Bangalore District Court
Has Taken Distinct Defenses And Thus The vs Beyond Reasonable Doubts And Nothing ... on 20 December, 2018
Crl. A. No.941/2017
1
IN THE COURT OF THE PRINCIPAL CITY CIVIL AND
SESSIONS JUDGE, AT BENGALURU
DATED THIS THE 20th DAY OF DECEMBER, 2018
PRESENT: SRI. SHIVASHANKAR B.AMARANNAVAR,
B.Com., LL.M.,
Principal City Civil and Sessions Judge,
Bengaluru.
CRL. A. No. 941/2017
BETWEEN:
Mr. Santosh S. Lad
S/o Shivaji Lad
Aged about 42 years
No.520, Amruth Nivas
7th Main, 13th Cross
RMV 2nd Stage
Dollars Colony
Bengaluru - 560 095. .. APPELLANT
(By Sri.Manjunath K.V., Advocate)
AND
M/s Rockline Entertainment Pvt. Ltd.,
A Limited Company having office at
No.96, Dr. Rajkumar Road
Bengaluru - 560 021.
Represented by its Director
Mr. T.N. Venkatesh .. RESPONDENT
(By Sri. A.Gopiprakash, Advocate)
JUDGMENT
The appellant has preferred the above appeal challenging the legality and correctness of the Judgment Crl. A. No.941/2017 2 dated 19.6.2017 passed by the XLII Additional Chief Metropolitan Magistrate, Bengaluru, in C.C. No.21527/2015 holding the appellant guilty of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 and sentencing the appellant to undergo simple imprisonment for five months and to pay fine of Rs.7,25,05,000/- and in default to undergo simple imprisonment for a period of six months.
2) The appellant has preferred the appeal on the following grounds:
The judgment passed by the trial Judge is unsustainable in law and is passed with no application of mind and without appreciation of evidence placed before the court; that the view taken by the trial court that the appellant has taken distinct defenses and thus the appellant is liable to be held guilty of the offence alleged, is unsustainable in law; that the only parameter for the trial court to hold the accused guilty is the impeccable evidence produced by the complainant proving the guilt of the accused beyond reasonable doubts and nothing else; that the trial court in its impugned judgment, has referred to the Memo filed by the appellant and the reason for the refusal to accept the said proposal for settlement; that when it was very clear from the records made available by the respondent himself that the cheques were issued by the appellant in relation to the loan availed by M/s. Media One Crl. A. No.941/2017 3 Global Entertainment Pvt. Ltd., and that they intended to settle the matter by repaying the amounts due under said cheques, the learned Magistrate is not justified in holding the appellant guilty and pass unreasonable sentence; that unfortunately, the learned Magistrate has virtually pushed the appellant for this litigation, which was otherwise unwarranted in view of the matter being settled amongst parties, if the trial court had not proceeded to pass the impugned judgment, even though demand drafts were also shown to the learned Magistrate to demonstrate bona fide of the appellant; that looking from any angle, the impugned judgment is highly unreasonable, unsustainable in the eye of law, contrary to the facts and based on notional conclusion without application of judicious mind to the facts and law.
3) On service of notice, the respondent appeared through counsel. The lower court records were secured.
4) Heard the arguments of the learned senior counsel Sri.Prabhulinga Navadgi appearing for the appellant and the learned counsel for respondent and perused the written arguments filed by Advocate for Appellant.
5) The following point arises for my consideration:
Point No.1: Whether the appellant has
made out grounds to interfere in the
Crl. A. No.941/2017
4
judgment of conviction for offence under Section 138 of N.I. Act?
Point No.2: Whether the sentence imposed is excessive? If so, what is the adequate sentence?
Point No.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 the final order for the
following:
REASONS
7) Point No.1: The learned senior counsel
Sri.Prabhulinga Navadgi appearing for the appellant has argued only on two points, even though several grounds have been raised in the appeal memo. The first contention is that as per Clause 3 of Ex.P1 Agreement, the respondent has not terminated the agreement and the appellant being the guarantor is not liable to pay the amount as the contract is a contingent contract for which termination of the agreement is essential. The second contention is that the complaint has been filed by one Sri.T.N. Venkatesh as a Crl. A. No.941/2017 5 Director of Complainant M/s Rockline Entertainments Pvt.
Ltd., and he has no authority to file the complaint.
