issued a notice dated
08.01.2001 asking the appellants to pay the amount within 15 days. The
appellants in their reply dated 27.01.2001 denied their liability and claimed
that blank cheques and signed blank stamp papers were issued to help
the respondent in some debt recovery proceedings, and not because of
any legally enforceable debt.
4. The respondent then lodged a private complaint under section
138 and 142 of the NIA read with Section 200 of the Code of Criminal
Procedure, 1973 (in short ‘CrPC’) before the Judicial Magistrate, Tiruppur.
In order to substantiate his claim, the respondent himself entered the
witness box and produced documentary evidence such as the cheque
issued by Appellant No.2. The respondent in his chief-examination initially
contended that the subject amount had been
received by the appellants
from the foreign buyer. However, when recalled on a later date, the
respondent produced the Deed of Undertaking dated 07.11.2000,
whereunder, the 2nd Appellant had acknowledged the liability towards
respondent. One PS Shanmugham (PW-2) who was working as Manager
in State Bank of India, Tiruppur Overseas Branch, was also examined
by the respondent.
5. Appellant No.2 in his statement under Section 313 CrPC plainly
denied the allegations and disputed the existence of any liability towards
the respondent. The appellants also examined one V. Rajagopal (DW-1)
who at the relevant time was working as Assistant Manager in State
Bank of India, Tiruppur Overseas Branch. DW-1 mainly deposed on the
inability of the respondent to pay back the credit that was advanced to
him, and the subsequent debt recovery proceedings initiated against him.
The appellants did not lead any documentary evidence in their defence.
6. The trial Court disbelieved the respondent’s claim and observed
that he had failed to establish a legally enforceable liability on the date of
M/S. KALAMANI TEX & ANR v. P. BALASUBRAMANIAN
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issue of cheque. The Court held that since the basic ingredients of an
offence under Section 138 of the NIA were not satisfied, the complaint
was liable to be dismissed.
7. Discontented with the order of the trial Court, the respondent
preferred a criminal appeal before the High Court, wherein, the Court
noted that Appellant No.2 had admitted his signatures on both the Cheque
and the Deed of Undertaking and had thus acknowledged the appellants’
liability. The High Court therefore vide impugned judgment allowed the
criminal appeal and convicted both the appellants under Section 138 of
NIA. Appellant No. 2 was awarded a sentence of three months simple
imprisonment with a fine of Rs. 5,000/- (or 20 days simple imprisonment
in lieu thereof). Additionally, Appellant No.1 was directed to pay a fine
of Rs. 5,000/-, in default of which, Appellant No. 2 would undergo another
one-month simple imprisonment.
8. The aggrieved appellants are now before this Court. It may be
mentioned at the outset that when the SLP came up for hearing on
12.03.2018, their learned Counsel agreed to deposit the entire amount in
dispute and in deference thereto, the appellants have on 11.04.2018
deposited a sum of Rs. 11.20 lakhs with the Registry of this Court.
CONTENTIONS
9. Learned Senior Counsel for the appellants, nonetheless, desired
to argue the case on merits and contended that there was no legally
enforceable liability on the date of issuance
of the cheque and that blank
stamp papers signed by Appellant No.2 were misused by the respondent
to forge the Deed of Undertaking dated 07.11.2000. Placing reliance on
Murugesan v. State Through Inspector of Police1, he urged that the
view taken by the trial Court was a possible view, and the High Court
committed patent illegality and exceeded its jurisdiction in reversing the
acquittal. Learned Senior Counsel also cited Reena Hazarika v. State
of Assam2to argue that the High Court did not take notice of the defence
raised by the appellants which has caused serious prejudice to them. He
passionately put forth the principles laid down in Basalingappa v.
Mudibasapp3 and Kumar Exports v. Sharma Carpets4,and submitted
thatthe presumption drawn against an accused under Section 118 and
1 (2012) 10 SCC 383, ¶ 32.
2 (2019) 13 SCC 289, ¶ 20.
3 (2019) 5 SCC 418.
4 (2009) 2 SCC 513.
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Section 139 of the NIA is rebuttable through a standard of
“preponderance of probability”, which has been successfully met by
the appellants in the present case.
