2020 (1) TMI 1373 - HC - Indian Laws

Dishonor of Cheque - insufficient consideration shown in the sale deed - It was specific case of respondent no.2 that cheques were not issued for any legally enforceable debt - HELD THAT - The applicants - original complainant are required to establish that cheques were issued towards remaining payment of sale consideration. The learned Appeal Court in para 12 and 13 has specifically found and observed that sale deed was silent as to issuance of any cheques on the date of execution of sale deed and /or any payment remaining on the date of execution and registration of sale deed in favour of respondent no.2. So in Court's considered opinion, the applicants - original complainants were required to establish that cheques obtained by them were towards legally enforceable debt and in absence of any debt, the cheques obtained or in possession of original complainant would not lead the Court to believe that there is any debt outstanding against respondent no.2. In order to attract penal provision for bouncing of cheques contained in Chapter XVII of the Act, it is essential that dishonour of cheques should have been issued in discharge, wholly or in part of any debt or liability of the drawer to the payee. Strict liability under section 138 of the Act can be enforced only when cheques is issued in discharge of any legally enforceable debt or any other liability. There is no legal obligation on the part of the private respondent to effect clearance of cheques, if it is not issued towards legally enforceable debt or any other liability. Section 139 of the Act merely raises presumption in favour of holder of cheque that same has been issued for discharge of any debt or liability. Existence of legally recoverable debt is not a matter of presumption under section 139 of the Act - In the case on hand, there was no debt or any liability on the part of the private respondent to be discharged as same has been proved by private respondent by submitting sale deed at Exh.49 and Exh.51 before the learned Trial Court, inter-alia, showing that there is no liability on the part of the private respondent to discharge at the time of execution of sale deed, since full consideration was paid to respective applicants herein. Thus, learned Appellate Court rightly found that private respondent discharged burden to prove that cheque in question was not issued for legally enforceable debt or any other liability, in light of sale deed executed and registered by the applicants themselves before the office of Sub Registrar. There are no substance in the present Revision Applications as there is no illegality or impropriety committed by the learned Appellate Court - revision application dismissed.

Summary

Issues:
1. Challenge to the order passed in Criminal Appeal No.27 of 2019 and Criminal Appeal No.26 of 2019 by the Sessions Judge.
2. Conviction under section 138 of the Negotiable Instrument Act.
3. Dispute over the sale of land and dishonored cheques.
4. Conviction reversal by the Appeal Court.
5. Legal enforceability of the debt related to the dishonored cheques.

Analysis:
1. The Revision Applications were filed challenging the order passed by the Sessions Judge in Criminal Appeal No.27 of 2019 and Criminal Appeal No.26 of 2019, seeking to restore the judgments of Criminal Case No.2138 of 2015 and Criminal Case No.2139 of 2015. The private respondent was convicted under section 138 of the Negotiable Instrument Act for dishonoring cheques issued during a land sale transaction.

2. The applicants, engaged in agricultural activities, alleged that the respondent offered to buy their land for ?21 lakhs. The respondent issued cheques worth ?3 lakhs each, but they bounced due to insufficient funds. The Trial Court convicted the respondent, sentencing imprisonment and a fine. However, the Appeal Court reversed this decision, leading to the Revision Applications.

3. The advocate for the applicants argued that the sale consideration was ?21 lakhs, although the sale deed mentioned ?1,80,000, causing confusion due to one applicant's illiteracy. The respondent presented the sale deed showing the lower amount, which was not contested in any court by the applicants, raising doubts about the debt's enforceability related to the dishonored cheques.

4. The Appeal Court observed that the sale deed did not mention any cheques or pending payments, indicating lack of evidence supporting a legally enforceable debt. The Court emphasized that for penal provisions of dishonored cheques to apply, the cheques must discharge a debt or liability. The absence of a legally recoverable debt at the time of issuing the cheques led to the Appeal Court's decision to reverse the conviction.

5. The Court concluded that the respondent had proven through the sale deed that there was no outstanding debt or liability at the time of the cheque issuance, satisfying the burden of proof. As per the legal requirements under section 138 of the Act, the cheques must be issued for a legally enforceable debt, which was not established in this case. Therefore, the Revision Applications were rejected, upholding the Appeal Court's decision to reverse the conviction under section 138 of the Negotiable Instrument Act.