® IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF JANUARY, 2019 BEFORE THE HON’BLE Dr.JUSTICE H.B.PRABHAKARA SASTRY CRIMINAL APPEAL No.464 OF 2018 BETWEEN:
M/s. Ajmera Housing Corporation, Bengaluru, A Partnership Firm having its Registered Office at: No.68, 7th C’ Main, 3rd Cross, 3rd Block, Koramangala Indl. L/o., Koramangala, Bengaluru-560 034.
Represented by its CEO & POA Mr. Deepak Mehta.
(By Sri. Sathyanarayana S. Chalke, Advocate) AND:
Mr. Ramachandra, Aged about 39 years, S/o. Mr.Gurappa, R/at:No.12/4, ‘Lakshmi Nivas’, Anand Reddy Layout, Electronic City, 2nd Phase, Bengaluru-560 100.
(By Sri. Rakshith K.N, Advocate) ...Appellant ...Respondent This Criminal Appeal is filed under Section 378(4) of Cr.P.C praying to set aside the judgment dated:22.02.2018 passed by the XLII A.C.M.M., Bengaluru in C.C.No.5779/2017-Acquitting the Respondent/Accused for the offence punishable under Section 138 on N.I Act.
This Criminal Appeal having been heard and reserved for Judgment on 11.01.2019, this day the Court delivered the following:
JUDGMENT In the complaint filed by the present appellant under Section 200 of Code of Criminal Procedure, against the present respondent, for the offence punishable under Section 138 of Negotiable Instruments Act, 1881 (hereinafter for brevity referred to as `N.I.Act’), the learned XLII Additional Chief Metropolitan Magistrate, Nrupathunga Road, Bengaluru City (hereinafter for brevity referred to as `trial Court’), in C.C.No.5779/2017 pronounced the judgment of acquittal on 22.02.2018. It is against the said judgment of acquittal, the complainant has preferred this appeal.
2. The summary of the case of the complainant in the trial Court is that it is a partnership firm. Towards the discharge of his liability, the accused had issued to it a cheque bearing No.154377 dated 03.11.2016 for a sum of `2,50,00,000/- drawn on M/s. Karnataka Bank Limited, Basavanagudi Branch, Bengaluru. When the said cheque was presented by the complainant to its Banker for its realisation, the same came to be dishonoured for the reason ‘funds insufficient’ with a memo dated 31.12.2016. The complainant was informed about the same from its Banker on 02.01.2017. Thereafter, the complainant got issued a legal notice demanding the accused to pay the cheque amount within 15 days from the date of issuance of notice which was dated 04.01.2017. Despite receipt of notice, the accused did not make any payment of the amount covered under the cheque. Thus, it constrained the complainant to file a complaint against the accused for the offence punishable under Section 138 of the N.I.Act.
3. To prove its case, the complainant got examined two witnesses as PWs.1 and 2 and got marked documents from Exs.P1 to P8. From the accused side, accused himself was examined as DW1 and Exs.D1 and D1(a) were marked. After hearing both side, the trial Court by its impugned judgment dated 22.02.2018, acquitted the accused of the alleged offence. It is against the said judgment, the appellant has preferred this appeal.
4. For the sake of convenience, the parties would be referred to as per their ranks before the trial Court.
5. It is the argument of the learned counsel for the appellant that the trial Court even after holding that the complainant has proved that the accused has issued a cheque at Ex.P2 towards discharge of legally enforceable debt and that on presentation of the said cheque, the same was dishonoured for the reasons “funds insufficient” and also even after holding that the demand made by the complainant against the accused for payment of the cheque amount was also not met by the accused, had erroneously held that merely because the complainant Firm was shown to be an unregistered Firm and that the person who has filed the complaint being a General Power of Attorney Holder, the accused deserves to be acquitted of the alleged offence. Relying upon some reported judgments, which will be discussed at an appropriate stage hereafterwards, the learned counsel submitted that the said finding of the trial Court deserves to be set-aside and the accused is liable to be convicted for the alleged offence.
