Karnataka High Court
Kapur Investments Private Limited vs Mr. Sarvana Prasad on 27 May, 2024
1 CRL.A NO.898 OF 2018
c/w CRL.A NO.897 OF 2018
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF MAY, 2024
BEFORE
THE HON'BLE MS.JUSTICE J.M.KHAZI
CRIMINAL APPEAL NO.898 OF 2018
C/W
CRIMINAL APPEAL NO.897 OF 2018
IN CRL.A NO.898 OF 2018
BETWEEN:
KAPUR INVESTMENTS PRIVATE LIMITED
OLD NO.12, NEW NO.169
REX THEATRE BUILDING
BRIGADE ROAD, BENGALURU - 560 001
REPRESENTED HEREIN BY ITS
MANAGING DIRECTOR
MR. KAMAL KUMAR KAPUR
......APPELLANT
(BY SRI. C.P.JITENDRA, ADVOCATE FOR
SRI. V VINAY GIRI, ADVOCATE)
AND:
MR. SARVANA PRASAD
NO.22/131, F BLOCK
BDAMIG FLATS, DOMLUR II STAGE
BENGALURU - 560 071
.......RESPONDENT
(BY SRI. DR.J.HALASHETTI, ADVOCATE)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION
378(4) OF CR.P.C PRAYING TO a) SET ASIDE THE JUDGMENT
DATED 28.02.2018 (ANNEXURE-A) PASSED BY THE LEARNED
XXV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE,
BENGALURU, IN C.C.NO.13293/2014 ACQUITTING THE
RESPONDENT UNDER SECTION 255(1) OF THE CODE OF
CRIMINAL PROCEDURE, 1973 OF THE OFFENCE UNDER
SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT,
1881; b) CONVICT THE RESPONDENT OF THE OFFENCE
2 CRL.A NO.898 OF 2018
c/w CRL.A NO.897 OF 2018
UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS
ACT, 1881 AND PUNISH HIM IN ACCORDANCE WITH LAW;
AND c) PASS SUCH OTHER AND / OR FURTHER ORDERS AS
THIS HON'BLE COURT MAY DEEM FIT, IN THE INTERESTS OF
JUSTICE AND EQUITY.
IN CRL.A NO.897 OF 2018
BETWEEN:
M/S. KAPUR OIL AND FERTILISER INDUSTRIES
OLD NO.12, NEW NO.169
REX THEATRE BUILDING
BRIGADE ROAD, BENGALURU - 560 001
REPRESENTED HEREIN BY ITS
MANAGING PARTNER
MR. KAMAL KUMAR KAPUR
......APPELLANT
(BY SRI. C.P.JITENDRA, ADVOCATE FOR
SRI. V VINAY GIRI, ADVOCATE)
AND:
MR. SARVANA PRASAD
NO.22/131, F BLOCK
BDA MIG FLATS, DOMLUR II STAGE
BENGALURU - 560 071
.......RESPONDENT
(BY SRI. DR. J.HALASHETTI, ADVOCATE)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION
378(4) OF CR.P.C PRAYING TO a) SET ASIDE THE JUDGMENT
DATED 28.02.2018 (ANNEXURE-A) PASSED BY THE LEARNED
XXV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE,
BENGALURU, IN C.C.NO.13294/2014 ACQUITTING THE
RESPONDENT UNDER SECTION 255(1) OF THE CODE OF
CRIMINAL PROCEDURE, 1973 OF THE OFFENCE UNDER
SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT,
1881; b) CONVICT THE RESPONDENT OF THE OFFENCE
UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS
ACT, 1881 AND PUNISH HIM IN ACCORDANCE WITH LAW;
AND c) PASS SUCH OTHER AND / OR FURTHER ORDERS AS
THIS HON'BLE COURT MAY DEEM FIT, IN THE INTERESTS OF
JUSTICE AND EQUITY.
3 CRL.A NO.898 OF 2018
c/w CRL.A NO.897 OF 2018
THESE APPEALS HAVING BEEN HEARD AND RESERVED
ON 27.02.2024, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY, THE COURT DELIVERED THE
FOLLOWING:
JUDGMENT
These two appeals filed under Section 378 (4) of
Cr.P.C are by the complainant challenging the acquittal
of respondent/accused for the offence punishable under
Section 138 of Negotiable Instruments Act, 1881 (for
short 'N.I. Act').
