2021 (1) TMI 624 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - Rebuttal of presumption - trial Court came to the conclusion that appellant utterly failed to prove the guilt of accused beyond all reasonable doubt to the satisfaction of the Court - offence punishable under section 138 of Negotiable Instruments Act and section 139 of NI Act - HELD THAT - The primary requirement is the existence of any debt or liability and that the said debt has to be legally enforceable debt. Therefore it is stated that when any cheque is drawn by a person on account maintained by him with Bank for payment of any amount of money to another person from out of that account for discharge in whole in part of any debt or other liability is returned by the Bank unpaid in such situations the provision under this section will come into play. Therefore the primary requirement would be the existence of legally recoverable debt or other liability. In the present case on hand on complaint being registered and cognizance being taken the presumption in law will act in favour of appellant as any cheque i.e. presented to the Bank would be presumed to be issued for the purpose of discharge of whole or in part of any debt or other liability. Therefore this provision acts as reverse burden on respondent/accused to prove to the contrary to rebut the said presumption and to prove to contrary that there does not exist or that there never existed any legally recoverable debt or liability. In the present case in the cross-examination of P.W.1 he has categorically admitted that respondent was due only Rs. 41, 545/- Therefore this amount of Rs. 41, 545/- is legally recoverable debt assuming and believing the statement of P.W.1 and to substantiate the same strangely. P.W.1 has himself produced and got marked Ex. P.7 which shows outstanding balance of respondent Rs. 41, 545/- as on 25.10.2004 - Admittedly even according to P.W.1-complainant no cement was purchased by respondent after 08.09.2003 and according to the appellant as on 08.09.2003 respondent was due Rs. 49, 545/- as per their statement. But somehow strangely appellant comes with the theory that respondent has got issued a cheque on 11.10.2004 wherein he has not only agreed to pay Rs. 41, 545/- but agreed to pay a debt of other person namely Mallikarjun Sangannavar which is not admitted and on careful examination of P.W.1 it is seen that the said Mallikarjun Sangannavar was due Rs. 22, 500/- to the appellant as on 31.07.2003. In order to rebut the presumption there has to be preponderance of probabilities and probable defence which is required to be raised by respondent as there is already a presumption in favour of appellant that the cheque is issued towards discharge of legally recoverable debt either whole or in part. When once the rebuttal has been established and proved to the contrary by the respondent/accused then the burden shifts on appellant to satisfy such rebuttal and prove that cheque has been issued towards legally enforceable debt or liability. In the present case the trial Court has considered all these aspects and has passed a detailed order appreciating all the contentions raised by both the parties and has arrived at a conclusion that the cheque issued by respondent as per Ex. P.2 was towards discharge of legally recoverable debt for Rs. 64, 045/- - it can be safely said that the cheque presented by appellant for Rs. 64, 045/- cannot be said to be issued towards discharge of legally recoverable debt or liability and hence same will not come within the purview of Section 138 of the N.I. Act. The trial Court has passed a just and reasonable Judgment which does not call for interference by this Court and the same deserves to be upheld - Appeal dismissed.

Summary

Issues Involved:
1. Whether the respondent rebutted the presumption in favor of the appellant under Section 139 of the Negotiable Instruments Act (NI Act)?
2. Whether the judgment of the trial court deserves to be set aside and reversed?

Detailed Analysis:

Issue 1: Rebuttal of Presumption under Section 139 of NI Act

The appellant, a public limited company, claimed that the respondent, a cement dealer, issued a cheque for Rs. 64,045 as part payment for cement supplied. The cheque was dishonored due to insufficient funds. The appellant issued a legal notice, which the respondent did not respond to, leading to a complaint under Section 138 of the NI Act.

The trial court acquitted the respondent, concluding that the appellant failed to prove the guilt beyond a reasonable doubt. The appellant argued that the trial court ignored the presumption under Sections 118 and 139 of the NI Act, which favors the appellant once the issuance of the cheque and signature are admitted by the respondent.

The respondent contended that the cheque was issued as security and not for a legally enforceable debt. The respondent also claimed no business transactions occurred after 08.09.2003, which the appellant's witness (PW1) admitted. The trial court found the respondent’s rebuttal sufficient, shifting the burden back to the appellant to prove the existence of a legally enforceable debt.

The court noted that the appellant admitted the respondent owed only Rs. 41,545, and the remaining Rs. 22,500 was owed by another individual, Mallikarjun Sangannavar. The appellant failed to provide evidence that the respondent agreed to pay Sangannavar’s debt. Thus, the court concluded that the respondent successfully rebutted the presumption under Section 139 of the NI Act.

Issue 2: Whether the Judgment of the Trial Court Deserves to be Set Aside and Reversed

The appellant argued that the trial court’s judgment was contrary to the evidence and legal principles. The appellant relied on several precedents to support their case, asserting that the trial court should have convicted the respondent based on the admitted issuance and signature on the cheque.

The respondent maintained that the trial court’s judgment was based on the correct evaluation of evidence and legal principles. The respondent argued that there was no legally subsisting debt, improper service of notice, and no relationship with Sangannavar.

The court examined the evidence and found that the appellant failed to prove the respondent’s agreement to pay Sangannavar’s debt. The court emphasized that for Section 138 of the NI Act to apply, there must be a legally enforceable debt. The court concluded that the appellant did not meet the burden of proof to counter the respondent’s rebuttal.

The court upheld the trial court’s judgment, finding it just and reasonable, and dismissed the appeal.

Order:
(i) Appeal is dismissed;
(ii) The judgment of acquittal passed by I Additional J.M.F.C., Court, Bagalkot in C.C. No. 1523/2006 dated 15.09.2009 is upheld.