2020 (4) TMI 412 - HC - Indian Laws

Dishonor of Cheque - failure to prove the ingredients of giving notice as required under Section 138 of the N.I. Act - existence of legally enforceable debt or not - rebuttal of presumption - Section 139 of the N.I. Act - HELD THAT - From the provisions of Section 27 of the General Clauses Act, 1897 and Section 114 of the Indian Evidence Act, 1872 it manifests that once Notice is served by registered post by correctly addressing it to the drawer of the Cheque, the service of Notice is deemed to have been effected. In such a circumstance the requirements of Proviso (b) of Section 138 of the N.I. Act stands complied if the Notice is served in the manner prescribed therein. The object of these provisions are to ensure that unscrupulous drawers of Cheques are unable to avoid service of the statutory Notice by leaving their homes for sometime, and thereby evade prosecution. No deficiency emanates on the part of the Appellant for having issued Notices to the Respondent in his admitted address and it therefore concludes that the Notices having been sent to the Respondent s correct address were duly served, fulfilling the requirement of giving Notice, contrary to the finding of the learned trial Court. Legally enforceable debt or not - HELD THAT - In view of the contents in Exhibit 1 there is a clear admission by the Respondent of his liability to repay the amounts mentioned in the document. There is no escaping the fact that it was a legally enforceable liability. The issuance of three post dated Cheques by the Respondent further endorses this circumstance. The argument of learned Counsel for the Respondent that the Appellant is a Government servant hence the source from where he afforded ₹ 42,00,000/- only, has not been indicated was never raised in the evidence of the Respondent and for the first time finds place only in Appeal. Rebuttal of presumption - HELD THAT - The presumption under Section 139 of the N.I. Act is an extension of the presumption of Section 118(a) of the Act. If the negotiable instrument happens to be a Cheque, Section 139 raises a further presumption that the holder of the Cheque received the Cheque in discharge in whole or in part of any debt or other liability. Section 118 of the N.I. Act uses the phrase until the contrary is proved, Section 139 of the N.I. Act provides unless the contrary is proved. Section 4 of the Evidence Act which defines may presume and shall presume makes it clear that presumptions to be raised under the aforestated provisions are rebuttable. This Court is conscious and aware that interference against an acquittal recorded by the learned trial Court should be rare and in exceptional circumstances, however it is open to the High Court to reappraise the evidence and the conclusion drawn by the learned trial Court to consider whether the Judgment of the learned trial Court can be stated to be perverse. The word perverse has to be understood in law as defined to mean against the weight of evidence. From the discussions it is held that the findings arrived at by the learned trial Court are perverse and erroneous. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the learned trial Court was in error in concluding that the Appellant failed to prove the ingredients of "giving notice" as required under Section 138 of the N.I. Act?
2. Whether the Appellant failed to establish beyond a reasonable doubt that the Respondent had to discharge a debt or a legal liability?
3. Whether the Respondent was able to rebut the presumption in terms of Section 139 of the N.I. Act?

Analysis of Judgment:

Issue 1: "Giving Notice" under Section 138 of the N.I. Act
The trial court concluded that the Appellant failed to prove the "giving notice" requirement under Section 138 of the N.I. Act. The Appellant argued that the notices were sent to the Respondent’s permanent address as indicated in Exhibit 1 and received by his family members. The court discussed the relevance of Section 27 of the General Clauses Act, 1897, and Section 114 of the Indian Evidence Act, 1872, which state that once a notice is served by registered post to the correct address, it is deemed to have been served. The court referenced the Supreme Court judgments in K. Bhaskaran v. Sankaran Vaidhyan Balan and Anr. and C.C. Alavi Haji v. Palapetty Muhammed and Ors., which support the presumption of service if the notice is correctly addressed and dispatched. The trial court's reliance on M.D. Thomas v. P.S. Jaleel and Ors. was found to be per incuriam as it did not consider the binding precedent of C.C. Alavi Haji. The court concluded that the notices were duly served, fulfilling the requirement of "giving notice."

Issue 2: Existence of Debt or Legal Liability
The trial court held that no legal liability existed as no money receipts were tendered to establish transactions between the parties. The Appellant argued that Exhibit 1, an agreement executed by the Respondent, explicitly acknowledged the debt. The court noted that the Respondent admitted the execution of Exhibit 1 and issuance of post-dated cheques, which raised a presumption of a legally enforceable liability. The court referenced the judgment in Purna Kumar Gurung v. Ankit Sarda, which clarified that "debt" and "liability" under Section 138 mean legally enforceable obligations. The court found that the Respondent's argument regarding the Appellant's financial capacity was raised for the first time on appeal and was not substantiated during the trial. The court concluded that the Appellant successfully established the existence of a debt or legal liability.

Issue 3: Rebuttal of Presumption under Section 139 of the N.I. Act
The trial court concluded that the presumption under Section 139 was successfully rebutted by the Respondent. The court examined the provisions of Sections 118 and 139 of the N.I. Act, which create a rebuttable presumption that the holder of the cheque received it for the discharge of a debt or liability. The court referenced the Supreme Court judgments in Hiten P. Dalal v. Bratindranath Banerjee and Kamala S. v. Vidhyadharan M.J. and Another, which held that the presumption of law must be raised in every case where the factual basis for the presumption is established. The Respondent admitted the issuance of the cheques and the execution of Exhibit 1, thereby raising the presumption of a legally enforceable debt. The court found that the Respondent failed to rebut this presumption with credible evidence.

Conclusion:
The court found the trial court's findings to be perverse and erroneous. Consequently, the appeals were allowed, and the Respondent was convicted under Section 138 of the N.I. Act. The Respondent was sentenced to three months of simple imprisonment for each complaint, to run concurrently. Additionally, the Respondent was ordered to pay compensation of ?42,70,000 with interest at 9% per annum from the date of filing the complaints, failing which he would undergo two years of simple imprisonment. The Respondent was directed to surrender within sixty days, failing which a non-bailable warrant would be issued.