Dismissed

Mitra Finance (R) v. Vasanth Naik

Karnataka HC12 Sept 2023CRL.A/913/2010

Case brief

AI extract

What is this about?

The High Court set aside the conviction of accused persons in a cheque bounce case. Although the appeal was dismissed on the ground of maintainability, the court independently found that the accused rebutted the statutory presumption by proving the cheque was issued for an earlier transaction. The accusers had relied on the firm being closed to prove bad faith, and the complainant failed to accoun

What did the court decide?

The appeal filed by the complainant was dismissed, and the impugned order setting aside conviction by the Fast Track Judge was confirmed.

Mitra Finance (R) Vs Vasanth Naik — Cheque Dishonour | Karnataka HC (2023)

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CRL. A NO.913 OF 2010

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 12^TH DAY OF SEPTEMBER, 2023

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BEFORE

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THE HON'BLE MS.JUSTICE J.M.KHAZI

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CRIMINAL APPEAL NO.913 OF 2010

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BETWEEN:

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MITRA FINANCE (R) MITRA PRIYA, OLD POST OFFICE ROAD, UDUPI - 576 101, REPRESENTED BY MANAGING PARTNER, N.ACHUTHA HOLLA.

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…APPELLANT

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(BY SRI. S K ACHARYA, ADVOCATE)

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AND:

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1 . VASANTH NAIK, AGED 58 YEARS, S/O CHANDU NAIK, R/A SHANKAR BUILDING, UDUPI TALUK AND DISTRICT.

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2 . V S C HOLLA,

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AGED ABOUT 50 YEARS, S/O LATE V S HOLLA, "JALAJA NIVAS", GUNDIBAIL, UDUPI TALUK.

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…..RESPONDENTS

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(BY KUM. THANIMA BEKAL, ADVOCATE FOR SRI. T.HAREESH BHANDARY, ADVOCATE)

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THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) OF CODE OF CRIMINAL PROCEDURE PRAYING TO ALLOW THE CRIMINAL APPEAL BY SETTING ASIDE THE JUDGMENT DATED 11.01.2010 PASSED IN CRIMINAL APPEAL NO.11 AND 13 OF

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CRL. A NO.913 OF 2010

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2007, ON THE FILE OF THE COURT OF THE FAST TRACK JUDGE, UDUPI DISTRICT, UDUPI AND TO CONFIRM THE JUDGMENT DATED 30.12.2006, PASSED IN C.C.NO.2148/1999, ON THE FILE OF THE COURT OF THE I ADDL. CIVIL JUDGE (JR. DN.) AND JMFC, UDUPI, IN THE INTEREST OF JUSTICE.

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THIS CRIMINAL APPEAL HAVING BEEN HEARD AND RESERVED ON 20.06.2023, COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, THE COURT DELIVERED THE FOLLOWING:

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JUDGEMENT

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This appeal is by the complainant, a

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partnership firm engaged in money lending business, challenging the impugned judgment and order passed by the Sessions Court, allowing the appeals filed by accused challenging their conviction and sentence by the Trial Court for the offence punishable under Section 138 of Negotiable Instrument Act.

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For the sake of convenience, the parties are referred to by their rank before the Trial Court.

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It is the case of the complainant that it is a registered partnership firm carrying on business of money lending. It is represented by Shri Sudhakar Andrews being the General Power of Attorney holder of

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CRL. A NO.913 OF 2010

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Managing Partner Shri N .Achutha Holla. The accused are in charge and control of the affairs of M/s.Sri Krishna Combines, a partnership firm represented by its partners i.e., accused No.2-Vasanth Naik and accused No.3V.S.C.Holla .They are the persons responsible for daytoday business transaction of accused No.1-Firm.

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3.1. On 25.6.1993, accused Nos.2 and 3 have borrowed loan of Rs.50,000/- agreeing to repay the same with interest at 23% per annum within a period of one month. They have executed an on demand promissory note as principal borrower and guarantor respectively. But they failed to keep up with their promise and on 30.3.1996, have executed acknowledgement of debt letter. In this regard, on 17.11.1998, accused Nos.2 and 3 have issued cheque of accused No.1–Firm for a sum of Rs.1,12,131/- towards repayment of the amount due. However, when presented for repayment, it was dishonoured on the ground that the “account is closed”.

