Bangalore District Court
Finance Company (Regd) vs For The Offence Punishable Under ... on 16 August, 2022
KABC020151252013
IN THE COURT OF THE ADDL. CHIEF METROPOLITAN
MAGISTRATE, BENGALURU CITY.
DATED THIS THE 16th DAY OF AUGUST 2022
Present: Miss.B.T.ANNAPOORNESHWARI
B.A., L.L.B., L.L.M.
C/c XXII ADDL., SCJ & ACMM,
MEMBER - MACT,
BENGALURU.
JUDGMENT
1. Sl. No. of the Case : C.C.No.6950/2013
2. The date of commission : 19.01.2013 of offence
3. Name of the : M/S Karnataka Merchants Complainant Finance Company (Regd) Office at No.565, 2nd floor H.M.T layout, 2nd block, 8th main road, Vidyaranyapura, Bangalore97.
Represented by authorized Person Abdul Subhan H.A., (By Sri.K.V.Harish, Advocate.)
4. Name of the Accused : Sri. R.Ramesh S/o C.V.R Naidu Aged about 46 years, 2 CC No.6950/2013 SCCH-24 No.888, Model Colony, Near by Syndicate bank ATM Yeswanthapura, Bangalore22.
(By Sri.Mahesh M., Advocate.)
5. The offence complained : u/Sec.138 of Negotiable of or alleged Instruments Act
6. Plea of the Accused : Pleaded not guilty
7. Final order : Accused is acquitted
8. Date of such order : 16.08.2022 JUDGMENT This complaint is filed by the Complainant against the Accused for the offence punishable under section 138 of N.I. Act.
2. The case of the Complaint in brief is that, the complainant running a finance company and the accused is a member of their company. For improvement of business, on 30.05.2012 the accused had approached them for loan of Rs.1,50,000/ and they considered his request and released the said amount by way of cash, which was acknowledged by the accused and the accused had also under taken to repay the same in installments within short period. In this regard as a 3 CC No.6950/2013 SCCH-24 security the accused has executed on dated 30.5.2012. As per the assurance the accused has not paid regular installments and after repeated demands, the accused has issued a post dated cheque bearing No.654253 in favour of the complainant company dated 10.12.2012 drawn on State Cooperative Apex Bank Gokul Branch, Bengaluru, for Rs.1,68,740/ and they presented the said cheque for encashment through their banker i.e., Corporation bank, Vidyaranyapura, Bengaluru, on 1012 2012, but the cheque was returned with shara "Funds Insufficient" on 12.12.2012. Thereafter the complainant contacted and demanded the dishonored cheque amount but the accused not given proper answer. Then, they issued legal notice to the accused on 18.12.2012 through RPAD which was returned on 28.12.2012 and accused has not replied. Therefore, the accused has committed an offence punishable under section 138 of N.I. Act.
3. In response to summons issued by this court, the accused appeared through his counsel and obtained bail. The copies of prosecution/complaint papers were supplied to the 4 CC No.6950/2013 SCCH-24 accused as required u/s 207 of the Cr.P.C. The substance of accusation for the alleged offence punishable under section 138 of N.I. Act., is read over and explained to the accused in the language known to him to which he pleaded not guilty and claimed to be tried and submitted that he has got defense.
4. The complainant in order to bring home the guilt of the accused, has examined his GPA holder by name Sri.Abdul Subhan H.A. as PW.1 and got marked 16 documents as per Exs.P.1 to P.16(a). During the cross examination of DW.2 the Ex.P.17 to 20(a), (b) are got marked.
5. The statement of the accused under section 313 of the Cr.P.C was recorded by explaining incriminatory circumstances appearing against him. The accused has denied the entire evidence of the prosecution/Complainant. The accused got examined himself as DW.1, but not produced any documents on his behalf and also examined Sri.Govinda Swamy M.V. as DW.2 and got marked copy of his bank account as per Ex.D.1.
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6. Heard the arguments of the learned counsel for both the parties and perused the materials on record. The counsel for the accused has filed written arguments and has also relied upon the following decisions and Act;
(1) Section 20 of the Karnataka Money Lenders Act, 1961.
