High Court of KeralaSingle Judge2012-03-22Appeal allowed; conviction under Section 138 NI...

Perpectual Chitties and Hire Purchase (P) Ltd. v. E.S. Kalim Nazeelka Manzil Kalathode and State of Kerala

Case / Petition Number:CRL.A. No. 257 of 2002

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: P. Q. Barkath Ali
Judgment Date: 2012-03-22
Court Decision / Holding: The appeal is allowed. The judgment of the lower court dismissing the complaint and acquitting the accused is set aside. The accused is found guilty of the offence punishable under Section 138 of the NI Act and is convicted thereunder. He is sentenced to imprisonment till the rising of the court and to pay compensation of Rs.40,000 to the complainant, with default simple imprisonment for two months. Bail bonds are cancelled. The accused shall surrender before the trial court on or before 30-04-2012 to suffer the sentence.
Final Disposition: Appeal allowed; conviction under Section 138 NI Act; sentence as stated; acquittal reversed; bail bonds cancelled; required surrender for sentence.

Parties to the Case

Appellants / Petitioners

Perpectual Chitties and Hire Purchase (P) Ltd., Thrissur, represented by its Managing Director, Shri. Gopinathan Nambiar

Respondents

E.S. Kalim, Nazeelka Manzil Kalathode, Ollukkara Village, Thrissur
State of Kerala, represented by Public Prosecutor, High Court of Kerala, Ernakulam

Legal Representation & Advocates

Counsels for Petitioners

• Sri Vargheese C. KuriaKose

Counsels for Respondents

• Sri Noushad Thottathil

Case Synopsis & Summary

The appellant, Perpectual Chitties and Hire Purchase (P) Ltd., filed a criminal appeal under Section 389 CrPC challenging a conviction under Section 138 of the Negotiable Instruments Act, 1881. The complainant had filed C.C.No.268/1999 before the Judicial First Class Magistrate-II, Thrissur, alleging that the accused, who acted as a surety for a subscriber (Musthafa), issued Ext.P3, a signed cheque for Rs. 36,720 to discharge that liability. The cheque was dishonoured for insufficient funds and notice Ext.P5 was issued; the accused did not repay. The trial court acquitted/ dismissed the complaint, holding that PW1 (the complainant’s MD) was not authorized to represent the company, and that Ext.P3’s due execution was not proved. The appellant argued that Ext.P1 and Ext.P2 establish PW1’s authority, and that the cheque, though possibly signed on a blank, was given to discharge a legally enforceable debt; the cheque was subsequently filled and presented in settlement. The High Court, relying on prior Kerala decisions (General Auto Sales and ICDS Ltd.), held that the presumption under Sections 118 and 139 NI Act applies and that the cheque was issued to discharge a legally enforceable debt. Consequently, the court convicted the accused under Section 138 NI Act and imposed imprisonment till rising of the court plus Rs.40,000 as compensation, with default imprisonment and surrender directions. The appeal was allowed, reversing the lower court’s acquittal.

Provisions of Law Cited

Section 138 of the Negotiable Instruments Act, 1881Sections 118 and 139 of the NI ActSection 313 Cr.P.C.

Legal Doctrines & Maxims

Presumption under Sections 118 and 139 of the Negotiable Instruments Act (that a cheque issued to discharge a legally enforceable debt gives rise to liability)
Cheque issued by guarantor or as security, when later filled up to liquidate a debt, can fall within Section 138 NI Act (as recognized by case law)

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellant contends that PW1, the complainant’s Managing Director, was duly authorized to represent the company, as evidenced by Ext.P1 (minutes) and Ext.P2 (resolutions). The accused’s defense that the complainant obtained a blank signed cheque and filled it later does not negate liability under Section 138 NI Act. Ext.P3’s execution is presumed under Sections 118 and 139 NI Act; the cheque was issued to discharge a legally enforceable debt of Rs.36,720 after notice (Ext.P5) failed, so the acquittal was not sustainable. Reliance on the principles in General Auto Sales v. Vijayalakshmi and ICDS Ltd. v. Beena Shabeer supports that a blank or security cheque can still attract Section 138 liability when the debt is quantifiable.