8) It is the case of the respondent-complainant that the appellant-accused approached the complainant and requested to lend a sum of Rs.6 Crores to save M/s Media One Global Entertainment Limited from its debt by assuring that the appellant-accused himself would repay the same. Accordingly, the respondent-complainant agreed to clear the loan of the said M/s Media One Global Entertainment Limited and lent money through demand draft on 17.11.2014 in favour of M/s Sheetal Developers. The appellant-accused to discharge the said liability issued ten cheques bearing Nos.000201 to 000210 and agreement was executed to that effect on 24.11.2014 as per Ex.P1. Out of the said ten cheques, the appellant-accused got back three cheques and as per the request of the appellant- accused, the respondent-complainant presented the remaining seven cheques for encashment, but all the cheques dishonoured with endorsement 'Funds Insufficient'. Even after the issuance of legal notice, the accused failed to pay the amount covered under the cheques, but got issued false reply. The complaint has been filed on 24.7.2015. The issuance of the cheque, presentation of the cheque, dishonour of cheques for insufficient funds and issuance of legal notice and filing of the complaint in time is not disputed by the appellant- accused. The learned senior counsel Sri.Prabhulinga Crl. A. No.941/2017 6 Navadgi has contended that there was no liability of the appellant-accused and therefore the cheques have not been issued for discharge of debt or liability. He further contended that the appellant-accused only stood as guarantor and his liability is contingent and the appellant is liable only in the event M/s Media One Global Entertainment Limited does not pay the loan amount to the respondent-complainant within 160 days and the respondent terminates the agreement Ex.P1. On that point he relied on the clauses of Ex.P1. For the purpose of better understanding, the clauses 1 to 3 of Ex.P1 are extracted as under:
"1. The Party of the second part has granted a loan of Rs.6,00,00,000/- (Rupees Six Crores only) to the First Party.
2. It is understood between the parties that M/s. Media One Global Entertainment Ltd., shall discharge the loan amount within the stipulated period of 160 days from the date of this Agreement, failing which the First Party shall ensure the payment and discharge of the loan amount.
3. Whereas failure on the part of M/s. Media One Global Entertainment Ltd., to discharge the loan amount within 100 days as agreed above, then the First Party shall discharge the loan Crl. A. No.941/2017 7 amount at the time of termination of this Agreement or the Second Party shall have full rights to recover the said loan amount through cheques issued by the First Party, (SB Account No.12081000034245) vide Nos. 000201, 000202, 000203, 000204, 000205, 000206, 000207, HDFC Bank Limited, Miller Road, Bangalore."
9) Ex.P1 is the agreement between two parties i.e., the appellant-accused being the First Party and respondent-complainant being the Second Party. There are no other parties in Ex.P1, but Dr.J.Murali Manohar has signed the agreement as Confirming Party. The said Dr.J.Murali Manohar appears to be the Director of M/s. Media One Global Entertainment Limited. The respondent- complainant has lent Rs.6 crores to M/s. Media One Global Entertainment Limited and at the request of appellant- accused, has paid the said amount of Rs.6 Crores to M/s Sheetal Developers through DD bearing No.013674 dated 17.11.2014 drawn on Axis Bank, Peenya Branch, Bangalore, to clear the loan amount availed by M/s. Media One Global Entertainment Limited. As per the terms of Ex.P1, the appellant-accused being the First Party has ensured prompt repayment of the entire loan amount within the stipulated period of 160 days from the date of the said agreement i.e., 24.11.2014. As per Clause 1 of Ex.P1 agreement extracted as above, the respondent- complainant has granted loan of Rs.6 Crores to the Crl. A. No.941/2017 8 appellant-accused. As per Clause 2, M/s. Media One Global Entertainment Limited, shall discharge the loan amount within the stipulated period of 160 days from the date of agreement, failing which the First Party i.e., the appellant- accused shall ensure the payment and discharge the loan amount. It is not the case of the appellant-accused that M/s. Media One Global Entertainment Limited has discharged the loan amount within the stipulated period of 160 days. M/s. Media One Global Entertainment Limited coming forward to issue D.D. in favour of the respondent- complainant during pendency of the criminal case before the court below and the same goes to show that it has not discharged the loan amount within the stipulated period. Therefore, as per Clause 2, the appellant-accused has to ensure the payment and discharge the loan amount.
