Cri. R. P. No.765 of 2003

16th October, 2006

Petitioner Counsel: R. L. PATIL
Respondent Counsel: G. JAIRAJ

Cases Cited:
C. Manohar Vs. B. R. Poornima, 2004 Cri.L.J. 4436 [Para PARA9]
Nagisetty Nagaiah Vs. State of A.P., 2004 Cri.L.J. 4107 [Para PARA10]
G. Premadas Vs. Venkataraman, 2001(1) KCCR 437 [Para PARA11]
Bharat Barrel & Drum Manufacturing Company Vs. Amin Chand Payrelal, 1999(2) ALL MR 269 (S.C.)=AIR 1999 SC 1008 [Para 12]
M/s. Prasanna & Company, Bangalore Vs. Prasanna Kumar, 2000(5) KLJ 166 [Para PARA13]
K. N. Beena Vs. Muniyappan, 2002(1) ALL MR 277 (S.C.)=(2001)8 SCC 458 : AIR 2001 SC 2895 [Para 15,23]
Sh. Sadhu Ram Singla Vs. State, 2001(3) DCR 173 [Para PARA17]
Shaik Hussan & Sons Vs. M. G. Kannaiah, (1981)3 SCC 71 [Para PARA18]
State of Maharashtra Vs. Jagmohan Singh Kuldip Singh Anand, 2004(7) SCC 659 [Para PARA19]
Ram Briksh Singh Vs. Ambika Yadav, (2004)7 SCC 665 [Para PARA19]
Ratakonda Raghu Naidu Vs. Kolla Sivaram Prasad, 2004(1) DCR 91 [Para PARA20]
V. Satyanarayana Vs. M/s. Sandeep Enterprises, 2005 ALL MR (Cri) JOURNAL 60=2005(1) DCR 203 [Para 21]
Hiten P. Dalal Vs. Bratindranath Banerjee, 2001 ALL MR (Cri) 1497 (S.C.)=AIR 2001 SC 3897 [Para 22]
A. V. Murthy Vs. B. S. Nagabasavanna, 2002 ALL MR (Cri) 709 (S.C.)=2002(1) Crimes 306 [Para 24]

JUDGMENT

- This revision is against the order of dismissal of the criminal appeal filed by the petitioners in No.65/03 by the IX Addl. Sessions Judge, Bangalore City by order dated 28-6-2003.

2. A complaint was filed by the respondent before the XV Addl. CMM, Bangalore under S.138 of the Negotiable Instruments Act which was registered in CC 20134/1999. These petitioners are arrayed as accused 2 and 7. Accused 1 is the company by name Saroj Mining Ltd., Bangalore. The 1st petitioner is the Chairman and the 2nd petitioner is the Director and it is alleged that accused have borrowed loan from the complainant in a sum of Rs.18.5 lakhs. There was also a resolution passed by the accused to clear the amount due to the complainant. The 3rd accused being the Managing Director of the accused-company, on the basis of the resolution, had issued a cheque for Rs.20 lakhs in favour of the complainant. On presentation, the said cheque came to be dishonoured for 'insufficient funds' After causing a legal notice demanding to pay the cheque amount, a complaint was filed for non-compliance. Thereafter, learned Magistrate who held the enquiry, convicted accused 1, 2 & 7 for the offence under S.138 of the Negotiable Instruments Act and sentenced them to pay fine of Rs.34,65,000/- and in default, it was ordered that accused 2 & 7 to undergo simple imprisonment for a period of three months. Out of the fine amount, an amount of Rs.34,40,000/- was ordered to be paid as compensation to the complainant.

3. Being aggrieved by the said order, petitioners have preferred appeal before the IX Addl. Sessions Judge. Bangalore who, in turn, while confirming the order of the trial Court, dismissed the appeal. Hence, this revision by the accused petitioners.

