The Andhra Pradesh High Court upheld the acquittal of the accused under Section 138 of the Negotiable Instrument Act and held that though there was no dispute about the factum of dishonour of cheque, the complainant has to establish that it was issued towards discharge of a legal enforceable debt and the evidence on record would not at all prove all those aspects in the present case.

Brief Facts:

The accused joined as a subscriber in one of the Chits conducted by the complainant in Chit Group for the chit value of Rs.1,00,000/- payable in 25 monthly instalments. The accused paid some instalments, participated in the auction and became the highest bidder and agreed to forego a sum of Rs.36,500/- and received prize money of Rs.63,500/- from the complainant but he did not pay the instalments to the complainant in spite of repeated requests and demands except some instalments and on the demand of complainant officials, accused issued a cheque towards part payment of chit due to the complainant but when the same was presented for encashment it was dishonoured with an endorsement ‘Exceeds Arrangement’. The complainant got a legal notice issued to the accused to make the payment due under the cheque on the receipt of which the accused issued another cheque towards part payment but it was also dishonoured with an endorsement of ‘Exceeds Arrangement’ after which the complainant issued a notice to the accused but the accused never paid the amount nor sent any reply after which a case was filed against the accused under Section 138 of the Negotiable Instruments Act where the magistrate found the accused not guilty of an offence under Section 138 of NI Act and the present appeal has been filed against this order.

Contentions of the Applicant:

The learned counsel appearing on behalf of the petitioner contended that the judgment of the trial court was not sustainable under law and facts and the learned Magistrate erroneously held that there is no legally enforceable debt and that the evidence on record would prove the alleged offence as such Appeal against the accused may be allowed.

Contentions of the Respondent:

The learned counsel appearing on the behalf of respondent contended that the complainant did not file an account copy before the trial Court to show the amount due by the accused and the suit filed by the complainant before the learned I Additional Senior Civil Judge, Kakinada was decided by holding that the amount due was only Rs.25,000/- and, if that be the case, issuance of cheque in the manner as alleged is highly doubtful.

Observations of the Court:

The court stated that there is no dispute that when the complainant filed a Suit before the learned Additional Senior Civil Judge, seeking a huge amount, it was decided that only an amount of Rs.25,000/- was due by the accused to the complainant company and The averments in the complaint that accused paid some installments as on the date of participating in the auction and after becoming successful bidder, he paid some installments is nothing but vague.

The court observed that Ex.P-7 discloses that if a subscriber commits default consecutively for three installments, the complainant had every cause of action to terminate the chit agreement and to recover the amount in a lump sum and it is not understandable as to why the complainant kept quiet without availing the legal remedies when the accused committed default for three consecutive installments and under the circumstances, it is the duty of the complainant to connect Ex.P-1 with that of a legally enforceable debt.

It was further stated that the judgment of the Civil Court is binding on the Criminal Court and it is quite clear that the claim of the complainant before a competent Senior Civil Judge claiming the huge amount of Rs.75,000/- was disbelieved by holding the amount due was only Rs.25,000/ and it is doubtful as to whether accused could have issued Ex.P-1 for a sum of Rs.75,000/, so important link is missing in the evidence to connect Ex.P-1 with that of a legally enforceable debt pertaining to the chit transaction. It was stated that though there was no dispute about the factum of dishonor of cheque. Still, the complainant has to establish that it was issued towards discharge of a legally enforceable debt and the evidence on record would not at all prove all those aspects in the present case.

The decision of the Court:

The court dismissed the appeal, concluded that the complainant miserably failed to prove the offence under Section 138 of the NI Act against the respondent beyond a reasonable doubt and upheld the impugned order.

Case Title: M/s. Kakinada Chit Funds (P) Ltd v. Sri Chukkala Satyanarayana & anr.

Coram: Hon’ble Mr. Justice A.V. Ravindra Babu

Case No.: CRIMINAL APPEAL No.853 OF 2007

Advocate for the Applicant: Mr. N. Siva Reddy

Advocate for the Respondent: K. Kanaka Raju

Read Judgment @LatestLaws.com

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