2017 (9) TMI 287 - HC - Indian Laws

Dishonor of cheque - Acquittal for the offence punishable under section 138 of the Negotiable Instruments Act, 1881 - legally enforceable debt proof - Held that - All burden of proving that a legally enforceable debt did not exist against the accused lies on the accused himself which has to be discharged by bringing on record some cogent evidence to make the Court believe that the existence of such liability was not probable. The Trial Court has erred in not appreciating the provisions of section 139 and 118 of the NI Act and appears to be obsessed with idea that initial burden is on the complainant instead of the accused. The complainant was only required to prove that the cheque issued by the respondent No.3 was dishonoured, and the statement of complainant that it was issued by respondent against her liability/debt is sufficient proof of debt or liability thus shifting the onus to the respondent to rebut by way of cogent evidence and not by bare statement. Trial Court has erred in rejecting the complaint on the ground that no other invoice has been placed on record by the appellant to show that there had been dealing between the appellant and respondent no.3 upto December, 2010 and by dismissing the complaint on this score, the Trial Court has erred in putting the initial burden on the complainant/appellant without realising that initial burden was on the accused/respondents no.2 and 3. It was for the respondent no.3 to adduce cogent evidence and certainly not bare statement that there were no business dealings with the appellant after 2009 or that the goods in question were not purchased by her from the appellant. This is particularly so when respondent no. 3 admitted in her deposition that there was running account with the complainant and in the month of October/November, 2010, there was an outstanding balance of ₹ 9,200/-. The complainant while appearing as CW-1 in his examination in chief testified that he got issued one legal notice dated 31.12.2010 to the accused by registered AD & UPC dated 4.1.2011 which was duly served and despite service of notice the accused did not discharge the liability nor took any steps for repayment of the amount. The copy of the legal notice was exhibited as Ex.CW-1/C and postal receipts as Ex.CW-1/D (Colly.). In his cross-examination, the respondent/ accused had not disputed receipt of notice. She has failed to reply said notice which attracts the applicability of principles of Non-Traverse. It has been held by the Supreme Court in Rangappa s case (2010 (5) TMI 391 - SUPREME COURT OF INDIA ) that the very fact that the accused had failed to reply to the statutory notice under Section 138 of the Act leads to an inference that there was merit in the complainant s version. If the bare statement of the accused stating that the cheque in question bearing his signatures and date was misplaced by him in the market is taken as gospel truth, then all accused persons under section 138 of the NI Act can easily get away from their legally enforceable liability by taking such sham and false defence. This Court finds that the impugned judgment is erroneous and perverse and is not sustainable both on facts and in law. In the result, the criminal appeal is allowed and and the accused/respondent No.3 is convicted for the offence under section 138 of NI Act.

Summary

Issues Involved:
1. Acquittal of respondents under Section 138 of the Negotiable Instruments Act, 1881.
2. Presumption under Sections 118 and 139 of the NI Act.
3. Credibility of the respondent's defense regarding the stolen cheque.
4. Legal principles surrounding "stop payment" instructions.
5. Failure to reply to the statutory notice under Section 138 of the NI Act.

Detailed Analysis:

1. Acquittal of Respondents under Section 138 of the Negotiable Instruments Act, 1881:
The Trial Court acquitted respondents 2 and 3 based on two grounds: (i) there was cutting/interpolation on the date of the bill/invoice no. 254 dated 18.12.2010, and (ii) no other invoice was placed on record to show that the appellant and respondents had dealings up to December 2010.

2. Presumption under Sections 118 and 139 of the NI Act:
The appellant argued that under Sections 118 and 139 of the NI Act, there is a presumption against the accused in a case under Section 138, which the respondents failed to rebut with cogent evidence. The appellant relied on the Supreme Court's decision in Rangappa v. Sri Mohan, which emphasizes that once the execution of the cheque is admitted, a presumption arises that it is for a legally enforceable debt or liability.

3. Credibility of the Respondent's Defense Regarding the Stolen Cheque:
The respondent claimed the cheque was stolen by the appellant from her residential office and also mentioned that she had given stop payment instructions to her banker on 01.12.2010. However, the court found inconsistencies in her statements and noted that she did not provide any cogent evidence to support her defense. The court emphasized that mere statements without evidence do not suffice to rebut the presumption under Sections 118 and 139 of the NI Act.

4. Legal Principles Surrounding "Stop Payment" Instructions:
The court reiterated that even if "stop payment" instructions are given, the drawer/accused cannot avoid liability unless it is proven that there was no legally existing debt or liability at the time of the cheque's presentation. This principle was supported by the Supreme Court's ruling in M.M.T.C. Ltd. v. Medchl Chemicals and Pharma (P) Ltd., which held that the presumption under Section 139 is attracted even in cases of stop-payment instructions.

5. Failure to Reply to the Statutory Notice under Section 138 of the NI Act:
The appellant issued a legal notice dated 31.12.2010, which was duly served, but the respondents did not reply. The court noted that the failure to reply to the statutory notice leads to an inference that there was merit in the complainant's version, as supported by the Supreme Court in Rangappa's case.

Conclusion:
The court found that the Trial Court erred in its judgment by not properly appreciating the provisions of Sections 118 and 139 of the NI Act and the relevant case law. The respondent's inconsistent defenses and lack of evidence failed to rebut the statutory presumption of liability. Consequently, the High Court set aside the Trial Court's judgment, convicted the respondent under Section 138 of the NI Act, and imposed a fine of ?3,45,044/-, with a provision for simple imprisonment for one year in case of non-payment. The court also directed that the fine amount, once realized, be released to the appellant as compensation.