Bangalore District Court
K. Suryanarayana Raju vs E. Mallick Sait on 16 June, 2020
IN THE COURT OF THE XXVI ADDL.CITY CIVIL
& SESSIONS JUDGE AT MAYO HALL ,
BENGALURU.
(CCH-20)
:Present:
Sri.D.S.VIJAYA KUMAR, B.Sc., LL.B.,
XXVI Addl.City Civil & Sessions Judge, Bengaluru.
Dated: This the 16th day of June, 2020.
Criminal Appeal No.25101/2018
Appellants:- 1. K. Suryanarayana Raju,
S/o. Late K. Narasimha,
Aged about 50 years,
Managing Director,
M/s. Blue Valley Properties Pvt.
Ltd., Blue Valley Celestial,
No.41, Nandidurga Main Road,
Jayamahal Extension,
Bengaluru - 560 046
2. M.C. Indu Mouli,
S/o. M.V. Chandrashekar,
Aged about 49 years,
No.201, II Floor,
Bridge M M Annexe,
K.R. Road, Yediyur,
Bengaluru - 560 070
Director,
M/s. Blue Valley Properties Pvt.
Ltd.,
Blue Valley Celestial,
No.41, Nandidurga Main Road,
Jayamahal Extension,
2 Crl.A.25101/2018
Bengaluru - 560 046
3. M/s. Blue Valley Properties Pvt.
Ltd.,
Blue Valley Celestial,
No.41, Nandidurga Main Road,
Jayamahal Extension,
Bengaluru - 560 046
( By Sri. S.B. Advocate )
V/s.
Respondent:- E. Mallick Sait,
S/o. A.K. Ebrahim Sait,
Aged about 30 years,
Flat No.101, Pearl Castle
Apartment,
Plot No.19, 20 and 21,
Erappa Reddy Layout,
Subbanapalya, Banaswadi,
Bengaluru - 560 043
( By Sri. MGSK Advocate )
JUDGMENT
The accused Nos. 1, 2 and 4/appellants 1 to 3 have preferred this appeal u/s 374(3) of the Cr.P.C. questioning the judgment of conviction and sentence dt.26.05.2018 passed in C.C. No. 26859/2011 by the XV Addl. Small Cause Judge - XXIII ACMM, Mayohall, Bengaluru where under 3 Crl.A.25101/2018 the appellants have been convicted for the offence u/s 138 of N.I. Act by sentencing to pay a fine of Rs.23,10,000/- and in default to under go S.I. for three months and out of the fine amount order is made for payment of Rs. 23,00,000/- as compensation to the complainant/respondent.
2. Brief facts of the complaint leading to the prosecution are as follows :-
During the month of January 2008, accused Nos. 1 and 2 being the Directors and accused No.3 being an authorized signatory of accused No.4 company represented on behalf of the said company to the complainant that they were developing a residential township therein forming residential plots in an area of 45 acres of land comprising of various Survey numbers of Adde Vishwanathapura Village, Hesaraghatta Hobli, Bengaluru Rural District, under the name and 4 Crl.A.25101/2018 style smiley Anandavana, Phase - 3 and that any investment in the the project would yield high return and complainant/respondent if entered into an agreement to buy plots in the said project, he will have an option to sell the plots being constructed back to the accused with assured return on the investment. Believing said representation, complainant agreed to purchase an extent of 10,000 Sq.ft. of land in the form of residential plots in the said township being developed by the accused. An agreement to sell was entered into by the complainant with accused on 23.01.2008. In that connection, in terms of the agreement complainant/respondent paid an aggregate sum of Rs. 55,00,000/- partly by way of cash and partly by way of cheque. As a result of sale negotiations, accused agreed to buy back said 10,000/- Sq.ft. from the complainant at the rate of Rs. 850/- per Sq.ft.
5 Crl.A.25101/2018 Accused passed receipt for having received Rs.55,00,000/-. Later, complainant in exercise of buy back option had asked the accused to buy back the plot and in that connection, accused issued a cheque for Rs.85,00,000/- bearing No.045246, dated 10.12.2008 drawn on Axis Bank, Wheeler's Road, Cox Town, Bengaluru towards the sale consideration to the complainant in respect of said 10,000 Sq.ft. of land which was subject matter of the sale agreement dated 23.01.2008. However, on presentation of the cheque, it was returned unpaid vide memo dated 28.05.2009 for want of funds. Complainant initiated prosecution u/S. 138 of N.I. Act against accused in respect of dishonor of said cheque in PCR No.48227/2009 which was renumbered as C.C.No. 79937/2009 before the Learned XIV ACMM, Bengaluru. During the pendency of said criminal case, at the 6 Crl.A.25101/2018 intervention of the well wishers, complainant and accused entered into a memorandum of understanding by reaching settlement and in terms thereof, accused agreed to pay a sum of Rs. 57,50,000/- to the complainant in full and final settlement. In furtherance of the MOU dated 11.12.2009, accused issued six cheques to the complainant in total for a sum of Rs. 55,00,000/-.
