2018 (6) TMI 1088 - HC - Indian Laws

Offence u/s 138 of Negotiable Instruments Act, 1881 - revisional jurisdiction under Sections 397 and 401 of Code of Criminal Procedure, 1973 - release of applicant on Bail. Held that - The Trial Court has taken into account all the aspects. The defence raised by the applicant-accused has been dealt with by assigning reasons. The judgment of the Trial Court also indicate that the Court has scrutinized and appreciated the evidence on record and after giving opportunity to the defence, has held that the applicant-accused is liable to be convicted for the said offence. The Appellate Court has confirmed the judgment of conviction by taking into consideration the evidence on record and the submissions advanced by both the parties. The complainant has examined himself and two other witnesses. The accused has examined himself as a defence witness to contend that the transactions were in the nature of Badla transactions, which are prohibited in law - Admittedly from February1993, the applicant-accused was dealing with the complainant in connection with purchase and sale of shares. The accused has issued cheques in question which were exhibited in evidence vide Exhibits19, 20 and 21. The applicant-accused has admitted that the amount of cheques is due and payable to the complainant. However, the defence of the applicant-accused is that the alleged transactions are forward trading transactions, which are also called as Badla transactions, which were prohibited by Pune Stock Exchange, and therefore, the same are not legally enforceable. In accordance with Section 138 of Negotiable Instruments Act, it shall be presumed unless contrary is proved, that the holder of the cheque received the cheque of the nature referred to in Section 138 of the Act for the discharge in whole or in part of any debt or other liability. In the present case, the complainant has proved that the cheques were issued by the applicant-accused. The said presumption is not rebutted by the applicant-accused in any manner. The applicant-accused had admitted issuance of cheques and that there were outstanding due from him to the complainant in February 1996. The findings of conviction imposed by the Trial Court and confirmed by the Appellate Court, are required to be accepted. While imposing sentence, however, the Trial Court has ordered that the applicant is sentenced to suffer imprisonment for three months and to pay fine of ₹ 10,000/. The sentence of fine was modified by the Appellate Court by maintaining substantive sentence of imprisonment. Criminal Revision Application disposed off.

Summary

Issues Involved:
1. Legally enforceable debt or liability.
2. Nature of transactions (Badla Trading/forward trading).
3. Issuance and dishonor of cheques.
4. Admissibility of additional evidence (SEBI report).
5. Sentencing and compensation.

Issue-wise Detailed Analysis:

1. Legally enforceable debt or liability:
The applicant was prosecuted under Section 138 of the Negotiable Instruments Act, 1881, for issuing cheques that were dishonored. The applicant contended that the cheques were not issued in discharge of a legally enforceable debt. The Trial Court and the Appellate Court both found that the cheques were indeed issued to settle outstanding dues. The applicant admitted to issuing the cheques and acknowledged the outstanding amount payable to the complainant.

2. Nature of transactions (Badla Trading/forward trading):
The applicant argued that the transactions were in the nature of Badla Trading, which was banned, and thus any amount claimed from such transactions was not legally recoverable. Both courts rejected this defense, noting that the applicant failed to prove that the transactions were forward trading or Badla transactions. The courts emphasized that the applicant did not produce any evidence from the Pune Stock Exchange or SEBI to substantiate this claim.

3. Issuance and dishonor of cheques:
The applicant issued three cheques totaling ?3.85 lakh, which were dishonored upon presentation. The complainant issued a notice demanding payment, which the applicant failed to comply with. The courts found that the applicant admitted to issuing the cheques and the outstanding dues, thereby establishing the issuance of cheques in discharge of a debt.

4. Admissibility of additional evidence (SEBI report):
The applicant sought to introduce a SEBI report as additional evidence, claiming it would support his defense that the transactions were illegal Badla transactions. The court dismissed this application, noting that the applicant did not specify which witnesses he intended to examine to introduce the SEBI report. The court also observed that the applicant had ample opportunity to present such evidence during the trial but failed to do so.

5. Sentencing and compensation:
The Trial Court sentenced the applicant to three months of simple imprisonment and a fine of ?10,000. The Appellate Court modified this, directing the applicant to pay compensation instead of a fine. The High Court further modified the sentence, setting aside the imprisonment and imposing a fine of ?3.95 lakh, with ?3.85 lakh to be paid as compensation to the complainant. The court acknowledged the applicant's deposit of ?3.85 lakh during the revision application and allowed the complainant to withdraw this amount.

Conclusion:
The High Court upheld the conviction under Section 138 of the Negotiable Instruments Act, confirming that the cheques were issued in discharge of a legally enforceable debt. The court rejected the defense that the transactions were illegal Badla transactions and dismissed the application to introduce additional evidence. The sentence was modified to a fine, with a significant portion directed as compensation to the complainant.