M/S Shriram Transport Finance Co. Ltd. Vs Simon Correa — Arbitration | Karnataka HC (2025)

M/S Shriram Transport Finance Co. Ltd. Vs Simon Correa — Arbitration | Karnataka HC (2025)

What the court decided

AI extract

Outcome

Dismissed

Issue for consideration

Whether the judgment of acquittal dated 15.09.2015 passed by the JMFC-V, Mangalore in C.C.No.1426/2014 under Section 138 of the NI Act contains any error or illegality warranting interference in this criminal appeal under S.378(4) CrPC. +2 more

Court's answer

On re-appreciation of the entire evidence on record, the Court found no error or illegality in the trial Court's judgment of acquittal and accordingly dismissed the appeal.

Ratio / Principle

Non-production of any challan issued to the accused for receipt of the Rs.9,10,000/- cheque, left unexplained by the complainant, creates reasonable doubt as to the accused's issuance of the cheque as alleged.

Key takeaways

Exhibit P9 account statement disclosed neither receipt of the disputed cheque nor its dishonour for insufficient funds; in the absence of such entry it is difficult to accept the complainant's case.ratio¶45
DW1-Simon Correa deposed that he had borrowed a loan of Rs.11,00,000/- from the complainant company and was repaying the same.ratio¶45
At the time of lending, the complainant company had obtained five cheques, and the accused did not issue the cheque in dispute.ratio

Detailed headnote1 paragraphs

Acquittal under S.138 NI Act upheld. Criminal appeal u/S.378(4) CrPC by M/S Shriram Transport Finance Co. Ltd. against acquittal dt.15.09.2015 (JMFC-V, Mangalore, C.C.No.1426/2014) of Simon Correa for dishonour of cheque No.493710 dt.14.07.2014 for Rs.9,10,000/- ('funds insufficient'). On re-appreciation, G Basavaraja J. found: (i) no challan for receipt of the cheque was produced and the omission was unexplained, creating reasonable doubt about its issuance; (ii) Ex.P9 account statement showed neither receipt of the disputed cheque nor its dishonour; (iii) DW1 deposed he borrowed Rs.11,00,000/-, was repaying it, five cheques had been taken at disbursal, the cheque in dispute was not issued and arrears were only two instalments; (iv) PW1 admitted maintenance of remittance/disbursement accounts. The trial Court had drawn adverse inference u/S.114(g) Evidence Act, 1872 for non-production of documents, relying on Gopal Krishnaji Ketkar v. Mohamed Haji Latif, AIR 1968 SC 1413. The Court further noted the complainant's arbitral award dt.04.04.2016 (Arbitration Case No.1644/2014) stood set aside u/S.34 Arbitration and Conciliation Act in Arbitration Suit No.18/2016 with finality unchallenged, and a fresh arbitration notice dt.19.05.2025 (Sole Arbitrator V. Paul Das) revealed suppression of material facts and want of clean hands. Finding no error or illegality in the acquittal, the appeal was dismissed.

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CRL.A No. 1241 of 2015

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13^TH DAY OF NOVEMBER, 2025

BEFORE

THE HON'BLE MR. JUSTICE G BASAVARAJA CRIMINAL APPEAL NO.1241 OF 2015

BETWEEN:

M/S SHRIRAM TRANSPORT FINANCE CO. LTD. HAVING ITS REGISTERED OFFICE AT NO.123, ANGAPPA NAICKEN STREET, MYLAPORE, CHENNAI-600004 WITH ITS DIVISIONAL OFFICE AT MANGALORE AND BRANCH OFFICE AT SURATKAL, MANGALORE-575011 REP. BY ITS MANAGER (LEGAL) MR. NAGABHUSHAN M.C. S/O CHIKKARANGAIAH AGED ABOUT 39 YEARS.

…APPELLANT

(BY SRI. M. J. ALVA, ADV.)

AND:

SIMON CORREA S/O MR. FELIX CORREA AGED ABOUT 57 YEARS NO.3, 48/5 (1) YESU KRIPA, GANDHI NAGAR, KUNJATBAIL, KAVOOR, MANGALORE-575105

…RESPONDENT

(BY SRI. H. PAVANA CHANDRA SHETTY, ADV.)