(2) 2009 Crl.L J 3777: Sanjay Mishra V/s Ms Kanishka Kapoor @ Nikki & Anr., (3) 2014 Crl.L.J 2304 : John K Abraham V/s Simon C Abraham & Anr., (4) 2008 (3) KLO 133 AC 103: K.Narayana Nayak V/s M. Shivarama Shetty (5) (2015) 1 SCC 99: K.Subramani V/s K Damodara Naidu (6) (2019) 5 SCC 418: Basalingappa V/s Mudibasappa (7) (2009) 14 SCC 683: Jugesh Sehgal V/s Shamsher Singh Gogi (8) 2005 2 DCR 169 : Chariman, Jawahar Coop Urbank Bank Ltd., & Ors., (9) 2013 (2) CR 427: Aswin Papers V/s B.G Kalathil (10) AIR 2014 SC 630: A.C Narayanam V.s State of Maharastra and G.Kamalakar V.s Surana Securities Ltd., & Anr., (11) 2018 (1) DCR 148: V.U Pathrose V/s K Jeevalan & Anr..
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7. Now the points that arise for consideration of this court are:
1. Whether the Complainant proved that, the accused issued cheque bearing No.654253 dated 10.12.2012 for a sum of Rs.1,68,740/ drawn on State Cooperative Apex Bank, Gokul branch, Bangalore, to discharge the legally recoverable debt or liability? [
2. Whether Complainant proved that, he has complied the mandatory requirements of section 138 of NI Act and therefore the accused has committed the offence punishable under section 138 of N.I Act?
3. What order?
8. On hearing the arguments and perusal of oral and documentary evidence on record, this court answers the above points as under;
1) In the negative,
2) In the negative,
3) As per final order, for the following reasons; 7 CC No.6950/2013
SCCH-24 REASONS
9. Point Nos.1 and 2: These points are taken up together as they are connected with each other for the sake of convenience and to avoid repetition of facts and circumstances of the case.
10. It is the specific case of the Complainant that, the accused is a member of the complainant company took loan of Rs.1,50,000/ from them for improvement of his business and got the loan amount of Rs.1,34,700/ through cheque and a sum of Rs.15,300/ by cash and at that time the accused undertook to pay the said loan amount but not paid the regular installments as agreed and on demand issued the post dated cheque in question and assured its honour on presentation but on presentation the cheque dishonoured on 12.12.2012 for 'funds insufficient' and inspite of issuance of notice through RPAD which returned not claimed the accused did not make payment.
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11. The Complainant, in order to prove that the accused has issued the cheque in question for discharge of legally recoverable debt or other liability, has examined the GPA holder as PW.1 and marked 16 documents. The Ex.P.1 is the GPA copy, Ex.P.2 is the Register of Firms Form No.A, Ex.P.3 is the Register of Firms Form No.C., Ex.P.4 is the membership application, Ex.P.5 is the loan application, Ex.P.6 is the on demand promissory note, Ex.P.7 is the bank account statement, Ex.P.8 receipt for having received the cash, Ex.P.9 is the cash receipt acknowledgement, Ex.P.10 is the original cheque, Ex.P.10(a) is the signature of the accused, Ex.P.11 is the letter for having issued cheque for repayment of loan, Ex.P.12 is the challan counter foil, Ex.P.13 is the Bank endorsement, Ex.P.14 is the legal notice, Ex.P.15 is the postal receipt, Ex.P.16 is the returned postal cover and Ex.P.16(a) is the notice.
12. In the crossexamination of PW.1 it is brought out that, he has not produced any documents to show that he is working as Asst. Manager in complainant company, himself signed on the present complaint filed in the year 2013, on Ex.P.1 there is 9 CC No.6950/2013 SCCH-24 no his signature, prior to obtaining loan amount their membership is compulsory and have to pay pigmy amount, on the basis of pigmy amount they will lend the loan, he cannot say as to how much amount the accused had paid pigmy amount and also not produced any documents. It is further elicited that they will take surety from the persons who takes loan above Rs.5,000/, they did not take any surety from the accused, he does not remember as to after how much period of accused being their member they lent loan to him, they have to furnish details of lending of loans to the Registrar of Firms, in Ex.P.6 interest rate mentioned as monthly 6%, they have not produced the details of the register to show as to how much amount the accused had repaid, as per Exs.P.5 and 8 the payment of installments are mentioned as 200 days. Further the PW.1 stated that the cheque in question issued to them prior to 34 days to 10.12.2012, in Ex.P.11 there is no details of cheque are mentioned, the interest upto 10.12.2012 is included in the cheque amount.
