Allowed

Shri a Mohan Das v. Shri Himanshu Gupta

Karnataka HC22 Nov 2024CRL.A/135/2023

Case brief

AI extract

What is this about?

Complainant's appeals against acquittal in two cheque dishonour cases arising from an MOU to refund site purchase money. Holding that only the drawer of the cheque is liable under Section 138 NI Act even if acting for a company, and that security cheques attract presumption, the High Court convicted the accused and sentenced him to fines with compensation.

What did the court decide?

Acquittals set aside; accused convicted under Section 138 NI Act; fined Rs.3,50,000/- (CC 52483/2019) and Rs.13,00,000/- (CC 50026/2020), default SI one year each; compensation paid to complainant.

Shri a Mohan Das Vs Shri Himanshu Gupta — Cheque Dishonour | Karnataka HC (2024)

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NC: 2024:KHC:47734 CRL.A No. 135 of 2023 C/W CRL.A No. 56 of 2021

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 22^ND DAY OF NOVEMBER, 2024

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BEFORE

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THE HON'BLE MRS JUSTICE M G UMA

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CRIMINAL APPEAL NO. 135 OF 2023 (A)

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C/W

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CRIMINAL APPEAL NO. 56 OF 2021

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BETWEEN:

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Digitally signed by NANDINI B G Location: high court of karnataka

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SHRI. A. MOHAN DAS AGED 71 YEARS SON OF LATE H.S. ARUNACHALAM RESIDING AT: NO.753, FERNS PARADISE DODDANAKUNDI, MARATHAHALLI BENGALURU - 560 037 (BY SRI. PALLAVA .R., ADVOCATE)

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AND:

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SHRI. HIMANSHU GUPTA ADDITIONAL DIRECTOR AND AUTHORIZED SIGNATORY M/S. ESVEEGEE REALTY (GUJARAT) PRIVATE LIMITED RESIDING AT NO.65 LAUGHING WATERS RAMAGONDANAHALLI WHITEFIELD BENGALURU - 560 066

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…COMMON APPELLANT

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…COMMON RESPONDENT

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(BY SRI. GURUSWAMY K.S., ADVOCATE)

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CRL.A.NO.135/2023 IS FILED UNDER SECTION 378(4) CR.P.C PRAYING TO SET ASIDE THE IMPUGNED JUDGMENT AND ORDER OF ACQUITTAL DATED 01.12.2022 PASSED BY THE XXXIV A.C.M.M., MAYO HALL BENGALURU IN C.C.NO.50026/2020; CONVICT THE RESPONDENT/ACCUSED FOR THE OFFENCE PUNISHABLE UNDER

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SECTION138 OF NI ACT AND IMPOSE MAXIMUM SENTENCE OF IMPRISONMENT AND FINE AVAILABLE UNDER LAW.

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CRL.A.NO.56/2021 IS FILED UNDER SECTION 378(4) CR.P.C PRAYING TO SET ASIDE THE IMPUGNED JUDGMENT AND ORDER OF ACQUITTAL DATED 01.12.2020 PASSED BY THE XXXIV ADDL. C.M.M., MAYO HALL, BENGALURU IN C.C.NO.52483/2019 - ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT.

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THESE CRIMINAL APPEALS, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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CORAM: HON'BLE MRS JUSTICE M G UMA

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COMMON ORAL JUDGMENT

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The complainant in CC No.52483 of 2019 and CC No.50026 of 2020 on the file of the learned XXXIV Additional Chief Metropolitan Magistrate, Mayo Hall, Bengaluru, is impugning the judgment dated 01.12.2020 and 01.12.2022 respectively, acquitting the respondent - accused for the offence punishable under Section 138 of the Negotiable Instruments Act (for short 'the NI Act'), holding that the complainant is not successful in proving the guilt of the accused beyond reasonable doubt, has preferred these appeals.

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For the sake of convenience, the parties shall be referred to as per their rank and status before the Trial Court.

