Bangalore District Court
Was Paying In Respect Of Two Chits Rs.25 vs Sustained Loss And Stopped The Chit ... on 18 January, 2022
1 CC.4146/2020 (J)
IN THE COURT OF THE XV ADDL CHIEF METROPOLITAN
MAGISTRATE AT BANGALORE CITY.
Dated this the 18th Day of January2022
Present: Lokesh Dhanapal Havale. B.A.L.L.B.,
XV Addl.C.M.M., Bangalore.
Judgment U/s.355 of the Cr.P.C. 1973.
1.Sl.No.of the case CC.No.4146/2020
2.Name of the Complainant: Sri.Maniklal M.Dhongadi,
S/o.Motilal Dhongadi,
Age: 48 years,
Occ: Advocate,
R/a No.52/8, BDA Apartment,
Nandini Layout,
Bengaluru560 096.
3.Name of the accused: Sri.R.S.Shakthi Kumar,
S/o.N.Sanjeevappa,
Occ: Real Estate & Chit Business,
Age: 50 years,
R/a 420, 4th Cross,
Syndicate Bank Layout,
Bengaluru560 091.
And also having office at
# 767, 9th Main,
3rd Stage, 3rd Block,
Basaveshwara Nagar,
Bengaluru560 079.
4.The offence complained of : U/s.138 of Negotiable Instruments
Act.
5.Plea of the accused: Pleaded not guilty.
6.Final Order: Acting U/s.255(1) Cr.P.C., accused is
Acquitted.
2 CC.4146/2020 (J)
7.Date of final Order 18.01.2022.
***
This complaint is filed U/Sec.200 of Cr.P.C. against the accused
for the offence punishable U/Sec.138 of the Negotiable Instruments
Act, 1881.
2. The facts of the complaint in brief are as under:
The complainant knew the accused from past 4 years. He came
to know about the accused through his common friend by name
Niranjan K.M. The accused was running chit business at No.726, 2 nd
Floor, Modi Hospital Road, Bengaluru. The complainant became
subscriber and invested amount towards monthly subscription. The
complainant was paying in respect of two chits Rs.25,000/ each for 40
months. The complainant paid the chit amount from February 2016 to
December 2018. The complainant paid 34 chit installments amounting
to Rs.17 lakhs. The accused assured him to repay Rs.20 lakhs with
interest and took further amount of Rs.3 lakhs by way of cash. The
accused sustained loss and stopped the chit business. He also closed the
office. The accused promised to pay legally recoverable amount
invested by him in the chit business. He postponed the payment stating
that he is about to sell the site. After repeated demands, the accused
issued cheque bearing No.362314 dated 9.7.2019 for Rs.20 lakhs
drawn on Karnataka Bank Ltd. Global village branch, Bengaluru, in his
favour. The complainant presented the cheque for encashment through
his account and it was dishonored with a shara "Funds Insufficient" on
16.07.2019. He intimated the dishonor of cheque to the accused and
the accused requested him to present the cheque once again. On its
3 CC.4146/2020 (J)
presentation for encashment through his banker, the cheque returned
dishonoured with shara "Funds Insufficient" on 27.08.2019. He issued
the legal notice to the accused on 25.09.2019 through RPAD and it was
duly served on the accused on 29.09.2019. The accused issued cheque
for discharge of legal debt/liability, which was dishonored and failed to
pay the amount even after 15 days from the date of service of notice.
Hence prayed to punish the accused and compensate the complainant.
3. After the institution of the complaint, cognizance was
taken and the case was registered as PCR No.14980/2019. The sworn
statement of the complainant was recorded and on the basis of sworn
statement and other materials on hand, the criminal case was
registered against the accused and summons was issued to him. The
accused appeared before the court and he got enlarged on bail. The
prosecution papers supplied to the accused and the substance of
accusation for the offence punishable U/s.138 of Negotiable
Instruments Act was read over to the accused. He pleaded not guilty
and claimed to be tried.
4. During the trial complainant examined himself as PW1
and got marked Ex.P.1 to P.15. The statement of the accused U/s. 313
of Cr.P.C. was recorded. The accused examined himself as DW1 and
got marked Ex.D.1 to D.12.
5. I have heard the argument of both learned counsels and
perused the entire materials. The following points would arise for my
consideration.
4 CC.4146/2020 (J)
1. Whether the complainant proves that the accused
issued cheque bearing No.362314 dated 9.7.2019
for Rs.20 lakhs drawn on Karnataka Bank Ltd,
Global village, Bengaluru in his favour towards the
discharge of legally enforceable debt/liability and
on its presentation for encashment, it was
dishonored with an endorsement of "Funds
Insufficient" in the account maintained by the
accused and the accused has not paid the amount
even after 15 days from the date of service of notice
and thereby accused committed an offence
punishable U/Sec.138 of N.I. Act, 1881 ?
