DR M KRISHNA SHETTY vs. SRI H R NAGABHUSHAN

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WP/29144/2018HC KarnatakaKAHC01009065201829 August 2018Bench: JOHN MICHAEL CUNHA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that while cash transactions violating Section 269 SS may be independent criminal offenses, they do not invalidate a prosecution for dishonor of a cheque under Section 138 of the NI Act. The court stated that such contentions could be decided during the trial.

What were the facts?

The petitioner sought to quash proceedings under Section 138 of the Negotiable Instruments Act. The petitioner argued that the Magistrate failed to consider Section 269 SS of the Income Tax Act when taking cognizance of the offense.

What were the issues?

Whether a prosecution under Section 138 of the Negotiable Instruments Act is vitiated by non-compliance with Section 269 SS of the Income Tax Act. Can the validity of a cheque dishonor prosecution be challenged based on violations of income tax provisions before trial?

Which sections of the Income-tax Act were involved?

Section 138,Section 269 SS

AI-generated summary — verify with the full judgment below

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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 29TH DAY OF AUGUST, 2018

BEFORE

THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA

WRIT PETITION NO.29144/2018

Between:

Dr. M. Krishna Shetty S/o Late Sri M Vasu Shetty, Aged about 69 years, Residing at Manipal Hills, Flat No.B-1, Ground Floor, Anantha Nagar Road, Syndicate Circle, Manipal, Udupi.

…Petitioner

(By Ms. Surabhi Srinivas, Advocate for Sri Harikrishna S. Holla, Advocate)

And:

Sri H. R. Nagabhushan Aged about 56 years, Residing at No. 10, 1st Main, 1st Cross, Munikalappa Lane, Ganapathypura, Konanakunte Extension, Kanakapura Road, Bengaluru-560 062. ...Respondent

This Writ petition is filed under articles 226 & 227 of the Constitution of India praying to quash the proceedings

2 in C.C.No.22014/2017 on the file of Addl. Chief Metropolitan Magistrate, Annexure-B, Bengaluru and etc.

This Writ petition coming on for Preliminary Hearing, this day, the Court made the following:

ORDER Heard the learned counsel for the petitioner.

2.

The petitioner has sought to quash the proceedings initiated against him under Section 138 of Negotiable Instruments Act, 1881 (‘Act’ for short).

3.

The contention of the petitioner is that the learned Magistrate has failed to take into consideration the provisions of Section 269 SS of the Income Tax Act, 1961 while taking cognizance of offence. The learned counsel for the petitioner has placed reliance of the on the decision of the Hon’ble Supreme Court of India in the case of G.Pankajakshi Amma and others vs. Mathai Mathew (Dead) through legal representatives and another reported in (2004) 12

3 SCC 83 with reference to para No.10, wherein it is held as under:

“10. There is any reason also why the impugned judgment cannot be upheld. According to the 1st respondent these transactions were to be unaccounted transactions. According to the 1st respondent, all these amounts are paid in cash. If these are unaccounted transactions then they are illegal transactions. No Court can come to the aid of the party in an illegal transaction. It is settled law that in such cases the loss must be allowed to lie where it falls. In this case as these are unaccounted transaction, the Court could not have lent its hands and passed a decree. For these reasons also the suit was required to be dismissed.”

4.

The facts of the above case are that the 1st respondent filed two suits against the appellants therein in O.S.No.6/1982 and O.S.No.48/1982 for recovery of a sum of Rs.2,56,000/- with interest. The suits were filed on the basis of five promissory notes. The trial court examined these promissory notes and other documents and arrived at a conclusion that the above documents even though supposedly executed on different dates were in the same hand writing and in the same ink and admittedly, all of them had been filled in

4 by the clerk. Therefore, it held that the demand promissory notes relied on by the 1st respondent cannot be relied on. The High Court reversed the findings of the trial court and decreed the suits. While appreciating the evidence and nature of the transactions put forward by the parties, the Hon’ble Supreme Court has observed that the transactions itself were illegal transaction and no Court can come to the aid of the party in an illegal transaction.

5.

In the instant case, the prosecution is initiated against the petitioner for the alleged dishonor of a cheque. The case of the complainant is that in repayment of the hand loan advanced by him, the petitioner/accused issued the cheque in question which has been dishonored. No doubt, the sources from which the complainant paid the loan amount may be required to be established during the trial, but the prosecution under Section 138 of N.I. Act cannot be stalled for non-

5 compliance of Section 269 SS of the Income Tax Act. Any cash transaction in violation of Section 269 SS of Income Tax Act may give rise to an independent criminal offences, but on account of violation of the said provision, the prosecution of the petitioner for the alleged dishonor of cheque under Section 138 of Act does not become bad in law. Even otherwise, the contention urged by the petitioner could be decided only during the trial. Hence, reserving liberty to the petitioner to canvas the said plea before the trial court, petition is dismissed.

Sd/- JUDGE

ds/HA

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