Karnataka High Court
Sri G Jayadevappa vs Sri Shankar Murthy H C on 7 December, 2023
Author: Rajendra Badamikar
Bench: Rajendra Badamikar
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CRL.A No. 1298 of 2019
C/W CRL.A No. 1414 of 2021
CRL.A No. 1415 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF DECEMBER, 2023
BEFORE
THE HON'BLE MR JUSTICE RAJENDRA BADAMIKAR
CRIMINAL APPEAL NO. 1298 OF 2019
C/W
CRIMINAL APPEAL NO. 1414 OF 2021
CRIMINAL APPEAL NO. 1415 OF 2021
IN CRL.A.NO. 1298 OF 2019
BETWEEN:
SRI. G. JAYADEVAPPA,
AGED ABOUT 74 YEARS,
S/O LATE SRI. SHEKARAPPA,
RESIDING AT SRI. PAMPA NILAYA,
JAYADEVA COMPLEX,
NEAR JAIL CIRCLE,
DURGIGUDI MAIN ROAD,
SHIVAMOGGA - 577 201.
...APPELLANT
Digitally (BY SRI. C.N. KAMATH, ADVOCATE)
signed by
SOWMYA D AND:
Location:
High Court SRI. SHANKAR MURTHY H. C,
of AGED ABOUT 40 YEARS,
Karnataka S/O OF SRI. H.D. CHANDRAPPA,
STOCK N SHARES,
HSBC INVEST DIRECT NO.15, 1ST FLOOR,
BASAVA SADANA SHIVAMOGGA CITY,
SHIVAMOGGA - 577 201.
...RESPONDENT
(BY SRI. SACHIN B.S., ADVOCATE)
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CRL.A No. 1298 of 2019
C/W CRL.A No. 1414 of 2021
CRL.A No. 1415 of 2021
THIS CRL.A. IS FILED U/S.378(4) OF CR.P.C PRAYING TO
SET ASIDE THE JUDGMENT DATED 20.04.2019, PASSED BY
THE III ADDITIONAL CIVIL JUDGE AND J.M.F.C., SHIVAMOGGA
IN C.C.NO.3/2011, C.C.NO.3217/2011 AND C.C.NO.205/2012,
ACQUITTING THE RESPONDENTS/ACCUSED FOR THE OFFENCE
P/U/S 138 OF THE N.I ACT.
IN CRL.A.NO. 1414 OF 2021
BETWEEN:
SRI. G. JAYADEVAPPA,
AGED ABOUT 74 YEARS,
S/O LATE SRI. SHEKARAPPA,
RESIDING AT SRI. PAMPA NILAYA,
JAYADEVA COMPLEX,
NEAR JAIL CIRCLE,
DURGIGUDI MAIN ROAD,
SHIVAMOGGA - 577 201.
...APPELLANT
(BY SRI. C.N. KAMATH, ADVOCATE)
AND:
SRI. SHANKAR MURTHY .H. C,
AGED ABOUT 49 YEARS,
S/O OF SRI. H.D. CHANDRAPPA,
STOCK N SHARES,
HSBC INVEST DIRECT NO.15, 1ST FLOOR,
BASAVA SADANA SHIVAMOGGA CITY,
SHIVAMOGGA - 577 201.
...RESPONDENT
(BY SRI. SACHIN B.S., ADVOCATE)
THIS CRL.A. IS FILED U/S.378(4) OF CR.P.C PRAYING TO
SET ASIDE THE JUDGMENT DATED 20.04.2019, MADE IN
C.C.NO.3217/2011 ON THE FILE OF III ADDIONAL CIVIL JUDGE
AND J.M.F.C., SHIVAMOGGA - ACQUITTING THE RESPONDENT/
ACCUSED FOR THE OFFENCE P/U/S 138 OF N.I ACT.
