Bangalore District Court
Bengaluru - 560 039 vs Mr. Ganesh Shet on 9 May, 2023
1
KABC0C0143392019
IN THE COURT OF XIV ADDL. CHIEF METROPOLITAN
MAGISTRATE, MAYO HALL, BENGALURU
PRESENT
SRI.OONKAR MURTHY K.M.,
B.Sc., L.L.M.,
XIV Addl. C.M.M., Bengaluru
DATED ON THIS 9 th DAY OF MAY 2023
CASE NO C.C. NO.53846/2019
M/s. Winsid Coatings India Pvt., Ltd.,
Administrative Office at
"INDOCEM HOUSE"
327/5, Next to BHEL Factory,
Mysuru Road,
COMPLAINANT Bengaluru - 560 039
Reptd by Power of Attorney Holder
Mr. Anil Kumar K.R
S/o. K.A. Ramachandra,
Aged about 45 years,
Mob. No.99453 38982
2
Email : [email protected]
[email protected]
(By Sri. Rajeswara P.N - Adv.,)
Shri Guru Raghavendra Traders,
No.1, Taramakki Road,
Gokarna - 581 326
Represented by its Proprietor
ACCUSED Mr. Ganesh Shet
S/o. Venkatesh Shet,
Aged about 45 years
(By Sri. C.N. Srinivas Rao - Adv.,)
OFFENCE U/s.138 of Negotiable Instruments Act
PLEA OF THE
ACCUSED Pleaded not guilty
FINAL ORDER
Accused is convicted
Digitally signed by
ONKARMURTHY K
ONKARMURTHY M
KM Date: 2023.05.09
15:57:36 +0530
(OONKAR MURTHY K.M)
XIV ADDL. C.M.M.,
BENGALURU
3
JUDGMENT
This is a private complaint filed by the complainant against the accused persons under Sec.200 Cr.PC alleging the offense punishable under Section 138 of the Negotiable Instruments Act, 1881.
The brief facts of the complaint are as follows ;
2. The accused being the dealer of complainant company which is manufacturing and trading Paints and other allied materials, had purchased paints and other materials under several invoices. The outstanding due from the accused is Rs.6,36,121.80. Further the accused had entered into agreement for Car scheme under which the accused is required to reach the scheme target of Rs.2 crores in five years and the complainant had given White Audi Q-3 Car to the accused under the agreement. The complainant has paid a sum of Rs.10,92,780/- towards EMIs of the car till January 2019 during which the car was in possession of the accused. Upon failure of the accused to fulfill the terms of the agreement, the accused has returned the car to the complainant in 4 January 2019. Under the agreement, the accused is required to pay EMI which has already been paid by the complainant. Therefore, the accused in all is due for a sum of Rs.17,28,901.80/-. Towards discharge of said liability, the accused has issued two cheques bearing No.609239 dtd.26.12.2018 and No.609240 dtd.05.01.2019 for Rs.5 lakhs each drawn at State Bank of India, Tadri branch, Gokarna, Uttar Kannada. The first cheque was presented twice and is returned dishonoured with endorsement dtd.8.1.2019 and 18.2.2019 respectively for the reason " insufficient funds " and the second cheque was also presented twice which was also returned dishonored with endorsement dtd.06.02.2019 and 11.03.2019 respectively for the reason " insufficient funds " from the complainant's banker i.e., RBL Bank Ltd., Prestige Towers, Residency Road branch, Bengaluru. Thereafter the complainant got issued legal notice dtd.19.03.2019 to the accused calling upon the accused to repay the cheque amount. The said notice was duly served to the accused on 23.03.2019. In spite of it, the accused has neither replied to the notice nor 5 paid the cheque amount. Therefore, the accused has committed the offense punishable under Sec.138 of Negotiable Instruments Act, 1881. Hence, this complaint.
3. On filing of the complaint, cognizance has been taken for the offense punishable under Sec.138 of Negotiable Instruments Act, 1881 and a private complaint was initially registered in PCR. No.52713/2019. Sworn statement of the complainant was recorded. On hearing the complainant and considering the documents on record, summons was issued to the accused by registering the criminal case in C.C. No.53846/2019. Later in response to the summons issued, the accused has appeared before the court through his counsel. The accused has been enlarged on bail. Plea of the accused has been recorded. The accused has pleaded not guilty and claims to be tried for which the matter was posted for trial.
4. The sworn statement of the Power of Attorney holder of complainant which has been recorded as CW.1 is treated as his examination-in-chief in view of the 6 decision of the Hon'ble Apex Court reported in (2014) 5 SCC 590 - Indian Bank Association and others Vs Union of India and others-[W.P. (civil) No.18/2013]. To prove the guilt against the accused, the complainant has relied on the documents marked at Ex.P1 to Ex.P52. Incriminating circumstances in the evidence of the complainant, have been brought to the notice of the accused and his statement under Sec.313 of Cr.PC was recorded. The accused has denied the incriminating circumstances by stating that the cheques issued as a security have been misused by the complainant and there is no dues to be paid by him. The accused has not adduced any defense evidence though opportunity has been provided to him.
