2022 (1) TMI 611 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - legally enforceable debt or not - acquittal of the accused - sufficiency of service of notice or not - rebuttal of presumption u/s 139 of NI Act - HELD THAT - In the instant case the postal receipt has been filed by the appellant and information received under the Right to Information Act 2005 has also been filed by the appellant relating to postal receipts by which the Postal Department had informed that the item had been delivered on the respondent. In his affidavit given in the examination-in-chief the appellant has deposed about these facts. It categorically establishes that in fact service had been sufficient on the respondent. There is no doubt about it. While referring to the complaint and the statement of the appellant learned counsel for the respondent submits that nowhere the appellant had revealed the date time when the loan was taken by the respondent and place where the loan was taken by him. Based on it it is submitted that non-disclosure of date time and place where the loan taken infers that there was no legally enforceable debt or other liability - This Court is of the view that this argument does not merit acceptance. The explanation to Section 138 of the Act clarifies the words debts or other liability as used in Section 138 of the Act and according to it the debts and other liability means legally enforceable debts or other liability. Even if particular date time and place is not mentioned in the complaint or at any place it does not mean that the respondent was not under any debt or legally enforceable liability. The offences under Section 138 of the Act in fact though is criminal in nature but it has an element of enforcing negotiable instruments to ensure free and fair transactions. It has an element of civil liability as well. Admittedly both the parties had their business dealings. It is also admitted that in fact in the past the respondent had paid certain amounts to the appellant - As stated in the instant case parties were in business dealing. They were dealing in the property. They have transactions in the past as well. Therefore this Court is of the view that the interest of justice would be served if a fine of 6 Lacs is imposed on the respondent. Out of the fine 4 Lacs should be paid to the appellant as compensation. In default of payment of fine the respondent shall undergo simple imprisonment for a period of six months. The respondent Sohan Lal Kala is convicted under Section 138 of the Act. A fine of 6 Lacs is imposed on the respondent Sohan Lal Kala under Section 138 of the Act. In default of payment of fine the respondent shall undergo simple imprisonment for a period of six months. Out of the fine deposited by or recovered from the respondent 4 Lacs shall be paid to the appellant as compensation - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act, 1881.
2. Validity of the notice served under Section 138 of the Act.
3. Presumption under Section 139 of the Act.
4. Repayment of the loan.
5. Handwriting discrepancies on the cheques.
6. Acquittal by the trial court and appellate court's power to reverse the acquittal.
7. Sentence determination upon conviction under Section 138 of the Act.

Detailed Analysis:

1. Legally Enforceable Debt or Liability:
The appellant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, alleging that the respondent had taken a loan of ?4 Lakh and issued two cheques for ?3 Lakh and ?1 Lakh, respectively, which were dishonoured due to insufficient funds. The respondent admitted to issuing the cheques but claimed that the loan had been repaid. The trial court acquitted the respondent, concluding that the debt was not legally enforceable as the respondent had repaid the loan. However, the appellate court found this conclusion against the weight of evidence, noting that the repayment entries in the appellant's account were from 2010 and 2012, which could not discharge a debt incurred in 2013.

2. Validity of the Notice Served:
The appellant served a notice to the respondent on 02.12.2013, which was confirmed delivered by the Postal Department. The court referenced the Supreme Court case of N. Parameswaran Unni Vs. G. Kannan, which clarified that once notice is sent by registered post to the correct address, service is deemed effected unless rebutted. The appellate court held that the notice was validly served, satisfying the requirements under Section 138 of the Act.

3. Presumption under Section 139 of the Act:
Section 139 of the Act presumes that the holder of a cheque received it for the discharge of a debt or liability unless proven otherwise. The appellate court noted that the respondent admitted to issuing the cheques, and the signatures were undisputed. The respondent's failure to rebut the presumption under Section 139 effectively supported the appellant's claim.

4. Repayment of the Loan:
The trial court's finding that the respondent had repaid the loan was based on bank entries from 2010 and 2012. The appellate court found this reasoning flawed, as the cheques were issued in 2013. The respondent's claim of repayment was not substantiated with evidence corresponding to the loan period, leading the appellate court to conclude that the loan was not repaid.

5. Handwriting Discrepancies on the Cheques:
The trial court questioned the appellant's credibility, noting discrepancies in the handwriting on the cheques. The appellate court dismissed this issue, emphasizing that the respondent admitted to issuing the cheques and did not contest the signatures or the issuance of the cheques.

6. Acquittal by the Trial Court and Appellate Court's Power to Reverse the Acquittal:
The appellate court discussed the principles governing appeals against acquittal, referencing the Supreme Court's guidelines in Guru Dutt Pathak Vs. State of Uttar Pradesh. It emphasized that while appellate courts should be cautious in reversing acquittals, they can do so if the trial court's findings are perverse or unsustainable. The appellate court found the trial court's acquittal unsupported by evidence and reversed it, convicting the respondent under Section 138 of the Act.

7. Sentence Determination:
Upon conviction, the appellate court considered the appropriate sentence. It noted the business relationship between the parties and the nature of the offence under Section 138, which aims to ensure the reliability of negotiable instruments. The court imposed a fine of ?6 Lakh on the respondent, with ?4 Lakh to be paid as compensation to the appellant. In default of payment, the respondent would undergo six months of simple imprisonment.

Conclusion:
The appellate court set aside the trial court's acquittal, convicting the respondent under Section 138 of the Negotiable Instruments Act, 1881, and imposed a fine with a provision for compensation to the appellant. The judgment emphasized the legal presumptions under Sections 138 and 139, the validity of the notice served, and the insufficiency of the respondent's evidence of repayment.

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