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2021 (1) TMI 262 - HC - Indian LawsDishonor of Cheque - offence punishable under Section 138 of the NI Act - rebuttal of presumption - Sections 118 and 139 of the NI Act - Sections 118 and 139 of the NI Act - HELD THAT - Section 118 of the NI Act provides certain presumptions to be raised laying down some special rules of evidence relating to presumptions. The presumption, therefore, is a matter of principle to infuse credibility to negotiable instruments including cheques and to encourage and promote the use of negotiable instruments in financial transactions. Section 118 of the NI Act provides presumptions to be raised until the contrary is proved, (i) as to consideration, (ii) as to date of instrument, (iii) as to time of acceptance, (iv) as to time of transfer, (v) as to order of indorsements, (vi) as to appropriate stamp and (vii) as to holder being a holder in due course. That apart, Section 139 of the NI Act provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 of the NI Act for the discharge, in whole or in part, of any debt or other liability. Applying the definition of the word 'proved' in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the NI Act, it becomes evident that in a trial under Section 138 of the NI Act, a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. Section 141 of the NI Act provides constructive liability on the part of the Directors of the company or other persons responsible for the conduct of the business of the company. Though the heading of Section 141 of the NI Act reads Offences by companies , as per the Explanation to that Section company means any body corporate and includes a firm or other association of individuals ; and director in relation to a firm, means a partner in the firm. Their liability is joint and several. Consequently, therefore, when an offence is alleged to have been committed by the partnership firm, every person who, at the time the offence was committed, was in charge of and was responsible to the firm for the conduct of its business as well as the firm shall be deemed to be guilty of the offence and shall be liable to be proceeded under Section 138 of the NI Act. The conclusions drawn by the trial court and the appellate court to convict the accused 1 and 2 are perfectly legal. The cheque in question was drawn for consideration and the holder of the cheque received the same in discharge of an existing debt. Thereafter, the onus shifts on the accused to establish a probable defence so as to rebut such presumption, which onus has not been discharged by the accused. Once the cheque is proved to be issued, it carries statutory presumption of consideration under Sections 118 and 139 of the NI Act. Then, the onus is on the accused to disprove the presumption at which they have not succeeded. It is well settled law that when concurrent findings of facts rendered by the trial court and appellate court are sought to be aside in revision, the High Court does not, in the absence of perversity, upset factual findings arrived at by the two courts below. It is not for the revisional court to re-analyse and reinterpret the evidence on record in a case, where the trial court has come to a probable conclusion. Unless the contrary is proved, it is presumed that the holder of a cheque received the cheque of the nature referred to in Section 138 of the NI Act for the discharge, in whole or in part, of any debt or other liability. In the case at hand, the accused has no case that he has not signed the cheque or parted with under any threat or coercion. That apart, the accused has no case that unfilled cheque had been lost irrecoverably or stolen. The accused failed to prove in the trial by leading cogent evidence that there was no debt or liability - Thus, both the trial court and the appellate court rightly held that the burden was on the accused to disprove the initial presumption under Sections 118 and 139 of the NI Act. The accused was examined as DW1 in this case. He stated that the cheque was entrusted to M/s Leap Forwarders as a blank signed one. No evidence was let in to prove the alleged entrustment with M/s Leap Forwarders as contended. The burden is not discharged rightly. Hence, the conviction of the accused for the offence under Section 138 of the NI Act is only to be upheld. Question of sentence - HELD THAT - The trial court convicted and sentenced the 1st accused to pay a fine of ₹ 5,000/- each and 2 nd accused to undergo simple imprisonment for three months each in CC Nos. 592 and 593 of 1999 on the file of the Judicial First Class Magistrae Court-I, Ernakulam. Further, it was ordered to pay a sum of ₹ 1,19,000/- in CC of 1999 to the complainant under Section 357(3) of Cr.P.C. and default of payment of fine to undergo simple imprisonment for three months each more. The amount involved in CC No. 592 of 1999 is ₹ 79,160/- as per cheque bearing No. 509028 dated 26.05.1999. The concurrent conviction under Section 138 of the NI Act is sustained. Section 138 of the NI Act provides sentence of imprisonment or with fine or with both. Sentence of imprisonment is not compulsory. The object is to pay the amount covered under the cheque. Hence, the mandatory term of imprisonment awarded by the trial court, which was confirmed in appeal, is liable to be set aside. The conviction and sentence as against the 1st accused stand confirmed - While confirming the conviction of the 2nd accused, in modification of the sentence, the 2nd accused is sentenced to pay a fine of ₹ 79,160/- and in default of payment of fine to undergo simple imprisonment for a period of three months. If the amount is paid as compensation, the same shall be given to the complainant as compensation under Section 357(3) of Cr.P.C. In view of the situation prevailing in the country due to the outbreak of Covid-19 pandemic, this Court is inclined to grant six months time from today to the revision petitioners/accused 1 and 2 to deposit the compensation and the fine amount before the trial court, failing which the learned Magistrate shall take necessary steps to execute the sentence against the revision petitioners/accused 1 and 2 in accordance with law - Petition allowed.
