Allowed

Seetha Investments v. H v Raghavendra

Karnataka HC7 Nov 2023RSA/253/2012

Case brief

AI extract

What is this about?

The High Court allowed the second appeal, setting aside the appellate judgment that dismissed the suit. The Court found the plaintiff proved the loan via the defendant's dishonoured cheque and legal notice, rejecting the defence that the suit was based on misused blank papers.

What did the court decide?

Impugned judgment and decree of the Principal District Judge set aside; judgment and decree of the Principal Civil Judge restored; no order as to costs.

Seetha Investments Vs H v Raghavendra — Money Laundering | Karnataka HC (2023)

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1 - NC: 2023:KHC:39644 RSA No. 253 of 2012

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 7^TH DAY OF NOVEMBER, 2023

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BEFORE

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THE HON'BLE MR JUSTICE ASHOK S.KINAGI

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REGULAR SECOND APPEAL NO. 253 OF 2012 (MON)

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BETWEEN:

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SEETHA INVESTMENTS A REGISTERED PARTNERSHIP FIRMBY ITS PARTNERSRI D M SURESH BABU, S/O D MANJAPPAMAJOR, SITA COMPLEX, B H ROADSHIMOGA CITY, REP BY ITS POWER OF ATTORNEY HOLDER M RANGANATH

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…APPELLANT

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(BY SRI RAMESH CHANDRA & MAHESH.C., ADVOCATE)

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AND:

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Digitally signed by SUNITHA GANGARAJU Location: High Court of Karnataka

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H V RAGHAVENDRA S/O S V HANUMANTHA RAO AGED ABOUT 48 YEARS PROP:PANCHAMI, NEHRU ROAD OPP.S N MARKET, SHIMOGA CITY

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…RESPONDENT

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RSA FILED UNDER SEC.100 OF CPC., AGAINST THE JUDGMENT AND DECREE DATED 26.07.2011 PASSED IN R.A.NO.124/2008 ON THE FILE OF THE PRINCIPAL DISTRICT JUDGE AT SHIMOGA, ALLOWING THE APPEAL AND SETTING ASIDE THE JUDGMENT AND DECREE DATED 17.09.2008 PASSED IN O.S.NO.09/2001 ON THE FILE OF THE PRINCIPAL CIVIL JUDGE, (SENIOR DIVISION) & C.J.M AT SHIMOGA.TRIAL COURT DECREED THE SUIT, APPELLATE COURT DISMISSED THE APPEAL.

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THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, THE COURT DELIVERED THE FOLLOWING:

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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JUDGMENT

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This second appeal is filed by the appellant challenging the judgment and decree dated 26.07.2011 passed in RA No.124/2008 by the Principal District Judge at Shimoga.

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The parties are referred to as per their ranking

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before the trial Court for the sake of convenience.

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Plaintiff filed a suit for recovery of money against the defendant. It is the case of the plaintiff that the plaintiff is a registered Partnership firm and is a financial institution. It has obtained money laundering licence from the competent authority. Defendant borrowed a sum of Rs.1 lakh from the plaintiff on 27.04.2000 for the purpose of his business agreeing to repay the said loan with interest at the rate of 23%pa on demand. The plaintiff advanced a sum of Rs.1 lakh to the defendant through a cheque bearing No.244010 drawn on Union Bank of India, Shimoga. On the same day towards payment of his dues, the defendant had issued a post dated cheque bearing No.382265 drawn on Vijaya Bank, Shimoga. On 21.11.2000 the plaintiff presented the cheque issued by the defendant for encashment, but on 22.11.2000 the said cheque

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3 - NC: 2023:KHC:39644 RSA No. 253 of 2012

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was returned dishonoured with shara 'funds insufficient'. Plaintiff issued a legal notice as required under Section 138 of Negotiable Instruments Act to the defendant. In spite of service of notice, the defendant failed to repay the said loan amount and hence the plaintiff filed a private complaint before the Chief Judicial Magistrate, Shimoga and the same is pending. Hence, cause of action arose for the plaintiff for filing a suit for recovery of the said amount of Rs.1 lakh from the defendant.

