Supreme Court Upholds Conviction & Jurisdiction Over Securities Transactions

Hiten P. Dalal Versus Bratindranath Banerjee

Hiten P. Dalal Versus Bratindranath Banerjee - [2001] 32 SCL 499 (SC), 2001 AIR 3897, 2001 (3) SCR 900, 2001 (6) SCC 16, 2001 (5) JT 386, 2001 (4) SCALE ... Issues Involved:
1. Jurisdiction of the Special Court under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992.
2. Validity of the conviction under Section 138 of the Negotiable Instruments Act, 1881.
3. Rebuttal of statutory presumptions under Sections 118, 138, and 139 of the Negotiable Instruments Act, 1881.
4. Appellant's defense regarding the issuance of cheques.

Detailed Analysis:

1. Jurisdiction of the Special Court:
The appellant contested that the Special Court lacked jurisdiction to try the offence as it was committed after 6-6-1992. The Court clarified that the period specified in Section 3(2) of the Act qualifies the word 'transactions' and not 'offence'. The jurisdiction of the Special Court is limited to transactions in securities that occurred between 1-4-1991 and 6-6-1992, regardless of when the offence was committed. This interpretation aligns with the Act's Statement of Objects and Reasons, the preamble, and supporting judgments such as Harshad Shantilal Mehta v. Custodian. The Court held that the Special Court had jurisdiction as the transactions related to the cheques occurred within the statutory period.

2. Validity of the Conviction under Section 138:
The appellant was convicted under Section 138 for issuing four cheques that were dishonoured due to insufficient funds. The Court noted that the cheques were executed within the statutory period and were issued for payment of losses arising from transactions in securities. The appellant received notices under Section 138 but failed to make the payment. The Special Court's jurisdiction to entertain the complaint was upheld, and the conviction was affirmed based on the evidence presented.

3. Rebuttal of Statutory Presumptions:
The Bank relied on statutory presumptions under Sections 118, 138, and 139 of the Negotiable Instruments Act. Section 118 presumes that every negotiable instrument was made for consideration. Section 138 presumes that the dishonoured cheque was issued for the discharge of a debt or liability. Section 139 presumes that the holder of a cheque received it for the discharge of a debt or liability. The Court emphasized that these presumptions place the evidential burden on the appellant to prove otherwise. The appellant failed to provide sufficient proof to rebut these presumptions, as mere explanations without evidence were inadequate.

4. Appellant's Defense:
The appellant claimed that the cheques were issued for intended transactions that did not materialize and were not meant to be encashed. However, the Court found no evidence supporting this defense. The appellant did not testify, and the witnesses called by the appellant did not substantiate the claim that the cheques were unrelated to any liability. The Special Court found the appellant's defense improbable and the evidence flawed. The appellant's argument that he could not pay due to attachment of his properties was also rejected, as he made no attempt to seek permission from the Special Court to fulfill his obligations.

Conclusion:
The Supreme Court affirmed the conviction and sentence imposed by the Special Court, finding no reason to interfere with its decision. The appellant's preliminary objection regarding jurisdiction was rejected, and the statutory presumptions under the Negotiable Instruments Act were upheld. The appellant's defense was found to be unsubstantiated, and the appeal was dismissed with costs assessed at Rs. 10,000.