Allowed

Sri. G Jayadevappa v. Sri. Shankar Murthy H C

Karnataka HC7 Dec 2023CRL.A/1298/2019

Case brief

AI extract

What is this about?

The High Court allowed three criminal appeals filed by the complainant against a Criminal Court judgment acquitting the accused of cheque dishonor. Finding the trial court's acquittal perverse due to failure to draw mandatory presumptions under Section 139, the High Court convicted the accused and imposed substantial fines.

What did the court decide?

Impugned acquittals set aside; accused convicted and sentenced to pay fines aggregating Rs.14,80,000 or undergo imprisonment; records remanded to trial court for execution.

Sri. G Jayadevappa Vs Sri. Shankar Murthy H C — Cheque Dishonour | Karnataka HC (2023)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 7^TH DAY OF DECEMBER, 2023

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BEFORE

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THE HON'BLE MR JUSTICE RAJENDRA BADAMIKAR

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CRIMINAL APPEAL NO. 1298 OF 2019

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C/W

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CRIMINAL APPEAL NO. 1414 OF 2021 CRIMINAL APPEAL NO. 1415 OF 2021 IN CRL.A.NO. 1298 OF 2019

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BETWEEN:

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SRI. G. JAYADEVAPPA, AGED ABOUT 74 YEARS, S/O LATE SRI. SHEKARAPPA, RESIDING AT SRI. PAMPA NILAYA, JAYADEVA COMPLEX, NEAR JAIL CIRCLE, DURGIGUDI MAIN ROAD, SHIVAMOGGA - 577 201.

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…APPELLANT

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Digitally (BY SRI. C.N. KAMATH, ADVOCATE) signed by SOWMYA D AND: Location: High Court SRI. SHANKAR MURTHY H. C, of AGED ABOUT 40 YEARS, Karnataka S/O OF SRI. H.D. CHANDRAPPA, STOCK N SHARES, HSBC INVEST DIRECT NO.15, 1ST FLOOR, BASAVA SADANA SHIVAMOGGA CITY, SHIVAMOGGA - 577 201.

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…RESPONDENT

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(BY SRI. SACHIN B.S., ADVOCATE)

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THIS CRL.A. IS FILED U/S.378(4) OF CR.P.C PRAYING TO SET ASIDE THE JUDGMENT DATED 20.04.2019, PASSED BY THE III ADDITIONAL CIVIL JUDGE AND J.M.F.C., SHIVAMOGGA IN C.C.NO.3/2011, C.C.NO.3217/2011 AND C.C.NO.205/2012, ACQUITTING THE RESPONDENTS/ACCUSED FOR THE OFFENCE P/U/S 138 OF THE N.I ACT.

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IN CRL.A.NO. 1414 OF 2021

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BETWEEN:

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SRI. G. JAYADEVAPPA, AGED ABOUT 74 YEARS, S/O LATE SRI. SHEKARAPPA, RESIDING AT SRI. PAMPA NILAYA, JAYADEVA COMPLEX, NEAR JAIL CIRCLE, DURGIGUDI MAIN ROAD, SHIVAMOGGA - 577 201.

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…APPELLANT

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(BY SRI. C.N. KAMATH, ADVOCATE)

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AND:

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SRI. SHANKAR MURTHY .H. C, AGED ABOUT 49 YEARS, S/O OF SRI. H.D. CHANDRAPPA, STOCK N SHARES, HSBC INVEST DIRECT NO.15, 1ST FLOOR, BASAVA SADANA SHIVAMOGGA CITY, SHIVAMOGGA - 577 201.

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…RESPONDENT

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(BY SRI. SACHIN B.S., ADVOCATE)

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THIS CRL.A. IS FILED U/S.378(4) OF CR.P.C PRAYING TO SET ASIDE THE JUDGMENT DATED 20.04.2019, MADE IN C.C.NO.3217/2011 ON THE FILE OF III ADDIONAL CIVIL JUDGE AND J.M.F.C., SHIVAMOGGA - ACQUITTING THE RESPONDENT/ ACCUSED FOR THE OFFENCE P/U/S 138 OF N.I ACT.

