TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 473
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....bsequently the appellant had issued a cheque to the tune of Rs. 6,50,000/- to the respondent and said cheque was encashed on 31.08.2015. Further case of the appellant is that during the course of such period the opposite party herein, towards interest on the aforesaid borrowed sum of money had issued cheques to the tune of Rs. 16,250/- on 01.012.2015, 16,250/- on 29.02.2016 Rs. 7042/- on 29.03.2016 and Rs. 8,288/- on 25.05.2016 in favour of the appellant. 3. However the respondent did not pay the full interest for the entire period of loan and in discharge of the said existing liability or legal debt, the respondent had issued the impugned cheque bearing no. 000555 dated 18th August, 2016 to the tune of Rs. 6,50,000/- in favour of complainant Kishan Kr. More (HUF). Said cheque was signed by the respondent as authorized signatory of M/S Manpuria Enterprises. Subsequently the appellant herein presented the said cheque for encashment which was returned unpaid with the endorsement "funds insufficient". The appellant received the said cheque with cheque return memo dated 15th September, 2016 through his banker and thereafter a demand notice was issued to the respondent herein in his fo....
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....n 138 of the Act, as a whole would leave no room for hesitation that expression 'said amount of money' occurring in clause (b) and ( c) to the proviso to section 138 refers to the words 'payment of any amount of money' occurring in main section in 138 i.e. the cheque amount. So, the notice under clause (b) to the proviso, demand has to be made for the cheque amount. Learned Magistrate erred in observing that the demand notice was improper in view of the fact that the same did not reveal the rate of interest payable on the principal amount, the money received from the accused or the outstanding dues. Such observation made by trial court is bad in law and liable to be set aside. 7. He further submits that the respondent herein despite the service of a perfectly valid and legal demand notice had failed to make the necessary payment. The dishonest intention on the part of the Respondent is apparent from the fact that cheque was issued in favour of the appellant which upon presentation was returned unpaid with an endorsement from bank stating 'fund insufficient'. Therefore, under no stretch of imagination it can be presumed that there was intention on the part of the respondent herein ....
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....ted in cross examination that he has given the friendly loan to the opposite party but not for the period of one year. 10. Such contradictions are very much material in nature that goes to the root of the case and is fatal since the appellant had not filed any document to show that the loan was given to the respondent for a term of one year. Since the appellant has not issued any loan termination notice to the opposite party before the presentation of the cheque, the criminal proceeding under section 138 of the N.I. Act is pre-mature and not maintainable. 11. Respondent's further contention is that the impugned cheque was given as a security towards repayment of the amount within a time period being stipulated for repayment and it cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque has been issued as security and in this context respondent relied upon the judgment of Sripati Sing Vs. The State of Jharkhand and another reported in (2022) 18 SCC 614. Further case of the respondent is that since the said cheque was pre maturely sought to be encashed, section 138 of N.I. Act does not attract. 12. He further submits that there is s....
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....and different. 15. He further argued that the appellant is a Hindu Undivided Family (HUF) being represented by a Karta namely Kishan Kr. More/complainant, but such complainant admitted that he has not filed any money lending license nor the said HUF possess any money lending license or business. PW1 also admitted that he has not produced any document to show that the HUF had the capacity to provide such loan. Accordingly the complainant cannot claim any interest going against the prohibition laid down in Bengal Money Lenders Act, 1940 and the loan so advanced without a money lending licence does not attract prosecution under section 138 of the N.I. Act. In this context he also placed reliance upon D. Saroja Vs. A Sukavanamma, reported in 2023 SCCOnline 4442. 16. In this context he further contended that the appellant also admitted in his cross examination that his loan amount and interest amount are not shown in the income tax return for the relevant period, which makes the very fact of loan being advanced by the appellant as illegal and barred by law. 17. He further argued that in answer to question no.4, in his examination under section 313, the Respondent has stated that he h....
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....is affidavit in chief as well as on demand notice (ext.6). Though there is admission in the part of the accused person regarding borrowing Rs. 6,50,000/- from the complainant but he has not admitted the interest on the principal amount or the period of granting loan. No written agreement has been produced by the complainant to substantiate his claim regarding interest and period of loan. Moreover the contention of the defence is that the accused has not received any loan termination notice from the complainant. The date of termination of loan was also not mentioned in the demand notice. In the cross examination of PW1 he has stated that as per his demand the accused has paid interest time to time and at present he could not say how much money the accused has paid to him as interest. As PW-1 has not averred about the interest and the period of loan in his examination in chief filed by supported by affidavit, it cannot be hold that the interest was 17% per annum and the loan was for 1 year. Even for argument sake, if it is hold that the interest and period of loan as stated in the complaint is true, then also it cannot be said that the liability of the accused was Rs. 6,50,000/- on t....
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....substantiate why he raised objection when the document was admitted in evidence. Accused not even challenged his signature appearing in exhibit 3. While he was examined under section 313, in answer to question no.3, he admitted that for business purpose he took loan of Rs. 6,50,000/- in 2016 and in answer to question no. 4 he said loan was given thorough the mediator Pramod Sharma. He further stated in answer to question no.4 that he asked said mediator Pramod not to present the cheque for encashment as his company was suffering over dispute between two brothers and shortly company will start to function and payment will be made but complainant did not pay heed to such request and placed the cheque for encashment. While said accused deposed as DW-1 he nowhere stated that he did not take the loan or he issued cheque as security but his only contention in examination-in-chief is that he paid Rs. 2,50,000/- to mediator Pramod and complainant. However, he did not bring said Pramod as witness to substantiate his aforesaid alleged payment nor proved any document in respect of such alleged payment. 24. The language of section 138 of the N.I. Act makes it clear that the liberty was always....
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....reme Court held in para 21 as follows:- "21. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. "Security" in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified time-frame and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of the NI Act would flow." 22. When a cheque is issued and is treated as "security" towards repayment of an amount with a time period being s....