Allowed

Mrs Komala S P v. Mrs Asha L @ Asha Chethan Kumar

Karnataka HC11 Sept 2024CRL.A/199/2024

Case brief

AI extract

What is this about?

The High Court allowed the criminal appeal filed by the complainant challenging the acquittal of the accused. The Court held that the accused failed to rebut the presumption under Section 139 of the NILA regarding a legally enforceable debt arising from a sale agreement and thus restored the trial court's conviction.

What did the court decide?

The criminal appeal was allowed; the judgment of acquittal was set aside; the trial court's judgment of conviction and sentence were restored.

Mrs Komala S P Vs Mrs Asha L @ Asha Chethan Kumar — Cheque Dishonour | Karnataka HC (2024)

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1 - NC: 2024:KHC:37109 CRL.A No. 199 of 2024

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 11^TH DAY OF SEPTEMBER, 2024

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BEFORE

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THE HON'BLE MRS JUSTICE M G UMA CRIMINAL APPEAL NO. 199 OF 2024 (A)

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BETWEEN:

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MRS. KOMALA S.P. AGED ABOUT 34 YEARS, D/O. SRI. SRINIVASAPURA PRAKASH, RESIDING AT NO.36/1, 2^ND FLOOR, 11^TH CROSS, 1^ST MAIN, 1^ST STAGE, INDIRA NAGAR, BANGALORE - 560 038

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Digitally signed by SWAPNA V Location: high court of karnataka

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…APPELLANT (BY SRI.SANDESH J CHOUTA SR.AD.FOR SRI. ACHAPPA P.B., ADVOCATE)

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AND:

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MRS. ASHA L. @ ASHA CHETHAN KUMAR, AGED ABOUT 36 YEARS, W/O. MR. CHETHAN KUMAR M.U. R/AT NO.14, KHB COLONY, NANDINI LAYOUT, BENGALURU - 560 096 ALSO HAVING HER ADDRESS AT C/O. PURPLE TREE UNISEX SALOON, NO 33, CBI MAIN ROAD, R.T. NAGAR, BENGALURU - 560 032

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…RESPONDENT (BY SRI. ANANDA GANGENURA .S., ADVOCATE)

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THIS CRL.A IS FILED U/S 378(4) OF CR.P.C. PRAYING TO SET ASIDE THE JUDGMENT PASSED IN CRL.A.NO.25319/2022 ON THE FILE OF LXXII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, AT MAYOHALL, BENGALURU AND CONSEQUENTLY UP HOLD THE JUDGMENT PASSED IN C.C.NO.51657/2019 AND DIRECT THE RESPONDENT TO PAY DOUBLE THE CHEQUE AMOUNT AS PROVIDED UNDER THE NEGOTIABLE INSTRUMENTS ACT.

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THIS CRL.A, COMING ON FOR FURTHER HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MRS JUSTICE M G UMA

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ORAL JUDGMENT

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The appellant being the complainant in CC No. 51657/2019 on the file of the learned XXXIII Additional Chief Metropolitan Magistrate, Bengaluru, (herein after referred to as Trial Court) is impugning the judgment dated 17.08.2023 passed in Crl.A.No.25319/2022 on the file of the learned LXXII Additional City Civil & Sessions Judge, Bengaluru, (herein after referred to as First Appellate Court) acquitting the accused for the offence punishable under Section 138 of Negotiable Instruments Act (for short 'the NI Act') by setting aside the judgment dated 05.11.2022 passed by the Trial Court convicting the accused for the above said offence.

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For the sake of convenience, the parties shall be

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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 filed the private complaint in P.C.R.No.50890/2019 against the accused before the Trial Court, alleging commission of the

