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IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
U. DURGA PRASAD RAO, J.
Sri Sai Karuna Finance & Enterprises – Appellant
Versus
N. Sandhyarani and Ors. – Respondents
Criminal Appeal No. 452 of 2006
Decided On : 24-10-2018
Negotiable Instruments Act, 1881 – Section 138, 118 and 139 – Evidence Act, 1872 – Section 114 – Partnership Act, 1932 – Section 69 – Challenge judgment Criminal Appeal passed by Sessions Judge appeal was allowed and conviction and sentence recorded in CC by Additional Judicial Magistrate of First Class against respondent for offence under Section 138 of Act, 1881 was set aside – Alleging that accused, who is Proprietrix of Jaya Sree Gas Agencies of Bharat Gas for her business purpose borrowed Amount from complainant and issued post-dated cheque for said amount drawn on Andhra Bank, in favour of complainant and when complainant presented said cheque with his banker i.e., State Bank of India branch for collection, said cheque was returned with memo stating "exceeds arrangement" and cheque was dishonoured – Complainant issued statutory notice to accused but accused refused to receive said notice and hence it was returned –Whether in fact situation, presumption under Section 139 of N.I. Act is applicable against accused – Whether complaint is hit by Section 69 of Act, 1932 – Held, High Court of AP and High Court of Bombay held that private complaint under Section 138 of NI Act is not maintainable at instance of unregistered firm in view of explanation to Section 138 of NI Act where it is mentioned that "debt or other liability" means "legally enforceable debt or other liability" – If Section 69 of Partnership Act alone taken into consideration, it would appear as if suits alone are barred and not criminal prosecution – However Section 138 of NI Act cannot ignored because matter under consideration in respect of private complaint filed under Section 138 of NI Act – So far judgment of Apex Court concerned, as already stated supra, it was rendered in different context – In view judgments of High Courts of Bombay and Andhra Pradesh alone considered and followed – Even judgment of Division Bench of this Court binding precedent for me net result is complaint in instant case is hit by Section 69 of Partnership Act – Criminal Appeal dismissed. (Paras: 26 to 28)
Facts of the case:
Challenge judgment Criminal Appeal passed by Sessions Judge appeal was allowed and conviction and sentence recorded in CC by Additional Judicial Magistrate of First Class against respondent for offence under Section 138 of Act, 1881 was set aside – Alleging that accused, who is Proprietrix of Jaya Sree Gas Agencies of Bharat Gas for her business purpose borrowed Amount from complainant and issued post-dated cheque for said amount drawn on Andhra Bank, in favour of complainant and when complainant presented said cheque with his banker i.e., State Bank of India branch for collection, said cheque was returned with memo stating "exceeds arrangement" and cheque was dishonoured – Intimation memo was issued to complainant on Following mandatory procedure laid under Section 138 of N.I. Act, complainant issued statutory notice to accused but accused refused to receive said notice and hence it was returned.
Findings of the court:
High Court of AP and High Court of Bombay held that private complaint under Section 138 of NI Act is not maintainable at instance of unregistered firm in view of explanation to Section 138 of NI Act where it is mentioned that "debt or other liability" means "legally enforceable debt or other liability" – If Section 69 of Partnership Act alone taken into consideration, it would appear as if suits alone are barred and not criminal prosecution – However Section 138 of NI Act cannot ignored because matter under consideration in respect of private complaint filed under Section 138 of NI Act – So far judgment of Apex Court concerned, as already stated supra, it was rendered in different context – In view judgments of High Courts of Bombay and Andhra Pradesh alone considered and followed – Even judgment of Division Bench of this Court binding precedent for me net result is complaint in instant case is hit by Section 69 of Partnership Act.
Result: Criminal Appeal dismissed
Certainly. Based on the provided legal document, here are the key points:
The case involves a dispute under Section 138 of the Negotiable Instruments Act, 1881, concerning the dishonour of a cheque issued by the respondent, who claims she did not borrow the amount and that her staff misused her signatures and blank cheques (!) (!) .
The trial court initially found that the signature on the cheque was of the respondent and that the statutory presumption under Section 139 of the Negotiable Instruments Act applied, shifting the burden onto her to prove she did not owe the debt (!) (!) .
