Karnataka High Court

The Venkataraman Credit vs Sri Gowtam on 25 July, 2025

Author: H.P.Sandesh

Bench: H.P.Sandesh

                            1



       IN THE HIGH COURT OF KARNATAKA AT BENGALURU

           DATED THIS THE 25TH DAY OF JULY, 2025

                          BEFORE

           THE HON'BLE MR. JUSTICE H.P. SANDESH

              CRIMINAL APPEAL NO.1909/2019

BETWEEN:

THE VENKATARAMAN CREDIT
CO-OPERATIVE SOCIETY (R),
SULLIA BRANCH AT PADMA COMPLEX,
OPP : INDIANA HOSPITAL,
PUMPWELL, MANGALURU,
D.K. DISTRICT-575 001.
REPRESENTED BY ITS
BRANCH MANAGER,
SRI. VIMALAKSHA P.,
AGED ABOUT 43 YEARS.                          ... APPELLANT

           (BY SRI. BALAKRISHNA M.R., ADVOCATE)
AND:

SRI. GOWTAM
S/O. LATE GOPALAKRISHNA,
AGED ABOUT 33 YEARS,
R/AT NO.7-27,
NEAR LAKSHMI VENKATESHWARA TEMPLE,
TENKULIPADY VILLAGE,
POST MALALI,
MANGALURU TALUK,
D.K. DISTRICT-574 165.                     ... RESPONDENT

           (BY SRI. J. SATHISH KUMAR, ADVOCATE)
                                  2



     THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4)
OF CR.P.C. PRAYING TO SET ASIDE THE JUDGMENT AND ORDER
OF ACQUITTAL DATED 06.09.2019 PASSED BY THE JMFC (V
COURT), MANGALURU, D.K. DISTRICT IN C.C.NO.1273/2017 -
ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE
PUNISHABLE     UNDER   SECTION    138   OF  NEGOTIABLE
INSTRUMENTS ACT AND ETC.

    THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT   ON   18.07.2025 THIS  DAY,  THE   COURT
PRONOUNCED THE FOLLOWING:

CORAM:    HON'BLE MR. JUSTICE H.P.SANDESH

                        CAV JUDGMENT

Heard the learned Counsel for the appellant and the

learned Counsel for the respondent.

2. This criminal appeal is filed praying this Court to set

aside the judgment and order dated 06.09.2019 passed in

C.C.No.1273/2017 on the file of JMFC (V Court), Mangaluru for

the offence punishable under Section 138 of N.I. Act.

3. The factual matrix of the case of the

complainant/appellant before the Trial Court is that the

complainant is a registered Credit Co-operative Society. That

the accused has approached the complainant on 21.05.2016 with

a request for grant of loan of Rs.26,60,000/- for purchase of

Ashok Leyland Tipper. Hence, the complainant has sanctioned a

loan of Rs.26,50,000/- to the accused as per its resolution

No.59/2 dated 09.06.2016 and the accused has executed a bond

in favour of the complainant on 24.06.2016 along with two

sureties and also executed letter of guarantee in favour of

complainant and also executed a Deed of Hypothecation by

hypothecating the Ashok Leyland Tipper bearing Reg. No.KA19-

AB-6150 and also executed a promissory note in favour of

complainant along with two sureties. The amount was paid by

way of Cheque. As per the terms and condition of the loan, the

accused has agreed to repay the loan by 60 monthly

installments. The accused was very irregular in payment of the

loan installments and hence, the complainant repeatedly

requested the accused to pay the loan installments. But he has

not paid the overdue loan amount. Hence, the complainant

seized the hypothecated tipper and issued a notice to the

accused to settle the loan amount but, the accused has not

responded to the said notice. Hence, the officer of the

complainant personally visited the accused residence and

advised him to repay the loan amount or otherwise, the

complainant society will proceed to sell the hypothecated tipper.

