Partly allowed

M/S. Trishla Minerals v. M/S. Champions

Karnataka HC23 Jul 2021WP/56974/2018

Case brief

AI extract

What is this about?

In a money laundering/cheque dispute writ petition, the High Court of Karnataka set aside the trial court's rejection of applications to summon income tax returns and recall a witness, holding Section 311 Cr.P.C. applies to ensure fair trial even after defence evidence.

What did the court decide?

Impugned orders set aside; trial court to issue summons to Principal Commissioner of Income Tax for returns 2009-2014; Partly allowed application to recall witness after response.

M/S. Trishla Minerals Vs M/S. Champions — Cheque Dishonour | Karnataka HC (2021)

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W.P.No.56974/2018

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 23^RD 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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WRIT PETITION No.56974/2018 (GM-RES)

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BETWEEN : M/S.TRISHLA MINERALS I FLOOR, ABOVE INDIAN OVERSEAS BANK LANDLINKS TOWNSHIP DEREBAIL, KONCHADY MANGALORE- 57 REP. BY ITS PROPRIETOR SRI KRISHNARAJA MAYYA …PETITIONER (BY SRI P.P.HEGDE, ADVOCATE) AND :

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M/S.CHAMPIONS A PARTNERSHIP FIRM REP. BY ITS PARTNER SRI UMASHANKAR REDDY HAVING ITS OFFICE AT NO.1048, 20^TH MAIN ROAD RAJAJINAGAR, BENGALURU- 560 010 …RESPONDENT (BY SRI RAVI L.VAIDYA, ADVOCATE)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF CR.P.C. PRAYING TO QUASH THE ORDERS DATED 06.10.2018 (ANNEXURE-A) AND 20.11.2018 (ANNEXURE-B) PASSED BY XX ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BENGALURU ON THE APPLICATIONS FILED UNDER SECTIONS 91 & 311 OF CR.P.C AND SECTION 311 OF CR.P.C. RESPECTIVELY IN C.C.NO.9472/2014 ETC.

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THIS WRIT PETITION COMING ON FOR FURTHER HEARING THIS DAY, THE COURT MADE THE FOLLOWING:

W.P.No.56974/2018

O R D E R

In this petition, the petitioner is seeking quashing of the orders dated 06.10.2018 (Annexure-A) and 20.11.2018 (Annexure-B) passed by XX Additional Chief Metropolitan Magistrate, Bengaluru in C.C.No.9472/2014. By the impugned orders, the learned Magistrate rejected the applications of the petitioner as per Annexures-J and K.

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Under Annexure-J the application under Sections 91 and 311 of Cr.P.C., the petitioner sought summoning the Principal Commissioner of Income Tax, Bengaluru, direct him to seize, secure and cause production of the income tax returns along with book of accounts, statement of accounts, audited balance sheet of the respondent company for the years 2009-2010, 20102011, 2011-2012, 2012-2013, 2013-2014.

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Under Annexure-K the application under Section 311 of Cr.P.C, the petitioner sought to recall PW.1 the complainant for further cross-examination.

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The respondent was the complainant and the petitioner was the accused before the trial Court. For the

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purpose of convenience, the parties will be referred to henceforth as per their ranks before the trial Court.

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The complainant under the complaint Annexure-C sought prosecution of the accused for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (‘the Act’ for short).

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The gist of the complaint in brief is as follows:

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The accused was trading in iron ore and on his request, the complainant had financed to the tune of Rs.19,96,05,000/under different memorandum of understandings. Towards discharge of the dues of those transactions, the accused issued 10 cheques shown in the complaint for various amounts. Then the accused filed PCR No.12/2013 alleging forgery of cheques. In the conciliation process, the accused agreed to pay Rs.18,41,33,000/-. Towards discharge of that liability, he issued two cheques for Rs.9,00,00,000/- and Rs.9,38,83,000/- respectively. When the cheques were presented they were returned with endorsement ‘payment stopped’. Therefore the statutory notice was issued calling upon the accused to pay the said amount for which the accused issued frivolous

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reply. Thus he sought prosecution of the accused for the offence punishable under Section 138 of the Act.

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The trial Court on taking cognizance of the offence, registered the case in C.C.No.9472/2014. After the evidence of the complainant and the accused were over on 26.09.2018, the accused filed application to summon the Principal Commissioner of Income Tax, Bengaluru for search, seizure and production of the income tax returns with book of accounts, statement of accounts etc as aforesaid from the custody of the complainant. That application was contested by the complainant.

