Bangalore District Court
The Federal Bank Ltd vs Mr.Ganapthi N Hegde on 6 April, 2017
IN THE COURT OF THE XXVI ADDL.CHIEF
METROPOLITON MAGISTRATE, BANGALORE CITY
Dated this the 6th day of April 2017
:PRESENT:
SMT.SHEILA B.M. M.Com. LL.M.
XXVI Addl.C.M.M., Bangalore City.
JUDGMENT U/S 355 OF Cr.P.C
Case No. : C.C No.9471/ 2014
Complainant : The Federal Bank Ltd.
Incorporated under the Companies
Act, with
its Head Office at Federal Towers,
Aluva,, Ernkulam,
Kerala, and having its
Asset Recovery Branch at
No.4, 2nd Cross, CSI Compound,
Mission Road,
Bangalore - 560 027
Represented by its Chief Manager
Sri.Udyakumar M Shetty
(By Sri.JS - Adv.)
Accused : Mr.Ganapthi N Hegde
s/o. Narashima Hegde
Residing at 373, 2nd Phase,
West of Chord Road,
Rajajinagar,
Bangalore - 560 086
(By Sri.SNM - Adv.)
Offence complained of : U/s 138 of N.I.Act.
Plea of the accused : Pleaded not guilty.
Final Order : Accused is acquitted
Date of Order : 06.04.2017
2 CC No. 9471 of 2014
The complainant has filed this complaint against the
Accused for the offence punishable u/s 138 of Negotiable
Instruments Act.
2. The Complainant has stated that the accused had
availed loan and had agreed to repay the loan in
Installments. He committed default in payment and in
order to recover the amount the bank had recalled the
credit facility and called upon the accused to repay the loan
availed. The Complainant also filed OA No.445/2011 for
recovery of Rs.30,49,785/- before the DRT, Bangalore.
3. During pendency of the above petition the accused
admitting the liability towards partial discharge of the debt
had issued cheque dated 04.01.2013 for Rs.35,00,000/-.
When the said cheque was presented it was dishonoured
with "Funds insufficient" on 10.01.2013. The legal notice
was issued on 02.02.2013 which was served on 05.2.2013.
In spite of receipt of notice the accused had failed make the
payment. Hence the complaint.
3 CC No. 9471 of 2014
4. On presentation of the complaint, cognizance and
statement of the Complainant was recorded and case was
ordered to register against the accused for the offence
punishable u/s 138 of Negotiable Instruments Act. Notice
was sent to the accused.
5. The accused appeared before the court through his
counsel and was enlarged on bail. Copies of the papers
were furnished to him as required u/s 207 of Cr.P.C. The
summons and the substance of the accusation for the
offence punishable u/s 138 of Negotiable Instruments Act
was read over and explained to the accused. The accused
pleaded not guilty and claimed trial.
6. The Complainant has examined its Chief Manager
as PW1 and got marked Ex-P1 to P15. After closing the
Complainant side, the statement of the accused u/s 313 of
Cr.P.C. was recorded and the accused has denied the
incriminating evidence against him. Accused examined as
DW1 and got marked Ex-D1 and D2.
4 CC No. 9471 of 2014
7. Heard arguments.
8. The points that arise for consideration are as
under:
1) Whether the accused proves that,
cheque bearing No.972982 dated:
04.01.2013 was not issued in discharge of
any legally recoverable debt in favour of the
Complainant ?
2) What order?
9. My findings on the above points are as under:
Point No.1: In the affirmative,
Point No.2: As per the final order for the
following:
REASONS
POINT NO.1:
10. It is undisputed fact that Ex-P1 cheque pertain to
the account of the accused and when the said cheque was
presented it has been dishonoured as "Funds insufficient"
in the account of the accused.
5 CC No. 9471 of 2014
11. Once the cheque relates to the accused and his
signature on the said cheque is proved an initial
presumption as contemplated u/s. 138 of Negotiable
Instruments Act has to be raised by the court in favour of
the Complainant. Sec. 139 of the Negotiable Instrument
Act contemplates that it shall be presumed unless contrary
is proved that the holder of the cheque received the cheque
of the nature referred to in the Sec.138 for the discharge of
the whole or in part any debt or liability. The presumption
referred to u/s 138 of Negotiable Instruments Act is
mandatory presumption and in general presumption. But
the accused is entitled to rebut the said presumption.
What is required to be established by the accused in order
to rebut the presumption is different from each case under
given circumstances. But the fact remains that mere
plausible explanation is not expected from the accused and
it must be more than plausible explanation by way of
rebuttal evidence. In other words the defence raised by
6 CC No. 9471 of 2014
way of rebuttal evidence must be probable and capable of
being accepted by the court.
12. The accused has stated that in the year 2007
through broker he approached the Complainant Bank. The
bank officials assured him they will give mortgage loan and
asked him to produce documents with regard to property;
the property was already gifted to his wife and minor
daughter in the year 2003 ; that the officials told him that
the loan will be granted subject to giving personal cheques ;
that on the same day he gave personal blank cheque to the
Complainant and bank sanctioned Rs.25 lakhs to him.
