The Commissioner of Income Tax vs. Sudarshan International

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD THURSDAY, THE FIRST DAY OF SEPTEN/BER TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE DR. JUSTICE G.RADHA RANI CRIMINAL REVISION CASE NO: 593 OF 2016 Criminal Revision Case filed Under Sections 397 and 401 of Cr.P.C confirming the Judgment dated. 15.6.2015 passed in C. C.No. 396 of 2014 on the file of the Court of the X Special Magistrate, Hyderabad, against the Judgment dated. 25.'1 1.2015 passed in Crl.A.No. 560 of 2015 on the file of the Court of the Special Judge for trial of Offences under SCs and STs. (POA) Actcum-Vl Additional Metropolitan Sessions Judge, Secunderabad. Between: M. Bharat, S/o. Mahendra Shah, Occ.Advocate, Ryo. H.No. 16-12-51 1lDl262 and 263, Flat No. 304, Rahsghree Enclave, Shalivahana Nagar, Dilsukhnagar, Hyderabad - 500036 ... Petition e r/Ap pe tla nt AND '1 . State of Telangana, represented by the Public Prosecutor, High Court of Judicature, at Hyderabad, for the state of Telangana and the State of Andhra Pradesh. ... Respondent 2. Mr. Nirmal Goyal @ Vikey Goyal, Rl/o. Flat No. 36, Block-A, 2nd Floor, H.No. 1-8-3001414, Bharani Complex, Minister Road, Secunderabad - 500003 ... RespondenURespondenUAccused Counsel for the Petitioner: SRI K. RAMA SUBBA RAO Counsel for the Respondent No.1: THE PUBLIC PROSECUTOR Counsel forthe Respondent No.2: SRI V. HARNOOR The Court made the following: ORDER I

TIIE IIONOURABLE DR. JUSTICE G. RADHA RAI{I Criminal Revision Case No.593 of 2016 ORDER: This Crirninat Revision Case is filed by the complainant herein under Sections 397 and 401 of Criminal Procedure Code, 1973 assailing the judgment dated 25.11.2015 passed in Crirninal Appeal No.560 of 2015 on the file of the' Special Judge for Trial of Offences under S.C.s and S.T.s (Pre'rention of Atrocities) Act cum \/I Additional Metropolitan Sessions Judge, Secunderabad, confirming the judgment dated 15.06.2015 passed in C.C.No.396 of 201.4 (Old C.C.No.1261 of 2014) on the hle of the X Special Nlagistrate, Hyderabad. 2, Heard leamed counsel for the Revision Petitioner / complainant. None appeared for the 2n'i respondent / accused. 3. The parties herein will be referred to as per their array in the Coul below. 4. The case of the complainant was that the accused herein was known tc him for the past four (04) years and due to friendship developed between them, the accused requested the complainant to arange for a hand loan of Rs.50,000/-,

DI,GRR,. crlrc 593 2016 Rs.60,000 and Rs.90,000/- in different spells. The cornplainant accordingly provided the said amounts as hand loan to the accused. Again, the accused approached him on 03.12.2013 and requested the complainant for a hand loan of Rs.3,00,000/- for his business urgently. The complainant informed the accused that he was not having the said amount of Rs.3 lakhs, but was having only an amount of Rs.2,43,000/- for which the accused accepted to receive the same and also promised to repay the same within one or two months with interest @ 2Yo per month. But, the accused did not repay the said arnount within the agreed .ime; but, however, he paid interest thereon for a period of three (03) months 3.1 On persistent demands made by the complainant, the accused issued a cheque bearing No.013812, dated 14.08.2014, drawn on ICICI Bank, M.G. Road, Hyderabad Branch for an amount of Rs.2,43,000/- towards discharge of 3.2 The complainant presented the above cheque in the bank for realization. However, the said cheque was retumed by the bank with endorsement 'insufficient funds'. and failed to pay any amounts thereafter. legally enforceable debt.

