2021 (1) TMI 30 - HC - Indian Laws

Dishonor of Cheque - acquittal of the accused - Section 138 of the NI Act - main grounds urged in the respective appeals are that the trial Judge has committed an error in acquitting the accused and not properly appreciated the evidence in a proper perspective - HELD THAT - Having perused the evidence available on record issuance of cheque is not in dispute and also notice has been given to the accused is also not in dispute. There is no dispute with regard to the fact that those notices are served on him and notice was served on him and he did not choose to give any reply. When the cheques are admitted and not given any reply the Judgment of Rangappa s case is aptly applicable to the case on hand. No doubt on perusal of the agreement there is a recital to enforce the agreement for specific performance and also to claim the damages. But in the case on hand the claim of the complainant is that the contract did not take place between the parties. Hence the accused has issued the cheque for return of the amount what has been received. The very conclusion of the Trial Court is that the complainant ought to have approached the Civil Court is erroneous and there is a clause in the agreement itself in the event of failure on the part of the first party to perform this agreement he shall refund the advance amount. The other reason given by the Trial Court is that the cheques are issued towards security is also not based on any record - First of all the accused has not given any reply to the notice and also he did not dispute the issuance of notice. When such being the case it is mandate on the part of the Trial Court to draw the presumption under Section 139 of the NI Act. Apart from that the accused counsel himself suggested that the agreement was cancelled. When the same was cancelled question of enforcing the agreement does not arise. Having perused the reasoning of the The Trial Court that the same is a civil remedy and cheques might have issued for security is erroneous and the very approach of the Trial Court is not in consonance with the provisions of Section 138 of the NI Act and so also not under Section 139 of the NI Act and not drawn presumption. The Trial judge has committed an error in paragraph No.10 in coming to the conclusion that the complainant has not produced documents to show that there was talks between himself and accused pertaining to calculation of damages after alleged breach of contract for which accused had issued the cheque - the Trial Judge proceeded to pass an acquittal order not based on the presumption as well as on the settled principles of law and the material available on record. In the case on hand the accused has not rebutted the case of the complainant and there is no effective cross- examination and nothing is elicited from the mouth of P.W.1 with regard to the transaction and apart from that the accused himself has admitted the MOU between the complainant and accused. When such being the case the Trial Judge ought not to have acquitted the accused - impugned Judgments of acquittal are hereby set aside - accused is convicted for the offence punishable under Section 138 of the NI Act - Appeal allowed.

Summary

Issues Involved:
1. Whether the Trial Court erred in acquitting the accused for the offence punishable under Section 138 of the Negotiable Instruments Act (NI Act).
2. Determination of the appropriate order.

Issue-wise Detailed Analysis:

Issue 1: Whether the Trial Court erred in acquitting the accused for the offence punishable under Section 138 of the NI Act.

The appeals were filed by the complainant challenging the judgments of acquittal in four cases where the accused was acquitted by the Trial Court. The complainant contended that the accused, who had entered into a Memorandum of Understanding (MOU) to procure land, failed to secure the lands and issued cheques towards the refund of the amount received, which were dishonored due to "Insufficient Funds." The complainant filed complaints under Section 138 of the NI Act after the accused failed to repay the cheque amount.

The Trial Court acquitted the accused, reasoning that the complainant should have approached the Civil Court for specific performance of the contract and that the cheques were issued as security, not for discharging any debt. The complainant's counsel argued that the MOU specified the receipt of the amount by the accused, who failed to act upon it, and the cheques were issued for refund. The counsel relied on several judgments, including *Ripudaman Singh v. Balkrishna* and *Rangappa v. Mohan*, to support the claim that cheques issued in pursuance of an agreement constitute legally enforceable debt or liability.

The Court noted that the accused did not lead any defense evidence but cross-examined the complainant. The complainant's evidence was consistent with the complaint averments and the documents marked. The Court emphasized that the accused did not dispute the issuance of cheques or reply to the notice, mandating the presumption under Section 139 of the NI Act. The Trial Court's reliance on civil remedy and the assumption that cheques were issued as security was found erroneous.

The Court referred to the principles laid down in *Rangappa's case*, where the presumption of legally recoverable debt or liability is mandatory if the cheques are not disputed and no reply is given. The accused failed to rebut the presumption effectively, either through cross-examination or by leading evidence. The Court also highlighted the erroneous application of precedents by the Trial Court, particularly the misinterpretation of the *Krishna Janardhan Bhat v. Dattatraya G. Hegde* judgment.

Issue 2: Determination of the appropriate order.

The Court concluded that the Trial Court erred in acquitting the accused, as the complainant had established the issuance of cheques and the failure of the accused to rebut the presumption under Section 139 of the NI Act. The appeals were allowed, and the judgments of acquittal were set aside. The accused was convicted for the offence punishable under Section 138 of the NI Act and directed to pay ?1,55,00,000/- to the complainant within eight weeks, failing which the accused would undergo Simple Imprisonment for two years. The Trial Court was directed to secure the accused if the payment was not made.

Order:
1. The appeals are allowed.
2. The impugned judgments of acquittal are set aside.
3. The accused is convicted under Section 138 of the NI Act.
4. The accused is directed to pay ?1,55,00,000/- to the complainant within eight weeks, failing which he shall undergo Simple Imprisonment for two years.
5. The Trial Court is directed to secure the accused if he fails to pay the amount.
6. The Registry is directed to transmit the Trial Court records forthwith.