THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. SAMARTH URBAN COOPERATIVE CREDITJ SOCIETY LTD.,

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IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 30TH DAY OF MAY, 2023 BEFORE THE HON'BLE MR JUSTICE ANIL B KATTI CRIMINAL APPEAL NO. 100172 OF 2015 BETWEEN:

BHEEMREDDY S/O SHIVAPPA RAJUR, AGE: 36 YEARS, OCC: PRIVATE SERVICE, R/O: HUDCO COLONY, KOPPAL ROAD, MUNDARGI, TQ and DIST: GADAG. …APPELLANT

(BY SRI. S.B. DODDAGOUDAR, ADV.)

AND:

1 . EVEN. G. GUDGUNTI, AGE: 52 YEARS, OCC: BUSINESS, R/O MISSION COMPOUND, HUBBALLI, DIST: DHARWAD.

2 . THE STATE OF KARNATAKA REPRESENTED BY ITS STATE PUBLIC PROSECUTOR, HIGH COURT OF KARNATAKA, DHARWAD BENCH, DHARWAD. …RESPONDENTS (BY SRI. G.A. BHAT AND MISS. SEEMA SHIVA NAIK, ADVS. FOR R1 AND SRI. PRAVEEN K. UPPAR, HCGP FOR R2) ***

THIS CRIMINAL APPEAL IS FILED U/S 378(4)OF CR.P.C. PRAYING TO SET ASIDE THE ORDER OF ACQUITTAL DATED 30.06.2015, PASSED BY THE LEARNED DISTRICT AND SESSIONS JUDGE, GADAG, IN CRL. APPEAL NO.36/2014 REVERSING THE ORDER OF CONVICTION DATED 25.09.2014 PASSED BY THE LEARNED CIVIL JUDGE AND JMFC, MUNDARGI IN C.C. NO.27/2011.

J MAMATHA Digitally signed by J MAMATHA Date: 2023.05.28 02:34:54 +0530

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THIS APPEAL COMING ON FOR ARGUMENTS AND THE SAME HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 15.03.2023, THIS DAY, THE COURT, DELIVERED THE FOLLOWING:

JUDGMENT

The appellant-complainant feeling aggrieved by the judgment of First Appellate Court on the file of Addl. District and Sessions Judge, Gadag in Crl.A.No.36/2014 dated 30.06.2015 preferred this appeal. 2. Parties to the appeal are referred with their ranks as assigned in the trial Court for the sake of convenience. 3. The factual matrix leading to the case of complainant can be stated in nutshell to the effect that complainant is working as an authorized agent for Swaraj Tractor and Farm Equipments Agent and well acquainted with the accused. Accused started partnership business at Mundargi under the name and style of Suvarna Auto Care and availed over draft facility of Rs.20,00,000/- under over draft account No.125/270 from Syndicate Bank, Mundargi branch. Accused closed the business of firm M/s. Suvarna Auto Care without closing the OD account. On Bank insisting complainant, being surety for the over draft account of accused, has paid

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Rs.7,50,000/- on different dates. Complainant has discharged the said debt of accused being principal borrower. Accused in order to repay the said amount has issued cheque drawn on Syndicate Bank, Mundaragi branch dated 16.08.2010 bearing cheque No.576538. Complainant presented the said cheque through his banker Syndicate Bank on 16.08.2010 for encashment and the same came to be dishonored on 28.08.2010 as “Funds insufficient”. Complainant issued demand notice on 30.08.2010. The said notice was duly served to the accused on 31.08.2010. Accused has replied to the demand notice on 13.09.2010 and denied the transaction made by the complainant towards the OD loan account at Syndicate Bank, Mundargi branch by giving evasive reply. Therefore, complaint came to be filed on 11.10.2010 for taking appropriate legal action against the accused. 4. In response to the summons, accused has appeared through counsel and contested the matter. Complainant in order to prove his case relied on the evidence of PW.1 and PW.2 and the documents Ex.P1 to P11. 5. On closure of complainant side, statement of accused under Section 313 of Cr.P.C. came to be recorded.

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Accused denied all incriminating material evidence appearing against him and claimed that false case is filed. Accused led his own evidence as DW-1. The trial Court after appreciating the evidence on record convicted the accused for the offence under Section 138 of Negotiable Instruments Act and imposed sentence as per order of sentence. 6. The accused has challenged the said judgment of conviction and order of sentence before the First Appellate Court on the file of First Additional District and Sessions Judge, Gadag in Crl.A.No.36/2014. The First Appellate Court by judgment dated 30.06.2015 allowed the appeal and set aside the judgment of conviction and order of sentence passed by the trial Court. 7. Appellant-complainant challenged the judgment of First Appellate Court and filed this appeal contending that the trial Court on proper appreciation of evidence on record and by raising statutory presumption in terms of Section 118 and 139 of NI Act, has rightly convicted the accused for the offence under section 138 of NI Act. The First Appellate Court was not justified in doubting the financial capacity of complainant to deposit money to the bank towards satisfaction of OD account

