JUDGMENT 1. Crl.A No.772/2021 has been filed by accused no.3, whereas Crl.A No.827/2021 has been filed by accused no.2. Both the appeals have sought to challenge the judgment of conviction dated 27.05.2021 and order of sentence dated 28.05.2021 passed in Spl.Case No.927/2019 by the LXXXI Addl. City Civil & Sessions Judge (CCH-82), Bengaluru, convicting and sentencing the appellants/accused for an offence punishable under Section 138 of the Negotiable Instruments Act. 2. The complaint came to be filed by the respondent-bank against the accused persons for an offence punishable under Section 138 of the Negotiable Instruments Act, ("N.I.Act", for short) seeking for registration of case against the accused and for punishment. The complaint came to be initiated in light of dishonour of the cheque stated to have been issued for the purpose of repayment of Term Loan which cheque was issued on behalf of accused no.1 vide cheque bearing No.129013 dated 30.10.2007. The cheque is stated to have been signed by accused nos.2 and 3 on behalf of accused no.1 company. 3. It is stated that on presentation of the cheque for encashment, the same came to be returned on 13.11.2007 with an endorsement "Insufficient Funds". It is submitted that such dishonour of cheque took place on three occasions and after the third occasion wherein the cheque came to be dishonoured with an endorsement "Insufficient Funds", legal notice came to be issued, which is served on accused no.2. Though notice issued to accused no.3 was not served, it is submitted that as separate notice to accused no.3 was not necessary, complaint came to be filed and proceedings were initiated. The complainant examined the DGM of the complainant bank as PW.1 and produced documents as per Ex.P1 to P14. 4. It is submitted that though accused nos.2 and 3 appeared pursuant to the summons, accused no.1 though appeared before the court has subsequently not participated in the proceedings. The court has recorded the substance of the accusation and putforth the same to accused nos.2 and 3 who have pleaded not guilty and sought to be tried, subsequent to which evidence was recorded. 5. It is further borne out from the records that accused nos.2 and 3 have denied the incriminatory material forthcoming as against them while recording 313 statement. 5. It is further borne out from the records that accused nos.2 and 3 have denied the incriminatory material forthcoming as against them while recording 313 statement. Accused no.2 has chosen to adduce his defence evidence and has examined DW.1 and got marked the documents as per Ex.D1 and D2, while accused no.3 has not chosen to adduce any defence evidence. 6. The trial court after hearing both sides and considering oral and documentary evidence has recorded findings on the points for consideration and has proceeded to pass the judgment of conviction and also passed order on the sentence. The trial court has recorded a finding that the case putforth by accused nos.2 and 3 goes to prove that accused nos.2 and 3 admit that there was a loan availed by the accused no.1 company from the complainant-bank. It is further observed that the only contention of accused nos.2 and 3 was that the repayment schedule as regards the said loan had not commenced, however, the trial court has eventually concluded by observing that there is no bar for the borrowers for repayment of the loan earlier to commencement of the installment. Accordingly, the trial court has rejected the contention of accused nos.2 and 3 that there is no legally enforceable debt or any such liability as on the date of issuance of cheque at Ex.P3. The court has also rejected the contention of the appellants that the material supporting the transactions creating liability was not produced which would be fatal to the case of the complainant by observing at Para 23 that the evidence of accused no.2 in the form of deposition of DW.1 would indicate that there was no dispute regarding the loan availed by accused no.1 from the complainant bank. Accordingly, the trial court has observed that despite the complainant having failed to produce the documents regarding alleged debt, the same was fatal to the case of the complainant. The trial court has further observed that presumption under Section 139 of the N.I.Act that is applicable as regards to the cheque at Ex.P3 has not been rebutted. The trial court has also observed that non-service of notice to accused no.3 would not defeat the proceedings as accused nos.2 and 3 were Chairman & Managing Director and Director of the Company and that notice was served on the Company. The trial court has also observed that non-service of notice to accused no.3 would not defeat the proceedings as accused nos.2 and 3 were Chairman & Managing Director and Director of the Company and that notice was served on the Company. As against the said judgment of conviction, the present appeal has been filed. 7. It must be noted that this court by its judgment dated 05.07.2022 has allowed Crl.A 805/2022 filed by the accusedcompany while making specific reference to Section 32A of the IBC Code. Accordingly, as on date, liability of the company i.e., accused no.1 has been set aside and what remains is consideration of liability of the Chairman & Managing Director/accused no.2 and that of the Director/accused no.3. 8. It is the contention of the appellants that the trial court has grossly erred in recording a finding that there was a legally enforceable debt which is contrary to the contents of Ex.D1, which is the copy of loan agreement and also contrary to evidence and deposition tendered upon cross-examination by PW.1. 