Accused agreed and undertook to repay the balance of Rs. 2,50,000/-. Again when the said cheques were presented, out of six cheques four cheques were cleared and one cheque for Rs.10,00,000/- and another cheque for Rs. 25,00,000/- were dishonored for want of funds. Complainant caused a legal notice dated 02.06.2010 to the accused informing of the dishonor of cheque and called upon to pay the amount of two cheques. Upon receiving the notice, accused by letter dated 10.07.2010 sent 7 Crl.A.25101/2018 reply and in terms thereof paid a sum of Rs.2,00,000/- by way of pay order and again issued six post dated cheques for the balance of Rs.33,00,000/-. Afterwards, however, accused requested the complainant not to present the said cheque and subsequently on different points of time accused paid and cleared an aggregate sum of Rs. 13,00,000/- towards four cheques. Two cheques in total for Rs.20,00,000/- remained unpaid. They were given for a sum of Rs.10,00,000/- each. Complainant presented the said cheque bearing No.073378, dated 20.08.2010 and 077375, dated 25.08.2010, both drawn on Axis Bank Ltd., Cox Town Branch, Bengaluru for Rs. 10,00,000/- each through his Banker namely State Bank of India, Shivajinagar Branch, Bengaluru on 03.12.2010 for encashment. But, the said cheques were returned unpaid with endorsement "insufficient 8 Crl.A.25101/2018 funds" vide Bank memo dated 04.12.2010. Again the complainant caused notice on 11.12.2010 calling upon the accused to make payment of Rs. 20,00,000/- towards the said two cheques within 15 days from the date of receipt of the notice and sent notice through RPAD as well as COP. Notice was duly served on the accused through RPAD. Accused sent reply on 18.12.2010 admitting transactions and all the averments made in the notice sent by the complainant. But, sought extension of time till 31.03.2011 to make payment of balance outstanding amount. Accused Nos. 1 and 2 are the Directors in charge of day to day affairs of Accused No.4 company and accused No.3 is the General Manager and authorized signatory of accused No.4. One of the above cheque was signed by accused No.1 and another by accused No.3. Accused had issued the said cheques 9 Crl.A.25101/2018 towards dishonor of their liability. Having so issued, had failed to maintain sufficient funds for encashment of the same. They failed to pay cheque amount within 15 days of receipt of notice. Therefore, complaint was filed on 13.01.2011 in PCR No. 226/2011.
3. After complaint was filed, Learned ACMM has taken cognizance of the offence u/S. 138 of N.I. Act and recorded the sworn statement and upon finding prima-facie material has issued process to the accused. Thereafter, accused Nos.1 and 2 have appeared and they have been enlarged on bail. Whereas, accused NO.4 company is represented by accused Nos. 1 and 2. Accused No.3 has not appeared and as he could not be secured, case has been split up against him and separate criminal case has been ordered to be registered against him.
10 Crl.A.25101/2018
4. Since accused Nos. 1, 2 and 4 have pleaded not guilty, complainant has examined himself as Pw-1 and got marked Ex.P.1 to 5 documents, on his behalf. Thereafter, accused have been examined u/S. 313 of Cr.Pc. Accused have not adduced defence evidence.
5. After hearing matter, learned Magistrate has found the appellants guilty of the offence u/S. 138 of N.I. Act and convicted of the same by imposing sentence in question.
6. Being aggrieved by the same, on the following grounds appellants have questioned the impugned judgment and order of sentence :-
Judgment passed by the trial court is erroneous and not sustainable either in law or on facts. Judgment and sentence passed by the trial court suffers from vice of lack of application of 11 Crl.A.25101/2018 mind and hence liable to be set aside. Learned Trial Judge failed to consider that accused has already made payment of cheque amount on various dates from 29.09.2004 to 29.02.2016 before the Trial Court and payments were recorded in the order sheet and acknowledged by the complainant. By receiving and accepting the payments by conduct, complainant had accepted the compromise memo dated 19.09.2014 and 29.09.2014, filed by accused. If the complainant/ respondent was not willing to accept the compromise it was incumbent upon him to seek rejection of memo, dated 19.09.2014 and 29.09.2014. But, after receiving the payment in terms of the said memos, complainant continuing to prosecute his case was not acceptable. Trial Judge ought to have dismissed the complaint by holding that complainant has compromised the matter by his conduct. Evidence on record was 12 Crl.A.25101/2018 not appreciated in proper perceptive. As the complainant had pleaded that he had involved in money spinning contract, Trial Court ought to have held the contract to be void and there was no legally recoverable debt. On the said grounds, appellants have sought for setting aside the impugned judgment and sentence, dated 26.05.2018 in C.C. No. 26859/2011 passed by the XXIII ACMM, Bengaluru.
