2025 (7) TMI 552 - HC - Indian Laws

Trial court's acquittal overturned in dishonour of cheque case under Section 138 NI Act

Victor Cletus Versus State Of Kerala, Navas.

Kerala HC set aside trial court's acquittal in dishonour of cheque case. Trial court erroneously held that absence of evidence regarding prior meeting ... Dishonour of Cheque - funds insufficient - acquittal of accused without a proper appreciation of the facts and evidence brought on record in this case - rebuttal of presumptions - HELD THAT:- There are no hesitation in holding that the fact that the evidence of PW1 and PW2 to the effect that they did not witness the accused making the entire entries in the cheque leaf is of little consequence. In the case at hand, even the accused does not have a case that the signature found in Ext.P1 cheque does not belong to him. As held in Johnson Zachriah v. State of Kerala [2006 (8) TMI 693 - KERALA HIGH COURT], an admission of signature in the cheque goes a long way in proving the execution, and the possession of the cheque by the complainant also goes a long way in proving the issuance of the cheque. Whether the accused had succeeded in displacing the presumption which is available under Section 139 of the N.I. Act in favour of the complainant? - HELD THAT:- The trial court observed that there was no evidence to show that, before the lending of the money, the accused had contacted the complainant and the complainant had agreed to lend the money. In the judgment, it is also mentioned that in the absence of any evidence regarding the prior meeting or discussion between the complainant and the accused, it cannot be said that there was an understanding between them before the alleged lending of money. This finding also appears to be unreasonable and unsustainable. The absence of specific evidence showing that the complainant demanded money before the lending of the same, or that there was a prior meeting of minds, has no significance at all. A complainant in a 138 matter is not supposed to tender evidence regarding the date on which the accused approached him with a demand for money, particularly when no questions were asked during cross-examination regarding the date on which the accused approached the complainant and demanded money. Therefore, the omission to mention such details in the evidence is not sufficient to hold that the transaction alleged in this case is not proven. In the present case, the evidence adduced from the side of the complainant is sufficient to prove the transaction in question and the execution of Ext.P1 cheque by the accused. Once the transaction and execution are proved, the statutory presumption under Section 139 of the N.I. Act would certainly operate in favour of the complainant. However, the said presumption stands not displaced in this case, and therefore, it is liable to be held that the accused is guilty of the offence punishable under Section 138 of N.I. Act. In essence, the judgment of the trial court acquitting the accused deserves interference. The judgment of acquittal rendered by the trial court stands set aside - Appeal allowed. 1. ISSUES PRESENTED and CONSIDERED- Whether the accused is guilty of the offence punishable under Section 138 of the Negotiable Instruments Act (N.I. Act) for dishonour of cheque due to insufficiency of funds.- Whether the presumption under Section 139 of the N.I. Act regarding issuance of cheque in discharge of debt or liability applies in the facts of the case.- Whether the accused succeeded in rebutting the statutory presumption under Section 139 of the N.I. Act.- The legal effect of the cheque being filled in by a person other than the drawer and whether that affects the prosecution under Section 138.- The credibility and sufficiency of evidence regarding the transaction alleged and the issuance of the cheque.- The relevance and impact of the complainant being an income tax payee on the veracity of the transaction alleged.- Whether the trial court's findings and appreciation of evidence warrant interference by the High Court in appeal against acquittal.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Guilt of the accused under Section 138 of the N.I. Act for cheque dishonourLegal framework and precedents: Section 138 of the N.I. Act penalizes the drawer of a cheque if it is returned unpaid due to insufficiency of funds or if it exceeds the arrangement made with the bank. Section 139 creates a presumption that the cheque was issued for discharge of a debt or liability once the cheque is proved to have been issued and dishonoured. The burden then shifts to the accused to rebut this presumption.Court's interpretation and reasoning: The Court observed that the complainant lent Rs. 1,00,000 to the accused, who issued a cheque dated 04.01.2007. The cheque was dishonoured for insufficient funds. The complainant served statutory notice demanding payment, which was ignored. The trial court initially convicted the accused, but the Sessions Court acquitted him. The High Court scrutinized the evidence and legal principles to determine the correctness of the acquittal.Key evidence and findings: The complainant (PW1) and an independent witness (PW2) testified regarding the issuance and dishonour of the cheque. The accused admitted signing the cheque but claimed it was a security cheque related to a chitty transaction. The accused's witness (DW1) and documents (Exts. D1 to D3) were examined to support this defence.Application of law to facts: The Court emphasized that the complainant successfully established the execution of the cheque and its dishonour, thereby invoking the presumption under Section 139. The accused failed to provide cogent evidence to rebut this presumption. The defence evidence was found insufficient and unconvincing to displace the statutory presumption.Treatment of competing arguments: The accused's argument that the cheque was a security for a chitty transaction was rejected due to