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of accused without there being any demand from the bank to clear the OD account of accused. The evidence of PW.2 would go to show that complainant being surety of the OD account maintained by accused has deposited the amount. Therefore, there was no valid reason for the First Appellate Court to hold that complainant has no financial capacity to deposit the amount of Rs.7,50,000/- covered under the cheque-Ex.P1. Therefore, prayed for allowing the appeal and to set aside the judgment of First Appellate Court. Consequently, to restore the judgment of conviction and order of sentence passed by the trial Court. 8. In response to notice of appeal, respondent-accused has appeared through counsel. 9. Heard the arguments of both sides. 10. On careful perusal of oral evidence of PW1 and PW2 and the documents Ex.P1 to P11, it would go to show that the cheque in question Ex.P1 was issued by the accused with his signature on the account maintained by him for lawful discharge of debt. The said cheque Ex.P1 on presentation for collection was dishonored for want of sufficient funds in the account of accused vide bank endorsement-Ex.P2.

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Complainant issued demand notice-Ex.P3 and the same was duly served to the accused-Ex.P5. Accused replied to demand notice-Ex.P5. The learned counsel for appellant/complainant argued that once issuance of cheque with signature of accused on the account maintained by him is admitted, then, statutory presumption in terms of Section 118 and 139 of NI Act will have to be drawn. Therefore, it is up to the accused to place rebuttal evidence to displace the statutory presumption available in favour of the complainant. 11. In this context of the matter, it is useful to refer the judgment of Hon’ble Apex court in Basalingappa vs Mudibasappa reported in 2019 Cr. 639(SC) wherein it has been observed and held that “Presumption under Section 139 is a rebuttal presumption and onus is on accused to raise probable defence.” Standard of proof of rebutting the presumption is that of preponderance of probabilities. To rebut presumption, it is open for accused to rely on evidence led by him or accused can also rely on materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from materials brought on records by the parties but also by reference to circumstances upon which they rely. It is not necessary for accused to come

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in witness box in support of his defence. Section 139 imposed an evidentiary burden and not a persuasive burden.” In view of the principles enunciated in this decision, it is evident that accused to probabalise the defence can rely on his own evidence and also can rely on materials submitted by the complainant. It is not necessary for the accused to step into the witness box to probabalise his defence. 12. In the present case, the accused to probablised his defence not only relied on the materials brought on the record during the cross examination of PW.1 and PW.2, but also relied on is own evidence as DW1. Whether the said rebuttal evidence placed on record by the accused probablises his defence in questioning the financial capacity of the accused or not is to be decided. 13. Indisputably, complainant was working as authorized agent for Swaraj Tractor and Farm equipments. Accused is the permanent resident of Hubballi and started a partnership business in Mundargi under the name and style M/s Survarna Auto care. The accused has raised over due amount from Syndicate Bank, Mundargi branch bearing OD account No.175/270 for Rs.20,00,000/-. Complainant stood as surety

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for the OD account of accused. Subsequently, accused closed his firm M/s Suvarna Auto Care business without closing OD account of Syndicate Bank, Mundargi branch. 14. Accused in paragraph-4 of the complaint has pleaded the amount deposited to the OD account as follows:

1 31.03.2009 Rs.3,20,000-00 Ex.P9 2 30.06.2009 Rs. 40,000-00 Ex.P7 3 17.06.2009 Rs.2,93,000-00 Ex.P10 4 30.03.2009 Rs.2,00,000-00 Ex.P8 15. The total amount would come to Rs.5,53,000/-. It is further pleaded that accused has taken hand loan of Rs.1,20,000/- and in all accused was in due of Rs.7,50,000/-. Accused in order to discharge the said debt issued the cheque Ex.P1 drawn on Syndicate Bank, Mundaragi branch dated 16.08.2010. The said cheque was dishonored for want of sufficient fund in the account of accused. 16. Learned counsel for appellant-complainant has argued that when once the issuance of cheque with signature of accused on the account maintained by him is admitted, then statutory presumption will have to be drawn in terms of Section 118 and Section 139 of NI Act. Accused has not made any basic foundation questioning the sources of income of complainant to

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deposit the money as claimed by the complainant. In support of such contention, reliance is placed on the judgment of Hon’ble Apex court in Tedhi Singh Vs. Narayan Dass Mahant reported in 2020 Livelaw SC page No. 275, where in it has been observed that “Basic foundation has to be made on the first available opportunity in the reply given to the demand notice by questioning the financial capacity. Otherwise, the complainant has no any opportunity to place evidence on record in proof of his financial capacity.” 17. In the present case, complainant has issued demand notice Ex.P3 and the same is replied as per Ex.P5 by denying the transaction between complainant and accused, further depositing of money to the OD account of accused as claimed in the notice. Therefore, basic foundation has been made by the accused by pleading in paragraph-2 of the reply notice that complainant was working in Suvarna Auto Care and Farm equipments, Mundarigi as an office assistant to look after the bank transactions and office work. Complainant by taking undue advantage of the faith reposed by accused created

