Karnataka High Court
Sri Tanoji Rao S/O Nagesh Rao vs Sri M Nagaraj S/O Veerappa on 7 October, 2020
Author: H.B.Prabhakara Sastry
Bench: H.B.Prabhakara Sastry
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF OCTOBER 2020
BEFORE
THE HON'BLE Dr. JUSTICE H.B.PRABHAKARA SASTRY
CRIMINAL APPEAL No.1048 OF 2010
BETWEEN:
Sri. Tanoji Rao
S/o. Nagesh Rao
Now Aged about 44 years,
Occupation: Businessman,
Resident of Sreenivasa Nagar,
Hadadi Road,
Davanagere.
.. Appellant
(By Sri. N. Srinivas, Advocate)
AND:
Sri. M. Nagaraj,
S/o. Veerappa
Occupation: Businessman,
Manju Mudrana, II Main,
P.J. Extension, Near Law College,
Davanagere.
.. Respondent
(By Smt. P.V. Kalpana, Amicus Curiae)
***
This Criminal Appeal is filed under Section 378(4) of
Cr.P.C. praying to set aside the judgment passed by the
Court of the II Additional District and Sessions Judge,
Davangere vide its judgment dated 04-08-2009 in Crl.
Crl. Appeal No.1048/2010
2
Appeal No.162/2007 and confirm the order of conviction
dated 28-11-2007 passed against the respondent/accused in
C.C.No.1297/2005 by the JMFC-II Court, Davanagere,
thereby acquitting the respondent/accused for the offence
punishable under Section 138 of the Negotiable Instruments
Act, 1881.
This Criminal Appeal having been heard through
Physical Hearing/Video Conferencing and reserved for
judgment on 30-09-2020, coming on for pronouncement this
day, the Court delivered the following:
JUDGMENT
In the complaint filed by the present appellant under Section 200 of the Code of Criminal Procedure, 1973, against the present respondent, for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter for brevity referred to as the "N.I.Act"), the learned Judicial Magistrate First Class II at Davanagere (hereinafter for brevity referred to as `Trial Court'), by the judgment dated 28-11-2007, passed in C.C.No.1297/2005, convicted the accused for the said offence and sentenced him to pay a sum of Crl. Appeal No.1048/2010 3 `1,57,500/-, and in default of payment of fine amount, to undergo Simple Imprisonment for six months.
Aggrieved by the same, the accused preferred an appeal before the learned II Additional District and Sessions Judge, Davangere, (hereinafter for brevity referred to as `Sessions Judge's Court'), in Criminal Appeal No.162/2007, which by its judgment dated 04-08-2009, while allowing the appeal and setting aside the judgment passed by the Trial Court, acquitted the accused of the offence punishable under Section 138 of the N.I. Act. Being aggrieved by the same, the complainant/appellant has preferred the present appeal.
2. The summary of the case of the complainant in the Trial Court is that, the accused who was his good friend had availed a hand loan of a sum of `1,50,000/- in the first week of December 2004 to meet his family needs. The accused has agreed to repay the same with interest at the rate of `2% per month within a period of Crl. Appeal No.1048/2010 4 one month. Since the accused failed to repay the loan amount, even at the repeated requests made by him, he issued a cheque No.0412 for a sum of `1,50,000/- drawn on Navodaya Credit Co-operative Society, Davangere and in favour of the complainant.
It is further the case of the complainant that, when he presented the said cheque for its realisation through his banker, the same came dishonoured with the banker's endorsement as "insufficient funds". Thereafter, he got issued a legal notice to the accused, demanding the payment of the cheque amount from him, which demand the accused did not meet. This constrained the complainant to institute a criminal case against the accused for the offence punishable under Section 138 of N.I. Act in the Trial Court.
3. The respondent who was the accused in the Trial Court appeared and contested the matter. In order to prove the guilt of the accused, the complainant Crl. Appeal No.1048/2010 5 examined himself as PW-1 and got marked documents from Exs.P-1 to P-7(a). On behalf of the accused, he himself got examined as DW-1 and got marked documents from Exs.D-1 to D-4.
