Dismissed

M.C.Ashok v. Vincent Pinto

Karnataka HC21 Nov 2023WP/1194/2020

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed writ petitions filed under Section 482 CrPC challenging the taking of cognizance for offence u/s 138 NI Act. The Court held that an acknowledgement of debt executed by the petitioner served as a valid endorsement under Section 56 NI Act for the unpaid balance, thus making the cheque dishonour valid.

What did the court decide?

Writ petitions challenging the order of taking cognizance and registration of criminal cases were dismissed.

M.C.Ashok Vs Vincent Pinto — Cheque Dishonour | Karnataka HC (2023)

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NC: 2023:KHC:41960 WP No. 1194 of 2020 C/W WP No. 1196 of 2020 WP No. 2074 of 2020 WP No. 2126 of 2020

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 21^ST DAY OF NOVEMBER, 2023

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BEFORE

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THE HON'BLE MR JUSTICE R. NATARAJ WRIT PETITION NO. 1194 OF 2020 (GM-RES) C/W WRIT PETITION NO. 1196 OF 2020 (GM-RES), WRIT PETITION NO. 2074 OF 2020 (GM-RES), WRIT PETITION NO. 2126 OF 2020 (GM-RES)

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BETWEEN:

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M.C.ASHOK S/O RUDREGOWDA, AGED ABOUT 50 YEARS, PROPRIETOR, SRI LAKSHMI VENKATESHWARA COFFEE TRADING CO., JVS BUILDING, A.I.T. CIRCLE, K.M. ROAD, JYOTHINAGAR, CHIKKAMAGALURU-577102

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…PETITIONER (COMMON)

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Digitally signed by SUMA Location: High Court of Karnataka

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(BY SMT. S. SUSHEELA, SENIOR ADVOCATE FOR SRI. GURURAJ JOSHI, ADVOCATE)

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AND:

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VINCENT PINTO S/O LATE J. PINTO, AGED ABOUT 66 YEARS, COFFEE PLANTER, HUDUGANAHALLI KHAN ESTATE, GABGAL POST, MUDIGERE TALUK, CHIKKMAGALURU DISTRICT-577132

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…RESPONDENT (COMMON)

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(BY SRI. H.N.MANJUNATHPRASAD, ADVOCATE)

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NC: 2023:KHC:41960 WP No. 1194 of 2020 C/W WP No. 1196 of 2020 WP No. 2074 of 2020 WP No. 2126 of 2020

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IN W.P.NO.1194/2020:

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO QUASH THE ORDER OF TAKING COGNIZANCE DATED 11.01.2016 AND ORDER OF ISSUE OF PROCESS AGAINST THE PETITIONER/ACCUSED, DATED 19.02.2016 AT ANNEXURE-A PASSED BY THE HONBLE PRINCIPAL CIVIL JUDGE AND JMFC, MUDIGERE IN PCR NO.7/2016 (OLD CC.NO.1842/2014 AND C.C.NO.176/2016) NOW PENDING ON THE FILE OF THE HONBLE SENIOR CIVIL JUDGE AND JMFC, MUDIGERE IN C.C.NO.38/2019 FOR OFFENCE PUNISHABLE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881 AND ETC.

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IN W.P.NO.1196/2020:

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO QUASH THE ORDER OF TAKING COGNIZANCE DATED 11.01.2016 AND ORDER OF ISSUE OF PROCESS AGAINST THE PETITIONER/ACCUSED DATED 19.02.2016 AT ANNEXURE-A PASSED BY THE HONBLE PRINCIPAL CIVIL JUDGE AND JMFC MUDIGERE IN PCR NO.4/2016 (OLD C.C.NO.39/2019) FOR OFFENCE PUNISHABLE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT 1881QUASH THE COMPLAINT DATED 02.12.2013 FILED BY THE RESPONDENT /COMPLAINANT AGAINST THE PETITIONER/ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT AT ANNEXURE-E AND CONSEQUENTIAL QUASH THE ENTIRE PROCEEDINGS AGAINST THE PETITIONER/ACCUSED IN C.C.NO.39/2019 PENDING ON THE FILE OF SENIOR CIVIL JUDGE AND JMFC MUDIGERE FOR OFFENCE

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PUNISHABLE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881.