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IN CRL.A.NO. 1415 OF 2021

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BETWEEN:

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SRI. G. JAYADEVAPPA, AGED 74 YEARS, S/O LATE SRI SHEKARAPPA, RESIDING AT SRI. PAMPA NILAYA, JAYADEVA COMPLEX, NEAR JAIL CIRCLE, DURGIGUDI MAIN ROAD, SHIVAMOGGA : 577 201.

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…APPELLANT

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(BY SRI. C.N. KAMATH., ADVOCATE)

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AND:

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SRI. SHANKAR MURTHY H.C, AGED ABOUT 49 YEARS, S/O OF SRI. H. D. CHANDRAPPA, STOCK N SHARES, HSBC INVEST DIRECT NO.15, 1ST FLOOR, BASAVA SADANA SHIVAMOGGA CITY, SHIVAMOGGA : 577 201.

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…RESPONDENT

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(BY SRI.SACHIN.B.S., ADVOCATE)

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THIS CRL.A. IS FILED U/S.378(4) OF CR.P.C PRAYING TO SET ASIDE THE COMMON JUDGMENT DATED 20.04.2019, MADE IN C.C.NO.205/2012 ON THE FILE OF III ADDIONAL CIVIL JUDGE AND J.M.F.C AT SHIVAMOGGA, ACQUITTING THE RESPONDENTS/ACCUSED FOR THE OFFENCE P/U/S 138 OF THE N.I ACT.

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THESE APPEALS, COMING ON FOR DICTATING JUDGMENT, THIS DAY, THE COURT DELIVERED THE FOLLOWING:

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JUDGMENT

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These appeals are filed by the appellant/complainant under Section 378(4) of Cr.P.C., challenging the judgment of acquittal passed by III Additional Civil Judge and JMFC at Shivamogga in CC No.03/2011, CC No.3217/2011 and CC No.205/2012 vide order dated 20.04.2019.

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For the sake of convenience, the parties herein are referred with the original ranks occupied by them before the Trial Court.

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The brief factual matrix leading to the case are as under:

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The complainant is a trading customer with the accused franchise. He has invested a sum of Rs.15,00,000/for the purchase of shares and commodities. The accused is a proprietor of the franchise, has traded in the shares/commodities utilizing the money invested by the complainant without the permission of the complainant. The accused utilized the money of the complainant from his D.P. account. When this fact came to

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the knowledge of the complainant, he questioned the accused and the accused conceded this act and agreed to pay a sum of Rs.15,00,000/- to the complainant. It is further alleged that he has issued 3 cheques bearing No.116237, 116236 and 116235 of Indian Overseas Bank, Shivamogga, for a sum of Rs.1,40,000/-, Rs.1,52,000/and Rs.5,00,000/- respectively towards repayment of the said amount. When the complainant presented these cheques for encashment, all 3 cheques were returned with an endorsement as 'insufficient of funds'.

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Then the complainant has got issued a legal

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notice and accused did not respond to the legal notice. As such, the complainant lodged a complaint before the learned Magistrate under Section 200 of Cr.P.C., alleging that the accused has committed an offence under Section 138 of the Negotiable Instruments Act, 1881 (for short ‘N.I. Act’).

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The learned Magistrate has recorded the sworn statement of complainant. After verification of the

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documentary evidence, he has issued a process against

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the accused after taking cognizance of the offence.

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The accused appeared through his counsel in all the 3 matters and he was enlarged on bail. The plea under Section 138 of the N.I Act was recorded in each case independently and accused denied the same.

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Thereafter, since all these matters are between

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the same parties and arising out of the same transaction, they are clubbed together and common evidence was led. The complainant got himself examined as PW1 and he placed reliance on 37 documents marked at Ex.P1 to Ex.P37.

