2010 (2) TMI 1288 - HC - Indian Laws

Appellate court acquits accused due to lack of evidence, cites failure to prove debt and compliance with tax laws.

Sandeep Shirodkar Versus Shankar Dhawaskar Another

The appellate court set aside the trial court's conviction of the accused, finding that the complainant failed to prove the existence of a legally ... - Issues Involved:1. Legally enforceable debt.2. Presumption under Section 139 of the Negotiable Instruments Act.3. Evaluation of evidence by trial and appellate courts.4. Compliance with Section 269-SS of the Income Tax Act.Detailed Analysis:1. Legally Enforceable Debt:The primary issue revolves around whether the accused had a legally enforceable debt towards the complainant. The complainant alleged that the accused borrowed various sums totaling Rs. 35,00,000 and issued cheques in discharge of this liability. However, the appellate court found that the complainant failed to prove the existence of this debt convincingly. The complainant's evidence lacked credibility, especially since significant amounts were allegedly lent to a person they barely knew, without any substantial documentation or credible witness testimony.2. Presumption Under Section 139 of the Negotiable Instruments Act:The trial court relied heavily on the presumption under Section 139, which assumes that the cheques were issued for the discharge of a debt or liability. However, the appellate court noted that this presumption does not extend to the existence of the debt itself, which must be initially proved by the complainant. The accused successfully rebutted this presumption by presenting a probable defense, including the existence of a partnership and the possibility of the cheques being signed in blank. The appellate court emphasized that the burden of proof shifts back to the complainant once the accused raises a probable defense.3. Evaluation of Evidence by Trial and Appellate Courts:The appellate court criticized the trial court for not properly evaluating the evidence. The trial court had convicted the accused based on an 'Acknowledgement of Debt' and receipts presented during cross-examination, which were not initially mentioned in the complaint. The appellate court found that these documents were suspicious and possibly fabricated, given the identical nature of the receipts and the circumstances under which they were produced. The appellate court conducted a thorough re-evaluation of the evidence and found significant inconsistencies and lack of credibility in the complainant's case.4. Compliance with Section 269-SS of the Income Tax Act:The appellate court also noted a violation of Section 269-SS of the Income Tax Act, which prohibits cash transactions above Rs. 20,000. The complainant's alleged cash loan of Rs. 35,00,000 to the accused was in direct violation of this provision, further weakening the complainant's case. The court held that the existence of a legally enforceable debt is a sine qua non for invoking Section 138 of the Negotiable Instruments Act, and the violation of Section 269-SS negated this requirement.Conclusion:The appellate court's judgment set aside the trial court's conviction of the accused, finding that the accused had successfully rebutted the presumption under Section 139 of the Negotiable Instruments Act. The complainant failed to prove the existence of a legally enforceable debt and did not comply with the provisions of the Income Tax Act. The appellate court's detailed evaluation of the evidence revealed significant discrepancies and lack of credibility in the complainant's case, leading to the dismissal of the appeals and the acquittal of the accused.