M/S A M K Traders vs M/S Shreeji Agro Industries
2021 Latest Caselaw 4884 Kant

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

  DATED THIS THE 26 T H DAY OF NOVEMBER, 2021

                      BEFORE

THE HON'BLE MR. JUSTICE SREENIVAS HARISH KUMAR

CRIMINAL REVISION PETITION NO.298 OF 2018

BETWEEN:

1. M/s AMK Traders
   Represented by its
   Proprietor Sri Arvind M G
   Office at No.1-9-22
   Azad Nagar, Station Road
   Raichur - 584 101

2. Arvind M G
   Proprietor
   Aged about 38 years
   M/s AMK Traders
   Office at No.1-9-32
   Azad Nagar, Station Road
   Raichur - 584 101
                                           Petitioners
(By Sri G.Balakrishna Shastry, Advocate)

AND:

M/s Shreeji Agro Industries
Plot No.214/5
Raichur Growth Centre
Yeganoor village
KIADB Industrial Area
Hyderabad Road, Raichur
Represented by its partner
Sri Himanshu
                                       ...Respondent
(By Sri S. Basavaraj, Advocate)
                                    :: 2 ::



       This Criminal Revision Petition is filed under
Section 397 read with Section 401 of Cr.P.C. praying
to   set-aside        the    judgment         dated     29.12.2017       in
Crl.A.No.296/2017             passed        by   the    Court    of   LXVI
Additional City Civil and Sessions Judge, Bengaluru,
confirming       the        judgment         dated     27.01.2017,       in
C.C.No.1474/2016 on the file of the XLII ACMM,
Bengaluru be dismissed and this Crl.R.P. be allowed
with costs throughout.

       This     Criminal      Revision        Petition    having      been
heard and reserved on 15.11.2021, coming on for
pronouncement this day, the Court pronounced the
following:

                                   ORDER

This revision petition is filed by the accused

in Criminal Appeal No.296/2017, on the file of the

LXVI Additional City Civil and Sessions Judge,

Bengaluru City. The respondent prosecuted the

accused for the offence under Section 138 of

Negotiable Instruments Act ('N.I.Act' for short), as

three cheques issued by the second accused on

behalf of first accused were dishonored for

insufficiency of funds. The learned ACMM :: 3 ::

convicted the accused by his judgment dated

27.01.2017; then the accused preferred an appeal

to the Sessions Court, which, by its judgment

dated 29.12.2017, confirmed the judgment of

ACMM. Hence this revision petition. The parties

are referred to with respect to their position in the

trial Court.

2. The facts in brief are as follows:

The first accused is proprietorship concern of

second accused. The respondent is a partnership

firm involved in the business of selling rice and its

commodities. On 18.11.2013, there came into

existence a Memorandum of Understanding (MoU)

between the accused and the complainant

according to which, the accused would introduce

the buyers of rice to the complainant and get

commission from the buyers. Two of the eleven

conditions of MoU stipulate that the accused would

be the guarantor/surety for every transaction :: 4 ::

between the seller and the buyer and that in case

the buyer defaults in paying the bill amount i.e.,

purchase money, the same can be recovered from

the guarantor if the first party seller does not

receive a cheque or instrument from the buyer,

however the seller has discretion to proceed

against either the buyer or guarantor. The MoU

being in force, the accused introduced a

partnership firm, namely, M/s. Tanz Inc to the

complainant. M/s. Tanz Inc started buying rice

from the respondent, and relating to one

transaction of buying rice, Tanz Inc became a

defaulter. The same being brought to the notice

of accused No.2, he issued three cheques, each for

Rs.17,65,125/- to the complainant to hold them as

security for the payment to be made by M/s. Tanz

Inc. The complainant presented these cheques

and as they were dishonored for insufficiency of

funds in the bank of the accused, the complainant

initiated action under Section 138 of N.I.Act. It is :: 5 ::

pertinent to mention here that the complainant

also initiated action against M/s Tanz Inc for

dishonor of five cheques issued by it and that

complaint was dismissed after trial on the ground

that demand notice issued to M/s Tanz Inc was not

valid.

3. For convicting the accused, the trial

Court has assigned the reasons that the second

accused being the proprietor of first accused does

not dispute his liability as a guarantor in view of

MoU, that he admits the cheques issued by him,

but has failed to rebut the presumption available

under Section 139 of N.I.Act in favour of

complainant. Its further conclusions are that

according to Ex.D.1, the accused issued three

cheques in favour of the complainant. In Ex.D.1,

it is written that the complainant could present the

cheques for encashment with prior intimation to

him if the complainant fails to recover money from :: 6 ::

M/s. Tanz Inc. Referring to Ex.D.3, copy of the

judgment in C.C.No.6576/2015, a proceeding

under Section 138 of N.I.Act initiated by the

complainant against M/s Tanz Inc, the trial Court

has further held that since the case against M/s

Tanz Inc has been dismissed, the complainant

could not recover money from M/s Tanz Inc.

Regarding prior intimation to be given to accused

as mentioned in Ex.D.1, the trial Court has held

that it is not mentioned therein that prior

intimation must be given in writing before taking

action under Section 138 of N.I.Act, that anyway

the complainant issued notice as per Ex.P.14, and

that the accused received it and came to know

that the complainant had presented the cheques

for payment, but the accused did not make any

effort to make payment. On this premise the trial

Court rejected the defence and convicted the

accused.

