Dishonour of cheque-amount not disclosed in income tax can be recovered
“......The learned J.M.F.C. has also held
against the complainant the fact that the
complainant had not shown the amount advanced
by him in his income tax returns. I do not think
that every person who gives friendly loans does in
all cases show such loans in their income tax
returns more so if they are payable on demand
after short time. The learned acquitting J.M.F.C.
entirely lost sight of the several presumptions
which the law has enacted in favour of the
complainant.
IN THE HIGH COURT OF BOMBAY AT GOA
CRIMINAL APPEAL NO.6 OF 2012
Mr. Krishna P. Morajkar V/s Mr. Joe Ferrao,
CORAM : R.C. CHAVAN, J.
Pronounced Date : 19th JULY, 2013
Citation;2013 CR l J(NOC)572 Bombay
This appeal questions appellate judgment of the learned Additional
Sessions Judge, Mapusa whereby the learned Additional Sessions Judge
set aside judgment of conviction of the respondent for offence punishable
under Section 138 of the Negotiable Instruments Act and sentence of
paying compensation quantified at Rs.4,00,000/- or in default to suffer
imprisonment for one year imposed upon the respondent by the learned
JMFC, 'E' Court, Mapusa Goa on the conclusion of trial of Criminal Case
no.OA/NIA/759/P/O6/E before the learned Magistrate.
2.
The facts which are material for deciding this appeal are as under:
The appellant claimed to be a friend of respondent. The respondent
approached the appellant in last week of March, 2006 stating that the
respondent wanted to renovate his premises and, therefore, needed a sum
of Rs.3 lacs which he would repay in about 7 to 8 months. The appellant
claimed to have advanced a sum of Rs.2,40,000/- against which the
respondent issued 10 cheques dated 31/03/2006 to 30/09/2006 for
amounts ranging from Rs.20,000/- to Rs.35,000/-. The first cheque for
Rs.20,000/- dated 31/03/2006 was realised.
The second cheque was
dishonoured on the ground that the funds were insufficient. In respect of
this second cheque dated 30/04/2006, the appellant issued a notice and
upon failure of the respondent to pay the amount demanded, filed a
criminal case bearing no.478/2006, which was pending when the
complaint dated 18/12/2006 was filed in respect of dishonour of the
remaining cheques. The appellant presented the remaining cheques on
the dates they were due and since those cheques were dishonoured, the
appellant issued notice to the respondent calling upon the respondent to
pay the amounts under those cheques. Since the respondent did not pay
the amount of Rs.2 lacs demanded within 15 days of the receipt of notice,
the appellant filed the complaint before the learned Magistrate at Mapusa.
After examining the complainant, the learned Magistrate directed
issuance of process.
3.
After respondent appeared, substance of acquisition was explained
to the respondent and since he pleaded not guilty, he was put on trial at
which the appellant examined himself in order to prove his case. The
respondent was examined under Section 313 of the Criminal Procedure
Code and sought to tender evidence in defence. He examined himself as
DW1 and one Lawrence Fernandes as DW2.
The defence of the
respondent was that the appellant came to his house on 31/03/2006 at
about 9.30 a.m. with unknown persons and demanded “hafta”, protection
money of Rs.3 lacs possibly alleging that the respondent had sold his
premises and, therefore, respondent had huge amount with him. On
respondent telling the appellant that he had no money, the appellant saw
the cheque book lying on the table and forced the respondent to write the
cheques in question. The respondent stated that there was no question of
respondent being in need of money to renovate his business premises by
name 'Sunrise Bar and Restaurant', since he had already sold the premises
4
cria no.6 of 2012
'Sunrise Bar and Restaurant' on 11/08/2005 and had placed DW2
Lawrence Fernandes in its possession. In fact, a shop by name M/s.
Elisha Enterprises dealing with consumer goods had been inaugurated in
the premises on 11/10/2005.
Further, there was no question of the
appellant being in a position to advance any amount to the respondent in
the shop on 31/03/2006. After considering this evidence tendered before
the learned Magistrate, the learned Magistrate held that the appellant had
proved the charge and convicted the respondent as aforementioned.
Aggrieved thereby, the respondent preferred an appeal before the Court of
Sessions.
4.
The learned Additional Sessions Judge held that the respondent had
proved that the defence was probable and, therefore, set aside the
conviction. While doing so, he relied on several judgments and also
invoked provisions of Section 269SS and 271D of the Income Tax Act.
He observed that the appellant had not produced the books of account to
show that he had sum of Rs.2,40,000/- to be advanced to the respondent.
The learned Additional Sessions Judge relied on the judgments of
Supreme Court in Krishna Janardhan Bhat vs Dattatraya G. Hegde
reported at 2008 (4) SCC 54 and Kamala S. V/s. Vidyadharan M.J. &
anr. reported at 2007 (2) Bom.C.R. 570 as also judgment of this Court in
5
cria no.6 of 2012
Vinay Parulekar V/s. Pramod Meshram reported at 2008 (1) Mh.L.J.
(Cri) 517.
5.
