2025 (4) TMI 429 - HC - Indian Laws

Cheque bounce conviction upheld under Section 138 NI Act, sentence modified to Rs 30 lakh fine only

Delhi HC upheld conviction under Section 138 NI Act for cheque dishonour due to insufficient funds. Petitioner challenged conviction claiming mechanical ... Dishonour of Cheque - insufficient funds - petitioner submitted that the petitioner has been convicted in a mechanical manner without due application of mind - violation of principles of natural justice - HELD THAT:- It is trite law that this Court is required to exercise restraint and should not interfere with the findings in the impugned orders or reappreciate evidence merely because another view is possible unless the impugned orders are wholly unreasonable or untenable in law - It is also well settled that once the execution of the cheque is admitted, the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration and the presumption under Section 139 of the NI Act that the holder of the cheque received the cheque in discharge of a legally enforceable debt or liability are raised against the accused. Coming to the facts of the present case, a bare perusal of Ex. CW-1 shows that when the complainant withdrew the first complaint, being, CC 2152/1/08, in terms of the compromise between the parties, he had received the subject cheque as part of the settlement. The cheque details were duly noted in the said order and the statements of the petitioner as well as the respondent was also recorded. The petitioner had assured that the subject cheque shall be encashed and she would abide by the terms of the compromise deed between the parties. The petitioner had affirmed her signature on the compromise deed as well. It is also relevant to note that the compromise deed records the admission of the petitioner to the liability in complaint case bearing no. 2152/1/08. Undue emphasis cannot be laid solely on the factor of adjudication of liability, because even though the same is a factor, the absence of such adjudication does not relegate the complainant to establishing its case afresh, especially when the unchallenged compromise deed records admission on part of the accused. In the present case, after reaping the benefits of the complainant withdrawing the first complaint, the petitioner initially denied the factum of any settlement or compromise - The learned trial Court has rightly noted that the compromise deed has all the essentials of a contract wherein once the respondent withdrew the original complaint, the petitioner could not be allowed to escape her liability under the same. Considering the mitigating circumstances brought forth by the petitioner as well as the quantum of fine imposed, in the opinion of this Court, interests of justice would be met if the sentence imposed on the petitioner is modified to the extent of only payment of the fine amount of Rs. 30,00,000/- with no substantive sentence of imprisonment. In default of payment of fine, the petitioner shall undergo simple imprisonment for a period of six months. Let the fine amount be released to the respondent as compensation. This Court is not interfering in the fine amount considering the nature of the offence as well as the conduct of the petitioner to blatantly deny having entered into any settlement at the first instance. Conclusion - The conviction under Section 138 of the NI Act upheld, but the sentence is modified to exclude imprisonment, focusing on the fine, given the petitioner's circumstances. Petition disposed off. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:1. Whether the petitioner was rightly convicted under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) for dishonor of a cheque issued as part of a settlement agreement.2. Whether the presumption under Sections 118 and 139 of the NI Act regarding the cheque being issued for a legally enforceable debt or liability was correctly applied.3. Whether the petitioner successfully rebutted the presumption of liability under the NI Act.4. Whether the sentence of two years of simple imprisonment and a fine of Rs. 30 lakhs was appropriate and justified.ISSUE-WISE DETAILED ANALYSIS1. Conviction under Section 138 of the NI ActRelevant legal framework and precedents: Section 138 of the NI Act criminalizes the dishonor of a cheque for insufficiency of funds, provided certain conditions are met. The presumption under Sections 118 and 139 of the NI Act assumes the cheque was issued for consideration and in discharge of a debt unless proven otherwise.Court's interpretation and reasoning: The Court noted that the petitioner had issued the cheque as part of a settlement agreement, which was subsequently dishonored. The petitioner initially denied any settlement or liability but later claimed coercion without evidence to support this claim. The Court held that the settlement created an independent contractual liability.Key evidence and findings: The evidence included the settlement agreement, the dishonored cheque, and the petitioner's inconsistent defenses. The Court found that the petitioner failed to rebut the presumption of liability under the NI Act.Application of law to facts: The Court applied the presumption under Sections 118 and 139 of the NI Act, finding that the petitioner did not successfully rebut the presumption of a legally enforceable debt.Treatment of competing arguments: The petitioner argued that the cheque was a security cheque and not linked to a legally enforceable debt. The Court rejected this argument, noting the petitioner's failure to provide evidence or take action against the alleged misuse of the cheque.Conclusions: The Court upheld the conviction under Section 138 of the NI Act, finding no merit in the petitioner's defenses.2. Sentencing and FineRelevant legal framework and precedents: The sentencing under Section 138 of the NI Act involves imprisonment and/or a fine, with the amount of fine often being twice the cheque amount.Court's interpretation and reasoning: The Court considered the petitioner's prior convictions, the nature of the offense, and the mitigating circumstances, including her role as the sole caretaker of a dependent daughter with special needs.Key evidence and findings: The petitioner's personal circumstances and prior conduct were considered in determining the sentence.Application of law to facts: The Court modified the sentence to only require payment of the fine, removing the substantive sentence of imprisonment, considering the petitioner's circumstances.Treatment of competing arguments: The petitioner argued that the imprisonment was unnecessary given the civil nature of the offense and her personal circumstances. The Court agreed to some extent, modifying the sentence accordingly.Conclusions: The Court modified the sentence to a fine of Rs. 30 lakhs, with imprisonment only in default of payment, considering the petitioner's personal circumstances.SIGNIFICANT HOLDINGSThe Court reaffirmed the principle that once a cheque is issued and dishonored, the presumption under Sections 118 and 139 of the NI Act applies, and the burden shifts to the accused to rebut this presumption. The Court emphasized that a settlement agreement creates an independent contractual liability, and parties cannot later deny the terms of such an agreement without evidence.Verbatim quotes of crucial legal reasoning:'Once parties have voluntarily entered into such an agreement and agree to abide by the consequences of non-compliance of the settlement agreement, they cannot be allowed to reverse the effects of the agreement by pursuing both the original complaint and the subsequent complaint arising from such non-compliance.'Core principles established: The judgment reinforces the binding nature of settlement agreements and the presumption of liability under the NI Act for dishonored cheques, emphasizing the need for evidence to rebut such presumptions.Final determinations on each issue: The conviction under Section 138 of the NI Act was upheld, but the sentence was modified to exclude imprisonment, focusing on the fine, given the petitioner's circumstances.