2024 (10) TMI 377 - HC - Indian Laws

Cheque dishonor conviction upheld after accused fails to rebut statutory presumption under Section 138

M/s Mahindra & Mahindra Finance Ltd. Versus Raghubir Chand

The HC allowed the appeal against acquittal in a dishonor of cheque case under Section 138 of the Negotiable Instruments Act. The accused issued a cheque ... Dishonor of Cheque - challenge to judgment of acquittal - presumption that the cheque was issued in discharge of legal liability and the burden is upon the accused to prove the contrary - HELD THAT:- It was laid down by the Hon’ble Supreme Court in Mallappa v. State of Karnataka, [2024 (2) TMI 1391 - SUPREME COURT] that while deciding an appeal against acquittal, the High Court should see whether the evidence was properly appreciated on record or not; second whether the finding of the Court is illegal or affected by the error of law or fact and thirdly; whether the view taken by the Trial Court was a possible view, which could have been taken based on the material on record. The Court will not lightly interfere with the judgment of acquittal. It was observed 'The presumption continues at all stages of the trial and finally culminates into a fact when the case ends in acquittal. The presumption of innocence gets concretised when the case ends in acquittal. It is so because once the trial court, on appreciation of the evidence on record, finds that the accused was not guilty, the presumption gets strengthened and a higher threshold is expected to rebut the same in appeal.' In the present case, the accused has not examined himself to prove that he had issued the cheque as security; rather he examined his driver Roop Lal (DW-1) and Baldev (DW-2) regarding the snatching of the vehicle. Therefore, the version of the complainant that he had issued a blank cheque as a security has not been proved on record. In the present case, the statement of account (Ex.CW1/M) shows that the amount of ₹94,135/- was due on 11.06.2008. The cheque was issued for ₹94,135/- on 18.04.2008 which means that the accused had a subsisting liability of ₹94,135/- on the date of issuance of the cheque. Even if a blank cheque was issued by the accused as a security, the complainant had sufficient authority to fill the amount and present it before the Court since the amount of ₹94,135/- was due on 18.04.2008. It was laid down by the Hon’ble Supreme Court in Bir Singh v. Mukesh Kumar [2019 (2) TMI 547 - SUPREME COURT], that a person is liable for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act even if the cheque is filled by some other person. Hon’ble Supreme Court held in Rohit bhai Jivanlal Patel v. State of Gujarat [2019 (3) TMI 769 - SUPREME COURT] that once the presumption had been drawn, the onus shifted to the accused and unless the accused discharged the onus, any doubt on the complainant’s case could not have been raised for want of evidence regarding the source of fund or non- examination of the witnesses. The complaint could not have been dismissed on the ground that the presumption did not extend to the existence of legally enforceable debt or liability - the accused would be liable for the commission of an offence punishable under Section 138 of N.I. Act when the cheque was dishonoured with an endorsement of the account closed. The complainant stated that a notice (Ex.CW1/H) was issued to the accused by registered post as well as a postal certificate. The registered letter (Ex.CW1/L) was returned with an endorsement ‘refused’. Thus, the same was deemed to have been delivered to the accused. Further, the complainant stated that the registered letter sent by UPC was not returned, therefore, the same is presumed to have been served upon the accused. It was laid down by the Hon’ble Supreme Court in C.C. Alavi Haji v.Palapetty Muhammed [2007 (5) TMI 335 - SUPREME COURT] that when the registered letter containing the notice is returned unserved with the endorsement of refused, the notice is deemed to have been served. The ingredients of Section 138 of the Negotiable Instrument Act were duly satisfied in the present case and the learned Trial Court erred in acquitting the accused. The judgment passed by the learned Trial Court is set aside. The accused is convicted of the commission of an offence punishable under Section 138 of N.I. Act - Appeal allowed. Issues Involved:1. Whether the accused was guilty of committing an offense under Section 138 of the Negotiable Instruments Act (N.I. Act).2. Whether the presumption under Section 139 of the N.I. Act was correctly applied by the Trial Court.3. Whether the evidence presented was sufficient to establish the existence of a legally enforceable debt.4. Whether the notice of demand was properly served to the accused.5. Whether the cheque issued by the accused was in discharge of a legal liability or merely as security.Detailed Analysis:1. Offense under Section 138 of the N.I. Act:The primary issue was whether the accused committed an offense under Section 138 of the N.I. Act, which deals with the dishonor of cheques for insufficiency of funds or if the account is closed. The accused issued a cheque for Rs. 94,135, which was dishonored with the endorsement 'account closed.' The complainant alleged that this cheque was issued to discharge a liability, while the accused contended it was issued as security. The High Court found that the dishonor due to 'account closed' falls within the purview of Section 138, as established in NEPC Micon Ltd. v. Magma Leasing Ltd., where such dishonor indicates insufficient funds.2. Presumption under Section 139 of the N.I. Act:The High Court emphasized the statutory presumption under Section 139, which presumes that a cheque was issued for the discharge of a debt or liability unless proven otherwise by the accused. The Trial Court's failure to properly apply this presumption was a significant error. The accused admitted to issuing the cheque, which activated the presumption of legal liability. The High Court cited precedents, including Rangappa v. Sri Mohan, affirming that the presumption includes the existence of a legally enforceable debt or liability.3. Evidence of Legally Enforceable Debt:The complainant presented evidence, including a statement of account, showing the accused's liability of Rs. 94,135 on the date of the cheque's issuance. The accused did not provide sufficient evidence to rebut this presumption, nor did he testify to support his claim that the cheque was issued as security. The High Court noted that the complainant's evidence, corroborated by documents, established the existence of a debt, shifting the burden to the accused, who failed to discharge it.4. Service of Demand Notice:The High Court addressed the issue of whether the demand notice was properly served. The notice sent by registered post was returned with an endorsement of 'refused,' which, under the law, constitutes valid service. The Court referred to C.C. Alavi Haji v. Palapetty Muhammed, which holds that refusal to accept a registered letter is deemed service. Additionally, the accused's failure to pay within 15 days of receiving the court summons further negated his claim of non-receipt.5. Cheque as Security or Legal Liability:The accused claimed the cheque was issued as security, not in discharge of a debt. However, the High Court highlighted that even if a cheque is issued as security, it can still attract liability under Section 138 if the debt existed at the time of presentation. The Court cited Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd., which supports the view that a cheque issued as security can still be actionable if it represents a subsisting liability.Conclusion:The High Court concluded that the Trial Court erred in its judgment by not properly applying the presumption under Section 139 and failing to appreciate the evidence of a legally enforceable debt. Consequently, the High Court set aside the acquittal, convicted the accused under Section 138 of the N.I. Act, and scheduled a hearing for sentencing.