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Brief facts of the case are that, the complainant has

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filed the private complaint in PCR No.50217 of 2018 and PCR No.50218 of 2019 against the accused alleging commission of offence punishable under Section 138 of NI Act. It is contended that one M/s ESVEEGEE Realty (Gujarat) Pvt. Ltd., (hereinafter referred to as the 'Company') is engaged in business of real estate and formed residential layout comprising of several sites of different dimensions, by name 'Highlands' in Sy.Nos.58 and 61 of Dadahalli Village, Jayapura Hobli, Mysore Taluk.

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The complainant along with his wife Smt Malathi Mohan was desirous of purchasing site No.19 measuring 2324 sq.ft. and entered into an agreement of sale with the accused on 05.01.2011 by paying the entire sale consideration of Rs.12,66,580/-. The accused represented the said Company and received the consideration amount by executing the agreement dated 05.01.2011. The accused has not executed the sale deed in respect of site No.19, but later during 2016,

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the complainant and his wife came to know that site No.19 agreed to be sold by the accused in their favour was in fact sold in favour of a third party by name Dr.Harsha. When they contacted the accused, he agreed to return the consideration amount paid by them and executed Memorandum of Understanding (MOU) dated 01.06.2018 agreeing to repay the amount and issued 5 post dated cheques as referred to in MOU, towards discharge of legally enforceable debt. When the cheques were presented for encashment, same were dishonored as funds insufficient.

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Two separate legal notices were issued to the accused, one in respect of cheque bearing No.758087 dated 25.10.2018 for Rs.2,90,000/- and another in respect of other 4 cheques bearing No.758083 dated 18.06.2018 for Rs.3,00,000/-, No.758084 dated 25.07.2018 for Rs.3,00,000/-, No.758085 dated 25.08.2018 for Rs.2,00,000/- and No.758086 dated 25.09.2018 for Rs.2,00,000/- calling upon him to pay the

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cheque amount. Both these notices was served on the accused, but in spite of service of notice, the accused has not repaid the cheque amounts nor replied to the notices and

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thereby, he has committed the offence punishable under Section 138 of NI Act.

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The Trial Court took cognizance of the offence in both the cases and registered CC No.52483 of 2019 and CC No.50026 of 2020 respectively and summoned the accused. The accused appeared before the Trial Court and pleaded not guilty. The complainant in CC No.52483 of 2019 examined himself as PW1 and got marked Exs.P1 to P12 in support of his contention. The accused denied all the incriminating materials available on record and examined himself as DW1. In CC No.50026 of 2020, the complainant examined himself as PW1 and got marked Exs.P1 to P16 in support of his contention. The accused denied all the incriminating materials available on record, examined himself as DW1 and got marked Exs.D1 to D15 in support of his defence. The Trial Court after taking into consideration all these materials on record passed the impugned judgments as referred to above and acquitted the accused holding that the complainant has not proved the guilt of the accused beyond reasonable doubt. Being aggrieved by the same, the complainant is before this Court.

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Heard Sri R Pallava, learned counsel for the appellant and Sri K S Guruaswamy, learned counsel for the respondent. Perused the materials including the Trial Court records.

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Learned counsel for the complainant contended that the accused is the authorized signatory and Additional Director of the Company, which formed residential layout in Mysuru and offered to sell site No.19 in favour of complainant. The accused had entered into agreement of sale with the complainant as per Ex.P11 in CC No.52483 of 2019 and as per Ex.P15 in CC No.50026 of 2020 and agreed to sell site No.19 of Highland project for a total consideration of Rs.12,66,580/-. The entire amount was received by the accused. But later, on 30.01.2012, on behalf of the company, the accused sold the said site No.19 in favour of Dr.Harsha. When these facts came

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to the knowledge of the complainant, he approached the accused and demanded back the amount. At that time, it was the accused who entered into MOU dated 01.06.2018 marked as Ex.P12 in CC No.52483 of 2019 and Ex.P16 in CC No.50026 of 2020 undertaking to repay the amount that was due to be paid to the complainant and accordingly issued 5 post dated

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cheques, which are the subject matter of these two complaints. When the cheques were presented for encashment, all the 5 cheques were dishonored and two different legal notices were sent to the accused informing him about dishonor of the cheques and calling upon him to pay the cheque amounts. In spite of that, the accused has not repaid the cheques amount, thereby, committed the offence under Section 138 of NI Act.

