Allowed

Khaleel Khan P v. Sunil Kumar G C

Karnataka HC4 Nov 2022CRL.P/4098/2019

Case brief

AI extract

What is this about?

In three connected criminal petitions, the High Court of Karnataka quashed proceedings under Section 138 of the Negotiable Instruments Act. The Court held that cheques issued to refund bribes do not involve a legally enforceable debt, and Section 65 of the Contract Act does not validate such liabilities.

What did the court decide?

The proceedings in C.C. No.4074/2019, C.C. No.1024/2019, and C.C. No.4626/2019 against the petitioner are set aside.

Khaleel Khan P Vs Sunil Kumar G C — Cheque Dishonour | Karnataka HC (2022)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4^TH DAY OF NOVEMBER, 2022

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BEFORE

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THE HON’BLE MR. JUSTICE M.I.ARUN

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CRIMINAL PETITION No.4098 OF 2019

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CONNECTED WITH CRIMINAL PETITION No.4099 OF 2019 AND CRIMINAL PETITION No.4101 OF 2019

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IN CRL.P. NO.4098 OF 2019

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BETWEEN:

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KHALEEL KHAN P. S/O. LATE BUDEN KHAN AGED ABOUT 56 YEARS WORKING AS PHARMACIST PRIMARY HEALTH CENTRE KALYADI KALYADI POST, JAVAGAL HOBLI ARSHIKERE TALUK HASSAN DISTRICT - 573 103 R/AT KHAN MANZIL MUJAVAR MOHALA, 3RD CROSS OPP. TIPPU STORE, ARASIKERE HASSAN DISTRICT - 573 103. ... PETITIONER (BY SRI PRASANNA D.P., ADVOCATE)

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AND:

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SUNIL KUMAR G.C. S/O. M.N. CHANDRAPPA AGED ABOUT 44 YEARS R/AT GANAGUR VILLAGE SOMAWARAPETE TALUK KODAGU DISTRICT - 571 236 R/AT NO.41/C, 6TH CROSS SANTHOSH NAGAR

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T. DASARAHALLY POST BENGALURU - 560 057.

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... RESPONDENT

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[BY SRI K.G. DEVARAJAIAH, ADVOCATE (ABSENT)]

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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.4074/2019 ON THE FILE OF THE XIX A.C.M.M., BENGALURU, FOR THE OFFENCE P/U/S 138 OF N.I. ACT AS PER ANNEXURE-A.

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IN CRL.P. NO.4099 OF 2019

BETWEEN:

... PETITIONER

(BY SRI PRASANNA D.P., ADVOCATE)

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AND:

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SRI. SADDAM PEER S/O. KHADAR PEER AGED ABOUT 25 YEARS R/AT KAGGALAPURA VILLAGE AMRUTHUR HOBLI, KUNIGAL TALUK TUMKUR DISTRICT - 572 111 PRESENTLY R/AT NO.39 2ND CROSS, JAI MARUTHINAGAR NANDHINI LAYOUT BENGALURU - 560 096. ... RESPONDENT

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[BY SRI K.G. DEVARAJAIAH, ADVOCATE (ABSENT)]

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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.1024/2019 ON THE FILE OF THE XXVII A.C.M.M., BENGALURU, FOR THE OFFENCE P/U/S 138 OF N.I. ACT AS PER ANNEXURE-A.

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IN CRL.P. NO.4101 OF 2019

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BETWEEN:

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KHALEEL KHAN P. S/O. LATE BUDEN KHAN AGED ABOUT 56 YEARS WORKING AS PHARMACIST PRIMARY HEALTH CENTRE KALYADI KALYADI POST, JAVAGAL HOBLI ARSHIKERE TALUK HASSAN DISTRICT - 573 103 R/AT KHAN MANZIL, MUJAVAR MOHALA, 3RD CROSS, OPP. TIPPU STORE, ARASIKERE HASSAN DISTRICT - 573 103.

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... PETITIONER (BY SRI PRASANNA D.P., ADVOCATE)

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AND:

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SRI Y.M. JAYAKUMAR RAJU S/O. LATE MALLIKARJUNA RAJU AGED ABOUT 46 YEARS R/AT NO.817, KARUNA NIVAS 2ND CROSS, K.N. EXTENSION TRIVENI ROAD, YESHWANTHAPURA BENGALURU - 560 022. ... RESPONDENT [BY SRI K.G. DEVARAJAIAH, ADVOCATE (ABSENT)]

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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.4626/2019 ON THE FILE OF THE XII A.C.M.M., BENGALURU, FOR THE OFFENCE P/U/S 138 OF N.I. ACT AS PER ANNEXURE-A.

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THESE CRIMINAL PETITIONS COMING ON FOR FURTHER HEARING, THROUGH PHYSICAL HEARING/VIDEO CONFERENCING THIS DAY, THE COURT MADE THE FOLLOWING:

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O R D E R

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Crl.P.No.4098/2019 is filed under Section 482 of Cr.P.C. with a prayer to quash the proceedings in C.C. No.4074/2019 on the file of XIX Additional Chief Metropolitan Magistrate, Bangalore, Crl.P.No.4099/2019 is filed under Section 482 of Cr.P.C. with a prayer to quash the proceedings in C.C. No.1024/2019 on the file of XXVI Additional Chief Metropolitan Magistrate, Bengaluru and Crl.P.No.4101/2019 is filed under Section 482 of Cr.P.C. with a prayer to quash the proceedings in C.C. No.4626/2019 on the file of XII Additional Chief Metropolitan Magistrate, Bangalore, for the offence punishable under Section 138 of the Negotiable Instruments Act ('the Act' for short).

