2022 (1) TMI 99 - HC - Indian Laws

Dishonor of Cheque - existence of the legally enforceable debt or not - rebuttal of presumption under Section 139 as well as Section 118 of the Negotiable Instruments Act - HELD THAT - Once it is proved that a negotiable instrument has been executed and handed over to the payee thereof the presumption as contemplated under the aforesaid provision comes into play. Unless the said presumption is rebutted by the accused by adducing some evidence, the court has to proceed on the basis of existence of a legal liability towards the complainant. In this case, the defence put forward by the 1st respondent is that the cheque which was collected by the appellant as part of the chitty transaction at an earlier point of time and it was later misused by the appellant by entering figures therein - the exact figure may not find a place in those statements as the amount mentioned in Ext.P2 cheque is the aggregate of the total arrears. In the light of presumption under Section 139 of the Negotiable Instruments Act, the appellant is entitled to succeed. In this case, the 1st respondent could not make out any case by adducing any evidence or otherwise to rebut the presumption available in favour of the appellant. In the light of the presumption under Section 139 which stands unrebutted and also the supporting materials in the form of Exts.P8 and P9 series, it is found that the cheque was issued in discharge of a legal liability towards the appellant herein - legal requirements for attracting the offence under Section 138 of the Negotiable Instruments Act regarding the issuance of notice and timeline to be followed before initiating the proceedings are seen duly complied with. The offence under Section 138 of the Negotiable Instruments Act is clearly established and the finding entered into by the Judicial First Class Magistrate Court-IV, Punalur contrary to the same is liable to be set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegation of offence under Section 138 of the Negotiable Instruments Act.
2. Failure to prove allegations against the accused.
3. Applicability of presumptions under Sections 118 and 139 of the Negotiable Instruments Act.
4. Defence of misuse of cheque and contention of security for chitty transaction.
5. Compliance with legal requirements for Section 138 offence.
6. Setting aside of the lower court's judgment and conviction of the accused.

Analysis:
1. The appellant filed a complaint under Section 138 of the Negotiable Instruments Act against the 1st respondent for defaulting on chit payments. The trial court acquitted the respondent due to lack of proof, leading to the appeal.

2. The appellant contended that the Magistrate erred in not considering the presumptions under Sections 118 and 139 of the Act. Witnesses and exhibits supported the transactions, but the Magistrate ruled against the appellant.

3. Section 118 presumes consideration for negotiable instruments, while Section 139 presumes a cheque is for discharging a debt unless proven otherwise. The appellant's evidence and the unrebutted presumption favored the existence of a legal liability.

4. The respondent claimed the cheque was misused for chitty security, but admitted to signing it. The cheque amount was a sum of arrears, not individually listed in statements. Despite the defense, the presumption under Section 139 remained unchallenged.

5. Legal requirements for Section 138 offence, including notice issuance and timelines, were met. The court found the offence established, contrary to the lower court's ruling, justifying the appeal's allowance.

6. The judgment set aside the lower court's decision, convicted the respondent under Section 138, and imposed a fine and imprisonment in default. The fine, if paid, was to be given to the appellant as per the Criminal Procedure Code.

This detailed analysis highlights the legal aspects, evidence, and reasoning leading to the judgment's outcome in the case involving the offence under the Negotiable Instruments Act.