Karnataka High Court
Marutiprasad S/O Govindappa Shetty vs H.Hanumesh S/O Laxmayya Shetti M on 18 August, 2023
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CRL.A No.100054 OF 2015
®
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 18TH DAY OF AUGUST, 2023
BEFORE
THE HON'BLE MR JUSTICE ANIL B KATTI
CRIMINAL APPEAL NO.100054 OF 2015 (A)
BETWEEN:
MARUTIPRASAD
S/O. GOVINDAPPA SHETTY,
AGE: 35 YEARS,
OCC: BUSINESS AND AGRICULTURE,
R/O. GANGAVATHI
DIST: KOPPAL.
...APPELLANT
(BY SRI. SHRIHARSH A NEELOPANT, ADVOCATE)
AND:
M.HANUMESH
CHANDRASHEKAR S/O. LAXMAYYA SHETTI. M,
LAXMAN
KATTIMANI AGE: 43 YEARS, OCC: BUSINESS,
R/O. MITAIGAR STREET, NEAR NEELA BEKARI,
Digitally signed by
CHANDRASHEKAR GANGAVATHI, DIST: KOPPAL.
LAXMAN
KATTIMANI ...RESPONDENT
(BY SRI. N. D. GUNDE, HCGP)
***
THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378 (4) OF
CR.P.C., PRAYING TO GRANT LEAVE TO THE APPELLANT TO FILE THE
PRESENT APPEAL AGAINST THE IMPUGNED JUDGMENT DATED
13.02.2015 PASSED BY THE PRL. CIVIL JUDGE AND JMFC COURT,
GANGAVATHI IN C.C. NO.255/2012 AND ALLOW THE APPEAL AND
SET ASIDE THE IMPUGNED JUDGMENT DATED 13.02.2015 PASSED
BY THE PRL. CIVIL JUDGE AND JMFC COURT, GANGAVATHI IN
C.C.NO.255/2012 AND PRAYING TO CONVICT THE
ACCUSED/RESPONDENT FOR THE OFFENCE P/U/S 138 OF NI ACT
WITH WHICH THEY HAVE BEEN CHARGED.
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CRL.A No.100054 OF 2015
THIS CRIMINAL APPEAL COMING ON FOR HEARING AND THE
SAME HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON
23.06.2023, THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:
JUDGMENT
Appellant/complainant feeling aggrieved by judgment of Trial Court on the file of Principal Civil Judge and JMFC, Gangavathi, in CC No.255/2012, dated 13.02.2014, preferred this appeal.
2. Parties to the appeal are referred with their ranks as assigned by the Trial Court for the sake of their convenience.
3. Heard the arguments of both sides.
4. On careful perusal of oral and documentary evidence placed on record, it would go to show that complainant and accused are known to each other and accused availed loan of Rs.2,00,000/- for purchase of the house. Accused to repay the said amount has given post dated cheque bearing No.272266 for Rs.2,00,000/-, dated 01.12.2012 drawn on Karnataka Bank Ltd., Gangavathi, Ex.P.1. -3-
CRL.A No.100054 OF 2015 Complainant presented the said cheque for collection through his banker Karur Vysya branch Gangavathi on 05.12.2011 Ex.P.2. The same was dishonoured vide bank intimation Ex.P.3 and endorsement Ex.P.4 as "funds insufficient". Complainant issued demand notice Ex.P.5 and postal receipt Ex.P.6 and the same is duly served to wife of accused vide acknowledgment Ex.P.7. Accused deliberately after knowing the contents of notice, neither replied to the demand notice nor paid the amount covered under the cheque. Complainant is filed on 02.01.2012.
5. The defence of accused is that he has lost hand bag in the temple containing the cheque book of Karnataka Bank and Corporation Bank having signed cheque. Complainant immediately given intimation to both banks dated 08.07.2011. In support of such contention reliance is placed on his own evidence as DW.1 and documents at Exs.D.1 and D.2.
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CRL.A No.100054 OF 2015
6. The Trial Court recorded following findings to acquit the accused for the offence under Section 138 of N.I.Act:-
1. Other than Ex.P.1 no documents obtained for advancing loan as security.
2. Signature of Ex.P.1 and other particulars of cheque are with different ink.
3. Not furnished documents regarding income from business and agriculture.
4. Income tax documents are not produced.
5. The rebuttal evidence of DW.1 and documents Exs.D.1 and D.2 probabilised the defence about theory of lost cheque.
The above referred grounds of Trial Court leading to the acquittal of accused has to be re-appreciated in deciding the correctness and legality of judgment of Trial Court.
