Holding

The Supreme Court upheld the lower courts' findings that the appellant failed to prove the absence of a loan, that notice was properly served, and that the presumptions under Sections 118 and 139 did not relieve him of liability, dismissing the appeal.

Summary

The appellant was convicted under Section 138 of the Negotiable Instruments Act for issuing two cheques of Rs.60,000 each that were dishonoured. He contested the existence of a creditor‑debtor relationship, the service of statutory notice, and the authenticity of his signature. The trial and appellate courts found that the complainant proved the loan, that notice was properly served, and that the appellant’s signature matched the cheques, imposing three months' imprisonment and a fine of Rs.1,55,000. On revision, the appellant reiterated these contentions and relied on the Supreme Court’s decision in Krishna Janardhan Bhat. The Supreme Court held that the lower courts’ factual findings were sound, the burden of proof rightly shifted to the appellant, and there was no ground for interference. Consequently, the appeal was dismissed and the fine directed to be released to the complainant.

Issues considered

The existence of a creditor‑debtor relationship between the parties
Whether statutory notice under the proviso to Section 138 was validly served
The applicability of the presumptions under Sections 118 and 139 of the Negotiable Instruments Act
The burden of proof on the accused after the complainant establishes a loan
The authenticity of the appellant’s signature on the cheques

Legislation cited

Negotiable Instruments Act, 1881s. 118, s. 138, s. 139

Subjects

Section 138Negotiable Instruments Actcheque bouncepresumptioncreditor-debtor relationshipservice of noticeburden of proofcriminal appealfineimprisonment

Judgment

26 SUPREME COURT REPORTS [2008] 15 S.C.R.
,._
A ORDER ,,.•

Leave granted.

Appellant is before us aggrieved by and dissatisfied with
the judgment and order dated. 21.8.2006 passed by the learned
B Single Judge of the High Court of Karnataka at Bangalore in
Criminal Revision No.1020/2006, whereby and whereunder the
revision. application filed by him from the judgment dated
14.10.2006 passed by the Vlth Fast Track Court at Bangalore
in Criminal Appeal No. 4050/2005 affirming the judgment and
c order dated 22.10.2005 passed by the XVlth Additional Chief
Metropolitan Magistrate, Bangalore in CC NO. 3400/2002, was
dismissed.

Respondent allegedly gave a hand loan of Rs. 1,20,000/- ,,
D to the appellant on 4.10.2000. In discharge of the said debt the 1
appellant is said to have issued two cheques for Rs. 60,000/-
each on 26.4.2001 and 5.4.2001. The said cheques were
presented before the bank on July .10, 2001 and were returned
dishonoured on the ground that sufficient fund therefor was not
available.
E
Upon service of notice upon the respondent, a criminal
complaint was filed. By an order dated 20th November, 2002,
cognizance of the offence under Section 138 of the Negotiable
>
Instruments Act, 1881, was taken by the learned Magistrate.
F
Before the learned Trial Judge, the parties examined
themselves. One of the contentions raised by the appellant was
that there did not exist any relationship of creditor and debtor ·~

between the parties. It was furthermore urged that notice in
G terms of the proviso appended to Section 138 of !he Negotiable
Instruments Act was not served upon the appellant.

Learned Additional Metropolitan Magistrate upon
considering the materials brought on record by the parties,
including the report of a hand writing expert, opined that the
H signatures appearing on Exhibit P-11 (Postal Acknowledgment)
P. VENUGOPAL v. MADAN P. SARATHI 27
--1 ~

was not that of the appellant. The signatures of the appellant A
on the said Postal Acknowledgment was compared with his
signatures on the cheque. Respondent, however, examined the
postal peon - BA Subramanium as PW-2.

~, He stated that he knew the appellant very well.
B
'"I,'
-f
The learned Metropolitan Magistrate did not place any
reliance upon the said report of the hand writing expert and held
that the notice was in fact served upon the appellant. It was also
not disputed that the address of the appellant stated by the
complainant was the correct address. c
So far as the contention raised by the learned counsel that
the appellant had failed to prove the relationship of creditor and
' debtor is concerned, yet again on appreciation of the evidence
I
l brought on record, the leamed Trial Judge opined that the said D
~
relationship had been established.

