HONOURABLE SRI JUSTICE SAMUDRALA GOVINDARAJULU CRIMINAL APPEAL NOs.80 & 86 OF 2007 DATE:16.07.2010 Crl.A.No.80 of 2007 Between: M/s.Housing & Urban Development Corporation Ltd., …… Appellant/Complainant And: M/s.Saumya Medicare International Ltd., And others. …..Respondents Crl.A.No.86 of 2007 Between: M/s.Housing & Urban Development Corporation Ltd., …… Appellant/Complainant And: M/s.Saumya Medicare International Ltd., And another. …..Respondents HONOURABLE SRI JUSTICE SAMUDRALA GOVINDARAJULU CRIMINAL APPEAL NOs.80 & 86 OF 2007 COMMON JUDGMENT: 1. These two appeals are filed by the complainant against two judgments dated 17.10.2006 passed by the I Additional Chief Metropolitan Magistrate, Hyderabad in C.C.Nos.3218 of 2005 and 3242 of 2005 respectively acquitting the accused/1st respondent for offence under Section 138 of the Negotiable Instruments Act (in short, the Act). 2. There is no dispute that the complainant/appellant sanctioned loan of Rs.14.00 crores to the accused in respect of which the accused entered into Ex.P-3 loan agreement dated 06.09.1999 with the complainant. At this stage, there is no dispute that as security package for repayment of the loan, the complainant obtained some blank undated signed cheques from the accused. The loan is repayable in quarterly instalments of Rs.25,00,000/- each. While so, alleging that the accused committed default in payment of five instalments, the complainant presented five cheques out the cheques given towards security package for enachment and those five cheques were dishonoured for want of sufficient funds in the account of the accused. Exs.P-4 to P-6 in C.C.No.3218 of 2005 are the dishonoured cheques; and Exs.P-4 and P- 5 are dishonoured cheques in C.C.No.3242 of 2005. After issuing statutory notices and after waiting for the statutory period, the complainant filed two complaints in the lower court against the accused alleging offences punishable under Section 138 of the Act. After trial, the lower court recorded finding of acquittal in both the cases. 3. In these appeals, there is no need to repeat evidence of P.Ws.1 and 2 and D.W.1 who were examined in the lower court, having regard to centre of controversy being limited in these appeals. Two grounds on which the accused was acquitted in these two cases are that there is putting of rubber stamp in the column relating to payee and filling of dates in these five cheques before presentation for encashment by the complainant, and that there is no legally enforceable debt relating to these five cheques. 4. In so far as the plea under Section 87 of the Act is concerned, simply because P.Ws.1 and 2 who are officers of the complainant could not state as to who filled up the cheques and who affixed rubber stamp of the complainant in the column provided for payee on the cheques, one cannot jump to the conclusion that there is material alteration in the cheques. In all the cheques, there is no affixer of rubber stamp of the complainant in the column relating to name of the payee. In Ex.P-5 cheque in C.C.No.3218 of 2008 payee’s name is filled up in hand writing. Under Section 87 of the Act, it is only such material alteration in a Negotiable Instrument, which was made without the consent of the drawer, which is void; but if such alteration was made in order to carry out common intention of the original parties, then even if there is any alteration, the instrument will not become void. When the accused who is loanee gave signed cheques to the complainant in pursuance of Ex.P-3 agreement as a security package, then intention of the parties and particularly that of the accused is to enable the complainant to present such cheques by filling them up in case there is default in repayments as per the repayment schedule. So, it cannot be said that the cheques were filled up by the appellant/complainant without consent of the accused. It was to carry out common intention of both the complainant and the accused, the complainant filled up those blanks in the signed cheque and presented the same for encashment. If it is not permitted to be done by the complainant, then there is no purpose for the complainant in obtaining such signed cheques from the accused openly as per terms Ex.P-3 loan agreement as a measure of security package. This Court finds that the cheques were presented by the complainant in pursuance of and in order to carryout common intention of both the parties. Contention of the 1st respondent’s counsel that before filling up the blank signed cheques, the complainant should have issued notice to the accused and should have obtained consent of the accused for such filling up of blank columns in the signed cheques, is not tenable as such procedure is not contemplated by law much less by Section 87 of the Act. In Assoo Hajee v. K.I.Abdul Latheef[1] the Kerala High Court held that where blank cheque was drawn in favour of the complainant as security for repayment of amount with him become due and when such cheque was filled up after verifying accounts of the complainant with respect to outstanding liability, the accused is guilty of offence punishable under Section 138 of the Act in case such cheque is bounced for want of funds. It was held therein that in those circumstances the complainant must be held to have proved a liability outstanding from the accused. 5. Therefore, it has to be seen herein whether there was any outstanding liability between the complainant and the accused by the time the complainant filled up and presented these five cheques to the banker for payment. There is no dispute that by the dates of presentation of these five cheques, the accused made total repayments to the tune of Rs.7,65,25,553/-. The said amount includes prepayment of Rs.4.00 corores on 21.04.2001 and also prepayment charges of Rs.4.00 crores. There is no dispute that Ex.P-3 agreement provides for prepayment of instalments by the loanee/accused. Main contention of the complainant in these appeals is that as per circular of the complainant/HUDCO, any prepayment made by the loanee should go in discharge of last instalment and not current instalments. The complainant contends that as per circular dated 30.04.1996, prepayment should be adjusted towards final instalments. There is no specific condition in Ex.P-3 agreement to that effect. It is contended by the appellant’s counsel that there is clause No.6.1(j) in Ex.P-3 to the effect that it shall be the borrowers obligation to keep itself acquainted with the rules of the lender in force from time to time. D.W.1 who is Chairman and Managing Director of the accused company who signed in Ex.P-3 agreement on behalf of the accused deposed that he was not aware of the alleged circular dated 30.04.1996 of the complainant. The alleged circular was long prior to Ex.P-3 loan agreement. Nothing prevented the complainant to incorporate term as to appropriation of prepayment from out of final instalments, in Ex.P-3 agreement or atleast, to incorporate particulars of the said circular in Ex.P-3 agreement. The complainant did not file the alleged circular dated 30.04.1996 during trial in the lower court much less did not confront the same to D.W.1. In the absence of the alleged circular before the Court and in the absence of incorporating the said term in Ex.P-3 agreement, now it is not open to the appellant to contend that the complainant is entitled to appropriate prepayment of amounts towards final instalments only and not towards current instalments. If the amount of Rs.4.00 crores paid by the accused on 21.04.2001 is adjusted towards current instalments, then there were no defaults committed by the accused in making repayments as per agreed schedule of repayments. Therefore, the lower court rightly came to the conclusion that there is no supporting debt much less legally enforceable debt for these five cheques in question. In the absence of any default in repayment of the loan amount as per repayment schedule, it cannot be said that there is any existing liability for the accused to honour the cheques which were presented by the complainant for encashment. The lower court rightly found the accused not guilty of the offences under Sections 138 of the Act in both the cases. This Court agrees with the said finding of not guilty and consequential acquittals in these cases. 6. In the result, both the appeals are dismissed. __________________________________ SAMUDRALA GOVINDARAJULU,J. Date:16.07.2010. Gk. HONOURABLE SRI JUSTICE SAMUDRALA GOVINDARAJULU CRIMINAL APPEAL NOs.80 & 86 OF 2007 DATE:16.07.2010 Gk. [1] 2005 CRI.L.J 640