Issues Involved:
1. Admissibility of evidence under Section 138 of the Negotiable Instruments Act (NI Act). 2. Legitimacy of the complainant's representation. 3. Presumptions under Sections 118 and 139 of the NI Act. 4. Vicarious liability under Section 141 of the NI Act. 5. Sentencing and modification of punishment. Comprehensive, Issue-wise Detailed Analysis: 1. Admissibility of evidence under Section 138 of the NI Act: The accused were charged under Section 138 of the NI Act for issuing a cheque that was dishonored due to "Exceed Arrangement." The trial court found that the execution of the cheque was admitted by the accused, and the cheque was dishonored. The court concluded that the cheque was issued for the discharge of a debt or liability. The appellate court upheld this finding, and the High Court affirmed it, emphasizing that the cheque was drawn for consideration and received in discharge of an existing debt. 2. Legitimacy of the complainant's representation: The complainant, M/s Shipping Corporation of India, was represented by its local agent, M/s Jairam & Sons. The accused contended that the complainant, being a public sector company, could not authorize someone to represent it in legal proceedings. However, the court found that the complainant was doing business through its agent, and it was the agent's duty to collect and deposit freight charges. The court held that the representation by the agent was valid and that the cheque was issued for a legally enforceable debt. 3. Presumptions under Sections 118 and 139 of the NI Act: The court examined the presumptions under Sections 118 and 139 of the NI Act, which provide that every negotiable instrument is presumed to be made for consideration and executed for the discharge of debt or liability. The court noted that once the execution of the cheque is proved or admitted, the burden shifts to the accused to rebut this presumption. In this case, the accused failed to provide evidence to rebut the presumption that the cheque was issued for a legally enforceable debt. 4. Vicarious liability under Section 141 of the NI Act: The court addressed the issue of vicarious liability, noting that under Section 141 of the NI Act, every person responsible for the conduct of the business of the partnership firm at the time of the offence is deemed guilty. The court cited the Supreme Court's ruling in M/s Kusum Ingots & Alloys Ltd. v. M/s Pennar Peterson Securities Ltd., which outlined the conditions for liability under Section 138. The court found that the partner of the accused firm was responsible for issuing the cheque, and thus, both the firm and the partner were liable. 5. Sentencing and modification of punishment: The trial court sentenced the 1st accused to pay a fine and the 2nd accused to undergo simple imprisonment. The High Court upheld the conviction but modified the sentence, setting aside the mandatory term of imprisonment for the 2nd accused. Instead, the 2nd accused was sentenced to pay a fine, with a default clause of simple imprisonment. The court granted six months for the accused to deposit the compensation and fine, considering the Covid-19 pandemic. Conclusion: The High Court sustained the concurrent conviction under Section 138 of the NI Act, confirming the fine against the 1st accused and modifying the sentence of the 2nd accused to a fine with a default clause. The court emphasized the statutory presumptions under the NI Act and the validity of the complainant's representation, ultimately finding the accused liable for the dishonored cheque.
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