2006 (10) TMI 511 - HC - Indian Laws

Summary

Issues Involved:
1. Legally enforceable debt and liability.
2. Responsibility of company directors.
3. Applicability of Money Lenders Act.
4. Quantum of fine and compensation.

Summary:

1. Legally enforceable debt and liability:
The petitioners argued that there was no legally enforceable debt to be discharged and that the complainant failed to produce sufficient evidence to prove the amount due. They contended that the presumption u/s 20 and 118 of the Negotiable Instruments Act was rebutted due to suspicious circumstances. The court, however, upheld the concurrent findings of the lower courts, stating that as per Section 118 & 139 of the Negotiable Instruments Act, the cheque was presumed to have been issued for discharging a debt or liability, and this presumption could only be rebutted by the accused through cogent evidence, which was not provided.

2. Responsibility of company directors:
The petitioners, who were the Chairman and a Director of the accused company, claimed they were not responsible for the day-to-day affairs of the company. The court noted that the petitioners had signed resolutions passed by the company, indicating their involvement in the company's affairs. The court found that the petitioners were indeed responsible for the conduct of the business of the company, as evidenced by the documents and the overall reading of the complaint.

3. Applicability of Money Lenders Act:
The petitioners argued that the complainant was a money lender without a license, making the debt unenforceable. The court held that the complainant could not be considered a money lender based on a single transaction and that the Money Lenders Act did not apply in this case. It was noted that the complainant was exercising special powers under the Negotiable Instruments Act, which is quasi-civil and criminal in nature, rather than filing a suit for recovery of money.

4. Quantum of fine and compensation:
The trial court had sentenced the accused to pay a fine of Rs. 34,65,000, with Rs. 34,40,000 to be paid as compensation to the complainant. The High Court found no illegality in the conviction but modified the order of sentence. The fine was reduced to Rs. 28,25,000, with Rs. 23,000 towards fine and the remaining amount as compensation to the complainant. The amount of Rs. 10 lakhs deposited before the trial court by the petitioners was ordered to be released in favor of the respondent. The petition was allowed in part.