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13. The accused in support of his defence got examined himself as DW.1 and deposed that he knows the complainant since 2005 as he was taking loan from them and was repaying it within the stipulated time. He was in need of money during May 2012 and approached the complainant Firm and requested a sum of Rs.1,50,000/, at that time they told him to deposit a sum of Rs.25,000/ alongwith one surety to be furnished then only they release the funds to him for which he agreed and deposited a sum of Rs.25,000/ during the mid week of May 2012 and one Govinda Swamy offered surety to the said loan by giving his blank signed cheque bearing No:91351 drawn on Vijaya Bank, Bengaluru and also by signing the few blank documents of the complainant firm and they also took one signed blank cheque from him and in the last week the complainant sanctioned loan of Rs.1,50,000/ out of which they have deducted the interest part and paid a sum of Rs.1,34,700/ through cheque bearing No:00338965 on 30.5.2012 drawn on Corporation Bank, Vidyaranyapura Branch, Bengaluru which is Ex.P.7 and the said loan has to be repaid in terms of daily collection for 200 days. Accordingly he 11 CC No.6950/2013 SCCH-24 was repaying the said loan amount in terms of the daily collection to them till second week of August 2012 and as he had met with an accident he could not repay the balance amount for which the complainant firm have filled up the contents of the blank signed cheque and presented the same on 10.12.2012 which got bounced and the legal notice was not served upon him. The complainant had also presented the cheque issued by his surety Sri.Govinda Swamy during the last week of December 2012 and same got encashed on 24.12.2012 when it was questioned by the said Govinda Swamy that he did not take any loan and as to why they presented the cheque for which complainant told that as his cheque got bounced and hence they presented the cheque of Sri.Govinda Swamy and withdrawn a s um of Rs.1,75,670/ with an excess amount of Rs.6,930/ but even then have filed this false case against him. Therefore prayed for dismissing the complaint.
14. In the crossexamination of accused/DW.1 he admitted the signatures found on Exs.P.4 to 6 and P.8 to P.11, he paid 12 CC No.6950/2013 SCCH-24 Rs.750/ per day upto 150 days, only some amount is balance in the total loan amount.
15. The accused has examined Sri.Govinda Swamy M.V., as DW.2 who deposed supporting the defence of the accused and got marked Ex.D.1/his Bank Account extract. In the cross examination it is elicited that he is customer of the complaint company, he is the member of the complainant bank by filing membership application on 02.07.2012 as per Ex.P.17, he submitted loan application dated 20.7.2012 to the complainant as per Ex.P.18, his signature is appearing on money receipt dated 27.7.2018 which was filed by him before the complainant as per Ex.P.19, the Ex.P.20 on demand promissory note executed by him, he availed loan twice from the complainant, he issued blank cheques to the complainant, he has not filed any complaint against the complainant company for misusing his cheque.
16. Keeping in mind the evidence on record, the ingredients of Section 138 of the Negotiable Instruments Act is to be looked into. Sec.138 of the N.I. Act reads thus; 13 CC No.6950/2013
SCCH-24 "Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [ a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both."
17. Section 139 of the Negotiable Instruments Act which is presumption needs to be drawn in favour of the complainant when he satisfies the ingredients of Section 138 of N.I. Act. Section 139 of N.I. Act reads thus;
"139. Presumption in favour of holder It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of 14 CC No.6950/2013 SCCH-24 the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability."
Therefore, the debt or other liability narrated in the above Sections has to be construed as existence of legally recoverable debt or liability so far as the accused is concerned.
18. As per settled principles of law laid down by the Hon'ble Apex court in Rangappa vs. Sri Mohan and many other cases once the accused admitted issuance of cheque by signing itself is sufficient to draw presumption in favour of the complainant and presumption u/Sec.139 includes there is legally recoverable debt or liability unless it is rebutted as it is rebuttal presumption. In this case the accused admitted issuance of cheque by signing then the presumption is in favour of the complainant as rightly argued by the counsel for the complainant. Whether the said presumption is rebutted by the accused as required under law is to be looked into as it is rebuttable presumption and if the presumption is rebutted by preponderance of probabilities by leading separate evidence or with the materials placed by the complainant itself then the 15 CC No.6950/2013 SCCH-24 presumption raised in favour of the complainant stands rebutted and the burden of onus shifts again on the complainant as rightly pointed out by the counsel for the accused.
