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2022 (2) TMI 1 - HC - Indian LawsDishonor of Cheque - discharge of legally enforceable debt or not - misuse of cheque or not - case of the revision petitioner/accused is that the 2nd respondent/complainant had taken one signed blank cheque, two unsigned blank cheques and promissory note from him with a promise to arrange a loan for him and thereafter, the 2nd respondent/complainant had misused the cheques - section 138 of NI Act - HELD THAT - In the instant case, a perusal of the material available on record would show that the 2nd respondent/P.W.1 admitted in his cross-examination that he was an Income Tax Assessee, but he did not mention the loan transaction in his income tax returns. In the absence of any corroborative evidence and in view of the admission made by the 2nd respondent/PW1 that he is an Income Tax assessee, the question would be whether non-showing of the amount in his income tax return is sufficient to rebut a presumption that the cheque was not issued in discharge of a debt or liability. In the instant case, as per the evidence of the 2nd respondent/complainant, Ex.P2- pronote was executed by the revision petitioner/accused, on 26.08.1999, for ₹ 1,10,000/-, whereas the cheque under Ex.P1 was issued for ₹ 1,81,400/- on 05.07.2002. However, the 2nd respondent/complainant has not properly explained under what circumstances, the cheque was issued for ₹ 1,81,400/-. That apart, the 2nd respondent/complainant (P.W.1) has admitted in his cross-examination that he has withdrawn ₹ 30,000/- by depositing the cheque of the revision petitioner/accused on 01.12.2000, which clearly proves the contention of the revision petitioner/accused that the 2nd respondent/complainant had misused the cheques issued by him for obtaining a bank loan. The finding recorded by the learned trial Judge that the 2nd respondent/complainant had established that the cheque was issued towards discharge of legally enforceable debt, which was confirmed by the appellate Court, is suffered from illegality and caused miscarriage of justice. Hence, the conviction and sentence imposed against the revision petitioner/ accused for the offence punishable under Section 138 of the N.I. Act is liable to be set aside - Criminal revision case allowed.
Issues:
1. Interpretation of Section 138 of the Negotiable Instruments Act. 2. Determination of whether the cheque was issued towards discharge of a legally enforceable debt. 3. Consideration of evidence regarding misuse of cheques by the complainant. Analysis: The case involved a Criminal Revision Case against a judgment convicting the accused under Section 138 of the Negotiable Instruments Act. The complainant alleged that the accused borrowed a sum and issued a cheque that bounced due to "Account Closed." The trial court found the accused guilty, sentencing him to imprisonment and compensation. The appellate court upheld this decision. The key contention was whether the cheque was issued for a legally enforceable debt. The complainant contended that the cheque was issued to repay a debt, while the accused claimed the complainant misused the cheques. The court referred to the objective of Section 138, emphasizing the strict liability regarding negotiable instruments. The complainant's failure to disclose the transaction in his income tax returns raised doubts about the debt's legality. Citing a Bombay High Court case, the court highlighted that unaccounted cash amounts not disclosed in tax returns cannot constitute legally recoverable debts. The court noted that failure to disclose a small amount in tax returns might not rebut the presumption under Section 139. However, in this case, the significant amount and lack of explanation for the cheque's issuance raised suspicions. The complainant's withdrawal of cash using the accused's cheque further supported the accused's claim of misuse. Consequently, the court set aside the conviction and acquitted the accused, emphasizing the need to discourage misuse of legal provisions. In conclusion, the court allowed the Criminal Revision Case, acquitted the accused, and ordered the refund of any fines paid. The bail bonds were canceled, and pending miscellaneous petitions were closed. The judgment highlighted the importance of upholding the legal principles behind negotiable instruments and preventing their misuse for personal gains.
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