2021 (3) TMI 904 - HC - Indian Laws

Dishonor of Cheque - Whether the Appellate Court has erred in appreciating the evidence allowing the appeal and acquitting the respondent - accused? - HELD THAT - The answer is in affirmative. A mandatory presumption is required to be raised in respect of Negotiable Instrument in terms of Section 118 (b) of the Act. Section 139 of the Act merely raises a presumption that the cheque has been issued for discharge of any debt or other liability. The proceeding under Section 138 of N.I. Act is quasi criminal in nature. In these proceedings proof beyond reasonable doubt is subject to presumptions envisaged under Sections 118 139 and 146 of N.I. Act - An offence under Section 138 of N.I. Act is committed not on dishonor of cheque but on failure of drawer of the cheque to make payment within 15 days from the date of receipt of notice of dishonor. An essential ingredient of Section 138 of N.I. Act is that the cheque in question must have been issued towards a legally enforceable debt. Sections 118 and 139 of the Act envisage certain presumptions. Under Section 118 of the Act a presumption shall be raised regarding consideration date transfer endorsement and regarding holder in the case of Negotiable Instruments. Even under Section 139 a rebuttable presumption shall be raised that the cheque in question was issued towards discharge of legally enforceable debt. The accused has not at all denied his signature on Ex.P.1. The accused has contended that other writings on Ex.P.1 do not belong to him. PW.1 admitted hand writing on Ex.P.1 is not of accused. It is not objectionable or illegal in law to receive an inchoate negotiable instrument duly signed by the maker despite the material particulars are kept blank if done with an understanding and giving full authority to the payee to fill up the material contents as agreed upon. Such a course of action in law cannot vitiate the transaction nor can invalidate the negotiable instrument issued and such transaction fully binds the maker of instruments to the extent it purports to declare. The Trial Court on appreciating the evidence on record has rightly held that the complainant has established that the cheque in question was issued for discharge of debt and accused has failed in all the attempts to make a probable defense which would falsify the case of prosecution. Therefore the Trial Court has rightly convicted the respondent - accused for the offence punishable under Section 138 of N.I. Act. The Appellate Court without appreciating the evidence in proper perspective and on assumption has held that the complainant has not proved that Ex.P.1 - Cheque issued towards payment of legally enforceable debt. The said finding of the Appellate Court is erroneous. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Validity of the cheque issued by the accused.
2. Presumption under Sections 118 and 139 of the Negotiable Instruments Act (N.I. Act).
3. Defense of the accused regarding the alleged loss/theft of the cheque.
4. Evaluation of evidence by the Trial Court and Appellate Court.
5. Legally enforceable debt or liability.

Analysis of Judgment:

1. Validity of the Cheque Issued by the Accused:
The complainant advanced a loan of ?7,00,000 to the accused, who issued a cheque dated 15.03.2010 for the same amount. The cheque was dishonored with the endorsement "account closed by drawer." The complainant issued a legal notice, and upon non-payment, filed a complaint under Section 138 of the N.I. Act. The Trial Court convicted the accused, but the Appellate Court acquitted him, which was challenged in this appeal.

2. Presumption under Sections 118 and 139 of the N.I. Act:
The judgment emphasizes the mandatory presumption under Section 118(b) and Section 139 of the N.I. Act. These sections presume that the cheque was issued for the discharge of any debt or liability. This presumption is rebuttable, but the burden lies on the accused to prove otherwise. The Supreme Court in *Rangappa vs. Shri Mohan* and *M/s. Kalemani Tax vs. Balan* reiterated that even a blank cheque signed by the accused attracts this presumption.

3. Defense of the Accused Regarding the Alleged Loss/Theft of the Cheque:
The accused claimed the cheque was stolen and lodged complaints with the police. However, inconsistencies in the accused's defense were noted. The accused did not lodge any complaint against the complainant for the alleged theft. The accused's employees testified about the loss of the cheque book, but their evidence was inconsistent and did not support the accused's claim that the cheque was lost in Bengaluru. The accused's defense was deemed unconvincing and appeared to be fabricated for the case.

4. Evaluation of Evidence by the Trial Court and Appellate Court:
The Trial Court found the complainant's case credible, noting that the accused did not dispute his signature on the cheque. The Trial Court held that the complainant proved her case beyond reasonable doubt, while the accused failed to provide a probable defense. The Appellate Court, however, did not appreciate the evidence properly and acquitted the accused on erroneous grounds. The High Court found the Appellate Court's judgment to be mechanical and lacking judicial application.

5. Legally Enforceable Debt or Liability:
The High Court reiterated that an offence under Section 138 of the N.I. Act is committed not on the dishonor of the cheque but on the failure to make payment within 15 days of receiving the notice of dishonor. The complainant’s financial capability to lend ?7,00,000 was established, and the accused's inconsistent defense regarding the loss/theft of the cheque was not credible. The presumption under Sections 118 and 139 was not successfully rebutted by the accused.

Conclusion:
The High Court allowed the appeal, setting aside the Appellate Court's judgment and affirming the Trial Court's conviction of the accused under Section 138 of the N.I. Act. The accused was ordered to either pay the fine or serve the sentence as per the Trial Court's judgment.