5. Further, when the matter was set for cross- examination of CW.1, the counsel for the accused has filed application U/s.91 of Cr.PC seeking production of following documents from the complainant.
a) Statement details of the complainants bank account in RBL Bank Limited A/c.7
No.409000369870, Bangalore from 2016 to 2019.
b) Income Tax Returns of the complainant for the year 2015 -
16, 2016-17, 2017-18, 2018-19, 2019-20, 2020-21, 2021-22, whether the cheque amount receivables by the accused have been declared or not.
c) What is the annual income of the complainant.
d) Details of other two cheques given by the accused as security deposit.
e) The copy of all invoices for the transactions made with the accused.
f) Copy of all the documents for the transactions taken place with the accused till date.
6. In the application, it is stated that the said documents are absolutely required for just decision of the case. On 11.08.2022, this court has made an order directing the complainant to proceed with the cross- examination of CW.1 irrespective of result of the application and accordingly CW.1 has been cross examined.
87. The complainant has filed objections to the said application, stating that Sec.91 of Cr.PC can be invoked only when the documents called for is necessary and desirable for adjudicating the matter. No roving or fishing enquiry can be permitted with the aid of Sec.91 of Cr.PC. The application is as vague as vagueness could be and no proper reasons have been assigned. The case of the complainant will stand or fall on the documents and witnesses relied upon by it. The accused can rebut the presumption based on the documents and witnesses relied upon by the complainant and cannot seek directions for producing the documents. The accused has to furnish the particulars of the documents such as dates, relevancy of the documents and necessary foundation has to be laid to show that the documents are in the custody of the complainant. No such details are forthcoming. Hence, has prayed to dismiss the application.
98. Heard the arguments of counsel for the complainant. The counsel for the accused has filed his written arguments and additional written arguments.
9. The counsel for the complainant has relied on the following Authorities;
i) Uttam Ram Vs Devinder Singh
Hudan & Another - [(2019) 10
SCC 287]
ii) D.K. Chandel Vs Wockhardt Ltd.,
& Another - [(2020) 13 SCC 471]
iii) Bir Singh Vs Mukesh Kumar -
[(2019) 4 SCC 197]
iv) Sampelly Satyanarayana Rao Vs
Indian Renewable Energy
Development Agency Ltd., -
[(2016) 10 SCC 458]
v) Mainuddin Abdul Sattar Shaikh Vs
Vijay D. Salvi - [(2015) 9 SCC
622]
10. The counsel for the accused has relied on the following decisions;
10i) A.C. Narayanan Vs State of Maharashtra & another - [(Crl.
A. No.73 of 2007 (Supreme Court)]
ii) Shibu L.P Vs Neelakantan & Another - [Crl. A. No.1191 of 2008 - dated.21.07.2022 (High Court of Kerala at Ernakulam]
11. Perused the materials on record. The points that arise for my consideration are:-
1) Whether the documents sought for production U/s.91 of Cr.PC are necessary and the desirable for adjudicating the matter?
2) Whether the complainant proves that the accused has issued two cheques bearing No.609239 dtd.26.12.2018 and No.609240 dtd.05.01.2019 for Rs.5 lakhs each drawn at State Bank of India, Tadri branch, Gokarna, Uttar Kannada for discharge of legally recoverable debt and the said cheques were dishonored for the reason "insufficient funds". In spite of issuance of legal notice dated 19.03.2019, accused has failed to repay the loan amount and thereby the accused has committed the offense punishable under Sec.138 of N.I. Act, 1881?11
3) What Order?
12. My findings on the above points are as under;
Point No.1 : In Negative,
Point No.2 : In Affirmative
Point No.3 : As per final order,
for the following.,
REASONS
13. Point No.1: After filing of the application
U/s.91 of Cr.PC , as per the direction of the court the accused has proceeded with the cross examination of CW.1. Thereafter, the complainant has produced the documents sought at Sl. Nos. (a), (e) & (f) of the application at Ex.P14 to P52. The other documents sought at Sl. Nos. (b) & (c) by the accused, in my opinion are not necessary for adjudication of this matter. There are no materials to show that two other cheques were given by the accused as security to the complainant. Therefore without any basis, the documents at at Sl.no.(d) have been sought. Under the circumstances, no grounds have been made out for 12 production of other documents as sought for. Accordingly, I hold Point No.1 in Negative.
