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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13th DAY OF AUGUST, 2021 BEFORE THE HON’BLE MR. JUSTICE K.NATARAJAN CRIMINAL APPEAL No.362 OF 2011 BETWEEN SMT. MAMATHA, W/O. VIJAY, AGED ABOUT 30 YEARS, RESIDENT OF No.46/2, “MANJUNATHA NILAYA”, 4TH CROSS, OPP: VIDYA PUBLIC SCHOOL, KAMMAGONDANAHALLI, JALAHALLI WEST, BENGALURU. …APPELLANT (BY SRI K.A. CHANDRASHEKARA, ADV., through VC) AND
S.K. GOVINDARAJU, S/O. LATE H. KRISHNAPPA, AGED ABOUT 46 YEARS, RESIDENT OF LAKSHMI VENKATESHWARA NILAYA, No.50, 12TH CROSS, NEAR C.M. NATIONAL SCHOOL, MUTHYALANAGARA, BENGALURU.
…RESPONDENT (BY SRI M.S. NAGARAJA, ADV., through PH)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) OF THE CODE OF CRIMINAL PROCEDURE, PRAYING TO SET ASIDE THE ORDER DATED 26.02.2011 PASSED BY THE PRESIDING OFFICER, FTC-VI, BENGALURU, IN CRL.A.No.822/2010 - ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF THE N.I. ACT AND RESTORE THE ORDER DATED 27.10.2010 PASSED
2 BY THE XII ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BENGALURU, IN C.C.No.7508/2009.
THIS CRIMINAL APPEAL HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 29.07.2021 AND COMING ON FOR PRONOUNCEMENT, THIS DAY THE COURT PRONOUNCED THE FOLLOWING:
J U D G M E N T This appeal filed by the appellant/complainant under Section 378(4) of Cr.P.C., being aggrieved by the judgment of acquittal passed by the Fast Track Court (Sessions Judge), Bengaluru (F.T.C.No.VI) (hereinafter referred to as the ‘First Appellate Court’) in Crl.A.No.822/ 2010 dated 26.02.2010 by reversing the judgment of conviction and sentence passed by the XII Additional Chief Metropolitan Magistrate, Bengaluru dated 27.10.2010 against the respondent/accused for the offence punishable under Section 138 of the Negotiable Instruments Act (for short ‘N.I. Act’).
Heard the arguments of the learned counsel for the appellant/complainant and respondent/accused.
3 3. For the sake of convenience, the ranks of the parties before the Trial Court are retained for convenience.
The case of the complainant before the Trial Court is that she filed a complaint under Section 200 of Cr.P.C. against the accused for the offence punishable under Section 138 of N.I. Act alleging that she was well acquainted with the accused and on the basis of the said friendship, during the month of July 2008, the accused approached the complainant for hand loan of Rs.2.00 Lakhs to clear his debts. Accordingly, she gave Rs.2.00 Lakhs to the accused and the accused assured to repay the said amount within a short period, but failed to repay the said amount. When the complainant approached the accused and demanded for repayment of the said amount, he issued a cheque bearing No.296500, dated 22.10.2008, drawn on State Bank of India, Jalahalli Branch, Bengaluru. Accordingly, the complainant presented the said cheque for collection through her Banker Vijaya Bank, Malleshwaram Branch, Bengaluru, but the said cheque was dishonored
4 with an endorsement “insufficient funds”, on 22.10.2008 and 22.11.2008. The complainant informed the accused and got issued a legal notice on 10.12.2008 by R.P.A.D. and UCP, which was served on the accused, but the accused failed to repay the cheque amount. Hence, the complaint came to be filed.
After taking cognizance, the Trial Court issued notice to the accused in C.C.No.7508/2009. The accused appeared before the Court and his plea was recorded wherein he pleaded not guilty. He has denied the charges. The complainant to prove her case examined herself as PW-1 and got marked nine documents as per Exs.P1 to P9. After closing of the evidence of the complainant, the statement of the accused under Section 313 Cr.P.C. has been recorded. The case of the accused was one of total denial and he got examined himself as DW-1 and got marked two documents. After hearing the arguments, the Trial Court vide its order dated 27.10.2010 found the accused guilty and convicted him for the offence
5 punishable under Section 138 of N.I. Act, with fine of Rs.2,10,000/- and in default, the accused was sentenced to undergo simple imprisonment for one year. The Trial Court further directed that the accused shall pay Rs.2.00 Lakhs to the complainant as compensation as per Section 357 of Cr.P.C. and the balance fine amount of Rs.10,000/- shall be forfeited to the State.
Being aggrieved by the same, the accused preferred an appeal before the First Appellate Court in Crl.A.No.822/2010 and after hearing the arguments and re-appreciating the evidence, the First Appellate Court allowed the appeal by setting aside the order of conviction and sentence and acquitted the accused. Being aggrieved by the order of acquittal, the complainant has preferred the present appeal.
