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TMI Blog2008 (7) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The respondent herein is the complainant before the learned Magistrate. I shall refer to the parties herein with reference to their ranking in the Court below. 3. The complainant filed a complaint against the accused under Section 138 of the N.I. Act, inter alia contending that the accused for the purpose of improving his business and for repayment of his loan, borrowed a sum of ₹ 75,000/- from the complainant on 20.5.2002 and for discharging the said liability, the accused issued post dated cheque bearing No. 480735 dated 10.3.2003 for ₹ 75,000/- drawn on Allahabad Bank, Mysore Branch and requested the complainant to present the said cheque for encashment on 10.3.2003. When the complainant presented the said cheque on 10.3.2003 for encashment through his Banker, the said cheque came to be returned with an endorsement 'payment stopped by the drawer' and for 'insufficient funds' on 28.3.2003. Thereafter, the complainant issued a legal notice to the accused on 2.5.2003 informing the accused about the dishonour of the cheque and demanding payment of the amount covered under the cheque. Though the accused received the said notice on 9.5.2003, he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of FTC-II to whom the appeal was assigned, heard the matter. During the pendency of the said appeal, the accused sought to produce certain additional documents by filing an application and the said application came to be allowed by the Appellate Court. Those documents were marked as Exs. P.2 to P.13. After hearing the counsel for the parties, the Appellate Court by the judgment under revision affirmed the finding of the Trial Court and held that the accused is guilty of the offence punishable under Section 138 of the N.I. Act. 9. Being aggrieved by the said judgment passed by the Appellate Court, the accused-petitioner has presented this Revision Petition questioning the legality and correctness of the judgment of the Courts below. 10. I have heard the learned Counsel appearing on both sides. 11. Learned Counsel appearing for the petitioner vehemently contended that the Courts below have utterly failed to see that the complainant has not proved the existence of legally enforceable debt or liability against the accused. In this regard, he contended that the evidence on record clearly establishes that the complainant had no financial capacity to advance loan of ₹ 75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is absolutely no suggestion put to him to the effect that he had no financial capacity to lend a sum of ₹ 75,000/-. Therefore, in the absence of any such suggestion, the learned Counsel submitted that there is no substance in the contention of the learned Counsel for the petitioner with regard to the proof of existence of legally enforceable debt or liability. Learned Counsel further submitted that the conduct of the accused in taking different stand at different stages would be a circumstance to hold that the defence of the accused was not consistent and acceptable. Therefore, having regard to the fact that the accused has admitted issuance of cheque, the Courts below have rightly drawn presumption available under Section 139 of N.I. Act, as such, the Courts below have not committed any error in holding the accused guilty of the offence under Section 138 of the N.I. Act. With these contentions, the learned Counsel sought for dismissal of the petition. 13. In the light of the above, the point for my consideration is; (i) Whether the Courts below were justified in holding the accused guilty of the offence under Section 138 of the N.I. Act? 14. Perusal of the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted the said presumption, the Appellate Court has confirmed the order of conviction passed by the trial Magistrate. 17. In the light of the above, it is necessary to find out as to what is the position in law about presumption under Section 139 of the N.I. Act and to what extent presumption under Section 139 of the N.I. Act extends. 18. The Hon'ble Supreme Court in the case of Krishna Janardhan Bhat referred to supra, had an occasion to consider this aspect of the matter. This matter arises out of the judgment of this Court. The brief facts of the said reported decision are; The appellant therein named Krishna Janardhan Bhat and one R.G. Bhat were jointly running the business in the name and style of Vinaya Enterprises at Hubli and appellant stated to have executed Power of Attorney in favour of the said R.G. Bhat. It was alleged that the appellant handed over the duly attorney four blank cheques for meeting certain expenses of the business. Thereafter, disputes and differences arose between the appellant and R.G. Bhat in connection with running of the said business. Therefore, the Power of Attorney was cancelled. The disputes between them was referred to Panchayath. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability. 