2008 (12) TMI 682 - SC - Companies Law

Whether offence punishable under Section 138 of the Act is made out against the appellant? Held that - Having regard to the scheme of the Code of Criminal Procedure, 1973 this Court is of the view that after finding the appellant guilty under Section 138 of the Act, the judicial discretion of imposing appropriate sentence could not have been abdicated by the learned Single Judge in favour of the learned Magistrate. Having found the appellant guilty under Section 138 of the Act it was the bounden duty of the High Court to impose appropriate sentence commensurate with the facts of the case. Therefore, we do not approve or accept the procedure adopted by the High Court. Be that as it may, in this case, we have found that reversal of acquittal itself was not justified. Appeal allowed.

Summary

Issues Involved:
1. Validity of the acquittal under Section 138 of the Negotiable Instruments Act, 1881.
2. Presumptions under Sections 118 and 139 of the Negotiable Instruments Act.
3. Procedure adopted by the High Court in remitting the matter for sentencing.

Issue-wise Detailed Analysis:

1. Validity of the Acquittal under Section 138 of the Negotiable Instruments Act, 1881:
The appellant was initially acquitted by the Judicial Magistrate I Class, Karnal, under Section 138 of the Negotiable Instruments Act, 1881, which was later overturned by the Punjab and Haryana High Court. The case revolved around two cheques issued by the appellant that were dishonoured due to insufficient funds. The respondent claimed these cheques were issued for the purchase of woolen carpets. However, the appellant contended that the cheques were given as advance payment and that no goods were delivered. The Judicial Magistrate found the respondent's evidence insufficient to prove that the cheques were issued for the discharge of a debt or liability, considering the lack of corroborative evidence and the testimony from the Sales Tax Department indicating no sale of carpets during the relevant period. Consequently, the appellant was acquitted.

2. Presumptions under Sections 118 and 139 of the Negotiable Instruments Act:
The High Court relied on the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, which assume that the cheques were issued for the discharge of a debt or liability unless proven otherwise. The Supreme Court examined these presumptions, noting that while they facilitate trade and negotiability, they are rebuttable. The appellant successfully rebutted these presumptions by presenting evidence that no sale occurred, as supported by the Sales Tax Department's records and the respondent's affidavit. The Supreme Court emphasized that once the appellant provided evidence to the contrary, the burden shifted back to the respondent, who failed to substantiate his claims with adequate evidence.

3. Procedure Adopted by the High Court in Remitting the Matter for Sentencing:
The Supreme Court found the High Court's procedure of remitting the matter to the trial court for sentencing after convicting the appellant to be legally flawed. The Appellate Court, upon reversing an acquittal, is required to impose the appropriate sentence itself, as per Section 386(a) of the Code of Criminal Procedure, 1973. The High Court's decision to delegate this judicial function to the Magistrate was deemed improper. The Supreme Court clarified that the judicial discretion of imposing a sentence rests solely with the Appellate Court upon finding the appellant guilty.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment convicting the appellant under Section 138 of the Negotiable Instruments Act. The acquittal judgment by the Judicial Magistrate I Class, Karnal, was restored, reaffirming that the respondent failed to establish the existence of a debt or liability as required by law. The Supreme Court also disapproved the High Court's procedural error in remitting the matter for sentencing, underscoring the Appellate Court's responsibility in this regard.