2021 (8) TMI 475 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - stop payment of cheque was ordered - rebuttal of presumption - preponderance of probabilities - section 138 of NI Act - HELD THAT - The two cheques at Exs.P1 and P2 for a sum of ₹ 2,00,000/- and ₹ 5,00,000/- respectively both dated 22.01.2013 were drawn by the accused. It is also not in dispute that those cheques when presented for realisation came to be returned unpaid with the banker's endorsement as 'exceeds arrangement' with respect to the cheque for an amount of ₹ 2,00,000/- and with a reason of 'insufficiency of funds' with respect to the cheque for an amount of ₹ 5,00,000/- as could be seen from exhibits P3 to P5. It is also not in dispute that after the dishonour of the cheques, the complainant got issued a legal notice to the accused as per Ex.P7 to which the accused sent a reply as per Ex.P10 - these undisputed facts would form a presumption in favour of the complainant about the existence of a legally enforceable debt under Section 139 of the N.I. Act. However, the said presumption is rebuttable. Even though the alleged 'stop payment' instruction is shown to have been given on 22.06.2012, it cannot be ignored of the fact that the cheques in question are dated 22.01.2013 which means that they have been drawn subsequent to the alleged 'stop payment' instruction. Even though the accused has also stated that he had filed a police complaint against the complainant on 07.06.2012 but admittedly the police, except issuing an endorsement in form 76A as can be seen at Ex.D3 have not filed any charge-sheet against the complainant. Further the accused has produced a copy of the application said to have been filed by him for housing loan and also statement of account at Exs.D4 and D7 respectively. But they also do not prove that the alleged balance amount of ₹ 7,00,000/- has been paid by the accused to the complainant in cash. Thus the attempt made by the accused to show that he has cleared the alleged outstanding liability of ₹ 7,00,000/- to the complainant by paying the said amount in cash could not be established by him. As such, the presumption that was formed in favour of the complainant becomes crystallised and accused could not succeed in rebutting the said presumption formed in favour of the complainant even by making out a case of preponderance of probabilities. The Trial Court has convicted the accused for the alleged offence which was further confirmed by the Sessions Judge's Court - the trial Court has sentenced the accused to pay a fine of ₹ 10,00,000/-, in default of payment of fine amount, to undergo simple imprisonment for a period of six months. It has further ordered that, out of the total compensation/fine amount, a sum of ₹ 5,000/- shall to be remitted to the State as fine. The Criminal Revision Petition is partly allowed.

Summary

Issues:
1. Conviction under Section 138 of the Negotiable Instruments Act, 1881.
2. Appeal against the conviction and order on sentence.
3. Examination of evidence and legal arguments.
4. Rebuttal of presumption of legally enforceable debt.
5. Dispute over loan repayment and cheque encashment.
6. Legal implications of 'stop payment' instruction.
7. Sentencing policy and proportionality of the fine imposed.

Issue 1: Conviction under Section 138 of the Negotiable Instruments Act, 1881:
The petitioner was accused of an offence under Section 138 of the N.I. Act for dishonoring cheques. The Trial Court convicted the accused, and the Sessions Judge upheld the conviction, leading to the revision petition before the High Court.

Issue 2: Appeal against the conviction and order on sentence:
The accused challenged the conviction and sentence in the Sessions Judge's Court, which confirmed the Trial Court's decision. The accused then filed a revision petition seeking interference in the judgment.

Issue 3: Examination of evidence and legal arguments:
The High Court examined the evidence presented in the Trial Court and the Sessions Judge's Court, focusing on the testimonies of witnesses and documents produced. Both sides presented arguments regarding the existence of a legally enforceable debt and the repayment of the loan.

Issue 4: Rebuttal of presumption of legally enforceable debt:
The complainant claimed a loan was advanced to the accused, supported by the dishonored cheques and legal notice. The accused attempted to rebut the presumption by alleging full loan repayment and misuse of cheques by the complainant. The High Court analyzed the evidence and legal contentions to determine the validity of the debt.

Issue 5: Dispute over loan repayment and cheque encashment:
The accused contended that the loan was repaid in part through a cheque and in cash, disputing the outstanding amount claimed by the complainant. However, the High Court found insufficient evidence to support the accused's repayment claims, leading to the maintenance of the conviction.

Issue 6: Legal implications of 'stop payment' instruction:
The accused provided a 'stop payment' instruction to his bank for certain cheques, attempting to show no liability towards the complainant. The High Court rejected this argument, emphasizing that the instruction did not absolve the accused of the debt, especially considering the timing and lack of conclusive evidence.

Issue 7: Sentencing policy and proportionality of the fine imposed:
The High Court reviewed the sentencing policy and found the fine imposed on the accused slightly excessive. Consequently, the Court modified the fine amount while upholding the conviction, ensuring proportionality between the gravity of the offense and the penalty imposed.

In conclusion, the High Court partly allowed the revision petition, confirming the conviction but modifying the fine amount to ensure fairness in sentencing. The judgment highlighted the importance of evidence, legal arguments, and proportionality in adjudicating cases involving dishonored cheques under the N.I. Act.