High Court Convicts Respondent under Section 138 of NI Act, Emphasizes Presumption of Debt

The High Court reversed the Trial Court's decision and convicted the respondent under Section 138 of the NI Act. The court emphasized the presumption of debt under Section 139, the establishment of the source of funds, and the respondent's admission of liability through a text message and a signed cheque. The Trial Court's acquittal was set aside due to contradictions in evidence and the failure to consider the respondent's admissions, leading to the conviction of the respondent.

---

---

Issues Involved:

1. Legally enforceable debt or liability.
2. Source of funds for advancing the loan.
3. Admissibility and significance of the text message as evidence.
4. Presumption under Section 139 of the NI Act.
5. Acquittal by the Trial Court and its validity.

Detailed Analysis:

1. Legally Enforceable Debt or Liability:

The appellant claimed that the respondent took a friendly loan of Rs. 14,40,000/- in April 2013, which was not repaid despite reminders. The respondent issued a cheque dated 8th July 2013, which was dishonored due to insufficient funds. The respondent denied taking the loan and claimed the cheque was given as security for committee payments. The court emphasized the presumption under Section 139 of the NI Act, which includes the existence of a legally enforceable debt or liability unless rebutted by the accused.

2. Source of Funds for Advancing the Loan:

The appellant attempted to prove the source of funds through witnesses Devender Singh and Raj Kumar. Devender Singh stated that part of the sale proceeds from a property went to Brijesh Kumar, which was used for the loan. Raj Kumar corroborated this. The court noted that the absence of a sale deed does not negate the financial capacity of the appellant to give the loan, as the factual basis was established through witness testimony.

3. Admissibility and Significance of the Text Message as Evidence:

The appellant presented a text message where the respondent allegedly admitted his liability. The respondent argued that it was inadmissible without a certificate under Section 65B of the Indian Evidence Act. However, the respondent admitted in his deposition that he sent the SMS. The court held that this admission negated the need for further proof of the text message, thus establishing the respondent's acknowledgment of the debt.

4. Presumption under Section 139 of the NI Act:

The court reiterated the presumption under Section 139 of the NI Act, which favors the complainant once the factual basis of a legally recoverable debt is established. The burden then shifts to the accused to rebut this presumption by preponderance of probability. The court cited various precedents, including Rangappa v. Sri Mohan, to emphasize that the presumption includes the existence of a legally enforceable debt and that the accused can rebut it by raising a probable defense.

5. Acquittal by the Trial Court and Its Validity:

The Trial Court acquitted the respondent, finding contradictions in the appellant's evidence and questioning the financial capacity to lend the amount. However, the High Court found this decision perverse, noting that the respondent's admission of sending the SMS and the signed cheque indicated liability. The High Court concluded that the Trial Court erred in not considering these admissions and thus set aside the acquittal, convicting the respondent under Section 138 of the NI Act.

Conclusion:

The High Court reversed the Trial Court's decision, convicting the respondent under Section 138 of the NI Act based on the established presumption of debt, the source of funds, and the respondent's admission of liability. The case was listed for hearing on the order of sentence.

---