Dismissed

M/S Bagalkot Cement and Industries Limited v. M/S Gajanan Cement Dealer

Karnataka HC17 Dec 2020CRL.A/2754/2011

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed the criminal appeal filed by a cement company challenging an acquittal of a dealer under Section 138 of the Negotiable Instruments Act. The court held that the respondent successfully rebutted the presumption of debt by proving the cheque amount exceeded the actually admitted legally recoverable debt.

What did the court decide?

Appeal dismissed; judgment of acquittal upheld.

M/S Bagalkot Cement and Industries Limited Vs M/S Gajanan… — Cheque Dishonour | Karnataka HC (2020)

¶1

¶2

IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH

¶3

DATED THIS THE 17^{T H} DAY OF DECEMBER, 2020

¶4

BEFORE

¶5

THE HON’BLE MR. JUSTICE PRADEEP SINGH YERUR

¶6

CRIMINAL APPEAL NO.2754/2011VISHAL NPATTIHAL

¶7

Digitallysigned byVISHAL NPATTIHALDate:2020.12.2215:59:05+0530

¶8

BETWEEN:

¶9

M/S. BAGALKOT CEMENT AND INDUSTRIES LTD., (FORMERLY KNOWN AS KANORIA INDUSTRIES LTD.,) A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT 6^TH FLOOR, BLOCK NO.1, STADIUM HOUSE, VEER NARIMAN ROAD, CHURCH GATE, MUMBAI-400020 REPRESENTED BY ITS AUTHORIZED SIGNATORY MANAGER LEGAL MR.ABBAS RAJESAB NIDASESHI AGE: 56 YEARS, OCC: MANAGER (LEGAL), R/O. BAGALKOTE. ….APPELLANT.

¶10

(BY SHRI S.B.HEBBALLI, ADVOCATE.)

¶11

AND: M/S.GAJANAN CEMENT DEALER PROPRIETOR: SHIVANAND KULKARNI CEMENT DEALER, CHENNAMMA PARK ROAD, AT POST BAILHONGAL, DIST: BELAGAVI.

¶12

….RESPONDENT.

¶13

(BY SHRI HANAMANT LATUR, ADVOCATE.)

¶14

¶15

THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) OF CR.P.C., PRAYING TO SET ASIDE THE JUDGMENT AND ORDER OF ACQUITTAL DATED 15.9.2009, PASSED BY THE COURT OF I ADDL. JMFC, BAGALKOTE, IN C.C.NO.1523/2006, ETC.,.

¶16

THIS APPEAL COMING ON FOR FINAL HEARING THIS DAY, THE COURT DELIVERED THE FOLLOWING:

¶17

JUDGMENT

¶18

This appeal is preferred by complainant aggrieved by judgment of acquittal dated 15.9.2009, passed by I Addl. JMFC Court, Bagalkote, in C.C.No.1523/2006, whereby trial Court acquitted respondent/accused of the offence punishable under section 138 of Negotiable Instruments Act (‘the Act’ for short).

¶19

Brief facts leading to filing of this appeal are as under:

¶20

Appellant/complainant is a public limited company registered under the Indian Companies Act and is engaged in the business of manufacturing and sale of cement having its manufacturing unit at Bagalkote. Accused is a proprietor who is a dealer in cement, running his

¶21

¶22

firm in the name of M/s.Gajanan Cement Dealer at Bailhongal. Appellant and respondent have been dealing in cement business transactions where respondent was purchasing cement from appellant company. Towards one such part payment of cost of cement supplied by appellant company, respondent got issued a cheque bearing No.266124 dated 11.10.2004 for a sum of Rs.64,045/-.

¶23

On presentation of the said cheque, the same came to be dishonoured with an endorsement ‘insufficient funds’ on 23.10.2004. Thereafter appellant got issued a legal notice to respondent on 9.11.2004 through registered post which was served to respondent on 13.11.2004. Despite receipt of legal notice, respondent did not repay the amount demanded therein and neither did he reply to the said notice. Thereafter complainant lodged a complaint against respondent for the offence punishable under section 138 of Negotiable Instruments Act.

¶24

¶25

On cognizance being taken for the said offence, presence of accused was secured and he was enlarged on bail. Plea of accused was recorded, he pleaded not guilty and claimed to be tried. Accordingly he was tried.

