Bangalore District Court
M/S.S.P.Enterprises vs Manjunath R.V. S/O Late ... on 24 May, 2016
IN THE COURT OF THE LX ADDITIONAL CITY CIVIL &
SESSIONS JUDGE, BENGALURU
(CCH-61)
Dated this the 24th day of May, 2016
:Present:
Sri B.Jayantha Kumar, B.A.,Law, LL.M.
LX Addl. City Civil & Sessions Judge,
Bengaluru.
Crl. Appeal. No.1484 / 2015
Appellant :- M/s.S.P.Enterprises
Represented by its Proprietor
Prashant D.Panieker
S/o Damodar Paniekar
R/at No.337/338B, 13th Main
Shanthiniketan Layout,
Arekere, Bannerghatta Road
Bangalore-560 076
(Rep by Sri B.R.Vishwanath, Advocate)
Vs
Respondent:- Manjunath R.V. S/o Late Venkataswamappa
Aged about 42 years
R/at. No.40, Kalkere,
Union Bank post
Bannerghatta Road
Bangalore.
2 Crl.A.1484/2015
Also at:-
No.342, Vysya Bank Colony
Arekere, Bannerghatta Road
Bangalore-560 076
(Rep by Sri M.Munegowda, Advocate)
JUDGMENT
This appeal is filed u/sec.374(3) of Cr.P.C. challenging the Judgment dated 16.11.2015 passed by the XXII ACMM, Bengaluru in C.C.No.10819/2014 convicting the appellant/ accused for the offence punishable u/s.138 of Negotiable Instruments Act and sentencing him to pay a fine of Rs.5,000/- and in default to undergo simple imprisonment for a period of three months and directed the accused to pay compensation of Rs.6,00,000/- and in default to undergo S.I. for one year.
2. The appellant is accused and respondent herein is the complainant before the lower court. Hereinafterwards, the parties are referred to as per their ranks assigned to them before the lower court.
3 Crl.A.1484/2015
3. The brief facts leading to this appeal are as follows:-
On 06.05.2013, the accused entered into lease agreement with complainant in respect of property bearing No.1, khatha No.1/1 situated at Kalkere village, Jigani Hobli, Anekal Taluk for a period of 25 years for the purpose of garment business in the name and style of 'S.P.Enterprises'. As per the terms of the lease agreement, the accused had paid advance amount of Rs.3,00,000/- by way of cheque bearing No.790410 dt.6.11.2013 drawn on Corporation Bank, Arekere Branch, Bangalore and the accused had requested the complainant not to present the said cheque on 6.11.2013 and requested one month time and on 8.1.2014, the complainant approached the accused and demanded the cheque amount and the accused advised the complainant to present the said cheque. Accordingly, the complainant presented the cheque on 13.01.2014 through his banker Corporation Bank, Arekere Gate Branch, Bengaluru and the said cheque returned unpaid with
4 Crl.A.1484/2015 an endorsement payment stopped and therefore, the complainant got issued a legal notice to the accused on 24.01.2014 calling upon the accused to pay the cheque amount and said notice was duly served upon the accused on 25.1.2014. In spite of service of notice, the accused did not pay the cheque amount. Hence, the complainant presented the complaint before lower court alleging the offence punishable u/s 138 of Negotiable Instruments Act.
4. After filing of the private complaint, the learned Magistrate took cognizance of the offence and issued summons to the accused, who put in appearance through his counsel and thereafter, the lower court recorded the plea of the accused, who pleaded not guilty and claimed to be tried. Hence, the trial was conducted by the lower court.
5. In the lower court, the complainant himself examined as P.W.1 and got marked Ex.P1 to 8. After conclusion of trial, statement of accused u/s 313 of Cr.P.C., was recorded. The 5 Crl.A.1484/2015 accused denied all the incriminating circumstances appeared in the prosecution evidence. In support of his defence, accused examined as DW1 and got marked three documents as Ex.D.1 to Ex.D.3 and closed his side.
6. On hearing the parties, learned Magistrate recorded a finding that the accused has committed an offence punishable u/s 138 of Negotiable Instruments Act and passed the sentence against the accused as aforesaid.
7. Feeling aggrieved by the impugned judgment and sentence passed, the accused preferred this appeal inter-alia contending that the lower court has not appreciated the fact that the respondent has not proved fact of subsistence of legally recoverable debt. Admittedly, transaction is in pursuance of lease deed and there is no compliance of terms of the same. The complainant has categorically admitted that he has not converted the land for non-agricultural purpose. Establishing any industry or garments factory in the said land will be illegal 6 Crl.A.1484/2015 as the same is contravenes the provisions of Karnataka Land Revenue Act 1964. Accused could not establish his industry and suffered huge loss as he already put up partial construction and the lower court has failed to appreciate the said fact. The lower court has failed to appreciate the fact that the complainant could not get the khatha issued by the competent authority. The learned Magistrate has failed to appreciate the fact that the accused had instructed his banker to stop payment in view of the violation of the terms of the agreement and misrepresentation on the part of the complainant. The learned Magistrate has failed to appreciate the fact that the complainant has failed to establish that there is legally enforceable debt and hence, prayed for setting aside the judgment passed by the lower court.
