Allowed

M/S Shriram Transport Finance Co. v. Eshwarappa Naikar S/O. Bhuthappa

Karnataka HC8 Dec 2020CRL.A/100155/2015

Case brief

AI extract

What is this about?

The High Court allowed the criminal appeal against acquittal under Section 138 of the Negotiable Instruments Act. The court held that the cheque was issued for a loan balance under a continuing security agreement, distinguishing it from hire-purchase cases. The accused failed to rebut the statutory presumption of debt and consideration by leading evidence.

What did the court decide?

The appeal allowed; acquittal set aside; accused held guilty under Section 138 NI Act; ordered to pay fine and compensation.

M/S Shriram Transport Finance Co. Vs Eshwarappa Naikar… — Cheque Dishonour | Karnataka HC (2020)

¶1

IN THE HIGH COURT OF KARNATAKA

¶2

DHARWAD BENCH

¶3

DATED THIS THE 8^TH DAY OF DECEMBER 2020

¶4

BEFORE

¶5

THE HON’BLE MR.JUSTICE RAVI V.HOSMANI

¶6

CRIMINAL APPEAL No.100155/2015

¶7

BETWEEN:

¶8

M/S SHRIRAM TRANSPORT FINANCE COMPANY LTD., A COMPANY REGISTERED UNDER THE INDIAN COMPANIES ACT HAVING ITS REGISTERED OFFICE AT MUMBAI AND BRANCH OFFICE AT HOSPET, R/BY ITS CONSTITUTED ATTORNEY PRAVEEN SHETTY S/O LATE SACHIDANAND SHETTY, AGED ABOUT 37 YEARS, OCC: SERVICE AS ASST. CREDIT MANAGER, II FLOOR, RAJAPURA SKIES, OPP. JAYARAM HOSPITAL, COLLEGE ROAD, HOSPET.

¶9

... APPELLANT

¶10

(BY SRI SHREEVATSA S.HEGDE, ADVOCATE)

¶11

AND

¶12

ESHWARAPPA NAIKER S/O BHUTHAPPA, AGE: MAJOR, OCC: BUSINESS, R/O H.NO.67, P.K.HALLI, POST, TALUKA HOSPET, DIST: BALLARI.

¶13

... RESPONDENT

¶14

(BY SRI ANWAR BASHA, ADVOCATE)

¶15

¶16

THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) OF CR.P.C. PRAYING TO SET ASIDE THE JUDGMENT OF ACQUITTAL DATED 25.06.2015 PASSED BY THE PRINCIPAL CIVIL JUDGE AND JMFC, HOSPET IN C.C.NO.537/2010 AND CONVICT THE RESPONDENT FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT.

¶17

THIS APPEAL BEING RESERVED FOR JUDGMENT ON 04.12.2020, THIS DAY, THE COURT, DELIVERED THE FOLLOWING:

¶18

JUDGMENT

¶19

Aggrieved by the judgment dated 25.06.2015 passed by the Principal Civil Judge and JMFC, Hospet in C.C.No.537/2010 acquitting accused for offence punishable under Section 138 of Negotiable Instruments Act (hereinafter referred to as ‘N.I.Act’ for short), complainant is in appeal before this Court.

¶20

Brief facts of the case are that appellant filed a private complaint under Section 200 of Code of Criminal Procedure (hereinafter referred to as ‘Cr.P.C.’ for short) stating that it is a transporting finance company and accused had borrowed a loan for purchase of Tata Tipper 2006 model bearing

¶21

¶22

registration No.KA-35/8287 by taking loan of Rs.14,79,100/from appellant under loan-cumhypothecation agreement No.STFC/HPT/76257. As accused was in arrears, complainant made a demand for repayment. In response to demand, accused issued it cheque for Rs.6,87,000/- bearing No.523522 drawn on Pragati Gramina Bank, Ballari Road, Hosapete Branch dated 05.05.2009. When the cheque was presented for collection through Axis Bank, College Road, Hosapete on 14.10.2009, it returned with endorsement dated 15.10.2009 as ‘funds insufficient’. The intimation was received by complainant on 26.10.2009. Thereafter complainant issued statutory notice dated 25.11.2009 calling upon accused to pay cheque amount within fifteen days. The notice was sent by RPAD and received by accused on 27.11.2009. But accused failed to pay the amount. He did not reply to notice. Hence, complaint came to be filed on 24.12.2009.

¶23

¶24

After recording of sworn statement of

¶25

complainant, cognizance was taken and summons issued to accused. After appearance, accused pleaded not guilty and sought trial. In order to establish complainant’s case, one witness was examined as PW1 and marked Exs.P1 to P8. Thereafter

¶26

incriminating evidence was explained to accused and his statement under Section 313 of Cr.P.C. was recorded. The accused denied the same and did not offer any explanation. He did not choose to lead any evidence.

