Karnataka High Court

Sri C R Nagesh vs Sri Mukhul Khanna on 28 May, 2024

                           1             CRL.A NO.287 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.287 OF 2015

BETWEEN:

SRI C R NAGESH
S/O C K RAMANNA
AGED ABOUT 49 YEARS
R/AT NO. 18, ARATI
I-A CROSS, ANJANEYANAGAR
BENGALURU - 560 085
                                        ......APPELLANT
(BY SMT. ANANDITA SRINIVASAN, ADVOCATE FOR
    SMT. SUKRUTA R, ADVOCATE)

AND:

SRI MUKHUL KHANNA
S/O S N KHANNA
MAJOR
R/AT NO.H-28, GROUND FLOOR
GREATER KAILASH II-MASJID MOTA
NEW DELHI - 110 048
                                     .......RESPONDENT
(BY SRI. SHRISHAIL NAVALGUND, ADVOCATE)

     THIS CRIMINAL APPEAL IS FILED UNDER SECTION
378(4) OF CR.P.C PRAYING TO a) ALLOW THE APPEAL; b) SET
ASIDE THE JUDGMENT DATED 03.01.2015 PASSED BY THE
COURT OF THE XIX ADDITIONAL CHIEF METROPOLITAN
MAGISTRATE, BENGALURU CITY IN C.C.NO.21122/2012 AND
ALLOW THE COMPLAINT IN C.C.NO.21122/2012 FILED BY THE
APPELLANT ON THE FILE OF THE XIX ADDITIONAL CHIEF
METROPOLITAN MAGISTRATE AT BENGALURU CITY AS
PRAYED FOR IN THE INTEREST OF JUSTICE AND EQUITY.

     THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
08.04.2024, COMING ON FOR PRONOUNCEMENT OF
                                  2                  CRL.A NO.287 OF 2015




JUDGMENT THIS           DAY,   THE    COURT    DELIVERED           THE
FOLLOWING:
                         JUDGMENT

This appeal filed under Section 378 (4) of Cr.P.C, is

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, the parties are

referred to by their rank before the trial Court.

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

to know the accused through a common friend Sachin.

Complainant has made an investment of Rs.30 lakhs by

paying the said amount in instalments between

03.01.2011 to 04.07.2011. However, by March 2012,

complainant was disillusioned with respect to the returns

on the said investment. Therefore, through electronic

mail, complainant requested accused to close all the

operations and refund the money. Accused requested

time till 27.04.2012, but failed to refund the same even

after the said date. However, he issued a post dated

30.04.2012 cheque for a sum of Rs.30 lakhs.

Complainant presented the cheque for encashment

through his account. It was returned unpaid for "Funds

Insufficient". Through the good office of a common

friend, accused assured the complainant to represent the

cheque on 30.05.2012. Accordingly, complainant

presented the cheque on 31.05.2012. Once again it was

dishonoured for want of sufficient funds and when he

tried to communicate the accused, he did not respond.

Therefore, complainant got issued legal notice to the

accused. Though, duly served accused has failed to pay

the amount due under the cheque. He has also not sent

any reply and hence the complaint.

4. After service of summons, before the trial

Court accused has appeared through counsel and

contested the matter.

5. In order to prove the allegations against the

accused, complainant has examined himself as PW-1 and

relied upon Ex.P1 to 9.

6. During the course of his statement under

Section 313 Cr.P.C, the accused has denied the

incriminating evidence led by the complainant.

7. The accused has not led any defence

evidence.

8. Vide the impugned judgment and order, the

trial Court has acquitted the accused.

9. Being aggrieved by the same, the complainant

is before this Court, contending that the impugned

judgment and order are passed not only on complete

misunderstanding of the facts and material available on

record, but also misunderstanding of the applicable law.

The trial Court has not appreciated the fact that accused

has not sent any reply to the legal notice and he has also

not let any defence evidence to discharge the burden

placed on him and thereby to failed to rebut the

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

during the cross-examination the defence set up by the

accused is that the subject cheque is misused by their

common friend Sachin, but he has not taken any steps

against him and not let any evidence to establish the said

allegation.

9.1 The trial Court has committed a grave error in

holding that accused has repaid a sum of Rs.20 lakhs and

that complainant has admitted the same. The trial Court

has failed to appreciate that Rs.9,96,200/- was paid by

the accused upto 29.02.2012 and the subject cheque

was issued only in the last week of April 2012. Therefore,

the payment of Rs.9,96,200/- is towards the profit and

not towards payment of Rs.30 lakhs invested by the

complainant. In the light of the fact that there is no

dispute with regard to the transaction between the

parties, the trial Court has not appreciated the entire

evidence on record in right perspective and fell into error

in acquitting the accused.

10. In support of his arguments, learned counsel

for complainant has relied upon the decision in Rangappa

Vs. Sri Mohan (Rangappa)1.

(2010) 11 SCC 441

11. On the other hand, learned counsel for the

accused has supported the impugned judgment and

order and sought for dismissal of the appeal also.

12. Heard elaborate arguments of both sides and

perused the record.

13. Thus, it is the specific case of the complainant

that in between 03.01.2011 to 24.07.2011 he invested in

a total sum of Rs.30 lakhs with the accused in

commodity trading and by March 2012, he was

disillusioned with the returns and requested the accused

to refund the entire investment. The accused issued the

subject cheque towards repayment of the investment

made by him, but when presented it was dishonoured for

want of sufficient funds and after service of legal notice,

when accused failed to pay the amount due under the

cheque, he was forced to file the complaint.

