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2025 (6) TMI 749 - HC - Indian LawsDishonour of Cheque - Reversal of order of acquittal - enforceability of the debt claimed by the complainant against the accused - validity of the presumption under Sections 118 and 139 of the Negotiable Instruments Act - HELD THAT - Merely the Accused had signed the cheque and issued it it will not help the Complainant to raise a presumption against the Accused. As per the notice issued by the Accused under Ex.D-3 Ex.D-4 and Ex.D-5 it indicates that there is no liability. The Accused had discharged the burden of proving the rebuttal evidence under Section 139 of the Negotiable Instruments Act. Therefore the learned Judicial Magistrate had recorded acquittal against he Accused. The learned III Additional District and Sessions Judge had failed to appreciate the evidence in the light of the document under Ex.D-1 to Ex.D-8 and merely on the basis of the presumption under Section 139 of the Negotiable Instruments Act reversed the finding of acquittal and thereby recorded the finding of guilt against the Accused which is found perverse. Since it is judgment of acquittal the Appeal against the acquittal had to be preferred only before the High Court and not before the Sessions Court. Therefore the learned I Additional District and Sessions Judge taking up the Appeal for consideration itself is an illegality. The Appeal itself was not maintainable. The Accused had preferred this Criminal Revision under Section 397 r/w. 401 of Cr.P.C. Therefore this Court has to exercise the power of revision under Section 401 of Cr.P.C to re-assess the evidence. Accordingly this Court had call for records and perused the records and found that the appreciation of evidence was proper by the learned Judicial Magistrate Fast Track Court-I Coimbatore in C.C.No.14 of 2014 whereas the learned Sessions Judge without jurisdiction considered the argument of the learned Counsel for the Complainant/Appellant and reversed the finding of the learned Judicial Magistrate Fast Track Court-I Magisterial level Coimbatore. This Court exercising the powers of revision under Section 401 of Cr.P.C treated this revision as Appeal perused the original records and re-assessed the evidence on the same set of evidence. On re-assessing the evidence it is found that the Complainant had not approached the Court with clean hands. Conclusion - i) The complainant failed to discharge the burden of proving the accused s liability and the existence of a legally enforceable debt. ii) The appeal against acquittal before the Sessions Court was not maintainable and was an illegality. iii) The conviction recorded by the learned I Additional District and Sessions Judge was perverse and is set aside. The point for consideration is answered against the Complainant and in favour of the Accused - this Criminal Revision Case is allowed.
The core legal question considered by the Court was whether the judgment of conviction recorded by the learned I Additional District and Sessions Judge in Criminal Appeal No. 507 of 2018 dated 27.04.2019, which reversed the acquittal of the accused under Section 138 of the Negotiable Instruments Act, 1881, was perverse and liable to be set aside. This central issue involved several subsidiary questions: (i) the enforceability of the debt claimed by the complainant against the accused, (ii) the applicability and effect of the Memorandum of Understanding (MoU) between the partners of the firm, (iii) the validity of the presumption under Sections 118 and 139 of the Negotiable Instruments Act in the context of disputed liability, (iv) the procedural propriety and maintainability of the appeal filed against the acquittal, and (v) the adequacy and reliability of the evidence led by the complainant and the accused.