14. Point No.2: Mr.Anil Kumar.K.R who is representative of the complainant company has examined himself as CW.1. In his chief-examination, he has reiterated the entire averments of the complaint. Further has produced two original cheques bearing No.609239 dtd.26.12.2018 and No.609240 dtd.05.01.2019 for Rs.5 lakhs each drawn at State Bank of India, Tadri branch, Gokarna, Uttar Kannada at Ex.P1 and P2 respectively. Ex.P3 and P4 are the Bank endorsements dtd.8.1.2019 and 18.2.2019 respectively showing dishonor of the cheque at Ex.P1 for the reason "funds insufficient" . Ex.P5 and P6 are the bank endorsements dtd.6.2.2019 and 11.3.2019 respectively showing dishonor of the cheque at Ex.P2 for the reason "funds insufficient" . Ex.P7 is the Legal notice dtd.19.03.2019 issued by the complainant to the accused demanding payment of the cheque amount. Ex.P8 is the postal receipt showing dispatch of the said 13 legal notice on 19.03.2019. Ex.P9 is the Track Consignment Report showing service of the said notice to the accused on 23.03.2019. These documents show that the complainant has complied all the mandatory requirement of section 138 of N.I.Act.
15. Further Ex.P10 is the General Power of Attorney dtd.06.05.2019 wherein CW.1 has been authorized to prosecute the present matters on behalf of the complainant company. Ex.P11 is the Board Resolution dtd.24.05.2015 authorizing CW.1 to prosecute all the matters on behalf of the Company. Ex.P12 is the Ledger Account Extract from April 2017 to March 2018. Ex.P13 is the Ledger Account Extract from April 2018 to March 2019. Ex.P14 to P32 are the Tax Invoices, Ex.P33 to P42 are the Consignor's receipt showing supply of materials to the accused. Ex.P43 is the Certificate dtd.05.12.2022 issued by the Chartered Accountant in respect of filing of GSTR-1 for the period from July 2017 to June 2018. Ex.P44 is the Agreement for Car Scheme, Ex.P45 to P47 are the bank 14 statement of the complainant showing payment of EMIs by the complainant company towards car purchase. Ex.P48 to P52 are the bank statement of complainant showing payment of money by the accused towards purchase of materials from the complainant. These documents pertains to the transactions with the accused.
Principles:
16. In respect of the proof of the fact that the cheque has been issued for discharge of legally enforceable debt, there is a presumption of law under Sec.139 of Negotiable Instruments Act, 1881 in favour of the holder of the cheque which reads as follows:
Sec.139 - Presumption in favour of holder: it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.
The presumption under Sec.139 of Negotiable Instruments Act is a presumption of law and not the presumption of fact. The presumption has to be raised 15 in all the cases once the factum of issuance of cheque and its dishonour is established. U/s.118(a) of Negotiable Instruments Act, there is a presumption in respect of passing of consideration in favour of the complainant. The onus of proof to rebut the presumption lies on the accused. The accused need not rebut the presumption beyond all reasonable doubt. But the accused has to place sufficient materials to convince the court that his case is more probable when it is compared with the case of the complainant. Accused may adduce direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability. He may also rely upon the averments in the complaint, statutory notice and the circumstantial evidence adduced by the complainant during the trial. Accused need not enter into the witness box to rebut the presumption.
17. In the case on hand the complainant has established the factum of issuance of cheque and its 16 dishonor. Therefore, this court shall raise a presumption that the accused has issued cheque towards discharging the legally enforceable debt. After raising initial presumption it is for this court to consider whether the presumption has been rebutted by bringing in cogent materials on record with reference to the defense raised by the accused.
18. On the basis of the arguments of both the parties, the suggestions made in the cross-examination of CW.1, the defense of the accused can be deduced as follows;
i) Cheque was issued by the accused as a security for the car scheme and the same has been misused by the complainant.
ii) There is no proper authority of CW.1 to prosecute the matter.
iii) CW.1 has no personal knowledge of the transaction.
iv) Agreement for car scheme is deficiently stamped, hence cannot be looked into.
17v) The accused has paid all the dues and there is no existence of legally recoverable debt.
vi) complainant company is making illegal claim from the accused without disclosing GST input credit availed towards purchase of BMW car.
Existence of legally recoverable debt:
19. The counsel for the accused in the cross- examination of CW.1 dtd.11.10.2022 has suggested that the accused has paid all the dues for the materials supplied by the complainant company and there is no balance to be paid. Also has suggested that the cheque issued by the accused as a security during execution of the agreement for car scheme and the same has been misused by the complainant.
20. On the contrary, it is the contention of the complainant that there is an outstanding due Rs.6,36,121.80 towards the purchase of paints and other materials from the accused. Also under the agreement for car scheme, the complainant has paid a sum of Rs.10,92,780/- towards the EMI till January 18 2019 during which the possession of the car was handed over to the complainant by the accused. Therefore, the complainant claims that there is due of Rs.17,28,901.80 from the accused.
