Bangalore District Court
Reptd By Its Duly Constituted Attorney/ vs Om Chandi Art on 4 March, 2023
1
KABC0C0199942019
IN THE COURT OF XIV ADDL. CHIEF METROPOLITAN
MAGISTRATE, MAYO HALL, BENGALURU
PRESENT
SRI.OONKAR MURTHY K.M.,
B.Sc., L.L.M.,
XIV Addl. C.M.M., Bengaluru
DATED ON THIS 4 th DAY OF MARCH 2023
CASE NO C.C. NO.55548/2019
M/s. Reliance Capital Ltd.,
Registered Office at No.37,
3 rd Floor, Bharmananda Court,
Lalbagh Road,
Bengaluru-560 027.
COMPLAINANT Reptd by its duly constituted Attorney/
Authorized Representative
Mrs. Benazir Afshan
D/o. Mohammed Muslim
Aged about 32 years,
E-mail: [email protected]
2
(By Smt. Kavitha H.N - Adv.,)
M/s. OM Chandi Art
Represented by Authorized Signatory
Mrs.A. Vijaya Laxmi
D/o. Pochaiah Alugota
Aged about 51 years,
ACCUSED OM Chandi Art, No.69,
5A Next to Bhanu Nursing Home,
Virat Nagar, Bommanahalli,
Bengaluru - 560 068
Mob : 99801 61612
E-mail: [email protected]
(By Sri. P. Ravichandra - Adv.,)
OFFENCE U/s.138 of Negotiable Instruments Act
PLEA OF THE
ACCUSED Pleaded not guilty
FINAL ORDER
Accused is convicted
Digitally signed
by
ONKARMURTHY ONKARMURTHY
KM KM
Date: 2023.03.04
15:42:11 +0530
(OONKAR MURTHY K.M)
XIV ADDL. C.M.M.,
BENGALURU
JUDGMENT
3 This is a private complaint filed by the complainant against the accused under Sec.200 Cr.PC alleging the offense punishable under Section 138 of the Negotiable Instruments Act, 1881.
The brief facts of the complaint are as follows ;
2. The complainant company is incorporated under the Companies Act, 1956, having its registered office at No.37, 3 rd Floor, Bharmananda Court, Lalbagh Road, Bengaluru-560 027. The complainant is dealing with financial services and introduced schemes for disbursing commercial loan etc. 2.1) The accused has applied for SME LOAN and the complainant company has granted the said loan vide Account bearing No.RLSRBAN000299480. The accused has availed the said loan. Towards discharge of partial liability of the said loan, the accused had issued a cheque bearing No.126639 dtd.05.01.2019 for Rs.2,35,449/- drawn at ING Vysya Bank, Bommanahalli branch, Bengaluru in favour of the complainant. Further as per the request of the accused, the complainant presented the said cheque for encashment through its banker i.e., HDFC Bank Ltd., 4 Richmond Road branch, Bengaluru. But the said cheque was returned dishonored for the reason "Account Closed"
vide return memo dated 08.01.2019. Thereafter the complainant got issued legal notice dtd.16.01.2019 to the accused by registered post calling upon the accused to repay the same within 15 days from the date of receipt of the said notice. The said notice was duly served on the accused on 24.01.2019. The accused has neither replied to the notice nor has repaid the loan amount. Therefore, the accused has committed the offense punishable under Sec.138 of Negotiable Instruments Act, 1881.
3. The complaint was initially registered in PCR. No.51702/2019. Sworn statement of the representative of the complainant was recorded. On hearing the complainant and considering the documents on record, summons was issued to the accused by registering the criminal case in C.C. No.55548/2019. Later in response to the non-bailable warrant issued, the accused has appeared before the court through his counsel. The accused has been enlarged on bail. Plea of the accused has been recorded. The accused 5 has pleaded not guilty and claims to be tried for which the matter was posted for trial.
4. The sworn statement of the representative of the complainant - Benazir Afshan has been recorded as CW.1 is treated as her examination-in-chief in view of the decision of the Hon'ble Apex Court reported in (2014) 5 SCC 590-Indian Bank Association and others Vs Union of India and others-[W.P. (civil) No.18/2013]. To prove the guilt against the accused, CW.1 has relied on the documents marked at Ex.P1 to Ex.P6. Since the earlier representative/CW.1 has left the job, authorized representative by name Deblina Mitra has been substituted in place of earlier representative and has been examined as PW.1. Further through PW.1, Ex.P7 and P8 have been produced. The incriminating circumstances in the evidence of the complainant have been brought to the notice of the accused and her statement under Sec.313 of Cr.PC was recorded. The accused has denied the incriminating circumstances. The accused in support of her case has examined herself as DW.1 and relied on the documents marked at Ex.D1 to D4.
