2016 (11) TMI 1706 - HC - Indian Laws

Dishonor of cheque - insufficiency of funds - rebuttal of presumption - existence of debt/liability or not - HELD THAT - It is a settled position of law that the presumption under section 139 of the N.I. Act postulates that whenever a cheque or negotiable instrument is issued in favour of the other side, then the Court can presume that it was issued in discharge of existing liability. It is true that there is no presumption as to the existence of debt or liability and it is to be proved by the complainant before the floor of the Court. This Court on scrutiny of the evidence on record both oral and documentary, considering the judgment of the Trial Court and the First Appellate Court and also the agreement advanced is satisfied that the approach of the First Appellate Court to reverse the order of conviction was not in conformity with the legal position as decided by this Court in NITA KANOI VERSUS PARIDHI AND ORS. 2015 (1) TMI 1471 - CALCUTTA HIGH COURT . This Court is not willing to answer the point as to whether the interest or damages claimed was usurious as it was not a point either before the Trial Court or before the First Appellate Court. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Validity of the cheque issued under Section 138 of the Negotiable Instruments Act, 1881.
2. The presumption under Sections 118 and 139 of the Negotiable Instruments Act.
3. The role of handwriting analysis in determining the validity of the cheque.
4. The impact of the agreement for sale and the earnest money on the case.
5. The legality of the stop payment instruction and its impact on the case.
6. The appropriateness of the sentence imposed by the Trial Court.

Detailed Analysis:

1. Validity of the Cheque Issued under Section 138 of the Negotiable Instruments Act, 1881:
The Trial Court convicted the accused under Section 138 of the Negotiable Instruments Act for issuing a cheque that was dishonored due to insufficient funds. The cheque was issued as a refund for earnest money paid under an agreement for the sale of property. The First Appellate Court reversed this conviction, doubting the authenticity of the cheque due to alleged alterations by the complainant. However, the High Court reinstated the conviction, emphasizing that the cheque was indeed signed by the accused and thus valid under Section 138.

2. The Presumption under Sections 118 and 139 of the Negotiable Instruments Act:
The High Court reiterated the presumption under Sections 118 and 139 of the Negotiable Instruments Act, which assumes that a cheque is issued for the discharge of a debt or liability unless proven otherwise. The accused's failure to provide substantial evidence to rebut this presumption led the High Court to uphold the Trial Court's conviction.

3. The Role of Handwriting Analysis in Determining the Validity of the Cheque:
The First Appellate Court had compared the handwriting on the cheque with other documents and concluded that the complainant had filled in the body of the cheque. The High Court criticized this approach, stating that such comparisons should be left to handwriting experts. The High Court referenced its own decision in Nita Kanoi @ Bansal v. M/s. Paridhi, which held that the drawer of a cheque is liable even if the cheque was partially blank when handed over.

4. The Impact of the Agreement for Sale and the Earnest Money on the Case:
The agreement for sale and the payment of ?1,00,000 as earnest money were central to the case. The accused had issued the cheque as a refund for this amount. The High Court found that the agreement and the earnest money payment were valid and that the cheque was issued to discharge this liability. The accused's claims of the agreement being executed under the influence of alcohol were dismissed due to lack of evidence.

5. The Legality of the Stop Payment Instruction and Its Impact on the Case:
The accused claimed to have instructed the bank to stop payment on the cheque, citing a lost cheque book. However, no evidence was provided to support this claim. The High Court noted that the bank employee (P.W. 2) testified that there were no such instructions from the accused. The High Court concluded that the stop payment instruction was a fabricated defense.

6. The Appropriateness of the Sentence Imposed by the Trial Court:
The Trial Court had sentenced the accused to one year of rigorous imprisonment and imposed a fine of ?2,60,000. The High Court found the imprisonment term excessive and reduced it to three months. The fine was converted into compensation under Section 357(3) of the Code of Criminal Procedure, 1973. The accused was directed to pay the compensation within one month or face additional imprisonment.

Conclusion:
The High Court set aside the First Appellate Court's order of acquittal and restored the Trial Court's conviction. The substantive sentence was reduced to three months of rigorous imprisonment, and the fine was converted to compensation. The accused was directed to comply with the payment order or face further imprisonment. The judgment emphasized the presumption of validity of cheques under the Negotiable Instruments Act and criticized the unauthorized handwriting analysis by the First Appellate Court.