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The trial Court by order dated 06.10.2018 rejected the application on the ground that as per the complainant, they have not filed income tax returns, therefore there was no reason to believe that such document was in possession of the witness to invoke Section 91 of Cr.P.C.

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Relying on the judgment of this Court in C.N.Dinesha vs. Smt.C.G.Mallika [2017 (3) AKR 365] the

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trial Court further held that, if the complainant has

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violated any of the provisions of the Income Tax Act, 1961 that may give rise to his prosecution under the Income Tax Act and that is not relevant for the purpose of discharge of burden of proof of the accused in the proceedings under Section 138 of the Act.

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After the order dated 06.10.2018, the accused filed another application on 25.10.2018 as per Annexure-K under Section 311 of Cr.P.C. to recall PW.1 for further cross-examination with reference to his income tax returns. The complainant opposed the said application also.

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The trial Court by order dated 20.11.2018 rejected the said application on the ground that PW.1 was cross-examined on seven hearing dates and the application is out come of dilatory tactics and lacks bonafides . The trial Court further held that if the complainant has violated any of the provisions of the Income Tax Act that may give rise to separate prosecution against him and that is not relevant for prosecution under Section 138 of the Act.

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W.P.No.56974/2018

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Sri P.P.Hegde, learned Counsel for the

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petitioner seeks quashing of the said orders on the following grounds:

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(i) The accused needs to rebut the presumption. Therefore sufficient opportunity should have been given to the accused to rebut the presumption;

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(ii) Despite the accused calling upon the complainant to produce the income tax returns, he did not produce the entire income tax returns. Whatever were submitted, was not genuine documents. Therefore the accused was forced to summon the income tax returns from the Income Tax Department;

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(iii) After the evidence of accused, it was necessary

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to cross-examine him with reference to the same. Therefore opportunity should have been given to further cross-examine PW.1 by recalling him;

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(iv) The learned Magistrate followed the procedure for trial of the summon cases and should have given opportunity to lead further examination of the accused.

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In support of his contentions, he relies upon

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the following judgments:

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(i) J.V.Baharuni v. State of Gujarat¹

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(ii) Kalyani Baskar v. M.S.Sampoornam²

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Sri Ravi.L.Vaidya, learned Counsel for the respondent opposes the petition on the following grounds:

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(i) In the proceedings relating to the offence under the NI Act, summary trial procedure has to be followed;

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(ii) Having regard to Section 143 of the NI Act, Section 311 of Cr.P.C. is not applicable;

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(iii) In the application the accused had not stated

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how the documents sought to be summoned are relevant and the application is outcome of dilatory tactics;

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(iv) Since the burden was on the complainant to

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prove his lending capacity, if he failed to produce any documents, he was bearing his own risk;

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(v) When the complainant said that he has not

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submitted the income tax returns for the said years, the

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1 (2014) 10 SCC 494

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2 (2007) 2 SCC 258

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question of summoning the documents under Section 91 of

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Cr.P.C. does not arise;

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(vi) The right to summon the documents is

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available only during trial and not at conclusion of trial.

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In support of his contentions, he relies upon

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the following judgments:

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(i) Mandvi Cooperative Bank Ltd. v. Nimesh B.Thakore³

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(ii) Indian Bank Assn. v. Union of India⁴

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(iii) M/s.Mahathru Technologies vs. M/s.Creative Infotech⁵

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(iv) In Re.Expeditious Trial of cases Under Section 138 of N.I.Act, 1881⁶

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It is settled proposition of law that the power under Section 482 of Cr.P.C. shall be exercised sparingly. However, if the Court finds that the impugned proceedings are likely to cause failure of the ends of justice, to prevent the same such power can be exercised.

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The sum and substance of the judgments relied on by learned Counsel for the respondent is that in

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3 (2010) 3 SCC 83

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4 (2014) 5 SCC 590

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5 Crl.P.No.1329/2020 DD 19.11.2020

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6 2021 SCC Online SC 325

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the case involving the offence under Section 138 of the Act, the proceedings shall be concluded expeditiously and there shall not be any liberty to the accused or any party to prolong the proceedings.

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So far as the applicability of Section 311 of Cr.P.C to the Negotiable Instruments Act proceedings, it is no doubt true that the Act is a special enactment. As per Section 4 of Cr.P.C., in cases under Special Laws the procedure contemplated under the said Act shall have to be followed. Section 143 of the Act deals with the procedure and the power of the Court to try the cases summarily under the Code.