8. After filing of this appeal, this court issued notice to the respondent, who put his appearance through his counsel. Records from lower court are secured.
7 Crl.A.1484/2015
9. Heard the arguments of learned counsel for appellant and respondent.
10. In the light of the contentions taken up in the memorandum of appeal, the points that arise for my determination are as follows;
1) Whether the court below has committed an error of law and facts in convicting the appellant/accused for the offence punishable U/Sec.138 of Negotiable Instruments Act in giving findings that the cheque in question was issued by the accused towards discharge of legally recoverable debt or liability?
2) Whether the judgment of the lower court needs to be modified?
3) What order?
11. My findings on the above points are as follows:
Point No.1 : In the Negative Point No.2 : In the Affirmative 8 Crl.A.1484/2015 Point No.3 : As per final Order REASONS
12. Point No.1:- It is the specific case of the complainant that on 06.05.2013, the accused entered into lease agreement with complainant in respect of property bearing No.1, khatha No.1/1 situated at Kalkere village, Jigani Hobli, Anekal Taluk for a period of 25 years for the purpose of garment business in the name and style of 'S.P.Enterprises'. As per the terms of the lease agreement, the accused had paid advance amount of Rs.3,00,000/- by way of cheque bearing No.790410 dt.6.11.2013 drawn on Corporation Bank, Arekere Branch, Bangalore and the accused had requested the complainant not to present the said cheque on 6.11.2013 and requested one month time and on 8.1.2014, the complainant approached the accused and demanded the cheque amount and the accused advised the complainant to present the said cheque. Accordingly, the complainant presented the cheque on 9 Crl.A.1484/2015 13.01.2014 through his banker Corporation Bank, Arekere Gate Branch, Bengaluru and the said cheque returned unpaid with an endorsement payment stopped and therefore, the complainant got issued a legal notice to the accused on 24.01.2014 calling upon the accused to pay the cheque amount and said notice was duly served upon the accused on 25.1.2014. In spite of service of notice, the accused did not pay the cheque amount. Hence, the complainant presented the complaint before lower court alleging the offence punishable u/s 138 of Negotiable Instruments Act.
13. In order to prove his case, the complainant himself examined as PW1. He has filed his affidavit in lieu of his chief examination. In his affidavit, he has stated that the accused had entered into lease agreement in respect of his site bearing No.1, Khatha No.1/1 situated at Kalkere village, Anekal Taluk and lease was for a period of 25 years. In pursuance of the lease agreement, the accused had issued a cheque for 10 Crl.A.1484/2015 Rs.3,00,000/- towards advance amount and said cheque was dishonoured when presented to the bank as payment stopped by the accused. With these allegations, the complainant presented the complaint before the lower court to take necessary action against the accused.
14. In support of his case, the complainant has produced documents. Ex.P.1 is the lease agreement dt.6.5.2013. Original cheque is at Ex.P.2, bank endorsement is at Ex.P.3, copy of legal notice at Ex.P.4, postal receipt at Ex.P.5, courier receipt is at Ex.P.6, postal acknowledgement is at Ex.P.7 and original lease agreement is at Ex.P.8.
15. The proprietor of the accused firm by name Prashanth D.Panieker examined himself as DW1. In his evidence, he has admitted that the complainant had executed lease agreement for the purpose of constructing building and said lease agreement was entered in to for a period of 25 years and for an advance amount of Rs.3,00,000/-. He has further 11 Crl.A.1484/2015 deposed that monthly rent was fixed at Rs.20,000/- p.m. He has further deposed that he could not complete his construction and the complainant has not handed over the documents and he could not obtain necessary permission from the Department. He has further deposed that he has paid Rs.3,00,000/- by way of cheque to the complainant in order to obtain building approval. In support of his case, he has produced credit sanction intimation issued by Corporation Bank as per Ex.D.1 and 2 and building plan at Ex.D.3. He has further admitted that he has spent Rs.40 Lakhs for construction of building. During the course of cross-examination, he has admitted that before execution of agreement, he had verified the documents pertaining to the property and he had discussed with the complainant regarding lease. He has admitted that Ex.P.8 lease agreement was prepared as per his instruction and he put his signature after reading the contents. He has admitted that he issued cheque towards advance amount at the 12 Crl.A.1484/2015 time of execution of agreement. He has admitted that he paid Rs.3,00,000/- as security deposit. He has admitted that as per the terms of agreement Ex.P.8, he has to put up construction by spending his money. He has admitted that he has not paid any rent as per the terms of agreement Ex.P.8. He has admitted that he has not approached the panchayath for licence and he has not given any application for obtaining licence. On perusal of the evidence of DW1, it is clear that the accused obtained the site belonging to the complainant on lease for a period of 25 years agreeing to pay the security deposit of Rs.3,00,000/- and issued cheque in question and the said cheque returned unpaid as stopped payment, when presented to the bank for encashment. So the complainant filed this complaint against the accused.