7. The first ground relates to not obtaining any document as security other than the cheque Ex.P.1. There is no any mandate of law to secure another document for the cheque amount whenever the loan transaction takes place between the known persons. Accused has not disputed complainant is known to him, further reiterated in examination-in-chief opening line that complainant is -5- CRL.A No.100054 OF 2015 known to him for the last 20 years. Complainant has specifically pleaded and deposed that the loan transaction between him and accused took orally. Accused assured to repay the amount within 2 months and issued post dated cheque by mentioning the date as 01.12.2011. The said post dated cheque was delivered to complainant on the day of taking loan. Therefore, there was no any reason or occasion for the complainant to obtain separate documents for the loan transaction leading to issuance of post dated cheque Ex.P.1 on the day of transaction itself. It terms of Section 118 of N.I.Act, until the contrary is proved necessary presumption will have to be drawn regarding passing of consideration, as to date, as to time of acceptance, as to time of transfer, as to order of indorsements, as to stamps, that holder is a holder in due course. If the defence of accused is not accepted for proving last theory of cheque then necessary presumption will have to be drawn in terms of Section 118 of N.I.Act.
8. The second ground is to the effect that signature on Ex.P.1 and other particulars of cheque differs. It is true -6- CRL.A No.100054 OF 2015 that admitted signature of accused on Ex.P.1 is in black colour ink and the other particulars are filled with blue ink. If the cheque is issued duly signed by accused authorizing the holder in due course to fill the particulars of cheque, then it is not open for the accused to contend that he has not written the particulars of cheque.
9. The Trial Court has further recorded finding that no documents regarding income from business and agriculture, further income tax returns are not produced by complainant to show the source of income to give loan of Rs.2,00,000/- to accused. Complainant has specifically pleaded that he is doing business and agriculture and reiterated the same during the course of his evidence. Accused in the entire cross examination of PW.1 has never denied that complainant is doing business and agriculture, further has got source of income from the said avocation. It has been elicited in the cross-examination that he was doing money lending business and income tax assessee. PW.1 has stated that he was doing money lending business till the year 2009. The cheque Ex.P.1 is issued on -7- CRL.A No.100054 OF 2015 01.12.2011. Accused who claims that complainant is still doing money lending business has not produced any documents to that effect. In this context, the Trial Court has rightly applied principles enunciated in the judgment of this Court in S.Parameshwarappa Vs. S.Choodappa reported in ILR 2006 Karnataka 4287 wherein it has been held that the question of holding money lending license by complainant would not be considered in this proceedings, since the complainant is exercising special powers provided under the N.I.Act. The said question would be considered only in the case of suit for recovery of money. Therefore, non production of money lending license cannot be said as fatal to the case of complainant, even if it is assumed that complainant is still doing money lending business.
10. The Trial Court also observed and held that complainant has not produced any income tax returns, it is also suggested in the cross examination of PW.1 that if there was to be any transaction in excess of Rs.20,000/-, the same will have to be done either through DD or -8- CRL.A No.100054 OF 2015 through cheque. PW.1 placed his ignorance on the said requirement. In this context, the Hon'ble Apex Court examined the constitutional validity of Section 269-SS of Income Tax Act in the judgment reported in Assistant Director of Inspection Investigation Vs. A.B.Shanthi reported in (2002) 6 SCC 259, wherein it has been observed and held that, "This Court while recording the said finding has taken note of the decision of Apex Court in Assistant Director of Inspection Investigation referred above. In para 7 of the said judgment concluded that in the light of the observations of Apex Court, it cannot be said that Section 269-SS only provided for the mode of acceptance payment or repayment in certain cases so as to counteract evasion of Tax. Section 269-SS does not declare all transactions of loan, by cash in excess of Rs.20,000/- as invalid, illegal or null and void, while as observed by the Apex Court, the main objection of introducing the provisions was to curb and unearth black money. To construe Section 269-SS as a competent enactment declaring as illegal and enforceable all transactions of loan, by cash, beyond Rs.20,000/- in my opinion cannot be countenanced. It is true that the said decision has been rendered in a Civil suit for recovery of money, -9- CRL.A No.100054 OF 2015 buy the principle of law with regard to the effect of Section 269-SS of Income Tax act holds good. Therefore, in view of the principles enunciated in the above referred decisions, the finding of the Trial Court that the transaction involved leading to issuance of cheque in question as per Ex.P1 which is contravention of Section 269-SS of Income Tax Act has become unenforceable debt and by virtue of the same, the presumption in favour of complaint stood rebutted cannot be illegally sustained." The Hon'ble Apex Court having so observed negated the contention of appellants that taking a loan or receiving a deposit is a single transaction wherein a lender and borrower are involved and by the impugned section, the borrower alone is sought to be penalized and the lender is allowed to go scot-free.
