2025 (6) TMI 1872 - HC - Indian Laws

Dishonour of Cheque - insufficient funds - legally enforceable debt or not - accused failed to rebut the presumption under section 139 of the NI Act by adducing any cogent evidence - non-application of judicial mind - violation of principles of natural justice - HELD THAT - While the accused faced the dock as DW1 he also admitted that he used to perform work on behalf of the company as project manager and the total project was under his control. He also admitted that the payment was made to him by the company. He further admitted that he came to know about the cheque only after receiving the demand notice and thereby the service of demand notice upon the accused is not in dispute in the present case. Same accused in his cross-examination admitted that he used to take advance from the company for his work and he has not disputed his signature in the impugned cheque during crossexamination. In the aforesaid facts and circumstances of the case and the documents which is marked as exhibited and also the evidence as adduced on behalf of the complainant/opposite party herein and also on behalf of the convict there is no other option but to conclude that it has been clearly established during trial that the cheque has been issued by the accused in favour of the complainant in discharge of his legally enforceable debt. The demand notice was served upon the accused persons within the statutory period and considering all these there is nothing to interfere with the observation made by the trial court as well as made by the court below because the judgments impugned have not resulted in any gross or manifest failure of justice nor has there been any illegality or perversity committed by the courts below while passing the impugned judgments. The judgment passed by the trial court dated 23.07.2018 and judgment passed by the court below dated 30.03.2019 are hereby affirmed. The convict is hereby directed to appear before the court below within a period of thirty days from the date of communication of the order to serve out the sentence of TRC and sentence of payment of compensation in default the court below will be at liberty to take every endeavour including issuance of warrant of arrest to secure attendance of the convict/appellant before the said court to serve out the sentence as ordered by the trial court dated 23.07.2018 - Application dismissed.

Summary

Issues Presented and Considered

The core legal questions considered by the Court were:

• Whether the accused issued the cheque in question in discharge of a legally enforceable debt or liability towards the complainant;
• Whether the complainant complied with the procedural requirements under Section 138 of the Negotiable Instruments Act, including presentation of the cheque within the prescribed period and issuance of a valid demand notice;
• Whether the accused failed to rebut the statutory presumption under Section 139 of the Negotiable Instruments Act by adducing cogent evidence;
• Whether the trial court and the appellate court correctly applied the law and appreciated the evidence in convicting the accused under Section 138 of the Negotiable Instruments Act;
• Whether the examination of the accused under Section 313 of the Criminal Procedure Code was conducted in accordance with law and whether any irregularity in this regard vitiated the proceedings.

Issue-wise Detailed Analysis

1. Whether the cheque was issued in discharge of a legally enforceable debt

The relevant legal framework is Section 138 of the Negotiable Instruments Act, which criminalizes the dishonor of a cheque issued for discharge of a legally enforceable debt or liability. The presumption under Section 139 places the burden on the accused to rebut the presumption that the cheque was issued for such debt or liability.

The Court analyzed the evidence, including the complainant's testimony (PW1), who established that the accused was entrusted with Rs. 6,95,000 for company use but utilized the money for personal purposes. The accused issued cheque No. 199456 dated 16.04.2014 for Rs. 5,00,000 in favor of the complainant. The cheque was dishonored due to insufficient funds, as per Exhibit 3 (cheque return memo).

During cross-examination, PW1 confirmed that the accused acknowledged indebtedness to the company and no suggestion was given to deny this. The accused, examined as DW1, admitted receiving advances from the company and acknowledged his signature on the cheque, but claimed to have learned about the cheque only after receiving the demand notice.

The Court found no evidence that the cheque was issued for any reason other than repayment of debt. The accused did not dispute the debt or issue of the cheque in discharge of such debt. Thus, the Court concluded that the cheque was issued in discharge of a legally enforceable debt.

2. Compliance with procedural requirements under Section 138 N.I. Act

The complainant presented the cheque within the prescribed period and the cheque was dishonored with the remark "Fund insufficient" (Exhibit 3). The demand notice dated 04.05.2014 was sent to the accused and was duly served as per the report from Kolkata GPO, Customer Care Centre dated 06.06.2014 (Exhibits 4 and 5).

The Court emphasized that the complainant complied with all procedural requirements mandated under the Negotiable Instruments Act, including timely presentation of the cheque and service of demand notice within the statutory period.

3. Whether accused failed to rebut presumption under Section 139 of the N.I. Act

Section 139 creates a presumption that the cheque was issued for discharge of debt. The accused bears the burden to rebut this presumption by adducing credible evidence.

The Court noted that the accused did not provide any cogent evidence to rebut this presumption. He neither disputed his signature nor the issuance of the cheque in discharge of debt. The accused also failed to reply to the demand notice denying liability or offering any other explanation.

Hence, the Court held that the accused failed to rebut the statutory presumption under Section 139.

4. Validity of trial court's and appellate court's judgments

The trial court framed eight points for consideration and after evaluating the evidence, concluded that the accused was liable under Section 138. The appellate court affirmed the trial court's findings, holding that the complainant proved the case beyond reasonable doubt and that the debt was legally enforceable.

The petitioner argued that the courts below failed to consider materials on record and did not conduct the Section 313 Cr.P.C. examination properly, leading to a failure of justice.

However, the High Court found that the trial court and appellate court's judgments were well reasoned and based on evidence. The examination under Section 313 was not shown to have been conducted improperly to the extent of vitiating the proceedings.

The Court found no illegality, perversity, or gross miscarriage of justice in the impugned judgments.

5. Examination under Section 313 Cr.P.C.

The petitioner contended that the examination of the accused under Section 313 of the Cr.P.C. was not conducted in accordance with law, which vitiated the entire proceeding.

The Court examined this contention and found no merit. The accused was examined and given an opportunity to explain the evidence against him. No substantial procedural irregularity was demonstrated that would invalidate the trial or appeal.

Significant Holdings

The Court held:

"It has been clearly established during trial that the cheque has been issued by the accused in favour of the complainant in discharge of his legally enforceable debt. The demand notice was served upon the accused persons within the statutory period and considering all these there is nothing to interfere with the observation made by the trial court as well as made by the court below because the judgments impugned have not resulted in any gross or manifest failure of justice, nor has there been any illegality or perversity committed by the courts below while passing the impugned judgments."

Core principles established include:

• The presumption under Section 139 of the Negotiable Instruments Act is a significant evidentiary burden on the accused to rebut the issuance of cheque for discharge of debt;
• Compliance with procedural requirements such as presentation of cheque and service of demand notice is essential for prosecution under Section 138;
• Failure to reply to the demand notice or produce cogent evidence to rebut the presumption results in conviction;
• Proper examination under Section 313 Cr.P.C. is necessary but mere procedural lapses without prejudice do not vitiate the trial;
• Appellate courts will not interfere with well-reasoned judgments based on evidence and proper application of law.

Final determinations:

• The accused was rightly convicted under Section 138 of the Negotiable Instruments Act;
• The sentence of imprisonment till rising of the court and compensation of Rs. 6,50,000/- was upheld;
• The appeal was dismissed and the accused was directed to serve the sentence as ordered.