7. Learned counsel for the appellants submitted arguments reiterating the facts of the case and argued that the complainant/ Pw-1 has admitted during his cross-examination that he has received entire amount of Rs.20,00,000/- pertaining to two cheques in question. Accused/ appellants have filed a memo undertaking to pay the cheque amount and accordingly paid entire amount on various dates before the trial court 13 Crl.A.25101/2018 which is evidenced in the order sheet. Yet without taking same into consideration, impugned judgment and sentence is passed by learned Trial Judge and hence it is not sustainable. Learned counsel for the appellants placed reliance on the decision of the Apex Court in the case of Meters and Instruments Private Limited and Another V/s. Kanchan Mehta reported in (2018) 1 Supreme Court cases 560. Ratio of the said decision is summarized in the head note as follows :
"Criminal Appeals No. 1731 of 2017 with Nos. 1732 of 2017 and 1733 of 2017, decided on October 5, 2017 Negotiable Instruments Act, 1881 - Ss. 138, 142 to 147 [as amended by Negotiable Instruments (Amendment & Misc. Provisions) Act, 2002] - Trial proceedings - Object, scheme and procedure contemplated under - How proceedings for offence under S. 138 can be regulated where accused willing to deposit cheque amount
- Offence uner S. 138 primarily in nature of civil wrong and proceedings primarily compensatory in nature - Summary procedure
14 Crl.A.25101/2018 should normally be followed except where exercise of power under second proviso to S.143 considered necessary - Court has jurisdiction under S. 357 (3) CrPC to award suitable compensation with default sentence under S. 64 IPC with further powers of recovery under S. 431 CrPC - Court may close proceedings if accused deposits amount as assessed by it having regard to cheque amount, interest/costs, etc, within stipulated period - Compounding at initial stage and even at later stage acceptable - Certain proceedings can be conducted on-line
- Issuance of summons in terms of S. 144 - Burden, nature and standard of proof and nature of evidence required - Affidavit evidence an be received as evidence at all stages of trial or proceedings - When can accused's appearance before court be exempted - In case trial proceeds, court may explore possibility of settlement and plea bargaining - Criminal Procedure Code, 1973 - Ss.258, 431, 264 and 357(3) - Penal Code, 1860, S.64"
Relying on the above said decision of the Apex Court, learned counsel for the appellant argued that when the appellant had deposited
15 Crl.A.25101/2018 entire cheque amount, Trial Court ought to have closed the proceedings. Thus, it was submitted that the impugned judgment of conviction is not sustainable and prayed for allowing the appeal.
8. Countering the same, learned counsel for the respondent/complainant submitted arguments as well as written submissions contending that the complainant had paid an aggregate sum of Rs. 55,00,000/- to the accused as long back as 23.01.2008. Thereafter, under the buy back option accused had purchased the plot which was subject matter of contract for Rs. 85,00,000/-. In that connection, accused had issued cheques for Rs.85,00,000/- and upon dishonor, Complainant/Respondent had initiated prosecution for the offence u/S. 138 of N.I. Act, during the course of which at the intervention of well wishers settlement was reached and MOU 16 Crl.A.25101/2018 was entered into and accused had agreed to pay Rs. 57,50,000/- towards full and final settlement of the dispute. Then, again they had issued cheques and finally present two cheques remained unpaid and thus, complainant/ respondent's money was stuck with the accused since 2008 and according to the accused repayment was made in 2016. Therefore, litigation expenses and interest on the amount which complainant had paid by believing representation of the accused was required to be taken into consideration. For eight years interest on Rs.20,00,000/-, would far exceed the fine amount imposed in the case. Money had been paid for commercial transaction and therefore, complainant was entitled to reasonable interest. In the light of said facts, judgment passed does not call for any interference. Learned counsel submitted that there was no joint compromise 17 Crl.A.25101/2018 petition filed before lower court and accused had on their own filed memo undertaking to pay amount. As per Sec. 138 and 142 of the N.I. Act , on failure to pay cheque amount within 15 days from the date of service of legal notice upon dishonor of the cheque will result in attracting the offence u/S. 138 of N.I. Act. Therefore, in the absence of complainant conceding for compromise and there being no such joint compromise entered into between parties, Trial Court was justified in proceeding with the case. Accused have not offered anything towards return, expenses and interest on such huge amount for such long period of time. On the said grounds, the learned counsel for respondent/ complainant prayed for dismissing the appeal.
9. The points that arise for my consideration are as under:-
18 Crl.A.25101/2018
1. Whether the trial court should have terminated the proceedings in C.C. No. 26859/2011, in view of payment of Rs. 20,00,000/- which was cheque amount, during course of trial ?
2. Whether the complainant has proved the offence u/s.138 of N.I.Act against the appellants, beyond reasonable doubt?
3. Whether the impugned judgment and sentence suffers from arbitrariness and patent illegality and calls for interference ?
3. What order?
10. My findings to the above points are as under:-
Point No.1 : In the negative Point No.2 : In the affirmative Point No.3 : Order of sentence requires modification.
19 Crl.A.25101/2018 Point No.4 : As per final order for the following:-
REASONS
11. Point Nos.1 to 3:- All these three points are taken together for consideration since the facts are inter connected and it would be convenient for discussion.
There is no challenge in this appeal with respect to compliance of Sec. 138 (a) to (c) and Sec. 142 of N.I. Act, in filing the complaint before the trial court. Even then, I have examined whether there is due compliance of the said provisions. Ex.P.11 and Ex.P.13 are the cheques dated 20.08.2010 and 25.08.2010 issued for Rs.10,00,000/- each. Ex.P.12 and Ex.P.14 are the cheque return memos issued by the Bank to the complainant/respondent on 04.12.2010. Thus, cheques have been presented within the period 20 Crl.A.25101/2018 of their validity but as per the remarks in Ex.P.12 and Ex.P.14 they have been returned unpaid in view of the appellants not maintaining sufficient fund in the account. Therefore, complainant has caused legal notice as per Ex.P.15 on 11.12.2010 i.e., within the prescribed time from the date of intimation to the complainant about the dishonor of cheque. Ex.P.16 to 19 are the postal receipts and Ex.P.20 to 23 are the postal acknowledgments which show that the said legal notice about intimation of dishonour of cheques in question was duly served on the appellants and accused No3 against whom case is split up. Complainant has also sent legal notice through COP as per postal receipt marked at Ex.P. 24. Ex.P. 25 is the reply notice dtd. 18.12.2010 sent by Accused No.3 on behalf of Accused No.4/Appellant No.3 company. Complainant has instituted the complaint on 13.01.2011 and as 21 Crl.A.25101/2018 such, same is also filed within the period of limitation.
