2015 (7) TMI 1392 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - rebuttal of presumption - material defence of the first respondent was that the cheque does not bear her signature - Sections 118 and 139 of NI Act - HELD THAT - Admittedly the appellant had retired from the school when various advances of the amounts from June 2006 is said to be made to the first respondent on a specious ground that the first respondent was known to the appellant as she was the husband of the headmaster of the school where the appellant was earlier serving. It has come in the evidence of PW1 that there was no business transaction as such between the appellant and the first respondent and for the matter of that between the appellant and Avdhuth Kakodkar the husband of the first respondent. It is not even the case that Avdhuth Kakodkar had at any time approached the appellant with a request for financial accommodation - It is really difficult to accept that the appellant would advance these amounts without there being anything in writing and without there being any agreement to pay interest and particularly when on his own saying he continued to advance the amount although the amounts paid earlier were not repaid. One of the material circumstances to be established in a prosecution of the present nature is that the cheque should have been shown to be issued in discharge of a legally enforceable debt or liability. The existence of such a promissory note by the first respondent was a material circumstance and would have found place in the notice as well as the complaint. However that is lacking. It is trite that presumption under Sections 118 and 139 of the Act can arise only where the signature is admitted. In the present case it appears from the cross-examination of PW1 that the first respondent had disputed her signature on the cheque. It cannot be gainsaid that the first respondent had not made any attempt to get the documents examined. The fact remains that the appellant had himself made an application for sending the document to the forensic laboratory - the observations herein pertain to the complaint under Section 138 of the Act and the issues which arise thereunder. If the appellant has taken recourse to any other legal remedy for recovery of the amount the same shall be decided on its own merits without being influenced by any of the observations herein. Appeal dismissed.

Summary

Issues Involved:
1. Legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act, 1881.
2. Admissibility and credibility of the promissory note.
3. Signature authenticity on the disputed cheque.
4. Compliance with Section 269SS of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legally Enforceable Debt or Liability:
The appellant, a retired teacher, claimed that he had advanced various amounts totaling Rs. 7 lakhs to the respondent, who was the wife of his former headmaster. The appellant alleged that the respondent issued two post-dated cheques, one of which was dishonored, leading to the complaint under Section 138 of the Negotiable Instruments Act. The trial court acquitted the respondent, concluding that the appellant failed to prove that the cheque was issued in discharge of a legally enforceable debt or liability. The appellate court upheld this view, noting that the appellant's narrative lacked credibility, especially given the absence of written documentation for substantial cash advances and the improbability of advancing such amounts without any formal agreement or interest.

2. Admissibility and Credibility of the Promissory Note:
The appellant heavily relied on a promissory note (exhibit 40) dated 20/12/2007, written on a stamp paper dated 31/03/2003. However, the court observed that the appellant did not mention this promissory note in the statutory notice or the initial complaint, which would have been a significant piece of evidence to establish the debt. The court found this omission critical and indicative of the promissory note's questionable credibility.

3. Signature Authenticity on the Disputed Cheque:
The respondent disputed the authenticity of her signature on the cheque. Although the appellant initiated the process to have the cheque examined by a forensic laboratory, this effort was not pursued to completion. The court noted that the presumption under Sections 118 and 139 of the Act, which assumes the cheque was issued for a debt or liability, only arises when the signature is admitted. Given the disputed signature and the incomplete forensic examination, the court found the appellant's evidence insufficient to establish the cheque's validity.

4. Compliance with Section 269SS of the Income Tax Act:
The court highlighted that the appellant admitted to advancing large sums in cash, which were not reflected in his income tax returns. This practice contravenes Section 269SS of the Income Tax Act, which mandates that loans above Rs. 20,000 must be made through an account payee cheque. The court cited the Supreme Court's decision in Krishna Janardan Bhat Vs. Dattatraya G. Hegde, emphasizing that non-compliance with this provision undermines the appellant's claim of a legally enforceable debt.

Conclusion:
The appellate court concluded that the trial court's view was neither perverse nor impossible, and thus, there was no ground for interference. The court reiterated the principle that in appeals against acquittal, the appellate court must respect the double presumption of innocence in favor of the accused. The appeal was dismissed with no order as to costs, and the court clarified that its observations were limited to the Section 138 complaint and would not affect any other legal remedies the appellant might pursue.