2022 (9) TMI 379 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - accused admitted his signatures on the cheques or not - raising of presumption available under section 139 of the Negotiable Instruments Act - HELD THAT - The evidence on record discloses that the respondent does not dispute to have issued cheques to the appellant, and he also admits his signature on the cheques. In the complaint as also in the examination-in-chief, the appellant stated that the respondent obtained hand loan of Rs. 2,25,000/- in the month of December 2006 assuring to repay the same within two months. For discharging this loan the respondent issued two cheques as per Exs.P1 and P2 - Appellant has also admitted that he asked the respondent for giving security for regularizing his appointment, but he denied the suggestion that the respondent gave two cheques at that time by way of security. Same was the evidence given by respondent when he adduced evidence as DW1. In the light of the evidence available on record, if the findings of the courts below are examined, it may be stated that the trial court is justified in coming to conclusion that the respondent issued the cheques Exs.P1 and P2 for repaying the hand loan that he had obtained from the appellant. When the evidence of PW1 to this effect has not at all been questioned in the cross- examination, it remains unassailed. The appellant got issued legal notice before initiating action for the offence under section 138 of the Negotiable Instruments Act. Respondent admits to have received the notice, but did not reply - It is highly impossible to believe that the respondent being part of the management would give cheques by way of security to a teacher whose appointment was to be confirmed by the education department. This defence is against the practical phenomenon that usually the management demands money from the teachers for confirmation of their appointment in the private schools. In the case on hand, it is not the defence of the respondent that the appellant had no capacity to lend Rs. 2,25,000/- to him. When such a defence was not taken by the respondent, it was impermissible for the appellate court to give a finding to that effect for upsetting the judgment of the Magistrate. Indeed it is incumbent on the part of the complainant to prove that the dishonoured cheque was issued by the accused for discharging in full or part of legally enforceable debt. If according to the accused, the complainant had no capacity to lend money, he must introduce a specific defence to that effect. Unless such a defence is introduced, the court is not expected to give a finding regarding financial capacity. The judgment of the appellate court is set aside and the judgment of conviction passed by the Magistrate is restored - Appeal allowed.

Summary

Issues:
1. Correctness of judgment passed by II Additional District and Sessions Judge in Criminal Appeal 64/2009 under section 138 of the Negotiable Instruments Act.
2. Conviction, fine, and compensation awarded by the learned Magistrate.
3. Appeal to the Court of II Additional District and Sessions Judge, Davanagere.
4. Applicability of section 139 of the Negotiable Instruments Act.
5. Capacity of the complainant to lend money and prove the transaction.
6. Defence raised by the respondent regarding security for appointment and misuse of cheques.
7. Examination of evidence and justification of trial court's conclusion.
8. Comparison with precedent case of Shiva Murthy vs Amruthraj [ILR 2008 KAR 4629].
9. Relevance of legal notice and response in determining the defence's credibility.
10. Error in the reasoning of the first appellate court and restoration of the judgment of conviction by the Magistrate.

Analysis:

1. The appeal questions the correctness of the judgment in Criminal Appeal 64/2009 under section 138 of the Negotiable Instruments Act. The complainant initiated action due to dishonoured cheques issued by the respondent for loan repayment. The Magistrate convicted the respondent, imposed a fine, and directed imprisonment if the fine was not paid, along with compensation. The II Additional District and Sessions Judge acquitted the respondent, leading to the current appeal.

2. The learned Magistrate's conviction was based on evidence establishing the loan transaction and dishonoured cheques. The appellate court reversed this judgment, emphasizing the complainant's failure to prove his capacity to lend the loan amount. The Magistrate's reliance on section 139 of the Act for presumption was contested by the appellate court.

3. The respondent's defence of providing cheques as security for appointment regularization was refuted by the Magistrate, highlighting the lack of response to legal notices and the practicality of such a scenario. The appellate court's decision was criticized for exceeding the evidence on record and not considering the absence of a specific defence regarding the complainant's lending capacity.

4. The comparison with the Shiva Murthy case emphasized the need for the complainant to prove financial capacity in lending, which was not contested by the respondent in this case. The appellate court's departure from established legal principles led to the restoration of the Magistrate's conviction judgment by the High Court, setting aside the appellate court's decision.

5. The relevance of legal notices, examination of evidence, and adherence to legal precedents were crucial in determining the correctness of the judgments and upholding the conviction under the Negotiable Instruments Act. The analysis highlighted the importance of factual evidence, legal defenses, and procedural aspects in such cases.