Bangalore District Court
Sri. Vinay.G.R vs Sri.Ashok.M on 5 September, 2022
KABC030131972019
Presented on : 21-02-2019
Registered on : 21-02-2019
Decided on : 05-09-2022
Duration : 3 years, 6 months, 12 days
IN THE COURT OF THE XVIII ADDL.CHIEF
METROPOLITAN MAGISTRATE, BENGALURU CITY
PRESENT: MANJUNATHA M.S. B.A., LL.B.
XVIII ADDL.C.M.M., BANGALORE
DATED : THIS THE 5 th DAY OF SEPTEMBER 2022
Criminal Case No.4388/2019
COMPLAINANT: Sri. Vinay.G.R.
S/o Ramamurthy.B.
Aged about 31 years,
R/at No. 30, Gantiganahalli,
Village, Singanayakanahalli Post,
Yelahanka Hobli,
Bengaluru-560 064 .
(By Sri.B.M.B Advocate)
// Versus //
ACCUSED: 1. Sri.Ashok.M.
S/o Muneeshwarachar.M.N
2.Smt.Neha K.S.
W/o Ashok K.S.
No.1 & 2 are R/at
Plot No.131/2, Behind Power
Grid Corporation,
Singanayakanahalli,
Yelahanaka, Bengaluru-560 064.
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And also at
C/o Sanjeevappa,
Old society Road,
Kodigehalli, Bangalore-560 092.
(By Sri.S.S.C- Advocate)
Offence complained : U/Sec.138 of Negotiable
Instrument Act.
Name of the complaint : Sri.Vinay G.R.
S/o Ramamurthy.B.
Date of commencement
of evidence : 24-10-2019
Date of closing evidence : 28-07-2022
Opinion of the Judge : Accused No.1 found guilty.
Accused No.2 found not guilty.
(MANJUNATHA M.S.)
XVIII A.C.M.M.,BANGALORE
JUDGMENT
The complainant has filed this complaint under section 200 of code of criminal procedure read with section 138 of the Negotiable Instruments Act (in short referred as "N.I. Act") against the accused No.1 and 2 alleging that they have committed the offence punishable under section 138 of NI Act.
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02. The sum and substance of the complainant's case is as follows; The accused No.1 & 2 are engaged in the business of development of lands and sale of residential plots etc., and had entered into a joint development agreement dated 31.1.2013 with Mr.Kandha Swamy and 4 others for the purpose of forming a residential layout. The said land owners agreed to share the sites so formed to the extent of 50% each with the accused No.1 & 2 and have executed a General Power of Attorney dated 31.1.2013 by giving a powers to the accused No. 1 & 2 to do all things incidental to the formation of residential layout etc., and also to sell their share of the sites in the layout so formed in terms of the said joint development agreement.
03. The accused No.1 & 2 represented to the complainant that they are the partners of their firm, they have undertaken the project and developing the said land as per the aforesaid said Joint Development agreement and GPA and they would complete all necessary work i.e., getting lands converted, layout formation, approval etc and that they had started marketing the sites so formed by entering into sale agreement for sale of sites etc.,. The accused 4 Judgment C.C.4388/2019 No.1 & 2 convinced the complainant to purchase three such sites in the layout to be formed by them. The complainant has trusted the representations made by the accused No.1 & 2 and agreed to purchase three sites measuring 30X40 feet each totally 3600 Sq.ft area. The accused No.1 & 2 as the GPA holders of the said land owners have entered in to a registered sale agreement dated 9.11.2016 for total sale consideration of said three sites of Rs.27,86,000/- with the complainant, out of which the complainant has paid Rs.24,51,002/- to the accused No.1 & 2 by way of cash, RTGS and NEFT by availing loan of Rs.22,50,000/-. The accused No.1 & 2 have promised to convey the agreed sites to the complainant within one years from the date of the agreement, but they failed to fulfill their said promise and miserably failed even to make any progress with respect to formation of the intended residential layout as required under the law. The complainant has repeatedly approached the accused No.1 & 2 and requested them to convey the agreed sites, but they expressed their inability to complete the formation of the layout/sites and to execute the sale deed. They have entered into one more registered sale agreement dated 02.04.2018 with the complainant and also made fresh promise 5 Judgment C.C.4388/2019 that they would convey the agreed three sites along with one more additional site as a compensation for delay in performance of earlier sale agreement dated 9.11.2016 or alternatively, if accused No.1 and 2 have failed to execute sale deed for the said four sites within the stipulated time in favour of the complainant they would repay a total sum of Rs.29,50,000/- being the advance amount of Rs.24,51,002/- and further compensation of Rs.5,00,000/-for their such failed to perform the agreed terms of agreement. Accused No.1 & 2 agreed to complete the entire transaction within a strict time frame of six months i.e., before 2.10.2018, failing which they would be liable to pay the agreed compensation and they have issued undated cheque bearing No. 015040 for a sum of Rs.29,50,000/- drawn on their joint Bank account State Bank of Mysore, Rajanakunte Branch, Bangalore in favour of the complainant and instructed him to present the said cheque in case of their failure to fulfill the said promises as per the said sale agreements on or before 2.10.2018. But accused No.1 & 2 have failed to either convey the said four sites or repay the agreed amount of Rs.29,50,000/-. Therefore, the complainant was constrained to issue legal notice dated 12.11.2018 demanding the accused persons to either convey 6 Judgment C.C.4388/2019 of the agreed four sites or repayment of the agreed amount of Rs.29,50,000/- as per the agreement. But they have failed to respond to the said notice and avoided it. Therefore, the complainant was constrained to presented the above said cheque bearing No. 015040 dated 22.11.2018 for Rs.29,50,000/- for encashment through his banker, but the said cheque was dishonored for "Funds Insufficient" on 27-11-2018. Therefore, the complainant has got issued demand notice on 21-12-2018 to the accused No.1 & 2 by demanding the payment of cheque amount. The notice issued to the accused No.1 & 2 to their residential address was duly served and notice issued to the official address was returned "Unserved" on 22.12.2018. Despite of the demand notice the accused No.1 & 2 have not paid the cheque amount and thereby they have committed an offence punishable under section 138 of N I Act.