2. For the sake of convenience, parties are
referred to by their rank before the trial Court.
3. Since the parties are common and the facts
based on which the complaint came to be filed as well as
the defence taken by the accused are same, for the sake
of convenience these two appeals are clubbed together
and a common order is passed.
4. It is the case of the complainant that it is a
private limited company incorporated under the
provisions of Companies Act 1956. Accused approached
c/w CRL.A NO.897 OF 2018
the complainant from time to time seeking loan in order
to meet his financial needs and obligations. Complainant
agreed to grant the loan subject to payment of interest
at 18% per annum. Accused agreed to repay the amount
with interest, as and when demanded. In the above
terms, complainant disbursed a sum of Rs.50 lakhs
through cheque No.054 dated 30.07.2007 drawn on
Kotak Mahindra Bank Ltd. Similarly, complainant has
disbursed a sum of Rs.20 lakhs to the accused vide
cheque No.267266 dated 12.11.2007 drawn on South
Indian Bank Ltd in favour of the accused.
4.1 In this regard, the accused has executed
separate demand promissory note dated 17.09.2008
acknowledging receipt of Rs.50 lakhs as well as Rs.20
lakhs. Even though initially accused was prompt in
paying the interest, he has committed default in paying
the interest from 01.04.2008. However, he has
acknowledged his liability by issuing balance
confirmation letters. Therefore, the complainant is not
having any other alternative, but demand the principal
c/w CRL.A NO.897 OF 2018
amount of Rs.50 lakhs and 20 lakhs respectively,
excluding the outstanding interest. After repeated
request and demand, accused has issued two separate
cheques dated 10.02.2014 for Rs.70 lakhs and 20 lakhs.
4.2 Complainant presented them on 13.02.2014
through his account in Kotak Mahindra Bank Ltd.
However, they were returned dishonoured on the ground
"Account blocked". Accused has deliberately issued the
cheques knowing fully well that his account was blocked.
He never informed the complainant that his account from
which the subject cheques were issued was blocked. In
fact, complainant believe that accused account was
blocked even before he issued the cheques in question,
by suppressing the said fact. In this regard, complainant
got issued legal notice dated 11.03.2014 calling upon the
accused to make payment of the amount due. Though
the legal notice is duly served on the accused, he has
neither paid the amount due nor sent any reply and
hence, the complaint.
c/w CRL.A NO.897 OF 2018
5. Before the trial Court, the accused appeared
through counsel and contested the case by pleading not
guilty.
6. In both cases on behalf of complainant, one
witness is examined as PW-1. In C.C.No.13293/2014,
Ex.P1 to 22 are marked and in C.C.No.13294/2014,
Ex.P1 to 19 are marked.
7. During the course of his statement under
Section 313 Cr.P.C, the accused has denied the
incriminating evidence led by the complainant.
8. Accused has not led any defence evidence.
9. Vide the impugned judgment and order, the
trial Court has acquitted the accused.
10. Aggrieved by the same, the complainant has
come up with these appeals contending that the
impugned judgment and order are opposed to law,
contrary to the facts of the case, and the evidence
placed on record and as such liable to be set aside. The
c/w CRL.A NO.897 OF 2018
trial Court has committed error in acquitting the accused,
though ingredients of Section 138 are clearly present
and established by the complainant. The trial Court has
failed to appreciate the oral and documentary evidence
placed on record in proper perspective and as such it is
perverse.
10.1 The trial Court has committed grave error by
holding that complainant has not discharged the initial
burden of proving the existence of loan transaction
between the complainant and accused. In concluding
above, the trial Court has completely lost sight of the
extracts of bank account statements of the complainant
for the relevant period which shows disbursement of
amount by the complainant to the accused and also the
demand promissory note and acknowledgement of debt
letters given by the accused every year.
10.2 In the light of presumption under Section
118 and 139 of the N.I. Act, the initial burden is on the
accused to rebut the presumption. Having regard to the
fact that the accused has failed to rebut the
c/w CRL.A NO.897 OF 2018
presumption, the trial Court has committed grave error
in acquitting accused. The trial Court has also committed
grave error in holding that the complainant has failed to
produce the books of accounts.