I have heard the learned Counsel for the appellant and the learned
Counsel for the respondent and with the help of both, I have gone through
the entire evidence on record. The learned Counsel for the respondent
first submitted that it would not be open to this Court to set aside an
acquittal unless the judgment of the acquittal was shown to be perverse or
based on untenable evidence. He submitted that if the view taken by the
learned Additional Sessions Judge was probable this Court may not
interfere with such a finding.
There can be no doubt about this
proposition of law. It would therefore be necessary to find out whether
the learned Judge was justified in setting aside conviction recorded by the
learned Magistrate.
6.
The learned Counsel for the appellant submitted that the learned
Additional Sessions Judge was not justified in coming to the conclusion
that the appellant could not at all have advanced a sum of Rs.2,40,000/- to
the respondent or that the defence of the respondent was probabalised.
He submitted that if the respondent really had no need of money and had
not received any amount from the appellant there is no reason why the
respondent allowed a cheque of Rs.20,000/- to be honoured. The learned
Counsel further pointed out that the appellant had in fact filed another
criminal case against the respondent upon dishonour of the second cheque
in the series. In that case bearing no.478/06/C, the respondent had filed
an application at exhibit 34 on 8/01/2007 making a payment of
Rs.20,000/- to the appellant. This application is at page 170 of the
compilation. The respondent had admitted in his deposition in the present
case that he thus paid a sum of Rs.40,000/- towards the cheques issued.
The learned Counsel for the appellant wondered as to why the respondent
could be paying a sum of Rs.40,000/- if the cheques were obtained by the
appellant by force. He also submitted that the respondent had ample
opportunity to make a complaint to the police about his being forced to
sign the cheques, but he had not done so. The learned Counsel submitted
that if the respondent claimed that appellant was a bully and, therefore, he
was under fear, there is no reason as to how this fear had gone away when
the respondent avoided payment towards the remaining cheques.
7.
The learned Counsel for the respondent submitted that the
respondent filed an application in the case no.478/06/C on 8/01/2007,
unconditionally proposing to pay a sum of Rs.20,000/- with the
understanding that the appellant would withdraw even the present case
i.e. Criminal Case No.759/06, if he made that payment. This according to
the learned Counsel for the appellant appears to be farfetched since the
order passed by the learned Magistrate on application at exhibit 15 in the
said case no.478/06 shows that the complainant was not willing to
compound the matter though the appellant was ready to pay a sum of
Rs.20,000/-.
Therefore, there is no question of there being any
understanding reached between the parties. Therefore, the payment of
Rs.20,000/- by allowing a cheque to be encashed, and an offer to pay a
sum of Rs.20,000/- made in case no.478/06 are inexplicable and would be
indicative of the respondent having some liability towards the appellant.
8.
The learned Counsel for the appellant submitted that the story put
forth by the respondent that he had no need of money is itself not proved.
First, if the respondent was not in need of money it is not clear as to why
he came up with the case of sale of his premises to DW2/Lawrence
Fernandes. Secondly, though the respondent claimed to have received
consideration towards the premises from DW2/Lawrence Fernandes, the
evidence of Lawrence Fernandes in the present case as also in the earlier
case no.478/06 which have been duly considered by the learned
Magistrate show that the story sought to be made out by the respondent is
without any foundation. According to the respondent, the respondent had
sold the premises to Lawrence Fernandes on 11/08/2005 and had placed
Lawrence Fernandes in possession on the same day.
But, in his
examination-in-chief itself, the respondent stated that possession of
second shop was also given but the agreement was made later. He then
stated “we” started business in the said shop in October 2005”. The
learned Counsel for the respondent stated that “we” should be read as
“he” referring to Lawrence Fernandes.
The agreements which were
produced were of 11/08/2005 and 17/02/2006. There are two telephone
bills of 7/01/2006 and 7/12/2005, which show that the telephone stood in
the name of Lawrence Fernandes. It was also sought to be proved that a
labour inspector had visited the shop. DW3/Rupesh Kotambikar, Labour
Inspector had visited the shop on 23/01/2006 and found that in the shop
sale of electronic items was going on. The name of the shop was Elisha
Enterprises with the address of 4-5 Punam Apartments, Angod Mapusa.
The evidence of this witness, particularly, cross-examination, shows that
the witness did not in fact remember anything. The learned Additional
Sessions Judge, however, seems to have believed the evidence of
DW3/Rupesh Kotambikar, since he was a government servant and
performing his duty in official capacity and, therefore, could not have any
reason to create fake documents with the so intention of helping the
appellant.
9.
The learned Counsel for the appellant submitted that the two
agreements which have been placed on record show that the first
agreement is in respect of shop no.4. This dated 11/08/2005. The second
agreement is dated 17/02/2006 and is in respect of shop no.5. Though the
respondent claimed that he had placed Lawrence Fernandes in possession
of both the shops on 11/08/2005, the evidence of Lawrence Fernandes
would create a doubt about the truthfulness of what the respondent stated.
Lawrence Fernandes stated in his cross-examination that though the
schedule of payment was mentioned in the agreements there was some
delay in payment of amounts under the agreement. The payment under
the first agreement was delayed by 2 to 3 months and payment under the
second agreement was delayed by about an year.
