Allowed

Muduganti Srinivas Reddy v. Kotha Venkata Rao and Another

Telangana HC7 Jun 2023CRLP/4922/2014

Case brief

AI extract

What is this about?

Criminal Petition filed under Section 482 CrPC praying to quash proceedings in a private complaint alleging breach of contract and cheque dishonour. The court held that the complaint was filed by the wrong party, the debt was time-barred, and the company involved in the business transaction was not made a party.

What did the court decide?

The Criminal Petition was allowed and the proceedings in C.C. No. 726 of 2013 before the Special Judicial Magistrate, Khammam, were quashed.

Muduganti Srinivas Reddy Vs Kotha Venkata Rao and Another — Money Laundering | Telangana HC (2023)

¶1

HIGH COURT FOR THE STATE OF^{TELANGANA AT HYDERABAD}

¶2

WEDNESDAY,THE SEVENTH^{DAY OF JUNE} TWO THOUSAND AND TWENTY^THREE

¶3

PRESENT

¶4

THE HONOURABLE SMT JUSTICE^{G.ANUPAMA CHAKRAVARTHY}

¶5

CRIMINAL PETITION NO:^{4922 OF 2014}

¶6

Between

¶7

Muduganti Srinivas^Red dy, S/o M.Goverdhan^{Reddy, agedabout 31 yrs Ryo H No.7-2-} 724, Mankamma Thota, Karimnagar, Karirnnar^District.

¶8

...Petitioner/Accused

¶9

AND

¶10

1 Kotha Venkata Rao S/o^{Gurvaiah, Aged about41 yrs. Occ: Business, r/o H'No 6-} 2-104/E, Jammibandapark^{Road, Khammam Town andDistrict} ....ComplainanU1't^ResPondent'

¶11

2 State of Andhra^{Pradesh,, throughPublicProsecutor' High Courtof A-P} ' Hyderabad,

¶12

...ResPondent No.2.

¶13

Petition under Section^{482 of Criminal Procedure Codeprayingthat in the} circumstances statedⁱⁿ the^{Memorandumof Grounds of criminalPetition,the High} courtmaybepleasedtoquashtheC.C'No.T26of20l3onthefileofSpecialJUdicial Magistrate of First Class,^{Prohibition and Excise Court,KhammamDistrict' at} Khammam.

¶14

l.A. NO: 1 OF 2022

¶15

Petitionundersection4S2ofCr.P-Cprayingthatinthecircumstancesstatedin the Memorandum of^{Grounds of Criminal Petition,the HighCourt may be pleasedto} extend the lnterim Stay^{Order dated 28-04-2014 in Crl.M-PNo 4603of 2O14 (1 A No'} 1 ot 2014') in Crl. P. No.^{4922 of 2O'14 until further ordersby this Hon'ble Court}

¶16

l.A. NO: 2 2 3

¶17

Petition under Section^{rB2 of Cr.P C praying that in the circumstances statedin} the Memorandum of^{Groundsof Criminal Petition,theHigh Courtmay be pleased} pleased to Stay of all and further^{proceedings, includingexeculon of N B Ws issued} against the^{petitioner/Accusedin docket orderon 23-3-2023in c.c.No. 709 f 2019on} the file of the^{I Additional Juniorcivil Judge,cum I Additional Metropolitan Magistrate,} Ranga Reddy district^{at L.B.Nagar Pending disposalof the CriminalPetition'}

¶18

l.A NO: 1 oF.2023

¶19

Petitionundersection4S2ofCr.P.Cprayingthatinthecircumstancesstatedin theMemorandumofGroundsofCriminalPetition,theHighCourtmaybepleasedto extendthelnterimstayorderdaled.2a'O4-2o14inCrlMPNo4603of2014(lANo'lof iOf+l i, CAp No.49i2^{of 20'14beyond31-o1-?o23 to until lurther orders by this} Honble Court.

¶20

t.A. NO: 1 OF 2O14^{ICRLPMP. NO:4603 0F201 4l}

¶21

PetitionUndersection4S2ofCr'P.Cprayingthatinthecircumstancesstatedin theMemorandumofGroundsofCriminalPetition,theHighCourtmaybepleaSedto itay att turttrer Proceedings^{in the C.C No.726 of 2013on the file of I Additional}

¶22

Judrcial Magistrate of First class at Khammam including appearance of the petition -.r/accused herein, pending disposal of the above quash petition. l his Petition coming on for hearing, upon perusing the Memorandum of Grounds oF Criminal Petition and upon hearing the arguments of Sri Kiran Reddy Mallaralu, Advocate for the Petitioner and the^{publicprosecutor} (TG) on behalf of the Respondent No.2 and of Sri. V. Brahmaiah Chowdary, Advocate for the Respondent No.1 .