21. To substantiate the said dues, CW.1 has produced ledger account extract at Ex.P12 and P13 for the period from April 2017 to March 2019 giving the entire details of the invoices under which the accused has purchased the materials from the complainant. Also has given the detail of payments made by the accused. The payment of 18 EMIs at the rate of Rs.60,710/- per month totally amounting to Rs.10,92,780/- is also shown in the said ledger account extract. After deducting the credits made by the accused, the total balance is shown as Rs.17,28,901.80. To substantiate the said ledger account extract, the complainant has produced tax invoices at Ex.P14 to P32. The said tax invoices is in conformity with the entries in the said ledger account extract. CW.1 has also produced the Certificate dtd.05.12.2022 issued by Chartered 19 Accountant at Ex.P.43 in respect of filing of GSTR-1 for the period from July 2017 to June 2018. The amount of tax shown in the tax invoices at Ex.P14 to P32 corresponds with the entries in the said Certificate produced at Ex.P43. Ex.P33 to P42 are the Consignor's receipt of the VRL Logistics Ltd, showing supply of paints and other materials to the accused firm Shri Gururagavendra Traders. CW.1 has also produced the statement of account issued by Kotak Mahindra Prime Ltd., at Ex.P45 and P46 showing payments of the EMIs towards car finance by M/s.Indocem India Pvt., Ltd. Ex.P47 is the statement of bank account issued by YES Bank pertaining to M/s.Indocem India Pvt., Ltd., showing the transfer of EMIs from its account to Kotak Mahindra Prime Ltd's account. This document shows that the M/s.Indocem India Pvt., Ltd., has paid EMI towards the loan raised in respect of the car bearing Chassis No.WAUZEH8U2HY001420, Engine No.CYL001793 and Registration No.KA-01-MQ-3005 AUDI Q3 TDI PREMIUMPLUS SUNROOF CAR. The accused has not disputed transactions with the 20 complainant. Also has not disputed the execution of the agreement for car scheme. He has also not disputed the car number and other details. Taking possession of the Car under the Car Scheme Agreement is also not disputed by the accused. Under the circumstances, the said documents produced by the complainant clearly show that the complainant through M/s.Indocem India Pvt., Ltd., has paid the EMIs pertaining to the car given to the accused.
22. Furthermore, the original Agreement for Car Scheme is produced at Ex.P44. The relevant portion of the said agreement is extract below for better appreciation;
M/s. WIND COATINGS INDIA PVT LTD termed as the COMPANY manufacturing and distributing Paints from Bangalore. And M/s SHRI GURU RAGHAVENDRA TRADERS termed as DEALER having the paint store in Gokarna in Karnataka have agreed upon the below mentioned terms and conditions towards the CAR SCHEME. SCHEME - AUDI Q-3 TOP END, WHITER COLOUR SCHEME TARGET : Rs.2 Crores.
21TOTAL TARGET - FOR 5 YEARS Rs.2 Crores net sales before vat or GST, averaging 40 lacs per year and 3.5 lacs per month.
COMPANY LIABILITY - EMI Rs.55,000/- PER MONTH FOR 60 MONTHS (Down payment, Insurance and other registration charges and life time road tax borne by the dealer) The difference of EMI shall be paid by the dealer as an advance for every four months, to the company.
SCHEME PERIOD: 01-05-2017 TO 30-04-2022 (FIVE YEARS) ............
9) MONTHLY INSTALLMENT -Borne by -INDOCEM INDIA PVT. LTD., for WINSID COATINGS INDIA PVT LTD.
10)......
11)......
12) In case of non-completion-or any other dispute in payment terms to the scheme given to the dealer or any other non-fulfilling of the terms of the agreement of the scheme by the DEALER, the company will have all the rights to take back the vehicle from the DEALER's possession, & all the EMI shall be repaid to the company with interest without any conditions from the DEALER.
23. The above terms of the agreement disclose that Company liability is EMI of Rs.55,000/- per month for 60 months. The difference of EMI is to be paid by the Dealer as an advance for every four months to the 22 complainant Company. At Sl. No.9 of the agreement, it is clearly stated that monthly installments are to be borne by M/s.Indocem India Pvt., Ltd., for Winsid Coatings India Pvt., Ltd. The documents produced at Ex.P45, P46 and P47 clearly show that all the installments towards car loan have been paid by M/s.Indocem India Pvt., Ltd., to the financier Kotak Mahindra Prime Ltd. At clause 12 of the agreement, it is clearly stated that in case of non-fulfillment of the terms of the agreement by the dealer, the company will have all the rights to take back the vehicle from the dealers possession and all EMI shall be repaid to the complainant with interest without any conditions from the dealer.
