TaxTMI 
TaxTMI 
2025 (11) TMI 1185
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....int Case No. 45340/2019, titled 'Bindu Mahajan vs. Satish Kumar', whereby the petitioner was convicted for commission of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 [hereafter 'NI Act']. 2. The brief facts of the case, as alleged in the complaint filed under Section 138 of the NI Act, are that in March 2015, the petitioner-accused Satish Kumar, had approached respondent no. 2/complainant Ms. Bindu Mahajan, seeking financial assistance, pursuant to which she had advanced a friendly loan of Rs. 4,00,000/- to him. Thereafter, in May 2015, an additional sum of Rs. 20,00,000/- was allegedly advanced as a friendly loan for a period of three years. Two promissory notes dated 20.03.2015 and 28.05.2015 were purportedly executed by the petitioner in acknowledgment of these amounts. Subsequently, in 2019, the petitioner allegedly issued three cheques towards repayment of the total loan amount, i.e. cheque bearing no. 060929 amounting to Rs. 4,00,000/-, and cheque bearing nos. 011187, and 011188, each for Rs. 10,00,000/-, i.e. a total of Rs. 24,00,000/-. However, upon presentation, the said cheques were dishonoured - two on the ground of "Funds Insuffici....
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....Appellate Court, vide the impugned judgment dated 02.07.2024, upheld both the conviction and the sentence awarded to the petitioner. Aggrieved thereby, the petitioner has preferred the present petition before this Court. 7. The learned counsel appearing for the petitioner contends that the conviction of the petitioner is contrary to law and the evidence on record. It is argued that the cheques in question were not issued towards any legally enforceable debt or liability, but had been handed over as signed blank cheques to the husband of respondent no. 2 in 2015 for the limited purpose of facilitating the purchase of an office space at Dwarka, which were subsequently misused by respondent no. 2. It is further submitted that the two promissory notes relied upon by the complainant are forged and fabricated documents, bearing signatures that do not belong to the petitioner. The learned counsel also relies upon a legal notice dated 20.05.2016 (Mark A/DX-1), purportedly addressed by the petitioner to the husband of respondent no. 2, seeking return of the said cheques, to establish his bona fides and to demonstrate that the cheques had been given in trust and not in discharge of any li....
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....,00,000/- in cash on 28.05.2015. In acknowledgment of this liability, the petitioner executed two promissory notes dated 20.03.2015 and 28.05.2015, and later issued three cheques - two of Rs. 10,00,000/- each and one of Rs. 4,00,000/- - towards repayment of the said loan. Upon presentation, the cheques were dishonoured due to insufficient funds, and despite service of the statutory notice dated 19.11.2019, the petitioner failed to make payment, leading to the filing of the complaint under Section 138 of the NI Act. It is further argued that during trial, the petitioner admitted his signatures on the cheques but failed to substantiate his defence that they were issued as security for purchase of property. He did not disclose any details such as the name of the seller, address, market value, or the location of the alleged property, nor did he specify the financial capacity or authority of respondent no. 2's husband to conclude such a transaction. It is also argued that the alleged legal notice dated 20.05.2016 (Mark A/DX-1), relied upon by the petitioner, is fabricated, as no original postal receipt or tracking proof was produced, and the address mentioned therein was one at which re....
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....ingredients of the offence under Section 138 are: 26.1. The drawing of a cheque by person on an account maintained by him with the banker for the payment of any amount of money to another from that account; 26.2. The cheque being drawn for the discharge in whole or in part of any debt or other liability; 26.3. Presentation of the cheque to the bank; 26.4. The return of the cheque by the drawee bank as unpaid either because the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account; 26.5. A notice by the payee or the holder in due course making a demand for the payment of the amount to the drawer of the cheque within 30 days of the receipt of information from the bank in regard to the return of the cheque; and 26.6. The drawer of the cheque failing to make payment of the amount of money to the payee or the holder in due course within 15 days of the receipt of the notice." 12. There is no dispute that, to constitute an offence under Section 138 of the NI Act, the cheque in question must have been issued in discharge of a leg....
