Bangalore District Court
Ms Rajesh Exports Ltd vs K V Kishore on 6 November, 2024
KABC020183332007
IN THE COURT OF THE ADDL. CHIEF METROPOLITAN
MAGISTRATE, BENGALURU CITY.
-:: PRESENT ::-
SMT. PRAKRITI KALYANPUR, B.A(L),LL.B., LL.M.
DATED THIS THE 6th DAY OF NOVEMBER 2024
XXIII ASCJ & XXI ACJM.
1. Sl. No. of the Case : C.C.No.19781/2007
2. The date of 03.08.2007
complaint of :
commission of
offence
3. Name of the M/s RAJESH EXPORTS
Complainant : LTD.
A company incorporated
under company's Act and
having its office at No.4,
Batavia Chambers,
Kumara Krupa Road,
Kumara Park East,
Bangalore - 560 001.
and represented by its officer
Mr.Arjun Sanjay Kumar B.G.
(By Sri.P.Raju, K.Sampath
Kumar and Mahesh Kumar
K.M., Advocate/s.)
4. Name of the Accused Mr. K.V.Kishore
: S/o K.R.V.Rathnam,
SCCH-25SCCH-2 2 CC No.19781/2007
Managing Director of
M/s Jewel De Paragon Pvt.
Ltd.,
Rathnam's Complex,
10/5, Kasturba Road,
Bangalore - 560 001.
(By Sri.S.R.Kamalacharan.,
Advocate.)
5. The offence : u/Sec.138 of Negotiable
complained of Instruments Act
6. Plea of the Accused : Pleaded not guilty
7. Final order : Accused is Convicted.
8. Date of such order : 06.11.2024
JUDGMENT
The complainant has filed this complaint u/s.200 Cr.P.C. against the accused for the offence punishable u/s. 138 of N.I. Act.
2. The complainant's case in brief is as follows:
The complainant is a Company registered under the Companies Act. The Complainant company is engaged in the business of sale of Gold jewelry and gold bullion. The SCCH-25SCCH-2 3 CC No.19781/2007 Accused is one of the customers of the complainant company. The Accused had business transactions with the complainant company. He was the Managing Director of M/s Jewel De Paragon Pvt. Ltd., and was purchasing gold and gold jewelry from the complainant company from time to time on credit basis. In respect of the purchase so made, by the accused he was due to the complainant company an amount of Rs.3,00,00,000/-. For repayment of the said amount the accused issued a Cheque in his personal capacity for the discharge of liability of his company. The complainant company has no other relationship with the accused except business relationship. Hence, he issued a Cheque bearing No.851101 dated 05.04.2007 for a sum of Rs.3,00,00,000/- drawn on State Bank of India, Specialized personal Banking branch, Bangalore - 560 001 in favour of the complainant and assured that the cheque would be honoured when presented. But when the complainant presented the same on 05.04.2007 before the Canara Bank, Madhavanagara Branch, the same was returned with endorsement "Account Closed"
SCCH-25SCCH-2 4 CC No.19781/2007 dated 07.04.2007 and was intimated to the complainant company on 09.04.2007. The said fact was brought to the notice of the accused by sending demand notice through RPAD & UCP on 26.04.2007 and the said notice was duly served on 03.05.2007. The accused has neither replied nor paid the amount. In spite of repeated request and demands, the accused failed to repay the amount covered under the Cheque. Hence this complaint.
3. Since it was a complaint filed u/s. 200 Cr.P.C., after taking cognizance, the sworn statement of the complainant was recorded and process was issued against the accused. The accused appeared through his counsel and got enlarged on bail. The plea was recorded and the accused pleaded not guilty.
4. Thereafter the complainant got examined its Authorized Representative as PW.1 and got marked 13 documents as per Ex.P.1 to 13. Thereafter, the evidence recorded against the accused was read over to him as required u/s. 313 of Cr.P.C., and his answers were recorded.
SCCH-25SCCH-2 5 CC No.19781/2007 To disprove the case of the complainant, the Accused has got examined himself as DW.1 and got marked Exs.D.2 to D.10. During the cross examination of PW.1, the counsel for the accused confronted the document and got marked Ex.D.1.
5. Heard arguments of both sides. Perused the oral and documentary evidence placed before the court. Both the counsel have filed written arguments.
The counsel for the Accused has furnished the decisions as follows:
1. (2023) 1 SCC 578 : Dasharathbai Trikambhai Patel Vs. Hitesh Mahendrabhai Patel AND Anr.
2. Crl. Revision Petition No.768/2018 : S.K.Honnappa Vs. S.A.Murthy.
3. (2016) 12 scc 288 : Muddasani Venkata Narsaiah (dead) though Lrs. Vs. Muddasani Sarojana.
The counsel for the Complainant has furnished decisions as follows:
1. (2013) 1 SCC 177 : MSR Leathers Vs. S. Palaniappan.
2. (2023) 10 SCC 148 : Rajesh Jain Vs. Ajay Singh.
SCCH-25SCCH-2 6 CC No.19781/2007
3. (2022) 16 SCC 762 : Sunil Todi Vs. State of Gujarat.
