Partly allowed

H. M. Nagaraju v. N. Sonne Gowda

Karnataka HC4 Mar 2024CRL.A/1246/2019

Case brief

AI extract

What is this about?

In a cheque bounce case under Section 138 NI Act, the High Court held that the Sessions Court erred in directing compensation when allegations were not proved. The Court found the complainant failed to prove financial capacity to advance the loan, leading to the quashing of the compensation order while dismissing the complainant's appeal for conviction.

What did the court decide?

Compensation of Rs.30,000/- was set aside. The Sessions Court order of acquittal was confirmed. The appeal for conviction was dismissed. Records were remanded.

H. M. Nagaraju Vs N. Sonne Gowda — Cheque Dishonour | Karnataka HC (2024)

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CRL.A No. 1246 of 2019 C/W CRL.RP No. 703 of 2019 NC: 2024:KHC:8993

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 4^TH DAY OF MARCH, 2024

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BEFORE

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THE HON'BLE MS JUSTICE J.M.KHAZI CRIMINAL APPEAL NO.1246 OF 2019

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C/W

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CRIMINAL REVISION PETITION NO.703 OF 2019

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IN CRL.A NO.1246 OF 2019

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BETWEEN:

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H.M.NAGARAJU S/O M.MUNIYAPPA, AGED ABOUT 58 YEARS, R/AT NO.264, 1^ST C BLOCK, WEST OF CHORD ROAD, MAHALAKSHMIPURAM, BENGALURU - 560 086.

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…APPELLANT

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(BY SRI. MANJUNATH B R, ADVOCATE)

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Digitally signed by REKHA R Location: High Court of Karnataka

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AND:

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N.SONNE GOWDA S/O NARAYANAPPA, AGED ABOUT 51 YEARS, R/OF MUTTUGADA VILLAGE, KESHWARA POST, SHIDLAGHATTA TALUK, CHICKBALLAPUR DISTRICT - 562 105.

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…RESPONDENT

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(BY SRI. A.V.RAMAKRISHNA, ADVOCATE)

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THIS CRL.A IS FILED UNDER SECTION 378(4) OF CR.P.C PRAYING TO a) SET ASIDE THE JUDGMENT AND ORDERS PASSED BY THE ADDITIONAL CITY CIVIL AND SESSIONS JUDGE (CCH-56) AT BENGALURU IN CRL.A.NO.473/2016

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CRL.A No. 1246 of 2019 C/W CRL.RP No. 703 of 2019 NC: 2024:KHC:8993

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DATED 24.04.2019 AND CONFIRM THE JUDGMENT DATED 06.04.2016 IN C.C.NO.21272/2013 ON THE FILE OF THE XX ADDITIONAL CHIEF METROPOLITAN MAGISTRATE AT BENGALURU FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF NI ACT; b) PASS SUCH OTHER ORDER/S DEEMS FIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE INTEREST OF JUSTICE.

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IN CRL.RP NO.703 OF 2019

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BETWEEN:

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N.SONNE GOWDA S/O NARAYANAPPA, AGED ABOUT 51 YEARS, RESIDING AT MUTTUGADA VILLAGE, KESHWARA POST, SIDDALAGHATTA TALUK, CHIKKABALLAPUR DISTRICT - 562 101.

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…PETITIONER

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(BY SRI. A.V.RAMAKRISHNA, ADVOCATE)

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AND:

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H.M.NAGARAJU S/O M.MUNIYAPPA, AGED ABOUT 50 YEARS, RESIDING AT NO.264, 1^ST C BLOCK, WEST OF CHORD ROAD, MAHALAKSHMIPURAM, BENGALURU - 560 086.

