The Commisisoner of Income Tax-IV, vs. M/S Lokesh Machines Limited,

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF JANUARY, 2023 BEFORE THE HON'BLE MR JUSTICE P.N.DESAI CRIMINAL APPEAL NO. 172 OF 2012 (A) BETWEEN: SMT. G. SUMA, W/O. SRI. B.C SIDDARAJU, AGED ABOUT 34 YEARS, C/O.K L HARISH, KRS. AGRHARA KUNIGAL TOWN, KUNIGAL, TUMKUR DISTRICT. …APPELLANT (BY SRI. GIRISH H.C, ADVOCATE FOR SRI. C.P DHANANJAYA,

ADVOCATE) AND: SRI. K.G. RAJU, S/O.SRI. GANGAIAH, AGED ABOUT 51 YEARS, THE PROPRIETOR, MAYURA STUDIO, TAPCMS BUILDING, KUNIGAL TOWN, KUNIGAL, TUMKUR DISTRICT. …RESPONDENT (BY SRI. AKARSH KUMAR, ADVOCATE FOR SRI. NARENDRA D.V.

GOWDA, ADVOCATE)

R Digitally signed by NAGARATHNA M Location: HIGH COURT OF KARNATAKA

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THIS APPEAL IS FILED U/S. 378(4) CR.P.C BY THE ADV., FOR THE APPELLANT PRAYING TO SET ASIDE THE ORDER DT:29.01.11 PASSED BY THE P.O., FTC-II, TUMKUR IN CRL.A.NO.100/10 - ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT RESTORE THE ORDER DATED:3.8.10 PASSED BY THE PRL. C.J., JMFC, KUNIGAL IN C.C.NO.12/06.

THIS APPEAL, COMING ON FOR FURTHER HEARING, THIS DAY, THE COURT DELIVERED THE FOLLOWING:

JUDGMENT

This appeal is filed challenging the judgment of acquittal dated 29.01.2011 passed in Crl.A.No.100/2010 by the Presiding Officer, Fast Track Court-II, Tumkur, wherein the respondent accused was acquitted for the offence punishable under section 138 of Negotiable Instruments Act, 1988('N.I. Act' for short) by reversing the judgment of conviction and order of sentence dated 03.08.2010 passed in C.C.No.12/2006 by learned Prl. Civil Judge & JMFC, Kunigal. 2. The appellant was the 'complainant' and the respondent was the 'accused' before the trial court. They will be referred as such as per their respective ranks before the trial Court in this appeal.

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evidence and he got examined himself as DW-1 and got marked 23 documents. After hearing the arguments, the learned Prl. Civil Judge, Kunigal convicted the accused for the offence punishable under section 138 of N.I. Act and imposed fine of Rs.70,000/-. It was also ordered that out of the amount so realised, a sum of Rs.65,000/- shall be paid to the complainant as compensation under section 357 (3) Cr.P.C. The same was challenged by the accused before the learned Presiding Officer, FTC-II, Tumakuru. Learned Sessions Judge allowed the said appeal and set-aside the judgment of conviction and acquitted the accused. Challenging the same, the present appeal is filed by the complainant. 5. Heard Sri. Girish H.C. for Sri. C.P. Dhananjay for the appellant and Sri. Akarsh Kumar, for Sri. Narendra D.V. Gowda, learned counsel for the respondent. Perused the judgment of the trial court and also the appellate court.

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inpatient. It was admitted that he has spent Rs.40,000/- towards medical expenses. The same is not considered. Once the issuance of cheque Ex-P1 and the signature found are admitted by the respondent/accused, then the appellant is entitled for statutory presumption. The appellate court failed to appreciate the fact that the accused/respondent has not adduced evidence to rebut the presumption. The appellate Court has committed an error by not considering the fact that notice was sent to the correct address of the accused and she has complied the statutory obligation. Therefore, the learned counsel argued that the order of the learned Appellate Court needs to be set-aside and the judgment of the trial court needs to be confirmed.