4. ILR 2018 KAR 4775 : v.V.Chari Vs. M/s Meenakshi Developers.
5. (2015) 9 SCC 622 : Mainuddin Abdul Sattar Vs. Vijay D. Salvi.
6. 2014 SCC Online Del 3428 : State Trading Corporation of India Ltd. Vs. Toepfer International Asia PTE Ltd.
7. (2005) 10 SCC 626 : Gurcharan Singh Vs. Allied Motors Ltd.,
8. Crl. A. 434/2018 : Durga Projects Vs. Babu Reddy.
9. (1999) 8 Supreme Court Cases 221: Central Bank of India & Anr. Vs. Saxons Farms and Ors.
6. The points that arise for my consideration are as follows:
1. Whether the complainant proves beyond reasonable doubt that the accused has issued a cheque bearing No.851101 dated 05.04.2007 for Rs.3,00,00,000/-, which was drawn on the State Bank of India, Specialized Personal Banking Branch, Bangalore, in its favour towards the discharge of legal debt and the same has been returned unpaid for the reason "Account Closed"
on 07.04.2007 and even after service of legal notice, accused has not paid the debt covered under the said cheque within the statutory period and thereby committed an offence punishable U/s.138 of N.I. Act?
2. What order?
SCCH-25SCCH-2 7 CC No.19781/2007
7. My findings to the above points are:
Point No.1: In the Affirmative;
Point No.2: As per final order
For the following:
REASONS
8. POINT NO.1:
The burden is on the complainant initially to prove that he has followed all the mandatory requirements of Sec.138 of N.I. Act.
The counsel for the Complainant has furnished decisions as follows:
1. (2013) 1 SCC 177 : MSR Leathers Vs. S. Palaniappan.
Wherein the Hon'ble Supreme Court of India has held:
Proviso to Section 138, however, is all important and stipulates three distinct conditions precedent, which must be satisfied before the dishonour of a cheque can constitute an offence and become punishable. The first condition is that the cheque ought to have been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. The second condition is that the payee or the holder in due course of the cheque, as the case may be, ought to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the SCCH-25SCCH-2 8 CC No.19781/2007 receipt of information by him from the bank regarding the return of the cheque as unpaid. The third condition is that the drawer of such a cheque should have failed to make payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. It is only upon the satisfaction of all the three conditions mentioned above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence under Section 138 can be said to have been committed by the person issuing the cheque.
2. (2023) 10 SCC 148 : Rajesh Jain Vs. Ajay Singh.
Wherein the Hon'ble Supreme Court of India has held that the accused need not prove the non existence of the presumed fact beyond reasonable doubt, but he must meet the standard of "preponderance of probabilities", similar to a defendant in a civil proceedings.
These Two decisions lay down the basic conditions of filing a complaint u/Sec.138 of NI Act and the standard of proof in the said proceedings.
In this connection, the complaint averments reveal that the accused towards purchase of gold, has issued cheque bearing No.851101 dated 05.04.2007 for a sum of Rs.3,00,00,000/- drawn on State Bank of India, Specialized Personal Banking Branch, Bangalore. The same is reiterated in the affidavit filed by the authorized representative of the SCCH-25SCCH-2 9 CC No.19781/2007 complainant company in lieu of his chief examination. In support of the same, he has produced and marked original cheque as per Ex.P.3, the signature of the accused as Ex.P.3(a).
9. The accused has not disputed his signature on the cheque nor has he disputed that the cheque belongs to his account. Therefore, the complainant has discharged his burden of proving that the cheque was issued by the accused.
The cheque was issued dated 05.04.2007 and the same was presented for encashment on 05.04.2007, which shows that the cheque was presented for encashment within the statutory period of three months. Ex.P.4 is the memo, which shows that the cheque was returned with endorsement "Account Closed" on 07.04.2007. Ex.P.5 is the legal notice sent by the counsel for the complainant to the accused dated 26.04.2007, which shows that the legal notice is issued within 30 days of the dishonour of the cheque. Ex.P.5(a) is the postal receipt and Ex.P.5(c) is the RPAD acknowledgment, which show that the RPAD has been served on 03.05.2007.
SCCH-25SCCH-2 10 CC No.19781/2007 The accused had 15 days either to comply with the demand notice or to reply to the same. Since he has failed to do the same, the cause of action to file a complaint has arisen and the complainant had time for another one month to file the complaint. He has filed the complaint on 16.06.2007, which shows that the complaint is within time. Therefore, the complainant has complied the mandatory provisions of Sec.138 of N.I. Act.
10. U/s.118 and 139 of N.I. Act the presumptions are available regarding consideration, as to the date and also the holder in due course about the cheque. When the complainant presents the cheque, it implies that it has been given to him by the accused for some purpose. Therefore, the presumption is raised in favour of the complainant.
11. There is no dispute by the Accused about the incorporation of the company of the complainant or about authorizing PW.1 to depose on behalf of the complainant.
There is also no dispute that the cheque belonged to the accused and he had issued it. The signature of the accused SCCH-25SCCH-2 11 CC No.19781/2007 on the cheque is also not disputed. There is also no dispute about the execution of the agreement at Ex.P.6. The complainant has stated that the initial gold of 50000 grams of gold was issued as per the 11 vouchers marked at Ex.P.7.
