High Court of KeralaSingle Judge2008-02-12Convicted

K. MOHAN DAS v. G. RAVEENDRAN NAIR and STATE OF KERALA

Case / Petition Number:CRL.A. No.1169 of 2002 (D)

Neutral Citation:/null

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: K. P. Balachandran
Judgment Date: 2008-02-12
Court Decision / Holding: Convict the first respondent under Section 138 of the Negotiable Instruments Act; acquittal set aside. Sentencing adjourned to 25/02/2008.
Final Disposition: Convicted

Parties to the Case

Appellants / Petitioners

K. Mohan Das

Respondents

G. Raveendran Nair
State of Kerala

Legal Representation & Advocates

Counsels for Petitioners

• M. Ramaswamy Pillai

Counsels for Respondents

• V. N. Gopalakrishnan Nair
• G. Surarshan
• P. Ravindra Babu

Case Synopsis & Summary

This criminal appeal, CRL.A. No.1169 of 2002 (D), is filed by the complainant, K. Mohan Das, challenging the acquittal of the first respondent under Section 138 of the Negotiable Instruments Act in CC 95/1998 of the Judicial First Class Magistrate's Court-IV (Mobile Court), Thiruvananthapuram. The appellant alleged that the respondent issued Ext. P2 cheque for Rs. 24,26,960 drawn on the South Indian Bank, which was dishonoured for funds insufficiency as shown in Ext. P4. A notice under Ext. P5 was served on the respondent but payment was not made within the statutory period, thus fulfilling the prerequisites for a complaint under Section 138 NI Act. The trial court acquitted the respondent, relying on Srinivasan v. State of Kerala (1999) (KLT) which held that a cheque issued as security does not attract Section 138. On appeal, the appellant contends that subsequent decisions of the Supreme Court and this Court have clarified that a cheque issued by way of security can attract Section 138, and that inability to secure a bank loan does not discharge liability. The respondent contends that the cheque was given as security and that alleged security documents were not proven and the statutory prerequisites were not satisfied. The High Court holds that the earlier decision is no longer good law in light of later authorities, reverses the acquittal, and convicts the respondent under Section 138 NI Act. Sentencing was adjourned to 25 February 2008.

Provisions of Law Cited

Section 138 of the Negotiable Instruments Act, 1881Section 255(1) of the Cr.P.C.

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellant contends that the trial court relied on Srinivasan v. State of Kerala to hold that a cheque issued as security does not attract Section 138 NI Act; however, subsequent Supreme Court and Kerala decisions have held that security cheques can attract Section 138, and that inability to obtain a loan does not discharge liability. The cheque (Ext. P2) was issued in relation to a business transaction as security, with the appellant alleging that the liability arose from the supply of goods. The appellant also argues that statutory preconditions for a complaint under Section 138 were satisfied and that the absence of receipts for security documents should not defeat the case; the court should not rely on an outdated principle to acquit. The appellants pray for reversal of the acquittal and conviction under Section 138.