12. In Ex.P. 25 reply dtd. 18.12.2010 liability in respect of Ex.P. 11 and 13 cheques is clearly admitted by Accused No.3 on behalf of the company. Admittedly Accused No.3 was the General Manager of 4th Accused Company and Accused Nos.1 and 2 are the Directors. In the reply notice, liability in respect of the cheques is clearly admitted.
13. There is no contention urged anywhere either during the Trial or in the appeal that Accused Nos.1 and 2/ Appellants 1 and 2 who are Directors of the company did not actually participate in issuance of cheques and transaction in question with the complainant.
22 Crl.A.25101/2018
14. Sole contention of the appellants/Accused in the appeal is that during the course of trial of the case before the lower court, they filed a Memo before the court undertaking to pay the cheque amount and thereafter they paid entire amount of Rs. 20,00,000/- in respect of Ex.P.11 and 13 cheques in 20 installments of Rs.1,00,000/- each and the complainant/respondent received entire amount without any demur and hence, by conduct, complainant has accepted the memo filed by the appellants. Therefore, complainant should not have been permitted to continue the prosecution of the complainant but the trial judge failed to take notice of the same and committed error in passing the judgment of conviction. However, as already noted said contention has been opposed by the respondent by contending that the memo which was filed by the accused was not a joint 23 Crl.A.25101/2018 memo and even copy was not served on the complainant and accused having received money in 2008, have not paid any compensation. Transaction was commercial in nature and as per the agreement accused were actually liable to pay Rs. 85,00,000/- to the complainant and accordingly accused had issued cheques for Rs. 85,00,000/- and after dishonor of the same complainant has instituted a private complaint for the offence u/S. 138 of N.I. Act, but during the pendency of the said case, at the intervention of well wishers settlement was reached and thereupon the accused agreed to pay Rs. 57,50,000/- by way of full and final settlement and issued six cheques. But, thereafter failed to pay the amount covered under Ex.P.11 and Ex.P.13 cheques. Thus, it is the contention of the respondent that mere payment of cheque amount in installments without consent from the 24 Crl.A.25101/2018 complainant, and without paying any compensation and cost of the litigation will not exonerate the accused of the offence u/S. 138 of N.I. Act.
15. In order to determine the above said rival contentions, I am of opinion that it is necessary to take into consideration the agreement of sale which is dated 23.01.2008 entered into between complainant and accused. Complainant has produced same as per Ex.P.1. This agreement is not in dispute and on page 5 of the agreement relevant terms can be found which are as follows :
"The second Party has paid to the first party the following amount as under towards advance payment:-
1. Rs.6,00,000/- (Rupees six lakhs only) by way of cheque No.311530 dated 25.01.08 drawn on State Bank of India.
2. Rs.49,00,000/- (Rupees forty nine lakhs only) by cash on 22.01.2008.
25 Crl.A.25101/2018 The second party, the purchasers shall pay a balance amount of Rs.3,25,000/-
(Rupees Three lakhs twenty five thousand only) And additional amount if a corner site is selected, to the first party on or before the date of registration/on completion of development works/on being informed that the plot is ready for registration. The first party is giving an option to the second party as under:-
1. The purchaser can buy a plot of 10000 Sqft land. (OR)
2) Buy back option : The developer/First party hereby offer the buy back option to purchaser/second party, that in case the second party decides to avail the buy back offer made to him by the first party the second party can surrender the site to the first party on completion of all development works and the first party hereby agrees to buy back the plot and make payment to the second party at Rs.850/- per sqft after 9 to 10 months from the date of execution of this Agreement It is agreed upon that the purchaser shall bear the stamp duty, registration charges, legal and incidental expenses for registration".
Above terms of the sale agreement executed by accused in favour of the
complainant shows that accused have received in total Rs. 55,00,000/- from the complainant under the agreement and out of the same Rs.6,00,000/-
26 Crl.A.25101/2018 has been paid by cheque on 25.01.2008 and Rs. 49,00,000/- has been paid by cash on 22.01.2008. So, in the month of January 2008 itself accused have received in total Rs. 55,00,000/- from the complainant. Further, agreement term shows that accused have agreed to sell plot measuring 10,000 sq.ft. to complainant with buy back option. Accused have given the option to the complainant either to purchase the plot or buy back option that accused will buy back the said plot at Rs. 850/- per sq.ft. after 9-10 months from the date of execution of agreement. So the complainant has exercised the option of buy back and the same being obligatory on the part of accused they have issued cheque for Rs.85,00,000/- in compliance of the said terms of the contract. Hence, allegedly liability of the accused was Rs. 85,00,000/-. But, upon earlier cheques issued 27 Crl.A.25101/2018 came to be dishonored, complainant had initiated the prosecution u/S. 138 of N.I. Act, whereafter accused have entered into settlement and agreed to pay Rs. 57,50,000/- as full and final settlement of the claim. Then, accused have issued six cheques, out of the same two cheques in question has remained unpaid and dishonored.
