IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 29TH DAY OF AUGUST, 2019 BEFORE THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA CRIMINAL APPEAL No.1433 OF 2017 C/W CRIMINAL APPEAL No.1431 OF 2017, CRIMINAL APPEAL No.1432 OF 2017 & CRIMINAL APPEAL No.1430 OF 2017 IN CRL.A. No.1433 OF 2017:
BETWEEN:
SMT. NAGARATHNAMMA, AGED ABOUT 48 YEARS, W/O. KRISHNA REDDY, R/AT. MULLUR VILLAGE, VARTHUR HOBLI, BANGALORE EAST TALUK.
... APPELLANT (BY SRI E.R. GAJENDRA NAIDU, ADVOCATE) AND:
1. M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER, NO.18, CUNNINGHAM ROAD, BANGALORE-560 052.
2. SRI KRISHNA, DIRECTOR, M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER, NO.18, CUNNINGHAM ROAD, BANGALORE-560 052.
ALSO AT, NO.263, 15TH MAIN, 6TH CROSS, RMV II STAGE, SADASHIVANAGAR, BANGALORE-560 080.
... RESPONDENTS (BY SMT. ANANDITA SRINIVASAN, ADVOCATE FOR SRI S. GANESH SHENOY, ADVOCATE) THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) CR.P.C PRAYING TO SET ASIDE THE JUDGMENT OF ACQUITTAL DATED 28.06.2017 IN C.C.NO.23527/2011 ON THE FILE OF THE LEARNED XIII ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BANGALORE AND TO CONVICT THE ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT AND TO SENTENCE HIM TO PAY A FINE OF RS.25,00,000/- IN ADDITION TO THE SENTENCE OF IMPRISONMENT FOR A PERIOD OF 2 YEARS.
IN CRL.A.No.1431 OF 2017: BETWEEN:
SMT. KANTHAMMA, AGED ABOUT 54 YEARS, D/O. LATE CHINNAPPA REDDY, R/AT. #48, HOSUR ROAD, BEHIND KARNATAKA CHECK POST, NEAR NEW BALDWIN SCHOOL, ATTIBELE, ANEKAL TALUK, BANGALORE-562 107.
… APPELLANT (BY SRI E.R. GAJENDRA NAIDU, ADVOCATE) AND:
1. M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER, NO.18, CUNNINGHAM ROAD, BANGALORE-560 052.
2. SRI KRISHNA, DIRECTOR, M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER, NO.18, CUNNINGHAM ROAD, BANGALORE-560 052.
ALSO AT, NO.263, 15TH MAIN, 6TH CROSS, RMV II STAGE, SADASHIVANAGAR, BANGALORE-560 080.
... RESPONDENTS (BY SMT. ANANDITA SRINIVASAN, ADVOCATE FOR SRI S. GANESH SHENOY, ADVOCATE) THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) CR.P.C PRAYING TO SET ASIDE THE JUDGMENT AND ORDER DATED 28.06.2017 PASSED BY THE XIII ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BANGALORE IN C.C.No.28158/2011-ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT.
IN CRL.A. No.1432 OF 2017: BETWEEN:
SMT. NAGARATHNAMMA, AGED ABOUT 48 YEARS, W/O. KRISHNA REDDY, R/AT. MULLUR VILLAGE, VARTHUR HOBLI, BANGALORE EAST TALUK.
(BY SRI E.R. GAJENDRA NAIDU, ADVOCATE) AND:
1. M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER, NO.18, CUNNINGHAM ROAD, BANGALORE-560 052.
2. SRI KRISHNA, DIRECTOR, M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER, NO.18, CUNNINGHAM ROAD, BANGALORE-560 052.
ALSO AT, NO.263, 15TH MAIN, 6TH CROSS, RMV II STAGE, SADASHIVANAGAR, BANGALORE-560 080.
... APPELLANT ... RESPONDENTS (BY SMT. ANANDITA SRINIVASAN, ADVOCATE FOR SRI S. GANESH SHENOY, ADVOCATE) THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) CR.P.C PRAYING TO SET ASIDE THE JUDGMENT OF ACQUITTAL DATED 28.06.2017 IN C.C.NO.23526/2011 ON THE FILE OF THE LEARNED XIII ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BANGALORE AND TO CONVICT THE ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT AND TO SENTENCE HIM TO PAY A FINE OF RS.25,00,000/- IN ADDITION TO THE SENTENCE OF IMPRISONMENT FOR A PERIOD OF 2 YEARS.