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…RESPONDENT

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(BY SRI. MANJUNATH B R, ADVOCATE)

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THIS CRL.RP IS FILED UNDER SECTION 397 R/W SECTION 401 OF THE CODE OF CRIMINAL PROCEDURE PRAYING TO a) SET ASIDE THE PORTION OF JUDGMENT AND ORDER PASSED BY THE 55^TH ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AT BENGALURU THEREBY DIRECTING THE PETITIONER TO PAY A SUM OF Rs.30,000/- AS COMPENSATION TO THE RESPONDENT IN CRL.A.NO.473/2016 DATED 24.04.2019 BY ALLOWING THIS CRIMINAL REVISION PETITION; b) GRANT SUCH OTHER RELIEF AS THIS HON'BLE

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CRL.A No. 1246 of 2019 C/W CRL.RP No. 703 of 2019 NC: 2024:KHC:8993

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COURT DEEMS FIT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE INTEREST OF JUSTICE.

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THESE CRIMINAL APPEAL C/W CRIMINAL REVISION PETITION, COMING ON FOR FURTHER HEARING, THIS DAY, THE COURT DELIVERED THE FOLLOWING:

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JUDGMENT

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These two appeal and criminal revision petition are

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arising out of judgment and order dated 24.04.2019, in Crl.A.473/2016 on the file of 55^th Addl.Civil and Sessions Judge, Bengaluru, whereby it set aside the conviction and sentence imposed by the trial Court for the offence punishable under Section 138 of N.I. Act on the accused, but directed the accused to pay compensation in a sum of Rs.30,000/- to the complainant.

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While complainant has filed the criminal appeal challenging the acquittal of accused, accused has filed the criminal revision petition challenging the order passed by the Sessions Court, directing him to pay compensation in a

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sum of Rs.30,000/- to the complainant.

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For the sake of convenience, the parties are

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referred to by their rank before the trial Court.

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CRL.A No. 1246 of 2019 C/W CRL.RP No. 703 of 2019 NC: 2024:KHC:8993

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Complainant filed a private complaint under

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Section 200 Cr.P.C against the accused alleging offence punishable under Section 138 of N.I Act, contending that accused is known to him and on 05.01.2013, accused borrowed hand loan of Rs.5,00,000/- to meet his financial difficulties. He agreed to pay interest at the rate of 2% p.m. In support of the said transaction, accused executed an On Demand Promissory Note and Consideration Receipt dated 05.01.2013 and also issued a post dated 04.03.2013 cheque for Rs.5,00,000/-. He assured to pay the interest in cash as and when due. On 04.03.2013, complainant presented the cheque for encashment through his account in Pragati Gramina Bank, Hoskote. However, it was returned dishonoured with endorsement “No such account’’. Complainant got issued a legal Notice dated 20.04.2013. Though it is duly served on the accused, he has neither paid the amount due nor sent any reply and hence the complaint.

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After due service of summons, accused

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appeared and contested the case by pleading not guilty.

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To prove the allegations against accused,

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complainant has examined himself as PW-1. He has examined one witness as PW-2 and got marked Ex.P1 to 44.

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During the course of his statement under

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Section 313 Cr.P.C, accused has denied the incriminating evidence lead by the complainant.

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He has also given evidence by examining

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himself as DW-1, Manager of the drawer Bank as DW-2. He has relied upon Ex.D1 to 9.

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Vide judgment and order dated 06.04.2016, the trial Court convicted the accused and sentenced him to pay fine of Rs.6,10,000/in default to undergo imprisonment for three months.

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Aggrieved by the same, accused filed appeal before the Sessions Court. Vide the impugned Judgment and order dated 24.04.2019, the Sessions Court allowed the appeal filed by the accused and set aside the order of the conviction imposed by the trial Court. However, it directed the accused to pay compensation in a sum of Rs.30,000/- to the complainant.