14. Even though the accused admit certain

investment by the complainant with him towards

commodity trading, he has denied that it was Rs.30

lakhs. On the other hand, he has claimed that he

received only Rs.22 lakhs and the claim that he has

made several payments. The accused has also denied

that he issued the subject cheque towards refund of the

investment made by the complainant. On the other hand,

he has made a specific allegation that their common

friend Sachin has misused the cheque given to him and

after filling up the same to suit his convenience

complainant has presented it. The accused has also

claimed that the cheque does not reflect the actual sum

due and on 04.05.2012 i.e, after the date of cheque,

Rs.3 lakhs is paid and the complainant has not given

deduction to the same and he is not justified in

presenting the cheque for the entire sum.

15. Having regard to the fact that the cheque in

question belongs to accused, drawn on his account

maintained with his banker and it bears his signature,

presumption under Section 139 of N.I. Act is operating in

favour of the complainant, placing the initial burden on

the accused to prove that the cheque was not issued

towards repayment of any debt or liability and on the

other hand to establish the circumstances in which the

cheque has reached the hands of the complainant.

16. In John K.Abraham Vs. Simon C. Abraham &

Anr (John K.Abraham)2, 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.

(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.

17. This is not a case of complainant having

advanced loan, but it is a case of investment. While the

complainant claimed that he has invested Rs.30 lakhs, the

(2014) 2 SCC 236

accused admit receipt of Rs.22 lakhs. He has disputed

that a sum of Rs.5 lakhs paid through the account of

complainant's wife is towards the said investment made

by complainant. He has also disputed receipt of Rs.3 lakhs

in cash through the common friend Sachin. The accused

has also alleged that their common friend Sachin has

misused the subject cheque by handing it over to the

complainant.

18. Therefore, as held by the Hon'ble Supreme

Court in John K Abraham, the complainant is required

to prove the basic facts, only after which the presumption

under Section 139 of N.I. Act is required to be drawn,

placing the burden on the accused to rebut the same.

19. As noted earlier, the complainant admit receipt

of Rs.12 lakhs on 11.02.2011 and Rs.10 lakhs in July

2011 through RTGS. However, he has disputed that he

received Rs.5 lakhs through the account of wife of the

accused towards the investment made by him and Rs.3

lakhs in cash through Sachin. During the course of his

cross-examination, the complainant has stated that he

has maintained accounts with regard to the investment

made with and returns received from the accused.

Despite the accused disputing the receipt of Rs.8 lakhs by

way of investment from/on behalf of the complainant, he

has not chosen to produce necessary evidence. Even

where it is accepted that Rs.5 lakhs transferred through

the account of the wife of complainant is for/on his behalf,

the complainant has not proved payment of Rs.3 lakhs in

cash through Sachin.

20. The accused has contended that the trading

business was done by complainant and Sachin and

claimed that Rs.3 lakhs paid by the complainant is paid to

Sachin. The complainant has also stated that Sachin was

not his agent. Therefore, the complainant ought to have

examined the said Sachin. The accused has also alleged

that he has not issued the subject cheque to complainant,

but on the other hand taking advantage of the joint trade

done by him with Sachin, the said Sachin has misused the

blank signed cheque and filled it to suit the convenience

of the complainant and presented. In fact, during his

cross-examination, the complainant has deposed that at

the first instance that the subject cheque was presented

to the Bank by Sachin at Delhi and it was dishonoured.

21. In the complaint, it is stated that through the

good office of common friend, whose name is not

disclosed, accused requested the complainant to re-

present it. Therefore, the examination of Sachin would

have been helpful to the case of complainant to prove the

investment of Rs.30 lakhs as well as the issue of subject

cheque by the accused to the complainant. It's

presentation at the first instance through Sachin etc.,

unless and until the complainant discharge the burden of

establishing these facts, the presumption under Section

139 of N.I Act cannot be raised so as to place the burden

on the accused to rebut the same.

22. During his cross-examination, the complainant

has admitted that during March 2012 he has received

Rs.9,96,200/-, on 04.05.2012 Rs.3 lakhs, on 28.06.2012

Rs.3 lakhs and finally on 10.07.2012 Rs.5 lakhs from the

accused. Thus, in all the complainant has received

Rs.12,96,200/- from the accused. Production of the

accounts maintained by him would have thrown light on

the said payment received by the complainant. The

complainant has also not produced the e-mail

communication made with the accused demanding refund

of investment made by him. In fact, during his cross-

examination, the complainant has admitted that as on the

date of filing the complaint, only Rs.22 lakhs were due

from accused.

23. Out of the various amount received by him

from the accused, Rs.3 lakhs paid on 04.05.2012 is

subsequent to 30.04.2012, i.e., the date of cheque and

before 31.05.2012 i.e, the date of presentation of the

cheque to the Bank. Thus, as on 31.05.2012, entire sum

of Rs.30 lakhs was not due from the accused and the

cheque was not representing the amount due from the

accused to the complainant.

24. 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.

25. In Dashrathbhai Trikambhai Patel Vs. Hitesh

Mahendrabhai Patel and Anr. (Dashrathbhai)3, 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:

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

(2023) 1 SCC 578

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.

26. 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."

27. 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.

28. Thus, even where the entire defence of the