SRI SUJIES BENEFIT FUNDS LIMITED versus M. JAGANATHUAN

Citation: [2024] 8 S.C.R. 322 · Decided: 13-08-2024 · Supreme Court of India · Bench: HIMA KOHLI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

[2024] 8 S.C.R. 322 : 2024 INSC 602
Sri Sujies Benefit Funds Limited 
v. 
M. Jaganathuan 
(Criminal Appeal No. 3369 of 2024)
13 August 2024
[Hima Kohli and Ahsanuddin Amanullah,* JJ.]
Issue for Consideration
In order to partly discharge the loan amount, a cheque was issued 
by the respondent-accused for a sum of Rs.19,00,000/-. However, 
the cheque was returned with the endorsement ‘Account Closed’. 
Whether a discrepancy apropos the rate of interest, whether it be 
1.8%, 2.4% or 3% per month was sufficient to disbelieve the claim 
of the appellant-chitfund company.
Headnotes†
Negotiable Instruments Act, 1881 – s. 138 – The respondent-
accused, being a subscriber of the appellant-chitfund 
company, borrowed loan amounts on several dates from 
appellant totaling Rs. 21,09,000/- – In order to partly discharge 
the aforesaid loan amounts, a cheque was issued by the 
accused for a sum of Rs.19,00,000/- – However, the cheque was 
returned with the endorsement ‘Account Closed’ – The Trial 
Court convicted the accused for the offence u/s. 138, N.I. Act 
and sentenced him to undergo one year simple imprisonment 
and to pay a fine of Rs. 38,00,000/- as compensation to 
the complainant – However, the Appellate Court acquitted 
the respondent and same was upheld by the High Court – 
Correctness:
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 
* Author
[2024] 8 S.C.R. 
323
Sri Sujies Benefit Funds Limited v. M. Jaganathuan
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 
324
[2024] 8

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