Sri Sujies Benefit Funds Limited vs M. Jaganathuan

2024 INSC 602 REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 3369 OF 2024 [@ SPECIAL LEAVE PETITION (CRL.) NO.4022 OF 2022]

SRI SUJIES BENEFIT FUNDS LIMITED …APPELLANT

VERSUS

M. JAGANATHUAN … RESPONDENT

JUDGMENT

AHSANUDDIN AMANULLAH, J.

Heard Mr B. Ragunath, learned counsel for the appellant and

Mr. S. Nagamuthu, learned senior counsel for the respondent.

2. Leave granted.

3. The present appeal arises out of the Final Judgment dated Signature Not Verified Digitally signed by

29.01.2020 (hereinafter referred to as the “impugned judgment”), Ashwani Kumar Date: 2024.08.13 17:57:18 IST Reason:

passed by the learned Single Judge of the High Court of Judicature at 2

Madras (hereinafter referred to as the “High Court”) in Criminal Appeal

No.582/ 2012, whereby the appeal filed by the appellant was dismissed

and the judgment dated 20.06.2012 of the V th Additional District and

Sessions Judge, Coimbatore (hereinafter referred to as the “Appellate

Court”) in Criminal Appeal No.186/2010, was upheld.

BRIEF FACTS:

4. The sole Respondent (hereinafter also referred to as the

“accused”), being a subscriber of the Appellant-chitfund company

(hereinafter also referred to as the “complainant”), borrowed loan

amounts on several dates from the Appellant over a period of about two

years which swelled to a sum of Rs.21,09,000/- (Rupees Twenty One

Lakhs and Nine Thousand) including interest, after eight years. The

loans were advanced in the following manner: Rs.1,50,000/- (Rupees

One Lakh and Fifty Thousand) was given on 09.03.1995; Rs.6,00,000/-

(Rupees Six Lakhs) on 29.12.1995; Rs.1,00,000/- (Rupees One Lakh)

on 22.03.1995; Rs.3,00,000/- (Rupees Three Lakhs) on 11.03.1996;

Rs.1,00,000/- (Rupees One Lakh) on 09.04.1997; and finally,

Rs.2,00,000/- (Rupees Two Lakhs) on 24.04.1997. In order to partly

discharge the aforesaid loan amounts, Cheque No.0150573 dated

03.02.2003 was issued by the accused for a sum of Rs.19,00,000/- 3

(Rupees Nineteen Lakhs) in favour of the complainant drawn on Indian

Overseas Bank, District Court Extension Counter, Coimbatore. The

complainant, on 04.02.2003, presented the cheque in Bank of India,

Kurichi Industrial Estate Branch, Coimbatore which came to be returned

on 05.02.2003 with the endorsement ‘Account Closed’. Thereafter, a

statutory notice was issued by the complainant on 20.02.2003, reply to

which was issued by the accused on 27.02.2003 repudiating the debt.

Aggrieved, the complainant filed C.C.No.379/2003 before the Judicial

Magistrate Court No.VII, Coimbatore (hereinafter referred to as the

“Trial Court”) for the offence under Section 138 1 of the Negotiable

Instruments Act, 1881 (hereinafter referred to as the “N.I. Act”).

1 ‘138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either be - cause of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it ex- ceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 69[within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.

Explanation.—For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.’ 4

5. Before the learned Trial Court, on behalf of the complainant, the

manager of the chit-fund company was examined as PW1 and nineteen

exhibits were marked. On behalf of the accused, no witness was

examined, however, five exhibits were marked. The learned Trial Court,

after perusing the evidence on record and hearing the parties, passed

judgment dated 16.08.2010 whereby it convicted the accused for the

offence under Section 138, N.I. Act and sentenced him to undergo one

year simple imprisonment and to pay a fine of Rs.38,00,000/- (Rupees

Thirty Eight Lakhs) as compensation to the complainant.

6. The accused filed Criminal Appeal No.186/2010 in the Appellate

Court, challenging the conviction and sentence, along with a petition

under Section 3912 of the Code of Criminal Procedure (hereinafter

referred to as the “Code”), for letting in additional evidence. The

Appellate Court allowed the petition filed under Section 391 of the

Code. This order was challenged by the complainant before the High

2 ‘391. Appellate Court may take further evidence or direct it to be taken.—(1) In dealing with any appeal under this Chapter, the Appellate Court, if it thinks additional evidence to be necessary, shall record its reasons and may either take such evidence itself, or direct it to be taken by a Magistrate, or when the Appellate Court is a High Court, by a Court of Session or a Magistrate.

(2) When the additional evidence is taken by the Court of Session or the Magistrate, it or he shall certify such evidence to the Appellate Court, and such Court shall thereupon proceed to dispose of the ap - peal.

(3) The accused or his pleader shall have the right to be present when the additional evidence is taken.

