IN THE HIGH COURT OF JUDICATURE AT MADRAS

Reserved on	:   04.11.2022
Pronounced on	:   10.11.2022

Coram:

THE HONOURABLE MR. JUSTICE P.VELMURUGAN

 

Criminal Appeal No.714 of 2022

M/s.V.T.Impex Ltd

Represented by its Admin Officer

J.Hazarath Reddy, aged 54 years

No.12, S.B.I. Officers Colony 2^nd Street,

Arumbakkam, Chennai-600106         … Appellant

Vs.

1.Susheela Yogish Bungle

2.Yogish Dwrakish Bungle

3.Assytect (Partnership firm)

No.563, 13^th Cross, 16^th Main,

HSR Lay Out

Bangalore – 560034             … Respondents

Prayer : Criminal Appeal filed under Sections 378 of Criminal Procedure

Code, praying to set aside the Judgment of the learned Metropolitan Magistrate Fast Track Court No.II, Egmore, Chennai-8, made in C.C.No.3841 of 2010 dated 06.06.2019 in acquitting the respondents/accused for the offence punishable under Section 138 of the Negotiable Instruments Act and convict them for the said offence.

For  Appellant           : Mr.C.Prasanna Venkatesh

For Respondents       :  M/s.Gopi Prakash & Associates

J U D G M E N T

This Criminal Appeal has been filed seeking to set aside the

Judgment of acquittal passed by the learned Metropolitan Magistrate Fast

Track Court No.II, Egmore, Allikulam, Chennai, made in C.C.No.3841 of 2010 dated 06.06.2019 and convict the respondents for the offence punishable under Section 138 of the Negotiable Instruments Act.

2. The appellant herein is the complainant and the respondents 1 to 3 are the accused. The appellant had filed a complaint against the respondents 1 to 3  in C.C.No 3841 of 2010 on the file of the Metropolitan Magistrate Fast Track Court No.II, Egmore, Allikulam,

Chennai, for the offence under Section 138 of Negotiable Instruments Act and after the trial,  the learned Magistrate dismissed the complaint and acquitted the respondents. Aggrieved over the same, the complainant has filed the present appeal before this Court.

3. The specific case of the appellant/complainant is that on theassurance given by the respondents herein to  become partners to carry out the partnership business under the name and style of  ASSYTECH, a deed of partnership was executed on 06.06.2007 between the appellant and the respondents and a Memorandum of Understanding was also entered between them on 07.06.2007. Subsequently, the appellant herein contributed a sum of Rs.26 lakhs towards its share to establish the firm, whereas the respondents cunningly with an intention to defraud and cheat the appellant, kept quite without contributing any amount as their share and did not come forward to start the partnership business as a result of that, the appellant was put to untold hardship, suffering and mental agony and in spite of repeated demands made by the appellant, the respondents had paid only part of the amount of Rs.5 lakhs on 12.10.2007 and for the balance amount inclusive of interest, the 1^st respondent, issued the cheque in question bearing No.619814 dated 22.07.2010 in favour of the appellant for a sum of Rs.36,72,200/-. When the appellant presented the same in its bank, it was returned for the reason “insufficient funds”. Therefore, the appellant issued a statutory notice calling upon the respondents to pay the cheque amount and the same was returned to the appellant with a postal endorsement “unclaimed” on 16.08.2010. Hence, the appellant was constrained to file the private complaint before the Court below.
4. In order to substantiate the complaint, on the side of the complainant, two witnesses were examined as P.W.1 and P.W.2 and marked 13 documents as Ex.P.1 to Ex.P.13. On the side of the accused two witnesses were examined as D.W.1 and D.W.2 and no document was produced.
5. After trial, on hearing of arguments advanced on either side, considering the facts and materials, the trial Court dismissed the complaint and acquitted the respondents. Challenging the Judgment of acquittal, the complainant has filed the present appeal before this Court.
6. The learned counsel for the appellant would submit that the the

3^rd respondent firm has been included only as a formal respondent and only the 1^st and 2^nd respondents  are liable to repay the cheque amount to the appellant. Even though the cheque was issued by the 1^st respondent, the entire materials would show that the 2^nd respondent is also equally responsible to repay the said amount. Even the 1^st respondent, during

evidence, had admitted the signature in the cheque. Though the 2^nd respondent admitted that the cheque was issued to the appellant for some other purpose, she has not produced any evidence to proof the same. Further, on the side of the complainant, the Bank Manager of the appellant was examined as P.W.2 and he has clearly deposed that a sum of Rs.26 lakhs was transferred to the account of the 1^st respondent from the account of the appellant herein. Even D.W.1 and D.W.2/ the 1^st and 2^nd respondents herein themselves admitted in their cross examinations that in the Memorandum of Understanding/Ex.P.7, it is mentioned that the appellant will pay the respondents a sum of Rs.35 lakhs and the same will be returned to the appellant company by 31^st December 2008 and till such period, they will pay interest @ 2% per month from 1^st April 2008 or a share in the profit @ 20% whichever is higher and in case, if the

respondents are not able to return the amount of Rs.35 lakhs by 31^st December 2008, they would pay interest @ 3% per month from 1^st January 2009. Therefore, the appellant through oral and documentary

evidence proved that the appellant paid a sum of Rs.26 lakhs to the 1^st respondent to start business but the respondents neither started business nor returned the money to the appellant within the stipulated time as agreed by them and therefore, the amount received by the respondents has become a debt. Therefore, there is a presumption that the cheque issued by the respondents is to discharge the legally enforceable debt and that the respondents are liable to return the amount received from the appellant with agreed interest. The trial Court failed to appreciate the evidence properly and instead of convicting the respondents and ordering for compensation to the appellant, simply dismissed the complaint which warrants interference.

