PR.COMMISSIONER vs. M/S SHRIRAM CHITS

For the sake of convenience, parties are referred to by their rank before the trial Court.

It is the case of complainant that he and accused are family friends and known to each other for the past few years. Accused was visiting the house of complainant regularly. During June 2016, accused was under the severe financial constraint and caught in debt trap due to losses in the business. Therefore, he approached the complainant and requested for hand loan of Rs.6 lakhs. Taking pity and considering the long standing relationship, complainant gave hand loan of Rs.6

After due service of summons, accused appeared before the trial Court and contested the case by pleading not guilty.

In order to prove the allegations against accused, complainant has examined himself as PW-1 and relied upon Ex.P1 to 5.

During the course of his statement under Section 313 Cr.P.C, accused has denied the incriminating evidence led by the complainant.

In fact, he has stepped into the witness box and examined himself as DW-1. Accused has relied upon Ex.D1 to 7. 8. Vide the impugned judgment and order, the trial Court dismissed the complaint, amongst other on the ground that the legal notice is not duly served on the accused and that complainant has failed to prove his financial capacity.

Complainant has challenged the impugned judgment and order, contending that the trial Court has gravely erred in not considering the fundamental principle of law while passing the impugned judgment and order. It has not given due consideration to Ex.P1 to 5. It failed to consider the admissions given by the accused during his cross-examination. Viewed from any angle, the impugned judgment and order are not sustainable and pray to allow

In support of her arguments, learned Amicus Curiae for appellant has relied upon the following decisions: (i) Bir Singh Vs. Mukesh Kumar (Bir Singh)1

On the other hand, learned counsel for accused has supported the impugned judgment and order and sought for dismissal of the appeal.

Heard elaborate arguments of learned Amicus Curiae and learned counsel for respondent and perused the record.

Before going to the merits of the case, it is necessary to examine whether the legal notice is duly served on the accused or not. During the trial, the accused has taken up a specific defence that the notice is not duly served on him. However, he does not dispute his address to which the legal notice is sent. In fact, during his cross- examination, the accused has stated that the acknowledgement at Ex.P5 bears signature of his sister- in-law i.e, brother's wife. It is not his case that his brother's wife is not residing in the same premises and that she has not brought the fact of service of notice through Ex.P5 to his notice. Thus, through Ex.P5, the legal notice sent by complainant is duly served on the accused. However, he has not chosen to send reply to the same.

As held by the Hon'ble Supreme Court in C.C.Alvi Haji, the object and purpose of issue of legal notice to the accused is to enable honest drawer of cheque to make payment within the specified time and thereby

Now coming to the merits of the case, it is the definite case of the complainant that at the relevant point of time, the accused had suffered heavy loss in the business and in order to come out of the same, he secured hand loan of Rs.6 lakhs from the complainant and issued the subject cheque to him. The accused admitted that the subject cheque is drawn on his account, maintained with his banker and it bears his signature. He has disputed the loan transaction and alleged that the son of complainant was visiting the shop of accused and during the said time he has taken a blank signed cheque belonging to the

Having regard to the fact that the cheque in question belongs to accused, drawn on his account maintained with his banker and it bears his signature, presumption under Section 139 of the N.I Act is operating in favour of the complainant, placing the initial burden on the accused to prove that the cheque was not issued towards repayment of any debt or liability and on the other hand to establish the circumstances in which the cheque has reached the hands of the complainant. Though accused has not sent reply to the legal notice challenging the financial capacity of complainant to lend him hand loan of Rs.6 lakhs, during the trial he has challenged his financial capacity.

In John K.Abraham Vs. Simon C. Abraham & Anr (John K.Abraham)6, the Hon'ble Supreme Court held that in order to draw presumption under Sections 118 and 139 of N.I Act, the burden lies on the complainant to show that:

Therefore, as held by the Hon'ble Supreme Court in Tedhi Singh Vs Narayan Das Mahant (Tedhi Singh)7, where the accused has failed to send reply to the legal notice, challenging the financial capacity of the complainant, at the first instance, complainant need not prove his financial capacity. However, at the trial if the financial capacity of

In APS Forex vs Shakti International Fashion Linkers Pvt. Ltd (APS Forex)8, the Hon'ble Supreme Court held that when accused raises issue of financial capacity of complainant, in support of his probable defence, despite presumption operating in favour of complainant regarding legally enforceable debt under Section 139 of N.I. Act, onus shifts again on the complainant to prove his financial capacity by leading evidence, more particularly when it is a case of giving loan by cash and thereafter issue of cheque.