6. Learned counsel for the respondent did not dispute the finding of the Court below that the cheque in question was issued by the accused to the complainant towards discharge of legally enforceable debt and that for the disnonour of the said cheque with a reason “funds insufficient”, and also that the complainant within time had also issued a legal notice to the accused demanding the payment of the cheque amount. However, he contended that the finding of the Court below that an unregistered Firm cannot file a complaint for the offence punishable under Section 138 of the N.I.Act and that the General Power of Attorney Holder of the complainant has not asserted about his personal knowledge in respect of the transaction, as such, he could not maintain the complaint, does not warrant any interference at the hands of this Court.
7. Learned counsel for the respondent also relied upon the very same judgment reported in (2014) 11 SCC 790, which was also relied upon by the learned counsel for the appellant.
8. According to the complainant itself, it is a partnership firm. Since PW1, who was examined on behalf of the complainant though has stated that the complainant is a registered firm and that he has no difficulty to produce the document of registration of the Firm. But, since he has failed to produce any document in that regard and noticing that there was no material to hold that the complainant Firm was a registered partnership firm, the trial Court has held that the complainant Firm is an unregistered partnership firm. Further, the trial Court appreciating the argument addressed from the accused side that by virtue of Section 69(2) of the Partnership Act, an unregistered Firm cannot maintain a suit against the third party to enforce a right arising from a contract, unless the Firm is registered, has relied upon the Division Bench judgment of Andhra Pradesh High Court in Amit Desai Vs. Shine Enterprises reported in 2000 Crl.L.J 2386 and held that the complainant being an unregistered Firm cannot maintain a complaint against the accused.
9. Learned counsel for the appellant / complainant in his argument submitted that the said judgment of Amit Desai’s case (supra) was over ruled by a Full Bench judgment of Andhra Pradesh High Court in A.V.Ramanaiah Vs.M.Shekhara reported in Laws (APH) 2007 12 87. In Paragraph 14 of the said judgment, the Full Bench of High Court of Andhra Pradesh was pleased to observe as below:
“14. From a careful analysis of what has been set out supra, it emerges that the expression ‘suit’ envisaged under Section 69 of the Partnership Act cannot be stretched for securing immunity from criminal prosecutions. As was noticed supra the bar under Section 69 of the Partnership Act is liable to be confined only to enforcement of contractual obligations, but not to any other proceeding initiated for securing of enforcing statutory protections or obligations. It must necessarily follow that the bar contained under Section 69 of the Partnership Act does not encompass immunity from penal liability and the criminal proceedings for the offence committed under Section 138 of the Act, as meaning a legally enforceable debt or liability, does not reference even remotely to the penal liabilities. Penal liability is completely distinct from measures taken for enforcing a debt or any other liability. Penal consequences follow only from offences, and unless a particular act is recognized as an offence, the penal consequences could not have flow there from.”
Further, in the same judgment at Paragraph Nos.23 and 24 it was pleased to observe as below:
“23. We are, therefore, of the view that the Division Bench has not correctly appreciated the distinction between the right of enforcing contractual obligations arising out of business transactions carried out by an unregistered partnership firm, as contemplated and covered under Section 69 of the Partnership Act, in contrast of the penal action rendering dishonour of cheque as an offence contained under Section 138 of the Act. Therefore, we hold that the Division Bench in Amit Desai V. M/s. Shine Enterprises (Supra), has not laid down correct law.
24. The reference is, accordingly, answered holding that the bar contained under Section 69 of the Partnership Act would not get attracted for initiating action by or against an unregistered partnership firm for the offence committed under Section 138 of the Act.”
10. In M/s Gowri Containers Vs. S.C. Shetty & Anr. reported in 2008 Crl.L.J 498 a Co-ordinate Bench of this Court drawing analogy with the finding of the Hon’ble Apex Court in Kamal Pushpa Enterprises Vs. D.R.Construction Company reported in (2000) 6 SCC 659, where the Hon’ble Apex Court was pleased to observe that the bar to enforce rights arising from contract under Section 69(2) of the Partnership Act applies only in respect of suits and not applicable to the proceedings before the Arbitrator, was pleased to hold that the disability of an unregistered Firm under Section 69(2) of the Indian Partnership Act to file a suit to enforce the right arising out of the contract does not make such debt or liability a not legally enforceable debt or liability.