10.3 The trial Court has overlooked the well
settled position of law that for the offence under Section
138 of N.I. Act. There is no burden on the complainant to
prove the transaction between the parties before the
execution of cheque. When the accused admit issuance
of cheque, the Court is bound to draw presumption
under Section 118 and 139 of the N.I. Act. The
observation of the trial Court that the accused is not
expected to prove the negative is contrary to the
statutory presumption under Section 118 and 139 of the
N.I Act.
10.4 The trial Court has failed to appreciate the
fact that despite taking several defence, the accused has
not led any evidence to prove the same and thereby
failed rebut the presumption and discharge the burden
placed on him. The trial Court has committed grave error
c/w CRL.A NO.897 OF 2018
in holding that complainant is indulged in money lending
business without possessing requisite license when the
said issue is not even raised by the accused.
10.5 The transaction between complainant and
accused does not amount to money lending business
requiring license under the Karnataka Money Lender Act.
After rightly noting that one of the object of
complainant/ company is to lend money on promissory
notes, the trial Court has committed a grave error in
holding that there ought to have been a resolution by the
Board permitting lending of money. The trial Court has
failed to appreciate all the documents placed on record in
right perspective. There is no application of mind by the
trial Court. Viewed from any angle, the impugned
judgment and order are not sustainable and it calls for
interference by this Court and pray to allow the appeals,
convict the accused and sentence him in accordance with
law.
11. In support of his arguments, learned counsel
for complainant has relied upon the following decisions:
c/w CRL.A NO.897 OF 2018
(i) Gurucharan Singh Vs. State of U.P and Anr.
(Gurucharan Singh)1
(ii) Bhavani Agencies, Bangalore Vs.G.C.Colour
Lab, Bangalore and Anr. (Bhavani
Agencies)
(iii) M/s Beacon Industries Vs. Anupam Ghosh
(Beacon Industries3)
(iv) D.K.Chandel Vs. Wockhardt Ltd and Anr.
(D.K.Chandel)4
(v) Narendra Vs. Balbirsingh (Narendra)5
(vi) Rajesh Jain Vs. Ajay Singh (Rajesh Jain)6
12. On the other hand learned counsel for
accused has supported the impugned judgment and
order and sought for dismissal of appeals.
13. In support of his arguments, learned counsel
for accused has relied upon the decision in Monica Sunit
Ujjain Vs. Sanchu M.Menon and Ors. (Monica Sunit
Ujjain)7.
2002 (3) BC 164
2003 SCC Online Kar 580
ILR 2003 KAR 4325
(2020) 13 SCC 471
2020 SCC Online Bom 223
(2023) 10 SCC 148
MANU/MH/4864/2022
c/w CRL.A NO.897 OF 2018
14. Heard elaborate arguments of both sides and
perused the record.
15. Thus, it is the definite case of complainant
that accused borrowed a sum of Rs.50 lakhs and 20
lakhs agreeing to repay the same with interest at 18%
per annum. Though initially he paid the interest
regularly, later on he became defaulter and on request
and demand, he has issued the subject cheques for
Rs.50 lakhs and Rs.20 lakhs towards principal. However,
when presented the cheques came to be dishonoured on
the ground that Account is blocked. Despite issue and
service of legal notice, accused has failed to repay the
amount due.
16. Accused has not disputed the fact of service of
legal notice. Admittedly, he has not sent any reply to the
legal notice, putting forth his defence at the earliest
available opportunity. In fact, there is no specific defence
taken by the accused, except suggesting that Rs.50
lakhs paid by the accused has gone to the account of
"Innovative" and that the person referred to as Saravana
c/w CRL.A NO.897 OF 2018
to whose account Rs.20 lakhs is credited on behalf of
complainant is not the accused. In the light of such
defence, it is necessary to examine whether the
allegations against accused are proved and whether the
trial Court is justified in dismissing the complaint filed
against the accused.
17. At the outset, it is relevant to note that
accused has not disputed the fact that the subjects
cheques belongs to him, drawn on his account,
maintained with his banker and they bear his signature.
