2019 (10) TMI 159 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - offence punishable under Section 138 of the Negotiable Instruments Act - legally enforceable debt or liability or not - HELD THAT - The cheques issued by the Petitioner in favour of the complainant have been presented by the complainant in his bank within a period of six months. On their presentation the same were dishonoured on account of stoppage of payment. Thereafter the complainant issued demand notice to the Petitioner however the Petitioner fails to make the payment of the said amount to the complainant. Therefore there is a compliance of mandate of Section 138 of the Negotiable Instruments Act by the Complainant. Whether there is legally enforceable debt existed as asserted by the complainant and the cheques in question were issued in discharge of the said liability/debt? - HELD THAT - It is a settled law that at the stage of taking cognizance and summoning or issuing process the Magistrate is required to apply his judicial mind only with a view to taking cognizance of the offence In other words the Magistrate has to find out whether a prima facie case has been made out or not and the Magistrate is not required to evaluate the merits of the material or evidence in support of the complaint. The Petitioner/Accused in the present case has to adduce evidence to rebut the presumption that the cheques have been given by the Petitioner to the complainant in discharge of his debt/liability in the trial - further having regard to the said undertaking given by the Petitioner in the consent terms this Court is of the prima facie opinion that the Petitioner has admitted his liability. Considering the material on record the complainant has succeeded in showing that all the essential ingredients of offence under Section 138 have been attracted. It is a settled law that onus lies upon the accused to rebut the presumption and to establish that the cheques in question were not given in respect of any debt or liability with the standard of proof being preponderance of probabilities. As the signature in the cheque is admitted to be that of the accused the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins on the court to presume that the holder of the cheque received it for the discharge. Prima facie the complainant has succeeded in showing that the accused has issued the cheques in discharge of legally enforceable liability which were dishonoured on their presentation and that the Petitioner accused failed to make payment of the cheques - Whether the cheques obtained by the complainant from the Petitioner under duress or coercion and/or whether the documents signed by the Petitioner under pressure will be the issue that has to be decided in the trial after adducing evidence by parties. Hence the orders of issuance of process passed by the learned Magistrate do not require any interference. This Court is of the considered opinion that no case for interference in the impugned orders is made out - Petition dismissed.

Summary

Issues Involved:
1. Legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act.
2. Validity and implications of consent terms.
3. Allegations of coercion and duress in obtaining cheques.
4. Compliance with procedural requirements under Section 138.
5. Applicability of precedents and legal principles.

Detailed Analysis:

1. Legally Enforceable Debt or Liability:
The primary issue revolves around whether there existed a legally enforceable debt or liability as asserted by the complainant, and whether the cheques in question were issued in discharge of said liability. The court examined the consent terms dated 17/06/2016, which were signed by the complainant, the petitioner, and their respective advocates. The petitioner issued cheques as part of these terms, which were dishonored upon presentation due to "Payment Stopped by Drawer". The court noted that the petitioner had given an undertaking in the consent terms that the cheques would be honored and that no instructions to stop payment would be issued.

The court referred to Sections 138 and 139 of the Negotiable Instruments Act, which establish the presumption that a cheque is issued in discharge of a debt or liability unless proven otherwise. The court found that the complainant complied with the procedural mandates of Section 138, including issuing a demand notice and presenting the cheques within the stipulated period.

2. Validity and Implications of Consent Terms:
The consent terms explicitly stated that the petitioner agreed to pay ?12 Lakhs to the complainant, issuing post-dated cheques as part of the settlement. The court highlighted clauses from the consent terms, particularly clauses 2 and 3, which mandated that the cheques would be honored and that no instructions to stop payment would be issued. The court found that the petitioner’s actions of stopping the payment were contrary to these terms.

3. Allegations of Coercion and Duress:
The petitioner alleged that the consent terms and cheques were obtained under duress and coercion, particularly citing the arrest of his daughter. The court noted these allegations but emphasized that such claims need to be substantiated with evidence during the trial. The court referred to the legal principle that at the stage of issuing process, the magistrate is not required to evaluate the merits of the evidence but only to ascertain if a prima facie case is made out.

4. Compliance with Procedural Requirements:
The court found that the complainant had complied with all procedural requirements under Section 138, including presenting the cheques within six months, issuing a demand notice, and filing the complaint within the stipulated period. The court noted that the petitioner had failed to make the payment within 15 days of receiving the demand notice, thus attracting the penal provisions of Section 138.

5. Applicability of Precedents and Legal Principles:
The court examined several precedents cited by both parties. It distinguished the present case from those cited by the petitioner, such as Lalit Kumar Sharma and Indus Airways Pvt. Ltd., noting that the facts were materially different. The court relied on precedents like Goaplast Pvt. Ltd. v. Chico Ursula D’Souza and M. Mohan Rao v. Bheemshetty Shreedhar, which supported the view that cheques issued as part of consent terms constitute a legally enforceable debt.

The court also referred to the recent Supreme Court judgment in Bir Singh v. Mukesh Kumar, which held that a person who signs a cheque remains liable unless they adduce evidence to rebut the presumption of it being issued for a debt or liability.

Conclusion:
The court concluded that the complainant had successfully demonstrated the essential ingredients of an offence under Section 138. The petitioner’s contentions regarding coercion and duress were matters to be proved during the trial. The court upheld the orders of issuance of process by the learned Magistrate, finding no merit in the writ petitions. The petitions were thus rejected, and the rule was discharged.

Final Observations:
The court clarified that the observations made were prima facie in nature and confined to the adjudication of the present writ petitions.