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IN W.P.NO.2074/2020:

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO QUASH THE ORDER OF TAKING COGNIZANCE DATED 11.01.2016 AND ORDER OF ISSUE OF PROCESS AGAINST THE PETITIONER/ACCUSED, DATED 19.02.2016 AT ANNEXURE-A, PASSED BY THE HON'BLE PRINCIPAL CIVIL JUDGE AND JMFC, MUDIGERE IN PCR.NO.6/2016 (OLD C.C.NO.1843/2014 AND C.C.NO.174/2016) NOW PENDING ON THE FILE OF THE HONBLE SENIOR CIVIL JUDGE AND JMFC, MUDIGERE IN C.C.NO.37/2019 FOR OFFENCE PUNISHABLE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881 AND ETC.

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IN W.P.NO.2126/2020:

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO QUASH THE ORDER OF TAKING COGNIZANCE DATED 11.01.2016 AND ORDER OF ISSUE OF PROCESS AGAINST THE PETITIONER/ACCUSED, DATED 19.02.2016 AT ANNEXURE-A, PASSED BY THE HON'BLE PRINCIPAL CIVIL JUDGE AND JMFC, MUDIGERE IN PCR.NO.5/2016 (OLD C.C.NO.1841/2014 AND C.C.NO.173/2016) NOW PENDING ON THE FILE OF THE HONBLE SENIOR CIVIL JUDGE AND JMFC, MUDIGERE IN C.C.NO.36/2019 FOR OFFENCE PUNISHABLE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881

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THESE PETITIONS, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioner in all these cases has challenged the orders taking cognizance of an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (henceforth referred to as ‘N.I. Act’) by the Principal Civil Judge and JMFC, Mudigere (henceforth referred to as ‘Trial Court’) in PCR Nos.7/2016, 4/2016, 6/2016 and 5/2016 and the registration of C.C.Nos.38/2019, 39/2019, 37/2019 and 36/2019 respectively, for the offence punishable under Section 138 of the N.I. Act. The petitioner has also sought for quashing of the proceedings in the aforesaid cases.

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The respondent initiated prosecution of the petitioner for the offence punishable under Section 138 of the N.I. Act for dishonour of four cheques for a sum of Rs.66,00,000/- drawn by the petitioner. The respondent claimed that the petitioner had purchased 2000 bags of Robusta Cherry coffee from him at Rs.3,300/- per bag and was therefore, liable to pay Rs.66,00,000/-. He claimed that the petitioner had issued four cheques for Rs.16,50,000/- each towards payment of the value of the coffee purchased by him.

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The respondent claimed that out of the total due, the petitioner had deposited a sum of Rs.10,00,000/- into the account of the respondent but failed to pay Rs.56,00,000/-. As a result, the respondent tendered all the four cheques for encashment but were dishonoured due to insufficient funds. The respondent therefore, caused a notice of demand but the petitioner failed to pay the amount. Therefore, the respondent was compelled to file four private complaints against the petitioner herein.

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The Trial Court recorded the pre-summons evidence of the respondent and after considering the material on record, took cognizance of the offence punishable under Section 138 of the N.I. Act and registered C.C.Nos.38/2019, 39/2019, 37/2019 and 36/2019 for the said offence and issued process.

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Being aggrieved by the aforesaid, the petitioner has filed these petitions.

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The learned Senior counsel for the petitioner contended that in view of Sections 56 read with section 15 of the N.I. Act, an offence under Section 138 of N.I. Act is not committed. She contended that once a sum of Rs.10,00,000/-

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was received by the respondent, the debt was not Rs.66,00,000/- and therefore, there was no liability to the extent of Rs.66,00,000/-. She therefore, contended that no endorsement under Section 56 of the N.I. Act was made on the cheques and hence, the respondent could not have presented the cheques for encashment for the entire amount. In this regard, she relied upon the judgment of the High Court of Kerala in Santhosh K.G. vs. Nandakumar B. Menon [2016 (3) R.C.R. (Criminal) 965] and in the case of Joseph Sartho vs. Gopinathan Nair [2009 (2) Crimes 463 (Kerala)] . She also relied upon the judgment of the High Court of Madras in

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Angu Parameshwari Textiles vs. Sri. Rajam and Company [2001 STPL 1556 Madras] . She also relied upon the judgment of the Hon’ble Supreme Court in the case of Dashrathbhai Trikambhai Patel vs. Hitesh Mahendrabhai Patel and another [(2023) 1 SCC 578] .