16. Now, coming to the payment by the accused in this case before the trail court, accused has filed a memo dated 19.09.2014 undertaking to pay the cheque amount of Rs. 20,00,000/- in 20 monthly installments of Rs. 1,00,000/- each. Said memo of undertaking dated 19.09.2014 reads as below :
"IN THE HON'BLE SMALL CAUSES COURT MAGISTRATE AT MAYOHALL, BANGALORE (SCH
20) CC No.26859/2011 Between:
E.Mallick Sait : Complainant
28 Crl.A.25101/2018
A n d:
Suryanarayana Raju.K. & Ors. :Ac c u s e d
Memo of Undertaking
The above named Accused No.1 I.e, K.Suryanarayana Raju, S/o Late Narasimha, Aged about 45 years, Managing Director of M/s. Blue Valley Properties Pvt. Ltd., No.41, Nandidurga Road, Jayamahal Extension, Bangalore-560 046 do hereby agree that to pay the bounced Cheque amount of Rs.20,00,000/- (Twenty Lakhs only) to the above said Complainant within Twenty installments, every month as Rs.1,00,000/- (One Lakh only). Because of company now running under the huge loss and lack of insufficient funds.
The Accused No.1 hereby undertaking behalf of Accused No.3 also, because of he was an employee as General Manager, when that cheque was issued. He left the company without notice in the year 2010 itself.
Hence, the Accused No.1 humbly requesting this Hon'ble Court to grant a sufficient of time to close the above said case in the interest of justice and equity. Date : 19.09.2014 For Blue Valley Properties Pvt Ltd.
Sd/-
Place: Bangalore. Managing Director, Accused No.1"
Above memo shows that accused No.1 has undertaken to pay the amount on behalf of himself and company, accused No.3 who was the General Manager of the company. Copy of the same has not been served upon the complainant 29 Crl.A.25101/2018 or his counsel. Even though memo was filed on 19.09.2014, accused have started making payments from 30.09.2014. Details of the payments made by the accused is mentioned at Para No.6 of the appeal memo which are as below :
Sl.No. Date Amount
1. 30.09.2014 Rs.1,00,000/-
2. 30.10.2014 Rs.1,00,000/-
3. 29.11.2014 Rs.1,00,000/-
4. 07.01.2015 Rs.1,00,000/-
5. 30.01.2015 Rs.1,00,000/-
6. 28.02.2015 Rs.1,00,000/-
7. 31.03.2015 Rs.1,00,000/-
8. 30.05.2015 Rs.1,00,000/-
9. 30.05.2015 Rs.1,00,000/-
10. 29.06.2015 Rs.1,00,000/-
11. 29.07.2015 Rs.1,00,000/-
12. 29.08.2015 Rs.1,00,000/-
13. 29.09.2015 Rs.1,00,000/-
14. 30.10.2015 Rs.1,00,000/-
15. 30.11.2015 Rs.1,00,000/-
16. 30.12.2015 Rs.1,00,000/-
17. 30.01.2016 Rs.1,00,000/-
18. 02.03.2016 Rs.1,00,000/-
19. 02.04.2016 Rs.1,00,000/-
20. 29.04.2016 Rs.1,00,000/-
30 Crl.A.25101/2018
17. In the order sheet of the trial court records above payments have been recorded. According to the same, payments have been made in 20 installments but, irregularly. Last payment has been made on 29.04.2016. Trial court has passed order on the memo of the accused on 08.07.2016 i.e., subsequent to the accused made the last payment on 29.04.2016. On 08.07.2016, learned trail judge has deferred consideration of memo on the ground that accused No.3 is still absconding. Thus, by keeping the memo filed by the accused open, the trial court has directed the complainant to take steps against accused No.3. Therefore, trial court has split up the case against accused No.3 by order dated 18.08.2017. After that no order has been passed on the said memo filed by accused. In fact, complainant has filed objections to memo dated 29.04.2016 filed by accused opposing the 31 Crl.A.25101/2018 closure of case and has prayed for continuing prosecution of the accused u/S. 138 of N.I. Act. Accused have actually filed two memos dated 19.09.2014 and 29.09.2014. They have termed it as compromise memo. However, records reveal that complainant is not a party to the said memo which was unilaterally filed by accused. They are joint memos filed by both side parties.
8. Law is well settled that if the accused issues cheque for discharge of legal debt and upon its dishonor fails to pay the cheque amount within 15 days from the date of service of notice about dishonour of the cheque, same will clearly constitute an offence u/S. 138 of N.I. Act. Since in this case issuance of cheques and legally enforceable debt in respect of cheques and dishonor of said cheque and non-payment of cheque amount despite due service of legal notice, intimating the said fact are not in dispute, 32 Crl.A.25101/2018 offence u/S. 138 of N.I. Act is squarely established against the accused persons. Now, the question is whether the trial court should have closed/terminated the proceedings upon the accused paid the cheque amount of Rs.20,00,000/- in installment of Rs. 1,00,000/- each. In this connection decision of the Apex Court in the case of Meters and Instruments Pvt. Ltd., and Another V/s. Kanchan Mehta, which is relied on by the Appellants counsel is note worthy. At Para 18 (i) to (iii) following ratio is laid down in the above case:-
"18. From the above discussion following aspects emerge:-
i) Offence under Section 138 of the Act is primarily a civil wrong. Burden of proof is on accused in view presumption under Section 139 but the standard of such proof is "preponderance of probabilities". The same has to be normally tried summarily as per provisions of summary trial under the Cr.P.C. but with such variation as may be appropriate to proceedings under Chapter XVII of the Act. Thus read, principle of Section 258 Cr.P.C. will apply and the Court can close the proceedings and 33 Crl.A.25101/2018 discharge the accused on satisfaction that the cheque amount with assessed costs and interest is paid and if there is no reason to proceed with the punitive aspect.
ii) 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.
iii) Though compounding requires consent of both parties, even in absence of such consent, the Court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the accused".