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borrowed the amount for his treatment. The appellate court has rightly held that the appellant has not produced the documents to show that he has paid the income-tax and it is not shown what is the bank amount and after considering the evidence on record has rightly held that the trial court has wrongly convicted and has set-aside the said order. Said order is proper, legal and needs no interference by this Court. Hence, prayed to dismiss the appeal.

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Rs.10,000/- and imposition of fine of Rs.70,000/- is illegal. Accordingly, he has set-aside the judgment.

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These documents prima-facie indicate that the complainant has satisfied the ingredient of section 138 of N.I. Act.

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referred to section 27 of the General Clauses Act and section 114 of the Evidence Act and held that notice sent by registered post, if it is returned with an endorsement not available, refused, house lock, shop locked, due service has to be presumed and it is held at paras 13, 14 and 15 as under: 13. "It is clear from Section 27 of the General Clauses Act, 1897 and Section 114 of the Indian Evidence Act, 1972, that once notice is sent by registered post by correctly addressing to the drawer of the cheque, the service of notice is deemed to have been effected. Then requirements under proviso (b) of Section 138 stands complied, if notice is sent in the prescribed manner. However, the drawer is at liberty to rebut this presumption.

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house” or “house locked” or “shop closed” or “addressee not in station”, due service has to be presumed. Though in process of interpretation right of an honest lender cannot be defeated as has happened in this case. From the perusal of relevant sections it is clear that generally there is no bar under the N.I. Act to send a reminder notice to the drawer of the cheque and usually such notice cannot be construed as an admission of non-service of the first notice by the appellant as has happened in this case."

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distinction between “giving of notice” and “receiving of notice”, as found in Black’s Law Dictionary, namely, “A person notifies or gives notice to another by taking such steps as may be reasonably required, to inform the other in the ordinary course, whether or not such other actually comes to know of it. The court has held that if the above compliance is found, it is duly delivered to him or at his place of business. The apex court has further held that if a strict interpretation is given that the drawer should have actually received the notice for the period of 15 days to start running, no matter that the payee sent the notice to the correct address, a trickster cheque drawer would get the premium to avoid receiving notice by different strategies and he can escape from the legal consequences of Section 138 of the Act. The court has laid down that the court should not adopt an interpretation which helps a dishonest evader and clips a honest payee, as that would defeat the very legislative measure and has held that the context envisaged in section 138 of the Act invites a liberal interpretation for the person, who has the statutory obligation to give notice, because he is presumed to be the loser in the transaction and it is for his interest the very provision is made by the Legislature. The tenor of clause (b) of the Proviso to Section 138, indicates that a payee has a statutory obligation to make a demand” by giving notice. The thrust in the clause is on the need to make a demand. It is only the mode for making such demand, which the Legislature has prescribed. A payee can send the notice for doing his part of giving the notice. Once it is dispatched, his part is over and the next depends on what the sendee does. It is well settled that a notice refused to be accepted by the addressee, can be presumed to have been served on him. In answering the question, whether there would be any significant difference between the two circumstances, where the notice is returned as, “unclaimed” and not “as refused”, the apex Court has drawn attention to Section 27 of the General Clauses Act, 1897, which reads as follows:-

“27. Meaning of service by post. Where any central Act or Regulation made after the

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commencement of this Act authorizes or requires any document to be served by post, whether the expression “serve” or either of the expressions “give” or “send” or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.”

The apex court has held that though Section 138 does not require that the notice should be given only by post. Nonetheless the principle incorporated in Section 27 could profitably be imported in a case where the sender has dispatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was responsible for such non-service. Any other interpretation can lead to a very tenuous position as the drawer of the cheque, who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding notice. The apex court has held in that case as well that when a notice was returnable by the sendee as unclaimed, such date would be the commencing date in reckoning the period of 15 days contemplated in clause (d) of the Proviso to Section 138 of the NI Act. It would however be open to the drawer of the cheque to show that he had no knowledge that notice was brought to his address."

Therefore, the contention of the respondent that the notice is not served is not at all tenable.