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The complainant got issued a legal notice, calling upon them to pay the amount due. Though it is duly served,

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CRL. A NO.913 OF 2010

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the accused have failed to comply with the same, and on the other hand have sent an evasive reply. Without any alternative, the complaint is filed.

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After due service of summons, accused appeared before the Trial Court and contested the case. They pleaded not guilty and claimed trial.

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In order to prove the allegations against the accused, one witness is examined as PW1 and Exs.P1 to 21 are marked. During the course of the statement under Section 313 Cr.P.C., the accused have denied the incriminating evidence.

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Accused have not lead any defence evidence.

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Vide Judgment and order dated 30.12.2006, the Trial Court convicted the accused and sentenced accused Nos.2 and 3 to undergo simple imprisonment for one month and pay fine of Rs.1,25,000/- in default to undergo simple imprisonment for three months.

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Being aggrieved by the same, accused Nos.2

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and 3 filed appeals before the Sessions Court. Vide the

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CRL. A NO.913 OF 2010

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impugned judgment and order, the Sessions Court has allowed the appeals filed by accused Nos.2 and 3 and acquitted them.

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Being aggrieved by the same, complainant is before this Court contending that the impugned judgment and order of the Sessions Court is wholly improper and illegal. The accused have not lead any evidence to discharge the burden placed on them and this fact is not appreciated by the Sessions Court. It has erred in holding that PW1-Achutha Holla was not competent person to represent the complainant-Firm, especially when the accused have not disputed his competence to file the complaint. Being aware of the transaction, he was competent to speak about the same. There are no justifiable grounds for the Sessions Court to interfere with the same and reverse a well reasoned judgment of the Trial Court and prays to allow appeal and confirm the judgment and order of Trial Court.

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CRL. A NO.913 OF 2010

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In support of his arguments, learned counsel

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representing the complainant has relied upon the following decisions:

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i. M/s.TRL Krosaki Refractorise Ltd. Vs.M/s.SMS Asia Private Limited and Another¹ ( M/s.TRL Krosaki )

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ii. S.C.Narayanan Vs.State of Maharashtra and Anr² ( S.C.Narayanan )

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iii. Mita India Pvt.Ltd. Vs.Mahendra Jain³ ( Mita India )

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iv. Amaresh Vs.Shivakumar⁴ ( Amaresh )

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On the other hand, the learned counsel for

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accused supported the impugned judgment and order and prays to dismiss the appeal.

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In support of the defence of the accused, the

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learned counsel representing them has relied upon the following decisions.

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1 2022 (1) Kar.L.R.543 (SC)

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2 AIR 2014 SC 630

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3 II (2023) BC 227 (SC)

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4 II (2023) BC 114 (Kar.)

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CRL. A NO.913 OF 2010

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i. Om Shakthi SC/ST and Minority Credit Cooperative Society Ltd. Vs.M.Venkatesh⁵ ( Om Shakthi )

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ii. S.C.Narayanan Vs.State of Maharashtra and Anr⁶ ( S.C.Narayanan )

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iii. M.K.Basheer Vs.State of Kerala & another⁷ ( M.K.Basheer )

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Heard arguments and perused the record.

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Thus accused are being prosecuted on the

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allegations that having borrowed loan of Rs.50,000/-, they have agreed to repay the same with interest and in this regard, in their capacity as the principal borrower and guarantor, accused Nos.2 and 3 have executed acknowledgement of debt letter and ultimately chosen to issue cheque in question towards payment of principal and interest. However, when presented for encashment, it was dishonoured on the ground that account is closed. Therefore, after issuing notice and complying with all the formalities, complaint is filed.