Contentions of Respondents

The respondent/accused argued that PW1’s authority to represent the complainant was not established and that Ext.P3 was not proven to be due execution. The defense emphasized that the cheque may have been blank or signed as security, and that there was no proven legally enforceable debt to discharge. The lower court’s findings, including absence of due execution proof, should be maintained.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
ICDS Ltd. v. Beena Shabeer	2002 (3) KLT 218	Positive	Cited as the apex Court decision underpinning the view that a guarantor’s blank or security cheque can fall under Section 138 when the debt is quantified and the cheque is later presented; supports the presumption under NI Act Sections 118 and 139.
General Auto Sales v. Vijayalakshmi	2005 (1) KLT 478	Positive	Cited for the principle that a cheque given by a guarantor, even if blank, can be used to discharge a liability under Section 138 NI Act; relied on the ICDS decision to apply the presumption.

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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 P.Q.BARKATH ALI THURSDAY, THE 22ND DAY OF MARCH 2012/2ND CHAITHRA 1934 CRL.A.No. 257 of 2002 ( ) ------------------------AGAINST THE ORDER/JUDGMENT IN CRMC.701/2002 DATED 03-04-2002 CC.268/1999 of J.M.F.C.-II,THRISSUR APPELLANT(S)/COMPLAINANT IN C.C.NO.268/99: ----------------------------------------- M/S.PERPECTUAL CHITTIES AND HIRE PURCHASE (P) LTD., THRISSUR, REPRESENTED BY ITS MANAGING DIRECTOR, SHRI.GOPINATHAN NAMBIAR, AGED 53 S/O. MADHAVA KURUP, PONKUNNAM. BY ADV. SRI.VARGHESE C.KURIAKOSE RESPONDENT(S)/ACCUSED & STATE: ------------------------------ 1. E.S.KALIM NAZEELKA MANZIL KALATHODE, - OLLUKKARA VILLAGE,THRISSUR. 2. STATE OF KERALA, REPRESENTED BY PUBLIC - PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM. PUBLIC PROSECUTOR SRI.NOUSHAD THOTTATHIL THIS CRIMINAL APPEAL HAVING BEEN FINALLY HEARD ON 2203-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **P. Q. BARKATH ALI, J.** ## **----------------------------------------------Crl.A. No. 257 of 2002 ------------------------------------------------------Dated this the 22[nd] day of March, 2012** ## **J U D G M E N T** Appellant is the complainant in C.C.No.268/1999 on the file of the Judicial First Class Magistrate-II, Thrissur. The complainant is Perpectual Chitties and hire purchase (P) Ltd., Thrissur represented by its Managing Director, PW1. Complainant filed a complaint under Section 138 of the NI Act before the lower court. The learned Magistrate by the impugned judgment dated October 4, 2001 dismissed the complaint and acquitted the accused. Complainant has now come up in appeal by special leave challenging the said judgment of the lower court. 2. The case of the complainant/company as testified by its Managing Director PW1 before the lower court and as detailed in the complaint in brief is this: Accused was a surety to a subscriber Musthafa, who has priced the chitty and received the amount from the complainant/company. He failed to repay the chitty amount, when complainant/company issued the notice to the accused, he came to the company and gave Ext.P3 cheque dated January 23, 1996 for Rs.36,720/- to discharge that debt. The cheque when presented for collection was returned ## **Crl.A. No. 257 of 2002 2** dishonoured for want of sufficiency of funds in the account of the accused in the bank. In spite of the notice Ext.P5 dated February 6, 1996 demanding the amount. The accused did not repay the amount. Therefore, the complainant filed a complaint before the lower court under Section 138 of NI Act. 3. On receipt of the complaint, the trial court recorded the sworn statement of the complainant and took cognizance of the offence. The accused on appearance before the trial court, pleaded not guilty to a charge under section 138 of the Negotiable Instruments Act. The complainant was examined as PW1 and Exts.P1 to P7 were marked on his side. When the accused was questioned under section 313 Cr.P.C by the learned Magistrate, the accused submitted that when the said Musthafa auctioned the kuri and received the amount accused was called to the company and a blank signed cheque was obtained from him and no amount was due from him to the company. No defence evidence was adduced. 4. The trial court, on an appreciation of evidence, found that PW1 was not authorised to represent the complainant/company and that the complainant has failed to prove the due execution of Ext.P3 cheque and dismissed the ## **Crl.A. No. 257 of 2002 3** complaint and acquitted the accused. The accused has now come up in appeal by special leave challenging the said judgment of the lower court. 5. Heard the learned counsel for the appellant/complainant. Though notice was served on the 1[st] respondents/accused he did not appear. 