24. In the case on hand, there is no specific contention of the accused as to when he has received possession of the vehicle and when he has handed over the possession to the complainant company. Even though it is suggested in the cross-examination of CW.1 that accused has paid all the money due to the 23 complainant company, except oral assertions, nothing has been produced before the court to believe the said version. On the contrary, the complainant has produced all the documents showing purchase of paints and other materials from the complainant by the accused and payment of EMI's by the complainant company by producing the documents at Ex.P12 to P47. Also has produced the bank statements at Ex.P48 to P52 pertaining to the complainant company showing receipt of payments from the accused which synchronizes with the credits shown in the ledger account extract produced at Ex.P12 and P13. Under the circumstances, the case of the complainant showing balance of Rs.6,36,121.80 towards purchase made by the accused and the liability of the accused to pay sum of Rs.10,92,780/- towards EMI paid by the complainant company under the agreement for car scheme cannot be doubted. Therefore, the complainant has clearly shown the existence of legally recoverable debt to the tune of Rs.17,28,901.80. On the contrary, the accused has totally failed to rebut the presumption U/s.118(a) 24 and sec.139 of N.I. Act available to the complainant. Under all the circumstances, the contention of the accused that there is no existence of legally enforceable liability holds no water.
25. In the case of Uttam Ram's case (supra) relied upon by the complainant, the Hon'ble Supreme Court at para 20 has held as follows;
Para 20. The Trial Court and the High Court proceeded as if, the appellant is to prove a debt before civil court wherein, the plaintiff is required to prove his claim on the basis of evidence to be laid in support of his claim for the recovery of the amount due. A dishonour of cheque carries a statutory presumption of consideration. The holder of cheque in due course is required to prove that the cheque was issued by the accused and that when the same presented, it was not honoured. Since there is a statutory presumption of consideration, the burden is on the accused to rebut the presumption that the cheque was issued not for any debt or other liability.
(Emphasis supplied)
26. In the case of D.K. Chandel's case (supra) relied upon by the complainant, the Hon'ble Supreme Court at para 7 has held as follows;
25Para 7. As held by the Trial Court as well as by the High Court that the cheque was issued towards the amount due and payable by the appellant for purchase of pesticides. As rightly observed by the High Court production of the account books/cash book may be relevant in the civil court; but may not be so in the criminal case filed under Section 138 of the N.I. Act. This is because of the presumption raised in favour of the holder of the cheque. In view of the concurrent findings recorded by the Trial Court as well as by the High Court we do not see any ground warranting interference with the conviction of the appellant under Section 138 of the N.I. Act. (Emphasis supplied)
27. In the above precedents it is held that the productions of books of accounts/cash book may be relevant in civil cases but not in criminal cases and the complainant need not prove his claim on the basis of evidence to be laid in support of his claim for the recovery of the amount due as if to prove debt before civil court in view of presumption raised in favour of the holder of the cheque. The burden is on the accused to rebut the presumption that the cheque was issued not for any debt or other liability. However in the case on hand the complainant has produced all relevant documents for showing existing liability. But accused 26 has failed to rebut the presumption of existence of legally recoverable debt available to the complainant U/s. 118(a) and sec.139 of N.I.Act.
Defense - Cheque issued as a security during execution of agreement for car scheme has been misused:
28. In the written arguments, the counsel for the accused has taken up the contention that the cheque was issued by the accused as a security for the car scheme, but the complainant company has misused it and has filed this false case. Except oral assertions and suggestions made in the cross-examination of CW.1, no cogent materials have been produced by the accused to show that the cheque was issued as a security during execution of the said agreement. Even otherwise, for adjudicating whether the cheque issued as a security for some transaction attracts the offense punishable U/s.138 of N.I. Act, I would like to rely upon the decision of Hon'ble Supreme Court in the case of Sripati Sing Vs. State of Jharkhand and another, wherein at para 17 and 18 it is has held as follows;
27Para 17. "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 fulfilment 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 N.I. Act would flow".
Para 18. "When a cheque is issued and is treated as 'security' towards repayment of an amount with a 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 instalment 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 28 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 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".
(Emphasis supplied) In the above precedent, it is clearly held that if a loan is advanced and the borrower agree 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, the cheque which is issued as a 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 dishonored, the consequences contemplated under Section 138 and the 29 other provisions of Negotiable Instruments Act would flow.
29. The Hon'ble Supreme Court in the case of Sampelly Satyanarayana Rao's ( supra), relied upon by the complainant at para 10 has held as follows;
Para 10. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments.The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.
(Emphasis supplied) In the above precedent, it is held that even though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. Once the loan was disbursed and 30 installments have fallen due, dishonour of such cheques would fall under Section 138 of the Act.