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The respondents herein have filed private complaints under Section 200 of Cr.P.C. against the petitioner for the offence punishable under Section 138 of the Act. The case of the respondents is that the petitioner herein represented

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to them that he is a very influential person and he is in a position to get them jobs in the health department provided they pay a certain amount to him. Accordingly, the respondents paid certain amounts to the petitioner. However, as the petitioner was not able to procure them jobs as promised they insisted for refund of the said amounts and accordingly, the petitioner has issued a Cheque for Rs.2,00,000/to the respondent in Crl.P.No.4098/2019, a Cheque for Rs.2,00,000/- to the respondent in Crl.P.No.4099/2019 and Cheques for Rs.4,00,000/and Rs.6,000/to the respondent in Crl.P.No.4101/2019. The said Cheques upon presentation have been dishonored by the Bank. Hence, the respondents have filed private complaints against the petitioner herein under Section 138 of the Act read with Section 200 of Cr.P.C. The learned Magistrates in all the three cases have taken cognizance of the offence under Section 138 of the Act and issued process to the petitioner herein. Aggrieved by the same, the instant criminal petitions are filed.

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The case of the petitioner is that he is not liable to pay any amount to the respondents as even presuming that the allegations made by the respondents are true, they do not constitute a legally enforceable debt and hence, he cannot be prosecuted for dishonor of the Cheques.

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Respondents, though served and represented by an Advocate, the Advocate has remained absent today.

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Section 138 of the Act reads as under:

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" 138. Dishonour of cheque for insufficiency,

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

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Thus, a person is guilty of dishonor of Cheque as contemplated under Section 138 of the Act only when the Cheque is issued in discharge of a legally enforceable debt or liability. The person shall not be guilty of an offence under Section 138 of the Act, if the debt is not legally enforceable.

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Admittedly, in the instant cases, the transaction between the petitioner and the respondents is that the respondents paid bribe amount to the petitioner to get them jobs in the health department by using his influence. When he failed to do so, they sought for refund of the amounts paid by them and in turn the petitioner has issued Cheques which have been dishonored.

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The question that arises for consideration in these petitions is whether the debt is legally enforceable or not.

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Section 23 of the Indian Contract Act, 1872 ('the Contract Act' for short) reads as under:

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” 23. What consideration and objects are

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lawful, and what not. —The consideration or object of an agreement is lawful, unless —

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it is forbidden by law; or

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is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or

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involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.

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In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void."

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Further, Sections 2(g) and 2(h) of the Contract Act

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read as under:

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"2(g) An agreement not enforceable by law is said to be void;

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2(h) An agreement enforceable by law is a contract;"

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Thus, in the instant cases, as the agreement between

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the petitioner and the respondents is one for illegal purposes, the same is void and not enforceable in law.

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However, Section 65 of the Indian Contract Act reads as under:

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" 65. Obligation of person who has received advantage under void agreement, or contract that becomes void. —When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it."

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Under the said circumstances, the only aspect to be considered is that though it is a void contract, whether the liability of the petitioner is a legally enforceable debt or not.

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The Hon'ble Supreme Court of India in KUJU

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GOLLIERIES LTD., vs. JHARKHAND MINES LTD., AND

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OTHERS reported in AIR 1974 SC 1892 in paragraph No.6 has held as under:

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"6. We are of the view that Section 65 of the Contract Act cannot help the plaintiff on the facts and circumstances of this case. Section 65 reads as follows:-

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"When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement

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or contract is bound to restore it, or to make compensation for it to the person from whom he received it".

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The section makes a distinction between an agreement and a contract. According to Section 2 of the Contract Act an agreement which is enforceable by law is a contract and an agreement which is not enforceable by law is said to be void. Therefore, when the earlier part of the section speaks of an agreement being discovered to be void it means that the agreement is not enforceable and it, therefore, not a contract. It means that it was void. It may be that the parties or one of the parties to the agreement may not have, when they entered into the agreement, known that the agreement was in law not enforceable. They might have come to know later that the agreement was not enforceable. The second part of the section refers to a contract becoming void. That refers to a case where an agreement which was originally enforceable and was, therefore, a contract, becomes void due to subsequent happenings. In both these cases any person who has received any advantage under such agreement or contract is bound to restore such advantage, or to make compensation for it to the person from whom he received it. But where even at the time when the agreement is entered into both the parties knew that it was not lawful and, therefore, void, there was no contract but only an

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agreement and it is not a case where it is discovered to be void subsequently. Nor is it a case of the contract becoming void due to subsequent happenings. Therefore, section 65 of the Contract Act did not apply."

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The agreements between the petitioner and the respondents are wherein all of them knew that the agreements were void when they were entering into it as the same were being entered into for illegal purpose and it is not a case where it was later discovered that the agreements were void or that the contract at a subsequent date became void. Under the said circumstances, as per the law laid down by the Hon'ble Supreme Court in the aforementioned decision, the respondents are not entitled to claim return of the advantage received by the petitioner herein. For the said reason, the debt owed by the petitioner to the respondents cannot be considered as a legally enforceable debt and the petitioner cannot be held guilty of offence punishable under Section 138 of the Act even if the allegations made in the complaints by the respondents are considered to be true.

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For the aforementioned reasons, the petitions are allowed and the proceedings in C.C. No.4074/2019 on the file of XIX Additional Chief Metropolitan Magistrate, Bangalore, C.C. No.1024/2019 on the file of XXVI Additional Chief Metropolitan Magistrate, Bengaluru and C.C. No.4626/2019 on the file of XII Additional Chief Metropolitan Magistrate, Bangalore, against the petitioner herein are hereby set aside.

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Sd/JUDGE

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hkh.

Khaleel Khan P v. Sunil Kumar G C

Case brief

What is this about?

What did the court decide?

Khaleel Khan P v. Sunil Kumar G C

Case brief

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