13. PW1 pleads ignorance with regard to the date of
the gift deed. However he admits that the date of the gift
deed is earlier to the mortgage deed. From this it is clear
that Complainant was aware that the mortgage property
was not standing in the name of the accused. EX-P1
cheque discloses that it is non CTS cheque. If the cheque
was given in the year 2012 it could have been CTS cheque.
This is one of the circumstances which indicates that the
7 CC No. 9471 of 2014
cheque might have been given in the year 2007 at the time
of availing the loan.
14. DW1 stated that he paid 16-17 Installments. He
fell ill in the year 2009 ; in the year 2011 bank initiated
DRT proceedings for the loan recovery amount against him
and his wife which was pending ; that without informing
him the Complainant had presented the blank cheque
which he had given at the time of availing the loan ; during
the pendency of the DRT case he had never gone to the
Complainant Bank nor he has discussed with them with
regard to the compromise and he had not given the cheque
voluntarily towards the settlement amount. It is stated that
the Complainant had misused the cheque which he had
given for security at the time of availing the loan. During
cross-examination it is suggested that the said cheque
were given towards security. By this suggestion
Complainant admits that Ex-P2 cheque was given as
security it also contradicts the contention of the
8 CC No. 9471 of 2014
Complainant that cheque was given towards the part
payment of the dues.
15. It is elicited from PW1 that in the year 2011 they
had filed OA before the DRT ; that they have not disclosed
about the concealment of the documents and there has
been no compromise between the parties in the OA case.
On the day of negotiation accused gave the cheque ; that
the negotiation had taken place in his presence. Prior to
the negotiation accused had spoken to him and he had
informed about the over due amount; that he had informed
the accused about the total due is Rs.40,00,000/- and if he
goes for settlement the head office will give concession ;
that he had no difficulty to say about the receipt of the
cheque in OA proceedings ; that he has not produced any
documents to show that as on the date of the cheque the
accused was due for Rs.35 lakhs; that the accused has not
given any under taking letter and there is no documents to
show that negotiation took place between the Complainant
and the accused.
9 CC No. 9471 of 2014
16. The cheque Ex-P1 is dated 04.01.2013. The DRT
proceedings were initiated in the year 2011. The accused
had contested the proceedings which is evident from the
orders on main petition in OA 445/2011 as per Ex-P8.
There is no documents with regard to negotiation or
settlement nor there is entry in the order sheet that the
parties are going for settlement. According to Complainant
there was negotiation and the accused had given cheque for
Rs. 35 lakhs on the date of the negotiation.
17. The evidence discloses that the accused is a
businessman. If the accused did not have sufficient funds
he would certainly not have issued cheque for
Rs.35,00,000/- and would not have invited prosecution
when there was already proceeding initiated for recovery of
debt.
18. Section 138 intended to punish only those who
knowingly full well that they have no amount in the bank
and yet issue any cheque in discharge of the debt or
liability already borrowed or incurred which amounts to
10 CC No. 9471 of 2014
cheating Section 138 draws presumption that one commits
the offence if he issues cheque dishonestly for defrauding
the creditors and stalling the payments. The act was
intended to give more credibility to cheque as a financial
instrument. However, the object was not to provide
effective and speedy remedy for recovery of loan. And to
punish those who could not discharge the debt borrowed,
the liability incurred on account of financial stringency.
The law makers must not have intended or imagined that
money lenders or bank would obtain blank or post dated
cheque while sanctioning / disbursing loan as securities
and would use them and to make debtors / borrowers to
repay the loan under threat of prosecution and punishment
u/s 138 of NI Act. Moreover section 138 is a penal offence
and criminal prosecution is neither for recovery of money or
for enforcement of any security. The person victimized by
the dishonour can always file civil suit against the drawer
of the cheque for recovery of the amount.
11 CC No. 9471 of 2014
19. In the present case the accused had availed the
loan amount of Rs.25 lakhs in the year 2007 and the
property has been mortgaged. He had paid about 16-17
Installments. It is specific contention of the accused that
the cheque in question was blank signed cheque collected
by the Complainant at the time of sanction of loan. The
amount advanced by the Complainant was the large
amount of Rs.25 lakhs. The accused would not have
ventured to issue cheque for Rs.35,00,000/- without
having sufficient amount so as to attract penal provisions.
The contention of the accused advocate that to pressurize
the accused go for settlement, the cheque has been filled by
the Complainant's and false case been foisted against the
accused appears to be probable. So having regard to the
purpose with which provision under section 138 is
introduced subject to presumption and proof, if it is proved
that the cheque is given as security then section 138 would
not be applicable. Reliance is placed upon the decision of
12 CC No. 9471 of 2014
Apex court in M/s. Narayana Menon vs. State of Kerala
AIR 2006 SC 366
"if defense is acceptable as probable the cheque
therefore cannot be held to be have been issued
in discharge of the debt for Eg. the cheque is
issued for security or for any other purpose
would not come within in perview of section 138
of the Act."