7. The learned counsel for the respondents 1 and 2 would submit that the respondents 1 and 2 had not borrowed any amount from the appellant and that the appellant had only invested the said amount in the

3^rd respondent firm towards its share and it is not a debt. Therefore, the appellant failed to discharge the initial onus in respect of the legally recoverable debt. He would submit that due to non co-operation of the appellant, they could not start the business. Therefore, the appellant is not entitled to get back the said amount and the respondents 1 and 2 are not liable to pay any interest since it was not a debt and the respondents had not agreed to repay the said amount. Further, the appellant has admitted that it is an investment for the partnership firm and therefore, the appellant cannot file a complaint under Section 138 of Negotiable Instruments Act as if, it is a debt and therefore, the cheque in question was not issued to discharge any legally enforceable debt. The trial Court rightly appreciated the evidence and found that there is no debtor and creditor relationship between the appellant and the respondents and the amount paid by the appellant is not a debt. Since the respondents had not borrowed any money from the appellant for interest and there is no agreement to repay the amount with interest, there is no cause of action at all. Therefore, the trial Court rightly dismissed the complaint and acquitted the respondents. He would submit that in the appeal against acquittal, the Court needs strong evidence, whereas the appellant has failed to prove his case beyond reasonable doubt. Therefore, the appeal is liable to be dismissed.

8. Heard the learned counsel appearing for the appellant and the learned counsel for the respondents 1 and 2 and perused the materials available on record.
9. Admittedly, the appellant paid a sum of Rs.26 lakhs to the 1^st respondent through bank transaction and from the oral and documentary evidence, the appellant has proved that the said amount was transferred to the 1^st respondent to start business. However, from the materials, it is clearly  proved that no business was started and that the respondents had not invested any money towards their share to start business. Further, it is not the case of the respondents that both the parties had contributed certain amount and started a business and since there was a loss, they cannot repay the amount, but in this case both the appellant and the respondents had agreed to start business and accordingly, the appellant had paid a sum of Rs.26 lakhs towards his share. But the respondents failed to prove that based on the deed or based on the Memorandum of Understanding, on receipt of the amount from the appellant, the respondents started business. Therefore, in the  absence of the same, the amount paid by the appellant is liable to be returned by the respondents. Once the appellant proved that the respondents received the amount from the appellant to start business and subsequently, they failed to start business as agreed by them, then the respondents are liable to repay the amount even though it was not a debt on the date of payment and subsequently on failure of starting business, the respondents are liable to repay the same. Therefore, the cheque issued by the respondents presumed to be a legally enforceable debt or liability.  Though the amount was not lent as debt, it does not mean that the appellant is not entitled to recover the amount. Once it is admitted by the respondents that they have not started the business as agreed by them after receiving the amount, then the respondents who benefited with the amount paid by the appellant are liable to repay the same with reasonable interest.
10. It is settled proposition of law that the burden of proof of thecomplainant is not heavy as that of the prosecution in the criminal  Even though the complaint under Section 138 of Negotiable Instruments Act is civil in nature, it is a mixed colour of criminal and civil.
11. In this case the appellant proved the foundational facts that the amount paid by the appellant to the respondents become a legally enforceable liability by preponderance of probability then, it is for the respondents to rebut the presumption that the cheque which was issued by the 1^st respondent is not towards discharge of legally enforceable

liability.

12. The respondents have admitted the signature and execution of cheque. Since they admitted the signature and the appellant also established the foundational facts under what circumstances, the cheque was issued and the purpose for issuance of cheque, hence the initial burden of the complainant is proved then the onus is shifted to the respondents. There is a statutory presumption under Section 118 and 139 of the Negotiable Instruments Act that once  the execution of cheque is admitted, the law presumes that the cheque was issued to discharge  a legally enforceable debt or liability then it is for the accused to rebut the presumption. The said presumption is a rebuttable presumption. The accused need not rebut the presumption by letting direct evidence and the accused can always rebut the presumption by preponderance of probability in the manner known to law.

13.This Court being an appellate Court as final Court of fact finding, has to necessarily re-appreciate the entire evidence and give its independent findings. Accordingly this Court while re-appreciating the entire evidence, finds that the appellant/complainant has established its case that the cheque was issued  by the respondents to discharge a legally enforceable liability. Though the 2^nd respondent, in his evidence had stated that the cheque was issued in the year 2007 for security purpose, they have not proved their defence in the manner known to law. There is no quarrel with the settled proposition that normally the appellate Court will not automatically interfere with the judgment of acquittal unless compelled circumstances warrants and while reversing the judgment of acquittal, the appellate Court has to give valid reasons and also the compelled circumstances.