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offence punishable under Section 138 of NI Act. It is the contention of the complainant that she along with her partner was running an Unisex Saloon in the name and style as "Purple Tree". The accused joined the saloon and showed interest in investing in the business. She entered into an agreement with the complainant and her partner to purchase the parlour for a total consideration of Rs.68 Lakhs. On 24.02.2018, a sale receipt was also executed in that regard. Subsequently, the parties have agreed to sell the business for consideration of Rs.56 Lakhs and an agreement was entered into on 03.08.2018. Towards payment of the consideration amount, the accused had issued several cheques as referred to in the agreement, out of which, two cheques bearing No.073776 dated 01.10.2018 for Rs.10 Lakhs and the other cheque bearing No.073777 dated 01.10.2018 for Rs. 9 Lakhs were presented for encashment. The same came to be dishonored as payment stopped. In the meantime, the accused had sent an email on 03.10.2018 taking untenable defence and also asserting that she had issued stop payment instructions to her banker. Accordingly, the complaint was lodged by the complainant with the police on 04.10.2018. The accused was summoned by the police and both the parties

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have agreed to settle the dispute amicably, where the accused agreed to pay Rs.5,50,000/- even though, she was liable to pay Rs.29 Lakhs.

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It is contended that the accused had not even paid

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the said amount of Rs.5,50,000/- which was agreed before the police and therefore, the complainant had issued legal notice dated 27.11.2018, informing that the cheques referred to above will be re-presented for encashment, if she fails to make the payment. In spite of that, the accused had not paid the agreed amount and therefore, the cheques in question were presented for encashment, which were again dishonored as payment stopped. The complainant issued legal notice informing the accused regarding dishonor of the cheques and calling upon her to repay the same. The accused instead of paying the cheque amount had sent an untenable reply on 05.12.2018. Thereby, she has committed the offence punishable under Section 138 of NI Act. Accordingly, the complainant requested the Trial Court to take cognizance of the offence and to initiate legal action.

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The Trial Court took cognizance of the offence and

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summoned the accused. The accused appeared before the Trial

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Court and pleaded not guilty. The complainant examined herself as PW-1 and got marked Ex.P-1 to P-9 in support of her contention. The accused has denied all the incriminating materials available on record. But she has not chosen to lead any oral evidence in support of her defence. She got examined herself as DW-1 and got marked Ex.D-1 to D-16 in support of her defence.

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The Trial Court after taking into consideration all these materials on record came to the conclusion that the complainant was successful in proving the guilt of the accused beyond reasonable doubt. Accordingly, the accused was convicted for the offence punishable under Section 138 of NI Act and she was sentenced to pay a fine of Rs.21,50,000/- . Being aggrieved by the same, the accused has approached the First Appellate Court, by preferring the appeal i.e., Crl.A.No.25319/2022. The First Appellate Court on re-appreciation of the materials on record, formed an opinion that the accused is successful in rebutting the presumption

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under Section 138 of NI Act and therefore, she is entitle for acquittal. Being aggrieved by the impugned judgment of

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acquittal passed by the First Appellate Court, the complainant is before this Court.

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Heard Sri Sandesh J Chouta, learned Senior Advocate for Sri. Achappa P.B, learned counsel for the appellant and Sri. Ananda Gangenura. S, learned counsel for respondent. Perused the materials including the Trial Court records.

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Learned Senior Advocate for the complainant contended that it is not in dispute that the complainant is the owner of the business establishment. The accused had agreed to purchase the business along with the stock and the fixtures. It is also not in dispute. Ex.D-2 is the agreement, admittedly entered into between the complainant, her partner and the accused, where under, the accused had agreed to purchase the business establishment for a total consideration of Rs.56 Lakhs. Ex.D-2, which is dated 03.08.2018 refers to the mode of payment of consideration of Rs.56 Lakhs. There is reference to two cheques, which are subject matter of this complaint for Rs.10 Lakhs and Rs.9 Lakhs respectively dated 01.10.2018. Therefore, those cheques were the post dated cheques issued on 03.08.2018, when the agreement to sell came to be executed.

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Learned Senior Advocate submits that as per the

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recitals of the admitted agreement to sell - Ex.D-2, only after realization of the sale proceeds by honoring the cheque, the accused was entitled for the possession of the business. But since the accused was working under the complainant in the business, she took over the possession of the business for which, the complainant had not objected to. As per Ex.D-2, the documents relating to the business were supposed to be handed over to the accused only after realization of the amount mentioned in the cheques. Further, learned Senior Advocate contended that as per Clause-7, the vendor had a right to cancel the agreement, subject to terms, but the purchaser had no such right to unilaterally cancel the agreement. The ownership of the business was agreed to be transferred on realization of the cheque amount. But admittedly, the accused had not honored the cheques referred to above, which are for Rs.10 Lakhs and Rs.9 Lakhs respectively as she had issued stop payment instructions to her banker.