:: 7 ::

4. In the appeal, the Sessions Court

confirmed the findings of the trial Court and it is

not necessary to refer to those details.

5. The main thrust in the argument of Sri

G.Balakrishna Shastry for the accused is that

though the accused issued the cheques to the

complainant, they were not issued for discharging

any liability; the accused was a middleman

between the complainant and M/s Tanz Inc. The

MoU clearly stipulates that the liability of the

accused arises only if payment is not made or

cheque is not issued by the buyer. Since M/s Tanz

Inc issued the cheques, the liability of the accused

does not arise. Moreover in Ex.D.1, it is clearly

written that the complainant should give prior

intimation to the accused before presenting the

cheques. But no intimation was given. The

answer of PW1, i.e., the complainant that he orally

intimated the accused is a self serving testimony.

:: 8 ::

In the legal notice, Ex.P.14, it is not stated that

the complainant presented the cheques by giving

prior intimation. The trial Court's conclusions are

thus erroneous.

6. Sri S.Basavaraj argued that the liability

of the accused being the guarantor is coextensive

with the liability of M/s Tanz Inc. MoU is not

disputed, issuance of cheques is not disputed and

likewise dishonor of cheques issued by M/s Tanz

Inc is also not disputed. The complainant's money

was not paid. Ex.D.1 does not say that written

information must be given. The complaint against

M/s Tanz Inc was dismissed, and therefore the

complainant did not receive the money due to him.

Both the Courts below have taken consistent view

against the accused. Therefore the revision

petition is to be dismissed.

7. Both the counsel have raised interesting

question on facts, Legal position that the liability :: 9 ::

of the accused being the guarantor is not

debatable. The second accused admits to have

issued cheques when it was brought to his notice

that M/s Tanz Inc did not pay the price money.

But it is also not disputed that M/s Tanz Inc

subsequently issued five cheques, and they too

were not honoured for want of sufficient balance in

its bank account. It appears that the complainant

initiated action under Section 138 of N.I.Act after

initiating action against M/s Tanz Inc. The

complaint against M/s Tanz Inc was dismissed by

the trial Court holding that the demand notice was

invalid, be that as it may, the question here is

whether the complainant could have proceeded

against the accused in view of a specific clause in

the MoU and a recital in Ex.D.1.

8. Ex.P.18 is the MoU, its clause 8 recites

as under:

:: 10 ::

"If Buyer (Debtor) defaults in paying Bill amount, the amount recoverable shall be recoverable from the second party, if no cheques or other instrument is received from buyer (Debtor), but this will be the discretion/will of the seller/creditor he can proceed against anyone of them for recovery through second party and shall is liable."

9. It is not disputed that M/s. Tanz Inc

issued five cheques. And because of this, one

possible inference that can be drawn based on

Clause 8 of MoU is that the complainant cannot

recover money due to him from the accused, and

at the same time, latter part of the stipulation

entitles the complainant to proceed against the

accused at his discretion. Despite this

interpretation being possible, it cannot be said

that the complainant gets unfettered right to take

action against the accused under Section 138 of

N.I.Act. Here comes the interpretation of Ex.D.1,

a letter issued by the accused to the complainant, :: 11 ::

which is also not disputed. The second para of

Ex.D.1 reads:

"If Shreeji Agro Tech Industries, Raichur legally fails to recover money from M/s. Tanz Inc..............., then Shreeji Agro Tech Industries can intimate me well in advance before encashing the cheques in the Bank."

10. The evidence on record shows that the

complainant, having received Ex.D.1, did not take

any objection to the condition imposed on it. It is

not the evidence of PW1 that he did not agree to

this condition, rather he has answered in the cross

examination that he orally intimated about

presentation of cheques. This is nothing but a self

serving testimony, for if really such an oral

intimation had been given, he would have stated

so in the demand notice issued to the accused as

per Ex.P.14. And in Ex.P.15, the reply issued by

the accused to the complainant, it is very clearly

stated that prior intimation was not given and :: 12 ::

thereby the complainant committed breach of trust

by not holding the promise. That means, the

complainant presented the cheques without giving

prior intimation to the accused. This makes all the

difference in fixing the liability on the accused

with respect to the cheques in question. As per

Clause 8 of MoU, the complainant having received

five cheques from M/s. Tanz Inc and having taken

action against it, which was though under Section

138 of N.I.Act, but purportedly for the money due

to it, the liability of the accused as per terms of

MoU did not arise and the accused could not have

been prosecuted. The MoU fastens a civil liability

on the accused. Although dishonour of cheques

issued by the accused attracts action under

Section 138 of N.I.Act, such action in the facts and

circumstances, was permitted only in terms of

letter, Ex.D.1.

:: 13 ::

11. Another aspect to be mentioned here is

that by a separate judgment pronounced today,

the appeal filed by M/s Shreeji Agro Tech

Industries against M/s. Tanz Inc has been allowed

and the latter has been convicted.

12. For the above reasons, I find that this

revision petition deserves to be allowed, and

judgments of the appellate Court and the trial

Court, set-aside against the accused for the

offence punishable under Section 138 of the

Negotiable Instruments Act. Therefore, the

complaint, C.C.No.1474/2016 is dismissed. The

petitioners/ accused 1 and 2 are acquitted of the

offence under Section 138 of the Negotiable

Instruments Act.

Sd/-

JUDGE

Kmv/-