Therefore, as held by the Hon'ble Supreme Court in
several decisions starting from Rangappa Vs Sri Mohan
(Rangappa)8 and upto Rajesh Jain, presumption under
Section 118 and 139 of the N.I Act comes into operation
in favour of the complainant that the cheques in question
are issued towards repayment of any legally recoverable
debt or liability, placing the initial burden on the accused
to rebut the same and establish the circumstances in
which the cheques have reached the hands of
(2010) 11 SCC 441
c/w CRL.A NO.897 OF 2018
complainant. Only after the accused succeeds in
rebutting the presumption, burden would shift on the
complainant to prove his case. Of course, as held by the
Hon'ble Supreme Court in Basalingappa Vs Mudibasappa
(Basalingappa)9 in order to rebut the presumption, it is
not necessary for the accused to lead evidence by
stepping into the witness box and also examining
witnesses and he may make use of the evidence led by
the complainant and prove his defence. Of course, it is
sufficient for the accused to prove his defence on
preponderance of probabilities, whereas the complainant
is required to prove his case beyond reasonable doubt.
18. However, in John K.Abraham Vs. Simon C.
Abraham & Anr (John K.Abraham)10, the Hon'ble
Supreme Court held that in order to draw presumption
under Sections 118 and 139 of N.I Act, the burden lies
on the complainant to show that:
(i) She had the requisite funds for advancing
the sum of money/loan in question to
accused.
(2019) 5 SCC 418
(2014) 2 SCC 236
c/w CRL.A NO.897 OF 2018
(ii) The issuance of cheque by accused in
support of repayment of money advanced
was true and
(iii) The accused was bound to make payment
as had been agreed while issuing cheque in
favour of the complainant.
19. In fact, in Rajesh Jain, Hon'ble Supreme
Court held that on proof of preliminary facts,
presumption comes into picture.
20. In the light of ratio in John K Abraham and
Rajesh Jain, it is necessary to examine whether the
complainant has proved the preliminary facts giving rise
to presumption. PW-1 Kamal Kumar Kapur is one of the
Directors of the complainant company. He has claimed
that he is the Managing Director which fact is disputed
by the accused. Ex.P20 and 21 are the Memorandum of
Association and Articles of Association of the complainant
company, which disclose the fact that PW-1 is one of the
Directors. As per Ex.P22 the Board of Directors have
passed the resolution in the board meeting dated
10.02.2014, authorising PW-1 to represent the company
c/w CRL.A NO.897 OF 2018
in all the legal matters before the Courts, Tribunal,
Corporation, and Government Department.
21. Therefore, in his capacity, as the Director of
the complainant company, PW-1 is authorised to file the
complaint and prosecute the same. The accused has
disputed that any such resolution has been passed
authorising PW-1 to prosecute complaint. Of course PW-
1 has denied the said suggestion. The documents at
Ex.P20 to 22 prima facie establish the fact that PW-1 is
having the authority to file the complaint and prosecute
the same. The accused has not led any evidence to
disprove the same. Even where there is no resolution
passed by the company, it may satisfy the action taken
by the complainant. It is the internal matter between the
Directors and if at all there is any dispute between them,
they may question the resolution and not the accused.
Therefore, this Court is of the considered opinion that
PW-1 is well within his right to file the complaint and
prosecute the same.
c/w CRL.A NO.897 OF 2018
22. The oral and documentary evidence placed on
record establish the fact that as per Ex.P10 Rs.50 lakhs
and as per Ex.P11 a sum of Rs.20 lakhs is transferred
from the account of complainant. With regard to the
borrowing of Rs.50 lakhs and Rs.20 lakhs, the accused
has executed Ex.P3 & 4 Demand Promissory Note and
the consideration receipt dated 17.09.2008, Ex.P8
balance confirmation letter dated 24.04.2013, Ex.P12
Demand Promissory Note dated 30.07.2007 for Rs.50
lakhs and Ex.P13 Demand Promissory Note dated
12.11.2007 for Rs.20 lakhs. Ex.P14 is the covering letter
dated 17.09.2008 sent by the accused, forwarding the
Demand Promissory Note. Ex.P15 to 19 are confirming
the balance due as on 31.03.2008 to 31.03.2012.