2. Whether the accused rebuts the presumption
U/s.139 of N.I.Act?
3. What order?
6. My answers to the above points are as under.
Point No.1 : In the Negative
Point No.2 : In the Affirmative
Point No.3 : As per final order for the following;
REASONS
7. Point No.1 & 2: The points are taken together for discussion
to avoid repetition of facts and evidence. At this juncture, it is necessary
to go through the provisions of N.I.Act before proceeding further. The
provisions under Section 118(a) and 139 of the Act., 1881 are
extracted and they reads thus;
5 CC.4146/2020 (J)
"118. Presumptions as to negotiable
instruments. - Until the contrary is proved,
the following presumptions shall be made:
(a) of consideration - that every
negotiable instrument was made or drawn
for consideration, and that every such
instrument, when it has been accepted,
indorsed, negotiated or transferred, was
accepted, indorsed, negotiated or
transferred for consideration.
(b) as to date: that every Negotiable
Instrument bearing date was made or drawn
on such date;
"139. Presumption in favour of holder.
It shall be presumed, unless the
contrary is proved, that the holder of a
cheque received the cheque of the nature
referred to in section 138 for the discharge,
in whole or in part, of any debt or other
liability."
8. On plain perusal of the provisions under Section 118(a)
and 139 of the N.I.Act., as extracted herein above, it can be seen that
initially the presumptions constituted under these two provisions
favour the complainant. However, it is open to an accused to raise a
defence to rebut the statutory presumptions. An accused can raise a
defence, wherein the existence of legally enforceable debt or liability
can be contested.
6 CC.4146/2020 (J)
9. It is also well established that an accused for discharging
the burden of proof placed upon him under a statute need not examine
himself. He may discharge his burden on the basis of the materials
already brought on record. An accused has constitutional rights to
maintain silence. Standard of proof on part of the accused and that of
the prosecution in a Criminal case is different. The prosecution must
prove the guilt of an accused beyond all reasonable doubts, the
standard of proof so as to prove a defence on the part of an accused is
"Preponderance of probabilities".
10. Under the light of above extracted provisions of the Act, I
have perused the oral and documentary evidence on record. In order to
prove his case the complainant examined himself as PW.1 and got
marked Ex.P.1 to P.15. Ex.P.1 is the cheque bearing No.362314 dated
9.7.2019 for Rs.20 lakhs drawn on Karnataka Bank Ltd, Global village
branch, Bengaluru and Ex.P.1(a) is the signature of the accused on the
cheque. Ex.P.2 is the Bank endorsement dated 16.07.2019, which was
issued with a Shara "Funds Insufficient". Ex.P.3 is the Bank
endorsement dated 27.08.2019, which was issued with a Shara "Funds
Insufficient". Ex.P.4 is the office copy of the statutory notice dated
25.09.2019. Ex.P.5 and P.6 are the Postal receipts for having sent the
statutory notice to the accused through registered post. Ex.P.7 is the
postal envelope sent to the office address of the accused. It returned
unserved with shara 'door locked'. Ex.P.8 is the letter dated 15.10.2019
sent to postmaster GPO Bengaluru to enquire about the delivery of
notice sent to the accused to his residential address. Ex.P.9 is the reply
issued by the Chief Postmaster, GPO, Bengaluru stating that the notice
was served on the accused at his residential address on 29.09.2019.
7 CC.4146/2020 (J)
11. The complainant also produced and got marked several
documents during the course of crossexamination of DW1 by way of
confrontation. On their admission by DW1, the documents were
marked as Ex.P.10 to P.15. Ex.P.10 is the FIR dated 22.01.2021 in
Crime No.20/2021 registered against the accused and three others by
one Jagannath for the offences punishable U/ss.420, 506 and 34 of
IPC. Ex.P.11 is the complaint filed by the accused to Commissioner of
Police, Bengaluru on 6.8.2019 against subscribers of the chit company
by name Shaktikumar Chit Funds India Pvt. Ltd. run by him. Ex.P.12 is
the letter given by the accused to PSI Basaveshwaranagar P.S.
Bengaluru to close the complaint filed by him. EX.P.13 is the statement
given by the accused to PSI Basaveshwaranagar P.S. on 10.08.2021
against the complainant in this case. Ex.P.14 is the endorsement issued
by the PSI Basaveshwaranagar P.S. on 10.06.2021 to the accused
stating that the complaint filed by him against the complainant in this
case is of civil nature and intimated him to settle the matter before the
Court. Ex.P.15 is the complaint given by the accused to Commissioner
of Police, Bengaluru on 15.03.2021 against complainant, his wife by
name Pushpavathi for alleged to have threatened him for payment of
money.
