Allowed

Sri M Chinnakoti Reddy v. Smt B Bhagyalakshmi

Karnataka HC2 Sept 2013CRL.A/2556/2009

Case brief

AI extract

What is this about?

In an appeal under Section 378 CrPC, the High Court set aside an acquittal and convicted the respondent for cheque bounce. The court held that the allegations of cheque loss and prior stop-payment instruction were not established and that Section 141 does not require a proprietorship to join a suit for offences committed by the proprietor.

What did the court decide?

Accusals acquitted and sentence imposed: Fine of Rs.15,00,000 (Rs.14,90,000 compensation) and simple imprisonment of 3 months in default.

Sri M Chinnakoti Reddy Vs Smt B Bhagyalakshmi — Cheque Dishonour | Karnataka HC (2013)

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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH

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DATED THIS THE 2^ND DAY OF SEPTEMBER, 2013

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BEFORE

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THE HON’BLE MR. JUSTICE ANAND BYRAREDDY

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CRIMINAL APPEAL No.2556 OF 2009

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BETWEEN:

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Shri M. Chinnakoti Reddy, S/o. M. Gali Reddy, Aged about 40 years, Agriculturist, Hosa Nelludi Village, Bellary District & Taluk. …APPELLANT

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(By Shri V. Shivaraja Hiremath, Advocate)

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AND:

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Smt. B. Bhagyalakshmi, Proprietor Hareesh Slates, Pattabhi Street, 5^th Ward, Markapur, Prakasham District. …RESPONDENT

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(By Sri. M.B. Gundawad, Advocate for Shri Y. Lakshmikant Reddy, Advocate)

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This appeal is filed under Section 378 of the Code of Criminal Procedure, 1973 praying to a) call for the records in

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C.C.No.451/2008 passed by the III Additional JMFC, Bellary, b) to set aside the order dated 3.4.2008 in C.C.No.451/2008 passed by the III Additional JMFC, Bellary and c) to allow this appeal and the complaint in C.C.No.451/2008 on the file of the III Additional JMFC, Bellary.

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This appeal coming on for final hearing this day, the Court delivered the following:

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JUDGMENT

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Heard the learned counsel for the appellant and the learned counsel for the respondent.

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The appellant was the complainant before the Trial Court alleging an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as ‘the NI Act’, for brevity). It was alleged by the complainant that the respondent had borrowed a loan of Rs.10,00,000/- for purpose of her business and had executed two promissory notes in favour of the complainant, agreeing to repay the amount with interest at 24%. Accordingly, a demand was made in the month of December 2002, for repayment. The respondent is said to have issued two post-dated cheques each for a sum of

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Rs.5,00,000/- drawn on Andhra Bank, Markapur, bearing Nos.875469 and 875471 to discharge the debt. The same when presented through the complainant’s banker on 14.06.2003, were dishonoured with an endorsement that the funds were insufficient in the account of the accused as per endorsement dated 12.07.2003 and accordingly, the complainant is said to have issued notice dated 24.07.2003 demanding payment of the sum covered under the said cheques. That demand not having been complied with, the complaint was lodged. Upon service of notice, the respondent had entered appearance and pleaded not guilty and claimed to be tried. The complainant had examined himself as PW-1 and got marked Exhibits P1 to P10 and closed his evidence. The statement of the accused was recorded under Section 313 of the Code of Criminal Procedure, 1973 (hereinafter referred to 'Cr.P.C.', for brevity), and the accused denied the entire case of the prosecution and led evidence by examining herself as DW-1 and DW-2 to DW-8, and got marked Exhibits D1 to D14. After hearing the

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arguments of both the parties, the court below framed the following points for consideration:

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“1) Whether complainant proves that Ex. P1 cheque has been issued by accused towards discharge of legal liability?

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Whether complainant proves that Ex. P-1 cheque was dishonoured on its presentation for insufficient of funds?

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Whether complainant complied mandatory provisions of Section138(a) to (c) of N.I. Act?

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Whether complainant proves beyond reasonable doubt that accused without having necessary funds in her account issued Ex. P-1 cheque towards discharge of her liability and failed to make good to the complainant after its dishonour within stipulated period and thereby committed an offence punishable under Section 138 of the N.I. Act?

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What order?”

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The court below held all the points in the negative and acquitted the accused. It is that which is under challenge in the

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present appeal.

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The learned counsel for the appellant would contend

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that the court below has proceeded to address the financial capacity of the complainant in addressing whether there was a legal liability by the alleged loan having been lent by the appellant in favour of the respondent. It is the finding of the court below that the appellant did not have the capacity to even subscribe to the telephone connection in her name and therefore, it was difficult to digest that the appellant was capable of lending a sum of Rs.10 lakh. When it was his case that he holds about 7 acres of irrigated land and there is an income of more than Rs.1.50 lakh per year and that he had earned an amount of Rs.4 to 5 lakh in money lending, this has been overlooked by the Trial Court.