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.... the complainant's version as to create a reasonable doubt regarding the existence of a legally enforceable debt or liability. The Hon'ble Supreme Court in Oriental Bank of Commerce v. Prabodh Kumar Tewari: 2022 SCC OnLine SC 1089, has reiterated that once the drawer admits his signature on the cheque and the fact that it was handed over to the payee, a presumption arises that it was issued in discharge of a debt or liability. The burden then shifts to the drawer to rebut this presumption by adducing credible evidence. The relevant observation is as follows: "16. A drawer who signs a cheque and hands it over to the payee, is presumed to be liable unless the drawer adduces evidence to rebut the presumption that the cheque has been issued towards payment of a debt or in discharge of a liability. The presumption arises under section 139." 14. To appreciate the arguments raised before this Court, it shall be apposite to first examine the testimonies of the witnesses. From the testimony of CW-1, it emerges that she reiterated the version set out in her complaint and deposed regarding her long-standing acquaintance with the accused/petitioner and his family. She adopted her p....
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....perties earlier. (b) He deposed that he wished to buy an office space in Dwarka, and since he often travelled for work, he handed over six signed blank cheques, including the three cheques in question, to Rajan Mahajan to be used for payment of token money for the property. (c) He claimed to have also handed over documents relating to his Kalkaji property to Rajan Mahajan for sale purposes. (d) DW-1 stated that when informed that the desired office space had been sold to someone else, he sought return of his cheques, but Mahajan failed to do so. Consequently, he allegedly sent a legal notice dated 20.05.2016 (Mark A/DX-1) seeking their return. (e) He deposed that the cheques were later misused by the complainant, and that he had duly replied to the statutory legal demand notice issued under Section 138 of NI Act. (f) During cross-examination, DW-1 initially stated that he had never taken any money from the complainant or her husband but, upon being confronted with bank entries (Ex. CW-1/9), admitted having received Rs. 4,00,000/-, i.e. Rs. 2,00,000/- each from the accounts of the complainant and her daughter. (g) He conceded tha....
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....t was addressed to an incorrect flat number, and the complainant has consistently deposed that she began residing at that address only in 2018, much after the purported date of the notice. These circumstances lend strong support to the inference drawn by the learned Trial Court that the said document was subsequently fabricated to bolster a false defence. The petitioner's conduct in allegedly issuing such a notice seeking return of his cheques, yet taking no steps to issue stop-payment instructions or otherwise prevent their misuse, also belies his defence. Taken cumulatively, these inconsistencies and improbabilities render the petitioner's version unconvincing and implausible. 19. As regards the argument of the petitioner that the suggestion put to him in cross-examination - wherein he stated, "It is correct that I have never taken any amount of money from the complainant or her husband" - demonstrates that no legally enforceable debt existed, this contention is unmerited. The learned Trial Court has rightly observed that this very portion of the petitioner's testimony proved detrimental to his own case. When confronted with the bank records (Ex. CW-1/9 colly) reflecting trans....
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....question her as to the source of funds, savings, or financial arrangements through which the loan was advanced. No material was brought on record to create even a reasonable doubt regarding her ability to lend the said amount. The learned Appellate Court has also correctly noted that even if part of the transaction was made in cash, such payment would not render the loan invalid or unenforceable under the law. A mere violation of Section 269SS of the Income Tax Act, 1961, if any, attracts at best a penal consequence under Section 271D of the said Act, but does not make the underlying transaction void, illegal, or non-existent. 22. The recent decision of the Hon'ble Supreme Court in Sanjabij Tari v. Kishore S. Borcar: 2025 INSC 1158, has put the controversy to rest by holding as under: "19. Recently, the Kerala High Court in P.C. Hari vs. Shine Varghese & Anr., 2025 SCC OnLine Ker 5535 has taken the view that a debt created by a cash transaction above Rs. 20,000/- (Rupees Twenty Thousand) in violation of the provisions of Section 269SS of the Income Tax Act, 1961 (for short 'IT Act, 1961') is not a 'legally enforceable debt' unless there is a valid explanation for the sa....