2022 (2) TMI 887 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - petitioner has not been able to dislodge the presumption in view of inconsistency in his evidence - Section 138 of N.I. Act - HELD THAT - Undoubtedly there is no proper application of mind to the facts and the evidence brought on record. Firstly if the premise on which the respondent initiated action against the petitioner is seen, it can be gathered from the averments made in the complaint that the respondent made payment of ₹ 19,50,000/- to the petitioner as per the terms of Ex. P.5. The respondent has stated that he and one Ananda Kumar made the payments, and to this effect there are endorsements made on different dates, and they show total payment of ₹ 19,50,000/-. But the terms of Ex. P.5 are that the petitioner and the respondent agreed to develop the property jointly, that the respondent undertook to pay the balance of ₹ 7,00,000/- to the land owner Ramakanth Revankar and bear other incidental expenses and that he also agreed to pay ₹ 5,00,000/- to the petitioner for his personal commitments - the petitioner admits to have received ₹ 3,50,000/- on 16.06.2006 and ₹ 1,00,000/- on 26.06.2006 and he admits the endorsement to this effect found in Ex. P.5. But he disputes all other endorsements and the signatures below them. Though it is possible to infer that signatures found below the endorsements are that of the petitioner despite their denial by him, and that there is no consistency in his defence, it is not possible to accept the respondent's case that the petitioner issued the cheque in question for discharging liability of ₹ 19,50,000/-. Ex. P.5 is the document that the respondent has relied upon to prove the existence of legally enforceable debt. This document shows liability of ₹ 12,00,000/- only. Payment of incidental charges did not arise because the sale deed was not executed. DW1, i.e., the petitioner has stated in para 4 of his affidavit that the respondent did not pay ₹ 2,50,000/-. The petitioner has admitted to have received only ₹ 4,50,000/-. The counsel for the respondent referred to one answer of D.W.1 in his cross examination that he received one payment from Ananda Kumar and submitted that this admission would prove the transactions. But this argument cannot be accepted, for it is just a stray answer. If the tenor of cross-examination of P.W.1 and questions put to D.W.1 are seen, what appears is that he has not accepted to have received ₹ 19,50,000/- except ₹ 4,50,000/- and at least in this regard his stand is consistent - there is no congruence in the averments made in the complaint and the evidence placed by him. Therefore presumption under Section 139 of N.I. Act cannot be drawn. In spite of inconsistency in the defence version of the petitioner the respondent's case does not stand on its own strength and therefore it is not possible to hold that the offence under Section 138 of N.I. Act is proved against the petitioner. Revision petition is allowed.

Summary

Issues:
1. Interpretation of the Memorandum of Understanding (MoU) in relation to the issuance of a cheque for a specific amount.
2. Analysis of evidence presented regarding the payment transactions between the parties.
3. Examination of the presumption under Section 139 of the Negotiable Instruments Act (N.I. Act).
4. Evaluation of the consistency and credibility of the defense evidence provided by the petitioner.
5. Review of the lower court judgments and the correctness of the findings.

Issue 1 - Interpretation of the MoU and Cheque Issuance:
The respondent alleged that the petitioner issued a cheque for &8377; 19,50,000 to discharge a liability based on the terms of the MoU. However, the petitioner disputed the amount, arguing that the MoU only indicated a liability of &8377; 12,00,000. The petitioner contended that certain endorsements on the MoU were questionable, suggesting discrepancies in the payment details. The courts failed to properly analyze the evidence and concluded that the petitioner was guilty under Section 138 of the N.I. Act. Ultimately, the High Court found that the respondent failed to prove the issuance of the cheque for the disputed amount, leading to the acquittal of the petitioner.

Issue 2 - Analysis of Payment Transactions:
The petitioner admitted to receiving a specific sum from the respondent and Ananda Kumar, but disputed other payment endorsements on the MoU. The courts considered the petitioner's inconsistent defense but failed to thoroughly assess the evidence presented. The High Court highlighted discrepancies in the payment records and concluded that the respondent's case lacked credibility, especially regarding the amount claimed to have been paid. The court emphasized the importance of examining the evidence in detail to establish a legally enforceable debt.

Issue 3 - Presumption under Section 139 of N.I. Act:
The trial court invoked the presumption under Section 139 in favor of the respondent, assuming the validity of the cheque issuance. However, the High Court determined that the presumption was not adequately supported by the evidence presented. The appellate court also noted inconsistencies in the case but upheld the trial court's decision, which the High Court found to be erroneous. The High Court emphasized the necessity of proving the existence of a legally enforceable debt to justify invoking the presumption under the N.I. Act.

Issue 4 - Consistency of Defense Evidence:
The petitioner's defense was scrutinized for inconsistencies, particularly regarding the circumstances of the cheque issuance. The courts observed discrepancies in the petitioner's statements but failed to thoroughly assess the respondent's claims. The High Court emphasized the need for a comprehensive evaluation of all evidence to determine the veracity of the allegations and the credibility of the parties involved.

Issue 5 - Review of Lower Court Judgments:
The High Court critically analyzed the judgments of the lower courts and found shortcomings in their assessment of the evidence. The High Court highlighted the failure of the trial and appellate courts to properly consider the payment transactions and the terms of the MoU. Ultimately, the High Court set aside the lower court judgments, acquitted the petitioner of the offense under Section 138 of the N.I. Act, and ordered the refund of any fines paid by the petitioner. Additionally, the High Court directed the Legal Services Authority to compensate the amicus curiae for their services in the case.