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  REPORTABLE  

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.  2402  OF 2014 [ Arising out of  SLP (Crl.) No.6197 of 2014]

K. Subramani         …     Appellant(s)  

versus

K. Damodara Naidu              …    Respondent(s)

J U D G M E N T

C. NAGAPPAN, J.  

1. Leave granted.

2. This appeal  is preferred against judgment and order  

dated 10.10.2013 passed by the High Court of Karnataka at  

Bangalore in Criminal Appeal No.368 of 2009   wherein the

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High Court set aside the judgment of acquittal of the trial  

court and remanded the case to the trial court for retrial.

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3. The  respondent  herein/complainant  and  the  

appellant/accused  were  working  as  lecturers  in  a  

Government  College  at  Bangalore.   The  case  of  the  

complainant is that the accused borrowed a loan of Rs.14  

lakhs  in  cash  on  1.12.1997  from  him  to  start  granite  

business, promising to repay the same with 3%  interest per  

month  on  demand  and  issued  post-dated  cheque  dated  

30.11.2000  for  sum  of  Rs.29,12,000/-  which  included  

principal and interest and few days prior to presentation of  

the  cheque  on  its  due  date  to  bank for  encashment,  the  

accused requested him not to present the cheque  and took  

extension of time of another three years for repayment and  

finally  issued  a  cheque  dated  16.08.2005  for  a  sum  of  

Rs.73,83,552/- which included principal  and interest.  The  

complainant  presented  the  cheque  on  19.8.2005  for

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encashment to his banker and it  was dishonored with an  

endorsement ‘fund  insufficient’ and the complainant issued  

legal notice on 12.9.2005 demanding  repayment within 15  

days from the date of its receipt thereof and accused  sent  

reply  but  failed  to  comply  with  the  demand  and  the  

complainant  lodged  complaint  under  Section  138  of  the  

Negotiable Instrument Act, against the accused.  

4. In the trial the complainant examined himself as PW1  

and  examined   CWs1  and  2  on  his  side  and  marked  

documents Exh. P1 to P23.  The accused examined himself  

as DW1 and marked documents Exhs. D1 to D5.  The trial  

court held that the complainant had no source of income to  

lend a sum of Rs.14 lakhs to the accused and he failed to  

prove that there is legally recoverable debt payable by the  

accused  to  him and that  in  discharge  of  said  liability  he  

issued the cheque and accordingly acquitted the accused  for  

the alleged offence under Section 138 of N.I. Act.  Aggrieved

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by the same the complainant preferred appeal in the High  

Court  in  Criminal  Appeal  No.368  of  2009,  and  the  High  

Court  heard  the  appeal  along  with  9  other  appeals  by  

framing two legal issues which are as under:

“  i) Whether an action under Section 138 of the  

N.I.  Act  for  dishonor  of  cheque  is  the  

complainant required to establish his financial  

capacity to lend money?

ii)  Will  not presumption under Section 139 of  

the  N.I.  Act  accrues  to  the  benefit  of  the  

complainant  unless  the  accused  rebuts  that  

presumption?”

5. Relying on the ratio  laid down by this  Court  in the  

decision in  Rangappa vs.  Sri Mohan  [(2010) 11 SCC 441]  

the High Court answered the first issue in the negative and  

the second issue in the affirmative.  It further held that the  

orders  of  acquittal  recorded  by  the  trial  court  in  all  the  

appeals  suffer from legal infirmity as the prosecution has

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been  undone only on the ground that complainant had not  

proved his capacity to lend money and hence those orders  

are liable to be set aside.  Accordingly it allowed the appeals  

and  set  aside  the  respective  judgments  of  acquittal  and  

remanded  the  cases  to  courts  concerned  directing  retrial.  

The  present  appeal  is  preferred  challenging  the  said  

judgment.

6. The  learned  counsel  appearing  for  the  

appellant/respondent  contended  that  the  High  Court  

erroneously  clubbed a  batch of  10  criminal  appeals   and  

formulated two questions of law and insofar as the present  

appeal is concerned  the trial court never proceeded on the  

assumption that the presumption under Section 139 of the  

N.I. Act would enure to the benefit of the complainant only if  

he proves his financial capacity and on the contrary the trial  

court had for reasons recorded found that the accused has

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rebutted the presumption by placing cogent evidence that  

there  was  no  legally  recoverable  debt  or  liability  and  the  

complainant had no capacity to lend huge amount of Rs.14  

lakhs  and,  accordingly,  dismissed  the  complaint  by  

acquitting the accused.  It is his further contention that the  

High  Court  without  going  into  the  merits  proceeded  to  

remand the present case to the trial court for being retried  

and it has caused great prejudice to the appellant herein and  

hence the impugned judgment is liable to be set aside.

