The Commissioner of Income - Tax II vs. Transport Corporation of India Limited

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 31ST DAY OF AUGUST 2018

BEFORE

THE HON'BLE MR. JUSTICE BUDIHAL R.B.

CRIMINAL APPEAL NO.487/2013

BETWEEN:

Shri Dr.Mruthunjaya D. Hulgur S/o Late D.S.Hulgur Age: 40 years R/at: Block No.3 Flat No.1, DGW Residencies Western Road Stafford St.16 3RS England, Represented by GPA Holder

Shri Shivanna D.Hulgur R/at: No.90, 2nd Cross 20th Main, 1st Stage 1st Phase, BTM Layout Bangalore – 560 068.

…APPELLANT

(By Sri Ashok B. Patil, Adv.)

AND:

Shri M.Vijayakumar S/o Muniyappa Aged about 44 years R/at: No.1228, 18th Main 1st Stage, 1st Phase,

2 BTM Layout Bangalore – 560 029.

…RESPONDENT

(By Sri N.Ravindranath Kamath, Adv.)

This Criminal Appeal is filed under Section 378(4) Cr.P.C. praying to set aside the order dated:01.03.2013 passed by the XIII A.C.M.M., Bangalore in C.C.No.12052/2009 – acquitting the respondent/accused for the offence p/u/s 138 of N.I. Act.

This Appeal coming on for Hearing this day, the Court delivered the following :

JUDGMENT

This appeal is preferred by the complainant being aggrieved by the judgment and order dated 1.3.2013 passed by the XIII ACMM Court, Bengaluru, in C.C. No.12052/2009, whereby the accused is acquitted of the offence punishable under Section 138 of Negotiable Instruments Act, 1881 (for short ‘the N.I. Act’).

3 BTM Layout, Bangalore (Ward No.65), dated 09.12.2004 in favour of the appellant. The said agreement was registered. The agreed total sale consideration was Rs.70 Lakhs. Out of the said amount, the respondent received Rs.25 lakhs by cheque and the balance amount in cash, on different dates. The appellant submits that, the above said agreement to sell was cancelled by agreement dt.22.03.2005 which is also registered. In the said agreement of cancellation, it is stated that, a cheque bearing No.653704 drawn on Bank of Baroda, John Nagar Branch, Bangalore – 560 034, dt.22.03.2005, for Rs.30 lakhs is given towards the repayment of part of the sale consideration. However, the said cheque was in fact not given to the appellant, but used by the respondent himself, which is clear from the statement of account of the bank account of the respondent marked as Ex.P.11. Cheque bearing No.00653704 of the value of Rs.10,090/- is debited from the account on 25.04.2005. Thus, no part of the sale consideration of Rs.70.00 lakhs was

4 refunded. It is further stated by the appellant that, he was persisting the respondent for payment through his general power of attorney holder, who is his brother. The general power of attorney holder was also insisting the respondent to pay the amount. The respondent paid a sum of Rs.10.00 lakhs by a Banker’s cheque dt.16.08.2006 bearing No.230908 of Bank of Baroda, John Nagar, Bangalore-560 034, favouring the appellant- complainant. Apart from the above said amount of Rs.10.00 lakhs, the respondent has not paid any amount out of Rs.70.00 lakhs. As such, the respondent was due in a sum of Rs.60.00 lakhs to the appellant. It is further stated by the appellant that, through his general power of attorney holder, he was constantly pursuing the respondent to pay the balance amount of Rs.60.00 lakhs. In this regard, the respondent issued two cheques bearing No.653705 dt.09.12.2008 drawn on Bank of Baroda, John Nagar, Bangalore – 560 034 for a sum of Rs.30.00 lakhs and another cheque bearing No.121708

5 dt.18.10.2008, drawn on Sree Charan Souharda Co- Operative Bank Ltd., H.B.Samaja Road, Basavangudi, Bangalore – 560 004 for a sum of Rs.30 lakhs towards the discharge of the above said obligation to repay. This appeal is with regard to the dishonor of the cheque of Shree Charn Souharda Co-Operative Bank Ltd. The appellant has filed another appeal with regard to the cheque of Bank of Baroda which was the subject matter of CC No.12053/2009. The appellant has further stated that, his power of attorney holder, Shri Shivanna D. Hulgur was informed by the respondent to present the cheques on or after 05.02.2009. Accordingly, the appellant presented the above said cheques for encashment through the his banker on 06.02.2009. The above said cheque of Shree Charan Souharda Co- operative Bank Ltd is returned by the bankers of the accused, dishonored on the ground of insufficiency of funds in the account of the respondent on 06.02.2009 itself. The intimation of the return of the cheque was