3 DT.GRR,J crlrc 593 2016 3.3 Thereafter, the complainant issued a legal notice dated 25.08.2014 which was delivered to the accused on 27.08.2014. But, even after receivirrg the same, the accused neither gave reply nor made arangements for payrnent of the amount. 5. Aggrieved thereby, the complainant filed a complaint before the Trial Court 6. Trial was conducted by the X Special Magistrate, Hyderabad. The accused pleaded not guilty. The complainant was examined as PW.l and Exs.P.l to P.5 were marked on his behalf. No evidence was adduced by the accused. 7. On considering the oral and documentary evidence on record, the Trial Court, by order dated 15.06.2015, found the accused "not guilty" for the offence punishable under Section 138 of Negotiable Instruments Act, 1881 (.for short, 'the N.I. Act') and acquitted him. 8. Aggrieved by the order of acquittal passed by the leamed X Special Magistrate, Hyderabad in C.C.No.396 of 2014, dated 15.06.2015, the complainant herein preferred Criminal Appeal, vide Criminal Appeal No.560 of 2013 before the Special Judge for Trial of Offences trnder S.C.s and S.T.s

4:z Dr.GRR,- crlrc 593 2016 (Prevention of Atrocities) Act - cum - VI Additional Metropolitan Sessions Judge, Secunderabad. 9. On considering the evidence on record, the Appellate Court, by order dated 25.11.2015, also dismissed the Criminal Appeal No.560 of 2015, and confirmed the judgment of the Trial Coum in C.C.No.396 of 2014, dated 15.06.201s. 10. Aggrieved further, the compiainant preferred the present Criminal Revision. I 1. Learned counsel for complainant contended that the Appellate Courl failed to see that the Trial Court did not consider the presumption as mandated under Section 139 ofN.I. Act; in fact, nothing had been considered by the Trial Court except extracting the contentions and citations relied on by the respective parties; it was not stated by the Appellate Court as to how the accused became successful in his rebuttal evidence, and had discharged his burden to.disprove the complainant's case and was able to displace the presumption; except extracting the entire cross-examination of the complainant and listing the citations given by the accused, nothing had been considered by the Court below; the learned Appellate court also extracted the contentions of complainant but .--'

5 DT.CRR,J crlrc 593 2016 did not advert to the plea of presumption as mandated under Section 139 of N.t. Act; the Trial Court went on to say that no single scrap of paper was produced by the plaintiff to show that he gave money to the accused; the accused asserted that he repaid the amount; it was the specific case of the complainant that on earlier occasion the accused had requested him for a hand loan of I1s.50,000/-, Rs.60,000/- and Rs.90,000/- at different spells and, in fact, the accused had repaid the said amount to the complainant during the last two years; the assertion of the accused was that he repaid the amount and the complainant misused the cheque issued at that time; if it was the case of accused, he ought to have issued a reply notice to the statutory legal notice issued by the complainant, and in the absence of the same, it could not be said that the accused had discharged his burden; it was the duty of the accused to adduce evidence to show that he repaid the amount related to the present transaction; therefore, the Courts below have not considered the decision of Hon'ble Apex Court in Rangappa vs. Mohanl properly; in view of presumption under.section 139 of N.I. Act and the law laid down by the Hon'ble Apex Court with regard to the existence of legally enforceable debt or liability, there was no necessity to file other supporting documents in respect of debq both the Courts trelow had ' atR zoto sc tggs

6:: Dr.GRR,- crlrc 593,2016 not considered the facts and law in right perspective, and hence, the judgrnents of the Courts below were liable to be set aside. 12. Leamed counsel for the complainant further contended that it was also held in Om Prakash Agarwal vs. Khaja Krishna Prasad2 that "not giving a reply to the statutory legal notice would strengthen the case of the complainant and improbabilizes the defence and inference could be drawn fiom the said conduct in not giving reply", when once presumption was mandated under law, both the Courts below went wrong in arriving at a conclusion that the complainant did not prove prima facie case; the observation of the Trial Court that complainant had not filed any Income Tax Retums which mandated payment of more than Rs.20,000/- by way of cheque or Demand Draft was concemed, the same would be considered if the accused would discharge his rebuttal evidence; and prayed this Court to allow the Criminal Revision Case by setting aside the judgments of the Courts below. 13. Now the point for consideration is "whether there is any illegality or infirmity in the orders passed by the Courts below? " 14. As seen from the judgment of the Trial Court, except extracting the cross- examination of the complainant and the list of the citations relied by both ' rnws 1acu1-zora-o-za

