2019 (1) TMI 1495 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - Section 138 of Negotiable Instruments Act - discharge of a legally enforceable debt or liability - rebuttal of presumption - Held that - It is clear that explanation to Section 138 leaves no manner of doubt that to attract an offence under section 138 of the NI Act, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. Thus, considering the admissions given by the complainant, it cannot be said positively that the said cheque has been issued by the applicant/accused for the discharge of any legally enforceable debt or liability as on the date of issuance of the cheque. It is well settled that presumption under section 118 read with section 139 of the N.I. Act is rebuttable presumption and the accused can do so on preponderance of probability and also on the basis of the cross -examination of the complainant and his witnesses, if any - In the instant case, the applicant/accused has discharged the said burden and rebutted the presumption drawn under section 118 read with section 139 of the Act. Thus, the evidence is short of proving that there exists a legally enforceable debt or liability for which the applicant/accused has given the said cheque. There was no reason for the applicant/accused to issue a cheque of his personal liability in the capacity as a Proprietor of Hindustan Traders. The complainant has not bothered to explain the same. Thus, the applicant/accused is entitled for the benefit of doubt. Criminal Revision Application is allowed.

Issues Involved:
1. Legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act.
2. Presumption under Section 118 and 139 of the Negotiable Instruments Act.
3. Rebuttal of presumption by the accused.
4. Adequacy of evidence to prove the existence of legally enforceable debt or liability.
5. Withdrawal of deposited amount by the complainant.

Issue-wise Detailed Analysis:

1. Legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act:
The applicant/original accused was convicted under Section 138 of the Negotiable Instruments Act by the 7th Judicial Magistrate First Class, Aurangabad, and the conviction was confirmed by the Ad-hoc Additional Sessions Judge, Aurangabad. The complainant alleged that the accused issued a cheque for ?50,000/- as repayment for a hand loan. The cheque was dishonoured twice due to insufficient funds, leading to the filing of the complaint.

2. Presumption under Section 118 and 139 of the Negotiable Instruments Act:
The courts below drew the presumption under Section 118 and 139 of the Negotiable Instruments Act, which assumes that the cheque was issued for the discharge of a legally enforceable debt or liability. The complainant argued that the accused had obtained the amount as a hand loan and issued the cheque in discharge of that liability.

3. Rebuttal of presumption by the accused:
The accused contended that no loan was taken from the complainant. Instead, the cheque was issued in connection with business transactions between the complainant and the company where the accused was a director. The accused argued that the cheque was issued as a temporary measure until the company could make the payment, which was subsequently done via demand draft. The accused relied on the judgment in Domina De Souza Vs. Kamalkant Sawant, emphasizing that the presumption under Section 118 and 139 is rebuttable.

4. Adequacy of evidence to prove the existence of legally enforceable debt or liability:
The court noted the admissions made by the complainant during cross-examination, which indicated ongoing business relations and payments made by the company to the complainant. The court found it difficult to accept that the complainant would give a substantial hand loan to the accused, who was not the sole proprietor but a director of a company. The court also observed that the complainant had received payments from the company through various means, and the cheque in question was not necessarily issued for a legally enforceable debt or liability.

5. Withdrawal of deposited amount by the complainant:
The court addressed the issue of the ?50,000/- deposited by the accused in the trial court. It was noted that the complainant's application to withdraw the amount was rejected. The court directed that if the amount was still lying in the court, it should be paid to the accused. If the complainant had withdrawn the amount, the accused could execute a bond or undertaking to reclaim it.

Conclusion:
The court concluded that the accused had successfully rebutted the presumption under Section 118 and 139 of the Negotiable Instruments Act. The evidence did not sufficiently prove the existence of a legally enforceable debt or liability at the time of issuing the cheque. Consequently, the judgment and order of conviction were quashed and set aside, and the accused was acquitted of the offence under Section 138 of the Negotiable Instruments Act. The fine amount, if paid, was ordered to be refunded to the accused. The criminal revision application was allowed, and the rule was made absolute in the stated terms.

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