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CRL.A No. 1298 of 2019
C/W CRL.A No. 1414 of 2021
CRL.A No. 1415 of 2021
IN CRL.A.NO. 1415 OF 2021
BETWEEN:
SRI. G. JAYADEVAPPA,
AGED 74 YEARS,
S/O LATE SRI SHEKARAPPA,
RESIDING AT SRI. PAMPA NILAYA,
JAYADEVA COMPLEX,
NEAR JAIL CIRCLE,
DURGIGUDI MAIN ROAD,
SHIVAMOGGA : 577 201.
...APPELLANT
(BY SRI. C.N. KAMATH., ADVOCATE)
AND:
SRI. SHANKAR MURTHY H.C,
AGED ABOUT 49 YEARS,
S/O OF SRI. H. D. CHANDRAPPA,
STOCK N SHARES,
HSBC INVEST DIRECT NO.15, 1ST FLOOR,
BASAVA SADANA SHIVAMOGGA CITY,
SHIVAMOGGA : 577 201.
...RESPONDENT
(BY SRI.SACHIN.B.S., ADVOCATE)
THIS CRL.A. IS FILED U/S.378(4) OF CR.P.C PRAYING TO
SET ASIDE THE COMMON JUDGMENT DATED 20.04.2019,
MADE IN C.C.NO.205/2012 ON THE FILE OF III ADDIONAL
CIVIL JUDGE AND J.M.F.C AT SHIVAMOGGA, ACQUITTING THE
RESPONDENTS/ACCUSED FOR THE OFFENCE P/U/S 138 OF THE
N.I ACT.
THESE APPEALS, COMING ON FOR DICTATING
JUDGMENT, THIS DAY, THE COURT DELIVERED THE
FOLLOWING:
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CRL.A No. 1298 of 2019
C/W CRL.A No. 1414 of 2021
CRL.A No. 1415 of 2021
JUDGMENT
These appeals are filed by the appellant/complainant
under Section 378(4) of Cr.P.C., challenging the judgment
of acquittal passed by III Additional Civil Judge and JMFC
at Shivamogga in CC No.03/2011, CC No.3217/2011 and
CC No.205/2012 vide order dated 20.04.2019.
2. For the sake of convenience, the parties herein
are referred with the original ranks occupied by them
before the Trial Court.
3. The brief factual matrix leading to the case are
as under:
The complainant is a trading customer with the
accused franchise. He has invested a sum of
Rs.15,00,000/- for the purchase of shares and
commodities. The accused is a proprietor of the franchise,
has traded in the shares/commodities utilizing the money
invested by the complainant without the permission of the
complainant. The accused utilized the money of the
complainant from his D.P. account. When this fact came to
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the knowledge of the complainant, he questioned the
accused and the accused conceded this act and agreed to
pay a sum of Rs.15,00,000/- to the complainant. It is
further alleged that he has issued 3 cheques bearing
No.116237, 116236 and 116235 of Indian Overseas Bank,
Shivamogga, for a sum of Rs.1,40,000/-, Rs.1,52,000/-
and Rs.5,00,000/- respectively towards repayment of the
said amount. When the complainant presented these
cheques for encashment, all 3 cheques were returned with
an endorsement as 'insufficient of funds'.
4. Then the complainant has got issued a legal
notice and accused did not respond to the legal notice. As
such, the complainant lodged a complaint before the
learned Magistrate under Section 200 of Cr.P.C., alleging
that the accused has committed an offence under Section
138 of the Negotiable Instruments Act, 1881 (for short
'N.I. Act').
5. The learned Magistrate has recorded the sworn
statement of complainant. After verification of the
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documentary evidence, he has issued a process against
the accused after taking cognizance of the offence.
6. The accused appeared through his counsel in all
the 3 matters and he was enlarged on bail. The plea
under Section 138 of the N.I Act was recorded in each
case independently and accused denied the same.
7. Thereafter, since all these matters are between
the same parties and arising out of the same transaction,
they are clubbed together and common evidence was led.
The complainant got himself examined as PW1 and he
placed reliance on 37 documents marked at Ex.P1 to
Ex.P37.