11. Similarly in Bhavani Agencies Vs.
G.C.Colour Lab and another reported in 2004 (1) Kar.L.J pg 421, another Co-ordinate Bench of this Court with respect to Section 138 of the Negotiable Instruments Act in the case of dishonour of cheque was pleased to hold that the complaint under Section 200 Cr.P.C for the offence punishable under Section 138 of the N.I.Act being criminal in nature and provision of Partnership Act barring institution of suit by unregistered Firm is not attracted, as such, complaint lodged by partner on behalf of his unregistered Firm regarding dishonour of cheque was held maintainable.
12. Thus, the above decisions go to show that an unregistered partnership firm also can maintain a complaint under Section 200 Cr.P.C for the offence punishable under Section 138 of the Negotiable Instruments Act.
13. However, the learned counsel for the respondent in his argument relied upon a judgment of the Bombay High Court in Sai Accumulator Industries Sangamner Vs. M/s Sethi Brothers, Aurangabad reported in ABC 2016 (I) 469 Bom wherein it was pleased to observe that a perusal of Section 138 of the Negotiable Instruments Act shows that it has to be a transaction which relates to legally enforceable debt or liability. It is quite clear that under Section 69(2) of the Partnership Act, the complainant, unregistered partnership could not have legally enforced debt. If being unregistered partnership it cannot legally enforce the debt, it cannot be legally enforceable debt and would go out of the purview of Section 138 of the Negotiable Instruments Act.
The said reasoning in Sai Accumulator’s case (supra) is not acceptable in the case on hand, for the reason that, once it is established that cheque was issued to the complainant / payee by the Drawer / accused, then a legal presumption under Section 139 of the Negotiable Instruments Act, about existence of legally enforceable debt or liability starts operating in favour of the complainant. However, the said presumption is rebuttable.
14. In the instant case, the trial Court has clearly held that the issuance of cheque in question from the accused to the complainant has been established. That being the case, the presumption under Section 139 of the Negotiable Instruments Act that there existed a legally enforceable debt or liability from the accused in favour of the complainant has formed in favour of the complainant.
15. The Hon’ble Apex Court in BSI Ltd. and another Vs. Gift Holdings Pvt.Ltd. and another reported in (2000) 2 SCC 737 was pleased to observe at Paragraph 20 of its judgment that a criminal prosecution is neither for recovery of money nor any enforcement of any security etc.,. Section 138 of the Negotiable Instruments Act is a penal provision, the commission of which offence entails a conviction and sentence on proof of guilt in duly conducted criminal proceedings. Once, the offence under Section 138 of the Negotiable Instruments Act is completed, the prosecution proceedings can be initiated not for recovery of amount covered by the cheque but for bringing the offender to penal liability.
16.Thus, the prosecution for the offence punishable under Section 138 of the Negotiable Instruments Act not being any proceeding, much less, a suit, to enforce a right arising from a contract, but it being proving of an offence alleged to have been committed by drawer of a cheque in favour of the complainant and also as observed by the trial Court, since the said issuance of a cheque towards legally enforceable debt by the accused in favour of the complainant since proved, the complainant merely because, being an unregistered firm is not precluded from initiating the complaint under Section 200 Cr.P.C against the accused for the offence punishable under Section 138 of the Negotiable Instruments Act. It is also to be noticed that though in Sai Accumulator’s case (supra), the learned Judge of Bombay High Court relied upon Amith Desai’s case (supra), but it has not considered the Full Bench judgment of the very same Andhra Pradesh High Court in A.V.Ramanaiah’s case (supra), wherein the decision in Amith Desai’s case (supra) was held as not laid down the correct law.
17. Further in M/s Uttam Traders Ranghri Vs.
Tule Ram @ Tula Ram reported in Laws (HPH) 2018 9 1, the learned Single Judge of Himachal Pradesh High Court also after considering various decisions of Kerala High Court, this Court, Punjab and Haryana High Court and also judgment of Hon’ble Apex Court in BSI Limited case (supra) was pleased to observe that save and except an isolated authority of the Division Bench of Andhra Pradesh High Court in Amith Desai’s case (supra) all other High Courts in the Country have categorically held that the proceedings under Section 138 of the Negotiable Instruments Act are not recovery proceedings, therefore, even an unregistered partnership Firm can maintain a complaint under Section 138 of the Negotiable Instruments Act.
For the above reasons, the finding of the trial Court that the complainant being an unregistered Firm could not maintain a complaint for the offence punishable under Section 138 of the Negotiable Instruments Act is an erroneous finding.
