2025 (7) TMI 276 - HC - Indian Laws

Appeal dismissed in dishonour case as complainant failed proving investment liability despite civil decree

Delhi HC dismissed appeal in dishonour of cheque case. Complainant alleged money given to respondent for stock market investment promising 10% monthly ... Dishonour of Cheque - discharge of onus of establishing from evidence that there was no existing legal liability or debt - HELD THAT:- Pertinently, as per the Complainant, the money had been given to the Respondent for investment in Blue Chip Companies through Stock Market to ensure return of about 10% per month. However, the Complainant failed to produce even one single purchase of share / debentures made by him. It is difficult to accept that had this money been given to the Respondent for investment in Blue Chip Companies through Stock Market, he would not have questioned or ensured the purchase of shares as has been claimed by him. His claim that the money was invested from time to time, is not reflected in his bank statement and also is not corroborated by any purchase of shares of Blue Chip Companies as was claimed by him. To prove that the Loan amount was returned, it is not denied that Rs.75,000/- had been transferred to the account of the Complainant on 21.09.2017 which she has asserted was towards return of the Loan amount. She also has claimed that she was paying Rs.21,000/- per month from September, 2017 to February, 2018, which come to Rs.1,26,000/-. This amount is added to Rs. 75,000- it comes to Rs.2,01,000/-, which according to her is the total loan amount along with the interest @ 5 % per month. While it may be a weak defence, but it has been successfully established that the Complainant had not given the advance of Rs. 7,50,000/- to the Respondent. The Appellant has contended that once the Civil Suit has been decreed, it is a proof of legal liability of Rs. 7,50,000/- of the Respondent. In this regard, it may be observed that while granting Leave to Defend, the defence of the Respondent was considered in detail, which was found to have some merit and the Leave to Defend was allowed. Merely, because the Suit has been decreed on account of non-fulfilling the condition for grant of leave, it cannot be held as conclusive finding on the outstanding liability of Rs. 7,50,000/-. It is held that the learned MM has rightly concluded that the complainant had not been able to prove the outstanding liability of Rs. 7,50,000/- of which the alleged cheque in question was claimed to have been issued. There is no merit in the present Appeal which is hereby, dismissed. The core legal questions considered in this judgment include:1. Whether the complainant had established the existence of a legally enforceable debt or liability owed by the respondent to the complainant, as required under Section 138 of the Negotiable Instruments Act (NI Act).2. Whether the respondent successfully rebutted the statutory presumption under Sections 118(a) and 139 of the NI Act regarding the existence of consideration and discharge of debt/liability through the cheque in question.3. The validity and effect of the respondent's defence that the cheque was issued as security for a smaller loan amount, which was already repaid, and not in discharge of the alleged larger debt claimed by the complainant.4. The evidentiary value of the bank statements, cheque issuance, and other documentary evidence presented by both parties in establishing or negating the alleged debt and liability.5. The impact of the civil suit decree obtained by the complainant on the issue of liability under the NI Act complaint.Issue-wise detailed analysis:Existence of Legally Enforceable Debt or Liability under Section 138 NI ActThe legal framework mandates that for a complaint under Section 138 NI Act to succeed, the complainant must prove the existence of a legally enforceable debt or liability in respect of which the cheque was issued. The statutory presumptions under Sections 118(a) and 139 of the NI Act presume the existence of consideration and discharge of liability upon execution and dishonour of the cheque, respectively. However, these presumptions are rebuttable by the accused.Precedents such as Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal and K. Prakashan vs. P.K. Surenderan clarify that once the accused raises a probable defence disputing the debt or consideration, the onus shifts back to the complainant to prove the existence of such debt or liability. The accused can discharge this initial burden either by disproving the consideration directly or by showing that the existence of consideration is improbable or doubtful.In the present case, the respondent asserted that she had taken only a loan of Rs. 1,50,000/- from the complainant, which was fully repaid, and the cheque in question was a security cheque related to that loan. She provided bank statements (Ex. DW-1/A) corroborating the receipt and repayment of this smaller loan amount. She also claimed that the complainant misused the blank signed cheques given as security.The complainant, on the other hand, claimed that Rs. 7,50,000/- was invested with the respondent for a Portfolio Management Scheme promising high returns, and the cheque was issued in discharge of this larger liability. However, the complainant failed to produce any documentary evidence of such investment, including absence of share purchase records or bank statements reflecting the transfer of the entire Rs. 7,50,000/- to the respondent's account. The only corroborated bank transaction was Rs. 3,00,000/- deposited on 04.09.2017, which was immediately withdrawn by the respondent using one of the security cheques.The court noted that the complainant's assertion of cash payments totaling Rs. 3,05,500/- was unsupported