2015 (10) TMI 2841 - HC - Indian Laws

Directors sentenced to jail & fined for dishonoring cheques under Section 138 N.I. Act

The court found the respondents guilty under Section 138 of the N.I. Act for dishonor of cheques and imposed a six-month simple imprisonment sentence on ... Dishonour of Cheque - acquittal of the accused - discharge of any debt or other liability - rebuttal of presumptions - Whether the transactions in question were simple lending of money for which the appellant/complainant had no valid licence and hence the provisions of Section 138 or 139 of the N.I. Act is not attracted in the case? HELD THAT:- There cannot be any dispute to the fact that the presumptions both in Section 118 and 139 of the N.I. Act are rebuttable presumptions. In the present case the only point for rebuttable of such presumptions for the respondents/accused is that the transactions in question are illegal transactions as the appellant/complainant has no money-lending licence. As held earlier, lending money without having a money-lending licence itself is not prohibited under the Bengal Money-Lender's Act, 1940. So, the presumptions in favour of the appellant/complainant stand unrebutted. The respondents/accused cannot, therefore, escape from the liability under Section 138 of the N.I. Act, especially when there is no denial of the fact that the respondents/accused issued the cheques in question which were dishonoured due to insufficient fund in the account of the respondents/accused. The order passed by the learned Metropolitan Magistrate, 6th Court, Calcutta on 29.06.2013 in case No. C-15450/2011 acquitting the respondents/accused is hereby set aside. All the respondents/accused are found guilty of the offence under Section 138 of the N.I. Act and all the respondents/accused are convicted accordingly. All the respondents/accused are found guilty of the offence under Section 138 of the N.I. Act. Respondents/accused number 2 and 3, namely, Mahendra Kumar Patni and Anjani Kumar Shahi are sentenced to suffer Simple Imprisonment for six months each. They are also directed to pay compensation to the appellant/complainant under Section 357(3) of the Code of Criminal Procedure @ rupees 50,00,000.00 (rupees fifty lakh only) each, in default, they will suffer Simple Imprisonment for two months more. The respondents/accused company, i.e., respondent number 1 is also directed to pay compensation to the appellant/complainant for an amount of rupees 2,50,00,000.00 (rupees two crore and fifty lakh only) under Section 357(3) of the Code of Criminal Procedure within two months from this date failing which the amount would be realised from the company according to the provisions in law. Appeal allowed. Issues Involved:1. Issuance of cheques by the accused.2. Presentation of cheques within the validity period.3. Return of cheques unpaid by the bank.4. Demand notice for payment.5. Non-payment by the accused after receiving notice.6. Nature of the transaction (loan or other liability).7. Legality of loan transactions without a money-lending license.Issue-wise Detailed Analysis:1. Issuance of Cheques by the Accused:The court confirmed that the respondents/accused issued five cheques amounting to Rs. 2,50,00,000.00 to the appellant/complainant. The respondents/accused did not dispute the issuance of these cheques.2. Presentation of Cheques within the Validity Period:It was uncontested that the appellant/complainant deposited the cheques within the prescribed period. The cheques were marked as Exhibit-3 to 3/4.3. Return of Cheques Unpaid by the Bank:The cheques were returned unpaid due to 'insufficient funds' in the respondents/accused's account. This was evidenced by Exhibit-4 series (return memos).4. Demand Notice for Payment:The appellant/complainant sent a demand notice on 10.05.2011, which was duly served on 12.05.2011, as evidenced by Exhibit-5 (demand notice), Exhibit-6 series (postal memos), and Exhibit-7 (postal acknowledgment card).5. Non-payment by the Accused after Receiving Notice:The respondents/accused failed to pay the amount or respond to the demand notice. The trial court decided points 1 to 5 in favor of the appellant/complainant, and these decisions were not disputed during the appeal.6. Nature of the Transaction (Loan or Other Liability):The main defense was that the transactions were simple money lending for which the appellant/complainant had no valid license. The court examined the nature of the transaction and found that the appellant/complainant's primary business was money lending, as indicated by their balance sheet and the memorandum and articles of association (Exhibit-A).7. Legality of Loan Transactions without a Money-lending License:The court noted that money-lending without a license is not entirely prohibited by the Bengal Money-Lender's Act, 1940. The Act regulates the business but does not make unlicensed money-lending illegal per se. The court referenced several judgments, including Samarendra Nath Das vs. Suprio Moitra, which stated that the absence of a money-lending license is not relevant in a Section 138 N.I. Act case.Presumption of Legally Enforceable Debt:The court discussed the presumption under Section 139 of the N.I. Act, which includes the existence of a legally enforceable debt or liability. The court cited the case of Rangappa vs. Sri Mohan, which held that the presumption under Section 139 includes legally enforceable debt.Conclusion:The court found the trial court's views erroneous in law and set aside the order of acquittal. The respondents/accused were found guilty under Section 138 of the N.I. Act and convicted accordingly. The court imposed a sentence of six months of simple imprisonment for the directors and directed the respondents/accused to pay compensation totaling Rs. 3,50,00,000.00 to the appellant/complainant under Section 357(3) of the Code of Criminal Procedure.Sentencing:The court emphasized the importance of Section 138 of the N.I. Act in maintaining the efficacy of the banking system and awarded compensation to the appellant/complainant for financial losses and legal expenses. The respondents/accused were directed to surrender before the trial court within two months to serve their sentence, failing which appropriate legal actions would be taken.Final Orders:The appeal was allowed, and the lower court records, along with a copy of the judgment, were sent to the trial court. Urgent certified photocopies of the judgment were ordered to be supplied to the parties upon compliance with formalities.