Charanjit Singh Anand S/O Swinder ... vs Mallikarjun S/O Ningappa Goravi
2023 Latest Caselaw 2214 Kant

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                                                              CRL.A No. 100191 of 2018



                                        IN THE HIGH COURT OF KARNATAKA,
                                                 DHARWAD BENCH


                                     DATED THIS THE 13TH DAY OF APRIL, 2023

                                                    BEFORE

                                      THE HON'BLE MR JUSTICE ANIL B KATTI

                                      CRIMINAL APPEAL NO. 100191 OF 2018
                             BETWEEN:

                             CHARANJIT SINGH ANAND
                             S/O. SWINDER SINGH ANAND
                             AGE: 45 YEARS, OCC: BUSINESS,
                             R/O: AMRIT VILLA, 4TH CROSS,
                             DESHPANDE NAGAR,
                             HUBBALLI-580029.                          ...APPELLANT

                             (BY SMT. SEEMA NAIK, ADVOCATE)

                             AND:
          Digitally signed
          by J MAMATHA
          Location: HIGH
J         COURT OF           MALLIKARJUN S/O. NINGAPPA GORAVI
          KARNATAKA,
MAMATHA   DHARWAD
          BENCH,
                             AGE: MAJOR, OCC: BUISNESS,
          DHARWAD.
          Date: 2023.04.13   H.NO.313, RENUKA NAGAR,
          16:48:50 +0530
                             GOKUL ROAD, HUBBALLI-580030.              ...RESPONDENT

                             (BY SHRI DINESH M. KULKARNI, ADVOCATE)

                                                      ***
                                  THIS CRIMINAL APPEAL IS FILED UNDER SECTION
                             378(4) OF CR.P.C., PRAYING TO CALL FOR RECORDS IN
                             C.C.NO.1308/2012 ON THE FILE OF HON'BLE PRINCIPAL CIVIL
                             JUDGE AND JMFC, COURT HUBBALLI AND TO SET ASIDE THE
                             JUDGEMENT AND ORDER OF ACQUITTAL DATED 13.06.2018
                             AND CONVICT THE RESPONDENT/ ACCUSED FOR THE OFFENCE
                             PUNISHABLE    UNDER   SECTION    138  OF    NEGOTIABLE
                             INSTRUMENT ACT.
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                                     CRL.A No. 100191 of 2018



     THIS APPEAL COMING ON FOR FURTHER HEARING AND
THE SAME HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 07.03.2023, THIS DAY, THE COURT, DELIVERED
THE FOLLOWING:

                            JUDGMENT

Appellant/complainant feeling aggrieved by judgment of

acquittal passed by Prl. Civil Judge and JMFC, Hubballi, in

C.C.No.1308/2012 dated 13.06.2018 preferred this appeal.

2. The trial Court by its judgment dated 30.12.2015

convicted the accused and imposed sentence as per order of

sentence. Accused feeling aggrieved by the said judgment of

conviction and order of sentence preferred appeal before the

first Appellate court in Crl.A.No.17/2016. The first Appellate

Court by its judgment dated 27.01.2018 allowed the appeal in

part and remanded the case to trial Court to re-examine the

documents Exs.P.5, 12 and 13 and also for ascertaining

compensation. It is after remand the trial Court by impugned

judgment acquitted the case.

3. Parties to the appeal are referred with their ranks as

assigned in the trial Court for the sake of convenience.

4. The factual matrix leading to the case of

prosecution can be stated in nutshell to the effect that

CRL.A No. 100191 of 2018

complainant is a proprietor of Karnataka Automotive situated at

Harbachan complex, Deshpande nagar, Hubballi, being the sole

distributor for Bharat Springs. Accused is known to complainant

being the businessman and good friend. Complainant in order

to help his friend-accused, from time to time has advanced loan

of Rs.14 lakhs. Accused in discharge of the said debt issued two

cheques of Rs.7 lakhs each bearing Nos.944978 and 944980

drawn on Vijaya Bank, S.M.E., Gokul road, Hubballi. The said

cheques when presented for encashment were returned with

endorsement 'opening balance insufficient' vide bank memo

dated 16.10.2012. Complainant issued demand notice dated

15.11.2012 and the accused did not deliberately receive the

notice which was returned as 'not claimed'. Therefore,

complainant has filed complaint for taking appropriate legal

action against the accused.

