Karnataka High Court
Smt. Kasturi Naik. K vs Radha. S on 6 August, 2024
1 CRL.A NO.1783 OF 2018
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 06TH DAY OF AUGUST, 2024
BEFORE
THE HON'BLE MS.JUSTICE J.M.KHAZI
CRIMINAL APPEAL NO.1783 OF 2018
BETWEEN:
SMT. KASTURI NAIK. K
W/O. RADHAKRISHNA,
AGED ABOUT 52 YEARS,
R/AT NO. 167,
CHAMUNDI NAGARA,
BDA LAYOUT,
HOSAKEREHALLI POST,
BENGALURU-560 085.
...APPELLANT
(BY SRI. D.P.PRASANNA, ADVOCATE)
AND:
1. RADHA. S
W/O. SRINATH. B. S.,
AGED ABOUT 36 YEARS,
2. SRINATH. B. S.
S/O. SURYANARAYAN RAO,
AGED ABOUT 40 YEARS,
BOTH ARE RESIDING AT NO.348,
8TH CROSS, BDA LAYOUT,
AVALAHALLI, BANASHANKARI,
3RD STAGE, BENGALURU-560 085.
...RESPONDENTS
(BY SRI.K.A.CHANDRASHEKARA, ADVOCATE FOR R1 & R2)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION
378(4) OF CR.P.C PRAYING TO SET ASIDE THE JUDGMENT
PASSED BY HON'BLE XV ACMM BENGALURU CITY IN
C.C.NO.25135/2016 DATED 02.08.2018 IN THE INTEREST OF
JUSTICE.
2 CRL.A NO.1783 OF 2018
THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
26.07.2024, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY, THE COURT DELIVERED THE
FOLLOWING:
JUDGMENT
Being aggrieved by the acquittal of respondents/
accused for the offence punishable under Section 138 of
Negotiable Instruments Act, 1881 ('N.I. Act' for short)
complainant has come up with this appeal under Section
378 (4) of the Cr.P.C.
2. For the sake of convenience, parties are
referred to by their ranks before the trial Court.
3. It is the case of complainant that accused
No.1 is the wife of accused No.2. Accused No.2
represented to the complainant that he is the agreement
holder with the owner of Flat No.PH -1, 3rd Floor, Image
Greens Apartments, having agreed to purchase it for a
sum of Rs.26 lakhs. Claiming that they are short of Rs.18
lakhs, accused No.2 offered to sell the same to the
complainant for a total sum of Rs.35 lakhs by assigning
the rights accrued to him. Complainant had money by
selling his property situated at Veerabhadranagar
Bengaluru-560085 and was interested to buy the said
apartment. Complainant paid a sum of Rs.18 lakhs to the
accused who acknowledged the same on 18.12.2013.
However, accused No.2 could not secure the said
apartment. Therefore, he issued two cheques for Rs.9
lakhs each dated 04.11.2015 and 05.11.2015. When
presented for realisation they were dishonored for want
of 'sufficient funds'. On the instructions of accused, the
complainant re-presented the cheques on 16.12.2015.
Once again they were dishonoured for want of sufficient
funds.
4. However, accused No.2 paid a sum of Rs.2
lakhs in cash and assured the payment of balance of
Rs.16 lakhs on or before 10.01.2016, but failed to keep
up his promise. On the other hand, on 08.05.2016 he
lodged a complaint against the complainant with
Girinagar police. In the said complaint, he admitted the
fact that he is due in a sum of Rs.16 lakhs to the
complainant. In this regard, accused No.1 issued two
cheques dated 23.08.2016 for a sum of Rs.8 lakhs each.
Accused have executed a memorandum of understanding
dated 23.08.2016 and requested complainant not to
present the cheques on 23.08.2016. Complainant heed
to their request. Since the validity period of the cheques
was going to expire, complainant presented the cheques
on 05.10.2016. To the dismay of complainant, both
cheques were dishonoured for 'funds insufficient' as per
the endorsement dated 06.10.2016. Accused No.2 has
executed the memorandum of understanding dated
23.06.2016 and accused No.1 has issued the cheques
securing the payment due from accused No.2. Therefore,
both accused are jointly and severally liable.