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Complainant has challenged the acquittal of accused, contending that the impugned judgment and order passed by the Sessions Court are not sustainable either in law or on facts. Having regard to the fact that accused admitted that the cheque belongs to him, drawn on his account, maintained with his banker and it bears his signature, the Sessions Court has failed to draw presumption that the cheque in question was issued towards repayment of * any legally recoverable debt and in support of the same the accused has also executed On Demand Promissory Note and Consideration Receipt at Ex.P6 and 7. Despite receipt of legal notice, the accused

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Inserted vide Chamber order dated 27.03.2024

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has not sent any reply and the same is not taken into consideration by the Sessions Court. The Sessions Court has failed to take note of the fact that accused has failed to prove his defence and thereby rebut the presumption. On the other hand, the complainant has proved his case beyond reasonable doubt. Viewed from any angle, the impugned judgment and order are not tenable and pray to all the allow the appeal, set aside the judgment and order of the Sessions Court and restore the order of the trial Court.

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In support of his arguments, learned counsel for

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complainant has relied upon the following decision:

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(i) T.Vasanthkumar Vs. Vijayakumari ( T.Vasanthkumar )¹

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On the other hand, the accused has challenged

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the order of the Sessions Court, directing him to pay compensation in a sum of Rs.30,000/- to the complainant, contending that when the Sessions Court has come to the conclusion that the allegations against accused are not

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1 2015 Crl.LJ 2853

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CRL.A No. 1246 of 2019 C/W CRL.RP No. 703 of 2019 NC: 2024:KHC:8993

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proved, it erred in directing accused to pay compensation. It conflict with the finding given by it and that the trial Court has erred in convicting the accused. There is no justification for the said order and pray to set aside portion of the judgment and order granting compensation to the complainant.

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In support of his arguments learned counsel for

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accused has relied upon the following decisions:

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(i) M/s Bridgestone India Pvt. Ltd Vs. Inderpal Singh ( M/s Bridgestone India Ltd. )²

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(ii) Gopal Krishna Vs. Abdul Bakai ( Gopal Krishna )³

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Heard elaborate arguments of both sides and perused the record.

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Thus, it is the definite case of complainant that

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accused borrowed a sum of Rs.5,00,000/- from him and issued the subject cheque and also executed an On Demand Promissory Note and Consideration Receipt.

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When the cheque was presented for realization, it was

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2 2015 AIR SCW 6556

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3 2019 (2) KLR 284

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dishonoured with endorsement "No such account". After

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issue of legal notice and on the failure of accused to pay the amount due, complaint is filed. Though accused admit that cheque in question belongs to him, drawn on his account maintained with his banker, he has disputed of having borrowed hand loan of Rs.5,00,000/- from the accused. On the other hand, he has claimed that during 1999, he had borrowed hand loan of Rs.25,000/- from PW-2 Chikkahanumappa, who is a relative of complainant

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and at that time he had issued the subject cheque, Demand Promissory Note and Consideration Receipt in blank form. Though he repaid the same, the blank cheque, Demand Promissory Note and Consideration Receipt were not returned by Chikkahanumappa. He has got filed the present complaint through complainant who is his relative to make wrongful gain. He has also contended that the said account came to be closed as it was not in operation.

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Having regard to the fact that the cheque in question belongs to accused, drawn on his account

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maintained with his banker and it bears his signature, presumption under Section 139 of the N.I Act is operating in favour of the complainant, placing the initial burden on the accused to prove that the cheque was not issued towards repayment of any debt or liability and on the other hand to establish the circumstances in which the cheque has reached the hands of the complainant.

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However, in John K.Abraham Vs. Simon C. Abraham & Anr ( John K.Abraham )⁴ , the Hon'ble Supreme Court held that in order to draw presumption under Sections 118 and 139 of N.I Act, the burden lies on the complainant to show that:

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(i) She had the requisite funds for advancing the sum of money/loan in question to accused.

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(ii) The issuance of cheque by accused in support of repayment of money advanced was true and

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(iii) The accused was bound to make payment as had been agreed while issuing cheque in favour of the complainant.