DW2/Lawrence
Fernandes denied having ever stated in the earlier criminal case, where he
was examined, that he had received possession of shop no.5 in
compliance with agreement dated 17/02/2006. He was confronted with
his evidence in the earlier case, where it was mentioned that it was true
that possession of shop no.4 was given in compliance with exhibit 33 and
shop no.5 was given in compliance with exhibit 34. On being confronted
with this statement the witness stated that it may be due to some mistake
that he made such a statement.
If he was so casual about making
statement on oath in Court, it cannot be said that the learned Magistrate
was off the mark in branding Lawrence Fernandes as a lier. In any case,
on his own admission, the entire consideration has not been paid to the
respondent.
Therefore, to say that the respondent was not at all in
possession of any part of the premises would be farfetched.
10.
Further, as rightly submitted by the learned Counsel for the
appellant this aspect is relevant only for testing the reliability of the
statement made by the appellant that he met the respondent on
31/03/2006 in the premises in question. Even if the respondent may have
sold the premises to Lawrence Fernandes or have handed over possession
to Lawrence Fernandes or even if it is accepted that Lawrence Fernandes
had started some business of the consumer goods in the premises, that
will not prevent the appellant and the respondent to meet in the said shop.
Where the parties met may not be determinative of the question whether
the appellant had advanced a sum of Rs.2,40,000/- to the respondent as
claimed by the appellant. Therefore, on facts, there was no reason to give
any extra weightage to the claim of the respondent based on his story
about sale of premises to Lawrence Fernandes, particularly, when
Lawrence Fernandes had no compunction in contradicting himself with
reference to his deposition in earlier case.
11.
The learned Additional Sessions Judge had observed that
since the respondent had received about Rs.18 lacs, it was difficult to
believe that he would be in need of another sum of Rs.3 lacs. Now, if
Lawrence Fernandes himself admits that there was some delay in
payment of the amounts and that delay in respect of the first agreement
was about three months and in respect of the second agreement about one
year, obviously, the respondent could not claim to have received the
amounts under the agreement.
If it is taken for a while that the
respondent was in need of money and, therefore, he sold those premises
and if the payment was not forthwith coming as per the schedule, there
will be nothing wrong in the respondent seeking to get some help from
the complainant. Therefore, the learned Additional Sessions Judge need
not have rejected the appellant's case on the ground that the accused was
not in need of money.
12.
On the question of fact, it has to be held that the learned Additional
Sessions Judge erred in coming to the conclusion that since the
respondent had agreed to sell his business he had enough money with him
making it unnecessary for him to borrow any sum from the appellant-
complainant.
This is so because the evidence of DW2/Lawrence
Fernandes itself shows that the payment was not being made as per
schedule and that in respect of the second agreement the payment was
lagging behind by almost an year. Therefore, if the accused had in fact
agreed to sell his premises, presumably because he needed money, rather
than the premises, and if money was not forthcoming for whatever needs
he had, it cannot be said that he had no reason to borrow from the
complainant. This is also to be considered in the context of the fact that
the accused agreed to repay in instalments which may be consistent with
the promise of the purchaser Lawrence Fernandes to pay according to a
schedule fixed in the agreements and not in one lump sum.
13.
As to the question whether the appellant-complainant was right in
claiming that the accused had sought this advance for renovating his bar,
this need not have influenced the learned Additional Sessions Judge, even
if it is taken that the complainant's word on this count was not true, since
the complainant would depend on what the accused told him and would
have no reasons to check up whether the accused really needed money for
the purpose for which he was seeking it. Therefore, these things could
not be said to be so material to outweigh the presumption that the amount
represented in the cheque was for legally enforceable debt or liability.
14.
These conclusions are fortified by the fact that the accused had in
fact allowed a cheque of Rs.20,000/- to be honoured and was ready to pay
a further sum of Rs.20,000/- when another case of dishonour of cheque
issued in the same series was before the same Magistrate.
Had the
complainant been a bully and had snatched the cheques from the accused
and had the accused been really scared and, therefore, not made a
complaint to the police, he would at least not have offered to pay
Rs.20,000/-, when a case was already filed against him and when he was
before the Court.
Therefore, the learned Additional Sessions Judge
should have noted these aspects and held as a matter of fact that the story
of complainant having made an advance of Rs.2,40,000/- had not been
rebutted.
15.
The learned Additional Sessions Judge next held that the
complainant did not produce his books of accounts to show that he had
sum of Rs.2,40,000/- with him which he could have advanced, since the
complainant had not filed any income tax returns. The learned Judge then
referred to provisions of Section 269 SS and 271 D of the Income Tax Act
and the judgment of the Supreme court in Krishna Janardhan Bhat
(supra). The reference to these provisions surfaced in the judgment of the
Supreme Court in Krishna Janardhan Bhat (supra). In that judgment,
the Supreme Court held that existence of legally enforceable debt is not a
matter of presumption under Section 139 of the Negotiable Instruments
Act.
As far as this aspect is concerned, this judgment has been
specifically overruled by a three Judges Bench of the Supreme Court in
Rangappa V/s. Sri Mohan reported at 2010 (11) SCC 441.
16.
