2017 (9) TMI 1564 - HC - Indian Laws

Offence under Section 138 of NI act - issue of cheque and dishonoring - onus to prove debts - Held that - As has been laid down in Bharat Barrel s case (1999 (2) TMI 627 - SUPREME COURT), the respondent can rebut the presumption under Sections 139 and 118 of the NI Act by raising a probable defence. The respondent in doing so can either bring in his own evidence or rely upon the evidence submitted by the appellant. In the present case the respondent deposed that he had only received by way of loan from the appellant an amount of ₹ 1,76,000/-. This assertion without any proof is not likely to go very far in raising a probable defence, but the appellant himself admitted that a cheque for the sum of ₹ 1,76,000 and cash ₹ 24,000/- was paid to the respondent, strengthens the defence of the respondent. Even this stand in cross-examination by the appellant is contradictory to the agreement which mentions that loan amount of ₹ 2 lacs includes interest. The fallacy in the appellant s case is also brought from the fact that the loan agreement mentions that a post-dated cheque for the amount of ₹ 2,00,000/- bearing no.965528 dated 27.12.11 drawn on SBI, Rail Bhawan was handed over to the appellant at the time of execution of the loan agreement but in his complaint as well as in his evidence, the appellant had stated that the said cheque was handed over to him after he raised a demand for repayment of the loan amount to the respondent in December of 2011. The controversy whether a cheque given as security can be brought within the purview of Section 138 of the NI Act does not arise here as a cheque has to be issued for the amount which is due to the holder of the cheque. The various contradictions in the appellant s version has put a serious doubt as to whether there exists a legally subsisting liability of ₹ 2 lacs in favour of the appellant. The various inconsistencies in the stand taken by the appellant leads the Court to believe that the existence of the liability to be highly improbable. Since the appellant was not able to prove the amount of ₹ 24,000/- allegedly paid by cash to the respondent as loan along with a cheque of ₹ 1,76,000/-, the cheque in question which was for the amount of ₹ 2,00,000/- can in no way be said to have been issued for the legally existing liability of ₹ 1,76,000/-.

Summary

Issues Involved:
1. Whether the cheque issued by the respondent was for a legally enforceable debt under Section 138 of the Negotiable Instruments Act, 1881.
2. The amount of loan advanced by the appellant to the respondent.
3. The applicability of Section 138 of the NI Act to cheques issued as security.

Detailed Analysis:

1. Whether the cheque issued by the respondent was for a legally enforceable debt under Section 138 of the Negotiable Instruments Act, 1881:

The appellant and respondent entered into a loan agreement on 01.04.2011, where the appellant granted a loan of ?2,00,000 to the respondent, who issued a cheque for the same amount dated 27.12.2011. The cheque was dishonoured due to "Funds Insufficient," leading the appellant to file a complaint under Section 138 of the NI Act. The Trial Court acquitted the respondent, finding that the cheque was issued as security. The appellant contended that a cheque given as security, if dishonoured, is covered under Section 138 of the NI Act, citing a precedent where the onus to rebut the presumption of debt lies with the accused. However, the respondent argued there was no legally subsisting liability when the cheque was handed over.

2. The amount of loan advanced by the appellant to the respondent:

The appellant claimed to have advanced ?2,00,000 as per the loan agreement, while the respondent contended that only ?1,76,000 was received. The appellant's cross-examination revealed a contradiction, stating that ?1,76,000 was given by cheque and ?24,000 in cash, which was not mentioned in the complaint. The loan agreement itself contained contradictory statements about the amount and inclusion of interest. The court noted these inconsistencies and found the appellant's claim of advancing ?2,00,000 questionable.

3. The applicability of Section 138 of the NI Act to cheques issued as security:

The court examined whether a cheque issued as security can attract Section 138 of the NI Act. It emphasized that a cheque must be for an amount due to the holder. The appellant's contradictory statements and the loan agreement's inconsistencies led the court to doubt the existence of a legally subsisting liability of ?2,00,000. The court concluded that the appellant failed to prove the cash component of ?24,000, making the cheque for ?2,00,000 not reflective of a legally enforceable debt of ?1,76,000.

Conclusion:

The court upheld the Trial Court's judgment, dismissing the criminal appeal due to the appellant's failure to establish a legally enforceable debt and the inconsistencies in the appellant's evidence.