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Learned Senior Advocate further submitted that the accused had sent an email dated 03.10.2018 produced as per Ex.D-3, expressing her willingness to cancel the agreement to

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sell only on the ground that the complainant had not handed over the documents relating to the business. But even as per the agreement, the accused was not entitled for receiving the documents unless she pays the entire amount agreed under the agreement. Moreover, she had no right to unilaterally cancel the agreement.

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Learned Senior Advocate further submitted that in the email - Ex.D-3 the accused categorically admitted that she is in possession of the business. She contended that she has incurred loss of Rs.7 Lakhs and claimed compensation for the same with interest. There is no basis for making such a demand. On receipt of the email dated 03.10.2018, where the accused made baseless allegations and threatened to cancel the agreement, the complainant had filed the complaint with the police on 04.10.2018 as per Ex.D-4. It is stated that the occupation of the business premises by the accused is unauthorized and illegal and demanded to return the possession of the business. However, in the police station due to compulsion, the complainant agreed to receive Rs.5,50,000/instead of Rs.29 Lakhs from the accused and to settle the dispute. The accused had also issued a letter, which is part of

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Ex.D-5, which is also dated 04.10.2018 undertaking to pay the amount of Rs.5,50,000/- on or before 10.11.2018. Admittedly, even the said amount is not paid by the accused till date. Therefore, the complainant had sent an email dated 27.11.2018 as per Ex.P-10 calling upon the accused to make the payment and also notified that 2 cheques will be re-presented for encashment within 2 days. However, there was no reply to the said notice and therefore, the cheques were re-presented for encashment on 30.11.2018, which came to be dishonored on 01.12.2018 as payment stopped.

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Learned Senior Advocate submitted that the complainant had issued the legal notice as per Ex.P-5 dated 11.12.2008 notifying the accused regarding dishonor of the cheques and calling upon to pay the cheque amount. The accused had not replied to the said notice, but on the other hand to the notice Ex.P-10 dated 27.11.2018, she had issued the reply as per Ex.P-7 taking specific defence. Even as per the defence taken in Ex.P-7 - the reply notice, the accused admitted entering into an agreement - Ex.D-2 on 03.08.2018 and she agreeing to pay Rs.56 Lakhs. She also admitted issuance of the cheques in question towards part payment of the consideration.

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She further admitted the possession of the business and contended that she had suffered loss in the business. A defence was taken that the tenancy was not attorned in favour of the accused and therefore, she is not liable to honor the cheque. Learned Senior Advocate submitted that even as per terms of the agreement attornment of tenancy was only after realization of the cheque amount and not before. Under such circumstances, there is no valid defence taken by the accused even in the reply notice.

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Learned Senior Advocate submitted that even during cross examination of PW-1, nothing has been elicited from her to disbelieve the existence of legally recoverable debt. In the statement of the accused recorded under Section 313 of Cr.PC, there is mere denial of the incriminating materials. The accused had never stepped into the witness box, but filed the affidavit, which is not permissible in law. Learned Senior Advocate submitted that no such affidavit could be filed by the accused either under Section 313 or even under Section 145 of NI Act. No permission was sought by the accused to file such an affidavit at the stage of 313 statement. Therefore, the affidavit filed by the accused cannot be looked into for any purpose. He

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placed reliance on the decision of the Hon'ble Apex Court in Mandvi Cooperative Bank Limited v/s Nimesh B Thakore¹

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in support of his contention that it is only the complainant is authorized to file the affidavit in lieu of examination in chief in a complaint under Section 138 of NI Act, but no such authority is vested with the accused.

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Learned Senior Advocate further submits that even if the affidavit filed by the accused is to be taken into consideration, there is no valid defence. The only defence raised in the affidavit is that there is no attornment of tenancy and the documents were not handed over in her favour. Even as per the terms of the admitted document Ex.D-2, the attornment of tenancy and handing over the documents were only after realization of the cheque amount.