12. I have perused the exhibits on which the complainant has
placed his reliance. On perusal of the exhibits, it is clear that the
cheque at Ex.P.1 bearing No.362314 dated 9.7.2019 for Rs.20 lakhs
drawn on Karnataka Bank Ltd, Global village branch, Bengaluru was
presented through the Bank within its validity for encashment and the
Bank issued endorsement as per Ex.P.3 on 27.08.2019 with shara
"Funds Insufficient". The complainant issued statutory notice dated
8 CC.4146/2020 (J)
25.09.2019 as per Ex.P.4 within time from the date of receipt of Bank
Memo.
13. The case was contested by the accused and the service of
notice was disputed. The notice was served on the accused as per
Ex.P.9. However the counsel for the accused suggested PW.1 that the
address of the accused was not correctly mentioned and the notice was
not received by the accused. The accused also denied the service of
notice in his defence evidence. However accused admitted his
residential address and office address as mentioned in the complaint
and notice in his cross examination. The admission leads to draw
presumption as per Section 27 of General Clauses Act, which states that
the notice sent through post shall be deemed to be served, if it is
properly addressed to a person to whom it is sent. The notice sent to
the office address of the accused, returned unserved with shara 'door
locked' as per ExP.7. The notice was also sent to the residential address
of the accused and the acknowledgment was not returned. Therefore
the letter dated 15.10.2019 as per ExP.8 was sent to postmaster GPO
Bengaluru to enquire about the delivery of notice and the Chief
Postmaster, GPO, Bengaluru issued reply as per ExP.9 stating that the
notice was served on the accused at his residential address on
29.09.2019. Therefore, in view of the admission of the office address
and residential address by the accused in his crossexamination, the
notice at Ex.P.4 is deemed to have been served on him as per Ex.P.9.
Even otherwise as per the Judgment of the Hon'ble Supreme Court of
India in Crl.Appeal No.767 of 2007 (Arising out of SLP (Crl) No.3910
of 2006 between CC Alavi Haji Vs.Palapetty Muhammed and
9 CC.4146/2020 (J)
another decided on 18.5.2007, wherein it has been held by the Hon'ble
Supreme Court of India para No.17 as under;
17. It is also to be borne in mind that the
requirement of giving of notice is a clear departure from
the rule of Criminal Law, where there is no stipulation
of giving of a notice before filing a complaint. Any
drawer who claims that he did not receive the notice
sent by post, can, within 15 days of receipt of
summons from the court in respect of the complaint
U/s.138 of the Act, make payment of the cheque
amount and submit to the Court that he had made
payment within 15 days of receipt of summons (by
receiving a copy of complaint with the summons) and,
therefore, the complaint is liable to be rejected. A person
who does not pay within 15 days of receipt of the
summons from the Court along with the copy of
the complaint u/s.138 of the Act, cannot obviously
contend that there was no proper service of notice as
required u/s.138, by ignoring statutory presumption to
the contrary u/s.27 of the G.C. Act and Section 114 of
the Evidence Act. In our view, any other interpretation
of the proviso would defeat the very object of the
legislation. As observed in Bhaskaran's case (supra), if
the 'giving of notice' in the context of Clause (b) of the
proviso was the same as the 'receipt of notice'
a trickster cheque drawer would get the premium to
10 CC.4146/2020 (J)
avoid receiving the notice by adopting different
strategies and escape from legal consequences of Section
138 of the Act.
14. In a nutshell it can be said that the statutory notice is an
opportunity given to the accused to make payment and avoid the
consequences of 138 of N.I.Act. In the case on hand, there was delay of
18 days in filing the complaint and the notice on delay application was
served to accused and accused filed objections. Thereafter order was
passed condoning the delay on 11.02.2020. Thereafter complainant
filed affidavit in lieu of sworn statement and examined himself as
PW.1. Thereafter criminal case was registered and summons was issued
to accused. The summons was duly served on accused as per order
sheet dated 09.03.2020. He appeared before the Court and contested
the case by taking all probable defences. Therefore he cannot take the
shelter of statutory requirement of service of notice to avoid the
consequences of Section 138 of N.I.Act. The complaint was filed on
30.11.2019 and there was delay of 18 days. However as discussed
above the delay was condoned. Hence the the complaint is within
limitation. Therefore, the documents on record clearly show that the
complainant has complied the ingredients of Section 138(a) to (c) of
the N.I.Act. Therefore the presumptions U/s.118 and 139 of the N.I.Act
arise in favour of the complainant. The presumptions are rebuttable
and the burden is on the accused to rebut the presumptions. Once the
issuance of cheque and signature are proved, the presumption arises in
respect of the fact that the cheque was issued for legally enforceable
debt/liability. The accused can rebut the presumption by raising
11 CC.4146/2020 (J)
probable defence and proving it relying on the evidence of the
complainant or by leading his direct evidence.