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4 (2014) 2 SCC 236

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As held by the Hon'ble Supreme Court in Tedhi Singh Vs Narayan Das Mahant ( Tedhi Singh )⁵ , where the accused has failed to send reply to the legal notice, challenging the financial capacity of the complainant, at the first instance, complainant need not prove his financial capacity. However, at the trial if the financial capacity of complainant is challenged, then it is for the complainant to prove the same.

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In APS Forex vs Shakti International Fashion Linkers Pvt. Ltd ( APS Forex )⁶ , the Hon'ble Supreme Court held that when accused raises issue of financial capacity of complainant, in support of his probable defence, despite presumption operating in favour of complainant regarding legally enforceable debt under Section 139 of N.I. Act, onus shifts again on the complainant to prove his financial capacity by leading evidence, more particularly when it is a case of giving loan by cash and thereafter issue of cheque.

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5 2022 SCC OnLine SC 302

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6 (2020) 12 SCC 724

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In Vijay Vs. Laxman and Anr ( Vijay )⁷ , K.Subramani Vs. K.Damadara Naidu ( K.Surbamani )⁸ and K.Prakashan Vs. P.K.Surenderan ( K.Prakashan )⁹ , also the Hon'ble Supreme Court held that the presumption under Section 139 of N.I. Act, is a rebuttable presumption and when accused rebut the same by preponderance of probabilities, it is for the complainant to prove his case beyond reasonable doubt including the financial capacity.

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Keeping in mind the ratio in the above decisions of the Hon'ble Supreme Court and having regard to the fact that accused has challenged the financial capacity of complainant, at the outset it is necessary to examine whether the complainant has proved his financial capacity after which it would be necessary for the accused to prove his defence.

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With regard to his financial capacity, the complainant has deposed that he is owning 4 acres of

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7 (2013) 3 SCC 86

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8 (2015) 1 SCC 99

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9 (2008) 1 SCC 258

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agricultural land and growing vegetables such as Ridge Gourd, Chillies, Ladies finger, flowers and also silk cocoons. He has produced Ex.P9 to 44 with regard to sale of vegetables as well as the silk cocoon. However, he has not produced the documents to show that he is owning agricultural land and carrying out agricultural activities, including growing vegetables, flowers, poultry and also raising silk cocoon.

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During his cross-examination, complainant has claimed that he is residing in Bengaluru. He has not made it clear whether he carries out agricultural operations in person or through servants. It is alleged by the accused that he has concocted Ex.P9 to 44 for the purpose of this case. In the light of the said suggestion, the production of documents to his ownership over the agricultural land would have supported his claim of having agricultural land and sufficient income. It would have allowed the Court to cross verify whether the agricultural products sold through Ex.P9 to 44 were in fact grown in the said land and these documents actually pertains to the complainant. He has

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also not produced any document to show that he is running a Poultry farm and also growing flowers. For reasons best known to him, the complainant has not chosen to produce the said documents.

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Though the complainant is operating an account in Pragati Gramina Bank, through which he has presented the subject cheque for realization and also claims that he is having upto Rs.6 lakhs p.a. income from the agriculture, he has not chosen to produce his account extract to prove his income. Having operating an account and when is expected to carry * out transactions of more than Rs.20,000/- through account, it would be reasonable to expect that complainant credit his income to his account. The claim of the complainant that he had kept cash of Rs.5,00,000/- in his house and paid it to the accused, especially when he is disputing the said transaction, appears to be unnatural.

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One more important aspect noteworthy is that

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according to the accused, he had issued the subject

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Corrected vide Chamber order dated 27.03.2024

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cheque as well as the On Demand Promissory Note and Consideration Receipt blank to PW-2 Chikkahanumappa and the same has been utilized by complainant to file the complaint against accused. It is also relevant note that complainant is an Engineer by profession. According to the complainant, the cheque was completely filled when accused gave it to him and Ex.P6 and 7 were filled by one Gopalaswamy. If at all accused has executed Ex.P6 and 7, there was no impediment for the complainant to get it written by the accused himself, which would have supported complainant's case. When suggested that Ex.P1 cheque is not in the handwriting of accused, complainant has replied that he might have got it written by someone else. This supports the defence of accused that when he signed Ex.P1, 5 and 6, they were blank.

