Peoples Co-operative Bank Ltd. vs Subhash Karbhari Bhutekar

This is an appeal at the instance of original complainant who had instituted proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) against present respondent vide STC No. 2690 of 2002. Learned trial court, after hearing both sides and on appreciating the evidence as well as law, acquitted the accused. Hence, the present appeal.

Learned counsel Mr. Agrawal would submit that, complainant is a co-operative bank and one Walmik had borrowed loan for hotel Ruchi Vihar. That, present respondent-original accused stood guarantor to the said loan. That the borrower failed to repay the loan and therefore, on his behalf, accused issued cheque in the capacity of guarantor. However, it was dishonoured. He pointed out that thereafter, demand notice was dispatched but as in spite of time given to repay the cheque amount, amount was not repaid, proceedings under Section 138 of the NI Act were instituted.

Learned counsel for the appellant would further submit that there is no dispute that there was legally enforceable debt, i.e. loan amount. That, accused had undertaken the responsibility of repayment of loan by becoming guarantor. Cheque was also issued and as such, issuance of cheque and signature over it was admitted. Therefore, it is his submission that, presumption available under Sections 118 and 139 of the NI Act comes into play. That, evidence of complainant has remained intact, but learned trial court misread the said evidence and by ignoring settled law, gave benefit of doubt to the accused. That, approach of learned trial court is incorrect and on this count, he invited attention of this Court to the observations of trial court, more particularly in para 6. According to him, the said reasoning is incorrect and against the spirit of law under Section 138 of the NI Act. Consequently, he prays to allow the appeal by setting aside the impugned order.

Learned counsel for the respondent-original accused would justify the acquittal for complainant having failed to prove essential ingredients to attract the offence under Section 138 of NI Act.

After hearing above submissions, evidence adduced before learned trial court is put to scrutiny. Complainant seems to have adduced evidence of PW1 Gopal Agrawal at Exhibit 14 and also adduced evidence of PW2 Shashikant Kandi at Exhibit 23, apart from placing on record the cheque in question at Exhibit 17, bank memo at Exhibit 18, office copy of notice, reply, acknowledgment of receipt and RPAD.

In his affidavit of evidence, complainant has reiterated the contents of complaint. However, while facing cross, there is admission that no amount was given to accused as loan and nothing was due from him towards the said loan, and that accused stood as a guarantor by mortgaging a plot which is still not auctioned. It is admitted that two months prior to filing of case, borrower Walmik tendered application showing his readiness and willingness to deposit the amount. There is also admission that, at the time of filing case, after issuing notice to the accused, the borrower Walmik had already deposited Rs.10,000/- towards part payment of the loan amount.

In the light of above discussion, it is clear that original accused/present respondent was not the main borrower and rather he was a guarantor who had mortgaged his own plot as a security for repayment of loan borrowed by Walmik. PW2 has admitted that accused himself was not a borrower of any loan. Thus, apparently, cheque in question was issued in the capacity of guarantor. However there is further admission by complainant’s witness that, after issuing legal notice, original borrower Walmik had repaid Rs.10,000/- as part payment and it was duly accepted by complainant. Therefore, in such situation and circumstance, if out of Rs.25,000/- legal dues, part payment to the tune of Rs.10,000/- was received, then there were no legal dues to the extent of Rs.25,000/-. It was expected of complainant to give an endorsement on the cheque acknowledging the receipt of part payment. Consequently, the amount reflected on the cheque was not the amount due towards Walmik. In fact the legal debts were not to the tune which was reflected over the instrument.

At this juncture, it would be useful to refer to the judgment of the Hon’ble Apex Court in the case of Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel and another (2023) 1 SCC 578 wherein it has been observed that, when part payment of a debt is made after the cheque was drawn but before the cheque is encashed, then such payment, it was held that, must be endorsed on the cheque under Section 56 of the NI Act and the cheque cannot be presented for encashment without recording the part payment. It was further observed that, if the unendorsed cheque is dishonoured on presentation, the offence under Section 138 would not be attracted since the cheque does not represent a legally enforceable debt at the time of encashment.

The above ruling is squarely applicable here as, after drawing of cheque and before initiating action under Section 138, complainant acknowledges receipt of part payment of Rs.10,000/- and therefore, complainant was expected to endorse to that extent on the instrument which was presented for realization. This precisely does not seem to have been done by the complainant and therefore, as rightly held by trial court, there was no legally enforceable debt and it was not proved by complainant in trial court.

Further, as pointed out, and is also evident from the very complaint that details of the entire transaction of loan are not forthcoming from the complainant’s side on record. How much was the exact loan is not stated in complainant, nor it is deposed by PW1. It is incumbent upon the complainant, and rather it is a burden on complainant, to establish legally enforceable debt at the time of presentation of cheque. Unless that is done so, presumption available under NI Act would not get attracted.

For above reasons, this Court does not find there to be any error on the part of learned trial court in acquitting the accused. Hence, the following order :

The Criminal Appeal is dismissed.