5. After the dishonour of cheques, he got issued
legal notice dated 19.10.2016 to both accused
demanding payment of Rs.16 lakhs due under the
cheques. Accused No.1 has received the notice, but failed
to comply with the same. She has also not sent any
reply. Accused No.2 has failed to receive the notice and
sent it back as not claimed. Therefore, both accused are
liable to be punished for the offence punishable under
Section 138 of N.I Act.
6. On service of summons both accused have
entered appearance through a common counsel and
resisted the proceedings by pleading not guilty.
7. To prove the allegations against accused,
complainant has examined himself as PW-1 and relied
upon Exs.P1 to 12.
8. During the course of their statement under
Section 313 Cr.P.C, the accused have denied the
incriminating evidence led by the complainant.
9. Accused No.1 has examined herself as DW-1.
No documents are marked on behalf of accused.
10. During the cross-examination of DW-1, the
Vakalatnama of the accused is marked as Ex.C1.
11. The trial Court dismissed the complaint and
acquitted the accused on the ground that the transaction
was between complainant and accused No.2 and
therefore the cheques issued by accused No.1 would not
attract the provisions of Section 138 of N.I Act.
12. Challenging the impugned judgment and order
the complainant is before this Court contending that it is
perverse, illegal and erroneous and as such liable to be
set aside. The trial Court has failed to consider that both
accused have admitted that they owed a sum of Rs.18
lakhs and out of it repaid Rs.2 lakhs in cash and for the
balance the subject cheques were issued. The accused
have also not disputed the cheques in question are
drawn on the account of accused No.1 and they bear her
signature and issued to the complainant and therefore
the presumption under Section 139 of N.I Act is
attracted, placing the initial burden on the accused to
rebut the said presumption. In fact, accused filed a
complaint against the complainant where they have
admitted their liability to pay the amount in question.
The findings of the trial Court are perverse calling for
interference by this Court.
13. In support of his arguments, learned counsel
for complainant has relied upon the following decisions:
(i) I.C.D.S. Ltd. Vs. Beena Shabeer and
Anr.(ICDS)1
(ii) Prasad Raykar S/o. Vidyadhar V Raikar Vs. B T
Dinesh S/o. T A Bharamappa (Prasad Raykar)2
14. On the other hand, learned counsel for
accused supported the impugned judgment and order
and sought for dismissal of appeal.
15. In support of his arguments, learned counsel
for accused has relied upon the following decisions:
(i) M/s. Mandvi Co-op. Bank Ltd. Vs. Nimesh
B.Thakore (Mandvi Co-op society) 3
16. Heard elaborate arguments of both sides and
perused the record.
17. The undisputed facts are that accused Nos. 1
and 2 are wife and husband. Accused No.2 had a sale
agreement in his favour for purchase of a Flat in Image
Greens Apartments for a total sum of Rs.26 lakhs. When
(2002) 6 SCC 426
Crl.A.No.725 of 2011 DD 02.01.2023
AIR 2010 SC 1402
he was short of Rs.18 lakhs, he offered to sell it to the
complainant by way of assignment for a total sum of
Rs.35 lakhs and received Rs.18 lakhs. It appears for
some reason the said deal could not go through, and
therefore accused No.2 issued two cheques for Rs.9 lakhs
each in favour of the complainant towards repayment of
Rs.18 lakhs. However, when presented they were
dishonoured for want of sufficient funds. Subsequently,
accused No.2 has paid cash of Rs.2 lakhs and also
executed a memorandum of understanding.
18. It is the specific case of complainant that
towards balance payment of Rs.16 lakhs accused No.1,
being the wife issued two cheques for Rs.8 lakhs each.
However, when presented for realisation both cheques
issued by accused No.1 came to be dishonoured for want
of sufficient funds. Though accused No.1 admitted that
the subject cheques were issued by her and they bear
her signatures, she has taken a specific defence that
they were only issued by way of security and therefore
she cannot be held liable under Section 138 of N.I Act. At
the trial, the accused No.1 has also taken up a defence
that at the police station, she was forced to issue the
subject cheques. She and her husband have separated.
19. In the light of the above facts and
circumstances, it is necessary to examine whether
having issued the cheques by way of security towards
the amount due from her husband, accused No.1 is liable
under Section 138 of N.I Act. It is also necessary to
examine despite the fact that the liability is that of
accused No.2 to pay the amount due under the cheques
and when he is not the drawer of the cheques, whether
accused No.2 is liable under Section 138 of the N.I Act.