This is also not disputed by the accused, except vague denial in written arguments. In support of the same, there is also undertaking marked at Ex.P.8. Before proceeding further, it is important to refer some clauses of Ex.P.6, which are extracted here for easy reference.
Clause (3): The said 50000.000grams of 22 carat gold jewellery lent by "REL" will be utilized by "JDP" for its business purpose and in consideration of the said assistance rendered by "REL" to "JDP" reciprocally agrees as under:
(a) "JDP" agrees and covenants that it shall invariably make a purchase of minimum 45000.000 grams per quarter from "REL" (i.e., on an average 15000.000 grams per month as stated above). The minimum assured purchase per quarter by "JDP" from "REL" will be 45000.000 grams on immediate cash payment basis, at the prevailing rates at that time plus agreed making charges and all other levies such as sales tax etc leviable at the time the sale is effected would be added extra.
SCCH-25SCCH-2 12 CC No.19781/2007
(b) In the event of any shortage in purchase of 45000.000 grams per quarter from "REL" by "JDP", "REL" is entitled to collect a penalty of 4.5% on the value of the quantity of 22 carat gold jewellery which is not purchased by "JDP" from out of the minimum assured guaranteed purchase of 45000.000 grams for that particular quarter. For example, if in a particular quarter, "JDP" is able to purchase only about 35000.000 grams and does not purchase the balance of 10000.000 grams towards the assured minimum purchase of 45000 grams, then "REL" can at its discretion impose, levy and collect penalty at 4.5% of the value of 10000.000 grams of 22 carat gold jewellery. The value of the 10000.000 grams would be decided by "REL" as per market value". The penalty would be paid by "JDP" to "REL"
immediately on demand.
(c) Under no circumstances, "JDP" will be allowed to carry over the assured quantity purchase to the next or preceding quarter inasmuch as if a purchase is effected over and above 45000.000 grams, either prior to the defaulting quarter or after the defaulting quarter,such excess purchases so made will not in any manner ensure to the benefit of "JDP" for seeking any waiver of penalty for the shortage effected in the purchase made by "JDP" in the defaulting quarter. The levy of penalty of 4.5% per quarter is at the sole and absolute discretion of "REL" and an exclusive right of "REL".
(d) As against the value of the 50000.000grams of 22 carat god jewellery lent this day by "REL" to "JDP" categorically agrees that the said jewellery will be used exclusively by it for its business promotional purpose and that "JDP" shall SCCH-25SCCH-2 13 CC No.19781/2007 on an average, retain a minimum of 125 Kgs of 22 carat gold jewellery stock at its showroom/business establishment.
(e) "REL", can decide by itself as to when the loan should be terminated and the 50000.000grams of 22 carat gold jewellery be recalled by "REL". "JDP" in such an event, shall forthwith return the said 22 carat gold jewellery within fifteen days of notice from "REL". In case "JDP" fails to return the said 22 carat gold jewellery as stated above "JDP" shall be treated as a defaulter. The moment "JDP" is considered as a defaulter by "REL", then the 50000.000grams of 22 carat gold jewellery so lent by "REL" to "JDP" shall be treated, at that point of time, as having been automatically sold to "JDP" or as having been automatically purchased by "JDP". In such an event, the value of the said 50000.000grams of 22 carat gold jewellery stands automatically payable forthwith by "JDP" to "REL". To enable "REL" to forthwith collect the said value of 50000.000grams of 22 carat gold jewellery so deemed sold, as stated supra, "JDP" has this day issued a Cheque for Rs.3.00 crores in favour of "REL" (which reflects the value of such 50000.000grams of 22 carat gold jewellery as stated in clause 2 supra). "JDP" has this day handed over a Cheque bearing No.928314 drawn on State Bank of India, Overseas Branch in favour of "REL". The date in the said Cheque is left blank. "REL" has every right to fillup the date in the said Cheque and thereafter present the cheque for payment. The date, as stated above, is left blank in the cheque only because "REL" is given an absolute, unfettered and unhindred right to present the said cheque for payment at SCCH-25SCCH-2 14 CC No.19781/2007 any point of time from the date of issuance thereof, as it is the discretion of "REL" alone to hold "JDP" a defaulter and forthwith treat the said loan of 50000.000grams of 22 carat gold jewellery as sale and collect the sale consideration of Rs.3.00 crores form "JDP" (as stated above). However, if the 22 carat gold jewellery value, at that point of time exceeds Rs.3.00 crores for 50000.000grams of 22 carat gold jewellery, then "JDP" shall also forthwith pay the difference to "REL" and in case of delay in making this payment, "REL" is entitled for interest at 18% per annum compounded quarterly. Further it is agreed to between the parties to this deed that "REL" is entitled to levy and collect the imposition of Sales Tax and such other additional Tax/Taxes as are applicable under law at that point of time separately on the sales of 50000.000grams of 22 carat gold jewellery effected and "JDP" undertakes that the same shall be paid separately dehors the sun of Rs.3.00 crores.