¶23

The Court made the following: ORDER

¶24

HON'BLE SMtr. JUSTICE G. ANUPAMA CHAKRAVARTHY Crl.P.No.4922 OF 2OL4

¶25

ORDER:

¶26

This Criminal Petition is filed to quash all further proceedings in C.C.No.726 of 2013, on the lile of Special Judicial Magistrate of First Class, Prohibition^andExcise Court, Khammam District.

¶27

The brief facts culled out of the complaint are^that the 1"t respondent/complainant lodged a^private complaint under Section 2OO Cr.P.C alleging^{that the} petitioner/ accused is the partner in M/s. Sudershan Enterprises, Secunderabad and he entered^intoan agreement through his Manager, Satish^{Kumar with the} wife of the l"t respondent for supply of^graniterough blocks and received Ern amount of^{Rs.5 lakhs on} 15.06.2007. The petitioner had acknowledged^{ttre debt} through his Manager for Rs.^{10,75,O00/-on 30.04.2010} and on repeated demands of the l"t^{respondenton behalf} of his wife for payment of debt amount,^{the petitioner} issued a cheque on OI.O2.2O13 drawn^{on AndhraBank,} DBHS Extension Counter, Markamma^{Thota Branchr,}

¶28

it* v

¶29

¶30

G,IC, J Crl.P.No.19)2^{ol 20l't}

¶31

Karirnnagar, Karimnagar^{District forRs 3,OO,0OO/-} towards the above^{referreddebt and the Manager of the} petitioner had endorsed^{the same on reverseside of the} agreement dated^{i 5.06.2OO7 - It is further alleged that} the said cheque^{was returne d on 12} 'O2'^{20 13 due to} insufficient funds and^{later, the 1"t respondentissued a} legal notice to thc^{petitioner on 25 'O2} '2013^demanding payrnent of the said^{ch eque amount, but the petitioner} intentionally did not^{receive the said notices' Therefore,} the l"t respondent^{liled the above said complaint'}

¶32

Heard the learned^{counsel for the petitioner and the} learned counsel^for the^{1't respondent'}

¶33

It is the specific contention^{of the leamed counsel} for the petitioner^{that the atlegationsmade against the} petitioner are false and^{conten'ded that the allegeddebt} due is to the wife of^{the complainant but not to the l"t} respondent and^{therefore, there is no legally enforceable} debt between the^{petitioner aldthe complainant' The} allegations made^{in the complaint, the petitioner received} an amount of^{Rs.5 lakhs on 75.06.2007 and cheque was}

¶34

¶35

G.IC. J Crl.?.No.4922 of 201!

¶36

issued on 01.O2.2013 and therefore, he contends that it is a time barred debt. It is further alleged in the complaint that the petitioner entered into an agreement with the complainant through his Manager, Y.Satish Kumar which clearly discloses that the accused had not entered into an agreement with the wife of the l"t respondent. Further, it is contended that Y.Satish Kumar is unknown person to the petitioner and there was no Manager to the petitioner company and therefore, a false complaint has been lodged against the petitioner and prayed to quash the complaint.

¶37

In support of his contentions, learned counsel for the petitioner relied on the following judgments:-

¶38

Milind Shr-tpad. Chandurkar a. Kalim M.Khqn and Anotherr, wherein it is held as follows:

¶39

"18. Section 7 of the Act l88l defines "Payee" as the person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid. Section 8 defrnes "the holder of the cheque" as any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. Section 9 dehnes "holder in due course" as any person who for consideration became the possessor of a cheque if payable to a bearer or the payee or endorsee thereof..

