M/S RAJCO STEEL ENTERPRISES VS. MRS. KAVITA SARAFF AND ANOTHER

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M/S RAJCO STEEL ENTERPRISES VS. MRS. KAVITA SARAFF AND ANOTHER

CITATION	Special Leave to Appeal (Criminal) No. 5583 of 2022
DATE OF JUDGEMENT	April 9, 2024
COURT	SUPREME COURT OF INDIA
APPELLANT	M/S RAJCO STEEL ENTERPRISES
RESPONDENT	KAVITA SARAFF AND ANR.
BENCH	HON’BLE MR. JUSTICE ANIRUDDHA BOSE HON’BLE MR. JUSTICE SANJAY KUMAR

INTRODUCTION

The current appeal before the Supreme Court pertains to M/S RAJCO STEEL ENTERPRISES VS. MRS. KAVITA SARAFF AND ANOTHER, where the petitioner challenges a final judgment issued by the High Court of Calcutta. On 26 June 2016, the High Court’s decision dismissed the petitioner’s appeal contesting the acquittal of the first respondent for offenses under Section 138 of the Negotiable Instruments Act, of 1881. The appellant alleged that the respondent had issued cheques that were dishonored. The appellant contended that the respondent had not sufficiently refuted the existence of the debt and liability, whereas the respondent asserted that the cheques were obtained unlawfully. Upon scrutinizing the evidence, the court affirmed the trial court’s acquittal decision, citing insufficient evidence to establish a legally binding debt. The judgment underscores the necessity for a greater likelihood of truth in such matters.

FACTS OF THE CASE

The accused-respondent appealed the magistrate’s decision. On May 18, 2017, the Additional District and Sessions Judge in Calcutta overturned the earlier conviction and declared the accused not guilty.
The current appeal has been lodged against the aforementioned acquittal judgment.
M/s. Rajco Steel Enterprises, a Partnership Firm, allegedly provided financial aid to the accused, Kavita Saraff, through banking transactions. The appellant claims that the accused issued cheques to partly fulfill her obligation, which were subsequently dishonored due to insufficient funds. Despite receiving a demand notice, the accused failed to comply, leading to the appellant initiating proceedings under Section 138 of the Negotiable Instruments Act, of 1881. The appellant’s counsel relies on the presumptions outlined in Sections 118(a) and 139 of the Act, particularly emphasizing Section 118(a)’s presumption of consideration for negotiable instruments.
The complainant, being a partnership firm, lacks personal accounts or familial ties as a juridical entity.
Ramesh Kumar Gupta allegedly engaged in speculative transactions with the accused and attempted to conceal them from his family members. However, Gupta transferred funds from the complainant firm’s account, even though all partners of the firm were Gupta’s family members.
The accused’s husband’s company received a brokerage percentage from her account with Motilal Oswal, where she engaged in speculation on behalf of the complainant. Since the accused did not personally benefit from the complainant’s remuneration, the evidence presented does not meet the standard of reasonableness expected from a prudent individual.

ISSUE RAISED

Whether the findings of the First Appellate Court and the High Court, which dismissed the petitioner’s petitions for special leave to appeal, are based on sufficient evidence or are perverse.

CONTENTIONS OF APPELLANT

Sr. Advocate Raju Ramchandran, the appellant’s counsel contends that unless proven otherwise, the presumption outlined in the mentioned sections remains in force, with the burden of disproving it falling upon the accused. If the accused successfully rebuts the existence of any legally recoverable debt or liability, the burden then shifts to the complainant to demonstrate the presence of such debt or liability, for which the cheques were issued.
The counsel cited the following judgments to support his arguments:

• Uttam Ram Vs. Devindar Singh Hudan, (2019) 10 SCC 287 [Para 7]

• Kishan Rao Vs. Shankargouda, (2018) 8 SCC 165 [Para 7]

• Shree Daneshwari Traders Vs. Sanjay Jain, (2019) 16 SCC 83 [Para]

The appellant’s counsel aims to discredit the defense presented by the accused-respondent, asserting its improbability in countering the presumption under Section 139 of the Negotiable Instrument Act, of 1881.
The accused’s claim during examination-in-chief suggests the complainant’s reluctance to engage in personal account trading due to privacy concerns. However, this assertion is contradicted by factual evidence.
Citing Rahul Sudhakar Anantwar v. Shivkumar Kanhiyalal Shrivastav (2019) 10 SCC 203, the appellant’s counsel argues that the statutory presumption is not satisfactorily rebutted by admitting the signature on a cheque, coupled with an improbable defense.
The appellant’s counsel challenges the Sessions Judge’s decision to acquit respondent No. 1 based on the outlined grounds.
Counsel argues that there was no formal agreement signed by the complainant regarding the purported loan.
The complainant’s inability to provide any written documentation confirming the loan or an agreement supporting his claim of providing substantial financial aid is emphasized.
Legal precedents are cited to support the contention regarding the necessity of documentary evidence in such cases.