Regarding the enforceability of the debt and the accused's liability, the Court examined the legal framework under Section 138 of the Negotiable Instruments Act, which mandates that for a conviction, the cheque must have been issued for discharge of a legally enforceable debt or liability. The complainant alleged that the accused issued a cheque for Rs. 30,00,000/- towards part payment of a loan of Rs. 70,00,000/- advanced to the partnership firm M/s. Exide Industrial Distributors (EID). The accused contended that he was inducted as a partner only after the loan was taken and that his liability was limited to Rs. 10,44,462/- as per the MoU entered into between the partners, which was not marked or relied upon by the complainant. The accused further asserted that the cheque for Rs. 30,00,000/- was not issued by him and was misused by the complainant, who had not taken any action against the other partners for recovery of the loan. The Court scrutinized the MoU (marked as Ex.D-2) and noted the agreed sharing of liabilities among the partners: 25% each for two partners and 50% for the third. The MoU explicitly detailed the amounts payable by each partner and the issuance of cheques corresponding to those amounts. The accused had issued a cheque for Rs. 10,44,462/- (Cheque No.109686) to discharge his liability, which was admitted. The complainant's failure to mark the MoU or explain the basis for fixing the accused's liability at Rs. 30,00,000/- raised serious doubts about the claim. Furthermore, the complainant did not produce documents evidencing the loan transaction, the rate of interest, or the distribution of liability among partners. The Court emphasized that the complainant must prove the existence of a legally enforceable debt and the accused's liability beyond reasonable doubt. On the presumption under Section 139 of the Negotiable Instruments Act, the Court acknowledged that the signature on the cheque was not disputed, thus initially raising a presumption of issuance for discharge of debt. However, the accused discharged the burden of rebuttal by adducing evidence including stop payment letters and the MoU, thereby shifting the onus back on the complainant to disprove the defense. The complainant failed to satisfactorily discharge this burden. The Court relied on the Supreme Court's ruling in Rangappa v. Sri Mohan, which clarified that once the accused raises a probable defense, the burden shifts to the complainant to prove the charge beyond reasonable doubt. The Court also addressed the procedural issue regarding the maintainability of the appeal filed against the acquittal. It was held that as per the amended Section 378 of the Code of Criminal Procedure, an appeal against an acquittal in a private complaint under Section 138 of the Negotiable Instruments Act lies only to the High Court with its leave, and not before the Sessions Court. The learned I Additional District and Sessions Judge, who entertained the appeal, lacked jurisdiction, rendering the appeal and the resulting conviction liable to be set aside on this ground alone. Regarding the evidence, the Court observed that the complainant initially relied on his Power of Attorney agent as P.W-1, who lacked personal knowledge of the transactions. The complainant himself was examined belatedly as P.W-2, which was against established principles requiring the principal complainant to be the competent witness with personal knowledge. The complainant's evasive and incomplete testimony, including admissions that he did not specify the date of loan, rate of interest, or the basis for the accused's liability, further weakened the prosecution's case. The Court drew adverse inferences from the complainant's conduct, including the failure to mark the MoU and the unexplained possession of the cheque for Rs. 30,00,000/- by the complainant. In applying the law to the facts, the Court concluded that the complainant had not established a legally enforceable debt against the accused for Rs. 30,00,000/-, nor had he proved that the cheque in question was issued by the accused for such debt. The accused's defense that his liability was limited as per the MoU and that the cheque was misused was found credible and probable. The presumption under Section 139 was rebutted, and the complainant failed to rebut the defense. The procedural irregularity in entertaining the appeal also vitiated the conviction. The competing arguments were carefully considered. The complainant's contention that the accused had signed the cheque and thus was liable was weighed against the accused's evidence of limited liability and misuse of the cheque. The Court favored the latter, emphasizing the necessity of proving the particulars of debt and liability rather than relying solely on presumptions. The appellate court's reliance on Section 139 presumption without adequately considering the MoU and rebuttal evidence was criticized as perverse. The Court's conclusions were that the learned I Additional District and Sessions Judge's judgment convicting the accused was perverse and liable to be set aside. The acquittal by the learned Judicial Magistrate, Fast Track Court-I, Coimbatore was restored. The complaint under Section 138 of the Negotiable Instruments Act was dismissed for lack of proof of legally enforceable debt and the accused's liability. Significant holdings include the following verbatim excerpts of crucial legal reasoning: "Merely because the Accused signed the cheque and had not disputed the cheque and it gives a presumption to the Court under 118 and 139 of Negotiable Instrument Act, it will not help the Complainant in this case." "The Complainant failed to explain the circumstances which prompted the Accused to allegedly issue the cheques. Hence, the trial court reversed the burden upon the Complainant to explain about the existing liability between the parties." "The defense raised by the Accused creates doubt regarding the existing liability, until the contradiction is proved. It is presumed that the cheque in question was issued for legal enforceable debt or liability unless and otherwise the contrary is proved." "Once the Accused discharges the burden of rebuttal evidence under Section 139, the burden shifts towards Complainant to disprove the case of the Accused. The Complainant had not discharged the burden to disprove the rebuttal evidence of the Accused." "The learned I Additional District and Sessions Judge taking up the Appeal for consideration itself is an illegality. The Appeal itself was not maintainable." "The learned Appellate Judge shall appreciate the judgment of acquittal with caution. It shall not reverse the finding of acquittal without proper assessment of evidence." "The complainant has not approached the Court with clean hands. He has, with ulterior motive, filed the complaint through his Power of Attorney and allowing his Power of Attorney to let in evidence on his behalf which is also against the reported decision of the Honourable Supreme Court." Core principles established include:
Final determinations on each issue are:
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