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After the conclusion of evidence of the complainant, the statement of accused under Section 313 of Cr.P.C is recorded to enable the accused to explain the incriminating evidence appearing against him in the case of the complainant. The case of accused is of total denial.

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The accused in his 313 Cr.P.C. statement did not specify any defence.

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Learned Magistrate after hearing the arguments

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and after appreciating the oral and documentary evidence has acquitted the accused for the offence punishable under Section 138 of N.I. Act, mainly on the ground that the accused is not proved to be agent of the firm and no steps were taken against the agent and he has not produced relevant documents to prove transfer of amount to the account of the accused.

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Being aggrieved by the judgment of acquittal, the complainant is before this Court by way of these appeals.

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Heard the arguments advanced by the learned counsel for appellant and the learned counsel for respondent. Perused the records.

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Learned counsel for appellant would submit that

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the accused is an agent of the company and he has

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received the amount of Rs.15,00,000/from the complainant for purchase of shares and he was dealing with the demat account of the complainant. He would further assert that the accused has misused the amount without knowledge of the complainant by playing fraud on the complainant by investing the same in other investments and when complainant got knowledge of these aspects, he demanded the amount and in this regard, these disputed cheques were issued. He would also assert that the accused is the proprietor of Stock-NShares and he was dealing on behalf of IL & FS Investsmart, which was subsequently taken over by HSBC investment.

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He would further assert that the complainant has paid the amount by way of cash and cheque and receipts were issued by accused. It is his contention that the fraud is played by the accused in his individual capacity for having misappropriated the amount and therefore, in his Individual capacity, he has issued the

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cheques and question of he approaching the company does not arise at all. He would also assert that the cheques belong to the accused and they bear the signature of accused are undisputed facts and therefore, the presumption under Section 139 of the N.I. Act that the cheques were issued towards legally enforceable debt shall

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be drawn. But accused has not rebutted the said presumption except putting forward a defence which he has failed to prove. Alternatively, he would also assert that the bank statements regarding transfer of the amount to the account of the accused are being now applied and they would be produced in due course and hence, he seeks time to produce these documents by seeking adjournment.

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The learned counsel for respondent would contend that in the entire complaint there is no specific pleading as to how the amount was misappropriated. He would also assert that the signatures on the receipts produced at Ex.P7 to Ex.P27 are in the name of Sanjay Nayak, but not in the name of accused and hence, he

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would assert that the amount is required to be demanded from the company by way of reimbursement. As such, he would contend that the complainant has failed to establish a legally enforceable debt and the learned Magistrate has properly appreciated the oral and documentary evidence in proper perspective and has rightly acquitted the accused. Hence, he would contend that no perversity is found in the judgment of acquittal so as to call for any interference by this Court. As such, he would seek for dismissal of all the appeals.

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Having heard the arguments and after perusing the oral and documentary evidence, now the following point would arise for my consideration:

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“ Whether the judgment of acquittal in C.C. No.03/2011, CC No.3217/2011 and CC No.205/2012 passed by the trial Court is perverse and arbitrary so as to call for any interference by this Court.”

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There is no serious dispute of the fact that the complainant is a trading customer of IL & FS investsmart. It is also not under serious dispute that subsequently, the

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said company was taken over by HSBC Investments. It is the specific assertion of the complainant that accused is a franchise of the said company and he has invested a sum of Rs.15,00,000/- for purchase of the shares and accused misused the said amount through his demat account and in this regard, he conceding his illegal act, issued the cheques for Rs.1,40,000/-, Rs.1,52,000/and Rs.5,00,000/- towards part payment. It is also admitted fact that the complainant has also filed a civil suit for recovery of the said amount against accused and his wife. But the Civil remedy and criminal remedies are different and filing of civil suit does not bar the complainant from initiating criminal action.

