s138 NI Act | Complainant Had No Right Over Property, Misused Cheques Issued To Grandfather: Karnataka High Court Upholds Accused's Acquittal

The Karnataka High Court has dismissed an appeal upon noting that the appellant/complainant under the Negotiable Instruments (NI) Act did not possess any right over the property which had been purchased by the accused using the cheques which were dishonoured.

The Court also found that the appellant had misused the cheques which had been issued by the accused in her grandfather's (H.V.Venkatappa Reddy) name. 

In upholding the acquittal of the accused, a single judge bench of Justice S Rachaiah observed that the property in question was a joint family property and that no right had accrued to the appellant over the property through a partition decree or otherwise.

It held: It is admitted that neither her grandfather nor her maternal uncle has promised her to give [share in the property]. It appears that the cheques said to have been issued as security in respect of the sale transaction of property with Sri.H.V.Venkatappa Reddy have been misused by the complainant.

The complainant claimed that H.V.Venkatappa Reddy, was her grandfather and that she was a member of his joint family.

It was submitted that she was entitled to 1/12th share in the properties of H.V.Venkatappa Reddy. The complainant thus demanded her share in the joint family property and also insisted on a partition. 

When the partition was not effected she filed a civil suit for partition, and the matter ended in compromise, with the share of the complainant in the property being fixed.

Per the said compromise, the complainant argued that an amount of Rs.30 lakhs was to be paid along with six sites measuring 40 x 60 feet in the ancestral property to be transferred to her.

In the meanwhile, the accused who wished to acquire the property, issued three cheques as security.

When those cheques were presented for encashment, it was dishonoured as ‘funds insufficient’, following which the complaint under Section 138 of the NI Act was filed. 

The Trial Court opined that the complainant had proved the guilt of the accused and convicted him.

In the subsequent appeal preferred by the accused, his conviction was set aside on the ground that unless the complainant proved that she had a right over the property purchased by the accused, the amount mentioned in the cheques was not liable to be paid.

In preferring the present appeal, the complainant argued that the Appellate Court had failed to consider the evidence on record or documents in respect of the transaction and as such its verdict required it to be set aside.

It was argued that the complainant had filed a partition suit claiming her share in the properties for which the accused had issued the cheques.

The complainant claimed that the accused issued those cheques in his personal capacity to induce the complainant to record the compromise in her partition suit.

On the other hand, the respondent submitted that the accused had purchased the property in the name of M/s.Shalini Resorts and Hotels Limited from its owners, namely, H.V.Venkatappa Reddy, V.Krishnamurthy, V.Nagaraj and Kodandaram on 26.10.2005.

It was argued that the liability in respect of the cheques in dispute was not proved by the complainant before the Trial Court and that they were issued to H.V.Venkatappa Reddy at the time of the transaction and were misused by the complainant who presented them for encashment.

Upon hearing the parties, the bench noted it is a settled principle of law that there is a presumption under Section 138 of the N.I. Act which protects the drawee from being deceived by the drawer of the cheque.

It held that it was a settled principle of law that once the ingredients of Section 138 of the N.I Act were proved, the mandatory presumptions are required to be raised. In such cases, the burden would lie on the accused to rebut the presumption by leading cogent evidence.

Considering the evidence the Bench noted that the complainant had admitted that she had not made the accused a necessary or proper party to the proceedings.

Further, she had admitted in her cross-examination that she was not informed regarding her share over the property either by her grandfather or by her maternal uncle. It was also admitted that neither her grandfather nor her maternal uncle had promised her "Rs.30 lakhs or six sites.”

On considering the admissions of the complainant in her cross-examination, the Court observed that the cheques had been issued as security in respect of the sale transaction of the property in question, to the appellant's grandfather, and had been misused by her. 

Accordingly, the Court held that on such basis, and because the accused had not been made a party to the partition proceedings initiated by the complainant, the present appeal was liable to be dismissed.

Appearance: Advocate K G Sadashivaiah for Appellant.

Advocate P N Manmohan for Respondent

Citation No: 2023 LiveLaw (Kar) 456

Case Title: Manimala @Roopa AND K Satish Kumar

Case No: CRIMINAL APPEAL NO. 610 OF 2011

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