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2022 Supreme(Kar) 1399
IN THE HIGH COURT OF KARNATAKA
J.M.Khazi, J.
Kallappa - Appellant
Versus
Gandhinagar Urban Co-operative Credit Society Ltd. - Respondent
Criminal Petition No. 102255 of 2022 (482-CRPC)
Decided On : 02-09-2022
Sabeel Ahmed, Advocate, Aravind D.Kulkarni, Advocate
A cheque furnished as security is covered under Sec. 138 of N. I. Act, and the presumption under Sec. 139 of N. I. Act is attracted even in the case of blank cheques unless evidence is adduced to rebut the presumption.
Headnote:
Sec. 138 of Negotiable Instruments Act - Quashing of Criminal Proceedings - Sec. 138 of N. I. Act - Summary of Acts and Sections: Sec. 138 of N. I. Act, Sec. 139 of N. I. Act, Rangappa Vs. Sri Mohan (2010) 11 SCC 441, Sunil Todi and Others Vs. State of Gujarat and Another, AIR 2022 SC 147 - The court discussed the provisions of Sec. 138 and Sec. 139 of the N. I. Act, as well as the interpretation and application of these provisions in the context of blank cheques issued as security. The court also referenced the decision in Rangappa Vs. Sri Mohan and Sunil Todi's case to establish that a cheque furnished as security is covered under Sec. 138 of N. I. Act, and the presumption under Sec. 139 of N. I. Act is attracted even in the case of blank cheques unless evidence is adduced to rebut the presumption.
Fact of the Case:
The petitioner borrowed a loan from a Credit Co-operative Society and issued five blank cheques as security. When one of the cheques was presented and returned with an 'account closed' endorsement, the respondent filed a private complaint under Sec. 138 of N. I. Act.
Finding of the Court:
The court found that the blank cheques were issued as security and were rightfully considered as issued towards the repayment of a legally recoverable debt. The court also held that the presumption under Sec. 139 of N. I. Act is attracted even in the case of blank cheques unless evidence is adduced to rebut the presumption.
Issues: The issues revolved around whether the blank cheques were issued towards repayment of a legally recoverable debt, and whether the provisions of Sec. 138 and Sec. 139 of N. I. Act were attracted in this case.
Ratio Decidendi: The court's decision was based on the interpretation and application of Sec. 138 and Sec. 139 of N. I. Act, as well as the precedents set in Rangappa Vs. Sri Mohan and Sunil Todi's case, establishing that a cheque furnished as security is covered under Sec. 138 of N. I. Act, and the presumption under Sec. 139 of N. I. Act is attracted even in the case of blank cheques unless evidence is adduced to rebut the presumption.
Final Decision: The court held that no errors or illegality were committed by the trial court in taking cognizance and proceeding with the matter, and therefore dismissed the petition.
JUDGMENT
1. In this petition filed under Sec. 482 of Cr.P.C., petitioner is seeking quashing of criminal proceedings against him in C.C. No.1593/2022 (Old C.C. No.1383/2020) on the file of Prl. Senior Civil Judge and CJM, Dharwad, for the offence punishable under Sec. 138 of Negotiable Instruments Act (for short "N. I. Act")
2. Brief facts leading to the filing of the present petition are that petitioner borrowed loan in a total sum of Rs.24,20,060.00 from respondent-Credit Co-operative Society, by mortgaging immovable property and also five blank cheques were issued by way of security. Due to unavoidable circumstances he could not repay the loan. Petitioner has alleged that with ulterior motive respondent presented cheque bearing No.563825 dtd. 31/8/2020 for a sum of Rs.34,36,439.00. The same was returned with an endorsement "account closed". Petitioner has stated that the said account being "dormant account" was closed pending investigation in ACB case. It is the further case of petitioner that the cheques in question were not issued towards repayment of legally recovery of debt - but they were issued by way of security.
3. After the cheque in question was returned with the said endorsement, respondent issued legal notice and filed private complaint in PC No.425/2020. After taking cognizance it was registered in C.C. No.1384/2020. On 11/12/2020 petitioner appeared and secured bail. He filed application under Sec. 258 of Cr.P.C on 30/3/2021. However, it came to be rejected on 19/4/2021.
4. Against the said order petitioner filed Criminal Revision Petition No.51/2021 before the III Additional District and Sessions Judge, Dharwad. However, the said petition is also dismissed on 22/2/2022. In the meanwhile, C.C.No.1384/2020 came to be transferred to the Court of III Additional Civil Judge and JMFC., Dharwad and renumbered as C.C. NO.1593/2022. During the crossexamination of complainant, petitioner has taken a specific contention that the blank cheques were issued by way of security and not towards re-payment of any legally recoverable debt or liability. Being aggrieved by the initiation of criminal proceedings, he has filed this petition.
5. During the course of arguments the learned counsel representing the petitioner submitted that there is no prima-facie material to show that the petitioner has authorized the respondent to fill up blank cheques and present the same to the bank. The trial Court has not appreciated the fact that the cheques in question were issued by way of security and not towards repayment of legally recoverable debt and therefore provisions of Sec. 138 of N. I. Act is not attracted. Instead of proceeding against the immovable property, with a malafide intention respondent has presented one of the cheque issued by way of security. The cheques issued by way of security cannot be presented unless the respondent is not left with any other mode of recovery of loan. Respondent has adopted illegal method to pressurize the petitioner and prays to allow the petition.
6. In support of his arguments learned counsel for the petitioner has relied upon the order passed in Criminal Misc. No.27216/2010 dtd. 1/10/2012 by the Single Judge of Hon'ble High Court of Allahabad in the matter of Vijay Kumar Upadhyay Vs. State of U.P and Others,Crl. Misc. Application No.27216/2010 dtd.1/10/2012. (Vijay Kumar's Case)
7. On the other hand, the learned counsel representing the respondent submitted that at the time of availing loan, in addition to mortgaging the immovable property, petitioner has issued five blank cheques authorizing the respondent to fill up the same and present in case of his failure to repay the loan amount which would be due including the interest and thereby rightly the trial Court has taken cognizance and proceeded in the matter and prays to dismiss the petition.
8. Heard the arguments and perused the records.
9. It is an undisputed fact that petitioner has borrowed a total sum of Rs.24,64,060.00 from respondent. H