14. This court while re-appreciating the evidence finds that the appellant has substantiated his case with oral and documentary evidence whereas, the respondents 1 and 2 have admitted the execution of cheque but not rebutted the presumption in the manner known to law as observed above.
15. This Court finds that the complainant has established his complaint and its averments through oral and documentary evidence and the trial Court has failed to appreciate the same. Therefore, the findings of the trial Court dismissing the complaint filed by the appellant is perverse. Therefore, the Judgment of the trial Court is liable to be set aside.
16. Accordingly, this criminal appeal is allowed. The respondents 1 and 2 are convicted for the offenec under Section 138 of Negotiable Instruments Act.  However, since the appellant himself has sought not to proceed as against the 3^rd respondent firm, the appeal against the  3^rd respondent firm is dismissed.
17. For a reversal judgment, before imposing sentence, the accused have to be heard. Hence, the respondents 1 and 2 are directed to appear before this Court on 21.11.2022 for hearing on the question of sentence.
18. List the matter on 21.11.2022 “for hearing on the question of sentence”.

10.11.2022

ksa-2 Index:Yes/No

P.VELMURUGAN, J

ksa-2

To

1. The Metropolitan Magistrate Fast Track Court No.II, Egmore, Chennai-8
2. The Section Officer, Criminal Section, High Court, Madras.

Pre-Deliver Order in

Criminal Appeal No.714 of 2022

10.11.2022

Crl.A.No.714 of 2022

P.VELMURUGAN.J.,

When the matter came up on 10.11.2022, under the caption “for pronouncing judgment” this Court allowed the appeal and the respondents/accused 1 & 2 were directed to appear before this Court on 21.11.2022 for hearing the question of sentence and directed to post the matter on the said date.  When the matter was taken up on 21.11.2022, the respondents did not appear before this Court, at that time the learned counsel for the respondents sought time and undertook to produce the respondents/accused before this Court on the next date of hearing. Since it was a reversal judgment and also the offence is under Section 138 of the Negotiable Instruments Act, one more opportunity was granted to the respondents and therefore, the matter was directed to be posted today (ie. 23.11.2022).  Today when the matter is taken up for hearing, the respondents have appeared before this Court and heard

respondents/accused.

2. Though the learned counsel appearing for the respondents/accused after pronouncement of the judgment, once again started to argue the appeal on merits and made his arguments on two folds (i)the power of attorney has no locus standi to give the evidence and it is not competent witness to speak about the transaction as against the respondents and had not received money from the appellant as a debt or any liability, since it is only a personal transaction between the appellant and the second respondent and  (ii)the first respondent has not borrowed any money and she is not a Managing Partner or Managing Director of the company and she has no role to play the alleged transaction.  Further, the learned counsel submitted that even before the Trial Court also the appellant company were not seeking any relief against the first respondent and third respondent.   The learned counsel further submitted that the partnership firm was established and started its business and nowhere they were admitted that they were liable for repaying the said amount and without resolving the partnership firm and the amount utilised for the partnership firm cannot invoke Section 138 of NI Act, as if the second respondent is the debtor, who borrowed the amount as debt and they are not liable to invoke the offence under Section 138 of the Act as against the first and third respondents.
3. The learned counsel for the appellant contended that the second respondent himself admitted in the cross examination regarding the money received and signature in the cheque and also not starting the business by utilising the fund received from the appellant.
4. Heard the respondents/accused and the learned counsel

appearing on either side.

5. In the Appeal, the learned counsel for the respondents already raised the contentions and the same has been answered in the judgment and posted the matter only for hearing on the questioning of sentence and appearance of the respondents 1 & 2 and they have appeared and stated that they are not liable to pay any amount to the appellant and they already repaid the entire amount.
6. Considering the fact that this Court has already come to a conclusion that the cheque was issued to discharge a legally enforceable liability and respondents have not rebutted the presumption under Section 139 of the NI Act in the manner known to law and found guilt of the respondents 1 and 2/accused 1 and 2. Therefore, first and second respondents are convicted and the second accused/second respondent is sentenced to undergo six months simple imprisonment for the offence under Section 138 of the NI Act and the respondents/accused 1 & 2 are directed to pay a fine of Rs.36,72,200/- with 9% interest from the date of complaint till the date of realisation within a period of one month to the credit of CC.No.3841 of 2020, on the file of Metropolitan Magistrate Fast Track Court No.II, Egmore, Chennai-8, failing which the first and second respondent/A1 & A2 shall undergo one month simple

imprisonment.  After remittance of the amount by the respondents, the same shall be paid to the appellant by way of compensation, after filing due application before the trial Court.

23.11.2022

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Note : Issue order copy on 24.11.2022

 

P.VELMURUGAN,J.,

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Crl.A.No.714 of 2022

23.11.2022