The case revolves around a financial dispute between Sri Sujies Benefit Funds Limited (the appellant) and Mr. M. Jaganathuan (the respondent), arising out of the dishonor of a cheque issued by the respondent. The respondent, who was a subscriber to the appellant’s chit-fund company, had borrowed multiple loans from the appellant over a period of two years, amounting to ₹21,09,000/- including interest after eight years. In partial discharge of this loan, the respondent issued a cheque dated February 3, 2003, for ₹19,00,000/- drawn on Indian Overseas Bank. However, the cheque was dishonored with the remark “Account Closed,” leading the appellant to file a complaint under Section 138 of the Negotiable Instruments (N.I.) Act, 1881.
The case was heard by a bench comprising Justice Hima Kohli and Justice Ahsanuddin Amanullah. The appellant was represented by Mr. B. Ragunath, while the respondent was defended by Senior Advocate Mr. S. Nagamuthu.
Legal Issues Involved:
1. Presumption under N.I. Act: The primary legal issue was whether the presumption of the cheque being issued towards a legally enforceable liability under Sections 138, 139, and 118(a) of the N.I. Act could be rebutted by the respondent.
2. Rate of Interest and Legality: Another issue concerned the rate of interest charged on the loans, which was disputed by the respondent and became a focal point in the appeal. The respondent argued that the interest rate mentioned in the appellant’s Statement of Accounts was inconsistent and higher than what was permissible under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003.
Court’s Decision and Important Observations:
The Supreme Court, in its judgment authored by Justice Ahsanuddin Amanullah, reversed the decisions of the High Court of Judicature at Madras and the Appellate Court, which had acquitted the respondent. The Court restored the conviction of the respondent under Section 138 of the N.I. Act, albeit with modifications.
Key observations from the judgment include:
– The Court emphasized that once the issuance of a cheque is established, a presumption arises under the N.I. Act that the cheque was issued for a legally enforceable liability. This presumption is rebuttable, but the burden lies on the accused to discharge it with evidence.
– The Court noted that discrepancies in the rate of interest (whether it was 1.8%, 2.4%, or 3% per month) did not suffice to disbelieve the appellant’s claim. The respondent had failed to produce complete evidence showing full repayment of the loan.
– The Court also highlighted that the Tamil Nadu Act’s cap on interest rates would only apply if the parties had agreed to a rate exceeding the statutory limit, and it was incumbent upon the respondent to challenge any excessive rate in an appropriate forum. Since the respondent did not raise such an objection, the rate mentioned in the pronotes was deemed acceptable.
– A significant observation was made regarding the conduct of the respondent, who, after issuing the cheque, closed the bank account shortly thereafter. The Court considered this as a serious indication of the respondent’s intent to avoid repayment.
Also Read
Judgment Summary:
The Supreme Court set aside the acquittal of the respondent and restored the trial court’s conviction, ordering the respondent to pay a fine amounting to 1.5 times the cheque amount, totaling ₹28,50,000/-. Considering the respondent’s advanced age (86 years) and personal circumstances, the Court waived the sentence of imprisonment but directed that the fine be paid within eight months. Failing which, the sentence of one year of simple imprisonment would be revived.
Case Reference:
– Sri Sujies Benefit Funds Limited vs. M. Jaganathuan, Criminal Appeal No. 3369 of 2024 [@ Special Leave Petition (Crl.) No.4022 of 2022]
