Bangalore District Court
Sailesh Kumar vs Renuka Murthy on 11 March, 2026
KABC010292332022
IN THE COURT OF LXVII ADDL CITY CIVIL AND
SESSIONS JUDGE; BENGALURU CITY (CCH.No.68)
PRESENT
SMT.RASHMI.M.
BA.LL.B., LL.M.
LXVII ADDL CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Dated this the 11th day of March 2026.
Crl. Appeal No.1317/2022
APPELLANT : Sailesh Kumar,
S/o.N.Sreeramalu,
Aged about 49 years,
Ex-Director of
Fortuna Urbanscape Pvt. Ltd.
A Company incorporated under
Companies Act, 1956,
R/at.No.12, Lalitha Manor,
2nd and 3rd Floor, 14th Cross,
AECS Layout, Sanjay Nagar,
Bengaluru.
(By Sri.M.D., Advocate)
.Vs.
RESPONDENT : Renuka Murthy,
S/o.Shekarappa,
Aged about 51 years,
R/at.Flat No.103,
Vastu Elite, 10th Cross,
8th Main, Ideal Homes Layout,
Crl.Appeal No.1317/2022
2
Rajarajeshwari Nagar,
Bengaluru.
Also at :
Flat No.42, Stella Building,
Near ABA School,
Madinat Qaboos,
Muscat Sulnate of Oman.
(By Sri.K.M., Advocate)
JUDGMENT
This appeal is preferred by the appellant challenging the conviction judgment and order of sentence passed by the learned VI Addl. Judge, Court of Small Causes & Addl. C.M.M., Bengaluru in C.C.No.3011/2018, dated:21.09.2022 as to the alleged offence under Section 138 of N.I.Act and prays to set aside the impugned judgment & order of sentence and to acquit the accused.
2. The appellant herein was the accused and respondent was the complainant before the trial court. For the sake of convenience, parties would be referred to by the ranks they were assigned before the trial court.
3. Brief facts of the case are as under:
The accused with an intention to develop the immovable landed property and put up the residential Crl.Appeal No.1317/2022 3 apartment building at Yelahanka Village, had given an advertisement and put the hoardings for Pre-Launch offer and called for general public to invest the money and purchase the apartment property. During 29 th and 30th May 2015, the accused had given the presentation about the property to complainant at Muscat. The complainant with an intention to own a residential apartment in Bengaluru had placed his desire to purchase the said property in the said project. The accused had offered him to invest a sum of Rs.60,00,000/- as total sale consideration in respect of duplex apartment property measuring 1650 sq. feet of super built up area in the said project. The complainant was convinced with the words of accused and decided to purchase the property and had paid the entire sale consideration of Rs.60,00,000/- to the accused through cheque bearing No.721492, dated:18.06.2015 drawn on ICICI Bank. On receiving the said amount, both the parties had entered into a sale agreement on 23.06.2015 in respect of the above property and the accused had agreed to sell undivided share in the converted landed property to the extent of 5 guntas in several lands situated at Venkatala Village in different survey numbers. The accused neither obtained necessary sanction from the concerned authority nor constructed the residential apartment building. The accused has started to delay the completion of project.
Crl.Appeal No.1317/2022 4 When the complainant has enquired through his agent with the accused about the development of project, by then the accused has expressed his incapability to complete the project. On 23.10.2017 the complainant had visited the office of accused to take back the entire sale consideration and accordingly the Managing Director of the accused company had issued a cheque bearing No.000787 for Rs.60,00,000/- drawn on HDFC Bank and requested the complainant not to present the cheque till he sends the confirmation through E-mail to him. The accused went on requesting the complainant not to present the cheque because there was no sufficient funds in his account. The accused had also tried to avoid the phone calls of the complainant. On 23.01.2018 the accused has sent a confirmation E-mail to the complainant and informed him to present the cheque bearing No.000787. When the complainant had presented the said cheque for encashment, it came to be dishonoured with an endorsement "REKYC Await Present Again" vide Banker's Memo dated:13.03.2018. When the complainant had re-presented the said cheque for encashment, again it was dishonoured with the same reason. Thereafter the complainant got issued the legal notice dated:21.05.2018 calling upon the accused to pay the cheque amount. The said legal notice was returned unserved with an endorsement "accused's office has closed". The legal notice sent to Crl.Appeal No.1317/2022 5 another address of the accused was duly served on him. Despite service of legal notice, the accused had neither paid the cheque amount nor replied the said notice. Hence, the complainant was constrained to file the complaint under Section 200 of Cr.P.C., against the accused for the offence punishable under Section 138 of N.I.Act.