65. Heard the arguments of both the counsels. Perused the materials on record.
6. The points that arise for my consideration are:-
1) Whether the complainant proves that the accused has issued a cheque bearing No.126639 dtd.05.01.2019 for Rs.2,35,449/- drawn at ING Vysya Bank, Bommanahalli branch, Bengaluru for discharge of legally recoverable debt and the said cheque was dishonored for the reason "Account Closed". In spite of issuance of notice dated 16.01.2019, accused has failed to repay the loan amount and thereby the accused has committed the offense punishable under Sec.138 of N.I. Act, 1881?
2) What Order?
7. My findings on the above points are as under;
Point No.1 : In affirmative,
Point No.2 : As per final order,
for the following.,
REASONS
7
8. Point No.1: The complainant company has
examined its representative -Benazir Afshan as CW.1. In her chief-examination, CW.1 has reiterated the averments of the complaint. Also has relied on the documents marked at Ex.P1 to P6 wherein Ex.P1 is the notarized copy of Power of Attorney dt.18.05.2018 showing her authority to prosecute the matter. Ex.P2 is the original cheque bearing No.126639 dtd.5.1.2019 for Rs.2,35,449/- drawn at ING Vysya Bank Ltd., Bommanahalli branch, Bengaluru. Ex.P3 is the endorsement of the Bank dtd.8.1.2019 showing that the said cheque has been dishonoured for the reason "account closed". Ex.P4 is the legal notice issued to the accused on 16.1.2019. Ex.P5 & P6 are the two postal acknowledgments showing service of the said notice to the accused on 24.01.2019. Thereafter CW.1 has not tendered herself for cross- examination. By stating that CW.1 has left the job of the complainant company, a new representative by name Deblina Mitra has been substituted and she has been examined as PW.1. In her chief-examination, she has reiterated the averments of the complaint. Further has produced notarized copy of Power of Attorney 8 dt.01.06.2021 at Ex.P7 showing her authority to prosecute the matter. Ex.P8 is the statement of account pertaining to loan account of the accused showing total loan over due of Rs.12,65,082/-. In the cross- examination, the suggestion that alleged cheque was obtained during lending of the loan for security purposes has been denied. All other suggestions made against prosecution case has been denied.
9. The accused on her behalf has examined herself as DW.1. In her chief-examination, she has stated that she has borrowed loan of Rs.27,69,300/- with monthly installments of Rs.78,483/- with repayment tenure of 42 months. She has paid Rs.32,96,286/- towards the loan along with interest. She has not paid last six installments amount of Rs.4,70,898/-. Also has stated that she has borrowed second loan of Rs.35 lakhs and she has repaid Rs.18 lakhs and is due to pay 17 monthly installments. Since Karnataka Government banned plastic flex, she fell into crises and was not able to run flex printing unit and therefore was not able to pay the loan. During lending of loan, the bank has collected six blank 9 cheques from her and eight blank cheques from her husband for security purposes. The cheque belongs to the year 2016. The executives of the complainant company assured her that in case of unforseen happening, money will be covered through insurance and have collected extra amount towards insurance. Instead of resorting to loan recovery proceedings through DRT and Arbitration proceedings, the present complaint alleging offense U/s. 138 of N.I. Act is filed. Further, in support of her case, she has produced the certified copy of statement of account of her loan account at Ex.D1 & D2 (same statement is produced by the complainant at Ex.P8). The documents such as copy of the insurance, application, promissory note, letter of continuity, irrevocable power of attorney together have been marked at Ex.D3. The copies of five undated cheques stated to be given by the complainant company during borrowing of the loan have been produced at Ex.D4.
10. In the cross-examination, DW.1 clearly admits borrowing of Rs.27,69,300/- and Rs.35 lakhs from the complainant company. Also has admitted her signature on 10 the cheque at Ex.P2. She has clearly admitted the correctness of address which is mentioned in the complaint. But she denies receiving of the legal notice and she has not replied to the said notice. Further admits that the seal on the postal acknowledgment at Ex.P5 as the one belongs to her firm. When it was suggested there are three loans pending against her in the complainant company, DW.1 states that only two loans are pending. She could not say the date on which cheques have been given by her to the complainant company. The suggestion that the cheque at Ex.P2 was issued by her towards repayment of the loan has been denied by DW.1.