¶40

'^{AIR 2011sc 1588}

¶41

¶42

G,1(',.1 Crl. P.No.1922 of 2011

¶43

Section 138 provrdcs for^{penalties incase of} dishonour of cerlait't chcclucs^{for insufficiencyof} funds in the accounts,^{Hou'cver,exception} contained in clause^{(c) thereof reads as under:}

¶44

"The drawer of such cheque fails to make the payment of the said amount of money^{to the payee} or, as the case may be, to^{the holclcr} in^{due course} of the cheque,^rn itl'rin^{fiftcen days of the receipt of} the said notice.^"

¶45

This Court in Shankar Finance^and Investments v. Statc of Andhra^{Pradesh & Ors.,} (2OO8) 8 SCC 536, dealt u'ith the issue involved herein claborately and hetd that^{wherethe "payee"} is a proprietary concern thc complaint^{can be hled} (i) by the proprietor of the proprietary concern describing himself as the sole^{proprietor of the} "payce"; (ii) the proprietary conccrn describing itself as the sole proprietary concern^{representedby its} proprietor; and (iii) the proprietor or the^proprietary concern represented by thc Attorney^Holderunder the power of attorney executcd by the^sole proprietor.

¶46

However, it shall not be^pe rmissible^{for an Attorney} Holder to file the complaint in^{his own name as if} he was the complainant. He can^{initiatecriminal} proceedings on behalf of thc principal.

¶47

In a case of this nature,^where the^{"payee" is a} company or a sole proprietary concern,^{such issue} cannot be adjudicated upon taking^anyguidance from Section 142 of t!l]e Act 1881 but^{the caseshall} be governed by the general law^{i.e. the Companies} Act 1956 or by civil law u,here an^{individual carries} on business in the name or style other than^his own name. In such a situation,^{he can} sue^{in his} own name and not in trading name, though^others can sue him in the trading name.^{So far as Section} 742 is concerned, a complaint shall^be maintainable in the name of the^"payee", proprietary concern itself or in the name of the proprietor of the said concern.

¶48

¶49

GAC, J Crl.P.No.4922 ol 2014

¶50

In the instant case, it is evident that the hrm, namely, Vijaya Automobiles, has been the payee and that the appellant cannot claim to be the payee of the cheque, nor can he be the holder in due course, unlcss he establishes that the cheques had been issued to him or in his favour or that he is the sole proprietor of the concern and being so, he could also be payee himself and thus, entitled to make the complaint.

¶51

The appellant miserably failed to prove any nexus or connection by adducing any evidence, whatsoever, worth the name with the said firm, namely, Vijaya Automobiles. Mere statement in the affidavit in this regard, is not sufhcient to meet the requirement of law. The appellant failed to^produce any documentary evidence to connect himself^with the said firm. It is evident that the firm had a substantial amount of business as in one^month it sold the dicsel to respondent no.

¶52

I - a single party, for a sum of Rs. 7 lakhs.^The appellant u'ould, in addition, have also been carrying out business with other^persons.

¶53

Thus, a person with such a big business must have had transactions with the bank and must have been a payee of income tax, sales^tax etc.^{Thus, in} such a fact-situation, there would be no dearth^of material which could have been^produced by the appellant to show that he was the sole^{proprietor of} the said [-trm. The appellant failed to adduce^any evidence in this regard, nor made any^attemptto adduce any additional evidence at the^appellate stage, in spite of the fact that the^{respondent is} raising this issue from the initiation of^the proceedings."

¶54

2. Gtrdhari Lal Rathi t. P.T.V,Ramanujdchdri2,

¶55

wherein it is held as follows:

¶56

'z^{zooz(z) AICLR507}

¶57

¶58

¶59

G.,IC, J O l.l'. No.4922^{of 2011}

¶60

a:?,

¶61

"7. Thc allegcd loan r,r'as advanced in^{the year} 1985 and the chequc^{nas issued in thc year 1990.} By the time the chcque^{was issucd,the debt} appears to have been barred^{by limitationbecause} no acknowledgment is alleged Lo^{have been} obtained by the appellant^{from thefirst} respondent-accused before cxpirv^{ol three years} from the date of 1oan. Thus it^{is crystal clearthat} the debt was not legally enforceable^{at the time of} issuance of the cheque and,^{therefore,vide} Explanation to section^1.38 of the^Negotiable Instruments Act, which read s as^under:

¶62

"trxplanation:- Until the debt is legally recoverable the drawer of the cheque car-rnot^{be fastcned with} the liability under section^{138 of thc Act."}

