2025 (10) TMI 1 - HC - Indian Laws

Conviction for cheque dishonour upheld as cheques were enforceable loan liability; Section 139 NI Act and s.25(3) Contract Act applied

Shardha Nand Bansal Versus Ashok Kumar Bhalla

HC affirmed conviction and sentence for cheque dishonour and dismissed the criminal revision petition. The court held the cheques represented a legally ... Dishonour of Cheque - legally enforceable debt or not - security cheque or not - time barred debt or not - failure to appreciate that the cheques in question were issued in respect of a debt that was hopelessly barred by limitation and therefore, was not a legally enforceable debt - rebuttal of statutory presumption. Whether there existed a Legally Enforceable Debt? - HELD THAT:- Pertinently, while in response to the Notice, the Petitioner has claimed that this was given as security for the loan amount, he has failed to step into the witness box in defence to prove that these were the security cheques. Pertinently, no date has been mentioned by the Petitioner on which these alleged security cheques had been handed over. There is also no suggestion given to the Complainant in his cross-examination that the two impugned cheques were given as security. Also, the Petitioner has failed to state and give the date when these alleged security cheques had been handed over to the Complainant - It is, therefore, established that there existed a legally enforceable liability to repay the loan of Rs. 25 lakhs along with the agreed interest. Whether the Debt was Time Barred? - HELD THAT:- The contention that the debt being time barred, is completely demolished by the fact that the Loan was payable by 08.08.2015 while the two impugned Cheques had been handed over to the Petitioner in March, 2018, which amounts to an acknowledgement of the existing debt. Furthermore, the cheques dated 24.08.2015 and 16.08.2015 even if considered to have been issued in respect of time barred debt which was payable till 07.08.2018, then too Section 25(3) Indian Contract Act, 1872 provides that a promise made in writing and signed by the person to be charged therewith, to pay wholly or in part, a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid and enforceable contract. A cheque is a promise to pay made in writing and signed by the drawer. It must be noted that the ground of debt being time-barred and thus, not being payable was not raised before the Trial Court. The ld. Trial Court held that the Accused was unable to rebut the statutory presumption and could not substantiate the defense that the loan was fully repaid - The accused in his Appeal before the learned ASJ raised the issue of debt being time-barred. However, the Ld. ASJ rejected the ground and held that although the original mortgage deed stipulated a repayment date of July, 2014, but the subsequent documents, such as the demand for a refund which was made by the Complainant in a letter dated 10.06.2015 (Ex.CW1/A3) point to the fact that the “repayment of loan was kept open and final date of repayment of the loan was to be determined by the ''arties as per their will”. Repayment of Loan - next defense of the Petitioner was that the loan stood repaid, for which reliance was placed on the Receipt dated 01.11.2018 Ex. DW1/1 - HELD THAT:- The second piece of evidence which has been led by the Respondent in support of his defence of alleged repayment of the cheque amount is the payment receipt dated 01.11.2018 Ex.DW1/1. Pertinently, this Receipt states that a balance sum of Rs. 14 lakhs has been given in cash by Dr. Sharda Nand Bansal. Interestingly, it nowhere states that this money had been received from Nitesh Srivastava on behalf of the Petitioner, as has been asserted by him. Pertinently, this payment Receipt also does not mention about the cheque of Rs. 9 lakhs given to the Complainant in partial discharge of the loan of Rs. 25 lakhs. Also, the Petitioner did not appear in the witness box to prove this payment receipt - Moreover, aside from making bald assertions of repayment vide this alleged Receipt of re-payment Ex.DW1/1, the Petitioner has failed to produce any other cogent evidence like Bank Statements, to prove the alleged repayment. The Petitioner has thus, failed to rebut the statutory presumption under Section 139 of the NI Act. The burden was on him to show on a preponderance of probabilities, that there was no existing legally enforceable debt. A mere assertion of repayment or misuse of security cheques, without corroborative evidence, is insufficient to dislodge this presumption. The concurrent findings of the learned MM and the learned ASJ are based on a proper and judicious appreciation of the evidence on record. This court finds no perversity, jurisdictional error, or manifest illegality in impugned judgments - the impugned judgment dated 23.01.2025 passed by the learned Additional Sessions Judge, North-West, Rohini Courts, Delhi, in CA No. 276/2023, upholding the judgment of conviction dated 18.11.2023 and the order on sentence dated 22.11.2023 passed by the learned M.M. in CC No. 12599/2018, is affirmed and upheld. The Criminal Revision Petition is hereby, dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the cheques in question were issued in discharge of a 'legally enforceable debt or other liability' within the meaning of Section 138 of the Negotiable Instruments Act. 2. Whether the underlying loan had become time-barred at the time of presentation of the cheques and, if so, whether issuance of the cheques in 2018 revived or created a fresh legally enforceable liability (interaction of Section 138 NI Act with Section 25(3) Indian Contract Act). 3. Whether the defence that the cheques were handed over merely as security (and therefore not actionable) was established on the evidence. 4. Whether the alleged repayment of the loan by a receipt dated 01.11.2018 and testimony of DW1 rebutted the statutory presumption under Section 139 NI Act and sufficiently negated existence of liability. 5. Whether the concurrent findings of conviction by the Trial Court and the Appellate Court suffer from any illegality, perversity or jurisdictional error warranting interference in revision. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Existence of a 'legally enforceable debt' for the purposes of Section 138 NI Act Legal framework: Section 138 NI Act requires that a dishonoured cheque be issued for discharge, in whole or in part, of a 'legally enforceable debt or other liability'; Explanation defines the phrase as a legally enforceable debt. Precedent treatment: The court relied on the statutory presumptions in Sections 118 and 139 NI Act (presumption of consideration and presumption that cheque was issued for discharge of debt) and on established authorities recognizing that a cheque, prima facie, evidences a debt unless rebutted. Interpretation and reasoning: The record showed two mortgage deeds acknowledging a Rs.25 lakh loan and subsequent documents evidencing continued dealings; the complainant's testimony that post-dated cheques were handed over in March 2018 was accepted. The accused admitted taking the loan and failed to lead credible evidence to show absence of liability. Ratio vs. Obiter: Ratio - where admissions and documentary evidence establish a loan and the drawer fails to rebut statutory presumptions, a legally enforceable debt exists for Section 138. Conclusion: A legally enforceable liability to repay the loan existed on the date of cheque presentation. Issue 2 - Time-bar defence and effect of issuing cheques on a time-barred debt (Section 25(3) Indian Contract Act) Legal framework: Limitation law renders some debts unenforceable after prescribed period; Section 25(3) Indian Contract Act provides that a written and signed promise to pay a time-barred debt amounts to a valid contract. A cheque constitutes a written signed promise. Precedent treatment: Reliance placed on authoritative decisions holding that issuance of a cheque in respect of a time-barred debt revives the debt under Section 25(3) ICA and that such revived debt is actionable under Section 138 NI Act. Interpretation and reasoning: The court observed that even if the original debt had become time-barred by earlier repayment dates, the handing over of post-dated cheques in March 2018 constituted a fresh promise. Documentary and oral evidence (demand letter, subsequent mortgage terms, date of cheques) supported the view that repayment obligations were kept open and the 2018 cheques represented a new enforceable liability. Ratio vs. Obiter: Ratio - issuance of a cheque in writing and signed by the drawer can revive a time-barred debt as a fresh legally enforceable liability under Section 25(3) ICA, bringing it within Section 138 NI Act. Conclusion: The time-bar defence failed because issuance of the cheques in 2018 created a fresh legally enforceable liability; the complaint remained maintainable. Issue 3 - Whether the cheques were mere security and non-actionable Legal framework: A cheque given purely as security may not amount to a promise to discharge a debt unless proved; burden to prove security lies on the drawer to rebut statutory presumptions. Precedent treatment: Court applied settled principles that assertions of 'security cheques' must be supported by contemporaneous documentary evidence or credible witness testimony; absence thereof leads to failure to rebut Section 139 presumption. Interpretation and reasoning: The mortgage deeds and contemporaneous receipts were silent about any undated blank security cheques; the accused did not testify to establish when/why security cheques were handed over; no suggestion was put to complainant in cross-examination. The improbability of omitting mention of crucial security cheques from detailed mortgage documents was noted. Ratio vs. Obiter: Ratio - mere after-the-fact assertions of security, unsupported by contemporaneous documentary or credible oral evidence, cannot displace statutory presumption and defeat prosecution under Section 138. Conclusion: Defence of cheques being mere security was not substantiated and therefore failed. Issue 4 - Credibility and effect of alleged repayment receipt dated 01.11.2018 and DW1 testimony Legal framework: To rebut Section 139 presumption on a preponderance of probabilities, the drawer must produce cogent evidence (bank statements, clear receipts, credible testimony) showing repayment prior to cheque presentation. Precedent treatment: Courts require contemporaneous, consistent evidence to accept repayment; belated or contradictory receipts, or testimony inconsistent with accused's statements, are insufficient. Interpretation and reasoning: The receipt relied on was dated after filing of the complaint; the drawer did not testify. DW1's testimony contradicted the accused's Section 313 statement regarding who paid the cash/cheque and when; absence of bank account evidence and unexplained source of cash undermined credibility. The timing (receipt dated after complaint) rendered the defence an afterthought. Ratio vs. Obiter: Ratio - a post-complaint receipt and inconsistent witness testimony do not satisfactorily rebut statutory presumption under Section 139; burden remains on drawer. Conclusion: The alleged repayment evidence failed to rebut the presumption; defence of repayment was rejected. Issue 5 - Validity of concurrent findings and scope for interference in revision Legal framework: Revisional jurisdiction under criminal procedure is limited; concurrent findings of Trial and Appellate Courts are interfered with only on grounds of illegality, perversity, or jurisdictional error. Precedent treatment: Court followed principle that factual appreciation by two courts concurrently deserves deference unless demonstrably perverse or legally erroneous. Interpretation and reasoning: The High Court re-examined the record, found detailed and reasoned findings below on existence of debt, applicability of Section 25(3) ICA, failure to rebut Section 139 presumption, and credibility of evidence. No material illegality, perversity or jurisdictional error was shown to justify interference. Ratio vs. Obiter: Ratio - concurrent findings supported by evidence and legal reasoning are to be upheld in revision absent demonstrable legal error. Conclusion: Concurrent convictions and sentence do not suffer from any illegality or perversity; revision petition dismissed and impugned orders affirmed.