2015 (1) TMI 1389 - HC - Indian Laws

Existence of a legally enforceable debt or liability - cheque issued earlier were dishonored due to insufficiency of funds - now, the accused claimed that there was no liability on him and the cheque was given to Chit Fund Company as a security, of which the accused was a member - Section 138 of N.I. Act - Held that - Since offence under Section 138 of N.I. Act is a document based technical offence, deemed to have been committed because of dishonour of cheque issued by the accused or his company or his firm, the accused must disclose to the Court as to what is his defence on the very first hearing when the accused appears before the Court. The accused, however, did not disclose their defence at that stage. Thereafter when all the incriminating evidence was put to the accused while recording their statement under Section 313 Cr.P.C. at that time, there was no denial that the cheque in question was signed by them. However, it was alleged that the cheque was not issued against any debt or liability and that the cheque was not issued to the complainant. Service of legal notice was also denied. Accused claimed that he was a member of Chit Fund Company and the cheque in question was given to Chit Fund Company as a security. In order to substantiate this plea, DW1 Rajesh Kumar, employee of Sevarath Chit Fund Pvt. Ltd. was examined and this witness denied that any cheque or payment was received by the Chit Fund from the accused. Since the witness did not support the case of accused, he was cross-examined by the counsel for the accused and in cross-examination, the witness categorically deposed that the company did not take any cheque amounting to ₹ 3 lacs from the accused. He also deposed that cheque Ex.CW1/1 was never taken from the accused - the defence of issuing of the blank signed cheque to the Chit Fund taken by the accused falls to the ground. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While 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 - the accused has failed to raise a probable defence which may create doubts about the existence of a legally enforceable debt or liability. Further prior to the filing of the complaint, after the dishonour of the cheque, statutory notice was served upon the accused persons calling upon them to pay the cheque amount. Service of this legal notice has been denied by the accused in their Statement u/s 313 Cr.P.C. - Although this presumption is rebuttable but mere denial to receive the notice is not sufficient to rebut the presumption. It is for the accused to show that common course of business was interrupted by some supervening circumstances. It is not the case of the accused that the notice was not sent on a correct address or some supervening circumstances existed which prevented ordinary course of business in delivering the notice to the addressee. Moreover, even no suggestion was given to the complainant that legal notice was not served upon the accused. Under the circumstances, it was duly proved by the complainant that on dishonour of cheque, statutory notice was served upon the accused. The accused failed to reply to the statutory notice which leads to the inference that there was merit in the complainant‟s version. The accused did not raise a probable defence. The defence of giving signed cheque to the Chit Fund Company was demolished by the accused‟s own witness DW1- Rajesh - this Court finds that the judgment of acquittal passed by the learned Trial Court is erroneous and perverse and is not sustainable both on facts and in law. Appeal allowed.

Summary

Issues Involved:
1. Validity of the legal notice under Section 138 of the NI Act.
2. Presumption under Section 139 of the NI Act and its rebuttal.
3. Existence of debt or liability.
4. Defense of issuing a blank signed cheque to a Chit Fund.
5. Service of legal notice.

Detailed Analysis:

1. Validity of the Legal Notice:
The respondent's counsel argued that the legal notice was defective because it mentioned "insufficient funds" while the bank's return memo stated "referred to drawer." The court dismissed this argument, noting that the back of the cheque itself indicated "fund insufficient." Therefore, the legal notice was deemed valid.

2. Presumption Under Section 139 of the NI Act and Its Rebuttal:
The court emphasized that Section 139 of the NI Act creates a mandatory presumption in favor of the holder of the cheque, which can only be rebutted by the accused through raising a probable defense. The accused admitted their signatures on the cheques but claimed the cheques were given as security to a Chit Fund Committee. However, their witness, DW1 Rajesh Kumar, did not support this defense, stating that no such cheque was received by the Chit Fund. The court held that the accused failed to rebut the presumption under Section 139 effectively.

3. Existence of Debt or Liability:
The complainant alleged that the cheques were issued to discharge a debt, which the accused denied, claiming no loan was taken from the complainant. The court found that the complainant provided sufficient details during cross-examination, clarifying the loan was given for starting a factory. The accused's failure to provide a plausible rebuttal led the court to accept the existence of a debt or liability.

4. Defense of Issuing a Blank Signed Cheque to a Chit Fund:
The accused claimed the cheques were given blank and signed to a Chit Fund as security. The court rejected this defense since DW1 Rajesh Kumar, an employee of the Chit Fund, denied receiving any such cheque. The court noted that the accused did not provide any evidence to show how the cheques came into the complainant's possession if they were indeed given to the Chit Fund.

5. Service of Legal Notice:
The accused denied receiving the legal notice. The court invoked Section 27 of the General Clauses Act, 1897, which presumes service of notice when properly addressed, prepaid, and posted by registered post. The court found no evidence to rebut this presumption, such as incorrect addressing or interruption in the ordinary course of business. Thus, the court concluded that the legal notice was duly served.

Conclusion:
The court concluded that the accused did not raise a probable defense to rebut the presumption under Section 139 of the NI Act. The defense of issuing a blank signed cheque to the Chit Fund was not substantiated, and the existence of a legally enforceable debt or liability was established. The court found the judgment of acquittal by the learned Trial Court to be erroneous and perverse, setting it aside and finding both accused guilty under Section 138 of the NI Act. The accused were directed to pay Rs. 4,50,000 each within two months or face simple imprisonment for six months.