5. In response to the summons, accused has appeared

through counsel and contested the case. Complainant in order

to prove his case relied on the evidence of PW-1 and

documents Ex.P.1 to Ex.P.13. Accused relied on his own

evidence as DW-1 and no any documents were marked on his

behalf. The trial Court after having heard arguments of both

CRL.A No. 100191 of 2018

side and on appreciation of evidence on record has acquitted

the accused by judgment dated 13.06.2018.

6. Appellant/complainant has challenged correctness

and legality of the judgment of acquittal passed by trial Court

contending that trial Court has committed serious error in

holding that Ex.P.5 is insufficiently stamped under Section 33 of

the Karnataka Stamp Act and the same is liable to be

impounded. The trial Court has also recorded improper

reasonings in holding that complaint is not maintainable

without impleading proprietorship concern as party to the

proceedings. The trial Court inspite of the documents Exs.P.5,

12 and 13 were being marked without any objection, has

committed serious error in holding that complainant has failed

to prove source of income to advance loan of Rs.14 lakhs to the

accused. The approach and appreciation of oral and

documentary evidence by trial Court cannot be legally

sustained. Therefore, prayed for allowing the appeal and to set

aside the order of the trial Court. Consequently, to convict the

accused for the offence punishable under Section 138 of the

Negotiable Instruments Act (for short 'the N.I.Act').

CRL.A No. 100191 of 2018

7. In response to notice of appeal, accused appeared

through counsel. Heard the arguments of both sides.

8. On careful perusal of oral and documentary

evidence placed on record by the parties, it would go to show

that accused in lawful discharge of duty issued two cheques

dated 06.05.2012 bearing Nos.944978 and 944980 for

Rs.7 lakhs each, drawn on Vijaya Bank, S.M.E., Gokul road,

Hubballi, Ex.P.1 and Ex.P.2. The said cheques were presented

by complainant through his banker SBM, Deshpande nagar,

Hubballi, in October, 2012. The said cheques were dishonoured

vide bank endorsement 'opening balance insufficient' dated

16.10.2012, Exs.P.3 and 4. Accused by letter dated

06.05.2012, Ex.P.5 has admitted that he is due to the cheque

amount and asked the complainant to present the cheque for

collection with prior intimation. Accused has not paid the

amount covered under the cheque and as such, complainant

issued demand notice dated 15.11.2012-Ex.P.6, postal receipt

Ex.P.7 and unclaimed postal cover containing the demand

notice-Ex.P.8.

9. In view of the above referred documents produced

by complainant supported by evidence-PW-1, it will have to be

CRL.A No. 100191 of 2018

held that accused issued two cheques-Ex.P.1 and Ex.P.2 for

lawful discharge of debt and the said cheques were

dishonoured as 'opening balance insufficient' vide bank

endorsement Ex.P.3 and Ex.P.4. Accused has not responded to

the demand notice by paying the amount covered under the

cheque. Therefore, necessary presumption will have to be

drawn in favour of complainant in terms of Section 118 and 139

of the N.I. Act. Thus, complainant has discharged his initial

burden of proving Ex.P.1 and Ex.P.2 were issued for lawful

discharge of debt. Now, it is upto the accused to displace the

initial presumption available in favour of complainant.

10. In this context, it is useful to refer to the judgment

of Hon'ble Apex Court in BASALINGAPPA VS.

