Karnataka High Court
M/S Stcl Limited vs M/S Shree Ganesh Steel Rolling Mills Ltd on 7 August, 2024
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NC: 2024:KHC:31514
CRL.A No. 312 of 2012
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF AUGUST, 2024
BEFORE
THE HON'BLE MRS JUSTICE M G UMA
CRIMINAL APPEAL NO. 312 OF 2012 (A)
BETWEEN:
M/S. STCL LIMITED
(A GOVERNMENT OF INDIA UNDERTAKING)
HAVING THEIR OFFICE AT NO.7A
STC TRADE CENTRE
NANDINI LAYOUT
BANGALORE - 560 092
REPRESENTED BY ITS MANAGING DIRECTOR
THROUGH HIS AUTHORIZED OFFICER
MR.K.L. ANAND SAI
GENERAL MANAGER MARKETING
...APPELLANT
Digitally
signed by (BY SRI. ARVIND DESAI, ADVOCATE)
NANDINI B G
Location: high
court of AND:
karnataka 1. M/S. SHREE GANESH STEEL
ROLLING MILLS LTD.
14-A, ENNORE HIGH ROAD
THIRUVOTTIYUR
CHENNAI - 600 019.
REP. BY ITS DIRECTOR
SHRI ASHOK KUMAR SARAF.
2. ASHOK KUMAR SARAF
DIRECTOR
M/S. SHREE GANESH STEEL ROLLING MILLS LTD.
14-A, ENNORE HIGH ROAD
THIRUVOTTIYUR
CHENNAI - 600 019,
ALSO AT:NO.148
POONTHEMALEE HIGH ROAD
BEHIND APPOLO 1ST MED HOSPITAL
KILPAUK
CHENNAI - 600 010.
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NC: 2024:KHC:31514
CRL.A No. 312 of 2012
APPEAL AGAINST R-2 IS ABATED
(V/O DATED 06.11.2023)
3. MRS. RUCHIRA SARAF
DIRECTOR
M/S. SHREE GANESH STEEL ROLLING MILLS LTD.
14-A, ENNORE HIGH ROAD
THIRUVOTTIYUR
CHENNAI - 600 019.
ALSO AT:NO.148
POONTHEMALEE HIGH ROAD
BEHIND APPOLO 1ST MED HOSPITAL
KILPAUK, CHENNAI - 600 010.
...RESPONDENTS
(BY SRI. HARI PRASAD U.J., ADVOCATE FOR R1 (ABSENT)
SRI NISCHAL DEV B R, ADVOCATE FOR R3)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) OF
CR.P.C PRAYING TO SET ASIDE THE JUDGMENT AND ORDER OF
ACQUITTAL PASSED BY THE XV ADDL. C.M.M., BANGALORE IN C.C.
NO.3062/2010 DATED 21/12/2011 - ACQUITTING THE
RESPONDENTS/ ACCUSED 1-3 OF THE OFFENCE PUNISHABLE UNDER
SECTION 138 OF N.I.ACT.
THIS CRIMINAL APPEAL, COMING ON FOR FINAL HEARING,
THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MRS JUSTICE M G UMA
ORAL JUDGMENT
The complainant in CC No.3062 of 2010 on the file of the learned XV Additional Chief Metropolitan Magistrate, Bengaluru city, is impugning the judgment dated 21.12.2011 acquitting the accused for the offence punishable under Section 138 of Negotiable Instruments Act (for short 'the NI Act'). -3-
NC: 2024:KHC:31514 CRL.A No. 312 of 2012
2. For the sake of convenience, the parties shall be referred to as per their rank and status before the Trial Court.
3. Brief facts of the case are that, the complainant filed the private complaint against the accused alleging commission of the offence punishable under Section 138 of NI Act. It is alleged that the complainant is the Government of India undertaking engaged in the business of importing and exporting of various items. During the course of business, the complainant entered into two contracts with accused No.1 through its Directors who are accused Nos.2 and 3, to supply the steel and scarp materials. Accused No.1 issued cheque bearing No.894198 dated 15.04.2009 for a sum of Rs.1,25,78,000/- drawn on Union Bank of India, Chennai on 21.06.2008 and accused No.2 is the signatory on behalf of the Company. Regarding the second agreement dated 11.08.2008, accused No.1 issued the cheque bearing No.972051 dated 18.04.2009 for Rs.1,40,97,000/-. As per the contracts, cargoes have reached the destination, but the accused have not made payment as agreed. As per the terms of contract, the complainant presented the cheques for encashment. But both the cheques were dishonored as there was insufficient funds in -4- NC: 2024:KHC:31514 CRL.A No. 312 of 2012 the account of the accused. Legal notice as per Ex.P15 was issued calling upon the accused to make payment. Notice was served on the accused to its various addresses as per the postal acknowledgments. In spite of that, the accused have neither paid the cheque amount nor issued any reply. Therefore, the complainant filed the private complaint against the accused for the offence punishable under Section 138 of NI Act.