11. The proviso to Section 269-SS of the Income Tax Act prescribes the mode of taking or accepting certain loans, deposits specified sum. The said proviso would speak to the effect, no person shall take or accept from any other person (hereinafter referred to as the depositor). Mode of taking any loan or deposit or any specified sum otherwise
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CRL.A No.100054 OF 2015 than by an account payee cheque or account or accepting payees and draft or use of electronic clearing system through a bank account. The proviso was inserted in the Income Tax Act debarring person from taking or accepting from any other person any loan or deposit otherwise that by account payee cheque or account payee draft if the amount of such loan or deposit or the aggregate amount of loan or deposit is Rs.10,000/- or more. The amount of Rs.10,000/- was later revised as Rs.20,000/- with effect from 01.04.1989. The said proviso does not prohibit for giving or lending loan, it is only taking and acceptance is prohibited. The acceptance of loan by way of cash in excess of Rs.20,000/- may attract penal provision in terms of Section 271-D. Whether the provisions of Section 269- SS of the Income Tax Act, 1961, disentitles the plaintiff from filing recovery suits was directly under consideration by the Co-ordinate Bench of this Court in the judgment reported in Mr. Mohammed Iqbal vs. Mr. Mohammed Zahoor reported in ILR 2007 Kar. 3614, wherein it has been observed and held that:-
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CRL.A No.100054 OF 2015 " The main object introducing the provisions of Section 269-SS of the Income Tax Act is to curb and unearth black money. But the section does not declare the present transaction which is brought before the Court illegal, wide and unenforceable."
This Court while recording the said finding has taken note of aforementioned judgment of Hon'ble Apex Court in Assistant Director of Inspection Investigation's case.
In para 7 of the said judgment concluded that in the light of the observations of Hon'ble Apex Court, it cannot be said that Section 269-SS only provided for the mode of acceptance payment or repayment in certain cases so as to counteract evasion of tax. Section 269-SS does not declare all transactions of loan by cash in excess of Rs.20,000/- as invalid, illegal or null and void, while as observed by the Apex Court, the main object of introducing the provisions was to curb and unearth black money. To construe Section 269-SS as a competent enactment declaring as illegal and enforceable all transactions of loan, by cash, beyond Rs.20,000/- in my opinion cannot be countenanced. Therefore, in view of
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CRL.A No.100054 OF 2015 principles enunciated in the aforementioned judgments, the finding of Trial Court non-production of Income Tax documents would render the loan transaction as unenforceable cannot be legally sustained.
12. The Trial Court has also held that non-production of documents regarding the income from business and agriculture would render the financial capacity of complainant to lend the money. Complainant has stated that he is doing business and agriculture and has income from the said avocation. The source of income through agriculture and business has not been challenged by accused in the cross-examination of PW.1. The accused has not replied to the demand notice nor made any basic foundation after his appearance in the case when he chooses to contest the case by making written communication challenging the source of income of complainant to lend the money. In this context, it is useful to refer the judgment of Hon'ble Apex Court in Tedhi Singh vs. Narayan Dass Mahant reported in 2020 Live Law (SC) 275, wherein it has been observed
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CRL.A No.100054 OF 2015 and held that basic foundation has to be made on the first available opportunity in the reply given to the demand notice by questioning the financial capacity. Otherwise, the complainant has no opportunity to place any evidence on record in proof of his financial capacity. Therefore, both the aforementioned two grounds referred by the Trial Court cannot be legally sustained.
13. The last ground is that accused has lost his handbag during his visit to the temple containing cheque books of Karnataka Bank and Corporation Bank. Accused immediately on 08.07.2011 given intimation to both the banks Exs.D.1, D.1A and D.2. In support of such defence, accused got himself examined as DW.1. Indisputably, accused has not filed any police complaint for having lost his hand bag containing cheque book of Karnataka Bank and Corporation Bank. Accused claim that he lost the hand bag in July 2011 without giving any particulars of the cheque book containing the remaining signed cheque leaves in the cheque book of Karnataka Bank. The transaction in question took place after more than 3
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CRL.A No.100054 OF 2015 months on loss of cheque book kept in the hand bag claimed by accused. Accused by evidence on record failed to establish the nexus between loss of hand bag containing the cheque book of Karnataka Bank and Corporation Bank, further accused coming in possession of only one cheque Ex.P.1 out of the alleged loss of hand bag containing the cheque books. DW.1 admitted in the cross- examination that whenever there is need one or two cheques were taken from the cheque book and the entire cheque book will not be carried. DW.1 further admits that the cheque will be carried only when there is need for giving it to some other person. The uncorroborated evidence of DW.1 cannot be relied to prove the theory of lost cheque kept in a bag as claimed in his evidence.