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Learned Senior Advocate further submits that as

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per terms of Ex.D-2, there is an arbitration clause. Even if the accused had any grievance about the recitals in Ex.D-2, she could have invoked the arbitration clause. But she had never

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1 (2010) 3 SCC 83

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invoked arbitration clause, seeking appointment of the

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arbitrator.

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Learned Senior Advocate submitted that during cross examination of PW-1, it is elicited from the witness that there was limited liability partnership entered into between two partners as per Ex.D-6. Ex.D-6 is not a registered document as required under law and therefore, the same cannot be looked into. Further no such defence was taken by the accused in any of the notices issued by her prior to the cross examination of PW-1. Further more Ex.D-2 executed by both the partners, who are parties to Ex.D-6 and under such circumstances, the accused cannot have any defence in that regard.

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Learned Senior Advocate contended that Ex.D-9 is

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the notice issued by the owner of the premises to the complainant, terminating the tenancy. Except issuing this notice, no further steps were taken by the owner to terminate the tenancy of the complainant. Therefore, it cannot be the defence that could be taken by the accused to withhold payment.

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Learned Senior Advocate referring to the reasoning assigned by the Trial Court contended that it has properly appreciated the oral and documentary evidence on record and had arrived at a right conclusion. Since it is a well reasoned judgment to convict the accused, the same could not have been interfered with by the First Appellate Court. The First Appellate Court, without assigning valid reasons, formed an opinion that the accused is successful in rebutting the presumption which is not only perverse but it is patent illegality committed by the First Appellate Court.

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Learned Senior Advocate contended that the defence taken by the accused that she had cancelled the agreement in question cannot be accepted as a legal defence, since as per Section 31 of Specific Relief Act, 1963, the accused is not permitted to unilaterally cancel the agreement. Even if the accused wanted to cancel the agreement she should have approached the Civil Court, seeking the said relief. Admittedly, the accused has not approached the Civil Court seeking declaration that Ex.D-2 is a void document.

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Learned Senior Advocate placed reliance on the decision of the Co-ordinate Bench of this Court in Duggatti Matada Nagaraj v/s Danappa & Ors² to contend that the Coordinate Bench of this Court had reiterated the position of law that there cannot be unilateral cancellation of the agreement, as the same is void or voidable as the case may be, in view of Section 31 of Specific Relief Act. Thus learned Senior Advocate for the complainant contended that when the accused admitted the agreement - Ex.D-2 and its terms, issuance of the cheques marked as Ex.P1 and P2, it is also admitted that the cheques were dishonored as payment stopped and the accused had not paid the cheque amount, she has committed the offence. On admission of issuance of cheque by the accused with her signature, the presumption under Section 139 of NI Act would arise. The burden shifts on the accused to rebut the presumption under Section 139 of NI Act. The accused had never stepped in to the witness box to speak about her defence and no legal defence was taken by her. Therefore, she failed to rebut the legal presumption. Under such circumstances, the accused is liable for conviction. Hence, he prays for setting aside

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2 RSA No.738/2007 DTD 19.04.2024

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the impugned judgment of acquittal passed by the First Appellate Court and convict the accused by restoring the judgment of conviction passed by the Trial Court in the interest of justice.

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Per contra , learned counsel for the respondent opposing the appeal submitted that admittedly the business is a partnership firm and a Limited Liability Partnership agreement as per Ex.D-6 was entered into. Under such circumstances, the complainant alone was not entitled to enter into Ex.D-2. According to the learned counsel for the respondent, the complainant had played fraud on the accused and obtained the documents. He submits that the suit O.S.No.797/2022 is filed before the Civil Court for recovery of the damages. Learned counsel submits that since the complainant had not handed over the documents nor handed over the possession of the business, she was entitled to cancel the agreement and accordingly cancelled the agreement. Therefore, there was no legally recoverable debt to prosecute the accused. The First Appellate Court on proper appreciation of the materials on record acquitted the accused, which do not call for any interference by this Court. Accordingly, he prays for dismissal of the appeal.

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In view of the rival contentions urged by learned

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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 First Appellate Court suffers from perversity or illegality and calls for interference by this Court?"