04. After filing of complaint, this court has taken cognizance of the offence punishable under section 138 of Negotiable Instrument Act, sworn statement of the complainant was recorded. Being satisfied that there are prima-facie materials to proceed against accused, summons was issued. After appearance, the accused No.1 & 2 were enlarged on bail and their plea was recorded as per section 7 Judgment C.C.4388/2019 251 of Cr.P.C. The accused No.1 & 2 have not pleaded guilty and submitted that they have defense to make.
05. As per the direction of Hon'ble supreme court in "Indian Bank Association V/s Union of India and others reported in (2014) 5 SCC 590, the sworn statement of the complainant treated as complainant evidence and complainant has examined himself as PW1 by filing affidavit of chief-examination and got marked Ex.P.1 to 12. The accused No.1 & 2 have filed application under section 145(2) of NI Act for recall of PW1 for the purpose of cross- examination. The said application came to be allowed and defence counsel has fully cross-examined PW1. After completion of complainant's evidence, the statement of accused as contemplated under section 313 of code of criminal procedure was recorded. The accused have denied all the incriminating material appears against them in the complainant's evidence. Thereafter in spite of giving sufficient opportunities the accused No.1 & 2 have not adduced defence evidence. On 28.7.2022 the defence counsel has submitted that there is no defence evidence to make on behalf of accused No.1 & 2. Hence the stage of defence evidence closed and posted case for argument vide order dated 28.07.2022.
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06. Heard the arguments of learned counsel for complainant and accused. I have perused the materials available on record and decisions referred by complainant and accused. The complainant counsel has relied on the decision reported in AIR 2019 SC 1625, Ripudaman Singh Vs.Balakrishna, Crl.P.No.115/2021 unreported judgment of Hon'ble High Court of Karnataka in the case of Balaji Exims Vs D.V.Ramesh and 2008 AIR SCW 5411 D.Purushotama Reddy and V.K.Sateesh. On the other hand the defence counsel has relied on decisions reported (2022) 2 AICLR 745 Kodam Dhanalakshmi Vs State of Telagana, 2021(3) Supreme 612 Alka Khandu Avhad Vs Amar Syamprasad Mishra & anr, (2013) 8 SCC 71 Mrs.Aparna.A. Shah Vs M/s Sheth Developers Pvt Ltd and ors, (2014) 12 SCC 685 M/s Ajeet Seeds Ltd Vs K.Gopala Krishnaiah , (2006) 4 Supreme 540 Vindo Shivappa Vs Nanda Belliappa, 2006 (3) KCCR 1708 Uppinangadi Grampanchayathi.Vs P.Narayana Prabhu, 2006 (2) DCR 723 M/s Shreyas Agro Service Pvt Ltd., Vs Chandra Kumar.S.B. and 2021 (8) Supreme 614 Sunil Todi and Ors Vs State of Gujarath & anrs.
9 Judgment C.C.4388/2019
07. The points that arise for my consideration are as follows;
1. Whether the complainant has proves that the accused No.1 & 2 have issued cheque bearing No.015040 dated 22-11-2018 for Rs.29,50,000/- towards discharge of their liability, which was returned unpaid on presentation for the reason "Funds Insufficient " and despite of notice they have not paid the cheque amount and thereby committed an offence punishable under section 138 of Negotiable Instruments Act?
2. What Order?
08. My answer to the above points is as follows;
Point No.1: In the Affirmative so far as accused No.1 is concerned.
In the Negative so far as accused No.2 is concerned.
Point No.2: As per final order for the following;
REASONS
09. POINT No.1: The Complainant has filed this complaint alleging that the accused No.1 & 2 have committed offence punishable under section 138 of N.I. Act. The complainant has pleads and asserts that, the accused No.1 & 2 have received advance sale consideration amount of Rs. 24,51,002/- from him by 10 Judgment C.C.4388/2019 executing Ex.P9 and 10 agreement of sale and issued undated cheque for Rs.29,50,000/- by undertaking to pay the cheque amount being the advance sale consideration amount and compensation amount in case of their failure to perform their part of contract and subsequently they failed to perform their part of contract despite of the legal notice. Hence the complainant has presented the said cheque for encashment through his banker. The said cheque was returned with an endorsement "Funds Insufficient". Thereafter he got issued demand notice within time stipulated calling upon the accused No.1 & 2 to pay the amount covered under cheque. Despite of notice, the accused No.1 & 2 have not paid the amount within 15 days, which gave raise cause of action to file this complaint.
