2023 (1) TMI 503 - HC - Indian Laws

Dishonor of Cheque - legally enforceable debt or not - whether preponderance of probabilities established that the complainant was indulging with money lending activities without any licence? - rebuttal of presumption under Section 139 of the N.I. Act or not - HELD THAT - Since framing of points for determination by the First Appellate Court at the time of passing of the judgment or at the most at the time of hearing parties, assumes significance as in case the points for determination are framed in wrong manner, the reasoning is also going to affect. In the present matter, the learned First Appellate Court after hearing of the arguments and after perusing the entire records of the trial Court, framed the points for determination in paragraph 26 of the impugned judgment. Thus, it presumed that the learned First Appellate Court was entirely aware of the facts as well as defence raised by the accused before the learned Magistrate and even before the First Appellate Court. Paragraph 10 of the impugned judgment shows the arguments advanced on behalf of the accused thereby categorically state that in his reply to the demand notice he stated that he repaid the entire amount along with interest by making payment on monthly basis. Thus, it is clear from the record of the trial Court as well as arguments advanced before the First Appellate Court that the accused never disputed about issuing signed cheques in favour of the complainant. Though it was his defence that he handed over such blank signed cheque as a security. It is now well settled that even a cheque duly signed by the accused for the purpose of security of any loan, attracts the provisions of Section 138 of the N.I. Act. It is also well settled that blank signed cheque issued by the accused is presumed to have been handed over to the complainant with a understanding or the condition that blank portions on the cheque would be filled up before presenting it. Hence, now in the present matter there is absolutely no dispute about the issuance of cheque by the accused in favour of the complainant. In the present matter, there is absolutely no material to show that the activity of giving loan by the complainant to the accused is by way of charging any interest and that too when both parties are related to each other. Each transaction has to be considered in the light of definition of loan as defined in Section 2(k) of Goa Money Lenders Act, 2001. Thus, the observations in paragraphs 36 to 40 of the impugned judgment are erroneous and without considering the definition of loan as defined in Section 2(k) of the Act of 2001. Simply because the complainant advanced loan to 4 to 5 persons and that too without charging any interest, it cannot be presumed that such activity is covered under the Money Lenders Act and, therefore, recovery of it is barred. - onus to prove which accused asserted about repayment certainly lies on the accused himself. Though he had an opportunity to prove it by stepping into the witness box or by examining any witness regarding such repayment as alleged, he failed to avail such opportunity. In such circumstances, instead of recording any adverse inference, the contention of the accused has been accepted by putting undue burden on the complainant himself by the First Appellate Court and more so on the basis of so called letter written by the accused. The observations of the first Appellate Court in reversing the judgment of the learned Magistrate are required to be considered as perverse. Putting unnecessary burden on the complainant and not raising presumption under Section 139 of the N.I. Act needs to be considered as error in the eyes of law. Thus, such findings required interference as it cannot be construed that the view taken by the learned First Appellate Court is a plausible view in the facts and circumstances of the case in hand - Appeal allowed

Issues Involved:
1. Legally enforceable debt under Section 138 of the Negotiable Instruments Act (N.I. Act).
2. Applicability of the Goa Money-Lenders Act, 2001.
3. Rebuttal of presumption under Section 139 of the N.I. Act.
4. Conduct of the complainant and accused.
5. Procedural correctness in framing points for determination by the First Appellate Court.

Issue-Wise
Detailed Analysis:

1. Legally Enforceable Debt under Section 138 of the N.I. Act:
The complainant alleged that the accused borrowed Rs. 2,00,000 and issued two cheques for repayment, which were dishonored due to "Account closed." The trial court convicted the accused under Section 138 of the N.I. Act, holding that the cheques were issued for a legally enforceable debt, and the accused failed to rebut the presumption under Section 139 of the N.I. Act. The First Appellate Court, however, quashed the conviction, reasoning that the complainant was engaged in money lending without a license, making the debt not legally recoverable.

2. Applicability of the Goa Money-Lenders Act, 2001:
The First Appellate Court concluded that the complainant was involved in money lending without a license under the Goa Money-Lenders Act, 2001, thus invalidating the debt. However, the High Court disagreed, noting that the complainant did not charge interest on the loans and was not engaged in money lending as a business. The High Court emphasized that the definition of "loan" under the Act requires an advance at interest, which was not the case here.

3. Rebuttal of Presumption under Section 139 of the N.I. Act:
The High Court reiterated that the presumption under Section 139 of the N.I. Act favors the complainant, and the accused must rebut this presumption on a preponderance of probabilities. The accused admitted to borrowing the money and issuing the cheques but claimed to have repaid the loan. However, he failed to provide evidence to support this claim and did not step into the witness box, thereby failing to rebut the presumption.

4. Conduct of the Complainant and Accused:
The accused argued that the complainant's conduct was suspicious, pointing to the lack of specific dates in the complaint and the letter demanding the return of the cheques. The High Court found these arguments insufficient to rebut the presumption under Section 139, noting that the accused admitted to the loan and issuance of cheques but failed to prove repayment.

5. Procedural Correctness in Framing Points for Determination:
The High Court criticized the First Appellate Court for incorrectly framing the point for determination, which placed an undue burden on the complainant to prove the cheques were issued for a legally enforceable debt. The correct point should have been whether the accused succeeded in rebutting the presumption under Section 139 of the N.I. Act.

Conclusion:
The High Court quashed the judgment of the First Appellate Court and restored the trial court's conviction. It held that the complainant was not a money lender under the Goa Money-Lenders Act, 2001, and the accused failed to rebut the presumption under Section 139 of the N.I. Act. The High Court emphasized that the procedural error in framing points for determination by the First Appellate Court contributed to its incorrect conclusion. The appeal was allowed, and the original conviction and sentence were reinstated.

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