2025 (1) TMI 131 - HC - Indian Laws

Dishonour of Cheque - violation of cardinal ingredient of Section 138 (b) of the NI Act - discharge of burden to prove - presumption under Sections 139 and 118 of the NI Act - non-production of bank statement / IT return by the complainant would vitiate the complaint itself. Whether the complainant violated the cardinal principle laid down under Section 138(b) of the Negotiable Instruments Act? - HELD THAT - In Suman Sethi case 2000 (2) TMI 822 - SUPREME COURT the Hon ble Supreme Court held ' If in a notice while giving the break up of the claim the cheque amount, interest, damages etc. are separately specified, other such claims for interest, cost etc. would be superfluous and these additional claims would he severable- and will not invalidate the notice. If, however, in the notice an omnibus demand is made without specifying what was due under the dishonored cheque, notice might well fail to meet the legal requirement and may be regarded as bad.' Thus , to make a valid demand notice as per the proviso of Section 138(b) of the Act, 1881, the due amount of bounced cheque, and other additionally claimed amounts should be mentioned in a separate portion. In the demand notice, if other amount is mentioned with the cheque amount in a separate portion in detail, the said notice cannot be faulted. In the case on hand, the complainant demanded the cheque amount of Rs.9.00 lakhs and he additionally demanded Rs.5,000/- towards charges for issuance of the legal notice. Therefore, Ex.P.11 is a valid one. Whether the non-production of bank statements or Income Tax returns by the complainant would vitiate the complaint itself? - HELD THAT - In the light of the decision of the Madhya Pradesh High Court in Ragini Gupta vs. Piyush Dutt Sharma 2019 (4) TMI 114 - MADHYA PRADESH HIGH COURT , the finding of the learned trial Court that as the complainant failed to disclose Rs.42.00 lakhs alleged to have invested for the production of the film in his income tax returns is not correct because if the complainant did not disclose his income in the Income Tax Return, then the Income Tax Department is well within its rights to reopen the assessment of income of the assessee and to take action as per the provisions of Income Tax Act. Whether the complainant had discharged the onus, and whether the accused failed to discharge the onus on his part? - HELD THAT - As far as the aspect of existence of basic ingredients for drawing of presumption under Sections 118 and 139 of the N.I. Act is concerned, the accused did not deny his signature on the cheque in question that had been drawn in favour of the complainant on a bank account maintained by the accused. The said cheque was presented to the bank concerned within the period of its validity and was returned unpaid for the reason funds insufficient. So all the basic ingredients of Sections 118 and 139 of the N.I Act are apparent on the face of the record. The trial Court had failed to take note of all these facts and failed to draw the requisite presumption. Therefore, it is required to be presumed that the cheque in question was drawn for consideration and the holder of the cheque i.e. the complainant received the same in discharge of an existing debt. The onus, therefore, shifts on the accused to establish a probable defence so as to rebut such a presumption, which he failed to do so. With regard to the preponderance of probabilities, the accused has to bring on record such facts and circumstances which may lead the Court to conclude either that the consideration did not exist or that its non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist. Mere denial would not fulfil the requirements of rebuttal as envisaged under Sections 118 and 139 of the N.I. Act. Conclusion - i) In the demand notice, if other amount is mentioned with the cheque amount in a separate portion in detail, the said notice cannot be faulted. ii) Complainant correctly disclosed Rs.42.00 lakhs alleged to have invested for the production of the film in his income tax returns. iii) It is required to be presumed that the cheque in question was drawn for consideration and the holder of the cheque i.e. the complainant received the same in discharge of an existing debt. The onus, therefore, shifts on the accused to establish a probable defence so as to rebut such a presumption, which he failed to do so. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

• Whether the complainant violated the cardinal principle laid down under Section 138(b) of the Negotiable Instruments Act (NI Act).
• Whether the non-production of bank statements or Income Tax returns by the complainant would vitiate the complaint itself.
• Whether the complainant had discharged the onus, and whether the accused failed to discharge the onus on his part.
• Whether the judgment under appeal is liable to be set aside.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Demand Notice under Section 138(b) of the NI Act

• Relevant Legal Framework and Precedents: Section 138(b) of the NI Act requires a valid demand notice for the cheque amount. Precedents include Suman Sethi vs. Ajay K. Churiwal and K.R. Indira vs. G. Adinarayana, which clarify that additional demands in the notice do not invalidate it if the cheque amount is specified separately.
• Court's Interpretation and Reasoning: The court interpreted that the demand notice issued by the complainant, which included the cheque amount and additional charges separately, was valid under Section 138(b).
• Key Evidence and Findings: The demand notice (Ex.P.11) specified a cheque amount of Rs.9.00 lakhs and Rs.5,000/- for legal notice charges separately.
• Application of Law to Facts: The court applied the legal principles from the aforementioned cases to validate the demand notice.
• Conclusions: The demand notice was found to be valid, and the complainant did not violate Section 138(b).

Issue 2: Impact of Non-production of Bank Statements/IT Returns

• Relevant Legal Framework and Precedents: The court referenced Ragini Gupta vs. Piyush Dutt Sharma, which held that non-filing of Income Tax returns does not automatically disprove the source of income.
• Court's Interpretation and Reasoning: The court reasoned that non-disclosure of income in tax returns is an issue between the taxpayer and the tax authorities, not a determinant of the complainant's financial credibility in this context.
• Key Evidence and Findings: The complainant failed to provide bank statements or IT returns to substantiate the investment claim.
• Application of Law to Facts: The court found that the trial court's reliance on the absence of IT returns to dismiss the complaint was incorrect.
• Conclusions: The non-production of bank statements or IT returns did not vitiate the complaint.

Issue 3: Discharge of Onus by Complainant and Accused

• Relevant Legal Framework and Precedents: Sections 118 and 139 of the NI Act create presumptions in favor of the holder of the cheque, which the accused must rebut.
• Court's Interpretation and Reasoning: The court found that the accused did not deny the signature on the cheque, and the cheque was returned due to insufficient funds, thereby fulfilling the conditions for presumption under Sections 118 and 139.
• Key Evidence and Findings: The accused failed to present any evidence to rebut the presumption of the cheque being issued for a legally enforceable debt.
• Application of Law to Facts: The court applied the statutory presumptions and found the accused did not meet the burden of rebuttal.
• Conclusions: The complainant discharged the onus, and the accused failed to rebut the presumption.

Issue 4: Liability of the Judgment to be Set Aside

• Conclusions: Based on the analysis of the above issues, the court concluded that the trial court's judgment was erroneous and warranted interference.

3. SIGNIFICANT HOLDINGS

• Preservation of Verbatim Quotes: "It is required to be presumed that the cheque in question was drawn for consideration and the holder of the cheque i.e., the complainant received the same in discharge of an existing debt."
• Core Principles Established: The judgment reinforced the presumption under Sections 118 and 139 of the NI Act, emphasizing the need for the accused to provide a probable defense to rebut these presumptions.
• Final Determinations on Each Issue: The court set aside the trial court's judgment, validating the demand notice, dismissing the significance of non-production of IT returns, and affirming the presumption of the cheque being issued for a legally enforceable debt.

In conclusion, the criminal appeal was allowed, and the trial court's judgment was set aside, reinstating the presumption of the cheque being issued for a legally enforceable debt under the NI Act.