2021 (1) TMI 19 - HC - Indian Laws

Dishonor of Cheque - existence of legally enforceable debt or not - rebuttal of presumption - Section 139 of the NI Act - HELD THAT - It is clear that the amounts are not given to the complainant. DW.3 though in his evidence he says that the amount was paid in his presence and the complainant has affixed the signature on Ex.D2. It is elicited in the cross-examination that he does not know anything about the payment of money by the complainant to the accused and also how much amount was paid to him but he claims that the complainant told him that the accused has availed an amount of 3, 50, 000/- and insisted him to get the money from the accused. He also claims that in the Hotel it was decided to return the amount of 5, 50, 000/-. All of them have signed the documents in the Kanishka Hotel DW.2 was also present and he claims that an amount of 2 lakhs was paid but he came to know that already an amount of 3, 50, 000/- was paid prior to that. DW.2 says that in his presence the amount was not paid and he subsequently signed the documents-Exs.D2. But DW.3 claims that in his presence only after receiving the amount of 2 Lakhs the complainant has signed the documents. The trial Judge failed to appreciate the admission elicited from the mouth of DWs.1 to 3 particularly with regard to the defense which he has taken instead of that doubted the case of the complainant. Even though nothing is elicited in the cross- examination of PW.1 except not disclosing the same in the Income Tax returns. Hence the Judgment of the Trial Court requires to be set aside the same is perverse and not based on the material available on record and also the documents relied upon by the accused also not creditworthy and the accused even gone to the extent of indulging in creating of document - Ex.D2 and other documents not comes to the aid of the accused and in spite of that he has not rebutted the evidence of the complainant erroneously acquitted the accused. The subject matter of the cheque is for the year 2008 and almost 12 years has elapsed and while imposing the fine this Court has to take note of the period of 12 years in sentencing the accused for the offence under Section 138 of the NI Act - the impugned judgment of acquittal is set aside - appeal allowed.

Summary

Issues Involved:
1. Whether the Trial Judge committed an error in acquitting the accused for the offence punishable under Section 138 of the Negotiable Instruments Act (NI Act).
2. What order should be passed regarding the appeal?

Detailed Analysis:

Issue 1: Error in Acquitting the Accused for the Offence under Section 138 of the NI Act

The factual matrix of the case involves the complainant lending ?20 Lakhs to the accused for the production of a Kannada feature film. The accused issued a cheque dated 14.10.2008 for the said amount, which was dishonored upon presentation. Despite a legal notice, the accused failed to repay the amount, prompting the complainant to file a complaint. The trial court acquitted the accused, leading to this appeal.

The complainant's evidence included his testimony and documents marked as Exs.P1 to P7 and P7(a). The accused, in his defense, claimed to have borrowed only ?3,50,000 and repaid it with interest, totaling ?5,50,000, as per a Memorandum of Understanding (MOU). However, the complainant disputed the MOU, and a handwriting expert confirmed that the signature on the MOU did not belong to the complainant.

The trial court's judgment was challenged on several grounds, including the failure to consider the presumption under Section 139 of the NI Act, which states that the holder of a cheque received it for the discharge of debt or liability. The trial court also erred in relying on contradictory evidence from the accused's witnesses and failing to draw the correct inferences from the handwriting expert's unchallenged report.

The appellate court noted the complainant's consistent testimony and the accused's admissions during cross-examination, which included the issuance of blank cheques to others and the failure to disclose significant financial transactions in his income tax returns. The appellate court found material contradictions in the defense witnesses' testimonies and concluded that the trial court had failed to appreciate the evidence correctly.

The appellate court also referred to several judgments from the Apex Court, emphasizing the statutory presumption under Section 139 of the NI Act and the burden on the accused to rebut this presumption. The accused's failure to provide convincing evidence to rebut the presumption led the appellate court to conclude that the trial court's judgment was erroneous and perverse.

Issue 2: Order Regarding the Appeal

The appellate court allowed the appeal, setting aside the trial court's judgment of acquittal. The accused was convicted for the offence under Section 138 of the NI Act and directed to pay ?22,00,000 to the complainant within eight weeks. In default of payment, the accused would undergo simple imprisonment for one year. The trial court was instructed to secure the accused if he failed to pay the amount and ensure the sentence was served. The Registry was directed to transmit the trial court records forthwith.

Conclusion:

The appellate court's judgment underscores the importance of the statutory presumption under Section 139 of the NI Act and the necessity for the accused to provide substantial evidence to rebut this presumption. The judgment also highlights the significance of consistent and credible evidence in establishing the complainant's case and the need for careful appreciation of evidence by the trial court.