16. Learned counsel for the accused has argued that section 138 of Negotiable Instruments Act does not attract to the case in hand because, there is no subsistence of legally 13 Crl.A.1484/2015 recoverable debt. He has further argued that the subject matter is coming within green belt area and it is not converted into non-agricultural purpose and the accused cannot establish his industry or garment factory in the said land and if he establishes industry or garment factory, it contravenes the provisions of Karnataka Land Revenue Act 1964. He has argued that the complainant has suppressed the material facts. He has argued that when the property cannot be converted into non- agricultural purpose and given the same to the accused on lease for a period of 25 years and accused put up construction, but cannot establish his industry or garment factory, he is not liable to pay Rs.3,00,000/- advance amount to the complainant and that is why, the accused intimated the bank for stop payment and therefore, he is not liable under the provisions of Sec.138 of the Act. In support of his arguments, he has relied upon the decision reported in LAWS (SC)-2014-4-16 in the case of Indus Airways Pvt. Ltd., Vs. Magnum Aviation Pvt Ltd., .
14 Crl.A.1484/2015 In the said decision, Hon'ble Supreme Court has held as follows:-
"The above reasoning of the Delhi High Court is clearly flawed in as much as it failed to keep in mind the fine distinction between civil liability and criminal liability under Section 138 of the N.I. Act. If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be considered as subsisting liability and dishonour of
15 Crl.A.1484/2015 such cheque amounts to an offence under Section 138 of the N.I. Act. The Delhi High Court has travelled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. In what we have discussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability."
17. Relying on this decision, learned counsel for the accused has argued that to attract Sec.138 of Negotiable Instruments Act, there must be existence of legally recoverable 16 Crl.A.1484/2015 debt or liability. He has argued that as per Sec.95 of Karnataka Land Revenue Act, 1964, the property must be converted into non-agricultural purpose to establish industry or garment factor and since the subject matter is not converted into non- agricultural purpose, the accused cannot commence his industry. He has also relied upon the decision reported in ILR 1986 KAR 820 in the case of State of Karnataka Vs. Jayashree, wherein, the Hon'ble High Court of Karnataka has held as follows:-
Karnataka Land Revenue Act, 1964 - Section 95 - No permission to divert agricultural land within Green Belt Area for other purposes - Although no provision in the Act to appraise Planning Authority, authorities under Act to determine grant or otherwise of permission considering all aspects of law - Exercise of power under Section 95 subject to provisions of Karnataka Town and Country Planning Act - In the absence of
17 Crl.A.1484/2015 sanction 95 futile - No conditional sanction directing compliance with Planning Regulations.
18. He has also referred to Sec.56 of Indian Contract Act, 1872 and argued that an agreement to do an impossible in itself is void. He has also referred the definition of 'fraud' defined under Sec.17 of Indian Contract Act and argued that the complainant has suppressed the fact that the property cannot be used by the accused for non-agricultural purpose. Therefore, he has argued that the accused is not liable to pay any amount to the complainant and the cheque in question is not issued for legally recoverable debt or liability.
19. It is an admitted fact that the complainant and accused entered into lease agreement on 6.5.2013. Accused himself has admitted that the said lease agreement was prepared at his instruction. As per the terms of agreement, the accused is liable to pay security deposit of Rs.3,00,000/- and accordingly, the accused has paid security deposit of 18 Crl.A.1484/2015 Rs.3,00,000/- by way of cheque bearing No.790410 dt.6.11.2013 and lease period is for 25 years and lease period commenced from 6.5.2013 and accused is required to pay monthly rent of Rs.20,000/- from 1.5.2013 to 30.4.2014 and Rs.22,000/- from 1.4.2014 to 30.4.2015; Rs.22,000/- from 01.05.2015 to 30.04.2016; Rs.24,200/- from 01.05.2016 to 30.04.2017 and Rs.26,620/- from 01.05.2017 to 30.04.2018. As per the terms of the registered lease agreement, the accused taken possession of the property and he started construction of building. But he has not commenced any industry or garment factory. Admittedly, the accused has not paid monthly rent from 1.5.2013 till today. The accused has issued cheque towards security deposit and said cheque is not yet honoured. The accused acted upon the lease agreement and put up construction in the property and used the property of the complainant to start garment factory. Therefore, the accused is liable to pay Rs.3,00,000/- to the complainant. Now 19 Crl.A.1484/2015 Rs.3,00,000/- is not a debt, but it is a liability. The accused has agreed to pay Rs.3,00,000/- as security deposit and accordingly, he has issued cheque in favour of the complainant and said cheque dishonoured when presented to the bank.
