2017 (2) TMI 413 - HC - Indian Laws

Offence under Section 138 NI Act - Cheque bounce - Held that - The cheque has been signed by the accused is not denied by the accused. This itself raises a presumption against the accused under Section 139 of Negotiable Instruments Act that the cheque had been issued in respect of an outstanding debt or for consideration. The accused had claimed in his defence that the said cheque had been delivered to one Manoj Kumar from whom he had taken a loan, which he had repaid. The accused claimed that the cheque was not returned by Manoj Kumar to him and that Manoj Kumar who was also known to the complainant, had delivered the cheque to the complainant for it being misused. The same story was adopted in respect of Ex CW-1/1 and Ex. CW-1/2. In the present case, the initial burden was on the accused to probablise his defence. It was for the accused to establish upon preponderance of probabilities, his defence that he had taken a loan from Manoj Kumar in respect whereof the cheque had been issued. However, the accused did not produce the so-called Manoj Kumar to establish his loan transaction with Manoj Kumar, and also to establish that he had delivered the cheque in question to Manoj Kumar. No document evidencing the alleged loan transaction with Manoj Kumar was produced by the accused. He did not produce his own accounts / ITR to show that he had reflected the so called loan taken by him from Manoj Kumar in his books. The statement of the accused is as vague, as could be. He gives no particulars of the amount of loan taken from Manoj Kumar; the date of the said loan transaction; the manner in which it was taken i.e. whether in cash or through cheque; the dates(s) of its repayment, and; the manner of its repayment i.e. whether in cash or through cheque. Though the accused claimed that he had repaid the loan to Manoj Kumar, no document evidencing repayment of the loan was produced. The accused also did not explain as to why the cheque allegedly given to Manoj Kumar was, firstly, given in blank i.e. without name and, secondly, why it was not taken back at the time of repayment of the loan to Manoj Kumar. No notice or communication was issued by the accused to Manoj Kumar, recording that the loan had been repaid but the cheque not returned. The accused also did not stop payment of the said cheque by issuing any communication to his bank contemporaneously. The stand taken by the accused that documents Ex CW-1/1 and CW-1/2 had been given to Manoj Kumar is also completely belied by a perusal of the said documents. Both these documents have been executed in favour of, and by reflecting the name of the complainant Mukesh Kumar, and not Manoj Kumar. Had the loan been taken from Manoj Kumar and the said document executed and delivered, the same would have been delivered in the name of Manoj Kumar and not Mukesh Kumar. Thus, the stand taken by the accused in his defence with regard to issuance of the cheque to secure a loan taken from Manoj Kumar, was not at all probabalised. For all the aforesaid reasons, the impugned judgment is set aside and, since all the ingredients of the offence under Section 138 NI Act are established in the present case, the respondent/ accused is convicted of the offence under Section 138 of Negotiable Instruments Act.

Summary

Issues Involved:
1. Acquittal of the respondent/accused under Section 138 of the Negotiable Instruments Act.
2. Financial capacity of the complainant to advance the loan.
3. Authenticity and execution of the Memorandum of Settlement (MOS), receipt, and promissory note.
4. Presumption under Section 139 of the Negotiable Instruments Act.
5. Defense of the accused regarding the loan from Manoj Kumar and the misuse of the cheque.

Detailed Analysis:

1. Acquittal of the respondent/accused under Section 138 of the Negotiable Instruments Act:
The appeal was directed against the judgment dated 28.04.2015, where the respondent/accused was acquitted of the offence under Section 138 of the Negotiable Instruments Act. The case of the appellant was that the accused had taken a loan of ?3 lacs, which later increased to ?7.30 lacs, and issued a cheque dated 15.06.2011 towards repayment. The cheque was dishonored with the remark "account closed," leading to the issuance of a demand notice and subsequent complaint when payment was not made. The Trial Court acquitted the accused, questioning the financial capacity of the complainant and the authenticity of the documents (MOS, receipt, and promissory note).

2. Financial capacity of the complainant to advance the loan:
The Trial Court doubted the financial capacity of the complainant, noting his inconsistent statements about his income sources and lack of income tax returns. However, the High Court found this inquiry unnecessary, given the documentary evidence (Ex CW-1/1, CW-1/2, and CW-1/X) supporting the loan transaction. The High Court emphasized that the complainant's financial capacity should not overshadow the documentary proof of the loan.

3. Authenticity and execution of the Memorandum of Settlement (MOS), receipt, and promissory note:
The Trial Court questioned the authenticity of the MOS, receipt, and promissory note due to the complainant's inconsistent statements and failure to produce witnesses. The High Court, however, found that the complainant's limited education (studied up to 5th grade) and minor inconsistencies did not undermine the validity of the documents. The High Court criticized the Trial Court for selectively reading the complainant's testimony and not considering it in its entirety.

4. Presumption under Section 139 of the Negotiable Instruments Act:
The High Court highlighted that the accused's admission of signing the cheque raised a presumption under Section 139 that it was issued for an outstanding debt or consideration. The accused's defense that the cheque was given to Manoj Kumar as security for a loan, which was repaid but not returned, was not substantiated with evidence. The accused failed to produce Manoj Kumar or any documentation of the alleged loan transaction, thereby failing to rebut the presumption under Section 139.

5. Defense of the accused regarding the loan from Manoj Kumar and the misuse of the cheque:
The accused claimed that the cheque was given to Manoj Kumar, who misused it by handing it to the complainant. However, the accused did not provide any evidence of the loan from Manoj Kumar or steps taken to retrieve the cheque after repayment. The High Court found this defense unconvincing and unsupported by evidence. The accused's inconsistent statements and lack of action to recover the cheque further weakened his defense.

Conclusion:
The High Court found the Trial Court's judgment laconic and unsustainable, setting it aside and convicting the respondent/accused under Section 138 of the Negotiable Instruments Act. The High Court emphasized the importance of documentary evidence and the presumption under Section 139, which the accused failed to rebut. The case was listed for sentencing on 08.05.2017, with the respondent/accused required to be present in court.