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Andhra High Court
Vellanki Leasing & Finance Pvt Ltd vs Pfimex Pharmaceuticals Ltd And ... on 3 December, 2007
THE HONBLE SRI JUSTICE C.Y. SOMAYAJULU Crl.M.P.No.890 of 2007 And CRIMINAL APPEAL No.1619 of 1999
03-12-2007
Vellanki Leasing & Finance Pvt Ltd
Rep. By its Manager-cum-Accountant
Mr. N.V.V.Raghavarao
Pfimex Pharmaceuticals Ltd and two others
Counsel for Appellants: Sri C.Kodanda Rao
Counsel for Respondents: M.Kalyana Rama Krishna
:JUDGMENT:
1 Appellant filed the complaint under Section 138 of the Negotiable Instruments Act (the Act) against respondents 1 to 3 alleging that second respondent, as the director of the first respondent, entered into a bill discounting agreement dated 07.08.1995 with it and executed a demand promissory note for Rs.20,15,197=50 in its favour on 07.08.1995 as collateral security for discharging its liability under the aforesaid discounting bill discounting agreement and issued a cheque for Rs.20,15,197=50 dated 06.11.1995, drawn on Vijaya Bank, M.G. Road, Secunderabad in its favour signed by the second respondent on behalf of the first respondent towards discharge of the liability of the first respondent to the appellant. As per the instructions of the second respondent, that cheque was presented for payment in November 1995. But it was returned with an endorsement 'exceeds arrangement'. When that fact was intimated to him second respondent requested the appellant to present the cheque in the bank again on 13.12.1995 and accordingly, that cheque was presented for payment on 13.12.1995, but it was again dishonoured on the same ground. Again, at the request of the second respondent that cheque was presented for payment on 16.02.1996 for the third time but it was dishonoured on the same ground. So appellant got issued a legal notice to respondents 1 and 2 through its counsel on 23.02.1996 intimating them about the dishonour of cheque, with a demand to pay the amount covered by the dishonoured cheque within 15 days from the date of receipt of that notice. As no acknowledgement was received by 02.03.1996, a telegraphic notice was issued to respondents 1 and 2 on 02.03.1996 informing them about the dishonour of cheque and demanding payment of the amount covered by the dishonoured cheque within 15 days. Even after receipt of the registered legal notice as well as the telegraphic notice, as respondents 1 and 2 did not pay the amount covered by the dishonoured cheque, they are liable for punishment under Section 138 of the Act.
2 Respondents, after their appearance before the trial Court denied the offence. As per the orders in Crl.M.P.No.2061 of 1997 dated 02.08.1997 third respondent was discharged by the trial Court. That order became final.
3 In support of its case, the appellant examined one witness as P.W.1 on its behalf and marked Exs.P1 to P19. No evidence either oral or documentary was adduced by the respondents.
4 On the ground that appellant failed to establish that the dishonoured cheque was issued towards discharge of a legally enforceable debt and that the statutory notice was duly served on the respondents 1 and 2, the trial Court acquitted respondents 1 and 2 of the offence under Section 138 of the Act. Hence this appeal by the complainant against all the accused/respondents.
5 Since the third respondent was discharged as per the orders dated 02.08.1997 in Crl.M.P.No.2061 of 1997, and as that order became final, the appeal against the third respondent is not maintainable and hence the appeal against the third respondent is dismissed.
6 The point for consideration is whether the appellant brought home the guilt of respondents 1 and 2 beyond all reasonable doubt for the offence under Section 138 of the Act.
