Karnataka High Court

Reddappa Chetty vs Vidhyadhar S Wodeyar on 28 May, 2024

                          1             CRL.A NO.175 OF 2015




   IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 28TH DAY OF MAY, 2024

                       BEFORE

           THE HON'BLE MS.JUSTICE J.M.KHAZI

         CRIMINAL APPEAL NO.175 OF 2015

BETWEEN:

REDDAPPA CHETTY
S/O LATE VENKATARAMANA CHETTY
AGED ABOUT 62 YEARS
NO.1014, RAMYA SADANA
11TH MAIN, HAMPINAGARA
VIJAYANAGARA II STAGE
BENGALURU - 560 040
                                         ......APPELLANT
(BY SRI. JAYAPRAKASH R V, ADVOCATE)

AND:

VIDHYADHAR S WODEYAR
S/O SADASHIVA WODEYAR
AGED ABOUT 58 YEARS
NO.17, 12TH MAIN,
RAJAJINAGAR I BLOCK
BENGALURU - 560 010
                                       .....RESPONDENT
(BY SRI. G.R.GURUNATH, SENIOR COUNSEL FOR
    SRI. J.M.UMESHA MURTHY, ADVOCATE)

     THIS CRIMINAL APPEAL IS FILED UNDER SECTION
378(4) OF CR.P.C PRAYING TO SET ASIDE THE JUDGMENT
ORDER DATED 03.12.2014 IN C.C.NO.40638/2010, PASSED
BY   THE   XXIII  ADDITIONAL   CHIEF  METROPOLITAN
MAGISTRATE, NRUPATHUNGA ROAD, BENGALURU CITY AND
ALLOW     THE      COMPLAINT    FILED     BY     THE
APPELLANT/COMPLAINANT AND CONVICT THE ACCUSED FOR
AN OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I.ACT
IN ACCORDANCE WITH LAW IN THE INTEREST OF JUSTICE.
                                2               CRL.A NO.175 OF 2015




     THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
22.03.2024, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY, THE COURT DELIVERED THE
FOLLOWING:
                      JUDGMENT

This appeal is by the complainant challenging the

impugned judgment and order, whereby the complaint

filed under Section 200 Cr.P.C for the offence punishable

under Section 138 of Negotiable Instruments Act, 1881

(for short 'N.I. Act'), against the respondent/accused

came to be dismissed.

2. For the sake of convenience, parties are

referred to by their rank before the trial Court.

3. It is the case of the complainant that he and

accused are family friends. In turn accused is a friend of

one Ravi Shiriyanna. Accused is an architect. During the

month of September 2007, accused and his friend Ravi

Shiriyanna approached the complainant for hand loan of

Rs.25 lakhs. Accused offered to deposit the title deeds of

Ravi Shyiriyanna as security towards the loan. They

offered to pay simple interest. Accordingly, Ravi

Shiriyanna handed over the original title deeds of his

property at Hubli/Dharwad. Believing the words of

accused and out of good faith in the accused,

complainant advanced loan of Rs.25 lakhs on

03.09.2007. However, accused and Ravi Shiriyanna failed

to repay the amount within the stipulated time. After

repeated request and demand, accused informed the

complainant that Ravi Shiriyanna has filed a false

complaint alleging that the title deeds are lost and on the

basis of the said false complaint, he has raised loan

against the same property in some banks. Both accused

and Ravi Shiriyanna have played fraud on the

complainant.

4. It is further the case of the complainant that

thereafter accused undertook to pay the amount due

along with interest and executed agreement dated

11.09.2008. He issued a cheque for Rs.32.5 lakhs

assuring that he would pay the amount due within one

year, failing which, he is at liberty to present the cheque

and recover the amount. Since the accused failed to pay

the amount due, complainant presented the cheque on

22.10.2009 through his Banker. However, it was

returned dishonoured with endorsement 'Exceeds

arrangement'. Therefore, complainant got issued legal

notice dated 26.10.2009 and it is duly served on the

accused. However, the accused has neither sent any

reply nor paid the amount and hence, the complaint.

