Karnataka High Court
M/S.Kanoria Industries Ltd. vs M/S. Shri.Venkatesh Traders on 20 March, 2018
Author: John Michael Cunha
Bench: John Michael Cunha
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IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
ON THE 20TH DAY OF MARCH, 2018
BEFORE
THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA
CRIMINAL APPEAL NO.2552 OF 2010 (A)
BETWEEN
M/S.KANORIA INDUSTRIES LTD.,
BAGALKOT, KARNATAKA STATE,
(NOW KNOWN AS A BAGALKOT UDYOG LIMITED),
A COMPANY REGISTERED UNDER COMPANIES ACT,
REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE,
SRI.A.R.NIDASHESHI, AGED 43 YEARS, BAGALKOT.
... APPELLANT
(BY SRI.S.B.HEBBALLI, ADV. FOR
SRI.V.R.DATAR, ADV.)
AND
M/S. SHRI. VENKATESH TRADERS,
PROPRIETOR: G.V.GADADINNI, CEMENT DEALER,
NEAR PRITAM BAR, JAMAKHANDI,
BAGALKOT DISTRICT.
... RESPONDENT
(BY SRI.M.C.HUKKERI AND
SRI.P.N.HOSAMANE, ADVS.)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION 374(4)
OF CR.P.C. PRAYING TO CALL FOR RECORD IN C.C.
NO.2056/2006 ON THE FILE OF THE II ADDITIONAL JMFC,
BAGALKOT AND ON PERUSAL OF THE SAME BE PLEASED TO
SET ASIDE THE JUDGEMENT AND ORDER DATED 06.03.2009.
THIS CRIMINAL APPEAL COMING ON FOR HEARING THIS
DAY, THE COURT DELIVERED THE FOLLOWING:
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JUDGMENT
This appeal is directed against the judgment and order dated 06.03.2009 passed by the II Additional J.M.F.C., Bagalkot in C.C. No.2056/2006, whereby the learned Magistrate has acquitted the respondent/accused of the offences punishable under Sections 138 and 142 of the Negotiable Instruments Act (hereinafter called as "N.I. Act").
2. The facts leading to the appeal are as follows:
The complainant, Kanoria Industries Limited is a public limited company. It initiated action against the respondent/accused alleging that the respondent acknowledged the debt of one Satyappa Vantagodi of Jamkhandi in respect of the cement supplied by the complainant to him and in discharge of the said debt, issued a cheque bearing No.822232 dated 30.12.2004 for Rs.1,36,234/-. The said cheque when presented for encashment came to be dishonoured for "funds insufficient". The complainant issued the statutory notice :3: on 20.01.2005. The notice was served on the accused on 24.01.2005. The accused having failed to comply with the demand made therein, the complainant approached the Court with a complaint under Sections 138 and 142 of N.I. Act.
3. The Legal Officer of the complainant's company was examined as P.W.1 and through him, the complainant produced in evidence the original cheque - Ex.P-1, bank endorsements - Ex.P-2, copy of the legal notice - Ex.P-3, postal acknowledgment - Ex.P-4, letter issued by the accused dated 30.12.2004 - Ex.P-5 and the account ledger extract - Ex.P-6. In rebuttal, the accused examined himself as D.W.1 and produced in evidence eight documents, namely copy of the endorsements, copy of the account extract, copy of the order sheet in P.C. No.185/2003, copy of the specimen signature card, copy of the account opening receipt as Exs.D.1 to D.8. :4:
4. Based on the above evidence, the Trial Court was of the view that the complainant failed to establish that the cheque in question was issued by the accused in discharge of the debt due by him. The Trial Court was of the opinion that the alleged transaction was between Satyappa Vantigodi and the complainant. The accused had nothing to do with the said transaction. Therefore, there was no consideration for the accused to issue the cheque in question and hence he cannot be made liable for dishonour of the said cheque.
5. Feeling aggrieved by the impugned judgment and order, the complainant has preferred the above appeal, inter alia contending that the findings recorded by the Court below are opposed to Section 138 of N.I. Act and settled position of law.
6. I have heard the learned counsel for the appellant Sri. S.B.Hebballi and the learned counsel appearing for the respondent/accused Sri. M.C.Hukkeri. :5:
7. Learned counsel for the respondent has placed reliance on the decision of this Court in the case of K.Narayana Nayak Vs. M.Shivarama Shetty reported in 2008 (3) KCCR 1569, wherein it is held that the burden is cast on the complainant to prove that the cheque was issued towards the legally enforceable debt and not as a collateral security and if the complainant failed to prove the same, the accused is entitled for acquittal.
