2017 (8) TMI 573 - HC - Indian Laws

Conviction of offence under Section 138 of the Negotiable Instruments Act, 1881 - proof of existing debt - acquittal of charge - Held that - The absence of any evidence to show the solvency of the respondent for him to have advanced loan to the petitioner leads to the presumption that there was no existing debt. There is no documentary evidence to show that such a huge amount of loan was advanced to the petitioner. It is difficult to accept the proposition that such amount of loan would be paid on oral agreement. Both the courts below, therefore, have erred in holding that the petitioner could not rebut the presumption as contemplated under Section 139 of Negotiable Instruments Act, 1881. For the reasons aforestated, this revision petition is allowed and the judgment of conviction by the Trial Court and its affirmation by the Appellate Court are set aside and the petitioner is acquitted of the charge.

Summary

Issues Involved:
1. Conviction under Section 138 of the Negotiable Instruments Act, 1881.
2. Rebuttal of presumption under Sections 118B and 139 of the Negotiable Instruments Act, 1881.
3. Financial capacity and solvency of the respondent.
4. Admissibility and relevance of the "money receipt cum agreement to sell" (Mark D1).

Issue-wise Detailed Analysis:

1. Conviction under Section 138 of the Negotiable Instruments Act, 1881:
The petitioner was convicted for dishonoring two cheques totaling ?17,20,000/- issued to the respondent. The cheques were returned unpaid, leading to a complaint under Section 138 of the Negotiable Instruments Act, 1881. The Trial Court sentenced the petitioner to 8 months of rigorous imprisonment and a compensation of ?22,20,000/-. The Appellate Court upheld this conviction.

2. Rebuttal of presumption under Sections 118B and 139 of the Negotiable Instruments Act, 1881:
The Trial Court held that the petitioner failed to rebut the presumption under Sections 118B and 139, which assume that a negotiable instrument was made for consideration and that the holder of a cheque received it for the discharge of a debt. The petitioner argued that the cheques were issued to a broker, Anil Shandilya, for a property deal and not to the respondent directly. The Appellate Court also found that the petitioner did not successfully rebut the presumption.

3. Financial capacity and solvency of the respondent:
The petitioner questioned the respondent's financial capacity to lend ?17,20,000/-, citing discrepancies in the respondent's Income Tax Returns (ITRs) and his stated income. The respondent claimed to have withdrawn ?24 lakhs from his bank account to give the loan, but the petitioner argued that the same amount was redeposited shortly after withdrawal, casting doubt on the transaction. The Appellate Court dismissed these concerns, stating that the respondent had ?24 lakhs in his account on the date of the incident.

4. Admissibility and relevance of the "money receipt cum agreement to sell" (Mark D1):
The petitioner presented a "money receipt cum agreement to sell" (Mark D1) to support his claim that the cheques were issued for a property deal brokered by Anil Shandilya. The Appellate Court did not accept this document as it was only a photocopy and not proved as per the Indian Evidence Act. The court held that the petitioner failed to rebut the presumption regarding the consideration under Section 139 of the Negotiable Instruments Act, 1881.

Judgment Analysis:
The High Court examined the following:
- The relationship between the petitioner and the respondent was not definitively proved.
- The respondent's financial capacity to lend ?17,20,000/- was not conclusively established.
- The ITRs did not reflect transactions affirming the respondent's financial health.
- The withdrawal and redeposit of ?24 lakhs from the respondent's account raised doubts.
- The "money receipt cum agreement to sell" indicated that the cheques were part of a property deal, not a loan repayment.

The High Court concluded that the petitioner successfully rebutted the presumption of an existing debt by highlighting these inconsistencies and the lack of documentary evidence supporting the respondent's claim of a loan. Consequently, the High Court set aside the conviction and acquitted the petitioner.

Conclusion:
The revision petition was allowed, and the judgments of the Trial Court and Appellate Court were set aside. The petitioner was acquitted of the charge under Section 138 of the Negotiable Instruments Act, 1881. The court ordered the return of any amount deposited by the petitioner under court orders, allowing time for the respondent to challenge the decision in a superior court.