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Learned counsel contended that the accused has admitted entering into agreement of sale agreeing to sell site No.19 in favour of the complainant. He also admits entering into MOU and issuing of personal cheques of the accused towards repayment of legally enforceable debt. Either the agreement of sale or MOU relied on by the complainant was never disputed by the accused. The only defence taken by the accused is that, agreement of sale was entered into with the complainant by the accused in his capacity as authorized signatory of the Company and therefore, he is not personally liable to pay the cheque amounts. Learned counsel placed reliance on the decision of the Hon'ble Apex Court in

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Mainuddin Abdul Sattar Shaikh Vs Vijay D Salvi¹ , in

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support of his contention that when the accused has issued his personal cheques towards discharge of legally enforceable debt, he is liable for conviction.

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Learned counsel contended that the Trial Court proceeded to acquit the accused accepting the defence taken by the accused by holding that the Company and its Directors are not arrayed as accused and the accused is only the authorized signatory of the Company and therefore, he is not personally liable for conviction. The impugned judgment of acquittal passed by the Trial Court in both the cases are illegal and perverse and the same are liable to be set aside. Accordingly, he prays for allowing the appeals.

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Per contra, learned counsel for the respondent opposing the appeals submitted that entering into agreement of sale by the accused in his capacity as authorized signatory of the Company is admitted. It is admitted that MOU referred to

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above was entered into between the complainant and the accused. The accused agreed to repay the amount paid by the

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1 (2015) 9 SCC 622

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complainant only on behalf of Company and not in his personal capacity. However as security, 5 cheques were issued on behalf of the Company. But the accused is not personally liable to pay the amount. The Company or its Directors are not made as parties by the complainant. Under such circumstances, the Trial Court has rightly dismissed the complaint.

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Secondly, learned counsel for the respondent contended that legal notice was never served on the accused and therefore, the offence under Section 138 of NI Act is not complete. On that count also, the Trial Court is right in acquitting the accused. Accordingly, he prays for dismissal of the appeal.

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In view of the rival contentions urged by learned counsel for both the parties, the point that would arise for my consideration is:

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"Whether the impugned judgment of acquittal passed by the Trial Court suffers from perversity or illegality, which calls for interference by this Court?"

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My answer to the above point is in the 'Affirmative' for the following:

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REASONS

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The contention of the complainant that he had entered into an agreement of sale as referred to above with the accused being the authorized signatory of the M/s ESVEEGEE Realty (Gujarat) Pvt. Ltd., is not in dispute. The accused has not disputed that he had received Rs.12,66,580/- from the complainant as consideration for site No.19 formed in Highland project. It is the contention of the accused that he had received the amount and entered into agreement of sale for and on behalf of the Company, but not in his individual capacity. It is also admitted that the accused had agreed to repay the consideration amount of Rs.12,66,580/- and MOU as referred to above was executed. Again it is the contention of the accused that he had indeed executed MOU, but it was in his capacity as authorized signatory of the Company and not in his individual capacity. A specific defence was taken by the accused that 5 cheques referred to by the complainant in two different complaints were issued by the accused only as security, but not towards discharge of any debt or liability. Under such circumstances, it is the contention of the accused that the Company and its Directors should have been arrayed

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as accused and in their absence, offence under Section 138 of NI Act is not made out.

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The complainant examined himself as PW1 and got marked relevant documents. Similarly, accused also stepped into the witness box and put forth his defence. He got marked Exs.D1 to D15 in CC No.50026 of 2020. Even though voluminous documents are relied on by both the parties, the only dispute that arise for consideration is as to whether the accused is liable to honor the cheques, which were issued under the MOU towards discharge of legally enforceable debt payable to the complainant by the Company.