5. After due service of summons, accused

appeared and resisted the case by pleading not guilty.

6. In order to prove the allegations against

accused, complainant has examined himself as PW-1 and

got marked Ex.P1 to 11.

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. In fact, accused has led defence evidence by

examining himself as DW-1 and one witness as DW-2. He

relied upon exhibits D1 to 4.

9. Vide the impugned judgment and order, the

trial Court has dismissed the complaint mainly on the

ground that the cheque was presented for realization

beyond the period of its validity and therefore, the

complaint is not maintainable.

10. Aggrieved by the same, the complainant is

before this Court, contending that the order under

challenge is contrary to law, facts and evidence on

record. The entire approach of the trial Court is perverse,

arbitrary and manifestly illegal. The trial Court erred in

holding that the validity of cheque issued by the accused

was six months and now the validity of the cheque is

three months. Since the agreement entered into between

the complainant and accused is dated 11.09.2008 and

the cheque was issued on the same day, therefore, the

cheque was presented after a period of one year and as

such, it was barred. The trial Court has failed to

appreciate the fact that though the cheque was issued on

11.09.2008, it was a post dated 30.08.2009 cheque.

Therefore, it was presented within the period of its

validity. Moreover, the cheque is dishonoured not on the

ground that it is presented beyond the period of its

validity, but on the ground "Exceeds arrangement". This

fact is not appreciated by the trial Court.

11. The trial Court has also not appreciated the

fact that accused has not sent any reply to the legal

notice. There is also no denial by the accused regarding

the issue of the subject cheque by way of security

towards the loan borrowed by Ravi Shiriyanna.

Consequently, the trial Court was required to raise

presumption under Section 139 of the N.I Act. Accused

has not led any evidence to rebut the presumption by

establishing discharge. The trial Court has failed to

appreciate the fact that during the pendency of the

complaint, accused has paid a total sum of Rs.10 lakhs

by way of demand draft for Rs.5 lakhs each and in this

regard, the complainant has issued receipt. In the said

receipt, the accused has endorsed that he has stood as

guarantor to the loan borrowed by Ravi Shiriyanna and

undertaken to repay the balance. Viewed from any angle,

the impugned judgment and order are not tenable and

sought to allow the appeal, convict the accused and

sentence him in accordance with law.

12. In support of the arguments, learned counsel

for the complainant has relied upon the following

decisions:

(i) Rangappa Vs. Sri Mohan (Rangappa)1

(ii) Rohitbhai Jivanlal Patel Vs. State of Gujarat and Anr. (Rohitbhai Jivanlal Patel)2

(iii) APS Forex Services Pvt. Ltd., Vs. Shakti International Fashion Linkers and Ors.

(APS Forex)3

13. On the other hand, learned counsel for the

accused has supported the impugned judgment and

order and sought for dismissal of the appeal also.

14. In support of his arguments, learned counsel

for accused has relied upon the decision in Dashrathbhai

Trikambhai Patel Vs.Hitesh Mahendrabhai Patel and Anr.

(Dashrathbhai Trikambhai Patel)4.

(2010) 11 SCC 441

AIR 2019 SC 1876

AIR 2020 SC 945

2022 SCC Online SC 1376: AIR 2022 SC 4961

15. Heard elaborate arguments of both sides and

perused the record.

16. Thus, it is the definite case of the complainant

that he and accused are friends. The friend of accused by

name Ravi Shiriyanna was in need of financial

accommodation and therefore, on the recommendation

of the accused, he advanced hand loan of Rs.25 lakhs to

Ravi Shiriyanna, who undertook to repay the same with

simple interest and kept his title deeds with the

complainant by way of security. However, when he failed

to keep up with his promise and this fact was brought to

the notice of the accused, he undertook repay the

amount due from Ravi Shiriyanna and issued a cheque

for a total sum of Rs.32.50 lakhs which included the

principal and interest due from Ravi Shiriyanna. Accused

undertook to pay the amount within a period of one year

and by way of Security, he issued the subject cheque

with an understanding that if he failed to repay the

amount within a period of one year, the complainant is at

liberty to present the cheque and realize the amount.

