2018 (8) TMI 2153 - HC - Indian Laws

Dishonour of Cheque - acquittal of the Respondent of the offence - appellant failed to bring home proof of the existence of a legally recoverable debt or other liability for which the cheque was issued by the Respondent/Accused - rebuttal of presumption - HELD THAT - Section 138 of the NI Act provides that for a dishonoured cheque the drawer shall be liable for conviction if the demand is not met within 15(fifteen) days of the receipt of notice. If the cheque amount is paid within the above period or before the complaint is filed, the legal liability under Section 138 of the NI Act, ceases. It was argued by the Respondent that the dishonoured cheque by itself does not give rise to cause of action and the Respondent ought to be afforded an opportunity to remedy his error. Perusal of the records nowhere indicates any such effort on the part of the Respondent to have acted in compliance of this provision to prevent prosecution. Despite opportunity afforded to the Respondent during the cross-examination of the Appellant to disprove the Appellant s case, no contrary evidence whatsoever emerged to that effect nor did he testify despite opportunity afforded to him. Section 139 of the NI Act provides that unless the contrary is proved, the Court shall presume that the holder of a cheque received the cheque of the nature referred to in Section 139 for the discharge, in whole or in part of any debt or other liability. It would appear that the presumption under Section 139 of the NI Act is an extension of the presumption under Section 118(a) of the NI Act which provides that the Court shall presume a negotiable instrument to be one for consideration. If the negotiable instrument happens to be a cheque, Section 139 raises a further presumption that the holder of the cheque received the cheque in discharge in whole or in part of any debt or other liability. Having perused the observations of the learned Trial Court, it may be reasoned that obviously there would be no evidence of an oral agreement by simple virtue of the fact that it was an oral agreement. Despite opportunity afforded to the Respondent, the fact of such oral agreement between the parties was not decimated during cross examination. The reasoning that the agreement is void for allegedly being devoid of consideration from the Complainant but was merely a unilateral payment from the Accused is also unclear. Although, the learned Trial Court was of the opinion that there is an existence of presumption under Section 118(a) of the NI Act which can be rebutted, he has failed to indicate how the Respondent has rebutted the presumption. The issuance of Exhibit-1 as already explained leads to the irrevocable conclusion of acceptance of liability. The reasoning of the learned Trial Court that the repayment of Rs.1,00,000/- only, by the Respondent during the pendency of the trial can amount to an evidence of conduct but it would not suffice to raise a presumption under Section 139 of the NI Act does not impress. The Appellant has proved his case - Respondent is convicted of the offence under Section 138 of the NI Act - impugned Judgment is set aside - Appeal allowed.

Summary

Issues Involved:
1. Legally recoverable debt or liability.
2. Service of legal notice.
3. Presumption under Sections 118 and 139 of the NI Act.
4. Rebuttal of presumption by the accused.
5. Evidence of oral agreement and consideration.
6. Issuance of cheque as security.

Issue-Wise Detailed Analysis:

1. Legally Recoverable Debt or Liability:
The primary issue was whether the cheque issued by the Respondent was for a legally recoverable debt or liability. The Appellant claimed the Respondent issued a cheque for Rs.3,00,000/- to return the investment made in the Respondent's business. The trial court acquitted the Respondent, concluding that the Appellant failed to prove the existence of a legally recoverable debt or liability. However, the High Court found that the issuance of the cheque itself provided evidence of acceptance of liability, thereby reversing the trial court's decision.

2. Service of Legal Notice:
The issue of whether the legal notice was properly served was not contested by the Respondent. The trial court applied Section 27 of the General Clauses Act, 1897, and concluded that the notice was served. The High Court found no error in this conclusion.

3. Presumption under Sections 118 and 139 of the NI Act:
Sections 118 and 139 of the NI Act create presumptions in favor of the holder of the cheque. The trial court held that these presumptions were rebuttable and found that the Appellant failed to provide foundational facts to raise these presumptions. However, the High Court disagreed, stating that the issuance of the cheque and the signatures were not denied by the Respondent, thereby raising the presumption of liability under Section 139 of the NI Act.

4. Rebuttal of Presumption by the Accused:
The Respondent argued that the cheque was issued as security and not for encashment. The High Court examined the meaning of "security" and found that the Respondent failed to provide evidence to support this claim. The court emphasized that the burden of proof on the accused is not as high as that of the prosecution but still requires a preponderance of probability, which the Respondent failed to establish.

5. Evidence of Oral Agreement and Consideration:
The trial court found that there was no evidence of the terms of the oral agreement and that the agreement was void for lack of consideration. The High Court countered this by stating that the oral agreement was not decimated during cross-examination and that the issuance of the cheque itself indicated acceptance of liability. The court found the trial court's reasoning on this point to be erroneous.

6. Issuance of Cheque as Security:
The Respondent's claim that the cheque was issued as security was scrutinized. The High Court referred to the definition of "security" and found that the circumstances did not fulfill the ingredients of security. The court concluded that the Respondent failed to establish this defense.

Conclusion:
The High Court allowed the appeal, setting aside the trial court's judgment. The Respondent was convicted under Section 138 of the NI Act and sentenced to simple imprisonment of one month. Additionally, the Respondent was ordered to pay compensation of Rs.2,00,000/- with interest to the Appellant, failing which the trial court was directed to take necessary steps for realization of the amount. The Appellant was instructed to surrender within sixty days, failing which a non-bailable warrant would be issued.