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2020 (1) TMI 574 - HC - Indian LawsDishonor of Cheque - insufficiency of funds - legally enforceable debt or other liability or not - rebuttal of presumption - section 139 of NI Act - HELD THAT - The standard of proof for rebutting the presumption is that of preponderance of probabilities and not beyond reasonable doubt. To rebut the presumption, it is open for the accused to rely on evidence led by him or accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely. It is not necessary for the accused to come in the witness box in support of his defence because Section 139 imposed an evidentiary burden and not a persuasive burden. The subject matter of the entire dispute is the MOU. Strangely, complainant is relying on the amounts payable based on the MOU but chooses not to produce the MOU. In the cross examination, complainant admits that he executed the said MOU dated 3rd September 1996 for selling 2000 shares, which were with him, including shares of his wife, son, friend Mr. Dolare and his wife. At the same time, for reasons I am unable to fathom, complainant says he is not inclined to produce the MOU in these proceedings because he has produced it in a civil suit, which had already been filed. The Trial Court after considering the evidence and the documents and the facts and circumstances of the case, dismissed the complaint on the basis that there is no legally enforceable debt or other liability. The reason why the Escrow agent arrangement, as mentioned in paragraph 2 of the MOU, was arrived at was to only safeguard the interest of both the parties. It should not happen that accused make the payments but complainant does not resign from the company and hand over the original share certificates together with duly filled and signed share transfer forms. It should also not happen that complainant would submit or hand over the letter of resignation together with original share certificates and the share transfer forms duly filled and signed to accused but accused do not make the payments. This protective mechanism was created to protect the interest of both the parties. As per the impugned judgment and in my view also, complainant would have been entitled to receive the amounts only if he had fulfilled his side of the obligations - The situation would have been different if the resignation letter and the shares with the share transfer forms had been handed over to accused and to prove that complainant should have called the Escrow agent Mr. Sarangdhar as his witness. But for reasons best known to complainant, Mr. Sarangdhar was not called to testify. It is settled law that if the material witness is not called to testify, it would result in prejudice to others. There is an acquittal and therefore, there is double presumption in favour of the accused - Firstly, the presumption of innocence available to the accused under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. Secondly, the accused having secured acquittal, the presumption of their innocence is further reinforced, reaffirmed and strengthened by the Trial Court. For acquitting accused, the Trial Court observed that the prosecution had failed to prove its case. The opinion of the Trial Court cannot be held to be illegal or improper or contrary to law - The orders of acquittal cannot be interfered with - appeal dismissed.
Issues Involved:
1. Legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act, 1881. 2. Interpretation and compliance with the Memorandum of Understanding (MOU). 3. Presumption and rebuttal under Sections 118(a) and 139 of the Negotiable Instruments Act. 4. Appellate Court's power to interfere with the order of acquittal. Issue-wise Detailed Analysis: 1. Legally Enforceable Debt or Liability under Section 138 of the Negotiable Instruments Act, 1881: The appeals challenge the acquittal of the respondent under Section 138 of the Negotiable Instruments Act, 1881, which deals with the dishonour of cheques for insufficiency of funds. The complainant deposited five cheques, which were dishonoured due to insufficient funds. The complainant issued statutory notices, and the accused replied, denying liability, stating that the amounts under the cheques had not become due as certain preconditions were not met by the complainant. The Trial Court concluded that there was no legally enforceable debt or liability, as required by Section 138. 2. Interpretation and Compliance with the Memorandum of Understanding (MOU): The MOU dated 3rd September 1996 outlined the terms of the sale of 2000 shares for ?18 lakhs. According to Clause 2 of the MOU, the complainant was required to sign a resignation letter from his directorship and transfer forms for the shares, which were to be kept in escrow until full payment was made. The complainant admitted to executing the MOU but chose not to produce it in the proceedings, claiming it was already filed in a civil suit. The Trial Court found that the complainant failed to fulfill his obligations under the MOU, such as depositing the resignation letter and share transfer forms with the escrow agent. Consequently, the time for payment had not arisen, and the cheques were not for a legally enforceable debt. 3. Presumption and Rebuttal under Sections 118(a) and 139 of the Negotiable Instruments Act: Section 139 mandates a presumption that a cheque is for the discharge of a debt or liability, but this presumption is rebuttable. The accused can rebut the presumption by raising a probable defense based on the preponderance of probabilities. The Trial Court noted that the complainant did not address the accused's defense in the statutory notice replies. The Apex Court's principles in Basalingappa v. Mudibasappa were cited, emphasizing that the standard of proof for rebutting the presumption is preponderance of probabilities, and it is not necessary for the accused to testify. 4. Appellate Court's Power to Interfere with the Order of Acquittal: The High Court reiterated the settled law that if two reasonable conclusions are possible based on the evidence, the Appellate Court should not disturb the Trial Court's finding of acquittal. The High Court referred to the principles laid down in Chandrappa v. State of Karnataka, which emphasize that an appellate court must bear in mind the double presumption of innocence in favour of the accused. The High Court found that the Trial Court's conclusion was reasonable and not perverse, as the complainant failed to prove compliance with the MOU and did not call the escrow agent as a witness. Conclusion: The High Court upheld the Trial Court's judgment, finding no reason to interfere with the acquittal. The prosecution failed to prove its case, and the orders of acquittal were not illegal or improper. Both appeals were dismissed.
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