20. Our Hon'ble High Court in Shreyas Agro Service
Pvt. Ltd. v/s Chandrakumar Laws (kar) 2006- 2 -54 has
held,
The object of such insistence is to see that if
there is default on the part of the dealer, the
company would fill up the cheque showing the
amount due as on that day payable by the
dealers as a measure for effective recovery of
dues. The very scheme of procedure adopted
shows that the cheque are not issued in respect
of current existing ascertain liability. The words
" for discharge of any debt or liability in sec.
138 of NI Act should be interpreted to mean
current existing or past ascertaineds liabilities.
13 CC No. 9471 of 2014
The cheque issued in respect of further liabilities
not in existence as on the date of the cheque
would not attract prosecution u/s 138 of NI Act.
The above decision applied to the case on hand.
21. The counsel for the Complainant has contended
that even if it is presumed the cheque is given for security
purpose it would still attract provision of sec. 138 of NI Act.
In support of his contention he has relied upon the decision
of the Hon'ble SC reported in (2016) 3 SCC wherein, the
Hon'ble SC has observed,
"the present is, however, a case where the
existence of the debt / liability was never in
dispute. It was on the contrary acknowledged
and the promised was made to liquidate the
same within one month. Failure on the part of
the debtor to do so could lead to only one
result viz. presentation of the cheque for
payment and in the event of dishonor, launch
of prosecution"
14 CC No. 9471 of 2014
The said portion of the judgment is however not applicable
to the case on hand. In the very same decision the Hon'ble
SC at para No.13 line 2 has observed,
If cheques were issued in relation to the
continued contract or business where no claim
is made on the date of the issuance nor any
determinate amount payable to the holder, one
could perhaps argue that the cheque cannot be
presented or prosecution launched on a
unilateral claim of any debt or liability"
The circumstances before the court indicate that the
cheque might have been given at the time of availing the
loan and so cheque cannot be presented without giving
notice.
22. In case cheque is taken by the lender from the
borrower as security towards repayment of the loan
advanced by the former to later, such cheque cannot be
said to have been issued by the borrower to the lender
towards discharge of existing debt unless there is
agreement between the lender and the borrower that in
15 CC No. 9471 of 2014
event of failure on the part of borrower to repay the loan
amount on or before the specified date the lender would be
entitle to present the said cheque to the bank for its
encashment. In the absence of such an agreement, in
order to enforce the liability of the borrower to repay the
loan amount, the lender has to demand repayment of the
loan from the borrower by issuing him notice in writing or
by making oral demand, duly intimating the borrower that
the loan amount towards the repayment of loan of which
the cheque was given by him (borrower) to the lender as
security, is not payed as agreed, the said cheque will be
enchased by him by presenting it to the bank. If the
borrower does not repay the loan amount to the lender
despite such demand being made against him by the lender
then only the lender would become entitle to present the
said cheque to the bank for its encashment. In the present
case, the evidence of the Complainant does not disclose
that she has issued the notice before presenting the cheque
for encashment. Since the cheque is issued for security or
16 CC No. 9471 of 2014
any other purpose the same would not come within the
purview of sec 138 of the act as it has not been issued in
discharge of the debt as held the Hon'ble Supreme Court in
AIR 2006 SC 3366.
23. The case put forward by the accused that the
cheque was not given for the discharge of the debt appears
to be probable and convincing. The presumption u/s 118
and 139 of act would stand rebutted.
24. In view of the above discussion point no.1 is
answered in the affirmative.
POINT No.3
25. In view of the affirmative findings on point 1 the
Complainant is not entitled for the relief sought for. In the
result I proceed to pass the following:
ORDER
Acting u/s 255(1) of Cr.P.C., the accused is acquitted for the offence u/s 138 of NI Act.
17 CC No. 9471 of 2014Bail bond shall be in force for the period of 6 months as provided u/s 437A Cr.P.C. (Typed directly on computer to my dictation by the stenographer in the chamber, corrected and then pronounced by me in the open court on this the 6th April day of 2017) (SHEILA B.M.) XXVI ACMM, Bangalore City.
ANNEXURE Witnesses examined for the Complainant:
PW.1 Udayakumar Shetty Witness examined for the accused:
DW1 Ganapathy Hegde List of Documents marked for the Complainant:
Ex. P1 Cheque
Ex. P1(a) Signature of the accused on the cheque
Ex. P2 Bank endorsement
Ex. P3 Copy of Legal notice
Ex. P4 RPAD Receipt
Ex. P5 RPAD Acknowledgement
Ex. P6 Complaint
Ex. P7 General POA
Ex. P8 Order on main petition in OA 445/11.
Ex. P9 Recovery certificate in OA 445/11.
Ex. P10 Application for overdraft.
18 CC No. 9471 of 2014
Ex. P11 Agreement.
Ex. P12 On demand.
Ex. P13 Security delivery letter.
Ex. P14 Account statement.
Ex. P15 Dues as per recovery certificate.
List of Documents marked for the accused:
Ex. D1 Order in OA 445/11.
Ex. D2 Recovery certificate
XXVI ACMM, Bangalore.