20. Before going to the merits of the case, it is
relevant to note that in the trial Court records, Exs.P1 to
11 were not forthcoming. Therefore, vide order dated
27.05.2024, the Registry was directed to trace the same
and put up with the file. In this regard, the Registrar
(Judicial) has issued memo to the concerned
caseworkers, Section Officer and Assistant Registrar of
the criminal pending branch and they have given
explanation stating that despite making thorough search,
they were not able to trace the said documents.
21. In this regard the learned counsel for
complainant submitted that he has taken certified copies
of the documents in question and he would produce the
same along with application. Accordingly, he filed
I.A.No.1/24 under Section 391 Cr.P.C seeking permission
to produce additional documents. In fact, learned counsel
for accused fairly submitted that he has no objections to
allow the application and take the certified copies of
Exs.P1 to 11 on record. Accordingly, vide order dated
26.07.2024 I.A.No.1/24 was allowed and certified copies
of Exs.P1 to 11 were taken on record and enclosed with
the file.
22. At the out set learned counsel for accused
raised a preliminary objection that at the trial accused
No.1 has given evidence in examination-in-chief by way
of affidavit and it is contrary to the decision of the
Hon'ble Supreme Court in Mandvi Co-op Society case
referred to supra. In the said decision, the Hon'ble
Supreme Court held that the accused has no right to give
evidence by way of affidavit and he has to give oral
testimony on oath. This situation would arise if
complainant objects for the accused giving evidence by
way of affidavit. In the present case, the complainant is
not at all raising any objections for the accused having
given evidence on affidavit. For her convenience, the
accused No.1 has given evidence by way of affidavit and
now she cannot raise objection for it and take advantage
of her own fault. This appears to be only an attempt on
the part of accused to gain time by seeking remand. By
giving evidence in the examination-in-chief in the form of
affidavit, no prejudice have been caused to the accused
No.1. Therefore, the contention of the learned counsel
for accused on this aspect cannot be accepted.
23. Now coming to the merits of the case. When
accused No.1 admit that the subject cheques are drawn
on her account maintained with her banker and they bear
her signature and were issued to the complainant,
presumption under Section 139 of N.I Act comes into
picture that they were issued towards repayment of any
legally recoverable debt or liability, placing the initial
burden on the accused to prove their defence.
24. Immediately after the cheques were
dishonoured, the complainant has got issued legal notice
to both accused Nos.1 and 2. As per Ex.P7 the accused
No.1 has received the notice. However, she has not sent
any reply to the same. On the other hand accused No.2
has not claimed the notice and therefore the postal
envelope with the endorsement is returned to the sender
i.e, complainant. Consequently, both accused have lost
an opportunity to come up with their specific defence at
the earliest available opportunity.
25. It is pertinent to note that both accused have
engaged the services of same counsel and defended the
case. However, during her cross-examination, accused
No.1 has claimed that she and her husband i.e, accused
No.2 have separated. In this regard, she has stated that
in December 2016, she has shifted to the other address.
The legal notice was issued on 19.10.2016 and it is
received by accused No.1 within one or two days. Though
in her evidence, the accused No.1 has given a different
address than what is noted in the complaint and other
documents, she has not produced any documents to
substantiate that she is residing separately from accused
No.2. Even otherwise, since her alleged separation from
accused No.2 is subsequent to the transaction and the
legal notice, it does not affect the merits of the
complainant's case. Having regard to the fact that both
accused have engaged the services of the same counsel
and defended the case and before the High Court also
they are represented by a common counsel, this Court
has no hesitation to hold that for the sake of defence,
accused No.1 is now claiming that she separated from
accused No.2.
26. During the cross-examination of the
complainant, it is suggested that in respect of the said
transaction, he has paid only Rs.18 lakhs to accused
No.2 and questioned as to whether he was having
balance of Rs.17 lakhs with him and whether he has
issued notice to accused No.2 to execute sale deed and
whether he has made any efforts to file suit for specific
performance, etc. The material placed on record clearly
establishes that on account of some issue, the deal could
not go through and therefore the accused No.2 initially,
issued two cheques for Rs.9 lakhs each and after their
dishonour, he returned Rs.2 lakhs to the complainant in
cash and for the remaining sum of Rs.16 lakhs, two
cheques for Rs.8 lakhs each were issued by accused
No.1.