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On service of summons, the defendant appeared and filed his written statement denying the averments made in the plaint. It is contended that the plaintiff is doing money laundering business without obtaining any licence from the competitive authority. It is contended that plaintiff is not entitled for the said claim nor interest. It is contended that defendant borrowed a sum of Rs.1 lakh on 27.04.2000 for his business and agreed to repay the same with interest @23%pa. It is contended that the Plaintiff firm filed a private complaint against the defendant. It is contended that defendant had money transaction with the plaintiff and has repaid the same with interest. Plaintiff obtained certain blank cheques and promissory notes at the time of lending the money. Instead of

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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returning or destroying the said cheques and promissory notes to the defendant, the plaintiff has misused the same and instituted the suit with an intention to harass the defendant and to make a wrongful claim. Hence, the suit filed by the plaintiff is not maintainable and prays to dismiss the same.

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On the basis of the pleadings of the parties, the trial

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Court framed following six issues for consideration:

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"1) Whether the plaintiff proves that the defendant had borrowed Rs.1,00,000-00 on 27.04.2000 from the plaintiff?

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Whether the plaintiff proves that the defendant had agreed to repay the same with interest at the rate of 23%pa?

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1. Whether the suit of the plaintiff is bad for want of money lending license?

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Whether the defendant proves that the plaintiff has misused the cheque and promissory note of the defendant taken on blank forms on an earlier occasion of loan transaction?

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Whether the plaintiff proves that as on the date of filing of the suit Rs.1,16,293-00 was due from the defendant?

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5 - NC: 2023:KHC:39644 RSA No. 253 of 2012

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What order or decree?"

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The plaintiff, in order to prove the case, examined General Power of Attorney Holder of the plaintiff firm as PW1 and got marked six documents as Ex.P1 to P6. Defendant examined himself as DW1 and got marked 16 documents as Ex.D1 to D16.

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The trial Court considering the oral and documentary evidence, answered issue No.1, 2 and 5 in the affirmative and issue Nos.3 and 4 in the negative and consequently decreed the suit of the plaintiff with costs for recovery of Rs.1,16,293/- along with future interest at the rate of 10%pa. compounded yearly rests as on the date of filing of the suit till realization of decreetal amount.

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Being aggrieved by the judgment and decree passed by the trial Court the defendant preferred an appeal in RA No.124/2008 on the file of the Principal District Judge at Shimoga.

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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The Appellate Court after hearing the learned counsel for parties, framed the following points for

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consideration:

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"1. Whether the plaintiff firm proves that on 27.04.2000, the defendant had borrowed a loan of Rs.1,00,000/- from the plaintiff?

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Whether the plaintiff further proves that the defendant had agreed to repay the said loan with interest at the rate of 23%pa?

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Whether the defendant proves that he has not issued the post dated chque bearing no.382265, drawn on Vijaya Bank, Shimoga for Rs.1,00,000/- to the plaintiff as contended in the written statement?

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Whether the defendant proves that the plaintiff has misused the cheque and promissory note issued by the defendant on earlier occasion?

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Whether the suit is not maintainable for want of valid Money Lending Licence?

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Whether the plaintiff is entitled for the suit claim amount as sought?

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Whether the judgment and decree of the trial Court in OS No.9/2001, dated 17.09.2008 call for any interference by this Court?

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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8. What order or decree?"

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Appellate Court on re-appreciation of oral and documentary evidence answered point Nos.1,2,5 and 6 in the negative and Point Nos.3,4 and 7 in the affirmative and consequently allowed the appeal vide judgment dated 26.07.2011 and set aside the judgment and decree passed by the trial Court and dismissed the suit of the plaintiff.

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Being aggrieved by the judgment and decree

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passed in RA No.124/08, the plaintiff has filed this second appeal. Notice was issued to the defendant. In spite of service of notice, defendant remained absent.

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This Court while admitting the appeal 14.03.2019 has framed following substantial question of law for

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consideration:

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"Whether mentioning of document 'promissory note' and the suit being filed just on the basis of narrating transaction does materially affect the suit?"

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Heard the learned counsel for plaintiff.