9. It is specifically contended that in terms of Ex.D1 which is the loan agreement entered into between accused no.1 on 22.03.2006 and the Consortium of Banks. There was a moratorium period for repayment for a period of 24 months from the date of commercial production. Further, the repayment was to be made to the Bagalkot DCC Bank. Accordingly, it is submitted that relevant period for commencement ought to have been 24 months from the date of commercial production. 10. It is submitted that this aspect of the matter when confronted to PW.1 during cross-examination, PW.1 has admitted regarding such stipulation in Ex.D1. If that were to be so, it is stated that the agreement having been entered into on 22.03.2006 and even if is construed that commercial production started immediately, the moratorium period would be in force till 21.03.2008. If that were to be so, it is contended that issuance of cheque on 30.10.2007 was at a point of time where there was no liability of accused no.1 to make repayment and accordingly it could not be stated that there was any enforceable debt vis-a-vis respondent-bank. It is also specifically contended that the payment in terms of Ex.D1 ought to have been made only to the Lead Bank of the Consortium and accordingly the cheque could not have been presented by the respondent-Bank. It is also specifically contended that the payment in terms of Ex.D1 ought to have been made only to the Lead Bank of the Consortium and accordingly the cheque could not have been presented by the respondent-Bank. It is contended that the cheque ought to have been issued to the Lead Bank and presented by the Lead Bank and any proceedings contrary to Ex.D1 ought not be permitted. 11. It is further contended that insofar as accused no.3 is concerned, admittedly no notice has been sent to accused no.3 and though various judgments have been relied on during the course of arguments, the trial court despite referring to the orders of this court in the case of M/s.Seven H Logistics Private Ltd. and Others v. M/s. Deccan Cargo and Express Logistics Pvt. Ltd., has not followed the law laid down in the aforesaid judgment. It is submitted that this court has clearly held that even if the offence is committed by the company, it does not dispense with notice to the Directors if Directors are sought to be prosecuted on the ground that they were involved in day-to-day affairs of the Company. 12. It is further contended that that the approach of the trial court is completely erroneous and contrary to correct appreciation of presumption under Section 139 of the N.I.Act. It is stated that despite the operation of presumption under Section 139 of the N.I.Act, if the accused by leading evidence have succeeded in creating doubt and establish their defence on the basis of preponderance of probabilities, primary onus on the complainant would continue and that has not been discharged in the present case. 13. It is submitted that though issuance of cheque is admitted, it is specifically contended that liability does not commence in light of schedule of repayment contained in Ex.D1 and if the repayment would commence only 24 months after commencement of commercial production, such assertion and defence not having been denied by the other side, the accused had successfully proved their defence as per legally acceptable evidence which has not been taken note of by the trial court in an appropriate manner. It is further contended that the conclusion of the trial court that nothing prevented repayment at an earlier point of time is again contrary to the case of the complainant as no such case was putforth by the complainant in the complaint and such conclusion could not have been arrived at by the court which is contrary to the pleading and case made out in the complaint. 14. It is contended that admittedly no material was placed before the court regarding the amount that was required to be paid, amount that was disbursed and in the absence of such material, the trial court could not have recorded a finding that there was a legally enforceable debt pursuant to which cheque was issued. 15. It is submitted that the trial court though has referred to the judgment in Crl.A No.1072/2013 in the case of National Agricultural Co-op Marketing Federation of India (NAFED), Bengaluru v. Disha Impex (Pvt) Ltd. and Another has not followed the same and has wrongly distinguished the said judgment while holding that there was no dispute as such. 16. The learned counsel for respondent-Bank on the other hand would submit that the appellants have raised technical contention and on a previous occasion in the order dismissing Crl.P 9246/2009 and Crl.P 9243/2009, this court had recorded a finding that accused nos.2 and 3 would repay the entire cheque amount to the complainant. However, the learned counsel for appellants submit that subsequent to the order on 08.12.2009 dismissing the criminal petitions, the trial has been concluded and no case is made out on merits, the said undertaking does not hold good. 17. Heard both sides. 18. The point that arise for consideration is: Whether the judgment of the trial court calls for interference and the passing of an order of acquittal ? 