6 given to the appellant on 06.02.2009. The appellant caused issuance of a legal notice dated 16.02.2009 to the respondent calling upon him to make payment of the cheque amount of Rs.30.00 Lakhs within 15 days from the date of receipt of the notice. The said legal notice was dispatched through RPAD on 16.02.2009, which was delivered on 19.02.2009. Though the notice was served on the respondent on 19.02.2009, the respondent did not either pay the cheque amount of Rs.30.00 lakhss nor did he reply to the legal notice. The appellant filed PCR No.6868/2009 on 28.03.2009. The counsel for the appellant received an untenable reply dated 28.3.2009 on 31.03.2009 to the legal notice dated 16.02.2009. Reply is issued beyond the statutory period. The sworn statement of the power of attorney holder of the appellant was recorded on 01.06.2009 and the case was numbered as CC No.12052/2009.

7 The power of attorney holder of the appellant gave evidence as P.W.1 by filing affidavit of evidence on 25.01.2010 and Exs.P.1 to P.10 were marked. Subsequently, Exs.P.11 to P.12 were also marked. P.W.1 was cross examined by the counsel for the respondent on 29.06.2010, 13.07.2010, 31.08.2010, 13.10.2010. On 26.10.2010, the statement of the accused under Section 313 Cr.P.C. was recorded. On the respondent submitting that he has no defence evidence, case was posted for arguments on 20.11.2010.

8 correctness of the said judgment and order on the grounds as mentioned in the appeal memorandum at ground Nos.18 to 49, the appellant-complainant is before this Court in this appeal.

Even the total consideration amount agreed of Rs.70.00 lakhs is also undisputed. As per the complainant when the agreement of sale was cancelled by registered cancellation deed dated 22/03/2005. There afterwards, only the amount of Rs.10.00 lakhs was paid to the complainant by issuing

9 cheques and Rs.60.00 lakhs was in due. So far as Rs.60.00 lakhs is concerned, when the power of attorney holder of the complainant insisted the respondent- accused to pay the amount, at that time, the accused issued two cheques for the amount of Rs.30.00 lakhs each and when the cheques were presented on the dates as requested by the respondent-accused, they were dishonoured. The reason for dishonour was insufficiency of funds in the account of respondent-accused. The learned counsel further submitted that without going through the oral and documentary evidence of the power of attorney holder of the complainant placed before the learned Magistrate, the learned Magistrate has wrongly acquitted the accused holding that the complainant has not established his case to the satisfaction of the Court. Regarding payment of Rs.30.00 lakhs is concerned, the learned counsel submitted that there is no dispute between parties because it was specifically mentioned in the agreement of sale that the amount of Rs.25.00 lakhs

10 was issued by way of cheque and remaining Rs.5.00 lakhs was paid in cash, totaling Rs.30.00 lakhs. Regarding the amount of Rs.40.00 lakhs, the learned counsel submitted that the amount of Rs.40.00 lakhs was paid by the power of attorney holder to the respondent-accused in his house and he has obtained the receipt for payment of the said amount. But, this has been disbelieved by the learned Magistrate and the learned Magistrate has considered this aspect in isolation without appreciating the materials placed on record. It is his submission that if this amount of Rs.40.00 lakhs was not paid by cash by the complainant to the respondent accused and the amount paid was only Rs.30.00 lakhs, then what was the reason for respondent No.2 accused to issue two cheques for sum of Rs.30.00 lakhs each. This aspect is completely ignored by the learned Magistrate while appreciating the evidence on record. The learned Magistrate has also failed to take into consideration the issuance of the cheques and the signature on the

11 cheques that too in the name of the complainant and not in the name of power of attorney holder. This clearly shows that the cheques were issued in discharging the existing liability of Rs.60.00 lakhs to be payable to the complainant in view of cancellation of the agreement of sale. In this connection, the learned counsel drew the attention of this Court to the judgment of the Magistrate Court and submitted that regarding the liability of burden of proof is concerned, learned Magistrate has wrongly relied upon the judgment of the Hon’ble Apex Court in case of Krishna Janardhana Bhat Vs. Dattatraya G. Hegde reported in (2008) 4 SCC 54 and came to the wrong conclusion. There is subsequent decision of the Hon’ble Apex Court in the year 2010 in case of Rangappa –vs- Sri Mohan reported in (2010) 11 SCC 441, where in the Hon’ble Apex Court has held that there is presumption under Section 139 of N.I. Act that cheques are issued in discharge of the existing liability. This legal aspect is also completely over looked by the

