2025 (5) TMI 931 - SC - Indian Laws

Dishonor of cheque due to insufficiency of funds - Offence punishable under Section 138 of the Negotiable Instruments Act 1881 - cheque-in-question to discharge the liability against a loan taken from the complainant which was used by the accused-respondent to cover the expenses towards his medical treatment - accused acknowledge his signatures on the cheque-in-question - HELD THAT -The complainant also deposed that he had paid the amounts in question by providing two cheques to the accused-respondent and his wife upon their request. The first cheque was for a sum of Rs.1, 00, 000/- and the other was for a sum of Rs.4, 00, 000/-. The complainant further asserted that he had advanced a total of Rs.15, 00, 000/-to the accused-respondent and towards repayment of this loan the cheque-in-question was handed over by the accused respondent to the complainant. Thus the complainant led unimpeachable evidence to establish that the loan amount to the tune of Rs. 15, 00, 000/- was advanced to the accused-respondent through valid sources and was not merely a money lending transaction as recorded by the High Court. We may note that when the accused-respondent stepped into the witness box and examined himself in defence he consciously avoided to explain the complainant s version that a part of the amount was paid to him and his wife by the complainant through cheques. The consolidated effect of the following facts such as - i. The amounts in question were paid by the complainant to the accused-respondent through valid sources; ii. The cheque-in-question bears the signatures and the handwriting of the accused-respondent; iii. The cheque-in-question was dishonoured upon its presentation with the return memo stating insufficient funds; and iv. The notice issued to the accused-respondent under Section 138 of the NI Act remaining unanswered. Clearly give rise to the presumption under Section 118 read with Section 139 of the NI Act which the accused-respondent has miserably failed to rebut. The trial Court and the appellate Court provided exhaustive reasoning while convicting and affirming the conviction of the accused-respondent for the offence punishable under Section 138 of the NI Act. However the High Court took a divergent view holding that the complainant has omitted to adduce sufficient evidence as regards his money lending business and this omission on his part was sufficient to discharge the burden cast upon the accused-respondent. However we fail to see any rationale behind this reasoning. In the impugned judgment the High Court proceeded to minutely reappreciate the evidence and has substituted the concurrent findings of fact recorded by the Courts below by its own factual findings without any valid basis and by disregarding the positive evidence available on record which clearly established that the complainant had paid the amount in question to the accused-respondent through valid sources with a substantial part of the payment being made by cheques. Thus we are of the opinion that the judgment rendered by the High Court is based on conjectures and surmises and the findings recorded therein are perverse on the face of record. Hence the same cannot be sustained. Consequently the impugned judgment dated 3rd September 2021 is hereby set aside and as a result the judgments rendered by the trial Court dated 15th November 2016 and the appellate Court dated 1st August 2017 are hereby restored. The accused-respondent is sentenced to - i. A fine of Rs. 16, 00, 000/- and in the event of default in payment the accused-respondent shall undergo nine months simple imprisonment. ii. The fine upon being deposited shall be paid to the appellants being the legal heirs of the original complainant. iii. The accused-respondent is granted three months time to pay the amount of fine failing which he shall be taken into custody to serve the default sentence. Resultantly the appeal is allowed in these terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the accused-respondent was liable for the offence under Section 138 of the Negotiable Instruments Act, 1881 ("NI Act") for the dishonour of the cheque issued to the complainant.

- Whether the complainant had sufficiently established the existence of a legally enforceable debt or liability against the accused-respondent.

- Whether the accused-respondent rebutted the statutory presumption under Sections 118 and 139 of the NI Act regarding the issuance and dishonour of the cheque.

- The validity and effect of the accused-respondent's defence that the cheque was a signed blank cheque and that the particulars were not filled by him.

- The correctness of the High Court's interference with the concurrent findings of fact recorded by the trial and appellate courts, especially regarding the complainant's evidence on the loan transaction and the alleged private money lending business.