Then, the accused issued a Cheque for Rs.27,94,502/- but the

said Cheque was dishonoured and thereafter, the complainant

society again issued a notice to the accused but the accused has

not paid the amount as mentioned in the Cheque. Hence, the

complainant instead of taking legal action against the accused,

proceeded to auction the tipper by issuing publication and sold

the hypothecated vehicle on 19.04.2017 in a public auction to

the highest bidder for Rs.19,50,000/- and adjusted the said

amount towards the accused loan account and after adjusting

also, the accused is liable to pay a sum of Rs.10,32,977/-. On

demand, the accused again issued a Cheque for Rs.10,32,977/-

to the complainant and the said Cheque was also returned with

an endorsement 'insufficient funds'. Thereafter, the complainant

had issued a legal notice dated 23.05.2017 calling upon the

accused to pay the amount covered under the dishonoured

Cheque through registered post and when acknowledgment was

not received, the complainant society enquired with the Post

Master to furnish the details whether the notice is served to the

accused or not and the Senior Superintendent of Post Office,

Mangalore has issued endorsement on 04.07.2017 stating that

notice was served to the accused on 27.05.2017. Inspite of

service of notice, accused failed to repay the amount. Hence,

filed the complaint under Section 138 of N.I. Act.

4. After receipt of the complaint, the Trial Court took

the cognizance and recorded the sworn statement of the

complainant. In pursuance of the summons, accused appeared

and not pleaded guilty and claims for trial. In order to prove the

case of the complainant, examined its Branch Manager as PW1

and got marked the documents at Ex.P1 to P12. On the other

hand, accused examined himself as DW1 and got marked the

documents at Ex.D1 to D3. The Trial Court having considered

both oral and documentary evidence placed on record did not

accept the case of the complainant in coming to the conclusion

that the authorized person can depose and verify on oath before

the Court in order to prove the contents of the complaint.

However, the authorized person must have witnessed the

transaction as an agent of the payee/holder in due course of

possess due knowledge regarding the said transactions. The

authorized person did not utter anything as to how he acquired

the knowledge about the transaction in his chief examination. In

the absence of specific assertion in this regard in the complaint,

in his sworn statement and in his chief examination placed by

way of affidavit, the Court is under no obligation to draw

favourable presumption about the competency of the deponent

of the affidavit. In paragraph 18, extracted the admission on the

part of PW1 that in the evidence he says that he does not

remember after how many months of default, the vehicle was

seized and before seizure, no notice was given and paper

publication was also not given but claims that paper publication

was given after auction. But, with regard to public auction is

concerned, no notice was given. However, he claims that notice

was given in terms of Ex.P7 and they did not get the valuation of

the vehicle.

5. The Trial Court having taken note of this admission

comes to the conclusion that before seizure, no notice was given

and also comes to the conclusion that when vehicle was sold, the

hypothecation agreement entered between the parties comes to

an end. After appropriating the sale proceeds and after collecting

installments from the accused, the company cannot say that the

accused is due to pay a sum of Rs.10,32,977/- and accused has

denied the fact that he is due of said amount. The Trial Court

also comes to the conclusion that mere signature on Ex.P1-

Cheque itself is not sufficient to hold that the accused has issued

the Cheque towards his liability. No doubt, accused had not

replied to the demand notice of the complainant but not replying

the demand notice itself is not a badge of his admission with

regard to the existence of a debt or liability on his part because,

it is not a civil case wherein the complainant has taken the

responsibility of proving the allegation against the accused.

There is no document before the Court to show that the accused

had issued a Cheque at Ex.P1 towards the balance payment as

legally recoverable debt. In the absence of such evidence, the

Court cannot hold that the accused had issued the said Cheque

for Rs.10,32,977/-. The Trial Court having considered all these

material on record, acquitted the accused.

6. Being aggrieved by the said judgment of acquittal,

the complainant filed this appeal before this Court. The learned

counsel for the appellant would vehemently contend that availing

of loan is not in dispute and issuance of Cheque is also not in

dispute. The counsel would vehemently contend that before

conducting the auction also notice was given. But the fact that

Cheque was dishonoured and notice was issued but no reply was

given and the counsel would vehemently contend that the

observation of the Trial Court is erroneous. The counsel would

vehemently contend that there is no probable defence and not

rebutted the same under Section 139 of N.I. Act. The date of

loan is 09.06.2016. When all these materials are placed on

record, the Trial Court committed an error in acquitting the

accused.