19. Now keeping in view the above principles of law the same needs to be applied to the facts and circumstances of this case and as there is already a presumption in favour of complainant it is to be seen whether the accused has successfully rebutted the said presumption or not. In the present case the entire case of the complainant about issuance of cheques in question is based on the loan lent to the accused. The accused admitted taking the loan from the complainant but contends that when he not paid some installments at that time the complainant got presented his cheuqe which got bounced and got presented the cheque of DW.2 and encashed the amount more than which was due and hence there does not exist any legally recoverable amount under the cheque in question as he paid maximum of loan amount. 16 CC No.6950/2013
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20. First legal issue needs to be considered with regard to GPA holder's authority to represent the complainant from the date of filing the complaint. As per the Ex.P.1 is the GPA dated 28.5.2015 executed by the complainant's partners in favour of the PW.1. The complaint is presented on 19.1.2013. The GPA executed valid as on the date of presentation of complaint i.e. 19.1.2013 is not produced. The counsel for the accused contends that the GPA is not competent to depose and complaint is not maintainable without producing the GPA valid as on the date of presentation of the complaint and there must be contents in the complaint in that regard and he having knowledge about the transactions and relied upon the decision of Hon'ble Apex court in A.C.Narayanan's case and the decision in V.U.Pathrose by the Hon'ble Kerala High Court wherein also the decision of Hon'ble Apex court in A.C.Narayanan's case was referred. In the decision rendered in A.C.Narayanam vs. State of Maharastra, the Hon'ble S.C. at para 21, 23 clearly held as under;
"21.The power of attorney holder is the agent of the grantor. When the grantor authorizes the attorney holder to initiate legal proceedings and the attorney 17 CC No.6950/2013 SCCH-24 holder accordingly initiates such legal proceedings, he does so as the agent of the grantor and the initiation is by the grantor represented by his attorney holder and not by the attorney holder in his personal capacity. Therefore, where the payee is a proprietary concern, the complaint can be filed by the proprietor of the proprietary concern, describing himself as the sole proprietor of the payee, the proprietary concern, describing itself as a sole proprietary concern, represented by its sole proprietor, and the proprietor or the proprietary concern represented by the attorney holder under a power of attorney executed by the sole proprietor. However, we make it clear that the power of attorney holder cannot file a complaint in his own name as if he was the complainant. In other words, he can initiate criminal proceedings on behalf of the principal.
..............
23. In the light of the discussion, we are of the view that the power of attorney holder may be allowed to file, appear and depose fro the purpose of issue of process for the offence punishable under Section 138 of the N.I. Act. An exception to the above is when the power of attorney holder of the complainant does not have a personal knowledge about the transactions then he cannot be examined. However, where the attorney holder of the complainant is in charge of the business of the complainantpayee and the attorney holder alone is personally aware of the transactions, there is no reason why the attorney holder cannot depose as a witness. Nevertheless, an explicit assertion as to the knowledge of the Power of Attorney holder about the transaction in question must be specified in the complaint. ......."18 CC No.6950/2013
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21. As per the above discussion there is no bar to the GPA holder to file the complaint and to give evidence but there must be averments in the complaint specifying his knowledge about the transactions and the execution of GPA. On perusal of the present complaint there is no any specification about GPA holder of the complainant having knowledge about the alleged transactions and also there is no mention about the execution of GPA by the complainant. The PW.1 in his crossexamination stated that he does not know who have filled the contents in loan application, he does not know when the accused was granted loan after he becoming their member. This evidence of PW.1 clearly shows that he has no knowledge about the alleged transactions between the complainant and the accused. Further, the Ex.P.1 is the GPA executed in the year 2015. The complaint is filed by the PW.1 himself and he admits it but has not produced the GPA valid as on the date of the presentation of the complaint and this makes it clear that the complaint was not presented through the GPA as required under law. 19 CC No.6950/2013
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22. At this stage it is proper to place reliance upon the decision reported in "II(2014) BC 367 (Kar.) in the case of Canara Workshops Ltd. Vs. Mantesh" wherein it is held as under;
"..7...... in the present case on hand, it is found as a fact by the Trial court that a general power of attorney Ex.P.14, by one Premanath Curuva, the Executive Director of the complainant, executed in favour of PW.1 was sought to be produced as a proof of authorization. The Trial Court has observed that the said power of attorney was in respect of civil litigation and there was no proof of the fact that the said Premanath Guruva was the Executive Director of the company and that he himself had any authority to file a complaint or execute a power of attorney in terms of Ex.P.14 in favour of PW.1 and hence held that the complaint filed through the medium of PW.1 and sought to be prosecuted through the said Guruva, was not maintainable."