4. After hearing both side, the Trial Court by its impugned judgment dated 28-11-2007, convicted the accused for the offence punishable under Section 138 of the N.I. Act, however, in the appeal, the Sessions Judge's Court acquitted the accused of the said offence.
5. The Trial Court and the learned Sessions Judge's Court's records were called for and the same are placed before this Court.
6. In view of the fact that the learned counsel for the respondent failed to appear before this Court on several dates of hearing and also considering the fact that this appeal is nearly ten years' old appeal, this Court by its order dated 24-09-2020, appointed learned Crl. Appeal No.1048/2010 6 counsel Smt. P.V. Kalpana, as Amicus Curiae for the respondent.
7. Heard the arguments of learned counsel for the appellant and learned Amicus Curiae for the respondent and perused the materials placed before this Court.
8. For the sake of convenience, the parties would be referred to as per their ranks before the Trial Court.
9. Learned counsel for the appellant/ complainant in his argument submitted that, though the Trial Court had rightly convicted the accused for the alleged offence, but the Sessions Judge's Court, making an observation that the cheque at Ex.P-1 was not a cheque and the drawee is not a Member and further holding that the complainant had no capacity to lend the money, has reversed the finding and thereby acquitted the accused from the alleged offence, which is erroneous.
Contending that a Co-operative Society doing financial and banking activity also comes under Section Crl. Appeal No.1048/2010 7 138 of the N.I. Act, learned counsel relied upon a judgment of the Co-ordinate Bench of this Court in the case of Sri.S. Madhava Reddy Vs. Smt. Mangamma reported in ILR 2016 Kar 5065.
10. Per contra, Smt. P.V. Kalpana, learned Amicus Curiae for the respondent, in her arguments submitted that, though the issuance of an instrument as per Ex.P-1 and its dishonour for the reason of insufficiency of funds is not in dispute, but the drawee Co-operative Society is not a Bank, as such, Section 138 of the N.I. Act is not attracted.
In her support, she relied upon a Division Bench judgment of this Court in the case of Vyavasaya Seva Sahakara Sangha Niyamitha Vs. State of Karnataka reported in ILR 1990 Kar 2080.
11. After hearing both side, the points that arise for my consideration in this appeal are:
[i] Whether the complainant has proved beyond reasonable doubt that the accused has Crl. Appeal No.1048/2010 8 committed an offence punishable under Section 138 of the N.I.Act as alleged in the complaint?
[ii] Whether the judgments under appeal deserve an interference at the hands of this Court?
12. The complainant got himself examined as PW-1, who, in his examination-in-chief in the form of affidavit evidence, has reiterated the contentions taken up by him in his complaint. In his support, he got marked the alleged instrument which is said to be dishonoured and which, according to him, is a 'cheque' at Ex.P-1 and the signature of the accused therein at Ex.P-1(a). The challan counter foil, copy of debit advice and cheque return memo issued by the collecting and clearing Banks were also produced by him at Exs.P-2, P- 3 and P-4 respectively; copy of legal notice and the postal acknowledgment were marked by him at Exs.P-6 and P-7 respectively.
13. The accused got examined himself as DW-1, who in his examination-in-chief in the form of affidavit Crl. Appeal No.1048/2010 9 evidence has taken a contention that, he had never transacted with the complainant and even received hand loan of any sum, much less `1,50,000/- as contended by the complainant. He also denied of he issuing a cheque as per Ex.P-1, however, he took a defence that one Anand was the Manager of the Navodaya Credit Co- operative Society Limited, Davanagere, the complainant was also a Director of the said Credit Co-operative Society and that both Anand and the complainant were relatives. One Ravi Prasad who is his (accused's) brother-in-law and the complainant were friends. Ravi Prasad requested for a hand loan from the complainant of a sum of `20,000/- and at that point of time, the complainant had taken the blank Exhibit - P-1 from him (DW-1) as a guarantee to give the said loan to Ravi Prasad. Later on, the complainant did not arrange for hand loan to Ravi Prasad. The request of the accused to return Ex.P-1 to him was not acceded to by the Crl. Appeal No.1048/2010 10 complainant, who, by filling the said document by himself, presented it for its realisation, which was dis- honoured subsequently. With this, he denied the alleged loan transaction. He also contended that Navodaya Credit Co-operative Society is not a Bank, therefore, there arises no question of bouncing of a cheque.