4. Learned Magistrate took cognizance of the offence. PW1 is examined on behalf of the complainant and got marked Exs.P1 to P42 in support of its contention. The accused neither examined nor led any evidence either oral or documentary and the Trial Court proceeded to acquit the accused vide judgment dated 21.12.2011. Being aggrieved by the same, the complainant is before this Court.
5. Heard Sri Arvind Desai, learned counsel for the appellant and Sri B R Nischal Dev, learned counsel for respondent No.3. Learned counsel for respondent No.1 is absent. No representation. The appeal against respondent -5- NC: 2024:KHC:31514 CRL.A No. 312 of 2012 No.2 is abated vide court order dated 06.11.2023. Perused the materials including the Trial Court records.
6. Learned counsel for the appellant - complainant submitted that entering into two agreements as referred to above, issuance of cheques as per Ex.P5 and 6, signature of accused No.2 as Director of accused No.1, dishonor of cheques and service of legal notice as per Ex.P15 are not in dispute. When all these facts are admitted, the Trial Court committed an error in acquitting the accused on flimsy grounds. The terms of contracts are very clear that when the cargoes arrive, the accused have to make payment. It is only thereafter, delivery of cargo will take place. Even during cross examination of PW1, it is admitted that cargoes were ready for delivery, but admittedly, the accused have not made any payment. Under such circumstances, the cheques that were issued towards payment of value of the cargoes were presented for encashment and the same were dishonored. Admittedly, the accused have not repaid the cheque amount and thereby committed the offence. All necessary documents are placed before the Court. Admittedly, accused have not issued reply nor stepped into the witness box to speak about its defence. In -6- NC: 2024:KHC:31514 CRL.A No. 312 of 2012 spite of that, the Trial Court committed an error in dismissing the complaint. Accordingly, he prays for allowing the appeal.
7. Per contra, learned counsel for respondent No.3 submitted that entering into agreements dated 21.06.2008 and 11.08.2008 are not in dispute. Issuance of cheques as per Exs.P5 and 6 is also admitted. However, both the cheques were blank, with the signatures of accused No.2. The same were issued as security. As per clauses-3 and 11 of the contracts, only after delivery of cargoes, the accused is required to make payment. Admittedly, the cargoes were not delivered to the accused as per Ex.P1. Under such circumstances, there is no question of making any payment.
8. Secondly, the learned counsel contended that, there is material alteration in the cheques i.e., Exs.P5 and 6. It was filled in by the complainant and on that ground also, the complaint came to be dismissed. There are no reasons to interfere with the impugned judgment of acquittal. Hence, he prays for dismissal of the appeal.
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NC: 2024:KHC:31514 CRL.A No. 312 of 2012
9. In view of the rival contentions urged by learned counsel for both the parties, the point that would arise for my consideration is:
"Whether the impugned judgment of acquittal passed by the Trial Court suffers from perversity or illegality and calls for interference by this Court?"
My answer to the above point is in the 'Affirmative' and pass the following:
REASONS
10. The complainant and the accused entering into two agreements dated 21.06.2008 and 11.08.2008, the accused issuing cheques as security for delivery of cargoes as per Exs.P5 and 6 with the signatures of accused No.2 and dishonor of both the cheques as there was insufficient funds, are not disputed. Issuance of legal notice as per Ex.P15 is also not in dispute. The complainant produced Exs.P17, 23 and 27 - the postal acknowledgments for having served the copies of legal notice on the accused at various addresses and this fact is also not in dispute. Admittedly, none of the accused have issued any reply to the legal notice.
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NC: 2024:KHC:31514 CRL.A No. 312 of 2012
11. In view of the specific defence taken by the learned counsel for respondent No.3, I have considered the terms and conditions of the agreement marked as Exs.P3 and 11. As per clause - 10 of the agreement pertaining to delivery, the complainant shall keep the cargoes in CONCOR under its custody and it has to deliver the same on receipt of the payment from the accused. Even as per clause - 11, immediately on arrival of cargoes, the accused is required to make payment as per schedule and thereafter take delivery of the stocks. When the terms of contracts both for delivery and payment are very clear, the contention of the learned counsel for respondent No.3 that the complainant is entitled for receipt of payment from the accused only after delivery of the cargoes, cannot be accepted. This in fact, the accused are required to make payment first on arrival of cargoes and only thereafter, can take delivery of the goods.
12. During cross examination of PW1, a specific question was posed, wherein, he categorically admitted that the cargoes were ready for delivery, but delivery was not given, as the accused have not made payment. Under such circumstances, the accused are not justifiable for not keeping -9- NC: 2024:KHC:31514 CRL.A No. 312 of 2012 sufficient funds in the account, when they have issued Exs.P5 and P6.
13. The second contention that was raised by the learned counsel for respondent No.3 that there is material alteration in the cheques - Exs.P5 and P6, as the cheques were written by the complainant. It is his contention that the accused have issued blank cheques with the signature of accused No.2 on behalf of accused No.1 and the same were filled in by the complainant, which amounts to material alteration.
