Supreme Court Restores Acquittal in Cheque Dispute Case
In the case of K. Subramani v. K. Damodara Naidu, the Supreme Court of India addressed issues related to the dishonor of a cheque under Section 138 of the Negotiable Instruments Act. The central question was whether the complainant had the financial capacity to lend a substantial amount to the accused, thereby establishing a legally enforceable debt.
Background of the Case
Both the complainant, K. Damodara Naidu, and the accused, K. Subramani, were lecturers at a government college in Bangalore. The complainant alleged that on December 1, 1997, he lent Rs. 14 lakhs in cash to the accused for starting a granite business. In return, the accused purportedly issued a post-dated cheque dated August 16, 2005, for Rs. 73,83,552, which included the principal and interest. When presented for encashment, the cheque was dishonored due to insufficient funds. Subsequently, the complainant initiated legal proceedings under Section 138 of the Negotiable Instruments Act.
Trial Court Proceedings
The trial court examined the evidence and found that the complainant failed to prove his financial capacity to lend Rs. 14 lakhs:
The complainant claimed the loan amount came from his salary savings and the sale of a property (site No. 45). However, he did not provide details about the sale price or produce the sale deed.
Although he was an income-tax assessee, he admitted that he had not reported the sale of the property in his income-tax returns.
In 1997, the same year the loan was allegedly given, the complainant had taken a loan of Rs. 1,49,205 from the Life Insurance Corporation (LIC), indicating a lack of substantial savings.
Based on these findings, the trial court concluded that the complainant did not have the financial means to lend Rs. 14 lakhs and acquitted the accused.
High Court Proceedings
The complainant appealed the acquittal. The High Court, while addressing this case along with nine other similar appeals, framed two legal questions:
Is the complainant required to establish his financial capacity to lend money in an action under Section 138 of the Negotiable Instruments Act?
Does the presumption under Section 139 of the Negotiable Instruments Act benefit the complainant unless the accused rebuts that presumption?
Relying on the Supreme Court’s decision in Rangappa v. Sri Mohan [(2010) 11 SCC 441], the High Court answered the first question in the negative and the second in the affirmative. Consequently, it set aside the trial court’s acquittal and remanded the case for retrial.
Supreme Court Proceedings
The accused appealed to the Supreme Court. The Supreme Court observed that the High Court had clubbed multiple appeals without considering the individual merits of each case. The Supreme Court emphasized that while Section 139 of the Negotiable Instruments Act presumes the existence of a legally enforceable debt, this presumption is rebuttable. In this case, the accused successfully rebutted the presumption by highlighting the complainant’s lack of financial capacity to lend the substantial amount.
Conclusion
The Supreme Court set aside the High Court’s judgment and restored the trial court’s acquittal of the accused. This case underscores the importance of the complainant’s burden to prove the existence of a legally enforceable debt, including demonstrating the financial capacity to lend substantial amounts, in cases under Section 138 of the Negotiable Instruments Act.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific legal guidance, please consult a qualified lawyer.