10) It is the contention of the learned senior counsel appearing for the appellant-accused that to invoke the liability of the appellant-accused, the respondent- complainant has to terminate the agreement Ex.P1 as contained in Clause 3. He further contended that PW.1 in his cross-examination has admitted that he has not terminated the agreement Ex.P1. As per Clause 3 of Ex.P1, if M/s. Media One Global Entertainment Limited fails to discharge the loan amount within 160 days as agreed, then the appellant-accused shall discharge the loan amount at the time of termination of agreement Ex.P1 or the second party i.e., the respondent-complainant shall have full rights Crl. A. No.941/2017 9 to recover the said loan amount through cheques issued by the first party i.e., appellant-accused. A plain reading of Clause 3 clearly shows that if the first party i.e., the appellant-accused discharges the loan amount, then the agreement Ex.P1 is to be terminated. If the first party i.e., appellant-accused fails to discharge the loan amount, then the second party i.e., the respondent-complainant shall have full rights to recover the said loan amount. The two terms i.e., "then the First Party shall discharge the loan amount at the time of termination of this Agreement" and "the Second Party shall have full rights to recover the said loan amount through cheques issued by First Party" are separated by the word 'or'. Therefore, the said word 'or', which separates the said two terms gives right to the second party i.e., respondent-complainant to recover the loan amount through cheques issued by the first party i.e., appellant-accused on his failing to discharge the loan amount. There is no necessity of termination of the agreement as contended by learned senior counsel appearing for the appellant-accused. If the agreement Ex.P1 is terminated, without receiving any loan amount from first party i.e., appellant-accused, then the second party i.e., respondent-complainant will not have any right to recover the loan amount through the cheques issued by the appellant-accused.
11) The learned senior counsel has placed reliance on a decision between Western Coal Fields Limited vs. Crl. A. No.941/2017 10 Rajesh - reported in 2012 (1) Mah. L J 394, wherein paragraphs 19 and 20 it is held as under:
"19. In the context of the aforesaid position of law laid down by the Apex Court, section 126 of the Indian Contract Act, 1872, regarding contract of guarantee needs to be seen. The said provision of section 126 is, therefore, reproduced below - Section 126. 'Contract of guarantee', 'surety', 'principal debtor' and 'creditor' - "A 'contract of guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the 'surety'; the person in respect of whose default the guarantee is given is called the 'creditor'. A guarantee may be either oral or written."
A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default. The person who gives the guarantee is called 'surety'; the person in respect of whose default the guarantee is given is called the 'principal debtor', and the person to whom the guarantee is given is called the 'creditor'.
20. Section 31 of the Indian Contract Act, 1872, defines the contingent contract and the same is reproduced below -
Crl. A. No.941/2017 11 Chapter III : OF CONTINGENT CONTRACTS "Section 31. "Contingent contract" defined
- A "contingent contract" is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen."
Section 32 of the said Act, deals with the enforcement of the contracts contingent on an event happening, and the same is also relevant hence, reproduced below -
"Section 32. Enforcement of contracts contingent on an event happening. Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened.
If the event becomes impossible, such contracts become void."
A contract of guarantee is an independent contract between the Bank and the beneficiary thereof and if it is a contract, which permits the creditor to invoke the Bank Guarantee upon happening of an uncertain future event, then it becomes a 'contingent contract' as defined under section 31 and it cannot be enforced by law unless Crl. A. No.941/2017 12 and until that event has happened, in view of the provision of section 32. Till happening of an event, it merely remains a contract which is unenforceable. In case of such contingent contract, the beneficiary has no unfettered right to invoke the Bank Guarantees and to demand immediate payment. The terms of such contract will have to be strictly construed and if it prescribes the manner in which performance is to be claimed, it will have to be seen as to whether the performance is claimed, in the manner so prescribed. If the invocation is not in accordance with the terms and the manner prescribed, it would be bad. The violation of the terms can be regarded as the species of the same genus as fraud which disentitles a beneficiary to invoke the Bank Guarantees."
12) The appellant-accused is a guarantor to the loan availed by M/s. Media One Global Entertainment Limited from the respondent-complainant. In the event of failure to perform the promise or discharge the liability by M/s. Media One Global Entertainment Limited, the appellant- accused being the guarantor and as per the terms of agreement Ex.P1 liable to pay the amount of Rs.6 Crores to the respondent-complainant. The said M/s Media One Global Entertainment Limited has failed to discharge the loan amount within 160 days from the date of Ex.P1 and Crl. A. No.941/2017 13 therefore the appellant-accused being the guarantor is liable to pay the said loan amount. Therefore, the cheques issued by appellant-accused as per Ex.P2 to P8 in favour of the respondent-complainant are issued in discharge of legally enforceable debt or liability. The respondent- complainant has complied all the ingredients of Section 138 and 142 of N.I. Act, and therefore the court below has rightly raised presumption under Section 139 of N.I. Act. Therefore, the court below has rightly convicted the appellant-accused for offence under Section 138 of N.I. Act, by the impugned judgment. The appellant-accused has not made out any grounds to interfere or set aside the judgment of conviction passed by the court below dated 19.6.2017.