-1 Another contention which was raised by the appeilant
before the learned Trial Judge was that the cheque had in fact
been issued to one Satya Murthy who was a property dealer,
in respect whereof the learned Trial Judge_ held: E

"In the present case, the accused, to prove the argui:nents,
has not produced any documentary evidence supports
.....
before the Court. On the contrary, the Accused has
admitted his Signature on the document Ex.P.12 produced F
by the Complainant. It is marked as Ex.P12-A. In the
Ex.P12, there is writing to the effect of having given the
disputed cheques to the Complainant. As stated in this,
these cheques are produced on 2.7.01. Therefore, in the
absence of arguments of this Accused, having not G
~ produced in support, cannot be accepted. In case, if this
-4: Accused had really having given the Cheques to
Sathyamurthy, if he, having mingled with this Complainant,
had filed this Complaint, the Accused should have taken
legal action against this Sathysmurthy and the
H
28 SUPREME COURT REPORTS [2008] 15 S.C.R.

A Complainant, for having mis-used the alleged Cheques,
,_
e
but, there are no evidences before the Court, for having
taken such any legal proceedi~gs. Therefore, the defence
evidence, raised by this Accused, having been rejected,
the evidence produced by the Complainant, and the ......_

B Rulings reported hereinabove, coupled with the and r
keeping in mind the rulings reported by the Learned ,...
'f·
Counsel for the Complainant, in AIR 2005 Karnataka Page
4486; ILR ·1999 Page 1825; ILR 2001 Karnataka Page
4027; by coming to the conclusion that, the Accused has
c committed the offence punishable under Section 138 of
N. I. Act, I answer the Point No: One in the 'Affirmative'., II

On the aforementioned finding that the respondent had
proved its case against the appellant beyond any shadow of
doubt, a sentence of three months' simple imprisonment as
D also a fine of Rs. 1,55,000/- was imposed upon the appellant. 1
Out of the said amount of fine, Rs. 1,50,000/- was, however,
directed to be paid to the complainant and the remaining
a.mount of Rs. 5,000/- was directed to be credited to the . '

Government.
E
An appeal was preferred thereagainst wherein the
appellant inter alia raised a contention that he had filed an
application for adduction of additional evidence to prove that
)..
he, in fact, had filed a complaint petition against the respondent
F ""'.'"complainant for misuse of cheque. Opining that no sufficient
reason has been assigned for allowing the said application for
adduction of additional evidence, it was held that the burden
was on the appellant - accused to rebut the case of the
complainant. It was held that no material has been brought on
record by the appellant to show that the cheques had been
G
issued in favour of Satyamurthy, particularly, when hehad not >-
been examined.

Before the Appellate Court, a further contention was raised
that the complainant had not been residing at the address given
H by him, in support whereof a purported report of a police

' '
P. VENUGOPAL v. MADAN P. SARATHI 29
i
constable was produced. A

The learned Appellate Court opined:

"All the said contentions are of no use as it is not his
concern to see if complainant is residing at the said
address or not. Even if it is presumed for a while that B
complainant h~~ no residence, it does not mean that he
-i
cannot transact with any other person. In the light of the
same, what is required is had there been any transaction
between complainant and the accused, had the accused
in order to discharge the legally enforceable debt, issued c
the cheque, had the cheque issued was dishonoured when
presented for realization and had inspite of statutory notice
being issued and served, the accused did not discharge
the legally enforceable debt."
~
D
On the aforementioned finding, the appeal was dismissed.
The revision application filed by the appellant was also
dismissed by reason of the impugned judgment.