IN CRL.A.No.1430 OF 2017: BETWEEN:
SMT. SUNANDAMMA, AGED ABOUT 50 YEARS, D/O. LATE CHINNAPPA REDDY, R/AT. YELLA EDDY CIRCLE, BEHIND ESHWARA TEMPLE, KADUGODI, BANGALORE EAST TALUK.
(BY SRI E.R. GAJENDRA NAIDU, ADVOCATE) AND:
1. M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER, NO.18, CUNNINGHAM ROAD, BANGALORE-560 052.
2. SRI KRISHNA, DIRECTOR, M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER, NO.18, CUNNINGHAM ROAD, BANGALORE-560 052.
ALSO AT, NO.263, 15TH MAIN, 6TH CROSS, RMV II STAGE, SADASHIVANAGAR, BANGALORE-560 080.
… APPELLANT ... RESPONDENTS (BY SMT. ANANDITA SRINIVASAN, ADVOCATE FOR SRI S. GANESH SHENOY, ADVOCATE) THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) CR.P.C PRAYING TO SET ASIDE THE JUDGMENT OF ACQUITTAL DATED 28.06.2017 IN C.C.NO.28159/2011 ON THE FILE OF THE LEARNED XIII ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BANGALORE AND TO CONVICT THE ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF N.I. ACT AND TO SENTENCE HIM TO PAY A FINE OF RS.25,00,000/- IN ADDITION TO THE SENTENCE OF IMPRISONMENT FOR A PERIOD OF 2 YEARS.
THESE CRIMINAL APPEALS COMING ON FOR ADMISSION, THIS DAY, THE COURT DELIVERED THE FOLLOWING:
J U D G M E N T Heard learned counsel for appellant and learned counsel for respondents in all the above four cases. Perused the records.
2. The appellant in all the above cases initiated action against the respondents herein under Section 138 of the Negotiable Instruments Act, on the ground that four different cheques issued by the respondents were dishonoured for the reason of stop payment. Respondents/accused took up a plea before the trial Court that the cheques were issued in terms of the Memorandum of Understanding (hereinafter referred to as ‘MOU’) dated 13.07.2010 as security for performance of the terms of the said agreement viz., withdrawal of two suits i.e., O.S.No.1831/2006 and O.S.No.33/2005 and execution of Confirmation Deed. The agreement was time bound and the obligation were required to be completed on or before 15.07.2010. The MOU authorized the respondents/accused to issue mandate to the banker for stop payment in case of failure of the complainant to adhere to the terms of the said MOU. Since complainant failed to discharge the obligation undertaken under the said MOU within the stipulated time, respondents issued direction to the banker to stop payment. In the said circumstances, complainant had no cause of action to proceed against the respondents under Section 138 of the N.I. Act. This plea was found favour with the trial Court and accordingly, trial court having come to the conclusion that no contingency having arisen within the time stipulated therein, there was no cause of action for the complainant to present the cheques for encashment and consequently held that the complainant was not entitled to proceed against the respondents for the alleged dishonour.
3. After hearing learned counsel for appellant in all the above appeals and on going through the impugned order and the reasons assigned therein, I do not find any error or infirmity in the impugned order warranting interference by this Court. The reasoning of the trial Court find a place in para No.22 of the judgment in C.C.No.23527/2011 and in other cases also identical reasons are assigned which read as under:
”22. On careful scrutiny of the evidence adduced by the complainant both oral and documentary, it shows that the Ex.P.14 MOU, dated:13-07-2010 is basically an understanding between the parties is contingent contract. The liability under MOU, dated:13-07-2010 the contingent of performance of several obligations on the part of the complainant and their family. It is only on performance of some obligations i.e., on happening of some events only give rise for liability on the part of the accused. That means to say that the accused would get liability of payment of amount and honouring of the cheques i.e., disputed cheques mentioned in Ex.P.14 MOU would arise only on the performance of several obligation by the complainant and her family. If the complainant failed to perform their part of contract i.e., withdrawal of the suit by the complainant Krishna Reddy in O.S.33/2005 filed against Ramaswamy Reddy for enforcement of the agreement seeking relief of specific performance of contract or on failure to withdraw the suit filed by the complainant and Sunandamma i.e., the sister of the Krishna Reddy filed against Krishna Reddy in O.S.1831/2006 for the relief of partition and to obtain necessary no objections from the son and wife of Krishna Reddy namely Nagarathnamma and Jagadeesh to pay the amount to Krishna Reddy ‘within time stipulated therein’ in Ex.P.14 MOU i.e., within 15-07-2010 and to get execution of registered confirmation deed in favour of the accused i.e., in favour of H.G. Sandesh. If the complainant failed to perform these obligations that means to say that when the complainant and Sunandamma and Krishna Reddy have failed to perform their part of contract in time which is condition precedent for payment of considerations as mentioned in the MOU and honouring of cheque issued pursuant to such understanding, the liability cannot be enforced and no liability laid down to be called for. Since the liability out of cheques originated out of the MOU between parties and conditions to be fulfilled by the complainant. But the complainant and her family i.e., the complainant Kanthamma, Sunandamma and Krishna Reddy are at fault in complying the terms of MOU in time, as they are bound for the terms and conditions of MOU. Unless the complainant and her family complied the terms of contractual obligations under MOU, no liability/obligation will be created on the accused, when there is no obligations, the liability cannot be termed as legally enforceable liability.”