14. Learned counsel for respondent contended that demand notice Ex.P.5 is not served to the accused. It has been elicited in the cross-examination of PW.1 that signature on Ex.P.7 is not of accused, but states that it may be the signature of his wife. The acknowledgement card Ex.P.7 addressed to accused is received by
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CRL.A No.100054 OF 2015 M.H.Veena. DW.1 in his examination-in-chief itself states that demand notice was issued to his wife. It means that accused admits that signature appearing on Ex.P.7 is that of his wife. It is not in dispute that accused and his wife are residing together in the same house of the address given in the cause title. Learned counsel for accused in support of his contention that there is no proper service of demand notice to accused relied on the judgment of Hon'ble Apex Court in M.D.Thomas Vs. P.S.Jaleel reported in laws (SC)-2009 - 4 - 47, wherein it has been observed and held that " The notice of demand was served upon the wife of the appellant and not the appellant. Therefore, there is no escape from the conclusion that complainant-respondent had not complied with the requirement of giving notice in terms of Clause
(b) of proviso to Section 138 of the Act". The Hon'ble Apex Court having so observed acquitted the accused for non compliance of Section 138(b) of N.I.Act.
15. The Hon'ble Apex Court while considering the effect of issuance of demand notice in terms of Section 138(b) of
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CRL.A No.100054 OF 2015 N.I. Act and Section 27 of General Clauses Act, 1897 in K.Bhaskaran vs. Sankaran Vaidhyan Balan and another reported in (1999) 7 SCC 510, in para 21 and 24 held as under:-
"21. In Maxwell's Interpretation of Statutes, the learned author has emphasized that "provisions relating to giving of notice often receive liberal interpretation" (vide P. 99 of 12 Edition). The context envisaged in Section 138 of the Act invites a liberal interpretation for the person who has the statutory obligation to give notice because he presumed to be the loser in the transaction and it is for his interest the very provision is made by the legislature. The words in clause (b) of the proviso to Section 138 of the Act show that the payee has a statutory obligation to "make a demand" by giving notice. The thrust in the clause is on the need to "make a demand". It is only the mode for making such demand which the legislature has prescribed. A payee can send the notice for doing his part for giving the notice. Once it is dispatched, his part is over and the next depends on what the sendee does."
"24. No doubt Section 138 of the Act does not require that the notice should be given only by "post". Nonetheless, the principle incorporation in Section 27 (quoted above) can profitably be
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CRL.A No.100054 OF 2015 imported in a case where the sender has dispatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was not responsible for such non-service. Any other interpretation can lead to a very tenuous position as drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice."
This decision has been considered by the Larger Bench of Hon'ble Apex Court in view of the reference made by the Two Judge Bench for deciding the question of service of notice in terms of Section 138(b) of N.I.Act in C.C.Alavi Haji vs. Palapetty Muhammed and another reported in (2007) 6 SCC 555, wherein it has been served and held that :-
" It is not necessary to aver in the complaint under Section 138 of the N.I.Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.
When Section 114 of the Evidence Act, 1872 is applied to communications sent by post, it enables the Court to presume that in the common
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CRL.A No.100054 OF 2015 course of natural events, the communication would have been delivered at the address of the addressee. But the presumption that is raised under Section 27 of the General Clauses Act, 1897 is a far stronger presumption. While 114 of the Evidence Act refers to a general presumption, Section 27 of 1897 Act refers to a specific presumption.
Section 27 of the 1897 Act gives raise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that inspite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. The Supreme court has already held that when a notice is sent by registered post and is returned with a postal endorsement "refused" or "not available in the house" or "house locked" or " shop closed" or "
addressee is not in station", due service has to be presumed."
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CRL.A No.100054 OF 2015 In view of the principles enunciated in the aforementioned judgment of Hon'ble Apex Court, it will have to be held that in terms of Section 138(b) of N.I.Act, demand notice is given to the accused on the correct address mentioned in the cause title and the same is received by the wife of accused, further the accused and his wife are residing in one house is not in dispute. Hence, it will have to be held that there is deemed service of demand notice.