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For our purpose, Section 143(1) of Act and Second Proviso to the said Section are relevant which read as follows:

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“143. Power of court to try cases summarily

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(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), all offences under this Chapter shall be tried by a Judicial Magistrate of the first class or by a Metropolitan Magistrate and the provisions of sections 262 to 265 (both inclusive) of the

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said Code shall , as far as may be, apply to such trials:

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Provided further that when at the commencement of, or in the course of, a summary trial under this section, it appears to the Magistrate that the nature of the case is such that a sentence of imprisonment for a term exceeding one year may have to be passed or that it is, for any other reason, undesirable to try the case summarily , the Magistrate shall after hearing the parties, record an order to that effect and thereafter recall any witness who may have been examined and proceed to hear or rehear the case in the manner provided by the said Code .

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……………………………………………………………………………”

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Reading of the above provisions makes it clear

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that generally the cases under the Act shall be tried summarily as per the provisions of Sections 262 to 265 of Cr.P.C. The proviso states that having regard to the nature of the case and the sentence that contemplates, the learned Magistrate shall on hearing the parties and recording the reasons proceed in the manner provided in the Code.

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Section 262 of Cr.P.C. which speaks about the

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procedure for summary trial reads as follows:

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“ 262. Procedure for summary trials

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(1) In trials under this Chapter, the procedure specified in this Code for the trial of summons-case shall be followed except as hereinafter mentioned.

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(2) No sentence of imprisonment for a term exceeding three months shall be passed in the case of any conviction under this Chapter.”

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Reading of the above provision makes it clear that even in the summary trial the procedure specified for the summons cases shall be followed.

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The procedure for summary trial is

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enumerated in Section 254 of Cr.P.C. which falls under Chapter XX of Cr.P.C. reads as follows:

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“ 254. Procedure when not convicted

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(1) If the Magistrate does not convict the accused under section 252 or section 253, the Magistrate shall proceed to hear the prosecution and take all such evidence as may be produced in support of the prosecution, and also to hear the accused and take all such evidence as he produces in his defence .

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(2) The Magistrate may, if he thinks fit, on the application of the prosecution or the accused, issue

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a summons to any witness directing him to attend or to produce any document or other thing.

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(3) The Magistrate may, before summoning any witness on such application require that the reasonable expenses of the witness incurred in attending for the purposes of the trial be deposited in Court.”

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Reading of the above provision makes it clear that in trial of summons cases also, the learned Magistrate shall record the evidence of the prosecution and hear the accused and take up such defence evidence. Sub Section (2) of Section 254 of Cr.P.C. gives discretion to the learned Magistrate to issue summons to any witness on the application of the accused also.

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The entire order sheet of the trial Court, deposition of the witnesses, impugned orders and relevant records submitted for perusal of this Court go to show that the trial Court elaborately recorded the evidence of the complainant and the accused. On service of summons, the accused appeared and did not plead guilty. Thereafter the trial Court recalled the complainant and recorded his evidence on several hearing dates and then recorded the

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evidence of the accused also. None of the parties objected for the same.

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Therefore it goes to show that the Magistrate opted for the procedure involved in the summons cases and the parties accepted that. Having regard to such conduct of the parties and their acceptance that the case involves only summary trial, there is no scope for such application and it takes back seat.

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It was contented that after the trial is concluded, Section 91 of Cr.P.C. cannot be invoked. Relying on Mandvi Cooperative Bank Ltd.’s case referred to supra it was contented that in the trial of the offences under Section 138 of the Act, Sections 143 to 147 of the Act shall be strictly followed to avoid delay. In para 25 of the said judgment relied on by learned Counsel for the respondent himself it was held that the trial procedure shall be as expeditiously as possible, but without in any way compromising on the right of the accused for a fair trial.

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In the case involving the offence under Section 138 of the Act, once the accused admits that the cheque pertains to his account and it bears his signature, then

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there is presumption that the cheque was issued for consideration towards discharge of the liability. However, despite that, if the lending capacity of the complainant is disputed, the complainant has to prove that. The accused has to raise reasonable doubt in the mind of the Court about lending capacity of the complainant.

