Allowed

Sri P Manjunath v. Sri Ashok Kumar

Karnataka HC2 Dec 2020CRL.A/202/2014

Case brief

AI extract

What is this about?

High Court of Karnataka allowed appeals against acquittal in cheque-bounce cases. Court held that the Memorandum of Understanding and mortgage arrangement created a legally recoverable debt. The accused was found guilty under Section 138 NI Act and sentenced to pay fines and compensation.

What did the court decide?

Accused convicted; sentenced to pay Rs.1,60,000 and Rs.3,20,000 fines respectively as compensation to complainant; in default, to undergo simple imprisonment for one year and one and a half year.

Sri P Manjunath Vs Sri Ashok Kumar — Cheque Dishonour | Karnataka HC (2020)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 2^ND DAY OF DECEMBER, 2020

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BEFORE

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THE HON’BLE MR. JUSTICE N.K. SUDHINDRARAO

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CRIMINAL APPEAL NO.201 OF 2014 C/W

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CRIMINAL APPEAL NO.202 OF 2014

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BETWEEN:

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Sri. P.Manjunath S/o. late V.Padmanabaiah Aged about 58 years R/at: No.170/1 Seppings Road Bangalore - 560001

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...Appellant (Common)

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(By Sri.V.Javahar Babu, Advocate Appeared through video conferencing)

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AND:

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Sri. Ashok Kumar S/o.Sumermal Aged about 46 years Proprietor of M/s. Sumer Gold Palace R/at: No.33-B Lal Masjid St. Shivajinagar Bangalore - 560051 …Respondent (Common)

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(By Sri.Pradeep Naik K, Advocate Appeared through physical hearing)

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In Crl.A.No.201/2014

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This criminal appeal is filed under Section 378 of Cr.P.C., praying to set aside the order dt:17.1.14 passed by the XIV Addl. C.M.M., Bangalore in C.C.No.27123/11 – acquitting the respondent/accused for the offence p/u/s 138 of N.I.Act.

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In Crl.A.No.202/2014

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This criminal appeal is filed under Section 378 of Cr.P.C., praying to set aside the order dt:17.1.14 passed by the XIV Addl. C.M.M., Bangalore in C.C.No.27124/11 – acquitting the respondent/accused for the offence p/u/s 138 of N.I.Act.

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These appeals coming on for admission this day, the Court delivered the following:

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JUDGMENT

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These are the two appeals directed against the judgment passed in C.C.No.27123/2011 and

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C.C.No.27124/2011 on 17.01.2014 by XIV Additional C.M.M. Bangalore, wherein, the trial Court acquitted the accused for the offence punishable under Section 138 of Negotiable Instruments Act. Since the common complaint and the common accused person is involved, these matters are taken up for common disposal.

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The details of the case filed by the complainant

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are as follows:

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Sl.No.	C.C. No.	Date of disposal	Crl.A.No.
1.	27123/2011	17.01.2014	201/2014
2.	27124/2011	17.01.2014	202/2014

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In order to avoid confusion and overlapping

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the parties are addressed in accordance with their rankings as stood before the trial Court.

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The substance of the complaint is that complainant is the owner of property bearing new No.311, O.P.H.Road, Bengaluru and accused is a tenant doing the business in sales of Gold Jewellary under the name and style of ‘M/s.Sumer Ashok Jewellers’ and ‘M/s.Sumer Gold Palace’. During the month of February 2008, the accused approached the complainant to expand his business and for that the complainant was to offer his property bearing Old Nos.180, 181 & 182, New Nos.309, 310 & 311 situate at O.P.H. Road, Bengaluru. In this connection, they entered into an Memorandum of Understanding on

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27.02.2008, wherein, the accused has voluntarily agreed to pay a sum of Rs.75,000/- each per month with effect from 01.05.2008 and as per the said Memorandum of Understanding, the complainant is the ‘Mortgager’, accused is the ‘Confirming Party’ and M/s.Rajesh Exports Limited is the ‘Mortgagee’ which came to be registered at Shivajinagar, Bengaluru. The complainant has deposited all his original deeds and revenue records for the satisfaction of the Mortgage Debt of Rs.1,50,00,000/- and in the event of any default on the part of the accused, he has to pay interest at the rate of 18% per annum on the said amount till realization. As per memorandum of understanding, the accused has undertaken to pay 36 advanced cheques to the complainant for a sum of Rs.75,000/- each as monthly goodwill, but accused failed to make the said payment.

