2025 (4) TMI 172 - SC - Indian Laws

Dishonour of Cheque - discharge of a legally enforceable debt - rebuttal of presumption under Sections 118 and 139 of the Negotiable Instruments Act - burden of proof on the accused to rebut the presumption - HELD THAT - The High Court while allowing the criminal revision has primarily proceeded on the presumption that it was obligatory on the part of the complainant to establish his case on the basis of evidence by giving the details of the bank account as well as the date and time of the withdrawal of the said amount which was given to the accused and also the date and time of the payment made to the accused including the date and time of receiving of the cheque which has not been done in the present case. Pausing here such presumption on the complainant by the High Court appears to be erroneous. The onus is not on the complainant at the threshold to prove his capacity/financial wherewithal to make the payment in discharge of which the cheque is alleged to have been issued in his favour. In the present case on an overall circumspection of the entire facts and circumstances of the case it is found that the appellant succeeded in establishing his case and the Orders passed by the Trial Court and the Appellate Court did not warrant any interference. The High Court erred in overturning the concurrent findings of guilt and consequential conviction by the Trial Court and the Appellate Court. Conclusion - The complainant had successfully established the case under Section 138 of the Act and the High Court erred in overturning the concurrent findings of the lower courts. The Impugned Order is set aside - appeal allowed.

The core legal issues considered in this judgment revolve around the applicability of Section 138 of the Negotiable Instruments Act, 1881, specifically concerning the dishonor of a cheque and whether the accused issued the cheque in discharge of a legally enforceable debt. The Court also examined the presumption under Sections 118 and 139 of the Act, the burden of proof on the accused to rebut this presumption, and the procedural aspects of maintaining a complaint against a partnership firm under Section 141 of the Act.

In analyzing the issues, the relevant legal framework includes Section 138 of the Negotiable Instruments Act, which criminalizes the dishonor of a cheque for insufficiency of funds or if it exceeds the amount arranged to be paid. The section mandates that the cheque must be presented within the validity period, and the drawer must fail to make the payment within fifteen days of receiving notice of the dishonor for the offence to be constituted. Sections 118 and 139 of the Act create a presumption in favor of the holder of the cheque that it was issued for the discharge of a debt or liability, shifting the burden of proof to the accused to rebut this presumption.

The Court's interpretation and reasoning focused on the presumption of a legally enforceable debt arising from the issuance of the cheque by the accused. The accused admitted to signing the cheque but claimed it was lost and not issued for any debt. The Court found inconsistencies in the accused's defense, particularly regarding the timing of the police report about the lost cheque, which was allegedly filed in 2011, despite the cheque being dated 17.03.2010. This discrepancy undermined the credibility of the accused's defense.

Key evidence included the cheque itself, the non-receipt of a reply to the legal notice sent by the complainant, and the accused's admission of the signature on the cheque. The Court applied the legal presumption in favor of the complainant, noting that the accused failed to provide sufficient evidence to rebut the presumption of a legally enforceable debt.

The Court addressed the competing arguments by considering the accused's claim that the cheque was not issued for a debt but was lost. The Court found this defense unconvincing due to the lack of timely police reporting and the absence of an FIR, which diminished the evidentiary value of the accused's claim. The Court also considered the procedural argument regarding the non-inclusion of the partnership firm as a party to the complaint but found that the accused, being a signatory and in charge, was rightly arrayed as an accused.

In conclusion, the Court determined that the complainant had successfully established the case under Section 138 of the Act, and the High Court erred in overturning the concurrent findings of the lower courts. The Court allowed the appeal, reinstating the conviction and sentence but modified the sentence to a fine of Rs.32,00,000/- to be paid within four months, failing which the original sentence would be restored.

Significant holdings include the affirmation of the presumption under Sections 118 and 139 of the Act, the requirement for the accused to produce evidence to rebut the presumption of a legally enforceable debt, and the procedural validity of prosecuting a partner in a firm without arraigning the firm itself, provided the partner is the signatory and in charge of the firm. The Court emphasized the importance of maintaining the integrity of commercial transactions and the statutory presumption of dishonesty upon the dishonor of a cheque.

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