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Learned counsel for the appellant places reliance on the decision of the Hon'ble Apex Court in Mainuddin Abdul Sattar Shaikh (supra), wherein the Court considered a similar situation and held in paragraphs 9, 11 and 13 as under:

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"9. From a bare reading of Section 138 of the NI Act, the following essentials have to be met for attracting a liability under the section. The first and foremost being that the person who is to be made liable should be the drawer of the cheque and should have drawn the cheque on an account maintained by him with a banker for payment of

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12 -

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any amount of money to another person from out of that account for discharge in whole or part, of any debt or other liability. We see that from the bare test of the section it has been stated clearly that the person, who draw a cheque on an account maintained by him, for paying the payee, alone attracts liability.

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11. About the liability under Section 138 of the NI Act, where the cheque drawn by the employee of the appellant Company on his personal account, even if it be for discharging dues of the appellant Company and its Directors, the appellant Company and its Directors cannot be made liable under Section 138. Thus, we observe that in the abovementioned case, the personal liability was upheld and the Company and its Directors were absolved of the liability. The logic applied was that the section itself makes the drawer liable and no other person. This Court in P J Agro Tech Ltd., VS Water Base Ltd. [SCC p.150, para 14] noted as under:

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"14. … An action in respect of a criminal or a quasi criminal provision has to be strictly construed in keeping with the provisions alleged to have been violated. The proceedings in such matters are in personam and cannot be used to foist an offence

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on some other person, who under the statute was not liable for the commission of such offence."

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Going by the strict interpretation of the provision, the drawer which in the present case is the respondent, is liable under Section 138 of the NI Act.

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13. Thus, in the light of the position which the respondent in the present case held, we are of the view that the respondent be made liable under Section 138 of the NI Act, even though the Company had not been named in the notice or the complaint. There was no necessity for the appellant to prove that the said respondent was in charge of the affairs of the Company, by virtue of the position be held. Thus, we hold that the respondent Vijay D. Salvi is liable for the offence under Section 138 of the NI Act."

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(emphasis supplied)

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In view of the above, it is clear that the drawer of the cheques alone will be liable for the offence under Section 138 of NI Act, but not the Company or it Directors, who admittedly not the drawer of the cheques. In other words, even if the accused has issued the cheque as the drawer, for discharge of debt or liability pertaining to the Company he

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being the drawer of the cheques is liable for the offence under Section 138 of NI Act.

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In the present case, admittedly, the Company had not issued any cheques nor its Directors have issued any cheques. Even though the accused has signed the documents as authorized signatory of the Company, the cheques in question which are the subject matter of the complaints were the personal cheques of the accused. It was the accused who was the drawer of the cheques and when the cheques were presented for encashment, all the 5 cheques were dishonored as insufficient funds. Admittedly, the accused has not repaid the cheque amounts. Under such circumstances, the offence under Section 138 of NI Act is complete.

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The other defence taken by the accused is that, he has issued 5 cheques referred to in MOU which are subject matter of the complaints only as security, but not intended to be presented for encashment. This contention cannot be accepted even for a moment. It is now settled position of law that even issuance of blank cheque with signature of the drawer, as security attracts the penal provision under Section 138 of NI Act.

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In this regard, I may refer to the decision of Bir

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Singh Vs. Mukesh Kumar² , where the Court has made the position very clear in paragraphs 34 and 36 as under:

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"34. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence.

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36. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt."

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Learned counsel for the respondent places reliance

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on the decision of the Hon'ble Apex Court in Krishna Janardhan Bhat Vs Dattatraya G Hegde³ , to contend that presumption under Section 139 of NI Act merely raises a presumption in favour of the holder of the cheque that the same has been issued towards discharge of debt or liability, but

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2 (2019) 4 SCC 197

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3 (2008) 4 SCC 54

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the existence of legally enforceable debt is not a matter of presumption under Section 139 of NI Act. But this finding recorded by the Hon'ble Apex Court is already held as not good law. In Rangappa Vs. Sri. Mohan'⁴ , where the Hon'ble Apex Court has made the position of law very clear and held in paragraphs 26 which reads as under:

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"26. In light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant."

