2020 (11) TMI 889 - HC - Indian Laws

Dishonor of Cheque - legally recoverable debt or not - rebuttal of presumption u/s 139 of NI Act - complainant in the present appeal who contended that the Trial Court has committed error in not appreciating both oral and documentary evidence and it has erred in casting the burden on the complainant - HELD THAT - In the case on hand, it has to be noted that there is no dispute with regard to the issuance of the cheque and the same is also not denied by the accused and also has not given any reply notice when the notice was served on him and the defense was set up during the cross-examination that the said cheque was for security purpose to avail the loan by the complainant from the other financier and the same is not proved - there is no dispute with regard to the fact that the primary burden is on the complainant to prove with regard to the transaction and presumption has to be drawn if the cheque is admitted and no reply was given. Whether the probable defense was raised by the accused has to be considered. In the case on hand, the Trial Court has not at all invoked the presumption in favour of the complainant and also not discussed the evidence of the defense, particularly, the evidence of the accused, who has been examined as D.W.1 and also two witnesses, who have been examined as D.Ws.2 and 3 on behalf of the accused. Whether the Trial Court has committed an error in acquitting the accused in coming to the conclusion that the complainant has not proved legally recoverable debt? - HELD THAT - The defense of the accused that the said blank cheque was given to avail the financial assistance from the financiers and it is not the case of the accused from whom the complainant has borrowed the money to start the business. It is also an admitted fact that the Hotel Business was commenced in the year 2001 itself and this cheque pertains to the year 2005. When the accused admits his signature available on cheque - Ex.P1 and also on Ex.P6 notice served on him, the accused did not setup any defense immediately and during the course of cross-examination after thought set up a defense that the said cheque was given as security. The Trial Judge failed to consider the evidence in toto both the evidence of complainant and DWs.1 to 3 and not considered the documentary evidence available on record and mainly considered the evidence of P.W.1 and particularly, Ex.P14 - the letter and the said letter is not disputed by the complainant himself, he only got marked the document and the trial Court only concentrated on the source of the complainant. The Trial Judge did not consider the evidence available on record in toto and failed to discuss the evidence of DWs.1 to 3 and only considered the evidence of PW.1. It is a settled law that the complainant has to prove his case and in the case on hand, the accused also did not dispute the cheque as well as his signature and also he has not given any reply and no complaint was given when the notice was given. If really the said cheque was mis-used he would have given the complaint and categorically admits that he is not having any impediment to give complaint and also no difficulty to give any reply. When such being the case, the presumption is available in favour of the complainant and no doubt the said presumption is rebuttable presumption and the question before this Court is whether the accused rebutted the presumption and I have already discussed in detail, the evidence of DWs.1 to 3, it is clear that the accused himself has suffered the loss in Hotel business and his house was also brought for sale when the Sales Tax of the Hotel was not paid. The Trial Judge ought not to have come to the conclusion that the source has not been proved and non- examination of two witnesses from whom the complainant has received the money to advance the same in favour of the accused is not fatal - the Trial Court has committed an error in acquitting the accused and not drawn the presumption in favour of the complainant and therefore, it requires an interference of this Court. The accused is convicted for the offence punishable under Section 138 of the NI Act and directed to pay the amount of ₹ 10 lakhs in favour of the complainant within eight weeks from today. If the accused fails to pay the amount he shall undergo simple imprisonment for a period of one year - Appeal allowed.

Summary

Issues Involved:
1. Error in acquitting the accused by the Trial Court.
2. Failure to invoke the presumption under Section 139 of the N.I. Act.
3. Legally recoverable debt.

Issue-wise Detailed Analysis:

1. Error in Acquitting the Accused by the Trial Court:
The High Court examined whether the Trial Court committed an error in acquitting the accused by concluding that the complainant had not proven a legally recoverable debt. The Trial Court had primarily focused on the complainant's financial capacity to lend ?6 lakhs and had dismissed the complaint based on the complainant's inability to prove this capacity. The High Court noted that the Trial Court had failed to consider the evidence of the defense witnesses DWs.1 to 3 and had not discussed the presumption under Section 139 of the N.I. Act. The High Court highlighted that the Trial Court should have considered both the oral and documentary evidence from both parties and should have invoked the presumption in favor of the complainant.

2. Failure to Invoke the Presumption under Section 139 of the N.I. Act:
The High Court emphasized the importance of the presumption under Section 139 of the N.I. Act, which states that once the issuance of the cheque is admitted, there is a presumption that it was issued for the discharge of a debt or liability. The High Court referred to several judgments, including Rangappa v. Sri Mohan, Bir Singh v. Mukesh Kumar, and Rohitbhai Jivanlal Patel v. State of Gujarat, to underline that the burden of proof shifts to the accused to rebut this presumption. The High Court found that the Trial Court had failed to invoke this presumption and had not properly considered the defense's evidence, which did not sufficiently rebut the presumption.

3. Legally Recoverable Debt:
The High Court scrutinized the evidence presented by both parties. The complainant had alleged that the accused had issued a cheque for ?6 lakhs, which was dishonored due to insufficient funds. The complainant had also issued a legal notice to the accused, which was not replied to. The High Court noted that the accused admitted to issuing the cheque and receiving the notice but claimed the cheque was given as security. The High Court found that the accused had not provided cogent evidence to support this claim. The High Court also noted that the complainant's financial status was corroborated by defense witnesses, who admitted that the complainant had a sound financial status and was running a successful hotel business.

Conclusion:
The High Court concluded that the Trial Court had erred in acquitting the accused and had failed to properly invoke the presumption under Section 139 of the N.I. Act. The High Court set aside the Trial Court's judgment and convicted the accused under Section 138 of the N.I. Act, directing the accused to pay ?10 lakhs to the complainant within eight weeks, failing which the accused would undergo simple imprisonment for one year. The High Court ordered the Registry to transmit the Trial Court records forthwith.