31. The Courts below, as noticed hereinbefore, proceeded on the basis that Section 139 raises a presumption in regard to existence of a debt also, xxx 19. Thus from the observations extracted above, it is clear that presumption under Section 139 of the N.I Act is only to the extent that the cheque was drawn for discharge in full or in part of any debt or other liability and the said presumption do not relate to the existence of legally enforceable debt or liability. Therefore, before drawing the presumption under Section 139 of the N.I Act, it is the duty of the Court to see whether or not the complainant has discharged his initial burden as to existence of legally enforceable debt. No doubt as per Section 118(a) of the Act, there is a rebuttable presumption that every negotiable instrument was made or drawn for consideration and when such instrument is accepted, it shall be presumed that it was accepted for consideration. According to Clause (b) of Section 118, there is a presumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision, the Hon'ble Supreme Court considering various circumstances such as the complainants inability to show his source of income so as to enable him to advance a huge loan; non-production of book of accounts; absence of proof to show that the complainant got so much money from the Bank; absence of any written document evidencing lending of money; absence of any witness to the transaction; non compliance of provisions of Section 269SS of Income Tax Act which directs that any advance taken by way of any loan of more than ₹ 20,000/- should be made only by way of an Account Payee cheque; has set aside the conviction recorded against the accused therein. Before concluding the matter, the Hon'ble Supreme Court has also noticed the difficulty of proving a negative. The relevant observations are found in paragraphs 44 and 45 of the judgment which read thus; xxxxx The courts must be on guard to see that merely on the application of presumption as contemplated under Section 139 of the Negotiable Instruments Act, the same may not lead to injustice or mistaken conviction. It is for the aforementioned reasons that we have taken into consideration the decisions operating in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon'ble Supreme Court referred to above, the reasoning of the Courts below in this case cannot be held as legal and proper. The Courts below have not made any endeavour to find out as to whether or not the presumption under Section 118(a) of the Act has stood rebutted and if so, whether the complainant has proved the existence of any legally enforceable debt or liability. Without recording a finding on this aspect of the matter, the Courts below were not justified in drawing presumption under Section 139 of the N.I Act. 24. Therefore, let me consider the evidence on record to find out as to whether the complainant has proved the existence of legally enforceable debt or liability so as to draw presumption under Section 139 of the Act. 25. According to the case of the complainant, on 20.5.2002, the accused borrowed from him a sum of ₹ 75,000/- for improvement of his business and for discharge of that debt on the same day the accused issued the cheque in question but requested him to present the said cheque for encashment on 10.3.2003. Accordingly, when the said cheque was presented on 10.3.2003 the same came to be dishonoured with an endorsement 'payment sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him for the purpose of construction of the house on the site. Ex. D.11 is the allotment order under Ashreya Housing Scheme issued by Zilla Panchayath, Mandya. According to the contents of Ex. D.11, complainant was allotted house under Ashreya scheme in Koppal village. It is stated in Ex. D.11 that the allottee is a person belonging to below poverty line. According to Ex. D.11, persons whose annual income is less than ₹ 11,800/- are entitled for allotment. Exs. D.10 D.11 are dated 16.3.2002. As noticed earlier, according to the complainant, he lent a sum of ₹ 75,000/- to the accused on 20.5.2002. The complainant has not disputed the correctness of Exs.D.9 to D.11. If according to Exs. D.9 to D.11, the annual income of the complainant was hardly ₹ 9,000/- and he is a person belonging to below poverty line, it is not explained as to how he could muster his resources to pay ₹ 75,000/- as loan to the accused on 20.5.2002. If the annual income of the complainant as on 22.3.2002 was hardly ₹ 9,000/- within three months thereafter namely on 20.5.2002 how he could lend a sum of ₹ 75,000/- to the accused is not explained. These circumstances, in my con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which could be posed in the matter. It was open to the High Court to draw its own conclusion therein. Not only no document had been executed even no interest had been charged. 30. Thus, the circumstances of not charging any interest was also considered as the relevant circumstance to find out as to whether the existence of the debt has been proved or not. In the case on hand also, not only no document has been executed even, no interest has been charged. No explanation is forthcoming from the complainant as to why interest was not charged on ₹ 75,000/- alleged to have been lent by him for a period of nearly 10 months. No prudent man, in my considered view, would lend substantial amount of ₹ 75,000/- without charging interest. Admittedly, provisions of Section 269SS of Income Tax Act has not been followed, as, it is not the case of the complainant that, the loan of ₹ 75,000/- was advanced by means of Account Payee cheque. 31. Having regard to the evidence on record, I am of the considered view that the complainant has not established nor proved the existence of legally enforceable debt, against the accused appellant. The Courts below more particularly, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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