MUDIBASAPPA reported in 2019 Cr. R. 639 (SC) wherein it

has been observed and held that:

"Presumption under Section 139 is a rebuttable presumption and onus is on accused to raise probable defence. Standard of proof for rebutting presumption is that of preponderance of probabilities. To rebut presumption, it is open for accused to rely on evidence led by him or accused can also rely on materials submitted by complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn

CRL.A No. 100191 of 2018

not only from materials brought on record by parties, but also by reference to circumstances upon which they rely. It is not necessary for accused to come in witness box in support of his defence. Section 139 imposed an evidentiary burden and not a persuasive burden".

11. In view of the principles enunciated in this

judgment, it is evident that accused to probabilize his defence

can rely on his own evidence or also can rely on material

submitted by complainant. It is not necessary for the accused

to step into the witness box to probabilize his defence.

12. In the present case, accused to probabilize his

defence, apart from relying on his own evidence DW-1, also

relies on the cross-examination of PW-1. The defence of the

accused is that he has not taken any loan of Rs.14 lakhs from

time to time and not issued the cheque Ex.P.1 and Ex.P.2 for

lawful discharge of debt.

13. The trial Court has acquitted the accused on the

following grounds:

i) Complainant has failed to establish source of income to pay Rs.14 lakhs to accused,

CRL.A No. 100191 of 2018

ii) There is no pleading in the complaint regarding borrowing of money from cousins,

iii) Complainant has not shown the loan transaction of accused in income tax returns,

iv) The date, time and place of giving loan not pleaded in the complaint,

v) Ex.P.1 and Ex.P.2-cheques drawn in the name of proprietorship concern and the proprietorship concern is not party to the proceedings,

vi) Ex.P.5 is insufficiently stamped and not admissible which is liable to be impounded.

The above referred grounds referred by trial Court for

acquittal of accused will have to be examined in the light of

defence of accused and material evidence placed on record.

14. Complainant has pleaded in paragraph 4 of the

complaint that in order to help the accused went on paying

hand loan to the accused from time to time and accused has

received Rs.14 lakhs. However, PW-1 in his evidence has

deposed to the effect that he had no cash to give loan to

accused. But, he had borrowed Rs.5 lakhs from his cousin by

name Charanpreeth Singh Chadda and further borrowed Rs.10

lakhs from another cousin by name Ranjithkour Chadda.

CRL.A No. 100191 of 2018

Accused to evidence the said fact produced Ex.P.12 and

Ex.P.13 pass book of Corporation Bank pertaining to CPC and

RKC. In Ex.P.12, there is entry dated 28.11.2011 to show that

Charanpreetsingh Chadda has drawn cheque bearing No.871 in

favour of PW-1 for Rs.5 lakhs. Similarly, in Ex.P.12, there is

entry dated 30.01.2012 regarding withdrawal of an amount of

Rs.5 lakhs by way of cheque bearing No.873. The entry of

withdrawal of Rs.5 lakhs dated 02.01.2012 is found in Ex.P.13.

The trial Court for the reasons recorded in paragraphs 17 to 19

has observed and held that mere withdrawal of the money

found in Ex.P.12 and Ex.P.13 cannot by itself said as sufficient

evidence to hold that the said money was given to PW-1 for

giving loan to accused. Complainant is a business man and an

income tax assessee. As per income tax returns, Ex.P.11 and

the fact that cousins of complainant have drawn the money

Ex.P.12 and Ex.P.13, the said material evidence on record

would go to show that complainant is capable of generating

money to give loan to accused.

15. Learned counsel for appellant/complainant relied on

the judgment of Hon'ble Apex Court in P.RASIYA VS. ABDUL

NAZER AND ANOTHER in Crl.A.No.1233-1235/2022 dated

12.08.2022 wherein the High Court has set aside the

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concurrent finding of both the Courts below on the ground that

complainant has not specifically stated the nature of

transactions and the source of fund. However, the High Court

has failed to note the presumption under Section 139 of the

N.I.Act. As per Section 139 of the N.I.Act, it shall be presumed,

unless the contrary is proved, that the holder of a cheque

received the cheque of the nature referred to in Section 138 for

discharge, in whole or in part, of any debt or other liability.