18. The second point on which the trial Court pronounced the judgment of acquittal was for the reason that the person who filed the complaint in his capacity as Chief Executive Officer and Power of Attorney of the complainant Firm has not asserted about his personal knowledge in respect of the transactions alleged in the complaint.
19. The complaint in the trial Court which is marked as Ex.P5 is shown to have been filed by a partnership firm represented by its Chief Executive Officer and Power of Attorney Mr.Deepak Mehta. According to the learned counsel for the respondent / accused, there is no assertion in the complaint that the said Power of Attorney had personal knowledge in respect of the transaction alleged in the complaint. Therefore, he is not a proper witness to represent and depose the case of the complainant. In his support, he relied upon the judgment of the Hon’ble Apex Court in A.C.Narayanan Vs. State of Maharashtra and another reported in (2014) 11 SCC 790.
20. Per contra, learned counsel for the appellant / complainant relying upon the very same A.C.Narayanan’s case (supra) contended that in the verification of the complaint which is also a part of the complaint, the Power of Attorney has clearly stated that the averments made in the complaint are true and correct to the best of his knowledge. Further, along with the complaint, he has also filed his sworn affidavit narrating the facts of the case, wherein also he has stated that the facts are prepared upon his instructions and they are true to the best of his knowledge. Learned counsel further drawing the attention of this Court at Ex.P1 which is Power of Attorney and Ex.P6 which is the memorandum of understanding, also stated that even in those documents also the Firm has been represented by the very same Power of Attorney, as such, he has personal knowledge.
21. In A.C.Narayanan’s case (supra) at Paragraphs 29 and 30 of its judgment, the Hon’ble Apex Court was pleased to observe as below:
“29. From a conjoint reading of Sections 138, 142 and 145 of the NI Act as well as Section 200 of the Code, it is clear that it is open to the Magistrate to issue process on the basis of the contents of the complaint, documents in support thereof and the affidavit submitted by the complainant in support of the complaint. Once the complainant files an affidavit in support of the complaint before issuance of the process under Section 200 of the Code, it is thereafter open to the Magistrate, if he thinks fit, to call upon the complainant to remain present and to examine him as to the facts contained in the affidavit submitted by the complainant in support of his complaint. However, it is a matter of discretion and the Magistrate is not bound to call upon the complainant to remain present before the court and to examine him upon oath for taking decision whether or not to issue process on the complaint under Section 138 of NI Act. For the purpose of issuing process under Section 200 of the Code, it is open to the Magistrate to rely upon the verification in the form of affidavit filed by the complainant in support of the complaint under Section 138 of the NI Act. It is only if and where the Magistrate, after considering the complaint under Section 138 of the NI Act, documents produced in support thereof and the verification in the form of affidavit of the complainant, is of the view that examination of the complainant or his witness(s) is required, the Magistrate may call upon the complainant to remain present before the court and examine the complainant and/or his witness upon oath for taking a decision whether or not to issue process on the complaint under Section 138 of the NI Act.
30. In the light of the discussion, we are of the view that power-of-attorney holder may be allowed to file, appear and depose for the purpose of issue of process for the offence punishable under Section 138 of the NI Act. An exception to the above is when the power-of-attorney holder of the complainant does not have a personal knowledge about the transactions then he cannot be examined. However, where the attorney holder of the complainant is in charge of the business of the complainant payee and the attorney holder alone is personally aware of the transactions, there is no reason why the attorney holder cannot depose as a witness. Nevertheless, an explicit assertion as to the knowledge of the power-of- attorney holder about the transaction in question must be specified in the complaint. On this count, the fourth question becomes infructuous.”
22. In the instant case, the complainant is the Firm. However, it is being represented by one Sri.Deepak Mehta as its Chief Executive Officer and Power of Attorney (POA). As observed above, in the verification to the complaint, the said Power of Attorney has stated that the averments made in the complaint are true and correct to the best of his knowledge, information and belief. However, along with the complaint, he has filed a sworn affidavit wherein he has repeated the summary of the averments made in the complaint and stated that the affidavit was prepared upon his instructions and the contents of the same are true, correct and best of his knowledge. Apart from the complaint and the affidavit, the POA which is marked at Ex.P1 shows that said POA Deepak S. Mehta was authorised to file a complaint on behalf of the Firm. Document marked as Ex.P6 in the trial Court which is undisputedly a memorandum of understanding between the accused and the complainant also refers to the cheque in question which is for a sum of `2,50,00,000/-.
