2017 (9) TMI 2014 - HC - Indian Laws

Dishonour of Cheque - existence of legally enforceable debt or not - failure to apply presumption, as provided under Section 139 of N.I. Act - HELD THAT - Statutory presumptions under Sections 118 and 139 of the N.I. Act, have been duly rebutted by the accused herein not only by bringing out vital admissions during cross-examination of PW 1, but also by stepping into witness box that the cheque was not issued for any alleged debt or liability. The accused herein, in order to disprove the presumption has sufficiently brought on record the facts and circumstances, upon consideration of the same one has to believe that the consideration and the debt did not exist or their non-existence is so probable that a prudent man would under the circumstances of the case act upon the plea that it did not exist. The complainant has failed to bring on record any evidence in the form either Books of Accounts as he has been carrying the business of scrap or returns of Sales Tax or Income Tax in order to substantiate his contention that he had, in fact, delivered scrap worth Rs. 10 lakhs to the accused. In the case at hand the accused has rightly rebutted the presumptions on the basis of complaint, reply to the notice as well as from the cross-examination of the complainant. After having rebutted the presumption, which is acceptable in all the circumstances of the case and on preponderance of probabilities, the burden shifted back to the complainant, which he failed to discharge and there is no question of presumption again under Sections 118 and 139 of N.I. Act, coming to the rescue of the complainant. In the case of RANGAPPA VERSUS SRI MOHAN 2010 (5) TMI 391 - SUPREME COURT , the Hon'ble Supreme Court held that the presumption under Section 139 includes the presumption that there exists legally enforceable debt or liability. Nevertheless, such presumption is rebuttable in nature and it depends on the facts and circumstances of each case. As such, there is no doubt that there is an initial presumption which always favours the complainant. The learned trial Court has thus, considered all the aspects of the case and rightly reached a conclusion that the complainant has failed to prove the case under Section 138 of the N.I. Act and thereby rightly acquitted the accused. The acquittal passed by the trial Court, therefore, cannot be set aside without any sound and sufficient ground. It is a settled law that if two views are possible, then a view which supports acquittal of the accused should not be interfered with lightly. There is no substance in the appeal. The impugned judgment does not call for any interference and, therefore, the appeal stands dismissed.

Summary

Issues Involved:
1. Application of presumption under Section 139 of the Negotiable Instruments Act.
2. Existence of a legally enforceable debt or liability.
3. Evidentiary support and burden of proof.
4. Rebuttal of statutory presumptions under Sections 118 and 139 of the N.I. Act.
5. Validity of the acquittal judgment by the trial court.

Detailed Analysis:

1. Application of Presumption under Section 139 of the Negotiable Instruments Act:
The complainant argued that the trial judge failed to apply the presumption under Section 139 of the N.I. Act, which assumes that the cheque was issued for the discharge of a debt or liability. The accused admitted issuing the cheques but claimed they were given as an advance for a service that the complainant failed to perform. The court noted that the presumption under Section 139 is rebuttable and depends on the facts and circumstances of each case.

2. Existence of a Legally Enforceable Debt or Liability:
The complainant alleged that the cheques were issued for the purchase of scrap material worth Rs. 10 lakhs. However, the accused contended that there was no contract for the purchase of goods and that the cheques were issued as an advance for cutting and lifting machinery, which the complainant failed to accomplish. The court found no evidence of the delivery of scrap material or any written agreement supporting the complainant's claim of a sale.

3. Evidentiary Support and Burden of Proof:
The court observed that the complainant failed to provide any documentary evidence, such as delivery challans, bills, or tax returns, to substantiate the delivery of scrap material. The complainant admitted in cross-examination that he did not have any proof of the transaction. The court emphasized that in the absence of such evidence, it is difficult to believe that a businessman would supply material worth Rs. 10 lakhs without proper documentation.

4. Rebuttal of Statutory Presumptions under Sections 118 and 139 of the N.I. Act:
The court noted that the accused successfully rebutted the presumptions under Sections 118 and 139 by providing evidence that the cheques were issued as an advance for a service that was not performed. The accused's defense was supported by the lack of documentary evidence from the complainant and the inconsistencies in the complainant's statements. The court cited the Supreme Court's judgment in M/s Indus Airways Pvt. Ltd. & Ors. Vs. M/s. Magnum Aviation Pvt. Ltd. And Anr., which held that a cheque issued as an advance payment does not constitute an existing debt or liability.

5. Validity of the Acquittal Judgment by the Trial Court:
The court upheld the trial court's judgment of acquittal, stating that the complainant failed to prove the case beyond reasonable doubt. It emphasized that if two views are possible, the one favoring the acquittal should be preferred. The court referenced the case of John K. Abraham Vs. Simon C. Abrahim & another, highlighting that the complainant's lack of evidence and inconsistencies in his statements justified the trial court's decision.

Conclusion:
The appeal was dismissed, and the trial court's judgment of acquittal was upheld. The court concluded that the complainant failed to prove the existence of a legally enforceable debt or liability and did not provide sufficient evidence to support his claims. The accused successfully rebutted the statutory presumptions, and the complainant did not discharge the burden of proof that shifted back to him.