The presumption under Section 139 of N.I.Act is a statutory

presumption and it has to be rebutted by accused with cogent

evidence on record.

16. Learned counsel for appellant/accused also relied on

another judgment of Hon'ble Apex Court in ROHITBHAI

JIVANLAL PATEL VS. STATE OF GUJARAT AND ANOTHER

in Crl.A.No.508/2019 disposed of on 15.03.2019 wherein it has

been observed and held that the observations of the trial Court

that there was no documentary evidence to show the source of

funds for the respondent to advance the loan, or that the

respondent did not record the transaction in the form of receipt

of even kaccha notes, or that there were inconsistencies in the

statement of the complainant and his witness, or that the

witness of the complaint was more in know of facts etc., would

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CRL.A No. 100191 of 2018

have been relevant if the matter was to be examined with

reference to the onus on the complaint to prove his case

beyond reasonable doubt. These considerations and

observations do not stand in conformity with the presumption

existing in favour of the complainant by virtue of Sections 118

and 139 of the N.I.Act.

17. In view of the principles enunciated in both the

above referred judgments of Hon'ble Apex Court, the pleading

regarding source of income is not a relevant factor in view of

the presumption available in favour of the complainant in terms

of Sections 118 and 139 of N.I.Act. Therefore, the grounds at

1, 2 and 4 as observed and held by the trail Court cannot be

legally sustained.

18. The trail Court in paragraph 22 of its judgment has

held that the loan transaction claimed by the complainant is not

shown in the income tax return as per Ex.P.10 and Ex.P.11.

Therefore, held that non-disclosure of the said loan transaction

in the income tax returns is an unaccounted money and

therefore, it is held that complainant, PW-1 has no lending

capacity. This observation and finding of trial Court is to mean

that there is violation of Section 269-SS of Income Tax Act i.e.,

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CRL.A No. 100191 of 2018

the loan transaction covered under the cheque Ex.P.1 and

Ex.P.2 is in excess of Rs.20,000/- and the transaction should

have been evidenced through the account payee cheque only

and the same must also be shown in the income tax returns.

19. The Constitutional validity of Section 269-SS of

Income Tax was called in question before the Hon'ble Apex

Court in ASSISTANT DIRECTOR OF INSPECTION

INVESTIGATION VS. A.B.SHANTI (2002) 6 SCC 259,

wherein it has been observed and held that:

"The object of introducing Section 269-SS was to ensure that a taxpayer should not be allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he should not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records later to suit the plea of taxpayer. The main object of Section 269-SS was to curb this menace. As regards the tax legislations, it is a policy matter, it is for Parliament to decide in which manner the legislation should be made. Of course, it should stand the test of constitutional validity."

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The Hon'ble Supreme Court having so observed negated

the contention of appellants that taking a loan or receiving a

deposit is a single transaction wherein a lender and borrower

are involved and by the impugned section the borrower alone is

sought to be penalized and the lender is allowed to go scot-

free.

20. The proviso 269-SS only prescribes the mode of

taking or accepting certain loans, deposits and specified sum.

The said proviso would speak to the effect that no person shall

take or accept from any other person (herein referred to as the

depositor). Mode of taking any loan or deposit or any specified

sum, otherwise than by an account-payee Cheque or account or

accepting payees and draft or use of electronic clearing system

through a bank account. The proviso was inserted in the

Income Tax Act debarring person from taking or accepting from

any other person any loan or deposit otherwise than by account

payee cheque or account payee bank draft, if the amount of

such loan or deposit or the aggregate amount of such loan or

deposit is Rs.10,000/- or more. The amount of Rs.10,000/-

was later revised as Rs.20,000/- with effect from 01.04.1989.

