Allowed

Smt Bhavana Aggarwal v. Sri Chandrashekar Gopal

Karnataka HC19 Jul 2021CRL.P/7367/2018

Case brief

AI extract

What is this about?

The High Court of Karnataka allowed a criminal petition under Section 482 Cr.P.C. to quash proceedings in a Section 138 NI Act case. The court held the proceedings amounted to abuse of process because prosecution of non-signatory petitioners was liable to fail as cheques were not for an existing debt.

What did the court decide?

Proceedings in C.C.No.21858/2017 against the petitioners were quashed.

Smt Bhavana Aggarwal Vs Sri Chandrashekar Gopal — Cheque Dishonour | Karnataka HC (2021)

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Crl.P.No.7367/2018

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 19^TH DAY OF JULY 2021

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BEFORE

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THE HON’BLE MRS. JUSTICE K.S.MUDAGAL

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CRIMINAL PETITION No.7367/2018

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BETWEEN :

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SMT BHAVANA AGGARWAL W/O BHASKAR SHINTHRAY AGED ABOUT 45 YEARS R/AT NO.42, 7^TH CROSS 6^TH AND 7^TH MIDDLE MAIN ROAD MALLESHWARAM BENGALURU – 560 003

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BHASKAR SHINTHRAY S/O A.JUANARDHAN RAO AGED ABOUT 48 YEARS R/AT NO.42, 7^TH CROSS 6^TH AND 7^TH MIDDLE MAIN ROAD MALLESHWARAM BENGALURU – 560 003 …PETITIONERS

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(BY SRI S.S.SRINIVASA RAO, ADVOCATE)

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AND :

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SRI CHANDRASHEKAR GOPAL S/O GOPAL B.V. R/AT NO.22Y, 2^ND FLOOR 2^ND MAIN ROAD, 4^TH PHASE 7^TH BLOCK, BSK III STAGE BENGALURU – 560 085

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…RESPONDENT

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(NOTICE TO THE RESPONDENT IS HELD SUFFICIENT VIDE ORDER DATED 21.10.2019)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF CR.P.C. PRAYING TO QUASH THE PROCEEDINGS IN C.C.NO.21858/2017 PENDING ON THE FILE OF XII ADDITIONAL

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Crl.P.No.7367/2018

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CHIEF METROPOLITAN MAGISTRATE, BANGALORE AGAINST THE PETITIONERS FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT.

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THIS CRIMINAL PETITION COMING ON FOR FURTHER HEARING THIS DAY, THE COURT THROUGH VIDEO CONFERENCE MADE THE FOLLOWING:

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O R D E R

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“Whether the proceedings in C.C.No.21858/2017 against the petitioners amount to abuse of the process of the Court”? is the question involved in this case.

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Petitioner No.1 is the partner of M/s. Classic Construction Company. The said company had constructed project by name ‘Savita Regency’ to put up residential flat for sale. Petitioner No.2 is the husband of petitioner No.1. Petitioner No.1 represented that the construction of the flat was in accordance with law and the respondent agreed to purchase Flat No.302 in the said apartment.

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The petitioner firm entered into agreement of sale on 02.08.2013 for consideration of Rs.51,40,000/and executed the registered sale deed dated 25.09.2013 in favour of the respondent. The respondent claims to have paid sale consideration borrowing loan of Rs.46,40,000/-

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from Corporation Bank, Uttarahalli and he spent Rs.20,50,000/- for furnishing interiors of the house.

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On 21.11.2016, the respondent filed complaint before Mico Layout Police against petitioner No.1 and three others alleging that when he purchased the flat, accused assured that the documents of the properties are in order. He further alleged that during the course of getting khata changed in his name, he came to know that the accused has produced duplicate ‘A’ khata and building plan, the construction was unauthorised, thereby he has cheated. It is further alleged that when he enquired the accused, they agreed to pay him Rs.20,50,000/- to repurchase the property and failed to do so.

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On the basis of such complaint, Mico Layout Police registered the first information report in Crime No.971/2016 against petitioner No.1 and three others for the offences punishable under Sections 420, 468, 471 read with Section 34 of IPC. Pending investigation in Crime No.971/2016, petitioner No.1 and the respondent entered into memorandum of settlement dated 30.03.2017.

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Under the said settlement, petitioner No.1 agreed to refund Rs.20,08,000/- to the respondent to reconvey the property. Under the said agreement, sum of Rs.2,08,000/was paid by cash and balance of Rs.18,00,000/- was paid by four cheques mentioned in the agreement. Out of four cheques, three cheques were for Rs.5,00,000/- bearing Nos.453164 dated 10.04.2017, 453165 dated 20.04.2017 and 453166 dated 30.04.2017. The said cheques were drawn by petitioner No.1 on his account.

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On 15.04.2017, petitioner No.2 issued notice to the respondent claiming that memorandum of settlement dated 30.03.2017 was obtained by the respondent in the police station under coercion and the cheques in question were issued out of such coercion and called upon the respondent to return the aforesaid four cheques.

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Thereafter the respondent issued notice dated 28.06.2017 to the petitioners claiming that the said cheques were issued towards discharge of their liability

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and when presented they were returned with endorsement ‘payment stopped by drawer’. Further the respondent in the same notice called upon the petitioners to repay the amount or else to face the prosecution for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (‘the NI Act’ for short) .

