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IN THE HIGH COURT OF KARNATAKA
Ramachandra D. Huddar, J.
Varavinayak Ventures – Appellant
Versus
Rajesh Sharma – Respondent
Criminal Revision Petition No. 1165/2019
Decided On : 01-09-2023
N.I. Act - Dishonour of Cheque - Sec. 138, Sec. 139 - The court discussed the provisions of Sec. 138 of the Negotiable Instruments Act, which outlines the offence of dishonour of a cheque due to insufficient funds. It emphasized that the complainant had fulfilled the necessary legal requirements, including presenting the cheque within the validity period and issuing a statutory notice. The court also highlighted the presumption in favor of the holder of the cheque under Sec. 139, which places the burden of proof on the accused to demonstrate that the cheque was not issued for a legally enforceable debt. This legal framework was pivotal in affirming the conviction of the accused.
Fact of the Case:
The complainant, a partner in a firm, alleged that the accused, also partners in another firm, failed to pay the remaining balance of Rs. 8,00,000.00 for the purchase of a restaurant business, issuing post-dated cheques that were later dishonoured.
Finding of the Court:
The court found that the complainant had established the necessary elements of the offence under Sec. 138 of the N.I. Act, including the issuance of a cheque for a legally enforceable debt, its dishonour, and the proper issuance of a statutory notice. The court dismissed the accused's claims regarding the nature of the cheques and the alleged debts owed to them.
Issues: Whether the complainant could maintain the complaint given the partnership's unregistered status and whether the cheques were issued as security rather than for payment of a debt.
Ratio Decidendi: The court held that the unregistered status of the partnership did not preclude the complainant from maintaining the complaint. It also ruled that the presumption under Sec. 139 of the N.I. Act applied, and the accused failed to rebut the presumption that the cheques were issued for a legally enforceable debt.
Final Decision: The revision petition by the accused was dismissed, affirming the conviction and sentence imposed by the lower courts.
JUDGMENT
1. Appellants/accused Nos.1 to 5 have preferred this petition under Sec. 397 of Cr.P.C., challenging the judgment of conviction and sentence passed against them by the XX Additional Chief Metropolitan Magistrate, Bengaluru in C.C. No.173/2013 for the offence punishable under Sec. 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the 'N.I. Act', for brevity) and affirmed by the LVIII Additional City Civil and Sessions Judge (CCH -59), Bengaluru in Criminal Appeal No.472/2015 dtd. 6/2/2019.
2. Parties to this appeal are referred to as per their rank before the Trial Court. Brief facts of the case are as under:
3. The respondent complainant filed a private complaint against the accused persons alleging that, complainant and one Shri. B.P. Ramesh were the partners of a partnership firm and were running a hotel under the name and style of 'M/s. Sonakshi Nati Hallimane'. Because of various reasons and financial constraints, they decided to stop their restaurant business and wanted to sell the same. Accordingly, accused Nos.1 to 5 being the partners of 'M/s. Vara Vinayak Ventures' have agreed to purchase the business set up of 'M/s. Sonakshi Nati Hallimane' situated at 65/1A, Kaikundrahalli, Sarjapura Main Road, Bengaluru-35, for a valuable consideration of Rs.25, 50, 000.00. Accused Nos.1 to 5 being the partners of the aforesaid venture entered into business purchase agreement dtd. 12/6/2012.
4. It is the case of the complainant that, as per the said agreement, accused Nos.1 to 5 initially were to pay Rs.17, 50, 000.00. Out of the said amount, Rs.12, 00, 000.00 was paid to another partner by name Shri. B.P. Ramesh by way of a D.D. and Rs.5, 50, 000.00 was paid to the complainant by way of cash. The amount remained was Rs.8, 00, 000.00. Towards payment of the said amount, accused have issued four post dated cheques for Rs.2, 00, 000.00 each mentioning the dates 15/7/2012, 15/8/2012, 15/9/2012 and 15/10/2012 respectively drawn on HDFC Bank Ltd., Chamarajpet Branch, Bengaluru. When the said cheques were presented for encashment they were dishonored with an endorsement "Payment Stopped". Therefore, the complainant was constrained to issue the statutory notice for which accused Nos.1 to 5 gave evasive reply. This complaint was filed in respect of a cheque bearing No.001614 for Rs.2, 00, 000.00 and with regard to the other cheques, separate complaints have been filed.
5. Learned Magistrate after following the procedure with regard to the filing of a private complaint, permitted the complainant to lead evidence to substantiate his allegations made in the complaint.
6. Accordingly, the complainant himself entered the witness box and was examined as PW.1. On his behalf Ex.P.1 to Ex.P.8 were marked. To rebut the evidence of the complainant, one Vinay representing accused Nos.1 to 5 was examined as DW.1 and on behalf of his evidence Ex.D.1 to Ex.D.17 are marked.
7. Learned Magistrate on hearing the arguments of both the side and on perusal of the records found the accused persons guilty of committing the offence under Sec. 138 of N.I. Act and sentenced all the accused persons to pay fine of Rs.3, 00, 000.00 and in default of payment of the same, it was ordered that they shall suffer simple imprisonment for three months. Out of the fine amount so realized, it was ordered to pay compensation of Rs.2, 90, 000.00 to the complainant and remaining amount of Rs.10, 000.00 was ordered to be deposited to the State towards the expenses incurred in the prosecution.
8. This judgment of conviction and sentence passed by the learned Magistrate was challenged by the accused persons before the learned LVIII Additional City Civil and Sessions Judge (CCH-59), Bengaluru in Criminal Appeal No.472/2015. The learned LVIII Additional City Civil and Sessions Judge (CCH-59), Bengaluru, by judgment dtd. 6/2/2019 dismissed the said appeal. This is how appellants are before this Court by way of revision petition.
9. It is argued by the learn
AI
Revisional jurisdiction limited to perversity; unregistered firm competent for s138 NI Act complaint; ss118/139 presumptions arise on cheque admission, rebuttable by evidence; subsequent payments do ....
The arraignment of a company as an accused is a condition precedent for its prosecution, and the presumption of debt or legally enforceable liability can be rebutted by the defense.
The presumption of cheque issuance for a legally enforceable debt under Section 138 of the N.I. Act was not rebutted by the accused, leading to conviction.
The main legal point established in the judgment is that retirement from a partnership firm subsequent to the issuance of a cheque does not exonerate the partners who had given the cheque when they w....
[The judgment establishes that cheques issued in discharge of a liability are enforceable under Section 138 of the Negotiable Instruments Act, and the proper service of statutory notice is crucial fo....
Cheques issued under Section 138 of the NI Act create a presumption of legally enforceable liability, which the accused must rebut with credible evidence.
The presumption under Section 139 of the Negotiable Instruments Act mandates that once a cheque's execution is admitted, it is presumed to be issued for discharging a debt, which the accused must reb....
Once execution of a cheque is admitted, the presumption under Section 139 of the Negotiable Instruments Act arises, and the burden shifts to the accused to rebut the existence of a legally enforceabl....
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