7 The contention of the learned counsel for the appellant is that inasmuch as the trial Court without keeping in view the provisions of Section 139 of the Act, Section 114 of the Evidence Act and 27 of the General Clauses Act, and the ratio in K.N.Beena Vs. Muniyappan and another1 and Hiten P. Dalal Vs. Bratindranath Banerjee2 that the burden to establish that the dishonoured cheque was not issued for a legally enforceable debt is on the accused, and the ratio in Shimla Development Authority and others Vs. Santosh Sharma and another3 that presumption of valid service of the statutory notice under Section 138 of the Act can be drawn when notice is sent by registered post to the correct address of the accused, erroneously acquitted respondents 1 and 2 on the ground that appellant failed to establish that the dishonoured cheque was issued towards discharge of a legally enforceable debt and that statutory notice was served on them and so the judgment under appeal is not sustainable and in view of the evidence adduced by the appellant, respondents 1 and 2 are liable to be convicted under section 138 of the Act.
8 The contention of the learned counsel for respondents 1 and 2 is that since the appellant is a non banking financial institution, and since there is no evidence on record to show that the appellant obtained permission from the Reserve Bank of India under Chapter III B of the Reserve Bank of India Act (1934 Act) to carry on such business, there is a clear violation of the provisions contained in Chapter III B of 1934 Act, and so even assuming that any amount is due to the appellant from respondents 1 and 2, that debt cannot be said to be a legally enforceable debt in view of Reserve Bank of India Vs. Kuber Mutual Benefits Ltd, and others4 and so the complaint was rightly dismissed by the trial Court. Relying on M/s. Baba Finance Corporation Vs. Mohd. Nayeem and another5, where it is held that a moneylender in Telangana region, who has no licence to carry on money lending business under the provisions of the A.P. (Telangana Area) Money Lenders Act, 1349 Fasli (Money Lenders Act), cannot maintain a compliant under Section 138 of the Act, he contended that inasmuch as the appellant did not assert that it has a licence to carry on business in money lending under the Money Lenders Act, the complaint, in any event, is not maintainable. His next contention is that inasmuch as P.W.1 clearly admitted that he has no proof to show that any money belonging to the appellant was transferred to the account of respondents, and about the service of the legal notice on the respondents, and as admitted facts need not be proved in view of Section 58 of the Evidence Act, non examination of any witness by the respondents is of no consequence because no evidence is adduced by the complainant to show that Ex.P.3 promissory note is supported by consideration and that there is service of notice under Section 138 of the Act to respondents 1 and 2 and contended that in fact appellant's failure to produce its account books entails an adverse inference being drawn against it, because in M.S.Narayana Menon alias Mani Vs. State of Kerala and another6 it is held that in a case under Section 138 of the Act the burden to establish that there is a debt due from the accused is only on the complainant and as in D.Vinod Shivappa Vs. Nanda Belliappa7 it is held that presumption as to due service of notice cannot be drawn in all cases. Finally he contended that since the trial Court, after considering the entire evidence on record, acquitted the respondents, the appellate court should be slow in interfering with the said acquittal in view of the ratio in Jaisingh and others Vs. State of Karnataka8.
9 I am unable to agree with the sheet anchor contention of the learned counsel for the respondents 1 and 2 that the complaint is liable to be dismissed in view of the appellant's failure to adduce evidence relating to its having licence to carry on business of a non banking financial institution under 1934 Act or the Money Lenders Act and inasmuch as P.W.1 admitted that appellant did not file any document into Court to show that Reserve Bank of India issued permission to the appellant to carry on the activities of a non banking financial company, for the following reasons.