30. In the case on hand, the accused has failed to show that he has paid all the money dues to the complainant under the invoices produced at Ex.P14 to P32 and also the installments under the agreement for car scheme. The complainant has clearly shown the existing legally enforceable liability to the tune of Rs.17,28,901.80. Under the circumstances, even though it is to be presumed that the cheque issued is for security under the agreement at Ex.P44, the same would mature for presentation and on dishonor of the said cheques, consequences U/s.138 of N.I. Act would flow. Hence, the contention of the accused that the cheque was issued as a security under the agreement of car scheme and the same has been misused holds no water.
Defense - Agreement of car scheme is deficiently stamped and hence cannot be looked into :
3131. The accused in his written arguments contends that agreement at Ex.P44 is for Rs.2 crores and the same is executed on stamp paper of Rs.200/-. As per Stamp Act, the stamp duty prescribed is Rs.50 paise for the first 100 rupees and Rs.2.50 for next 500 rupees. The said document is deficiently stamped and therefore cannot be looked into. Section 33 of The karnataka Stamp Act reads as follows;
Sec.33. Examination and impounding of instruments;
(1) Every person having by law or consent of parties, authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
(2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him, in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in the State of Karnataka when such instrument was executed or first executed :
1. Adapted by the Karnataka Adaptations of Laws Order, 1973 w.e.f. 1.11.1973.
Provided that,--
32(a) nothing herein contained shall be deemed to require any Magistrate or Judge of a Criminal Court to examine or impound, if he does not think fit so to do, any instrument coming before him in the course of any proceeding other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898;
(b) ......
(3) ......
32. The proviso (a) of Sec.33 clearly excludes the applicability of examining and impounding of any instrument coming before a Magistrate other than the proceedings under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure Code 1898 (The corresponding provisions of Code of Criminal Procedure Code 1973 are Sections 145 to 148 pertaining to disputes in respect of immovable property and Sections 125 to 128 pertaining to maintenance of wives and children).
33. The case on hand, relates to an offense U/s.138 of N.I. Act and do not in any way relates to dispute as to immovable property or a dispute in respect of maintenance of wives and children. Under the circumstances, the contention of the accused that 33 the agreement at Ex.P44 is deficiently stamped and cannot be looked into has no substantiation.
Defense - CW.1 has no proper authority to prosecute the matter :
34. Ex.P11 is the Board Resolution passed by the complainant company in the meeting of Board of Directors held on 24.05.2015 wherein the representative of the complainant/CW.1-Mr. Anil Kumar K.R who is working as Accounts in charge in the Company has been authorized to handle all the matters and to attend court cases etc., on behalf of the company. The said Board Resolution is certified and signed by all the four Directors of the complainant company. CW.1 has also produced General Power of Attorney at Ex.P10 wherein one of the Director - Mr.N. Narayana Prasad has executed the said document authorizing CW.1 to prosecute, to give evidence to execute affidavits, indemnity bond, vakalath etc., in all the matters on behalf of the company. Both these documents clearly disclose that there is a clear authorization from the complainant company in favour of CW.1 for prosecuting 34 this matter and to give evidence on behalf of the complainant company. Under the circumstances, the said contention of the accused cannot be appreciated.
Defense - CW.1 has no personal knowledge of the transaction :
35. The counsel for the accused has argued that the cross-examination of CW.1 clearly show that he do not have knowledge of the transactions between accused and the complainant company and he is incompetent to give evidence. In support of his contentions, the counsel for the accused has relied on the decision of Hon'ble Supreme Court in the case of A.C. Narayanan Vs State of Maharashtra and another (supra), wherein the Hon'ble Supreme Court in para 33, 33.1 to 33.5 has held as follows;
"33. While holding that there is no serious conflict between the decisions in M.M.T.C and Janki Vashdeo Bhojwani, we clarify the position and answer the questions in the following manner:
33.1. Filing of complaint petition under Section 138 of N.I Act through power of attorney is perfectly legal and competent.35
33.2. The Power of Attorney holder can depose and verify on oath before the Court in order to prove the contents of the complaint. However, the power of attorney holder must have witnessed the transaction as an agent of the payee/holder in due course or possess due knowledge regarding the said transactions.
33.3. It is required by the complainant to make specific assertion as to the knowledge of the power of attorney holder in the said transaction explicitly in the complaint and the power of attorney holder who has no knowledge regarding the transactions cannot be examined as a witness in the case.
33.4. In the light of section 145 of N.I Act, it is open to the Magistrate to rely upon the verification in the form of affidavit filed by the complainant in support of the complaint under Section 138 of the N.I Act and the Magistrate is neither mandatorily obliged to call upon the complainant to remain present before the Court, nor to examine the complainant of his witness upon oath for taking the decision whether or not to issue process on the complaint under Section 138 of the N.I. Act.