Further observation at page-19 of the said decision is also pertinent, which is as below:-
"19. In view of the above, we hold that where the cheque amount with interest and cost as assessed by the Court is paid by a specified date, the Court is entitled to close the proceedings in exercise of its powers under Section 143 of the Act read with Section 258 Cr.P.C. As already observed, normal rule for trial of cases under Chapter XVII of the Act is to follow the summary procedure and summons trial procedure can be followed where sentence exceeding one year may be necessary 34 Crl.A.25101/2018 taking into account the fact that compensation under Section 357(3) Cr.P.C. with sentence of less than one year will not be adequate, having regard to the amount of cheque, conduct of the accused and other circumstances".
19. As per the above proposition laid down and enunciated by the Apex court, object of provision u/s.138 of N.I.Act is primarily compensatory and punative element of the provision is to ensure enforcement of the said compensatory element and compounding of the case has to be encouraged at the initial stage of the case itself. Importantly, mere payment of cheque amount will not be sufficient to seek benefit of compounding by the Accused. As per the observation and ratio discussed in the above decision when the Accused proposes to pay the cheque amount, court will have to assess the interest and cost and pass order directing the Accused to pay the cheque amount with interest 35 Crl.A.25101/2018 and costs. If such amount is paid only then, accused will be entitled to seek compounding of the offence. In fact, in the case of Damodara S.Prabhu Vs. Sayed Babalal.H., reported in 2010(5) SCC 663, Apex Court has laid down guideline about compounding of offence u/s.138 of N.I.Act if Accused makes application for the said purpose, upon entering appearance in the case. At para-21 of the said decision Apex court has held as below:-
"21. With regard to the progression of litigation in cheque bouncing cases, the learned Attorney General has urged this Court to frame guidelines for a graded scheme of imposing costs on parties who unduly delay compounding of the offence. It was submitted that the requirement of deposit of the costs will act as a deterrent for delayed composition, since at present, free and easy compounding of offences at any stage, however belated, gives an incentive to the drawer of the cheque to delay settling the cases for years. An application for compounding made after several years not only results in the system being burdened but the complainant is also
36 Crl.A.25101/2018 deprived of effective justice. In view of this submission, we direct that the following guidelines be followed:-
THE GUIDELINES
(i) In the circumstances, it is proposed as follows:
(a) That directions can be given that the Writ of Summons be suitably modified making it clear to the accused that he could make an application for compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without imposing any costs on the accused.
(b) If the accused does not make an application for compounding as aforesaid, then if an application for compounding is made before the Magistrate at a subsequent stage, compounding can be allowed subject to the condition that the accused will be required to pay 10% of the cheque amount to be deposited as a condition for compounding with the Legal Services Authority, or such authority as the Court deems fit.
(c) Similarly, if the application for compounding is made before the Sessions Court or a High Court in revision or appeal, such compounding may be allowed on the condition that the accused pays 15% of the cheque amount by way of costs.
(d) Finally, if the application for compounding is made before the Supreme Court, the figure would increase to 20% of the cheque amount.
37 Crl.A.25101/2018 Let it also be clarified that any costs imposed in accordance with these guidelines should be deposited with the Legal Services Authority operating at the level of the Court before which compounding takes place. For instance, in case of compounding during the pendency of proceedings before a Magistrate's Court or a Court of Sessions, such costs should be deposited with the District Legal Services Authority. Likewise, costs imposed in connection with composition before the High Court should be deposited with the State Legal Services Authority and those imposed in connection with composition before the Supreme Court should be deposited with the National Legal Services Authority".
20. As per the above ratio Accused after entering appearance, at the first or second hearing of the case, if he intends to make application for compounding file application for the said purpose and if the application is made at the first or second hearing of the case, it is laid down that the court may allow application without imposing any cost on the accused. However, if the application is made at subsequent stage, it is laid down that the 38 Crl.A.25101/2018 accused should be required to pay 10% of the cheque amount to Legal Service Authority or such authority as the court deems fit as a condition for compounding the offence. It is further held that if such application is made in appeal or revision before the before the Sessions Court or High Court such compounding may be allowed on the condition that the accused pays 15% of the cheque amount by way of cost to the Legal Service Authority and in case application is made before Apex Court, same should be 20% of the cheque amount.