23. During the cross-examination of PW-1, it is
elicited that Rs.50 lakhs paid as per Ex.P10 account
statement of complainant is credited in the name of
Innovative. Complainant has also claimed that Rs.20
lakhs credited as per Ex.P1 in the name of Saravana and
not the accused. Of course, PW-1 has denied the said
c/w CRL.A NO.897 OF 2018
suggestions and thereby pleaded that these two
payments are made in favour of the accused. However,
the accused has not made any suggestion to PW-1 that
he has nothing to do with Innovative in whose favour
Rs.50 lakhs is credited by the complainant.
24. The accused has also not produced his
account statement to show that payment of Rs.20 lakhs
as per Ex.P11 is not made to his account and the person
by name Saravana in whose favour the said payment is
made is someone else. It is the definite case of the
complainant that Ex.P3, 4, 8, 12 to 19 are executed by
the accused in connection with the loan of Rs.50 lakhs
and Rs.20 lakhs borrowed from the complainant. All
these documents bear the signature of accused.
However, accused has not come up with any explanation
as to why he has executed these documents. If these
documents are not issued in connection with these two
loans, then accused is not having explanation as to in
what respect they came to be executed and he issued
these documents. If at all he is disputing the execution
c/w CRL.A NO.897 OF 2018
and issue of these documents, then the proper course
available to him is to prove that the signature therein
does not belong to him.
25. If the loan in question is not availed by the
accused, then he is not also having any explanation as to
how the subject cheques came to the hands of
complainant. A suggestion is made to PW-1 that the
subject cheques were issued by way of security. Accused
has not come up with any details as to for what security
and to whom the subject cheques were issued. If at all
they were issued by way of security, then the burden is
on the accused to prove discharge, so as to claim that in
the light of discharge of the loan, the complainant was
not supposed to make use of the cheques and file the
complaint. Of course, the accused has failed to prove
that the loan availed through Ex.P10 and 11 was repaid.
26. In fact in Sunil Todi Vs State of Gujarat (Sunil
Todi)11, the Hon'ble Supreme Court held that merely
labelling a cheque as security would not obviate its
AIR 2022 SC 147
c/w CRL.A NO.897 OF 2018
character as an instrument designed to meet legally
enforceable debt or liability. Once agreement between
the parties provided for which monies due and payable,
cheque furnished as security is covered under the
provisions of Section 138 of N.I Act. In fact, in
Dashrathbhai Trikhambhai Patel (Dashrathbhai)12, the
Hon'ble Supreme Court held that when the borrower
agrees to repay the loan within a specified timeline and
issues a cheque for security, but default in repaying the
loan within the timeline, then the cheque measures for
presentation. However, if loan has been discharged
before the due date, or if there is an altered situation,
then the cheque shall not be presented for encashment.
27. In the present case, the accused has failed to
prove that the amount received through Ex.P10 and 11
has been repaid along with the agreed interest and
nothing was due. Therefore, it is not available to the
accused to content that the subject cheques were issued
by way of security and they ought not have been utilised
2022 SCC Online SC 1376
c/w CRL.A NO.897 OF 2018
by the complainant. By suggesting that Rs.50 lakhs paid
through Ex.P10 has gone to the account of innovative,
the accused has tried to indirectly indicate that he has
issued his personal cheques. This issue is dealt with by
the Hon'ble Supreme Court in ICDS Ltd Vs Beena
Shabeer and Anr (ICDS Ltd), which was a case wherein
the husband of accused availed loan based on hire
purchase agreement to purchase a car with complainant
and the cheque was issued by accused as a guarantor.
28. In Mainuddin Abdul Sattar Shaikh Vs. Vijay D
Salvi (Mainuddin)13, complainant booked a flat
proposed to be developed by the company through the
accused, who was the Managing Director by paying
advance of Rs.74,200/-. By the year 2003, as the project
did not materialise, after much persuasion by the
complainant, accused issued his personal cheque for
Rs.74,200/- and on its dishonour, complaint came to be
filed. The Hon'ble Supreme Court held that a person who
draws cheque on account maintained by him for paying
(2015) 9 SCC 622
c/w CRL.A NO.897 OF 2018
the payee alone attracts liability. Accused who was the
drawer would be liable, even though company was not
named in the notice or complaint. There was no
necessity for the complainant to prove that the accused
was in charge of the affairs of the company, by virtue of
the position he held. In the present case, even where it
is accepted that Rs.50 lakhs paid through Ex.P10 has
gone to the account of Innovative, having issued the
subject cheque for Rs.50 lakhs, the accused is personally
liable. In the absence of explanation by the accused, it
has to be held that accused has chosen to issue his
personal cheque and consequently, on their dishonour,
he is liable under Section 138 of the N.I Act.