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

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REASONS

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It is the specific contention of the complainant that

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she had entered into the agreement as per Ex.D-2 with the accused, where under the complainant, her partner and the accused have agreed to sell/purchase the business of Unisex Saloon in the name and style of 'Purple Tree' for a consideration of Rs. 56 Lakhs. The recitals in Ex.D-2 disclose that the accused agreed to pay Rs.56 Lakhs to the complainant as recited in clause No.2 i.e., by way of cash and cheque. There is reference to the cheques - Exs.P-1 and 2 in this admitted document and issuance of the cheques - Exs.P-1 and 2 is categorically admitted by the accused. It is also admitted that the cheques

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Exs.P-1 and 2 were dishonored as payment stopped. The accused admits receipt of the legal notice, where the complainant had notified the accused that the cheques in question were dishonored as payment stopped.

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It is pertinent to note even prior to presentation of the cheques for encashment, the complainant had issued the legal notice as per Ex.P-10 notifying the accused that the cheques will be presented for encashment. The accused admittedly issued reply dated 05.12.2018 marked as per Ex.P7, taking the specific defence admitting the agreement Ex.D-2, where under she agreed to pay consideration of Rs.56 Lakhs. It is pertinent to note that the accused admits being in possession of the business and contends that she had suffered loss in running the business.

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According to the defence taken by the accused in Ex.P-7, there was no attornment of tenancy and the documents were not handed over by the complainant to the accused. But as per clause No.6 of the agreement EX.D-2, the accused is entitled to receive the documents and attornment of tenancy only after realization of the amount mentioned in the cheque

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and not before that. When admittedly, the cheques were not honored, such defence could not have been taken by the accused. As per clause No.7 of Ex.D-2, it is only the vendor who had the right to cancel the agreement. No such right was reserved in favour of the purchaser - accused to cancel the agreement. As per clause No.10, the ownership of the business was agreed to be transferred only the realization of the cheque amount. Under such circumstances, the contention taken by the accused that she has cancelled the agreement since there was no attornment of tenancy or not handed over the documents or that she has suffered loss cannot be accepted as a probable defence to avoid prosecution for the offence under Section 138 of the NI Act.

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When the accused with her eyes wide open enters into the agreement as per Ex.D-2, she will be bound by the terms of the same. The accused was not authorized to unilaterally cancel the agreement. Admittedly, the accused had not approached the Civil Court as required under Section 31 of Specific Relief Act, seeking cancellation of agreement Ex.D2. Even though the learned counsel for the respondent contended that the accused had filed the suit O.S. No. 797/2022, the same

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was 3 years after filing the complaint and that too the relief claimed in the said suit is only for recovery of the amount by way of damages from the complainant and not for declaration that Ex.D-2 is either void or voidable or for cancellation of the same.

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When the accused admits execution of Ex.D-2, she is bound by the terms of the agreement and the defence that there was no attornment of tenancy by the complainant in favour of the accused or that the documents pertaining to the business were not handed over to the accused and therefore, she has issued stop payment instructions are not the valid defence as the accused had admitted the terms of Ex.D-2, according to which, all these procedures have to be completed only after realization of the amount mentioned in the cheque towards consideration payable to the complainant.

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The accused had filed an affidavit at the stage of recording his statement under Section 313 of Cr.PC. But he never treated it as his evidence nor tendered himself for cross examination. Learned counsel for the appellant placed release

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on Mandvi Cooperative (supra), wherein the Hon'ble Apex

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Court held in paragraph Nos. 46, 47 and 48 as under:

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"46 . On this issue, we are afraid that the High Court overreached itself and took a course that amounts to taking over the legislative functions. On a bare reading of Section 143 (sic Section 145) it is clear that the legislature provided for the complainant to give his evidence on affidavit and did not provide for the accused to similarly do so. But the High Court thought that not mentioning the accused along with the complainant in sub-section (1) of Section 145 was merely an omission by the legislature that it could fill up without difficulty. Even though the legislature in their wisdom did not deem it proper to incorporate the word “accused” with the word “complainant” in Section 145(1), it did not mean that the Magistrate could not allow the accused to give his evidence on affidavit by applying the same analogy unless there was a just and reasonable ground to refuse such permission.

