2025 (6) TMI 1953 - HC - Indian Laws

Dishonour of cheque - discharge of existing debt/liability or not - rebuttal of presumptions - proper service of demand notice or not - acquittal of accused in a proceeding u/s 138 of the Negotiable Instrument Act. Non-existence of legally enforceable debt - HELD THAT - The trial court on the basis of some irrelevant considerations like non filing of income tax return by the complainant and the complainants alleged inability to show that she had the means to advance the said amount and that complainant herself had not proved the Exercise Book (marked exhibit 9) has just tried to create doubts about the authenticity of exhibit 9. Needless to say that mere creation of doubt by the court below regarding the entry made in exhibit-9 is not sufficient to rebut the presumption as envisaged under section 138 of the N.I. Act. The trial court by mere creation of doubt about authenticity of exhibit-9 have proceeded on misplaced assumption that by mere denial made by the accused during cross examination of complainants witnesses or mere creation of doubt in the mind of court accused has sufficiently rebutted the presumption - it is clear that so far as the finding of the trial court regarding the non-existence of legally enforceable debt is perverse and is not sustainable in the eye of law. Proper service of demand notice or not - HELD THAT - Complainant during her evidence has filed and proved the A/D card bearing signature of Ani Das dated 24.03.2008 marked exhibit 5/1 and also one certificate of posting mentioning address 19/2 Baisnab Para Lane which is marked exhibit-6. In the complaint the complainant has specifically stated that Ani Das is the wife of accused Sanjib das @ Bholau and the accused no where denied that the name of her wife is Ani Das. Even accused did not specifically denied that he does not reside in the address where the demand notice was sent - the finding of court below that complainant failed to establish that demand notice was served upon the accused as it was sent in a wrong address is clearly perverse and not based on the materials available in record. On the contrary knowing fully well that his account became inoperative on and from 31.03.2006 accused had issued the cheque in favour of the complainant which conduct and motive of the accused shows the malafide intention of the accused to cheat the complainant from the very inception. Conclusion - On the basis of materials available in the case record and even keeping in mind the limited scope of High Courts interference in an appeal against acquittal there are no other option but to say that the judgment impugned is illegal and affected by not only error of law but also error of fact and the view taken by the trial court is not a fairly possible view on the basis of materials available on record and thereby suffers from illegality and perversity. Accused Sanjib Das @ Bholau is accordingly convicted for committing offence punishable under section 138 of the N.I. Act and he is sentenced to pay fine of Rs. 4, 50, 000/- within a period of 60 days from the date of the order failing which the convict shall suffer simple imprisonment for 6 (six) months - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the accused issued the cheques in discharge of a legally enforceable debt or liability under section 138 of the Negotiable Instruments Act (N.I. Act).

- Whether the complainant proved the existence of a legally enforceable debt or consideration for the cheques issued by the accused.

- Whether the demand notice under section 138 of the N.I. Act was properly served upon the accused at the correct address.

- Whether the entries in the complainant's exercise book (exhibit-9) are reliable and admissible evidence to prove the loan transaction.

- Whether the accused rebutted the statutory presumption under sections 118 and 139 of the N.I. Act by adducing evidence or raising probable defence.

- Whether the trial court erred in acquitting the accused based on alleged procedural and evidentiary deficiencies.

2. ISSUE-WISE DETAILED ANALYSIS

Existence of Legally Enforceable Debt and Issuance of Cheques

The legal framework under section 138 of the N.I. Act mandates that the cheque must be issued for discharge of a legally enforceable debt or liability. The complainant alleged that she and her husband advanced Rs. 2,30,000/- to the accused on various occasions between June and December 2005, supported by entries in an exercise book (exhibit-9). The accused issued two post-dated cheques in 2007 and 2008 which were dishonoured due to account closure.

The trial court disbelieved the complainant's evidence primarily due to overwriting in exhibit-9, lack of documentary proof of financial capacity, and suspicious timing and amounts of payments. The court also noted that the accused's bank account was inoperative well before the cheques were issued. However, the Court emphasized the principle from Kumar Exports Vs. Sharma Carpets that the accused must either prove non-existence of debt or show that such non-existence is probable enough to raise doubt.

The complainant's husband (PW-3) corroborated the entries in exhibit-9, and no cross-examination challenged the authenticity or correctness of these entries. The accused did not adduce any evidence to rebut the presumption of debt under section 139 of the N.I. Act. Mere denial or creation of doubt is insufficient to discharge this burden. The Court found the trial court's rejection of exhibit-9 on grounds of overwriting and suspicion to be perverse and unsupported by evidence.

