2025 (11) TMI 1426 - HC - Indian Laws

Revision in Section 138 NI Act cheque bounce upheld; no perversity found in conviction or statutory presumptions

Ma Kreeng Construction Pvt. Ltd. & Ors. Versus Mr. Dipak Saha & Anr.

HC, exercising limited revisional jurisdiction in a cheque dishonour case under section 138 N.I. Act, upheld the concurrent findings of the Trial Court ... Dishonour of Cheque - no/valid transaction or agreement for refund - cheque allegedly obtained under duress or not - failure to properly assess the case of the petitioners - HELD THAT:- The scope of interference at this stage is limited to examining whether the concurrent findings suffer from perversity, patent illegality, or non-consideration of material evidence affecting the foundation of the conviction under section 138 of the N.I. Act. The N.I. Act, 1881 was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. By the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, the Legislature introduced Chapter XVII comprising sections 138 to 142 with effect from 01.04.1989, to criminalise the dishonour of cheques for insufficiency of funds or like reasons. Section 138 prescribes the penalty for such dishonour and is intended to enhance the credibility of negotiable instruments in commercial transactions - However, sections 138 to 142 of the Act were found deficient in dealing with dishonour of cheques. The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, amended sections 138, 141 and 142 and inserted new sections 143 to 147 in the Act aimed at speedy disposal of cases relating to dishonour of cheque through their summary trial as well as making them compoundable. The Hon’ble Supreme Court in the case Electronics Trade & Technology Development Corporation Ltd., Secunderabad v. Indian Technologists & Engineers (Electronics) (P) Ltd. [1996 (1) TMI 398 - SUPREME COURT], observed that the object of bringing section 138 on statute appears to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments and section 138 intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a book and induce the payee or holder in due course to act upon it. This Court finds no merit in the argument that the Trial Court and Revisional Court passed “evasive” orders. Both the Learned Courts have considered the essential facts, recorded findings regarding the presumption under the Act, and assigned reasons for rejecting the defence. A conviction under Section 138 is sustainable so long as the Learned Courts apply the correct legal presumptions and evaluate the evidence on record - The complainant led pre-summoning evidence, and thereafter cognizance for offence punishable under section 138 of the Act was taken against the petitioner/accused. The Petitioner was ordered to be summoned for offence under section 138 of the Act. Notice under section 251 Cr.P.C. was given to the Petitioner, to which he pleaded ‘not guilty’ and claimed trial. Revision disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a valid transaction/refund agreement existed between the parties and whether the cheque in question was procured by fraud, coercion or undue influence. 2. Whether the ingredients of offence under Section 138 of the Negotiable Instruments Act were established (including presentation, dishonour, notice and failure to pay) and whether the statutory presumption in favour of the complainant operated. 3. Whether the Trial Court and the Revisional Court misapplied the law, failed to consider material evidence, or reached a perverse concurrent finding warranting interference under Section 401 read with Section 482 Cr.P.C. 4. Whether minor discrepancies in the complainant's testimony (place of signing/handing over) or other technicalities defeat the statutory presumption and conviction under Section 138. 5. Relief and procedural directions: Whether conviction, sentence and consequential directions of the Trial Court should be set aside or modified by the revisional forum. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Existence/Validity of Refund Agreement and Allegation of Coercion Legal framework: Validity of an agreement and the defence of coercion/duress must be proved by the accused by adducing independent, reliable and corroborative evidence; mere bald assertions do not suffice to displace presumptions under the Negotiable Instruments Act. Precedent treatment: Higher court authorities establish that a bare plea of coercion without probable or corroborative material is insufficient and the accused must bring probable evidence to support the plea; contemporaneous or subsequent steps challenging the document strengthen/affirm its validity. Interpretation and reasoning: The Court found admission of the cheque and the dishonour undisputed. Apart from lodging a contemporaneous complaint asserting coercion, petitioners produced no independent corroborative evidence (no witnesses, no supporting material). The petitioners also did not take concurrent steps to nullify the agreement or cheques. The existence of an express refund agreement acknowledging liability further weakens the coercion plea. Ratio vs. Obiter: Ratio - where the accused alleges coercion in respect of a cheque/agreement, the accused must lead substantive corroborative evidence to rebut statutory presumptions; a mere complaint or bald plea is insufficient. Obiter - none relied upon for outcome beyond application to facts. Conclusion: The plea of coercion was unproved and did not displace the presumption of a legally enforceable liability arising from the agreement and cheque. Issue 2 - Ingredients of Section 138 and Operation of Statutory Presumption Legal framework: The essential ingredients for conviction under Section 138 are (i) drawer drew a cheque for discharge of debt/liability; (ii) presentation within