Allowed

M/S Vishal Infrastructure v. Mr Akshar K Murthy

Karnataka HC7 May 2024CRL.RP/161/2021

Case brief

AI extract

What is this about?

Division Bench acquitted directors of Vishal Infrastructure for cheque dishonor under NI Act, 1881. Court held that a settlement agreement admitted no dues existed post-share transfer, defeating the presumption of debt liability required for conviction.

What did the court decide?

Petitioners acquitted under Section 138 NI Act; convictions and sentences set aside; bail bonds cancelled; deposits refunded.

M/S Vishal Infrastructure Vs Mr Akshar K Murthy — Company and Corporate | Karnataka HC (2024)

¶1

¶2

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶3

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 07^TH DAY OF MAY, 2024

¶4

BEFORE

¶5

THE HON'BLE MR JUSTICE S RACHAIAH CRIMINAL REVISION PETITION NO. 161 OF 2021

¶6

C/W

¶7

CRIMINAL REVISION PETITION NO. 232 OF 2021

¶8

IN CRIMINAL REVISION PETITION NO. 161 OF 2021

¶9

BETWEEN:

¶10

1 . M/S VISHAL INFRASTRUCTURE NO.1, 225/A, ANUGRAHA APARTMENTS, RUKMINI DEVI COLONY

¶11

“TRINSHANTHI”, 180 WEST MARREDAPALLY SECUNDERABAD - 500 026.

¶12

REP. BY MILIND KUMAR DESHPANDE DIRECTOR,

¶13

AGE 62 YEARS

¶14

2 . MR. MILIND KUMAR DESHPANDE

¶15

DIRECTOR,

¶16

AGE 62 YEARS NO.5, 2^ND MAIN, 4^TH CROSS MICO LAYOUT, AREKERE BANNERGHATTA ROAD BENGALURU - 560 076.

¶17

3 . MS. RANJANA GERA

¶18

AGE 56 YEARS, ADDITIONAL DIRECTOR F-21, BLOCK, F3 LAJPAT NAGAR II NEW DELHI - 110 024.

¶19

2 - CRL.RP No. 161 of 2021

¶20

C/W CRL.RP No. 232 of 2021

¶21

4 . MR. MOHAN PRABHAKAR DESHPANDE

¶22

NO. 68-A, SHIVAJINAGAR

¶23

ADDITIONAL DIRECTOR

¶24

NAGPUR - 440 010

¶25

5 . MR. V KEDARNATH MUDDA AGE 50 YEARS NO.17, SHANKAR NILAYA FFI, 8^TH MAIN, 18^TH CROSS UPPER PALACE ORCHADRS SADASHIVANAGAR BENGALURU - 560 080.

¶26

…PETITIONERS

¶27

(BY SRI. S P KULKARNI, SENIOR ADVOCATE FOR SRI. VASANTHAKUMAR, ADVOATE)

¶28

AND:

¶29

MR AKSHAR K MURTHY S/O B K KRISHNAMURTHY AGED ABOUT 30 YEARS R/AT NO. 274/A 37^TH CROSS, VIII BLOCK JAYANAGAR BENGALURU - 560 070.

¶30

…RESPONDENT

¶31

(BY SRI JACOB ALEXANDER, ADVOCATE)

¶32

THIS CRL.RP IS FILED U/S. 378 (4) OF CR.P.C PRAYING TO SET ASIDE THE ORDER OF CONVICTION AND SENTENCE DATED 12.04.2017 MADE IN C.C.NO.28893/2014 PASSED BY

¶33

¶34

CRL.RP No. 161 of 2021

¶35

C/W CRL.RP No. 232 of 2021

¶36

THE XV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE

¶37

COURT, BENGALURU AND ETC.,

¶38

IN CRIMINAL REVISION PETITION NO. 232 OF 2021

¶39

BETWEEN:

¶40

1 . M/S VISHAL INFRASTRUCTURE NO.1, 225/A, ANUGRAHA APARTMENTS, RUKMINI DEVI COLONY

¶41

“TRINSHANTHI”, 180 WEST MARREDAPALLY SECUNDERABAD - 500 026. REP. BY MILIND KUMAR DESHPANDE DIRECTOR,

¶42

AGE 62 YEARS

¶43

2 . MR. MILIND KUMAR DESHPANDE

¶44

DIRECTOR,

¶45

AGE 62 YEARS NO.5, 2^ND MAIN, 4^TH CROSS MICO LAYOUT, AREKERE BANNERGHATTA ROAD

¶46

BENGALURU - 560 076.