13) The learned senior counsel appearing for the appellant-accused has argued that Mr.T.N. Venkatesh has no authority to present the complaint on behalf of the complainant. Ex.P14 is the Certificate of Incorporation of Rockline Entertainments (P) Ltd., issued by Registrar of Companies, Karnataka, Bengaluru. The said Ex.P14 clearly establishes that Rockline Entertainments (P) Ltd., is a company incorporated under the provisions of Companies Act, 1956. Ex.P15 is Memorandum of Association and Ex.P16 is Articles of Association of the said Rockline Entertainments (P) Ltd. Ex.P17 is the copy of the Resolution dated 15.9.2014 passed in the Meeting of the Board of Directors of Rockline Entertainments (P) Ltd.
Crl. A. No.941/2017 14 Under the said Resolution, he has been authorised to enter into agreement, to represent the company in front of local bodies, authorities, courts, to appoint lawyers etc. Therefore, as per the said resolution Ex.P17 of the respondent-complainant, Mr. T.N.Venkatesh has authority to present the complaint, which is filed on 24.7.2015, which is subsequent to the date of the said resolution.
14) The learned senior counsel appearing for the appellant-accused has relied upon two decisions namely, (1) State Bank of Travancore vs. Kingston Computers India Pvt. Ltd., reported in 2011 (11) SCC 524 and (2) Canara Workshops Ltd., vs. Mantesh reported in 2014 (1) K L J
449. The facts of the said two decisions are different and therefore the said decisions are not applicable to the case on hand. The appellant-accused failed to make out any ground to interfere with the judgment of conviction dated 19.6.2017 passed in CC No.21527/2015 convicting the appellant-accused for offence under Section 138 of N.I. Act. Accordingly, I answer the point No.1 in the Negative.
15) Point No.2: The appellant-accused who has been convicted for offence punishable under Section 138 of N.I. Act has been sentenced to undergo simple imprisonment for five months and sentenced to pay a fine of Rs.7,25,05,000/- and in default shall undergo simple imprisonment for six months. Out of fine amount, a sum of Rs.7,25,00,000/- has been ordered to be paid to the Crl. A. No.941/2017 15 complainant towards compensation under Section 357 of Cr.P.C., and the balance amount of Rs.5000/- shall be remitted to the State. The punishment provided for offence punishable under Section 138 of N.I. Act is, with imprisonment for the term which may extend to two years or with fine, which may extend to twice the amount of the cheque or with both. The main object of the offence enumerated under Section 138 of N.I. Act is to see that the cheques are honoured in the area of trade and commerce or in the daily transactions between persons. The imposition of punishment of imprisonment in case of dishonour of cheque is not necessary as the main purpose of the said provision is to see that the holder / bearer of the cheque gets the cheque amount. It is sufficient that if fine is imposed on the offender, who has committed offence punishable under Section 138 of N.I. Act and the said fine amount is ordered to be paid as compensation to the complainant. In the present case, the court below has awarded sentence of imprisonment of the appellant- accused for five months. The said imprisonment appears to be excessive, it would be suffice if the appellant-accused is sentenced to pay fine off Rs.7,25,05,000/- and in default of payment of the said fine, he shall undergo simple imprisonment for a period of six months. Therefore, the sentence imposed by the court below requires to be modified. Therefore, I hold that the sentence imposed by the court below is excessive and it would be suffice that the sentence of fine as imposed by the court below is sufficient Crl. A. No.941/2017 16 to meet the ends of justice. Accordingly, I answer the point No.2 in the Affirmative.
16) Point No.3: In the result, I proceed to pass the following:
ORDER The Appeal is partly allowed.
The conviction of the appellant-accused passed by the court below for offence under Section 138 of N.I. Act is affirmed. The imposition of sentence is modified as under:
"The appellant-accused is sentenced to pay fine of Rs.7,25,05,000/- and in default shall undergo simple imprisonment for six months. Out of the fine amount of Rs.7,25,05,000/- a sum of Rs.7,25,00,000/- is ordered to be paid to the complainant towards compensation under Section 357 of Cr.P.C., and the balance amount of Rs.5000/- shall be remitted to the State."
(Dictated to the Judgment Writer, transcribed and computerized by him, then corrected, signed and pronounced by me in the open Court on this the 20th day of December, 2018).
(SHIVASHANKAR B. AMARANNAVAR) Principal City Civil & Sessions Judge, Bengaluru.
*sk/-
Digitally signed by SHIVASHANKAR SHIVASHANKAR BASAPPA AMARANNAVAR
DN: cn=SHIVASHANKAR BASAPPA
BASAPPA AMARANNAVAR,ou=HIGH COURT
OF KARNATAKA,o=GOVERNMENT
AMARANNAVAR OF KARNATAKA,st=Karnataka,c=IN
Date: 2018.12.20 17:19:18 IST