The respondent’s defense was that her staff misused her signatures and cheques, and she did not have any knowledge of the loan or the issuance of the cheque. She also argued that she was a war widow and had no direct involvement in the transaction (!) (!) .
The appellate court, however, held that the complainant failed to produce sufficient documentary evidence such as promissory notes or ledger accounts to substantiate the loan, and that the unregistered status of the complainant firm at the time of the transaction and complaint rendered the complaint invalid under the relevant law regarding enforceability of liabilities by unregistered firms (!) (!) (!) .
The appellate court also emphasized that the non-production of relevant documents and the absence of direct evidence from witnesses who allegedly participated in the loan transaction weakened the complainant’s case. The court found that the defense successfully raised doubts about the existence of a legally enforceable debt (!) (!) (!) (!) .
Additionally, the court considered whether the complaint was barred by the provisions of the Partnership Act, specifically Section 69, which restricts the enforceability of claims by unregistered partnership firms in civil suits. The court concluded that this bar also applied to criminal proceedings initiated via private complaints under Section 138 of the Act, given the explanation that "debt or other liability" must be legally enforceable (!) (!) (!) (!) (!) .
Based on these findings, the appellate court dismissed the criminal appeal, affirming that the complaint was not maintainable due to the unregistered status of the firm and the lack of sufficient evidence to prove the debt (!) .
Overall, the legal reasoning underscores the importance of documentary evidence and proper registration for establishing enforceable liabilities under the law, and clarifies that certain procedural and statutory bars apply to private criminal complaints under Section 138 of the Negotiable Instruments Act.
JUDGMENT :
U. Durga Prasad Rao, J.
1. The challenge in this Criminal Appeal at the instance of the complainant is the judgment dated 12.05.2005 in Criminal Appeal No. 37/2004 passed by the learned Sessions Judge, Nizamabad, whereunder the appeal was allowed and conviction and sentence recorded in C.C. No. 170 of 1999 by the Additional Judicial Magistrate of First Class, Nizamabad against the respondent for the offence under Section 138 of Negotiable Instruments Act, 1881 (for short "N.I. Act") was set aside.
2. The parties in this appeal are referred as they were arrayed before the Trial Court.
3. The factual matrix of the case in brief is thus:
(b) During trial, PWs. 1 and 2 were examined and Exs. P.1 to P.8 were marked on behalf of complainant. DWs. 1 to 3 were examined and Ex. D. 1 was marked on behalf of defence.
(c) The defence plea of accused in nutshell is that she is a war widow as her husband, who worked as Captain in the Indian Military (Indian Peace Keeping Force (IPKF)), died at Sri Lanka and the Government sanctioned her Gas Agency under Military quota in 1996 at Nizamabad and she started the Jaya Sree Gas Agency on 26.03.1996. She belongs to Srikakulam and she had no experience in the said business and so she entrusted the management of her Gas Agency to one Rama Krishna and Prasad, who worked as Manager and Assistant Manager, respectively. One week after inauguration, she left for Vizag due to health problem. At the request of both of them, she handed over the blank cheque books and letter pads with her signatures to them in the Nursing Home at Vizag. Both Rama Krishna and Prasad misused the blank cheques, borrowed amounts from different persons and issued cheques containing her signatures to make her liable. In March, 1999 on being informed by her Sales Manager about the misdeeds of both Rama Krishna and Prasad, she went to Nizamabad and removed them from service. She came to know about the misuse of the blank cheques after the cases were filed against her on the strength of the cheques. Thus her case is that she did not borrow any amount and tender the disputed cheque to the complainant in discharge of the debt.
(d) The Trial Court having regard to the fact that Ex. P.1-cheque contained the signature of accused and she did not receive Ex. P.3-legal notice and give any reply, opined that the presumption under Section 139 of N.I Act would operate and thereby the burden would rest on her to rebut the presumption. In that process, the Trial Court on appreciation of the defence evidence, ultimately held that the accused failed to rebut the presumption and on the other hand, the complainant successfully established its case and accordingly, convicted her for the offence under Section 138 of N.I Act and sentenced her to undergo simple imprisonment for a period of six(6) months and to pay a fine of Rs.5000/- and in default to suffer SI for three(3) months.
4. Aggrieved,
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