(f) "JDP" has further executed the required On Demand Promissory Note and all other deeds including that of personal guarantee of its Managing Director so as to secure the repayment of the value of the 50000.000grams of 22 carat gold jewellery lent i.e., of value Rs.3.00 crores. As "JDP" is a company, incorporated under the Companies Act 1956, the person executing this agreement on behalf of "JDP" has also given a Cheque similar to the one issued by "JDP" for Rs.3.00 crores, without any date mentioned therein,bearing No.851101, drawn on State Bank of India, St.Marks Road Branch in favour of "REL" and duly signed by him in his personal capacity towards the liability. "REL", SCCH-25SCCH-2 15 CC No.19781/2007 has absolute discretion to present any of these two cheques and proceed in the event of a default against the said person individually, for recovery of otherwise. It is further agreed by "REL" that if any of the cheques are encashed after presentation the other cheque will be automatically returned to "JDP" "GUARANTOR" as the case may be, without encashing the same.
(g) "JDP" covenants that the issuance of the said cheque as stated in clause - 3(1) supra is one of the form of repayment and the manner of collecting the payment from "JDP" - is again left to the sole discretion of "REL". "JDP" will not in any manner cause any impediment for the presentation of the said cheque for enchasment by "REL", or in any manner cause any impediment for "REL" in effecting recoveries of all the amounts due with interest at 18% per annum compounded quarterly in any of the modes available at its option and discretion. "JDP" further convenants and agrees that it shall not in any manner issue any 'stop payment' instructions to its bankers in respect of any of the said cheque(s) or refrain from maintaining the required balance in the bank account or otherwise resort to any mode of preventing "REL" from encashing any of the said Cheque(s) at any point of time.
(h) "JDP" further agrees that apart from all the available modes, stated above, for effecting recoveries, "REL" shall also have every right to forthwith go over to the establishment' business place place of "JDP" and forthwith recover 22 carat gold jewellery upto the weight of 50000.000grams. In case of failure to recover up to SCCH-25SCCH-2 16 CC No.19781/2007 50000.000grams of 22 carat gold jewellery, "REL" has right to recover other jewellery/valuables up to a value of 3.00 crores. "REL" has been given such rights by "JDP" and "JDP" further convenants that at all times, "REL",its agents or servants can take into its possession 22 Carat gold jewellery of weight 50000.000grams or of value fo Rs.3.00 crores from the premise/business establishment shop or otherwise of "JDP" and for that purpose, "JDP" will give "REL", its agents or servants all facilities to enter in or upon any premises occupied by "JDP", to search for seizure and take possession of the said 22 carat gold jewellery, without being liable in any way for any action of trespass or otherwise.
(i) "JDP", hereby covenants agrees and undertakes that it shall not , in any manner, create any charge on 50000.000grams of 22 carat gold jewellery out of the jewellery present in its showroom/shop/business establishment and that "REL" shall have the 1 st charges/lien on 50000.000grams of the 22 carat gold jewellery in its showroom/shop/business establishment, irrespective of any claim by any other person/agency/bank/institution. It is expressly made clear that under no circumstances there will be any charge created by "JDP", be it by pledge, hypothecation or otherwise on atleast 50000.000gramsof 22 carat gold jewellery in its showroom/shop/business establishment and that at all points of time 50000.000grams of 22 carat gold jewellery in the showroom/shop/business establishment of "JDP" shall be kept free of any charge or encumbrance and "REL" alone has SCCH-25SCCH-2 17 CC No.19781/2007 the 1st charge/right on the same. The ownership in the goods lent shall always rest with "REL" at any given point in time,, except when the said loan culminates into a sale as on the occurring of the event stipulated at Para 3(c) supra and subject to the rights reserved unto "REL" under this Agreement for effecting recoveries.
12. In order to rebut the presumption, the accused has taken the following contentions:
Undated Cheque:
The counsel for the Accused has contended that the Cheque was undated when it was issued in the year 2000 and the date was filled in by the complainant on 05.04.2007.
He has further argued that the cheques were issued more than 7 years before. There is a deliberate and material alternation to the Cheques, without consent of the accused.
At this point of time we should refer to Sec.87 of NI Act---
Effect of Material alteration.
Any material alteration of a negotiable instrument renders the same void as against anyone who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties;
SCCH-25SCCH-2 18 CC No.19781/2007 Alteration by indorsee.-- And any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof.
The counsel for the Complainant has furnished decision as follows:
ILR 2018 KAR 4775 : V.V.Chari Vs. M/s Meenakshi Developers.
Wherein the Hon'ble High Court of Karnataka has held that an undated cheque is also bill of exchange u/Sec.5 of NI Act.
13. It is an admitted fact that, the Cheques were given as security by the accused. Whenever the accused failed to make the payment for gold within the time stipulated by the complainant, the cheque was supposed to be used. Therefore, both the parties were clear about the common intention of giving the cheque. This fact is found in the Agreement between the parties marked at Ex.P.6. It was understood by the accused when he issued the cheques to the complainant that any time the gold amount became due by him, the date would be filled in by the complainant company. Therefore, there was a common intention between the parties. As such, the accused cannot be allowed to take a defence of "no SCCH-25SCCH-2 19 CC No.19781/2007 consent to fill in the cheque" after a complaint has been filed. Moreover, the counsel for the accused has not asked a single question about misuse of the Cheque to PW.1 except getting an admission that the Cheque did not bear any date. Therefore, fundamentally an argument which is not based on the defence taken during cross-examination of PW.1 cannot be considered at all.
