2019 (7) TMI 1338 - HC - Indian Laws

Dishonor of Cheque - rebuttal of presumption - statutory presumption under Sections 118 and 139 of the NI Act - HELD THAT - The presumptions under Section 118 or under Section 139 are rebuttable. Section 139 allows a presumption that the cheque referred to in Section 138 was given to discharge the debt in whole or in part. But the question is whether the debt or other liability under Section 139 is presumed to be a legally enforceable debt. The existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability. It has also held that the prosecution must prove the guilt of an accused beyond all reasonable doubt the standard of proof to prove an accused s defence is preponderance of probabilities. If the accused can raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability the prosecution will fail. So the accused can rely on the materials submitted by the complainant to raise such a defence and it is conceivable that sometimes the accused may not need to adduce evidence of his/her own. Appeal allowed.

Summary

Issues Involved:
1. Non-availability of Record and Proceedings (R & P)
2. Admissibility of Documents
3. Concept of Proprietary Concern
4. Issuance of Cheques as Security
5. Supply of Goods and Legally Enforceable Debt

Detailed Analysis:

I. The Technical or Procedural Objections:
Non-availability of Record and Proceedings (R & P):
The court addressed whether the absence of the trial court's complete record affects the rights of the parties. The appellant argued for an early disposal due to the appellant's senior citizen status, while the respondent insisted on the necessity of the complete record to ensure no prejudice. The court concluded that the absence of the complainant’s statement under Section 200 of Cr PC does not materially affect the appeal, as the statement is non-adversarial and only a substance, not a verbatim record.

II. Admissibility of Documents:
The court examined whether the documents submitted by Doshi were properly marked and admitted. The trial court's judgment did not include a schedule of admitted documents, which is essential for appellate review. The court decided to consider only those documents explicitly mentioned in the trial court’s judgment as admitted.

III. On the Merits:
(a) What is a Proprietary Concern?
The trial court was confused about the concept of a proprietary concern, treating it as if it required separate authorization for the proprietor to act. The court clarified that a proprietary concern is not a separate legal entity from its proprietor, and thus, no separate authorization is needed.

(b) Who is the Complainant?
The court found that the trial court erred in requiring authorization for Doshi to present the complaint on behalf of the proprietary concern. The proprietary concern and the proprietor are one and the same.

Issuance of Cheques as Security:
The court examined the contention that the cheques were given as security and not for debt discharge. The company argued various points such as the amount of the cheques, the series of cheques, and the method of dating the cheques. The court found these arguments unconvincing, emphasizing the continuous business relationship and the statutory presumption under Section 139 of the NI Act that the cheques were for discharging a debt.

Supply of Goods and Legally Enforceable Debt:
The company admitted to ordering goods but claimed non-receipt of the goods. The court noted the statutory presumptions under Sections 118 and 139 of the NI Act, which presume consideration and the existence of a legally enforceable debt unless proven otherwise. The trial court failed to consider these presumptions adequately. The court found that the company did not rebut the presumption effectively, as they did not provide evidence to support their claim of non-receipt of goods.

Collateral Factors:
The court noted that the company had a history of dishonoured cheques, which further weakened their defense.

The Last Limb:
The court distinguished the present case from Sachin Food Processor, where the facts were materially different and did not apply as a precedent.

Result:
The appeal was allowed, and the trial court's judgment was set aside. The respondents were convicted under Section 138 of the NI Act. Mustafa Mohammadihusain Sial was sentenced to one year of simple imprisonment, and both respondents were directed to pay ?10,00,000/- as compensation to the complainant. In default, Sial would undergo an additional three months of simple imprisonment. The bail bonds were surrendered, and any period of detention already undergone by Sial would be set off against the sentence. A copy of the judgment was to be provided to the accused free of cost.