7. In response to the arguments of the appellant's

counsel, the counsel for the respondent would vehemently

contend that the vehicle valuation was not done before

conducting the auction and there is no notice of seizure and

there is no notice while disposing of the vehicle and the same is

admitted by PW1 in his cross-examination. The counsel also

would vehemently contend that the value of the vehicle is more

than Rs.35,00,000/- and loan was only Rs.26,50,000/- and also

submits that interest was paid but not paid any installments.

Hence, the Trial Court having considered the material on record

rightly comes to the conclusion that the very issuance of Cheque

is not proved.

8. Having heard the learned counsel appearing for the

respective parties and also on perusal of the material on record,

the point that would arise for consideration of this Court is:

1. Whether the Trial Court committed an error in

acquitting the accused in coming to the

conclusion that the issuance of Cheque at

Ex.P1 is not proved and whether it requires

interference of this Court?

2. What order?

Point No.1

9. Having heard the learned counsel appearing for the

respective parties and also on perusal of both oral and

documentary evidence placed on record, it is not in dispute that

accused had availed the loan of Rs.26,50,000/- from the

complainant. It is also not in dispute that Cheque was presented

and same was dishonoured with an endorsement 'funds

insufficient'. It is also not in dispute that when notice was

issued, reply was not given. In order to prove the fact that the

Cheque was returned, the document at Ex.P2 is placed before

the Court that is bank return memo and legal notice was also

issued in terms of Ex.P3 and postal receipt is marked as Ex.P4.

In order to prove that notice was served, Post Master has issued

an endorsement on 04.07.2017 stating that the notice was

served on the accused on 27.05.2017 and copy of the letter

given to the Post Master and the copy of the letter given by the

Post Master also marked as Ex.P5 and P6. It is the contention of

the appellant/complainant that Ex.P8 is the loan application and

same is not in dispute. Ex.P9 is also agreement and same is not

in dispute. Ex.P10 is the statement of accounts which reflects

that for having made the payment towards interest amount and

except that payment nothing is paid towards any EMI. Ex.P11 is

the auction details and Ex.P12 is the resolution.

10. Having considered all these documents, it discloses

that Ex.P1 - Cheque is not in dispute and accused admits

issuance of Cheque. It is the case of the complainant that the

Cheque was issued and the same was not disputed and also the

fact that availment of loan is also not in dispute. Ex.P7 reflects

that after selling of the vehicle, given notice to the accused to

pay the balance amount, but, the accused did not pay the

balance amount. It is the case of the complainant that after

issuance of notice, it was acknowledged and subsequently, the

accused had issued a Cheque at Ex.P1 and said Cheque was

bounced.

11. I have already pointed out that issuance of Cheque is

not disputed and same was returned on 11.05.2017 with an

endorsement 'insufficient funds' is also not in dispute. It has to

be noted that in the admission of PW1, he categorically admitted

that reply was given in terms of Ex.D1. PW1 categorically admits

that for sale of vehicle is concerned, no public notice was given

and also admits that no notice was given with regard to the

seizure of the vehicle but claims that before selling the vehicle,

public notice was given. PW1 also admits that for auction is

concerned, no notice was given but claims that Ex.P7 was given

and on perusal of Ex.P7, it discloses that the complainant

demanded the balance amount after conducting the auction sale.

It is admitted that for the sale of vehicle is concerned,

documents are not produced before the Court and also admits

that vehicle was not valued before conducting the auction.

