Summary of the Judgment
Case Name: Sri Sujies Benefit Funds Limited v. M. Jaganathuan
Case Number: Criminal Appeal No. 3369 of 2024 [@ Special Leave Petition (Crl.) No. 4022 of 2022]
Date of Judgment: 13th August 2024
Judges: Hon'ble Justice Hima Kohli and Hon'ble Justice Ahsanuddin Amanullah
Advocates:
For the Appellant: Mr B. Ragunath, Advocate
For the Respondent: Mr S. Nagamuthu, Senior Advocate
Acts and Sections Involved:
Section 138, Negotiable Instruments Act, 1881
Section 391, Code of Criminal Procedure, 1973
Article 136, Constitution of India
Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003
Cited Judgments:
Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129
Introduction
The Supreme Court of India delivered a significant judgment in the case of Sri Sujies Benefit Funds Limited v. M. Jaganathuan on 13th August 2024, addressing key issues under the Negotiable Instruments Act, 1881 (hereinafter referred to as the “N.I. Act”). The judgment sets a precedent in dealing with the enforceability of cheque amounts in cases involving discrepancies in interest rates and the legal obligations of debt repayment.
Background of the Case
The appellant, Sri Sujies Benefit Funds Limited, a chit fund company, had advanced loans to the respondent, M. Jaganathuan, on several occasions between 1995 and 1997. The total amount borrowed, inclusive of interest, amounted to ₹21,09,000/-. In an attempt to discharge part of this debt, the respondent issued a cheque for ₹19,00,000/-, which was dishonoured with the endorsement “Account Closed.” This led the appellant to file a complaint under Section 138 of the N.I. Act, which deals with the dishonour of cheques.
The Trial Court convicted the respondent, sentencing him to one year of simple imprisonment and a fine of ₹38,00,000/- as compensation to the appellant. However, upon appeal, the Appellate Court acquitted the respondent, raising doubts about the legally enforceable liability of the cheque. The High Court upheld this acquittal, leading the appellant to approach the Supreme Court.
Submissions by the Parties
The appellant argued that the presumption under Sections 138, 139, and 118(a) of the N.I. Act, which assumes the cheque was issued for a legally enforceable debt, was not sufficiently rebutted by the respondent. The appellant further contended that the respondent failed to produce evidence during the Trial Court proceedings and only sought to introduce additional evidence under Section 391 of the Code of Criminal Procedure. The discrepancy in the interest rate calculation, according to the appellant, should not have influenced the judgment, as the principal amount was undisputed.
On the other hand, the respondent, represented by learned Senior Advocate Mr S. Nagamuthu, argued that the acquittal by the lower courts was based on sound legal principles. He maintained that the discrepancies in the interest rate mentioned in the pronotes and the Statement of Accounts justified the conclusion that the cheque amount was not legally due. Moreover, the respondent contended that the appeal did not raise any substantial question of law warranting interference by the Supreme Court.
Supreme Court’s Reasoning
Hon'ble Justice Ahsanuddin Amanullah, delivering the judgment, observed that the lower courts had erred in giving undue importance to the discrepancies in the interest rates. The Court noted that the principal amount was never in dispute, and the cheque amount reflected a legally enforceable debt, notwithstanding the variations in the interest rate. The judgment from Dashrath Rupsingh Rathod v. State of Maharashtra was cited, where it was held that an offence under Section 138 of the N.I. Act is committed when a cheque drawn for discharging a debt is dishonoured.
The Court also pointed out that the respondent’s actions—such as failing to take back the cheques or instructing the bank not to honour them—indicated an acknowledgment of the debt. The closure of the respondent's bank account shortly after issuing the cheque raised questions about his intent, further supporting the appellant’s claim.
Significant Observations
One of the critical observations made by the Supreme Court was related to the application of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 (hereinafter referred to as the “Tamil Nadu Act”). The Appellate Court had relied on this Act to argue that the interest rate charged was unlawful. However, the Supreme Court clarified that even at the rate of 1.8% per month, as stated in the pronotes, the interest rate exceeded the 12% per annum cap prescribed by the Tamil Nadu Act. The Court concluded that any agreement between the parties that exceeded this rate was subject to challenge, but such a challenge should have been raised before entering into the transaction, not retrospectively in collateral proceedings under the N.I. Act.
Furthermore, the Court highlighted the importance of the presumption in favour of the complainant under the N.I. Act. Once the cheque is issued, it is presumed to be for a legally enforceable debt unless the accused can rebut this presumption with credible evidence. In this case, the respondent’s failure to present comprehensive proof of loan repayment further weakened his position.
Conclusion
The Supreme Court set aside the orders of the Appellate Court and the High Court, restoring the Trial Court’s conviction but with modifications. The respondent was directed to pay a fine amounting to one and a half times the cheque amount, totalling ₹28,50,000/-. However, considering the respondent’s advanced age, the Court waived the sentence of imprisonment, contingent upon the payment being made within eight months. Failure to comply would result in the reinstatement of the one-year imprisonment.
This judgment serves as a crucial reminder of the stringent provisions under the N.I. Act, designed to uphold the sanctity of financial transactions. It reiterates the presumption in favour of the complainant and underscores the responsibility of the drawer to honour cheques issued against legally enforceable debts. The case also sheds light on the legal interpretations of interest rates in financial transactions, particularly in states like Tamil Nadu, where specific laws govern interest charges. In conclusion, this judgment not only clarifies the application of the N.I. Act but also reinforces the legal obligations of individuals in financial transactions, ensuring that justice is served in a manner that is fair and equitable.
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