2018 (8) TMI 827 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - case of accused is that the cheque in question was obtained by the Bank officials under force and duress; it was not issued by him in discharge of the debt of his father; therefore, he has not committed any offence under section 138 of N.I. Act - acquittal of accused of the offence punishable under section 138 of N.I. Act. Whether the accused could be held liable for the consequences of dishonour of the cheque when the same was issued by him in discharge of the debt due by his father? Held that - In order to render the accused liable for the penal action, firstly, the dishonored cheque should have been issued by the accused; secondly, the said cheque should have been drawn on the account maintained by him with the banker for payment of any amount of money to another person from out of that account; thirdly, the cheque should have been issued towards the discharge, in whole or in part of any debt or liability - There is nothing on record to show that the respondent/accused has taken any action against the bank officials for return of the said cheque on the ground that the said cheque was taken by the bank officials under force and duress as contended by him. Even when the complainant issued a notice to him demanding repayment of the cheque amount, the accused did not even bother to reply to the said notice, making it evident that the contentions urged by the respondent/accused is only an after-thought and is calculated to set up a defence to avoid the liability for the dishonor of the said cheque. The conduct of the accused clearly indicate that the said cheque was issued by him to avert the seizure of the movables and other property of his father. Going by the very stand taken by the accused, it stands established that the accused issued the cheque to avert seizure of movable and immovable properties of his father for recovery of the debt due by him. It is not in dispute that, on the date of issuance of the cheque by the accused, a legally enforceable debt was due by his father. It is in discharge of this debt, the accused issued the subject cheque and thereby averted the sale or confiscation of movable and immovable properties of his father in which the accused was vitally interested. Therefore, it cannot be said that the cheque was issued by the accused without any lawful consideration. Section 138 of the N.I. Act does not debar a person from taking up the liability of another person. It is for this reason, the explanation to Section 138 of N.I. Act defines the expression debt or other liability as a legally enforceable debt or other liability . Further, the presumption under Section 139 of N.I. Act provides that unless the contrary is proved, the holder of a cheque received the cheque for the discharge in whole or in part of any debt or other liability . Therefore, any debt and other liability would also cover the liability of another person as well. The accused having admitted the issuance of cheque and the complainant having proved the existence of a legally recoverable debt and also having established the circumstances in which the accused issued the said cheque to avert the sale or confiscation of the properties of his father, in my view, the presumption engrafted under Section 139 of the N.I. Act comes into play - The accused has failed to rebut the said presumption with cogent and acceptable evidence. Therefore, on both these counts, the findings recorded by the Court below cannot be sustained. Appeal allowed - accused is held guilty of the offence punishable under Section 138 of N.I.Act and is sentenced to pay a fine amounting to twice the amount of cheque i.e., ₹ 4,76,320/- within 60 days from the date of this order.

Issues Involved:
1. Legality of the cheque issued by the accused under Section 138 of the Negotiable Instruments Act, 1881.
2. Whether the accused issued the cheque under force and duress.
3. Whether the cheque was issued in discharge of the debt owed by the accused's father.
4. Applicability of Section 138 of the N.I. Act to cheques issued for the discharge of another person's debt.

Issue-wise Detailed Analysis:

1. Legality of the Cheque Issued by the Accused under Section 138 of the N.I. Act:
The appellant, a Primary Co-operative Agricultural and Rural Development Bank, challenged the order of the Addl. J.M.F.C., Honnavar, which acquitted the respondent of the offence under Section 138 of the N.I. Act. The cheque issued by the accused was dishonored due to insufficient funds. The complainant argued that the accused issued the cheque to settle the debt of his father, who had borrowed a loan from the bank. The trial court dismissed the complaint, ruling that the accused was neither the principal borrower nor a guarantor and had no legal obligation to issue the cheque.

2. Whether the Accused Issued the Cheque under Force and Duress:
The accused contended that the cheque was obtained by the bank officials under force and duress. However, there was no evidence to support this claim. The accused admitted that the bank officials visited his house to recover the loan and threatened to seize movables, prompting him to issue the cheque. The court found no action taken by the accused against the bank officials for coercion, indicating that the claim of duress was an afterthought to avoid liability.

3. Whether the Cheque was Issued in Discharge of the Debt Owed by the Accused's Father:
The court considered whether the accused could be held liable for a cheque issued to settle his father's debt. The Supreme Court's decision in I.C.D.S. Limited vs. Beena Shabeer and Another was pivotal. It held that a cheque issued for any debt or liability, including that of another person, falls under Section 138 of the N.I. Act. The accused issued the cheque to prevent the seizure of his father's property, thus acknowledging the debt. The court concluded that the cheque was issued in discharge of a legally enforceable debt.

4. Applicability of Section 138 of the N.I. Act to Cheques Issued for the Discharge of Another Person's Debt:
Section 138 of the N.I. Act does not restrict the liability to the drawer's debt alone. The terms "any debt" or "other liability" encompass debts of another person. The presumption under Section 139 supports this interpretation, shifting the burden of proof to the accused to show no existing debt or liability. The accused failed to rebut this presumption. The court held that the cheque issued by the accused, even for his father's debt, attracted the provisions of Section 138.

Conclusion:
The court found the trial court's judgment contrary to Section 138 of the N.I. Act. The accused's admission of issuing the cheque and the complainant's evidence of a legally recoverable debt led to the presumption under Section 139. The accused did not provide sufficient evidence to rebut this presumption. Consequently, the appeal was allowed, the trial court's judgment was set aside, and the accused was convicted under Section 138 of the N.I. Act. The accused was sentenced to pay a fine twice the cheque amount within 60 days, with a default sentence of one-year simple imprisonment. The fine was to be used to compensate the complainant and the government.

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