2023 (11) TMI 518 - HC - Indian Laws

Dishonour of Cheque - discharge of legally enforceable debt or not - acquittal of the accused - rebuttal of presumption - HELD THAT - It is a settled position in law that for the purpose of the prosecution under section 138 of the NI Act, an instrument must be entered into by the person who owes a legally enforceable debt to another and such person who takes over the liability of the former to discharge such debt in favour of the latter. The party to whom such debt is owed must either be made a party to such instrument or must be informed of such assignment/transfer of liability. A mere statement that the cheque was issued by a person to discharge the liability of another is not sufficient to set the wheels of criminal prosecution under section 138 of the NI Act in motion. The presumption under section 139 of the NI Act is rebuttable. The benefit under this section cannot be availed if the accused raises a plausible defence, which creates doubts about the existence of a legally enforceable debt or liability. To create such doubt, the accused can rely on the materials submitted by the complainant in order to raise such a defence, and it is conceivable that in some cases, the accused may not need to adduce evidence of his/her own. In the present case, the cheque was not issued by the accused towards the discharge of liability of the debt of Mr Dhaval Bhatt owed by him to the complainant. If the cheque had been issued by Mr Dhaval Bhatt for the outstanding amount of Rs. 10,02,980/-, the accused could have availed the benefit of section 139 of the NI Act. However, in the absence of the assignment of liability of Mr Dhaval Bhatt unto the accused and there being no nexus between the issuance of the said cheque and the liability of the accused to repay the outstanding amount to the complainant, the trial Court rightly concluded that the complainant failed to prove that the dishonoured cheque was issued by the accused for discharge of liability. The trial Court has rightly acquitted the accused for the offence punishable under section 138 of the NI Act - Appeal dismissed.

Summary

Issues:
The legality, propriety, and correctness of the Judgment and Order dated 25 August 2011 passed by the Metropolitan Magistrate in Criminal Case No. 512/SS/2010, acquitting the accused of the offence under Section 138 of the Negotiable Instruments Act, 1881, is challenged in this appeal.

Details of the Judgment:

Issue 1: Liability of the Accused

The complainant, a private limited company, supplied diamond jewellery to M/s. D. B. Diamonds, with an outstanding amount of Rs. 10,02,980/- allegedly taken over by the accused, brother-in-law of the proprietor. The accused issued a post-dated cheque which was dishonored due to 'stop payment' instructions. The complainant filed a complaint under section 138 of the NI Act.

Issue 2: Trial Proceedings

The learned Magistrate recorded evidence and documents from both parties. The accused abjured guilt and claimed trial. The Magistrate acquitted the accused, leading to the present appeal by the complainant.

Issue 3: Arguments and Counter-arguments

The appellant contended that the accused's liability was proved beyond reasonable doubt, relying on legal notice receipt and dishonored cheque. The respondent argued that there was no evidence of the accused taking over liability, citing lack of written agreement and pointing to the role of Mr. Dhaval Bhatt in the transaction.

Issue 4: Presumption under Section 139 of the NI Act

The court analyzed Section 139, which presumes that the holder received the cheque for the discharge of a debt unless proved otherwise. The absence of a written assignment of debt and the accused's actions in stopping the cheque payment led to the conclusion that the accused did not take over Mr. Dhaval Bhatt's liability.

Conclusion:

The Court upheld the trial court's decision, stating that the complainant failed to prove that the dishonored cheque was issued by the accused for the discharge of liability. Consequently, the appeal was dismissed.