2022 (10) TMI 260 - HC - Indian Laws

Dishonor of Cheque - acquittal of the accused - respondent/accused succeeded in rebutting the presumption - appellant strongly contended that the learned Magistrate failed to consider presumption under Section 139 of N.I. Act and wrongly put a burden on the complainant to prove otherwise - cross-examination of the complainant - sharing of profit - preponderance of probablities - Section 138 of the Negotiable Instrument Act - HELD THAT - The civil suit, though based on the same Agreement between the parties, is for the purpose of recovery of the amount whereas present proceedings are under Section 138 of the N.I. Act which is a penal provision on the ground that the accused failed to pay the amount mentioned in the cheque within a stipulated period of 15 days from the date of receipt of a legal notice. Thus, the civil action is completely separate and distinct and cannot be mixed up with the present proceedings. In the present case, the complainant paid the amount of ₹ 10,00,000/- to the accused by cheques which are reflected in the Agreement. The accused admitted a receipt of such an amount. The complainant stated that she received the said amount as a gift from her husband. Therefore, when the bank transaction clearly shows that the complainant was having an amount of ₹10,00,000/- which she paid to the accused by way of three cheques and the accused admitted of the receipt of such amount in an Agreement, the said accused cannot be allowed to question the capacity of the complainant to pay such amount. The evidence to that effect is more convincing on the basis of the Agreement and the cheques by which the amount was paid to the accused a friendly loan. It is clear that the accused need not enter the witness box to rebut the presumption. However, such presumption of law cannot be considered as rebutted only by giving denials and suggestions. There has to be some cogent material brought on record during the evidence of the complainant and his witnesses, on the preponderance of probabilities so as to rebut such presumption - In the present matter and from the cross-examination of the complainant, it is clear that the accused failed to rebut the presumption under Section 139 of N.I. Act. Once the accused acknowledged the debt of ₹12,50,000/- as mentioned in the Agreement itself, there was no need for the complainant to prove anything further. However, the accused was required to rebut such presumption by leading cogent and convincing evidence or by showing probabilities in his favour from the cross-examination of the complaint, both are absent in the present matter - On one hand he admitted receipt of three cheques issued by the complainant in his favour for a sum of ₹10,00,000/- as hand loan and thereafter tried to raise the defence that the complainant was not having sufficient finance, which cannot be permitted. Thus, the observations of the learned Trial Court are against the settled propositions of law and therefore, need interference. As far as the date of the cheque is concerned, the learned Magistrate has clearly observed that it was drawn on 23/11/2011 and not on 23/04/2011 as tried to be projected. Such findings are not challenged by the accused in any proceedings. Even otherwise such ground is of no substance as the Agreement at Exh-47 clearly discloses the number of the cheque, the date and the amount. The accused/respondent No.1 herein is found guilty of the offence punishable under Section 138 of the N.I. Act - Appeal allowed.

Summary

Issues Involved:
1. Whether the learned Magistrate committed an error in not drawing the presumption under Section 139 of the N.I. Act in favor of the complainant.
2. Whether the Agreement dated 24/09/2011 is having any aspect of a contingent contract.

Issue-wise Detailed Analysis:

1. Error in Not Drawing Presumption Under Section 139 of the N.I. Act:
The appellant argued that the learned Magistrate failed to consider the presumption under Section 139 of the N.I. Act, which mandates that unless the contrary is proved, it is to be presumed that the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or other liability. The appellant contended that the Magistrate wrongly placed the burden on the complainant to prove that the cheque was issued towards the discharge of a legally enforceable liability. The appellant's counsel cited several precedents, including Rangappa v. Sri Mohan and Bir Singh v. Mukesh Kumar, to support this contention. The High Court agreed with the appellant, noting that the presumption under Section 139 is a presumption of law and shifts the onus on the accused to rebut it. The court observed that mere denial or suggestions by the accused are insufficient to rebut the presumption; instead, cogent and convincing evidence is required.

2. Agreement as a Contingent Contract:
The respondent argued that the additional amount of Rs. 2,50,000 mentioned in the Agreement was a contingent contract dependent on the profit from a land transaction, which did not materialize. Therefore, the demand for Rs. 12,50,000 was not towards a legally enforceable debt. The High Court examined the Agreement and found that the accused acknowledged a debt of Rs. 12,50,000 and issued a cheque for this amount. The Agreement did not mention any contingency for the payment of Rs. 2,50,000. The court concluded that the Agreement was not a contingent contract and the accused's obligation to pay Rs. 12,50,000 was clear and unequivocal.

Factual Background:
The complainant advanced Rs. 10,00,000 to the accused for purchasing land, and the accused agreed to repay Rs. 12,50,000, including a profit share. The accused issued a cheque for Rs. 12,50,000, which was dishonored due to insufficient funds. Despite a legal notice, the accused did not pay the amount, leading to the complaint under Section 138 of the N.I. Act. The Magistrate acquitted the accused, accepting the defense that the cheque was issued blank and without signature for a different transaction.

High Court's Observations:
The High Court noted that the presumption under Section 139 of the N.I. Act is a rebuttable presumption that the accused must counter with evidence. The court found that the accused failed to rebut the presumption effectively. The Agreement explicitly stated the debt and the cheque details, making the accused's defense implausible. The court also dismissed the argument that the complainant's financial capacity to lend Rs. 10,00,000 was not proven, as the transaction was supported by bank records and the Agreement.

Conclusion:
The High Court concluded that the learned Magistrate erred in not drawing the presumption under Section 139 in favor of the complainant and in treating the Agreement as a contingent contract. The court quashed the Magistrate's judgment, found the accused guilty under Section 138 of the N.I. Act, and sentenced him to six months of simple imprisonment and to pay double the cheque amount as compensation.

Order:
The appeal was allowed, the Magistrate's judgment was set aside, and the accused was found guilty under Section 138 of the N.I. Act. The accused was sentenced to six months of simple imprisonment and directed to pay Rs. 25,00,000 as compensation, failing which he would face an additional three months of imprisonment. The accused was ordered to surrender within 15 days, failing which the Magistrate was directed to issue a warrant for his arrest.