2020 (9) TMI 638 - HC - Indian Laws

Dishonor of Cheque - legal presumption under sections 118 and 139 of Negotiable Instrument Act - In the absence of specific evidence led by defendant qua maintainability of suit in terms of section 3 of H.P. Registration of Money Lenders Act, Whether the findings of Ld. Court below holding that the suit is barred by section 3 of H.P. Registration of Money Lender Act is legally sustainable? HELD THAT - Instant suit filed by the plaintiff cannot be held to be not maintainable under Section 3 of the H.P. Registration of Money Lenders Act as the defendant failed to prove that plaintiff falls within the definition of money-lender under the Act and also failed to prove that various recovery suits instituted by the plaintiff pertained to that kind of loan which is included under the definition of loan in terms of the Act ibid. Therefore, findings in that regard of both the learned Courts below holding the suit to be not maintainable are quashed and set aside. However, separate findings recorded by both the learned Courts below in dismissing the suit of appellant on merits are based upon correct interpretation of law and facts. Plaintiff has not been able to prove that he had loaned ₹ 3,00,000/- to the defendant or that towards satisfaction of this loan amount, the defendant had handed him the cheque in question. The defendant has explained the circumstances under which the blank cheque in question signed by him was handed over by his father to the plaintiff. Defendant has also highlighted various suspicious aspects regarding manipulations in the cheque including filling of the amount, account number, name and signature in different ink on the cheque besides apparent addition of zero in the amount mentioned therein. Defendant has successfully rebutted the presumption attached to the cheque under Sections 118 and 139 of the Negotiable Instruments Act. There is no perversity or illegality in the concurrent judgments and decrees passed by learned Courts below in dismissing the suit of the appellant on merits. Appeal disposed off.

Summary

Issues Involved:

1. Legal presumption under Sections 118 and 139 of the Negotiable Instruments Act.
2. Applicability of the H.P. Registration of Money Lenders Act, 1976.

Detailed Analysis:

1. Legal Presumption under Sections 118 and 139 of the Negotiable Instruments Act:

The plaintiff argued that the courts below failed to appreciate the legal presumption available under Sections 118 and 139 of the Negotiable Instruments Act. The plaintiff contended that since the defendant admitted his signature on the cheque, the legal presumption should be that the cheque was issued for a legally enforceable debt. The plaintiff cited the Supreme Court decision in Bir Singh vs. Mukesh Kumar, which held that the burden of proof shifts to the defendant once the signature on the cheque is admitted.

However, the courts below found discrepancies in the cheque, noting that different inks were used for the signature, account number, name, amount, and date. Additionally, it appeared that a zero was added to the amount to change it from ?30,000 to ?3,00,000. The defendant explained that the cheque was initially given as security for a loan taken by his father, which was repaid, but the cheque was not returned. The courts concluded that the plaintiff failed to prove the transaction and that the defendant successfully rebutted the presumption of the cheque's validity. Therefore, the findings of the lower courts were upheld, dismissing the plaintiff's claim on the basis of suspicious circumstances surrounding the cheque.

2. Applicability of the H.P. Registration of Money Lenders Act, 1976:

The defendant argued that the plaintiff was a habitual moneylender engaged in multiple recovery suits and thus required to be registered and licensed under the H.P. Registration of Money Lenders Act, 1976. The plaintiff admitted to instituting various recovery suits but denied being a moneylender. The courts below noted the plaintiff's involvement in numerous recovery cases and concluded that the plaintiff was a moneylender who failed to produce the necessary registration and license, rendering the suit non-maintainable.

However, the High Court found that the defendant did not provide specific evidence to prove that the loans in the recovery suits fell within the definition of 'loan' under Section 2(8) of the Act. The court noted that loans based on negotiable instruments, such as cheques, are excluded from the Act's definition of 'loan.' Therefore, the suit for recovery based on a cheque could not be dismissed for lack of registration and license under the Act. The High Court quashed the findings of the lower courts on this point, holding that the suit was maintainable.

Conclusion:

(a) The suit filed by the plaintiff is maintainable under Section 3 of the H.P. Registration of Money Lenders Act, as the defendant failed to prove that the plaintiff was a 'moneylender' under the Act.

(b) The findings of the lower courts dismissing the suit on merits were upheld. The plaintiff failed to prove the loan transaction, and the defendant successfully rebutted the presumption attached to the cheque under Sections 118 and 139 of the Negotiable Instruments Act. The discrepancies and manipulations in the cheque were significant factors in dismissing the suit.

The second appeal was disposed of on these terms, along with all pending applications.