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documents for having deposited the money to the OD account of the accused. 18. On careful perusal of the evidence of PW1 and 2, it would go to show that amount of deposited covered under Ex.P.7 to P.10 totally amounts to Rs.7,53,000/-. Complainant in Paragraph 4 has pleaded that accused has taken hand loan of Rs.1,20,000/-. If the same is added to the amount covered under Ex.P7 to P10, then it works out to Rs.8,73,000/-. The complainant has not pleaded anything in the complaint or given satisfactory explanation as to how and why cheque of Rs.7,53,000/- was issued as against the above referred amount. Accused has to issue cheque either for Rs.7,53,000/- for the amount covered under Ex.P.7 to P10 or for the amount of Rs.8,73,000/- inclusive of hand loan of Rs.1,20,000/- as claimed by the complainant in paragraph-4 of the complaint. 19. Looking to the deposit of amount of Rs.2,00,000/- on 30.03.2009 and another amount of Rs.2,20,000/- on 31.03.2009-Ex.P9 within a day, further deposit of Rs.2,93,000/- on 17.06.2009-Ex.P10 and Rs.40,000/- on 30.06.2009-Ex.P7 and within 13 days could manage to deposit Rs.3,33,000/- covered under Ex.P7 and P10 creates serious

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doubt about the source of income of complainant in depositing such huge money to the OD account of accused without there being any demand from the bank to clear OD account. 20. It has been elicited in the cross examination of PW1 that earlier he was running Tractor agency in Laxmeshwar under the name and style of “Manikanta dealers” and was having an income of Rs.2,50,000/- per annum. It has been further elicited in the cross examination that because of financial constraints, he left Laxmeshwar and came to Mundarigi to work as commission agent in M/s Survarna Auto care and Farm equipments of accused. The said material evidence brought on record in the cross examination of PW.1 would demonstrate the fact that the accused was working as commission agent under accused No.1 in Suvarna Auto Care and Farm equipments. Complainant admittedly is not an income tax assesse and not produced any document to show that he is having income of Rs.2,50,000/- per annum. 21. Complainant while answering the sources of income to mobilize fund for depositing the OD account of the accused has stated that he has deposited Rs.2,20,000/- on 31.03.2009 as per Ex.P9 by taking loan from his friend Fakiragouda Patil of

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Bagewadi. On 17.06.2010, he has deposited Rs.2,93,000/- as per Ex.P10 by taking loan from his friend Fakiragouda Patil. Further, he has deposited Rs.40,000/- on 30.06.2009 as per Ex.P7 by taking loan from the said friend Sri.Fakiragouda Patil. Thus, totally Rs.5,53,000/- loan was taken from his friend Sri.Fakiragouda Patil to deposit the amount to OD account of accused. Complainant has not examined his friend Fakiragouda Patil to show that complainant has availed loan of Rs.5,53,000/- for depositing to the OD account of accused as referred above. On the other hand, complainant has stated that he is not going to examine his friend Fakiragouda Patil. 22. Complainant has further deposed that he has paid Rs.1,20,000/- as hand loan. However, no documents are produced by the complainant evidence taking loan from his friend Fakiragouda Patil or to prove his savings out of avocation of the commission agent working under the accused. 23. PW.1 has also admitted that he is facing trial in CC No.426/2012 in cheque bounce case for the amount of Rs.3,20,000/-. Therefore, looking to the avocation of complainant working under accused as an office assistant in M/s Suvarna Auto Care and also his earning in the earlier

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business under the name and style of Manikanta dealers, further failure of accused to examine his friend Fakiragouda Patil for lending money amount of Rs.5,53,000/- covered under Exs.P9, P7, P10 would go to show that complainant has no sources of income to deposit the money to the OD account of accused. The First Appellate court has rightly appreciated the judgment of Hon’ble Apex Court in the case of John K Abraham vs Simon C Abraham & Anr reported in (2014) 2 SCC 236 in holding that complainant has failed to establish the sources of income to deposit the OD account of accused. It is also pertinent to note that PW.2 has categorically admitted that no documents are available in the bank for having issued demand notice to complainant to clear the OD account of accused being surety, since the accused is in due of the amount in his OD account. 24. The trial Court without properly appreciating the evidence on record with regard to the source of income of complainant which was brought on record in the cross examination of PW1 and PW2, merely on the basis of issuance of cheque-Ex.P1 has proceeded to convict the accused for the offence under Section 138 of NI act. The First Appellate Court has rightly re-appreciated the oral and documentary evidence

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brought on record and was justified in setting aside the judgment of conviction passed by the trial Court. The findings recorded by the First Appellate Court are based on legal evidence on record and as such, the same does not call for any interference by this Court. Consequently, proceed to pass the following : ORDER Appeal filed by the appellant/complainant is hereby dismissed. The judgment of the First Appellate Court on the file of Addl. District and Sessions Judge, Gadag in Crl.A.No.36/2014 dated 30.06.2015 is hereby confirmed. The judgment of trial Court in C.C.No.27/2011 dated 25.09.2014 is restored. The registry is directed to transmit the records with the copy of this judgment to trial Court.

(Sd/-) JUDGE

HMB