lack of documentary or credible oral evidence linking the cheque and the complainant to any such transaction. The Sessions Court's reliance on the complainant's income tax status to disbelieve the cash transaction was held to be irrelevant and improper.Conclusions: The accused was found guilty of the offence under Section 138 of the N.I. Act as the cheque was issued for discharge of a debt or liability and dishonoured for insufficiency of funds. The statutory presumption was not rebutted.Issue 2: Applicability of Section 139 presumption when cheque entries are not in drawer's handwritingLegal framework and precedents: The Court relied heavily on the Supreme Court's ruling in Bir Singh v. Mukesh Kumar and other precedents, which clarified that there is no legal requirement that all entries in a cheque must be in the handwriting of the drawer. The key is the signature of the drawer on the cheque. The presumption under Section 139 applies once the cheque is proved to be signed and dishonoured.Court's interpretation and reasoning: The Court held that the trial court and Sessions Court erred in giving undue importance to the fact that PW1 and PW2 did not witness the accused writing the amount on the cheque. The law clearly states that a cheque can be filled by any person other than the drawer, and such filling does not invalidate the cheque or the prosecution.Key evidence and findings: The accused admitted signing the cheque. There was no claim that the signature was forged or obtained under coercion. The complainant had possession of the cheque and presented it for payment.Application of law to facts: The Court applied the settled legal position that the signature on the cheque is sufficient to attract the presumption under Section 139. The fact that the amount was not written by the accused did not absolve him of liability.Treatment of competing arguments: The defence contention that the cheque was a security cheque related to a chitty transaction and thus not liable under Section 138 was rejected as the accused failed to provide credible evidence.Conclusions: The presumption under Section 139 was rightly attracted and could not be rebutted merely because the cheque was not entirely in the drawer's handwriting.Issue 3: Credibility of the transaction and the complainant's evidenceLegal framework and precedents: The complainant is required to prove the transaction and execution of the cheque. Once proved, the burden shifts to the accused to rebut the presumption. The complainant's status as an income tax payee or the mode of payment (cash or bank transaction) is not material to the offence under Section 138.Court's interpretation and reasoning: The Court rejected the Sessions Court's finding that the complainant's cash transaction was unbelievable due to his income tax status. The Court held that such considerations are irrelevant in the context of the offence under Section 138. The complainant's testimony about lending money out of friendship and without charging interest was accepted.Key evidence and findings: The complainant's evidence was consistent and unchallenged on material points. The accused did not deny acquaintance or the transaction but claimed a different nature of the cheque.Application of law to facts: The Court held that absence of evidence regarding prior meeting or discussion about the loan was immaterial. No legal requirement exists for proving the exact date or prior demand in such cases. The complainant's testimony sufficed to establish the transaction.Treatment of competing arguments: The defence's attempt to discredit the complainant's case on grounds of income tax returns and lack of formalities was dismissed as irrelevant and unreasonable.Conclusions: The transaction and execution of the cheque were satisfactorily proved by the complainant, and the defence failed to cast sufficient doubt.Issue 4: Scope of appellate interference in acquittal casesLegal framework and precedents:It is well established that appellate courts generally do not interfere with acquittals unless the evidence overwhelmingly establishes guilt or the trial court's appreciation is perverse or contrary to settled legal principles.Court's interpretation and reasoning: The Court noted that while interference with acquittals is cautious, it is justified where the acquittal is based on erroneous appreciation of evidence or misapplication of law. In this case, the Sessions Court's acquittal was found to be based on flawed reasoning and disregard of settled legal principles regarding Section 139 presumption and the nature of cheque execution.Application of law to facts: The High Court found that the trial court's conviction was legally sound and the Sessions Court's acquittal was unsustainable.Conclusions: The High Court was justified in interfering with the acquittal and restoring conviction.3. SIGNIFICANT HOLDINGS'The proposition of law which emerges from the judgments referred to above is that the onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act.''It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.''Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.''The law does not mandate that a cheque shall be in the handwriting of the drawer. On the contrary, a cheque can be written by anybody other than a drawer, and the only mandate of law is that the holder in due course/payee has to prove the transaction and execution of the cheque to impose criminal culpability on the drawer.''The omission to mention such details in the evidence is not sufficient to hold that the transaction alleged in this case is not proven.''The accused is found guilty of the offence punishable under Section 138 of N.I. Act and he is convicted and sentenced to undergo simple imprisonment for a period of one day till the rising of the Court and to pay a fine of Rs. 1,50,000/- (Rupees One Lakh Fifty Thousand Only). Fine shall be given to the complainant as compensation under Section 357(1)(b) of Cr.P.C.'