In Krishna Janardhan Bhat (supra), the two Judges Bench of the
Supreme Court was considering the case of four blank cheques having
been issued by the accused. The trial Court had convicted the accused.
The Sessions Court dismissed the appeal and in the High Court while
conviction was maintained, sentence was reduced. The Supreme Court
observed in para 26 & 27 of the judgment as under :
“26. The courts below failed to notice that
ordinarily in terms of Section 269SS of the
Income Tax Act, any advance taken by way of any
loan of more than Rs.20,000/- was to be made by
way of an account payee cheque only.
27. Section 271D of the Income Tax Act reads as
under:
“271D. Penalty for failure to comply with the
provisions of Section 269SS - (1) If a person takes
or accepts any loan or deposit in contravention of
the provisions of Section 269SS, he shall be liable
to pay, by way of penalty, a sum equal to the
amount of the loan or deposit so taken or
accepted.
(2) Any penalty imposable under sub-section (1)
shall be imposed by the Joint Commissioner.”
(emphasis supplied).
The Supreme Court then allowed appeal and set aside the conviction of
the accused.
17.
As already observed the judgment in Krishna Janardhan Bhat
(supra), in so far as it relates to interpretation of Section 139 of the
Negotiable Instrument Act, has been overruled by a three Judges Bench
of the Supreme Court in Rangappa (supra). In Rangappa (supra) the
Supreme Court was considering an appeal against conviction recorded by
the High Court reversing an acquittal by the Court below for the offence
punishable under Section 138 of the Negotiable Instrument Act. In that
case, the complainant had stated that the accused requested him for a
handloan of Rs.45,000/- in order to meet construction expenses and the
complainant paid Rs.45,000/- by way of cash. The accused assured to
repay the amount but failed to do so and then issued cheque for
Rs.45,000/- which was dishonoured. The accused took defence that he
had lost a signed blank cheque. The Court considered the presumption
under Section 118 and 139 of the Negotiable Instruments Act and also the
judgment of the two Judge Bench in Krishna Janardhan Bhat (supra).
After considering several judgments the Supreme Court observed in para
26 as under:
“14. In light of these extracts, we are in agreement
with the respondent-claimant that the presumption
mandated by Section 139 of the Act does indeed
include the existence of a legally enforceable debt
or liability. To that extent, the impugned
observations in Krishna Janardhan Bhat (supra)
may not be correct. However, this does not in any
way cast doubt on the correctness of the decision
in that case since it was based on the specific facts
and circumstances therein. As noted in the
citations, this is of course in the nature of 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. However, there can be no doubt that
there is an initial presumption which favours the
complainant.” (emphasis supplied).
Thus, on the question of presumption about existence of legally
enforceable debt or liability Krishna Janardhan Bhat (supra) stood
expressly overruled.
18.
The learned Counsel for the respondent submitted that the
observations of the Supreme Court in para 14 of the judgment in
Rangappa (supra) show that the Supreme Court had not in any way cast
any doubt on the correctness of the decision in Krishna Janardhan Bhat
(supra), as it was based on specific facts and circumstances therein.
Therefore, he submitted that observations in Krishna Janardhan Bhat
(supra) about non-compliance of provisions of Section 269SS and the
implications of Section 271D of the Income Tax Act would still stand as
good law. The learned Counsel for the appellant submitted that even
these observations would stand impliedly overruled. He pointed out that
what was held in Krishna Janardhan Bhat (supra) was that advance
taken by way of loan of more than Rs.20,000/- was only to be made by
way of an account payee cheque. He submitted that in Rangappa (supra)
the Supreme Court was specifically considering the case of an advance of
Rs.45,000/- made in cash and yet the Supreme Court had upheld the
conviction recorded.
Thus even those observations based on the
provisions of Section 269SS and 271D of the Income Tax Act made in
Krishna Janardhan Bhat (supra) would stand impliedly overruled. I am
entirely in agreement with the learned Counsel for the appellant because
the Supreme court in Rangappa (supra) had specifically noted the
judgment in Krishna Janardhan Bhat (supra). The Supreme Court had
obviously noted the observations in para 26 in Krishna Janardhan Bhat
(supra) that advance of more than Rs.20,000/- was to be made only by
way of an account payee cheque, and yet the Supreme Court accepted
case of a complainant who claimed to have made an advance of
Rs.45,000/- in cash and proceeded to uphold the conviction, even though
the case rested on the fact that cash advance of a sum more than
Rs.20,000/- was made. Thus, on this aspect also Krishna Janardhan
Bhat (supra) stood impliedly overruled by Rangapaa (supra), and the
judgment is to be held rendered on the facts of that case, not laying down
any law. Therefore, judgments which follow Krishna Janardhan Bhat
(supra) can be safely ignored.
19.