8. Learned counsel for the appellant has relied on the decision rendered by the Madras High Court in the case of P.R. Shankar Rao Vs. Joseph and Joseph Regis Kalingarayar reported in 2001 CLJ 2392.
9. I have anxiously bestowed my thought to the submissions made at the bar and have carefully examined the records.
10. The accused does not dispute the fact that the cheque in question bears his signature. The only contention urged by the accused in the course of the trial :6: is that the said cheque was handed over by him to the complainant in some other transaction and the same has been misused by the complainant to lay a false claim against him. Whereas, the complainant has taken up a plea right from the beginning that the cheque in question was issued by the accused acknowledging the debt due by one Satyappa Vantigodi of Jamakhandi. In his evidence, the Law Officer who has been examined as PW.1 has deposed that the company had supplied cement to the aforesaid Satyappa Vantigodi and towards the part payment of the amount due by the said Satyappa, the accused issued the cheque in question. In the course of the cross-examination of PW.1, he was specifically questioned as to whether P.W.1/complainant was in possession of any document to show that the accused has acknowledged the debt due by the said Satyappa Vantigodi? In response to this question during his further examination, PW.1 produced the covering letter issued by the accused. The said letter is marked as Ex.P.5. Though :7: an attempt was made in the cross-examination to suggest that the said document was prepared for the purpose of this case, but the fact that the said document was produced by the complainant pursuant to the answers elicited during the cross-examination of PW.1 in my opinion the genuineness of the said letter cannot be doubted. The said letter reads as follows:
"Sub: Issue of Cheque No.822232 dated 30/12/04 for Rs.1.36.234 against outstanding of M/s Satyappa Vantagodi, Jamkhandi.
I/We hereby enclose Cheque No.822232 dated 30/12/04 for Rs.1.36.234/- duly drawn on Kanorla Industries Limited, against the amount due by M/s. Satyappa Vantagodi, Jamkhandi to your company towards supply of cement. I further confirm that this amount is being paid against the outstanding amount due to your company by M/s. Satyappa Vantagodi, Jamkhandi and I/We further forgo all my/sour rights against your company. I/We further undertake the responsibility of honouring the cheque as and when it comes for realisation and in the event of Cheque being dishonoured, you are entitled to take necessary legal action, as I am :8: principal debtor to your company as required under law.
Thanking you."
11. As against this document the accused has failed to probabalise the defence set up by him that the cheque in question was issued by him to the complainant in respect of the earlier transaction and the same has been misused by the complainant to lay a false claim against the accused. First and foremost, the accused has not produced any document in proof of the fact that there was any earlier transaction between him and the complainant. Secondly, no material has been placed before the Court to show that in respect of the earlier transaction the complainant has left the cheque bearing No.822232 with the complainant as contended. Therefore, I do not have any hesitation to hold that the defence set up by the accused is only an afterthought. On the other hand, on analysing the oral and documentary evidence produced by the complainant and the accused, I am of the clear view :9: that the cheque in question was issued by the accused in discharge of the debt due by Satyappa Vantigodi. But the question that arise for consideration is:
"whether the accused could be held liable for the consequences of dishonour of the cheque issued by him in discharge of the debt due by a third party?"
12. Learned counsel for the accused/respondent has emphatically submitted that in order to render the accused liable for conviction under the provisions of Section 138 of N.I. Act, the dishonored cheque should have been issued by the accused in discharge of the legally enforceable debt or liability due and payable by him and not the debt or liability contracted by any third party. In other words, it is the submission of the learned counsel that in the instant case the complainant himself having come forward with the plea that the cheque in question was issued in respect of the debt or liability due by the aforesaid Satyappa Vantigodi, with whom the accused has no relationship whatsoever, the accused cannot be made : 10 : liable to answer the charge under Section 138 of N.I. Act for the alleged dishonor of the cheque.