The said proviso does not prohibit for giving or lending loan, it

is only taking and acceptance is prohibited. The acceptance of

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loan by way of cash in excess of Rs.20,000/- may attract panel

provision in terms of Section 271-D. Whether the provisions of

Section 269-SS of the Income Tax Act 1961, disentitles the

plaintiff from filing recovery suits was directly under

consideration by the coordinate bench of this Court in the

judgment reported in ILR 2007 Kar 3614 - Mr.Mohammed

Iqbal Vs. Mr. Mohammed Zahoor, wherein it has been held

that : -

"The main object introducing the provisions of Section 269-SS of the Income Tax Act is to curb and unearth black money. But the Section does not declare the present transaction which is brought before the court illegal, wide and unenforceable."

This Court while recording such finding has considered

the above referred judgment of Hon'ble Apex Court in

ASSISTANT DIRECTOR OF INSPECTION INVESTIGATION

VS. A.B.SHANTI.

21. Learned counsel for appellant/accused relied on co-

ordinate bench judgment of this Court in

Crl.R.P.No.2011/2013 - Gajanan S/o Kallappa Kadolkar

Vs. Appasaheb Siddamallappa Kaveri. In this judgment,

both the above referred decisions of Hon'ble Apex Court have

been considered and held that contravention of Section 269-SS

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of the Income Tax Act does not make the alleged transaction

void. The concerned authorities can take necessary action

against the complainant for non compliance of Section 269-SS

of the Income Tax Act. Therefore, the observation and finding

of trial Court that non-disclosure of the loan transaction in

Income tax returns at Ex.P.10 and Ex.P.11 would render the

transaction illegal cannot be legally sustained.

22. The trial Court in paragraph 26 of its judgment has

held that the cheques in question-Ex.P.1 and Ex.P.2 are drawn

in the name of proprietorship concern and the evidence of PW-1

goes to show that he is using proprietorship concern account

for individual capacity. Therefore, without impleading the

proprietorship concern as party, the complaint itself is not

maintainable.

23. Learned counsel for complainant relied on the co-

ordinate bench of this Court in Crl.P.8257/2019 and connected

matters in Sri H.N.Nagaraj Vs. Sri Suresh Lal Hira Lal dated

21.09.2022 wherein it has been observed and held that

proprietorship concern as the name indicates can only be one

proprietor and it is the said proprietor who would be incharge of

the proprietorship concern. Thus, it is not required for any

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pleading to be made as regards to who is the person in charge

of a proprietorship concern when there is only one proprietor.

24. In the present case, it is in the evidence of PW-1

that the loan transaction with accused has nothing to do with

his business concern. However, it is not in dispute that for the

last 22 years, complainant is doing automobile business under

the name and style M/s. Karnataka Automotives which is a

proprietorship concern. If for the sake of arguments, even if it

is to be accepted that Ex.P.1 and Ex.P.2 are showed in the

name of business concern of complainant then also the

proprietorship concern is run and managed by complainant

himself even in his individual capacity. Therefore, the said

ground of trial Court in negating the claim of complainant

cannot be legally sustained.

25. The last ground on which the trial Court has

concluded that Ex.P.5 is insufficiently stamped and not

admissible which would liable to be impounded. The trial Court

held that Ex.P.5 is acknowledgement of debt in terms of Article

I of Schedule appended to Karnataka Stamp Act. On such

document written on a paper has to be on stamp paper of Rs.2

+ 2 for every thousand or part thereof subject to a maximum

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of Rs.1,000/-. Since the document at Ex.P.5 is insufficiently