Having perused these admissions on the part of PW1 and also

evidence of accused, it discloses that the accused only claims

that he paid the interest of Rs.74,900/- and same reflects in the

account extracts produced by the complainant. But in the cross-

examination, accused admits that he had availed the loan of

Rs.26,50,000/- and except the payment of Rs.74,900/-, he has

not made any payment of EMI and also admits that in order to

make the payment of installment, no agreement as to give any

notice. The accused also categorically admits that he has

received the notice regarding dishonour of the Cheque which was

issued by him and also categorically admits that he did not seek

any time with the complainant to make the payment. But he

categorically admits that the seizure was informed to him

through phone and he came to know about the seizure of the

vehicle through his driver also and he categorically admits that

from November 2016 to 19.04.2017, he did not made any

payment except claiming that he made the payment of interest

for a period of three months. He also categorically admits that

even after the seizure of the vehicle also he did not make any

efforts to pay the EMI balance amount. When suggestion was

made to the accused that public auction was conducted, he says

that he was not aware of the same but not specifically denied

that it was not conducted in the public auction. The accused also

admits that he did not give any notice to return the Cheque

which was obtained for security and also no action was taken

against the complainant for sold the vehicle for lesser amount.

12. Having reassessed the evidence of DW1 also it is

very clear that though he availed the loan from the complainant

bank, he did not pay any installments except payment of interest

of Rs.74,900/- and the same is reflected in the account extract.

I have already pointed out that even after the seizure of the

vehicle also the accused did not make any efforts to pay the

balance payment though vehicle was seized in the month of

November, 2016 till the month of April, 2019 and vehicle was

brought to the public auction on 19.04.2017. When the accused

did not make any efforts to make the payment of installment

and sought for custody of the vehicle, now, he cannot find fault

with the complainant in conducting the auction of the vehicle and

they cannot keep the vehicle for longer period since its value will

be deteriorated.

13. It is important to note that when vehicle was seized,

accused did not make any efforts to take back the vehicle by

paying the amount and the complainant also have no option

other than to conduct the auction and Ex.P11 which is marked

before the Court discloses that auction was conducted in the

public and highest bidder quoted the amount as Rs.19,15,000/-

and same was accepted. No doubt, there are lapses on the part

of the complainant in not valuing the vehicle before conducting

the auction. But even after seizure of the vehicle also, accused

did not question the same and not make any attempt to take

back the vehicle by paying the balance payment. It is clear from

the records that none of the installments was paid by the

accused. Hence, the accused cannot find fault with the

complainant in bringing the vehicle for auction.

14. On perusal of the material on record, it discloses that

Cheque was issued and same was dishonoured. It is not the case

of the accused that cheque was not issued. Under such

circumstances, presumption comes to rescue of the complainant

that Cheque was issued and accused has to rebut the same. The

accused except taking the contention that Cheque was issued

towards the security, nothing is placed on record. When such

being the case, the Trial Court committed an error in coming to

the conclusion that issuance of Cheque has not been proved

unless the case of the complainant is rebutted under Section 139

of N.I. Act. The very reasoning given by the Trial Court that

there is no document before the Court to show that accused had

issued Ex.P1 Cheque towards legally recoverable debt and the

same is erroneous when there is no denial from the accused.

Apart from that other reason given by the Trial Court that

accused has successfully rebutted the presumption available to

the complainant is nothing but an error on the part of the Trial

Court and reasoning that dishonour of Ex.P1 Cheque do not

attract penal consequences and complainant has not established

its case and the said finding of the Trial Court is an error. Hence,

the matter requires interference of this Court and presumption

lies in favour of the complainant.

15. However, it is important to note that when the

complainant conducted the auction sale of the vehicle, they have

not issued notice before conducting the auction and also not

valued the vehicle. When such being the case, though the

complainant is entitled for interest is concerned, having taken

note of this fact into consideration that valuation is not done and

also not given notice of seizure to the accused and also notice

was not given while disposing of the vehicle and thus, the

accused cannot be penalised to pay the interest. Hence, I am of

the opinion that the Trial Court committed an error in acquitting

the accused and it requires interference when there is a liability

on the accused and accused also did not make payment of

installments except payment of interest after availing the benefit

of loan. Hence, the matter requires interference. Accordingly,

the above point is answered as affirmative.

Point No.2:

16. In view of the discussions made above, I pass the

following:

ORDER

The appeal is allowed.

The impugned order dated 06.09.2019 passed in

C.C.No.1273/2017 by the Trial Court is set aside. The accused is

directed to pay the cheque amount of Rs.10,32,997/- within one

month from today. If accused fails to pay the said amount, he

shall undergo simple imprisonment for a period of one year.