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5 2008(1) AIR Kar R 311

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6 AIR 2014 SC 630

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7 2016 ACD 856 (KER)

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CRL. A NO.913 OF 2010

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In the reply notice, both accused Nos.2 and 3 have disputed that they have borrowed Rs.50,000/- and have agreed to repay the same with interest and they have executed acknowledgement of debt and finally issued the subject checque towards repayment of the said loan. On the other hand, they have taken up a specific defence that the accused No.1-Firm was closed even before 24.02.1995 and misusing the cheque issued in respect of earlier loan transaction, accused have chosen to file a false complaint.

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The accused Nos.2 and 3 have not disputed the fact that they are the partners of accused No.1-Firm, by name Sri Krishna Combines and the subject cheque at Ex.P5 belongs to the said Firm. Though during the course of his cross-examination, PW1-Achutha Holla has stated that the loan in question was borrowed by accused Nos.2 and 3 in their individual capacity, the demand promissory note indicate that the loan was borrowed in their capacity

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as the partners of accused No.1-Firm. The cheque in question is also of accused No.1-Firm. Therefore, it could

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CRL. A NO.913 OF 2010

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be safely held that the alleged loan was borrowed for and on behalf of accused No.1-Firm.

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When the cheque in question belongs to accused No.1-Firm and it bears the signature of accused Nos.2 and 3 and it is drawn on the account of the Firm maintained with the Banker, presumption under Section 139 of Negotiable Instruments Act is attracted and it is obligatory to draw a presumption that the cheque in question is issued towards legally recoverable debt or liability. Therefore the burden is on the accused to rebut the presumption and to establish the circumstances in which the cheque in question reached the hands of the complainant-Firm. Only when the accused rebut the presumption, the burden would shift on the complainant to prove its case. Of course it is sufficient for the accused to discharge the burden by preponderance of probabilities, whereas it is for the complainant to prove its case beyond reasonable doubt.

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Ex.P1 is the loan application. It contains space

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for noting previous loan particulars. The complainant has

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CRL. A NO.913 OF 2010

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not chosen to fill this portion to indicate whether accused have previously borrowed any loan and whether any amount was due. In fact, the accused have crossexamined PW1 on this aspect, wherein he has stated that it is left to the will of the complainant to fill the same. This fact assumes importance as the accused have taken up a specific defence that the cheque in question was issued while borrowing earlier loan and it is being misused and presented by the complainant.

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In order to prove that earlier accused had borrowed loan from the complainant, PW1 has been cross-examined. He has admitted that on 26.12.1991, accused have paid Rs.50,000/- to the complainant through cheque number 110417. This payment is earlier to the present loan transaction which is disputed by the accused. PW1 has also admitted that on 11.02.1994, 04.03.1994 and 04.03.1994, the accused have paid Rs.25,000/- each to complainant-Firm. However, PW1

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has not explained and accounted these payments in a sum of Rs.1,25,000/-. The complainant has also not

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CRL. A NO.913 OF 2010

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produced the account extract to show towards which liability, these payments have been adjusted.

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In the absence of any explanation from the complainant, it goes without saying that these payments especially Rs.50,000/- on 26.12.1991 were made in respect of earlier transaction between the complainant and accused persons. It is not the case of complainant that Rs.25,000/- each paid twice on 04.03.1994 is in respect of present transaction.

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In the absence of the complainant producing documents with regard to the earlier transaction, the contention of accused that the cheque in question was issued in respect of earlier transaction and misusing the same the present complaint is filed, is to be accepted. By this evidence, the accused have rebutted the presumption under Section 139 of N.I.Act by preponderance of probabilities, throwing the burden on the complainant to prove the alleged transaction between the complainant and accused.

