2020 (2) TMI 676 - HC - Indian Laws

Court upholds conviction under Negotiable Instruments Act, clarifies Income Tax Act violations.

Guddo Devi @ Guddi Versus Bhupender Kumar

The Court dismissed the petition challenging the conviction under Section 138 of the Negotiable Instruments Act, upholding the rigorous imprisonment and ... Dishonor of Cheque - section 138 of NI Act - enforceable debt or not - pre-summoning evidence - Section 251 of the Cr.P.C. - HELD THAT:- In the present case, there is no material to conclude that the respondent was carrying on the business of advancing loans. Merely because the respondent had lent money to three or four persons, did not lead to the inference that the respondent had been carrying out the activity of money lending as a business. The respondent had also expressly denied that he had given any loan on interest to public persons - The contention that the debt owed by the petitioner was rendered unenforceable by virtue of the provisions of the Income Tax Act, 1961 is also unmerited. Section 269SS of the Income Tax Act, 1961 prohibits making of any payment in cash above a sum of ₹20,000/-. Thus, any person violating the same would attract imposition of penalties under the said Act. However, the same does not render the said debt un-enforceable or precludes the lender from recovering the same - In the present case, the petitioner had clearly admitted to receiving the loan and, therefore, it could not be held that the petitioner had rebutted the presumption that the cheque had been issued in discharge of an enforceable debt. Petition dismissed. Issues Involved:1. Impugning judgment convicting petitioner under Section 138 of NI Act.2. Applicability of Punjab Registration of Money Lenders Act, 1938.3. Violation of Section 269SS of Income Tax Act, 1961.Analysis:Issue 1: Impugning Judgment under Section 138 of NI ActThe petitioner challenged the judgment convicting her under Section 138 of the Negotiable Instruments Act, 1881. The respondent filed a complaint as a cheque issued by the petitioner was dishonored. The Trial Court convicted the petitioner, sentencing her to rigorous imprisonment and a monetary penalty. The petitioner's appeal was dismissed by the High Court, upholding the conviction and sentence.Issue 2: Applicability of Punjab Registration of Money Lenders Act, 1938The petitioner argued that the loan was illegal as the respondent was not a registered money lender under the Punjab Registration of Money Lenders Act, 1938. However, the Court found that the respondent did not fall under the definition of a money lender as per the Act since there was no evidence to prove that the respondent was carrying on the business of advancing loans.Issue 3: Violation of Section 269SS of Income Tax Act, 1961The petitioner contended that the loan was unenforceable due to a violation of Section 269SS of the Income Tax Act, 1961, which prohibits cash transactions above a certain limit. The Court clarified that while such violations attract penalties, they do not render the debt unenforceable. The Court distinguished a precedent where non-disclosure in tax returns affected enforceability, unlike the present case where the petitioner admitted receiving the loan, making the debt enforceable.In conclusion, the Court dismissed the petition, stating that the debt was enforceable despite the alleged violations. The petitioner's claims regarding the illegality of the loan under the money lending and income tax laws were not upheld. The judgment highlighted the importance of distinguishing between legal violations and the enforceability of debts under the NI Act.