2021 (3) TMI 1228 - HC - Indian Laws

Dishonor of Cheque - validity of demand notice - full disclosure of the details of the transaction in the notice of demand not made - what constitutes valid consideration - insufficiency of funds - acquittal of accused - HELD THAT - No particular form has been prescribed under the Act with respect to a notice u/s. 138(b) of the Act except that the payee or holder in due course should make a demand for the payment of the amount of money within 30 days from the receipt of intimation from the bank regarding the return of the cheque. The court cannot legislate by prescribing a particular form and cannot require that the nature of the transaction, leading to the issuance of cheque, be disclosed in the notice when the statute does not provide for it. It is also to be noted in this context that the offence u/s. 138 of the Act is an offence which would be attracted on the ingredients referred being satisfied. Facts, circumstances and evidence adduced probabilise the version of the defence that in the year 1993 the accused issued cheque as a financial assistance. There are no hesitation to find that though execution of P1 cheque is proved the accused has successfully rebutted the presumption and it has been established that there was no valid consideration for issuance of the cheque. The accused having succeeded in rebutting the presumption, the burden shifts to the complainant to prove the consideration. In the case at hand apart from producing Ext. P1 cheque, complainant did not produce any document or other evidence to prove consideration. Source of fund though alleged to be his nephew and brother in law of his wife, they were not examined. There is no material produced to prove the alleged business transaction between himself and the accused in Riyad or the business of accused for which he asserted to have advanced loan - this is a case in which the accused rebutted the presumption available under Section 139 of the Act and the complainant miserably failed to prove the consideration for Ext. P1 cheque. The learned Addl. Sessions Judge rightly acquitted the accused. Non disclosure of the nature of the transaction between the parties in the notice is fatal and that the suppression of the particulars of the transaction in the complaint is sufficient to order acquittal is held to be not good law. Appeal dismissed.

Issues Involved:
1. Validity of statutory notice under Section 138 of the Negotiable Instruments Act, 1881.
2. Presumption under Sections 118(a) and 139 of the Negotiable Instruments Act.
3. Compliance with Section 9 of the Foreign Exchange Regulation Act, 1973 (FERA).
4. Burden of proof and rebuttal of presumption in cheque dishonour cases.
5. Impact of non-reply to statutory notice by the accused.

Issue-wise Detailed Analysis:

1. Validity of Statutory Notice:
The court addressed the conflicting opinions in Divakaran v. State of Kerala and Surendra Das B. v. State of Kerala regarding the necessity of detailing the nature of the transaction in the statutory notice under Section 138 of the Negotiable Instruments Act. The court concluded that the omission or error in the notice to state the nature of debt or liability does not render it invalid. It emphasized that no specific form is prescribed under clause (b) of proviso to Section 138 and that the demand for payment within 30 days suffices. The court held that the statutory notice need not disclose the nature of the transaction, aligning with the precedent set in Surendra Das B. v. State of Kerala.

2. Presumption under Sections 118(a) and 139:
The court reiterated that Section 139 of the Act provides a presumption in favor of the holder that the cheque is received for discharge of a debt or other liability unless the contrary is proved. The court found that the presumption under Sections 118(a) and 139 can be rebutted by the accused by raising a probable defense, and the burden then shifts back to the complainant to prove the consideration.

3. Compliance with Section 9 of FERA:
The court examined the accused's contention that the transaction violated Section 9 of FERA, which prohibits residents in India from making payments to or receiving payments from non-residents except through authorized dealers in foreign exchange. The court found that since both the complainant and the accused were in Riyad at the time of the alleged transaction, and the cheque was issued from a non-resident account, the transaction did not violate FERA. The court dismissed the accused's objection regarding the violation of FERA.

4. Burden of Proof and Rebuttal of Presumption:
The court analyzed the evidence and found inconsistencies in the complainant's case regarding the nature of the transaction and the source of funds. The complainant failed to provide consistent and credible evidence to support the claim of a business transaction or loan. The court noted that the accused successfully rebutted the presumption under Section 139 by presenting a plausible defense that the cheque was issued as financial assistance and not for a legally enforceable debt. The complainant's failure to prove the consideration further weakened the case.

5. Impact of Non-reply to Statutory Notice:
The court addressed the complainant's argument that the accused's failure to reply to the statutory notice should be considered a strong circumstance in favor of the complainant. The court referred to the precedent in John K. Abraham, which held that the failure to send a reply cannot be the sole basis to draw a presumption against the accused. The court concluded that the absence of a reply does not automatically validate the complainant's case or invalidate the defense.

Conclusion:
The court resolved the conflict by holding that the omission to state the nature of the transaction in the statutory notice is not fatal to the prosecution under Section 138 of the Negotiable Instruments Act. The court upheld the acquittal of the accused, finding that the complainant failed to prove the consideration and the accused successfully rebutted the presumption under Sections 118(a) and 139. The appeal was dismissed, and the law laid down in Surendra Das B. v. State of Kerala was affirmed as the correct legal position.

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