The learned Addl. C.M.M., Bengaluru after taking cognizance, recorded the sworn statement of the complainant and registered the case as C.C.No.3011/2018 and issued summons to the accused. On appearance of the accused through his counsel, he was enlarged on bail. The plea was recorded and the accused has pleaded not guilty and claimed to be tried. The sworn statement of the complainant was treated as examination in chief of P.W.1 and got marked 9 documents from Exs.P.1 to 9. After closure of the evidence of complainant, the statement of accused was recorded under Section 313 of Cr.P.C. The accused has denied the incriminating evidence against him. The accused himself examined as D.W.1 and got marked 9 documents from Exs.D.1 to 9. After hearing the arguments, the learned Magistrate has convicted the accused for the offence punishable under Section 138 of N.I.Act and sentenced to pay a fine of Rs.57,55,000/- in default he shall undergo simple imprisonment for three months. It is further ordered that out of the fine Crl.Appeal No.1317/2022 6 amount, a sum of Rs.57,50,000/- shall be paid to the complainant as compensation and the remaining balance of Rs.5,000/- shall be defrayed as prosecution expenses to the State.
4. The appellant/accused has preferred this appeal on the following grounds :
It is contended by the appellant that the impugned judgment passed by the trial court is not proper and correct. The entire approach of the learned Magistrate is erroneous and the impugned judgment overlooks the defense taken by the accused company. The learned Magistrate has erred in coming to the conclusion that the accused is guilty of the offence. The learned Magistrate has presumed or incorrectly perceived that the appellant is the Managing Director of the accused company, by misreading the Form No.32, Ex.D.8 through it was clearly stated that the appellant is the Director of the accused company. Thus, the impugned judgment is liable to be set aside. In the absence of any allegations against the appellant/accused, no vicarious liability can be fixed on the appellant, only on the ground that he has signed the cheque (Ex.P.1) not as Managing Director but as a Director. The learned Magistrate has failed to appreciate the fact that the accused company has been resolved under Section 31 of IB Code-2016 vide Ex.D.5 and the management of Crl.Appeal No.1317/2022 7 the said company has been handed over to the Resolution Applicant, Koncept Shelters. Upon passing of the order under Section 31 of IBN Code-2016, Section 32-A of the said Code comes into play, which exonerates the criminal liability of the accused company and its officers, which includes the directors of the company prior to initiation of Insolvency Resolution Process. Hence, the impugned judgment passed by the learned Magistrate is bad in law and cannot sustain under law. The learned Magistrate has failed to consider the fact that the appellant herein has not been arrayed as accused in the complaint. The appellant was only a representative of the accused company in the capacity of its director. To fix the vicarious criminal liability on the directors for the offence committed by the company, it is necessary to array the director as one of the accused along with accused company in view of Section 141 of N.I.Act. The Hon'ble High Court of Karnataka in Circular No.RJ 41/2022, dated:26.05.2022 has made it clear that the company/firm/association of persons to be represented by a natural person, with the designation of its representative. Hence the accused before the trial court was only the company and the director in its individual capacity. Even then the learned Magistrate has convicted the appellant wrongly believing him as the Managing Director of the accused company. The impugned judgment passed by the Crl.Appeal No.1317/2022 8 learned Magistrate is perverse and arbitrary. The learned Magistrate has failed to consider the fact that the appellant never made any transaction with the respondent, whereas the transaction was between Naresh Kumar (now deceased) and the respondent. The then first director (Naresh Kumar, now deceased) had given the presentation of the project in Muscat on 29 th and 30th May 2015. the complainant believing the words of said Naresh Kumar has paid the sale consideration of Rs.60,00,000/- in the account of the accused company on 18.06.2015 when Naresh Kumar was alive. Under such circumstances, the appellant is entitled for acquittal, however the learned Magistrate has convicted the appellant. Hence prayed to allow the appeal by setting aside the impugned judgment and to acquit the accused.
5. The respondent put his appearance through his counsel.
6. The trial court records were secured.
7. Heard.
8. The points raised for consideration are as under:
1. Whether the appellant/accused has made out sufficient grounds to interfere with the impugned Crl.Appeal No.1317/2022 9 judgment and order of sentence passed by the trial court ?