7 DT.GRR,J crlrc 593 2016 counsel, no reasoning was given by the Trial Court for cor-rsidering the accused as "not guilty" for the offence under Section 138 of N.l. Act. The Trial Courl directly came to the conclusion at para No.14 as under : " 1 4. From the oral evidence coupled with documentary evidence on record and facts and circumstances elicited by deknce counsel in the cross-examination of PIlt.l discussed in foregoing paras and case laws cited supra acctued has become successful in his rebuttal evidence and I find that accwed had discharged his burden to disprove the complainant's case and he is able to displace presumption that complainant fatled to prove the main ingredient of the offence that the accused issued cheque for discharge of his legally enforceable debt or other liability and that accused is entitled for acquittal. The points are answered accordingly. In the result, accused is found not guilty of the offence under Section 138 of N.I. Act and he is acquitted for the said offence under Section 255 (l) of Cr.P.C. Bail bonds of accused shall stand cancell,zd. " From the above, it can be seen that no reasoning was given by the Tri;rl Court in coming to the said conclusron 15. The Appellate Court observed that prima facie burden was on the shoulders of complainant to prove that the accused bonowed rnoney of Rs.2,43,000/-, and towards discharge of the same, the accused had issued Cheque (Ex.P.1), and subsequently the same was dishonoured with an I

8 Dr.GRR,.r crlrc 593-2016 produced by the complainant to show that he gave money to accused. Except the said cheque in question, there was no other document available on record to show that he gave money to the accused, and the accused gave cheque subsequently. In the cross-examination, PW.1 categorically admitted that apart from the cheque he has no document in support of the said cheque for the claim that he made as legally enforceable debt or tiability. PW. 1 further admitted in his cross-examination that he was an Advocate by profession and got legal knowledge with regard to the offence under Section 138 of N.I. Act, and that he was an Income Tax assessee, but he did not show the earlier transaction in his lncome Tax Returns. He stated that the present transaction was shown in his Income Tax Retums, but, no Income Tax Returns were filed and marked on his behalf. It was a constitutional right, even to the accused to maintain silence. There was no need or necessity for him to go into the witness box and to give his evidence. There was no compulsion to the accused to give his evidence. It was for the complainant to establish his case basing on the preponderance of probabilities. The burden was heavily upon the complainant that he had advanced money to the accused. No Income Tax Returns were filed by the complainant, as such, the Appellate Court held that the complainant miserably endorsement "insufficient funds"; and noted that no single scrap of paper was

9 DT.GRR,J {:rlrc_593-2016 failed to establish the offence under Section 138 of N.I. Act; and that the accused was entitled for acquittal. 16. In Goa Plast (Pvt.) Ltd. v. Chico Ursula D'Souza3, the Hon'ble Apex Court held as under : "Chapter XVII containing Sections 138 to 142 was introduced in the Act by Act 66 of 1988 with the object of inculcating faith in the eficacy oJ- banking operations and giving credibility to negotiable inslrumctts in business transactions. These provisions were intended to discourage lteople from not honouring their commitments by way of payment through cheques. The court should lean in favour of an interpretation which serves the object of the stalute. A post-dated cheque will lose its credibility and acceptabilitl, if its payment can be stopped routinely. The purpose of a post-dated cheque is to provide some accommodation to the drcwer of the cheque. Therefore, it is all the more necessary that the drawer of the cheque should not be allowed to abuse the accommodation given to hint by a creditor by way of acceptance of a post-dated cheque. In vielt of Section 139, it has to be presumed that a cheque is issued in discharge of any fubt or other liability. The presumption can be rebutted by adducing evidence and the burden of proof is on the person who wants to rebut the presumption. This presumption coupled with the object of Chapter WII of the Act leads to the conclusion thqt by countermattding pqyment of a post-dated cheEe, a party should not be allou'ed to get Qway from the penal provision of Section I 38. A contrary view would render S. I 38 a dead letter and will provide a handle to persons trying lo avoid poymenl under legal obligations undertaken by thent through their own acts whit:h in other words can be said to be taking advantage of one's own wrong.. ..." '(zoo:) : scc z:z