14. The accused have specifically admitted issuance of blank cheques with signature of accused No.2 and it is their contention that the cheques were issued as security to ensure their payments on arrival of cargo agreed to be delivered by the complainant. Section 20 of NI Act deals with inchoate stamped instruments. Section 11 of NI Act refers to inland instrument which means a promissory note, bill of exchange or cheque drawn or made in India and made payable in India. As per Section 20 of NI Act, where one person signs and delivers the negotiable instruments, either wholly or partially blank, he
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NC: 2024:KHC:31514 CRL.A No. 312 of 2012 thereby prima facie authorizes the holder thereof to make or complete the instrument for any amount specified therein, but not exceed the amount covered by the stamp. This section also states that the person who signed the negotiable instrument, shall be liable to the holder in due course for such amount.
15. When admittedly, accused No.2 for and on behalf of other accused signed the cheques - Exs.P5 and 6 and delivered it to the complainant as security for supply of cargoes under the agreement referred to above, the respondent cannot contend that filling up of the cheques would amount to material alteration. If such a defence is to be accepted, the contention that the blank cheques were issued as security for delivery of cargoes has no meaning.
16. In this regard, the decision of the Hon'ble Apex Court in Bir Singh Vs Mukesh Kumar1is relevant to be referred and in paragraph 36 of the judgment, the Hon'ble Apex Court held as under:
"36. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract 1 (2019) 4 SCC 197
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NC: 2024:KHC:31514 CRL.A No. 312 of 2012 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."
17. This decision in Bir Singh (supra) is again re- iterated by the Hon'ble Apex Court in its recent decision in M/s 2 Kalamani Tex and another Vs P Balasubramanian . Thus, the position of law is very well settled and under such circumstances, the contention taken by the respondent cannot be accepted.
18. It is pertinent to note that the cheques - Exs.P5 and 6 were not dishonored by the payee bank on the ground that there is material alteration, but the same were dishonored as there was insufficient funds in the account of the accused.
19. In view of the settled position of law, when the accused admits issuance of the cheques towards prompt payment of the amount as per terms of the agreements, when it is also admitted that the cheques on presentation were dishonored as there was insufficient funds in the account and further when it is admitted that the legal notice was served on 2 (2021) 5 SCC 283
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NC: 2024:KHC:31514 CRL.A No. 312 of 2012 the accused, the presumption under Section 139 of NI Act would arise in favour of the complainant and it is for the accused to rebut the same. Since the degree of proof to rebut the legal presumption is only the preponderance of probabilities, the same is required to be probablized by the accused. It is only thereafter, the reverse burden lies on the complainant to establish the guilt of the accused beyond reasonable doubt without the help of legal presumption.
20. When the complainant is successful in discharging his initial burden of proving issuance of cheques, dishonor of the same for want of sufficient funds, issuance of legal notice, service of the same on the accused and also non payment of cheque amount by the accused, the offence under Section 138 of NI Act is complete. When the accused failed to probablize its defence, they are liable for conviction.
21. I have gone through the impugned judgment of acquittal passed by the Trial Court. It has misdirected itself even after referring to the terms of agreements - Exs.P3 and 11 and held that filling up of the blank cheques signed by accused No.2 amounts to material alteration. The said finding
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NC: 2024:KHC:31514 CRL.A No. 312 of 2012 is perverse and illegal as the same is against the settled proposition of law. Therefore, I am of the opinion that the impugned judgment is liable to be set aside. Accordingly, I answer the above point in affirmative.
ORDER REGARDING SENTENCE Heard learned counsel for the appellant and learned counsel for respondent No.3 on imposition of sentence.
The cheques - Exs.P5 and 6 are for Rs.1,25,78,000/- and Rs.1,40,097,000/- respectively. Both the cheques are dated 15.04.2009. 15 years have lapsed from the date of cheques, which made the complainant to file the complaint, prosecute the accused, again prefer this appeal seeking to set aside the impugned judgment. It is also pertinent to note that the accused have never replied to the legal notice nor stepped into the witness box nor they have taken any probable defence. After entering into an agreements and issuing the cheques as security as per the terms of the agreements, the accused are successful in dodging the complainant for about 1½ decades. Taking into consideration all these facts and circumstances, I
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NC: 2024:KHC:31514 CRL.A No. 312 of 2012 am of the opinion that the accused are not liable for any leniency in sentencing.
Accordingly, I proceed to pass the following:
ORDER
(i) The Criminal Appeal is allowed.
(ii) The judgment dated 21.12.2011 passed in CC No.30621 of 2010 on the file of the learned XV Additional Chief Metropolitan Magistrate, Bengaluru city, is hereby set aside.
(iii) Consequently, the accused are convicted for the offence punishable under Section 138 of NI Act and are sentenced to undergo imprisonment for a period of two years and to pay a fine of Rs.3,00,00,000/- (Rupees Three Crores only).
(iv) Acting under Section 357(1) of Cr.P.C., out of the fine amount, a sum of Rs.2,99,00,000/- (Rupees Two Crores Ninety Nine Lakhs only), is ordered to be paid as compensation to the complainant.
Sd/-
(M G UMA) JUDGE *bgn/-
CT:VS, List No.: 2 Sl No.: 18