¶63

3. Aneeta Hada vs. Godfather Trauels And^Tours

¶64

Prioate Limlted3 wherein it is^{held as under:-}

¶65

"43. ln view of our aforesaid^{analysis,we arrive at} the irresistible conclusion^{that for maintainingthe} prosecution under Seclion i41 of the^Act, arraigning of a company as an^accusedis imperative. The other categories of offenders^can only be brought in the dragnet on the^touchstone of vicarious liability as the same^{has been} stipulated in the provision^{itself. Wc say so on the} basis of the ratio iaid down.^{in C.V. Parekh (supra)} which is a three-Judge Bench decision.^Thus,the view expressed in Sheoratan Agarwal^(supra) does not correctly lay down the law and, accordingly,^is hereby overruled. The decision in Anil^Hada (supra) is overruled with the qualiher as statedⁱⁿ paragraph.

¶66

37- The decision in Modi Distilleries^{(supra)has to} be treated to be restricted to its^{ownfacts as has} been explained by us hereinabove. Keeping in view the anatomy of the^aforesaid provision, our analysis pcrtaining^{to Section}

¶67

3 (2c 12) 5 scc 661

¶68

¶69

GAC, J Crl.P-No.4922 of 201I

¶70

¶71

¶72

14 1 of the Act would squarely apply to the 200O enactment. Thus a<ljudged, the director could not have been held tiable for the offence under Section 85 of the 2OOO Act. Resultantly, the Criminal Appeal No. 1483 of 2AO9 is allowed and the proceeding against the appellant is quashed. As far as the company is concerned, it was not arraigned as an accuscd. Drgo, the proceeding as initiated in the existing incarnation is not maintainable either against the company or against the director. As a logical sequeter, the appeals are allowed and the proceedings initiated against Avnish Balal as well as the company in the present form are quashed."

¶73

4. Harlhara Krishnan os, J. Thomasn, wherein it is

¶74

held as under:-

¶75

"23. The scheme of the prosecution in punishing under Section 138 of THE ACT .is different from the scheme of the CrPC. Section 138 creates an offence and prescribes punishment. No procedure for the investigation of the offence is contemplated. The prosecution is initiated on the basis of a written complaint made by the payee of a cheque. Obviously such complaints must contain the factual allegations constituting each of the ingredients of the offence under Section 138. Those ingredients are: (1) that a person drew a cheque on an account maintained by him with the banker; (2) that such a cheque when presented to the bank is returned by the bank unpaid; (3) that such a cheque was presented to the bank within a period of six months from the date it was drau,n or within the period of its validity whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made ,within a period of 3O days from the date of the receipt of

o (2018) 13 scc 663

;

G.lL'. .I Crl. P.\ o. J922 of 2011

¶80

the information bv thc^{payeefrom the bal'rk} regarding the return^{of thc chequcas unpaid. It is} obvious from the schemc^{of Se ction i 38 that cach} one o[ the ingredients^{flows from adocumcnl} which evidences the cxistence^{of such an} ingredient. The only^{other ingredient which is} required to be^{proved to establish[he commission} of an offence under^{Section138 is that inspitr:of} the demand notice^{referred to above, the drawer of} the cheque failed to^make the^{paymentwithina} period of 15 days from the date of^{the reccipt of} the demand. A fact^which the^{complainantcan} only assert but not^{prove, the burden would} essentially be on the^{drawer of thc cheque to} prove that he had in fact made the^payment pursuant to the de mand."

¶81

The above^{judgmentsare applicable to the facts and} circumstances of the case.^{It is held that a chequecannot} be issued for a time barred^{debt.Further, itis not} pernissible for a GPA holder to^{file a complaint as if, he} was; the complainant. But in the^{presentcase,there is no} GPr\ at all. Therefore, the^{complaint has to be deemed to} be Jlled by a stranger and^{the sameiS liable to be quashed} because the wife of the^{complainanthas not preferred the} conlplaint, though she was^{proper party to the private} complain-t.

¶82

7 . On the other hand, learned^{counsel for the 1't} respondent contends that^{presumptionunder Section139} of the Negotiable Instruments^{Act, 188 1 prevails as the}

¶83

.-;"{wl

¶84

¶85

GAC\ J Crl.P.No.4922 of 20t l

¶86

¶87

petitioner himself has issued the cheque for the legally enforceable debt and therefore, prayed to dismiss the petition.