8. After the conclusion of evidence of the
complainant, the statement of accused under Section 313
of Cr.P.C is recorded to enable the accused to explain the
incriminating evidence appearing against him in the case
of the complainant. The case of accused is of total denial.
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The accused in his 313 Cr.P.C. statement did not specify
any defence.
9. Learned Magistrate after hearing the arguments
and after appreciating the oral and documentary evidence
has acquitted the accused for the offence punishable under
Section 138 of N.I. Act, mainly on the ground that the
accused is not proved to be agent of the firm and no steps
were taken against the agent and he has not produced
relevant documents to prove transfer of amount to the
account of the accused.
10. Being aggrieved by the judgment of acquittal,
the complainant is before this Court by way of these
appeals.
11. Heard the arguments advanced by the learned
counsel for appellant and the learned counsel for
respondent. Perused the records.
12. Learned counsel for appellant would submit that
the accused is an agent of the company and he has
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received the amount of Rs.15,00,000/- from the
complainant for purchase of shares and he was dealing
with the demat account of the complainant. He would
further assert that the accused has misused the amount
without knowledge of the complainant by playing fraud on
the complainant by investing the same in other
investments and when complainant got knowledge of
these aspects, he demanded the amount and in this
regard, these disputed cheques were issued. He would
also assert that the accused is the proprietor of Stock-N-
Shares and he was dealing on behalf of IL & FS
Investsmart, which was subsequently taken over by HSBC
investment.
13. He would further assert that the complainant
has paid the amount by way of cash and cheque and
receipts were issued by accused. It is his contention that
the fraud is played by the accused in his individual
capacity for having misappropriated the amount and
therefore, in his Individual capacity, he has issued the
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cheques and question of he approaching the company
does not arise at all. He would also assert that the
cheques belong to the accused and they bear the
signature of accused are undisputed facts and therefore,
the presumption under Section 139 of the N.I. Act that the
cheques were issued towards legally enforceable debt shall
be drawn. But accused has not rebutted the said
presumption except putting forward a defence which he
has failed to prove. Alternatively, he would also assert that
the bank statements regarding transfer of the amount to
the account of the accused are being now applied and they
would be produced in due course and hence, he seeks
time to produce these documents by seeking adjournment.
14. The learned counsel for respondent would
contend that in the entire complaint there is no specific
pleading as to how the amount was misappropriated. He
would also assert that the signatures on the receipts
produced at Ex.P7 to Ex.P27 are in the name of Sanjay
Nayak, but not in the name of accused and hence, he
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would assert that the amount is required to be demanded
from the company by way of reimbursement. As such, he
would contend that the complainant has failed to establish
a legally enforceable debt and the learned Magistrate has
properly appreciated the oral and documentary evidence in
proper perspective and has rightly acquitted the accused.
Hence, he would contend that no perversity is found in the
judgment of acquittal so as to call for any interference by
this Court. As such, he would seek for dismissal of all the
appeals.
15. Having heard the arguments and after perusing
the oral and documentary evidence, now the following
point would arise for my consideration:
"Whether the judgment of acquittal in C.C.
No.03/2011, CC No.3217/2011 and CC No.205/2012
passed by the trial Court is perverse and arbitrary so
as to call for any interference by this Court."
16. There is no serious dispute of the fact that the
complainant is a trading customer of IL & FS investsmart.
It is also not under serious dispute that subsequently, the
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said company was taken over by HSBC Investments. It is
the specific assertion of the complainant that accused is a
franchise of the said company and he has invested a sum
of Rs.15,00,000/- for purchase of the shares and accused
misused the said amount through his demat account and
in this regard, he conceding his illegal act, issued the
cheques for Rs.1,40,000/-, Rs.1,52,000/- and
Rs.5,00,000/- towards part payment. It is also admitted
fact that the complainant has also filed a civil suit for
recovery of the said amount against accused and his wife.
But the Civil remedy and criminal remedies are different
and filing of civil suit does not bar the complainant from
initiating criminal action.