12 learned Magistrate by acquitting the respondent-accused. Regarding the power of attorney status in filing the complaint and giving his evidence in the case is concerned, the learned Counsel submitted that it is in accordance with law. In this connection, he has relied upon the decision of the Hon’ble Apex Court in case of Meters and Instruments Private Limited and Another –vs- Kanchan Mehta reported in (2018) 1 SCC 560. Referring to this decision and drawing the attention of this Court to Para Nos.18.1 and 18.4 of the said decision, he submitted that the nature of proceedings under Section 138 of the N.I. Act is primarily civil in nature and therefore the burden of proof is on the accused, in view of section 139 of the N.I. Act. Therefore, there is nothing wrong in the power of attorney holder filing the complaint and giving evidence on behalf of the complainant. He also submits that the power of attorney holder is the person who entered into the agreement of sale and the cancellation of agreement on behalf of the complainant

13 and he is having the personal knowledge in the matter for which he is the competent person to give evidence on behalf of the complainant in the proceedings. Therefore, this will not come in the way of the case of the complainant. The learned Counsel further submitted that the evidence of the power of attorney holder on the side of the complainant clearly shows that the amount of Rs.60.00 lakhss was due in connection with the agreement of sale for which, the cheques were issued. Though, in the cancellation agreement there is reference that the accused person issued cheques to the complainant for the amount of Rs.30.00 lakhss each, but looking at the statement of accounts (Ex.P.11) pertaining to the accused, he submitted that the cheque having similar number was presented and the amount of Rs.10,090/- was debited from the account of Respondent No.2-accused. Hence, this aspect is the documentary proof which clearly shows that the cheque was not given to the complainant and the same was not presented by

14 the complainant for Rs.30.00 lakhss as contended by the respondent-accused. This aspect is not correctly appreciated by the learned Magistrate. The learned Counsel further submitted that in spite of producing the statement of account (Ex.P.11) pertaining to the accused coupled with oral evidence of power of attorney holder (P.W.1), the learned Magistrate observed in his judgment that there is no supporting document regarding this contention of the complainant for payment of Rs.40.00 lakhs to the respondent. Therefore, this observation is not at all sustainable in law. Apart from that, the learned Counsel while drawing the attention of this Court to the relevant paragraphs at Para Nos.16, 17 and 18 of the judgment submitted that there are some wrong observations made by the learned Magistrate wherein, it is observed that the loan amount was given to the accused person. Therefore, the transaction and the Ex.P.9 is not the agreement of sale but in reality it is a loan transaction wherein as security the document was

15 executed. Drawing my attention to the contents of Ex.P.9, the learned Counsel submitted that there is no such mention in the said document that loan was given to the accused person, but on the contrary, what was mentioned is that the purchaser had borrowed the loan amount. To that extent, there is wrong reading of the contents of the document at Ex.P.9. Hence, he submitted that in view of the matter, the observation of the learned Magistrate is not correct and it is also not in accordance with the contents of Ex.P9-agreement of sale. The learned counsel further submitted that certain observations are made by the learned Magistrate with regard to the payment of amount of Rs.45.00 lakhs in cash and it is observed by the learned Magistrate that no documents have been produced by the complainant to show that such huge amount of Rs.45.00 lakhs was available. Further, he has also observed that the source for the amount of Rs.45.00 lakhs is also not explained by the complainant. Therefore, he submitted that when the

16 issuance of two cheques is admitted, signature is also admitted under Section 139 of the Act and when the burden is on the accused person, unless and until he rebuts the said burden, the observation of the learned Magistrate placing the entire burden on the complainant is also not correct. The learned counsel further submitted that if the cash of Rs.40.00 lakhs to Rs.45.00 lakhs was not at all paid to the accused person, then there was no reason for the accused to issue two cheques of Rs.30.00 lakhs each.

Hence, the appellant- complainant has proved his case to the satisfaction of the Court with oral and documentary evidence and the learned Magistrate ought to have allowed the case of the complainant and convicted the accused person under Section 138 of the N.I. Act. Hence, illegality has been committed in acquitting the accused. The appeal be allowed, judgment and order of acquittal be set aside and the accused be convicted for the offence punishable under Section 138 of the N.I. Act and the sentence is to

17 be imposed on the accused person. In support of his contentions learned counsel for the appellant- complainant has relied upon the following decisions: (1) Meters and Instruments Private Limited and Another –vs- Kanchan Mehta reported in (2018) 1 SCC 560.

