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2022 DIGILAW 1520 (KAR)

Devaraj S/o. Doddappa Biradar v. Balappa S/o. Somanna Kurabar @ Padasalagi

2022-11-30

ANIL B.KATTI

body2022
JUDGMENT : The appellant/complainant is challenging the judgment of acquittal passed by II Additional Civil Judge & JMFC-II, Vijayapura in C.C.No.4945/2015, dated 02.11.2020 for the offence under Section 138 of Negotiable Instruments Act (hereinafter referred to as 'N.I.Act'). 2. The 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 accused has approached the complainant and requested to give hand loan of Rs.2,50,000/- and promise to pay within six months. The accused in order to discharge the said debt has issued cheque bearing No.002051 dated 06.08.2015 drawn on ICICI Bank, Branch Jamakahandi taluka for an amount of Rs.2,50,000/-. The said cheque on presentation through his banker KVG Bank, Branch Bijapur on 20.08.2015 and came to be bounced for want of sufficient fund in the account of accused as per bank endorsement dated 20.08.2015. The complainant has issued demand notice dated 19.09.2015, the same has been duly served on 21.09.2015. The accused in spite of due service of notice has neither paid the amount covered under the cheque nor replied to the said notice. The complaint is filed on 04.11.2015. 4. In response to the summons, the accused has appeared through counsel and contested the case. The complainant in order to prove his case relied on the oral evidence of PW1 and the documents as per Ex.P1 to Ex.P5. The accused has not lead any defence evidence. The Trial Court after having heard the arguments of both sides and on perusal of oral and documentary evidence has acquitted the accused from the charge leveled against him for the offence under Section 138 of N.I.Act. 5. The appellant/ complainant has challenged the correctness and legality of the said judgment of acquittal contending that the non mentioning of exact date about the payment of money and issuance of cheque cannot be fatal to the case of complainant. The Trial Court was not justified in doubting the loan transaction by invoking Section 269-SS of Income Tax Act and committed serious error in recording the finding that it is not legally enforceable debt. The accused has never questioned the financial capacity of complainant in lending the money. The Trial Court was not justified in doubting the loan transaction by invoking Section 269-SS of Income Tax Act and committed serious error in recording the finding that it is not legally enforceable debt. The accused has never questioned the financial capacity of complainant in lending the money. The alleged land transaction claimed by the accused during the course of cross examination of PW1 is not supported by any evidence on record. The Trial Court has committed serious error in relying the overruled judgment of Krishna Janardhan Bhat vs. Dattatraya G. Hegde, reported in (2008) 4 SCC Page No.54, and the Trial Court should noted the subsequent judgment of Rangappa vs. Sri Mohan, reported in (2010) 11 SCC page No.441 and would have drawn necessary presumption in terms of Section 118 and 139 of N.I.Act. The approach and appreciation of oral and documentary evidence by the Trial Court is contrary to law and evidence on record. Therefore, prayed for allowing the appeal and to convict the accused for the charge leveled against him. 6. In response to the notice of appeal, respondent has appeared through his counsel. 7. Heard the arguments of both sides. 8. The appellant/complainant in support of his oral evidence about issuance of cheque by accused for legally enforceable debt has relied on the cheque as per Ex.P1 dated 06.08.2015 drawn on ICICI Bank Chikkali Cross Branch, Jamakhandi Taluka for Rs.2,50,000/-. The complainant has presented the said cheque for collection through his banker KVG Bank, Branch Bijapur as per Ex.P1. The same was bounced for want of sufficient funds in the account of accused vide bank endorsement as per Ex.P2 on 20.08.2015. The complainant has issued demand notice as per Ex.P3 dated 19.09.2015. The same is duly served on accused 21.09.2015 as per Ex.P5. The accused has not paid the amount covered under the cheque as per Ex.P1 on demand and therefore the complaint is filed on 04.11.2015. If the above referred documents are perused and appreciated with the oral testimony of PW1 then it is evident that the complainant has discharged his initial burden of proving the fact that accused has issued the cheque in question as per Ex.P1 for lawful discharge of debt. If the above referred documents are perused and appreciated with the oral testimony of PW1 then it is evident that the complainant has discharged his initial burden of proving the fact that accused has issued the cheque in question as per Ex.P1 for lawful discharge of debt. The Trial Court also has recorded its satisfaction of complainant having discharged his initial burden of proving the fact that the cheque as per Ex.P1 is issued by the accused for lawful discharge of debt. 9. The Trial Court on the basis of their being no specific date mentioned in complaint or in examination-in-chief of PW1. Secondly, by invoking Section 269-SS of Income Tax Act has held that the accused has successfully rebutted the presumption available in favour of complainant in terms of Section 118 and 139 of N.I.Act. The Trial Court has concluded that the accused by way of rebuttal evidence has probabalized his defence to disprove the initial burden available in favour of the complainant. 