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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Learned counsel for plaintiff submits that the plaintiff had advanced loan of Rs.1,00,000/- to the defendant and defendant had executed promissory note and agreed to pay interest @ 23%pa. He submits that defendant did not repay the loan amount. The defendant issued a cheque and when the said cheque was presented by the plaintiff for encashment, the said cheque was returned dishonoured and hence plaintiff filed a private complaint. He submits that plaintiff by producing the documents has proved that defendant had obtained the loan. But the Appellate Court placing reliance on Ex.P6 and has recorded a finding that plaintiff has not come to the Court with clean hands. He submits that Appellate Court have recorded a finding that plaint averment is different from the contents of Ex.P6. He submits that Ex.P6 produced by the plaintiff is of different transaction. On the contrary he submits that defendant has produced Ex.D6 pertaining to the suit transaction. Appellate Court has failed to consider the Ex.D6 and placed reliance on Ex.P6 and came to a conclusion that plaintiff has failed to prove that plaintiff has advanced loan of Rs.1,00,000/- to the defendant. He submits that Appellate Court has not properly appreciated the documents produced.

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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Hence, on these grounds he submits that the impugned judgment passed by the Appellate Court is improper and erroneous and hence on all these grounds prays to allow the appeal.

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SUBSTANTIAL QUESTION OF LAW:

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Perused the records.

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Plaintiff firm is a registered partnership firm and it is a financial institution and petitioner firm obtained money lending license from the competition authority. Defendant approached the plaintiff with a request to advance the loan of Rs.1,00,000/-. Plaintiff firm considering the need of the defendant agreed to advance loan of Rs.1,00,000/- to the defendant on 27.04.2000. The defendant also issued a post dated cheque bearing No. 382265 drawn on Vijaya Bank, Shimoga. The defendant failed to repay the said loan amount. Plaintiff got issued legal notice, calling upon the defendant to repay the said loan amount on 29/30.11.2000. The plaintiff firm presented the cheque issued by the defendant. The said cheque was dishonoured with an endorsement 'funds insufficient'. Thereafter plaintiff firm got issued legal notice

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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dated 29/30.11.2000, the said notice was served on the defendant, but in spite of service of notice defendant neither repaid the loan amount nor issued reply to the said notice. Therefore, cause of action arose for the plaintiff to file a suit.

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The GPA Holder of the plaintiff firm Sri D.M. Ranganath, was examined as PW1. He has reiterated the plaint averments in the examination in Chief had produced Ex.P1 - copy of the GPA, whereby plaintiff firm authorized PW1 to depose on behalf of the plaintiff firm; Ex.P2 - certified copy of the Form No. A, which discloses that the plaintiff firm is a registered partnership firm under Indian Partnership Act; Ex.P3 - copy of the Money Lending License, wherein plaintiff firm being a financial institution lending money and obtained money lending license from the competent authority; Ex.P4 - On demand promissory note executed by the defendant in favour of the plaintiff firm, at the time of obtaining the loan from the plaintiff in a sum of Rs.1,00,000/-; Ex.P5 - cheque, issued by the defendant in favour of the plaintiff; Ex.P6 - copy of the legal notice.

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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In the course of cross-examination it is suggested that plaintiff has misused the blank cheques and blank promissory note and got filed the present suit, but, it was denied by the plaintiff.

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On rebuttal the defendant examined himself as DW1 and he has reiterated the written statement averments in the examination in chief and in support of his defence he has produced Ex.D1 - Copy of the order sheet in CC No.220/2002; Ex.D2 - copy of the complaint filed by the plaintiff against the defendant under Section 200 Cr.P.C. for the offence punishable under Section 138 of NI Act; Ex.D3 - Copy of the cheque issued by the defendant in favour of the plaintiff firm for a sum of Rs.3,40,070/- on 21.11.2000; Ex.D4 - Copy of the Bank endorsement issued by the bank, which discloses that the said cheque was dishonoured on the ground of 'funds insufficient'; Ex.D5 - Copy of the postal acknowledgement; Ex.D6 - Copy of the legal notice, got issued by the plaintiff to the defendant on 29/30.11.2000; Ex.D7 - Copy of the COP receipt; Ex.D8 - Copy of the GPA executed by the plaintiff firm to A.S. Mohan Kumar, Manager, authorizing him to file suit and contest the suit and file complaint; Ex.D9 - Copy of the order sheet in PCR