In his support, he produced and marked a letter dated 06-03-2006, shown to have been written by an Advocate to the Reserve Bank of India, Bengaluru, at Ex.D-1; the reply by Reserve Bank of India dated 09-03-2006 to Ex.D-1 was marked at Ex.D-2; copy of the application dated 17-07-2006 made by one Sri. Madhava Rao M.K. to the Chief Information Officer and the Assistant Registrar of Co-operative Societies, Davanagere under Right to Information Act was marked at Ex.D-3; the reply from the Assistant Registrar of Co- operative Societies to Ex.D-3 was marked at Ex.D-4. Crl. Appeal No.1048/2010 11
14. It is not in dispute that the complainant and the accused were known to each other. Admittedly, the accused has not denied that the alleged cheque at Ex.P- 1 pertains to him and that he is the drawer of the said instrument. It is also not in dispute that the said instrument was sent by the complainant through his banker i.e. Canara Bank to the drawee of the instrument i.e. Navodaya Credit Co-operative Society Limited as evidenced in Exs.P-2 and P-3. But the said instrument came to be dishonoured with the reason of insufficiency of funds which is evident from Ex.P-4. These facts are not in dispute from the accused' side. Further the issuance of notice on behalf of the complainant to the accused as per Ex.P-5 and its service upon accused as per the acknowledgment at Ex.P-6 are also not in dispute. However, the only contention of dispute is, whether Ex.P-1 can be considered as a Crl. Appeal No.1048/2010 12 'cheque' under the N. I. Act and whether Section 138 of the N.I. Act is attracted.
15. Section 6 of the N.I. Act defines 'Cheque' as below:-
"6. "Cheque".- A "Cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
Explanation 1.-For the purposes of this section, the expressions-
(a) "a cheque in the electronic form" means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system;
(b) "a truncated cheque" means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.Crl. Appeal No.1048/2010 13
Explanation II - For the purpose of this section, the expression "clearing house" means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India."
The instrument at Ex.P-1 in its entirety reads as below:-
Date:03/02/05 Pay Tanoji Rao N ....................................................or bearer Rupees.....ONE LAKH, FIFTY THOUSAD ONLY.............................. .................................................................................
Rs.1,50,000/-
NAVODAYA CREDIT CO.OP SOCIETY LTD.
Hadadi Road, Davangere.
A/c No. 047 L.F. 94 Entd.
SB A/c.No.0412
16. The learned Amicus Curiae for the respondent fairly concedes that, to read Ex.P-1 and its look exactly resembles a cheque of any other Bank doing Banking business. She fairly concedes that its contents are that of a Bill of Exchange, however, she disputes that it is drawn on a banker, which means she is disputing that Navodaya Credit Co-operative Society is not a 'banker'.Crl. Appeal No.1048/2010 14
Section 3 of the Negotiable Instruments Act, 1881, defines 'banker' as, "banker" includes any person acting as a 'banker' and any post office savings bank.
The accused by producing Exs.D-1 to D-4 contended that the drawee Institution is not a 'banker', as such, Section 138 of the N.I. Act is not attracted.
17. Ex.D-1 which is a letter written by one H. Chandrashekar said to be an Advocate, to the Reserve Bank of India, seeking clarification as to whether Navodaya Credit Co-operative Society is registered with the Reserve Bank of India as a Banking Institution. The Reserve Bank of India through its reply in Ex.D-2 stated that, "The Navodaya Credit Co- operative Society Ltd." Davanagere is neither registered as a Bank nor it is deemed to be a Bank.
Relying on this, learned Amicus Curiae for the respondent contended that the Navodaya Credit Co- operative Society is not a banker. However, she could Crl. Appeal No.1048/2010 15 not able to submit to the Court as to whether it is mandatory for any Credit Co-operative Society to register with Reserve Bank of India before it entertains an account from its members and issues them the cheque facility. Therefore, merely because Ex.D-2 says that it is not registered with Reserve Bank of India, by that itself, it is difficult to accept that a Credit Co- operative Society registered with the Registrar of Co- operative Societies Act could not issue or entertain cheques.
