2025 (12) TMI 1733 - HC - Indian Laws

Cheque for alleged cash loan repayment and time-barred debt u/s138 NI Act; acquittal upheld, appeal dismissed.

In an appeal against acquittal under s.138 NI Act, the HC held that interference is warranted only if the acquittal is perverse or based on ... Dishonour of cheque - challenge to judgement of acquittal - burden to prove the non-existence of liability - accused admitted in her statement recorded under Section 313 of Cr.P.C. that the cheque bears her signature - no evidence to rebut the presumption - non-compliance with requirement of Section 269SS of the Income Tax Act, 1961 - HELD THAT:- It was laid down by the Hon’ble Supreme Court in Surendra Singh v. State of Uttarakhand, [2025 (1) TMI 1536 - SUPREME COURT] that the Court can interfere with a judgment of acquittal if it is patently perverse, is based on misreading/omission to consider the material evidence and reached at a conclusion which no reasonable person could have reached. In the present case, the cross-examination of the complainant made his financial capacity doubtful, and the presumption would be displaced. The statement of the complainant shows that he has advanced the loan in the year 2014 in the instalments of ₹4,00,000/-, ₹6,00,000/- and ₹2,00,000/- each. He did not mention the dates of advancing the loan; however, the cheque was issued in November, 2017. In the absence of the details of the advancement of the loan, the cheque was issued beyond the period of limitation and cannot be said to have been issued in discharge of her legally enforceable debt. It was laid down by this Court in Social Leasing (India) Ltd. v. Rajan Kumar Kanthwal [2025 (7) TMI 1946 - HIMACHAL PRADESH HIGH COURT], that a cheque issued for repayment of time-barred debt does not fall within the purview of Section 138 of the NI Act. Thus, the complaint was not maintainable as per the averments made in the complaint and the statement on oath. No adverse inference could have been drawn for failure to comply with the requirement of Section 269SS of the Income Tax Act, 1961. The learned Trial Court had taken a reasonable view while acquitting the accused and no interference is required with the judgment passed by it. Hence, the present appeal fails, and it is dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, in an appeal against acquittal, interference was warranted on the ground that the Trial Court's appreciation of evidence under Section 138 of the Negotiable Instruments Act was perverse or ignored material evidence. (ii) Whether the statutory presumptions attached to an admitted signature on the cheque stood rebutted on the basis of the complainant's own evidence, particularly regarding the alleged loan transaction and the complainant's financial capacity to advance the amount. (iii) Whether, on the complainant's pleadings and testimony as to the loan having been advanced in 2014 and the cheque having been issued in November 2017 without particulars of advancement, the cheque related to a time-barred debt and therefore was not issued towards a 'legally enforceable debt' under Section 138. (iv) Whether the Trial Court's adverse inference founded on non-compliance with Section 269SS of the Income Tax Act could be sustained, and if not, whether its correction affected the final result. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Appellate interference with acquittal Legal framework: The Court applied the settled parameters governing appeals against acquittal, namely that interference is justified only where the acquittal suffers from patent perversity, misreading/omission of material evidence, or results in a conclusion that no reasonable person could reach; and where two reasonable views are possible, the acquittal should not be disturbed. Interpretation and reasoning: The Court treated the appeal as one requiring strict scrutiny under the above parameters. It examined whether the Trial Court's doubts about the complainant's version and the resultant acquittal were unreasonable or perverse. After assessing the complainant's cross-examination and the absence of supporting proof for the alleged loan, the Court found that the Trial Court's view was a 'reasonable view' based on the record. Conclusion: No ground for appellate interference was made out because the acquittal was not shown to be perverse or based on ignoring material evidence. Issue (ii): Rebuttal of presumptions under the Negotiable Instruments Act by questioning financial capacity and probability of the transaction Legal framework: The Court accepted that admission of the signature on the cheque raises a presumption that it was issued for consideration and in discharge of liability, but reiterated that the presumption is rebuttable and can be displaced once contrary evidence emerges, including from the complainant's own testimony elicited in cross-examination. Interpretation and reasoning: The Court found the complainant's evidence 'highly unsatisfactory' on material aspects: the alleged cash advancement of a sum equivalent to about five years' salary; lack of explanation why payment was not transferred through banking channels despite claimed withdrawals; absence of any documentary record of the loan; inability to state dates of advancement; and non-examination of a claimed lender from whom funds were allegedly borrowed. The Court also noted internal inconsistency regarding the alleged need for the loan (purchase of land/house) vis-à-vis the complainant's admission that the accused already owned land and a house. On these circumstances, the Court held that the complainant's version about advancing the loan became doubtful, thereby displacing the statutory presumption and justifying insistence on proof of the loan/financial capacity. Conclusion: The presumption stood rebutted on the basis of the complainant's own evidence and surrounding improbabilities; consequently, the Trial Court's doubt about the existence of liability and the complainant's financial capacity was upheld as a reasonable conclusion. Issue (iii): Cheque allegedly issued beyond limitation-absence of legally enforceable debt Legal framework: The Court applied the principle that a cheque issued towards repayment of a time-barred debt does not attract Section 138 as it is not issued for a 'legally enforceable debt,' and assessed maintainability on the complaint averments and sworn statement. Interpretation and reasoning: The Court noted that, on the complainant's own case, the loan was advanced in 2014 in instalments, while the cheque was issued in November 2017. The complainant did not provide dates/details of advancement sufficient to demonstrate that the debt was within limitation when the cheque was issued. On this deficiency, the Court concluded that the cheque was issued beyond limitation and could not be treated as issued in discharge of a legally enforceable debt; therefore, the complaint was not maintainable on the complainant's own pleadings and testimony. Conclusion: The Court held that the cheque, on the complainant's showing, related to a time-barred debt and therefore did not satisfy the requirement of a legally enforceable debt for Section 138. Issue (iv): Effect of alleged violation of Section 269SS of the Income Tax Act on enforceability Legal framework: The Court considered whether a cash loan allegedly advanced in contravention of Section 269SS becomes invalid/unenforceable for purposes of Section 138, and held that such contravention attracts penalty but does not invalidate the underlying transaction or render the debt unenforceable. Interpretation and reasoning: The Court expressly disagreed with the Trial Court's reasoning that the alleged cash loan could not have been advanced due to Section 269SS and that such violation made the complainant's case suspect. The Court held that no adverse inference could be drawn solely on this ground because violation of Section 269SS results in penalty and does not, by itself, negate enforceability under Section 138 or rebut statutory presumptions. Conclusion: While correcting the Trial Court on Section 269SS, the Court held that the acquittal still required no interference because independent and sufficient grounds-doubt about the loan/financial capacity and the finding of time-barred debt-supported dismissal of the appeal.