Case: T.P. MURUGAN(DEAD) THROUGH LRS Vs. BOJAN

The facts of the case briefly stated are asThe 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 andOn 24.11.1998, the appellants resigned as Directors of the Company after which the respondent and his son,remained incharge of theappellants submitted that the respondent failed to return their sharein the company. The appellants made demands for07.08.2002, the respondent issued a Promissory Note for Rs.51,00,000/in favour of K.Posa Nandhithe 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.Posaand 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 ProduceThe cheques were presented for encashment on 03.02.2003 by the appellants, which were dishonoured due tons issued by theThe appellants issued the statutory notices under S.138 of the N.I. Act calling upon the respondent to discharge their debt/liability and clear theirThe respondent vide his reply dated 17.02.2003 refuted the claim of theThe appellants filed two complaints under S. 138 of the N.I. Act before the Court of Judicial Magistrate II,The respondent contended that the signed blank Promissory Note was issued by him in favour of N.R.R. Finances Investments Pvt. Ltd. under aagreement for purchasing a lorry on loan basis. The said Promissory Note was not issued in favour of the appellantcomplainants. 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 therespect to the two cheques which were dishonoured, the respondent contended that these were amongst 10 blank cheques signed and handed over to theNandhi as security, when he borrowed Rs.5,00,000/in 1995. That even though this loan wasin 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 blankThe 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/y. The respondent also admitted that the appellant had invested capital in their concern viz. M/s. Maanihada TeaCourt 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 sevenafter 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 offailing which, he shall undergo oneed by the said judgment, thefiled Criminal Appeal Nos.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 issueds. The respondentfailed 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 TrialAggrieved by the judgment and order dated 26.11.2008 passed by the District and Sessions Judge, Fast Track Court No. III, Coimbatore, thefiled two Criminal Revision Nos.of 2008 before the Madras High Court. That even though the appellants hereincomplainants 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.High Court recorded that thehad 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 thewas 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 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 theirHigh 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.

Court's reasoning:
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 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 athe present case, the respondent has failed to produce any credible evidence to rebut the statutory presumption. This would be evident from the followinged issued a Pronote for the amount covered by the cheques, which clearly states that it was being issued for aThe 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 aand lacked credibility, and hence was rightlyThe letter dated 09.11.2002 was addressed by the respondent after he had issued twocheques on 07.08.2002 for Rs.37,00,000/ng fully well that he did not have sufficient funds in his account. The letter dated 09.11.2002 was anand was written to evade liability. This defence also lacked credibility, as the appellants had never asked for return of the alleged cheques for sevenThe defence of the respondent that the Pronote dated 07.08.2002 signed by him, was allegedly filled by onean employee of N.R.R. Finances, was rejected as being false. DW.2 himself admitted in histhat he did not file any document to prove that he was employed in N.R.R. Finances. On the contrary, the appellantscomplainants 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.