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2023 (1) TMI 928 - HC - Indian LawsDishonor of Cheque - acquittal of the accused - rebuttal of presumption - whether non-mentioning of date as to when money was given can be fatal to the case of complainant or not? - HELD THAT - The proviso 269-SS only prescribes the mode of taking or accepting certain loans, deposits and specified sum. The said proviso would speak to the effect that no person shall take or accept from any other person (herein referred to as the depositor). Mode of taking any loan or deposit or any specified sum, otherwise than by an account-payee Cheque or account or accepting payees and draft or use of electronic clearing system through a bank account. The proviso was inserted in the Income Tax Act debarring person from taking or accepting from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft, if the amount of such loan or deposit or the aggregate amount of such loan or deposit is Rs.10,000/- or more. The amount of Rs.10,000/- was later revised as Rs.20,000/- with effect from 01.04.1989. The said proviso does not prohibit for giving or lending loan, it is only taking and acceptance is prohibited. The acceptance of loan by way of cash in excess of Rs.20,000/- may attract panel provision in terms of Section 271-D. Whether the provisions of Section 269-SS of the Income Tax Act 1961, disentitles the plaintiff from filing recovery suits was directly under consideration by the coordinate bench of this Court in the decision MOHAMMED IQBAL VERSUS MOHAMMED ZAHOOR 2007 (7) TMI 711 - KARNATAKA HIGH COURT , wherein it has been held that The main object introducing the provisions of Section 269-SS of the Income Tax Act is to curb and unearth black money. But the Section does not declare the present transaction which is brought before the court illegal, wide and unenforceable. The accused has to establish the nexus between alleged taking loan of Rs.50,000/- and the issuance of signed Cheque as a security for the said transaction. Otherwise, accused cannot take the advantage of complainant admitting that he has received the Cheque as a security as referred above. The onus is on the accused to prove that he has issued signed blank Cheque as a security for the loan of Rs.50,000/-, which he claims to have repaid with interest amounting to Rs.2,50,000/- by way of DD dated 30.11.2009 drawn on Alahabad Bank - It is for the accused to offer reasonable explanation as to how the interest on Rs.50,000/- works out to Rs.2,00,000/- within a period of 3 years. In the absence of any reasonable explanation of paying such an exorbitant interest on the alleged loan of Rs.50,000/- totally amounting to Rs.2,50,000/-, it cannot be accepted that the accused has probalized his defence that he has issued the Cheque - Ex.P1 as security for the loan of Rs.50,000/-. The trial Court was swayed away by the eye-wash explanation offered by accused in the form of evidence of DW1 and Ex.D1 and has wrongly accepted rebuttal evidence to disprove the presumption available in favour of the complainant in terms of Sections 118 and 139 of N.I. Act. In the present case, the accused by way of rebuttal evidence has failed to probablize his defence to disprove the statutory presumption available in favour of the complainant in terms of Sections 118 and 139 of N.I. Act. The failure of the accused to place rebuttal evidence or the defence being found to be not legally sustainable in law, then it will have to be held that the complainant has proved the charge leveled against the accused for the offence under section 138 of N.I. Act. If the accused is sentenced to pay fine of Rs.2,00,000/- in default of payment of fine shall undergo imprisonment for three months is imposed would meet the ends of justice - Appeal allowed.
Issues Involved:
1. Service of Demand Notice 2. Material Alteration in the Cheque 3. Date of Loan Transaction 4. Debt Being Time-Barred 5. Violation of Section 269-SS of Income Tax Act 6. Issuance of Cheque as Security Analysis: 1. Service of Demand Notice: The accused contended that the Demand Notice (Ex.P5) was not served to him, and the signature on the acknowledgment card (Ex.P6) was not his. The notice was served to the accused's residential address and received by S.M. Haralgi, who was identified as the accused's wife. The court held that service was deemed effective under Section 27 of the General Clauses Act, 1897, as the notice was correctly addressed and received by a family member. 2. Material Alteration in the Cheque: The Trial Court observed a material alteration in the cheque (Ex.P1) regarding the year "2010." However, the bank dishonored the cheque due to insufficient funds, not because of the alteration. The High Court held that the alteration did not render the cheque invalid, especially since the bank did not refuse to honor it on this ground. 3. Date of Loan Transaction: The Trial Court noted that the complaint did not specify the date when the loan was given. However, the High Court found that the complaint did mention that the accused approached the complainant on 07.02.2010 and requested a loan of Rs.2,00,000/-, which was given on the same date. The High Court held that there was no legal requirement to plead the date of approach, only the date of payment, which was adequately stated. 4. Debt Being Time-Barred: The Trial Court held that the debt was time-barred under Section 19 of the Limitation Act. The High Court disagreed, noting that the cheque was issued on 07.12.2010 and presented within the statutory period of six months. The court cited the Supreme Court's decision in Bir Singh vs. Mukeshkumar, which held that post-dated cheques do not absolve the drawer of the penal consequences under Section 138 of the N.I. Act. 5. Violation of Section 269-SS of Income Tax Act: The Trial Court found the transaction in violation of Section 269-SS of the Income Tax Act, which requires loans above Rs.20,000/- to be made through account payee cheques or drafts. The High Court clarified that Section 269-SS does not render such transactions invalid or unenforceable; it only prescribes the mode of acceptance. The court cited the Supreme Court's decision in Assistant Director of Inspection Investigation vs. A.B. Shanti and a Karnataka High Court decision, which held that Section 269-SS does not invalidate the loan transaction. 6. Issuance of Cheque as Security: The accused claimed that the cheque was issued as security for a loan of Rs.50,000/- taken in 2006-2007, which he repaid with interest amounting to Rs.2,50,000/-. The High Court found that the accused failed to establish the nexus between the alleged loan and the issuance of the cheque as security. The court noted that the accused did not provide specifics about the loan agreement or the interest rate and found the explanation of paying Rs.2,00,000/- as interest on a Rs.50,000/- loan within three years unreasonable. Conclusion: The High Court found that the accused failed to rebut the statutory presumption under Sections 118 and 139 of the N.I. Act. The judgment of acquittal by the Trial Court was set aside, and the accused was convicted under Section 138 of the N.I. Act. The accused was sentenced to pay a fine of Rs.2,00,000/- or undergo imprisonment for three months in default of payment. The Registry was directed to send a copy of the judgment and the Trial Court records back to the Trial Court.
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