Sri.K.A.Chandrashekara, learned counsel appearing for the appellant strenuously contended that the First Appellate Court has committed an error while re- appreciating the evidence. Even though some of the
6 documents are not part of the notebook, which is an unmarked document, the same has been appreciated by the First Appellate Court, which is erroneous and hence, liable to be set aside. He also further contended that the appellant had the capacity to lend money as she is a working woman, earning salary of more than Rs.33,000/- per month and her husband was also working in Bar and Restaurant, as such she was having good income, which is revealed in her evidence. Such being the case, the amount being paid by the complainant cannot be suspected. The Bank pass-book and the salary certificate were also produced by the complainant, which are marked as exhibits before the Trial Court. After considering the evidence, the Trial Court has rightly found the accused guilty and convicted him whereas, the First Appellate Court has reversed the same without any basis. The presumption under Section 139 of N.I. Act is available to the complainant and the same was not rebutted by the accused except examining himself and producing two documents. A complaint came to be filed by the accused
7 after receiving notice and service of the notice, ‘B’ report has been filed by the Police on the basis of the said complaint. Therefore, the said document is not useful to the complainant to disprove the case. The defence taken by the accused is that a signed cheque was kept in the Bar, which was stolen by one of the employees by name, Kempegowda, who is none other than a friend of the husband of the complainant and the said cheque was misused by Kempegowda through the husband of the complainant. The same was not proved by the accused by examining any other witness or by producing any other document except Exs.D1 and D2. Therefore, prayed for restoring the judgment of the Trial Court by setting aside the judgment of the First Appellate Court.
The learned counsel also in reply to the arguments of the learned counsel for the accused contended that the accused himself is the owner of the Bar, which has been admitted by him in Ex.D1- complaint. Such being the case, there is no necessity for making the owner of the Bar
8 and Restaurant as a party, which is represented by the accused and the complainant is a working woman and her income is below Rs.2.00 Lakhs and therefore, she need not declare her income to the Income-tax Authority under the Income-tax Act.
Per contra, the learned counsel appearing for the accused justified the judgment of the First Appellate Court and contended mainly that the capacity of the complainant is not proved. Transaction in respect of the amount paid by the complainant to the accused is not proved. Merely, a cheque is issued by the accused by signing the same is not a case for taking cognizance against him when the transaction is not proved. That apart, though the document, which is unmarked by the Trial Court has been perused by the First Appellate Court and referred to it, therefore, it cannot be considered and accepted. But the main contention of the accused is that the cheque was misused by the employee Kempegowda, who was working in the Bar and Restaurant of the accused. He used to
9 issue cheque to Kempegowda for the purpose of purchasing material to the Bar and Restaurant, which was misused by the husband of the complainant, viz., Vijay. Even considering the transaction between the husband of the complainant and the accused, the complainant has not chosen to examine the said Vijay to prove the transaction. Absolutely, there is no material to prove the transaction between the accused and the complainant. In order to show that there is legally dischargeable liability to the accused to pay Rs.2.00 Lakhs, the initial burden is on the complainant to prove that the cheque was issued in respect of the legally liable debt. Once the burden is discharged, then presumption is available to the complainant, which has been rebutted by the accused and even otherwise, the accused has proved his contention which was taken in the initial stage in the reply notice, Ex.P6 and defence was taken in the cross-examination. It is not a new defence taken only in the cross-examination, but it was taken in the reply statement and the same was proved by him by preponderance of probabilities.
10 Therefore, the learned counsel submits that the Trial Court has committed an error in convicting the accused and the First Appellate Court after re-appreciating the evidence has rightly acquitted the accused and therefore, prayed for dismissal of the appeal.
The learned counsel also submitted that the complainant had not denied in the cross-examination the issuance of cheque in respect of the loan and totally, there is no suggestion in the cross-examination, thereby, the accused was able to rebut the evidence of the complainant and there is no transaction and the cheque was issued not in respect of the said transaction. There is no legally liable debt payable by the accused to the complainant. Hence, prayed for dismissal of the appeal.
Having heard the arguments of the learned counsel, the following points arise for consideration of this Court: i) Whether the complaint is not maintainable against the proprietor without impleading the bar and
11 restaurant as accused No.1 (i.e. proprietorship concern)? ii) Whether the judgment of acquittal passed by the First Appellate Court is illegal, perverse and liable to be interfered with?”