15. The accused entered the witness box and examined
himself as DW.1. It is the defence of the accused that he knew the
complainant through one Niranjan K.M. from past 45 years. He was
running chit in the name and style Shaktikumar Chit Funds India Pvt
Ltd. The complainant is not a subscriber of chit in his company. The
company has not been made as party and the legal notice was not sent
to the company. He was in need of money and therefore he contacted
the complainant through Niranjan K.M. The complainant agreed to
lend the loan on the condition that he has to mortgage the property
and he has to give the cheques and stamp papers as security. Himself,
his wife Poornima and his son Ajay mortgaged the property totally
measuring 30 guntas land in Sy.No.15/15, 15/1, 15/9 situated at
Gunjuru village, Toobugere hobli, Doddaballapura taluk in favour of
the complainant by executing registered mortgage deed. The
complainant paid Rs.14 lakhs through DD drawn on Kotak Mahindra
Bank and Rs.1 lakh by way of cheque in favour of M/s. Shakti
Enterprises. The complainant took 7 cheques of Karnataka Bank Ltd.,
Global village branch, 1 cheque of Vijaya Bank, West of Chord branch
and blank signed stamp papers. He paid interest for 6 months.
Thereafter he was unable to pay interest and he sold the mortgaged
property in favour of P.V.R.Gupta through sale deed registered in the
office of SubRegistrar, Doddaballapura. The mortgage amount of
Rs.15 lakhs was transferred to the account of the complainant through
the account of purchaser P.V.R. Gupta through RTGS. The complainant
signed the sale deed as consenting witness. When he asked for return
12 CC.4146/2020 (J)
of cheques and stamp papers, the complainant told him that the
cheques and papers were in the house at Bengaluru and he would
return them later. The same day the complainant executed the deed of
cancellation of mortgage. He went to the house of the complainant 45
times and asked for return of cheques and stamp papers but the
complainant did not return it. Later one of the security cheques was
misused and the present complaint was filed. He filed complaint
against complainant, his wife Pushpavati and Niranjan K.M. before the
BasaveshwaraNagar P.S. and Commission of Police but no action was
taken. Later he filed the PCR.No.17425/2021 before Hon'ble 4 th
ACMM, Court against them. The complainant misused another security
cheque drawn on Vijaya Bank, West of Chord branch in collusion with
Niranjan K.M. and filled it for Rs.30 lakhs and filed false case against
him before this court after bouncing the said cheque. The complainant
filed the false cases misusing the security cheques demanding excess
payment of interest.
16. The accused in order to prove his defence produced and
got marked ExD.1 to 12. ExD.1 to 3 were marked during the course of
cross examination of PW.1 by way of confrontation. ExD.1 is the
certified copy of registered mortgage deed dated 04.08.2018 executed
by the accused, his wife and his son in favour of the complainant for
mortgage loan of Rs.15 lakhs. ExD.2 is the certified copy of the
registered deed of cancellation of mortgage dated 11.02.2019 executed
by the complainant in favour of the accused, his wife and his son in
respect of mortgage loan of Rs.15 lakhs. ExD.3 is the certified copy of
the registered sale deed dated 11.02.2019 executed by the accused, his
wife and children in favour of one P.V.R. Gupta for sale consideration
13 CC.4146/2020 (J)
of Rs.15 lakhs. The recitals of the sale deed clearly show that the sale
consideration amount of Rs.15 lakhs was directly transferred to
mortgagee (complainant) through RTGS and he signed the sale deed as
consenting witness. It bears photo, thumb impression and signature of
the complainant.
17. The complainant/PW.1 admitted the entire mortgage
transaction in his cross examination. It is specific defence of the
accused that he gave 8 blank signed cheques and blank signed stamp
papers as security at the time of obtaining the mortgage loan. PW.1
was cross examined in length is respect of the said aspect and
suggestions were made to him but PW.1 denied all the suggestions and
nothing worth was elicited in respect of security cheques and stamp
papers. During the cross examination of DW.1, it was elicited that he
has been doing chit business and have worldly knowledge of
transactions. DW.1 admitted that the complainant can recover the
mortgage money by selling the property and the property itself was
mortgaged as security for the loan. He denied that there was no
necessity of additional security. It was also elicited that the alleged fact
of giving security cheques is not mentioned in mortgage deed. He did
not give notice to the complainant to return the security cheques. He
did not file any case before the Court against the complainant for
taking back the security cheques. When he was asked that he had not
taken any action against the complainant for taking back the security
cheques, he answered that he did not take any action due to the faith
on the complainant. The counsel for the complainant argued that the
defence of the accused that the security cheques were given to the
complainant at the time of mortgage is not believable. On the other
14 CC.4146/2020 (J)
hand the counsel for the accused argued that the cheques were given as
security on the insistence of the complainant and the accused gave
them as he was in need of money. It is clear from ExD.1 that there is no
recital about the giving of cheques and stamp papers as additional
security apart from mortgaging the property. The accused had no
hurdle to mention it. He answered in his cross examination that he told
the complainant to mention it but the complainant did not mention it.
