2022 (6) TMI 1131 - HC - Indian Laws

Dishonor of Cheque - Insufficiency of fund - Legally enforceable debt or not - acquittal of the accused - preponderance of probablities - failure to discharge the fundamental burden of proving his capacity to advance loan - Section 397 and 401 of Cr.P.C. - HELD THAT - The consistent defence of the petitioner eversince he received the statutory notice from the complainant/respondent is that there was no privity of contract and the cheque was not given to the complainant to discharge any legally enforceable debt and further, the complainant has no source of income to advance Rs.9 lakhs. When a specific defence raised by the accused person at the inception itself even before filing the complaint, the complainant is bound to explain in his complaint regarding the source of income. Failure to explain his source of income is fatal to the complaint. The person capacity to advance loan of Rs.9 lakhs is a very fundamental fact when the capacity is questioned. To add, the complainant admits that he did not receive any other document for advancing loan of Rs.9 lakhs, except the postdated cheque given to him. In any transaction, when cheque is issued, it is presumed to be issued to discharge the existing debt. Offence under Section 138 of Negotiable Instruments Act will get attracted, if the said debt happens to be legally enforceable. Therefore, the existing debt pre-suppose a presumption. If the accused able to prove by preponderance of probabilities that there was no existing debt on the date on which the cheque bears, then the complainant under Section 138 of the Negotiable Instruments Act cannot have the advantage of the statutory presumption under Section 139 of the Negotiable Instruments Act. Hon'ble Supreme Court in BASALINGAPPA VERSUS MUDIBASAPPA 2019 (4) TMI 660 - SUPREME COURT , when the capacity to advance loan or transaction for which the alleged cheque given is denied, the complainant cannot take advantage of Section 139 of the Negotiable Instruments Act without discharging his burden of proving the fundamental fact regarding transaction, which has created an existing debt (or) his capacity to advance loan atleast equivalent to the amount found in the cheque. In this case, for the cheque amount is Rs.9 lakhs, no other previous existing debt (or) transaction claimed in the complaint. No evidence was produced by the complainant to prove his financial capacity to advance a huge sum of Rs.9 lakhs. Taking into consideration his background admittedly a small time farmer holding 6 acres of land and not even a bank savings account claiming he advanced loan of Rs.9 lakhs as against the postdated cheque and no other document obtained for the money transaction, is obviously bound to be suspected - this Court holds that the appellate Court erred in reversing the trial Court judgment. This Criminal Revision Case is allowed.

Summary

Issues:
1. Application of Section 138 of Negotiable Instruments Act in a private complaint.
2. Burden of proof regarding the issuance of a cheque for a legally enforceable debt.
3. Rebuttal of presumption under Section 139 of the Negotiable Instruments Act.
4. Capacity to advance a loan and the burden of proof on the accused.
5. Judicial interpretation of the principles under Section 139 of the Negotiable Instruments Act.
6. Reversal of the appellate court's judgment and restoration of the trial court's order.

Issue 1: Application of Section 138 of Negotiable Instruments Act in a private complaint

The case involved a private complaint under Section 138 of the Negotiable Instruments Act, where the accused was alleged to have issued a cheque that bounced due to insufficient funds. The complainant claimed that the cheque was given to discharge a debt, initiating legal proceedings against the accused.

Issue 2: Burden of proof regarding the issuance of a cheque for a legally enforceable debt

The trial court initially acquitted the accused, stating that the complainant failed to prove the cheque was issued for a legally enforceable debt. The appellate court, however, reversed this decision, emphasizing that the burden was on the accused to disprove the complainant's financial capacity to advance the loan, rather than on the complainant to prove the capacity.

Issue 3: Rebuttal of presumption under Section 139 of the Negotiable Instruments Act

The appellate court relied on Section 139 of the Negotiable Instruments Act, holding that the accused's failure to produce evidence regarding the alleged transaction with another individual named Ravi led to the presumption favoring the complainant. This presumption was deemed unrebutted by the accused.

Issue 4: Capacity to advance a loan and the burden of proof on the accused

The accused consistently argued that there was no privity of contract and that the complainant lacked the financial capacity to advance the loan amount. The complainant's failure to provide evidence of his financial capacity to lend Rs.9 lakhs was highlighted as a crucial aspect in determining the validity of the complaint.

Issue 5: Judicial interpretation of the principles under Section 139 of the Negotiable Instruments Act

The court referred to the Supreme Court judgment in Basalingappa v. Mudiasappa, emphasizing that the presumption under Section 139 is rebuttable, and the burden lies on the accused to raise a probable defense. The accused's failure to prove the absence of an existing debt or his capacity to advance the loan could not uphold the complainant's advantage under Section 139.

Issue 6: Reversal of the appellate court's judgment and restoration of the trial court's order

Ultimately, the High Court held that the appellate court erred in reversing the trial court's judgment, as the accused had sufficiently rebutted the statutory burden. The judgment of the appellate court was set aside, and the trial court's acquittal of the petitioner was restored, leading to the allowance of the Criminal Revision Case.

This detailed analysis of the judgment showcases the intricate legal considerations and interpretations surrounding the application of the Negotiable Instruments Act in the context of a private complaint, burden of proof, presumption under Section 139, and the capacity to advance a loan.