There is another aspect of the matter. The learned Counsel for the
respondent pointed out that in Krishna Janardhan Bhat (supra) attention
of the Supreme Court was possibly not drawn to the actual wording of
Section 269SS of the Income Tax Act. He submitted that Section 269SS
of the Income Tax Act, in fact, does not cast any burden upon a person
making advance in cash to record it in his returns and does not prevent
any such cash advance from being made. It may be useful to quote
provisions of Section 269SS and 271D of the Income Tax Act as under:
Section 269SS: No person shall, after the 30th day
of June, 1984, take or accept from any other person
(hereafter in this section referred to as the
depositor), any loan or deposit otherwise than by
an account payee cheque or account payee bank
draft if, -
(a) the amount of such loan or deposit or the
aggregate amount of such loan and deposit ; or
(b) on the date of taking or accepting such loan or
deposit, any loan or deposit taken or accepted
earlier by such person from the depositor is
remaining unpaid (whether repayment has fallen
due or not), the amount or the aggregate amount
remaining unpaid ; or
(c) the amount or the aggregate amount referred to
in clause (a) together with the amount or the
aggregate amount referred to in clause (b), is
twenty thousand rupees or more :
Provided that the provisions of this section shall
not apply to any loan or deposit taken or accepted
from, or any loan or deposit taken or accepted by-
(a) Government ;
(b) any banking company, post office savings bank
or co-operative bank;
(c) any corporation established by a Central,
State or Provincial Act;
(d) any Government company as defined in
section 617 of the Companies Act, 1956 (1 of
1956);
(e) such other institution, association or body or
class of institutions, associations or bodies which
the Central Government may, for reasons to be
recorded in writing, notify in this behalf in the
Official Gazette:
[Provided further that the provisions of this section
shall not apply to any loan or deposit where the
person from whom the loan or deposit is taken or
accepted and the person by whom the loan or
deposit is taken or accepted are both having
agricultural income and neither of them had any
income chargeable to tax under this Act.]
Section 271D – (1) If a person takes or accepts
any loan or deposit in contravention of the
provisions of section 269SS, he shall be liable to
pay, by way of penalty, a sum equal to the amount
of the loan or deposit so taken or accepted.
(2) any penalty imposable under sub-section (1)
shall be imposed by the joint Commissioner.
(emphasis supplied).
A plain reading of Section 269SS shows that no person can accept
any loan or deposit of a sum of Rs.20,000/- or more otherwise than by an
account payee cheque or account payee bank draft. It does not say that a
person cannot advance more than Rs.20,000/- in cash to another person.
It is clear that the restriction on cash advances was in fact on the taker
and not the person who makes the advance. The penalty for taking such
advance or deposit in contravention of provisions of Section 269SS was
to be suffered by one who takes the advance. Therefore, it was obviously
impermissible to invoke these provisions for preventing a person from
recovering the advance which he has made.
20.
The learned Counsel for the respondent submitted that the view
taken in Krishna Janardhan Bhat (supra) has been consistently followed
by this Court. He also relied on judgment of this Court in Sayeeda Iqbal
Vakil V/s. Javed Abdul Latif Shaikh & anr. reported at 2008 (2)
Bom.C.R. (Cri). 258 and Patricio D'Souza V/s. Oscar D'Souza & Anr.
reported at 2009 (1) Bom.C.R. (Cri.) 710 which in turn relied on
observations in Vasudev Ramchand Ahuja V/s. Vilas Shripati Kamble
reported at 2006 (2) Bom.C.R. (Cri.) 1 to the following effect:
“The observation seen by the trial Court that
amount allegedly paid by complainant during
period has not been reflected in Income Tax
returns as well as in books of account. Reasons
recorded by the Court below on appreciation of
evidence on record, impugned judgment cannot be
said to be unreasonable and perverse.”
This and some other circumstances led the Court to refuse leave to
file appeal against acquittal.
21.
In Peter Mascarenhas V/s. Monsabre Ashley Oswald Dias
reported at 2010 (2) Bom.C.R. (Cri.) 38 and Sandeep Shirodkar V/s.
Shankar Dhawaskar & anr. reported at 2010 (2) Bom.C.R. (Cri.) 867 on
which the learned Counsel for the respondent placed reliance, the Court
had quoted from Krishna Janardhan Bhat (supra).
The Court then
observed that the judgment in Krishna Janardhan Bhat (supra) lays
down a proposition that existence of a legally enforceable debt is not a
matter of presumption under Section 139 of the Act.
22.
As already observed, since Krishna Janardhan Bhat (supra) does
not lay down any proposition of law, judgments which follow Krishna
Janardhan Bhat (supra) would have to be ignored. This leaves question
of advance not being reflected in books of account. The learned Counsel
for the respondent relied on judgment in Sanjay Mishra V/s. Kanishka
Kapoor @ Nikki & anr. reported at 2009 (3) Bom.C.R. (Cri.) 157 = 2009
(4) Mah.L.J. 155 where the question of unaccounted money is
considered. In this judgment too, a learned Single Judge of this Court
copiously quoted from the judgment of Supreme court in Krishna
Janardhan Bhat (supra) in paragraphs 9,10 & 11. It need not be restated
that since Krishna Janardhan Bhat (supra) was expressly overruled on
the nature of presumption under Section 139 and impliedly on the
question of cash advances, it remains a decision on facts of that case and
so the observations in Sanjay Mishra (supra) based on Krishna
Janardhan Bhat (supra) may be safely excluded from consideration.
23.