It is not believable as the accused is not layman. He is business man
doing the registered chit business and he has worldly knowledge of
transactions. Apart from that admittedly the accused has not taken any
action against the complainant and the answer of the accused in his
cross examination that he has not taken any action against the
complainant for taking back the security cheques due to the faith on
the complainant is not believable. No prudent man would keep quiet
under the aforesaid circumstances. Therefore the defence of the
accused that the cheques were issued as security for mortgage loan and
one of them was misused is not believable.
18. Further on perusal of Ex.P.1, it makes clear that the
writings on the cheque and signature appears to have written with the
different ink. PW.1 was cross examined in that regard but nothing was
elicited. It is admitted by the accused that he signed the cheque in
question. He disputed the name and details written on the cheque
stating that blank signed cheque was issued as security for mortgage
loan. However he failed to prove that the cheque in question was one
of the cheques issued as security for mortgage loan. Therefore such
aspects have no bearing on the case because as per the presumption
U/s.118(b) of N.I.Act every Negotiable Instrument bearing a date was
15 CC.4146/2020 (J)
made or drawn on such date and as per Section 20 of the N.I.Act, if the
person signs and delivers Negotiable Instrument and it is left
incomplete and thereby he authorizes the holder to complete the
Negotiable Instrument and thereby he is liable for the amount
mentioned in the Negotiable Instrument. Therefore, the defence of the
accused is not tenable. Further in view of the Judgment rendered by
the Hon'ble Supreme Court of India in Bir Singh V/s.Mukesh Kumar
reported in AIR2019 SC 2446 also the above defence is not tenable. It
was held by the Hon'ble Apex Court that
"If a signed blank cheque is voluntarily presented to
a payee, towards some payment, the payee may fill up the
amount and other particulars. This in itself would not
invalidate the cheque. The onus would still be on the
accused to prove that the cheque was not in discharge of a
debt or liability by adducing evidence. Even a blank cheque
leaf, voluntarily singed and handed over by the accused,
which is towards some payment, would attract
presumption under Section 139 of the Negotiable
Instruments Act, in the absence of any cogent evidence to
show that the cheque was not issued in discharge of a debt.
19. The accused admitted the signature on the cheque and
issuance of the cheque. Therefore the presumption arises in favour of
the complainant. The admission attracts the ratio laid down by the
Hon'ble Supreme Court of India in its decisions reported in 2011 (11)
SCC 441 - Rangappa V/s Mohan and 2015 (8) SCC 378 -
T.Vasanthakumar V/s.Vijayakumari. The ratio is that the cheque shall
16 CC.4146/2020 (J)
be presumed to be for consideration unless and until the court forms a
belief that the consideration does not exist or considers the non
existence of consideration so probable that a prudent man ought under
such circumstances act upon the supposition that it does not exist.
20. It is also the defence of the accused that he is running chit
business in the name and style Shaktikumar Chit Funds India Pvt Ltd. It
is a registered chit fund company and the complainant is not its
subscriber in its chit groups. In order to prove his defence, he produced
Ex.D.4 to D.9 and D.12. Ex.D.6 is the order of the Asst. Registrar of
Chits Funds, First Division, Bengaluru Urban District, Bengaluru dated
30.08.2017 permitting the Shaktikumar Chit Funds India Pvt Ltd. to
manage the chit group bearing No.SK 5LG1 for an amount of Rs.5
lakhs for a period of 40 months after the receipt of fixed deposit receipt
dated 30.08.2017 for Rs.5 lakh made in Punjab National Bank,
Mahalakshmipuram Branch, Bengaluru. Ex.D.7 is the certificate dated
31.08.2017 issued by Asst. Registrar Chit Funds for commencement of
chit group No.SK 5LG1 and management of the same. Ex.D.8 is the
certificate dated 03.10.2017 issued by Asst. Registrar Chit Funds for
commencement of chit group No.SK 2LG1 for an amount of Rs.2 lakhs
for a period of 40 months and management of the same. The 40 chit
agreements pertaining to the chit group No.SK 2LG1 executed by by
accused on behalf of Shaktikumar Chit Funds India Pvt. Ltd., in favour
of the 40 subscribers in the said chit group are together marked as
Ex.D.9. The 40 chit agreements pertaining to the chit group No.SK 5L
G1 executed by by accused on behalf of Shaktikumar Chit Funds India
Pvt. Ltd., in favour of the 40 subscribers in the said chit group are
together marked as Ex.D.12. Ex.D.4 is the order of the Asst. Registrar
17 CC.4146/2020 (J)
Chit Funds dated 09.03.2021 to release the fixed deposit receipt for an
amount of Rs.2 lakhs dated 27.09.2017 deposited in Punjab National
Bank, Mahalakshmi Layout Branch in respect of chit group No.SK 2L
G1 in favour of the Shaktikumar Chit Funds India Pvt. Ltd. It discloses
that at the time of the commencement of the chit group number SK 2L
G1 the said fixed deposit receipt was kept with the Asst. Registrar Chit
Funds and after satisfaction that the subscribers of the chit have been
duly paid after completion of the said chit on 4.07.2020 and that the
amount to be paid to the Government had been paid, the Asst.