Learned counsel for the respondent mainly argued that without making the Bar and Restaurant as accused No.1, the proprietor is not liable to be prosecuted and is like a firm or a Company. Therefore, without making the Company or the firm as party, the criminal prosecution cannot be launched. In support of his arguments, he relied upon Section 141 of N.I. Act and also relied upon various judgments of the Hon’ble Supreme Court. On the other hand, learned counsel for the complainant contended that the accused being the proprietor, Manjunatha Bar and Restaurant, proprietorship concern is one and the same. Therefore, without making Manjunatha Bar and Restaurant as respondent/accused, the complaint is maintainable against the proprietor or proprietorship concern as party. Hence, prayed for allowing the appeal.
12 13. Learned counsel for the respondent relied upon paragraphs 12 and 13 of the judgment of the Hon’ble Supreme Court in the case of Raghu Lakshminarayanan vs. Fine Tubes reported in (2007) 5 SCC 103, which are as under: “12. If Accused No. 1 was not a Company within the meaning of Section 141 of the Negotiable Instruments Act, the question of an employee being proceeded against in terms thereof would not arise. The respondent was aware of the difference between a “partnership firm” and a “business concern” as would be evident from the fact that it described itself as a partnership firm and Accused No. 1, as a business concern. Significantly, the respondent deliberately or otherwise did not state as to in which capacity the appellant had been serving the said business concern. It, as noticed hereinbefore, described him as in charge, Manager and Director of Accused No.1. A person ordinarily cannot serve both in the capacity of a Manager and a Director of a Company. 13. The distinction between partnership firm and a proprietary concern is well known. It is evident from Order 30 Rule 1 and Order 30 Rule 10 of the Code of Civil Procedure. The question came up for
13 consideration also before this Court in M/s. Ashok Transport Agency v. Awadhesh Kumar and another [(1998) 5 SCC 567] wherein this Court stated the law in the following terms:- "6. A partnership firm differs from a proprietary concern owned by an individual. A partnership is governed by the provisions of the Indian Partnership Act, 1932. Though a partnership is not a juristic person but Order 30, Rule 1, CPC enables the partners of a partnership firm to sue or to be sued in the name of the firm. A proprietary concern is only the business name in which the proprietor of the business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of the business. In the event of the death of the proprietor of a proprietary concern, it is the legal representatives of the proprietor who alone can sue or be sued in respect of the dealings of the proprietary business. The provisions of Rule 10 of Order 30, which make applicable the provisions of Order 30 to a proprietary concern, enable the proprietor of a proprietary business to be sued in the business names of his proprietary concern. The real party who is being sued is the proprietor of the said
14 business. The said provision does not have the effect of converting the proprietary business into a partnership firm. The provisions of Rule 4 of Order 30 have no application to such a suit as by virtue of Order 30, Rule 10 the other provisions of Order 30 are applicable to a suit against the proprietor of proprietary business ‘insofaras the nature of such case permits’. This means that only those provisions of Order 30 can be made applicable to proprietary concern which can be so made applicable keeping in view the nature of the case." 14. The Hon’ble Supreme Court has clearly held that Section 141 of N.I.Act is in respect of vicarious liability fixed on the person who is in-charge of the company as the company is a legal entity and in case of a firm, the firm shall be made as a party and also the partner. In the said case, the Hon’ble Supreme Court quashed the proceedings against accused No.3, who is said to be the employee claiming to be the Director and in-charge Manager, which is a proprietorship concern. From the judgment of the Hon’ble Supreme Court, it can be gathered that the
15 proprietor of a concern and the proprietorship is one and the same. In a proprietary concern, a person may carry on the business in the name of a business concern, but he, being the proprietor thereof, would be solely responsible for the conduct of business affairs of the proprietary concern which is not a company or a firm under the Partnership Act within the meaning of Section 141 of N.I. Act and its explanation.
As per Black’s Dictionary, Proprietor means, a owner, especially, the one who owns a business. The meaning of sole-proprietorship also mentions, a business in which one person owns all the assets, owns all the liability and operates in itself or personal capacity also termed as individual proprietorship. It is also available in the “Insolvency and Bankruptcy Code of India” commentary by Ashish Makhija, that a proprietorship refers to an entity run and owned by one individual wherein, there is no difference between the owner and the business. Proprietorship means, simplest form of business under
16 which one can operate a business which is not a legal entity and simply refers to a person who owns the business, personally responsible for its debt. A sole proprietor can operate under the name of its owner or else do business using a fictitious name. It is a popular form of business in India, because of its simplicity of set up and nominal cost. Therefore, I am of the considered view that the respondent is a proprietor of Manjunatha Bar and Restaurant. The complaint can be filed against the individual name of the proprietor Govindaraju or the name of the concern namely, Manjunatha Bar and Restaurant. Merely, because the complainant has not mentioned that it is a proprietorship concern represented by the proprietor Govindaraju, that itself is not a ground to say that the complaint against the respondent is not maintainable in view of Section 141 of N.I. Act. Section 141 of N.I. Act is not applicable in the case of proprietorship. The complaint can be filed against the name of the proprietor or the proprietorship concern. Mere non-mentioning the name of the accused as representative of the proprietary concern or
17 proprietor, it cannot be said that the complaint is not maintainable. On the other hand, the complaint is maintainable against the name of the proprietor/proprietorship concern. Therefore, the contention of learned counsel for the respondent is not acceptable.
