2003 (6) TMI 473 - HC - Indian Laws

Summary

Issues Involved:
1. Issuance of cheque as security or for discharge of legally enforceable debt/liability.
2. Proof of discharge of liability by the accused.
3. Applicability of Section 138 of the Negotiable Instruments Act.
4. Validity of the acquittal judgment by the Magistrate.
5. Appropriate sentence upon conviction under Section 138 of the N.I. Act.

Issue-wise Detailed Analysis:

1. Issuance of Cheque as Security or for Discharge of Legally Enforceable Debt/Liability:
The accused admitted to issuing Ext. P4 cheque but claimed it was handed over as security for a loan of Rs. 1,25,000/- and not for discharging any legally enforceable debt/liability. The Court found that the complainant had proved that the cheque was issued with the understanding that it could be presented if the total amount was not paid by the specified date. The Court concluded that Ext. P4 was issued for the discharge of a legally enforceable debt/liability.

2. Proof of Discharge of Liability by the Accused:
The accused contended that she had paid seven installments totaling Rs. 87,500/- and only Rs. 37,500/- remained unpaid. However, the Court found no substantial evidence supporting the accused's claim of payments made by cash for three installments. The evidence showed that only three payments were made by cheque, and the remaining liability was not discharged.

3. Applicability of Section 138 of the Negotiable Instruments Act:
The Court reiterated that under Section 138 of the N.I. Act, a presumption of liability arises upon the issuance of a cheque. The accused must rebut this presumption by proving that the cheque was not issued for the discharge of any legally enforceable debt/liability. The Court found that the accused failed to rebut this presumption effectively.

4. Validity of the Acquittal Judgment by the Magistrate:
The Court reviewed the Magistrate's judgment and found it grossly erroneous. The Magistrate had concluded that Ext. P4 was issued only as security and not for discharging any debt/liability. The High Court found that this conclusion was not supported by evidence and that the complainant had established the elements required under Section 138 of the N.I. Act.

5. Appropriate Sentence Upon Conviction Under Section 138 of the N.I. Act:
The Court decided not to impose a deterrent substantive sentence of imprisonment. Instead, it sentenced the accused to imprisonment till the rising of the Court and directed her to pay Rs. 87,500/- as compensation under Section 357(3) Cr.P.C., with a default sentence of three months' simple imprisonment if the compensation was not paid.

Conclusion:
The appeal was allowed, the acquittal judgment was set aside, and the respondent/accused was found guilty under Section 138 of the N.I. Act. The accused was sentenced to imprisonment till the rising of the Court and directed to pay compensation, with a default sentence in case of non-payment. The Court emphasized that this direction would not affect the parties' rights to claim amounts due on settlement of accounts. The accused was ordered to appear before the Magistrate for execution of the sentence.