33.5. The functions under the general power of attorney cannot be delegated to another person without specific clause permitting the same in the power of attorney. Nevertheless, the general power of attorney itself can be cancelled and be given to another person."
(emphasis supplied by me) 36 37 38
36. The counsel for the accused has relied on the decision of Hon'ble High Court of Kerala in the case of Shibu L.P Vs Neelakantan & Another (supra) , wherein in at para 16, it is held as follows;
16......The evidence of PW1 discussed in detail would indicate that PW1 repeatedly given evidence during cross- examination that he had no direct knowledge about the transaction. Therefore, no credence can be given to the evidence of PW1, in the matter of transaction and execution of the cheque. Thus, in the case on hand, the complainant miserably failed to adduce convincing evidence to prove the transaction led to execution of Ex.P2 cheque in this case. ...
37. In A.C. Narayanan's case supra, it is clearly held that the Power of Attorney holder can depose and verify on oath before the Court in order to prove the contents of the complaint. It is also stated that the power of attorney holder must have witnessed the transaction as an agent of the payee/holder in due course or possess due knowledge regarding the said transactions. It is not mandatory that the power of attorney holder must have witnessed the transaction but possessing of due knowledge regarding the said 39 transactions in respect of the proof of contents of the complaint is also sufficient.
4038. In the case on hand, in his chief- examination, CW.1 has clearly stated that he is the Accounts in-charge of the complainant company and he has personal knowledge of the transaction. Same averment is also found in the complaint. Further CW.1 has spoken to the case of the complainant in his chief- examination. No doubt, CW.1 in the cross-examination states that he do not know from how long the complainant company is running, but states that the same is running earlier to his joining to the company. He also states that he do not know personal transactions between the complainant and the accused. Further for omnibus questions such as what are the amount of transactions done by the accused each year, CW.1 states that he knows only the due amount and do not have specific information of it. He clearly states that the accused is due for Rs.17,28,901.80 to the complainant company. For a question whether he can specifically say the amount paid by accused to the complainant, CW.1 states that he has to verify it. He has clearly spoken about the agreement for car scheme.
41Also states that the car was purchased on 30.06.2017 and has been delivered to the accused. Also states that the accused due to his failure to pay dues as voluntarily returned the car to the complainant company during December 2019. Also states that he himself has given information for issuing legal notice to the accused. CW.1 states that he could not remember the facts such as the date of notice, whether he has signed the notice, whether he has signed the Power of Attorney and the name of notary before whom he has sworn.
39. It is quite natural that a common man cannot remember each and every thing in minute details. However CW.1 has produced all relevant documents showing the whole transaction of the complainant with the accused. He has produced all the invoices, bank statements, consignor's receipt and agreement for car scheme along with cheques and other documents to substantiate the claim of the complainant . Also has spoken to the issuance of cheque and its dishonour.
4240. Moreover, the defense of the accused is that he has paid the entire dues. He has not denied the transactions with the complainant company. The burden is upon the accused to prove the said fact. No specific suggestions in respect of the money paid by the accused is made in the cross-examination of CW.1. Under the circumstances, CW.1 is expected to speak only in respect of the transactions under dispute and not to the facts extraneous to the transactions such as from how many years the complainant company was running etc. On consideration of over all evidence of CW.1, it cannot be said that he is not having due knowledge of the transaction. Under the circumstances, the above decisions relied upon by the counsel for the accused are of no help to the said defense of the accused.
Defense - complainant company is making illegal claim from the accused without disclosing GST input credit availed towards purchase of BMW car.
4341. In the additional written arguments filed by the accused, it is contended that the complainant at the time of purchase of BMW Car has claimed GST input credit and he has not revealed said fact before the court. If the car costs approximately Rs.2 crores, the GST input credit will be more than Rs.20 lakhs. The said fact has not been disclosed by the complainant company to make illegal claim from the accused. However in spite of taking such contentions, there is nothing brought on record to show that the complainant company has claimed GST input tax credit. The counsel for complainant has relied on Section 16 (1) and 17 (5) (a) of the Central Goods and Services Tax Act, 2017 which reads as follows;
16. Eligibility and conditions for taking input tax credit 44 (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
(2).....
17. Apportionment of credit and blocked credits (1) ...
(2) ...
(3) ...
(4) ...
(5) Notwithstanding, anything contained in sub-section (1) of Section 16 and sub- section (1) of section 18, input tax credit shall not be available in respect of the following namely:-
(a) motor vehicles and other conveyances except when they are used-
(i) for making the following taxable supplies, namely :-
(A) further supply of such vehicles or conveyances; or 45 (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for transportation of goods;
(b)....