In Sanjay Mishra (supra) the Court had also noted in para 14 the
observations of the Supreme Court in Dalmia Cement (Bharat) Ltd Vs.
Galaxy Traders & Agencies Ltd & Ors. reported at (2001) 6 Supreme
Court Cases 463 and, ultimately, refused leave for filing an appeal
against acquittal, possibly principally on account of the following facts
noted by the Court in paras 6,7 & 8 of the judgment.
“6. I have given careful consideration to the
submissions. I have perused a copy of the
complaint and notes of evidence. In the cross-
examination, the applicant has categorically stated
thus:
".... The entire amount was given in cash. The
entire amount was my cash amount. The cash
amount was kept at my Chembur's residence. At
that time, it was unaccounted. I had not disclosed
this amount to the Income Tax after giving the
loan till date. There was no agreement for interest
on the amount given. ....." (Emphasis added)
The complaint was filed in the year 2005. The
evidence of the applicant was recorded on 28th
February 2006. The applicant admitted that the
amount allegedly paid by him to the 1st
respondent by way of loan was a cash amount
kept at his residence and at that time it was an
unaccounted amount. He categorically admitted
that till date (i.e. till 28th February 2006) he has
not disclosed the amount to the Income Tax.
According to the case of the complainant, he had
advanced loan on 14th September 2004 which
was repayable within 90 days. Thus, on 14th
September 2004 the amount allegedly paid by him
to the 1st respondent was stated to be an
unaccounted amount which was kept at the
residence of the applicant. Moreover, till February
2006, when the evidence was recorded, the said
amount was not disclosed in the Income Tax
Returns of the applicant. Thus it continued to be
an unaccounted amount.
7. It is true that merely because amount advanced
is not shown in Income Tax Return, in every case,
one cannot jump to the conclusion that the
presumption under section 139 of the said Act
stands rebutted. There may be cases where a small
amount less than a sum of Rs.20,000/- is advanced
in cash by way of loan which may be repayable
within few days or within few months. A
complainant may not show the said amount in the
Income Tax Return as it is repayable within few
days or few months in the same financial year. In
such a case the failure to show the amount in the
Income Tax Return may not by itself amount to
rebuttal of presumption under section 139 of the
said Act. If in a given case the amount advanced
by the complainant to the accused is a large
amount and is not repayable within few months,
the failure to disclose the amount in Income-Tax
return or Books of Accounts of the complainant
may be sufficient to rebut the presumption under
section 139 of the said Act.
8.
In the present case, the amount was
allegedly advanced in September 2004. The
amount is a large amount of Rs.15 lacs. This is a
case where not only that there is a failure to
disclose the amount of loan in the Income Tax
Return of the applicant till the year 2006 but there
is a categorical admission on the part of the
applicant that the amount was an "unaccounted"
amount.” (emphasis supplied).
24.
It may be seen that even in Sanjay Mishra (supra) failure to show
the advances in income tax returns is not held to be always fatal. While
observing that small amounts of less than Rs.20,000/- could be so
advanced, the Court was obviously influenced by observations in
Krishna Janardhan Bhat (supra) and provisions of Sections 269SS and
271D of Income Tax Act, which as already pointed out, require a
borrower to receive amount in excess of Rs.20,000/- only by cheques. In
the case at hand, the amount was advanced in the last week of March,
2006 and was to be repaid by 30/09/2006 i.e. within 6 months. Thus,
even observations in Sanjay Mishra (supra) (minus the ceiling of
Rs.20,000/- which has no legal sanctity), would not make the appellant's
case untenable.
25.
The learned Counsel for the appellant submitted that the amounts
which were not reflected in the income tax returns or in the books of
accounts do not become irrecoverable. He relied on a judgment of this
Court in Shri Deelip Apte V/s. Nilesh P. Salgaonkar & Ors. reported at
2006 (2) Goa L.R. 229 in support of this proposition. It was observed
therein at para 4 as under:
“4. It is now common knowledge that the
Negotiable Instruments Act, 1881, was amended
with a view to enhance the acceptability of
cheques in settlement of liabilities by making the
drawer liable for penalties in case of bouncing of
cheques due to insufficiency of funds in the
accounts or for the reason that it exceeds the
arrangements made by the drawer, with adequate
safeguards to prevent harassment of honest
drawers, as the evil practice of issuing cheques in
settlement of liabilities without there being
adequate amount in the accounts had become
rampant and the amendment was carried out with
a view to curb the same effectively by enacting a
stringent law while at the same time taking care to
safeguard the interest of honest drawers. If that be
the object of the amendments, the provisions of
the Act are required to be interpreted in the light
of the said objects intended to be achieved.”
The Court further observed in respect of requirement to show
advances in the income tax returns as under:
“......The learned J.M.F.C. has also held
against the complainant the fact that the
complainant had not shown the amount advanced
by him in his income tax returns. I do not think
that every person who gives friendly loans does in
all cases show such loans in their income tax
returns more so if they are payable on demand
after short time. The learned acquitting J.M.F.C.
entirely lost sight of the several presumptions
which the law has enacted in favour of the
complainant. As already stated in the case at hand,
the complainant had sufficiently discharged his
initial burden by deposing that the complainant
had given a loan in the sum of Rs. 1,70,000/-
towards the repayment of which the accused had
issued the said cheques. In one of the cases, the
accused took a plea that although the cheque was
signed and filled by him, the amount of the loan
was not written by the accused. In this context, it
may be stated that the complainant had denied the
suggestion that he had taken three blank cheques
without the date and amount from the accused as
security. As regards the date, reference could be
made to Section 118(b) of the Act, which provides
that only when the contrary is proved, a
negotiable instrument is presumed to have been
made on the date shown on the instrument.”