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12 - NC: 2023:KHC:39644 RSA No. 253 of 2012

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No.3/2000 - CC No.242/2007 filed by the plaintiff firm against the defendant; Ex.D10 - Copy of the complaint filed against the defendant in PCR No.3/2000; Ex.D11 - Copy of the cheque, issued by the defendant in favour of plaintiff for a sum of Rs.1,00,000/-; Ex.D12 - Copy of the bank endorsement; Ex.D13 - Copy of the legal notice dated 29/30.1.2000 in respect of the loan transaction borrowed by the defendant from the plaintiff for a sum of Rs.2,00,000/-; Ex.D14 - Copy of the postal acknowledgment; Ex.D15 - Copy of the Postal receipt and Ex.D16 - Copy of GPA executed by the plaintiff firm.

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In the course of cross-examination the defendant has admitted that there was a loan transaction between the plaintiff and himself earlier to 1998. He has deposed that he has paid entire loan amount.

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From the perusal of the records produced by the plaintiff and defendant, which clearly discloses that there was a loan transaction between the plaintiff and defendant. The defendant has taken a defence in the written statement that he has executed blank promissory note and signed blank papers, but plaintiff has misused the said blank papers. However,

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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defendant has repaid the said amount. Therefore, the burden is on the defendant to prove that defendant has repaid the said amount. Defendant has not produced any amount to show that he has repaid the loan amount to the plaintiff. If at all defendant had repaid the loan amount, then defendant ought to have got issued a legal notice, calling upon the plaintiff to return the cheques and blank promissory notes executed by him. The defendant not got issued any legal notice to the plaintiff asking to return the cheque and promissory note. Further, plaintiff presented the cheque, which was issued by the defendant and said cheque was dishonoured with an endorsement 'funds insufficient'. Plaintiff got issued legal notice to the defendant on 29.11.2000.

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Though plaintiff has produced Ex.P6, copy of the legal notice dated 29/30.11.2000, from the perusal of the contents of the said legal notice which disclose that the defendant had borrowed a sum of Rs.2,00,000/on 19.02.2000, but the subject matter of the suit is in respect of loan borrowed by the defendant for a sum of Rs.1,00,000/-. Plaintiff got issued notice on 29/30.11.2000 in respect of the suit transaction, but the plaintiff instead of producing the legal

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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notice dated 29/30.11.2000 has produced the legal notice in respect of another loan transaction. The defendant also has produced copy of the legal notice got issued by the plaintff in respect of the suit transaction. From the perusal of Ex.D6, which clearly discloses that the plaintiff got issued legal notice in respect of the suit transaction. Comparing the contents of Ex.P6 with the plaint, the trial Court has recorded a finding that the plaint averments is entirely different from the contents of Ex.P6. Ex.D6 is tallying with the allegations made in Ex.D2. Perusal of the contents of the plaint with the Ex.D6, produced by the defendant, if the contents of Ex.D6 is compared with the contents of the plaint averments, then Ex.D6 totally tally with the allegations made in the plaint. Appellate Court has committed an error in comparing the contents of Ex.P6 with the plaint. Hence, the Appellate Court has committed an error in passing the impugned judgment.

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Further the plaintiff has also produced records to show that plaintiff firm is a registered partnership firm doing business of money lending. In view of the above discussions, I answer the substantial question of law in favour of plaintiff and I proceed to pass the following order:

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NC: 2023:KHC:39644 RSA No. 253 of 2012

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ORDER

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Appeal is allowed. Impugned judgment and decree dated 26.07.2011 passed in RA No.124/2008 by the Principal District Judge at Shimoga, is set aside. Judgment and decree dated 17.09.2008 passed by the Principal Civil Judge (Sr. Dn.) & CJM, Shimoga in OS No.9/2001, is hereby restored. No order as to costs.

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Sd/JUDGE

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VK List No.: 1 Sl No.: 31

Seetha Investments v. H v Raghavendra

Case brief

What is this about?

What did the court decide?

Seetha Investments v. H v Raghavendra

Case brief

What is this about?

What did the court decide?

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