2024 (3) TMI 221 - HC - Indian Laws

Dishonour of Cheque - Rebuttal of presumption - Financial Capacity - misuse of Cheque by the complainant - The petitioner argued that the complainant did not have the financial capacity to lend the amount mentioned in the cheques, as it was not reflected in his income tax returns. - presumption of legal liability under Section 139 of the Negotiable Instruments Act to be read with Section 118 of the Act - rebuttal of presumption - HELD THAT - Petitioner does not dispute his signature on any of the two cheques in question. His defence is that said cheques have been misused by the complainant. Once signature on the cheques are not in dispute, there is a presumption of legal liability under Section 139 of the Negotiable Instruments Act to be read with Section 118 of the Act, in favour of the complainant, though the said presumption is rebuttable. In Rangappa vs. Sri Mohan 2010 (5) TMI 391 - SUPREME COURT , a three judge bench of the Hon ble Supreme Court held that Section 139 of the NI Act includes the presumption regarding the existence of a legally enforceable debt or liability and that the holder of a cheque is also presumed to have received the same in discharge of such debt or liability. It was clarified in the aforesaid decision that the presumption of the existence of a legally enforceable debt or liability is, of course, rebuttable and it is open to the accused to raise a defence, wherein the existence of a legally enforceable debt or liability can be contested. Without doubt, the initial presumption is in favour of the complainant - An accused may not be expected to discharge an unduly high standard of proof, reverse onus clause requires the accused to raise probable defence for creating doubt about the existence of a legally enforceable debt or liability for thwarting the prosecution. The standard of proof for doing so would necessarily be on the basis of preponderance of probabilities and not beyond shadow of any doubt. In present case, in order to rebut the presumption, petitioner contended that complainant did not have the financial capacity; that he did not show the amount allegedly lent to the complainant in his income tax returns; and that cheques were managed by the complainant, when he was working as accountant with the accused and which he later on misused - Learned Trial Court rightly observed that no further question was asked from the complainant as to when the land was sold and for how much sale. Thus, the financial capacity of the complainant to lend the money is duly established. The complainant is not obliged to prove the loan or the financial capacity. Once the presumption under Section 139 of the NI Act is available to the complainant, entire burden shifts upon the accused to rebut that presumption, which in the present case accused-petitioner has utterly failed - In Rohitbhai Jivanlal Patel v. State of Gujarat another 2019 (3) TMI 769 - SUPREME COURT , it was held by the Hon ble Supreme Court that In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the Trial Court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing the loan to the accused and want of examination of the relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the Trial Court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the accused-appellant. The aspect relevant for consideration had been as to whether the accused-appellant has brought on record such facts/material/circumstances which could be of a reasonably probable defence. It is held that the learned Trial Court rightly concluded that the defence as pleaded by the accused was not probable and thus, he had failed to rebut the presumption under Section 139 of the Negotiable Instruments Act available to the complainant. Learned Appellate Court has also considered all the pleas as raised by the petitioner accused. This Court does not find any illegality in the impugned order. Present revision is hereby dismissed.

Summary

Issues Involved:
1. Conviction under Section 138 of the Negotiable Instruments Act.
2. Financial capacity of the complainant.
3. Misuse of cheques by the complainant.
4. Legal presumption under Section 139 of the NI Act.
5. Non-mentioning of loan amount in Income Tax Returns.

Summary:

This revision is directed against the conviction of the petitioner under Section 138 of the Negotiable Instruments Act, as recorded by the Trial Court and affirmed by the Appellate Court.

Issue 1: Conviction under Section 138 of the NI Act

The complainant filed a complaint seeking prosecution of the accused under Section 138 of the NI Act for dishonouring two cheques amounting to Rs. 8,00,000/-. The Trial Court convicted the accused and sentenced him to rigorous imprisonment for 1½ years and a fine of Rs. 5,000/-, which was modified to 1 year by the Appellate Court.

Issue 2: Financial capacity of the complainant

The petitioner contended that the complainant did not prove any source of money to advance a loan of Rs. 8,00,000/-. The Trial Court found that the complainant had arranged the amount by selling land and from Army benefits, establishing his financial capacity. The Court noted that no further questions were asked about the land sale details, thus affirming the complainant's financial capacity.

Issue 3: Misuse of cheques by the complainant

The petitioner claimed that the cheques were misused by the complainant, who was previously an accountant for the accused. The Trial Court found no evidence to support this claim, noting that the accused did not produce any records to show the complainant's employment or any misuse of funds. The Court also observed that the accused did not respond to the legal notice or file a complaint against the complainant for misuse, further discrediting this defense.

Issue 4: Legal presumption under Section 139 of the NI Act

The Court held that once the signature on the cheques is not disputed, there is a presumption of legal liability under Section 139 of the NI Act. This presumption is rebuttable, but the accused must probabilize his defense. The Court cited Supreme Court judgments emphasizing that the presumption under Section 139 includes the existence of a legally enforceable debt or liability, and the burden shifts to the accused to rebut this presumption.

Issue 5: Non-mentioning of loan amount in Income Tax Returns

The petitioner argued that the loan amount was not shown in the complainant's income tax returns. The Court held that non-mentioning of the loan amount in income tax returns cannot be a ground to disbelieve the complainant. It may attract penal provisions of the Income Tax Act but does not invalidate the prosecution under Section 138 of the NI Act.

In conclusion, the Court found no merit in the petitioner's contentions and dismissed the revision, directing the petitioner to surrender before the Chief Judicial Magistrate, Bathinda, to carry out the sentence.