Further, in the decision reported in "2014(4) KCCR 3032 in the case of "CREF Finance Limited, Kolkata Vs. Sree Shanthi Homes Private Limited, Bangalore and Another", wherein at para 7 it is held as under;
"7. The Board of Directors of the Company collectively entitled to exercise the powers and to do the acts on behalf of the company. Section 291 of the Companies Act confers the authority to the Board of Directors collectively. Therefore, if a complaint is to be filed, it is necessary for the Board of Directors to authorize any person to file a complaint or 20 CC No.6950/2013 SCCH-24 depose to the facts in a case and such an authority could be granted by the Board of Directors only under a resolution. The complainant has produced Ex.P.1 which is a certified copy of the Resolution dated 27.6.2000, which authorizes one Sri.Ravi Puri and Sri.Pramod Kumar, to sign any document in connection with the legal proceedings pertaining to recovery of the amount due and dishonour of cheques and to do all acts and deeds necessary in this behalf. It is in pursuance of this resolution Ex.P.1 that PW.1 Pramod Kumar has deposed on behalf of the company. This Resolution authorizes the aforesaid two persons to do all necessary acts in the legal proceedings.
But, the perusal of the complaint reveals that it is signed by "Ravi Seth", who is said to be the authorized signatory and VicePresident of the Company. The name of Sri.Ravi Seth is not seen in the resolution at Ex.P.1. So also, the complainant has not produced any other resolution or document conferring authority to Sri.Ravi Seth to file or sign a complaint on behalf of the Company. ....... On this aspect of the matter, a reliance is placed on the decision of this Court, Director, Maruti Feeds and Farms Pvt. Ltd. Vs. Basanna Pattekar, (2007 (3) KCCR1749): ILR 2007 Kar 3155, wherein it is held that the company is a juristic person and any person on behalf of the Company has to be authorized by the Company under Articles of Association or by a separate resolution to depose on behalf of the Company.
Therefore, this Court held that dismissal of the complaint is sound and proper. Though the decision refers to an authority to depose to the facts, the principle of law as such is applicable even to an authority to sign the complaint." 21 CC No.6950/2013
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23. In the present case it is clear that the complainant has filed the complaint against the accused for the offence under Section 138 of Negotiable Instruments Act and though the complainant has not stated that it is a company constituted under Companies Act but it being a company needs to be registered. The defence raised by the accused is that the complaint is filed by the complainant without authorization and not maintainable and argued on the said aspect. In this case the complainant and PW.1 not produced a single document to state that he is authorized to file complaint. Therefore, in absence of specific statement in the complaint with regard to execution of GPA and the GPA having knowledge of the transactions and nonproduction of GPA valid as on the date of filing of complaint and absence of resolution by the complainant nominating the GPA, it is clear that the PW.1 had no authority to present the complaint at all and as PW.1 has no personal knowledge of the transactions as evident from his cross examination it is clear that the PW.1 is also not competent to give evidence on behalf of the complainant company itself and 22 CC No.6950/2013 SCCH-24 the above decisions are aptly applicable to the present case and the complaint itself is not maintainable and the evidence give by PW.1 cannot be considered on behalf of complainant company.
24. As per the evidence of PW.1 they being money lenders have to submit accounts regarding lending of loan etc., to the Registrar of Firms but admittedly have not produced any such documents in this regard to prove the lending of loan to the accused. The Exs.P.2 and P.3 Register of Firms From No.A and Form No.C clearly shows that the complainant is a registered Finance Company. In this regard the counsel for the accused points out on Section 20 of the Karnataka Money Lenders Act, 1961, which reads as under;
"20. Duty of moneylender to keep accounts and furnish copies. (1) Every moneylender shall keep and maintain a cash book and a ledger [in Kannada or in English] in such form and in such manner as may be prescribed. (2) Every moneylender shall,
(a) Deliver or cause to be delivered,
(i) To the debtor within thirty days from the date on which a loan is made, a statement [either in Kannada or in English] showing in clear and distinct terms the amount and date of the loan and of its maturity, the nature of the security, if any, for the loan, the name and 23 CC No.6950/2013 SCCH-24 address of the debtor and of the money lender and the rate of interest charged:
Provided that no such statement shall be required to be delivered to a debtor if he is supplied by the moneylender with a pass book which shall be in the prescribed form and shall contain an uptodate account of the transactions with the debtor;
(ii) to the Assistant Registrar, within the said period, a statement containing the particulars referred to in subclause (i);
(b) Upon repayment of a loan in full, mark indelibly every paper signed by the debtor with words indicating payment or cancellation, and discharge every mortgage, restore every pledge, return every note and cancel or reassign every assignment given by the debtor as security for the loan. (3) No moneylender shall receive any payment from a debtor on account of any loan without giving him a duly signed receipt for the payment. (4) No moneylender shall accept from a debtor any article as a pawn, pledge or security for a loan without giving him a signed receipt for the same with its description, estimated value, the amount of loan advanced against it and such other particulars as may be prescribed."