18. Similarly, the Right to Information application at Ex.D-3 which is also not applied by the accused seeking clarification from the Assistant Registrar of Co- operative Societies, Davanagere, about the Navodaya Credit Co-operative Society, elicited an answer as per Ex.D-4, stating that the said Co-operative Society is registered in their office. However, the query as to whether the said Society can do transactions in cheques Crl. Appeal No.1048/2010 16 and involve in clearing activities, was answered by asking the applicant to approach the concerned authorities. Therefore, Ex.D-3 and Ex.D-4 also would not enure to the benefit of the accused to support his contention that Navodaya Credit Co-operative Society was not permitted to issue the instruments like Ex.P-1 and do financial activities.
19. Learned Amicus Curiae for the respondent also relied upon a judgment of the Division Bench of this Court in the case of Vyavasaya Seva Sahakara Sangha Niyamitha (supra) and drew the attention of this Court at paragraph 8 of the said judgment. The said paragraph is reproduced here below:
"8. It is not possible to accept this contention. The petitioners are not the banking Institutions coming under the purview of the Banking Regulation Act. They are the Co-operative Societies registered under the Act, and as such they are governed by the provisions of the Act passed by the State Legislature. Consequently, the State Government has control over them to the extent the Act permits. Major activities of Crl. Appeal No.1048/2010 17 the petitioners are to finance its member. For the purpose of financing its members, they borrow money from the financing agency and repay the same. Merely because the petitioners - the Co-operative Societies in question - are required to advance loans to its members, they do not cease to be Co- operative Societies governed by the Act nor they can be treated as banking companies. It is also not possible to hold that these activities of the petitioners amount to 'banking' as contemplated under the Banking Regulation Act, 1949, inasmuch as, these Co- operative Societies are not established for the purpose of doing 'banking' as defined under Section 5(b) of the Banking Regulation Act, 1949."
20. In the instant case, it is to be noticed that, the accused, no where stated and established as to under which law, the Navodaya Credit Co-operative Society has been registered. It cannot be ignored that Navodaya Credit Co-operative Society is not a mere Co-operative Society, but it is a Credit Co-operative Society. In the absence of its bye-law and the nature of registration, merely because the Reserve Bank of India has stated that the said Credit Co-operative Society is not Crl. Appeal No.1048/2010 18 registered with it as a Bank, by that itself, it cannot be inferred that the said Society was barred from doing any financial activity.
On the other hand, a judgment of a Co-ordinate Bench of this Court in the case of Upendra Kumar Vs. Don Finance Corporation reported in ILR 2009 Kar 439 draws some attention. In the said case, wherein also, the alleged dishonoured cheque was drawn on a Credit Co-operative Society by name 'Mangala Credit Co- operative Society Limited', Kodialbail, Mangalore, and when a specific contention was taken that, it is not a Banker and not amenable to Section 138 of the N.I. Act, this Court in a detailed order has analysed the definition of a 'Banker' under Section 3 of the N.I. Act and was pleased to hold that the Legislature in its wisdom has enhanced the scope of the term 'Banker' under the N.I. Act. The scope of the term 'Banker' under N.I. Act was beyond the meaning included in the Banking Regulation Crl. Appeal No.1048/2010 19 Act, 1949 (hereinafter for brevity referred to as the "B.R. Act"). While defining the word 'Banker', the language employed in the Section is 'includes' which is meant to ensure that not only Bank, Banker or Banking Institutions incorporated by the Act of Parliament or under the Banking Regulation Act, X of 1949 are within its ambit, but also to embrace business of banking. When a word is defined to 'include', the definition is inclusive. Therefore, the scope of the word 'Banker' under the N.I. Act is vast and stretches beyond the Banking Regulation Act of 1949.
