2015 (4) TMI 1366 - HC - Indian Laws

Dishonour of Cheque - security cheque or not - legally enforceable liability or not - rebuttal of presumptions - adverse inference to be drawn against the appellant for not producing document as ordered in the petition filed by the respondent under section 91 Cr.P.C. Whether the respondent/accused rebutted the presumption in the manner known to law? - HELD THAT - Having regard to the facts of this case, the respondent failed to rebut the presumption. The issuance of cheques was admitted and therefore the appellant is entitled to draw presumption under sections 118 and 139 of the N.I. Act. The case of the respondent is that the cheques were given as security. It is also stated that they only signed the cheques and they did not fill up other things in the cheques including date. In the statutory notice also, it was mentioned that the defence of the respondent was that they only signed the Cheques and the dates and payee's name and the amounts were filled up by the appellant. The fact that in all the three cheques referred to above, dates were altered and attested by the respondent and no explanation was given by the respondent for not demanding the return of the cheques would lead to the conclusion that the cheques were issued towards legally enforceable liability. If they did not owe any amount to the appellants, after the notice served on them calling upon them to pay the amount due under the cheques, the Respondent would have demanded the return of the cheques and the failure on the part of the respondents would lead to the conclusion that the respondent issued those cheques towards legally enforceable liability and they failed to rebut the presumption and only after the respondent rebutted the presumption, burden shifts on to the appellant to prove its case. In other words, when the respondent failed to rebut the presumption, the Court has to draw presumption in favour of the appellant and ought to have held that there was legally enforceable liability and the cheques were issued only towards that legally enforceable liability. The respondent/accused failed to rebut the presumption and therefore, the burden never shifted to the complainant and having admitted the issuance of cheques, the Court ought to have drawn presumption in favour of the appellant towards passing of consideration for the issuance of cheques and therefore, Point No.(i) is answered in favour of the appellant. Whether the adverse inference has to be drawn against the appellant for not producing document as ordered in the petition filed by the respondent under section 91 Cr.P.C.? - HELD THAT - It is true that the Memorandum of Understanding was mentioned in the notice as well as in the complaint and it was also spoken to during evidence and the said Memorandum of Understanding was also not filed during trial or during First Appeal. The respondent has not taken any defence regarding the Memorandum of Understanding to the effect that as per Memorandum of Understanding, no such amount claimed under these cheques were due and payable by him or there was no Memorandum of Understanding. If the respondent admitted the Memorandum of Understanding, then without asserting that under Memorandum of Understanding as claimed by the appellant, no such amount as claimed by the appellant was due, they cannot seek drawing of adverse inference for the non-production of the Memorandum of Understanding. However, as the cheques were admittedly issued and the respondent failed to rebut the presumption in the manner known to law as detailed above, the non-production of Memorandum of Understanding will not have any bearing. The present Criminal Appeals are allowed.

Summary

Issues Involved:

1. Whether the respondent/accused rebutted the presumption under the Negotiable Instruments Act.
2. Whether adverse inference should be drawn against the appellant for not producing documents as ordered under Section 91 Cr.P.C.

Issue-wise Detailed Analysis:

Issue 1: Rebuttal of Presumption

The central issue was whether the respondent successfully rebutted the presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881, which presume that a cheque was issued for consideration and the holder received it for discharge of debt or liability. The appellant claimed that the respondent issued 10 post-dated cheques towards the discharge of a liability amounting to Rs. 1,01,78,713, which were dishonored due to insufficient funds. The respondent contended that the cheques were issued as security and were blank when signed, arguing there was no legally enforceable liability.

The judgment emphasized that once the issuance of a cheque is admitted, the presumption under Sections 118 and 139 arises, and the burden shifts to the respondent to prove otherwise. The court referred to several Supreme Court judgments, including Bharat Barrel and Drum Manufacturing Company v. Amin Chand Payrelal and Hiten P. Dalal v. Bratindranath Banerjee, which clarified that the presumption is rebuttable and can be challenged by showing the non-existence of consideration through probable defense.

The court found that the respondent admitted to issuing the cheques and did not provide sufficient evidence to prove that they were issued as security. The alteration of dates on the cheques, counter-signed by the respondent, suggested that the cheques were not blank when issued. The absence of a demand for the return of the cheques after receiving statutory notice further weakened the respondent's defense. Consequently, the court concluded that the respondent failed to rebut the presumption, and the burden did not shift back to the appellant to prove the liability.

Issue 2: Adverse Inference for Non-production of Documents

The second issue was whether an adverse inference should be drawn against the appellant for not producing the Memorandum of Understanding and other documents, as ordered under Section 91 Cr.P.C. The respondent argued that the non-production of these documents indicated that there was no legally enforceable liability.

The court acknowledged that while the Memorandum of Understanding was mentioned in the notice and complaint, its non-production did not necessarily negate the existence of liability, especially given the respondent's failure to rebut the presumption of consideration. The court noted that the respondent did not contest the Memorandum's existence or its terms during the trial. Moreover, the application to produce the Memorandum during the appeal was considered, but the court found that even if adverse inference was drawn, it would not affect the outcome due to the findings on the first issue.

Conclusion:

The court set aside the judgments of the Additional District and Sessions Judge, which had favored the respondent by concluding there was no subsisting liability. It reinstated the trial court's conviction and sentence, affirming that the respondent failed to rebut the statutory presumption of liability under the Negotiable Instruments Act. The appeals filed by the appellant were allowed, and the connected miscellaneous petitions were dismissed.