2018 (4) TMI 302 - HC - Indian Laws

Cheque bounced - validity of cheque - Repayment of loan - Since the defence was that the amount had been repaid, the onus was on Respondent No. 1 to prove by cogent evidence that he had re-paid the loan amount sum to the petitioner and there was no legally recoverable debt when the subject cheques were presented for encashment - complaint under Section 138 of the Negotiable Instruments Act - Held that - Neither any document nor any independent witness from the bank was produced to show that any amount had been deposited by him in the bank account of the Petitioner or his wife and daughter. On the other hand he admitted in his cross-examination that he used to deposit money for membership of committee which supports the explanation of the petitioner that the amount of ₹ 20,000/- was towards an independent transaction. Further Respondent No. 1 did not even examine his brother who is alleged to have paid ₹ 70,000/- to the petitioner. Respondent No. 1 also could not give the details of the payments made and the respective dates or amounts - No evidence was produced by Respondent No. 1 to show that the subject cheques were issued in the year 2009 2010. Respondent No. 1 failed to even show that he had demanded the return of the subject cheques, when he is alleged to have repaid the loan amount. Even the statutory demand notice was not responded to. Merely because a cheque book with printed date / /200 is used after 01.01.2010 would not invalidate the cheque or become a suspicious circumstance in itself. Clearly the reasoning of the Appellate Court on this count is also perverse and untenable. Petition allowed.

Issues Involved
1. Whether the appellate court erred in setting aside the trial court's conviction under Section 138 of the Negotiable Instruments Act.
2. Whether the respondent had sufficiently rebutted the presumption of liability under Section 138.
3. Whether the cheques were issued as security and misused by the petitioner.
4. Whether the appellate court's reasoning regarding the printed date on the cheques was valid.

Detailed Analysis

Issue 1: Appellate Court's Error in Setting Aside Conviction
The petitioner impugned the appellate court's order dated 26.09.2015, which set aside the trial court's conviction and sentence orders dated 24.07.2015 and 31.07.2015, respectively. The trial court had convicted the respondent under Section 138 of the Negotiable Instruments Act for issuing two cheques of ?1 lakh each, which were dishonored due to "Insufficiency of Funds." The trial court sentenced the respondent to three months of simple imprisonment and directed the payment of ?3.50 lakhs as compensation.

Issue 2: Rebuttal of Presumption of Liability
The trial court raised a presumption in favor of the petitioner since the respondent admitted to signing the cheques. The trial court found that the respondent failed to prove the repayment of ?2.70 lakhs, as no documentary evidence or independent witness corroborated his claim. The appellate court, however, held that the respondent had sufficiently rebutted the presumption by showing there was a running account between the parties and that the petitioner was running a "Committee," which was not disclosed initially.

Issue 3: Cheques Issued as Security
The respondent contended that the cheques were issued as security and that he had repaid the loan amount except for ?7000. The appellate court accepted this defense, noting the existence of other transactions and the petitioner's involvement in a "Committee." The appellate court held that the respondent's evidence created a reasonable defense that the cheques were not issued for a legally recoverable debt.

Issue 4: Printed Date on Cheques
The appellate court found the printed date on the cheques (___/____/200___) suspicious, suggesting they were issued before 01.01.2010 and misused later. The trial court disagreed, stating that the printed date alone does not invalidate the cheques or create suspicion.

Judgment Summary
The High Court found that the appellate court erred in reversing the trial court's well-reasoned judgment. The appellate court failed to appreciate that the respondent admitted to taking the loan and signing the cheques. The respondent did not provide sufficient evidence to prove the repayment of the loan. The appellate court's reasoning regarding the printed date on the cheques was deemed perverse and untenable. Therefore, the High Court set aside the appellate court's order and restored the trial court's conviction and sentence. The respondent was directed to surrender before the trial court to undergo the sentence.

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