¶26

In order to prove the case, complainant got examined its legal officer as PW.1 and got marked Exs.P.1 to P.12 and closed its side. Thereafter statement of accused was recorded as required under section 313 of Cr.P.C., wherein respondent/ accused denied all incriminating evidence against him. Respondent adduced evidence of himself as DW.1. However no documents were marked on his behalf.

¶27

After considering entire material evidence both ocular and documentary placed by parties, trial Court came to the conclusion that appellant utterly failed to prove the guilt of accused beyond all reasonable doubt to the satisfaction of the Court and further held that the alleged fact of respondent agreeing to pay the

¶28

¶29

amount due on behalf of Mallikarjun Sangannavar is not convincing and satisfactory and hence acquitted respondent for the offence punishable under section 138 of Negotiable Instruments Act. Aggrieved by the said judgment of acquittal, appellant is before this Court challenging the correctness, legality, proprietary of judgment of trial Court.

¶30

Heard Shri S.B.Hebballi, learned counsel for appellant and Shri Hanamanth R. Latur, learned counsel for respondent.

¶31

It is contended by learned counsel for appellant that judgment of acquittal passed by trial Court is contrary to material evidence on record and factual aspect of the matter and hence the same deserves to be set aside and reversed. It is further contended by learned counsel for appellant that once it is admitted by defence witness, respondent herein that there was business transaction between appellant and respondent and issuance of cheque being admitted

¶32

¶33

by respondent, trial Court would be left with no other alternative but to convict the accused for the offence punishable under section 138 of Negotiable Instruments Act.

¶34

Learned counsel further contends that the trial Court has blatantly ignored the aspect of presumption under Section 118 and 139 of NI Act, which is in favour of the appellant. He further contends that once the respondent has admitted the issuance of cheque and signature on it, the said presumption further gets fortified in favour of the appellant. This aspect of the matter and the presumption in law has been blatantly ignored and hence judgment of acquittal is illegal and erroneous. Learned counsel further contends that the respondent has taken inconsistent and contradictory stand with regard to issuance of cheque, as at one breath the respondent has stated that the cheque was issued blank and for security purpose and at another breath he has stated that the cheque was not issued. Therefore,

¶35

¶36

trial Court ignored these aspects of inconsistency made by the respondent.

¶37

Learned counsel further contends that the respondent has failed to rebut the presumption cast in favour of the appellant and therefore, when there is no rebuttal to the existing presumption in favour of the appellant, the trial Court ought to have convicted the respondent rather than acquitting him. Learned counsel further contends that the amount of Rs.41,545/- is admittedly due by respondent to appellant and since one Mallikarjuna Sangannnwar, who is also the dealer in cement, was due in a sum of Rs.21,500/- to the appellant, respondent himself agreed to pay the amount which was due on behalf of Mallikarjuna Sangannnwar, who belongs to same town as that of the respondent. Therefore, when the respondent has admitted issuance of cheque and signature on it, the presumption under Section 139 of NI Act is in favour of the appellant and the

¶38

¶39

same has not been rebutted by the respondent in the present case. When there is no rebuttal of presumption of the material evidence produced by the appellant, trial Court ought to have convicted the respondent for the aforesaid offence. On these grounds learned counsel for appellant contends that the judgment of acquittal is illegal, perverse and arbitrary. Hence, the same deserves to be set aside and reversed. He relies on the following judgments in support of his case:

¶40

(1) D.K.CHANDEL vs M/S WOKHARDT LTD & ANR reported in 2020(1) SCC 582 (SC);

¶41

(2) M/S WOKHARDT LTD & ANR vs D.K.CHANDEL in the case of CRA-S-1717SBA of 2005;

¶42

(3) RANGAPPA vs SRI MOHAN reported in 2010(3) CRIMES 40(SC);

¶43

(4) M/S SHRIRAM TRANSPORT FINANCE COMPANY LTD., vs ESHWARAPPA NAIKER in Crl. A. No.100155/2015.

¶44

¶45

Per contra, learned counsel for respondent contends that the judgment of acquittal passed by the trial Court is based on the material evidence produced by the parties and the documents relied by both the parties, which is in accordance with law and the precedent laid down by the Hon’ble Apex Court, hence, same does not call for any interference. Learned counsel for respondent further contends that his arguments is of three folds, firstly, there is no legally subsisting debt or liability as against the respondent, secondly, he contends that there is no proper and effective service of notice as contemplated under Section 138 (b) of NI Act, and thirdly, he contends that there is absolutely no relationship whatsoever between him and one Sri Mallikarjuna Sangannavar.

