High Court convicts respondents under Section 138 of Negotiable Instruments Act, remands case for sentencing.

The High Court overturned the trial court's judgment of acquittal and convicted the respondents under Section 138 read with Section 141 of the Negotiable Instruments Act. The case was remanded for a sentencing hearing, directing the trial court to pass a sentence against the respondents. The appeal was allowed, and the judgment was to be sent to the lower court for implementation.

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Issues Involved:
1. Whether the cheque was issued in discharge of a legally enforceable debt or liability.
2. Whether the complainant-Company stood as a guarantor for the loan taken by the respondent no. 1-Company.
3. Whether the trial court's judgment of acquittal was justified based on the evidence presented.

Detailed Analysis:

Issue 1: Whether the cheque was issued in discharge of a legally enforceable debt or liability.
The appellant-Company alleged that it accommodated a loan of Rs. 50,00,000/- by way of a fixed deposit as collateral for the respondent no. 1-Company. The respondent no. 1-Company issued a cheque for Rs. 50,00,000/- in favor of the appellant-Company, which was dishonored due to insufficient funds. The appellant-Company sent a demand notice, but the respondents failed to pay the amount, leading to the filing of the complaint.

The defense argued that there was no debt or liability to the appellant-Company and that the cheque was given as a blank signed cheque in good faith, which was misused by the appellant-Company.

The High Court relied on the Supreme Court's decision in Bir Singh vs. Mukesh Kumar, which held that the presumption under Section 139 of the Negotiable Instruments Act includes the existence of a legally enforceable debt or liability. The burden to rebut this presumption lies on the accused. The High Court found that the respondents failed to discharge this burden, and the cheque was indeed issued in discharge of the debt.

Issue 2: Whether the complainant-Company stood as a guarantor for the loan taken by the respondent no. 1-Company.
The trial court questioned why the complainant-Company would stand as a guarantor for the respondent no. 1-Company without any business relationship. The trial court found no document proving that the complainant-Company had provided Rs. 50,00,000/- to the respondent no. 1-Company or that Dena Bank had issued such a loan.

However, the High Court noted that P.W.2, the Chief Manager of Dena Bank, testified that the fixed deposit in the name of the appellant-Company was used as collateral for the loan to the respondent no. 1-Company. The fixed deposit was appropriated by the bank to liquidate the loan when the respondent no. 1-Company failed to repay. This created a legally enforceable debt or liability against the respondent no. 1-Company.

Issue 3: Whether the trial court's judgment of acquittal was justified based on the evidence presented.
The trial court acquitted the respondents, stating that the complainant-Company failed to prove the issuance of the cheque in discharge of any debt or liability. The trial court did not consider the presumption under Section 139 of the Negotiable Instruments Act correctly.

The High Court found that the trial court erred in its appreciation of the evidence and the legal presumption. The High Court emphasized that the presumption under Section 139 includes the existence of a legally enforceable debt or liability, and the respondents failed to rebut this presumption.

Conclusion:
The High Court set aside the trial court's judgment of acquittal, convicting the respondents under Section 138 read with Section 141 of the Negotiable Instruments Act. The case was remanded to the trial court for a hearing on the point of sentence, directing the trial court to pass an order of sentence against the respondents. The appeal was allowed, and the judgment was to be sent to the lower court for compliance.

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