2020 (1) TMI 553 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - rebuttal of presumption - section 138 of the N.I. Act - trial court on the basis of the evidence on record has drawn the presumption under section 139 of the N.I. Act that the accused had issued the said cheque in favour of the complainant for discharge of his debt and liability - whether the accused has been able to rebut the presumption as available under section 139 of the N.I. Act in respect of issuance of the cheque in question? HELD THAT -All the important facts emanating from evidence, have not all been dealt and to me, it appears that the courts below have remained under an erroneous impression that the presumption has to be rebutted by the accused only by leading evidence from his side. The view taken that the accused having not responding in that light, right from the time of demand for payment made by the complainant till lodging of the complaint stands as a circumstance against his case favouring the case of the complainant appears to be a patent error - Therefore, the finding returned by the courts below based on which the conviction has been recorded against the accused suffers from the vice of perversity, particularly, for non-consideration of the evidence on record as pointed out above which pushes the existence of the debt or subsistence of liability owning to the complainant to the tune of ₹ 5.50 lakh and standing to be discharged by the accused into thick clouds of doubt. The courts below are thus found to have committed manifest error by going to hold the accused guilty for commission of offence under section 138 of the N.I. Act in convicting him thereunder followed by imposition of sentence and award of compensation as aforestated. Revision allowed.

Issues Involved:
1. Legality and propriety of the judgment of conviction under Section 138 of the Negotiable Instrument Act.
2. Whether the accused has rebutted the presumption under Section 139 of the N.I. Act.
3. Evaluation of evidence and financial capacity of the complainant.
4. Consideration of legal principles and precedents.

Detailed Analysis:

1. Legality and Propriety of the Judgment of Conviction:
The petitioner challenged the judgment dated 23.7.2016 by the Sessions Judge, Balasore, which upheld the trial court's conviction under Section 138 of the N.I. Act. The trial court sentenced the accused to one year of simple imprisonment and ordered compensation of ?6.00 lakh. The appellate court confirmed this judgment, leading to the present revision.

2. Rebuttal of Presumption under Section 139 of the N.I. Act:
The core issue was whether the accused successfully rebutted the presumption that the cheque was issued for discharging a debt or liability. The defense argued that the presumption under Sections 118(a) and 139 is rebuttable by raising a probable defense without disproving the consideration's existence. The accused claimed the cheque was given as a blank signed cheque for a loan of ?30,000, not ?5.50 lakh, and that the complainant misused it.

3. Evaluation of Evidence and Financial Capacity of the Complainant:
The complainant alleged that the accused took a friendly loan of ?5.50 lakh and issued a cheque for repayment, which was dishonored due to insufficient funds. The complainant provided evidence, including the cheque and a notarized agreement (Ext.11). The accused denied the ?5.50 lakh loan and claimed the cheque was given blank for a smaller loan. The trial court presumed the cheque was for discharging a debt, but the accused argued that the complainant failed to prove his financial capacity to lend such a large amount.

4. Consideration of Legal Principles and Precedents:
The judgment discussed several precedents, including "M.S. Narayana Menon vs. State of Kerala," which held that the presumption under Section 139 can be rebutted by showing the non-existence of consideration. The court emphasized that the burden of proof on the accused is preponderance of probabilities, not beyond reasonable doubt. The court also referred to "Basalingappa vs. Mudibasappa," which highlighted the need for the complainant to prove financial capacity when the accused raises a probable defense.

The court found discrepancies in the complainant's evidence, such as the exact amount of money allegedly given and the improbability of paying such a large sum in cash in a public place. The complainant's failure to prove financial capacity and the improbability of the transaction raised doubts about the existence of the debt.

Conclusion:
The court concluded that the complainant failed to prove the debt and liability of ?5.50 lakh. The accused successfully raised a probable defense, shifting the burden back to the complainant, who did not meet it. The judgments of the lower courts were found to be perverse for not considering these critical aspects. Consequently, the conviction and sentence under Section 138 of the N.I. Act were set aside, and the revision was allowed.

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