- 1 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF FEBRUARY, 2025 BEFORE THE HON'BLE MR JUSTICE SHIVASHANKAR AMARANNAVAR CRIMINAL APPEAL NO. 1221 OF 2015 BETWEEN: SRI. K.B. LAXMIKANTH S/O LATE SRI BOREGOWDA AGED ABOUT 53 YEARS MS BOREGOWDA COMPLEX VIRAJPET - 571 218 …APPELLANT (BY SRI. RAMESH P. KULKARNI, ADVOCATE) AND: SMT. SHAMANTAKAMANI D/O MR. RANGADAS AGED ABOUT 56 YEARS NO.4, KEERTANA FARM NEAR VARUNANALA CHANNEL OLD KESARE, K R MILL MYSORE - 570 001 …RESPONDENT (BY SRI. KRISHNAMURTHY G. HASYAGAR, ADV. – [VC]) THIS CRL.A. IS FILED U/S.378(4) CR.P.C PRAYING TO SET ASIDE THE JUDGEMENT AND ORDER DATED 25.7.2015 PASSED BY THE CIVIL JUDGE AND J.M.F.C, VIRAJPET IN C.C.NO. 652/2012 - ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE P/U/S 138 OF N.I ACT. THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: Digitally signed by HEMAVATHY GANGABYRAPPA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 CORAM: HON'BLE MR JUSTICE SHIVASHANKAR AMARANNAVAR ORAL JUDGMENT This appeal is filed by the complainant challenging the judgment of acquittal dated 25.07.2015 passed in C.C.No.652/2012 by the Civil Judge and J.M.F.C., at Virajpet, whereunder the respondent – accused has been acquitted for offence under Section 138 of Negotiable Instruments Act, 1881. 2. The brief facts of the complainant’s case are as under: The complainant is acquainted with the husband of the accused at K.R. Nagar for the past few years. The accused is the owner of Atithi Aradhana resort situated at Keerthana farm, Old Kesare, K.R.Mill, Mysore running lodging, bar and restaurant. The complainant was doing a business of lodging and bar at Virajpet. The complainant and accused entered into a lease agreement on - 3 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 29.05.2010 and as per terms of the said lease agreement, the complainant had paid a sum of Rs.8,00,000/- as security deposit and agreed to pay daily rent of Rs.6,000/-. The complainant was permitted to add the required furniture at his own cost with the consent of the accused and complainant has to furnish the details of expenditure incurred to the accused and accused after expiry of the lease period shall compensate the complainant. The complainant has carried out the business in the leased premises and also renovate the premises by incurring Rs.6,07,000/- which was due to be paid by the accused. The complainant carried out the business in a leased premise from June 2010 and due to poor business requested the accused to cancel the lease and cancellation agreement was entered on 14.12.2010. As per this agreement, the accused agreed to refund the security deposit of Rs.8,00,000/- and issued five cheques bearing Nos.465401 to 465405 dated 25.05.2011 to 29.05.2011 for a sum of Rs.1,60,000/- each drawn on Vijaya Bank, Sayyaji Rao Road, Mysore branch. Then, the - 4 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 complainant in the month of May 2011, when he suppose to present the said cheques, the accused requested for extension of time for three months. Therefore, the complainant presented the said cheques on 24.10.2011 through his banker Canara Bank, Virajpet and those cheques were returned with an endorsement as ‘insufficient funds’ on 26.10.2011. The complainant got issued legal notice on 03.11.2011 and it was served on the respondent – accused on 04.11.2011 for which the accused sent a reply. The claim of the accused in reply notice alleging that a settlement was made on 05.06.2011 through their well wishers and friends and a settlement was arrived for Rs.6,07,000/- after deduction of rent and have received Rs.5,00,000/- and the complainant had written shara in kannada acknowledging the same is false. The said amount has nothing to do with the cheque issued and same was towards renovation, fixtures and fittings made to the leased premises. The complainant filed a private complaint against the respondent – accused for offence under Section 138 of the N.I. Act. The learned - 5 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 Magistrate has taken cognizance and registered C.C.No.652/2012 for offence under Section 138 of the N.I. Act. The complainant in order to prove his case has examined himself as PW.1 and got marked Exs.P1to P15. The complainant also examined one witness PW.2 and got marked Exs.P16 to P18 - bills. The statement of the accused has been recorded under Section 313 of Cr.P.C. The accused got examined one witness as DW1 and got marked Exs.D1 and D2. The said exhibits are marked in the cross-examination of PW.1. The learned Magistrate after hearing arguments on both sides has passed the impugned judgment of acquittal. The said judgment of acquittal has been challenged by the appellant – complainant in this appeal. 