stamped and same is not admissible in evidence. On careful

reading of Ex.P.5, it would go to show that the accused by

letter dated 06.05.2012 sought for extension of time to pay the

money due to the complainant. It is not the document on which

the loan was availed by accused. Therefore, the said document

does not fall under Article 1 of Scheduled appended to

Karnataka Stamp Act. The coordinate bench of this Court in

MR. VASANTHA AMIN VS. SHEKARA N.H. reported in ILR

2018 KAR 5073 while considering the effect of Article 34 of

the Karnataka Stamp Act in a criminal proceedings filed under

Section 138 of N.I.Act, at paragraph 14 held that the question

of payment of stamp duty on the document tendered in a

criminal case was not required to be gone into by the trial

Court as the said document was sought for the Court only with

a view to render a fair decision in the said case. In the present

case also Ex.P.5 is only a simple letter for seeking extension of

time to pay the amount due to the complainant. It is not a

instrument chargeable with duty in terms of Article 1 of the

Schedule of the Karnataka Stamp Act. Therefore, finding of

trial Court that Ex.P.5 is insufficiently stamped document

cannot be legally sustained.

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26. Learned counsel for respondent/accused has

contended that there is material alteration of the year in

cheque Ex.P.1 and Ex.P.2 and the same is unenforceable. In

support of such contention, reliance is placed on the co-

ordinate bench decision of this Court in Crl.R.P.No.592/2019

- Herman Castelino Vs. Dr.Suresh Kudva dated

09.06.2022. In the said case, there was material alteration of

the year which was admittedly not authenticated by the drawer

of the instrument. If the alteration is by endorsee himself then

Section 87 of the N.I. Act will not render the instrument as

void.

27. In the second decision in Crl.A.No.1742/2006 -

M.B.Rajasekhar Vs. Savithramma dated 22.09.2011 also it

was found that there was no signature of accused for the

alteration made in the instrument. Therefore, it was held that

it is a material alteration and the instrument renders as void.

28. In the present case, there is alteration of the year

2012 in Ex.P.1 and Ex.P.2. However, the same bears the

signature of accused for such alteration. Therefore, in terms of

Section 87 of the N.I. Act, it is the accused who has issued

cheque has consented for such alteration and accordingly

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initialled on such alteration. The endorsement of bank Ex.P.3

and Ex.P.4 would go to show that cheque was not returned to

the complainant with the endorsement that there is a material

alteration of the year and it is not initialled by the accused at

the place of such alteration. It is true that accused has denied

his signature appearing at the place of alteration showing the

year. The mere denial of signature cannot be said as sufficient

evidence unless the same is rebutted by accused by acceptable

evidence on record. The accused has not taken any steps to

get expert opinion on the alleged disputed signature of accused

at the place of alteration. Therefore, under these

circumstances, the contention of learned counsel for accused

that in terms of Section 87 of the N.I. Act, there is material

alteration of the instrument and endorsing the same as void

cannot be legally sustained.

29. In view of the reasons recorded above, it has been

observed and held that accused has failed to probabilize his

defence to displace the presumption available in favour of

complainant in terms of Sections 118 and 139 of the N.I.Act.

Then, it will have to be held that complainant has proved that

accused has issued cheque Ex.P.1 and Ex.P.1 for lawful

discharge of debt.

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30. The question now remains about imposition of

sentence. The accused has failed to probabilize his defence.

looking to the facts and circumstances of the case, in my

opinion if the accused is sentenced to pay fine of Rs.14 lakhs

and in default to undergo simple imprisonment for six months

for the offence punishable under Section 138 of N.I. Act is

ordered, will meet the ends of justice.

31. Accordingly, proceed to pass the following:

ORDER

Appeal filed by appellant/complainant is hereby allowed.

The judgment of acquittal passed by Principal Civil Judge and JMFC, Hubballi, in C.C.No.1308/2012 dated 13.06.2018 is hereby set aside.

The accused is convicted for the offence punishable under Section 138 of N.I. Act and sentenced to pay fine of Rs.14 lakhs, in default of payment of fine shall undergo simple imprisonment for a period of six months.

Registry is directed to transmit the records of the case with copy of this judgment.

(Sd/-) JUDGE Jm/-