Mr. Hegde, learned counsel appearing on behalf of the
appellant reiterated the aforementioned contentions raised by E
the appellant before the Courts below. In support of the said
contentions, the learned counsel strongly relied upon a decision
of this Court in Krishna Janardhan Bhat v. Dattatraya G.
.
Hegde, [2008] 4 sec 54.
F
Section 138 of the Negotiable Instruments Act reads as
under:

"Dishonour of cheque for insufficiency, etc., of funds in the
account.- Where any cheque drawn by a person on an
G
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
because of the amount of money standing to the credit of
that account is insufficient to honour the cheque or that it H
30 SUPREME COURT REPORTS (2008] 15 S.C.R.

r-
A exceeds 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 o( this Act, be
punished with imprisonment for a term which may be
B extended to two years! or with fine which may extend to
twice the amount of the cheque, or with both:
r
Provided that nothing contained in this section shall
apply unless-

c (a) the cheque has been presented to the bank within
a period of six months fr()m the date on which it is drawn
or withinthe period ofits validity, whichever is earlier;

(b) the payee or the holder in due course of the
D 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, within thirty days of
, th~ receipt ofinforciiati6n by him from the bank rega.tding
the·return of the cheque as unpaid; and
E (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."

F The Act raised two presumptions; one contained in
Section 118 of the Act .and other in Section 139 thereof.
Section 11 B(a) reads as under:

"118. Presumption as to negotiable instruments.- Until the
contrary is proved, the following presumptions shaU be
G ·made:.:..
.~'
(a) of consideration.- that every negotiable
instrument was made or drawn for consideration, and that
every such instrument, when it has been accepted,
H indorsed, negotiated or transferred, was accepted,
P. VENUGOPAL v. MADAN P. SARATHI 31

indorsed, negotiated or transferred for consideration; A

Provided that, where the instrument has been
obtained from its lawful owner, or from any person in lawful
custody thereof, by means of an offence or fraud, or has
been obtained from the maker or acceptor thereof by
B
means of an offence or fraud, or for unlawful consideration,
-r the burden of proving that the holder is a holder in due
course lies upon him."

Section 139 of the Act reads:
c
"139. Presumption in favour of holder.- It shall be
presumed, unless the contrary is proved, that the holder
of a 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." D
~-

Indisputably, in view of the decisions of this Court in
Krishna Janardhan Bhat (supra), the initial burden was on the
complainant. The presumption raised in favour of the holder of
the cheque must be kept confined to the matters covered
thereby. The presumption raised does not extend to the extent E
that the cheque was issued for the discharge of any debt or
liability which is required to be proved by the complainant. In a
case of this nature, however, it is essentially a question of fact.

The complainant contended that he gave a loan of Rs. F
1,20,000/- to the appellant. He denied and disputed the said
fact. Both parties adduced their respective evidences.

All the three Courts below have arrived at a concurrent
finding that the complainant has been able to prove his case
G
of grant of a loan. Admittedly the burden of proof shifted to the
appellant. Again a finding of fact was arrived at that the appellant
had failed to discharge his burden.

In the aforementioned situation, we are of the opinion that
the finding of fact arrived at by the Courts below cannot be said H
32 SUPREME COURT REPORTS [2008] 15 S.C.R.

A to be such which warrants interference by us.

So far as the question of service of notice in terms of the
proviso appended to Section 138 of the Act is concerned,·
again the same is essentially a question of fact. If the evidence
of PW-2 has been believed by the learned Trial Judge as also
B
by the Appellate Court and the revisional Court, we in exercise
of our jurisdiction under Article 136 of the Constitution of India
should not interfere therewith.

So far as the address of the complainant is concerned, it
C appears, he is a resident of Marenahalli, J.P. Nagar, Bangalore,
as it appears from the affidavit affirmed in support of the
counter affidavit. From aperusal of the memo of appeal filed
by the appellant himself before the Appellate Court, it would
appear that therein also the same address was given, namely,
D Marenahalli, J.P. Nagar, Bangalore.

Appellant, therefore, was aware that the respondent had
been residing at Marenahalli, J.P. Nagar, Bangalore as also the
fact that he had shifted from his earlier residence, namely, No.
326, 41 st Cross Road, 8th Block, Jayanagar, Bangalore.
E
For the reasons aforementioned, we are of the opinion that
no case has been made out for our interference with the
impugned judgment. The appeal is dismissed.

F As the amount of fine has already been deposited, the Trial
Court shall release the amount of Rs. 1,55,000/- in favour of
the respondent, if it has not already been wjthdrawn.

RP. Appeal dismissed.