3. Heard the learned counsel for the appellant and the learned counsel for the respondent. - 6 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 4. Learned counsel for the appellant would contend that the respondent – accused has admitted his signatures on five cheques - Exs.P1 to P5 and also admitted that they are issued towards payment of security deposit under lease cancellation deed dated 14.12.2010. The respondent – accused has agreed to honour the said cheques and the details of those cheques are stated in Ex.D2 - cancellation of lease agreement deed. He further submits that the endorsement made on the last page of Ex.D2 which is at Ex.D2(a) is with regard to the amount of renovation done by the complainant in the leased premises and it has nothing to do with the refund of the security deposit. He contend that security deposit is Rs.8,00,000/- and renovation charge is Rs. 6,07,000/-. The evidence of PW.2 established that complainant got done renovation work for Rs.6,07,000/-. The respondent - accused has not denied the complainant getting renovation work done in the leased premises. He further submits that in lease agreement - Ex.D1, there is a clause that the - 7 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 respondent – accused i.e., lessor has to compensate to lessee i.e., complainant regarding additional expenditure incurred towards the extra or additional furniture, fittings and fixtures. He further submits that the respondent – accused has not entered the witness box to suppress the real aspects. The evidence on record will establish that the five cheques have been issued for making payment of security deposit of Rs.8,00,000/- and they are dishonoured and therefore, the respondent - accused has committed offence under Section 138 of the N.I. Act. Without considering these aspects, the learned Magistrate has swade away by the endorsement on Ex.D2 and erred in passing the impugned judgment of acquittal. With this, he prayed to allow the appeal and convict the respondent - accused for offence under Section 138 of the NI Act. 5. Learned counsel for the respondent would contend that after receipt of legal notice, the respondent – - 8 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 accused has got issued reply to the said legal notice as per Ex.P12, wherein in paragraph No.5, he has taken specific decision of she having paid Rs.5,00,000/- towards security deposit and agreed to pay remaining amount of Rs.1,07,000/- as per settlement arrived at in the presence of well-wishers and friends. The said defense has been put to the PW.1 in the cross-examination who has admitted regarding he making endorsement on the back of Ex.D2 as per Ex.D2(a). Considering the said endorsement as per Ex.D2(a), the learned Magistrate has rightly held that the cheques are not issued for discharge of the liability and rightly acquitted the respondent - accused by a reasoned judgment. With this, he prayed to dismiss the appeal. The learned counsel for the respondent further submits that there is no reference to renovation charges in notice - Ex.P11 got issued by the appellant - complainant. - 9 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 6. Having heard the learned counsels, the Court has perused the impugned judgment and Trial court records. 7. Considering the grounds urged, the following point arises for consideration: "Whether the learned Magistrate has erred in acquitting the respondent - accused for offence under Section 138 of the N.I. Act?" 8. My answer to the above point is in Affirmative for the following reasons: 9. It is not in dispute that the respondent is a lessor and the appellant - complainant is a lessee of the bar and restaurant by name Atithi Aradhana resort under agreement of lease dated 29.05.2010. It is also not in dispute that complainant / lessee has paid security deposit of Rs.8,00,000/- and the same is mentioned in Ex.D1 - agreement of lease. It is also not in dispute that there was - 10 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 cancellation of the said lease agreement by cancellation deed dated 14.12.2010. The copy of which is at Ex.D2. It is also not in dispute that under cancellation deed - Ex.D2, the respondent - accused has agreed to repay secutity deposit of Rs.8,00,000/- to the appellant - complainant and issued five cheques of Rs.1,60,000/- each. The liability of the respondent - accused to repay the security deposit of Rs.8,00,000/- has been established as per the terms of cancellation of lease deed dated 14.12.2010 which is at Ex.D2. Exs.P1 to P5 are the said five cheques, which are mentioned in Ex.D2 - cancellation deed issued towards repayment of security deposit to the complainant by the accused. 10. It is the specific defense of respondent accused in Ex.P12 - reply notice that there was settlement of the matter through well wishers and friends and as per that settlement, she has paid Rs.5,00,000/- and agreed to pay remaining Rs.1,07,000/- and there is a shara written by the complainant on cancellation deed dated 14.12.2010. - 11 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 The said cancellation deed - Ex.D2 contains shara that Rs.5,00,000/- is paid by the accused to the complainant on 05.06.2011 and agreed to pay balance of Rs.1,07,000/- in due course to the complainant. The said shara is marked at Ex.D2(a). It is the contention of the complainant that the said amount of Rs.5,00,000/- plus Rs.1,07,000/- is towards renovation charges got done by the complainant. PW.2 is a witness examined on behalf of the complainant, he has deposed regarding he has done the work of renovation in the leased premises amounting to Rs.6,07,000/-. There is no suggestion to PW.2 regarding not doing any renovation work in the leased premises at the expenses of the complainant. Even there is no suggestion in cross-examination of PW.1 that the complainant had not got done any renovation work worth Rs.6,07,000/-. Under lease agreement - Ex.D1, clause 7, reads thus: "7. It is also agreed between the parties to this agreement that the Lessees are at liberty to make any renovation, alteration etc., which may - 12 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 absolutely be required to do in the schedule premises to carry on the business smoothly. The lessees may add the required furniture, fixtures, fittings etc., at his own cost with the consent of the lessor. The lessees shall furnish the details of such expenditure incurred to the lessor. On the expiry of the lease period the lessor shall compensate the lessee on such additional expenditure incurred towards the extra or additional furniture, fittings and fixtures." 