Non service of Notice:
14. The counsel for the Accused has argued that the demand notice was not served on the Accused. The counsel for Accused has further contended that there was no suggestion in the cross-examination of DW.1 about the receipt of the notice. In support of the same, the Accused counsel has relied on the following decision:
(2016) 12 scc 288 : Muddasani Venkata Narsaiah (dead) though Lrs. Vs. Muddasani Sarojana.
Wherein the Hon'ble Supreme Court of India has held that non-cross-examination of plaintiff's witness on a particular fact gives rise to the presumption by the court that the witness's account has been accepted.
SCCH-25SCCH-2 20 CC No.19781/2007 As against this the counsel for the complainant has taken support of Sec.27 of General Clauses Act wherein the only requirement is for the notice to be sent to the correct address of the Accused. It is not the argument of the Accused that the address given in the notice at Ex.P.5 and the UCP at Ex.P.5(b) and RPAD acknowledgment at Ex.P.5(c) do not belong to the Accused. Such being the case, it is clear that the notice was sent by the complainant to the accused on his admitted address which is also found in his letters. The burden is on the Accused to show that the address given in the notice is not his. Therefore, the argument of the counsel for the accused that the signature in Exs.P.5(c) does not belong to the accused and so the notice was never served on him does not hold any water. When the address on the legal notice is not disputed by the accused, there is no question of making suggestions to DW.1 about non-service of notice.
Bald Notice:
15. The counsel for the Accused has vehemently argued that the notice at Ex.P.5 is very bald and does not mention about the object of issuance of Cheque.
SCCH-25SCCH-2 21 CC No.19781/2007 The counsel for the Accused has furnished the decision as follows:
Crl. Revision Petition No.768/2018 : S.K.Honnappa Vs. S.A.Murthy.
Wherein the Hon'ble High Court of Karnataka has held that the expression, "for the discharge, in whole or part, of any debt or other liability" is very important. That means the complainant, i.e., the holder of a cheque must disclose in the first instance in his demand notice the transaction that gives rise to debt or other liability to be discharged and then the same must be stated in the complaint also. Once such a disclosure is made and primary foundation is led in evidence, presumption can be drawn. To put it in other words, presumption can be drawn only in respect of disclosed or stated transaction, not undisclosed transaction. Mere acceptance of signature on the cheque by its drawer does not lead to presumption if the transaction engendering the liability is not stated. Since presumption to be drawn under section 139 leads to fastening criminal liability on the drawer of the cheque, the complainant cannot rest expecting the court to draw presumption in his favour without disclosing the transaction.
As against this the counsel for the complainant has relied on the decision of the Hon'ble Supreme court of India in Central Bank of India and Anr. Vs. Saxons Farms and Ors. reported in(1999) 8 SCC 221.
Wherein it is observed that though no form of notice is prescribed in the above clause (b) the requirement is that notice shall be given in writing within fifteen days of receipt of information from the bank SCCH-25SCCH-2 22 CC No.19781/2007 regarding return of the cheque as unpaid and in the notice a demand for payment of the amount of the Cheque has to be made. The object of notice is to give a chance to the drawer of the cheque to rectify his omission and also to protect an honest drawer.
16. The notice at hand at Ex.P.5 states that the Cheque was given with respect to business transaction with the complainant company and was dishonored when presented with an endorsement "Account Closed". Therefore, it has all the necessary ingredients of the demand notice as held above by the Hon'ble Supreme Court of India and the Hon'ble High Court of Karnataka in the decisions stated supra.
No demand for Gold:
17. Another contention taken by the accused is that, as per Ex.P.6 clause 3(e), the loan of the gold Jewelry by the complainant company would convert into a purchase of the gold if the company of the accused fails to return the gold within 15 days of demand from the complainant company. Such being the case, the counsel for the accused has argued that, till date there is no such notice by the complainant SCCH-25SCCH-2 23 CC No.19781/2007 company demanding for gold and the company has directly filed this criminal case by using the cheques. Since, the lending of gold never transformed into sale, complaint is not valid. He has further argued that there was never any purchase of gold jewelry only a lending and borrowing transaction. Per contra, the counsel for the complainant has argued that the Accused has referred to letter dated 01.12.2006 in Ex.D.1 and has drawn attention to the outstanding gold jewelry, which shows that there was a prior demand for gold by the complainant company in the year 2006 itself. There is no contrary argument by the counsel for the accused. Therefore, on the basis of the documents on record, it is clear that there was a demand for gold by the complainant company and the entire transaction was converted into sale making the company of the accused liable to pay the amount of gold.
No debt due as on date of Cheque:
18. The counsel for the accused has argued that the Cheques which were issued on 23.08.2000 were never issued SCCH-25SCCH-2 24 CC No.19781/2007 towards discharge of any debt, since as on that date there was no debt due as per Ex.P.6. Contrarily, the counsel for the complainant has argued that the cheque was issued as security for 50000grms of gold and the debt would become due only on demand by the complainant as contemplated under Ex.P.6 and in no other circumstance.