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These disputed cheques are produced at Ex.P1 in all the three cases independently. It is the specific contention of the complainant that initially accused has issued the cheques for the said amount and subsequently, he withdrew the said cheques and issued these disputed cheques on 31/01/2010. The cancelled cheques are also

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produced by the complainant at Ex.P29 to Ex.P31. The accused has not disputed Ex.P1 or Ex.P29 to Ex.P31 that they belong to his account and they bear his signatures. Accused has not even explained as to why the earlier cheques were cancelled and subsequent cheques were issued under Ex.P1 in all the three matters. However, the complainant has specifically assigned reasons for cancellation of the earlier cheques and issuance of subsequent cheques.

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When the cheque belongs to the account of the accused and it bears the signature of the accused, then drawing presumption under Section 139 of the N.I. act is mandatory. Section 139 of the N.I. Act reads as under:

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“[139. 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 the discharge, in whole or in part, of any debt or other liability.]”

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In Section 139 of the N.I. Act the wording used

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is ‘shall’ and not ‘may’ and when the word ‘shall’ is used there is no option but it is mandatory to draw presumption

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that the cheque was issued towards legally enforceable debt or liability towards discharge in whole or in part of any such debt or other liability. As such, the initial presumption is in favour of the complainant that these cheques under Ex.P1 in all the three cases were issued towards legally enforceable liability. No doubt the said presumption is a rebutablle presumption and it is for the accused to rebut the said presumption on the basis of Preponderance of probability. The accused can rebut presumption by raising defence, by way of crossexamination or by producing relevant documents.

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However, in the instant case, the statement of accused under Section 313 Cr.P.C. was recorded and he has not explained anything about this transaction as asserted and his case was of simple and total denial. He did not put forward any specific defence, which he has asserted in the cross-examination of PW1 regarding the issuance of cheque towards occupation of the property of complainant and the furniture thereunder, but a

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suggestion was that when the joint family members did not accept it, the said cheques were cancelled. However, the said suggestion came to be denied by the complainant. Even if this defence is accepted to be true and correct regarding cancellation of the cheques, it holds good for Ex.P29 to Ex.P31, but accused has not explained as to how

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the cheques under Ex.P1 in all the three cases came in possession of the complainant and why he issued these cheques after cancellation of cheques under Ex.P29 to Ex.P31. Absolutely no explanation was offered by the complainant in this regard.

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Much cross-examination of PW1 was regarding payment by way of cheque and said payment being shown in bank statement, which is not produced. No doubt, the complainant has not produced the bank statement but the onus shifts on him only when accused rebuts the presumption under Section 139 of the N.I. Act available in favour of complainant. But in the instant case, accused has not at all rebutted the presumption as to by giving any

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plausible explanation as to how the cheques under Ex.P1 came in possession of complainant. The entire crossexamination of PW1 is silent in this regard.

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The learned Magistrate has given undue importance to these aspects and fail to consider the fact that accused has no defence at all and in the absence of any specific defence regarding issuance of cheque under Ex.P1, question of rebutting presumption does not arise at all. The learned Magistrate has much discussed regarding demat account and trading account and sale of the shares to be made from demat account and amount being credited to trading account etc., but it is the specific contention of the complainant that his demat account is being operated by the accused.

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The Other contention raised by the accused is that he is not an agent of IL & FS Investsmart. The accused has disputed the fact that he was a franchise and receipt of amount on behalf of complainant towards purchase of the shares, but he did not explain how the

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cheques under Ex.P1 came in possession of the complainant. Interestingly, during the cross-examination of PW1 dated 16.03.2017, a suggestion was made to complainant asserting that H.C.Chandana i.e., wife of the accused is a sub-broker in HSBC.

