2016 (12) TMI 957 - HC - Indian Laws

Dishonor of cheques - Complaint filed under Section 138 of the Negotiable Instruments Act,1881 - Held that - The revisionist tried his best to run away from its liability by showing the cards of Share Purchase Agreement, i.e. Ex.CW1/D2, dated 22.06.2010 as well as profit sharing project. So far as the acting upon the agreement Ex.CW1/D2 is concerned, the same is not acted upon by the parties. There is nothing proved on record by the revisionist in rebuttal to say that the money received by them was not in consideration of the loan amount but was an investment on profit sharing basis. The respondent/complainant has proved the complaint, i.e. Ex.CW1/A, the cheques nos. 246320 and 246321, i.e. Ex. PW1/10 and Ex.PW1/8 respectively, both dated 15.05.2011 and the legal demand notice dated 02.06.2011. It is pertinent to mention, that the defence of the revisionist is sham having no roots to see the twilight of the day. Consequently, the order on conviction passed by learned Metropolitan Magistrate dated 04.09.2015 is upheld and does not require any interference. So far as the enhancement of sentence awarded by the learned Additional Session Judge, i.e. rigorous imprisonment for three months to rigorous imprisonment for one year, is concerned the learned appellate Court has rightly appreciated the facts on record as the revisionist at the initial stage has admitted its liability and despite admitting the liability the revisionist kept on taking undue benefit of the legal process and harassed the respondent/complainant and backed out many times during the court proceedings too as per the order sheet of the learned Metropolitan Magistrate dated 29.03.2012 and 15.05.2012. Consequently, the order on conviction dated 04.09.2015 passed by the learned Metropolitan Magistrate and the subsequent order of enhancement of sentence passed by the learned Additional Sessions Judge dated 22.12.2015 remains upheld and requires no interference by this Court.

Issues Involved:
1. Conviction under Section 138 of the Negotiable Instruments Act, 1881.
2. Onus of proving liability.
3. Validity of Share Purchase Agreement versus promissory notes.
4. Dishonour of cheques and subsequent legal notice.
5. Admission of liability by the revisionist.
6. Enhancement of sentence by the Additional Sessions Judge.

Detailed Analysis:

1. Conviction under Section 138 of the Negotiable Instruments Act, 1881:
The revisionist was convicted under Section 138 of the NI Act by the learned Metropolitan Magistrate and sentenced to three months of rigorous imprisonment with a fine of ?1,25,00,000. The conviction was based on the dishonour of two cheques amounting to ?90 lakhs issued by the revisionist to the respondent. The learned Additional Sessions Judge enhanced the sentence to one year of rigorous imprisonment.

2. Onus of Proving Liability:
The revisionist argued that the onus to prove liability lies on the respondent, which was not discharged. The respondent, however, provided evidence of the financial transactions, including the issuance of cheques and promissory notes, which the revisionist failed to rebut effectively.

3. Validity of Share Purchase Agreement versus Promissory Notes:
The revisionist claimed that the transactions were part of a Share Purchase Agreement, which superseded any prior understanding. However, the respondent contended that the Share Purchase Agreement was never acted upon, and no shares were issued. The court found that the promissory notes executed by the revisionist were valid and enforceable, as the Share Purchase Agreement was annulled and not acted upon.

4. Dishonour of Cheques and Subsequent Legal Notice:
The two cheques issued by the revisionist were dishonoured with the remarks "Account Blocked." The respondent issued a legal demand notice, which the revisionist received but did not respond to. The court noted that the dishonour of cheques and the failure to reply to the legal notice constituted a clear violation of Section 138 of the NI Act.

5. Admission of Liability by the Revisionist:
The revisionist admitted to receiving ?51 lakhs by cheque and ?19 lakhs through RTGS from the respondent. He also admitted issuing the two cheques in question and receiving the legal demand notice. These admissions were considered sufficient to establish liability under Section 138 of the NI Act.

6. Enhancement of Sentence by the Additional Sessions Judge:
The learned Additional Sessions Judge enhanced the sentence from three months to one year of rigorous imprisonment, citing the revisionist's initial admission of liability and subsequent attempts to evade payment. The court found no special circumstances to interfere with this enhancement, noting that the revisionist had taken undue advantage of the legal process and harassed the respondent.

Conclusion:
The court upheld the conviction and the enhanced sentence, dismissing the revision petitions. The judgment emphasized the revisionist's clear liability and the validity of the promissory notes over the unacted Share Purchase Agreement. The court found no merit in the revisionist's contentions and ordered the dismissal of the revision petitions, with no order as to costs.

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