29. It is suggested to PW-1 that the cheque for
Rs.50 lakhs is cleared through Bank and the cheque for
Rs.20 lakhs was paid across the counter. Whether the
cheques were cleared through the clearance or across
the counter, it is the definite case of the complainant
that payment under the said cheques were made to the
accused. Therefore, the burden is on the accused to
c/w CRL.A NO.897 OF 2018
establish that he has not received the payment under the
cheques as per Ex.P10 and 11. Of course, the accused
has failed to prove the same.
30. By making a suggestion that except the
signature rest of the writing in the subject cheque is not
that of the accused, accused is trying to make a
suggestion that they were taken blank. In Oriental Bank
of commerce Vs Prabodh Kumar Tewari (OBC)14, the
Hon'ble Supreme Court held that the provisions of
Section 138 of N.I. Act are applicable and presumption
under Section 139 of N.I Act is attracted even to a blank
cheque.
31. In Sumeti Vij Vs M/s Paramount Tech Fab
Industries (Sumeti Vij)15, the Hon'ble Supreme Court
held that where the accused has only recorded
statement under Section 313 Cr.P.C and has not
adduced any evidence to rebut the presumption that the
cheques were issued for consideration, and when once
the facts came on record remained unrebutted and
2022 SCC Online SC 1089
2021 SCC Online 201
c/w CRL.A NO.897 OF 2018
supported with the evidence on record with no
substantive evidence of defence of the accused to
explain the incriminating circumstances appearing in the
complaint against him, no error was committed by the
High Court in convicting the accused. It also held that
the statement of the accused recorded under Section
313 Cr.P.C is not a substantive evidence of defence, but
only an opportunity to the accused to explain the
incriminating circumstances, appearing in the
prosecution case of the accused. Therefore, there is no
evidence to rebut the presumption that the cheques
were issued for consideration. It further held that to
rebut the presumption, facts must be adduced by the
accused, which on preponderance of probabilities must
then be proved. In the present case also, the accused
has not taken any specific defence and has also not led
any evidence. Virtually the entire case of the
complainant has remained unchallenged.
32. If the subject cheques are not issued towards
repayment of any legally recoverable debt or liability
c/w CRL.A NO.897 OF 2018
towards the complainant, it is for the accused to explain
for what purpose and how the said cheques were issued
to the complainant or reached the hands of complainant.
It is suggested to PW-1 that the demand promissory
note is not in the handwriting of accused. There is no
rule that the promissory note is to be written by the
accused. A suggestion is made that the promissory note
and consideration receipt as well as the
acknowledgement letters are concocted. If the
promissory notes and acknowledgement of debt letters
are concocted by the complainant, certainly accused
would have taken action against it. But no such steps
have been taken by the accused.
33. At the first instance, the complainant has not
pleaded and placed on record the demand promissory
note and acknowledgement of debt letters and his
statement of account. On this aspect, PW-1 has been
cross- examined at length as to why there are no
pleadings to that effect in the notice, complaint and that
why the said documents were not produced at the first
c/w CRL.A NO.897 OF 2018
instance. In the light of presumption available under
Section 139 of the N.I Act, it was sufficient for the
complainant to plead that the cheques in question were
issued towards repayment of the debt. Having regard to
the fact that the accused has not sent reply to the legal
notice, complainant was not aware of the defence that
would be taken by the accused at the trial. Therefore,
complainant was not expected to plead and produce
these documents.
34. One of the grounds on which the trial Court
has acquitted the accused is that complainant has
indulged in money lending business without license. In
fact, a suggestion is made to PW-1 that the Articles of
Association of complainant company authorise to do
money lending business, but it has not secured license to
do the money lending and in fact, it is not doing money
lending business. Except the present case, the accused
has not placed any material on record to show that
complainant is habitually involved in money lending
business. Therefore, it cannot be accepted that the stray
c/w CRL.A NO.897 OF 2018
incident of complainant having granted loan to the
accused would amount to money lending business
requiring license. Even otherwise, it may amount to
violation of provisions of the Karnataka Money Lending
Act, attracting civil and criminal liability under the Act. It
will not give rise to a right to the accused to escape from
the liability to pay the amount due under the cheques.