4. There is no dispute with regard to the fact that both parties were bound by the terms of the MOU dated 13.07.2010. Recitals at Cl.(3) to (7) of the said MOU reads as under:
“3. The party of the second part has agreed and promised to clear the out standing amount on or before 20th day of July 2010 without fail and as a token of promise and towards the security, the party of the second part had issued the cheques for the said sum in favour of the parties of the first part and Smt. Sunandamma and Smt.Kanthamma as described below;-
Sl.
No.
Name of the Party Cheque No. Amount
4. The party of the second part has agreed that he would arrange the said sum and pay the same to the parties for the first part as referred above without fail on or before 20th July 2010 and take back the cheques issued to the parties of the first part towards the security.
5. The parties of the first part have also agreed to get the necessary confirmation deed registered in favour of the party of the second part from the said Smt. Sunandamma and Smt. Kanthamma by withdrawing the suit filed by them in O.S.No.1831/2006 against Krishna Reddy and others on or before 15.7.2010.
6. The party of the first part Sri. Krishna Reddy had also agreed to withdraw the suit filed by him against Ramaswamy Reddy in O.S.No.33/2005 for the relief of Specific Performance of Contract and further he and his son Jagadeesh have also no objections whatsoever to pay the amount in favour of Smt. Nagarathnamma.
7. If the party of the second party fails to perform his part of obligation within 20th July 2010, the parties of the first part including Smt. Sunandamma and Kanthamma are at liberty to present the said cheques for encashment and if the party of the second party pay the said sum to them, the parties of the first partry shall return the said cheques immediately unto the custody of the second party without fail. If for any reason the parties of the first part including Smt. Sunandamma and Kanthamma have failed to withdrawn the said suits and perform their part of obligation the party of the second part is at liberty to issue necessary instructions to its bankers for stop payment of the instruments issued to the parties of the first part as mentioned above.
5. A plain reading of the said MOU would indicate that liability under the said cheques would arise only in the event of failure of the respondent to comply with the terms of the said M.O.U. In terms of the said agreement, complainant was required to withdraw the suits and execute the Confirmation Deed within the stipulated time. It was a time bound agreement, which invested right with the respondents to issue necessary instructions to the banker to stop payment, in case any of those conditions were not complied within the time prescribed in the agreement. It is not in dispute that the aforesaid conditions were not discharged by the complainant within the prescribed time, as a result, the respondent had instructed the bankers to stop payment of the cheques.
6. The contention of the counsel for the appellant that the conditions of the M.O.U. were performed by the complainant subsequently and therefore, the complainant was not entitled to present the cheques cannot be accepted. Since, the M.O.U. itself provided for the consequences of failure to comply with the terms of the contract, presentation of the cheques after issuance of the instructions to the banker in terms of the aforesaid agreement, does not either extend the time for performance of the agreement nor does it create any new liability in favour of the complainant. Trial Court therefore was justified in rejecting the application. Delayed performance of the conditions of the agreement may give rise to civil remedies which could be worked out by the complainant before appropriate forum, but the same does not give right to the complainant to proceed against the respondents under Section 138 of the N.I. Act. Section 138 of the Act, is a penal provision, which should be construed strictly. Since parties were governed by MOU and in terms thereof, liability was to arise only on the happening of the contingency prescribed therein, there was no cause of action for the complainant to take recourse to Section 138 of the N.I. Act.
In that view of the matter, no fault could be found with the well considered judgment of the trial Court warranting interference by this Court. In the result, all the above appeals are liable to be dismissed. Accordingly, all the appeals are dismissed.
Sd/- JUDGE psg*