11. In her evidence DW.1 has clearly admitted loan over due and also admits issuance of cheque and her signature on the cheque. The sole contention of the accused is that blank cheque was issued as a security during borrowing of the loan.
12. On considering the arguments addressed by the counsel for the accused, the suggestions made in the 11 cross-examination of PW.1 and the evidence of DW.1, the defense of the accused can be deduced as follows;
i) Blank cheque which was issued as security during borrowing of the loan has been misused.
ii) Debt is time barred and offense U/s. 138 of N.I. Act is not attracted.
iii) Without resorting for money recovery proceedings through Arbitration or through DRT proceedings, filing of complaint U/s. 138 of N.I. Act is not maintainable.
Principles:
13. In respect of the proof of the fact that the cheque has been issued for discharge of legally enforceable debt, there is a presumption of law under Sec.139 of Negotiable Instruments Act, 1881 in favour of the holder of the cheque which reads as follows:
Sec.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.
The presumption under Sec.139 of Negotiable Instruments Act is a presumption of law and not the presumption of 12 fact. The presumption has to be raised in all the cases once the factum of issuance of cheque and its dishonour is established. U/s.118(a) of Negotiable Instruments Act, there is a presumption in respect of passing of consideration in favour of the complainant. The onus of proof to rebut the presumption lies on the accused. The accused need not rebut the presumption beyond all reasonable doubt. But the accused has to place sufficient materials to convince the court that his case is more probable when it is compared with the case of the complainant. Accused may adduce direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability. He may also rely upon the averments in the complaint, statutory notice and the circumstantial evidence adduced by the complainant during the trial. Accused need not enter into the witness box to rebut the presumption. In the case on hand the complainant has established the factum of issuance of cheque and its dishonour. Therefore, this court shall raise a presumption that the accused has issued cheque towards discharging the legally enforceable debt. After raising initial 13 presumption it is for this court to consider whether the presumption has been rebutted by bringing in cogent materials on record with reference to the defense raised by the accused.
Defense - Time barred debt:
14. The counsel for the accused has argued that the cheques were issued by the accused during the year 2014 and the same is presented to the bank during the year 2019 and hence the debt is time barred. Also the cheque is not presented within its validity. Therefore offense punishable U/s.138 of N.I. Act is not made out.
The complainant has produced statement of account pertaining to the loan account of the accused wherein the loan disbursal date is mentioned on 29.04.2015 with repayment tenure of 48 months. The loan tenure of 48 months completes on 29.04.2019. The cheque at Ex.P2 is dt.05.01.2019 which is within the period of loan tenure and therefore the contention of the accused that the cheque is issued towards time barred debt do not survive. Furthermore, the Hon'ble Supreme Court in the case of Yogesh Jain Vs Sumesh Chadha - (2022 LiveLaw 14 (SC) 879), wherein the Hon'ble Supreme Court has held as follows;
It appears prima facie from the materials on record that the loan was advanced sometime in the year 2011. The cheque in question duly issued by the accused for the discharge of the debt is dated 01.11.2018 and complaint for the offence under Section 138 of the N.I. Act was lodged on 14.01.2019. It appears that the High Court has gone by the date of the loan transaction to be precise the year of the loan transaction. If a cheque is issued on 01.11.2018 for the discharge of the debt incurred in the year 2011 then prima facie it could be said to be an acknowledgment of the debt. This aspect needs to be reconsidered by the High Court in its true perspective.
(Emphasis Supplied) In the above precedent, it is clearly stated that if a cheque is issued even for discharge of time barred debt, prima facie it could be said to be an acknowledgment of the debt. Under the circumstances, the contention of the accused that cheque issued towards time barred debt will not attract offense U/s.138 of N.I. Act holds no water. When the endorsement of the bank disclose that the cheque has been dishonored for the reason "account closed" and not for the reason that the cheque is invalid for its non-presentation within its validity, the contention 15 of the accused that the alleged cheque was not presented within its validity has no force.