The counsel for the Complainant has furnished decision as follows:
(2022) 16 SCC 762 : Sunil Todi Vs. State of Gujarat.
Wherein the Hon'ble Supreme Court of India has held that the term "debt also includes a sum of money promised to be paid on a future day by reason of a present obligation.
Therefore, it is clear that the cheque in this case becomes due only when a demand is made by the complainant i.e. in the year 2007.
19. It is to be noted here that, both the complainant company as well as the Accused have produced bare minimum documents before the court about the transaction of the gold. Even though the complainant company as well as the company of the accused are registered companies, none SCCH-25SCCH-2 25 CC No.19781/2007 have produced the account statement relating to the gold transaction between each other. Therefore, the court is constrained to make its observations only on the basis of the documents which are on record.
20. Ex.D.1 clearly shows that there was some kind of demand by the complainant company for return of gold. Therefore, it also follows as per Ex.P.6 clause 3(e) that the accused has failed to return the gold within the time fixed by the complainant company in its demand notice. This has converted the whole transaction of loan into purchase of gold. Accordingly, the complainant company became entitled as per Ex.P.6 to present the Cheque.
Evidence without pleadings:
21. The counsel for the accused has argued that para 3 to 7 of the affidavit of PW.1 was added in the additional examination in chief without any corresponding averments being made in the complaint or the notice at Ex.P.5. He has argued that for the first time the transaction under the Agreement dated 23.08.2000 was stated in the evidence of SCCH-25SCCH-2 26 CC No.19781/2007 PW.1 without supporting pleadings in the complaint or the notice. It is necessary to refer to S.K.Honnappa's Case cited supra, which states about disclosing details of a transaction in the demand notice. However, it is relevant to note that in the said case the Hon'ble High Court has observed that the Cheques were taken by the son of the complainant and the notice does not mention anything about the loan transaction with the complainant and the loan transaction for the first time was mentioned in the complaint. On the other hand, in the case on hand, the demand notice clearly mentions about the business transaction in gold between the parties. Therefore, it is clear that the evidence affidavit only gives the details of the business transaction without adding any new fact. The contents of the notice and complaint are clear for the accused to understand about the nature of transaction for which the Cheques were issued and used by the complainant.
SCCH-25SCCH-2 27 CC No.19781/2007
Part Payment:
22. The major contention taken by the counsel for the accused is that the accused has returned a major portion of the Gold to the complainant company. In order to prove the same, the accused got marked Ex.D.3, the 21 vouchers through which he claims to have returned the gold. It is to be noted that the description of Ex.D.3 is ornament issue voucher. In addition the accused has also produced the statement of gold account at Ex.D.4, which lists out the voucher number, voucher date and weight of gold. The accused further contends that only 9995grms of gold were remaining to be returned. He has further contended that complainant's argument that Ex.D.3 vouchers were not connected to the transaction of 50000grms of gold is not proved by the complainant. The Complainant has failed to show that the there was any other transaction with the accused. In support of the same, the accused has relied on the deposition of the complainant CW.1 dated 06.03.2009 in Arbitration Proceeding marked as Ex.D.6, wherein the SCCH-25SCCH-2 28 CC No.19781/2007 representative of the complainant company has stated as follows:
"Only on one occasion 50,000grams of jewellery was given to the respondent by the complainant. The jewellery was given to the extent of 50,000grams on different dates not on one date, as contemplated in the Agreement dated 23.08.2000 confirmed by the Agreement dated 15.09.2000".
The counsel for the Accused has further stated that CW.1 has admitted the return of gold jewellery by the company of the accused. The relevant portion of the deposition is "The witness is confronted with issue vouchers of JDP numbering 21 and he was asked whether they have been received by the claimant. We have received jewels as per the issue vouchers except the issue voucher dated 03.09.2004 for 7.8grams. These vouchers are marked as Ex.R.10. The witness further volunteers that the other items that has been received SCCH-25SCCH-2 29 CC No.19781/2007 is not with respect to the transaction in question viz., supply of 50,000 grams of gold".
23. The accused has relied on Ex.D.4 statement of gold account, which he claims to show the gold returned by his company to the complainant. These voucher numbers correspond to the weight and numbers shown in Ex.D.3. The counsel for the complainant has argued by denying the genuinity of Ex.D.4 stating that it does not bear the seal of the complainant company.
24. It is to be noted here that the vouchers produced by the complainant company as showing the gold lent by the complainant to the accused at Ex.P.7 are called as "Gold Receipt Voucher", which follows that the gold was received by the company of the accused as per the said vouchers. On the other hand, the vouchers produced at Ex.D.3 & D.3(a) are called as "Ornament Issue Voucher" which shows that the gold was issued from January 2003 to August 2006 through these vouchers to the complainant's company. On perusal of all these documents, depositions and the evidence before the SCCH-25SCCH-2 30 CC No.19781/2007 court, it is clear that the complainant does not deny the receipt of the gold at Ex.D.3, what it denies is the connection of the said gold to 50,000 grams of gold.