6. The following points arise for consideration :- - 1) Whether the judgment of the lower court acquitting the accused can be sustained? - 2) Whether the finding of the lower court that PW1 is not competent to represent the complainant/company and that complainant has failed to prove the due execution of Ext.P3 cheque can be sustainable ? - 3) What is the offence committed by the accused ? - 4) In the event of conviction what is the proper punishment ? 7. The main ground on which the learned Magistrate dismissed the complaint was that PW1 the present Managing Director is not competent to represent the complainant/company. For several reasons, I feel that the above finding of the lower court cannot be sustained. It is true, that the complaint was filed the then Managing Director Sri.M.D.Vincent. PW1 is Sri.V.Gopinahtan Nambiar who is one of ## **Crl.A. No. 257 of 2002 4** the Managing Director of the company. The company has elected him as the Managing Director of the company in the meeting held on September 28, 2001, with effect from that date which is proved by Ext.P1, the minutes of the meeting of the committee held on that date. Ext.P2 is the resolution which authorised PW1 to attend for cases and to conduct the cases on behalf of the company. It is clear from the above that PW1 was competent to represent the complainant/company. That apart, accused has not disputed the competency of PW1 to represent the complainant/company. It was not suggested during cross examination of PW1 that he is not competent to represent the complainant/company. Under these circumstances, I set aside the finding of the lower court that PW1 was not competent to represent the company and hold that he is perfectly competent to give evidence on behalf of the complainant/company. 8. The lower court has found that complainant has failed to prove the due execution of Ext.P3 cheque. The specific case of the accused when questioned under Section 313 Cr.P.C and as suggested during cross examination PW1 was that he has given a blank signed cheque to the complainant/company which was filled up by the complainant and created Ext.P3. A Single Bench ## **Crl.A. No. 257 of 2002 5** of this Court in **General Auto Sales v. Vijayalakshmi (2005 (1) KLT 478)** relying on the decision of the apex Court in **ICDS Ltd., v. Beena Shabeer (2002 (3) KLT 218)** has held the cheque given by a guarantor when bounced was found to be within the fold of Section 138 of the NI Act and that even if a blank cheque has been given towards liability or even as security, when the liability is assessed and quantified, if the cheque is filled up and presented to the bank, the person who had drawn the cheque cannot avoid the criminal liability arising out of Section 138 of the NI Act. In the light of the principles laid down in the above cases it has to be presumed as provided under Sections 118 and 139 of NI Act, that Ext.P3 cheque was issued by the accused to discharge legally enforceable liability and he cannot avoid the criminal liability raising out of Section 138 of NI Act. Accused has failed to adduce any evidence to rebut the above presumption. Therefore, I set aside the finding of the lower court that there was no legally enforceable debt or liability and hold that Ext.P3 cheque was issued to discharge a legally enforceable debt. 9. The next question to be considered what is the offence committed by the accused. The evidence of PW1 coupled with ## **Crl.A. No. 257 of 2002 6** Ext.P1 to P7 clearly shows that the accused has issued the cheque Ext.P3 to discharge a liability of Rs.36,720/-, which when presented for collection was returned dishonoured for want of sufficiency of funds in the account of the accused in the bank and that in spite of notice accused did not repay the amount, which is an offence punishable under Section 138 of NI Act. Therefore, I convict him thereunder. 10. As regards the sentence, the transaction is of the year 1996. Therefore, a lenient view is taken. Taking into consideration all these aspects, I feel that a sentence of imprisonment till the rising of court and a compensation of Rs.40,000/- to the complainant with default sentence would meet the ends of justice. In the result, this appeal is allowed. The judgment of the lower court dismissing the complaint and acquitting the accused is set aside. The accused is found guilty of the offence punishable under Section 138 of the NI Act and is convicted thereunder. He is sentenced to undergo imprisonment till the rising of court and to pay a compensation of Rs.40,000/- to the complainant in default undergo simple imprisonment for two months. His bail bonds are cancelled. Two months time is ## **Crl.A. No. 257 of 2002 7** granted for payment of compensation. The accused shall surrender before the trial court on or before April 30, 2012 to suffer the sentence. **P. Q. BARKATH ALI, JUDGE.** pm.