26.
Incidentally in Sanjay Mishra (supra) on which the learned
Counsel for the respondent relied on the question of object of Section 138
of the Negotiable Instruments Act, this Court held in para 15 as under:
“15. The Apex Court has held that the laws
relating to the said Act are required to be
interpreted in the light of the object intended to be
achieved by it despite there being deviation from
general law. The Apex Court expressed that the
object of section 138 of the said Act was to ensure
that commercial and mercantile activities are
conducted in smooth and healthy manner. The
explanation to section 138 of the said Act clearly
provides that a debt or other liability referred to in
section means a legally enforceable debt or other
liability. The alleged liability to repay an
unaccounted cash amount admittedly not
disclosed in the Income Tax Return cannot be a
legally recoverable liability. If such liability is
held to be a legally recoverable debt, it will render
27
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the explanation to section 138 of the said Act
nugatory. It will defeat the very object of section
138 of the Act of ensuring that the commercial
and mercantile activities are conducted in a
healthy manner. The provision of section 138
cannot be resorted to for recovery of an
unaccounted amount. A cheque issued in
discharge of alleged liability of repaying
"unaccounted" cash amount cannot be said to be a
cheque issued in discharge of a legally
enforceable debt or liability within the meaning of
explanation of section 138 of the said Act. Such an
effort to misuse the provision of section 138 of the
said Act has to be discouraged.” (emphasis
supplied).
The underlined observations do not disclose as to where can one
find a prohibition on recovering amounts not disclosed in income tax
returns. With utmost humility, I have to state that I have not come across
any provision of Income Tax Act, which makes an amount not shown in
the income tax returns unrecoverable. The entire scheme of the Income
Tax Act is for ensuring that all amounts are accounted for. If some
amounts are not accounted for, the person would be visited with the
penalty or at times even prosecution under the Income Tax Act, but it
does not mean that the borrower can refuse to pay the amount which he
has borrowed simply, because there is some infraction of the provisions
of the Income Tax Act. Infraction of provisions of Income Tax Act would
be a matter between the revenue and the defaulter and advantage thereof
28
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cannot be taken by the borrower. In my humble view, to say that an
amount not disclosed in the income tax returns becomes irrecoverable
would itself defeat the provisions of Section 138 of the Negotiable
Instruments Act. Apart from the purpose of this Act, which has been
outlined by the learned Single Judge in Shri Deelip Apte (supra) as well
as in Sanjay Mishra (supra), it ought to be seen that the moment a person
seeks to recover through a cheque an amount advanced in cash it gets
amounted for in the system and the revenue authorities can keep a track
of that and if necessary tax the person. To brand an amount which is not
shown in Income Tax Act as unaccounted money would be too farfetched
and, therefore, I am in respectful disagreement with the observations in
Sanjay Mishra (supra), which in fact amounts to reading an additional
requirement in Section 138 of the Negotiable Instruments Act, and
legislating that such amounts becomes irrecoverable. At the cost of
repetition, for saying that an amount not disclosed in income tax returns
cannot be legally recoverable liability, some provisions of law to that
effect would have to be shown. Such provision was not noticed by me
and even the learned Counsel for the respondent could not show any such
provision to me. For this reason, the judgment in Sayeeda Iqbal Vakil
(supra) and Vassudev Ramchand Ahuja (supra) cannot be followed.
Judgments in Patricio D'Souza V/s. Oscar D'Souza & anr. reported at
29
cria no.6 of 2012
2009 (1) Bom.C.R. (Cri.) 710 and Sandeep Shirodkar V/s. Shankar
Dhawaskar & anr. reported at 2010 (2) Bom.C.R.(Cri.) 867 are on facts
unfolded in those cases.
27.
The learned Counsel for the respondent submitted that if this Court
was taking a view different from that taken in Vassudev Ramchand
Ahuja (supra) or Sanjay Mishra (supra), this Court ought to make a
reference to a Division Bench. I do not think it is necessary because first
there is also a judgment of Single Judge of this Court in Shri Deelip Apte
(supra) which has already taken such a view and, secondly, in the absence
of express provision which would make such loans unrecoverable it
would not be possible for any Court to so hold.
28.