¶47

3 . MS. RANJANA GERA AGE 56 YEARS, ADDITIONAL DIRECTOR F-21, BLOCK, F3 LAJPAT NAGAR II NEW DELHI - 110 024.

¶48

4 . MR. MOHAN PRABHAKAR DESHPANDE

¶49

NO. 68-A, SHIVAJINAGAR

¶50

ADDITIONAL DIRECTOR

¶51

NAGPUR - 440 010

¶52

5 . MR. V KEDARNATH MUDDA

¶53

AGE 50 YEARS

¶54

NO.17, SHANKAR NILAYA

¶55

¶56

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶57

FFI, 8^TH MAIN, 18^TH CROSS UPPER PALACE ORCHADRS SADASHIVANAGAR BENGALURU - 560 080.

¶58

…PETITIONERS

¶59

(BY SRI. S P KULKARNI, SENIOR ADVOCATE FOR SRI. VASANTHAKUMAR, ADVOATE) AND:

¶60

MRS. LALANA MURTHY W/O. B.K.KRISHNAMURTHY AGED ABOUT 55 YEARS RESIDNG AT : NO.274/A 37^TH CROSS, VIII BLOCK JAYANAGAR BENGALURU – 560 070.

¶61

…RESPONDENT

¶62

(BY SRI. JACOB ALEXANDER, ADVOCATE)

¶63

THIS CRL.RP IS FILED U/S. 378(4) OF CR.P.C PRAYING TO SET ASIDE THE ORDER OF CONVICTION AND SENTENCE DATED 12.04.2017 MADE IN C.C.NO.28895/2014 PASSED BY THE XV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE COURT, BENGALURU AND ETC.,

¶64

THESE PETITIONS HAVING BEEN HEARD AND RESERVED ON 07.02.2024, COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, THE COURT MADE THE FOLLOWING:-

¶65

¶66

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶67

ORDER

¶68

These two appeals are arising between the same parties, therefore taken up together for consideration.

¶69

The petitioners herein are the directors of M/s.Vishal Infrastructure Pvt. Ltd. and they have been convicted for the offence under Section 138 of the Negotiable Instruments Act (for short ‘N.I Act’) and they have been sentenced to pay fine of Rs.25,00,000/- in C.C No.28893/2014 and further they have been convicted for the offence under Section 138 of Negotiable Instruments Act and sentenced to pay a fine of Rs.25,00,000/- in C.C No.28895/2014.

¶70

Brief facts of the case:

¶71

The respondents herein are the share holders of the company namely of M/s.Vishal Infrastructure Pvt. Ltd. Mr.Akshar K.Murthy being a complainant in C.C No.28893/2014 had held shares of 18,75,000/-. Smt.Lalana Murthy being another share holder having share of 63,75,000. Both these respondents were eligible to have dividend from the company. Mr.Akshar K.Murthy had to get his dividend worth of Rs.5,62,500/-. The company in order to pay the dividend issued two

¶72

¶73

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶74

cheques for Rs.56,250/- and Rs.5,06,250/-. Similarly Smt.Lalana Murthy was entitled to have the dividend of Rs.19,12,500/-. Accordingly, the company issued two cheques worth of Rs.1,91,250/- and 17,21,250/-.

¶75

When the respondents presented their respective cheques through their bank, both received endorsements as ‘payment stopped by the drawer’. Both have issued separate legal notices regarding dishonor of cheques. Despite notice being received by the petitioners, they have failed to make payment, therefore, complaints came to be registered by the respondents herein before the jurisdictional Magistrate.