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In this regard Ex.P74 is also a relevant document wherein there is specific reference that accused had obtained a tenament belonging to Sri Basaveshwara Veerashaiva Samaja Seva Sanga (R.) for running stock and share franchise and he has also dealt in the name of IL & FS franchise. Ex.P35 is a copy of the letter submitted by the accused to the administrator of the said Seva Sanga wherein he has specifically asserted that he was forced to join hands as franchise with strong company M/s. IL & FS investsmart (India) Ltd., a subsidiary to IL & FS Ltd., which is promoted by SBI, HDFC, UTI, Central Bank of India and others. Under Ex.P35 the accused has sought renovation of his office in view of getting franchise from the above said companies. Ex.P34 and Ex.P35 are

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not specifically denied and signatures were not even disputed. These documents clearly disclose that accused was dealing as a franchise. No doubt Ex.P7 to Ex.P28 do not disclose the signature of the accused, but the fact remains that accused was a franchise and the receipts were issued on behalf of the franchise. But at the same time, relevancy is that accused has nowhere explained under what transactions Ex.P1 in all the three cases which are the disputed cheques came to be issued. In the absence of giving any proper explanation or leading any cogent evidence in this regard it cannot be presumed that accused has rebutted the presumption available in favour of the complainant. Though the learned Magistrate has considered the decision of (2019) 5 SCC 418

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[ BASALINGAPPA vs. MUDIBASAPPA], but it has not appreciated the principles enumerated thereunder in proper perspective. Mere denial or taking defence cannot be termed as a rebuttal and accused never explained how the disputed cheques belonging to him came in possession of complainant and for what purpose he has issued these

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cheques. Though he tried to give a lame excuse regarding initially issuance of cheque and cancellation, that is not even substantiated before the Court. Even otherwise, that may be appropriate pertaining to Ex.P29 to Ex.P39, but it does not explain regarding Ex.P1 in all the three matters.

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As regards rebuttal the Hon’ble Apex Court has laid down certain guidelines in the decision reported in 2023 (10) SCC 148 [ RAJESH JAIN V/S AJAY SINGH ] and

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2023 LiveLaw (SC) 46 [ RAJARAM S/O SRIRAMULU NAIDU (SINCE DECEASED) THROUGH LRS VS. MARUTHACHALAM (SINCE DECEASED) THROUGH LRS] .

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These guidelines were not followed by the accused and the learned Magistrate has failed to appreciate any of these aspects in proper perspective and without there being any evidence on record, he went on considering the demat account and trading account etc., ignoring the fact that cheques and signature have been admitted and there is no explanation regarding return of issuance of these cheques on behalf of the accused. As observed above, the 313

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Cr.P.C. statement of the accused is also silent. Even the legal notice issued to the accused was not served, but it was issued to the last known address and it is returned as not claimed. In that event, the burden shifts on accused to give explanation as to non reply of notice. Even after appearance before the learned Magistrate, he did not bother to give any proper explanation regarding issuance of notice or for not claiming the notice. He did not enter into the witness box though it is not mandatory for him. But considering the cross-examination, it is evident that he has not rebutted the presumption available in favour of complainant regarding Ex.P1 in all the three matters. When the presumption is not rebutted, the question of seeking production of bank statement from the complainant does not arise at all as onus never shifted on the complainant.

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Looking to these facts and circumstances of the case, it is evident from the records that the learned Magistrate has failed to appreciate the oral and

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documentary evidence in proper perspective and the judgment of acquittal suffers from perversity. As such, the judgment of acquittal passed in all the three matters calls for interference.

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There is no dispute of the fact that the cheques were bounced and legal notice was issued in time and all technical compliances were duly met. Hence, there is material evidence on record to prove that accused has committed an offence under Section 138 of the N.I. Act. As such, he is required to be convicted for the said offence.

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The offence under Section 138 of the N.I. Act is punishable with imprisonment for a term which may extend to 2 years or with fine which may extend the twice the amount of the cheque or both. Admittedly, in the instant case, all other legal requirements as provided under the proviso to Section 138 of the N.I. Act have been complied with and there is no dispute of this aspect.