(4) The taking of evidence under this section shall be subject to the provisions of Chapter XXIII, as if it were an inquiry.’ 5

Court, which negatived such challenge and confirmed the order passed

by the Appellate Court to let in additional evidence. Before the Appellate

Court, the accused examined himself as DW1 and marked thirteen

exhibits in order to show that substantial amounts were repaid by him to

the complainant.

7. The Appellate Court, by judgment dated 20.06.2012, allowed the

accused’s appeal and acquitted the respondent holding that the cheque

was not issued towards a legally enforceable liability. The appellant filed

Criminal Appeal No.582/2012 in the High Court impugning the judgment

passed by the Appellate Court. The High Court dismissed such appeal

vide the impugned judgment.

SUBMISSIONS BY THE APPELLANT-COMPANY:

8. Learned counsel for the appellant submitted that the basic folly

committed by the Appellate Court as well as the High Court was that

they failed to appreciate that once issuance of cheque is

admitted/established, there is a presumption under Sections 138, 139

and 118(a) of the N.I. Act, which is a rebuttable presumption but the

respondent has not discharged this burden. It is contended that the

burden on the respondent to rebut the presumption by introducing 6

evidence was initially not done for no justifiable/valid reason before the

learned Trial Court and, even upon the plea for adducing additional

evidence under Section 391 of the Code, the presumption has not been

dislodged as required under law, and still the accused has been

acquitted.

9. Learned counsel submitted that the Appellate Court has given

benefit of doubt to the respondent by raising question about the figure

in the cheque not fully tallying as per the Statement of Accounts

inasmuch as in Exhibit D4 for Loan No.175, the total amount borrowed

was shown as Rs.6,00,000/- (Rupees Six Lakhs) and the rate of

interest is mentioned as Rs.1.80 paise per Rs.100 per month, whereas

in the Statement of Accounts, the balance amount is calculated at the

rate of 3% per month.

10. It was submitted that the issue of interest was not a matter to be

decided and even the learned Trial Court has not disputed the principal

amount. Further, learned counsel submitted that the learned Trial Court

has also not accepted that the respondent was able to show that

substantial amounts were returned. Thus, according to him, the dues

still remained to be repaid against the respondent to be made good and

so it cannot be said that the amount mentioned in the cheque which 7

was returned was not a legally-due amount. Learned counsel submitted

that on such flimsy and tenuous grounds, the amount which in law was

due to the appellant from the respondent, for which the N.I. Act has

been brought into existence by the Parliament so that such dues which

the accused denies but for which cheques have been issued by him are

not honoured, a quick procedure has been prescribed to ensure that

financial disputes reach finality, has been totally frustrated by the

Appellate Court and erroneously upheld by the High Court. For some

receipts shown by the respondent as part re-payment of the loan

amount, the contention of the appellant is that one relates to a

transaction by one Shri Laxmi Finance and the rest are not genuine due

to there being omissions of signature of the cashier, Manager, etc. This

aspect, it is submitted, has been brushed aside.

11. He summed up his arguments by submitting that when the

respondent also could not show any proof with regard to what was the

rate of interest decided inter-se the parties, such an issue unilaterally

could not be decided against the appellant and further that the logic of

the Appellate Court that the Tamil Nadu Prohibition of Charging

Exorbitant Interest Act, 2003 (hereinafter referred to as the “Tamil Nadu

Act”) prohibits charging of interest on any unsecured loan beyond a 8

maximum of 12% per annum, in itself, was unsound as even if it is

accepted that the rate of interest was only 1.8% per month, the amount

over and above the maximum rate of interest would stand excluded. It

was urged that this was no ground to disbelieve that the amount was

legally due to the appellant from the respondent.

SUBMISSIONS BY THE SOLE RESPONDENT-ACCUSED:

12. Per contra, the learned senior counsel for the respondent raised

a preliminary objection that the present appeal is devoid of any ques-

tion of law, much less a substantial question of law of public import-

ance, and does not warrant interference of this Court in exercise of dis-

cretionary jurisdiction vested under Article 136 of the Constitution of In-

dia.

13. On merits, it was his stand that when two Courts have taken the

view that the appellant was not able to show that the cheque amounts

were legally due to him from the respondent, this Court may not reverse

such finding. It was submitted that upon further evidence being pro-

duced before the Appellate Court, it was noticed that as there is differ-

ence in the rates of interest mentioned in the pronotes issued and the

Statement of Accounts of the appellant, it has rightly been concluded 9

that the claim of the appellant that the amount mentioned in the cheque

was legally due to him was not sustainable and thus, the same was not

relied upon and the respondent was acquitted. It was contended by the

learned Senior counsel that the proceeding under the N.I. Act being

more or less summary in nature, the Court has rightfully discharged its

duty of being strict in scrutiny of evidence so as not to disadvantage the

accused leading to miscarriage of justice. He submitted that the present

appeal does not merit any consideration and sought its dismissal.