Thus, the Court held that the complainant successfully established the existence of a legally enforceable debt, and the accused failed to rebut the statutory presumption.

Service of Demand Notice

Section 138 requires the complainant to serve a demand notice at the correct address of the accused. The trial court held that the demand notice was not properly served as it was sent to '19/2 Baisnab Para Lane' while the accused allegedly resided at '19 Baisnab Para Lane'. The complainant produced the postal acknowledgment (A/D card) signed by Ani Das, the wife of the accused, and the accused himself had used the '19/2' address in court documents and bail bonds.

The Court noted that summons were also sent to '19/2 Baisnab Para Lane' and received by Ani Das, who identified herself as the wife of the accused. The accused appeared in court and obtained bail using the same address. There was no denial by the accused regarding the identity of his wife or the address used.

The Court held that the trial court's finding that the demand notice was not served properly was perverse and contradicted by documentary evidence. The service of notice was valid and fulfilled the procedural requirement under section 138.

Reliability and Admissibility of Exhibit-9 (Exercise Book)

The trial court doubted the evidentiary value of the handwritten exercise book due to overwriting and because it was not produced by the complainant herself but by her husband. The respondent argued that such handwritten notes are relevant only in civil proceedings and not sufficient to prove criminal liability under section 138.

The Court rejected this narrow view, holding that the entries in exhibit-9 were admitted in evidence without effective challenge to handwriting or authenticity. The complainant explained that she maintained no formal balance sheet but recorded transactions in the exercise book. The husband's testimony supported this. The accused did not challenge the entries or produce any evidence to disprove the transaction recorded.

The Court emphasized that the trial court erred in disbelieving exhibit-9 on irrelevant grounds and that such evidence, when unchallenged, is admissible and relevant to prove the existence of debt.

Burden of Proof and Rebuttal of Presumption under Sections 118 and 139 of the N.I. Act

The statutory presumption under section 139 places the initial burden on the accused to prove that the cheque was not issued for discharge of debt or liability. The complainant's evidence, including the cheques, dishonour memos, demand notice, and exhibit-9, raised the presumption in her favor.

The accused's only defence was a bare denial, without adducing any evidence or explanation. The Court held that mere denial or creation of doubt is insufficient to rebut the statutory presumption. The accused failed to establish any probable defence or show the non-existence of debt to a degree that a prudent person would doubt the complainant's claim.

The Court relied on the Supreme Court's ruling in Rohitbhai Jivanlal Patel, which clarified that the trial court committed a fundamental error by acquitting on mere creation of doubt without requiring proof beyond reasonable doubt from the complainant. The complainant need only establish a prima facie case, after which the burden shifts to the accused.

Financial Capacity of Complainant and Other Procedural Considerations

The trial court doubted the complainant's capacity to advance Rs. 2,30,000/- because she earned Rs. 20,000/- monthly and had not produced income tax returns or bank passbooks. The Court held such considerations irrelevant to the issue of existence of legally enforceable debt. The complainant was not required to produce formal loan documents or tax returns to prove the debt, especially when the accused failed to challenge the entries in exhibit-9 or produce contrary evidence.

Similarly, the trial court's reliance on earlier dishonoured cheques and the inoperative status of the accused's bank account was insufficient to acquit when the accused did not explain these facts or rebut the presumption of debt.

3. SIGNIFICANT HOLDINGS

"The accused in a trial under section 138 of the Act has two options. He can either show that consideration or debt did not exist or that under the particular circumstances of the case, the nonexistence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed."

"Mere creation of doubt is not sufficient. The trial court appears to have proceeded on a misplaced assumption that by mere denial or mere creation of doubt, the appellant had successfully rebutted the presumption as envisaged by Section 139 of the NI Act."

"The burden of proving non-existence of legally enforceable debts always lies on the accused/respondent herein. Therefore, mere inability on the part of the complainant/appellant to produce any explicit loan document cannot discharge the accused/respondent from his liability to repay his debt."

"The finding of the trial court regarding the non-existence of legally enforceable debt is perverse and is not sustainable in the eye of law."

"The finding of court below that complainant failed to establish that demand notice was served upon the accused, as it was sent in a wrong address, is clearly perverse and not based on the materials available in record."

Final determination: The Court allowed the appeal, set aside the acquittal, convicted the accused under section 138 of the N.I. Act, and sentenced him to pay a fine of Rs. 4,50,000/- within 60 days, failing which he would undergo six months' simple imprisonment. The fine amount, if paid, would be given to the complainant as compensation.