(2) Rangappa –vs- Sri Mohan reported in (2010) 11 SCC 441

(3) Hiten P. Dalal –vs- Bratindranath Banerjee reported in (2001) 6 SCC 16

18 power of attorney holder used to lend him money by way of loan. He submitted that the respondent-accused was not at all knowing the complainant nor having acquaintance with the complainant. He never entered into any sort of transaction with the complainant. It is also his submission that so far as the payment of the amount of Rs.30.00 lakhs is concerned, it was by way of loan transaction by power of attorney holder with the respondent-accused. In this connection, the learned counsel submitted that the wife of the power of attorney holder was working as the manager in Bank of Baroda, John Nagar, Branch, Bengaluru. Out of Rs.30.00 lakhs, the power of attorney holder paid Rs.25.00 lakhs retaining Rs.5.00 lakhs towards interest which was not at all paid to respondent No.2-accused. The learned counsel also submitted that so far as the transaction of agreement of sale is concerned, in reality, it is not an agreement of sale with the complainant as the loan transaction was entered in between the power of attorney

19 holder and the respondent-accused by way of security to the loan. It is further submitted by the learned counsel that when the agreement of sale was cancelled as per the cancellation document (Ex.P.8), at that time, the accused was advised by the office that for the purpose of income tax an amount of Rs.30.00 lakhss is to be arranged. Therefore, the cheque was prepared and the accused handed over the same to the power of attorney holder. Thereafter, after cancellation of the agreement of sale, the power of attorney holder returned the said cheque to the accused. He submitted that if the transaction is really an agreement of sale and the consideration amount is Rs.70.00 lakhs and if it is paid in its entirety to the accused by the complainant, then why the complainant has not insisted for execution of registered sale deed in his favour and why he kept mum at the time of cancellation of agreement of sale (Ex.P.8), that too in the office of Sub Registrar. Therefore, he submitted that the amount of Rs.40.00 lakhs or Rs.45.00 lakhs as observed

20 by the learned Magistrate in the judgment that, it was paid in cash by the complainant to accused is concerned, except the oral say of the complainant, there is no supporting material in this regard. That was the reason for the learned Magistrate to disbelieve this portion of the evidence of the complainant and rejected the contention of the complainant. The learned counsel also submitted that if such a huge amount is in reality paid to the accused, necessarily there should have been execution of some documents and the complainant would have insisted for such document by the accused. Hence, in view of the same, the observation made by the learned Magistrate in disbelieving the case of the complainant is perfectly in accordance with the materials placed on record. No illegality has been committed nor perverse or capricious view has been taken by the learned Magistrate in coming to such conclusion. No merit in the appeal. There are no grounds to interfere with the judgment and

21 order passed by the learned Magistrate. Hence, the learned counsel submitted to dismiss the appeal. In support of his contention that the general power of attorney holder is not having locus standi to file the complaint, the learned counsel has relied upon the judgment of the Hon’ble Apex Court in case of A.C.Narayanan –vs- State of Maharashtra and Another with G.Kamalakar –vs- Surana Securities Limited and Another reported in (2014) 11 SCC 790. Drawing the attention to the relevant paragraph of the said judgment, the learned counsel submitted that the power of attorney holder cannot file complaint before the Court on behalf of the complainant. He also relied upon the following decisions: i) Janki Vashdeo Bhojwani and Another – vs- Indusind Bank Ltd. and others reported in (2005) 2 SCC 217 ii) S.Kesari Hanuman Goud –vs- Anjum Jehan and Others reported in (2013)12 SCC 64

22 iii) Shiva Murthy –vs- Amruthraj reported in ILR 2008 KAR 4629

23 “26. In light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat reported in (2008) 4 SCC 54 may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant”.

Therefore, in view of the proposition of law laid down by the Hon’ble Apex Court in the subsequent decision, the observation made by the learned Magistrate in his judgment, referring to the earlier decision of the

24 year 2008, that there is no such presumption in law and the entire burden is on the complainant to establish his case is not the correct observation in this case. 9. Learned Counsel for the respondent-accused has also raised the contention regarding the aspect of limitation. It is his contention that the agreement was cancelled in the year 2005 by way of registered cancellation of agreement and the complaint came to be filed in the year 2009. Therefore, as per Section 468(2) of Cr.P.C., the complaint is barred by law of limitation. Therefore, on this ground also, the complaint ought to have been rejected by the learned Magistrate. The contention of the complainant is that though the agreement of sale was cancelled by the registered cancellation deed, but the accused has made the payment of Rs.10.00 lakhs on 16.08.2006. It is also his contention that two other cheques for Rs.30.00 lakhs each were issued subsequently making a request to the complainant to present the same on the date as