17. These disputed cheques are produced at Ex.P1
in all the three cases independently. It is the specific
contention of the complainant that initially accused has
issued the cheques for the said amount and subsequently,
he withdrew the said cheques and issued these disputed
cheques on 31/01/2010. The cancelled cheques are also
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produced by the complainant at Ex.P29 to Ex.P31. The
accused has not disputed Ex.P1 or Ex.P29 to Ex.P31 that
they belong to his account and they bear his signatures.
Accused has not even explained as to why the earlier
cheques were cancelled and subsequent cheques were
issued under Ex.P1 in all the three matters. However, the
complainant has specifically assigned reasons for
cancellation of the earlier cheques and issuance of
subsequent cheques.
18. When the cheque belongs to the account of the
accused and it bears the signature of the accused, then
drawing presumption under Section 139 of the N.I. act is
mandatory. Section 139 of the N.I. Act reads as under:
"[139. Presumption in favour of holder.- 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 the discharge, in whole
or in part, of any debt or other liability.]"
19. In Section 139 of the N.I. Act the wording used
is 'shall' and not 'may' and when the word 'shall' is used
there is no option but it is mandatory to draw presumption
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that the cheque was issued towards legally enforceable
debt or liability towards discharge in whole or in part of
any such debt or other liability. As such, the initial
presumption is in favour of the complainant that these
cheques under Ex.P1 in all the three cases were issued
towards legally enforceable liability. No doubt the said
presumption is a rebutablle presumption and it is for the
accused to rebut the said presumption on the basis of
Preponderance of probability. The accused can rebut
presumption by raising defence, by way of cross-
examination or by producing relevant documents.
20. However, in the instant case, the statement of
accused under Section 313 Cr.P.C. was recorded and he
has not explained anything about this transaction as
asserted and his case was of simple and total denial. He
did not put forward any specific defence, which he has
asserted in the cross-examination of PW1 regarding the
issuance of cheque towards occupation of the property of
complainant and the furniture thereunder, but a
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suggestion was that when the joint family members did
not accept it, the said cheques were cancelled. However,
the said suggestion came to be denied by the complainant.
Even if this defence is accepted to be true and correct
regarding cancellation of the cheques, it holds good for
Ex.P29 to Ex.P31, but accused has not explained as to how
the cheques under Ex.P1 in all the three cases came in
possession of the complainant and why he issued these
cheques after cancellation of cheques under Ex.P29 to
Ex.P31. Absolutely no explanation was offered by the
complainant in this regard.
21. Much cross-examination of PW1 was regarding
payment by way of cheque and said payment being shown
in bank statement, which is not produced. No doubt, the
complainant has not produced the bank statement but the
onus shifts on him only when accused rebuts the
presumption under Section 139 of the N.I. Act available in
favour of complainant. But in the instant case, accused
has not at all rebutted the presumption as to by giving any
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plausible explanation as to how the cheques under Ex.P1
came in possession of complainant. The entire cross-
examination of PW1 is silent in this regard.
22. The learned Magistrate has given undue
importance to these aspects and fail to consider the fact
that accused has no defence at all and in the absence of
any specific defence regarding issuance of cheque under
Ex.P1, question of rebutting presumption does not arise at
all. The learned Magistrate has much discussed regarding
demat account and trading account and sale of the shares
to be made from demat account and amount being
credited to trading account etc., but it is the specific
contention of the complainant that his demat account is
being operated by the accused.
23. The Other contention raised by the accused is
that he is not an agent of IL & FS Investsmart. The
accused has disputed the fact that he was a franchise and
receipt of amount on behalf of complainant towards
purchase of the shares, but he did not explain how the
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cheques under Ex.P1 came in possession of the
complainant. Interestingly, during the cross-examination
of PW1 dated 16.03.2017, a suggestion was made to
complainant asserting that H.C.Chandana i.e., wife of the
accused is a sub-broker in HSBC.