16. In the latest Co-ordinate Bench judgment of Hon'ble Tripura High Court, Agartala, in Nabarun Datta vs. Goutam Roy Barman in Crl.A.20/2022 dated 25.07.2023, the demand notice served on the wife was under consideration as involved in the present case. The judgment of Hon'ble Apex Court in M.D. Thomas case referred above relied by learned counsel for the respondent was also referred and the same was examined in the light of Hon'ble Apex Court judgment in K Bhaskaran's case referred supra and recorded finding as under:
" It is an admitted fact that the wife of respondent had duly served the notice, and it was nowhere pleaded by the respondent that he and his
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CRL.A No.100054 OF 2015 wife were living separately during the relevant point of time, hence burden was upon the respondent to substantiate that he did not receive the notice. It is submitted that just to evade the liability of regarding the receipt of notice as they were staying together. Thus, it cannot be said that notice served on the wife is not served on the husband under Section 138 of N.I.Act."
The similar facts are also involved in the present case and the accused has not rebutted the said fact of service of notice on his wife in the given correct address, wherein the husband and wife are residing together. Therefore, in view of the principles enunciated in the aforementioned judgment, the defence of accused as referred above cannot be legally sustained.
17. When the accused has failed to probabilise his defence and issuance of cheque with his signature is admitted, then statutory presumption in terms of Section 118 and 139 of N.I.Act will have to be drawn. The learned counsel for appellant relied on the judgment of Hon'ble Apex Court in APS Forex Services Pvt. Ltd. Vs. Shakthi International Fashion Linkers and others reported in
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CRL.A No.100054 OF 2015 AIR 2020 Supreme Court 945, wherein it has been observed and held that once the issuance of cheque and signature is admitted, there is always a presumption in favour of complainant that there exist legally enforceable debt or liability. Plea by accused that cheque was given by view of security and same has been misused by complainant not tenable. On the same principles, reliance is also placed on another judgment of Hon'ble Apex Court in Bir Singh Vs. Mukesh Kumar reported in (2019) 4 SCC 197. It is profitable to refer the latest judgment of Hon'ble Apex Court in P. Rasiya vs. Abdul Nazer and another reported in 2022 SCC OnLine SC 1131, wherein it has been observed and held that' "Once the initial burden is discharged by the complainant that the cheque was issued by the accused and signature of accused on the cheque is not disputed, then in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for discharge of any debt or other liability. The presumption under Section 139 of N.I.A Act is statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt or other liability which
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CRL.A No.100054 OF 2015 is in favour of the complainant/holder of the cheque, in that case it is for the accused to prove the contrary."
In view of the principles enunciated in the aforementioned judgments, when the accused has failed to probabilise his defence and the issuance of cheque with his signature is admitted, then statutory presumption in terms of Section 118 and 139 of N.I.Act will have to be drawn.
18. The Trial Court without properly appreciating the evidence on record was swayed away by the untenable defence of accused and the rebuttal evidence placed on record and as a result, recorded erroneous finding. In view of the reasons recorded above, it will have to be held that the complainant has proved that accused has committed offence under Section 138 of N.I.Act.
19. Now, coming to the imposition of sentence. The Court will have to exercise the judicial discretion for imposing sentence. Looking to the facts and circumstances of the case, nature of evidence on record and the transaction involved, coupled with the attending
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CRL.A No.100054 OF 2015 circumstances of the case, if accused is sentenced to pay a fine of Rs.2,05,000/- and in default of payment of fine, shall undergo simple imprisonment for 6 months is ordered will meet the ends of justice. Consequently, proceed to pass the following:
ORDER Appeal filed by appellant/complainant is hereby allowed.
The judgment of Trial Court on the file of Principal Civil Judge and JMFC, Gangavathi, in CC No.255/2012, dated 13.02.2014, is set aside.
Accused is convicted for the offence under Section 138 of N.I.Act and sentenced to pay a fine of Rs.2,05,000/-
and in default of payment of fine, shall undergo simple imprisonment for 6 months.
In exercise of power under Section 357(3) of Cr.P.C., out of the fine amount Rs.2,00,000/- is ordered to be given to the complainant as compensation and remaining amount
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CRL.A No.100054 OF 2015 of Rs.5,000/- is ordered to be defrayed as expenses incurred for prosecution.
Registry is directed to send back the records with copy of judgment to the Trial Court.
SD/-
JUDGE gsr/mv