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The complainant claimed that he had lent Rs.18,38,83,000/- to the accused which is huge money. In the cross-examination of PW.1 the accused has denied the lending capacity and lending that much money. His claim is that Rs.5,60,000/- was borrowed and to discharge that debt he repaid more than that, still the accused was demanding further payments. The records further show that the accused filed application calling upon the complainant to produce his income tax returns to demonstrate if so much of amount was lent to him or could be lent to him.

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The order sheet of the trial Court sufficiently shows that the complainant took his own time to produce the summoned documents. Ultimately he produced the income tax returns for only one year. That was after the

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evidence of PW.1. Therefore the accused after his evidence was over filed an application to summon the income tax authorities.

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The complainant claims that except that year he did not submit the income tax returns for other years. Therefore after his evidence was over, the accused filed application to summon the income tax authorities for producing the income tax returns. It is no doubt true that in the application, how those documents were relevant for deciding the case was not clearly spelt out and the documents were sought to be summoned at random. But from the copies of the complaint, statutory notice, reply to that and other records it can be gathered that the accused attempted to establish that so much of amount was not lent and the complainant had no such lending capacity.

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Having regard to the huge amounts involved in the transaction and production of the income tax returns for only one year, proper opportunity should have been given to the accused to substantiate his defence and depriving of such right amounts to depriving him of fair trial.

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So far as the allegations of delay, no doubt the matter is pending since 2014. But the documents produced by the petitioner go to show that delay had occurred on account of the acts of both the parties. The accused to substantiate his defence had sought production of income tax returns and the audited balance sheets annexed to the income tax returns and not seeking prosecution of the complainant for violation of the provisions of the Income Tax Act. Therefore rejection of the application on such ground was not justifiable.

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So far his application under Section 311 of Cr.P.C, according to the learned Counsel for the accused, PW.1 was sought to be recalled to show that the income tax returns for the years 2010-2011 produced by him was not genuine. If the income tax authorities produce the income tax returns for the years 2009-2010 to 2013-2014 as sought for that itself demonstrates whether the income tax returns for the year 2010-2011 produced by the complainant was genuine or not.

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Even otherwise need of summoning the complainant on that point arises only after production of those documents. The question of consideration of genuineness of the income tax returns produced by the complainant arises, if at all the income tax authorities say that from 2009-2010 to 2013-2014 the complainant has not submitted any returns. Therefore that application has to be decided after the response of the income tax authorities to the application under Section 91 of Cr.P.C.

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So far as applicability of Section 311 of Cr.P.C.

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after conclusion of trial, it is relevant to refer to Section 311 of Cr.P.C. which reads as follows:

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“311. Power to summon material witness, or examine person present .

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Any Court may, at any stage of any inquiry, trial or other proceeding under this Code, summon any person as a witness, or examine any person in attendance, though not summoned as a witness, or recall and re-examine any person already examined; and the Court shall summon and examine or recall and re examine any such person if his evidence appears to it to be essential to the just decision of the case .”

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Reading of the above provision makes it clear

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that the power to summon under Section 311 of Cr.P.C can be exercised at any stage of any enquiry or trial, or other proceedings also. Even in Mandvi Cooperative Bank Ltd. ’s case referred to supra the Hon'ble Supreme Court held that there shall not be any compromise with the fair trial. The said judgment cannot be pressed into service to say that there is total bar to summon or recall the witnesses after the defence evidence is over. Therefore the trial Court shall consider the application under Section 311 of Cr.P.C. after response of the income tax authorities consequent to the summons issued to them under Section 91 of Cr.P.C.

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However in the application under Section 91 of Cr.P.C. the only relevant documents are income tax returns and the annexures to the income tax returns and not the documents as sought in the application. Therefore the petition is partly allowed.

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The impugned orders of the trial Court dated 06.10.2018 and 20.11.2018 are hereby set aside. The

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application of the accused under Section 91 of Cr.P.C. read

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with Section 311 of Cr.P.C. is hereby partly allowed.

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The trial Court shall issue summons to the Principal Commissioner of Income Tax, Bengaluru for production of income tax returns of the complainant along with the annexures enclosed with the said returns for the years 2009-2010 to 2013-2014.

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The trial Court shall consider the application of the accused under Section 311 of Cr.P.C., to recall PW.1 after the response of the income tax authorities on the summons issued to them under this order.

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Sd/JUDGE

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KSR

M/S. Trishla Minerals v. M/S. Champions

Case brief

What is this about?

What did the court decide?

M/S. Trishla Minerals v. M/S. Champions

Case brief

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What did the court decide?

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