42. Under sec.17(5) (a), the input tax credit shall not be available for the motor vehicles and other conveyances except the vehicles are used for supply of vehicles conveyances, transportation of passengers or imparting training on driving, flying, navigating such vehicles or conveyances and when they are used for transportation of goods. In the case on hand, it is argued by the complainant counsel that AUDI Q-3 being White board car is not eligible input tax credit. The materials on record to show that vehicle is not purchased for the purposes mentioned in Sec.17(5)(a) and therefore is not eligible for input tax credit to the complainant company. Moreover, the said contention itself is extraneous to the dispute and therefore the same is not helpful in any way for the defense of the accused. When the accused has utterly failed to rebut 46 the presumption available to the complainant U/s.118(a) and 139 of N.I. Act, the other contentions put forth by the counsel for the accused do not survive and are devoid of merits.
Conclusion:
43. Under all the circumstances, the complainant has clearly proved that the cheques have been issued by the accused towards discharge of legally recoverable debt and the same have been presented within its life time for encashment and the same were dishonoured for the reason "funds insufficient". The complainant has issued legal notice on 19.3.2019, which is served on 23.3.2019. The complaint is filed on 6.5.2019 which is well within the period of limitation. Therefore, the complainant has proved all the ingredients of Sec.138 of N.I. Act. Also has clearly madeout the existence of legally recoverable debt. On the contrary, the accused has miserably failed to rebut the statutory presumption available U/s.118(a) and 139 of N.I. Act in favour of the complainant. Therefore, the accused is found guilty 47 for the offense punishable U/s.138 of N.I. Act. Accordingly, I hold Point No.2 in Affirmative.
44. Point No.3: The punishment prescribed for the offense U/s.138 of Negotiable Instruments Act is imprisonment for a period which may extend to two years or with fine upto twice the cheque amount. Considering the facts and circumstances of this case, nature, year of the transaction, nature of the instrument involved, cost of litigation and the rate of interest proposed by Hon'ble Supreme Court in 2012 (1) SCC 260 (R.Vijayan Vs Baby), this court is of the considered view that it is just and desirable to impose fine of Rs.14,80,000/- and out of the said amount, it seems to be proper to award a sum of Rs.14,70,000/- as compensation to the complainant as provided U/s.357(1) (b) of Cr.PC and the remaining sum of Rs.10,000/- shall go to the State. In view of the discussions made while answering Point Nos.1 and 2, I proceed to pass the following.., ORDER 48 In exercise of power vested under section 255(2) of Cr.P.C., I hereby convict the accused for the offense punishable under Sec.138 of Negotiable Instruments Act, 1881.
The accused is sentenced to pay fine of Rs.14,80,000/-
(Fourteen Lakhs Eighty Thousand only) for the offense punishable U/s.138 of Negotiable Instruments Act, 1881. In default of payment of fine, the accused shall under go simple imprisonment for a period of six months.
In exercise of powers vested under section 357(1)(b) of Cr.P.C., out of fine amount a sum of Rs.14,70,000/-
(Fourteen Lakhs Seventy Thousand only) is ordered to be paid to the complainant as compensation and the remaining Rs.10,000/- (Ten Thousand only) shall go to the State.
49The bail bond of the accused stands canceled. The cash security deposited by the accused is ordered to be continued till expiry of the appeal period.
Free copy of the judgment shall be supplied to the accused forthwith.
(Dictated to the stenographer, transcribed thereof, computerized and print out taken by him is verified, corrected and then pronounced by me in open court on this the 9th day of May, 2023) Digitally signed by ONKARMURTHY ONKARMURTHY KM KM Date: 2023.05.09 15:57:56 +0530 (OONKAR MURTHY K.M) XIV ADDL. C.M.M., BENGALURU ANNEXURE List of witnesses examined by complainant:
CW.1 : Sri. Anil Kumar K.R List of Documents marked by complainant:
Ex.P1 & P2 : Two Cheques
Ex.P1(a) & 2(a) : Signature of the accused
Ex.P3 to P6 : Bank endorsements
50
Ex.P7 : Legal Notice
Ex.P8 : Postal receipt
Ex.P9 : Track Consignment Report
Ex.P10 : G.P.A dtd.06.05.2019
Ex.P11 : Board Resolution
Ex.P12 & P13 : Ledger Account Extracts
Ex.P14 to P32 : Tax Invoices
Ex.P33 to P42 : VRL Consignor's Receipt
Ex.P43 : Certificate issued by Chartered
Accountant
Ex.P44 : Agreement for car scheme
Ex.P45 to P52 : Statement of Bank accounts
List of Witnesses examined by defence:
NIL List of Documents marked by defence:
NIL Digitally signed by
ONKARMURTHY K
ONKARMURTHY M
KM
Date: 2023.05.09
15:57:45 +0530
(OONKAR MURTHY K.M)
XIV ADDL. C.M.M.,
BENGALURU