7. Learned  counsel  for  the  respondent/complainant  

submitted  that  the  High  Court  answered  the  legal  issues  

involved and has remanded the case to the trial  court for  

fresh consideration and no exception can be taken to the  

impugned judgment.

8. Three Judge Bench of  this  Court  in  the decision in  

Rangappa case  (supra)  laid  down  that  the  presumption

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mandated  by  Section  139  of  the  N.I.  Act  includes  a  

presumption that there exists  a legally enforceable debt or  

liability and that is a 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. Relying  

on  the  said  ratio  the  High  Court  answered  the  two  legal  

issues raised by it in the impugned judgment.  Though the  

criminal  appeals  were  preferred  against  the  judgment  of  

acquittal passed in all the cases arising under Section 138 of  

the N.I.  Act,  the factual  matrix and the evidence adduced  

were different.  The High Court after answering the two legal  

issues did not consider the merits of each case individually  

and has simply remanded  the matter to the trial court for  

fresh consideration.

9. In the present case the complainant and the accused  

were working as Lecturers in a Government college at the

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relevant time and the alleged loan of Rs.14 lakhs is claimed  

to have been paid by cash and it  is  disputed.  Both   of  

them  were governed by the Government Servants’ Conduct  

Rules which prescribes  the mode of lending and borrowing.  

There is nothing on record to show that the prescribed mode  

was  followed.  The  source  claimed  by  the  complainant  is  

savings from his salary and an amount of Rs.5 lakhs derived  

by him from sale of site No.45 belonging to him.  Neither in  

the  complaint  nor  in  the  chief-examination  of  the  

complainant, there is any averment with regard to the sale  

price of site No.45.  The concerned sale deed was also not  

produced.  Though  the  complainant  was  an  income-tax  

assessee he had admitted in his evidence that he had not  

shown the sale of site No.45 in his income-tax return. On the  

contrary the complainant has admitted in his evidence that  

in the year 1997 he had obtained a loan of Rs.1,49,205/-  

from L.I.C.  It  is  pertinent to note that  the alleged loan of  

Rs.14 lakhs is claimed to have been disbursed in the year

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1997  to  the  accused.  Further  the  complainant  did  not  

produce bank statement to substantiate his claim.  The trial  

court  took  into  account  the  testimony  of  the  wife  of  the  

complaint  in  another  criminal  case  arising  under  Section  

138 of the N.I. Act in which she has stated that the present  

appellant/accused  had  not  taken  any  loan  from  her  

husband.   On  a  consideration  of  entire  oral  and  

documentary evidence  the trial court came to the conclusion  

that the complainant had no  source of income to lend a sum  

of Rs.14 lakhs to the accused and he failed to prove that  

there is legally recoverable debt payable by the accused to  

him.

10. In our view the said conclusion of the trial court has  

been arrived at on proper appreciation of material evidence  

on record.  The impugned judgment of remand made by the  

High Court in this case is unsustainable and liable to be set  

aside.

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11.   In the result this appeal is allowed and the impugned  

judgment insofar as the appellant is concerned is set aside  

and the judgment of acquittal passed by the trial court is  

restored.

…………………………….J. (V. Gopala Gowda)

……………………………J. (C. Nagappan)

New Delhi; November  13, 2014

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ITEM NO.1A-For Judgment    COURT NO.11               SECTION IIB                S U P R E M E  C O U R T  O F  I N D I A                    RECORD OF PROCEEDINGS Criminal Appeal No. …..../2014 arising from SLP (Crl.)  No(s).   6197/2014 K SUBRAMANI                                        Appellant(s)                                 VERSUS K DAMODARA NAIDU                                   Respondent(s) Date : 13/11/2014 This petition was called on for JUDGMENT today.

For Petitioner(s)  Mrs. Vaijayanthi Girish,Adv.                 For Respondent(s)  M/s. Nuli & Nuli                    

         UPON hearing the counsel the Court made the following                              O R D E R

Hon'ble  Mr.  Justice  C.  Nagappan  pronounced  the  judgment  of  the  Bench  comprising  Hon'ble  Mr.  Justice  V.Gopala Gowda and His Lordship.

Leave granted.

The appeal is allowed in terms of the signed order.

     (VINOD KUMAR)    (MALA KUMARI SHARMA)

COURT MASTER COURT MASTER (Signed Reportable judgment is placed on the file)