2. What Order?
9. My findings to the above points are:
POINT No.1 : Negative, POINT No.2 : As per final order, for the following:
REASONS
10. POINT No.1:- I have considered the complaint averments along appeal averments, oral and documentary evidence placed before the trial court and the decisions relied by the learned advocate for appellant reported in "Union of India .Vs. M/s.Ruchi Soya Industries Ltd" (Writ Apepal No.2575/2018), "M/s.Nag Leathers Private Limited .Vs. M/s.Dynamic Marketing Partnership, Rep. by its Partners and Another" (Criminal Appeal No.1424/2021) and "Dewan Housing Finance Corporation Limited and Others .Vs. Union of India and Others" (Writ Petition No.3157, 3221 of 2021), (2021) AIR (SC) 1308 (P.Mohan Raj & Others .Vs. M/s.Shjah Brothers Ispat Private Limited). He has also produced the copy of order passed by the Hon'ble LXIX Addl. City Civil & Sessions Judge, Bengaluru in Crl. Appeal No.1343/2022 (Sri Sailesh Kumar .Vs. Sri Virupaxappa X. Janamatti).
Crl.Appeal No.1317/2022 10
11. It is the specific contention of the appellant that the appellant's company has been resolved under Section 31 of IB Code-2016 and the management of the said company has been hand over to the Resolution Applicant, Koncept Shelter. Upon passing of the order under Section 31 of IBN Code-2016, Section 32-A of the said code comes into play, which exonerates the criminal liability of the accused company and its affairs which includes the director of any offence committed by the company prior to initiation of Insolvency Resolution Process (IRP). Further the appellant herein has not been arrayed as accused in the complaint. The appellant was only a representative of the accused in the complaint. The appellant was only a representative of the accused company in the capacity of its director. To file the various criminal liability on the director, for the offence committed by the company, it is necessary to array the director as one of the accused along with accused company in view of Section 141 of N.I.Act. The accused before the trial court was only the company and the director in his individual capacity.
12. In this regard, it is necessary to refer Section 32- A of IBC which reads as under :
Liability for prior offences, etc. 1[32A. Liability for prior offences, etc.--(1) Notwithstanding anything to the contrary Crl.Appeal No.1317/2022 11 contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not--
(a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or
(b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court:
Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled:
Provided further that every person who was a designated partner as defined in clause (j) of Crl.Appeal No.1317/2022 12 section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or an officer who is in default, as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013), or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor's liability has ceased under this sub-section.
(2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not--
(i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or
(ii) a person with regard to whom the relevant investigating authority has, on the basis of Crl.Appeal No.1317/2022 13 material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court.
Explanation.--For the purposes of this sub- section, it is hereby clarified that,--
(i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor;
(ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against whom such an action may be taken under such law as may be applicable.
(3) Subject to the provisions contained in sub- sections (1) and (2), and notwithstanding the immunity given in this section, the corporate debtor and any person who may be required to provide assistance under such law as may be applicable to such corporate debtor or person, shall extend all assistance and co-operation to any authority investigating an offence committed prior to the commencement of the corporate insolvency resolution process.] Crl.Appeal No.1317/2022 14
13. From the plain reading of Section 32-A of IBC, it can be safely said that every person who was designated partner as defined in clause (j) of Section 2 of Limited Liability Partnership Act 2008 or an officer who is in default, as defined in clause 60 of Section 2 of the Companies Act or who was in any manner in charge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of the offence as per the report submitted or complaint filed by the Investigating Authority shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor.
14. Here itself, it is necessary to refer to Ex.D.2, which is a Collateral Agreement dated:20.07.2016 entered into between M/s.Fortuna Urbanscape Pvt. Ltd., represented by its director hereinafter referred as Developer-I in First Part and M/s.Fortuna Urbanscape Pvt. Ltd., represented by its Director Sailesh.S. referred to as Developer-II on the Second Part and Renuka Murthy (complainant) Purchaser/Secured Party on the last part. Also it is necessary to refer to the warranties and covenants of the Collateral Agreement (Ex.D.2), it is evident that the accused Private Limited a company incorporated under Companies Act was represented by Crl.Appeal No.1317/2022 15 its Director Sailesh.S. and the complainant herein. While the said director Sailesh.S. is refer to a Developer-II. It is also stated that the Developer-II is authorised to power to sale, receive the sale consideration and enter the sale agreements/deeds, etc., with respect to the collateral property.