10. On the other hand, learned Counsel for the respondent
maintained that the decision of the High Court is well reasoned and
founded upon due consideration of all relevant factors of the case. Laying
stress on the undisputed signatures on the cheque and the Deed of
Undertaking dated 07.11.2000, he asserted that the appellants have
admitted their existing liability of Rs.11.20 lakhs. Lastly, while pointing
out the financial loss suffered by the respondent and the adverse impact
on his business, learned Counsel prayed for suitable compensation.
ANALYSIS
11. The short question which falls for our consideration is whether
the High Court erred in reversing the findings of the trial Court in exercise
of its powers under Section 378 of CrPC?
12. Having given our thoughtful consideration to the rival
submissions, we do not find any valid ground to interfere with the
impugned judgment. It is true that the High Court would not reverse an
order of acquittal merely on formation of an opinion different than that
of the trial Court. It is also trite in law that the High Court ought to have
compelling reasons to tinker with an order of acquittal and no such
interference would be warranted when there were to be two possible
conclusions.5 Nonetheless, there are numerous decisions of this Court,
justifying the
invocation of powers by the High Court under Section 378
CrPC, if the trial Court had, inter alia, committed a patent error of law or
grave miscarriage of justice or it arrived at a perverse finding of fact.6
13. On a similar analogy, the powers of this Court under Article
136 of the Constitution also do not encompass the re-appreciation of
entirety of record merely on the premise that the High Court has convicted
the appellants for the first time in exercise of its appellate jurisdiction.
This Court in Ram Jag v. State of UP7, Rohtas v. State of Haryana8and
Raveen Kumar v. State of Himachal Pradesh9, evolved its own
5 CK Dasegowda and Others v. State of Karnatak, (2014) 13 SCC 119 ¶ 14.
6 State of UP v. Banne, (2009) 4 SCC 271,¶ 27; Ghurey Lal v. State of U.P.,  (2008) 10
SCC 450, ¶70.
7 (1974) 4 SCC 201, ¶ 14.
8 (2019) 10 SCC 554, ¶ 12.
9 2020 SCC Online SC 869, ¶ 14.
M/S. KALAMANI TEX & ANR v. P. BALASUBRAMANIAN
[SURYA KANT, J.]
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limitations on the exercise of powers under Article 136 of the Constitution
and has reiterated that while entertaining an appeal by way of special
leave, there shall not ordinarily be an attempt to re-appreciate the evidence
on record unless the decision(s) under challenge are shown to have
committed a manifest error of law or procedure or the conclusion reached
is ex-facie perverse.
14. Adverting to the case in hand, we find on a plain reading of its
judgment that the trial Court completely overlooked the provisions and
failed to appreciate the statutory presumption drawn under Section 118
and Section 139 of NIA.The Statute mandates that once the signature(s)
of an accused on the cheque/negotiable instrument are established, then
these ‘reverse onus’ clauses become operative. In such a situation, the
obligation shifts upon the accused to discharge the presumption imposed
upon him. This point of law has been crystalized by this Court in Rohitbhai
Jivanlal Patel v. State of Gujarat10 in the following words:
“In the case at hand, even after purportedly drawing the
presumption under Section 139 of the NI Act, the trial court
proceeded to question the want of evidence on the part of the
complainant as regards the source of funds for advancing
loan to the accused and want of examination of relevant
witnesses who allegedly extended him money for advancing
it to the accused. This approach of the trial court had been at
variance with the principles of presumption in law. After such
presumption, the onus shifted to the accused and unless the
accused had discharged the onus by bringing on record such
facts and circumstances as to show the preponderance of
probabilities tilting in his favour, any doubt on the
complainant’s case could not have been raised for want of
evidence regarding the source of funds for advancing loan
to the appellant-accused…..”
15. Once the 2nd Appellant had admitted his signatures on the
cheque and the Deed, the trial Court ought to have presumed that the
cheque was issued as consideration for a legally enforceable debt. The
trial Court fell in error when it called upon the Complainant-Respondent
to explain the circumstances under which the appellants were liable to
pay. Such approach of the trial Court was directly in the teeth of the
established legal position as discussed above, and amounts to a patent
error of law.