25. It is clear from the above provision that the money lender to keep account and furnish copies, but admittedly no such documents are produced by the PW.1 in this case to prove the existence of legally recoverable debt. Further, The Ex.P.4 is the Membership application which was submitted by the 24 CC No.6950/2013 SCCH-24 accused. In the backside of Ex.P.4 there is a note, wherein it is clearly mentioned about collection of loan suspence amount which will be adjusted to the loan, which will be mentioned in finance's slip. But admittedly the PW.1 has not produced any documents to show how much they collected from the accused and how much was adjusted to the loan. Though the PW.1 denied that they did not take any surety for the loan above Rs.5,000/ but in Ex.P.4 itself it is mentioned that Rs.5,000/ loan will be paid without surety. As per Ex.P.5/loan application which shows that loan of Rs.1,50,000/ was granted condition for payment of Rs.750/ per day upto 200 days. The Ex.P.6/on demand promissory note dated 30.5.2012 shows the interest levied is 16% per month which is excessive and not permissible rate of interest and to support the same that they have not produced any authority to levy such a rate of interest. As per Ex.P.7 which is also admitted by the accused a sum of Rs.1,34,700/ was paid to the accused through cheque but have not produced any documents to prove that they paid Rs.15,300/ by cash. The Ex.P.8 is the cash paid receipt which shows that cheque for Rs.1,34,700/ was issued and cash of 25 CC No.6950/2013 SCCH-24 Rs.15,300/ paid in favour of accused totaling to Rs.1,50,000/ and the signature of the accused is taken to the said document. The accused denies for having paid cash of Rs.15,300/ and contends that the said amount was deducted towards the advance interest on loan. The Ex.P.9 is the cash received receipt which shows the payment of loan of Rs.1,50,000/ to the accused. As discussed above the PW.1 has not produced the registers concerned and hence these documents are not supported with the authenticated registers. Further, on perusal of Exs.P.5, 6, 8, 9 it is clear that only signatures of the accused are taken on it while granting the loan admittedly were written by one person and as per the evidence of PW.1 they were written by their office. From this it can be inferred that they were filled afterwards to suit their claim.
26. The Ex.P.10 is the cheque dated 10.12.2012 and Ex.P.11 is the letter for giving cheque for security. As per the PW.1 in Ex.P.11 there is no specific mention of date of taking cheque but they calculated the interest till 10.12.2012. As per the Ex.P.6 the interest rate mentioned as 16% per month then if 26 CC No.6950/2013 SCCH-24 it is considered the cheque presented admittedly after receipt of loan installments the details of which not produced before the court, then from this adverse inference can be drawn that after receipt of maximum installments also only for getting illegal rate of interest the calculation made and shown in the Ex.P.10 cheque. There is no dispute that the cheque was presented and returned for insufficient funds but the disputed fact is there does not exists legally recoverable debt. As discussed above there is no ledger accounts extract and other registers produced to prove that there exists legally recoverable debt and they had authority to impose 16% interest per month. The Ex.P.14 notice also does not show the details as to how much repayment of loan amount was made by the accused and what was balance remained. On perusal of Ex.P.16 it was not served on the accused as the shara shows 'intimation delivered/door locked'. Therefore, there is no compliance of Section 138 of N.I. Act as the notice as required under law was not served on the accused at all.
27. As per the defence of the accused while granting the loan the complainant took surety of Sri.Govindaswamy which is 27 CC No.6950/2013 SCCH-24 denied by the PW.1 but the Ex.P.4 it is crystal clear that for granting loan about Rs.5000/ they required surety which falsifies the evidence of PW.1 in this regard. In order to prove the said defence the accused has examined himself as DW.1 and nothing worth is elicited in his crossexamination to disprove his defence. Further the accused has also examined the DW.2 in support of his defence that DW.2 stood as surety for him when the complainant granted the loan. The DW.2 has deposed in support of the defence of the accused and produced the Ex.D.1 to prove that the complainant got encashed a sum of Rs.1,75,670/. In the crossexamination though the DW.2 admitted that he took loans from the complainant twice and admits Exs.P.17 to P.20(a)(b) and he has not taken any action against the complainant for having encashed the amount from his account. From this it is clear that the DW.2 also took loan from the complainant. No doubt the DW.2 admitted that he did not take any action against the complainant for presenting the cheque but it does not mean that his entire evidence is falsified as the complainant has not produced any documents to prove that they took the alleged cheque from the DW.2 towards 28 CC No.6950/2013 SCCH-24 repayment of his loan itself. Therefore, the DW.2 evidence remained supportive to the defence of the accused. When the accused by leading his evidence and evidence of DW.2 has put forth the defence that the complainant took surety while granting the loan to the accused and the complainant got encashed the excess loan amount from the surety of the accused, then the burden shifts on the complainant to prove that they encashed the cheque as per Ex.D.1 towards the loan of DW.2 only which is not proved by the complainant.