Contentions of Respondents

The respondent contends the cheque was issued as security for liability and that the decision in Srinivasan remains applicable, with no clear proof of the debt repayment obligation or proper statutory compliance. The respondent points to DW1 and DW2 and the missing receipts for security documents (e.g., title deeds) and argues that the prosecution has failed to prove the statutory prerequisites for a complaint under Section 138. The defence asserts the security nature of the cheque and questions the reliability of Exts. P7, D1 in proving actual liability; the acquittal should stand.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Srinivasan v. State of Kerala	1999(3) KLT 849	Overruled	The trial court relied on Srinivasan to hold that a cheque issued as security does not attract Section 138. The appellate court notes that subsequent Supreme Court and Kerala decisions have held that security cheques can attract Section 138, thereby overruling the earlier principle relied upon by the trial court.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE K.P.BALACHANDRAN** **TUESDAY, THE 12TH FEBRUARY 2008 / 23RD MAGHA 1929** **CRL.A.No.1169 of 2002 (D)** **-------------------------------** **CC.95/1998 of JUDL. MAGISTRATE OF FIRST CLASS-IV (MOBILE COURT), TRIVANDRUM** **....................** ## **APPELLANT: COMPLAINANT:** **-----------------------** **K. MOHAN DAS, MANAGING PARTNER, M/S. YAMINI ASSOCIATES, THAKARAPARAMBU ROAD, THIRUVANANTHAPURAM.** **BY ADV. SRI.M.RAMASWAMY PILLAI** ## **RESPONDENTS: ACCUSED & STATE:** **-----------------------------------------** **1. G. RAVEENDRAN NAIR, T.C.37/892, THINKAL KALA, SOUTH NADA STREET, FORT, THIRUVANANTHAPURAM.** **2. STATE OF KERALA REP. BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.** ## **BY ADV. SRI.V.N.GOPALAKRISHNAN NAIR** ## **SRI.G.SURARSHAN** ## **PUBLIC PROSECUTOR SRI.P.RAVINDRA BABU** **THIS CRIMINAL APPEAL HAVING BEEN FINALLY HEARD ON 12/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## K.P.BALACHANDRAN, J. -----------------------------------------------Crl. Appeal No.1169 of 2002 -----------------------------------------------Dated this the 12[th] day of February, 2008 ## **JUDGMENT** This appeal with leave is filed by the complainant in C.C.95/98 on the file of the Judicial First Class Magistrate's Court-IV (Mobile Court), Thiruvananthapuram challenging the acquittal of the first respondent of offence under Section 138 of the N.I. Act under Section 255(1) of the Cr.P.C. The appellant filed complaint in the court below alleging that he is the Managing Partner of M/s.Thushara Traders, Neyyattinkara and also M/s Yamini Associates, Thakaraparambu Road, Thiruvananthapuram; that the first respondent has business dealings with him and to discharge the liability to the appellant, the first respondent issued Ext.P2 cheque to him for an amount of Rs.24,26,960/- drawn on the Thiruvananthapuram main branch of the South Indian Bank Ltd.; that he presented the cheque Crl. Appeal No.1169 of 2002 -2- for collection through his bankers viz. the Powerhouse branch of Indian Overseas Bank, Thiruvananthapuram, but the said cheque was returned dishonoured by the drawee bank under Ext.P4 memo assigning the reason “funds insufficient”; that the said memo along with Ext.P2 cheque was returned to him by his bankers on 26/09/97 under the original of Ext.P3 letter; that thereupon, the original of Ext.P5 notice was caused to be issued through lawyer on 01/10/97 by registered post with acknowledgment due intimating the first respondent of the dishonour of the cheque and calling upon him to make payment of the amount covered by the cheque; that the said notice was received by the first respondent on 07/10/97 under Ext.P6 postal acknowledgment card, but he has not cared to make payment of the amounts covered by Ext.P2 cheque either within the statutory period or ever thereafter and thus, he has committed an offence Crl. Appeal No.1169 of 2002 -3- punishable under Section 138 of the N.I. Act. 2. On appearance of the first respondent in the court below pursuant to receipt of summons he was served with copies of all relevant records in the case and he was questioned by the learned Magistrate reading over the particulars of the offence and explaining it to him. Thereupon, he pleaded not guilty and consequently, a trial of the case was conducted by the court below. 3. On the side of the appellant his power of attorney holder is examined as PW1; the Manager of the drawee bank was examined as PW2 and the appellant got himself examined as PW3 and documentary evidence Exts.P1 to P7 were got marked. On the appellant closing his evidence, the first respondent was questioned under Section 313 Cr.P.C. Thereupon, he admitted the purchases made by him as alleged from the business concern of the appellant, but denied of having issued any cheque; Crl. Appeal No.1169 of 2002 -4- admitted of having received Ext.P5 notice under Ext.P6 acknowledgment card and stated that he has issued Ext.P7 reply thereto. He also admitted that Ext.P2 cheque is one issued in account No.1268 in the current account maintained by him in the name of his business concern “Thinkal Kala” at the Spencer Junction branch of the South Indian Bank and that the cheque was being dishonoured under Ext.P4 memorandum for reason of “insufficiency of funds” in his account. He also admitted finally that in Ext.P2 cheque he himself has signed as proprietor. He further stated that the cheque was issued by him by way of security; that the appellant had promised him that the requisite time would be granted to avail of loan from bank and to make payment and accordingly, supply was effected to him of 155 numbers of T.V., four V.C.P and two audio systems and by way of security he was made to deliver signed plain paper, stamp paper as Crl. Appeal No.1169 of 2002 -5- also documents obtained from K.T.D.C in relation to the supply order and also obtained two cheques from him of which one is Ext.P2; that he made all attempts to secure loan from bank but he did not get it and that was for reason of the appellant himself, as he had taken documents in relation to eight and a half acres of property owned by him. 4. On the defence side the first respondent got himself examined as DW1 and another witness as DW2 and got marked in evidence Exts.D1 to D4. The court below considered the case in the light of the evidence adduced as aforesaid; found that the cheque was being issued by way of security and consequently, held on the strength of the decisions in _Srinivasan v. State of Kerala (1999(3) KLT 849)_ that the cheque issued by way of security does not attract Section 138 of the N.I. Act and consequently, acquitted the first respondent of offence under Section 138 of the N.I. Act. Crl. Appeal No.1169 of 2002 -6- 5. It is vehemently contended before me by the learned counsel for the appellant that the decision relied on by the court below is no longer good in law as it has been held by the Apex Court and by this Court in several subsequent decisions that cheque issued by way of security also attracts the penal provisions contained in Section 138 of the N.I. Act. As rightly contended by the counsel for the appellant a cheque issued by way of security for due discharge of debt or other liability also attracts provisions of Section 138 of the N.I. Act. In the instant case, the case of the first respondent is only that Ext.P2 cheque was being issued by way of security. Inability for him to raise loan to pay up the amounts is not a defence. The case of the first respondent that he could not avail of loan as the appellant had received from him documents in relation to eight and a half acres of property owned by him is not evidenced except Crl. Appeal No.1169 of 2002 -7- that it has been so mentioned in Ext.P7 reply notice and in Ext.D1 notice. If at all documents were so entrusted with the appellant then certainly some receipt should have been obtained in evidence thereof. There is no receipt or other record obtained evidencing delivery of title deeds in relation to eight and a half acres of property belonging to the first respondent to the appellant and the mention in Ext.P7 and Ext.D1 notices cannot serve the purpose. Apart from raising the above contentions, the first respondent has no case that statutory formalities which are prerequisites for the maintainability of a complaint under Section 138 of the N.I. Act do not stand satisfied in the instant case or that the dishonour of Ext.P2 cheque was not for reason of “insufficiency of funds” in his account to honour the cheque, but for any other reason. Consequently, therefore, the offence under Section 138 of the N.I. Act Crl. Appeal No.1169 of 2002 -8- stands proved and the acquittal of the first respondent of the said offence by the court below is incorrect and deserves to be set aside and reversed. 6. In the result, allowing this appeal, I set aside the order of acquittal passed by the court below and convict the first respondent/ accused of offence under Section 138 of the N.I. Act. Adjourned for questioning the first respondent regarding sentence as desired by the counsel for the first respondent to 25/02/08. K.P.BALACHANDRAN, JUDGE kns/-