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These factors also create doubt as to the

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veracity of complainant’s case. PW-2 Chikkahanumappa is no other than the brother-in-law of complainant, from whom accused claim to have borrowed hand loan of

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Rs.25,000/- and issued Ex.P1, 5 and 6 when they were blank except his signature. Though complainant claim that when the loan transaction took place, apart from PW-2 Chikkahanumappa, one Srinivas was also present and Ex.P5 and 6 are written by one Gopalaswamy, he has not chosen to examine them. Their evidence would have supported his case as they are not related to him, especially when PW-2 Chikkahanumappa is related to complainant and the accused is claiming that Ex.P1, 5 and

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6 were given to PW-2 Chikkahanumappa.

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During his cross-examination, the complainant has admitted that thrice he has presented the cheque for encashment. It is relevant to note that the subject cheque is dishonoured on the ground that no such account was in existence and it has come in the evidence of PW-2 that the account of accused was closed during 1995. The complainant is not having any explanation as to why he presented the cheque thrice, when the subject cheque was dishonoured on account of closure of account. He has

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stated that on first two occasion, the bank did not issue any endorsement and therefore he had to present it again. If the bank failed to issue endorsement, he could have pursued the matter and got the endorsement.

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The fact that subject cheque was printed prior to 2000 also supports the contention of accused that it was issued during 1999. Though the complainant was not having any control over the accused, issuing the cheque of the year 1999, at least he ought to have persuaded and insisted upon him to issue latest cheque. Though the complainant has claimed that accused is known to him since his childhood, he has stated that he do not know the phone number of accused which appears to be unnatural and it supports the contention of accused that complainant is a total stranger to him.

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On the other hand, the accused has lead evidence to show that at the relevant point of time when he has allegedly borrowed loan from the complainant, he was engaged in his work. The evidence of PW-2 prove that

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the cheque leaf in question is printed prior to 2000. As held by the Hon'ble Supreme Court in APS forex , unless and until the complainant prove his financial capacity, the burden would not shift on the accused.

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The last leg of arguments of learned counsel for accused is that the cheque in question is drawn on Canara Bank, Sidlaghatta branch and it is presented by the complainant through Pragati Gramina Bank, Hoskote and therefore the Addl. chief Metropolitan Magistrate, Bengaluru had no territorial jurisdiction to decide the dispute and the complainant ought to have filed complaint at Hoskote. In this regard he has relied upon the decision of the Hon'ble Supreme Court in bridge M/s Bridgestone India Ltd. , wherein the Hon'ble Supreme Court has held that in the light of amendment to Section 142 (2) (a) of N.I Act, it is the Court within whose territorial jurisdiction cheque is presented and dishonoured, which is having the *jurisdiction to decide the dispute. As rightly submitted by the learned counsel for accused when the complainant has

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Corrected vide Chamber order dated 27.03.2024

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failed to prove the allegations against accused on merit,

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no purpose would be served by remanding the case to the jurisdictional Court to decide the dispute once again.

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Though the Sessions Court has rightly come to

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the conclusion that allegations against accused are not proved, it has erred in directing the accused to pay compensation in a sum of Rs.30,000/- to complainant. To that extent the revision petition filed by the accused succeeds. However, the appeal filed by the complainant is liable to be dismissed and accordingly the following:

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ORDER

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(i) Appeal filed by the complainant under

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Section 378(4) of Cr.P.C. is

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dismissed.

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(ii) The Criminal Revision Petition filed by the accused under Section397 r/w Section 401 of Cr.P.C. is allowed.

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(iii) The impugned judgment and order of