::10:: DI.GRR,J crlrc-593.-2016 17. Section 118 of the N.I. Act provides presumption as to the negotiable instruments as under : "118. Presumptions as to negotiable instruments :- Until the contrary is proved, the following presumptions shall be made : 18. Sections 139 of N.I. Act provides presurnption in favour of holder of a negotiable instrument as under : "139. Presumption in favour of holder:- It sholl be presumed, unless the contrary is proved, that the holder ofa cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt, or other liability. " 19, In Rangappa v. Mohan case (1 supra), the Hon'ble Apex Court held that "ordinarily in cheque bouncing cases, what the courts have to consider is whether the ingredients of the offence enumerated in Section I j8 of the N.l. Act have been met and if so, whether the accused was able to rebut the statutorry presumption contemplated by Section 1 39 of the Act " . 20. Further, the Hon'ble Apex Court on considering the various judgments rendered by it till then on the sad aspect held at para No.7 as under : (a) ofconsideration : that every negotiable instrument was made or drawn for consideration, and that every such inslrumenl when it has been accepted, endorsed, negotiated or trdnsferred, was accepted, endorsed, negotioted or transferredfor consideration; ... ... "

::11:: DT.CRR,J crlrc 593 20 16 ''7. In light of these extracts, we are in agreement with the respondent- clainrunt thot the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To lhat extent, the impugned observations in Krishna lanardhan Bhot (supra) may not be correcl. However, this does not in any way cast doubt on the correctness of the decisiorr in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature ofa rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favottrs the complainant. Section 139 of the Act is an example ofa reverse onus clause thal hos been included in furtherance of the legislative objective of improvittg the credibility of negotiable instruments. l|'hile Section 138 of the Act specifies a strong criminol remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. ITowever, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory ofence since the bouncing of a cheque is largely in the nature of a civil wrong whose impoct is usually confined to the private parties tnvolved in commercial trdnsactio s. In such a scenario, the test of proportionality should guide the construction and interprototion of reverse onus clauses and the accused/defendant cannol be expected to discharge an unduly high stondard or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidenriary burden and not a persudsive burden. Keeping this in view, it is 4 seitled position that when an accused has to rebut the presumption under Sectiott 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if thc accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the proseculion can.fail. As clarified in the citations, the accused can rely on the materials submitted by the complatnant in order to raise such a deJbnce and it

DT.GRR,J crlrc 593 2O 16 is conceivable that in some cases the accused may not need to adduce evidence of his/her own. " 21. Leamed counsel for the complainant also relied upon the latest judgment of the Hon'ble Apex Court in Oriental Bank of Commerce v. Prabodh Kumar Tewari4, wherein it was held that: "15. A drawer who signs a cheque and hands it over to the payee, is presumed to be liable unless the drawer adduces evidene to rebut the presunption that the cheque has been issued towards payment of a debt or in discharge of a liability. Thc presumption arises under Section I 39 " 22. Coming to the facts in the present Revision, the accused herein also failed to give reply to the statutory notice given by the complainant under Section 138 of N.I. Act which would lead to an inference that there was merit in the version loans earlier, then why the accused had not demanded the complainant to retum the said cheque which the accused had given as security, was not explained by the accused. Further, no notice lvas issued by the accused for retum of the cheque before the complainant filed this present case nor did he choose to give reply to the legal notice issued by the complainant. When the accused admitted his signatures on the cheque, the reverse onus is placed by the statute upon him o crt.n. ruo.t26o of 2o2z dated t6.oa.zoz2 iIL2,. of the complainant. If the accused repaid the amounts taken by him as hand-

