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2015 (10) TMI 2835 - HC - Indian LawsDishonour of Cheque - insufficiency of funds - legally enforceable debt - rebuttal of presumption - acquittal of accused - mandatory presumption of law under Section 118 and 139 of the NI Act - Burden to prove - HELD THAT - Once the payment was not found to have been made on execution of agreement, the execution of promissory note on the same day i.e. 16.09.2008 (Ex. CW1/B) also became operative only on the contingency of the loan having being advanced. The Appellate Court, therefore, was of the view that the agreement was executed without any actual transfer of money. The printed proforma which contained the signature and the thumb print of the respondent were filled up with two different inks - in the absence of any proof of the amount of loan to have been paid, the promissory note and the agreement referred above lost all its efficacy and force. A promise for no consideration is a void agreement. Under Section 139 of NI Act, unless the contrary is proved, the holder of the cheque shall be presumed to have received the cheque in discharge of any debt or liability - Sub-clause (a) of Section 118 of the NI Act, inter-alia, provides that unless the contrary is proved, the drawn up negotiable instrument, if accepted, has to be presumed to be for consideration. In GOAPLAST (P.) LTD. VERSUS CHICO URSULA D SOUZA 2003 (3) TMI 533 - SUPREME COURT , the Supreme Court has held that that the provisions of section 138 to 142 of the NI Act, is for the purpose of giving credibility to negotiable instruments in business transactions. In view of section 139 of the NI Act, it had to be presumed that a cheque is always issued in discharge of any debt or other liability. The presumption could be rebutted by adducing evidence and the burden of proof is on the person who wants to rebut the presumption. In RANGAPPA VERSUS SRI MOHAN 2010 (5) TMI 391 - SUPREME COURT , section 139 of the NI Act is stated to be an example of a reverse onus clause which is in tune with the legislative intent of improving the credibility of negotiable instruments. Section 138 of the NI Act provides for speedy remedy in a criminal forum, in relation to dishonour of cheques. Nonetheless, the Supreme Court cautions that the offence under Section 138 of the NI Act is at best a regulatory offence and largely falls in the arena of a civil wrong and therefore the test of proportionality ought to guide the interpretation of the reverse onus clause. An accused may not be expected to discharge an unduly high standard of proof. A reverse onus clause requires the accused to raise a probable defence for creating doubt about the existence of a legally enforceable debt or liability for thwarting the prosecution. The standard of proof for doing so would necessarily be on the basis of preponderance of probabilities and not beyond shadow of any doubt . Thus, on an analysis of fact, the scale of balance tills in favour of the respondent. The respondent appears to have rebutted the presumption under Section 139 of the NI Act, namely, the existence of a legally enforceable debt by establishing that no loan was advanced to him even though there was an agreement and a corresponding promissory note and an affidavit. The aforesaid loan was not shown in the ITR return of the petitioner. An adverse inference could be drawn against the petitioner on that account. The loan amount also appears to be doubtful. Section 378(4) of the Cr.P.C. would apply not only to an original order of acquittal in a case of complaint but also to an order of acquittal passed by the Sessions Court in appeal. There is nothing in Section 378(4) of the Cr. P.C. to limit its application only to the order of acquittal passed in the first instance by the Trial Court - Sub-Clause (4) of Section 401 of Cr.P.C. provides that when an appeal is provided for and no such appeal is filed, no proceeding by way of revision shall be entertained at the instance of the party, who could have appealed. Sub-clause 5, however, permits the High Court on its satisfaction about the interest of justice to treat the application of revision as petition of appeal and deal with the same accordingly. The successful rebuttal of the presumption under Section 139 of the NI Act of any legally enforceable debt, and the petitioner failing in discharging his onus, in the second instance, the petition is dismissed - The respondent no. 2 stands acquitted.
Issues Involved:
1. Legally enforceable debt under Section 138 of the NI Act. 2. Evidence and documentation supporting the loan. 3. Presumption under Sections 118 and 139 of the NI Act. 4. Maintainability of revision petition under Sections 378(4) and 401(4) of the Cr.P.C. 5. Sentence imposed by the Trial Court. Issue-wise Detailed Analysis: 1. Legally enforceable debt under Section 138 of the NI Act: The petitioner alleged that the respondent was convicted under Section 138 of the NI Act for dishonoring a cheque of Rs. 1.50 lacs. The Trial Court found that the respondent had issued a cheque which was dishonored due to insufficient funds, leading to the conviction and sentencing of the respondent to five months of simple imprisonment and a fine of Rs. 3 lacs. However, the Appellate Court overturned this conviction, questioning the existence of a legally enforceable debt. 2. Evidence and documentation supporting the loan: The petitioner provided an agreement (Ex.CW1/A), a promissory note (Ex.CW1/B), and an affidavit (Ex.CW1/C) to support the loan claim of Rs. 1.40 lacs. The Appellate Court noted that the agreement did not acknowledge the disbursement of the loan amount and was not signed by any witness. The agreement was on plain paper instead of the required stamp paper, making it legally unenforceable. Consequently, the promissory note and affidavit also lost their efficacy due to the lack of proof of loan disbursement. 3. Presumption under Sections 118 and 139 of the NI Act: Sections 118 and 139 of the NI Act create a presumption in favor of the holder of the cheque regarding the existence of a legally enforceable debt. The Trial Court relied on this presumption to convict the respondent. However, the Appellate Court found that the respondent successfully rebutted this presumption by establishing that no loan was advanced. The petitioner failed to disclose the loan in his Income Tax Returns, leading to an adverse inference against him. The respondent's legal notice and civil suit further supported his claim of no enforceable debt. 4. Maintainability of revision petition under Sections 378(4) and 401(4) of the Cr.P.C.: The Court examined the maintainability of the revision petition against the Appellate Court's acquittal order. Section 378(4) of the Cr.P.C. allows for an appeal against an acquittal in complaint cases, but only with special leave from the High Court. The Court noted that Section 401(4) of the Cr.P.C. prohibits revision proceedings when an appeal is possible but not filed. Given the petition has been entertained since 2012, the Court opted to treat the revision petition as an appeal in the interest of justice, despite the procedural complexities. 5. Sentence imposed by the Trial Court: The Appellate Court also questioned the sentence imposed by the Trial Court, noting that under Section 262 of the Cr.P.C., a summary trial cannot result in a sentence exceeding three months. However, the Court clarified that Section 143 of the NI Act allows for a sentence of up to one year in summary trials, subject to certain conditions. Despite this, the focus remained on the existence of a legally enforceable debt, which the respondent successfully contested. Conclusion: The Court dismissed the petition, affirming the Appellate Court's judgment and order dated 12.09.2012, which acquitted the respondent. The respondent successfully rebutted the presumption of a legally enforceable debt under Section 139 of the NI Act, and the petitioner failed to discharge his onus to prove the existence of such a debt. The respondent was acquitted, and the Appellate Court's decision was upheld.
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