- The applicability of the legal notice requirement and the accused-respondent's failure to respond to the demand notice under Section 138 of the NI Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability under Section 138 of the NI Act for dishonour of cheque

Relevant legal framework and precedents: Section 138 of the NI Act criminalizes the dishonour of a cheque due to insufficiency of funds or other reasons, provided the cheque was issued for discharge of a legally enforceable debt or liability. Sections 118 and 139 of the NI Act create a presumption in favour of the holder of the cheque that the cheque was issued for discharge of such debt or liability.

Court's interpretation and reasoning: The Court observed that the accused-respondent admitted his signatures on the cheque and did not deny the cheque's issuance. The cheque was dishonoured due to insufficiency of funds, as evidenced by the return memo. The complainant issued a legal notice under Section 138, which was duly received by the accused-respondent, who failed to respond. These facts satisfy the foundational requirements of Section 138.

Key evidence and findings: The complainant's testimony established that the cheque was issued to discharge a loan amount of Rs. 15,00,000/- advanced to the accused-respondent and his wife. The complainant's evidence was corroborated by the cheque itself, the notice served, and the dishonour memo. The accused-respondent did not deny the signatures or the cheque's validity until the statement under Section 313 CrPC, where he claimed the cheque was a signed blank cheque.

Application of law to facts: The Court held that the statutory presumption under Sections 118 and 139 was triggered and remained unrebutted as the accused-respondent failed to provide credible evidence to negate the presumption. The late-stage defence of a signed blank cheque was not supported by any handwriting expert or other proof and therefore lacked conviction.

Treatment of competing arguments: The accused-respondent's defence that the cheque particulars were not filled by him was rejected as immaterial because under Section 118, the holder of the cheque in due course is entitled to fill in the details. The High Court's acceptance of the accused-respondent's version regarding the cheque being issued for groceries worth Rs. 65,000/- was found inconsistent with the complainant's unimpeached evidence of a loan of Rs. 15,00,000/-.

Conclusions: The accused-respondent was held liable under Section 138 of the NI Act for the dishonour of the cheque issued to discharge a legally enforceable debt.

Issue 2: Sufficiency and credibility of evidence regarding the loan transaction

Relevant legal framework and precedents: The complainant must establish the existence of a legally enforceable debt or liability. Evidence such as loan agreements, ledgers, payment receipts, and witness testimony are relevant.

Court's interpretation and reasoning: The Court noted that the complainant provided detailed testimony that the loan amount was advanced partly in cash and partly through cheques, with entries maintained in ledgers. The complainant's evidence was consistent and remained unshaken during cross-examination. The accused-respondent failed to challenge the mode or source of payment effectively.

Key evidence and findings: The complainant produced evidence of multiple payments by cheque and cash, as well as ledger entries reflecting the loan account. The accused-respondent did not explain or deny these payments when examined in defence.

Application of law to facts: The Court found that the complainant's evidence sufficiently established the loan transaction and the accused-respondent's liability. The High Court's reliance on the complainant's alleged failure to maintain proper books and its characterization of the transaction as private money lending was rejected as conjectural and ignoring material evidence.

Treatment of competing arguments: The High Court's adverse inference based on the complainant's private money lending business and alleged omission to produce books was found to be without basis. The Court emphasized that the complainant's testimony and documentary evidence adequately established the transaction.

Conclusions: The complainant successfully proved the existence of a legally enforceable debt, and the accused-respondent's liability was established beyond reasonable doubt.

Issue 3: Rebuttal of statutory presumption under Sections 118 and 139 of the NI Act

Relevant legal framework and precedents: Sections 118 and 139 create a presumption that the cheque was issued for discharge of debt unless the drawer proves otherwise. The burden of proof shifts to the accused-respondent to rebut this presumption by preponderance of evidence.

Court's interpretation and reasoning: The Court found that the accused-respondent did not rebut the presumption effectively. His claim that the cheque was a signed blank cheque and that the particulars were not filled by him was raised belatedly and without corroboration. No expert evidence was produced to disprove the complainant's version.