21.Complainant has instituted present complaint, before the Trial court on 13.01.2011 and Accused Nos.1 and 2 have entered appearance and have been enlarged on bail on 23.03.2013. Thereafter, number of adjournments have been taken and memo of undertaking to 39 Crl.A.25101/2018 pay the cheque amount in 20 installments of Rs.1.00. each is filed on 10.09.2014 only. After 1½ years of entering appearance in the case Memo of undertaking has been filed by Accused No.1. Then also, Accused No.1 has not come forward to pay entire cheque amount in lump sump, instead he has sought 20 monthly installments to pay cheque amount and then also as per the records accused were not regular in making payment and they have started making payment on 30.09.2014 and paid last installment on 29.04.2016. Accused have taken one year seven months for making payment from first installment to last installment. The Accused have not offered to pay any interest or cost or compensation and not asked the court to determine compensation, interest and cost.
22. In the case of Lafarge Aggregates & Concrete Vs. Sukarsh Azad & another, 40 Crl.A.25101/2018 reported in 2014 (13) SCC 779, facts being that the accused having made application for compounding of the offence u/S. 138 of N.I. Act. Later, when the matter went before High Court wherein quashing of complaint of cheque was sought for, complaint was quashed subject to payment of cheque amount of Rs. 2,50,000/- in that case, and upon preferring challeng to the same, Apex Court considering the compensation and compoundment of the matter modified the order and directed accused to pay double the cheque amount i.e., Rs. 5,00,000/-.
23. From the above proposition it emerges that mere payment of cheque amount in installments cannot entitle the Accused to seek compoundment of the offence. In the present case, accused have filed memo of undertaking to pay cheque amount in 20 installment, they have 41 Crl.A.25101/2018 not filed application by undertaking to deposit the cheque amount forthwith and they have also not paid the cheque amount immediately. They have also not undertaken to pay the cost or compensation and they have not sought the Court to determine the compensation/ interest and cost. Hence, unilateral memo of undertaking filed by the accused is not satisfying the guidelines laid down by the Apex Court for compounding the offence u/S. 138 of N.I. Act, even in the absence of consent from the complainant.
24. Learned trial judge has taken into consideration the admission made by the complainant/pw-1 about the payment made during the course of trail. But, learned trial judge has recorded that complainant has admitted part payment made by accused. At Para 17 of the impugned judgment, learned trail judge has 42 Crl.A.25101/2018 taken into consideration that the accused has received cheque amount in the year 2008 itself and the cheques were issued in the year 2010 itself and taking same into consideration has sentenced the accused to pay a fine of Rs. 23,10,000/- and ordered payment of Rs. 23,00,000/- out of the same as compensation to the complainant. Complainant/Pw-1 during his cross-examination has admitted that during the course of trial, he has received Rs. 20,00,000/-.
25. As it is settled law that even in appeal or revision, court can determine compensation and cost and upon payment of the same offence can be compounded, I am of the opinion that same may be determined in this appeal. Admittedly, from January 2008, accused has received amount from the complainant. Thereafter, during the pendency of this case before the trial court, accused have made first payment of 43 Crl.A.25101/2018 Rs. 1,00,000/- on 13.09.2014. In the case of Bhavani V/s. D.C.Doddarangaiah and another, reported in 2002 Criminal Law Journal 3814, Honorable High Court of Karnataka has held that interest to be awarded should not be less that 18% p.a. apart from the face value of cheque and costs. In fact relying upon the decision of a division bench, above said observation has been made at Para No.8 of the Judgment as below :
"8.. A contention is raised in the revision that it is mandatory on the part of the Magistrate while convicting the accused to impose a punishment of fine which should be twice the amount of cheque. This Court has relied upon the decision reported in II (2000) BC 313=ILR 2000 Kar. 2855 in the case of B. Harikrishna v. Macro Links Pvt. Ltd. and Anr. in support of the said contention. The learned Single Judge while hearing this matter, disagreed with the view taken in the aforesaid decision and therefore referred the matter to the Division Bench. Accordingly, the Division Bench after hearing the parties, has now laid down thus:
44 Crl.A.25101/2018 "It would be almost obligatory on the part of the Trial Court when the case has ended in a conviction to award a compensation that would be commensurated with the legal principles of fair play and this in our view having regard to the provision of Section 117 of the N.I. Act, which should not be less than the face value of the cheque, the interest computed at 18% per annum and the costs that may be computed by the Court. There is a distinct reason why the Legislature has provided for the upper limit of twice the face value of the cheque the reason being that having regard to the loss of interest and the costs involved that if the compensation of the fine were to be limited to the face value of the cheque, it could result in manifest injustice to the aggrieved party and the wrong-doer being benefited. In order to offset this injustice, the Legislature has provided for the upper limit of twice the face value of the cheque and in our considered view no Trial Court would be justified in overlooking this important aspect of the law."