25. At one hand, the accused states that there was no demand for gold made by the complainant company as required under Ex.P.6 and has filed the complaint u/Sec.138 of NI Act. On the other hand, the accused argues that even before the demand was made, he started returning the gold from 2003. It is also to be noted here that Ex.P.6 does not state anything about return of 50,000 grams of gold periodically. Therefore, it is clear that his contrary stands defeat his own arguments.
26. The counsel for the complainant has argued that the said vouchers are not relating to the initial transaction of 50000 grams of gold. In support of the same, he has relied on Ex.P.6 which states that in addition to the 50,000 grams of jewelry lent by the complainant company, the company of the accused shall also purchase a minimum of 45,000 of grams of gold per quarter i.e., 15,000 grams per month. There is SCCH-25SCCH-2 31 CC No.19781/2007 also an additional condition under Ex.P.6 that the company of the accused shall always maintain a minimum of 125kgs of 22 carat of gold at his stock. This shows other gold transactions with the complainant by the company of the accused other than the 50,000 grams of gold. Moreover, during the cross-examination of PW.1, the counsel for accused has suggested that it was a rolling and running account. This also goes on to show that there were other transactions of gold between the company of the accused and the complainant.
The counsel for the Accused has furnished the decision as follows:
(2023) 1 SCC 578 : Dasharathbai Trikambhai Patel Vs. Hitesh Mahendrabhai Patel AND Anr.
The Hon'ble Supreme Court of India has observed as follows:
In view of the discussion above, we summarise our findings below:
(i) For the commission of an offence under Section 138, the cheque that is dishonoured must represent a legally SCCH-25SCCH-2 32 CC No.19781/2007 enforceable debt on the date of maturity or presentation;
(ii) If the drawer of the cheque pays a part or whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque;
(iii) When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as prescribed in Section 56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138 will stand attracted;
In the case on hand, the accused has not proved that he has returned any part of the gold to the complainant. Therefore, Dasharathbai's case cannot be applied.
Personal liability for debt of company:
27. The counsel for the accused has argued that the accused is not personally liable for the debt of the company.
He issued the Cheque as security for the gold loan taken by SCCH-25SCCH-2 33 CC No.19781/2007 the company of the accused. It is already a settled principle of law that a Cheque issued for security also comes within Sec.138 of NI Act.
The counsel for the complainant has argued that the Cheque issued by the Accused was from his account in his personal capacity, even if discharging dues of the company, he is still liable. In support of the same, he has relied on (2015) 9 SCC 622 : Mainuddin Abdul Sattar Vs. Vijay D. Salvi.
Wherein the Hon'ble Supreme Court of India has held that the person who draws cheque alone attracts liability.
Therefore, since the cheque was issued by the accused in his personal capacity for the dues of his company as security, he is personally liable for the amount shown in the Cheque.
Reliance on Arbitral Tribunal Documents:
28. In support of his case the accused has produced the pleadings, deposition and award before the Arbitral SCCH-25SCCH-2 34 CC No.19781/2007 Court. As against this the counsel for the complainant has relied on the following decisions:
2014 SCC Online Del 3428 : State Trading Corporation of India Ltd. Vs. Toepfer International Asia PTE Ltd.
Wherein the Hon'ble High Court of Delhi has held that Sec.34 of the Arbitration Act is not an appeal and operates as an annulment by negating a decision in whole or in part, thereby depriving the portion negated of legal force and returning the parties, as to that portion, to their original litigating position. Sec.34 is on the grounds of affecting legitimacy of the process of decision as distinct from substantive correctness of the contents of the decision.
The counsel for the accused has argued that he is not relying on the arbitral award but only on the deposition of the parties. In the case on hand, this court has already extracted the relevant portions of the deposition of CW.1 and it was found that it is of no use to the accused, when taken in its entirety. The court cannot be forced to rely only on some sentences taken out of context from the depositions of any witness.
SCCH-25SCCH-2 35 CC No.19781/2007
Parallel Proceedings:
29. The counsel for the accused has argued that, the complainant has availed a remedy through Arbitration and cannot agitate the same cause in these proceedings. Against this the counsel for complainant has relied on the following decisions:
(i) (2005) 10 SCC 626 : Gurcharan Singh Vs. Allied Motors Ltd.,
(ii) Crl. A. 434/2018 : Durga Projects Vs. Babu Reddy.
Wherein the Hon'ble Supreme Court of India and Hon'ble High Court of Karnataka have held that parallel proceedings under Arbitration Act and Criminal Action in terms of Sec.138 of NI Act can be maintained. If at all there is any award by the proceedings before the Arbitration, then at the most, it can be a defence to the Accused and cannot be a ground to hold that complaint under Sec.138 of NI Act is not maintainable.
Therefore, by applying the principle laid down in above said decision, this contention also is of no use to the accused.