by any credible evidence or detailed explanation. The respondent's bank statements reflected consistent withdrawals or transfers soon after any credit, suggesting no accumulation of funds corresponding to the alleged large investment.The court found that the complainant failed to establish a legally enforceable debt or liability of Rs. 7,50,000/-. The respondent successfully discharged the initial burden by presenting credible evidence of a smaller loan and its repayment, thereby rebutting the statutory presumptions.Validity of the Respondent's Defence Regarding the Cheque as SecurityThe respondent admitted signatures on the cheque but contended that it was one of five blank signed cheques given as security for the loan of Rs. 1,50,000/-. The complainant's claim that the cheque was issued in discharge of Rs. 7,50,000/- was contradicted by the respondent's bank statements showing use of the security cheques for withdrawals by the respondent herself.The court scrutinized the discrepancies in the respondent's statements and the complainant's assertions. While some inconsistencies in the respondent's evidence were noted, such as differences in the amount of loan claimed (Rs. 1,50,000/- vs. Rs. 2,00,000/-) and minor inaccuracies in cash deposits, these did not negate the overall defence that the loan was smaller and repaid.The complainant's failure to produce any credible evidence of the larger loan or investment, combined with the respondent's documentary evidence, led the court to accept the respondent's defence as a probable and credible explanation.Application of Evidentiary Standards and PresumptionsThe court applied the principles established in the cited precedents that the presumption of consideration and liability under Sections 118(a) and 139 NI Act is rebuttable and the accused need not prove the negative but can raise a probable defence. The complainant must then prove the existence of debt/liability on a preponderance of probabilities.The evidence on record, including bank statements, cheque numbers, and transaction dates, was carefully analyzed. The court noted that the complainant's bank statements did not support the claim of Rs. 7,50,000/- being transferred to the respondent's account, and the respondent's statements showed repayment of a smaller loan amount with interest.The court also considered the absence of any reply by the respondent to the legal notice under Section 138 NI Act as an adverse inference but found that it was insufficient to overcome the respondent's credible defence supported by documentary evidence.Effect of Civil Suit DecreeThe complainant relied on a civil suit decree obtained under Order 37 CPC for recovery of Rs. 7,50,000/- with interest, contending that it conclusively established the respondent's liability. However, the court observed that the suit was decreed because the respondent failed to comply with the pre-condition of depositing 50% of the principal amount for leave to defend, not on the merits of the claim.The court held that the civil suit decree could not be treated as conclusive proof of the existence of the debt or liability for the purposes of the NI Act complaint. The findings in the criminal complaint under Section 138 NI Act are independent and require proof beyond the decree.Treatment of Competing ArgumentsThe complainant's argument that the respondent deceived him into investing Rs. 7,50,000/- in a portfolio management scheme promising high returns was found to be unsupported by credible evidence. The absence of any documentation or proof of share purchases or investments was critical.The respondent's contention that the complainant was a moneylender who took advantage of her financial weakness and misused blank signed cheques was supported by bank statements and consistent with the evidence of repayments.The court gave due consideration to all evidence and arguments and found the respondent's defence more plausible on the preponderance of probabilities.ConclusionsThe court concluded that the complainant failed to prove the existence of a legally enforceable debt or liability of Rs. 7,50,000/- owed by the respondent. The respondent successfully rebutted the statutory presumptions by establishing that the cheque was issued as security for a smaller loan that was repaid. The complaint under Section 138 NI Act was rightly dismissed by the learned Magistrate.Significant holdings and core principles established:'Once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument.''The words 'until the contrary is proved' in Section 139 NI Act, do not mean that accused must necessarily prove the negative that the instrument is not issued in discharge of any debt/liability, but the accused has two options. The first option is to prove that the debt/liability does not exist - and conclusively establish with certainty that the cheque was not issued in discharge of a debt/liability. The second option is to prove the non-existence of debt/liability by a preponderance of probabilities by referring to the circumstances of the case.''Merely because the Suit has been decreed on account of non-fulfilling the condition for grant of leave, it cannot be held as conclusive finding on the outstanding liability of Rs. 7,50,000/-.'Final determinations:- The complainant failed to prove the existence of a legally enforceable debt or liability of Rs. 7,50,000/- owed by the respondent.- The respondent successfully rebutted the statutory presumptions under Sections 118(a) and 139 NI Act by adducing credible evidence of a smaller loan and its repayment.- The cheque in question was held to be a security cheque related to the smaller loan, not a discharge of the larger alleged debt.- The dismissal of the complaint under Section 138 NI Act by the learned Magistrate was upheld.