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sections 118 and 139 of N.I. Act, a presumption arises in favour of holder of the cheque that the complainant received the same in discharge of an existing debt by drawer of cheque. Ofcourse, the initial burden of proving the ingredient of the offence is on the complainant himself. The accused can rebut that presumption by two ways; Firstly, by way of cross-examining the complainant and show before the Court that the case set up by the complainant is not tenable and defence of accused is probable. Secondly, the accused can also lead his defence evidence and rebut the presumption. Ofcourse, the proof of defence is not a proof beyond all reasonable doubt as in IPC or other criminal case, but it is a proof based on preponderance of probabilities. The dishonor of cheque cases which are popularly called as ‘cheque bounce cases’ are quasi civil in nature and they are regulatory offences.

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complainant. She has stated that the cheque was typed and it was given to her to sign only. It is suggested that when there was transaction between the father of the complainant and the accused, this cheque was forged and misused and that complainant colluded with the postal department, she has denied that suggestion. It is suggested that the accused has no transaction with her. She has denied it. This defence is contrary to the evidence of the accused. There was no defence of allegation of forgery set up by the accused. It is not the contention of accused that it is not his account, cheque does not belong to his account nor his signature is disputed. [ 19. PW-2-Prakash is the manager of DCC Bank, Kunigal has stated about Ex-P1 cheque and identified Ex-P1 and he has compared the said cheque with the earlier cheques and stated that signature at Ex-P1(a) belongs to accused only.

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father for last 20 years and the father of the complainant has taken the cheque as security and he has issued the said cheque about 13 years back for that purpose. Though he asked the father of the complainant to return the said cheque three or four times, complainant told it was lost. As accused was knowing the complainant and her father, he kept quiet and now a false case is filed against him. But no such suggestion as stated in his defence are made to PW-1 complainant. Not a single word regarding chit business is asked nor it is stated that as a security for the chit business, he has given the said cheque. Accused states he was in hospital when the notice came. It shows that accused was aware of notice, then he could have stated his defence by replying said notice.

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for the sake of defence. It is also admitted that the accused has not informed the Bank not to make any payment as the cheque was not returned. The accused cannot say on which day he was in hospital, he simply states that he was in hospital in Bengaluru and Tumkur for about 15 days. He was having cold and cough. He has spent about 40,000/- for treatment. He has produced medical records documents. That itself shows that accused has spent huge amount for his medical expenses. The date of transaction by the complainant with the accused and the date of treatment tallies with the contention of the complainant that for his medical treatment, accused has borrowed loan of Rs.50,000/-. No questions were put to the complainant to show that she had no financial capacity to pay the said amount. Learned Sessions Judge without there being any evidence or any defence in this regard has imagined a ground and passed erroneous order.

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admitted his signature on cheque. He says, it was given to the father of the complainant in the year 1994-1995 as a security, but no steps were taken by the accused to get back that cheque. Though learned JMFC has rightly discussed the evidence, but the learned Sessions Judge misdirected himself and went on imagining the circumstances which are not supported by oral or documentary evidence. The Hon'ble Supreme Court stated in several judgments as to how to appreciate the evidence in cases arising under N.I. Act and how the Court has to raise presumption and how the accused can rebut said presumption.

(2010) 1 SCC (Cri) 288] because the High Court has set aside the judgment of the trial court without pointing out any perversity therein. The said case of Arulvelu [Arulvelu v. State, (2009) 10 SCC 206 :

(2010) 1 SCC (Cri) 288] related to the offences under Sections 304-B and 498-A IPC. Therein, on

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the scope of the powers of the appellate court in an appeal against acquittal, this Court observed as follows : (SCC p. 221, para 36)

“36. Careful scrutiny of all these judgments leads to the definite conclusion that the appellate court should be very slow in setting aside a judgment of acquittal particularly in a case where two views are possible. The trial court judgment cannot be set aside because the appellate court's view is more probable. The appellate court would not be justified in setting aside the trial court judgment unless it arrives at a clear finding on marshalling the entire evidence on record that the judgment of the trial court is either perverse or wholly unsustainable in law.”

