Sri Sujies Benefit Funds Limited vs M. Jaganathuan

Held: It is settled that an offence u/s. 138 of the Negotiable Instruments Act, 1881 is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank – 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 – Even there, the respondent did not produce all the receipts showing total discharge of the loan amount, as was noted by the Appellate Court, and only the difference in the rates of interest as well as the finding that substantial amount has been repaid led to the acquittal of the respondent – Neither in the pronotes nor in the Statement of Accounts, the principal amount has been disputed – 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 Trial Court has meticulously gone into each and every issue while holding in favour of the appellant – The Appellate Court as also the High Court have 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 is erroneous and cannot be sustained – Thus, the order of the Trial Court is restored with certain modifications. [Paras 15, 16]

Negotiable Instruments Act, 1881 – s. 138 – Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 – Proceedings under N.I. Act – Interest rates not in conformity with the 2003 Act – Appropriate forum:

Held: The reasoning given by the Appellate Court, having taken note of the Tamil Nadu Act, fails to appreciate that even going by what has been written on the pronote i.e., 1.8% per month would lead to the interest being 21.6% per annum, which also is above the cap of 12% per annum prescribed in the Tamil Nadu Act – Thus, if the parties amongst themselves, agreed to a rate which is not in conformity with the Tamil Nadu Act, it was for the respondent 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 @ 3% per month does 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. [Para 17]