27. Such being the case, it cannot be expected
that complainant would seek specific performance of
contract. It is also suggested to the complainant that out
of Rs.18 lakhs, accused No.2 has paid Rs.2 lakhs in cash.
In this regard, complainant has deposed that after
paying Rs.2 lakhs, accused No.2 filed a complaint against
him and in that connection, he was summoned to the
Girinagar police station. A suggestion is also made by the
defence that at the police station, accused No.2 agreed
to pay Rs.16 lakhs to him within three months and
executed a memorandum of understanding and that the
two cheques issued by accused No.1 was towards
security of payment of Rs.16 lakhs by accused No.2 and
this fact is forthcoming in the memorandum of
understanding. By making the suggestions, the accused
admitted that out of Rs.18 lakhs due from accused No.2,
Rs.2 lakhs was paid in cash and for the remaining sum
accused No.1 issued the subject cheques by way of
security.
28. Ex.P12 is the photocopy of memorandum of
understanding entered into between complainant and
accused No.2. This document is marked during the cross-
examination of PW-1 as per the suggestions made by the
defence. It also prove that after repaying Rs.2 lakhs in
cash, accused No.2 entered into a memorandum of
understanding with the complainant, according to which
he agreed to pay balance of Rs.16 lakhs and by way of
security got issued the subject cheques through his wife
who is arraigned as accused No.1.
29. In the light of these admitted and established
facts, the question which falls for consideration is
whether for the dishonour of cheques issued by way of
security by a guarantor attracts penal provision of
Section 138 of N.I Act.
30. In this regard the decision of the Hon'ble
Supreme Court in ICDS referred to supra is relevant. It
was a case where the husband of the accused availed the
loan based on hire purchase agreement to purchase a car
with the complainant and cheque was issued by accused
as guarantor. At the instance of accused, the High Court
quashed the proceedings by holding that being a cheque
issued by the guarantor, it cannot be said to have issued
towards discharge of any debt or liability. Negating the
same, the Hon'ble Supreme Court held that a complaint
against guarantor on dishonour of cheque issued by her
is maintainable. It held that the words any cheque and
other liability occurring in Section 138 are two key
expressions which stand as clarifying the legislative
intent so as to bring the factual context within the ambit
of provisions of the statute. These expressions leave no
manner of doubt that for whatever reason it may be, the
liability under Section 138 of N.I. Act cannot be avoided
in the event, the cheque stands returned by the banker
unpaid. Any contra interpretation would defeat the intent
of the legislature. The High Court got carried away by the
issue of guarantee and guarantor's liability and thus has
overlooked the true intent and purport of Section 138 of
N.I Act.
31. In Shree Dhaneshwar Krupa traders, the
Hon'ble Supreme Court held that Section 138 of N.I Act
is attracted even to a cheque issued by way of security.
On fact, it was held that the goods were supplied on
credit basis for which cheques were issued, which is a
legally enforceable debt. However, accused failed to
prove due discharge of the amount towards purchase of
the commodities on credit.
32. This issue is also dealt with by the Hon'ble
Supreme Court In Sunil Todi and Ors Vs. State of Gujarat
and Anr (Sunil Todi)4, where it was held that merely
labelling a cheque as a security would not obviate its
character as an instrument designed to meet legally
AIR 2022 SC 147
enforceable debt or liability. Once agreement between
parties provide for which money is due and payable,
cheque furnished as a security is covered under the
provisions of Section 138 of N.I Act.
33. Similarly, Dashrathbhai Trikambhai Patel Vs.
Hitesh Mahendrabhai Patel and Anr. (Dashrathbhai
Trikambhai Patel), Hon'ble Supreme Court held that
where borrower agrees to pay the loan within a specified
timeline and issues a cheque for security, but defaults in
repaying the loan within the timeline, the cheque
matures for presentation. However, if the loan has been
discharged before the due date or if there is an altered
situation, then the cheque shall not be represented for
encashment. Regarding the post dated cheque, though it
might be drawn to represent legally enforceable debt at
the time of its drawing, for the offence to be attracted,
the cheque must represent legally enforceable debt at
the time of encashment. In this decision, the Hon'ble
Supreme Court has relied upon Sripati Singh and held
that if a cheque is issued as security and if the debt is
not repaid in any other form before the due date or if
there is no understanding or agreement between the
parties to defer the payment, the cheque would mature
for presentation.
