2023 (4) TMI 121 - HC - Indian Laws

Dishonour of Cheque - insufficient funds - legally enforceable debt - acquittal of accused - rebuttal of presumption - complainant has beyond doubt proved that the complainant has complied with the mandatory provisions envisage under Section 138 and Section 142(1)(b) of the Negotiable Instruments Act while filing the present complaint - Whether the complainant has beyond doubt proved that the accused has handed over the cheque against the legally enforceable debt, which being dishonored on the ground of 'insufficient funds', has committed offence under Section 138 of the Negotiable Instruments Act? HELD THAT - Under Section 138 of the Negotiable Instruments Act, once the cheque is issued by the drawer, a presumption under Section 139 of the Negotiable Instruments Act in favour of the holder would be attracted. Section 139 creates a statutory presumption that a cheque received in the nature referred to under Section 138 of the Negotiable Instruments Act is for the discharge in whole or in part of any debt or other liability. The initial burden lies upon the complainant to prove the circumstances under which the cheque was issued in his favour and that the same was issued in discharge of a legally enforceable debt - It is for the accused to adduce evidence of such facts and circumstances to rebut the presumption that such debt does not exist or that the cheques are not supported by consideration. In the present case, the accused has set up the specific defence in the reply given to the legal notice sent by the complainant. The accused has specifically raised the case of complainant being partner in a Krishna Lease Finance and the manner in which the cheque has been misused. The complainant in his cross examination has categorically admitted about defence of misuse of a signed blank cheques lying with Krishna Finance, being taken in reply to notice - In opinion of this Court, the accused counsel in cross examination has raised probable defence by questioning his financial capacity which raised serious doubt of the very claim of handing over the loan of Rs.10 lakhs in cash to accused. Thus, the existence of legally enforceable debt in absence of cogent material brought by the complainant, has not been established. The learned Magistrate has rightly shifted the burden upon the complainant to prove the case beyond reasonable doubt. In absence of any cogent material being brought on record in the form of evidence, the learned Magistrate has proceeded to record the order of acquittal - No error can be attributed to the learned Magistrate in recording order of acquittal of respondent-accused. Application for leave to appeal stands rejected.

Summary

Issues Involved:
1. Compliance with mandatory provisions under Section 138 and Section 142(1)(b) of the Negotiable Instruments Act.
2. Legally enforceable debt and dishonor of cheque under Section 138 of the Negotiable Instruments Act.

Summary:

Issue 1: Compliance with Mandatory Provisions
The trial Court framed the issue of whether the complainant complied with the mandatory provisions under Section 138 and Section 142(1)(b) of the Negotiable Instruments Act. The complainant presented oral and documentary evidence, including the disputed cheque, return memo, legal notice, and income tax returns. The trial Court noted that the mandatory requirements under Sections 118 and 139 of the Negotiable Instruments Act were fulfilled for filing the complaint under Section 138.

Issue 2: Legally Enforceable Debt and Dishonor of Cheque
The trial Court scrutinized the evidence and found discrepancies in the complainant's claim of advancing Rs.10 lakhs to the accused. The complainant's annual income did not exceed Rs.5 lakhs, and there was no promissory note or written agreement for the loan. The accused argued that the complainant misused a blank signed cheque given as security for a loan from Krishna Lease Finance. The trial Court found the complainant's version suspicious and noted the lack of supporting documents.

The complainant argued that the trial Court failed to appreciate the statutory presumption under Section 139 of the Negotiable Instruments Act, which favors the holder of the cheque. However, the accused rebutted this presumption by raising a probable defense, including the misuse of the cheque and questioning the complainant's financial capacity.

The trial Court concluded that the complainant failed to prove the existence of a legally enforceable debt beyond a reasonable doubt. The accused's defense raised serious doubts about the complainant's claim, leading to the order of acquittal.

Conclusion:
The High Court upheld the trial Court's decision, rejecting the application for leave to appeal and the criminal appeal. The trial Court's order of acquittal was based on the complainant's failure to prove the case beyond a reasonable doubt and the accused's successful rebuttal of the statutory presumption under Section 139 of the Negotiable Instruments Act.