THIS CRIMINAL APPEAL IS FILED U/S.378(4) CR.P.C PRAYING TO SET ASIDE THE JUDGMENT OF ACQUITTAL DATED 15.09.2015 PASSED BY THE JMFC-V, MANGALORE, D.K. IN C.C.NO.1426/2014 - ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE P/U/S 138 OF N.I. ACT.

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CRL.A No. 1241 of 2015

THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 14.10.2025 AND COMING ON FOR "PRONOUNCEMENT OF ORDERS" THIS DAY, THE COURT, DELIVERED THE FOLLOWING:

CORAM: HON'BLE MR. JUSTICE G BASAVARAJA

CAV JUDGMENT

This Criminal Appeal by the Appellant-Finance Company is against the Judgment of Acquittal dated 15^th September, 2015 passed in CC No.1426 of 2014 by the JMFC-V, Mangalore, Dakshina Kannada (for short "the trial Court") acquitting the respondent/accused for the offence punishable under Section 138 of Negotiable Instruments Act, 1881 (for short "NI Act").

Sri M. J. Alva, learned Counsel appearing for the appellant submits that the complainant has proved the essential ingredients to attract evidence under Section 138 of NI Act. The account extract is also produced. As per the account extract, there was due of Rs.9,10,000/- from the accused for which the accused has issued the cheque. The defendant has not placed any material to rebut the presumption under Section 138 of NI Act. However, the trial Court has not considered the same and acquitted the accused which is not sustainable. To substantiate his submissions, he has relied on the following decisions:

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T. VASANTHAKUMAR v. VIJAYAKUMAR - 2015(7) SCJ 130;

RAJESH JAIN v. AJAY SINGH - (2023)10 SCC 148;

R. VIJAYAN v. BABY AND ANOTHER - 2012(4) SCJ 500;

BIR SINGH v. MUKESH KUMAR - AIR 2019 SC 2446

As against this, Sri H. Pavanachandra Shetty, learned

counsel appearing for the respondent, would submit that the trial Court has properly appreciated the evidence on record in accordance with law and facts. He would submit that the complainant has initiated arbitration proceedings against the respondent. The learned Arbitrator has passed the award and the same was challenged by the respondent under Section 34 of Arbitration and Conciliation Act in Arbitration Suit No.18 of

The same was allowed and the award passed by the Arbitrator was set aside. The appellant has not challenged the

same and hence it reached finality. The subject matter of the Arbitration Suit No.18 of 2016 and the subject matter of the present appeal, are one and the same. Memo is filed by the learned Counsel for the respondent to show that even after setting aside of the arbitral award, again, another arbitration notice has been issued. The Notice is also produced. Learned

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CRL.A No. 1241 of 2015

Counsel submits that absolutely, there are no materials to interfere with the impugned Judgment of acquittal. To substantiate his argument, he has relied on the following decisions:

M.S. NARAYANA MENON ALIAS MANI v. STATE OF KERALA AND ANOTHER (2006)6 SCC 39;

CRIMINAL APPEAL NO.868 OF 2008 DECIDED ON 15^TH DECEMBER, 2011 RENDERED IN THE CASE OF P.B. JAYAPRAKASH RAI v. SAMSON TEVENCE AND ANOTHER

In reply, learned counsel for the appellant would submit that initiation of arbitration proceedings will not bar to initiate proceedings under Section 138 of NI Act.

I have examined the materials placed before this Court. It is the case of the complainant that the complainant is a Limited Company incorporated under the Companies Act, 1956 and the complainant company is a Non-baking Finance Company engaged in the business of financing on commercial vehicles, machineries, equipments under the schemes of hypothecation, hire-purchase as well as leasing of vehicles. It is stated that the accused has entered into loan-cumhypothecation agreement with the complainant company as per Agreement MNGL40211060005 dated 07^th November, 2021 in

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respect of Telcon Ex.200 Hitachi Machine bearing No.MECH2525 and towards full and final settlement of the loan outstanding in connection with the same loan the respondent had issued cheque No.493710 dated 14^th July, 2014 for Rs.9,10,000/- drawn on Mangalore Catholic Co-operative Bank Ltd., Hampanakatta Branch, Mangalore. When the cheque was presented for encashment, the same was dishonoured with bank endorsement "funds insufficient". Thereafter, the complainant Company got issued legal notice on 1^st August, 2014 through Advocate to pay the cheque amount within fifteen days of receipt of the said notice. Despite service of notice, the accused deliberately and intentionally failed to pay the cheque amount. Hence, the company-complainant lodged complaint under Section 138 of Negotiable Instruments Act.