10. To substantiate his case, the complainant has stepped into witness box and examined as PW.1 and got marked Ex.P-1 to Ex.P-
12. PW1 has reiterated the contents of the complaint in his affidavit evidence about the execution of agreement of sale and receipt of sale consideration amount of Rs.24,51,002/- by the accused No.1 and 2, issuance of cheque in question by the accused persons towards discharge of their liability and its dishonour of cheque for insufficient funds, issuance of legal notice to the accused persons 11 Judgment C.C.4388/2019 calling upon them to pay the cheque amount and their failure to comply the same.
11. In this scenario, let me scrutinize the documents relied by complainant in order to examine the compliance of statutory requirements envisaged under section 138 of N.I. Act. Ex.P.1 is cheque dated 22.11.2018. The said cheque was returned unpaid with an endorsement "Funds Insufficient " as per Ex.P.2 bank endorsement dated 27-11-2018, Ex.P.3 is legal notice dated 20-12- 2018 under which the complainant has demanded the payment of cheque amount, Ex.P.4 are postal receipts, Ex.P.5 & 6 are Unserved Postal covers, Ex.P.7& 8 are Postal track consignment details along with certificate under section 65(B) of Evidence Act , Ex.P.9 & 10 are the Sale agreements and Ex.P.11 & 12 are Two bank statements of complainant. This complaint came to be filed on 18.01.2019. A careful scrutiny of the documents relied by the complainant goes to show that, statutory requirements of section 138 of N.I. Act have been complied with and this complaint is filed within time. The complainant by examining himself as PW1 and by producing aforesaid documents has discharged his initial burden.
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12. The accused No.1 & 2 have specifically denied the issuance of cheque in question for discharge of their liability as alleged in the complaint. On perusal of the tenor of the cross-examination of PW1, it appears that the accused No.1 & 2 have putforth their defence that the complainant has forcibly obtained Ex.P.1 cheque from them in the sub-registrar office and forcibly obtain the signature of accused No.1 in the blank cheque and filled it for unlawful gain and misused the same to file a present case. They also contended that as on the date of issuance of cheque there is no existing of legally recoverable debt or liability. As such section 138 of NI Act is not attracted to the cheque in question. The accused No.2 contended that she is not the signatory of cheque in question as such proceedings under section 138 of NI Act against her is not maintainable. On these ground the defence counsel prays to acquit the accused No.1 and 2.
13. In the back drop of aforesaid rival contentions, this court has given anxious consideration to the material on record and the submissions made by both counsel. At the outset, it is pertinent to state here that during the cross-examination of PW1 the learned counsel for the accused has suggested that the complainant has 13 Judgment C.C.4388/2019 forcibly obtained signature of accused No.1 in a blank cheque and misused the same to file a present case. By suggesting so, the accused No.1 has clearly admitted that the signature found in the disputed cheque belongs to him. Therefore, the complainant has established that the signature found in Ex.P.1 belongs to accused No.1. The Hon'ble Supreme Court in M/S Kalamani Tex and another V/s P. Balasubramanian (2021) 5 SCC 283 has held that the Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these 'reverse onus' clauses become operative, such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. Therefore once the drawer has admitted the issuance of cheque as well as on the signature present therein or it is established that signature in cheque belongs to accused, then the presumption envisaged under section 118 and 139 of NI Act, would operate in favour of the complainant. The said provision lays down a special rule of evidence applicable to negotiable instrument. The presumption is one of law and thereunder court shall presume that the Negotiable instrument was endorsed for consideration. So, also in the absence of contrary evidence on behalf of the accused, the 14 Judgment C.C.4388/2019 presumption under section 118 and 139 of NI Act goes in favour of the complainant. In the present case also as stated above the complainant has established that signature found in Ex.P1 cheque belongs to the accused No.1. As such presumption under section 118 and 139 of NI Act has to be drawn in favour of the complainant. Section 118 reads as here:- "That every negotiable instrument was made or drawn for consideration and that every such instrument when it has been accepted, endorsed, negotiated or transferred was accepted, endorsed, negotiated or transferred for consideration". Further Section 139 of the Negotiable Instruments Act provides for presumption in favour of a holder. It reads as here: - "It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in section 138, for the discharge, in whole or in part, or any debt or other liability." A combined reading of above said sections raises a presumption in favour of the holder of the cheque that he has received the same for discharge in whole or in part of any debt or other liability.
14. No doubt, the said statutory presumption are rebuttable in nature. It is for the accused to place cogent and probable defence to 15 Judgment C.C.4388/2019 rebut the presumption raised in favour of the complainant. To put it other way, the burden lies upon the accused to prove that Ex.P.1 cheque was not issued for discharge of any debt or liability, but it was forcibly obtained by the complainant. It is worth to note that, section 105 of Indian Evidence Act postulates that, the burden is on the accused to establish the fact which is especially within his special knowledge. This provision is exception to the General Rule that the burden of proof is always in the prosecution to establish their case beyond all reasonable doubt. In that view of the matter the burden is on the accused to prove that the complainant has forcibly obtained cheque in question and misused the same to file a false case.