However, on the failure of accused to pay the amount

due under the cheque, when complainant presented the

cheque for realization, it was dishonoured as "Exceeds

arrangement" and after issue of legal notice, and on

failure of the accused to comply with the same, the

present complaint is filed.

17. The accused admit that the loan of Rs.25

lakhs was borrowed by Ravi Shiriyanna and on his failure

to repay the same, he undertook to pay a sum of Rs.32.5

lakhs and issued the subject cheque by way of security.

However, the accused has claimed that even before the

complaint was filed, Ravi Shiriyanna has paid a sum of

Rs.2.95 lakhs and Rs.5 lakhs and without deducting the

said amount, the complainant has presented the cheque

for the entire sum of Rs.32.5 lakhs and in the

circumstances, the complaint is not maintainable. The

complainant has also claimed that during the pendency

of the complaint, a total sum of Rs.10 lakhs is paid by

way of two demand drafts and without giving deductions

of the same, the complainant is claiming entire sum of

Rs.32.5 lakhs to make wrongful gain and the trial Court

has rightly dismissed the complaint and sought for

dismissal of the appeal also.

18. In the light of the undisputed facts emerging

out of the evidence led by the parties, it is the specific

case of the complainant that accused has issued the

subject cheque by way of security on behalf of Ravi

Shiriyanna. This is not a case, wherein the complainant is

required to prove that he had the financial capacity to

lend loan in question and therefore, the cross-

examination of PW-1 that he has not paid any amount to

the accused is not of any consequence.

19. It is the specific case of complainant that

before filing the complaint, he has issued legal notice to

the accused and it is duly served on him, but he has

failed to comply with the same and also send reply.

However, during the course of his cross-examination, the

accused has disputed the fact that legal notice is served

on him. It is relevant to note that accused is not

disputing his address to which the legal notice was sent.

In fact, it is the same address as given in the complaint.

Ex.P6 is the postal acknowledgement. Though it is not

received by the accused, it bears the seal of his office

and the signature therein appears to be of some staff of

the accused.

19.1 Under Section 27 of the General Clauses Act

when any Central Act or Regulation made after the

commencement of the General Clauses Act, authorizes or

requires any document to be served by post, whether the

expression service or either of the expressions give or

send, or any other expression is used, then, unless a

different intention appears, the service shall be deemed

to be effected by properly addressing, pre-paying and

posting by registered post, a letter containing the

document, and, unless the contrary is proved, to have

been effected at the time at which the letter would be

delivered in the ordinary course of the post.

20. When the legal notice is sent to the accused

through registered post to his correct address, it is

deemed to have been duly served. It is not open to the

accused to claim that notice is not served on him. Burden

is on him to prove otherwise. Therefore, this Court is of

the considered opinion that the notice is duly served on

him and he has neither chosen to comply with the same

nor sent reply. As held by the Hon'ble Supreme Court in

C.C. Alavi Haji Vs. Palapetty Muhammed & Anr (Alavi

Haji)5, the object of issue of legal notice is to enable a

prompt drawer to make payment and escape from the

trouble and ignominy of undergoing criminal trial. Having

regard to the specific defence taken by the accused, the

fact of service or otherwise of legal notice is not of much

consequence in the present case.

21. At the outset, it is necessary to examine

whether the trial Court is justified in holding that the

cheque was presented beyond its period of validity and

therefore, complaint is not maintainable. During his

examination-in-chief, the accused has deposed that he

has not borrowed any loan from the complainant, but

issued the subject cheque by way of security to the loan

(2007) 6 SCC 555

borrowed by Ravi Shiriyanna. It is not the case of the

complainant that accused has borrowed any loan from

him and that the subject cheque was issued towards

repayment of it. It is also the specific case of

complainant that the cheque is issued by way of security

to the loan due from Ravi Shiriyanna.