10 (2019) 18 SCC 106, ¶ 18.
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16. No doubt, and as correctly argued by senior counsel for the
appellants, the presumptions raised under Section 118 and Section 139
are rebuttable in nature. As held in MS Narayana Menon v. State of
Kerela11, which was relied upon in Basalingappa (supra),a probable
defence needs to be raised, which must meet the standard of
“preponderance of probability”, and not mere possibility. These
principles were also affirmed in the case of Kumar Exports (supra),
wherein it was further held that a bare denial of passing of consideration
would not aid the case of accused.
17. The appellants have banked upon the evidence of DW-1 to
dispute the existence of any recoverable debt. However, his deposition
merely highlights that the respondent had an over-extended credit facility
with the bank and his failure to update his account led to debt recovery
proceedings. Such evidence does not disprove the appellants’ liability
and has a little bearing on the merits of the respondent’s complaint.
Similarly, the appellants’ mere bald denial regarding genuineness of the
Deed of Undertaking dated 07.11.2000, despite admitting the signatures
of Appellant No. 2 thereupon, does not cast any doubt on the genuineness
of the said document.
18. Even if we take the arguments raised by the appellants at
face value that only a blank cheque and signed blank stamp papers were
given to the respondent, yet the statutory presumption cannot be
obliterated. It is useful to cite Bir Singh v.
Mukesh Kumar12, where
this court held that:
“Even a blank cheque leaf, voluntarily signed and handed
over by the accused, which is towards some payment, would
attract presumption under Section 139 of the Negotiable
Instruments Act, in the absence of any cogent evidence to
show that the cheque was not issued in discharge of a debt.”
19. Considering the fact that there has been an admitted business
relationship between the parties, we are of the opinion that the defence
raised by the appellants does not inspire confidence or meet the standard
of ‘preponderance of probability’. In the absence of any other relevant
material, it appears to us that the High Court did not err in discarding the
appellants’ defence and upholding the onus imposed upon them in terms
of Section 118 and Section 139 of the NIA.
11 (2006) 6 SCC 39, ¶ 32.
12 (2019) 4 SCC 197, ¶ 36.
M/S. KALAMANI TEX & ANR v. P. BALASUBRAMANIAN
[SURYA KANT, J.]
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20. As regard to the claim of compensation raised on behalf of
the respondent, we are conscious of the settled principles that the object
of Chapter XVII of the NIA is not only punitive but also compensatory
and restitutive. The provisions of NIA envision a single window for
criminal liability for dishonour of cheque as well as civil liability for
realisation of the cheque amount. It is also well settled that there needs
to be a consistent approach towards awarding compensation and unless
there exist special circumstances, the Courts should uniformly levy fine
up to twice the cheque amount along with simple interest at the rate of
9% per annum.13
21. The respondent, nevertheless, cannot take advantage of the
above cited principles so as to seek compensation. The record indicates
that neither did the respondent ask for compensation before the High
Court nor has he chosen to challenge the High Court’s judgment. Since,
he has accepted the High Court’s verdict, his claim for compensation
stands impliedly overturned. The respondent, in any case, is entitled to
receive the cheque amount of Rs.11.20 lakhs which the appellant has
already deposited with the Registry of this Court.
CONCLUSION:
22. For the reasons stated above, the present appeal is liable to be
dismissed. We order accordingly. Ordinarily and as a necessary sequel
thereto, Appellant No.2 would be liable to undergo the sentence of simple
imprisonment as awarded
by the High Court. However, given the peculiar
facts and circumstances of the case, namely, that the appellants
volunteered and thereafter have deposited the cheque amount with the
Registry of this Court in the year 2018, we are inclined to take a lenient
view. The impugned judgment of the High Court dated 09-11-2017 is
thus modified, and it is directed that Appellant No.2 shall not be required
to undergo the awarded sentence. The registry of this Court is directed
to transfer the amount of Rs.11.20 lakhs along with interest accrued
thereupon to the respondent within two weeks.
13 R. Vijian v. Baby, (2012) 1 SCC 260 ¶ 20.
Nidhi Jain
Appeal dismissed.