15. Here itself it is necessary to refer to the Warranties and Covenants of the agreement between the Developer and Secured Party (complainant), which reads as under :
1. That the DEVELOPER-II is the owner of the Collateral, free from any adverse lien or encumbrance except this lien described in this Security Agreement.
2. DEVELOPER-II will defend the collateral against all claims of other persons.
3. Developer-II is offering the collateral only as security against the investment made by the secured party in the project known as "FORTUNA LAKE TOWERS" and there shall not be any transfer of ownership interests.
4. DEVELOPER-II will do all such things as secured party at any time or from time to time may reasonably request to establish and maintain a perfected security interest in the collateral.
Crl.Appeal No.1317/2022 16
5. DEVELOPER-II will not transfer or encumber the collateral without the prior written consent of secured party, before the fulfillment of the condition for the release of the collateral.
6. DEVELOPER-II will keep the collateral insured against risk of loss or damage upon such terms as secured party may reasonably require.
7. DEVELOPER-II will keep the collateral free from any adverse lien and in good repair, will not waste or destroy the collateral and will not use the collateral in violation of any law. Secured Party may examine and inspect the Collateral at any reasonable time.
16. From the aforesaid Collateral Security Agreement (Ex.D.2), it can be safely said that the Director Sailesh Kumar is representing the company is not just the Director but it is also in the status of the Developer and he has signed the agreement not just on behalf of the accused company but also as the Developer. In this regard the learned Magistrate has rightly observed that "It is significant to note that on behalf of the developer and accused company, Dw:1 has executed aforesaid Collateral Security agreement in favor of the complainant as per Ex.D.2 in respect of flat at M/S Fortuna Buildcon (India) Private Limited. Original sale agreement Crl.Appeal No.1317/2022 17 was executed by deceased Managing director of the accused company in the year 2015, but, surviving Managing Director has subsequently executed ExD:2 in favor of the complainant herein acknowledging the receipt of sale consideration".
17. Further the learned Magistrate has rightly appreciated that "D.W.1-Sailesh Kumar has executed the collateral Agreement in favor of the complainant herein on 20.07.2016 in connection with same sale transaction. Cross examination of D.W.1 reveals that after initiation of IBC proceeding against the accused company, D.W.1 being sole surviving Managing Director of company had sent an Email to complainant herein on 9.3.2018 instructing him to present that cheque. Therefore, D.W.1 is liable to pay the cheque amount to complainant herein".
18. The learned Magistrate has rightly appreciated that "While recording statement under Section 313 Cr.P.C., accused has deposed that he had given two apartments to complainant herein, however, there is no evidence is placed on record to show that possession of those properties were handed over to the complainant herein.
Crl.Appeal No.1317/2022 18 Moreover, it is an admitted fact that the concerned authority has not sanctioned the approval to start up the construction work of apartment. Such being the case, it is difficult to believe the story of accused that he had handed over two apartments to the complainant herein".
19. In the present case the cheque was returned with an endorsement "REKYC Await Present Again". The said endorsement clearly goes to show that the account was not maintained by furnishing KYC by the Director who had issued a cheque and had asked the complainant to furnish the cheque. In this regard, the learned Magistrate has rightly observed that "In this case, issuance of cheque is not in dispute. The signature of accused found in Ex.P.1(a) is also not in dispute. The execution of sale agreement is admitted by the accused. However, it is specific plea of accused that accused company had sufficient funds to clear the cheque amount as on 09.05.2018, but D.W.1, the Managing Director of company was not aware of suspension of company's account for want of KYC. To Substantiate his contention, D.W.1 has not produced the company's bank statement of account".
Crl.Appeal No.1317/2022 19
20. Further the learned Magistrate has rightly observed that "Admittedly the statutory notice issued by the complainant herein has returned with an endorsement stating addressee left the address. The notice was sent to last known address of the accused company. Statutory notice was also sent to another address of Accused company and it was duly served on it as per Ex.P.7, the postal acknowledgment. So it can be safely a presumed that D.W.1 had knowledge of the contents of notice issued by the complainant after dishonour of cheque. The accused has not at all replied the notice of the complainant".