::13:: DT.GRR,J crlrc 5q3 20l6 to rebut the presumption under Section 139 of N.I. Act to show under what 23. A Dii,ision Bench of the Hon'ble Apex Court in T. Vasanthakumar vs. Vijayakumaris held at para nos.7, 8, 9 and 11 as under : "7. ... ... ... It is of great significance that the cheque has nol been disputed nor lhe signature of the defendant on it. There has been some controversy before us with respect to Section 139 of Negotiable Instrumenls Act as to whether complainant has to prove existence ofa legally enforceable clebt before the presumption under Section 139 of the Negotiable lnstruments Acl starts operaling and burden shifts to the dccused. Section I 39 reads as follov,s: ''139. Presumption in fovour of the holder : It shall be pre,sumed, unless lhe conlrary is proved that the holder ofa cheque received the cheque of the nature referred to in Section 1j8 for the discharge, in whole or in part, of any dcbt or other liability. " 8. This Court has held in its Three Judge Bench judgment in Rangappa vs. Sri Mohan as under: "The presumption mandated by Section 139 inclucles a presuntption thdt there exists d legally enforceable debt or liabilily. This is of course in the ndture of a rebfitable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be conlested. However, there can be no doubt thqt there is en inilial presumption which favours the respondent complainant- " t uwslscy-zots-a-zs circumstances he issued the said cheque to the complainant.

::14:: Dr.GRR,.; crlrc 593 2Ol6 9. ... ... ... since the cheque as well as the signature hus been accepted by the accused respondent, the presumption under Seclion 139 would operate. Thus, the burden was on the accused to disproye the cheque or the existence of any legally recoverable debt or liability. To this effect, lhe accused has come up with a story that the cheque was given to the complainant long back in 1999 as a security to a loan; the loan was repaid but the complainant did not return lhe security cheque. According to the accused, it was thal very cheque used by the complainant to implicate the accused. -.. ... ... 11. In light of tlxe above reasoning, we find that the learned High Court was misplaced in putting the burden of proof on the complainant. As per Section I39, the burden of proof had shifted on the accused which the accused failed to discharge. Thus, we find merit in this appeal. " 24. In the present case also, both the Courts below had placed the burden of proof on the complainant to show that it was the complainant who had to establish that there was a legally enforceable debt, even though the accused had not disputed the issuance of cheque to the complainant. As it is not the conect interpretation of law (as stated by the Hon'ble Apex Court in the above cited rases), and though the above decisions are cited before the Courts below, they failed to coffectly interpret the provisions of law and failed to appreciable the judgments of the Hon'ble Apex Court in correct perspective, it is considered fit to allow the Criminal Revision Case by setting aside the orders passed by both the Courts below.

::15:: DT.GRR,J crlrc 593 2016 25. As such, it is considered fit to convict the accused and to sentence him to undergo sirnple imprisonment till rising of the day and to pay a fine of Rs.2,43,000/- with default sentence of three months simple imprisonment. 26. The concemed Magistrate is directed to secure the presence of the accused by issuing a waruant to undergo the sentence in the open court and to cause recover the fine amount; and on such recovery, the fine shatl be paid to the complainant as compensation under Section 357 of Criminal Procedure Code. 27. Accordingly, the Criminal Revision Case is allowed as above No costs 28. As a sequel, miscellaneous petitions pending if any in this Revision, shall stand closecl. SD/.A.V.S.S.C:.S.M. SARMA ) DEPUn/ REGTSTRAR / i //TRUE COPY// To, sEcTtoN oFFtcER 1. The X Special Magistrate, Hyderabad (With records if any) 2. The Special Judge for trial of Offences under SCs and STs (prevention of Atrocities) Act-cum-Vl Additional Metropolitan Sessions Judge, Secunderabad.(With records if any) 3. Two CCs to the Public Prosecutor, High Court for the State of Telangana, at Hyderabad [OUT] 4. One CC to Sri K. Rama Subba Rao, Advocate [OPUC] 5. One CC to Sri V. Harnoor, Advocate IOPUCI 6. Two CD Copies 7. One Spare Copy IMMK gt..h^= \

HIGH COURT DATED:01/09/2022 ; i ,' : Of TE \ e * ^."$ $ I I l ORDER lt st,A t, CRL.R.C.No.593 of 2016 ALLOWING THE CRIMINAL REVISION CASI: rt1 L /'2).-.I