2022 (2) TMI 132 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - rebuttal of presumption under Sections 118 and 139 of the NI Act - HELD THAT - The material available on record shows that the case of the appellant before the Magistrate was that since he was having friendly relations with the respondent no. 1, he had advanced certain amounts to the said respondent on different dates, totaling to an amount of 6 lakhs. It was claimed ₹ that the respondent no. 1 failed to repay the said amounts, despite several visits and eventually, the subject cheques were issued in favour of the appellant - The statutory scheme of the aforesaid Act is that presumption operates in favour of the complainant under Sections 118 and 139 of the said Act. As long as the signature on the cheque is not denied, it is presumed that the cheque has been issued in discharge of legal debt or liability and the onus is on the accused to demonstrate why the presumption ought not to operate against him. There cannot be any doubt about the proposition that the presumption can be rebutted by the accused. It can be rebutted by the accused by leading defence evidence or by discrediting the claims made by the complainant by effective cross examination or confronting the complainant with certain documents. Another aspect of the matter is that the presumption would operate when foundational facts are established by the complainant. One of the relevant facts in this regard is the material, which is required to be placed on record by the complainant as regards the details of when and the manner in which the amounts were advanced to the accused and the source of such amounts supported by cogent material on record. The failure of the appellant in showing the said amounts in the Income Tax Returns is also a relevant factor, which the Sessions Court took into consideration while reversing the conviction and sentence - it is found that the Magistrate had erred in proceeding to convict and sentence the respondent no. 1 under Section 138 of the aforesaid Act and that the Sessions Court was justified in interfering with the same. Appeal dismissed.

Issues Involved:
1. Legality of the Sessions Court's decision to quash the conviction and sentence imposed by the Magistrate under Section 138 of the Negotiable Instruments Act, 1881.
2. Applicability and rebuttal of presumptions under Sections 118 and 139 of the Negotiable Instruments Act.
3. Adequacy of evidence provided by the complainant regarding the loan and issuance of cheques.
4. Evaluation of the respondent's defense and cross-examination effectiveness.

Detailed Analysis:

1. Legality of the Sessions Court's Decision:
The appellant challenged the judgment and order dated 12.01.2015 by the Sessions Court, which quashed the conviction and sentence imposed by the Magistrate under Section 138 of the Negotiable Instruments Act, 1881. The appellant argued that the Sessions Court erred in reversing the conviction and sentence, emphasizing that the presumption under the Act operated in favor of the appellant due to the undisputed signature on the cheques.

2. Applicability and Rebuttal of Presumptions:
The statutory scheme under Sections 118 and 139 of the Negotiable Instruments Act presumes that the cheque has been issued in discharge of a legal debt or liability unless the accused can rebut this presumption. The appellant argued that the respondent did not provide any positive defense, and thus the presumption should operate in full force. However, the Sessions Court found that the presumption was rebutted by the respondent through effective cross-examination and confronting the appellant with specific documents.

3. Adequacy of Evidence Provided by the Complainant:
The appellant claimed that he advanced a total of ?6 lakhs to the respondent, who issued three cheques that were subsequently dishonored. The appellant's evidence included the dishonored cheques, the bank's memorandum, and the notice issued to the respondent. However, during cross-examination, the appellant could not provide specific details about the loan, such as the time period or source of the funds, and admitted that these amounts were not mentioned in his Income Tax Returns. The absence of bank statements showing withdrawals further weakened the appellant's case.

4. Evaluation of the Respondent's Defense and Cross-Examination Effectiveness:
The respondent did not lead any evidence in his defense but effectively cross-examined the appellant, highlighting inconsistencies and the lack of foundational facts. The respondent also referenced an earlier similar complaint filed by the appellant, which was withdrawn after an alleged settlement. The respondent's statement under Section 313 of the Cr.P.C. claimed that the cheques were misused by the appellant, who was the Branch Manager of the bank where the respondent had obtained a loan.

The Sessions Court found that the respondent successfully rebutted the presumption under Sections 118 and 139 of the Act by demonstrating a probable defense through cross-examination. The court noted that the appellant failed to establish foundational facts necessary for the presumption to operate, such as details of the loan and the source of funds.

Conclusion:
The High Court upheld the Sessions Court's decision, concluding that the Magistrate erred in convicting the respondent under Section 138 of the Negotiable Instruments Act. The court found that the presumption in favor of the appellant was rebutted by the respondent, and the appellant failed to provide adequate evidence to support his claims. Consequently, the appeal was dismissed, affirming the respondent's acquittal.

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