Defense - Blank cheque was issued as a security during borrowing of the loan:
15. It is contended that the accused has issued blank cheque and its contents have been filled up by the complainant bank to its whims and fancies. For adjudicating the said issue, I would like to rely upon the decision of Hon'ble Supreme Court in the case of Oriental Bank of Commerce Vs Prabodh Kumar Tewari wherein at para 14 and 18 it is held as follows;
Para 14. In Bir Singh v. Mukesh Kumar,after discussing the settled line of precedent of this Court on this issue, a two-Judge Bench held:
33. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.16
34. 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.
[...]
36. Even a blank cheque leaf, voluntarily signed 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.
Para 18. For such a determination, the fact that the details in the cheque have been filled up not by the drawer, but by some other person would be immaterial. The presumption which arises on the signing of the cheque cannot be rebutted merely by the report of a hand-writing expert. Even if the details in the cheque have not been filled up by drawer but by another person, this is not relevant to the defense whether cheque was issued towards payment of a debt or in discharge of a liability.
(emphasis supplied) In view of the above ratio laid down by the Hon'ble Supreme Court, it is immaterial that the cheque might have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. Under the 17 circumstances, the contention that the contents of the cheque other than the signatures has been filled up by the complainant and has been misused finds no substantiation.
16. Even though it is contended that the alleged cheque was issued as a security while borrowing of the loan during the year 2015, there is nothing on record to substantiate the same except oral assertions. Even otherwise if it is presumed that the alleged cheque was issued as a security towards the loan borrowed, Hon'ble Supreme Court in the case of Sripati Sing Vs. State of Jharkhand and another, at para 17 and 18 has held as follows;
Para 17. "A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified time frame and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for 18 presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow".
Para 18. "When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security' cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an 'on demand promissory note' and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation".
19(Emphasis supplied) In the above precedent, it is clearly held that if a loan is advanced and the borrower agree to repay the amount in a specified time frame and issues a cheque as security to secure such repayment, if the loan amount is not repaid, the cheque which is issued as a security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of Negotiable Instruments Act would flow.
17. In the case on hand, the accused has clearly admitted borrowing of the loan and also has admitted the loan over due. Ex.P8 which is statement of account produced by the complainant also show loan balance of Rs.12,65,082/- as on 01.05.2019 which is not disputed by the accused. Under the circumstances, existence of legally recoverable debt has been proved by the complainant. Therefore, as laid down in the above precedent, even though cheque is issued towards security for the loan raised by the accused, the offense U/s.138 of N.I. Act is 20 attracted. Under the circumstances, the contention of the accused that the cheque issued for security do not attract provision of offense U/s.138 of N.I. Act holds no water.
Defense - Ought to have resorted for money recovery proceedings:
18. The counsel for the accused has argued that bank has provided loan forcibly to the accused for the printing machines manufactured at Bombay and after two years the said machines were banned. Bank by knowing that machines were going to be banned has sanctioned loan. The plea of the accused for one time settlement has not been entertained by the complainant. Also the plea of the accused for referring the matter to Arbitration is not considered. The complainant bank ought to have resorted for money recovery proceedings under arbitration proceedings or Debt Recovery Tribunal proceedings. Therefore, complaint U/s.138 of N.I. Act is not maintainable. In adjudicating the said issue, I would like to rely upon the decision of Hon'ble Supreme Court in the case of Sri.Krishna Agencies Vs State of Andhra Pradesh 21 and another, wherein at Para 5 and 7 it is observed has follows;
Para 5. In support of his submissions, Mr. Adhyaru referred to the decision of this court in Trisuns Chemical Industry Vs Rajesh Agarwal (1999) 8 SCC 686 - where the same question arose in relation to arbitration proceedings taken during the continuance of a complaint filed under Sections 415 and 420 of the Code of Criminal Procedure. In the said decision, it was held that merely because arbitration proceedings have been undertaken, the criminal proceedings could not be thwarted.
Para 7. We are also of the view that there can be no bar to the simultaneous continuance of a criminal proceeding and a civil proceeding if the two arise from separate causes of action. The decision in Trisuns Chemical Industry case appears to squarely cover this case as well.
(emphasis supplied) In the above precedent, it is clearly held that there can be no bar to the simultaneous continuance of a criminal proceeding and a civil proceeding if the two arise from separate cause of action. In the case on hand, the cause of action has arisen on issuance of cheque and its dishonour for the reason "account closed" which is an offense U/s.138 of Negotiable Instruments Act. The complainant is at liberty to initiate either civil or 22 criminal action. The accused has no right to insist the complainant to adopt the mode of recovery by way of civil action. Therefore, by relying upon the above precedent, the contention of the accused that the complainant company ought to have resorted for civil action under arbitration proceedings or DRT proceedings has no force.
