2021 (1) TMI 438 - HC - Indian Laws

Dishonor of Cheque - funds insufficient - post dated cheque - legally enforceable debt or not - acquittal of the accused - the accused in this case has contended that cheque in question was a post dated cheque issued for security purposes only - Whether the complainant has made out all the ingredients of Sec.138 of N.I.Act to prove the guilt of the accused person? - HELD THAT - accused admitted his signature on cheque and its issuance to complainant. Consequently presumption under Section 118 and 139 of N.I. Act would be available to complainant - In this case accused has not led his evidence. The reasons assigned by the trial Court that complainant failed to prove the particulars of seizure of vehicle of accused its sale to third party the amount received from such sale coupled with the contention that cheque issued was a post dated cheque given for security purpose only cast a serious doubt about the complainant s case would be contrary to the law under Negotiable Instruments Act regarding presumptions available to the complainant. The trial Court taking judicial notice of the fact that farmers borrowing loan from financials would put their signatures wherever indicated by the financiers is also perverse and not based on any evidence - liability of accused continues even after repossession and sale of vehicle to third parties for any balance due after adjusting amount recovered from sale. The complainant has established all the ingredients of offence under Section 138 and as the reason assigned by the trial Court for acquittal is held to be perverse the appeal is allowed the impugned order of acquittal is set aside. The accused is held guilty of offence punishable under Section 138 of the N.I. Act. It is felt just and proper to impose a sentence of fine instead of imprisonment as the offence is in the nature of a civil wrong and the purpose of Section 138 is compensatory and not punitive. The accused is hereby sentenced to pay a fine of 13, 74, 000/- i.e. twice the amount of the cheque and in default of payment of fine to undergo simple imprisonment for a period of fourteen months.

Summary

Issues:
1. Appeal against acquittal under Section 138 of Negotiable Instruments Act.

Analysis:
The judgment pertains to an appeal against the acquittal of the accused for an offence under Section 138 of the Negotiable Instruments Act. The appellant, a transporting finance company, filed a complaint stating that the accused had borrowed a loan for a commercial vehicle but failed to repay, leading to the issuance of a cheque that was dishonored due to insufficient funds. The trial court acquitted the accused based on the reasoning that the cheque was a post-dated security cheque, which, according to the appellant, did not absolve the accused of liability under Section 138. The appellant contended that the accused's defense lacked evidence and that the presumption under Sections 118 and 139 of the Act should apply. The appellant relied on precedents to argue that the burden of proof shifts to the accused to rebut the presumption. The court noted that the accused did not lead any evidence to substantiate his defense, leading to the failure to rebut the presumption in favor of the complainant.

The court further analyzed the evidence presented by the complainant, including the cheque, bank endorsements, statutory notice, and other documents, which corroborated the complainant's case. The trial court's reasoning that the complainant failed to prove specific details regarding the vehicle seizure, sale, and repayment amounts received was deemed contrary to the law on presumptions under the Negotiable Instruments Act. The court highlighted a clause in the loan agreement establishing continuing security, which differentiated the case from hire purchase agreements cited by the trial court. The court found that the complainant had established all elements of the offence under Section 138 and overturned the acquittal, holding the accused guilty under the Act.

Regarding the sentence, the appellant sought a severe penalty due to the accused's longstanding non-repayment, while the defense argued for leniency citing the accused's financial hardship. Following Supreme Court directives emphasizing compensatory rather than punitive measures for Section 138 offenses, the court imposed a substantial fine on the accused, twice the amount of the dishonored cheque, with a default imprisonment term. Additionally, the court ordered compensation to the complainant and defrayment of remaining fines to the state under Section 357 of the Code of Criminal Procedure.