10. The Trial Court by relying on the decision of Hon'ble Supreme Court reported in 2008 (4) SCC Page No.54, Krishna Janardhan Bhat vs. Dattatraya G. Hegde, has held that Section 139 of N.I.Act merely raises a presumption that the cheque was issued in favour of the holder of cheque and the presumption cannot be extended that it was so issued for lawful discharge of debt or other liability. This decision has been overruled in the subsequent decision reported in (2010) 11 SCC Page No.441, Rangappa vs. Sri Mohan, wherein it has been observed and held that when issuance of cheque with the signature of accused on the account maintained by him is proved then it will have to be held that initial burden has been discharged that the cheque in question was issued for lawful discharge of debt. Therefore in view of this decision, the finding of the Trial Court that Section 139 of N.I.Act merely raises a presumption about issuance of cheque in favour of holder of the cheque and same presumption cannot be extended for discharge of any debt or other liability cannot be legally sustained. 11. The onus now shifts on the accused to prove by way of rebuttal evidence that the cheque in question as per Ex.P1 was not issued for any lawful discharge of debt. 11. The onus now shifts on the accused to prove by way of rebuttal evidence that the cheque in question as per Ex.P1 was not issued for any lawful discharge of debt. The accused has not lead any defence evidence nor offered any explanation about the issuance of cheque as per Ex.P1. The mere denial that he has not issued the cheque and not received the notice cannot be said as sufficient rebuttal evidence to disprove the presumption available in favour of the complainant. 12. In this context it is useful to refer the latest decision of Hon'ble Supreme Court reported in (2022) 6 SCC 735 , Tedhi Singh vs. Narayan Dass Mahant, wherein it has been observed and held that when the complainant gives his evidence, unless a case is set up in the reply notice to the statutory notice sent, that the complainant did not have the wherewithal, it cannot be expected of the complainant to initially lead evidence to show that he had the financial capacity. However, the accused has right to demonstrate that the complainant in a particular case did not have the capacity and therefore, the case of the accused is acceptable which he can do by producing independent materials, namely; by examining the witnesses and by producing documents, by pointing out to the material produced by the complainant itself, or through the cross-examination of the complainant. It has been further held that the accused is not expected to discharge an unduly high standard of proof. All which the accused needs to establish is a probable defence. In the present case, the accused has not elicited anything worth material in the cross examination of PW1 that he has no financial capacity to lend the money. The Trial Court has observed and held that the date of which loan was advanced is not mentioned in the complaint and in the examination-in-chief of PW1. The accused himself during the course of cross examination of PW1 has not challenged the said aspect. What is elicited in the cross examination is only about non service of notice and the land transaction. The complainant has produced postal acknowledgment card as per Ex.P5 and the same contains the signature of accused and the said fact has not been denied by the accused. Therefore, the contention of accused that there is no service of notice cannot be accepted. 13. The complainant has produced postal acknowledgment card as per Ex.P5 and the same contains the signature of accused and the said fact has not been denied by the accused. Therefore, the contention of accused that there is no service of notice cannot be accepted. 13. The another contention of the accused is with respect to land transaction and the cheque in question as per Ex.P1 was issued for the said purpose, the same has been misused by the complainant and filed false complaint. However, no any supportive documents have been produced by the accused to substantiate the said transaction and cheque in question as per Ex.P1 was issued for the said purpose. The financial capacity of the complainant in lending the money covered under the cheque has not been challenged by accused during the cross examination of PW1. Therefore, the said contention of accused that the cheque in question as per Ex.P1 was issued for the land transaction without there being any supportive documents cannot be accepted. 14. The learned counsel for the accused relied on the decision reported in 2022 (2) KCCR Page No.1651, Sameer Rafiq Mulla vs. Asif Abdulhamid Misrikoti, and another decision reported in 2022 (1) KCCR page 316, Murtuja vs. Zakeer. In both these decisions in view of the facts involved therein, so also the material having been brought on record during the cross examination of PW1, it has been held that same would be sufficient as rebuttal evidence to disprove the presumption available in favour of the complainant. In the present case, the complainant has not elicited anything in the Cross examination of PW1 by questioning the financial capacity of the complainant in lending the money to accused covered under the cheque as per Ex.P1. Therefore, the said decisions have no any application to the facts of the present case. 15. The Trial Court has recorded the finding by invoking Section 269-SS of Income Tax Act, that the loan transaction covered under the cheque as per Ex.P1 is in excess of Rs.20,000/- and the transaction should have been evidenced through account payee cheque only. Secondly, the loan transaction must be shown in the Income Tax Returns. On these grounds, the Trial Court has held that the cheque in question as per Ex.P1 was not issued for any legally enforceable debt. 16. Secondly, the loan transaction must be shown in the Income Tax Returns. On these grounds, the Trial Court has held that the cheque in question as per Ex.P1 was not issued for any legally enforceable debt. 16. The constitutional validity of Section 269-SS of Income Tax Act was called in question before the Hon'ble Supreme Court in the case reported in (2002) 6 SCC Page No.259, Assistant Director of Inspection Investigation vs. A.B. Shanti, wherein it has been observed and held that : "The object of introducing Section 269-SS was to ensure that a taxpayer should not be allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he should not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records later to suit the plea of