¶46

Learned counsel for respondent contends that no doubt he had business relationship and transaction with appellant over a period of time and he had purchased cement from

¶47

¶48

appellant, which is not in dispute and while doing such business transaction he used to handover blank signed cheques to the appellant as security. He contends that no amount was due towards purchase of cement. Learned counsel further contends that there was no transaction after 08.09.2003. He further contends that it is also admitted by the Complainant – PW1 that there was no transaction of business dealings against each other post 08.09.2003. learned counsel for respondent further contends that appellant; has not fully complied with basic requirements of the ingredients of Section 138 of NI Act. He further contends that necessary mandatory requirement of existence of legally recoverable debt is not established by the appellant. These materials have been correctly evaluated by the trial Court and hence, has rightfully convicted the accused. Further, judgment of acquittal passed by trial Court is very well reasoned and considered order, which does not call for interference by this Court.

¶49

¶50

Hence, on these grounds he seeks to dismiss the appeal and confirm the judgment of acquittal passed by trial Court.

¶51

Having considered the submission of the learned counsel for appellant and learned counsel for respondent, the points that arise for consideration before this Court are:

¶52

(1) Whether respondent has rebutted the presumption in favour of appellant under Section 139 of NI Act?

¶53

(2) Whether the judgment of trial Court deserves to be set aside and reversed?

¶54

In order to answer these points let us have a cursory look at the facts of the case and evidence adduced by the parties.

¶55

It is not in dispute that appellant and respondent are well known to each other due to their business transactions. It is not in dispute that respondent had purchased the cement from

¶56

¶57

the appellant and towards the same he used to make payment by way of cheque. Respondent has admitted issuance of cheque in question at Ex.P2 to appellant. But he contends that the same has been issued as security for supply of cement and not towards repayment of any existing legally recoverable debt. Though it is contended by the learned counsel for respondent that legal notice got issued by the appellant as per Ex.P5 is served and hence there is non compliance of proviso (b) of Section 138 of NI Act. It is also not in dispute that the particulars mentioned in the legal notice at Ex.P5 is the same particulars which is mentioned in the complaint filed by the appellant and which particulars are not disputed by the respondent. Legal notice having been sent to the address as mentioned therein bears correct address of the respondent. The acknowledgement has been returned as served as per Ex.P6. In view of the fact that legal notice addressed to the correct address belongs to that of respondent, as

¶58

¶59

contemplated under Section 138 of NI Act, the service of notice is complete. Hence, the contention of the respondent that legal notice is not served is liable to be rejected. PW1 has entered the witness box and deposed about the transaction between the appellant and respondent. PW1 has stated in his evidence that respondent was due in all a sum of Rs.49,545/- as on 08.09.2003 and accordingly got issued the cheque dated 11.10.2004, which was presented to the bank and the same came to be dishonoured. The statement of PW1 – Complainant is the reiteration of the facts stated in the legal notice at Ex.P5. However, what requires to be seen and appreciated is that apart from stating that the cheque amount is Rs.64,045/- no bills have been mentioned by PW1 in his evidence. But in the cross examination of PW1 it is elicited that respondent was due to appellant only a sum of Rs.41,545/- and to substantiate that Complainant has got marked Ex.P5, which also depicts the

¶60

¶61

balance due by the respondent to appellant in a sum of Rs.41,545/- as on 25.10.2004. Thereafter, PW1 in the cross examination has admitted to the fact that the balance amount of Rs.25,500/- is not the amount due from the respondent to the appellant.

¶62

It is categorically admitted by appellant-

¶63

P.W.1 that this amount was due from one Mallikarjun Sangannavar and the statement of account to that effect is produced and marked at Ex.P.9 clearly depicts that as on 31.07.2003 the said Mallikarjun Sangannavar was due a sum of Rs.22,500/- to appellant. Therefore, it is not in dispute now that respondent was only liable to pay a sum of Rs.49,545/- as that was legally recoverable debt from respondent to appellant. The balance amount of Rs.22,500/- was to be recovered from Mallikarjun Sangannavar by appellant which is not in dispute and this fact admitted by appellant. Now in the present case, the cheque is presented for Rs.64,045/by

¶64

¶65

appellant. It is contended by appellant that respondent had agreed to pay the amount of said Mallikarjun Sangannavar of Rs.22,500/- and hence issued the cheque for Rs.64,045/- infavour of appellant as Mallikarjun Sangannavar belonged to the same town as that of respondent.

