Kerala High Court
Sreegokulam Chit & Finance Co.(P) Ltd vs Gopalakrishnan M.R on 13 December, 2021
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE ZIYAD RAHMAN A.A.
MONDAY, THE 13TH DAY OF DECEMBER 2021 / 22ND AGRAHAYANA, 1943
CRL.A NO. 202 OF 2015
AGAINST THE JUDGMENT DATED 29.11.2014 IN ST 432/2013 OF JUDICIAL
MAGISTRATE OF FIRST CLASS -II, SULTHAN BATHERY
APPELLANT/COMPLAINANT:
SREE GOKULAM CHIT & FINANCE CO.(P) LTD
REP. BY ITS AUTHORISED REPRESENTATIVE SRI.K.N.SUNIL,
S/O.NARAYAYAN, AGED 49 YEARS, KANADAMCHIRAYIL HOUSE,
MYLAMBADI, PURAKKADI AMSOM, APPATTU DESOM,
SULTHAN BATHERY TALUK, WYNAD - 673 591.
BY ADV SRI.MAHESH V RAMAKRISHNAN
RESPONDENTS/ACCUSED & STATE:
1 GOPALAKRISHNAN M.R
AGED 42 YEARS
MAROTTIYIL HOUSE, VALAVAYAL P.O.,
KENICHIRA, WYNAD - 673 596
2 STATE OF KERALA
REP. BY THE PUBLIC PROSECUTOR
HIGH COURT OF KERALA
ERNAKULAM
BY ADV.
SRI.SUDHEER GOPALAKRISHNAN, PUBLIC PROSECUTOR
THIS CRIMINAL APPEAL HAVING COME UP FOR ADMISSION ON
30.11.2021, THE COURT ON 13.12.2021 DELIVERED THE FOLLOWING:
CRL.A NO. 202 OF 2015
2
JUDGMENT
The appellant is the complainant in S.T.No.432/2013 on the file of the Judicial First Class Magistrate Court II, Sulthan Bathery. The aforesaid complaint was submitted by him against the 1 st respondent herein for the offence punishable under Section 138 of Negotiable Instruments Act.
2. The case of the appellant/complainant was that it is a company registered under Companies Act, 1956 engaged in the business of chit and financing. The accused was a guarantor to one person named Mrs.Sunith Babu who was a subscriber of a chit conducted by the Company. The sala of the chitty was Rs.50,000/- and the same was commenced on 26.02.2009 and terminated on 26.02.2011. The subscriber thereof received the chit amount, but later she defaulted the re-payment of monthly installments. The 1 st respondent herein had undertaken the liability of the said subscriber and issued a cheque in discharge of the same for an amount of Rs.18,517/-. Upon presentation, the said cheque got dishnoured with a memo "Funds Insufficient". Even though statutory notice was sent, the 1st respondent did not pay the amount or sent any reply. The complaint was submitted in the above CRL.A NO. 202 OF 2015 3 circumstances.
3. In support of the contentions raised in the complaint, the authorised representative of the appellant was examined as PW1 and Exts.P1 to P11 were marked from the side of the appellant. After prosecution evidence, 1st respondent was examined under Section 313 of Cr.P.C. and the incriminating materials were put to him. Exts.D1 to D2 were marked from the side of the 1 st respondent. After examining the materials brought out during the trial, the learned Magistrate arrived at the conclusion that the 1st respondent has not committed offence under Section 138 of NI Act and therefore, he was acquitted. Challenging the said order of acquittal this appeal is filed.
4. Heard Sri.Mahesh V.Ramakrishnan, learned counsel for the appellant. Even though notice was served to the 1 st respondent, there is no appearance for him. The learned counsel points out that the main ground on which the learned Magistrate found that there was no legally enforceable debt is that, as per Ext.P10 statement of accounts, it was found that the appellant was collecting interest at 24% with monthly compounding. The trial court found that such computation of compound interest in the manner mentioned above was not permissible CRL.A NO. 202 OF 2015 4 in the light of Ext.P11 promissory note and also going by the evidence of PW1. While, challenging the aforesaid finding, the learned counsel for the appellant relies on the judgment in Secretary Bhubaneshwar Development Authority v. Susantha Kumar Mishra [(2009)4 Supreme Court Cases 684] and contends that, going by the observations made by the Honourable Supreme Court therein, the interest charged on monthly installments which contain interest element does not amount to compounding of interest.
5. However, I am of the view that the aforesaid contention is not legally sustainable. The decision in Bhubaneshwar Development Authority (supra) was pronounced in a completely different set of facts. The question considered therein was whether, when the installments payable by the consumer was defaulted, the penal interest charged upon such monthly installments can be treated as compounding of the interest. The said question arose in that case because, the installment amount would contain element of principal amount as well as interest element. Therefore, while charging interest on the installment amount as a whole, that would amount to charging of interest on the interest element contained in the installment amount. It CRL.A NO. 202 OF 2015 5 was held that such computation would not amount to compounding of interest.
6. However, the factual situation contained in this case is completely different. The account statement produced as Ext.P10 would clearly indicate that every month interest was being added to the principal and the interest for the next month was calculated on the entire amount, including the previous arrears and the interest already added during the previous month. This method of computation is completely different from imposing penal interest upon an installment amount which contain interest element. Therefore, the observations made by the Hon'ble Supreme Court cannot be made applicable to the manner of computation adopted in this case. I have no doubt that the method of computation adopted by the appellant herein is amounting to compounding of interest. In such circumstances, the finding of the trial court cannot be interfered with. As rightly found by the trial court, none of the documents produced in support of the case of the appellant provide for compounding interest to be collected from the accused person. Even as per the Ext.P11 promissory note and also as per the evidence of PW1 what was permissible is interest at the rate of 24% per CRL.A NO. 202 OF 2015 6 annum. However, the cheque amount which tallies the final figure as shown in Ext.P10 account statement includes interest at compounding rates which was not authorised even as per the evidence adduced by the appellant himself. In such circumstances, the amount specified in Ext.P1 cheque cannot be treated as a legally enforceable debt so as to attract offence under Section 138 of Negotiable Instruments Act.
In such circumstances, I find no merit in the contentions put forward by the learned counsel for the appellant. In the result, the appeal is dismissed and the finding of acquittal entered into in S.T.432/2013 by Judicial First Class Magistrate II, Sulthan Bathery is confirmed.
Sd/-
ZIYAD RAHMAN A.A. JUDGE scs