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In C.C.No.3/2011 the cheque is for the amount of Rs.1,40,000/-. The transaction is of the year 2010. The accused without specifying any specific defence went on taking untenable defence. This is not a case wherein the sentence of imprisonment is warranted. However, considering that the transaction is old transaction, in my considered opinion, it is just and proper to impose fine of double he cheque amount to the accused i.e., Rs.2,80,000/- and in default he is required to undergo simple imprisonment for a period of 6 months.

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As regards C.C.No.3217/2011 the cheque is for the amount Rs.1,52,000/- the transaction is of the year 2010. The accused without specifying any specific defence went on taking untenable defence. This is not a case wherein the sentence of imprisonment can be imposed. However, considering that the transaction is old transaction, in my considered opinion, it is just and proper to impose heavy fine to the accused i.e., Rs.3,00,000/-

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and in default he is required to undergo simple imprisonment for a period of 6 months.

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As regards C.C.No.204/2012 the cheque is for the amount Rs.5,00,000/- and the transaction is of the year 2010. The accused without specifying any specific defence, went on taking untenable defence. This is not a case wherein the sentence of imprisonment is warranted. However, considering that the transaction is old transaction, in my considered opinion, it is just and proper to impose heavy fine to the accused i.e., Rs.9,00,000/and in default he is required to undergo simple imprisonment for a period of one year.

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In view of these facts and circumstances, all the appeals need to be allowed and as such, the point under consideration is answered in the affirmative. Accordingly, I proceed to pass the following:

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ORDER

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(i) Crl.A.No.1298/2019, Crl.A.No.1414/2021 and Crl.A.No.1415/2021 are allowed.

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(ii) The impugned judgment of acquittal passed by the III Additional JMFC Shivamogga, in C.C.No.3/2011, C.C.No.3217/2011 and C.C.No.205/2012, are set aside.

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(iii) The accused-respondent herein is convicted in all these C.C.No.3/2011, C.C.No.3217/2011 and C.C.No.205/2012 for the offence punishable under Section 138 of the N.I. Act.

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(iv) In C.C.No.3/2011 the accused is convicted and sentenced to pay a fine of Rs.2,80,000/- in default he is to undergo simple imprisonment for a period of 6 months. Out of the fine amount, Rs.2,60,000/- shall be paid to the complainant by way of compensation under Section 357 of Cr.P.C. and balance Rs.20,000/shall be credited to the State account towards the cost of the litigation incurred by the state.

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(v) In C.C.No.3217/2011 the accused is convicted and sentenced to pay a fine of Rs.3,00,000/- in default he is to undergo simple imprisonment for a period of 6 months. Out of the fine amount, Rs.2,75,000/- shall be paid to the complainant by way of compensation under Section 357 of Cr.P.C. and balance Rs.25,000/shall be credited to the State account towards the cost of the litigation incurred by the state.

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(vi) In C.C.No.205/2012 the accused is convicted and sentenced to pay a fine of Rs.9,00,000/- in default he is to undergo simple imprisonment for a period of one year. Out of the fine amount, Rs.8,75,000/- shall be paid to the complainant by way of compensation under Section 357 of Cr.P.C. and balance Rs.25,000/shall be credited to the State account towards the cost of the litigation incurred by the state.

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(vii) All the default sentences shall run independently.

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(viii) Original judgment shall be kept in Crl.A.No.1298/2019 and copies there off in other two appeals.

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(ix) Send back the records to the trial Court alongwith copy of this Judgment with a direction to the learned Magistrate to secure the presence of the accused for collection of the fine amount.

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Sd/- JUDGE

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RAK, DS

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List No.: 1 Sl No.: 15

Sri. G Jayadevappa v. Sri. Shankar Murthy H C

Case brief

What is this about?

What did the court decide?

Sri. G Jayadevappa v. Sri. Shankar Murthy H C

Case brief

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What the court decided

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