4. Heard the counsel for the respective parties.

5. It is the argument of the petitioners' counsel that both the Courts below have committed an error in convicting the accused although there is no legal evidence and no legally enforceable debt is to be discharged. Further, it is submitted that these petitioners though were arrayed as Chairman and one of the Directors of the accused 1/company, they were not responsible for the day-to-day affairs and conduct of the business of the company. Even according to the complainant, the amount was paid to the 1st petitioner but, the complaint has been filed against the Company which is contrary to the facts. The complainant failed to produce the statement of accounts to prove the amount due and also to prove that the complainant had sufficient funds and capacity to pay the said amount. The name of the complainant is not found in the creditors list of the company as such, the 1st accused or the petitioners are not responsible despite which both the Courts below have held the accused guilty and the said order requires interference.

6. It is argued further that no corroborating evidence is available to show that Rs.18 lakhs was paid to the 2nd accused and since the two directors were available at Bangalore, complainant filed a complaint against them and it was for the complainant to prove the payment of the legally enforceable debt. It is argued that if the circumstances are suspicious, the presumption under Ss.20 and 118 of the Negotiable Instruments Act gets rebutted. Further it is submitted that as per S.5 of the Money Lenders Act, unless there is a license, it cannot become a legally recoverable debt as the complainant is a money lender and that a time barred debt cannot be recovered as the amount is advanced during 1994. The petitioner has not signed any of the documents though he was the Chairman and accordingly submitted that the petitioner is not responsible for any of the transaction and, referring to some of the admissions made by the complainant regarding collecting of interest on the amount that would be advanced, it was contended that it is a clear case of money lending and in the absence of any such license being obtained by the complainant to lend money, the same cannot become a legally enforceable debt. Accordingly, in support of his arguments, learned counsel relied upon several decisions which I shall deal with in the course of the order.

7. Learned counsel for the respondent has contended that there is a concurrent finding by both the Courts below holding that there is a legally enforceable debt and the question of contending that the complainant has not obtained money lending license rises only when there is a recovery suit filed. Further, it is submitted that on behalf of the 1st accused, these petitioners and other Directors in the meeting held on 10-8-1998 have resolved to pay the amount due to the complainant and the 1st petitioner is the Chairman and 2nd petitioner is the family member of the 1st petitioner. There is cogent evidence on record to hold the petitioners guilty of the offence under S.138 of the Negotiable Instruments Act and it is a legally enforceable debt.

8. In the light of the arguments advanced, let me consider whether both the Courts below have committed any error in holding the accused guilty of the offence.

9. In the decision relied upon by the petitioners in the case of C. Manohar Vs. B. R. Poornima, 2004 Cri.L.J. 4436, the Madras High Court has held thus (Para 14) :

"Case of the complainant is that on behalf of the accused, he has filed claim petitions in MCO P 2339/92 and 246/93. Two civil cases were also filed. There is nothing to show that the complainant/advocate himself has paid the stamp duty and bore the legal fees. The complainant has not produced any agreement showing as to what was the arrangement between him and the accused, as to how much is the fee payable and whether the accused agreed for payment of stamp duty by her counsel itself. In the absence of any agreement. Ex.P1 cheque cannot be said to have been issued for the purpose of discharge of any substantial debt or liability."

10. Further, he has relied upon the decision of the Andhra Pradesh High Court in the case of Nagisetty Nagaiah Vs. State of Andhra Pradesh & Anr., 2004 Cri.L.J. 4107 wherein the said Court has observed that in the absence of furnishing of proper records as to filing of income tax returns and audit book to construe that there was a legally enforceable debt, it cannot be said that the factual basis for raising a presumption had been established and rather, it is to be construed as the complainant failed to discharge his initial burden that there was a legally enforceable debt.

11. Learned counsel has also relied upon the decision in the case of G. Premadas Vs. Venkataraman, 2001(1) KCCR 437 wherein this Court has held that presumption is available to the holder of the cheque but, unless the complainant discharges the basic requirement of proof of commission of offence through cogent evidence, such presumption cannot be drawn.

