2022 (9) TMI 424 - HC - Indian Laws

Dishonor of Cheque - insufficient funds - existence of legally enforceable debt or liability - acquittal of the accused - burden to prove - preponderance of probability - section 138 of NI Act - HELD THAT - There was no need or necessity for him to go into the witness box and to give his evidence. There was no compulsion to the accused to give his evidence. It was for the complainant to establish his case basing on the preponderance of probabilities. The burden was heavily upon the complainant that he had advanced money to the accused. No Income Tax Returns were filed by the complainant, as such, the Appellate Court held that the complainant miserably failed to establish the offence under Section 138 of N.I. Act; and that the accused was entitled for acquittal. In Rangappa v. Mohan case 2010 (5) TMI 391 - SUPREME COURT , the Hon ble Apex Court held that ordinarily in cheque bouncing cases, what the courts have to consider is whether the ingredients of the offence enumerated in Section 138 of the N.I. Act have been met and if so, whether the accused was able to rebut the statutory presumption contemplated by Section 139 of the Act . Coming to the facts in the present Revision, the accused herein also failed to give reply to the statutory notice given by the complainant under Section 138 of N.I. Act which would lead to an inference that there was merit in the version of the complainant. If the accused repaid the amounts taken by him as handloans earlier, then why the accused had not demanded the complainant to return the said cheque which the accused had given as security, was not explained by the accused - both the Courts below had placed the burden of proof on the complainant to show that it was the complainant who had to establish that there was a legally enforceable debt, even though the accused had not disputed the issuance of cheque to the complainant. As such, it is considered fit to convict the accused and to sentence him to undergo simple imprisonment till rising of the day and to pay a fine of Rs.2,43,000/- with default sentence of three months simple imprisonment - the concerned Magistrate is directed to secure the presence of the accused by issuing a warrant to undergo the sentence in the open court and to cause recover the fine amount; and on such recovery, the fine shall be paid to the complainant as compensation under Section 357 of Criminal Procedure Code. The Criminal Revision Case is allowed.

Issues Involved:
1. Legally enforceable debt under Section 138 of the Negotiable Instruments Act (N.I. Act).
2. Presumption under Section 139 of the N.I. Act.
3. Burden of proof and rebuttal evidence.
4. Failure to reply to statutory notice.
5. Interpretation of legal provisions and judgments by lower courts.

Detailed Analysis:

1. Legally Enforceable Debt under Section 138 of the N.I. Act:
The complainant alleged that the accused borrowed various sums of money, culminating in a loan of Rs. 2,43,000/- for which the accused issued a cheque that was dishonored due to insufficient funds. The complainant filed a case under Section 138 of the N.I. Act after the accused failed to repay the amount despite a legal notice. The Trial Court acquitted the accused, finding no documentary evidence from the complainant to prove the loan. The Appellate Court upheld this decision, emphasizing the complainant's failure to produce supporting documents or show the transaction in his Income Tax Returns.

2. Presumption under Section 139 of the N.I. Act:
The complainant argued that both the Trial and Appellate Courts failed to properly consider the statutory presumption under Section 139 of the N.I. Act, which presumes that the cheque was issued for a legally enforceable debt unless proven otherwise by the accused. The complainant cited the Hon'ble Apex Court's judgment in Rangappa vs. Mohan, which established that the presumption includes the existence of a legally enforceable debt and shifts the burden to the accused to rebut this presumption.

3. Burden of Proof and Rebuttal Evidence:
The Trial Court concluded that the accused successfully rebutted the presumption by asserting repayment of the loan and alleging misuse of the cheque by the complainant. However, the complainant contended that the accused failed to provide any evidence to support his claim of repayment and did not issue a reply to the statutory notice, which should have been considered indicative of the complainant's version being credible. The complainant further argued that the burden of proof was incorrectly placed on him by both lower courts, contrary to the legal standards set by higher courts.

4. Failure to Reply to Statutory Notice:
The complainant emphasized that the accused's failure to reply to the statutory notice should have been considered a significant factor in favor of the complainant, as held in Om Prakash Agarwal vs. Khaja Krishna Prasad. This failure was argued to strengthen the complainant's case and weaken the accused's defense.

5. Interpretation of Legal Provisions and Judgments by Lower Courts:
The High Court found that the lower courts did not provide adequate reasoning for their conclusions and failed to properly interpret the legal provisions and precedents. The judgments of the lower courts were criticized for not fully considering the statutory presumptions and the burden of proof as laid out in relevant case law, including the decisions in Goa Plast (Pvt.) Ltd. v. Chico Ursula D'Souza and T. Vasanthakumar vs. Vijayakumari.

Conclusion:
The High Court allowed the Criminal Revision Case, setting aside the judgments of the lower courts. The accused was convicted and sentenced to simple imprisonment till the rising of the day and a fine of Rs. 2,43,000/-, with a default sentence of three months simple imprisonment. The Magistrate was directed to secure the presence of the accused and recover the fine amount, which would be paid to the complainant as compensation under Section 357 of the Criminal Procedure Code.

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