24. In this regard Ex.P74 is also a relevant
document wherein there is specific reference that accused
had obtained a tenament belonging to Sri Basaveshwara
Veerashaiva Samaja Seva Sanga (R.) for running stock
and share franchise and he has also dealt in the name of
IL & FS franchise. Ex.P35 is a copy of the letter submitted
by the accused to the administrator of the said Seva
Sanga wherein he has specifically asserted that he was
forced to join hands as franchise with strong company
M/s. IL & FS investsmart (India) Ltd., a subsidiary to IL &
FS Ltd., which is promoted by SBI, HDFC, UTI, Central
Bank of India and others. Under Ex.P35 the accused has
sought renovation of his office in view of getting franchise
from the above said companies. Ex.P34 and Ex.P35 are
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not specifically denied and signatures were not even
disputed. These documents clearly disclose that accused
was dealing as a franchise. No doubt Ex.P7 to Ex.P28 do
not disclose the signature of the accused, but the fact
remains that accused was a franchise and the receipts
were issued on behalf of the franchise. But at the same
time, relevancy is that accused has nowhere explained
under what transactions Ex.P1 in all the three cases which
are the disputed cheques came to be issued. In the
absence of giving any proper explanation or leading any
cogent evidence in this regard it cannot be presumed that
accused has rebutted the presumption available in favour
of the complainant. Though the learned Magistrate has
considered the decision of (2019) 5 SCC 418
[BASALINGAPPA vs. MUDIBASAPPA], but it has not
appreciated the principles enumerated thereunder in
proper perspective. Mere denial or taking defence cannot
be termed as a rebuttal and accused never explained how
the disputed cheques belonging to him came in possession
of complainant and for what purpose he has issued these
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cheques. Though he tried to give a lame excuse regarding
initially issuance of cheque and cancellation, that is not
even substantiated before the Court. Even otherwise, that
may be appropriate pertaining to Ex.P29 to Ex.P39, but it
does not explain regarding Ex.P1 in all the three matters.
25. As regards rebuttal the Hon'ble Apex Court has
laid down certain guidelines in the decision reported in
2023 (10) SCC 148 [RAJESH JAIN V/S AJAY SINGH] and
2023 LiveLaw (SC) 46 [RAJARAM S/O SRIRAMULU
NAIDU (SINCE DECEASED) THROUGH LRS VS.
MARUTHACHALAM (SINCE DECEASED) THROUGH LRS].
These guidelines were not followed by the accused and the
learned Magistrate has failed to appreciate any of these
aspects in proper perspective and without there being any
evidence on record, he went on considering the demat
account and trading account etc., ignoring the fact that
cheques and signature have been admitted and there is no
explanation regarding return of issuance of these cheques
on behalf of the accused. As observed above, the 313
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Cr.P.C. statement of the accused is also silent. Even the
legal notice issued to the accused was not served, but it
was issued to the last known address and it is returned as
not claimed. In that event, the burden shifts on accused to
give explanation as to non reply of notice. Even after
appearance before the learned Magistrate, he did not
bother to give any proper explanation regarding issuance
of notice or for not claiming the notice. He did not enter
into the witness box though it is not mandatory for him.
But considering the cross-examination, it is evident that
he has not rebutted the presumption available in favour of
complainant regarding Ex.P1 in all the three matters.
When the presumption is not rebutted, the question of
seeking production of bank statement from the
complainant does not arise at all as onus never shifted on
the complainant.
26. Looking to these facts and circumstances of the
case, it is evident from the records that the learned
Magistrate has failed to appreciate the oral and
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documentary evidence in proper perspective and the
judgment of acquittal suffers from perversity. As such, the
judgment of acquittal passed in all the three matters calls
for interference.
27. There is no dispute of the fact that the cheques
were bounced and legal notice was issued in time and all
technical compliances were duly met. Hence, there is
material evidence on record to prove that accused has
committed an offence under Section 138 of the N.I. Act.
As such, he is required to be convicted for the said
offence.