22. Ex.P10 is the document got marked by the

complainant, stating that it is executed by the accused

while undertaking to indemnify the complainant with

regard to the liability of Ravi Shiriyanna. During his

cross-examination, accused admit that Ex.P1 bears his

signature. However, he has denied that it was executed

by him, but on the other hand claimed that it is executed

by Ravi Shiriyanna. The perusal of Ex.P10 clearly

indicates that it is a document given by the accused to

the complainant stating that towards the principal of

Rs.25 lakhs and interest in a sum of Rs.7.5 lakhs, i.e.,

Rs.32.5 lakhs is due from Ravi Shiriyanna and he

undertakes to indemnify him. There is also reference to

the issue of subject cheque number 561964 Rs.32.5

lakhs by him.

23. In fact, when accused produced and wanted to

rely upon Ex.D1, the learned counsel for complainant

raised objections. The trial Court has allowed the said

document to be marked based on Ex.P10. Ex.D1 is the

receipt dated 20.09.2009 given by complainant to

accused stating that he has received Rs.5 lakhs from the

accused towards amount due from Ravi Shiriyanna.

Complainant has also relied upon Ex.P7, which is the

receipt given by the complainant for having received

Rs.10 lakhs through two demand drafts of Rs.5 lakhs

each on 10.02.2011. When a suggestion is made to the

accused that he has given this document, he has replied

that it is given by Ravi Shiriyanna. In fact, it is a receipt

given by the complainant. It also bears the signature of

accused as a witness and also contains an undertaking

by Ravi Shiriyanna that he will pay the balance within a

period of one month, i.e., on or before 10.03.2011.

24. At the outset, it is relevant to note that

nowhere in the complaint or in any of the documents, the

date of the cheque is forthcoming. Nowhere the parties

have claimed that the subject cheque is specifically

dated. In the complaint, the complainant has pleaded

that on 11.09.2008, accused issued the subject cheque

by way of security for the sum of Rs.32.5 lakhs due from

Ravi Shiriyanna with an understanding that if he fails to

pay the amount within one year, the complainant is at

liberty to present the cheque and realise the amount. In

this regard, during his cross-examination, complainant

has stated that accused has issued the subject cheque

during September 2008 which corroborate with Ex.P10.

He has also admitted that as per Ex.P10, there is a

condition that Ravi Shiriyanna is required to pay the

amount on before 24.09.2008.

25. When questioned why the complainant did not

present the cheque immediately after 24.09.2008, the

complainant has replied that as accused had sought a

year's time, he waited for one year and thereafter

presented the cheque. This itself goes to show that the

cheque was not dated, but it was given by the accused

by way of security to be utilized in the case of failure on

the part of Ravi Shiriyanna to pay the amount due. It is

nobody's case that the subject cheque is dated

10.09.2008. In fact, no suggestion is made to PW-1 that

the subject cheque is dated 10.09.2008 and therefore, it

was required to be presented within three months from

the said date. Moreover, the subject cheque is not

dishonoured for the reason that it is presented beyond its

period of validity.

26. As evident from the face of it, the subject

cheque at Ex.P1 is dated 30.08.2009. From the mere

look at Ex.P1, it is evident that it is in the handwriting of

accused except the date which is in the different ink. As

per Ex.P2, it is presented in the month of October 2009

i.e., after the expiry of one year from 10.09.2008. As per

Ex.P2, the subject cheque is returned along with bank

memo on 22.10.2009. Therefore, after the failure of Ravi

Shiriyanna to pay the balance, the complainant has

chosen to present the cheque and it was dishonoured for

insufficient funds.

