2021 (1) TMI 1214 - HC - Indian Laws

Petitioner acquitted in cheque bounce case, court orders refund of fine and cancels bail bond

The High Court acquitted the petitioner of the charge under Section 138 of the Negotiable Instruments Act, setting aside lower court judgments. The court ... Dishonor of Cheque - insufficiency of funds - whether the Judgments of courts below suffer from any incorrectness, illegality and impropriety in convicting and sentencing the petitioner for the offence under section 138 of Negotiable Instruments Act? - HELD THAT:- The petitioner admitted the cheque as his cheque and the signature in the cheque as his signature. Admittedly, the cheque had been returned, since there was no funds in the account of the petitioner when the cheque was presented for collection. The learned counsel for the respondent submitted that nowhere in the reply, the petitioner has stated with regard to the alleged chit transaction and depositing the cheque as a security for chit transaction. Ex.P.7 Account statement shows that the respondent had sufficient means to lend the amount of ₹ 5,00,000/- to the petitioner. Moreover, there is presumption under 139 of the Negotiable Instruments Act that a cheque had been issued towards discharging the legally enforceable debt or liability, unless the contrary is proved. The petitioner did not prove the contrary fact against the fact of issuance of cheque for discharging the debt and return of the cheque for the reason that there was no funds in the account of the petitioner. With regard to burden of proof, it is said that whereas the prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof to prove a defence on the part of an accused is preponderance of probability. Inference of preponderance of probability can be drawn not only from the materials brought on record by the parties but also by reference to circumstances upon which he relies. When there is no material to show that the respondent is a regular income tax assessee and he has been regularly filing income tax returns, this Court is of the considered view that on the basis of Ex.P.7 one cannot come to the conclusion that the respondent has sufficient means to lend a sum of ₹ 5,00,000/- to the petitioner, especially when the petitioner said that he had no prior acquaintance with the respondent - It is seen from the evidence of PW-1 that he did not know the petitioner prior to lending a huge sum of ₹ 5,00,000/-. He came to know about the petitioner through one Rajendran. He did not even know the address of the said Rajendran. He did not get any supporting document like a promissory note to evidence the loan transaction. These aspects strengthens the case of the petitioner that the cheque he gave to Sathyan as a security for chit transaction is misused through the respondent. It is true that the petitioner has not happily worded in the reply that the cheque in question was given as security to Sathyan in chit transaction - There is no denial of the fact that Satyan is the close relative of the respondent. The fact that the respondent had not produced any acceptable evidence to show that he has means to lend a sum of ₹ 5,00,000/- to the petitioner, when seen in the backdrop of the case projected by the petitioner that the cheque was given as security in the chit rune by Satyan, probalised the case of the petitioner that the cheque which was given as security in the chit transaction is misused by the respondent. Both the Trial court and the Appellate court have not considered these vital aspects while proceeding to dispose the case and heavily placed reliance on the presumption under section 139 of the Negotiable Instruments Act, without minding that this provision 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. However, this presumption does not extend to the existence of a debt also. Existence of a legally enforceable debt is not a matter of presumption under section 139 of Negotiable Instruments Act - this court concludes that the judgments of the court below in convicting and sentencing the petitioner under Section 138 of Negotiable Instruments Act is not in consonance with established fats and position of law and has to be necessarily set aside. Petition allowed. Issues Involved:1. Validity of the loan transaction and issuance of the cheque.2. Financial capacity of the respondent to lend Rs. 5,00,000.3. Service of statutory notice under Section 138 of the Negotiable Instruments Act.4. Presumption under Section 139 of the Negotiable Instruments Act.5. Judgment of the lower courts.Issue-wise Detailed Analysis:1. Validity of the loan transaction and issuance of the cheque:The respondent alleged that the petitioner borrowed Rs. 5,00,000 on 28.09.2014 and issued a cheque to discharge this liability. The cheque was dishonored due to insufficient funds. The petitioner denied knowing the respondent and claimed that the cheque was issued as security for a chit fund transaction with one Sathyan, who absconded. The petitioner argued that the respondent, being a relative of Sathyan, misused the cheque.2. Financial capacity of the respondent to lend Rs. 5,00,000:The petitioner questioned the respondent's financial capacity to lend Rs. 5,00,000. The respondent produced an Income Tax statement (Ex.P.7) to prove his means. However, the court noted that Ex.P.7 was prepared after the case was filed and was not submitted to the Income Tax Authorities. The respondent did not produce any prior income tax returns or other evidence to substantiate his financial capacity. The court found this suspicious and concluded that the respondent failed to prove he had sufficient means to lend the amount.3. Service of statutory notice under Section 138 of the Negotiable Instruments Act:The petitioner contended that the statutory notice was not properly served as it was delivered to his wife, not him. Citing the judgment in (2009) 14 SCC 398 [M.D.Thomas Vs. P.S.Jaleel and Another], the court agreed that proper service of notice is mandatory under Clause (b) of the proviso to Section 138. Since the notice was not served on the petitioner directly, the court found this to be a valid ground for setting aside the conviction.4. Presumption under Section 139 of the Negotiable Instruments Act:The court acknowledged that Section 139 raises a presumption that the cheque was issued for discharging a legally enforceable debt. However, this presumption does not extend to the existence of the debt itself. The petitioner only needed to prove his case by preponderance of probability, not beyond reasonable doubt. The court found that the petitioner successfully raised a probable defense by showing the cheque was issued as security for a chit fund transaction.5. Judgment of the lower courts:The trial court and the appellate court heavily relied on the presumption under Section 139 and did not adequately consider the petitioner's defense or the lack of evidence regarding the respondent's financial capacity. The High Court found that both lower courts failed to properly evaluate these aspects and wrongly convicted the petitioner.Conclusion:The High Court set aside the judgments of the lower courts, acquitted the petitioner of the charge under Section 138 of the Negotiable Instruments Act, and ordered the refund of any fine paid. The bail bond was also canceled. The court concluded that the respondent failed to prove the existence of a legally enforceable debt and the proper service of notice, thereby invalidating the conviction.