10 No doubt as per Section 45 - IA in Chapter III B of 1934 Act, a non- banking financial company cannot commence or carry on the business as a 'non- banking financial institution' without obtaining a certificate of registration issued under that Chapter. Business of 'non banking financial institution', as per that section, means carrying on the business of a financial institution referred to in Clause (C) and includes business of non banking financial company referred to in Clause (F), which defines 'Financial Institution' and 'Non- banking financial company' respectively. The specific case of the appellant is that it entered into Ex.P.2 bill discounting agreement with the respondents and in pursuance thereof, the second respondent, on behalf of the first respondent, executed Ex.P3 demand promissory note for Rs.20,15,197=50. Even assuming that appellant needed to have a licence under Chapter III B of 1934 Act for entering into Ex.P.2 bill discounting agreement with respondents 1 and 2, the complaint cannot be dismissed on the ground of non production of such licence into Court, because respondents 1 and 2 never claimed in the trial Court that the complaint is liable to be rejected on that ground. Respondents 1 and 2, if they wanted to take such a defence, should have specifically stated that fact in their answer to the question put by the Court under Section 251 Cr.P.C or at least during Section 313 Cr.P.C. examination, so that appellant could have known the defence of respondents 1 and 2 to meet their case. The first question put to respondents 1 and 2 under Section 313 Cr.P.C read:
"P.W.-1, N.V.V.Raghava Rao, Manager-cum-Accountant in the complainant company deposed that the complainant has been carrying on business in finance, leasing and bill discounting. What do you say?"
For that question second respondent on behalf of first respondent and himself stated "I do not know". A complainant cannot be asked to prove the facts, which are not disputed by the accused. Had respondents 1 and 2 taken a plea that the complaint is not maintainable for want of permission under Chapter III B of 1934 Act, appellant, if it is having such a licence might have produced such licence. If it is not having such licence, it would have admitted that it has no such licence. Merely because P.W.1 stated that no document issued by the Reserve Bank of India to the appellant to carry on non banking financial activity "is filed into Court", it cannot be construed to mean that P.W.1 admitted that appellant has no such licence, because witness admitting that a document is not produced into Court does not tantamount to admitting that such document is not in existence. Though appellant may be having such licence, P.W.1 might not have produced into Court, because appellant's holding such licence is not disputed by respondents 1 and 2, because the earlier answer of P.W.1, during cross- examination reads
"It is not true that we are not empowered to carry bill discounting business in accordance with law."
Be that as it may, the consequence of not obtaining of a licence under Chapter III B of the 1934 Act is only to face a winding up petition to be filed by the Reserve Bank of India under Section 45 ML of the 1934 Act and nothing more, because non possession of a licence under Chapter III B of the 1934 Act does not have the effect of wiping out the debt due to the creditor institution, nor does it debar the creditor institution recovering the debt due to it from its debtors through a Court of law or otherwise. In fact the ratio in Kuber Mutual Benefits Limited case (4 supra), strongly relied on by the learned counsel for the respondents, is that an institution which did not apply for grant of certificate of registration under Chapter III B of 1934 Act, after its being denotified from status of N.I.D.H.I Company, is that it would be liable to be wound up, on a petition filed by the Reserve Bank of India in view of Section 45 ML of the 1934 Act. In fact, in the winding up proceedings the liquidator can recover the amount due from the debtors of such institution and distribute the assets to the creditors of that institution. So the non production of licence under Chapter III B of 1934 Act by the appellant, per se is not a ground to acquit respondents 1 and 2
11 The contention of the learned counsel for respondents 1 and 2 relating to the maintainability of the case in view of the provisions of the Money Lenders Act and the ratio in Baba Finance Corporation Case (5 supra) also has no force for the aforesaid reasons in para 10 above, and as the Money Lenders Act applies only to 'professional money lenders'. In fact in Munagala Yadgiri Vs. Pittala Veeriah9 it is held that the onus to establish that a creditor is a professional money lender is on the debtor. It is not the case of the case of the respondents, in the trial Court or in this Court, that the appellant is a 'professional money lender' within the meaning of the Money Lenders Act and in fact no such evidence is adduced by them. That apart the arrangement between the appellant and respondents may also fall under Section 4-G of the Money Lenders Act, as per which a loan advanced by one proprietor to another proprietor, in the ordinary course of business in accordance with the practice in trade, is not 'a loan' within the meaning of that Act.
