2020 (5) TMI 529 - HC - Indian Laws

Dishonor of Cheque - legally recoverable debt or not - rebuttal of presumption - whether the cheque was given in security or not and its effect? - HELD THAT - If any cheque is given in security, then presumption of legally enforceable debt or liability exists which has to be rebutted by the accused to the extent that full amount due and payable to the complainant has been paid or otherwise - in the case in hand, accused did not discharge the onus lying over him and he could not rebut the presumption as per Section 118 and Section 139 of the Act. Here, the complainant/ appellant on the request of respondent/accused, borrowed ₹ 1,00,000/- on 29-03-2007 and in lieu thereof accused/respondent issued a cheque in favour of the appellant bearing No.531001. Thus there is legally recoverable debt or liability on the accused/respondent. It is established that trial Court erred in passing the impugned judgment recording acquittal in favour of the accused i.e. respondent - Therefore, impugned judgment dated 18-08-2009 is hereby set aside and appeal stands allowed.

Summary

Issues involved:
Appeal against dismissal of complaint due to a cheque issued as security.

Analysis:
The core issue in this case is whether a cheque issued as security constitutes a legally recoverable debt or liability under Section 139 of the Negotiable Instruments Act. The appellant argued that the trial court erred in dismissing the complaint solely based on the cheque being issued as security. Reference was made to the judgment in Rangappa v. Mohan to emphasize that the existence of a legally recoverable debt is presumed under Section 139, and the accused must provide a probable defense to contest this presumption. The appellant also challenged the trial court's reliance on the Krishna Janardhan Bhatt case, asserting that even if a cheque is issued as security, Section 138 of the Act is still applicable.

The court analyzed the conflicting judgments and highlighted the importance of the presumption under Section 139 of the Act. It referenced the APS Forex Services Pvt. Ltd. case to explain the nature of this presumption as a rebuttable one, placing the burden on the accused to prove the absence of a legally enforceable debt or liability. The court discussed various legal precedents, emphasizing that the presumption in favor of the complainant is a crucial aspect in cases under Section 138 of the Act.

The judgment emphasized that the accused's failure to rebut the presumption under Section 139 led to the erroneous acquittal by the trial court. It was noted that the accused did not provide evidence to demonstrate full payment of the amount due and payable to the complainant. The court rejected the accused's claim that the cheques were given as security, especially since the cheque in question was issued after previous ones were dishonored. The court clarified that the burden of proof shifts to the complainant only if the accused questions the complainant's financial capacity, which was not the case here.

In conclusion, the court held that the trial court erred in acquitting the respondent and allowed the appeal. The respondent was directed to pay the amount due to the complainant along with compensation, failing which would result in imprisonment. The judgment highlighted the importance of the presumption of a legally enforceable debt or liability under Section 139 and the burden on the accused to rebut this presumption effectively.