28. Therefore, as per the evidence on record the complainant has failed to prove the legally recoverable debt under Ex.P.10. In a decision in the case of "Indus Airways P. Ltd. Vs. Magnum Aviation P. Ltd. 2014(4) SCALE 645", the Hon'ble Apex Court held that there is a fine distinction between the civil liability and criminal liability under Section 138 NI Act. It was observed as under;
"If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a 29 CC No.6950/2013 SCCH-24 criminal liability to be made out under Section
138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque."
29.The above decision is aptly applicable to the present case. Further in a decision reported in "AIR 2009 SC 1518 in the case of M/s. Kumar Exports v. M/s. Sharma Carpets", wherein it is held as under;
"11. The use of the phrase "until the contrary is proved" in Section 118 of the Act and use of the words "unless the contrary is proved"in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonable tending to show that the real fact is not as presumed, the purpose of the presumption is over. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the nonexistence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a 30 CC No.6950/2013 SCCH-24 criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently wold not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their nonexistence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act. The accused has also an option to prove the non existence of consideration and debt or liability either by letting in evidence on in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice 31 CC No.6950/2013 SCCH-24 and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue...."
Further in a decision reported in "AIR 2019 SC 942 in the case of Anss Rajshekar V. Augustus Jeba Ananth" wherein it is held as under;
"13.........an important facet in the matter was that the complainant failed to establish the source of funds which he is alleged to have utilized for the disbursal of the loan of Rs.15 lakhs to the appellant. During the course of his crossexamination the complainant deposed that earlier, the appellant had furnished two cheques, one of ICICI Bank for Rs.5 lakhs and another of Canara Bank for Rs.10 lakhs which he had presented. The complainant admitted that he had not mentioned anything about the accused having issued these two cheques in his complaint. Nothing was stated by the complainant in regard to the fate of the earlier two cheques which were allegedly issued by the appellant. The non disclosure of the facts pertaining to the earlier two cheques, and the steps, if any, taken for recovery was again a material consideration which indicated that there was a doubt in regard to the transaction.
12. On a totality of the facts and circumstances and based on the evidence on the record, the first appellate court held that the presumption under Section 139 of the Act stood rebutted and that the defence stood probablised. From the judgment of 32 CC No.6950/2013 SCCH-24 the High Court, the significant aspect of the case which stands out is that there has been no appreciation of the evidence or even a reference to the reasons furnished by the first appellate court. The High Court adverted to the Judgment of this court in Rangappa (AIR 2010 SC 1898) (supra). Having adverted to that decision, the High Court reversed the order of acquittal by holding that a mere denial of the transactions or an omnibus denial of the entire transaction could not be considered as a tenable defence. The judgement of the High Court is unsatisfactory and does not contain any reference to the evidence whatsoever. There was absolutely no valid basis to displace the findings of fact which were arrived at by the first appellate court, while acquitting the accused."
Further, in a decision reported in "2011 Crl.L.J. 531 (Bombay H.C.) in the case of Joseph Vilangadan v. Phenomenal Health Care Services Ltd. & Anr.", wherein it is held that, "Negotiable Instruments Act (26 of 1881), S.138 Dishonour of cheque Cheque in question not issued for discharge of any debt or liability But was issued as security deposit for due performance of terms of contract Dishonour thereof No case under S.138 made out Process issued against accused liable to be quashed. (Para 7, 9)"
Further in a decision reported in 2014 Crl.L.J. 2304 S.C. in the case of John K. Abrahm V. Simon C. Abraham and another, wherein it is held as under;
"Negotiable Instruments Act (26 of 1881), Ss.138, 118, 139 Dishonour of cheque Complainant 33 CC No.6950/2013 SCCH-24 alleging that accused borrowed a sum of Rs.1,50,000/ from him and issued a cheque for said sum which was dishonoured For drawing presumption under S.118 r.w. S.139 burden is heavily upon complainant Complainant not sure as to who wrote cheque nor aware as to when and where existing transaction took place for which cheque was issued by accused Defects in evidence of complainant as noted by trial court brushed aside by High Court without assigning any valid reason Conviction of accused therefore, not proper."