28. The offence under Section 138 of the N.I. Act is
punishable with imprisonment for a term which may
extend to 2 years or with fine which may extend the twice
the amount of the cheque or both. Admittedly, in the
instant case, all other legal requirements as provided
under the proviso to Section 138 of the N.I. Act have been
complied with and there is no dispute of this aspect.
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29. In C.C.No.3/2011 the cheque is for the amount
of Rs.1,40,000/-. The transaction is of the year 2010. The
accused without specifying any specific defence went on
taking untenable defence. This is not a case wherein the
sentence of imprisonment is warranted. However,
considering that the transaction is old transaction, in my
considered opinion, it is just and proper to impose fine of
double he cheque amount to the accused i.e.,
Rs.2,80,000/- and in default he is required to undergo
simple imprisonment for a period of 6 months.
30. As regards C.C.No.3217/2011 the cheque is for
the amount Rs.1,52,000/- the transaction is of the year
2010. The accused without specifying any specific defence
went on taking untenable defence. This is not a case
wherein the sentence of imprisonment can be imposed.
However, considering that the transaction is old
transaction, in my considered opinion, it is just and proper
to impose heavy fine to the accused i.e., Rs.3,00,000/-
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and in default he is required to undergo simple
imprisonment for a period of 6 months.
31. As regards C.C.No.204/2012 the cheque is for
the amount Rs.5,00,000/- and the transaction is of the
year 2010. The accused without specifying any specific
defence, went on taking untenable defence. This is not a
case wherein the sentence of imprisonment is warranted.
However, considering that the transaction is old
transaction, in my considered opinion, it is just and proper
to impose heavy fine to the accused i.e., Rs.9,00,000/-
and in default he is required to undergo simple
imprisonment for a period of one year.
32. In view of these facts and circumstances, all the
appeals need to be allowed and as such, the point under
consideration is answered in the affirmative. Accordingly, I
proceed to pass the following:
ORDER
(i) Crl.A.No.1298/2019, Crl.A.No.1414/2021 and
Crl.A.No.1415/2021 are allowed.
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(ii) The impugned judgment of acquittal passed by
the III Additional JMFC Shivamogga, in
C.C.No.3/2011, C.C.No.3217/2011 and
C.C.No.205/2012, are set aside.
(iii) The accused-respondent herein is convicted in
all these C.C.No.3/2011, C.C.No.3217/2011
and C.C.No.205/2012 for the offence
punishable under Section 138 of the N.I. Act.
(iv) In C.C.No.3/2011 the accused is convicted and
sentenced to pay a fine of Rs.2,80,000/- in
default he is to undergo simple imprisonment
for a period of 6 months. Out of the fine
amount, Rs.2,60,000/- shall be paid to the
complainant by way of compensation under
Section 357 of Cr.P.C. and balance Rs.20,000/-
shall be credited to the State account towards
the cost of the litigation incurred by the state.
(v) In C.C.No.3217/2011 the accused is convicted
and sentenced to pay a fine of Rs.3,00,000/- in
default he is to undergo simple imprisonment
for a period of 6 months. Out of the fine
amount, Rs.2,75,000/- shall be paid to the
complainant by way of compensation under
Section 357 of Cr.P.C. and balance Rs.25,000/-
shall be credited to the State account towards
the cost of the litigation incurred by the state.
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(vi) In C.C.No.205/2012 the accused is convicted
and sentenced to pay a fine of Rs.9,00,000/- in
default he is to undergo simple imprisonment
for a period of one year. Out of the fine
amount, Rs.8,75,000/- shall be paid to the
complainant by way of compensation under
Section 357 of Cr.P.C. and balance Rs.25,000/-
shall be credited to the State account towards
the cost of the litigation incurred by the state.
(vii) All the default sentences shall run
independently.
(viii) Original judgment shall be kept in
Crl.A.No.1298/2019 and copies there off in
other two appeals.
(ix) Send back the records to the trial Court
alongwith copy of this Judgment with a
direction to the learned Magistrate to secure
the presence of the accused for collection of
the fine amount.
Sd/-
JUDGE
RAK, DS
