2020 (5) TMI 717 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - discharge of legally enforceable debt or not - rebuttal of presumption - whether the accused-respondent No.1 could rebut the fact in respect of a legally enforceable debt, by deterring presumption under Section 139 of the NI Act? - HELD THAT - From the evidence it appears that after receipt of the demand notice which was delivered on 02.07.2013, the accused-respondent No.1 did not make payment to the complainant. The trial court has clearly observed that the court has condoned the delay that occurred in filing the complaint within one month from the day of expiry of 15 days from the day of receipt of the demand notice. Hence, the trial court has observed that the requirement of Section 138 of the NI Act for convicting any person has been complied but the complainant according to the trial court has failed to prove the existence of legally enforceable debt or liability and no presumption under Section 139 of the NI Act can be drawn. This court finds that sufficient justification has been given by the trial court while drawing inference in respect of financial capacity of the complainant. Even if, the other inference is capable of being drawn, this court, in view of the settled position of law as enunciated by the apex court in CHANDRAPPA AND ORS. VERSUS STATE OF KARNATAKA 2007 (2) TMI 704 - SUPREME COURT should not embark upon to disturb the finding of acquittal recorded by the trial court. In RANGAPPA VERSUS SRI MOHAN 2010 (5) TMI 391 - SUPREME COURT the apex court has clearly held that it is the settled position of law for that rebutting the fact that might lead to the presumption under Section 139 of the NI Act, the standard of proof is of preponderance of probabilities. From the evidence of the complainant it has been shown that the debt, for discharge of which the cheques were issued may not be real, if seen in the light of the financial capacity of the complainant. Thus, in the considered view of this court, the accused-respondent No.1 has discharged his onus by creating a serious doubt in respect of financial capacity of the complainant. This court is not inclined to disturb the finding of the trial court by acquitting the respondent No.1 - Appeal dismissed.

Summary

Issues Involved:
1. Whether the cheques were issued in discharge of a legal debt or liability.
2. Whether the demand notice was sent within the stipulated time.
3. Whether the complainant had the financial capacity to extend the loan.
4. Whether the presumption under Section 139 of the NI Act was appropriately applied.

Detailed Analysis:

Issue 1: Whether the cheques were issued in discharge of a legal debt or liability.

The trial court held that the complainant failed to prove that the accused issued the cheques in discharge of a legal debt or liability. The complainant asserted that the respondent issued two cheques for ?4,00,000/- which were dishonored due to insufficient funds. However, the trial court found that the complainant did not substantiate the claim that the cheques were issued for a legally enforceable debt. The court emphasized the necessity of proving the existence of such a debt or liability for the presumption under Section 139 of the NI Act to apply.

Issue 2: Whether the demand notice was sent within the stipulated time.

The trial court observed that the demand notice was sent by the complainant on 26.06.2013, and the return memo was issued on 23.05.2013. The complainant was informed that the notice was delivered on 02.07.2013. The court noted that the complainant made the demand for payment within 30 days from the date of dishonor of the cheques, thus complying with the statutory requirement under Section 138 of the NI Act.

Issue 3: Whether the complainant had the financial capacity to extend the loan.

The trial court questioned the financial capacity of the complainant to extend a loan of ?4,00,000/-. The complainant's financial status, as revealed during cross-examination, indicated that he ran an auto-rickshaw and had limited financial resources. The court found it improbable that someone of his economic status could have extended such a substantial loan. This doubt about the complainant’s financial capacity contributed to the court's conclusion that the cheques were not issued to discharge a legal debt or liability.

Issue 4: Whether the presumption under Section 139 of the NI Act was appropriately applied.

The trial court did not draw the presumption under Section 139 of the NI Act, which states that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it for the discharge of a debt or liability. The appellate court reviewed precedents, including the Supreme Court's decision in Bir Singh vs. Mukesh Kumar, which emphasized that the onus to rebut the presumption lies on the accused, and the standard of proof is the preponderance of probabilities. The appellate court found that the trial court had provided sufficient justification for its decision and that the accused had successfully rebutted the presumption by creating doubt about the complainant's financial capacity.

Conclusion:

The appellate court upheld the trial court's judgment of acquittal, agreeing that the complainant failed to prove the existence of a legally enforceable debt or liability and that the accused had successfully rebutted the presumption under Section 139 of the NI Act. The appeal was dismissed, and the trial court's findings were not disturbed.