15. To rebut the aforesaid presumptions and to prove their defence, the accused have cross-examined PW1, but they have not chosen to any lead defnce. No documents were got marked on behalf of them. During the cross-examination of complainant, it was suggested to him that he was got executed Ex.P10 agreement of sale from the accused by using political and police power. He denied the said suggestion in clear terms. It was also suggested that he has 16 Judgment C.C.4388/2019 forcibly obtained blank cheque from the accused No.1 and 2 in the Sub-registrar office and forcibly obtained signature of accused No.1 on the said blank cheque and misused the same to file present case and it was also suggested that he has created Ex.P2 bank endorsement for the purpose of this case only. The complainant has denied the said suggestions in clear terms. The complainant has further deposed that accused No.1 and 2 have given Ex.P1 cheque by saying that same is belongs to their joint account. The signature in the Ex.P1 cheque belongs to accused No.1. The accused No.1 has signed the cheque in his presence and the accused no.2 has written his name and amount in the cheque. He denied the suggestion that there is no existing liability on the date of issuance of cheque. He deposed that Ex.P3 notice was not served on accused No.1 and 2. He dose not know whether any documents have been produced to prove that on 20-12-2018 he has issued notice to the accused, however his advocate may knows the same. He denied the suggestions that false case has been filed against the accused No.1 and 2 to have unlawful gain.
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16. It is the specific case of the complainant that the accused No.1 & 2 have represented to the complainant they are the partners of their firm, they have undertaken the project for developing a layout as per Joint Development agreement and GPA and convinced the complainant to purchase three sites in the layout to be formed by them. The complainant trusted the representations made by the accused No.1 & 2 and agreed to purchase three sites measuring 30X40 feet each totally 3600 Sq.ft area. The accused No.1 & 2 as the GPA holders of the said land owners have entered in to a registered sale agreement dated 9.11.2016 for total sale consideration of said three sites of Rs.27,86,000/-, out of which the complainant has paid Rs.24,51,002/- to the accused No.1 & 2 by way of cash, RTGS and NEFT by availing loan of Rs.22,50,000/-. The accused No.1 & 2 promised to convey the agreed sites to the complainant within one years from the date of the agreement, but they failed to fulfill their said promise and miserably failed even to make any progress with respect to formation of the intended residential layout as required under the law. The complainant has repeatedly approached the accused No.1 & 2 and requested them to convey the agreed sites, but they expressed their inability to 18 Judgment C.C.4388/2019 complete the formation of the layout/sites and to execute the sale deed. They have entered into one more registered agreement of sale dated 2.4.2018 with the complainant and made fresh promise that they would convey the agreed three sites along with one more additional as a compensation for the delay in performance of agreement of sale dated 9.11.2016 or alternatively if they failed to execute the sale deed for the said four sites within the stipulated time in favour of the complainant they would repay a total sum of Rs.29,50,000/- being the advance amount of Rs.24,51,002/- and compensation of Rs.5,00,000/-for their such failed to perform the agreed terms of agreement. Accused No.1 & 2 agreed to complete the entire transaction and conclude it in terms of the said sale agreement within a strict time frame of six months i.e., before 2.10.2018, failing which they would be liable to pay the agreed compensation and issued undated cheque bearing No. 015040 for a sum of Rs.29,50,000/- drawn on their joint Bank account State Bank of Mysore, Rajanakunte Branch, Bangalore in favour of the complainant and instructed him to present the said cheque in case of their failure to fulfill the said promises as per the said sale agreements on or before 2.10.2018. But they have failed to fulfill 19 Judgment C.C.4388/2019 their above said promises despite of the legal notice dated 12-11- 2018. Hence the complainant has presented the above said cheque for encashment, but the said cheque was returned unpaid from the bank for reason Funds insufficient in the joint account of the accused No.1 and 2.
17. In order to prove the above said facts the complainant has examined as PW1 and reiterated facts stated in the complaint. In support of his oral testimony he has also produced documentary evidence as per Ex.P1 to 12. Ex.P9 and 10 are the certified copies of the registered agreement of sale dated 09-11-2016 and 02-04-2018 respectively entered into between complainant and accused no.1 and
2. So far as the execution of the agreement of sale dated 09-11-2016 and 02-04-2018 are concerned, during the cross-examination of PW1 the accused has posed suggestion that by using political and police power he has got executed Ex.P10 from the accused No.1 and
2. The complainant has denied the said suggestion. Except said suggestion there is no other materials on record to dispute the due execution of Ex.P9 and 10 agreements. Even the accused persons have not entered witness box to prove said allegation. The sale agreements Ex.P9 and 10 are the registered documents, there shall 20 Judgment C.C.4388/2019 be a presumption that the said agreements were duly executed by the accused No.1 and 2. The accused alleged that the complainant by using political and police influence has got executed Ex.P10 sale agreement from the accused no.1 and 2, but the said allegation has not been proved by them. Under such circumstance there shall be a presumption of the genuineness of the document and the burden to prove the contrary is upon the accused persons. But accused have not established any contrary in respect of Ex.P9 and 10 agreement of sale.
18. The recitals of Ex.P9 and 10 discloses that the complainant has paid Rs.24,50,000/- to the accused No.1 and 2 as advance sale consideration amount by way of cash, RTGS and NEFT. In the Ex.P10 at page No.3, it is specifically mentioned that the complainant has paid Rs.2,51,000/- by way of cash, Rs.19,99,000/- by way of RTGS on 03-11-2016 and Rs.2,00,000/- by way of NEFT on 22-12-2016. The accused No.1 and 2 both have acknowledge the receipt of Rs.24,50,000/- as advance sale consideration in the Ex.P10 agreement of sale by signing the said agreement of sale. The bank statement produced by the complainant marked at Ex.P11 and 12 are also further corroborate the case of complainant regarding 21 Judgment C.C.4388/2019 payment of amount to the accused No.1 and 2 through RTGS and NEFT. Hence the complainant by producing these overwhelming materials has clearly proved that accused No.1 and 2 by executing agreement of sale Ex.P9 and 10 have received advance sale consideration of Rs.24,50,000/-.
