2022 (4) TMI 925 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - rebuttal of presumption - section 139 of NI Act - HELD THAT - Admittedly, accused Bankim Chowdhury was the Chief Managing Director and accused Ratna Debnath was the Accounts Director of Tripura Real Estate Constructions Limited, a company registered under the Companies Act, 1956. By appearing before the court as DW-1 and DW-2 respectively, they have asserted that their company came out with an advertisement published in a leading daily namely, Dainik Sambad whereunder the company offered sale of land in plots at various places at Agartala and in response to the said advertisement, complainant agreed to purchase a land and paid a sum of ₹ 1,00,000/- as advance after executing a written agreement with the company. Admittedly, despite execution of written agreement between the parties and receipt of advance by the appellants, no land was transferred to the complainant respondent in terms of such agreement. DW-2 Ratna Debnath who is one of the convict appellants has categorically stated in her cross examination that due to internal problems of Tripura Real Estate Constructions Limited (convict appellant No.1), the agreement for sale of land to the complainant respondent could not be materialised. She did not attribute any fault to the complainant respondent for non execution of the said agreement - presumption under section 139 of the NI Act arises against the convict appellants. Obviously, the convict appellants could not raise a probable defence to create doubts with regard to the existence of such debt or liability. Rather, it is the admitted position of the case that ₹ 1,00,000/- was received by the appellants as advance from the complainant respondent for transfer of land in his favour for a price of ₹ 7,00,000/- in terms of the agreement executed between the parties. Admittedly, as officers of the appellant company they were aware of the fact that advance of ₹ 1,00,000/- was received from the respondent for sale of land to him and the company had an enforceable debt to the complainant as per the terms of agreement. No land was transferred to him nor the advance was refunded to him. In these circumstances, the liability on account of dishonour of the impugned cheque primarily falls on the drawer company which is a corporate liability and convict appellants No.2 and 3 as the officers of the company are vicariously liable for such offence, the principal accused is the company. In these circumstances, service of demand notice on the Chief Managing Director of the accused company is sufficient. Accused appellant No.2 Ratna Debnath who is the Accounts Director of the company cannot escape her liability by saying that no demand notice was issued to her. The impugned judgment passed by the learned Additional Sessions Judge in Criminal Appeal No.17 of 2018 stands affirmed subject to the above modification of the sentence awarded to the company (convict appellant No.1). The company shall pay a fine of ₹ 50,000/- to complainant respondent No.1. Convict appellant No.2 Bankim Chowdhury shall pay ₹ 50,000/- and convict appellant No.3 Ratna Debnath shall also pay fine of ₹ 50,000/- to the claimant respondent and in default Bankim Chowdhury and Ratna Debnath shall suffer SI for a term of 15 days. The criminal revision petition is disposed of.

Summary

Issues Involved:
1. Validity of the conviction and sentence under Section 138 of the Negotiable Instruments Act, 1881.
2. Service of demand notice under Section 138 of the NI Act.
3. Presumption under Section 139 of the NI Act and the burden of proof on the accused.
4. Legality of the sentence imposed on the corporate entity and its representatives.

Issue-wise Detailed Analysis:

1. Validity of the conviction and sentence under Section 138 of the Negotiable Instruments Act, 1881:
The petitioner challenged the judgment affirming the conviction and sentence under Section 138 of the NI Act. The trial court convicted the accused based on the evidence that the cheque issued by the accused was dishonored due to insufficient funds. The Additional Sessions Judge upheld this conviction, finding no infirmity in the trial court's judgment. The High Court also affirmed the conviction, noting that the complainant successfully established the essentials of Section 138 NI Act and the accused failed to discharge the presumption under Section 139 NI Act.

2. Service of demand notice under Section 138 of the NI Act:
The defense argued that no demand notice was served on accused Ratna Debnath before filing the complaint. The court found that the demand notice was indeed served on Bankim Chowdhury, the Chief Managing Director, who admitted receiving it but did not respond. The court held that service of notice on the Chief Managing Director of the accused company was sufficient, and Ratna Debnath, as the Accounts Director, could not escape liability by claiming no notice was served on her.

3. Presumption under Section 139 of the NI Act and the burden of proof on the accused:
The court emphasized that under Section 139 NI Act, it is obligatory to presume that the holder of the cheque received it for discharge of debt or liability. The burden then shifts to the accused to rebut this presumption with proof. The court cited the Gauhati High Court's judgment in Manik Lodh vs. State of Assam, which held that the presumption must be rebutted by proof, not mere explanation. The accused in this case failed to provide sufficient evidence to rebut the presumption, affirming their liability.

4. Legality of the sentence imposed on the corporate entity and its representatives:
The trial court sentenced the corporate entity and its representatives to a fine of ?50,000 each, with default imprisonment for the representatives if the fine was not paid. The High Court noted an error in the trial court's judgment, which imposed a default sentence on the corporate entity. The court modified the sentence, stating that the company cannot be sentenced to imprisonment. The fine imposed on the company was to be paid, and if not, it would be realized from the company's estate. The default sentence was applicable only to the individual representatives, not the corporate entity.

Conclusion:
The High Court upheld the conviction of the accused under Section 138 of the NI Act, modifying the sentence to correct the error regarding the corporate entity. The court directed the fines to be paid within one month, failing which appropriate legal processes would be initiated to enforce the default sentences. The judgment emphasized the legal principles of presumption under Section 139 NI Act and the sufficiency of service of demand notice on the company's Chief Managing Director.