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47. There are two errors apparent in the reasoning of the High Court. First, if the legislature in their wisdom did not think “it proper to incorporate a word ‘accused’ with the word ‘complainant’ in Section 145(1)….”, it was not open to the High Court to fill up the self-perceived blank. Secondly, the High Court was in error in drawing an analogy between the evidences of the complainant and the accused in a case of dishonoured cheque. The case of the complainant in a complaint under Section

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138 of the Act would be based largely on documentary evidence.

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48. The accused, on the other hand, in a large number of cases, may not lead any evidence at all and let the prosecution stand or fall on its own evidence. In case the defence does lead any evidence, the nature of its evidence may not be necessarily documentary; in all likelihood the defence would lead other kinds of evidences to rebut the presumption that the issuance of the cheque was not in the discharge of any debt or liability. This is the basic difference between the nature of the complainant's evidence and the evidence of the accused in a case of dishonoured cheque. It is, therefore, wrong to equate the defence evidence with the complainant's evidence and to extend the same option to the accused as well."

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When Section 145 of NI Act do not permit the

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accused to file such an affidavit, the accused is not entitled to rely on such affidavit. Even if the affidavit is to be taken into consideration, the defence raised in the same are not available to the accused in view of the fact that the accused had entered into an agreement as per Ex.D-2 and the defence taken by the accused is against the recitals found in Ex.D-2. Moreover the accused had never tendered herself for cross examination on the defence taken by her.

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It is contended by the learned counsel for the respondent that Ex.D-8 is the notice addressed by the complainant to the owner of the premises to attorn the tenancy in favour of the accused and to return the advance amount. Ex.D-9 is the reply given by the owner dated 27.12.2018, denying to attorn the tenancy in favour of the accused. Admittedly, the landlord had not taken any action either for eviction of the complainant or the accused and no proceedings are initiated for possession of the premises. Moreover, when the complainant had undertaken to attorn the tenancy in favour of the accused as per terms of the Ex.D-2, these are all the subsequent events that are taken place after dishonor of the cheque and cause of action that arose in favour of the complainant to initiate legal action under Section 138 of NI Act.

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During cross examination of PW-1, she categorically admitted the documents referred to above including Ex.D-2 and sending of the mail. She admits Ex.D-1, Ex.D-10, Ex.D-11 and Ex.D-12. The First Appellate Court mislead itself to acquit the accused even though no probable defence was taken by the accused.

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In view of the discussions held above, I do not find any justification for the defence taken by the accused or to accept the same as a probable defence raised by the accused for instructing her banker to stop payment of the cheque, which was issued towards legally enforceable debt. Under such circumstances, it is to be held that the accused had failed to rebut the legal presumption under Section 139 of NI Act and hence, liable for conviction.

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I have gone through the impugned judgment of conviction passed by the Trial Court. It has taken into consideration the oral and documentary evidence and also the position of law with proper prospective and proceeded to form an opinion that the complainant is successful in proving the guilt of the accused for the offence punishable under Section 138 of NI Act beyond reasonable doubt. I do not find any illegality in the same. Hence, I am of the opinion that the impugned judgment of acquittal passed by the First Appellate Court is liable to be set aside and the judgment of conviction passed by the Trial Court is to be restored.

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Accordingly, I answer the above point in the

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affirmative and 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 of acquittal dated 17.08.2023 passed in Crl.A.No. 25319/2022, on the file of the learned LXXII Additional City Civil & Sessions Judge, Bengaluru, is hereby set aside.

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(iii) Consequently, the accused is convicted by restoring the judgment of conviction and order of sentence passed by the Trial Court vide judgment dated 05.11.2022 passed in C.C.No.51657/2019 on the file of learned XXXIII Additional Chief Metropolitan Magistrate, Bengaluru.

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Send back the Trial Court records along with copy of the judgment to the Trial Court for information and needful action i.e., to secure the presence of the accused and to issue conviction warrant.

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Sd/(M G UMA) JUDGE

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SPV: List No.: 2 Sl No.: 1

Mrs Komala S P v. Mrs Asha L @ Asha Chethan Kumar

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Mrs Komala S P v. Mrs Asha L @ Asha Chethan Kumar

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