12. He has also relied upon the decision in the case of Bharat Barrel & Drum Manufacturing Company Vs. Amin Chand Payrelal, AIR 1999 SC 1008 : [1999(2) ALL MR 269 (S.C.)] to contend that to disprove the presumption the defendant has to bring on record such facts and circumstances, upon consideration of which the Court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances, shall act upon the plea that it did not exist.

13. Further he has also relied upon the decision in the case of M/s. Prasanna & Company, Bangalore Vs. Prasanna Kumar & Anr., 2000(5) KLJ 166. To contend that the condition precedent for passing a decree is, unless the Court is satisfied that the money lender held a valid money lending license, court cannot pass a decree in favour of the money lender.

14. Further, he has also relied upon the decision of the Apex Court in Crl. A. 950 & 951/2006 dated 13-9-2006 to contend that it is necessary to specifically aver in the complaint that at the time of commission of the offence, the person accused was in charge of and responsible for the conduct of the business of the company. This averment is an essential requirement of S.141 and has to be made in the complaint. Without this being made in the complaint, the requirement of S.141 cannot be said to be satisfied.

15. Per contra, learned counsel for the respondent relied upon the decision in K. N. Beena Vs. Muniyappan & Another, (2001)8 SCC 458 : [2002(1) ALL MR 277 (S.C.)] wherein it is held thus in para 7 :

The High Court appears to have proceeded on the basis that the denials/averments in respondent's reply to the legal notice were sufficient to shift the burden of proof on to the appellant complainant to prove that the cheque was issued for a debt or liability. This is an entirely erroneous approach. The accused had to prove in the trial, by leading cogent evidence, that there was no debt or liability. The respondent accused not having discharged the burden of proving that the cheque was not issued for a debt or liability, the conviction as awarded by the magistrate was correct. The High Court erroneously set aside that conviction.

16. In the above cited decision the Supreme Court has observed that as per Ss.118 & 139 of the Negotiable Instruments Act, the Court has to presume that the cheque had been issued for discharging a debt or liability and the said presumption could be rebutted by the accused by proving to the contrary and mere denial of the same in the reply notice is not sufficient.

17. Learned counsel also relied upon the case of Sh. Sadhu Ram Singla Vs. State & Ors., 2001(3) DCR 173 to contend that complaints filed against the petitioner who was the Chairman cum Director are legally maintainable even without impleading the other directors of the company.

18. In the decision in the case of Shaik Hussan & Sons Vs. M. G. Kannaiah & Anr., (1981)3 SCC 71 the Apex Court referring to S.313, Cr.P.C. has held that the statement of the accused by itself ............ And the language used cannot provide the necessary factual basis or fact situation which must exist before presumption can be raised.

19. Learned counsel has also relied upon the decision in State of Maharashtra Vs. Jagmohan Singh Kuldip Singh Anand & Ors., 2004(7) SCC 659 to the effect that the power of the High Court while exercising revisional powers, cannot be exercised as a second appellate power and that the High Court cannot undertake in depth and minute re-examination of entire evidence and upset the concurrent findings of the trial Court and the first appellate Court. He also relied upon another decision of the Apex Court in the case of Ram Briksh Singh & Ors. Vs. Ambika Yadav & Anr., (2004)7 SCC 665 to a similar effect.

20. Learned counsel has also relied upon the decision in Ratakonda Raghu Naidu Vs. Kolla Sivaram Prasad & Anr., 2004(1) DCR 91 to contend that as per S.2(7) of the Money Lenders Act Money Lender is only those persons whose regular business is to advance monies and not those who advances money casually and also to contend that in the absence of any evidence to show that the respondent advanced money regularly as a money lender, dismissal of the complaint was held to be erroneous.