Key evidence and findings: The accused-respondent's failure to respond to the legal notice and absence of any credible evidence undermined his defence. The complainant's unimpeached testimony and documentary proof supported the presumption.

Application of law to facts: The Court applied the statutory presumption and found it unrebutted. The accused-respondent's defence was held to be insufficient to discharge the burden cast upon him.

Treatment of competing arguments: The High Court's acceptance of the accused-respondent's defence was rejected as based on conjecture and ignoring the statutory presumption and evidence on record.

Conclusions: The accused-respondent failed to rebut the statutory presumption, and the presumption of liability under Section 138 stood established.

Issue 4: Validity of the High Court's interference with concurrent findings of fact

Relevant legal framework and precedents: Appellate courts and revisional courts ordinarily do not interfere with concurrent findings of fact unless such findings are perverse, arbitrary, or based on no evidence.

Court's interpretation and reasoning: The Court held that the High Court's judgment was based on conjectures and surmises, substituting its own findings for those of the trial and appellate courts without valid basis. The High Court ignored positive evidence and failed to appreciate the complainant's testimony and documentary proof.

Key evidence and findings: The trial and appellate courts had provided exhaustive reasoning and found the accused-respondent guilty based on evidence. The High Court's divergent view was found to be perverse and unsustainable.

Application of law to facts: The Court restored the concurrent findings of the trial and appellate courts, setting aside the High Court's judgment.

Treatment of competing arguments: The High Court's observations regarding the complainant's private money lending business and alleged omission to maintain books were rejected as irrelevant and insufficient to discharge the accused-respondent's burden.

Conclusions: The High Court's interference was unwarranted and the concurrent findings of the lower courts were restored.

Issue 5: Compliance with legal notice requirement under Section 138 of the NI Act

Relevant legal framework and precedents: Section 138 requires the complainant to issue a demand notice to the drawer of the cheque within 30 days of dishonour, demanding payment of the cheque amount.

Court's interpretation and reasoning: The complainant issued a legal notice which was duly received by the accused-respondent. The accused-respondent failed to respond or make payment within 15 days of receipt of the notice.

Key evidence and findings: The notice (Ex. CW1/D) and proof of receipt were on record. No reply or payment was made by the accused-respondent.

Application of law to facts: The Court found that the complainant complied with the statutory requirement, and the accused-respondent's failure to respond or pay further established his liability.

Treatment of competing arguments: No valid defence was raised against the service or contents of the notice.

Conclusions: The legal notice requirement was fulfilled, supporting the complainant's claim under Section 138.

3. SIGNIFICANT HOLDINGS

- "The consolidated effect of the following facts, such as: (i) The amounts in question were paid by the complainant to the accused-respondent through valid sources; (ii) The cheque-in-question bears the signatures and the handwriting of the accused-respondent; (iii) The cheque-in-question was dishonoured upon its presentation with the return memo stating 'insufficient funds'; and (iv) The notice issued to the accused-respondent under Section 138 of the NI Act remaining unanswered, clearly give rise to the presumption under Section 118 read with Section 139 of the NI Act, which the accused-respondent has miserably failed to rebut."

- The Court established the principle that the statutory presumption under Sections 118 and 139 of the NI Act is a powerful evidentiary tool that shifts the burden of proof to the accused-respondent, and failure to rebut it leads to conviction under Section 138.

- The Court held that the identity of the person who filled in the cheque particulars is immaterial when the cheque was issued to the holder in due course, as per Section 118 of the NI Act.

- The Court reaffirmed that appellate or revisional courts should not interfere with concurrent findings of fact unless such findings are perverse or unsupported by evidence.

- The Court concluded that the High Court's judgment was based on conjectures and surmises, and therefore set aside the acquittal, restoring the conviction and sentence imposed by the trial and appellate courts.

- The accused-respondent was sentenced to pay a fine of Rs. 16,00,000/- with a default sentence of nine months' simple imprisonment, and the fine was ordered to be paid to the legal heirs of the original complainant.