The principles aforesaid are not of much debate. In other words, ordinarily, the appellate court will not be upsetting the judgment of acquittal, if the view taken by the trial court is one of the possible views of matter and unless the appellate court arrives at a clear finding that the judgment of the trial court is perverse i.e. not supported by evidence on record or contrary to what is regarded as normal or reasonable; or is wholly unsustainable in law. Such general restrictions are essentially to remind the appellate court that an accused is presumed to be innocent unless proved guilty beyond reasonable doubt and a judgment of acquittal further strengthens such presumption in favour of the accused. However, such restrictions need to be visualised in the context of the particular matter before the appellate court and the nature of inquiry therein. The same rule with same rigour cannot be applied in a matter relating to the offence under Section 138 of the NI Act, particularly where a presumption is drawn that the holder has received the cheque for the discharge, wholly or in part, of any debt or liability. Of course, the

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accused is entitled to bring on record the relevant material to rebut such presumption and to show that preponderance of probabilities are in favour of his defence but while examining if the accused has brought about a probable defence so as to rebut the presumption, the appellate court is certainly entitled to examine the evidence on record in order to find if preponderance indeed leans in favour of the accused.

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118 and 139 of the NI Act. This Court stated the principles in Kumar Exports [Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513 : (2009) 1 SCC (Civ) 629 : (2009) 1 SCC (Cri) 823] as follows : (SCC pp. 520-21, paras 20-21)

“20. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability,

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the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act.

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facts/material/circumstances which could be of a reasonably probable defence.

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trail court relied upon the decision of this Court reported in M.C. Mohammed V. Smt. Gowramma and Others reported in 2007 (1) KLJ 378, wherein it is held that if notice is returned that it was not claimed, it is presumed to have been served in the absence of unrebuttal evidence.

Section 29 of Cr.P.C. reads as under:-

29.Sentences which Magistrates may pass-

(1) The Court of a Chief Judicial Magistrate may pass any sentence

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authorised by law except a sentence of death or of imprisonment for life or of imprisonment for a term exceeding seven years.

(2)The Court of a Magistrate of the first class may pass a sentence of imprisonment for a term not exceeding three years, or of fine not exceeding [ten thousand rupees], or of both.

(3) The Court of a Magistrate of the second class may pass a sentence of imprisonment for a term not exceeding one year, or of fine not exceeding [five thousand rupees], or of both.

(4)The Court of a Chief Metropolitan Magistrate shall have the powers of the Court of a Chief Judicial Magistrate and that of a Metropolitan Magistrate, the powers of the Court of a Magistrate of the first class.

Section 138 of N.I. Act reads as under:- Section 138: Dishonour of cheque for insufficiency, etc., of funds in the account. — Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice

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to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period of six months* from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. (emphasis supplied)

Explanation.— For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.] * The period has been reduced from six months to three months vide R.B.I. Notification No.RBI/2011- 12/251, DBOD.AML BC. No.47/14.01.001/2011- 12, dated 4th November 2011(w.e.f. 1-4-2012).

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Section 4 of Cr.P.C. deals with Trial of offences under the Indian Penal Code and other laws. It reads as under:- 4. Trial of offences under the Indian Penal Code and other laws- (1) All offences under the Indian Penal Code (45 of 1860) shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions hereinafter contained.

(2) All offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences."

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being in force, or any special jurisdiction or power conferred, or any special form of procedure prescribed, by any other law for the time being in force. 29. Further, Chapter XVII of N.I. Act deals with penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts. Sections 138 to 149 states what is dishonour of cheque, what is presumption, what defence can be taken, how cognizance of the offence is to be taken, what is the power of the court to try the cases, mode of service, evidence on affidavit and compounding of offences and prima-facie evidence of bank's slip. Therefore, when special procedure is prescribed and penalty is also prescribed under section 138 of N.I. Act, then general provision of section 29 Cr.P.C. has no application.

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resulted in miscarriage of justice needs interference by this Court. Hence, the said order needs to be set aside.

Accordingly, I pass the following: O R D E R 1. The appeal filed by the appellant-complainant under section 378(4) Cr.P.C. stands allowed.

Sd/- JUDGE MN List No.: 1 Sl No.: 6