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(emphasis supplied)

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4 (2010) 11 SCC 441

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Therefore, the contention of the learned counsel for the accused holds no water.

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Learned counsel for the respondent further

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submitted that legal notices sent by the complainant are not served on the accused. The complainant in CC No.52483 of 2019 produced postal track receipt to show that article is served on the addressee. In CC No.50026 of 2020 the complainant has produced the postal acknowledgment for having served notice, which is as per Ex.P14. As per these documents, notice is duly served on the addressee. Under such circumstances, the contention of the learned counsel for the respondent that address was not complete or that the same was not served on the accused, cannot be accepted. When the address mentioned in the agreement of sale, MOU and also in the complaints presented by the complainant are one and the same, which are found in the legal notice, the contention taken by the accused in that regard is liable to be rejected. Accordingly, it is rejected.

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From the discussions held above, it is clear that the accused had entered into the agreement of sale and accepted

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consideration amount of Rs.12,66,580/as authorized signatory of the Company and also entered into MOU agreeing to repay the said amount to the complainant, issued 5 post dated cheques as referred to in the MOU and all 5 cheques were issued by the accused in his personal capacity, but not on behalf of the Company. Admittedly, cheques were drawn from the personal bank account of the accused, and it was the accused who is the drawer of the cheques. Under such circumstances, when the accused has failed to discharge his burden by rebutting the legal presumption under Section 139 of NI Act, he is liable for conviction.

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I have gone through the impugned judgment of acquittal passed by the Trial Court. The Trial Court proceeded to acquit the accused solely on the ground that the Company and its Directors are not made as parties. It has not taken into consideration the settled proposition of law that it is only the drawer of cheque is liable for conviction under Section 138 of NI Act. When admittedly Company or its Directors are not the drawer of cheques, the findings recorded by the Trial Court is perverse and illegal and the same is liable to be set aside. Accordingly, I answer the above point in the affirmative.

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REGARDING SENTENCE

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Heard learned counsel for the appellant and learned counsel for the respondent on imposition of sentence.

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Learned counsel for the respondent submitted that maximum leniency may be shown while sentencing the accused.

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Learned counsel for the appellant submitted that the amount of Rs.12,66,580/- was paid under the agreement of sale dated 05.01.2011 and cheques were issued in the year 2018. In all, the complainant has paid Rs.12,90,0000/- to the accused. Even if the said amount was to be invested in any of the nationalized banks, it would have fetched interest of about Rs.6,00,000/-. Coupled with legal expenses, the accused is liable for sentence with double the cheque amounts. Accordingly, he prays for imposing maximum sentence.

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On consideration of the materials on record, it is clear that the accused voluntarily issued 5 post dated cheques under the MOU which is an admitted document. However, he has taken an untenable defence that he is not liable for the cheques amount and it was only the Company, which is liable. But the

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Trial Court accepted the said contention and acquitted the accused. Under such circumstances, I am of the opinion that accused is not liable for maximum sentence or substantive sentence. If the accused is sentenced only to pay fine, that would meet the ends of justice.

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Accordingly, I proceed to pass the following:

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ORDER

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(i) The Criminal Appeal is allowed.

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(ii) The judgment dated 01.12.2020 passed in CC No.52483 of 2019, dated 01.12.2022 passed in CC No.50026 of 2020 on the file of the learned XXXIV Additional Chief Metropolitan Magistrate, Mayo Hall Unit, Bengaluru, is hereby set aside.

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(iii) Consequently, the accused is convicted for the offence punishable under Section 138 of NI Act and in CC No.52483 of 2019, the accused is sentenced to pay fine of Rs.3,50,000/- to be paid within eight weeks and in default to pay fine amount, to undergo simple imprisonment for a period of one year. Out of the fine amount, Rs.3,40,000/- to be paid to the complainant as compensation.

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(iv) The accused is convicted in CC No.50026 of 2020, and is sentenced to pay fine of Rs.13,00,000/- to be paid within eight weeks and in default to pay fine amount, to undergo

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