12 The above two pleas raised by the learned counsel for respondents 1 and 2 for the first time in the appeal, are mixed questions of fact and law. As stated earlier, had respondents 1 and 2 raised those contentions in the trial Court, appellant would have known the defence of respondents 1 and 2, and might have produced evidence to meet those pleas. Respondents 1 and 2 who did not take pleas relating to mixed questions of fact and law in respect of which appellant has to adduce evidence in the trial Court, cannot after failing to raise such pleas in the trial Court, be permitted to spring a surprise on the appellant during appellate stage, and steal a march over the appellant, for escaping the penal consequences for their acts.
13 In re the contention of the learned counsel for respondents 1 and 2 relating to lack of evidence to establish Ex.P.3 being supported by consideration, inasmuch as Ex.P.5 letter addressed to the appellant by the first respondent, signed by the third respondent reads:
"This has reference to the discussions had with you during the last week of Dec. '95 that your payment would be cleared in the first week of Jan. '96. Since our fund limits have been squeezed by our bankers, the matter has been discussed with them during the Consortium Meeting held on Saturday i.e. 20th January '96.
We have been assured by our bankers that the limits would be revoked. The moment we hear from our banker, arrangements for payment shall be made.
In the meanwhile, we request you to bear with the inconvenience caused."
there can be no two opinions about the fact that Ex.P.3 is supported by consideration. Had not the amount for which Ex.P.3 promissory note was executed by the second respondent, on behalf of the first respondent in favour of the appellant, been transferred to the account of the first respondent, Ex.P.5 letter would not have been written and the liability of respondents 1 and 2 would have been disputed therein. The specific evidence of P.W.1 is that at the request of the first respondent they presented the cheque for 2nd time and that it was dishonoured and when that fact was intimated to the first respondent they received Ex.P.5 letter. P.W.1 was not cross-examined on Ex.P.5. In other words had not Ex.P.3 promissory note been supported by consideration, had not Ex.P.4 cheque been issued in discharge of the debt due under Ex.P.3, there was no need for the first respondent sending Ex.P.5 letter to the appellant.
14 In an attempt to get over Ex.P.5 letter the learned counsel for respondents 1 and 2 contended that inasmuch as third respondent was discharged from the case, Ex.P.5 letter signed by third respondent, cannot be taken into consideration. I find no force in that contention because the value of Ex.P.5 letter is not lost due to the third respondent being discharged from the case because, the criminal liability of persons other than the drawer of the cheque, is governed by Section 141 of the Act. Only because the third respondent does not fall in the categories of persons mentioned in Section 141 of the Act was he discharged from the case. That does not mean that the letter written by the third respondent, when he admittedly is working for the first respondent, to the appellant on behalf of the first respondent has no value. Inasmuch as Ex.P.5 binds the first respondent and consequently the second respondent also, they had to explain the circumstances in which Ex.P.5 letter was written to the appellant. But they failed to adduce any evidence on their behalf.
15 In fact, respondents 1 and 2 did not deny or dispute execution of Ex.P3 promissory note in favour of the appellant. The suggestion put to P.W.1 during cross-examination, which is denied by him, is that the bounced cheque (Ex.P4) was not issued in discharge of any liability and that respondents 1 and 2 do not owe any amount to the appellant. So it means and implies that issuance of Ex.P4 cheque to the appellant by the second respondent on behalf of first respondent, is admitted by respondents 1 and 2. As stated above, Ex.P.5 amply establishes that Ex.P.3 is supported by consideration.
16 The contention of the learned counsel for respondents 1 and 2 that the statement of P.W.1 during cross-examination that "no document to establish that money was transferred to the account of the respondents is filed into court", tantamounts to an admission that Ex.P.3 is not supported by consideration and so in view of Section 58 of Evidence Act respondents need not examine any witness, has no force because Ex.P.5 belies that contention.