¶76

In order to prove their respective cases, Mr.Akshar K.Murthy examined himself as PW.1 and got marked 30 documents as Exs.P1 to P30. Smt.Lalana Murthy examined herself as PW.1 and got marked 30 documents as Exs.P1 to P30. In both the cases, Sri.Milind Kumar Deshpande representing the company examined himself as DW.1 and got marked 7 documents as Exs.D1 to D7 and Exs.D1 to D3 respectively. The Trial Court after appreciating the material on record, convicted the petitioners for the offences stated supra. On appeals

¶77

¶78

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶79

being filed, the Appellate Court dismissed the appeals. Hence these revision petitions.

¶80

Heard Sri S P Kulkarni, learned Senior Counsel for the petitioners and Sri Jacob Alexander, learned counsel for the respondents.

¶81

It is the contention of the learned Senior counsel for the petitioners that both the Courts committed grave error in recording the sentence against the petitioners without following the principles of the Negotiable Instruments Act and also against the evidence on record. Therefore, the conviction is liable to be set aside.

¶82

It is further submitted that neither the company nor the directors were liable to make any payment to the respondents as on the date of the issuance of the cheques, there was no existing debt or liability. It is further submitted that the cheques were issued as security for making payments in the form of dividends. However, the respondents herein have misused those cheques and presented them for encashment in spite of payment having been made to them.

¶83

It is further submitted that the amount mentioned in the cheques do not tally with the books of accounts or

¶84

¶85

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶86

the dividend as declared by the company. When there is a contradiction in respect of the amount, the Trial Court and the Appellate Court should have rejected the complaints as not maintainable. However, both Courts have wrongly held that the petitioners are liable to pay the amount which is erroneous and baseless.

¶87

It is further submitted that the admissions of the respondents in their evidence should have been considered by both the Courts and should have acted upon such admissions, in fact, those admissions are in favour of the petitioners. Having failed to consider the admissions resulted in passing the impugned judgments which is required to be set aside. Making such submission, the learned Senior counsel for the petitioners prays to allow the petitions.

¶88

Per contra, Sri Jacob Alexander, learned counsel for the respondents in both the cases submitted that the cheques which were issued by the company much prior to the settlement agreement arrived at between the Sri.Krishnamurthy and the company. The respondents herein had shares of 18,75,000 and 63,75,000 respectively as per Ex.D1. The said cheques were issued

¶89

¶90

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶91

for making payment of dividends for the year 20102011, 2012-2013 respectively. The dividend declared each year was to be paid to each shareholder on the percentage of shares held in the company.

¶92

It is further submitted that even though the petitioners took the contention that the amounts mentioned in the cheques do not tally with the dividend payable to the respondents, the said contention has already been decided by both the Courts as per the calculation given to the Courts below. Therefore, the said contention need not be answered again as the Revisional Court does not have jurisdiction to re-appreciate the evidence.

¶93

It is further submitted that the petitioners contention that cheques were issued as security and no liability would be fastened to the cheques is concerned, even though the cheques were issued as security, DW.1 admitted the liability regarding making payment as dividend. After the issuance of the cheques, the petitioner company deliberately issued stop-payment instruction to the bank in order to avoid the payment. It is further submitted that even though the petitioner

¶94

10 -

¶95

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶96

contended that the dividend payable to the respondents had been paid, no documents were produced to show that payments were made. In the absence of documentary evidence, mere oral statements regarding payments are made is not sufficient to absolve the liability of the petitioner.

¶97

It is further submitted that the Trial Court and the Appellate Court after having appreciated the oral and documentary evidence on record properly recorded the conviction. No grounds are made out to interfere with the said findings. Therefore, the petitions deserve to be dismissed. Making such submission, learned counsel for the respondents prays to dismiss the petitions.

¶98

Having heard the learned counsel for the respective parties and also perused the findings of the Courts below, it is an admitted fact that the respondents in both cases were shareholders of the company. There was a dispute between Sri.B.K.Krishnamurthy and the present directors of the company, hence, a settlement agreement was made between them on 29.04.2014 as per Ex.P29.

¶99

11 -

¶100

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶101

It is to be noted here that as per the settlement agreement, the respondents herein have signed the said agreement and in the said agreement it is mentioned that ‘receipt of consideration in full relating to the transfer of shares’. However, there is no reference regarding dividends payable on those shares. It is an admitted fact that the respondents herein have sold the shares to the third party for valuable consideration.