The learned Counsel for the respondent next submitted that the
presumptions are rebutable and the accused is not required to tender
evidence or bear burden of proof of the same magnitude as the
prosecution. The learned Counsel for the respondent relied on judgment
of Supreme Court in M.S. Narayana Menon alias Mani V/s. State of
Kerala & Anr. reported at 2006 (6) SCC 39, which deals with how
presumptions under the Evidence Act as also under the Negotiable
Instruments Act could be rebutted and the Court observed on the
30
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consideration of facts in that case, that the standard of proof is
preponderance of probabilities and inference of preponderance of
probabilities can be drawn, not only from the materials on record, but also
by reference to the circumstances upon which the accused relies. The
Court also observed that the accused need not disprove the existence of
consideration by way of direct evidence and that the onus on an accused
is not as heavy as that of the prosecution and that it is comparable with
that on a defendant in civil proceedings. There can be no dispute about
this proposition. In fact, similar are the observations of three Judge bench
of Supreme Court in Rangappa (supra) where the Court held as under :
27. Section 139 of the Act is an example of a
reverse onus clause that has been included in
furtherance of the legislative objective of
improving the credibility of negotiable
instruments. While Section 138 of the Act
specifies a strong criminal remedy in relation to
the dishonour of cheques, the rebuttable
presumption under Section 139 is a device to
prevent undue delay in the course of litigation.
However, it must be remembered that the offence
made punishable by Section 138 can be better
described as a regulatory offence since the
bouncing of a cheque is largely in the nature of a
civil wrong whose impact is usually confined to
the private parties involved in commercial
transactions. In such a scenario, the 21 test of
proportionality should guide the construction and
interpretation of reverse onus clauses and the
accused/defendant cannot be expected to
discharge an unduly high standard or proof.
31
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28. In the absence of compelling justifications,
reverse onus clauses usually impose an
evidentiary burden and not a persuasive burden.
Keeping this in view, it is a settled position that
when an accused has to rebut the presumption
under Section 139, the standard of proof for doing
so is that of `preponderance of probabilities'.
Therefore, if the accused is able to raise a
probable defence which creates doubts about the
existence of a legally enforceable debt or liability,
the prosecution can fail. As clarified in the
citations, the accused can rely on the materials
submitted by the complainant in order to raise
such a defence and it is conceivable that in some
cases the accused may not need to adduce
evidence of his/her own.
29.
The question in this case is however that the defence evidence
tendered by the accused in this case, far from rebutting the burden, only
reinforces the case of the complainant. There would be no reason for the
accused to allow the cheque of sum of Rs.20,000/- to be honoured and
offer to pay another sum of Rs.20,000/- if in fact nothing was due and he
had been forced to write the cheques. This itself makes the story of the
accused suspicious.
30.
The learned Counsel for the respondent next submitted that since
this Court is considering an appeal against acquittal, this Court ought to
be extremely slow in setting aside an acquittal. There can be no doubt
about this proposition. In fact, the learned Counsel for the appellant
32
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himself drew my attention to four judgments which discuss as to when a
judgment of acquittal could be set aside. They are:
(1) Bhajan Singh alias Harbhajan Singh & Ors. V/s.
State of Haryana (2011) 7 SCC 421,
(2) State of Maharashtra V/s. Haribhau Krishnaji
Deshmukh & Ors. 2003 ALL MR (Cri.) 1441,
(3) Fahim Khan V/s. State of Bihar Noe Jharkhand
(2011) 13 SCC 142,
(4) Babu V/s. State of Kerala (2010) 9 SCC 189,
I have carefully gone through the judgments. In the case at hand,
the conclusions drawn by the learned Additional Sessions Judge were
thoroughly unwarranted and based on an untenable appreciation of the
evidence. As already observed, the learned Additional Sessions Judge
had principally relied on provisions of Section 269SS and 271D of the
Income Tax Act, which have absolutely no bearing and therefore the
judgment is unsustainable.
31.
Before I conclude, with all humility at my command, it has to be
noted that even after noticing the object of enacting Section 138 of
Negotiable Instruments Act, namely to enhance the acceptability of
cheques, Courts have been accepting virtually any argument advanced to
nullify the liability created, like ignoring or misreading presumption
under Section 139 of the Act, misreading provisions of Sections 269SS
and 271D of the Income Tax Act, unmindful of the consequence that
33
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unscrupulous individuals go on signing cheques irresponsibly. When a
person signs a cheque and delivers it, even if it is a blank cheque or a post
dated cheque, presumptions under Section 118(b) and 139 of the
Negotiable Instruments Act would have to be raised and would have to be
rebutted by the aced, albeit by raising a probability. Unless the Courts
start discouraging flimsy defences, acceptability of cheques would not
increase.
The problem of unaccounted money would be reduced if
transactions take place by cheques. Even a cash advance when repaid by
cheque gets accounted. Making it unrecoverable, would only push the
persons to extra judicial methods of recovery. The Courts would thus not
only be defeating the object of the provision but also indirectly be party
to increase lawlessness. This, in my humble view, cannot be allowed by
Courts.
32.
In view of this, the appeal is allowed. The judgment of the learned
Additional Sessions Judge is set aside and the judgment convicting the
respondent of offence punishable under Section 138 of the Negotiable
Instruments Act is restored. The learned Counsel for the respondent
submitted that since the respondent wants to take the matter to higher
forum the judgment may be kept in abeyance for a period of 8 weeks. If
the compensation is not deposited within a period for 8 weeks the learned
34
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Magistrate shall proceed to execute the sentence in default.
R.C. CHAVAN, J.
NH/-
