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Synopsis

The Supreme Court has on August 13, 2024 held that the discrepancy or difference in the rate of interest to be charged on a loan amount cannot lead to acquittal of an accused in a cheque dishonour case, when the issuance of bank instrument has been admitted.

A bench of Justices Hima Kohli and Ahsanuddin Amanullah set aside the acquittal of one M Jaganathuan by the appellate as well as the Madras High Court in a case related to issuance of a cheque to the sum of Rs 19 lakh which was dishonoured in 2003 due to closure of the bank account.

The cheque was issued to repay the total loan amount of Rs 21.09 lakh taken from a chit fund company, Sri Sujies Benefit Funds Limited in the 1990s.

The court said that the trial court had meticulously gone into each and every issue while holding in favour of the appellant and the appellate court as also the high court had only gone by scrutiny of the interest amount mentioned on the pronote and effected in the Statement of Accounts of the appellant and the evidence produced before the appellate court by the respondent to indicate that some repayment(s) was/were made. 

"This, according to us, is erroneous and cannot be sustained," the bench said.

In 2010, the trial court convicted the accused for the offence under Section 138, Negotiable Instruments Act and sentenced him to undergo one year simple imprisonment, with a fine of Rs 38 lakh as compensation to the complainant.

The accused challenged the conviction and filed an application before the appellate court under Section 391 of the CrPC for letting in additional evidence.

In 2012, the appellate court allowed the appeal and acquitted the accused, holding the cheque was not issued towards a legally enforceable liability. 

The appellant company filed an appeal before the high court which dismissed it.

In its arguments, the company contended once the cheque was issued, there was presumption against the respondent, though rebuttable, he had not discharged the burden. Even with additional evidence, the presumption had not been dislodged, it argued.

It also said the appellate court had given benefit of doubt to the respondent by raising question about the figure in the cheque not fully tallying as per the Statement of Accounts. 

The appellant also said the procedure prescribed to ensure that financial disputes reach finality, had been totally frustrated by the appellate court and erroneously upheld by the high court on flimsy and tenuous grounds.

It also contended that when the respondent also could not show any proof with regard to what was the rate of interest decided inter-se the parties, such an issue unilaterally could not be decided against the appellant and further that the logic of the appellate court that the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 prohibited charging of interest on any unsecured loan beyond a maximum of 12% per annum, in itself, was unsound.

The respondent, on his part, said when two courts had taken the view that the appellant was not able to show that the cheque amounts were legally due to him from the respondent, the top court might not reverse such finding. 

The claim of the appellant that the amount mentioned in the cheque.was legally due to him was not sustainable, he submitted.

Having considered the rival submission, the bench said that the fact that the cheque was issued as a consequence of failure to repay the loan taken by the respondent from the appellant to which the interest was added would more or less settle the issue.

"However, in the present case, a discrepancy apropos the rate of interest, whether it be 1.8%, 2.4% or 3% per month was not sufficient to disbelieve the claim of the appellant. Though the respondent before the trial court had contended that there was no loan transaction between the parties, but still, before the appellate court, by way of additional evidence, he marked receipts to show the re-payment of loan," the bench noted.

Even there, the respondent did not produce all the receipts showing total discharge of the loan amount, and only the difference in the rates of interest as well as the finding that substantial amount had been repaid led to the acquittal of the respondent, the bench added.

"When the respondent does not dispute that he has handed over the cheques or signed on them, it was incumbent upon him, the moment he claims the amount(s) were repaid to the appellant to have either taken back the cheques or instructed the bank concerned to not honour the concerned cheques. However, closure of the bank accounts within a few weeks of issuance of the cheque raises serious questions about the conduct and intent of the respondent," the bench said.

With regard to rate of interest, the bench said if the parties amongst themselves, agreed to a rate which was not in conformity with the Tamil Nadu Act, it was for the respondent accused to raise an objection or move the appropriate forum for getting the same corrected/taken care of, so that the interest rate did not exceed 1% per month but having agreed to a rate of 1.8% per month, the subsequent amount of interest calculated at the rate of 3% per month did not have much force for it was upon the respondent to challenge the rate of interest. 

"The respondent also cannot be said to be a layman, and being a subscriber to a chitfund company, he is expected to be aware of the laws and also of what is beneficial for him. Having issued the pronotes, he cannot now take a plea in these collateral proceedings under the N I Act to contend that the rate of interest was more than what was permissible under the Tamil Nadu Act," the bench said.

The court thus allowed the appeal and restored the trial court's judgment and directed the respondent to pay Rs 28,50,000 to the appellant company.

However, considering the fact that the respondent was 86 years old, living with a wife of advanced age, the court granted him eight months time to pay the amount, failing which the sentence of imprisonment of one year would be revived.

Case Title: Sri Sujies Benefit Funds Limited Vs M Jaganathuan