¶66

Now, it has to be seen whether the said aspect of respondent agreeing to pay the amount on behalf of Mallikarjun Sangannavar of Rs.22,500/- has been proved by the appellant pursuant to the rebuttal, if any, made by respondent.

¶67

In this view of the matter, it is necessary to extract proviso (a), (b) and (c) of Section 138 of the Act, which reads as under :

¶68

“Dishonour of cheque for insufficiency, etc., of funds in the account. —Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the

¶69

¶70

discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for 6 [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both:

¶71

Provided that nothing contained in this section shall apply unless—

¶72

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

¶73

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving

¶74

¶75

a notice in writing, to the drawer of the cheque, 7 [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

¶76

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

¶77

Explanation.— For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.”.

¶78

The primary requirement under the above said section is, the existence of any debt or liability and that the said debt has to be legally enforceable debt. Therefore, it is stated that when any cheque is drawn by a person on account maintained by him with Bank for payment of any amount of money to another person from out of that account for discharge in whole in part, of any debt or other liability is returned by the Bank

¶79

¶80

unpaid, in such situations, the provision under this section will come into play. Therefore, the primary requirement would be the existence of legally recoverable debt or other liability. In the present case on hand, on complaint being registered and cognizance being taken, the presumption in law will act in favour of appellant as any cheque i.e., presented to the Bank would be presumed to be issued for the purpose of discharge of whole or in part of any debt or other liability. Therefore, this provision acts as reverse burden on respondent/accused to prove to the contrary to rebut the said presumption and to prove to contrary that there does not exist or that there never existed any legally recoverable debt or liability. It is relevant to extract Section 139 of N.I.Act, which reads as under :

¶81

“Presumption in favour of holder.It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for

¶82

¶83

the discharge, in whole or in part, of any debt or other liability.”

¶84

In the present case, in the cross-

¶85

examination of P.W.1, he has categorically admitted that respondent was due only Rs.41,545/- Therefore, this amount of Rs.41,545/is legally recoverable debt assuming and believing the statement of P.W.1 and to substantiate the same strangely. P.W.1 has himself produced and got marked Ex.P.7 which shows outstanding balance of respondent Rs.41,545/as on 25.10.2004.

¶86

The other portion of the amount, admittedly added to the cheque is Rs.22,500/which is legal debt and liability of Mallikarjun Sangannavar to be paid to the appellant. As per the contention of appellant that the cheque Ex.P.2 has been issued by respondent himself for a sum of Rs.64,045/- adding the amount of liability and due by Mallikarjun Sangannavar.

¶87

¶88

In view of the fact that P.W.1 has

¶89

admitted in the cross-examination, the legal debt and liability of respondent is only Rs.41,545/-. In my opinion the respondent has rebutted the presumption cast in favour of appellant, thereby shifting the onus on appellant to prove the fact of agreeing to pay the amount which was due by Mallikarjun Sangannavar in favour of appellant. Admittedly, even accordingly to P.W.1, there is no document produced either by Mallikarjun Sangannavar or by respondent towards payment of Rs.22,500/-. Appellant has not produced any document before trial Court or before this Court to show that respondent had agreed to pay the balance due amount of Mallikarjun Sangannavar for purchase of 10 metric tones of cement by him.

¶90

Admittedly, even according to P.W.1complainant, no cement was purchased by respondent after 08.09.2003, and according to the appellant, as on 08.09.2003 respondent was due Rs.49,545/- as per their statement. But some how

¶91

¶92

strangely appellant comes with the theory that respondent has got issued a cheque on 11.10.2004, wherein he has not only agreed to pay Rs.41,545/- but agreed to pay a debt of other person namely, Mallikarjun Sangannavar which is not admitted and on careful examination of P.W.1, it is seen that the said Mallikarjun Sangannavar was due Rs.22,500/- to the appellant as on 31.07.2003.

¶93

The said aspect of respondent agreeing to pay the amount due by Mallikarjun Sangannavar is not admitted and no document to that effect or proof of the same is produced by appellant herein.

