2022 (5) TMI 69 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - discharge of legally enforceable/recoverable debt or not - Acquittal of the accused - offence punishable under Section 138 of NI Act - HELD THAT - Herein in this case the accused taken the contention that it was a security cheque which was given to the accused for some other transaction for getting rented car from the complainant but he has not produced any document to prove his contention - once the cheque is issued as security for the loan and if the loan is not paid back then if the cheque is dishonoured which attract 138 of NI Act - Therefore, the contention of the accused counsel cannot be acceptable that the cheque was given only for security purpose but without producing any document to show he has repaid the loan to the complainant, then he has to pay the cheque amount when it is presented for encashment which is legally recoverable debt. Another contention taken by the accused is that the complainant is not having capacity to lend so much amount as loan but in the cross examination of PW1 he himself elicited complainant is having 7 cars and he is running the travel agency and accused also running travel agency and appellant also had purchased 4 Innova cars for let out in his travel agency - The contention of the respondent accused is not acceptable as the complainant is having 7 cars of his own and other 4 Innova cars purchased for letting out for rent. Therefore merely he purchased car by loan, that itself is not ground to say he has no money in his hand when he is having 11 cars and travel business. The capacity of the complainant clearly reveals he has capacity to pay such amount to the accused. Hon'ble Supreme Court also held in a recent judgment 2019 (4) TMI 660 - SUPREME COURT relied by the accused counsel where the Hon'ble Apex Court has held the financial capacity are based upon the evidence lead by the defense. The accused required to raise the probable defense in his evidence but here in this case he has strengthen the evidence of the complaint that he is having 11 cars. Such being the case, the contention of the respondent counsel cannot be acceptable. Therefore, it is held the cheque was issued for discharge of the loan and the same was dis-honoured for want of funds, thereby the accused committed the offence under 138 of NI Act. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal filed under Section 378(4) of Cr.P.C. to set aside the judgment of acquittal and confirm the conviction.
2. Interpretation of whether the cheque issued was for discharge of legally recoverable debt.
3. Assessment of the judgment of the first appellate court for interference.

Issue 1: Appeal under Section 378(4) of Cr.P.C.
The appellant filed an appeal seeking to overturn the judgment of acquittal by the Additional City Civil and Sessions Judge and uphold the conviction by the Trial Court. The complainant alleged that the accused, involved in a traveling business, borrowed Rs. 7,00,000 and issued a post-dated cheque that bounced due to insufficient funds. The Trial Court convicted the accused, but the first appellate court acquitted him, leading to this appeal.

Issue 2: Interpretation of the Cheque Purpose
The key question was whether the cheque issued by the accused was for discharging a legally recoverable debt, thereby constituting an offense under Section 138 of the NI Act. The complainant argued that the cheque was issued as security for a loan, as per the loan agreement. The first appellate court considered this admission as best evidence, leading to the acquittal. However, the Supreme Court's recent judgment clarified that a security cheque can still be presented for recovery if the loan is not repaid, making the accused liable under Section 138.

Issue 3: Assessment of First Appellate Court's Judgment
The first appellate court's judgment was challenged on the grounds that it failed to consider the legal implications of the security cheque issued by the accused. The complainant's financial capacity was also questioned, but evidence of owning multiple cars and a travel agency indicated sufficient capacity to lend the amount. The Supreme Court precedent highlighted the importance of evidence in determining financial capacity, leading to the decision to set aside the first appellate court's judgment and restore the trial court's conviction.

In conclusion, the High Court allowed the appeal, setting aside the first appellate court's judgment and confirming the trial court's conviction. The accused's defense regarding the purpose of the cheque and the complainant's financial capacity were both dismissed, establishing the accused's liability under Section 138 of the NI Act.