19. The recitals of Ex.P10 at page No. 4 discloses that by executing said agreement of sale the accused No.1 and 2 have made fresh promise that they would convey the agreed three sites along with one more additional sites measuring 30x40 feet total 4 sites measuring 4800 Sq.ft as a compensation for the delay of more than one year in performance of earlier sale agreement dated 9.11.2016 within six months and in alternatively, if they failed to execute the sale deed for the said four sites within the stipulated time in favour of the complainant they would repay a total sum of Rs.29,50,000/- being the advance amount of Rs.24,51,002/- and compensation of Rs.5,00,000/-for their such failed to perform the agreed terms of agreement. Accused No.1 & 2 have agreed to complete the entire sale transaction within a time frame of six months i.e., before 2.10.2018, failing which they would be liable to pay the agreed compensation. Further it is specifically mentioned that the accused 22 Judgment C.C.4388/2019 No.1 & 2 have issued undated cheque bearing No. 015040 i.e. cheque in question for a sum of Rs.29,50,000/- drawn on State Bank of Mysore, Rajanakunte Branch, Bangalore in favour of the complainant and undertakes to pay the said cheque amount within one week after expiry expiry of stipulated period of six months in case of their failure to execute the sale deed. Now the accused have contended that the complainant has forcibly obtained the cheque in question in the sub-registrar office. The said contention is totally contrary to the terms of written contract Ex.P10. Except oral say of the accused nothing is on record to prove their contention. They have not chosen to lodge police complaint or stop payment intimation to the back alleging that the complainant has forcibly obtained cheque in question. The absence of any such action clearly shows that the accused have voluntarily issued Ex.P1 cheque to the complainant Therefore the accused have failed to prove that the complainant has forcibly obtained Ex.P1 cheque from their possession. Hence the said defence of the accused appears to be not a probable one.
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20. The learned counsel for the accused has contended that there was no existence of liability as on the date of issuance of cheque in question, as such the penal provision of section 138 of NI Act is not attracted to the Ex.P1 cheque. He argued that in the Ex.P10 it is mentioned that the accused No.1 and 2 have issued undated cheque. That means on the date of execution of Ex.P10 i.e. on 02-04-2018 the cheque in question was issued by the accused, therefore the said date has to be taken as the date of issuance of cheque. On the date of execution of Ex.P10 agreement of sale there was no liability on the accused to pay the cheque amount to the complainant. As on the date of Ex.P.10 sale agreement the accused No.1 and 2 had only liability to perform their part of contract and not otherwise. Hence section 138 of NI Act is not attracted to the cheque in question. He argued that if on the date of the cheque, a liability or debt exists or the amount has become enforceable, section 138 would stand attracted and not otherwise. In support of his submissions the learned counsel for the accused has relied on judgment of Hon'ble Karnataka High Court reported in 2006(3) KCCR 1708 in the case of Uppinangadi Grama Panchayathi Vs P.Narayana Prabhu and 2006 (2) DCR 723 in the case of M/s Shreya Agro Service Pvt Ltd Vs Chandra Kumar 24 Judgment C.C.4388/2019 S.B. 2021(8) Supreme 614 in the case of Sunil Todi and ors. Vs State of Gujarath & anrs.
21. In view of the aforesaid contention, once again I have meticulously gone through the recitals of the Ex.P10 agreement of sale dated 02-04-2018, wherein it is specifically mentioned that in case of failure to execute the sale deed for the said four sites within the stipulated time in favour of the complainant the accused No.1 and 2 would repay a total sum of Rs.29,50,000/- being the advance amount of Rs.24,50,000/- and compensation of Rs.5,00,000/-for their such failed to perform the agreed terms of agreement and issued undated cheque bearing No. 015040 i.e. cheque in question for a sum of Rs.29,50,000/- drawn on State Bank of Mysore, Rajanakunte Branch, Bangalore in favour of the complainant and undertakes to pay the cheque amount within one week after expiry expiry of stipulated period of six months. The said recitals clearly establishes that as a security to due performs of contract on their behalf the accused have issued said undated cheque by undertaking to pay cheque amount of Rs.29,50,000/- which includes the advance amount and compensation in case of failure to perform their part of contract within the stipulated period.
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22. Now the question would arise whether the cheque issued as security would attract section 138 of NI Act. In the judgment of Hon'ble High Court of Karnataka in the case of Uppinangadi Grama panchayathi and M/s Shreya Agro Service referred in supra referred by learned counsel for the accused the Hon'ble High Court of Karnataka has held that to warrant prosecution under section 138 of NI Act it is necessary that the cheque should have been issued in respect of either past or current existence debt or other liability. The cheque issued in respect to future liabilities not in existence as on the date of cheque would not attract prosecution under section 138 of NI Act. In the said judgment the effect of issuance of security cheques has not come before the court for adjudication. In judgment of the Hon'ble Supreme Court in the case of Sunil Todi and ors referred in supra referred by the learned counsel for the accused the Hon'ble Supreme Court by referring all its earlier judgments about the security cheque has held that whether the cheque has been issued as security or not is a matter of trial and power of High courts under section 482 of Cr.P.C. to quash the prosecedings should not be exercises. In this regards it is profitable to refer judgment of Hon'ble Supreme court reported in 2021 SCC 26 Judgment C.C.4388/2019 online SC 1002 in the case of Sripati Singh( Since deceased) Through His Son Gaurav Singh Vs. Sate of Jharkhan and another. In the said Judgment, the Hon'ble Apex court held that "A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfillment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified time frame and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of NI Act would flow. When a cheque is issued and is treated as 'security' towards repayment of an amount with a 27 Judgment C.C.4388/2019 time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security' cannot be presented prior to the loan or the installment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceedings initiated under section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an 'on demand promissory note' and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the 28 Judgment C.C.4388/2019 drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation."