¶94

It is not in dispute that cheque has been admitted by respondent and so also the signature, but it is categorically denied by respondent-D.W.1 in his evidence that the particulars other than the signature are not that of his and same are manipulated and mis-utilized. Therefore, when the respondent has rebutted presumption cast in

¶95

¶96

favour of appellant, the onus and burden shifts on appellant to bring this aspect before the Court and to prove beyond satisfaction of the Court to succeed in the matter. Whereas, appellant has not chosen to place any material except merely stating that cheque has been issued towards payment of legally recoverable debt of Rs.64,045/- by respondent. If this was the truth behind issuance of Ex.P.2, appellant nothing has been stated in the legal notice which was issued as per Ex.P.5. It is noticed that neither in the legal notice nor in the complaint and neither in the evidence led by P.W.1 factual aspect is narrated, therefore, it is for appellant to prove of rebuttal of presumption that there existed legally recoverable debt or liability of Rs.64,045/- as against the respondent.

¶97

In order to rebut the presumption, there has to be preponderance of probabilities and probable defence which is required to be raised by respondent, as there is already a presumption in

¶98

¶99

favour of appellant that the cheque is issued towards discharge of legally recoverable debt either whole or in part. When once the rebuttal has been established and proved to the contrary by the respondent/accused, then the burden shifts on appellant to satisfy such rebuttal and prove that cheque has been issued towards legally enforceable debt or liability. In the present case, the trial Court has considered all these aspects and has passed a detailed order appreciating all the contentions raised by both the parties and has arrived at a conclusion that the cheque issued by respondent as per Ex.P.2 was towards discharge of legally recoverable debt for Rs.64,045/-. On careful appreciation of the entire material evidence by the parties, both oral and documentary, it is well established that the respondent has rebutted the presumption cast in favour of appellant under Section 139 of the N.I.Act. Therefore, I answer point No.1 in the affirmative, in view of rebuttal having been

¶100

¶101

established by respondent, the onus shifted on appellant to prove his case and satisfy such rebuttal which the appellant has failed miserably. Therefore, it can be safely said that the cheque presented by appellant for Rs.64,045/- cannot be said to be issued towards discharge of legally recoverable debt or liability and hence, same will not come within the purview of Section 138 of the N.I.Act. The learned counsel for the appellant has relied on the case of D.K.Chandel Vs. M/s.Wockardt Limited and another, stated supra wherein it is held that there is no requirement of production of account books/cash books as the same would be relevant only in civil suit. But may not be so filed under Section 138 of the N.I.Act as there is a presumption raised in favour of holder of the cheque. In my humble opinion that the said issue and the facts therein are not be applicable to the present case of the facts, hence the said authority would not be helpful to the appellant.

¶102

¶103

Learned counsel also relied on the case of Rangappa Vs. Sri Mohan stated supra, wherein it is stressed that on admission of the signature on the cheque as statutory presumption is raised and if the same is not rebutted, then the Court will have to convict the accused. The said case would not be helpful as in the present case there is a rebuttal established by respondent against the presumption cast in favour of appellant under Section 139 of the N.I.Act. So also in the case of M/s.Shriram Transport and Finance Company Ltd., Vs. Eshwarappa Naiker S/o.Bhuthappa, stated supra the said authority is not applicable to the facts of present case and same would not be helpful to the appellant.

¶104

On careful consideration of the entire material evidence, both oral and documentary, it is seen that the trial Court has passed a just and reasonable Judgment which does not call for interference by this Court and the same deserves

¶105

¶106

to be upheld. Accordingly, I pass the following order :

¶107

ORDER

¶108

(i) Appeal is dismissed; (ii) The Judgment of acquittal passed by I Additional J.M.F.C., Court, Bagalkot in C.C.No.1523/2006 dated 15.09.2009 is upheld.

¶109

Sd/JUDGE

¶110

MRK/VK/ckk

M/S Bagalkot Cement and Industries Limited v. M/S Gajanan Cement Dealer

Case brief

What is this about?

What did the court decide?

M/S Bagalkot Cement and Industries Limited v. M/S Gajanan Cement Dealer

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

Shiddalingappa S/O. Basavanneppa Baligeri Vs Iranna S/O. Basavenneppa Baligeri

Shiddalingappa S/O Basavanneppa Baligeri Vs Iranna S/O Basavanneppa Baligeri

Siddalingappa S/O. Basappa Panadi, Vs Mallikarjun B Mavalli

R. Ramanath S/O R. Anjini Rao Vs State of Karnataka

Pradeep S/O Mahadevappap Hulasangi @ Bosale Vs Lohit S/O Vijaykumar Kudari

The Manager/Secretary, Vs Basangouda S/O Viranagouda Kulkarni