2021 (9) TMI 1159 - SC - Indian Laws

Supreme Court restores conviction under Section 138 of NI Act, emphasizes legal presumption

Triyambak S. Hegde Versus Sripad

The Supreme Court set aside the High Court's order and restored the conviction by the Judicial Magistrate under Section 138 of the Negotiable Instruments ... Dishonor of Cheque - insufficiency of funds - rebuttal of presumption - evidence on record to show that the appellant possessed the funds and the same had been actually paid by him to the respondent to constitute legally recoverable debt or not - preponderance of probablity - HELD THAT:- The signature on the documents at Exhibits P6 and P2 is not disputed. Exhibit P2 is the dishonoured cheque based on which the complaint was filed. From the evidence tendered before the JMFC, it is clear that the respondent has not disputed the signature on the cheque. If that be the position, as noted by the courts below a presumption would arise under Section 139 in favour of the appellant who was the holder of the cheque. On the position of law, the provisions referred to in Section 118 and 139 of N.I. Act as also the enunciation of law as made by this Court needs no reiteration as there is no ambiguity whatsoever. The legal position relating to presumption arising under Section 118 and 139 of N.I. Act on signature being admitted has been reiterated. Hence, whether there is rebuttal or not would depend on the facts and circumstances of each case. As is evident from the records the notice issued by the appellant intimating the dishonorment of the cheque and demanding payment, though received by the respondent has not been replied. In such situation, the first opportunity available to put forth such contention if true was not availed. Even in the proceedings before the learned JMFC, the respondent has not put forth such explanation in the statement recorded under Section 313 of CrPC nor has the respondent chosen to examine himself or any witness in this regard. The said contention had not been raised even in the appeal filed before the learned Sessions Judge. The case put forth by the respondent does not satisfy the requirement of rebuttal even if tested on the touchstone of preponderance of probability. Therefore, in the present facts it cannot be held that the presumption which had arisen in favour of the appellant had been successfully rebutted by the respondent herein. The High Court therefore was not justified in its conclusion. In the facts and circumstances of the instant case, if an enhanced fine is imposed it would meet the ends of justice. Only in the event the respondent accused not taking the benefit of the same to pay the fine but committing default instead, he would invite the penalty of imprisonment - sentence to undergo simple imprisonment for six months and fine of ₹ 2,00,000/- is however modified. The Respondent/Accused is instead sentenced to pay the fine of ₹ 2,50,000/- within three months. In default of payment of fine the Respondent/Accused shall undergo simple imprisonment for six months - From the fine amount, a sum of ₹ 2,40,000/- shall be paid to the Appellant/Complainant as compensation. Appeal allowed in part. Issues Involved:1. Validity of the High Court's order setting aside the conviction under Section 138 of the Negotiable Instruments Act, 1881.2. Presumption under Sections 118 and 139 of the Negotiable Instruments Act.3. Rebuttal of presumption by the respondent.4. Appropriate sentence and fine.Issue-wise Detailed Analysis:1. Validity of the High Court's Order:The appellant challenged the High Court's order which set aside the conviction of the respondent under Section 138 of the Negotiable Instruments Act. The High Court had allowed the respondent's revision petition and dismissed the appellant's petition seeking enhancement of the sentence. The Supreme Court examined whether the High Court was justified in setting aside the concurrent findings of the lower courts.2. Presumption under Sections 118 and 139 of the Negotiable Instruments Act:The Supreme Court emphasized the presumption under Section 139 of the N.I. Act, which mandates that the holder of a cheque received it for the discharge of any debt or liability, unless the contrary is proved. Similarly, Section 118(a) presumes that every negotiable instrument was made for consideration. The Court noted that the respondent did not dispute the signature on the cheque, thereby triggering these presumptions.3. Rebuttal of Presumption by the Respondent:The respondent contended that his signature on the cheque and the agreement was obtained under duress by the appellant's relative, who was a junior advocate in the office of his lawyer. This contention was raised for the first time during arguments before the High Court. The Supreme Court found this explanation unconvincing and noted that the respondent did not provide any rebuttal evidence during the trial or appeal. The Court held that the presumption in favor of the appellant had not been successfully rebutted by the respondent.4. Appropriate Sentence and Fine:The Supreme Court considered whether it was necessary to impose imprisonment at this stage, given the passage of more than two and a half decades since the transaction. The Court noted the financial distress of the respondent and the nature of the transaction, which was not purely commercial. The Court decided to enhance the fine instead of imposing imprisonment, modifying the sentence to a fine of Rs. 2,50,000, with Rs. 2,40,000 to be paid as compensation to the appellant. In default of payment, the respondent would undergo simple imprisonment for six months.Conclusion:The Supreme Court set aside the High Court's order and restored the conviction by the Judicial Magistrate. However, the sentence was modified to an enhanced fine, with imprisonment only in case of default. The appeals were allowed in part, and pending applications were disposed of.