In Vijay Vs. Laxman and Anr (Vijay)9, K.Subramani Vs. K.Damadara Naidu (K.Surbamani)10 and K.Prakashan Vs. P.K.Surenderan (K.Prakashan)11, also the Hon'ble Supreme Court held that the presumption under Section 139 of N.I. Act, is a rebuttable presumption and

In the light of ratio in the above decisions, it is necessary to examine whether the complainant has proved his financial capacity to lend Rs.6 lakhs to the accused, only after which the burden would shift on the accused to prove his defence.

In the complaint, complainant has not stated whether the amount in question was paid by cash or otherwise. However, during his cross-examination, complainant has specifically stated that he paid the loan amount in the form of cash and at that time his i.e., complainant's son was present. He has stated that always he keeps cash in his house, but he is not having any documents to prove the same. It is elicited during his cross-examination that complainant normally carry out his transactions through Bank account and when suggested that there was no impediment to pay the amount to

When questioned whether the fact of having given hand loan of Rs. 6 lakhs to the accused is reflected in his Income Tax Returns, complainant has replied that it would be done in the next year. His cross-examination is dated 30.05.2017. Even where it is held that he still had time to file Income Tax Returns, subsequently also complainant has not chosen to produce Income Tax Returns to show that the fact of having lent Rs.6 lakhs to accused is reflected therein. Though complainant has stated that in the accounts maintained by him, the fact of loan given to accused is reflected but the same is not produced. Admittedly, complainant has not produced his Income Tax Returns to show the cash available at his hands. Thus, the complainant has failed to prove that at the relevant point of time, he had financial capacity to lend Rs.6 lakhs to the accused.

It has come in the evidence that the shop of complainant and accused were situated side by side. The accused has taken up a specific defence that he is hailing from Rajasthan and every year thrice or four times he used to visit Rajasthan and at that time he was keeping signed blank cheques with the Manager. The accused has alleged that the son of complainant managed to lift one such cheque and utilizing the same the present complaint is filed. During the course of his evidence complainant has deposed to that effect. One of the circumstance he has relied upon to prove this fact is that earlier he was running business in the name and style of M/s Bangalore Computer Inc and was having account No.039211011010898 in the name of the said business. According to the complainant he has closed the said business and accordingly also closed account No.039211011010898 on 07.01.2014.

Accused has claimed that after closure of the said business he started the same business in the name

In the complaint, it is pleaded that accused approached complainant for hand loan during June 2016 and pursuant to the same, he paid the amount and on the same day, accused issued the subject cheque dated

The complainant has admitted that normally within Bengaluru City, it takes about 3 days for encashment. It is relevant to note that according to the complainant, he presented the subject cheque on 03.12.2016. Bank has issued the endorsement at Ex.P2 on 14.12.2016. Accused has alleged that colluding with the Bank Manager he has secured a false endorsement and therefore, it took such a long time for the Bank to issue the said endorsement. Of course complainant has denied the said suggestion. Ex.D2 to 7 produced by the accused prove that at the relevant point of time he was having sufficient balance in his account. The complainant has

Accused has also stated that the Manager with whom signed cheques used to be kept has left the job and gone to Pune. In fact a suggestion is made to the accused that while recording his plea, he has stated that the subject cheque was misplaced in 2009. The overall examination of the evidence placed on record makes it evident that complainant has failed to prove his financial capacity. On the other hand through the oral and documentary evidence placed on record, coupled with the cross-examination of complainant, accused has proved his defence by preponderance of probabilities.

Though the findings of the trial Court that there was no due service of notice is erroneous, taking into consideration the oral and documentary evidence placed