13. Per contra, the learned counsel for the appellant would submit that the very language employed in the Section makes the accused liable for the consequences of dishonour of the said cheque irrespective of the fact whether the said cheque was issued in discharge of the debt due by the complainant or by any other person. In support of this plea, the learned counsel has referred to the decision of the High Court of Madras, wherein it is held that the requirement for offence to be made out under this Section is that the cheque must be drawn "for the discharge, in whole or in part, of any debt or other liability". The Section does not say that the cheques should have been drawn for the discharge of any debt or other liability of the drawer towards the payee. Even in Section 139 of the N.I. Act, by which a legal presumption is created, the Parliament has only fixed the presumption that the cheque was issued "for the : 11 : discharge, in whole or in part, or any debt or other liability". This would mean that the debt or other liability includes the debt incurred from any other persons.
The contention raised by the parties is no more res integra, in view of the authoritative pronouncement of the Hon'ble Supreme Court in the case of I.C.D.S. Limited Vs. Beena Shabeer and Another reported in (2002) 6 SCC 426. In the said case, the husband of respondent No.1 namely accused No.1 entered into a hire-purchase agreement with the appellant company (ICDS Limited) for the purpose of purchase of Maruti Car on hire-purchase basis. Respondent No.1, his wife stood as guarantor in respect of the hire-purchase facilities being made available to her husband. In respect of the aforesaid transaction respondent No.1 issued a cheque. The said cheque was dishonored. The appellant issued a statutory notice calling upon the respondent No.1 to pay the amount. Respondent No.1 failed to comply with the demand, hence, action was initiated under Section 138 of N.I. Act. The respondent : 12 : moved a petition under Section 482 of Cr.P.C. for quashing the complaint on the ground that there was no subsisting debt in respect of which the respondent No.1 was liable to issue the said cheque. The High Court having accepted the plea quashed the proceedings on the reasoning that the issuance of the cheque cannot be co-related for the purpose of discharging any debt or liability and as such, the complaint under Section 138 of N.I. Act cannot be maintainable. However, on appeal, the Hon'ble Supreme Court in para 10 of the aforesaid judgment has held as under:
"10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the section stands with the words "Where any cheque". The abovenoted three words are of extreme significance, in particular, by reason of the user of the word "any"- the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words : 13 : at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment."
Further in para 11, it is held that:
"11. ......The language of the Statue depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embagor in the matter of application of the provisions of Section 138 of the Act: 'Any cheque' and 'other liability' are the two key expressions which stands as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. Any contra interpretation would defeat the intent of the legislature......": 14 :
14. In view of the above principles, the reasoning assigned by the trial Court that there was no subsisting debt in respect of which the accused could have issued the cheque is liable to be set aside. Moreover, in the instant case, as already stated above, the complainant has produced the covering letter Ex.P.5 which clearly establishes that the accused has taken over the liability of the aforesaid Satyappa Vantigodi and in repayment of the said liability he has issued the said cheque. By taking over the said liability the accused has stepped into the shoes of the guarantor and therefore, even on that score the accused is liable to honor the said cheque. The subject cheque having been dishonored for want of insufficiency of fund, the accused has rendered himself liable for conviction under Section 138 of N.I. Act. The contra finding recorded by the trial Court being opposed to the provisions of Section 138 of the N.I. Act and the material on record, in my view, cannot be sustained. Accordingly, the finding of acquittal recorded by the trial Court is : 15 : hereby set aside. For the reasons discussed above accused is held guilty of the offence punishable under Section 138 of N.I. Act.
15. Insofar as awarding the sentence is concerned, the cheque in question is dated 30.12.2004. The complainant is a company. The transaction in respect of the cheque is issued is a business transaction. Having regard to the said circumstances, it would be just and appropriate to sentence the accused to pay the fine amounting to twice the amount of the cheque i.e. Rs.2,72,468/- (Rs.1,36,234 x 2). Hence, the following:
ORDER The appeal is allowed.
The impugned judgment and order dated 06.03.2009 passed by the II Additional JMFC, Bagalkot in C.C.No.2056/2006 is set aside.
The accused-Sri.G.V.Gadadinni Proprietor:
Shri.Venkatesh Traders, is convicted for the offence : 16 : punishable under Section 138 of the N.I. Act and is sentenced to pay a fine of Rs.2,72,468/- (Rupees Two Lakhs Seventy Two Thousand Four Hundred and Sixty Eight Only) within eight weeks from the date of this order and in default to pay the aforesaid fine, the accused shall undergo simple imprisonment for a period of one year.
Sd/-
JUDGE Rsh/Sh