Abi Abraham v. Kanhangad Rubber Ltd.

Read Judgment : https://lawyerslibrary.in/books/fixn/

Negotiable Instruments Act, 1881 – Section 138 – Dishonour of Cheques – Presumption under Section 139 – Accused issued cheques for debt arising from agreement to purchase latex – Cheques dishonoured for insufficient funds – Complainant company established cheque execution – Accused failed to rebut presumption of legally enforceable debt by preponderance of probabilities – Claim that cheques were security unsupported by evidence.

Section 142 – Authorization of Complainant – Complaint filed by company through Managing Director – Articles of Association and Board resolution empowered Managing Director to initiate legal proceedings – Compliance with authorization requirements upheld.

Criminal Procedure Code, 1973 – Revisional Jurisdiction – Concurrent findings of trial and Sessions Courts upheld – No perversity, misreading of evidence, or jurisdictional error – Revisional Court not to act as appellate court unless findings are grossly erroneous or unreasonable.

Held: Convictions and sentences (six months’ imprisonment and Rs. 10,00,000 compensation per case) under Section 138 upheld – Criminal Revision Petitions dismissed.

Citation: 2025 (3) KLR 405 : 2025 KER 26370
Court: High Court of Kerala
Judge: K. Babu, J.
Case Numbers: Crl.R.P. Nos. 680, 691 & 693 of 2024
Date of Judgment: 24 March 2025
Parties: Abi Abraham v. Kanhangad Rubber Ltd.

Case Background

This case involves three Criminal Revision Petitions (Crl.R.P. Nos. 680, 691, and 693 of 2024) filed by Abi Abraham, challenging the judgments of the Sessions Court, Kasaragod, which upheld the convictions and sentences passed by the Judicial First Class Magistrate Court-III, Hosdurg, in C.C. Nos. 20, 42, and 72 of 2018. The complaints were filed by Kanhangad Rubber Ltd., alleging an offence under Section 138 of the Negotiable Instruments Act, 1881, due to the dishonour of three cheques issued by the petitioner.

Facts

  • Parties Involved:
    • Complainant: Kanhangad Rubber Ltd., a public limited company represented by its Managing Director.
    • Accused: Abi Abraham, proprietor of M/s. A & J Rubbers, Kannur.
  • Agreement: On 1 August 2014, the complainant and accused entered an unregistered agreement for the accused to purchase ammoniated-filled latex from 1 August 2014 to 31 December 2015. A debt of Rs. 1.37 crores was allegedly due from the accused.
  • Cheques Issued: The accused issued 17 post-dated cheques, of which three are the subject of this case:
    • C.C. No. 20/2018: Cheque No. 224438 dated 1 January 2016 for Rs. 10,00,000, dishonoured on 5 January 2016 (“funds insufficient”).
    • C.C. No. 42/2018: Cheque No. 224444 dated 8 June 2016 for Rs. 10,00,000, dishonoured on 10 June 2016 (“funds insufficient”).
    • C.C. No. 72/2018: Cheque No. 224445 dated 8 November 2016 for Rs. 10,00,000, dishonoured on 11 November 2016 (“exceeds arrangements”).
  • Notices: The complainant issued registered lawyer’s notices for each dishonoured cheque, which the accused received but did not respond to.
  • Trial Court Findings: The accused admitted to the agreement and issuing the cheques but claimed they were given as security and misused by the complainant. No defence evidence was adduced. The trial court convicted the accused under Section 138, sentencing him to six months of simple imprisonment and ordering compensation of Rs. 10,00,000 per case under Section 357(3) Cr.P.C.
  • Sessions Court: Upheld the trial court’s convictions and sentences.
  • Revision Petitions: The accused challenged the concurrent findings, alleging:
    1. The complainant’s representative was not duly authorized.
    2. The witnesses lacked direct knowledge of the transactions.
    3. There was no legally enforceable debt.

Issues

  1. Whether the complainant company was duly represented by an authorized person under Section 142 of the Negotiable Instruments Act.
  2. Whether the prosecution witnesses had sufficient knowledge of the transactions to support the complainant’s case.
  3. Whether the accused rebutted the presumption under Section 139 of the Negotiable Instruments Act that the cheques were issued in discharge of a legally enforceable debt.
  4. Whether the concurrent findings of the lower courts warranted interference by the revisional court.

Holding

The High Court dismissed the Criminal Revision Petitions, upholding the convictions and sentences.

Reasoning

  1. Authorization of Complainant’s Representative:
    • The court rejected the accused’s argument that the Managing Director was not authorized to represent Kanhangad Rubber Ltd. The Articles of Association and a Board resolution dated 12 August 2016 empowered the Managing Director to initiate legal proceedings.
    • Citing TRL Krosaki Refractories Ltd. v. SMS Asia Pvt. Ltd., the court held that the complainant was the company itself, represented by an authorized employee (the Managing Director), satisfying Section 142 requirements.
  2. Competence of Witnesses:
    • The court found the evidence of PW1 (Managing Director), PW2 (former Managing Director), and PW3 (Development Officer and former Manager/Managing Director) credible.
    • PW2 confirmed the agreement and cheque execution in his presence, while PW3 corroborated the debt of Rs. 1.37 crores. The accused’s reliance on Gujarat Guardian Ltd. v. George Kurian was deemed inapplicable.
    • A minor discrepancy regarding the number of cheques (17 in the complaint vs. 13 in witness testimony) did not undermine the complainant’s case.
  3. Presumption under Section 139:
    • The court held that the complainant established the execution of the cheques, triggering a presumption under Section 139 that they were issued for a legally enforceable debt.
    • The burden shifted to the accused to rebut this presumption by a preponderance of probabilities. The accused claimed the cheques were security but provided no evidence or circumstances to support this defence.
    • Cross-examination of prosecution witnesses revealed no material inconsistencies to doubt the complainant’s case.
  4. Revisional Jurisdiction:
    • Citing precedents like Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke and Asian Resurfacing of Road Agency Pvt. Ltd. v. CBI, the court emphasized that revisional jurisdiction is limited to correcting perverse, unreasonable, or erroneous findings.
    • The concurrent findings of the trial and Sessions Courts were neither perverse nor based on misreading of evidence. The judgments were consistent with the pleadings, oral evidence, and documents (cheques, agreement, ledger extracts, confirmation letter).

Disposition

  • The Criminal Revision Petitions were dismissed.
  • The convictions under Section 138 of the Negotiable Instruments Act and the sentences (six months’ simple imprisonment and Rs. 10,00,000 compensation per case) were upheld.

Significance

This judgment reinforces the strict liability under Section 138 of the Negotiable Instruments Act, emphasizing the presumption under Section 139 and the accused’s burden to rebut it with credible evidence. It also clarifies the requirements for a company to file a complaint through an authorized representative and underscores the limited scope of revisional jurisdiction in overturning concurrent findings.

Cited

  1. Rajesh Jain v. Ajay Singh, 2023 (6) KHC 391 (SC)
  2. TRL Krosaki Refractories Ltd. v. SMS Asia Private Limited and Ors., MANU/SC/0228/2022
  3. Gujarat Guardian Limited (M/s.) v. George Kurian, 2015 (2) KHC 516
  4. Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke, (2015) 3 SCC 123
  5. Munna Devi v. State of Rajasthan & Anr., (2001) 9 SCC 631
  6. Asian Resurfacing of Road Agency Pvt. Ltd. v. Central Bureau of Investigation, (2018) 16 SCC 299
, , ,