¶88

In support of his contentions, he relied on the judgment of the Apex Court report ed in M/s.Kalamcrni Tex & Another a, p. Bd.losubramanians, wherein it is held that the statute mandates that once the signature(s) of an accused on the cheque/ negotiable instrument are established, then these^,reverse onus, clauses become operative.

¶89

9 . The above said judgment is not applicable to the present facts ald circumstances of the case as there is no legally enforceable debt.

¶90

On perusal of the contents of the complaint, it is errident that there are busine.ss transactions between the petitioner and the wife of the l "t respondent. One Mr.Satish Ktunar, who is Tlleged to be the Manager of the pelitioner company has entered into agreement with the wife of the l"t respondent, but, for the reasons best known

5 1zozr1 s scc za:

';;

o t(. J Crl.l'.,\o.J922 ol 20I I

¶95

to thLe complainant, the wife of the^complainant '"vas^not the lrarly in C.C.No.726 of 2013 and^{eventhe complaint} does not disclose that it was filed^{on behalfof his wife as a} GPA holder. Therefore, the complaint itself is^not marntainable as there is no direct legally enforceable^debt betr.r.een the complainant and the^{petitioner.The entire} alleg.ations made in the complaint are against^Satish KurrLar, who is said to be the Manager of the^accused company. Once it is a business transaction,^{the company} has to made as party. Even the private complaint^i.e., C.C.No.726 of 2013 is filed on the narnes of^the indi.riduals but not on the name of the compaly.

¶96

1 1. On perusal of the entire allegations in the^private complaint i.e., C.C.No.726 of 2Q13, it can be^precisedas under:-

¶97

(i) Whether the individuals can file a private complaint without making company as a party, if at all the alleged debt- is taken during the course of business transactions of the company.

¶98

¶99

GAC, J Crl. P-t o.1922 of 2011

¶100

I I i i

¶101

¶102

(ii) whether there is any legally enforceable debt between the accused and complainant i.e, petitioner and the 1"r respondent.

¶103

(iii) Whether the debt is time barred debt as per the allegations made in the complaint.

¶104

Furthermore, the alleged debt is between the petitioner and the wife of the complainant. If at all any complaint has to be liled under Section 138 of NI Act, it is only the wife of the complainant who can prefer the complaint, but not the complainant as there is no legally enforceable debt between the complainant and the petitioner. The complainant can file a complaint if he is a GPA holder. But as stated supra, no GpA has been filed and there is no specific mention about GpA which is alleged to have been given by the wife of the complainant in his favour in order to file a complaint. On these grounds itself, the complaint is liable to dismissed. The date of boriowing the debt to a tune of Rs.S lakhs from the complainant is on 75.06.2002. It is alleged that the Manager, Satish Kumar has entered into an agreement with the wife of the complainant on the said date:

¶105

.,4.}

¶106

¶107

(;.1C. J CrLP.,\o-4922 ttf 20I I

¶108

Subrsequently, on repeated demar-rds, inspite of non payrnent, the Manager has acknowledged the debt on

¶109

30.04.20 I 0 and on further demands, the petitioncr/accused has issued a cheque on Ol.O2.2Ol3. Admittedly, the alleged amount has been received by the petitioner/ accused on 15.06.2OO7. Even, assuming for a morrrent that the cheque has been issued by the petitioner is on 01 .O2.2O73 as per the agreement and if at all money has to be recovered, the limitation is only for three years and in case, if the money is not received within three yearr; and if not demanded through legal notice, it is deerrred to be a time barred debt. Admittedly, a notice was issued on 25.O2.2O 13 for the debt received on 15.Ob.2007.

¶110

Considering the facts that the debt is a time barred debt one, further the company was not made as a party and :urther no proper party has preferred the complaint and there is no legally enforceable debt between the complainant and the accused, this Court is of the

¶111

¶112

G,{C, J Crl.P.No.4922 of 20tl

¶113

t \

¶114

considered view that the proceedings in C.C.No.726 of 2013 are liable to be quashed.

¶115

In the result, this Criminal petition is allowed and the proceedings in C.C.No.726 of 2OI3, on the file of Special Judicial Magistrate of First Class, prohibition and Excise Court, Khammam, is hereby quashed.

¶116

Pending miscellaneous applications, if any, shall

¶117

stand closed

¶118

To,

¶119

Sd/. A.V,S. PRASAD ASSISTANTSEGISTRAR //TRUE COPY// secHPorrrcEn

¶120