Further, the said memorandum of understanding wherein the complainant Firm is a second party, is again represented by its Chief Executive Officer Mr.Deepak S. Mehta, who is the POA in the complaint. Further, the letter shown to have been written by the accused to the complainant Firm and produced and marked by the accused himself at Ex.D1 go to show that the said letter is also addressed to the complainant firm represented by its Chief Executive Officer Sri.Deepak S. Mehta.
23. Thus, the transaction which is the subject matter of the complaint being recorded and evidenced in the memorandum of understanding at Ex.P6 and the related correspondence made by none else than the accused which letter dated 10.02.2016 is at Ex.D1 very clearly go to show that throughout the transaction the complainant Firm was being represented by its POA who in his capacity as a POA has represented the complainant Firm in the Court below. The trial Court without noticing the fact that the POA Sri.Deepak S. Mehta has produced the documents to show that he had the personal knowledge about the transaction in question and also has stated both in his complaint as well in a sworn affidavit along with the complaint that he had the knowledge of the transaction, has jumped to a hasty conclusion that the said POA has not asserted above his personal knowledge in respect of the transaction in the complaint, as such also, the complaint is not maintainable. In view of the above analysis, the said reasoning given by the trial Court also has to be held as erroneous.
24. In view of the fact that the trial Court despite holding that the complainant has proved that the accused has issued the cheque at Ex.P2 for a sum of `2,50,00,000/- towards discharge of legally enforceable debt and on presentation of the said cheque, the same came to be dishonoured with the reasoning “funds insufficient” and also even after holding that a statutory notice as required to be issued after dishonour of the cheque was also issued by the complainant within the time, still, acquitted the accused only for the reason that the complainant Firm was an unregistered Firm and the POA had failed to assert about his personal knowledge in respect of the transaction in the complaint. Since, those two reasoning for acquittal was now proved to be an erroneous finding given by the trial Court, the same deserves to be set-aside and the complainant having proved the guilt of the accused beyond reasonable doubt succeeds. Accordingly, I proceed to pass the following:
ORDER (i) Appeal is allowed.
(ii) The judgment of acquittal passed by the XLII Additional Chief Metropolitan Magistrate, Nrupathunga Road, Bengaluru City in CC No.5779/2017 dated:22.02.2018 for the offence punishable under Section 138 of the Negotiable Instruments Act is set- aside.
(iii) The respondent/accused by name – Mr.Ramachandra, s/o Gurappa, R/at No.12/4, ‘Lakshmi Nivas’, Anand Reddy Layout, Electronic City, 2nd Phase, Bengaluru-560 100, is convicted for the offence punishable under Section 138 of N.I.Act.
To hear on the sentence and for pronouncement of order on sentence, call the matter at 2.30 p.m.
Sd/- JUDGE GH ORDER ON SENTENCE Heard the learned counsel from both side on sentence part.
While the learned counsel for the appellant/ complainant submits for awarding maximum sentence for the offence for which the respondent/accused is convicted, the learned counsel for the respondent/accused submitting that accused is a family holder and a respectable person in society, prays for taking a lenient view.
It is the sentencing policy that the sentence ordered should not be either exorbitant nor for name sake for the proven guilt. It must be proportionate to the criminality for which the accused is found guilty of.
Considering the facts and circumstances of the case, the accused is sentenced to pay a fine of `3,00,00,000/- (Rupees Three Crores only) within four weeks from today, and in case of default of payment of fine, to undergo a simple imprisonment for a period of eighteen months. In case of payment of fine amount, a sum of `2,50,00,000/- (Rupees Two Crores Fifty Lakhs only) be paid to the complainant firm – M/s Ajmera Housing Corporation, Bangalore and remaining sum of `50,00,000/- (Rupees Fifty Lakhs only) be taken to the account of the State.
The Registry is directed to transmit a copy of this judgment to the trial Court forthwith, to enable it to proceed further in the matter for issuance of warrant of conviction, if necessary and proceed in accordance with law.
An entire copy of this judgment also be delivered to the respondent/accused, immediately free of cost.
Sd/- JUDGE GH