25 mentioned by the respondent-accused. Therefore, looking to the presentation of the cheques are concerned, it is on 06.02.2009, whereas the date given by the accused to present the cheques were on or before 05.02.2009. If this date is taken into consideration and the part payment of Rs.10.00 lakhs under the cheque, which is the admitted fact even according to the respondent-accused under the cheque bearing No.230908 of Bank of Baroda, John nagar, Bengaluru, this part payment makes out the acknowledgment of debt and subsequent issuance of two cheques and their presentation on 06.02.2009 and immediately thereafter the issuance of legal notice to the accused person and filing of the complaint, they are all within the law of limitation. Therefore, the contention of the accused that the claim of the complainant is barred by the law of limitation cannot be accepted. The material itself clearly shows that the complainant has taken necessary steps to file the complaint within the prescribed time. Hence, the

26 contention of the respondent-accused regarding the bar on law of limitation is not accepted by this Court.

27 Looking to the decision of the Hon’ble Apex Court, taking some defence is not the rebuttal of presumption but the accused has to place some material which is worth believable to rebut the presumption. Then only it can be said that there is rebuttal of the presumption on the part of the accused. In this case, the accused has not been examined himself as the defence witness. He has not entered into the witness box. Even looking to the cross- examination of the power of attorney holder of the complainant (P.W.1), there is no such cross examination so as to disbelieve the case of the complainant about the advancement of the amount of Rs.70.00 lakhs out of which only Rs.10.00 lakhs is paid by way of issuing the cheque and the remaining amount of Rs.60.00 lakhs is unpaid and it is the due amount. There was no reason for the accused to issue two cheques in the name of the complainant for the sum of Rs.30.00 lakhs each. Therefore, the respondent-accused has failed to make out his defence with worth believable material.

29 attorney holder on behalf of the complainant and he is having the personal knowledge of the said transaction which he has deposed before the Court. I have perused the decision relied upon by the learned Counsel for the respondent-accused in case of S.Kesari Hanuman Goud –vs- Anjum Jehan and Others reported in (2013) 12 SCC 64, wherein the Hon’ble Apex Court has observed as under (In para No.23):

“23. It is a settled legal proposition that the power-of-attorney holder cannot depose in place of the principal. The provisions of Order 3 Rules 1 and 2 CPC empower the holder of the power of attorney to “act” on behalf of the principal. The word “acts” employed therein is confined only to “acts” done by the power-of- attorney holder, in exercise of the power granted to him by virtue of the instrument. The term “acts”, would not include deposing in place and instead of the principal. In other words, if the power-of-attorney holder has preferred any “acts” in pursuance of the power of attorney, he may depose for the principal in

30 respect of such acts, but he cannot depose for the principal for acts done by the principal, and not by him. Similarly, he cannot depose for the principal in respect of a matter, as regards which, only the principal can have personal knowledge and in respect of which, the principal is entitled (sic liable) to be cross- examined”.

Therefore, even looking to the principles enunciated in the said paragraph, the power of attorney holder can give his evidence in respect of the transactions that he has done on behalf of his principal. In another decision relied upon by the learned Counsel for the accused in case of A.C.Narayanan –vs- State of Maharashtra and Another with G.Kamalakar –vs- Surana Securities Limited and Another reported in (2014) 11 SCC 790, the Hon’ble Apex Court has held as under (para No.33.1):

“33.1. Filing of complaint petition under Section 138 of the NI Act through power of attorney is perfectly legal and competent”.

32 “18.1. Offence under Section 138 of the Act is primarily a civil wrong. Burden of proof is on the accused in view of presumption under Section 139 but the standard of such proof is “Preponderance of probabilities”. The same has to be normally tried summarily as per provisions of summary trial under Cr.P.C. but with such variation as may be appropriate to proceedings under Chapter XVII of the Act. Thus read, principle of Section 258 Cr.P.C. will apply and the court can close the proceedings and discharge the accused on satisfaction that the cheque amount with assessed costs and interest is paid and if there is no reason to proceed with the punitive aspect.

“18.4. Procedure for trial of cases under Chapter XVII of the Act has normally to be summary. The discretion of the Magistrate under second proviso to Section 143, to hold that it was undesirable to try the case summarily as sentence of more than one year may have to be passed, is to be exercised after considering the further fact that apart from

33 the sentence of imprisonment, the court has jurisdiction under Section 357(3) CrPC to award suitable compensation with default sentence under Section 64 IPC and with further powers of recovery under Section 431 CrPC. With this approach, prison sentence of more than one year may not be required in all cases”.

34 Magistrate is illegal and it is not in accordance with law. The appellant-complainant has made out the case.

35 amount by way of compensation to be payable to the complainant.

Sd/-

JUDGE CS/-