The appellant has stated in her evidence that the accused is a known person to her husband and the accused was in need of money. Therefore, she paid Rs.2.00 Lakhs and in order to repay the same, the accused gave a cheque, which was dishonoured. Signing the cheque by the accused is not in dispute. The cheque was dishonoured for “insufficient funds” also not in dispute. Learned counsel for the respondent has taken two contentions, mainly that the complainant has capacity to pay Rs.2.00 Lakhs and cheque was signed and kept in the Bar and Restaurant. One of the employees namely, Kempegowda has stolen the cheque. The said Kempegowda is said to be a friend of the husband of the
18 complainant and they have misused the cheque. In support of the contention, the accused has not at all produced any books of accounts or list of names of the employees working in the Bar, but say that, one of the employees i.e., Kempegowda was working in the Bar and Restaurant. Ofcourse there is a oral evidence available on record. The husband of the complainant was also working in Shoba Bar and Restaurant, but no documentary evidence is available or produced by the learned counsel for the accused that Kempegowda was one of his employees and he has stolen the cheque. Ofcourse, the respondent filed a private complaint before the Court and the matter was referred to the Police as per Ex.D.1, FIR has been registered as against the husband of the complainant and Kempegowda, but the Police filed ‘B’ Final report. The same was not challenged by the accused and the complaint filed by the accused came to be closed. But there is no evidence adduced by examining any other person or by producing any document to show that Kempegowda was working in his Bar and Restaurant.
19 Therefore, the contention that the cheque was stolen by Kempegowda and it was misused by the husband of the complainant is not acceptable.
Another contention raised is, the capacity of the complainant wherein the complainant examined herself and has produced Ex.P.8, the salary certificate issued by the employer of the complainant, which says that she was getting the net salary of Rs.33,592/- and the same was credited to her account as per Ex.P.9, the passbook reflecting the same. Apart from that, her husband was also working, which shows that the complainant/appellant had the financial capacity to lend loan and she was also having independent source of income. Merely the passbook is not showing the outstanding amount of Rs.2.00 Lakhs, that itself is not a ground to suspect that she had no capacity. Though the respondent also produced the passbook showing that the cheque was given to Kempegowda, which was issued by him on 04.11.2019, but the said entries were made on the last page of the
20 notebook. On perusal of the entire notebook, the name of Kempegowda is no where found and no where it was mentioned that the said Kempegowda used to receive the cheque by signing in the notebook, but the accused might have created the document for the purpose of showing that the cheque was given to Kempegowda by making the entry in the last page of the notebook, which cannot be accepted. Even otherwise, the same was not marked. Therefore, the notebook cannot be considered as evidence.
Learned counsel for the respondent also relied upon various judgments in respect of presumption under Section 139 of the N.I. Act and I have gone through the same, wherein the involvement is more than Rs.14.00 Lakhs and heavy amount. Therefore, the Hon’ble Apex Court has held that the complainant had no capacity to lend such an huge amount. but here in this case, the complainant produced the documents including the salary certificate, passbook to show her financial capacity other than her husband’s income. Therefore, the contention raised by
21 the respondent-accused that she had no capacity to pay the loan of Rs.2.00 Lakhs to the accused cannot be acceptable.
Another contention raised by the respondent is that the complainant has not examined her husband, who is the friend of the accused. Merely her husband was not examined before the Court, that itself is not the ground to suspect the capacity of the complainant. Drawing presumption under Sections 118 and 139 of the N.I. Act is available in favour of the complainant where she has to discharge her initial burden that the accused received loan and in respect of repayment of loan, he has issued the cheque, which came to be dishonoured. The complainant is successful in proving the guilt of the accused and the legally liable debt to be recovered from the respondent- accused and the accused issued the cheque which came to be dishonoured and is liable to be punished under Section 138 of N.I. Act. But the First Appellate Court without proper re-appreciation of the evidence on record come to
22 the conclusion that the appellant has no capacity to lend loan and the cheque was stolen by Kempegowda. Therefore, held that, presumption is rebutted by the accused and came to a wrong conclusion and acquitted the accused, which is erroneous. Hence, the same is liable to be set aside and the judgment of the trial Court convicting the accused requires to be confirmed.
Accordingly, the Criminal Appeal is allowed.
The judgment of acquittal passed by the First Appellate Court is set aside. The judgment of the Trial Court passed in C.C. No.7508/2009 is confirmed.
Sd/- JUDGE DH mv