35. The trial Court has acquitted the accused also
on the ground that complainant has not produced the
Books of Account and Statement of Accounts. In the light
of the presumption available under Section 139 of the
N.I Act, initial burden is on the accused to prove that the
cheques are not issued towards repayment of any legally
recoverable debt or liability. Only on rebuttal of the
presumption, the burden shifts on the complainant to
prove his case. In the present case, the accused has
failed to rebut the presumption. It is not his case that
the loan has been discharged and therefore necessitating
the complainant to produce his statement of account and
books of account to prove otherwise.
c/w CRL.A NO.897 OF 2018
36. In D.K Chandel, referred to supra the trial
Court convicted the accused, but the Sessions Court
acquitted him holding that the complainant did not
produce cash and account books to prove that the
amount was due and payable by the accused. The
Hon'ble Supreme Court held that while resorting the
conviction, the High Court has rightly observed that
production of Account books/Cash book may be relevant
in Civil Court, but may not be so in criminal case filed
under Section 138 of N.I Act, because of presumption
raised in favour of holder of the cheque. In the light of
this decision, the trial Court has erred in coming to the
conclusion that the complainant has failed to prove the
allegations against accused for the simple reason that
the accounts book and statement of accounts maintained
by it was not produced.
37. There is nothing on record i.e., to be more
specific in the evidence led by the complainant to help
the accused to prove his defence. Such being the case by
not stepping into the witness box, the accused has failed
c/w CRL.A NO.897 OF 2018
to counter the evidence of PW-1 and the documents
placed on record under an oath. In fact, practically, there
is no defence taken by the accused except suggesting
that Rs.50 lakhs paid as per Ex.P10 has gone to
Innovative and that the person has received Rs.20 lakhs
as per Ex.P11 is not the accused. Of course, the accused
has failed to establish the same.
38. Without examining all these aspects, the trial
Court has acquitted the accused. It has failed to take
into consideration the presumption under Section 139 of
the N.I Act, placing the initial burden on the accused to
rebut the same. When the accused has failed to rebut
the presumption, the burden has not at all shifted on the
complainant. Based on the preliminary facts proved by
the complainant through the oral testimony of PW-1 and
the documentary evidence placed on record, the trial
Court ought to have accepted the case of complainant.
The findings of the trial Court are contrary to the
evidence on record and as such perverse calling for
interference by the Court.
c/w CRL.A NO.897 OF 2018
39. Before this Court, it is argued by the learned
counsel for accused that as an unregistered
company/firm, the complainant is prohibited from filing
the complaint under Section 69 of Partnership Act and
therefore, the complaint is not maintainable. On this
aspect the learned counsel for complainant submitted
that the provision contained under Section 69 (2) of
Partnership Act is with regard to filing of suit and the
same is not attracted to criminal proceedings initiated at
the instance of an unregistered partnership firm.
40. In Narendra referred to supra, a Division
Bench of the Hon'ble High Court of Bombay was
constituted to answer a question as to "whether
prosecution of accused under Section 138 of N.I Act is
hit by the bar created by Section 69(2) of Indian
Partnership Act, 1932"?. Section 69 of the Indian
Partnership Act deals with effect of non-registration of
firms and sub-section (2) provides that no suit to enforce
a right arising from a contract shall be instituted in any
Court by or on behalf of a Firm against any third party
c/w CRL.A NO.897 OF 2018
unless the Firm is registered and the persons suing
are/or have been shown in the Register of Firms as
partners in the Firm.
40.1 After examining various decisions of the
several High Court, at Para-17, the Division Bench of the
Hon'ble High Court of Bombay held that there is no point
in stretching the bar which is in the nature of temporary
bar to the suit to the complaints under Section 138 of N.I
Act, which is in the nature of penal provision with the
object to inculcate faith in banking transactions. The
term 'suit' under Section 69(2) of Indian Partnership Act
must receive its plain and simple meaning. It cannot be
stretched for securing immunity from criminal
prosecution. The bar is liable to be confined only to
enforcement of contractual obligations.