CONTENTIONS OF RESPONDENT

During the legal proceedings, the respondent’s counsel, Sr. Advocate S. Nagamuthu, argued that Section 139 of the Negotiable Instrument Act, of 1881 creates a presumption in favor of the check holder, indicating that the check was issued to discharge any debt or liability.
The accused, during cross-examination, claimed ignorance of the term “issue” despite holding a Master’s Degree in English, yet didn’t deny issuing the cheque.
Respondent No. 1’s counsel counters that the complaint lacks key details, including the amount of financial assistance and any supporting agreements. Thus, the necessary elements for invoking Section 138 of the Negotiable Instrument Acts are not met.
It’s argued that the cheques were seized by the CBI from the accused’s husband’s office, suggesting they were not in the complainant’s possession when presented for encashment.
The delay in presenting the cheque for encashment, just before its expiry and after the CBI raid, is deemed suspicious by respondent no.1’s counsel.
The complainant’s failure to prove legal ownership of the cheque and receipt of it is emphasized, with reliance on witnesses not being called to clarify.
The presumption under Section 139 of the Negotiable Instrument Act, of 1881 is challenged, asserting it was sufficiently rebutted due to lack of evidence.
The complainant’s financial records are questioned, with doubts raised over the plausibility of providing a substantial loan without proper documentation, especially given the firm’s financial situation.
Respondent no.1’s counsel argues that the accused can use materials provided by the complainant to build a defense and rebut the presumption under Section 139 of the Negotiable Instrument Act, of 1881.
The learned counsel of the respondent cited the following cases:

Basalingappa Vs. Mudibasappa (2019) 5 SCC 418
K. Subramani Vs. K. Damodara Naidu (2015) 1 SCC 99
Reverend Mother Marykutty Vs. Reni C. Kottaram and Another [(2013) 1 SCC 327] Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54.
M.S. Narayan Menon Vs. State of Kerala, AIR 2006 SC 3366.

JUDGEMENT

The High Court recently decided on a debt that was claimed to have been paid off with cheques. However, the petitioner did not have any records of this debt in their financial records. Additionally, the prosecution’s case was weakened by the lack of testimony from other partners in the firm who could have confirmed that the cheques were given as financial support.

After considering the accused’s dire financial situation, the High Court concluded that it was unlikely that she could have conducted any transactions on behalf of the petitioner without receiving something in return. The mere denial of the existence of such a debt was not enough to counter the legal presumption of guilt.

The findings of both the High Court and the First Appellate Court went against the complainant/petitioner, but they were not based on evidence. The Supreme Court rejected all the petitions as no laws were involved that would warrant interference.

ANALYSIS

Justice Sabyasachi Bhattacharyya of the Calcutta High Court recently delivered a judgment in a case that involved a dispute under the Negotiable Instrument Act. In this case, the appellant-accused the respondent of dishonoring cheques, while the respondent denied the existence of a legally enforceable debt. The judgment discusses legal presumptions, the burden of proof, and the standard of proof required to rebut presumptions. Ultimately, the appeals were dismissed, and the Trial Court’s judgment of acquittal was affirmed. The analysis highlights the significance of evidence, legal principles, and the court’s approach to determining the existence of a debt or liability in such cases.

CONCLUSION

The Supreme Court concurred with the lower court’s decisions to deny the petitioner’s petitions for special leave to appeal, thereby affirming their rulings. These rulings were grounded in the prosecution’s inability to substantiate the presence of a legally binding debt or liability, which served as a pivotal element in the context of dishonored cheques. A significant consideration in these determinations was the lack of documentary evidence supporting the purported debt, coupled with an examination of the financial circumstances of the accused. These factors collectively contributed to the court’s conclusions, underscoring the significance of both evidentiary support and the financial standing of the accused in adjudicating matters of dishonored cheques.

REFERENCES

This is written by Vibha, a student of CCS University, and an intern at Legal Vidhiya.

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