2023 (4) TMI 2 - HC - Indian Laws

Dishonour of Cheque - guarantor's liability - funds insufficient - legally enforceable debt or not - vicarious liability - discharge of initial burden in order to prove its case under Section 138 of the Negotiable Instruments Act - failure to rebut by oral or documentary evidence - HELD THAT - The guarantor's liability under the Indian Contract Act, 1872 is a civil liability. However, vicarious liability in the criminal law in terms of Section 141 of the Negotiable Instruments Act cannot be fastened because of the civil liability. Vicarious liability under sub-Section (1) to Section 141 of the Negotiable Instruments Act cannot be pinned when the person is in overall control of the day-to-day business of the company or firm. There was no legally enforceable debt in order to issue any cheque by the petitioner. The petitioner, being stood as a guarantee for the aforesaid two companies, was not liable to pay any amount to the respondent and nothing warranted for the petitioner to issue cheque for any enforceable debt in favour of the respondent herein. Therefore, the alleged cheque was not issued for any legally enforceable debt and the petitioner cannot be held to be liable for the offence punishable under Section 138 of the Negotiable Instruments Act. Unfortunately, both the Courts below mechanically convicted the petitioner for the offence punishable under Section 138 of the Negotiable Instruments Act and it cannot be sustained against the petitioner herein. The Criminal Revision Case is allowed.

Summary

Issues involved:
The judgment involves the conviction and sentence of the petitioner for the offence punishable under Section 138 of the Negotiable Instruments Act, along with the order of compensation to the respondent.

Details of the judgment:

Issue 1: Alleged offence under Section 138 of the Negotiable Instruments Act
The respondent lodged a complaint against the petitioner for issuing a cheque on behalf of two companies, M/s.Trial Tex and TKT Corporation, as a guarantor for job work. The cheque was dishonored, leading to legal proceedings.

Issue 2: Burden of proof and evidence
The trial court found the accused guilty based on oral and documentary evidence presented by both parties. The petitioner rebutted the presumption of legally enforceable debt by issuing a reply notice and presenting evidence.

Issue 3: Petitioner's defense
The petitioner claimed to be an adviser of Central Excise, Customs, and Foreign Trade, denying any connection with the two companies or standing as a guarantor. He argued that the respondent's misconduct was acknowledged by customs authorities, and the alleged companies were non-existent.

Issue 4: Vicarious liability and legal enforceable debt
The petitioner contended that as a guarantor, he was not liable for any enforceable debt to the respondent. The absence of a statutory notice to the companies and failure to involve them in the legal proceedings raised doubts on the petitioner's liability.

Judgment Outcome:
The High Court allowed the Criminal Revision Case, setting aside the lower court's conviction and sentence. The petitioner was acquitted, and any bail bond executed or fine paid was ordered to be refunded. The judgment highlighted the lack of legally enforceable debt and vicarious liability, ultimately ruling in favor of the petitioner.