2025 (4) TMI 1175 - HC - Indian Laws

Employee fails to prove legally enforceable debt for dishonored cheques worth Rs. 49 lakh under Section 138

T.A.N. Moorthy Versus C.K. Narayan and Anr

The Bombay HC dismissed an appeal against acquittal in a Section 138 Negotiable Instruments Act case. The complainant failed to prove legally enforceable ... Dishonour of Cheque - legally enforceable debt or liability - scope of an appeal against an acquittal - Section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- It would be worthwhile to note the scope of Appeal against Acquittal and the law with regard to scope of interference by Appellate Court in an Appeal against acquittal. A recent decision of the Division Bench of this Court in the case of ABC, Through Police Station, Chhavani, Nashik Vs. The State of Maharashtra and Anr. ABC, VERSUS THE STATE OF MAHARASHTRA, RAOSAHEB BABURAO MALI [2024 (6) TMI 1453 - BOMBAY HIGH COURT], has after analysing the settled law on the above issue laid down the scope for interference in Appeal against Acquittal. This is because the trial before the trial court on remand by the session court was specifically required to determine the existence of a legally enforceable debt. In the Suit plaint Complainant has stated that the claim arises out of a mutually agreed settlement between parties as on 30.06.1996 after accounts between the Plaintiff and the Defendants that is Complainant and Accused were worked out mutually between them and the said statement of claim was prepared. If this statement of cause of action is true then Exhibit-A appended to the Suit plaint ought to have been signed and acknowledged by both the parties. However it doesn’t bear signature of either parties. It is merely prepared by the Complainant on his own. There is no evidence or fact stated about how and whether the mutual settlement occurred or took place. Same cause of Action is pleaded by Complainant in the present case also when he is called upon to prove his legally enforceable debt or liability of the Accused towards him. The present appeal is dependent upon the strength of the evidence of the Complainant to prove the legally enforceable debt. In the present case it is seen that substantial witness action is led by both sides. What is crucial to be noted is the fact that claim of Complainant is for a substantial tenure of time on the ground that he brought good amount of business to the Accused and was to get 0.5 percent of the total turnover in addition to Rs. 3,000/- per month as salary. Complainant was employee of Accused and his firm, Meera Investments is an admitted fact - The question as to why did the Complainant choose to pay the third parties is left clearly unanswered. This goes to the root of the matter to prove legally enforceable debt, if any from the Accused. The Complainant admittedly was not the agent of the Accused so as to foist the liability on Accused. Complainant in his deposition claimed to be a guarantor but once again his claim is a bald claim without any deed of guarantee between the parties. Complainant did not choose to make the Accused aware even once that he was guarantor / surety for the investors over the years. Hence his case is unbelievable. It is seen that Complainant issued the legal notice under Section 138 in the year 1996 raising the demand of Rs. 49,83,836/- under the two cheques. It is seen that immediately thereafter in the reply to the said notice Accused raises his defense of the issue of the two cheques by fraudulent means. Complainant thereafter issued a rejoinder. In the notice and the rejoinder Complainant does not state the cause of action namely the details of the eleven (11) heads under which the twin cheques were issued by the Accused to him. There is admittedly no evidence produced to arrive at the said statements and liability. Hence, if it is Complainant’s case that the cheques were issued for a legally enforceable debt, it was his duty to prove the same. There is nothing on record placed by the Complainant to show that the amounts stated in Exhibit “P11” to Exhibit “P13” are arrived at pursuant to a legally enforceable debt. Exhibit “P11” to Exhibit: P-13 do not prove the case of the Complainant. Mere exhibition of the said Computer statement prepared by the Complainant do not prove the contents of the said document - The Complainant has failed to prove the existence of any legally enforceable debt and on the contrary. Accused in his defence by leading cogent evidence has clearly rebutted the Complainant’s case. On the basis of material on record, it cannot be said that Complainant has proved his case beyond all reasonable doubts. The burden on the Accused to prove his case only to the extent of preponderance of probability is clearly proved in the present case even though there may be a probability that Complainant brought business to the Accused or the Accused received loans from third parties. Admittedly there is no documentary evidence placed on record to that effect by Complainant. That apart