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Per contra, the learned counsel for the respondent submitted that the petitioner deposited a sum of Rs.10,00,000/- into the account of the respondent and the same was mentioned in the notice of demand under section

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138(b) of the N.I. Act. He contended that the petitioner had acknowledged the debt of Rs.56,00,000/- and had drawn an acknowledgement of debt, which was marked as Ex.P9. He therefore, contended that Ex.P9 was an endorsement made by the petitioner to be used to discharge the remaining liability. He therefore, contended that there is no error committed by the Trial Court in taking cognizance of the offence. He contended that since the evidence of the petitioner is already concluded, it is not proper to set at naught the proceedings initiated against the petitioner. He relied upon the judgment of the Hon’ble Supreme Court in the case of Rathish Babu Unnikrishnan vs.

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the State and another [2022 LiveLaw (SC) 413] .

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I have considered the submissions made by the learned Senior counsel for the petitioner and the learned counsel for the respondent. I have also perused the documents placed on record.

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The issue raised in these petitions revolves around Section 56 of the N.I. Act, which is extracted below:-

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“ 56. Indorsement for part of sum due .—No

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writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such amount has been partly paid, a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance.”

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An endorsement is defined under Section 15 of the N.I. Act and the same is extracted below:-

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“ 15. Indorsement .—When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to indorse the same, and is called the “indorser”.

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The Hon’ble Apex court in the case of Dashrathbhai Trikambhai Patel, referred supra, was considering a criminal appeal against the judgment of acquittal from an offence punishable under Section 138 of the N.I.Act, where it was held as follows:-

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“30. In view of the discussion above, we summarise

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our findings below:

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(i) For the commission of an offence under Section 138, the cheque that is dishonoured must represent a legally enforceable debt on the date of maturity or presentation;

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(ii) If the drawer of the cheque pays a part or whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque;

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(iii) When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as prescribed in Section 56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138 will stand attracted;

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(iv) The first respondent has made part-payments after the debt was incurred and before the cheque was encashed upon maturity. The sum of rupees twenty lakhs represented on the cheque was not the ‘legally enforceable

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debt’ on the date of maturity. Thus, the first respondent cannot be deemed to have committed an offence under Section 138 of the Act when the cheque was dishonoured for insufficient funds; and

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(v) The notice demanding the payment of the ‘said amount of money’ has been interpreted by judgments of this Court to mean the cheque amount. The conditions stipulated in the provisos to Section 138 need to be fulfilled in addition to the ingredients in the substantive part of Section 138. Since in this case, the first respondent has not committed an offence under Section 138, the validity of the form of the notice need not be decided.”

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The cheques in all these cases were dated 11.07.2013, 12.7.2013, 15.07.2012 and 17.07.2013 for Rs.16,50,000/- each. Before these cheques were presented for encashment, a sum of Rs.10,00,000/- was deposited by the petitioner into the account of the respondent. The petitioner is thereafter stated to have acknowledged the debt to an extent of Rs.56,00,000/and admitted it in terms of an acknowledgment of debt dated 22.09.2013. This

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acknowledgement of debt could be construed as “a slip of paper

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annexed to the cheque” and therefore, constituted a valid indrosement as defined under Section 15 of the N.I. Act. Though this is disputed by the petitioner, he has to establish that the said document is not executed by him before the Trial Court. Since the cheques were presented for encashment after the acknowledgement of debt dated 22.09.2013 was drawn up by the petitioner, it satisfied the requirement of Sections 56 and 15 of the N.I. Act. Even otherwise, the respondent had restricted the claim to a sum of Rs.56,00,000/- not only in the notice under Section 138(b) of the N.I. Act but also in the private complaints lodged to prosecute the petitioner. The judgments relied upon by the learned Senior counsel for the petitioner are inapplicable to the facts of this case in view of the acknowledgement of debt of Rs.56,00,000/- executed by the petitioner which was marked as Ex.P9 before the Trial Court. Therefore, there is no error committed by the Trial Court in taking cognizance of the offences against the petitioner warranting interference by this Court.

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