2018 (11) TMI 95 - HC - Indian Laws

Dishonor of cheque - Section 138 of the NI Act - burden of proof shifted on complainant - acquittal of accused by stating that the complainant has failed to prove that the 2nd accused received a sum of ₹ 50,000/- from the complainant as loan and in order to discharge the said loan, she had given the impugned two cheques - Held that - On overall analysis of the evidence on record, it is seen that the trial Court erred in holding that DW1 had set up the complainant to initiate the proceeding against the accused by giving the impugned cheques given to him as security by the accused. The story of setting up pleaded by the accused has not been proved by way of documentary proof. In the absence of any proof, it cannot be contended that DW1 had set up the complainant to initiate the present proceedings. Burden of prove - Held that - It is also settled that the accused had to prove in the trial by leading cogent evidence that there was no debt or liability and that the accused not having led any evidence could not be said to have discharged the burden cast on him. Existence of legally recoverable debt or liability is a matter of presumption under Section 139 of the NI Act. In the case on hand, the 2nd accused has not gone into the witness box. Since issuance of Exs.P1 and P2-cheques by the accused is admitted and the complainant has proved his case by way of preponderance of evidence to show that Exs.P1 and P2-cheques returned with an endorsement funds insufficiency, it is to be held that the complainant has proved his case and that the trial Court went wrong in dismissing the complaint and acquitting the accused. The criminal appeal is allowed setting aside the acquittal recorded by the trial Court and finds the accused guilty of offence under Section 138 of the NI Act - appeal allowed.

Issues Involved:
1. Whether the accused issued the cheques in question to discharge a loan.
2. Whether the cheques were dishonored due to insufficient funds.
3. Whether the accused rebutted the statutory presumption under Section 139 of the NI Act.
4. Whether the trial court erred in its judgment of acquitting the accused.

Issue-wise Detailed Analysis:

1. Issuance of Cheques to Discharge a Loan:
The complainant alleged that the accused issued two cheques to discharge a loan amounting to ?50,000. The trial court found that the complainant failed to prove the receipt of ?50,000 by the 2nd accused and the issuance of cheques to discharge this loan. The appellate court, however, noted that the complainant had categorically stated that the 2nd accused borrowed ?50,000 on 30.1.2002 and issued the cheques for repayment. The accused's claim that the cheques were given as security to a third party (Rajagopal) in 1995 and were misused was not substantiated with evidence.

2. Dishonor of Cheques:
The complainant presented the cheques for collection, but they were returned unpaid with the endorsement "funds insufficient." The complainant issued a legal notice to the accused, which was received but not replied to. The appellate court found that the non-issuance of a reply by the accused indicated that the cheques were indeed issued for repaying the loan.

3. Statutory Presumption under Section 139 of the NI Act:
The appellate court emphasized that under Sections 138 and 139 of the NI Act, the presumption is that the holder of the cheque received it for the discharge of a debt or liability. The burden of proof shifts to the accused to rebut this presumption. The accused failed to provide cogent evidence to prove that there was no debt or liability, and the statutory presumption was not rebutted.

4. Trial Court's Judgment:
The trial court's judgment was based on the finding that the complainant failed to prove the loan transaction and the role of the 2nd accused in the firm. The appellate court found this approach incorrect, noting that the trial court shifted the burden of proof to the complainant instead of the accused. The appellate court held that the trial court erred in dismissing the complaint and acquitting the accused.

Conclusion:
The appellate court re-evaluated the evidence and found that the complainant had established his case by oral and documentary evidence. The appellate court set aside the trial court's acquittal, convicted the accused under Section 138 of the NI Act, and directed the accused to pay ?50,000 towards the cheque amount and another ?50,000 as compensation and costs. The Legal Aid Authority was directed to pay ?5,000 to the Legal Aid Advocate.

Judgment:
The criminal appeal was allowed, the acquittal was set aside, and the accused was convicted and directed to make payments within eight weeks, failing which the trial court was instructed to realize the amount in accordance with the law.

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