21. In the decision relied upon by the learned counsel in the case of V. Satyanarayana Vs. M/s. Sandeep Enterprises, 2005(1) DCR 203 : [2005 ALL MR (Cri) JOURNAL 60], it is held that dishonour of a cheque issued by a money lender is not a bar for him to proceed to recover the amount and to file a complaint under S.138 of the Negotiable Instruments Act and also to contend that it is not sufficient to attract the provisions contained in Karnataka Money Lenders Act.

22. In the case of Hiten P. Dalal Vs. Bratindranath Banerjee, AIR 2001 SC 3897 : [2001 ALL MR (Cri) 1497 (S.C.)] relied upon by the learned counsel, the Apex Court has held that the presumption has to be raised as per S.139 of the Negotiable Instruments Act that the cheque was drawn for discharge of liability of the drawer and that mere plausible explanation is not sufficient by the accused and the proof of explanation is very much necessary.

23. Learned counsel also relied upon the case of K. N. Beena Vs. Muniyappan & Anr., AIR 2001 SC 2895 : [2002(1) ALL MR 277 (S.C.)] to contend that the burden of proving the cheque was not issued for any debt or liability is on the accused and that the accused has to prove in trial by leading cogent evidence that there was no debt or liability.

24. Counsel has also relied upon the decision in A. V. Murthy Vs. B. S. Nagabasavanna, 2002(1) Crimes 306 : [2002 ALL MR (Cri) 709 (S.C.)] to contend that dismissal of the complaint on the ground that the cheque was for a time barred debt, was not proper.

25. Based on the complaint filed by the respondent, the trial Court had taken cognizance for the offence under S.138 of the Negotiable Instruments Act. It is seen that 1st accused is the Company, petitioner 1/2nd accused is the Chairman; and 3rd accused is the Managing Director. The 4th accused is the Vice Chairman and 5th accused is the Joint Managing Director. The 6th accused is once again the Managing Director and accused 7 to 13 were said to be Directors.

26. It appears, complaint is proceeded against the accused 1 company and 2nd accused Chairman and 7th accused - Director who is said to be the wife of 2nd accused. During pendency of the matter accused 12 and 13 filed a criminal petition before this Court and got quashed the complaint against them in Crl. P. 954 and 946/1999 by order dated 12-7-1999. In so far as remaining accused, the case has been split up. It appears, the 3rd accused died during pendency of the matter, as such, the matter has abated. The trial Court was of the view that as per Ex.P2 dated 10-8-1998, 3rd accused being the Managing Director of the 1st accused Company, had sought for pardon for the inconvenience caused to the complainant due to the delay in making payment and further noted that Ex.P3 is the cheque issued by the 3rd accused for Rs.20 lakhs and the same has not been disputed. Stating that the accused have denied the loan transaction in S.313, Cr.P.C. statement, and further, no reasons are forthcoming from the accused as to why this 2nd accused has deposed in his evidence as to crediting of Rs.4,75,000/- to the personal account of the complainant from the account of the accused company and similarly another sum of Rs.6 lakhs was remitted. Noting the evidence that the amount has been transferred to Subhashini Service Station complainant's Petrol Bank through Credit cards of the 3rd accused and noting that Subhashini Service station is a partnership concern of which the complainant is one of the partner of the said Service Station, the trial Court was of the opinion that there was a transaction between the accused company and the complainant.

27. In so far as the amount credited to the complainant's partnership concern through the credit card of 3rd accused on behalf of accused company, it appears, the explanation offered by the complainant was that the same was in respect of supply of some petroleum products and the trial Court was of the view that the said payment made has nothing to do with the loan transaction.