Registrar ordered for the release of the said fixed deposit receipt.
Ex.D.5 is the order of the Asst. Registrar Chit Funds dated 09.03.2021
to release the fixed deposit receipt for an amount of Rs.5 lakhs dated
30.08.2017 deposited in Punjab National Bank, Mahalakshmi Layout
Branch in respect of chit group No.SK 5LG1 in favour of the
Shaktikumar Chit Funds India Pvt. Ltd. It discloses that at the time of
the commencement of the chit group number SK 5LG1 the said fixed
deposit receipt was kept with the Asst. Registrar Chit Funds and after
satisfaction that the subscribers of the chit have been duly paid after
completion of the said chit on 4.09.2020 and that the amount to be
paid to the Government had been paid, the Asst. Registrar ordered for
the release of the said fixed deposit receipt.
21. On perusal of the said documents, it is clear that two chit
groups bearing numbers SK 5LG1 and SK 2LG1 have been started by
the accused on behalf of Shaktikumar Chit Funds India Pvt. Ltd. The
period of chit group number SK 5LG1 is from 30.08.2017 to
04.09.2020 and the period of chit group number SK 2LG1 is from
03.10.2017 to 04.07.2020. The documents clearly show that the
18 CC.4146/2020 (J)
accused run registered chits only by following all the provisions and the
rules under the Chit Funds Act and the company of the accused is the
registered chit company. It is alleged in the complaint that the chit
group of Rs.10 lakhs was started by the accused in February 2016 and
the complainant took two chits of Rs.10 lakhs and became the
subscriber paying the monthly subscription of Rs.25,000/ each in
respect of two chits. He has been paying Rs.50,000/ per month
commencing from February 2016 till December 2018. The chit group
number is not mentioned in the complaint. Neither it is mentioned
about the chit agreement, passbook and the receipts in the complaint
nor they are produced. The accused was crossexamined by the counsel
for the complainant in respect of the documents such as the chit
agreements at Ex.D.9 and Ex.D.12 being created by the accused but
nothing worth was elicited. On the other hand, when PW1 was cross
examined by the counsel for the accused, it was elicited that the chit
subscribed by the complainant is not the registered chit and that the
accused was also running unregistered chits apart from the registered
chits. It was elicited that there was no chit agreement between him and
the accused. It was also elicited that the accused gave the receipts for
having paid Rs.25,000/ each in respect of two chits i.e., Rs.50,000/
per month and the accused also gave the passbook but the accused took
back the passbook and all the receipts and executed On Demand
Promissory Note and Consideration Receipt in favour of the
complainant. There is no document on record to show that the
complainant was the subscriber of the unregistered chit run by the
accused as alleged. Even the complainant did not produce the On
Demand Promissory Note and Consideration Receipt executed by the
accused in his favour. It was neither produced at the time of sworn
19 CC.4146/2020 (J)
statement nor at the time of his examinationinchief though it was
available with him all the time. It is also pertinent to note that there is
no averment in the notice as well as the complaint about the execution
of On Demand Promissory Note and Consideration Receipt by the
accused. When it was asked to the complainant that whether he had
any documents to show that the accused was running unregistered
chits, the complainant attempted to produce the On Demand
Promissory Note and Consideration Receipt during his cross
examination. The On Demand Promissory Note and Consideration
Receipt even if produced could not be considered as the proof of
accused having run the unregistered chit. Further the production of
document during crossexamination+ was opposed by the counsel for
the accused. The Court passed a specific order stating that as the stage
was set down for crossexamination, the document could not be taken
on record and marked in evidence and liberty was given to the
complainant to produce and mark the said document during his further
examinationinchief. The complainant has not done the sae. The
counsel for the complainant confronted the said On Demand
Promissory Note and Consideration Receipt to the accused during his
crossexamination but the accused denied the execution as well as the
signature in the said document and therefore it was not marked in the
evidence. Thereafter the complainant did not make any effort to recall
himself to get the said document marked in the evidence. Nonetheless
the complainant being the practicing Advocate and having the legal
knowledge as well as the knowledge of transactions, he would have at
least kept the photocopies of the documents before handing over them
to the accused. During his crossexamination PW1 stated that he did
not keep any records due to the faith on the accused. No prudent man
20 CC.4146/2020 (J)
would do that. Therefore it is not believable. Hence on perusal of the
oral and documentary evidence on record, this Court is of the opinion
that the complainant failed to prove that he is subscriber of the alleged
unregistered chit run by the accused.
