2018 (9) TMI 842 - HC - Indian Laws

Dishonor of Cheque due to insufficiency of funds - Section 138 of Negotiable Instruments Act - Held that - Once the complainant establishes the factual basis of existence of a legally recoverable debt it is obligatory on the Court to raise the presumption under Section 118 NI Act whereafter the onus shifts to the accused to rebut the same by preponderance of probability whether by leading defence evidence or on the evidence led by the complainant itself. By examining Devender Singh the complainant has proved the source of money available to him and merely because the sale deed was not exhibited by Devender Singh is no ground to come to the conclusion that factual basis for establishing the legal liability has not been discharged. In his cross-examination complainant admitted that he was a stock broker and presently unemployed. The loan of ₹14,40,000/- was given in cash and he had not shown the same in the Income Tax Return. The same was not withdrawn from any account. He volunteered that he sold a property which was given as a gift to him by his uncle and from the said money he gave the loan to the accused. He admitted that there was no loan agreement between himself and Mr. Sushil Kumar - Complainant tendered his evidence by way of affidavit and the text message was marked as Mark- A on 17th September, 2014. As per the original record though initially mark Ex.CW-1/7 was put on it however, later as noted in the evidence of the complainant on 17th September, 2014 it was only a marked document. Though the SMS was marked as mark A however, in his deposition as DW-1 Santosh Kumar Singh admitted that the SMS mentioned in para-8 of Ex.CW-1/7 to the complainant was sent by him. In case the blank signed cheques were given as security there was no question of the liability to pay as admitted in the SMS as also in the deposition - the fact that the cheque was signed by him even though he gave a blank signed cheque, the learned Trial Court committed an error in not considering this admission of the respondent on oath. Respondent is therefore, convicted for the offence punishable under Section 138 NI Act.

Summary

Issues Involved:

1. Legally enforceable debt or liability.
2. Source of funds for advancing the loan.
3. Admissibility and significance of the text message as evidence.
4. Presumption under Section 139 of the NI Act.
5. Acquittal by the Trial Court and its validity.

Detailed Analysis:

1. Legally Enforceable Debt or Liability:

The appellant claimed that the respondent took a friendly loan of ?14,40,000/- in April 2013, which was not repaid despite reminders. The respondent issued a cheque dated 8th July 2013, which was dishonored due to insufficient funds. The respondent denied taking the loan and claimed the cheque was given as security for committee payments. The court emphasized the presumption under Section 139 of the NI Act, which includes the existence of a legally enforceable debt or liability unless rebutted by the accused.

2. Source of Funds for Advancing the Loan:

The appellant attempted to prove the source of funds through witnesses Devender Singh and Raj Kumar. Devender Singh stated that part of the sale proceeds from a property went to Brijesh Kumar, which was used for the loan. Raj Kumar corroborated this. The court noted that the absence of a sale deed does not negate the financial capacity of the appellant to give the loan, as the factual basis was established through witness testimony.

3. Admissibility and Significance of the Text Message as Evidence:

The appellant presented a text message where the respondent allegedly admitted his liability. The respondent argued that it was inadmissible without a certificate under Section 65B of the Indian Evidence Act. However, the respondent admitted in his deposition that he sent the SMS. The court held that this admission negated the need for further proof of the text message, thus establishing the respondent's acknowledgment of the debt.

4. Presumption under Section 139 of the NI Act:

The court reiterated the presumption under Section 139 of the NI Act, which favors the complainant once the factual basis of a legally recoverable debt is established. The burden then shifts to the accused to rebut this presumption by preponderance of probability. The court cited various precedents, including Rangappa v. Sri Mohan, to emphasize that the presumption includes the existence of a legally enforceable debt and that the accused can rebut it by raising a probable defense.

5. Acquittal by the Trial Court and Its Validity:

The Trial Court acquitted the respondent, finding contradictions in the appellant's evidence and questioning the financial capacity to lend the amount. However, the High Court found this decision perverse, noting that the respondent's admission of sending the SMS and the signed cheque indicated liability. The High Court concluded that the Trial Court erred in not considering these admissions and thus set aside the acquittal, convicting the respondent under Section 138 of the NI Act.

Conclusion:

The High Court reversed the Trial Court's decision, convicting the respondent under Section 138 of the NI Act based on the established presumption of debt, the source of funds, and the respondent's admission of liability. The case was listed for hearing on the order of sentence.