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2021 (2) TMI 505 - SC - Indian Laws


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Issues Involved:
1. Legally enforceable liability under Section 138 of the Negotiable Instruments Act, 1881 (NIA).
2. Reversal of acquittal by the High Court.
3. Presumption under Sections 118 and 139 of the NIA.
4. Compensation to the respondent.

Detailed Analysis:

1. Legally enforceable liability under Section 138 of the NIA:
The appellants challenged their conviction under Section 138 of the NIA, arguing there was no legally enforceable liability on the date of the cheque issuance. They contended that the blank cheques and signed blank stamp papers were misused by the respondent to forge the Deed of Undertaking dated 07.11.2000. The trial court initially acquitted the appellants, finding that the respondent failed to establish a legally enforceable liability. However, the High Court reversed this decision, emphasizing that the appellant had admitted his signatures on the cheque and the Deed of Undertaking, thus acknowledging their liability.

2. Reversal of acquittal by the High Court:
The High Court reversed the trial court’s acquittal, convicting the appellants under Section 138 of the NIA. The High Court noted that the appellant had admitted his signatures, which should have led to a presumption of a legally enforceable debt. The Supreme Court upheld the High Court’s decision, stating that the trial court had committed a patent error of law by not appreciating the statutory presumption under Sections 118 and 139 of the NIA.

3. Presumption under Sections 118 and 139 of the NIA:
The Supreme Court emphasized the statutory presumption under Sections 118 and 139 of the NIA, which mandates that once the signatures on the cheque are established, the burden shifts to the accused to rebut the presumption of a legally enforceable debt. The Court cited various precedents, including Rohitbhai Jivanlal Patel v. State of Gujarat, to elucidate that the trial court erred in questioning the complainant’s evidence instead of focusing on whether the appellants had discharged their burden of proof. The Court held that the appellants’ defense did not meet the standard of “preponderance of probability” and failed to rebut the presumption.

4. Compensation to the respondent:
The respondent sought compensation for the financial loss and adverse impact on his business. The Supreme Court noted that the object of Chapter XVII of the NIA is both punitive and compensatory. However, since the respondent did not seek compensation before the High Court and accepted its judgment, the claim for compensation was impliedly overturned. The Court directed that the respondent is entitled to the cheque amount of ?11.20 lakhs, which the appellants had already deposited with the Registry.

Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court’s conviction of the appellants under Section 138 of the NIA. However, considering the appellants had already deposited the cheque amount, the Court took a lenient view and modified the High Court’s judgment, exempting Appellant No.2 from undergoing the awarded sentence. The Registry was directed to transfer the deposited amount to the respondent within two weeks.

 

 

 

 

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