Conclusion:
19. Under all the circumstances, the complainant has clearly proved that the alleged cheque has been issued by the accused towards discharge of legally recoverable debt and the same has been presented within its life time for encashment. The said cheque has been dishonoured with bank endorsement dtd.08.01.2019 for the reason "account closed". The complainant has issued legal notice on 16.01.2019 which has been served on the accused on 24.01.2019. Admittedly the accused has not repaid the cheque amount even after appearing before the court. The complaint is filed on 07.03.2019 which is well within the period of limitation. The accused has not disputed the existence of legally recoverable debt.
23Issuance of cheque and signature of the accused has been clearly brought out by the complainant. Therefore, the complainant has proved all the ingredients of Sec.138 of N.I. Act. On the contrary, the accused has miserably failed to rebut the statutory presumption available U/s.139 of N.I. Act in favour of the complainant. Therefore, the accused is found guilty for the offense punishable U/s.138 of N.I. Act. Accordingly, I hold Point No.1 in Affirmative.
20. Point No.2: The punishment prescribed for the offense U/s.138 of Negotiable Instruments Act is imprisonment for a period which may extend to two years or with fine upto twice the cheque amount. Considering the facts and circumstances of this case, nature, year of the transaction, nature of the instrument involved, cost of litigation and the rate of interest proposed by Hon'ble Supreme Court in 2012 (1) SCC 260 (R.Vijayan Vs Baby), this court is of the considered view that it is just and desirable to impose fine of Rs.3,60,000/- and out of the said amount, it seems to be proper to award a sum of Rs.3,55,000/- as compensation 24 to the complainant as provided U/s.357(1) (b) of Cr.PC and the remaining sum of Rs.5,000/- shall go to the State. In view of the discussions made while answering Point No.1, I proceed to pass the following.., ORDER In exercise of power vested under section 255(2) of Cr.P.C., I hereby convict the accused for the offense punishable under Sec.138 of Negotiable Instruments Act, 1881.
The accused is sentenced to pay fine of Rs.3,60,000/- (Three Lakhs Sixty Thousand only) for the offense punishable U/s.138 of Negotiable Instruments Act, 1881.
In default of payment of fine, the accused shall under go simple imprisonment for a period of three months.
In exercise of powers vested under section 357(1)(b) of Cr.P.C., out of fine amount, a sum of Rs.3,55,000/- (Three Lakhs Fifty Five Thousand only) is ordered to be paid to the 25 complainant as compensation and the remaining Rs.5,000/- (Five Thousand only) shall go to the State.
The bail bond of the accused stands canceled. The cash security deposited by the accused is ordered to be continued till expiry of the appeal period.
Free copy of the judgment shall be supplied to the accused forthwith.
(Dictated to the stenographer, transcripted thereof, computerized and print out taken by him is verified, corrected and then pronounced by me in open court on the 4th day of March, 2023) Digitally signed by ONKARMURTHY ONKARMURTHY K M KM Date: 2023.03.04 15:42:35 +0530 (OONKAR MURTHY K.M) XIV ADDL. C.M.M., BENGALURU 26 ANNEXURE List of witnesses examined by complainant:
CW.1 : Mrs. Benazir Afshan PW.1 : Mrs. Deblina Mitra
List of Documents marked by complainant:
Ex.P1 : Notarized copy of Power of Attorney Ex.P2 : Cheque Ex.P2(a) : Signature of the accused Ex.P3 : Bank endorsement Ex.P4 : Legal Notice Ex.P5 & P6 : Two postal acknowledgements Ex.P7 : Notarized copy of Power of Attorney Ex.P8 : Statement of accounts List of Witnesses examined by defence:
DW.1 : Smt. Vijaya Lakshmi List of Documents marked by defence:
Ex.D1 : Certified copy of closure statement Ex.D2 : Certified copy of Statement of Account Ex.D3 : Copy of certificate of Insurance etc., Ex.D4 : Copies of cheques Digitally signed by ONKARMURTHY ONKARMURTHY K M KM Date: 2023.03.04 15:42:25 +0530 (OONKAR MURTHY K.M) XIV ADDL. C.M.M., BENGALURU