2020 (6) TMI 9 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - rebuttal of presumption - failure of the drawer to make the requisite payment within fifteen days from the date of receipt of the notice - section 138 of NI Act - HELD THAT - Although the violation of the provisions of Section 269SS of the Income tax Act is an offence under Section 271-D of the Act, but it is not an offence under the Negotiable Instruments Act, 1881, which is silent about the cash limit. Thus, these violations alone may not be sufficient to throw away the complaint in entirety; still, it remains as one of the factors which would weigh in favor of the accused, while appreciating the evidence led in the course of discharging the statutory presumptions of Ss. 118 and 139 of the Negotiable Instruments Act, 1881 - Another factor that creates a serious doubt in the credibility of the holder of the cheque is that in cross-examination, the complainant admitted that although he was an Income Tax Payee, he had not mentioned the loan of ₹ 4,00,000/- in his books of accounts. The fundamental law relating to the successful rebuttal of the statutory presumption under Section 118 and 139 of the Negotiable Instruments Act, 1881 by the accused is that the burden to prove the accusations shifts back upon the complainant after the accused reasonably discharge the initial statutory onus of proof by establishing the facts contrary to the complaint s evidence, or by showing that the existence of consideration was improbable, or doubtful, or the same was illegal. After this, the burden shifts back to the complainant who will be obliged to prove her case just like any other criminal trial, where the initial burden is always on the accuser, and it never shifts - Failure to establish the accusations beyond a reasonable doubt would disentitle her for granting relief based on the bouncing of the negotiable instrument. The judgments of conviction are neither based on correct appreciation of evidence nor the proper application of law. The accused has successfully created a reasonable introspection in the mind of the Court by raising a probable defence that creates a serious doubt about the existence of a legally enforceable debt or existing liability - this Court is allowing the present petition, setting aside the judgments of conviction, and acquitting him of the accusations, by giving him the benefit of the doubt. Petition allowed.

Issues Involved:
1. Dismissal of the appeal by the Sessions Court.
2. Conviction under Section 138 of the Negotiable Instruments Act (NIA).
3. Rebuttal of the presumption under Section 139 of the NIA.
4. Financial capacity and credibility of the complainant.
5. Legal compliance under the Income Tax Act.
6. Examination of witnesses and evidence.

Issue-wise Detailed Analysis:

1. Dismissal of the Appeal by the Sessions Court:
The convict challenged the Sessions Court's dismissal of his appeal, which upheld the Chief Judicial Magistrate's conviction for cheque bouncing under Section 138 of the NIA. The convict sought acquittal from the High Court.

2. Conviction under Section 138 of the NIA:
The case's history traces back to 14.9.2010, when the Bhagat Urban Co-operative Bank Limited, Solan Branch, dishonored a cheque for ?4,00,000 due to insufficient funds. The complainant issued a legal notice under Section 138 of the NIA, demanding payment within fifteen days. Upon the drawer's failure to pay, a criminal complaint was filed, leading to the Chief Judicial Magistrate's conviction of the accused, which was upheld by the Sessions Court.

3. Rebuttal of the Presumption under Section 139 of the NIA:
The accused argued that he had successfully rebutted the presumption under Section 139 of the NIA, claiming the cheque was not issued for any legal consideration but was handed over to Roshan Lal Verma, a property dealer. The defense presented evidence (Ex. D-1) supporting this claim, suggesting the cheque was misused by Roshan Lal Verma.

4. Financial Capacity and Credibility of the Complainant:
The defense questioned the complainant's financial capacity to lend ?4,00,000 in cash, highlighting the absence of any written agreement or record of the transaction in the complainant's books of accounts. The complainant admitted in cross-examination that he did not withdraw the money from his bank account and had not declared it in his income tax returns, weakening his credibility.

5. Legal Compliance under the Income Tax Act:
The defense pointed out the violation of Section 269SS of the Income Tax Act, which prohibits cash transactions exceeding ?20,000. Although this violation is not an offense under the NIA, it weighed in favor of the accused while appreciating the evidence.

6. Examination of Witnesses and Evidence:
The complainant failed to mention or examine Roshan Lal Verma, a key witness, despite the defense's claims that the cheque was handed over in his presence. The court noted the complainant's silence on material aspects such as the relationship with the accused, the source of funds, and the specifics of the transaction, creating serious doubts about the existence of any liability.

Conclusion:
The High Court found that the judgments of conviction were not based on a correct appreciation of evidence or proper application of law. The accused successfully raised a probable defense, creating reasonable doubt about the existence of a legally enforceable debt. Consequently, the court allowed the petition, set aside the judgments of conviction, and acquitted the accused, directing the refund of any compensation deposited with accrued interest. The court also appreciated the assistance of the legal aid counsel and Amicus Curiae.

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