19. It must be noted at the outset that it is the clear defence made on behalf of the accused that as on the date of issuance of cheque, there was no legally enforceable debt by placing reliance on Ex.D1 and the clause relating to repayment in Ex.D1 which reads as follows: 2.2 REPAYMENT : a) The borrower agrees that the said loan shall be repaid to the respective banks. The particulars or repayment is as under, No. of installments - 20, Qtly, equal installment (March, June, September & December of each calendar year) i) Moratorium Period - 24 months from the date of commercial production. Mode of Repayment is made by Demand Draft or Account transfer through lead banker. The Bagalkot District Central Co-operative Bank Ltd. This aspect regarding repayment has also been accepted in the cross-examination of PW.1 which is found at Para 5, 6, 7 and 10 of cross-examination of PW.1. 20. It is to be noticed that evidence in light of Ex.D1 would even otherwise be the best evidence and prevail insofar as repayment is concerned. The suggestion during crossexamination to PW.1 is also to the effect that cheques were taken at the time of disbursal of loan as is noticed at para 9. In fact, it is the case of the appellant that the cheque that was taken was presented contrary to the instructions of accused no.1 and at a premature time as question of honouring any cheque would not arise in terms of Ex.D1. Such contention deserves acceptance. Ex.D1 was executed on 22.03.2006 and even if it were taken that commercial production started immediately, moratorium would be in force till 21.03.2008 and the cheque was issued on 30.10.2007 within the moratorium period. In light of evidence of DW.1 and cross-examination of PW.1 by the appellants, the defence regarding moratorium period in Ex.D1 has been put forth and established in terms of preponderance of probabilities as is required under law. Accordingly, as on the date the cheque was issued and presented, there was no legally enforceable debt. That having been done, the presumption under Section 139 of the N.I.Act stand rebutted and the primary burden upon the complainant then would continue and the complainant was required to establish that the cheque was in fact issued as regards to an enforceable debt. The said aspect has not been countered in evidence by the complainant and the trial court has merely concluded that there is no bar for repayment at an earlier point of time even earlier to the moratorium period. Such finding by the court does not find its foundation by any pleading putforth before the court by the complainant. The said aspect has not been countered in evidence by the complainant and the trial court has merely concluded that there is no bar for repayment at an earlier point of time even earlier to the moratorium period. Such finding by the court does not find its foundation by any pleading putforth before the court by the complainant. In the absence of any specific stand that cheque was issued despite the moratorium period by the accused no.1 and was required to be honoured, the said reason accepted by the court has no basis. There is no evidence to indicate that cheque was issued with an intention of clearing liability and make payment inspite of moratorium in Ex.D1. As is already adverted to, primary burden would continue to rest on the complainant once the accused had succeeded to prove their defence on preponderance of probabilities. 21. It must also be noted that admittedly, no documents have been produced regarding amount disbursed, amount repaid and the amount required to be repaid and in the absence of such material, reliance on the presumption under Section 139 by the Trial Court appears to be misplaced. Another aspect that needs to be noted is that the company itself has been acquitted by the order passed in Crl.A 805/2022 and the present case is only as regards to appellant no.2 in the capacity of Chairman & Managing Director of the Company. 22. Insofar as accused no.3 is concerned, undisputed facts being that no notice has been served on accused no.3. This court in the case of M/s.Seven H Logistics Private Ltd. (supra) has clearly held that even if the offence is committed by the Company, it would not dispense notice to the Directors if the Directors are sought to be prosecuted on the ground that they were involved in day-to-day affairs of the company. 23. In the present case, there is no dispute that loan has been taken by accused no.1. Accused no.3 was only Director. 23. In the present case, there is no dispute that loan has been taken by accused no.1. Accused no.3 was only Director. Even if accused no.3 is a signatory, in light of the law laid down in the case of M/s.Seven H Logistics Private Ltd. and Others v. M/s. Deccan Cargo and Express Logistics Pvt. Ltd.), lack of notice to the Director would be fatal as regards proceedings under Section 138 and the operation of Section 138 is limited by the proviso which would include requirement of notice under Section 138 (b) and on this ground also, conviction of accused no.3 is required to be set aside. 23. There is also merit in the submission that in terms of Ex.D1, repayment was to be made only to the Lead Bank of Consortium i.e., Bagalkot DCC Bank. In terms of Section 92 of the Evidence Act, the contents of Ex.D1 would acquire precedence over any other evidence and accordingly, the entirety of proceedings on the basis of cheque given to the complainant is contrary to the terms of the loan agreement. Though as regards to the finding regarding legally enforceable debt, the court has already recorded a finding that there was no legally enforceable debt as on the date of issuance of cheque. 24. Accordingly, Crl.A 772/2021 and Crl.A 827/2021 are allowed. The judgment of conviction and order of sentence are set aside. The bail bonds, if any, executed by accused nos.2 and 3 shall stand cancelled. The fine amount if any, deposited before the trial court shall be refunded to the appellants. Registry to transmit the records to the trial court forthwith.