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CRL. A NO.913 OF 2010

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In addition to denying the transaction, the accused have also disputed the competency of one Sudhakar Andrew to file the complaint. In this regard, the complainant has contended that the said Sudhakar Andrew was an employee of complainant-Firm and he was the General Power of Attorney holder of the Managing Partner PW1-Achutha Holla and in that capacity, he has filed the complaint. In fact, the complainant has produced the General Power of Attorney at Ex.P18, whereby PW1-Achutha Holla has given him the Power of Attorney to file complaint etc.,

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Ex.P16 is the partnership deed, which revealed that PW1-Achutha Holla is the Managing Partner. Though the complaint is filed through the GPA holder-Sudhakar Andrew, during evidence the Managing Partner-Achutha Holla has chosen to step into the witness box on the ground that Sudhakar Andrew has left the job. During his cross-examination PW1-Achutha Holla

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has deposed that there is resolution passed by the partners authorizing him to issue General Power of

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CRL. A NO.913 OF 2010

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Attorney in favour of others for the date today work of the Firm. However the said resolution is not produced. As held in Om Shakthi and M.K.Basheer , the absence of such authorization, the complainant has failed to prove that Sudhakar Andrew was authorized by the complainant-Firm to file the complaint. Though in the complaint, it is averred that the power of attorney holder in his capacity as the accountant of the complainant-Firm has knowledge of the transaction, in the absence of resolution by the partners authorizing the Managing Partner, the complaint filed through Sudhakar Andrew is not maintainable. Therefore the decision in S.C.Narayanan is not applicable to the case on hand.

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Admittedly, complainant-Firm is engaged in money-lending business. Consequently, it is expected to maintain proper records. In fact, the complainant has taken acknowledgement of debt letters from accused Nos.2 and 3. However, when the accused have allegedly issued the subject cheque towards repayment of the loan due from them, the complainant has not chosen to note

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CRL. A NO.913 OF 2010

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the said fact in the record. This also creates doubt as to whether the cheque in question was issued towards repayment of the present debt or it was issued by way of security for the earlier loan and it is being misused. This fact assumes importance, since the cheque is not in the handwriting of the person who issued it. On the other hand, its contents are typed. PW1 is specifically crossexamined suggesting that the contents of the cheque in question are typed in the complaint-Firm. Of course he has denied the said suggestion.

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At least complainant should have produced the accounts maintained with the complainant-Firm to show that as on 25.6.1993, a sum of Rs.1,12,131/- was due from the accused and accordingly the cheque at Ex.P5 was issued by accused Nos.2 and 3 towards repayment of the said sum. It would have corroborated the case of the complainant. On the other hand, with the help of admissions given by PW1 with regard to payment of Rs.1,25,000/- made by the accused and failure of complainant to establish that out of these payments,

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CRL. A NO.913 OF 2010

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Rs.75,000/-, which is paid subsequent to 25.06.1993 was in respect of the present loan transaction, the accused by preponderance of probabilities established that the cheque in question was not issued towards the payment of alleged loan transaction and on the other hand, it was issued in respect of earlier loan transaction and it is being misused.

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Moreover, the cheque in question was dishonoured on the ground that account is closed. However, the complainant has not lead any evidence to show that either after issuing the cheque, accused have got the account closed or after coming to know that the account is closed, they have issued the cheque with a malafide intention that it should be dishonoured. If the account is closed by the Bank due to operation of law, then the liability of accused would not arise. Therefore, the reasons for the closure of the account and weather it was in the knowledge of the accused was required to be established by the complainant, which it has failed to.

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CRL. A NO.913 OF 2010

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In the light of the above discussions, though

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the Sessions Court failed to decide the appeal on merits, on re-appreciation of the evidence placed on record, this Court is of the considered opinion that it was justified in allowing the appeal and setting aside the conviction of accused. In the result, this appeal also fails and accordingly the following:

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ORDER

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The appeal filed by the complainant is dismissed.

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The impugned order dated 11.01.2010 in Crl.Appeal No.11 and 13 of 2007 passed by the Court of the Fast Track Judge, Udupi district setting aside the conviction and sentence imposed by the Court of I Addl.Civil Judge (Jr.Dn.) and JMFC, Udupi in C.C.No.2148/1999 dated 30.12.2006 is hereby confirmed.

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Sd/JUDGE

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RR/KGK

Mitra Finance (R) v. Vasanth Naik

Case brief

What is this about?

What did the court decide?

Mitra Finance (R) v. Vasanth Naik

Case brief

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What did the court decide?

What the court decided

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