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In any event, the question of the financial capacity of the appellant was totally irrelevant for the purpose of establishing

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an offence punishable under Section 138 of the NI Act. It is further contended that the defence set up by the respondent was to the effect that, while she and her husband were travelling by train, there were several cheque leaves kept in her handbag, which were stolen in the Railway Station when her handbag was left unattended and it is two of those stolen cheque leaves that the appellant has misused the same in having claimed that they were issued in discharge of a loan transaction. There is no loan transaction and the cheques were never issued in discharge of a legal liability.

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While on the other hand, it was claimed that the respondent had immediately lodged a complaint with the jurisdictional police of the loss of the handbag and the stolen cheques and further, that she had also informed her banker to stop payment against the cheques.

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The learned counsel for the appellant would point out that insofar as the contention that the cheques were kept in a handbag and the handbag was stolen, when unattended at the

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Railway Station, is sought to be proved by two certificates issued by the police, both of which are issued subsequent to the legal notice regarding the dishonour of cheques. Therefore, it could not be assumed that the cheques were really kept in the handbag and were stolen. The certificates issued by the police to certify that such a complaint was lodged, is clearly an afterthought, obtained with the active connivance of the local police. There is no material produced to indicate the actual complaint lodged prior to the legal notice issued by the complainant in this regard. Insofar as the further contention that there was a direction issued to the banker to stop payment, is merely on the basis of the witness for the Bank, namely the Bank Manager who has claimed that such an instruction was received to stop payment as early as 3.3.2003 and the letter of the complainant was dated 27.01.2003. Therefore, the document sought to be built up insofar as the direction to stop payment, is also created subsequently and the Bank Manager having sought to tender evidence in support of the case of the

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respondent, was again clearly an afterthought. It is pointed out that the alleged petition to the Bank to stop payment was dated 27.01.2003, but according to the Bank Manager who tendered evidence in support of this has acknowledged the letter on 3.3.2003, and therefore, was clearly after the legal notice was issued by the complainant and it was a document sought to be created in support of the defence. Hence, there was no cogent material to support the contention that there were cheque leaves which were lost, which were sought to be misused by the complainant. Further, it is also pointed out that the cheques which were dishonoured were not dishonoured on account of there being instructions furnished to stop payment, but on the ground that there was insufficient funds. Hence, the evidence tendered by the Bank Manager is not consistent for, if really there were instructions to stop payment, the cheques would not at all have been returned for insufficient funds. Further, the learned counsel for the appellant would contend that the signature found on the cheques is that of the respondent and the

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cheques were on her account and the preponderance of probabilities of the cheque being issued in favour of the complainant is a presumption that arises under Section 139 of the NI Act and it is for the accused – respondent to establish that there was no legal liability in respect of which the cheques had been issued. Insofar as the finding of the court below that there was non-compliance with the requirements of the provisions of Section 138(a) to (c), is also incorrect, as the cheque was issued towards the discharge of a legal liability. The same was presented within time and the notice was also issued within the prescribed time. Therefore, the requirement of the section are complete. In that, the Exhibit P1, the cheque is dated 1.1.2003. Exhibit P2 is dated 15.2.2003. They were presented within six months and were returned with the memo dated 26.06.2003 Exhibit P4. The memo was received by the appellant on 12.7.2003 and the legal notice was issued on 24.07.2003 through registered post and the acknowledgement was produced at Exhibit P9 and the respondent failed to pay in

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spite of the service of notice. The complaint was presented within 30 days from the date of receipt of notice. Therefore, the legal requirement under Section 138 was fully complied with. There is no ground whatsoever for which the court below could have held that the complainant had failed to establish the case for an offence punishable under Section 138 of the NI Act and hence, would submit that the judgment be set aside and the accused be convicted.

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While the learned counsel for the respondent – accused

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would vehemently seek to justify the findings of the court below as regards the loss of the cheque leaves kept in her handbag, the certificate issued by two police stations, namely the Police Station within whose jurisdiction the cheques were allegedly lost and the Police Station within whose jurisdiction the respondent resided, have issued identical endorsements to the effect that the complaints were duly lodged as to the loss of the cheques. Further, insofar as the information provided to the

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Bank to stop payment is concerned, is supported by the independent evidence of the Bank Manager and that the same cannot be characterised as collusive evidence on the footing that there has been an active collusion between the respondent and the Bank Manager. Further, the legal liability was to be established when there was vehement denial of the appellant’s financial capability to have lent such huge amounts and the same not having been evidenced by any other document except the cheques in question, and the absence of the alleged promissory notes, in itself is clear proof of a got up transaction merely of misuse of the stolen cheques, which according to the respondent, was informed to the police as well as the Bank, in the first instance. The mere reference to the dates of the respective certificates and endorsement and the presumption that there was an afterthought in obtaining such documents, only to support the defence of the respondent, is an unfair presumption, as both the police as well as the Bank, cannot be suspected of having colluded with the respondent. In the

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absence of any such mala fides being established, it is not open for the appellant to call upon this court to draw such an inference. The court below has rightly held that the legal liability has not been established and that the same had been lost in transit and that the possibility of the same being misused by the appellant has also been accepted by the court below. Therefore, he would submit that on facts, the appellant has not established his case beyond all reasonable doubt and hence, the acquittal of the accused was in order.