22. It is also the defence of the accused that the complainant
has no financial capacity to pay the monthly chit subscription of
Rs.25,000/ each in respect of 2 chits i.e. Rs.50,000/ per month and he
has also no capacity to pay Rs.3 lakhs as alleged in the complaint. As
far as the financial capacity of the complainant to pay the aforesaid
amount is concerned, the contention of the accused can not be believed
as the accused himself took defence that he took Rs.15 lakhs mortgage
loan from the complainant and repaid it. This clearly show that the
accused has financial capacity to pay the aforesaid amount. However it
can not be believed in the absence of cogent evidence regarding the
complainant being the subscriber of the unregistered chit alleged to
have run by the accused that the complainant paid those installments
in cash. Further in respect of the Rs.3 lakhs being paid by the
complainant to the accused, it was elicited in the cross examination of
PW.1 that the amount of Rs.3 lakhs was not paid at once but in
installments. The mode of payment and the dates of payment were not
mentioned in the complaint. This creates doubt in the transaction as
alleged by the complainant.
23. It is clear from the complaint and evidence on record that
the chit alleged to have run by the accused is unregistered chit. The
complainant alleged to have become subscriber of the chit group of 40
members of worth of Rs.10 lakhs and took two chits. The complainant
21 CC.4146/2020 (J)
alleged to have paid 34 installments in respect of two chits having
monthly subscription of Rs.25,000/ each i.e. Rs.50,000/ per month
totally amounting to Rs.17 lakhs and the accused took Rs.3 lakhs from
him with assurance to return the amount of Rs.20 lakhs with interest.
As discussed above, the complainant failed to prove that he was
subscriber of unregistered chit run by accused and paid Rs.20 lakhs to
the accused. Even though it is assumed that the complainant is
subcriber of the unregistered chit and paid the monthly subcriptions as
alleged and the accused issued the cheque in question in discharge of
the said chit liability, it is to be considered whether such liability
becomes the legal debt or liability or not as per the explainantion
appended to Section 138 of NI Act. Therefore it is important to discuss
the issue as to whether the cheque in question, which is said to have
been issued towards chit liability can be said to have been issued in
discharge of a legal debt or liability. At this juncture it is necessary to
discuss the law governing Chit Funds. The Chit Funds Act, 1982
(hereinafter referred to as the Chit Funds Act). It provides for
mandatory registration of chit fund companies, in addition to sanction
with respect to each chit scheme individually. It also mandated a
provision for minimum capital requirements for a company intending
to organize a chit fund, written chit agreements between the foreman
and the subscribers detailing their respective contractual obligations,
and other similar regulations to protect investor's interest. As per the
rules, a Chit Fund company, in order to run business is required to first
obtain a certificate of incorporation from the Registrar of Companies.
Then the same needs to be registered with the Chit Fund Department of
the government after compliance with the elaborate formalities
including drawing up of bye laws and spot inspection by the registrar.
22 CC.4146/2020 (J)
As per the Act, a prior registration is mandatory. In addition to the
above, every new chit group organized needs to be approved from the
Registrar. Moreover as per provisions laid down in Sections 4 and 5 of
the Chit Funds Act, no person shall commence or conduct any chit or
publish any notice, circular, prospectus, proposal or other document
inviting the public to subscribe for tickets in any chit unless previous
sanction of the State Government is obtained and unless the chit is
registered in that State. A written chit agreement is mandated as per
Section 6 of the Chit Funds Act which must include the details
regarding the subscribers, the amount of subscription and various other
particulars. Moreover, the said chit fund agreement is required to be
filed with the Registrar, as per provisions of Section 7. It is also
mandated that the foreman has to provide copy of the chit fund
agreement to all the subscribers, as per provisions of Section 10 of Chit
Funds Act. Most importantly, the subscribers to the chit fund are
entitled to receive a receipt for the payment made by them in lieu of
installments, as per provisions of Section 27 of the Chit Funds Act. The
act also requires the foreman to give security of an amount equal to the
chit amount, before applying for sanction. This has been done with
object of protecting the interest of the investor. As per Section 13 of the
Chit Funds Act, no foreman, other than a firm or other association of
individuals or a company or cooperative society, shall commence or
conduct chits, the aggregate chit amount of which at any time exceeds
twentyfive thousand rupees. It is pertinent to note that the accused
runs registered chit company by name Shaktikumar Chit Funds India
Pvt Ltd but the complainant being the practicing Advocate and having
the legal knowledge did not choose to invest in registered chit of the
accused and instead invested in the unregistered chit. It is clear that the
23 CC.4146/2020 (J)
complainant is not the subscriber of registered chit. The unregistered
chit as alleged by the complainant is of the value of Rs.10 lakhs and it
is in gross violation of the provisions of the Act.
