Accused convicted under Section 138

The accused failed to rebut the statutory presumption under Sections 118 and 139 of the N.I. Act. The High Court set aside the judgment of acquittal by the Trial Court and convicted the accused under Section 138 of the N.I. Act. The accused was sentenced to pay a fine of Rs.2,00,000/- or undergo imprisonment for three months in default of payment. The Registry was directed to send a copy of the judgment and the Trial Court records back to the Trial Court.

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Issues Involved:
1. Service of Demand Notice
2. Material Alteration in the Cheque
3. Date of Loan Transaction
4. Debt Being Time-Barred
5. Violation of Section 269-SS of Income Tax Act
6. Issuance of Cheque as Security

Analysis:

1. Service of Demand Notice:
The accused contended that the Demand Notice (Ex.P5) was not served to him, and the signature on the acknowledgment card (Ex.P6) was not his. The notice was served to the accused's residential address and received by S.M. Haralgi, who was identified as the accused's wife. The court held that service was deemed effective under Section 27 of the General Clauses Act, 1897, as the notice was correctly addressed and received by a family member.

2. Material Alteration in the Cheque:
The Trial Court observed a material alteration in the cheque (Ex.P1) regarding the year "2010." However, the bank dishonored the cheque due to insufficient funds, not because of the alteration. The High Court held that the alteration did not render the cheque invalid, especially since the bank did not refuse to honor it on this ground.

3. Date of Loan Transaction:
The Trial Court noted that the complaint did not specify the date when the loan was given. However, the High Court found that the complaint did mention that the accused approached the complainant on 07.02.2010 and requested a loan of Rs.2,00,000/-, which was given on the same date. The High Court held that there was no legal requirement to plead the date of approach, only the date of payment, which was adequately stated.

4. Debt Being Time-Barred:
The Trial Court held that the debt was time-barred under Section 19 of the Limitation Act. The High Court disagreed, noting that the cheque was issued on 07.12.2010 and presented within the statutory period of six months. The court cited the Supreme Court's decision in Bir Singh vs. Mukeshkumar, which held that post-dated cheques do not absolve the drawer of the penal consequences under Section 138 of the N.I. Act.

5. Violation of Section 269-SS of Income Tax Act:
The Trial Court found the transaction in violation of Section 269-SS of the Income Tax Act, which requires loans above Rs.20,000/- to be made through account payee cheques or drafts. The High Court clarified that Section 269-SS does not render such transactions invalid or unenforceable; it only prescribes the mode of acceptance. The court cited the Supreme Court's decision in Assistant Director of Inspection Investigation vs. A.B. Shanti and a Karnataka High Court decision, which held that Section 269-SS does not invalidate the loan transaction.

6. Issuance of Cheque as Security:
The accused claimed that the cheque was issued as security for a loan of Rs.50,000/- taken in 2006-2007, which he repaid with interest amounting to Rs.2,50,000/-. The High Court found that the accused failed to establish the nexus between the alleged loan and the issuance of the cheque as security. The court noted that the accused did not provide specifics about the loan agreement or the interest rate and found the explanation of paying Rs.2,00,000/- as interest on a Rs.50,000/- loan within three years unreasonable.

Conclusion:
The High Court found that the accused failed to rebut the statutory presumption under Sections 118 and 139 of the N.I. Act. The judgment of acquittal by the Trial Court was set aside, and the accused was convicted under Section 138 of the N.I. Act. The accused was sentenced to pay a fine of Rs.2,00,000/- or undergo imprisonment for three months in default of payment. The Registry was directed to send a copy of the judgment and the Trial Court records back to the Trial Court.

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