23. If the above said principle is kept in view, as already noted, under the agreement of sale Ex.P10 the accused No.1 and 2 have issued the cheque in question as security for performance of their part of contract and failure to perform their part of contract they undertaken to pay Rs.29,50,000/-. The cheque which was held as security was presented for realization on 27-11-2018, which is after the period agreed for performance of contract under Ex.P10 and despite of notice dated 12-11-2018 they failed to perform their part of contract. Therefore, prima facie the cheque which was taken as security had matured for payment as on the date of presentation of the cheque and the complainant was entitled to present the cheque for encashment as agreed by the accused no.1 and 2 in the Ex.P10 agreement of sale. Admittedly, the said cheque was dishonoured for 29 Judgment C.C.4388/2019 funds insufficient as per Ex.P2 bank endorsement, as such section 138 of NI Act attract to Ex.P1 cheque.
24. The learned counsel for the accused has argued that it is the case of the complainant that the accused have issued undated cheque and he has filled date in the said cheque for presentation. But the writing in the cheque including the date, amount in numerical as well as words and name of the complainant are in same handwritings and ink. That means the complainant himself has filled cheque in question for his convenience. He contended that the complainant during his cross-examination has clearly admitted that he has filled the date in the cheque. As such the said version of the complainant clearly establishes that he has misused blank cheque which was forcibly obtained in the sub- registrar office from the custody of the accused. No doubt the complainant during his cross- examination has deposed that he has wrote the date in the cheque. But he specifically deposed that accused No.1 has signed the cheque and accused No.2 has wrote the name and amount in the cheque. Once it is established that Ex.P1 cheque contained signature of the accused No.1, under such circumstances section 20 of the NI Act gives prima facie authority to the holder of the cheque to make or 30 Judgment C.C.4388/2019 complete it as negotiable instruments, for any specified therein. The person so signing shall be liable upon such instrument. In this point it is appropriate to refer judgment reported in (2019) AIR 16 in Bir Singh Vs Mukesh Kumar, Hon'ble Apex court has held that " A meaningful reading of the provisions of the Negotiable Instruments Act including in particular, section 20, 87 and 139 of makes it amply clear that a person who signs a cheque and makes it once to the payee remain liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is dully signed by the drawer. If the cheque is otherwise valid, the penal provision of section 138 would be attracted". Hence in view of the above proposition of law the contention of the accused that writing in the cheque is not in his hand writing, the complainant has filled the Ex.P.1 cheque for his convenient has no value at all.
25. So far as the service of notice is concerned, the learned counsel for the accused has argued that no notice has been served to the accused No.1 and 2 in compliance of section 138(b) of NI Act. The complainant himself has admitted that Ex.P3 notice has not 31 Judgment C.C.4388/2019 been served on the accused. The complainant also shows his ignorance about issuance of notice to the accused and there is no specific averment in the complaint that the accused have evaded service of notice. Under such circumstance non compliance of section 138(b) of NI Act is fatal to the case of the complainant and liable to be dismissed for want of cause of action to prosecute the accused under section 138 of NI Act. In support of his submission he has referred judgment of Hon'ble Supreme court reported in (2014) 12 SCC 685 and (2006) 6 SCC 456.
26. The learned counsel for the complainant has contended that the complainant has issued demand notice as contemplated under section 138(b) of NI Act to the accused No.1 and 2 on their office address as well as residential address. But the notice sent to the office address was returned unserved as per Ex.P5 and 6, however the notice sent to the residential address was duly served on them as per Ex.P7 and 8 postal Track consignment. I have perused the Ex.P7 and 8 postal Track Consignment, wherein it is mentioned that item delivered. That means notice has been duly served on the accused no.1 and 2. On perusal of Ex.P3 legal notice and Ex.P9 and 10 agreement of sale, it appears that the address of the accused persons 32 Judgment C.C.4388/2019 mentioned in the Ex.P3 legal notice and Ex.P9 and 10 agreement of are one and the same. That means the complainant has sent the notice on the correct address of the accused No.1 and 2 and as per Ex.P7 and 8 postal Track consignment the said notice was duly served to the accused no.1 and 2, which is sufficient compliance of section 138(b) of NI Act. Further more though the accused have disputed the service of notice, but they have not entered into witness box to state their correct address or produced any document such as Adhar card, election ID etc., to show which is their correct address. Therefore the accused have failed to probabalized their defence that no notice has been served on them as contemplated under section 138(b) of NI Act. As such the judgment referred by the learned counsel for the accused are not applicable to the fact of the present case.