24. Therefore the question to be considered is whether such an
agreement between the parties, which is forbidden by law can give rise
to legally enforceable contract. The prosecution U/s 138 of the Act can
be sustained, if the debt or liability is legally enforceable. The
agreement to contribute made by a subscriber to an unregistered chit
fund being run in violation of the statute is legally unenforceable. Such
an agreement, the object of which is forbidden by law, if given effect to
would defeat the provisions of statute i.e. Chit Funds Act. Section 4 & 5
of the Chit Funds Act, 1982 prohibit running of a chit fund or
proposing subscriptions in a chit fund without sanction. Also there is
clear violation of Section 13 of the Chit Funds Act. The complainant
and accused knew that running chit without compliance of the Act is
illegal. Even though they did not know, ignorance of law is no excuse.
The Courts can not enforce an illegal agreement at the instance of a
person, who is himself a party to an illegality or fraud. It is clear that
the inherent infirmities in the case of the complainant are sufficient to
rebut the presumption of legal liability. Thus the complainant has failed
to establish one of the fundamental ingredients of Section 138 of the
Act, i.e. that the dishonoured cheque was issued in discharge of a
legally recoverable debt or liability.
25. The aforesaid reasons are sufficient to hold that the
complainant failed to prove the issuance of cheque by the accused in
24 CC.4146/2020 (J)
his favour in discharge of the legally enforceable debt as alleged. It is
well settled that the accused needs to prove his defence by
preponderance of probabilities. It is sufficient if the doubt is created on
the alleged transaction. The accused has created the doubt on the
alleged issuance of cheque in favour of complainant as alleged in the
complaint. Therefore this Court is of the opinion that the accused
rebutted the statutory presumption U/s.139 and 118(a) of the Act.
Accordingly, the accused is found not guilty for the offence punishable
U/s.138 of the N.I.Act. Hence, the Point No.1 is answered in the
Negative and Point No.2 is answered in the Affirmative.
26. Point No.3 : In view of the reasons assigned on Point No.1
and 2, I proceed to pass the following:
ORDER
As per the provisions of Sec.255(1) Cr.P.C. the accused is hereby acquitted of the offence punishable u/s.138 of NI Act, 1881.
The personal bond executed by the accused and surety bond stand cancelled.
(Dictated to the Stenographer, transcript thereof is computerized and printout taken by him, is verified and then pronounced by me in Open Court on this the 18th day of January2022.) (Lokesh Dhanapal Havale) XV Addl. CMM., Bangalore.
25 CC.4146/2020 (J) ANNEXURE Witnesses examined for the Complainant: PW.1 Maniklal M.Dhongadi Documents marked for the Complainant: Ex.P.1 Cheque.
Ex.P.1a Signature of the accused. Ex.P.2 & P.3 Two Bank endorsements.
Ex.P.4 Legal Notice.
Ex.P.5 & P.6 Two Postal Receipts.
Ex.P.7 Postal Envelope.
Ex.P.8 Office copy of letter given to
postal authorities.
Ex.P.9 Reply issued by the Postal authorities.
Ex.P.10 C.C of the FIR.
Ex.P.11 C.C. of complaint made to the
Police Commissioner.
Ex.P.12 Letter to PSI, Basaveshwarnagar P.S.
to close the complaint.
Ex.P.13 C.C. of the police complaint given in
Basaveswaranagar P.S.
Ex.P.14 Endorsement issued by police.
Ex.P.15 Certified copy of another complaint.
Witnesses examined For Defence: DW1 Shakti Kumar.
26 CC.4146/2020 (J) Documents marked for Defence: Ex.D.1 Certified copy of registered Mortgage Deed. Ex.D.2 Certified copy of registered Deed of Cancellation of Mortgage.
Ex.D.3 Certified copy of registered Sale Deed. Ex.D.4 Orders of Asst. Registrar, Chit Funds in respect of releasing FD reciept in favour of accused in respect of Chit Group No.SK 2LG1 ExD.5 Orders of Asst. Registrar, Chit Funds in respect of releasing FD reciept in favour of accused in respect of Chit Group No.SK 5LG1 Ex.D.6 Order of Asst. Registrar, Chit Funds dated 30.8.2017 to manage Chit Group No.SK 5LG1.
Ex.D.7 Chit Certificate dated 31.08.2017 issued by Asst.
Registrar, Chit Funds in respect of Chit Group No.SK 5LG1.
Ex.D.8 Chit Certificate dated 03.10.2017 issued by Asst.
Registrar, Chit Funds in respect of Chit Group No.SK 2LG1.
Ex.D.9 Chit Agreements of 40 Members of Chit Group No. SK 2LG1.
Ex.D.10 Police Commissioner Acknowledgement. Ex.D.11 Certified copy of the complaint in PCR.No.17425/2021.
Ex.D.12 Chit Agreements of 40 Members of Chit Group No. SK 5LG1.
(Lokesh Dhanapal Havale) XV Addl. CMM., Bangalore.