40.2 At para-18, the Division Bench held that
when the plaint is rejected being barred by Section 69(2)
of the Act, the same shall not preclude the plaintiff from
presenting a fresh plaint in respect of the same cause of
action, in view of Order 7, Rule 13 Cr.P.C. Similar kind of
c/w CRL.A NO.897 OF 2018
provision is neither available in N.I Act or Cr.P.C. At
para-19, it was observed by the Division Bench that by
way of simple endorsement, the cheque can be
negotiated in the name of any person or registered firm
and in this way, the effect of Bar can be neutralised by
an unregistered firm, and in such an eventuality, there
won't be a privity of contract between the drawer of the
cheque and its holder.
41. In fact, in A V Ramaiah Vs M Shekhar
(A.V.Ramaiah)16, the Division Bench of the Hon'ble
Andhra Pradesh High Court, while overruling the decision
of the Single Bench in Amit Desai Vs. Shine Enterprises
(Amit Desai)17, held that Section 69 is intended to
prevent unregistered partnership firm to enforce a right
arising out of a contract against a third party and that it
is not intended to create any such bar for enforcing
rights arising out of statutes or for invoking the
protection available under any other statute.
ALD(CRI) 2009 2 801
2000 Crl L.J. 2386
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42. In fact, in Gurucharan Singh, referred to
supra the Co-ordinate Bench of U.P High Court held that
what is barred under Section 69(2) was suit if the firm
was not registered. Word 'Suit' means a process
instituted in a Court for recovery or protection of a right,
enforcement of a claim or to redress civil injuries.
Section 138 of N.I. Act being a criminal provision,
prescribe punishment for bouncing of cheque.
Legislature, therefore, in its wisdom, use the word
complaint and not suit in Section 142, because suit can
be maintained for recovery of money or for any other
civil remedy. Bar created for maintaining under Section
69 by an unregistered firm cannot be stretched and
applied to maintaining a criminal proceedings under
Section 138 of N.I Act.
43. Similar view has been taken by Co-ordinate
Bench of the Court in Bhavani agencies and M/s
Beacon Industries.
44. In the light of ratio in the above decisions,
this Court has no hesitation to hold that a vain attempt is
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being made by the accused to escape from the criminal
liability by referring to Section 69 of the Indian
Partnership Act.
45. Thus from the above discussion, this Court is
of the considered opinion that despite the fact that the
accused has failed to rebut the presumption under
Section 139 of the N.I Act, the complainant has proved
the allegation against accused beyond reasonable doubt.
Without appreciating the oral and documentary evidence
placed on record in right perspective, the trial Court has
come to a wrong conclusion that the allegations against
accused are not proved. It is a fit case to interfere in
exercise of Appellate jurisdiction of this Court.
46. When the Court comes to the conclusion that
the charge levelled against the accused is proved 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.
c/w CRL.A NO.897 OF 2018
47. 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.
The amount involved through the cheque in
C.C.No.13293/2014 is Rs.70,00,000/- and in
C.C.No.13294/2014 is Rs.20,00,000/-. Taking into
consideration all these aspects, this Court is of the
considered opinion that sentencing accused to pay fine of
Rs.80,00,000/- in C.C.No.13293/2014 and
Rs.30,00,000/- in C.C.No.13294/2014 would be
sufficient to meet the ends of justice. In default of
paying the fine, sentencing accused to undergo
imprisonment for a period of one year each would be
proportionate to the gravity of offence and accordingly, I
proceed to pass the following:
ORDER
(i) Appeals filed by the complainant under
Section 378(4) of Cr.P.C. are allowed.
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(ii) The impugned judgments and orders dated
28.02.2018 in C.C.Nos.13293/2014 and
13294/2014, on the file of XXV ACMM,
Bengaluru is set aside.
(iii) In both cases accused is convicted for the
offence punishable under Section 138 of the
N.I.Act.
(iv) In C.C.No.13293/2014, accused is sentenced
to pay fine in a sum of Rs.80,00,000/- and in
C.C.No.13294/2014, accused is sentenced to
pay fine in a sum of Rs.30,00,000/-.
(v) In default of payment of fine, accused is
sentenced to undergo imprisonment for a
period of one year each.
(v) The entire fine amount recovered is ordered
to be paid to the complainant by way of
compensation.
(vi) The Registry is directed to return the trial
Court records along with copy of this
judgment forthwith.
Sd/-
JUDGE
RR