27. The next contention of the learned counsel for the accused is that as per the version of the complainant the accused No.2 is not the signatory of the Ex.P1 cheque. As per section 138 of NI Act only drawer of the cheque can be prosecuted for the offence punishable under section 138 of NI Act. In support of his submission he has referred judgment of Hon'ble Apex court in the case of Alka Khandu 33 Judgment C.C.4388/2019 Avhad Vs Amar Syamprasad Mishra & Anr reported in 2021 (3) Supreme 612, Aparna A Shah Vs. Sheth Developers Private Limited and another reported in (2013) 8 SCC 71 and judgment of Telangana High Court reported in 2021 SCC Online TS 1431 in the case of Kodam Danalakshmi Vs. Sate of Telangana.
28. It is the case of the complainant that accused No.1 and 2 have issued cheque in question drawn on their joint account. As such both of them have committed offence punishable under section 138 of NI Act. On perusal of the Ex.P1 cheque, it appears that names of both accused have been printed on the cheque. That means the said cheque has belongs to the joint account of the accused No.1 and 2, but it contained only one signature. The complainant in his cross- examination deposed that accused No.1 alone has signed the said cheque. The defence counsel has suggested the complainant that he has forcibly obtained signature of accused No.1 in the cheque in question. The said suggestion clearly goes to show that accused no.1 has admitted that signature found in Ex.P1 cheque belongs to him. Admittedly, the cheque in question was dishonoured for Funds insufficient as per Ex.P2 bank Endorsement and not for signature differs. Therefore it is clear that signature of accused No.1 found in 34 Judgment C.C.4388/2019 the cheque tally with the specimen signatures of accused No.1 collected while opening the bank account.
29. The main contention of the learned counsel for the accused is that the case against the accused No.2 liable to be dismissed, inasmuch as she is merely a joint account holder and not a signatory to the subject mater of the cheque in question. In this context it is appropriate to extract Section 138 of N.I.Act, which reads as follows: "Section 138 - Dishonour of cheque for insufficiency, etc., of funds in the account - 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 35 Judgment C.C.4388/2019 may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless-
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. As per the mandate given under Section 138 of N.I Act, 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
36 Judgment C.C.4388/2019 account by an agreement made with that bank, such person shall be deemed to have committed an offence. Section 138 of the NI Act does not speak about the joint liability.
30. In Alka Khandu Avhad's case (supra), cited by the learned counsel for the accused, the Hon'ble Apex Court observed as follows: "Para 7: On a fair reading of Section 138 of the NI Act, before a person can be prosecuted, the following conditions are required to be satisfied: i) that the cheque is drawn by a person and on an account maintained by him with a banker; ii) for the 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; and iii) the said cheque 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. Therefore, a person who is the signatory to the cheque and the cheque is drawn by that person on an account maintained by him and the cheque has been issued for the discharge, in whole or in part, of any debt or other liability and the said cheque has been returned by the bank unpaid, 37 Judgment C.C.4388/2019 such person can be said to have committed an offence. Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence Under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque.
31. In Mrs. Aparna A. Shah's case referred in supra, cited by the learned counsel for accused, the Hon'ble Apex Court took the view that under Section 138 of the N.I. Act, it is only the drawer of the cheque who can be prosecuted. In the said case, the husband had drawn the cheque on the account, which was being jointly maintained by him and his wife. The Hon'ble Supreme Court held that in case of issuance of a cheque from joint account, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who has a joint account holder. The Hon'ble Supreme Court observed as follows: "Para 23:
38 Judgment C.C.4388/2019 We also hold that under Section 138 of the N.I. Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who is a joint account holder. The said principle is an exception to Section 141 of the N.I. Act which would have no application in the case on hand. The proceedings filed under Section 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. It cannot be said that the complainant has no remedy against the appellant but certainly not under Section 138. The culpability attached to dishonour of a cheque can, in no case "except in case of Section 141 of the N.I. Act" be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act. Even the High Court has specifically recorded the stand of the appellant that she was not the signatory of the cheque but rejected the contention that the amount was not due and payable by her solely on the ground that the trial is in progress. It is to be noted that only after issuance of process, a person can approach the High Court seeking quashing of the same on various grounds available to him. Accordingly, the 39 Judgment C.C.4388/2019 High Court was clearly wrong in holding that the prayer of the appellant cannot even be considered. Further, the High Court itself has directed the Magistrate to carry out the process of admission/denial of documents. In such circumstances, it cannot be concluded that the trial is in advanced stage."
32. In the instant case, it is evident from the material placed on record and admission of complainant that the accused No.2 is merely a joint account holder and she is not the signatory to the subject matter of cheque in question. On the other hand, it is culled out from the record that though the account relating to the disputed cheque is a joint account, only contained signature of accused No.1. Penal provisions should be construed strictly, but not in a routine/casual manner. The words used in Section 138 of N.I. Act that "such person shall be deemed to have committed an offence"
refers to a person who has drawn the cheque, but not any other person, except the contingencies mentioned under Section 141 of the N.I.Act. The aforesaid judgments has been followed in the judgment of Hon'ble Telangana High court in the judgment referred supra referred by learned counsel for the accused. In view of the aforesaid 40 Judgment C.C.4388/2019 proposition of law, the accused No.2 who is a mere a joint account holder but not a signatory to the Ex.P1 cheque, cannot be prosecuted under Section 138 of N.I.Act and complaint against accused No.2 is liable to dismissed on the said ground as ingredients of section 138 of NI Act not made out against her. However it is made it clear that so far as against accused no.1 is concerned he being the drawer and signatory of the cheque drawn on joint account holder is liable for prosecution under section 138 of NI Act as the complainant has made out all the ingredients of section 138 of NI Act agaisnt him. In Mrs. Aparna A. Shah's case the Hon'ble Apex Court has quashed the proceedings only against the appellant as she is not the signatory of the cheque and permitted to continue the proceedings against the husband of the appellant who is the signatory of the cheque. The said proposition of law is aptly applicable in the present case since the accused No.1 alone is the signatory of the cheque and the complainant has complied all the ingredients so far as accused No.1 is concerned. As stated above the defence taken by accused No.1 is not a probable one. Therefore he has failed to rebut the presumption envisage under section 118 and 139 of NI Act.