¶27

Based on the above, trial Court framed following points for its consideration:

¶28

1. Whether the complainant has made out all the ingredients of Sec.138 of N.I.Act to prove the guilt of the accused person?

¶29

2. What order?

¶30

¶31

After answering point no.1 in negative, trial Court passed impugned order of acquittal. Aggrieved by the same, complainant is in appeal.

¶32

Challenging judgment passed by trial Court, learned counsel Sri. Shreevatsa Hegde appearing for appellant-company made following submissions.

¶33

The appellant being a Transport Financing Company, and accused having availed loan for purchase of a commercial vehicle had defaulted in repayment of loan amount. On a demand made by company, cheque was issued by accused for balance amount. The said cheque having been presented for payment, it returned unpaid with endorsement ‘insufficient funds’. Despite receiving statutory notice, within time accused failed to make payment. Thus, the complainant established all the ingredients of the offence under Section 138 of N.I. Act.

¶34

¶35

It was further submitted that though

¶36

accused set up a defence that cheque in question was a post dated cheque, given for security purposes only and not towards discharge of any debt, accused did not lead any evidence or substantiate said contention. It was submitted that in view of admission of signature on cheque by accused, presumption under Section 118 and 139 of N.I.Act would be available to complainant and complainant need not prove entire transaction in detail beyond reasonable doubt. But trial Court acquitted accused on sole reasoning that dishonor of a post dated cheque issued as a security, would not attract the provisions of Section 138, as agreement would come to an end upon repossession of vehicle and its sale to third parties, by relying upon decisions, which were all pertaining to hire purchase agreements and not loan-cum-hypothecation agreement as is in the instant case. He submitted that as it was established that accused committed

¶37

¶38

offence under Section 138, the judgment of acquittal be set aside and accused be convicted for the said offence.

¶39

On the other hand, learned counsel Sri Anwar Basha submitted that the complainant failed to prove the entire loan transaction, failed to disclose the details of installments paid by accused and the amount received after sale of vehicle to third party and therefore acquittal by trial court was justified. It was also contended that cheque in question was given as security for obtaining loan for purchase of commercial vehicle, which were taken as a matter of course by company as stipulated in the hypothecation agreement. Hence, offence under Section 138 was not attracted.

¶40

In reply, learned counsel for appellant

¶41

submitted that in a proceeding under Section 138, once it is established by complainant that cheque is

¶42

¶43

signed by accused and issued to complainant, the presumption under Section 118 and 139 of the N.I. Act would be available. Unless accused rebuts such presumption, complainant is not required to establish every fact of transaction as if it were a civil suit. Learned counsel relied upon the Apex Court decision in the case of D.K.Chandel V/s M/s Wockhardt Ltd. and others reported in 2020(1) CIVIL COURT CASES 582 (SC) which reads as under:

¶44

“8. As held by the Trial Court as well as by the High Court that the cheque was issued towards the amount due and payable by the appellant for purchase of pesticides. As rightly observed by the High Court production of the account books/cash book may be relevant in the civil court; but may not be so in the criminal case filed under Section 138 of the N.I. Act. This is because of the presumption raised in favour of the holder of the cheque. In view of the concurrent findings recorded by the Trial Court as well as by the High Court we do

¶45

¶46

not see any ground warranting interference with the conviction of the appellant under Section 138 of the N.I. Act.”

¶47

I have heard learned counsel for appellant as well as respondent, perused the impugned judgment and record.

¶48

From the above, it is seen that the accused in this case has contended that cheque in question was a post dated cheque issued for security purposes only. Which means that accused admitted his signature on cheque and its issuance to complainant. Consequently presumption under Section 118 and 139 of N.I. Act would be available to complainant as per

¶49

Kishan Rao V/s Shankargouda, reported in (2018) 8 SCC 165 and Rangappa V/s Sri Mohan, reported in 2010 (11) SCC 441 .

¶50

In this case, accused has not led his evidence. In the cross-examination of PW1, there are

¶51

¶52

mere suggestions made to the witness which are denied. In such circumstances, the observations in Kishan Rao (supra), are apposite. Referring to earlier decision in the case of Kumar Exports V/s Sharma Carpets, reported in (2009) 2 SCC 513, it was held that:

¶53

“The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the

¶54

¶55

complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist .”

¶56

emphasis supplied

¶57

Hence, as accused failed to substantiate his contention by cogent evidence, it has to be held that he failed to rebut presumption in favour of complainant.