¶102

The defence of the accused is that there was no existing debt or liability and neither the company nor directors are liable to pay the amount mentioned in the cheques. In fact, the father and husband of the complainants was one of the directors of the company and he has misused those cheques and presented them for encashment in spite of notice issued by the accused and directed them not to present those cheques for encashment.

¶103

As per Ex.P29 which is termed as a settlement agreement, both these complainants have affixed their signatures and admitted the execution of the said document. The said settlement agreement point No.2 which reads thus:

¶104

12 -

¶105

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶106

“2. Second party hereby confirm the receipt of consideration in full relating to the transfer of 14875000 equity shares to the prospective buyers and nothing is accrue, due either from the buyer or from the company either past or present in whatsoever on such shares.”

¶107

On reading of the above clause of the settlement agreement which clearly indicates that the complainants have sold equity shares to the prospective buyers. According to them, nothing was due either from the buyers or from the company, either past or present in whatsoever on such shares. When the averments of the said agreement clearly indicate that the complainants have no rights to claim any amount in respect of shares which they have sold or transferred, claiming the amount based on the said shares is baseless and liability would not be fastened either to the company or to the directors.

¶108

The evidence of DW.1 clearly indicates that cheque was issued to Krishnamurthy who is none other than the father and husband of the complainants and who was working as one of the directors of the said company. Even if the evidence of DW.1 is considered as true in

¶109

13 -

¶110

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶111

respect of dividends, the said dividend has to be paid to the prospective buyers of the shares of the complainants. In such a way, the accused has successfully rebutted the presumption that the cheques were issued other than the legally recoverable debt or liability, however, the evidence of PW.1 in both cases failed to demonstrate that they are entitled for the legally recoverable debt or liability. Moreover, both the complainants have failed to prove that there was existing debt or liability as on the date of the alleged issuance of the cheques. When the execution of Ex.P29 is admitted by the complainants, clause No.2 has to be accepted as true. Therefore, the complainants are not entitled for any amount mentioned in the cheques. Therefore, I am of the considered opinion that the concurrent findings recorded by the Courts below regarding debt or liability appear to be erroneous and untenable.

¶112

In the light of the observations made above, I proceed to pass the following:-

¶113

(i) The Criminal Revision Petitions are allowed .

¶114

ORDER

¶115

14 -

¶116

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶117

(ii) The judgment of conviction and order of sentence dated 12.04.2017 in C.C.No.28893/2014 passed by the XV Additional Chief Metropolitan Magistrate Court, Bengaluru and the judgment dated 07.12.2020 in Crl.A.No.720/2017 passed by the LVIII Additional City Civil and Sessions Judge, Bengaluru City, Bengaluru (CCH-59) are set aside.

¶118

(iii) The judgment of conviction and order of sentence dated 12.04.2017 in C.C.No.28895/2014 passed by the XV Additional Chief Metropolitan Magistrate Court, Bengaluru and the judgment dated 07.12.2020 in Crl.A.No.719/2017 passed by

¶119

the LVIII Additional City Civil and Sessions Judge, Bengaluru City, Bengaluru (CCH-59) are set aside.

¶120

(iv) The petitioners / accused are acquitted for the offence under Section 138 of NI Act.

¶121

(v) Bail bonds executed, if any, stand cancelled.

¶122

15 -

¶123

CRL.RP No. 161 of 2021 C/W CRL.RP No. 232 of 2021

¶124

(vi) If any deposits are made pursuant to Section 143 of N.I. Act, that may be refunded to the

¶125

accused in accordance with law.

¶126

Sd/JUDGE

M/S Vishal Infrastructure v. Mr Akshar K Murthy

Case brief

What is this about?

What did the court decide?

M/S Vishal Infrastructure v. Mr Akshar K Murthy

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

The State of Karnataka Vs Shubamoy Burman

M. Ravi @ Ravikumar Vs State of Karnataka by

Sri Venaktaramana a G Vs State of Karantaka

Venkat Subbaiah Eranty Vs Puttarangappa

Sri M R Narasimha Murthy Vs M/S Elgi Rubber Company Limited

Mr Ando Paul Vs Mr G Ismail Musliyar