17 Apart from Ex.P.5 letter, in view of the ratio in K.N.Beena case (1 supra) that the burden of proof to establish that the bounced cheque was not issued for a debt or liability is on the accused it is for respondents 1 and 2 to establish that Ex.P.3 is not supported by consideration. In fact in Hiten P. Dalal case (2 supra) it is held
"Because both Sections 138 and 139 require that the Court 'shall presume' the liability of the drawer of the cheques for the amounts for which the cheques are drawn, it is obligatory on the court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. Such a presumption of fact which describes presumptions of law, as distinguished from a presumption of fact which describes provisions by which the court 'may presume' a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter, all that is meant is that the prosecution is obliged to prove the case against the accused beyond all reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact.
In other words, provided the facts required to form the basis of a presumption of law exist, no discretion is left with the Court but to draw the statutory conclusion."
So in view of Ex.P.5, appellant's failure to produce record to show that its money stood transferred to the account of the first respondent, is not of any consequence, because it is for respondents 1 and 2 to show that Ex.P.3 is not supported by consideration. Respondents 1 and 2 who failed to discharge the onus that lay on them, after having impliedly admitted execution of Ex.P3 and issuance of Ex.P4 in discharge of Ex.P3 debt, and sent Ex.P.5 letter to the appellant, and failed to produce their account to establish that the money for which Ex.P3 promissory note was executed was not transferred to the account of the first respondent, cannot be heard to say that the appellant failed to establish that Ex.P.4 cheque was issued in discharge of the debt that is due to it under Ex.P.3.
18 The facts in M.S.Narayana Menon case (7 supra) strongly relied on by the learned counsel for the respondents are entirely different from the facts of this case. In that case the accused who was carrying on business in shares in a stock exchange, through the complainant in that case, had issued the dishonoured cheques. Inasmuch as discrepancies were found in the books of accounts maintained by the complainant for proving the said transactions and as the evidence adduced by the accused prima facie disclosed that the dishonoured cheques were issued for the purpose of discounting, the Court held that the onus that lay on the accused shifted to the complainant to establish that what was stated by the accused is not correct, and acquitted the accused inasmuch the shifted onus was not discharged by the complainant. As no evidence whatsoever is adduced by the respondents 1 and 2 in this case, question of shifting of onus to appellant does not arise in this case.
19 During the course of arguments, learned counsel for the appellant stated that the appellant filed a suit for recovery of the amount covered by Ex.P.4 and that that suit was decreed. That fact need not be taken into consideration for disposal of this appeal because no material is available on record in that regard.
20 The other contention relates to the issuance of the notice contemplated by Section 138 of the Act. It is no doubt true that P.W.1, during cross- examination on 09.07.1998, stated that no proof to show that such notice was issued is filed into Court. He was recalled on 24.11.1998 for further evidence and Ex.P8 (office copy of the legal notice dated 23.2.1996 issued to the respondents 1 and 2) and Ex.P16 (letter dated 01.03.1996 addressed to the Postmaster S.R.Nagar Post office by the counsel for the appellant) and Ex.P17 (telegraphic notice dated 02.03.1996) were marked through him. There was cross examination on those aspects by respondents 1 and 2. The address of the first respondent mentioned in the complaint is '4-1-1240, King Koti, Hyderabad'. The address mentioned in Ex.P15 postal receipt, under which notice contemplated by Section 138 of the Act was sent to the first respondent, is 'D.No.4-1-1240, King Koti, Hyderabad'. Ex.P14, addressed to the second respondent also contains the same address. Ex.P9 telegraphic notice dated 02.03.1996 was also sent to the same address. Ex.P10 Endorsement of the Post Master shows that that telegram was served on the addressee. So it is clear that telegraphic notice was served on the second respondent for him and on behalf of the first respondent and registered notice was sent to the correct address of the second respondent.
21 Ex.P.6 endorsement of the drawee bank dated 19.2.1996 shows that Ex.P4 cheque was dishonoured as it 'exceeds arrangement'. Ex.P8 notice is dated 23.2.1996. Ex.P9 telegram is dated 02.03.1996. So it is clear beyond doubt that appellant sent the notice contemplated by Section 138 of the Act to respondents 1 and 2 within 15 days from the date of receipt of communication relating to dishonour of Ex.P4 cheque by the drawee bank.