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It is further contended that admittedly, the cheques were issued on behalf of M/s. Hareesh Slates. As defined under Section 141 of the NI Act, every person who is in charge or was responsible to a company or a firm or for that matter, a proprietorship, if established guilty of the offence, would be liable to be proceeded against. The question whether such a complaint can be lodged in the absence of such entity, namely the company, firm or proprietorship being made a party, has been answered in the negative by a three judge bench decision

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of the Supreme Court in the case of Aneeta Hada Vs. M/s. Godfather Travels & Tours Pvt. Ltd., reported in (2012) 5 SCC 661. Therefore, in the absence of M/s. Hareesh Slates being made a party to the proceedings, the proceedings would not be tenable and hence, would contend that the complaint was not maintainable in the absence of the concern of which the respondent represented.

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On a consideration of these contentions, insofar as the finding of the court below that the appellant had failed to establish that he was a man of means and did possess the financial capability of lending a large sum of money of Rs.10 lakh, is not a finding that was warranted, as it was not incumbent on the complainant to establish the legal liability in the first instance. The presumption under Section 139 of the NI Act is in favour of the holder of the cheque and the burden of establishing that there was no legal liability in respect of which the cheques had been issued, was on the respondent. In this regard, the respondent having produced material to establish

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that the cheques in question were never issued in discharge of a legal liability when they were blank signed cheques kept in her handbag and were lost while travelling by train and the same might have been misutilised by the appellant, in support of which she has produced two certificates issued by the two police stations which are identically worded and stamped to suggest that there was a complaint. But, no copy of the complaint is furnished except the certificates dated much after the legal notice issued by the complainant, making a demand in terms of Section 138. Therefore, it cannot be ruled out that the respondent has secured these certificates to sustain her defence subsequent to the issuance of the legal notice. Similar is the evidence of the Bank Manager. In that, much after the alleged stop payment was issued, it appears to have been recorded in the records of the Bank, which is also indication of the respondent having managed to obtain such evidence. The Bank Manager was not even in office when the said stop payment is said to have been issued. Further, the cheques have not been

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dishonoured on the footing that there was instruction for stop payment, but was dishonoured with the endorsement that there were insufficient funds. Hence, the defence set up by the respondent is inconsistent with the facts of the case. In that, it is not established that the cheques had been actually lost much before the notice under Section 138 was issued by the complainant nor was it established that there was instruction to stop payment to the banker issued much prior to the notice. Insofar as the contention that the complaint was invalid or not maintainable on account of non-compliance of Section 141 of the NI Act and that in the light of the decision in Aneeta Hada by the Apex Court, the same was not maintainable, is a question which has to be answered in the negative. As it is evident from a reading of the definition of the ‘company’ that insofar as Section 141 is concerned, it is evident that Section 141 contemplates that a Company would mean a body corporate and would include a firm or other association of individuals. It does not refer to a proprietorship. A proprietorship is one which is

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managed by an individual. In that, a proprietorship would consist of a sole proprietor. If it is only an association of persons, it could either be a registered firm or unregistered firm of partners. There is hence no indication in Section 141 that a company would include a proprietorship and that a complaint would not be maintainable if it is brought in the name of the proprietor without the proprietorship concern also being made a party.

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Therefore, in the opinion of this court, there is no infirmity in the complaint having been presented in the sole proprietor by name without indicating the concern or the proprietorship by name. To that extent, it cannot be said that the decision in Aneeta Hada would be a bar to the complaint. Consequently, the judgment of the court below is set aside. The appellant has established an offence punishable under Section 138 of the NI Act having been committed by the respondent. Consequently, the respondent is sentenced to pay a fine of Rs.15,00,000/- (Rupees Fifteen Lakh only), out of which

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Rs.14,90,000/- shall be paid as compensation to the appellant in terms of Section 357 of the Cr.P.C. The amount of fine shall be paid within a period of eight weeks, in default of which, the respondent shall be sentenced to undergo simple imprisonment for a period of three months.

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Sd/JUDGE

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Sri M Chinnakoti Reddy v. Smt B Bhagyalakshmi

Case brief

What is this about?

What did the court decide?

Sri M Chinnakoti Reddy v. Smt B Bhagyalakshmi

Case brief

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What did the court decide?

What the court decided

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