26. Transaction pertaining to this case between complainant and accused has arisen out of contract which is purely commercial in nature. Therefore, interest will have to be calculated at 18% on the cheque amount. As already noted earlier in the above transaction, accused had agreed to buy back the land at the rate of 45 Crl.A.25101/2018 Rs.850/- per sq. feet and in that connection had issued cheque for Rs.85.00 lakhs to the complainant. But, afterwards in the previous complaint filed for dishonour of cheque accused have entered into compromise by agreeing to pay Rs.57,50,000/- as full and final settlement. From the date of Agreement dtd. 23.01.2008 to 30.09.2014 i.e., date of payment of first installment of Rs.1.00 lakh, 6 years 8 months and 7 days has elapsed. If 18% interest is calculated on Rs.20.00 lakhs for the said period, interest would be Rs.24,00,000/-. Even if the interest is calculated from the date of cheque interest till payment of first installment at the rate of 18% per annum would be Rs.14,70,000/-. And Rs.20,00,000/- has been paid by the Accused from 30.09.2014 to 29.04.2016 over a period of one year and seven months. If interest at 18% is calculated for the said period by treating the 46 Crl.A.25101/2018 debt of Rs.20.00 lakhs as payable in EMIs, interest at 18% for the said period 30.09.2014 to 29.04.2016 would be Rs.3,13,383/-. Therefore, if the interest is calculated as above, same for the period from 23.01.2008 to the date of payment of last installment on 29.04.2016, total interest would become Rs.27,13,383/-. However, u/s.138 of NI Act, fine cannot exceed total cheque amount. Hence, interest will have to be restricted, so that total fine amount will not exceed the total cheque amount. The Trial Judge has imposed fine of Rs.23,10,000/-. However, since cheque amount of Rs.20.00 lakhs had been paid during the pendency of the trial, if the said amount of Rs.20.00 lakhs is added to the fine amount of Rs.23,10,000/- imposed by the trial court, same will add upto Rs.43,10,000/- which is exceeding double the cheque amount and hence 47 Crl.A.25101/2018 to that extent the sentence of fine cannot be sustained.
27. Considering the interest part and also litigation cost and misc. expenses complainant would have incurred, I am of opinion that the amount payable for compounding the offence can be fixed at Rs.40,00,000/- which is double the cheque amount. As the accused have already paid Rs.20,00,000/-, they may be directed to pay the balance of Rs.20,00,000/- which covers element of compensation and cost. Further, as per the decision in the case of Damodar S.Prabhu Accused will have to be directed to pay the cost at 10% of the cheque amount to Legal Service Authorities as the memo of undertaking not only being not in accordance with the Apex Court guideline, it has been filed quite belatedly before the Trial Court. As the offence u/s.138 of N.I. Act is actually established against the Accused, I am 48 Crl.A.25101/2018 of opinion that by keeping the above option for compounding, Order of conviction will have to be sustained by modifying the sentence of fine. Now also Accused have not made specific application undertaking to pay the compensation and cost part of the cheque amount. Therefore, Order of conviction will have to be sustained with an alternative order of compounding of offence subject to payment of compensation and cost part of the cheque within the time being fixed for the said purpose.
28. In view of the above discussion, I am of opinion that Memo of undertaking filed by the Accused not being in accordance with the guideline laid down in the above discussed decision of the Apex Court, trial court could not have terminated the proceedings on the bass of the same in which accused have not asked the court to determine the interest and cost and not 49 Crl.A.25101/2018 undertaken to pay the cheque amount including the interest and cost. As the offence u/s.138 of N.I. Act is made out, I am of opinion that except for modification of the fine amount imposed by the learned Trial Judge, impugned judgment of conviction does not call for interference. Learned counsel for appellants has submitted that already a decree in Civil Court is passed in respect of the same cheques. However, it is not the case of appellants that they have paid the decree amount to the respondent. The appellants ought to have sought remedy in the suit u/s.357(5) of Cr.P.C. It is settled law that decree in Civil suit does not come in the way of passing an order u/s.138 of N.I.Act. Consequently, Point No.1 is answered in the negative, Point No.2 is answered in the affirmative and Point No.3 is answered to the effect that order of sentence requires modification.
50 Crl.A.25101/2018
29. Point No.4:-For the above reasons, I proceed to pass the following:
ORDER Criminal appeal filed by the appellants/accused Nos.1, 2 and 4 is hereby decided as hereinafter:-
The impugned judgment of conviction dtd. 26.05.2018 in C.C.No.26859/2011 passed by the Learned XV Addl. Small Causes Judge-XXIII ACMM., Mayo Hall, Bangalore is hereby confirmed.
However, sentence of fine of Rs.23,10,000/- imposed under the said judgment is modified and fine amount is reduced to Rs.20,00,000/- and in default to pay fine amount, it is ordered that 51 Crl.A.25101/2018 the appellant No.1 and 2/Accused Nos.1 and 2 shall undergo simple imprisonment for 6 months each. If fine amount is paid/recovered, it is ordered that a sum of Rs.19,90,000/- be paid out of the same to the respondent/ complainant u/s.357 of Cr.P.C. by way of compensation and appropriate balance amount of Rs.10,000/- to the State Exchequer.
However, in the alternative, it is further ordered that if the accused deposit Rs.20,00,000/-
towards compensation to the complainant and 10% of the
cheque amount I..e, Rs.2,00,000/- towards cost payable to District Legal Service Authority within two 52 Crl.A.25101/2018 months, from today, offence under section 138 of N.I. Act shall stand compounded and accused shall stand acquitted of the said offence.
Send certified copy of this judgment to the Secretary, District Legal Service Authority, Bangalore, within 15 days, for information and needful action.
Send back LCR along with a Certified copy of this judgment to the lower court without delay by not later than 15 days from today.
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(Judgment dictated to the Stenographer, computerized by him and after corrections, signed by me and pronounced on this day of 16th day of June, 2020)
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53 Crl.A.25101/2018 (D.S.VIJAYA KUMAR) XXVI Addl.City Civil & Sessions Judge, Mayohall , Bengaluru.
54 Crl.A.25101/2018