2021 (1) TMI 803 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - Respondent had not repaid the amount despite receipt of notice and neither did he reply to the said legal notice - acquittal of accused - Rebuttal of presumption - Whether the appellant has proved the guilt of accused thereby warranting a conviction of the respondent? - HELD THAT - This Court will have to adjudicate on the theory putforth by the respondent as to a theory which is probable in defence and whether the same has been accepted and admitted by the appellant. When respondent tries to disprove the version of appellant he cannot merely make a statement of denial or posing certain suggestions that he does not owe any money to the appellant. The burden cast on the respondent is so heavy in view of the presumption under section 139 of the Act that while raising the probable defence it has to be more than a mere statement of denial, but it has to be a theory which can be believed by the Court and which is probable to the normal prudent man's understanding. Further, even if, such theory is not putforth by way of any document, the same should be accepted and admitted by appellant in cross-examination therefore, the presumption cast on the respondent under section 139 of the Act clearly says that unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability . Unless the contrary is proved it is for the respondent to establish by way of cogent evidence either orally or through document to the contrary thereby rebutting the presumption cast under section 139 of the Act. In the present case, it is the case of appellant that right from the date of issuance of legal notice on 15-9-2008, there is clarity when the loan amount was given, in what manner loan amount was given and the post dated cheque having been issued by the respondent on 1-8-2008 by mentioning the date as 16-8-2008 and in order to show abundant caution, the appellant has got indorsed behind the back of cheque, wherein the respondent has countersigned stating that he has received ₹ 3,00,000/- in cash and promises to honour this cheque. This fact of the matter of admitting the signature by respondent and cheque being drawn on the account of respondent and the countersignature at the backside of the cheque has not been disputed - In the present case on hand, it is an admitted fact with regard to issuance of cheque, signature on the cheque and the loan transaction thereby raising a presumption under section 139 of the Act that there exists a legal enforceable debt or liability. No doubt, the said presumption under section 139 of the Act is a rebuttable presumption. In the present case, there is no evidence by respondent which can show that the presumption has been rebutted and the theory put forward by the respondent with regard to Ex.D.1 is a believable theory. Ex.D.1 document is not an admitted document though the signature on the document is not denied. Merely admitting the signature on the document Ex.D.1, it does not prove the admission of contents and proof of the document. The other theory putforth by the respondent that Ex.P.1 was issued as security towards an earlier transaction is not a believable theory. In the absence of any material to show that there is existed any earlier transaction other than the present one stated by the appellant. The Court below has materially erred in not properly appreciating and considering the presumption in favour of complainant-appellant herein that there exists a legally enforceable subsisting debt or liability as per Section 139 of the Act. Further, it is relevant to note here that the trial Court has committed a serious error in shifting the burden of proof to prove the debt or liability and the existence of a debt without appreciating the mandate of legislation as laid down in Section 139 of the Act. Section 139 of the Act is an example of reverse onus clause and therefore once issuance of cheque has been admitted and signature on the cheque has been admitted and in this case transaction of loan is also admitted. There is always a presumption in favour of appellant-complainant that there exists a legally enforceable debt or liability and thereby the burden is on the respondent-accused to rebut such presumption by leading cogent evidence either oral of documentary. The appellant has proved the necessary ingredients of section 138 of the Act for conviction of respondent-accused for the offence punishable under section 138 of the Act - Respondent-accused herein is held guilty for the offence punishable under section 138 of the Act and he is convicted for the offence punishable under section 138 of the Act.

Summary

Issues Involved:
1. Whether the appellant has proved the guilt of the accused warranting a conviction under Section 138 of the NI Act.
2. Whether the judgment of acquittal deserves to be set aside.

Issue-wise Detailed Analysis:

1. Whether the appellant has proved the guilt of the accused warranting a conviction under Section 138 of the NI Act:

The appellant contended that the trial court's judgment of acquittal was erroneous and arbitrary, failing to appreciate the necessary ingredients required under Section 138 of the NI Act. The appellant provided a loan of ?3,00,000 to the respondent, who issued a post-dated cheque as repayment. The cheque was dishonored due to insufficient funds, leading to the issuance of a legal notice and subsequent filing of a complaint under Section 200 of the Cr.P.C. The appellant examined himself and another witness, marking several exhibits, while the respondent cross-examined the appellant but did not lead any evidence. The trial court concluded that the appellant failed to prove a legally subsisting debt or liability, acquitting the respondent.

Upon appeal, the High Court examined the evidence, noting that the appellant consistently narrated the events and provided substantial evidence, including the dishonored cheque and legal notice. The court emphasized the presumption under Section 139 of the NI Act, which places the burden on the respondent to disprove the appellant's case. The respondent's defense, including the claim that the cheque was issued as security for a previous transaction, lacked credible evidence. The court found the appellant's evidence credible and consistent, while the respondent's defense was unsubstantiated. The High Court concluded that the appellant proved the necessary ingredients of Section 138, establishing the respondent's guilt.

2. Whether the judgment of acquittal deserves to be set aside:

The trial court's judgment of acquittal was based on the appellant's failure to prove the existence of a legally subsisting debt or liability. The High Court, however, found this conclusion erroneous. The trial court heavily relied on Ex.D.1, a document allegedly proving the respondent's repayment of ?50,000, but the High Court noted that this document did not inspire confidence and lacked essential details such as the name of the recipient and the date. The trial court's reliance on the appellant's non-disclosure of the loan in income tax returns was also deemed misplaced, as it did not negate the existence of the debt.

The High Court emphasized the presumption under Section 139 of the NI Act, which the respondent failed to rebut with credible evidence. The trial court's shifting of the burden of proof to the appellant was incorrect. The High Court found that the appellant's evidence, including the dishonored cheque and the respondent's admission of the signature, sufficiently proved the existence of a legally enforceable debt. The trial court's judgment was thus found to be arbitrary and not supported by the evidence on record.

Conclusion:

The High Court set aside the trial court's judgment of acquittal, holding the respondent guilty under Section 138 of the NI Act. The respondent was sentenced to pay a fine of ?4,05,000, with ?4,00,000 to be paid as compensation to the appellant and ?5,000 to be deposited to the state. In default of payment, the respondent would undergo simple imprisonment for one year. The court directed the registry to transmit the order to the trial court for further proceedings.