It is the specific case of the complainant that the accused has issued cheque bearing No.493710 dated 14^th July, 2014 for Rs.9,10,000/-. When the accused has issued Cheque for Rs.9,10,000/-, it is the duty of the Complainant Company being a Company registered under Companies Act, to issue challan as to receipt of the cheque for Rs.9,10,000/- and also to enter the same in the concerned Register as to receipt of cheque. In the instant case, the complainant has not produced

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CRL.A No. 1241 of 2015

any challan issued to the accused for having received the cheque. The complainant has not explained anything as to nonproduction of the challan. Therefore the same will create reasonable doubt as to issuance of cheque by the accused, as alleged by the complainant. The complainant-company has produced Exhibit P9-Account Statement, in which also, the complainant company has not disclosed as to the receipt of disputed cheque. If really, the accused had issued the disputed cheque to the complainant as alleged by the complainant, the Complainant Company ought to have mentioned the same in the account statement Exhibit P9 that the Company has received the disputed cheque and thereafter, the Company should have shown that the cheque was dishonoured by the bank for insufficient funds. But the complainant had not done so. In the absence of such entry, it is difficult to accept the case of the complainant. Further, DW1-Simon Correa, has clearly deposed in his evidence that he has borrowed loan of Rs.11,00,000/- from the Complainant Company and he was repaying the same. The agents of the Complainant Company were recovering the loan amount. At the time of lending loan, the Complainant Company has obtained five cheques. The accused has not issued the cheque in dispute and he was in

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arrears of only two instalments. During the course of crossexamination of PW1, he has clearly admitted that the complainant-Company has maintained the account as to the remittance and disbursement of the loan amount.

The learned Counsel for the respondent has produced the copy of the judgment passed in Arbitration Suit No.18 of 2016 which is between the complainant and the accused, in which the learned District Judge, has observed as under:

" 12. Coming to the merits of the case, the plaintiffs have produced the certified copy of the order in C.C.1426/2014. The perusal of the entire judgment of the Criminal Court shows that the legally enforceable debt was not proved by defendant No.1 and there was no account extract which was produced by defendant No.1 which would have been a conclusive evidence. Para-19 of the judgment shows that only the gist of the accounts was produced but not the entire details of the account. It was also noticed that some agents of the defendant No.1 had approached the plaintiff for recovery of the instalments and those instalments were paid but they were not reflected in the accounts of the defendant No.1. This contention of the plaintiffs was sufficiently probabilised before the criminal court which resulted in acquittal of the plaintiff No1. Thus the criminal court had come to the conclusion that there was no such dues worth Rs. 9,10,533/- and therefore the plaintiff was absolved from the criminal liability."

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CRL.A No. 1241 of 2015

In view of the above observations, the learned District

Judge has set aside the award dated 04^th April, 2016 passed by the Arbitrator in Arbitration Case No.1644 of 2014. The learned Counsel for the respondent has also filed memo along with the copy of the notice issued by the Complainant Company to the accused on 19^th May, 2025, which reveals that the Sole Arbitrator Mr. V. Paul Das, has issued notice to the accused stating that the accused shall not send any letter directly to the Arbitrator. The counsel for the respondent along with Memo has also produced copy of the notice dated 19^th May, 2025

issued by Sri V.Paul Das, Advocate and Arbitrator. The subsequent proceedings initiated by the complainant Company reveals that the Complainant Company has suppressed the material facts and filed complaint against the accused. The complainant-Finance Company has not approached the Court with clean hands. The trial Court has properly appreciated the evidence on record in accordance with law and facts. The trail Court, relying upon the judgment of Hon'ble Supreme Court in the case of GOPAL KRISHNAJI KETKAR v. MOHAMED HAJI LATIF reported in AIR 1968 SC 1413, has held that adverse inference can be drawn against the complainant Company for non-

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production of documents under Section 114(g) of Indian Evidence Act, 1872.

On re-appreciation of the entire evidence on record, I do not find any error/illegality in the judgment of acquittal. Hence, I proceed to pass the following:

O R D E R

Appeal dismissed.

Sd/(G BASAVARAJA) JUDGE

lnn