taxpayer. The main object of Section 269-SS was to curb this menace. As regards the tax legislations, it is a policy matter, it is for Parliament to decide in which manner the legislation should be made. Of course, it should stand the test of constitutional validity." The Hon'ble Supreme Court having so observed negated the contention of appellants that taking a loan or receiving a deposit is a single transaction wherein a lender and barrower are involved and by the impugned section the barrower alone is sought to be penalized and the lender is allowed to go scot-free. 17. The proviso 269-SS only prescribes the mode of taking or accepting certain loans, deposits and specified sum. The said proviso would speak to the effect that no person shall take or accept from any other person (herein referred to as the depositor). Mode of taking any loan or deposit or any specified sum, otherwise than by an account-payee cheque or account or accepting payees and draft or use of electronic clearing system through a bank account. The said proviso would speak to the effect that no person shall take or accept from any other person (herein referred to as the depositor). Mode of taking any loan or deposit or any specified sum, otherwise than by an account-payee cheque or account or accepting payees and draft or use of electronic clearing system through a bank account. The proviso was inserted in the Income Tax Act debarring person from taking or accepting from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft, if the amount of such loan or deposit or the aggregate amount of such loan or deposit is Rs.10,000/- or more. The amount of Rs.10,000/- was later revised as Rs.20,000/- with effect from 01.04.1989. The said proviso does not prohibit for giving or lending loan, it is only taking and acceptance is prohibited. The acceptance of loan by way of cash in excess of Rs.20,000/- may attract panel provision in terms of Section 271-D. Whether the provisions of Section 269-SS of the Income Tax Act 1961, disentitles the plaintiff from filing recovery suits was directly under consideration by the coordinate bench of this Court in the decision reported ILR 2007 Kar Page No.3614, wherein it has been held that : "The main object introducing the provisions of Section 269-SS of the Income Tax Act is to curb and unearth black money. But the Section does not declare the present transaction which is brought before the court illegal, wide and unenforceable." (Emphasis supplied) This Court while recording the said finding has taken note of the decision of Apex Court in Assistant Director of Inspection Investigation referred above. In para 7 of the said judgment concluded that in the light of the observations of Apex Court, it cannot be said that Section 269-SS only provided for the mode of acceptance payment or repayment in certain cases so as to counteract evasion of Tax. Section 269-SS does not declare all transactions of loan, by cash in excess of Rs.20,000/- as invalid, illegal or null and void, while as observed by the Apex Court, the main objection of introducing the provisions was to curb and unearth black money. To construe Section 269-SS as a competent enactment declaring as illegal and enforceable all transactions of loan, by cash, beyond Rs.20,000/- in my opinion cannot be countenanced. To construe Section 269-SS as a competent enactment declaring as illegal and enforceable all transactions of loan, by cash, beyond Rs.20,000/- in my opinion cannot be countenanced. It is true that the said decision has been rendered in a Civil suit for recovery of money, but the principle of law with regard to the effect of Section 269-SS of Income Tax Act holds good. Therefore, in view of the principles enunciated in the above referred decisions, the finding of the Trial Court that the transaction involved leading to issuance of cheque in question as per Ex.P1 which is contravention of Section 269-SS of Income Tax Act has become unenforceable debt and by virtue of the same, the presumption in favour of complainant stood rebutted cannot be legally sustained. 18. When the defence of the accused that no any specific date is mentioned in the complaint about lending money to the accused and the transaction as per Ex.P1 is more than Rs.20,000/- is in contravention of Section 269-SS of Income Tax Act are found to be legally not sustainable then it will have to be held that the accused has failed to place rebuttal evidence to dispel the presumption available in favour of the complainant in terms of Section 118 and 139 of N.I.Act. The complainant having discharged his initial burden of proving the fact that the cheque in question as per Ex.P1 was issued for lawful discharge of debt, the failure of the accused to place rebuttal evidence or the defence being found to be not legally sustainable in law then it will have to be held that the complainant has proved the charge leveled against the accused for the offence under section 138 of N.I.Act. 19. The question now remains is imposition of sentence. Looking to the facts and circumstances of the case, if the accused is sentenced to pay fine of Rs.2,50,000/- in default of payment of fine shall undergo imprisonment for three months is imposed would meet the ends of justice. Consequently, proceed to pass the following: ORDER The appeal filed by the appellant/complainant is hereby allowed. The judgment of acquittal passed by II Additional Civil Judge & JMFC-II, Vijayapura in CC No.4945/2015 dated 02.11.2020 is hereby set aside. Consequently, proceed to pass the following: ORDER The appeal filed by the appellant/complainant is hereby allowed. The judgment of acquittal passed by II Additional Civil Judge & JMFC-II, Vijayapura in CC No.4945/2015 dated 02.11.2020 is hereby set aside. The accused is convicted for the offence under Section 138 of N.I.Act and sentenced to pay fine of Rs.2,50,000/- in default of payment of fine shall undergo imprisonment for three months. The Registry is directed to send the copy of judgment and the Trial Court Records to the Trial Court.