11. As per the above said clause, complainant - lessee is at liberty to renovate and alter the premises at his own cost by putting up furniture, fixtures, fittings etc., and on the expiry of the lease period, the lessor shall compensate the lessee on such additional expenditure incurred towards the extra or additional furniture, fittings and fixtures. The respondent - accused has not disputed that complainant - lessee having got done at his expenses the said renovation work by PW.2. The evidence of PW.2 will establish that he has done the renovation and alteration work in the leased premises at the request of - 13 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 the complainant worth Rs.6,07,000/-. The accused has not entered the witness box to put forth her defence regarding the settlement of security deposit in a sum of Rs.6,07,000/- in the presence of well-wishers and friends. The accused has also not examined his friends and well- wishers who were present at the time of settlement. DW.1, who is witness to the endorsement Ex.D2(a) and signed as per Ex.D2(c) has deposed that out of Rs.8,00,000/- to be paid by the accused to the complainant, a sum of Rs.5,00,000/- is paid on the date of cancellation deed and remaining amount of Rs.1,93,000/- has been adjusted towards arrears of the rent and remaining amount is paid through one cheque. The said averments are not forthcoming in Ex.D2. The said DW.1 is not witness to Ex.D2 - cancellation deed and witnesses which have signed as witness Nos.1 and 2 are difference persons. What PW.2 is stated in cross-examination is that out of Rs.6,07,000/- which is due has been paid by cash in a sum of Rs.5,00,000/- and for remaining amount, the cheque has been issued. The evidence of DW.1 does not - 14 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 establish that what is paid in a sum of Rs.5,00,000/- by cash is towards security deposit. 12. Learned counsel for the respondent contended that the endorsement - Ex.D2(a) contains the term 'mungada hana' that is advance amount. 13. Learned counsel for the appellant contends that the term 'mungada hana' has been written by mistake. The total security deposit amount agreed to be paid under Ex.D2 - cancellation deed is Rs.8,00,000/- and for making payment of the same five cheques which are at Exs.P1 to P5 are issued. The respondent - accused has not placed on record that the payment of Rs.8,00,000/- has been settled for Rs.6,07,000/- and considering the same, the endorsement Ex.D2(a) appears to be not towards repayment of the security amount. Therefore, the respondent - accused has failed to establish that he has paid part of security amount and there was settlement for payment of security amount for Rs.6,07,000/- as against - 15 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 Rs.8,00,000/-. Therefore, the defence put forth by the respondent - accused appears to be not true. Considering the contents of the Exs.D1 and D2 and the cheques - Ex.P1 to P5, the appellant - complainant has established that the said cheques are issued for making payment of security deposit. The said cheques are dishonoured for want of funds. The complainant has issued legal notice within a statutory period. The respondent - accused has not paid the amount of the said five cheques, within the statutory period. The appellant - complainant represented the complaint within statutory period. 14. Considering all these aspects, the learned Magistrate ought to have convicted the respondent - accused for offence under Section 138 of the N.I. Act. The appellant - complainant has made out case for setting aside the impugned judgment of acquittal and to convict the respondent - accused for offence under Section 138 of the N.I. Act. In the result, the following: - 16 - NC: 2025:KHC:7076 CRL.A No. 1221 of 2015 ORDER i) The appeal is allowed; ii) The impugned judgment dated 25.07.2015 passed in C.C.No.652/2012 by the Civil Judge and J.M.F.C., Virajpet is set aside; iii) The respondent - accused is convicted for offence under Section 138 of the N.I. Act and she is sentenced to pay fine of Rs.8,10,000/- (Rupees Eight Lakhs ten thousand only) and in default of payment of the said fine amount to undergo simple imprisonment for six months; iv) Out of the fine amount, a sum of Rs.8,00,000/- (Rupees Eight Lakhs only) is ordered to be paid as compensation to the appellant - complainant. The respondent - accused shall deposit the said fine amount, within two months from this day. Sd/- (SHIVASHANKAR AMARANNAVAR) JUDGE KG List No.: 1 Sl No.: 61