Further in a decision reported in IV (2016) CCR 79 (SC) S.C. in the case of Sampelly Satyanarayana Rao Vs. Indian Renewable Energy Development Agency Limited", wherein it is held;
"(I) Negotiable Instruments Act, 1881 Section 138 Dishonour of Cheque Security cheque issued against loan agreement Question whether a post dated cheque is for discharge of debt or liability depends on nature of transaction .."
30. The aforesaid decisions are aptly applicable to the present case. Further the decisions relied upon by the counsel for the accused which are referred above at para 6 are also applicable to the defence raised by the accused. Therefore, this court holds that the complainant has failed to prove the existence of legally recoverable debt or liability as claimed by him 34 CC No.6950/2013 SCCH-24 and complaint is not maintainable at all for the reason that the GPA holder was not having any authority to present the complaint and the PW.1 has no knowledge about transaction between the complainant and the accused and about the issuance of cheque in question. Further, the complaint also fails for the reason of issuance of proper notice to the accused as required under law as discussed above and there is no compliance of Section 138 of NI Act. Therefore, the accused has raised probable defence and rebutted the presumptions raised in favour of complainant. Accordingly, it is held that the complainant has failed to prove that the cheque in question marked at Ex.P.10 was issued towards discharge of legally debt or other liability and hence there is non compliance of provisions required u/Sec.138 of Negotiable Instruments Act and hence, these points are answered in the Negative.
31. Point No.3: For the reasons and discussions made above and findings given to above point Nos.1 to 2, this court is of the opinion that the Accused ise to be acquitted for the offence punishable under 35 CC No.6950/2013 SCCH-24 section 138 of NI Act. Accordingly, this court proceeds to pass the following:
ORDER By exercising the powers conferred u/Sec.255(1) of Cr.P.C the accused is hereby acquitted of the offence punishable under section 138 of Negotiable Instruments Act.
The bail bonds of the accused and surety shall be in force till the appeal period is over.
(Typed by me directly on the laptop, computerized by the Stenographer, then corrected, signed and then pronounced in open court on this the 16th day of August 2022.) (Miss. B.T.ANNAPOORNESHWARI) C/c XXII Addl., ASCJ & ACMM, Bangalore.
ANNEXURE Witnesses examined on behalf of the Complainant:
PW.1 : Mr.Abdul Subhan H.A.
36 CC No.6950/2013
SCCH-24
Witnesses examined on behalf of the Accused:
DW.1 : Sri. R.Ramesh DW.2 : Sri Govinda Swamy M.V.
Documents marked on behalf of the Complainant:
Ex.P.1 : Copy of GPA
Ex.P.2 : Register of Firms Form No.A
Ex.P.3 : Register of Firms Form No.C
Ex.P.4 : Membership application
Ex.P.5 : Loan application
Ex.P.6 : On demand promissory note
Ex.P.7 : Bank account statement
Ex.P.8 : Receipt of payment
Ex.P.9 : Cash received receipt
Ex.P.10 : Original Cheque
Ex.P.10(a) : Signature of the accused
Ex.P.11 : Letter for having issued cheque for repayment of loan
Ex.P.12 : Challan counter foil
Ex.P.13 : Bank endorsement
Ex.P.14 : Legal notice
Ex.P.15 : Postal receipt
Ex.P.16 : Returned postal cover
Ex.P.16(a) : Notice inside the cover
Ex.P.17 : Membership application
Ex.P.18 : Loan application
Ex.P.18(a) : Signature
37 CC No.6950/2013
SCCH-24
Ex.P.19 : Money receipt
Ex.P.19(a) : Signature
Ex.P.20 : On demand promissory note
Ex.P.20(a) & : Two signatures
P20(b)
Documents marked on behalf of the Accused:
Ex.D.1 : Copy of bank account statement of DW.2 (Miss. B.T.ANNAPOORNESHWARI) C/c XXII Addl., ASCJ & ACMM, Bangalore.38 CC No.6950/2013
SCCH-24 16.08.2022 CKVH AMM For Judgment JUDGMENT PRONOUNCED IN OPEN COURT VIDE SEPARATE ORDER ORDER By exercising the powers conferred u/Sec.255(1) of Cr.P.C the accused is hereby acquitted of the offence punishable under section 138 of Negotiable Instruments Act.39 CC No.6950/2013
SCCH-24 The bail bonds of the accused and surety shall be in force till the appeal period is over.
C/c XXII Addl., ASCJ & ACMM, Bangalore.