¶58

Apart from above, Complainant in this case, has produced Cheque as Ex.P1, the Bank Endorsement as Ex.P2 and P3, the Statutory notice as Ex.P4, the complaint to postal authorities and endorsement regarding delivery of article as Ex.P5,

¶59

¶60

UCP receipt as Ex.P6, joining report as Ex.P7 and power of attorney as Ex.P8. I have perused contents of the same and found that they duly corroborate complainant’s case.

¶61

The reasons assigned by the trial Court that complainant failed to prove the particulars of seizure of vehicle of accused, its sale to third party, the amount received from such sale coupled with the contention that cheque issued was a post dated cheque given for security purpose only cast a serious doubt about the complainant’s case, would be contrary to the law under Negotiable Instruments Act regarding presumptions available to the complainant. The trial Court taking judicial notice of the fact that farmers borrowing loan from financials would put their signatures wherever indicated by the financiers is also perverse and not based on any evidence. Reliance upon the decision in Sudha Beevi V/s State of Kerala reported in 2004 Crl.L.J. 3418

¶62

¶63

which was in respect of Hire Purchase Agreement unlike the loan-cum-hypothecation agreement in this case containing a specific clause regarding continuing guarantee, would also be unsustainable. The trial Court has not taken note of Clause-11 of agreement, which reads as follows:

¶64

THESE PRESENTS TO BE CONTINUING SECURITY:

¶65

The Borrower agrees that this agreement and the security hereby created shall operate as a continuing security for all the obligations / facilities of the Borrower in respect of the said credit facilities, not withstanding existence of a credit balance in the said account or any partial payments or fluctuation of accounts.

¶66

In view of above terms, liability of accused

¶67

continues even after repossession and sale of vehicle

¶68

¶69

to third parties, for any balance due after adjusting amount recovered from sale. Therefore, clause-11 distinguishes this case from cases of hire purchase agreements as in Sudha Beevi (supra) relied upon by trial Court to come to conclusion that contract of Hire Purchase comes to an end with repossession and sale of asset, would be perverse and liable to be set aside.

¶70

As it is held that the complainant has established all the ingredients of offence under Section 138 and as the reason assigned by the trial Court for acquittal is held to be perverse, the appeal is allowed, the impugned order of acquittal is set aside. The accused is held guilty of offence

¶71

punishable under Section 138 of the N.I. Act.

Sd/JUDGE

CLK

ORDER ON SENTENCE

Learned counsel for the appellant submitted that accused borrowed loan from the complainant and failed to repay the same since more than a decade. The cheque issued by accused on 05.05.2009 was dishonoured on the ground of insufficiency of funds, which the accused was well aware of. On the above grounds, the counsel for appellant sought for imposition of severe sentence and maximum penalty permissible in law.

¶77

On the other hand, learned counsel for accused submitted that accused was poor agriculturist and suffering severe financial hardship and therefore sought for minimal sentence/penalty.

¶78

Following the directions issued by Hon’ble Supreme Court in Damodar S.Prabhu V/s Sayed Babalal H., reported in (2010) 5 SCC 663, I feel it just and proper to impose a sentence of fine instead

¶79

¶80

of imprisonment as the offence is in the nature of a

¶81

civil wrong and the purpose of Section 138 is compensatory and not punitive. The accused is hereby sentenced to pay a fine of Rs.13,74,000/(Rupees thirteen lakhs seventy-four thousands only) i.e. twice the amount of the cheque and in default of payment of fine, to undergo simple imprisonment for a period of fourteen months.

¶82

Acting under Section 357 of the Code of Criminal Procedure, it is ordered that a sum of Rs.13,50,000/(Rupees thirteen lakhs fifty thousands only) shall be paid to the complainant as compensation and the remaining amount is ordered to be defrayed to the State towards expenses incurred in prosecution.

¶83

Sd/JUDGE

¶84

CLK

M/S Shriram Transport Finance Co. v. Eshwarappa Naikar S/O. Bhuthappa

Case brief

What is this about?

What did the court decide?

M/S Shriram Transport Finance Co. v. Eshwarappa Naikar S/O. Bhuthappa

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Nagappa S/O Basappa Karavinakoppa, Vs Tukaram Narayan Gouda

State of Karnataka Vs K.Venkatareddy S/O. Narayanareddy

M/S Shriram Transport Finance Co. Vs Nijagunappa Ningappa Hadimani

Parbhakar S/O. Basappa Katagi Vs G.Krishnareddy S/O. Nagareddi

Shrishailappa S/O Shivarayappaj Nidavani Vs P Govindraju

M/S Shriram Transport Finance Co. Vs Shivappa S/O. Hulugappa