27. Section 118 of the N.I Act deals with

presumption as to negotiable instruments. As per sub

clause (a) regarding the presumption as to the date,

unless the contrary is proved, it shall be presumed that

every negotiable instrument bearing a date was made or

drawn on such a date. In the light of this provision,

though according to the complainant and also as per

Ex.P10, the cheque in question was issued on

11.09.2008, having regard to the fact that on the face of

it, it is bearing date 30.08.2009, it goes without saying

that it was a cheque issued without specifying the date

and after the expiry of one year, the complainant has

presented it for realization. Therefore, during October

2009, when it was presented, it was within the period of

its validity. The trial Court has committed a grave error

in coming to the conclusion that since the cheque was

issued as long back as on 11.09.2008, its presentation

during October 2009 is beyond the period of its validity.

If really Ex.P1 was presented beyond its period of

validity, then the Bank would have returned it for the

said reason and not on the ground of "Exceeds

arrangement". Therefore, the findings of the trial Court

that the cheque was issued beyond the period of its

validity cannot be accepted.

28. It is pertinent to note that except examining

the validity of the cheque, the trial Court has not

examined the other aspects, including the merits of the

case. From the material placed on record, it is evident

that Ravi Shiriyanna borrowed a sum of Rs.25 lakhs

during September 2007 from the complainant. When he

failed to repay the same, as per Ex.P10, on 11.09.2008,

the accused has given an undertaking that he would pay

Rs.32.5 lakhs which includes the principal of Rs.25 lakhs

and interest of Rs.7.5 lakhs, within a period of one year

and issued the subject cheque by way of security to be

utilized in the event of failure of accused to fulfill his

promise.

29. The complainant has claimed that both Ravi

Shiriyanna and accused have failed to pay the amount

and therefore, he is justified in presenting the cheque by

noting the date as 30.08.2009. Despite admitting that

Ravi Shiriyanna Borrowed Rs.25 lakhs and on his failure,

he has given an undertaking as per Ex.P10 to indemnify

the complainant of principal and interest, at the trial the

accused has taken up specific defence that before the

issue of legal notice, Ravi Shiriyanna has paid a sum of

Rs.2.95 lakhs and five lakhs and without giving

deductions to the same, the complainant has presented

the cheque for entire sum of Rs.32.5 lakhs and therefore,

complaint is not maintainable. The accused has also

pleaded that subsequent to the filing of the complaint,

Ravi Shiriyanna has paid a sum of Rs.10 lakhs by way of

two demand drafts of Rs.5 lakhs each and this aspect is

also not taken care by the complainant. As per Ex.P11,

the accused admitted receipt of Rs.10 lakhs by way of

two demand drafts for Rs.5 lakhs each subsequent to the

filing of the complaint.

30. In order to prove that before the complaint

was filed, a sum of Rs.2.95 lakhs and 5 lakhs were

credited to the account of the complainant, the accused

has relied upon Ex.P12, his account extract. He has

relied upon the entry dated 22.10.2008 for Rs.2.95 lakhs

and 01.10.2009 for Rs.5 lakhs. During his cross-

examination, the complainant has denied that these

payments in cash were made by Ravi Shiriyanna.

However, he has not produced any evidence to show

from whom the said payments have come to his account.

31. Therefore, in order to prove that these

payments were made by Ravi Shiriyanna, the accused

has examined DW-2 Raghavendra, Deputy Manager of

Axis Bank. During his further examination-in-chief, he

has deposed that these two payments are made by Ravi

Shiriyanna. He has produced two vouchers at Ex.D3 and

4. Along with these payment vouchers, the attested

copy of Pan Card of Ravi Shiriyanna is also forthcoming

in Ex.D3. From these vouchers, it is evident that the

payments of Rs.2.95 lakhs and Rs.5 lakhs in question

were made by Ravi Shiriyanna. However, while

presenting the subject cheque for realization, the

complainant has not given deduction to these payments

and claimed the entire sum of Rs.32.5 lakhs.

32. At this stage it is relevant to refer to Section

56 of N.I. Act deals with endorsement for part of sum

due. It provides that no writing on a negotiable

instrument is valid for the purpose of negotiation if such

writing purports to transfer only a part of the amount

appearing to be due on the instrument; but where such

amount has been partly paid a note to that effect may be

endorsed on the instrument, which may then be

negotiated for the balance.