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It appears that the petitioners did not reply to the notice. Then the respondent filed complaint in PCR No.9727/2017 against the petitioners to prosecute them for the offence punishable under Section 138 of the NI Act. Learned Magistrate on taking cognizance, registered the said case in C.C.No.21858/2017 and summoned the petitioners to take up trial.

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The petitioners seek quashing of the said proceedings on the following grounds:

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(i) Petitioner No.1 is not the drawer of the cheque. Therefore, the prosecution against her for the offence punishable under Section 138 of NI Act is not maintainable;

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(ii) So far as petitioner No.2, the cheque was not issued for discharge of his liability. Therefore, he is not liable for prosecution for the offence punishable under Section 138 of NI Act;

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(iii) The cheques were issued not towards the existing liability but as a consideration for the respondents reconvening the property. The respondent without reconvening the property cannot claim that there was a enforceable debt;

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(iv) Admittedly, the liability pertains to partnership firm of M/s. Classic Construction Company. Petitioner No.1 was the partner of the said company. Admittedly, the cheques in question were not drawn either on the account of the said company or on the account of petitioner No.1;

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(v) The liability for which the said cheque related was not the liability of petitioner No.2 but that was the liability of the firm Classic construction of which petitioner No.1 was the partner;

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(vi) The cheque in question shall be drawn on account of the accused. Secondly the cheque shall be issued to discharge liability of the drawer of the cheque.

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Admittedly, the liability in question pertains to M/s.Classic Construction Company and not petitioner No.2 though he was the drawer of the cheque.

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For prosecution of a person under Section 138

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of the NI Act, the requirement of the said provision shall be complied. Section 138 of NI Act reads as follows:

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“ 138. Dishonour of cheque for insufficiency, etc., of funds in the account. -

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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 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 (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:

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Provided that nothing contained in this section shall apply unless-

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(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;

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

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(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.”

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In view of the above provision, the mandatory

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requirements are :

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(i) The cheque shall be drawn by the accused on the account maintained by him;

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(ii) The cheque shall be issued to pay any debt or other liability of the accused;

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(iii) The cheque shall be presented to the Bank

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within six months from the date of which it was drawn;

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(iv) The cheque shall be dishonored;

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(v) The holder of the cheque shall issue notice to

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the drawer within 30 days from the date of the receipt of the information of the dishonor. If the drawer of the cheque fails to make payment of the amount to the payee within 15 days of the notice, then the complaint shall be filed.

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In the case on hand, neither petitioner No.1 was the drawer of the cheques nor the cheques were drawn on her account. So far as petitioner No.2, the cheques were drawn not towards discharge of his liability. Further as per the Memorandum of settlement and the complaint in Crime No.971/2016, the cheques were issued with the understanding that the petitioners shall repay the amount spent by the respondent and he shall re-convey the property. But such re-conveyance has not taken place. Therefore, it cannot be said that cheques were issued towards the existing liability.

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Further it is contended that on investigation in Crime No.971/2016 Mico Layout Police have charge sheeted petitioner No.1 and the other accused in the said case and petitioner No.1 has filed Crl.P.No.9442/2018 before this court seeking quashing of the said proceedings and that matter is still pending. Therefore, it is contended that the prosecution in C.C.No.21858/2017 amounts to double jeopardy.

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In the similar circumstances, Madras High Court in Subburam vs Rajendran, Crl.O.P.(MD) No.14832 of 2004 and Crl.M.P.Nos.5178 and 5179 of 2004 has held that “for the purpose of Section 138 of NI Act, “debt or liability” means a “legally enforceable” debt or other liability. The respondent cannot legally enforce the debt or liability of M/s.Classic Construction Company or of petitioner No.1 against petitioner No.2 as he is not partner of the firm.

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16. In Aparna A. Shan vs. Sheth Developers (P)

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Ltd¹ , the Hon’ble Supreme Court held that only the drawer

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1 (2013) 8 SCC 71,

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of the cheque is liable for prosecution and in the case of joint accounts, each and every account-holder cannot be prosecuted unless he has signed on the cheque.

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Though the account of which the cheque was drawn is the joint account, the cheque shows that petitioner No.1 was not a signatory to the cheque. Therefore, in view of the judgment of Aparna’s case supra, petitioner No.1 does not render herself liable for prosecution for the offence punishable under Section 138 of the NI Act.

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In support of his contention learned counsel for the petitioner relied upon the deposition of the respondent recorded in CC.No.21858/2017. The respondent in his cross-examination has categorically admitted that as per the agreement he had to re-convey the property after the repayment of the balance loan amount of the bank. He has further stated that those installments were to be paid by the accused and they did not pay. Therefore, there is force in the contention that holding back the flat the respondent

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cannot claim that the cheques were issued towards

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discharge of legally enforceable debt.

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19. In Indus Airways Private Limited and Others v. Magnum Aviation Private Limited and Another² , the

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Hon’ble Supreme Court held that, if a cheque is issued as an advance payment for purchase of goods and for any reasons purchase order was not carried out to its logical conclusion either because of the cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, the cheque cannot be said to have been drawn for an existing debt or liability.

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Having regard to the aforesaid facts and circumstances and the legal position, even if the impugned proceedings were to continue against the petitioners, the chance of their conviction is remote. Under such circumstances, the impugned proceedings amounts to abuse of the process of Court. Therefore, the petition is allowed.

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