Value of Gold:
30. The counsel for accused has argued that the value of gold was only 2.5 crores as on the date of execution of the SCCH-25SCCH-2 36 CC No.19781/2007 Ex.P.6 i.e., 23.08.2000. To show the same, he has produced the Historical Gold Rates from the year 1964 till date marked at Ex.D.10. On the contrary the counsel for the complainant has stated that Ex.P.6 is not disputed by the Accused. As per Ex.P.6 the value of the gold when the demand for return of gold would be made by the complainant would be taken for using the Cheque. The Complainant counsel has further argued that as on the date of presentation of the Cheque the value of 50,000 grams of gold was more than 5 crores as per the document given by the accused himself at Ex.D.10.
Therefore, the Accused was due more than what is shown in the Cheque. On perusal of Ex.P.6 it is clear that the value of gold was fixed by both the parties at 3 crores. Therefore, after 20 years the accused cannot be allowed to argue that the value fixed at the time of execution of Ex.P.6 is not proper.
31. None of the contentions raised by the accused probabalise a probability that can rebut the presumption raised in favour of the complainant. Therefore, the accused has failed to rebut presumption raised in favour of the SCCH-25SCCH-2 37 CC No.19781/2007 complainant. Accordingly, I hold that the complainant has proved that the Accused had issued cheque and failed to repay the amount in spite of notice by the Complainant and has committed an offence p/u/Sec.138 of NI Act. Therefore, I answer the Point. No.1 in the "Affirmative".
32. POINT No.2 The complainant has averred that the company of the accused took gold from the complainant in the year 2000 and the accused issued Cheque as security. The Accused became a defaulter in 2007. If the same amount was utilized by the complainant, the complainant would have earned interest on the same. There is considerable delay, which needs to be compensated. If 10% simple interest is given on Rs.3,00,00,000/-, the interest payable from 2007 would be Rs.30,00,000/- per year. Therefore, in the circumstances of the case I deem it necessary that interest of Rs.5,10,00,000/- for Seventeen years must also be paid by the accused by way of compensation to the complainant. However, u/Sec.138 of NI Act, the maximum fine that can be imposed is twice the SCCH-25SCCH-2 38 CC No.19781/2007 amount of the Cheque. In view of the above discussion, I proceed to pass the following:
ORDER In exercise of powers conferred U/s. 255(2) Cr.P.C., accused is convicted for the offence punishable U/s. 138 N.I. Act.
The accused is sentenced to pay a fine of Rs.6,00,00,000/- for the offence punishable u/s. 138 of N.I.Act and in default of payment of fine, the accused shall undergo simple imprisonment for a period of one year.
Acting under section 357(1)(b) Cr.P.C., accused is ordered to pay the fine amount of Rs.5,99,90,000/- to the complainant as compensation and the remaining Rs.10,000/- to defray the expenses of the state.
Bail bond and surety bond of the accused and his surety are canceled forthwith.
SCCH-25SCCH-2 39 CC No.19781/2007 Furnish free copy of this judgment to the accused forthwith.
(Dictated to the stenographer directly on computer, typed by her, then corrected by me and pronounced in open court on this the 6th day of November 2024) (PRKRITI KALYANPUR) XXI Addl.C.J.M & XXIII ASCJ, Bangalore.
:ANNEXURE:
LIST OF WITNESSES EXAMINED FOR PROSECUTION:
PW.1 : Mr. Mallikarjuna B.G. (Now called as Arjun Sanjay Kumar) LIST OF WITNESSES EXAMINED FOR DEFENCE:
DW.1 : Mr.K.V.Kishore LIST OF DOCUMENTS MARKED FOR PROSECUTION:
Ex.P.1 : Certified copy of Certificate of incorporation
Ex.P.2 : Certified copy of Board Resolution dated
14.08.2012
Ex.P.3 : Cheque dated 05.04.2007
Ex.P.3(a) : Signature of Accused
Ex.P.4 : Bank Endorsement
Ex.P.5 : Legal notice dated 26.04.2007
Ex.P.5(a) : Postal Receipt
Ex.P.5(b) : UCP receipt
Ex.P.5(c) : Postal Acknowledgment
Ex.P.6 : Agreement dated 23.08.2000
SCCH-25SCCH-2 40 CC No.19781/2007
Ex.P.7 : 11 true copies of invoices
Ex.P.8 : Letter of undertaking
Exs.P.9
to 13 : True copies of five vouchers
LIST OF DOCUMENTS MARKED FOR DEFENCE:
Ex.D.1 : Letter
Ex.D.2 : Copy of order from the Hon'ble High Court
Ex.D.3 : Certified copies of 21 Issue Vouchers
Ex.D.3(a) : Terms and Conditions
Ex.D.4 : Certified copy of the statement
Ex.D.5 : Copy of the Award
Ex.D.6 : Certified copy of deposition of M.A.Prakash
representing the complainant company Ex.D.7 : Certified copy of evidence of K.V.Kishore Ex.D.8 : Certified copy of order Ex.D.9 : Copy of claim petition, written statement, amended claim petition, rejoinder, additional written statement and another amended claim petition Ex.D.10 : Historical Gold rates from 1964 till date along with Sec.65B Certificate.
(PRKRITI KALYANPUR) XXI Addl.C.J.M & XXIII ASCJ, Bangalore.
Digitally signed by PRAKRITI KALYANPUR PRAKRITI KALYANPUR Date:
2024.11.08 17:29:57 +0530