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However, the accused on 30.06.2010 has

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issued six cheques for Rs.75,000/- each, out of which four cheques bearing No.713717 dated 1.7.2010, No.713718

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dated 1.8.2010, No.713719 dated 1.9.2010 and No.713720 dated 1.10.2010 in C.C.No.27124/2011 and two cheques bearing Nos.571519 dated 1.11.2010 and No.571520 dated 1.12.2010 in C.C.No.27123/2011. They were presented through National Cooperative Bank, the cheques were dishonored because of insufficient funds. The legal notice was issued on 03.01.2011 in both the matters to the accused and the same was served on accused on 05.01.2011, thereafter complaints were filed on 15.02.2011.

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The contention of the accused is that neither monitory obligation subsisted between the complainant and the accused nor there was any legally recoverable debt. The matters are in civil nature, unnecessarily they have been brought on to the criminal nature. The good will it is not the amount to be borrowing.

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Learned trial Judge on the basis of oral and documentary evidence on behalf of both the parties, by its

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judgment acquitted the accused for the said offence. Against which complainant is before this Court.

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The learned counsel Sri. V.Javahara Babu, for complainant/appellant would submit that the contextual reading of the complaint, the documents filed therein and the stand of the parties reveal that the accused definitely stood on a platform wherein he has monitory obligation in the form of legally recoverable debt, as per the promise made in favour of the complainant. But the learned trial Judge misread the scope of relationship between the complainant and the accused and also wrongly understood the memorandum of understanding and dismissed the complaint.

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The complaint is filed for the offence under Section 138 of N.I.Act, which exclusively apply for a cheque. One of the three negotiable instruments are promissory note, bill of exchange and a cheque. The cheque is also a bill of exchange drawn on a specified

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banker in favour of payee or to a person. Uniqueness of Negotiable Instrument Act is a presumption under Sections 8 and 9 of the Act, which stand for holder and holder in due course. The Act suggests a presumption that holder in due course a person who comes in possession of any instrument in bonafide way for consideration, testing of rebuttal or irrebuttal presumption, there may be grounds wherein the rebuttal has to be rebutted.

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Further, the claim of the complainant is that the accused was a tenant in two premises belonging to complainant and he was doing jewelry business. In the course of time, he wanted to expand his business, he approached the complainant for extension of business, he require other portions of the complainant’s building bearing old No.s181 and 182 and new Nos.309, 310 & 311. The complainant had obliged the accused and offered his property which was already under the tenancy of the accused by way of mortgage to one M/s.Rajesh Exports Limited under a registered mortgage dated 10.03.2008.

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The details of the mortgage has been mortgage deed dated 10.03.2008, amount - Rs.1,50,00,000/- mortgager is the complainant and accused is the confirming party and M/s.Rajesh Exports Limited was a mortgagee. There was a covenant that in the event of any default of repayment of amount of Rs.1,50,00,000/-, the accused to pay interest at the rate of 18% per annum till realization. Thus, the transaction is of its own time.