ANALYSIS, REASONING AND CONCLUSION:

14. Having considered the rival contentions, we find that the im-

pugned judgment upholding the order of the Appellate Court requires

interference.

15. This Court in Dashrath Rupsingh Rathod v State of Maha-

rashtra, (2014) 9 SCC 129 held that “An offence under Section 138 of

the Negotiable Instruments Act, 1881 is committed no sooner a cheque

drawn by the accused on an account being maintained by him in a

bank for discharge of debt/liability is returned unpaid for insufficiency of

funds or for the reason that the amount exceeds the arrangement made

with the bank.” The fact that the cheque was issued as a consequence 10

of failure to repay the loan taken by the respondent from the appellant

to which the interest was added would more or less settle the issue.

However, in the present case, a discrepancy apropos the rate of in-

terest, whether it be 1.8%, 2.4% or 3% per month was not sufficient to

disbelieve the claim of the appellant. Though the respondent before the

learned Trial Court had contended that there was no loan transaction

between the parties, but still, before the Appellate Court, by way of ad-

ditional evidence, he marked receipts to show the re-payment of loan.

Even there, the respondent did not produce all the receipts showing

total discharge of the loan amount, as was noted by the Appellate

Court, and only the difference in the rates of interest as well as the find-

ing that substantial amount has been repaid led to the acquittal of the

respondent.

16. On this issue, we would like to indicate that neither in the pro-

notes nor in the Statement of Accounts, the principal amount has been

disputed and the amount arrived at, as reflected in the cheque whether

it is in respect of 1.8% interest or 3% interest per month cannot be given

undue importance for the reason that the pronotes indicated that under

normal circumstances, when there would be repayment by the respond-

ent, the rate would be 1.8% per month but in the event of non-repay- 11

ment, how much interest by way of an added burden would lie on the re-

spondent has not been specified. Thus, if the rate of interest of 3% in-

stead of 1.8% per month has been added on the principal amount and

the amount in the cheques reflects the same, it cannot be said that the

cheques were not for repayment of the principal amount, totalling

Rs.14,50,000/- (Rupees Fourteen Lakhs and Fifty Thousand). When the

respondent does not dispute that he has handed over the cheques or

signed on them, it was incumbent upon him, the moment he claims the

amount(s) were repaid to the appellant to have either taken back the

cheques or instructed the bank concerned to not honour the concerned

cheques. However, closure of the bank accounts within a few weeks of

issuance of the cheque raises serious questions about the conduct and

intent of the respondent. The learned Trial Court, in our view, has me-

ticulously gone into each and every issue while holding in favour of the

appellant and the Appellate Court as also the High Court have only

gone by scrutiny of the interest amount mentioned on the pronote and

effected in the Statement of Accounts of the appellant and the evidence

produced before the Appellate Court by the respondent to indicate that

some repayment(s) was/were made. This, according to us, is erroneous

and cannot be sustained.

12

17. Furthermore, the reasoning given by the Appellate Court, having

taken note of the Tamil Nadu Act, fails to appreciate that even going by

what has been written on the pronote i.e., 1.8% per month would lead

to the interest being 21.6% per annum, which also is above the cap of

12% per annum prescribed in the Tamil Nadu Act. Thus, if the parties

amongst themselves, agreed to a rate which is not in conformity with

the Tamil Nadu Act, it was for the respondent to raise an objection or

move the appropriate forum for getting the same corrected/taken care

of, so that the interest rate did not exceed 1% per month but having

agreed to a rate of 1.8% per month, the subsequent amount of interest

calculated @ 3% per month does not have much force for it was upon

the respondent to challenge the rate of interest. The respondent also

cannot be said to be a layman, and being a subscriber to a chitfund

company, he is expected to be aware of the laws and also of what is

beneficial for him. Having issued the pronotes, he cannot now take a

plea in these collateral proceedings under the N.I. Act to contend that

the rate of interest was more than what was permissible under the Tamil

Nadu Act.

18. For reasons aforesaid, the Appellate Court’s order as also the

impugned judgment are set aside. The order of the learned Trial Court 13

stands restored albeit with certain modifications. It is considered appro-

priate to direct the respondent to pay fine amounting to one and a half

(1½) times the amount mentioned in the cheque. Accordingly, the re-

spondent is held liable to pay an amount of Rs.28,50,000/- (Rupees

Twenty Eight Lakhs and Fifty Thousand). Further, as has been averred

by the respondent in his compliance affidavit that he is 86 years old and

living with his wife who is also advanced in age and without issue, the

sentence of imprisonment is waived, however, subject to payment, in

terms of the present judgment within eight months from today, failing

which such sentence of simple imprisonment for one year shall stand

revived.

19. The appeal, accordingly, stands allowed in the aforesaid terms.

20. Parties are left to bear their own costs.

.………………….......................J. [HIMA KOHLI]

...………………….....................J. [AHSANUDDIN AMANULLAH]

NEW DELHI AUGUST 13, 2024