2022 (1) TMI 1285 - HC - Indian Laws

Dishonor of Cheque - legally enforceable debt or not - rebuttal of presumption under Section 139 of the N.I.Act - burden to prove - Power of review - whether this is a case where the Appellate Court is required to exercise the discretion because of miscarriage of justice in case of acquittal, whether it enjoys full power of review evidence? - whether the notice issued is invalid in wake of the part payment made by the respondent as the payment sought is in excess of the amount due? - HELD THAT - The Court is empowered to exercise appellate jurisdiction of reverting judgment and need not send the matter for retrial, by considering the evidence by proper weightage and consideration. In the instant case also, as an Appellate Court, this Court can consider these parameters and arrive at consideration other than what the Trial Court did. What is vital to be considered here is that in a prosecution under the NI Act, once the cheque is dishonoured, demand of notice within a stipulated time period is must and at the time of trial, the statute has provided presumption under the law and concept of reverse burden. In case of MS NARAYANA MENON @ MANI VERSUS STATE OF KERALA ANR. 2006 (7) TMI 576 - SUPREME COURT , the Court considering the issue of presumption under the NI Act held that the Court needs to presume the negotiable instrument for consideration unless existence of consideration is disproved. It has further held that unless, on consideration of matter before it, the Court either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. The Court held that the initial burden of proof is on the accused to rebut the said prosecutions by raising a probable defence. The burden of proof on the accused is not heavy. It need not disprove the prosecution s case in its entirety beyond reasonable doubt. As the essential ingredient of Section 138 are of the drawing of the cheque by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, on presentation of the cheque by the payee or the holder in due course, the return of the cheque unpaid by the drawee of the bank for want of insufficient fund obligates issuance of a written notice to the drawer of the cheque within 15 days. Failure of the drawer to make the payment to the payee would amount to his not having fulfilled the liability of the drawer of the cheque as to the amount of the money and as in the matter on hand, the part payment had already been made, the Trial Court rightly held that the part payment made by the respondent ought to have been reflected in the notice issued by the appellant - In the instant case, as the amount of cheque is higher than the amount which actually was due to the appellant, the Court has chosen to hold that the statutory notice issued for demand of return of cheque was not a valid notice and an omnibus notice for not having recognized the payment made. This appeal deserves no indulgence at the hands of this Court.

Summary

Issues Involved:
1. Legality, validity, and propriety of the trial court's judgment acquitting the respondent under Section 138 of the Negotiable Instruments Act.
2. Whether the cheque was issued for a legally enforceable debt.
3. Validity of the notice issued under Section 138 of the N.I. Act.
4. Whether the respondent had rebutted the presumption under Section 139 of the N.I. Act.
5. Whether additional evidence could be admitted under Section 391 and 482 of the Code of Criminal Procedure.

Issue-wise Detailed Analysis:

1. Legality, Validity, and Propriety of the Trial Court's Judgment:
The appellant challenged the trial court's judgment dated 30.08.2016, which acquitted the respondent for the offence under Section 138 of the N.I. Act. The trial court's acquittal was based on the ground that the cheque was not issued for a legally enforceable debt. The appellant argued that the trial court failed to consider the presumption under Section 139 of the N.I. Act, which was not rebutted by the respondent.

2. Whether the Cheque was Issued for a Legally Enforceable Debt:
The respondent, father-in-law of the appellant's elder son, had borrowed Rs. 20 lakhs from the appellant, promising to repay it within six months. A cheque for Rs. 20 lakhs was issued, which was dishonored due to insufficient funds. The trial court found that the cheque was not issued for a legally enforceable debt, noting that the appellant had received part payments totaling Rs. 4,09,315/- from the respondent. The appellant argued that the presumption under Section 139 of the N.I. Act, which assumes the cheque was issued for a legally enforceable debt, was not rebutted by the respondent.

3. Validity of the Notice Issued under Section 138 of the N.I. Act:
The appellant issued a legal notice demanding payment of Rs. 20 lakhs, without acknowledging the part payments made by the respondent. The trial court held that the notice was invalid as it did not reflect the actual amount due, which was less than Rs. 20 lakhs after accounting for the part payments. The court emphasized that a notice demanding more than the actual amount due is not in conformity with Section 138(b) of the N.I. Act and is therefore invalid.

4. Whether the Respondent had Rebutted the Presumption under Section 139 of the N.I. Act:
The respondent argued that he had rebutted the presumption under Section 139 by proving that he had made part payments totaling Rs. 4,09,315/-, which the appellant accepted. The trial court found that the respondent had successfully rebutted the presumption by providing evidence of these payments. The appellant contended that the trial court erred in its judgment by not considering the presumption under Section 139, which assumes the cheque was issued for a legally enforceable debt unless proven otherwise.

5. Whether Additional Evidence Could be Admitted under Section 391 and 482 of the Code of Criminal Procedure:
During the pendency of the appeal, the respondent requested to adduce additional evidence, specifically a letter correcting a typographical error in the amount due. The High Court allowed the application for additional evidence under Section 391 and 482 of the Code of Criminal Procedure, remanding the case to the trial court for a limited purpose. The trial court was directed to complete the process within eight weeks and send back the entire record to the High Court.

Conclusion:
The High Court upheld the trial court's judgment, emphasizing that the notice issued by the appellant was invalid as it demanded more than the actual amount due. The court reiterated that a valid notice under Section 138(b) of the N.I. Act must specify the correct amount due, and an omnibus notice demanding more than the actual amount is not legally valid. The court also noted that the respondent had successfully rebutted the presumption under Section 139 by providing evidence of part payments. The appeal was dismissed, but the appellant was allowed to pursue other legal recourses for recovering the outstanding amount.