Complainant had no right whatsoever to recover the amounts given by him on his own volition to third parties from the Accused. Complainant was neither guarantor nor surety for these amounts. Accused has clearly set and proved the probability that the Complainant through his nexus/ employment with the firm of the Accused obtained the two cheques signed by the Accused which is believable and therefore the onus of proving that the two cheques were issued towards a legally enforceable debt and liability was on the Complainant. The Complainant has failed to discharge this burden. Therefore the case of the Complainant- Appellant before me fails miserably. Conclusion - The Complainant failed to prove the existence of a legally enforceable debt, and the Accused successfully rebutted the presumption under Section 139. Therefore, the acquittal by the trial court is upheld. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe primary legal issue in this case was whether the cheques issued by the Accused to the Complainant were for a legally enforceable debt or liability, as required under Section 138 of the Negotiable Instruments Act, 1881. The Court also considered the scope of an appeal against an acquittal, particularly the standards and principles guiding appellate interference with a trial court's decision to acquit.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsSection 138 of the Negotiable Instruments Act, 1881, mandates that a cheque must be issued for the discharge of a legally enforceable debt or liability. Section 139 of the Act presumes the existence of such a debt or liability unless the contrary is proved. The presumption under Section 139 is rebuttable, and the burden of proof lies on the accused to show that the debt was not legally enforceable.The Court referred to several precedents, including Sheo Swarup v. King Emperor and M.G. Agarwal v. State of Maharashtra, which outline the principles governing appellate review of acquittals. The appellate court has full power to review the evidence but must give due weight to the trial court's findings, especially regarding witness credibility and the presumption of innocence.Court's Interpretation and ReasoningThe Court emphasized that the burden of proving a legally enforceable debt lies with the Complainant. The Court noted that the Complainant failed to provide documentary evidence to substantiate the claim that the cheques were issued for a legally enforceable debt. The evidence presented by the Complainant, including handwritten notebooks and computer-generated statements, was not sufficient to prove the existence of such a debt.Key Evidence and FindingsThe Complainant relied on handwritten notebooks (Exhibits P2 to P4) and computer printouts (Exhibits P11 to P13) to support the claim of a legally enforceable debt. However, the Court found these documents insufficient as they were not corroborated by independent evidence or agreements. The Accused argued that the cheques were issued blank and were misused by the Complainant, a claim supported by the lack of evidence showing a mutual settlement or acknowledgment of debt by the Accused.Application of Law to FactsThe Court applied the principles of Section 138 and 139 of the Negotiable Instruments Act, emphasizing the need for the Complainant to prove the existence of a legally enforceable debt. The Court found that the Complainant failed to meet this burden, as the evidence did not establish that the cheques were issued for a legally enforceable debt. The Accused successfully rebutted the presumption under Section 139 by demonstrating the absence of any agreement or acknowledgment of debt.Treatment of Competing ArgumentsThe Complainant argued that the cheques were issued as part of a settlement for various liabilities, including loans and unpaid salary. However, the Court found these claims unsupported by evidence. The Accused's defense of fraud and misuse of blank cheques was found more credible, given the lack of documentary evidence from the Complainant.ConclusionsThe Court concluded that the Complainant failed to prove the existence of a legally enforceable debt, and the Accused successfully rebutted the presumption under Section 139. Therefore, the acquittal by the trial court was upheld.SIGNIFICANT HOLDINGSThe Court upheld the trial court's acquittal, emphasizing the importance of proving a legally enforceable debt under Section 138 of the Negotiable Instruments Act. The Court reiterated the principle that the burden of proof lies with the Complainant to establish the existence of such a debt, and mere issuance of a cheque is insufficient without supporting evidence.The judgment reinforced the appellate court's cautious approach in interfering with acquittals, highlighting the presumption of innocence and the need for compelling reasons to overturn a trial court's decision.The appeal was dismissed, and the trial court's judgment of acquittal was upheld, as the Complainant failed to prove the existence of a legally enforceable debt or liability.