20. The contention of the accused is that the property is situated within green belt area and property is not converted into non-agricultural purpose cannot be accepted because, admittedly, the accused verified the documents before entering into lease agreement and it is the duty of the accused to verify the documents and to see the feasibility of the property to start his garment factory. Now he cannot blame the complainant that the property is not converted and he cannot obtain licence and cannot start garment factory. Till today, he has not applied for licence and he has not cancelled the lease agreement. The lease agreement is still subsisting. Until and unless, the lease agreement is cancelled, he cannot instruct the bank to stop payment of the cheque amount of Rs.3,00,000/-.
20 Crl.A.1484/2015 Even after the issuance of legal notice by the complainant, the accused has not taken any steps to cancel the agreement of lease and he has not issued any legal notice to the complainant stating that the property has to be converted for non- agricultural purpose. He has not issued any legal notice calling upon the complainant to furnish all necessary title documents to obtain the licence or calling upon the complainant to convert the land into non-agricultural purpose. Simply, the accused gave instructions to the bank for stop payment. The accused has not produced any document to show that he had sufficient balance amount in his bank account when he issued cheque in favour of the complainant and when he gave instructions to the bank for stop payment of the cheque. He has not produced any document to show what were the reasons mentioned for stop payment. Therefore, the accused issued cheque for discharge of legally recoverable liability and the accused is liable to pay the cheque amount and the lower court after verifying the 21 Crl.A.1484/2015 records rightly come to the conclusion that the accused has committed an offence punishable U/Sec.138 of Negotiable Instruments Act. There are no grounds to set aside the judgment of conviction passed by the lower court. The citation relied upon by the learned counsel for the accused is not applicable to the facts of this case. I am of the considered view that there is no merit in the submission of the accused that the cheque issued as security deposit and hence complaint U/s.138 of Negotiable Instruments Act is not maintainable. With these observations, I answer point No.1 in Negative.
21. Point No.2:- Perused operative portion of the order passed by the lower court. The lower court sentenced the accused to pay fine of Rs.5,000/-. In default, he shall undergo S.I. for a period of three months and also awarded compensation of Rs.6,00,000/-, in default to undergo S.I. for a period of one year. Section 138 of Negotiable Instruments Act prescribes punishment i.e., imprisonment for a term which may 22 Crl.A.1484/2015 be extend to two years or with fine which may extend to twice the amount of the cheque or with both. In this case, the lower court imposed fine of Rs.5,000/- and awarded compensation of Rs.6,00,000/-, which is more than twice the amount of the cheque. In the present case, the accused issued cheque for Rs.3,00,000/- on 06.11.2013. Therefore, it is just and proper to modify the order of sentence and awarding of compensation and direct the accused to pay a fine of Rs.4,05,000/-, in default to undergo S.I. for a period of six months and out of the fine amount, Rs.4,00,000/- shall be paid as compensation to the complainant U/s.357(1) of Cr.P.C. With these observations, I answer point No.2 in the Affirmative.
22. Point No.3: In view of my findings on point No.1 and 2, I proceed to pass the following:
ORDER The appeal filed u/sec.374(3) of Cr.P.C. by the appellant/accused is hereby partly allowed.
23 Crl.A.1484/2015 The judgment of conviction passed by the XXII ACMM, Bengaluru, in C.C.No.10819/2014 dated 16.11.2015 convicting the accused for the offence punishable U/Sec.138 of Negotiable Instruments Act is hereby confirmed. However, the order of sentence and awarding of compensation is hereby modified to the extent that the accused is sentenced to pay a fine of Rs.4,05,000/- and in default to pay fine amount, he shall undergo simple imprisonment for a period of six months. Out of the total fine amount, Rs.4,00,000/- shall be paid as compensation to the complainant U/s.357(1) of Cr.P.C.
Send a copy of this judgment to the lower court along with LCR.
(Dictated to the Judgment Writer, transcribed and typed by him, corrected and then pronounced by me in the open court on this the 24th day of May, 2016) (B.Jayantha Kumar) LX Addl.City Civil & Sessions Judge, Bengaluru.
Rrt*