33. In Dashrathbhai Trikambhai Patel Vs. Hitesh

Mahendrabhai Patel and Anr. (Dashrathbhai)6, the

Hon'ble Supreme Court has dealt with the effect of part

payment made after the cheque is drawn, but before it is

encashed and it is dishonoured for the entire sum. It held

that:

(2023) 1 SCC 578

For attracting Section 138, as per proviso(b) a demand notice needs to be made by the drawee and an Omni bus demand notice (For the entire sum) without specifying as to what was the amount due under the dishonoured cheque would not subserve the requirement of law. Further, when a part payment of the debt is made after the cheque was drawn, but before the cheque is encashed, such payment, held, must be endorsed on the cheque under Section 56 of N.I Act, and the cheque cannot be presented for encashment without recording part payment. Therefore, if the unendorsed cheque is dishonoured on presentation, the offence under Section 138 of N.I act would not attract, since the cheque does not represent illegally recoverable debt at the time of encashment.

34. At para No.34 of the judgment, the Hon'ble

Supreme Court summarized the findings as under:

"34.1 For the commission of an offence under Section 138, the cheque that is dishonoured must represent a legally enforceable debt on the date of maturity or presentation. 34.2 If the drawer of the cheque pays a part or whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque.

34.3 When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as

prescribed in Section 56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138 will stand attracted. 34.4 The first respondent has made part-payments after the debt was incurred and before the cheque was encashed upon maturity. The sum of rupees twenty lakhs represented on the cheque was not the "legally enforceable debt"

on the date of maturity. Thus, the first respondent cannot be deemed to have committed an offence under Section 138 of the Act when the cheque was dishonoured for insufficient funds.

34.5 The notice demanding the payment of the "said amount of money" has been interpreted by judgments of this Court to mean the cheque amount. The conditions stipulated in the provisos to Section 138 need to be fulfilled in addition to the ingredients in the substantive part of Section 138. Since in this case, the first respondent has not committed an offence under Section 138, the validity of the form of the notice need not be decided."

35. Thus, as per Section 56 of N.I. Act, an

indorsement for part of the amount appearing to be due

on the instrument is prohibited. However, as per the

second part of the Section, there is no impediment for

the complainant to make a note on the cheques

regarding the part payment and present it for balance.

When the accused has made part payments, the

complainant was not supposed to claim the entire

amount due under the cheque. He was required to give

deductions to the payments made and present the

cheque only for balance amount.

36. Having regard to the fact that this is not a

case wherein the complainant is claiming lending of

Rs.32.5 lakhs to the accused and on the other hand, it is

his specific case that the accused has stood as guarantor

to the loan due from Ravi Shiriyanna, the decisions in

Rangappa, Rohitbhai Jivanlal Patel and APS forex

are not applicable to the case on hand.

37. Thus, in the light of the decision of the Hon'ble

Supreme Court in the case of Dashrathbhai

Trikambhai Patel and Section 56 of the N.I Act, the

complaint claiming the entire sum of Rs.32.5 lakhs as

reflected in the subject cheque is not maintainable. The

proper recourse available to him was to endorse on Ex.P1

regarding the receipt of part payment and only claim the

balance, which he has failed to do. Consequently, though

not on the ground that the complainant has presented

the cheque beyond the period of validity, on this ground,

the complaint is liable to be dismissed and accordingly,

the following:

ORDER

(i) Appeal filed by the complainant under

Section 378 (4) Cr.P.C is hereby dismissed.


     (ii)    The findings of the trial Court in judgment

             and      order    dated   03.12.2014         in

C.C.No.40638/2010 on the file of XXIII

ACMM, Bengaluru, that the cheque was

presented beyond its period of validity is

set aside.

(iii) However, the complaint is dismissed for

non-compliance of Section 56 of Negotiable

Instrument Act and in the light of the

decision of the Hon'ble Supreme Court in

the case of Dashrathbhai Trikambhai

Patel.