21. In a similar case of Sri. S. Madhava Reddy (supra), a similar question arose before another Co- ordinate Bench of this Court to decide as to, whether a Credit Co-operative Society carrying on banking business in contravention of Section 22 of the B.R. Act, until action is taken by the RBI can be treated as a 'Banker' for the purpose of Section 3 and Section 138 of Crl. Appeal No.1048/2010 20 the N.I. Act. This Court held that the definition of 'Banker' under the N.I. Act would 'include' a Credit Co- operative Society carrying on banking business in contravention of Section 22 of the Banking Regulation Act, 1949, until action is taken by the RBI by initiating a complaint according to Section 47 of the B.R. Act. It was further observed that, even after a complaint is made under Section 47 of the B.R. Act, the initiation of such complaint will not invalidate the previous transactions and the drawer of a cheque would not be relieved of his obligations under the law.
In the very same case, this Court has further held that the instrument styled as "cheque" drawn by a person on the account held by him in a Credit Co- operative Society carrying on banking business contrary to the provisions of Section 46(4) of the B.R. Act, can be termed as a "cheque" issued on an account held by him with a banker as occurring in Section 138 of the N.I. Act Crl. Appeal No.1048/2010 21 and in case of dishonor of cheque, all the consequences under Section 138 of the N.I Act would follow subject to fulfillment of other conditions. With this, it held that, the initiation of complaint by the Reserve Bank of India in contravention of the provisions of Section 46(4) of the B.R. Act would not enable the drawer of the cheque to plead the invalidity of the cheque drawn by him. With these observations, it held that Section 138 of the N.I. Act would be attracted in such cases.
22. These two judgments clearly apply to the case on hand also. I do not find any reasons to deviate from the said settled position of law. As such, the only contention of the learned counsel for the Amicus Curiae for the respondent that Navodaya Credit Co-operative Society would not fall within the ambit of Section 3 of the N.I. Act and that the instrument at Ex.P-1 cannot be called as a cheque as per Section 6 of the N.I Act and that the said Credit Co-operative Society is not Crl. Appeal No.1048/2010 22 amenable under Section 138 of the N.I. Act, is not acceptable.
23. The defence of the accused that, he had issued a cheque to the complainant to enable his brother-in-law to avail a loan of `20,000/- and the said instrument was a blank instrument and that the same was misused by the complainant, have all become a mere contention without any proof to believe the same. As such, the issuance of cheque in favour of the complainant by the accused as per Ex.P-1, its subsequent dishonour for the reason of insufficiency of funds and service of demand notice from the complainant to the accused, demanding the payment of the cheque amount, have all been not in dispute. Suffice it to say that, the Trial Court had rightly convicted the accused for the alleged guilt, whereas the Court of appeal, without analysing the materials placed before it and without any proper reasoning, itself Crl. Appeal No.1048/2010 23 jumping into a wrong conclusion that, Ex.P-1 is not a cheque and would not fall under the N.I. Act, proceeded to set aside the judgment of the Trial Court.
24. Since now it is found by the above reasoning that, the said impugned judgment of the learned Sessions Judge's Court is erroneous and the finding given by the Trial Court is after proper appreciation of the evidence placed before it, I am of the view that the appeal deserves to be allowed.
25. The quantum of sentence ordered by the Trial Court since being proportionate to the proven guilt of the accused, the same does not warrant any interference by this Court.
Accordingly, I proceed to pass the following:
ORDER [i] The Criminal Appeal is allowed.
[ii]The judgment passed by the learned II Additional District and Sessions Judge, Davangere in Crl. Appeal No.1048/2010 24 Criminal Appeal No.162/2007 dated 04-08-2009, setting aside the judgment of conviction passed by the Court of the Judicial Magistrate First Class-II at Davanagere in C.C.No.1297/2005 dated 28-11-2007, and acquitting the respondent/accused for the offence punishable under Section 138 of N.I.Act, is set aside;
[iii] The judgment of conviction passed by the Court of the Judicial Magistrate First Class-II at Davanagere in C.C.No.1297/2005 dated 28-11-2007 is hereby confirmed.
Registry to transmit a copy of this judgment along with Trial Court and Sessions Judge's Court's records to the concerned Courts without delay.
The Court while acknowledging the service rendered by the learned Amicus Curiae for the accused/respondent - Smt. P.V. Kalpana, recommends honorarium of a sum of not less than `4,000/- to her payable by the Registry.Crl. Appeal No.1048/2010 25
The accused/respondent is entitled to a free copy of this judgment immediately.
Sd/-
JUDGE BMV*