22 D.Vinod Shivappa case (6 supra) relied on by the learned counsel for the respondents has no application to the facts of this case, as in that case the endorsement on the returned notice read 'party not in station. Arrival not known'. In view thereof only, it was held that presumption of due service cannot be drawn. The facts in this case are different. In this case Notice under Section 138 of the Act i.e Ex.P5 Registered notice, and the telegraphic notice (Ex.P9) were sent to the correct address of respondents 1 and 2. Ex.P10 shows that the telegram was served on the addressee. In view of the ratio in Shimla Development Authority case (3 supra) where the apex Court held that in cases where notice is sent by registered post to the correct address, presumption as to due service on the addressee can be drawn in view of Section 27 of the General Clauses Act even if the acknowledgement is not produced and as Section 138 of the Act does not lay down that the notice mentioned therein should be served only through registered post, even issuance of Telegraphic notice also would be sufficient compliance with the mandate in that section. In this case the appellant had well within the 15 days of receipt of the said intimation relating to dishonour of cheque, sent notices contemplated by Section 138 of the Act to respondents 1 and 2 both by registered post and through telegram. They were served on the respondents. So, the appellant complied with the requirements relating to notice contemplated by Section 138 of the Act also.
23 As it is not the case of the respondents 1 and 2 that they paid the amount covered by Ex.P4 after service of notice under Section 138 of the Act, it cannot but be said that respondents 1 and 2 committed the offence under Section 138 of the Act.
24 Jaisingh case (8 supra) relied on by the learned counsel relates to murder committed by the persons in an unlawful assembly. In that case the trial Court acquitted the accused, but on appeal by the State to the High Court, the High Court reversed the judgment of the trial Court and convicted the accused. On appeal to it by the accused the apex Court holding that in cases where two views relating to the guilt of the accused are possible, the view taken by the trial Court in favour of the accused should be retained, allowed the appeal and acquitted the accused. In this case, the trial Court without keeping in view Ex.P.5 and the presumptions available under Sections 138 and 139 of the Act and Section 27 of the General Clauses Act, erroneously gave the benefit of doubt to respondents 1 and 2. Since the evidence on record establishes the offence under Section 138 of the Act beyond all reasonable doubt and as respondents 1 and 2 did not adduce any evidence on their behalf, the view taken by the trial Court that respondents 1 and 2 are entitled to be acquitted cannot but be said to be perverse and so the said finding of the trial Court is liable to be and hence is set aside and so I hold that appellant established beyond all reasonable doubt that respondents 1 and 2 committed the offence under Section 138 of the Act. The point is answered accordingly.
Crl.M.P.No.890 of 2007
25 This petition is filed by the appellant to receive some documents as additional evidence in this appeal to show that money belongs to the appellant was transferred to the account of first respondent and that the registered notices sent to respondents 1 and 2 were served on them. In view of my findings on the point for consideration, this petition is dismissed as unnecessary.
26 For the above reasons, the appeal is allowed and the judgment of the trial Court is set aside, and respondents 1 and 2 are convicted under Section 138 of the Act.
27 First respondent is sentenced to a fine of Rs.10,00,000/- out of which Rs.2,00,000/- shall be paid as compensation to the appellant. Second respondent is sentenced to simple imprisonment for six months and a fine of Rs.10,000/-, in default simple imprisonment for one month.
?1 2002 (1) Civil LJ 1
2 (2001) 6 SCC 16
3 (1997) 2 SCC 637
4 2002 (2) Bank. J. 518
5 1997 (1) ALD (Crl.) 719 (AP)
6 AIR 2006 SC 3366
7 AIR 2006 SC 2179
8 2007 (1) ALD (Crl.) 983 (SC)
9 1958 ALT 543
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