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2013 (7) TMI 1163 - HC - Indian LawsPreponderance of Probabilities - Presumption in favour of Holder u/s 139 of NI Act - Appellant claimed that respondent took loan from him and repaid part of it through cheque, rest of the cheques were dishonoured. Respondent claimed that the cheques were obtained by appellant by force. Respondent was not having balance in account so cheques were dishonoured. Appellant's claims and justifications raised a doubt on the claims of the respondent. - HELD THAT - Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. Initial presumption favours the complainant. Absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. If the respondent is able to raise a probable defence that creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. But in this case, the respondent couldnot prove his defence thus held liable. Decision in the case of - SANJAY MISHRA VERSUS KANISHKA KAPOOR AND ORS. 2009 (2) TMI 901 - BOMBAY HIGH COURT was humbly dissented.
Issues Involved:
1. Legality of the acquittal of the respondent by the Additional Sessions Judge. 2. Validity of the defense raised by the respondent regarding the forced issuance of cheques. 3. Applicability of Sections 269SS and 271D of the Income-tax Act. 4. Presumption of legally enforceable debt under Section 139 of the Negotiable Instruments Act. 5. Impact of non-disclosure of the loan amount in income tax returns on the enforceability of the debt. 6. Standards for setting aside an acquittal in appellate proceedings. Detailed Analysis: 1. Legality of the Acquittal of the Respondent: The appeal challenges the appellate judgment of the Additional Sessions Judge, Mapusa, which set aside the conviction of the respondent under Section 138 of the Negotiable Instruments Act. The learned Magistrate had convicted the respondent for dishonor of cheques and sentenced him to pay compensation of Rs. 4,00,000/- or face imprisonment for one year. The Additional Sessions Judge acquitted the respondent, relying on several judgments and invoking provisions of the Income-tax Act. 2. Validity of the Defense Raised by the Respondent: The respondent claimed that the cheques were issued under duress when the appellant and unknown persons demanded "hafta" (protection money). The respondent alleged that he had already sold his premises and had no need for renovation funds. The trial court, however, found the appellant's claim credible and convicted the respondent. The Additional Sessions Judge found the defense probable, noting inconsistencies in the appellant's financial capability to advance the loan. 3. Applicability of Sections 269SS and 271D of the Income-tax Act: The Additional Sessions Judge invoked Sections 269SS and 271D of the Income-tax Act, which mandate that loans above Rs. 20,000/- must be made via account payee cheque or bank draft. The judge observed that the appellant did not produce books of account to show he had Rs. 2,40,000/- to lend. However, the judgment in Krishna Janardhan Bhat v. Dattatraya G. Hegde, which the Additional Sessions Judge relied upon, was overruled by the Supreme Court in Rangappa v. Sri Mohan, which held that the presumption under Section 139 of the Negotiable Instruments Act includes the existence of a legally enforceable debt. 4. Presumption of Legally Enforceable Debt: The Supreme Court in Rangappa v. Sri Mohan clarified that the presumption under Section 139 of the Negotiable Instruments Act indeed includes the existence of a legally enforceable debt or liability. This presumption is rebuttable, and the accused can contest the existence of such debt. The Additional Sessions Judge's reliance on the overruled judgment in Krishna Janardhan Bhat was thus misplaced. 5. Impact of Non-Disclosure in Income Tax Returns: The Additional Sessions Judge held that the appellant's failure to show the loan amount in his income tax returns rebutted the presumption of a legally enforceable debt. However, the court noted that there is no provision in the Income-tax Act making an undisclosed loan irrecoverable. The judgment in Sanjay Mishra v. Kanishka Kapoor, which held that unaccounted loans are not legally enforceable, was found to be based on the now-overruled Krishna Janardhan Bhat case and thus not binding. 6. Standards for Setting Aside an Acquittal: The court emphasized that an acquittal should only be set aside if it is shown to be perverse or based on untenable evidence. The Additional Sessions Judge's conclusions were found to be unwarranted and based on a misappreciation of evidence, particularly the misapplication of the Income-tax Act provisions. The appellate court's judgment was thus deemed unsustainable. Conclusion: The appeal was allowed, and the judgment of the Additional Sessions Judge was set aside. The conviction of the respondent under Section 138 of the Negotiable Instruments Act was restored. The court emphasized the importance of upholding the presumption of legally enforceable debt under Section 139 and discouraged defenses based on technicalities that undermine the object of the Negotiable Instruments Act. The respondent was given eight weeks to comply with the compensation order, failing which the sentence would be executed.
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