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Basically complainant and the accused were landlord and tenant in respect of the premises consisting of three numbers and accused request the complaint to help in expanding the business nothing but he requires funds. Complainant if he had money should have helped or kept quite. He agrees to offer his other property by way of creating mortgage with M/s.Rajesh Exports limited for Rs.1,50,00,000/-. Thus, in the said mortgage M/s.Rajesh Exports limited is the mortgagee, mortgager is the complainant and accused is the confirming party may be

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similar to surety. The one nature has to be understood that in case of default by the mortgager either to pay principal amount or the interest, the properties of complainant would be at stake and he has to suffer detriment. In this connection Section 2(d) of the Indian Contract ACT, 1872 is necessary to be mentioned which reads as under:

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“2. Interpretation-clause.—In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:—

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(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;”

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The detriment now is the complainant suffers

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in the event of default of paying the entire amount of Rs.1,50,00,000/- by the accused would fall on his head. It is also necessary to mention that in the Life Insurance

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Corporation whenever a policy is obtained by insurer, insuring the life and then premium of Rs.1,00,000/- is paid for several years, if it is surrendered, the insurance company would refund the entire amount what was remitted and it would be because of risk coverage. In this connection, memorandum of understanding entered into between the parties wherein, the accused agreed to pay Rs.75,000/- per month as good will, cheques to be issued for 36 months and six cheques were initially issued and payment to be started from 01.04.2008 and they came to be dishonoured, two complaints were filed.

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The term ‘good will’ is defined in many ways in Banking Law and Company Law which classify the term ‘good will’ as a fixed asset in the business. The term ‘goodwill’ is meant as reputation, popularity, fame and name earned by a person through his business and service which is capable of being ascertained in terms of money.

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Parties are definitely entitled to the concept of ‘good will’ that if a contracting party gets the benefit of the name, fame and generosity of other party for getting the financial benefits. In the circumstances, calling Rs.75,000/- as good will cannot be a fiction or myth towards legal obligation involved monitory liability of promising to pay the cheque amount of Rs.75,000/- in respect of legally recoverably debt.

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The learned trial judge basically failed to understand the background of the case. The scope of benefit of running the business, registered mortgage deed of three portions and payment of good will or it may be called as remuneration or monitory return for having suffered detriment or consideration given for taking the risk. As such, it is wrong to call as there is no legally recoverable debt . The cheques were presented on 01.07.2010 to 1.12.2010 and were returned with bank endorsement insufficient funds on 29.12.2010, by that time, 24 months have elapsed. Regard being had to the

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fact that there is no complaint of default by the confirming party - the accused in respect of the mortgage. Just because transaction exists which is separate from the present one the said matter cannot be branded as civil in nature and dislodge domain of Section 138 of N.I.Act. Issuance of cheques are not disputed. The accused took up the special plea and has failed to discharge it. I find the judgments passed in both the cases is hereby liable to be set aside and accused is found guilty of the offence punishable under Section 138 of N.I. Act and he is liable for punishment.

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At this stage, the learned counsel for the respondent/accused submits that a lenient view may be taken while imposing punishment.

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In the circumstances of the case, the appeals are allowed. The complaint lodged by the complainant is allowed. The accused in both the case is found guilty of the offence punishable under Section 138 of N.I.Act.

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In this connection, in C.C.No.27123/2011, the

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accused is sentenced to pay a fine of Rs.1,60,000/-. Out of which Rs.1,55,000/- shall be paid as compensation to the complainant and remaining sum of Rs.5,000/- shall be adjusted to the State account. Further, in default of payment of fine, the accused shall undergo S.I., for a period of one year.

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In C.C.No.27124/2011 the accused is sentenced to pay a fine of Rs.3,20,000/. Out of which Rs.3,10,000/- shall be paid as compensation to the complainant and Rs.10,000/- shall be adjusted to the State account. In case of default of payment of fine, the accused shall undergo S.I., for a period of one and half (1½) year.

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Office to send back the file to the trial Court along

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with copy of this judgment for further formalities.

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Sd/JUDGE

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Sri P Manjunath v. Sri Ashok Kumar

Case brief

What is this about?

What did the court decide?

Sri P Manjunath v. Sri Ashok Kumar

Case brief

What is this about?

What did the court decide?

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