21. The learned Magistrate has rightly observed that "accused company is not liable to refund the earnest money to complainant because of initiation of proceedings under IBC by the Agreement holders. Said proceeding was initiated in the year 2017 and it is not in dispute. The cheque was issued by D.W.1 even though knowing the fact that proceeding has been initiated against the company in NCLT in the year 2017. Further, it is admitted fact that D.W.1 has sent an Email to complainant herein on 23.01.2018 instructing him to present the cheque in question for encashment. Under these facts Crl.Appeal No.1317/2022 20 and circumstance, D.W.1 is personally liable to pay the amount covered under cheque".
22. The learned Magistrate has rightly observed that "There is no positive evidence placed on record to believe the version of D.W.1 to prove his defence. The material available on record clearly reveals that there was a transaction took place between the parties to the case in respect of an immovable property and D.W.1 has issued Ex.P.1-cheque to complainant towards refund of earnest money".
23. It is the specific contention of the appellant/accused that the said Sailesh Kumar is not made a separate accused, but he is only representing the company which is against which the proceedings of insolvency has been initiated by the NCLT in the year 2017. In this regard it is pertinent to note that admittedly the Director-Sailesh Kumar has sent e-mail to the complainant on 23.01.2018 instructing the complainant to present the cheque in question for encashment. As the prudent man he was expected to inform the complainant about the insolvency proceedings initiated against the company, which he did not do so. But on the contrary he chose to instruct the complainant to present the cheque for encashment, Crl.Appeal No.1317/2022 21 which clearly shows that the intention of Director Sailesh Kumar was to misrepresent the complainant and take benefit of the insolvency proceedings by not holding himself personally liable. Hence one cannot expect the complainant to know about the insolvency proceedings against the company. As such they are chosen to make the company as the accused represented by its Director in good faith.
24. Further as per Section 32-A of IBC though the company cannot be held liable after the commencement of the corporate insolvency resolution, but any director or any related party of the proceedings or a partner or any officer who is in default shall continue to be liable. In the present case, as discussed supra the Director Sailesh Kumar who is representing the company which is facing insolvency proceedings has abetted and conspired in commission of offence by giving a signed cheque on behalf of the company and also by sending an individual e-mail asking the complainant to proceed in presenting the cheque even though he knew that the account was not been properly maintained in the bank.
25. Further the learned Magistrate has rightly observed that "There is no rebuttal evidence to disbelieve the evidence of P.W.1. Hence, the Crl.Appeal No.1317/2022 22 evidence of the complainant has to be believed. The D.W.1 has issued above cheque to complainant, and also he failed to prove that he is not liable to pay the amount to complainant, it indicates that he has failed to rebut the presumption, which is in favour of complainant. The D.W.1 is already on record as Managing Director of accused company and therefore he liable to pay the cheque amount. As appreciated and discussed supra, the complainant has proved by placing convincing evidence to show that accused is due of payment of cheque amount. In view of Section 139 of N.I.Act, it has to be presumed that a cheque is issued in discharge of any debt or other liability. Coming back to the facts in the present case, this court is of the view that D.W.1 did not raise a probable defence.
In the light of the discussion herein above, I am of the considered opinion that the complainant has proved that D.W.1 has committed the offence punishable under Section 138 of Negotiable Instruments Act".
26. The decisions relied by the learned advocate for appellant is not of much help to prove that the Director is not liable to pay the amount on behalf of the company.
Crl.Appeal No.1317/2022 23
27. In view of the discussion supra, it is held that the learned Magistrate has rightly convicted the accused for the offence punishable under Section 138 of N.I.Act. Hence this court is of the considered view that the appellant/accused has not made out grounds to interfere with the impugned judgment passed by the trial court. Accordingly, I answer the Point No.1 in the Negative.
28. POINT No.2 : My finding on this point is as per following :
ORDER The Crl. Appeal filed by the appellant is hereby dismissed.
Consequently, the impugned judgment passed by the learned VI Addl. Judge, Court of Small Causes & Addl. C.M.M., Bengaluru in C.C.No.3011/2018, dated:21.09.2022 stands confirmed. Send back the records to the trial court along with the copy of this judgment. (Dictated to then Stenographer Grade-II directly on computer, corrected, signed and then pronounced by me in the open court on this the 11 th day of March 2026) (RASHMI.M) LXVII Addl.City Civil & Sessions Judge, BENGALURU.
Digitally signed by RASHMI M RASHMI Date:
M 2026.03.11
17:17:54
+0530
Crl.Appeal No.1317/2022
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