34. In the light of the ratio in the above decisions,
even a cheque issued by way of security or as a
guarantee the provisions of Section 138 of N.I Act are
attracted and on the dishonour of the same, accused
No.1 is liable to be punished under Section 138 of the N.I
Act. The trial Court has failed to apply the ratio in the
above decisions and has fell into error by holding that
since the amount due was from accused No.2, for having
issued the cheque by way of security, accused No.1 is
not liable.
35. In Crl.A.No.725/2011 referred to supra, and
relied upon by the complainant, the co-ordinate Bench of
the Court, relying upon the decision of the Hon'ble
Supreme Court in ICDS has held that accused who has
issued the cheques for repayment of the debt due from
his father is liable and upheld the decision of the trial
Court in convicting the accused and that the Sessions
Court committed error in reversing the judgment and
order of the trial Court.
36. When accused No.1, being the drawer of the
cheque is held liable under Section 138 of N.I Act in
respect of the amount due from accused No.2, the next
question is whether accused No.2 is also liable under
Section 138 of N.I Act. Section 138 of the N.I Act makes
an act of issuing a cheque towards repayment of any
debt or liability punishable when the same is not
honoured for want of sufficient funds in the account or
when necessary arrangement is not made with the Bank
for payment of the same. One of the necessary
ingredients for attracting the provision is to issue notice
within 30 days to the drawer of the cheque, calling upon
him to pay the amount within 15 days of the service of
notice. Thus, in case of individuals only the drawer of the
cheque is required to be issued notice to pay the amount
due. Even though the complainant has got issued legal
notice to accuses No.2 on whose behalf the cheques were
issued by accused No.1 by way of security or guarantor,
he cannot be proceeded against Section 138 of N.I Act.
He may be liable under the civil liability or other
provision, but not for the violation of Section 138 of the
N.I Act for which the present complaint is failed.
37. Of course, after receipt of notice from the
complainant, had the accused No.2 repaid the amount
due under the cheques, things would have been
different. Since the compliance is not made by both
accused, for violation of Section 138 of N.I Act, the
accused No.1 being the drawer of the cheques is liable.
Despite the fact that the amount due was from accused
No.2, he cannot be proceeded against in the present
complaint. Accordingly the impugned judgment and order
passed by the trial Court so far as accused No.1 is
concerned is liable to be set aside and she is liable to be
punished for the offence under section 138 of N.I Act.
38. When the Court comes to the conclusion that
the charge levelled against the accused is proved beyond
reasonable doubt for the offence punishable under Section
138 of N.I.Act and the appeal is allowed by setting aside
the impugned judgment and order of acquittal, the next
question would be to what punishment accused is liable.
39. The punishment prescribed for the offence
under Section 138 of the N.I.Act is imprisonment for a term
which may extend to two years or with fine which may
extend to twice the amount of cheque or with both. As on
the date of presentation of the said cheques, the amount
due was Rs.16 lakhs. The complainant has presented the
cheques for Rs.16,00,000/- which came to be dishonoured.
The matter is of the year 2015. Already 9 years have
elapsed. Taking into consideration these aspects, this Court
is of the considered opinion that sentencing accused No.1
to pay fine in a sum of Rs.20 lakhs in default of paying the
fine sentencing her to undergo imprisonment for a period of
one year would meet the ends of justice and accordingly,
the following:
ORDER
(i) Appeal filed by the complainant under
Section 378(4) of Cr.P.C is allowed in
part.
(ii) The impugned judgment and order dated
27.08.2018 in C.C.No.25135/2016 on the
file of XV ACMM, Bengaluru is set aside so
far as against accused No.1 is concerned.
(iii) Accused No.1 is convicted for the offence
punishable under Section 138 of the N.I.
Act and sentenced to pay fine in a sum of
Rs.20 lakhs in default of payment of fine,
to undergo imprisonment for a period of
one year.
(iv) The entire fine amount is ordered to be
paid to the complainant by way of
compensation.
(v) Appeal is dismissed so far as accused
No.2 is concerned and the impugned
judgment and order of the Trial Court
acquitting accused No.2 is confirmed.
(vi) The Registry is directed to return the trial
Court records along with copy of this
judgment to the trial Court.
Sd/-
JUDGE
RR