41 Judgment C.C.4388/2019
33. From the discussion made supra, it is clear that, the accused No.1 neither taken probable defence nor taken steps to prove the same. To put it other way, the accused No.1 has not taken and proved probable defence to rebut the presumption of law available in favour of the complainant, envisaged under section 118 read with section 139 of N.I. Act. Accordingly, the case of the complainant is acceptable. The complainant has proved that, for discharge of liability accused No.1 has issued Ex.P.1 cheque and he has intentionally not maintained sufficient amount in their joint account to honour the said cheque. Hence, this point No.1 under consideration is answered in the Affirmative so far as accused No.1 is concerned and negative so far as accused No.2 is concerned.
34. POINT NO.2: In view of the reasons stated and discussed above, the complainant has proved the guilt of the accused No.1 punishable under section 138 of N.I. Act. Hon'ble Supreme Court of India in a decision reported in, (2015) 17 SCC 368, in a case of H.Pukhraj Vs. D.Parasmal, observed that, having regard to the length of trial and date of issuance of the cheque, it is necessary to award reasonable interest on the cheque amount along with cost of 42 Judgment C.C.4388/2019 litigation. Further the Hon'ble Apex Court in its recent decision in M/s. Meters & instrument Pvt Ltd. Vs. Kanchana Mehta reported in (2018)1 SCC-560 held at para 18 that "The object of the provision being primarily compensatory, punitive element being mainly with the object of enforcing the compensatory element, compounding at the initial stage has to be encouraged but is not debarred at later stage subject to appropriate compensation as may be found acceptable to the parties or the court. " Therefore, keeping in mind the time when the transaction has taken place and primary object of the provision, this court is of the opinion that, rather than imposing punitive sentence, if sentence of fine is imposed with a direction to compensate the complainant for his monitory loss, by awarding compensation U/Sec.357 of Cr.P.C, would meet the ends of justice. The complainant has paid advance sale consideration amount of Rs.24,50,000/- in the year 2016 with an intention to purchase house sites. But the accused No.1 and 2 have failed to perform their part of contract and failed to refund of advance amount with compensation as agreed in the Ex.P10 agreement of sale. The date of cheque is 22-11-2018. The complainant has spent considerable time and money in prosecuting the case against the 43 Judgment C.C.4388/2019 accused to take back his hard earned money. If the complainant has deposited the said amount in any nationalized bank it would earn good interest. By considering all these aspects, this court is of the opinion that, it is just and proper to imposed fine amount of Rs.,35,80,000/-, which includes interest and cost of litigation, out of which compensation of Rs.35,70,000/- has to be awarded to the complainant U/s 357 Cr.P.C. Accordingly, this court proceeds to pass the following;
ORDER Acting under section 255 (1) of Criminal Procedure Code, accused No.2 is here by acquitted of the offence punishable under section 138 of Negotiable Instrument Act.
Acting under section 255 (2) of Criminal Procedure Code, accused No.1 is here by convicted for the offence punishable under section 138 of Negotiable Instrument Act and he has been sentenced to pay fine of Rs.35,80,000/-(Rupees Thirty Five Lakhs and Eighty Thousand only). In default thereof 44 Judgment C.C.4388/2019 he shall undergo simple imprisonment for the term of 6(Six) months.
Acting under section 357(1) (b) of code of criminal procedure, it is ordered that, Rs.35,70,000/- ( Rupees Thirty Five lakhs and Seventy Thousand only), therefrom shall be paid to the complainant as a compensation, remaining fine amount of Rs.10,000/- (Rupees Ten Thousand only) is defrayed to the state for the expenses incurred in the prosecution.
Bail bond of accused No.2 stand cancelled.
Office is directed to supply free copy of the judgment to the accused No.1.
(Directly dictated to the Stenographer on computer, typed by her, corrected by me and then judgment pronounced in the open court on this the 5th day of September 2022).
(MANJUNATHA M.S.) XVIII A.C.M.M.,BANGALORE ANNEXURE I. List of witnesses on behalf of complainant:
P.W.1:Vinay G.R.
45 Judgment C.C.4388/2019 II. List of documents on behalf of complainant:
Ex.P-1 : Original Cheque.
Ex.P-2 : Bank memo.
Ex.P-3 : Legal notice.
Ex.P-4 : Postal Receipts .
Ex.P-5&6 : Unserved Postal covers
Ex.P-7 & 8 : Postal track consignment details
Ex.P-9&10 : Copies of sale agreement
Ex.P.11& 12 : Two Bank statements.
III. List of witnesses for the accused:Nil
IV. List of documents for accused:Nil
(MANJUNATHA M.S.)
XVIII A.C.M.M.,BANGALORE
Digitally signed
by
MANJUNATHA MANJUNATHA
MS MS
Date: 2022.09.05
17:03:47 +0530
46 Judgment C.C.4388/2019