validity; (iii) cheque returned unpaid for insufficiency/exceeds arrangement; (iv) notice given within prescribed period; (v) failure to pay within 15 days; and (vi) complaint filed within the prescribed period. The Explanation provides that 'debt or other liability' means a legally enforceable debt or other liability, and a statutory presumption operates in favour of the complainant once the cheque and signature are admitted. Precedent treatment: The Court relied on higher court jurisprudence that the object of Section 138 is to protect credibility of negotiable instruments and that once the cheque and signature are admitted and procedural steps complied with, the presumption of liability applies unless rebutted by credible material. Interpretation and reasoning: Admissions in the record established issuance of the cheque and its dishonour with the bank remark 'exceeds arrangement.' There was no satisfactory rebuttal: petitioners failed to produce bank statements, financial records or other contemporaneous material showing non-payment of the underlying consideration. Minor discrepancies in cross-examination about the place of signing were held immaterial in view of admitted cheque and signature and applicable statutory presumptions. Ratio vs. Obiter: Ratio - upon admission of cheque and its dishonour and compliance with notice/presentation requirements, the statutory presumption of debt operates and shifts burden on accused to produce convincing material to rebut; failure to do so sustains conviction. Obiter - emphasis that sections introduced to restore credibility of cheques and enable summary remedy. Conclusion: Ingredients of Section 138 were satisfied on record; statutory presumption applied and was not rebutted by petitioners, supporting conviction. Issue 3 - Alleged Failure of Trial and Revisional Courts to Properly Assess Evidence / Perversity Legal framework: Revisional interference under Sections 401 and 482 Cr.P.C. is limited; appellate/revisional intervention is warranted only where concurrent findings suffer from perversity, patent illegality or there is non-consideration of material evidence affecting foundation of conviction. Precedent treatment: Courts have held that concurrent findings of Trial and Revisional Courts merit interference only if unsupportable on record or vitiated by manifest legal error or non-application of statutory presumptions. Interpretation and reasoning: The Court examined trial and revisional judgments and records and found that both courts applied the statutory presumptions, considered essential facts and reasons, and rejected the defence after evaluating evidence. The petitioners' objections that the revisional court passed an 'evasive' order were rejected because the revisional forum had recorded findings and reasons. Other similar challenges in related matters were also dismissed by a coordinate bench, indicating consistent treatment. Ratio vs. Obiter: Ratio - concurrent findings consistent with law and supported by record do not warrant interference; absence of perversity or patent illegality precludes setting aside conviction in revisional proceedings. Obiter - none material beyond application to facts. Conclusion: No ground for interference; Trial and Revisional Courts did not err in law or fact to an extent warranting exercise of revisional jurisdiction. Issue 4 - Materiality of Minor Discrepancies and Technicalities in Complainant's Testimony Legal framework: Minor discrepancies in testimony do not necessarily negate primary admitted facts (cheque, signature, dishonour); statutory scheme disfavors allowing technicalities to defeat presumption once core ingredients are satisfied. Precedent treatment: Higher court authority supports that technicalities or minor contradictions do not automatically rebut statutory presumption where primary incriminating facts are admitted and not credibly contested. Interpretation and reasoning: The Court treated omissions regarding exact place of issuance/handing over as immaterial because the crucial facts - issuance, admission and dishonour of the cheque - were on record and uncontested. The accused bore the burden of affirmative proof to rebut the presumption and failed to discharge it. Ratio vs. Obiter: Ratio - immaterial/technical discrepancies do not negate statutory presumption if core facts are admitted and defence lacks substantive rebuttal. Obiter - caution that material contradictions would be treated differently. Conclusion: Minor discrepancies did not vitiate the complainant's case or the conviction under Section 138. Issue 5 - Relief, Sentence Execution and Ancillary Directions Legal framework: Where convictions are sustained, directions for execution of sentence and communication to trial court for compliance follow; interim orders may be vacated and surrender ordered where custodial sentences were imposed. Precedent treatment: Courts may direct surrender for execution of sentence and require trial courts to proceed in accordance with law; interim relief will be vacated if no stay is granted by appellate forum. Interpretation and reasoning: Having found no infirmity, the Court dismissed the revisional application, directed surrender of convicted accused within a specified period for execution of sentence, vacated interim order, and directed transmission of the judgment to the trial court. A subsequent prayer for stay of operation of the judgment was rejected. Ratio vs. Obiter: Ratio - where revisional interference is refused, appellate or trial court processes for execution of sentence and vacating of interim relief follow as per law. Obiter - pragmatic directions for registry and certified copies. Conclusion: Conviction and sentence sustained; directions given for surrender and execution; interim order vacated and no stay granted.