28. Even in so far as loan transaction and the application of the Money Lenders Act in not obtaining license, the trial Court was of the view that the complainant cannot be held to be a money lender only on the basis of a sole transaction and that there is no evidence on record to that effect. In so far as time-barred debt is concerned, the trial Court was of the view that as the case of the accused is not that the complainant has lent money, as such, it has not accepted the said contention. However, the reasoning of the appellate Court in this regard is erroneous having taken a similar view as that of the trial Court, but the fact remains as per Ex.P2, the letter said to have been issued by the 1st accused-company through 3rd accused, it is clear that they acknowledged the payment and also expressed their regret for the inconvenience caused in repayment and they have decided to clear all the amount due to the complainant. This letter is dated 10th August, 1998 wherein they have agreed to clear before 25th October, 1998. Such being the case, it is to be presumed that they have acknowledged to pay the debt much less a time-barred debt. As per S.25 of the Contract Act, when such an agreement or terms are there despite the amount said to be time-barred, then the debt becomes enforceable. Further, the cheque is shown to have been issued by the 1st accused-company on 9-12-1998 which is duly signed by the 3rd accused-Managing Director which fact has not been disputed. Once the cheque is issued the accused cannot contend that it is not in respect of legally enforceable debt or else proper procedure has not been followed according to the provisions of Negotiable Instruments Act. only if the cheque is presented after its validity period, then only such contentions would arise. Even in respect of the contention taken by the petitioners that it is a monetary transaction by way of money lending by the complainant and that he did not have the money lending license, the answer would be - this Court has already held in so far as a transaction of this nature, the question of the complainant having a money lending license with him does not arise. May be true that this Court in respect of the money lending as a matter of obligation on the part of the plaintiff in a suit for recovery of money, would insist, as a condition precedent, to have a money lending license. This is not a suit for recovery of money rather, the complainant is exercising the special powers provided under the Negotiable Instruments Act for non-payment and dishonour of cheque which is more in a quasi civil and criminal in nature.

29. Of course it is the argument of the counsel for the petitioners that 1st petitioner was only a nominal and honorary Chairman of the accused-company and that he is in no way concerned with the conduct of business of the company and similarly, in respect of 2nd petitioner, she was only a Director and in no way responsible for the conducting of the business of the company. It is to be noted, looking into some of the documents produced viz., the proceedings of the 1st accused-company wherein these two petitioners are said to have signed the resolution passed by the company, as is rightly observed by the trial Court and the appellate Court, the same negates the contention of the petitioners that they were not responsible for the day-to-day affairs or the accused-company. An overall reading of the complaint depicts there is a pleading to the effect of petitioners being responsible for the conduct of the business of the company.

30. In so far as some of the payments made by the 3rd accused on behalf of 1st accused-company in a sum or Rs.4,50,000 and Rs.6 lakhs respectively, it appears, according to the complainant they were in respect of other transactions like supplying of petroleum products. However, it was for the petitioners to produce cogent documents to show that the amount was paid towards the discharge of the amount said to have been borrowed by the 1st accused-company and not in respect of some other transaction. Except the oral say, it appears other documents have not been produced.

31. In the case on hand, participation of the petitioners as a Chairman and the Director of the accused 1/company has been noted by both the Courts below. As such, it cannot be said that they were not at all involved in managing the affairs of the company. Further, of course against other Directors, the case is shown to be split up. The responsibility to pay the amount in the first instance, would be on the accused 1/company as the amount shown to be borrowed is for the purpose of the company and the liability of the petitioners may arise only after the amount is not satisfied out of the assets and proceeds of the company. How ever, having regard to the facts and circumstances of the case, I do not find any illegality in passing the impugned order of conviction. But in so far as the amount to be paid, the learned Magistrate has awarded Rs.34,65,000/-. Of course though it is permissible to award double the amount as fine or compensation, no reasoning,has been assigned why so much of fine is imposed above the cheque amount. Might be that it is towards interest or for delay in payment.

32. Having regard to the facts and circumstances of the case, while modifying the order of sentence to pay fine, the 1st accused-company and petitioners 1 and 2 shall pay Rs.28,25,000/- out of which Rs.25,000/- shall be towards fine and the remaining amount shall be paid to the complainant as compensation. The amount of Rs.10 lakhs said to have been deposited before the trial Court by the petitioners shall be released in favour of the respondent. Accordingly, petition is allowed in part.

Ordered accordingly.