2025 (7) TMI 62 - HC - Indian Laws

Dishonour of Cheque - Funds insufficient - liability towards the Complainant or not - discharge on onus on balance of probabilities - jurisdiction of learned Metropolitan Magistrate in terms of Section 29(2) Cr.P.C. to impose a fine exceeding Rs. 10, 000/- - HELD THAT - The learned Metropolitan Magistrate has rightly concluded not only the factum of giving the loan by the Complainant to the Petitioner but also that it was not returned has been fully established. Further Complainant has deposed that the cheque was first presented on 29.09.2020 when it was dishonoured for insufficiency of funds. On the request of the Petitioner it was presented the second time on 13.10.2020. If the defence of the Petitioner was genuine she would have stopped the payment against the cheque atleast after its first presentation. Her inaction and silence and the Cheque being presented twice further establishes that the loan amount had not been refunded to the Complainant - a Legal objection has been taken that under Section 29 of Cr.P.C. the First-Class Magistrate has the power to impose the fine to the maximum of Rs.10, 000/-. Therefore the fine of Rs.10, 65, 000/- as imposed by the Ld. Metropolitan Magistrate is illegal and against the mandate of law. It may be observed that the trial has been held under a Special Act i.e. Negotiable Instruments Act wherein Section 138 itself provides that in case the offence is proved under Section 138 the person convicted may be punished with an imprisonment of a term which may extend to two years and the fine which may extend to twice the amount of the cheque or with both. This being conviction in a trial under the Special Act it would prevail over the general law as contained in Cr.P.C. The cheque amount was Rs. 6, 00, 000/- and the jurisdiction of the Ld. Metropolitan Magistrate to impose the fine was the double of the cheque amount. Therefore the fine imposed in the sum of Rs. 10, 65, 000/- is within the jurisdiction of learned Metropolitan Magistrate. It is held that the Petitioner has been rightly convicted and sentenced by the Ld. Metropolitan Magistrate vide Order dated 01.11.2023 which has been rightly upheld by the learned ASJ vide Judgment dated 06.02.2025 - There is no merit in the present Criminal Revision Petition which is hereby dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the Petitioner, who had signed a cheque, can be held liable under Section 138 of the Negotiable Instruments Act, 1881 (N.I. Act) for dishonour of the cheque issued for repayment of a loan?

- Whether the Petitioner's defence that she did not know the Complainant and that the cheque was given to a third party (CW-2) who misused it, is tenable and sufficient to rebut the presumption of liability under Section 138 N.I. Act?

- Whether the loan transaction, allegedly advanced without a money lending license and secured by a post-dated cheque, falls outside the ambit of Section 138 of the N.I. Act?

- Whether the Complainant discharged the burden of proving the existence of a legally enforceable debt or liability at the time of issuance of the cheque?

- Whether the imposition of a fine exceeding Rs. 10,000/- by the learned Metropolitan Magistrate is valid, given the limits prescribed under Section 29(2) of the Code of Criminal Procedure, 1973 (Cr.P.C.)?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability of the Petitioner under Section 138 of the N.I. Act for dishonour of cheque issued for repayment of loan

The legal framework is governed by Section 138 of the N.I. Act which penalizes dishonour of cheque issued for discharge of a legally enforceable debt or liability. The presumption under Section 139 N.I. Act is that the cheque was issued for discharge of such debt, which can be rebutted by the accused.

The Court examined the evidence tendered by the Complainant, including the signed cheque, bank statements, Income Tax Returns, and computation sheets corroborating the loan transaction. The testimony of the Complainant (CW-1) and the witness (CW-2), who acted as an intermediary in arranging the loan, was found credible and unchallenged on material aspects.

The Petitioner admitted her signatures on the cheque but denied knowledge of the Complainant, claiming the cheque was handed over to CW-2 and misused. However, she failed to adduce any corroborative evidence or cross-examine CW-2 on the repayment or misuse assertions.

The Court held that the Petitioner's admissions and omissions established that the loan was taken and remained unpaid. The dishonour of the cheque for insufficient funds on two occasions, despite the Petitioner's knowledge, further substantiated the liability. The Court also noted the Petitioner's failure to stop payment or respond to the legal notice, which a prudent person would have done if the defence was genuine.

Thus, the Court applied the law to facts and concluded that the Petitioner was rightly convicted under Section 138 of the N.I. Act.

Issue 2: Defence that the cheque was misused by a third party and the Petitioner did not know the Complainant

The Petitioner's defence was that she had no dealings with the Complainant and that the cheque was given to CW-2, who misused it. The Court observed that CW-2 corroborated that he arranged the loan from the Complainant on behalf of the Petitioner, and there was no denial or suggestion during cross-examination challenging this fact.

The Court referred to precedents stating that the presumption under the N.I. Act is rebuttable, and once rebutted, the burden shifts to the Complainant to prove the debt. However, here the Petitioner's defence was not supported by evidence, and she failed to prove repayment or misuse by CW-2. The Petitioner also did not take the witness stand to substantiate her claims.

The Court found the defence to be an afterthought and rejected it, noting that the Petitioner's own admissions and conduct negated the claim of misuse or lack of knowledge of the Complainant.

Issue 3: Applicability of Section 138 N.I. Act to loan transactions without money lending license

The Petitioner contended that since the loan was advanced by the Complainant without a money lending license, the transaction was not covered by Section 138 N.I. Act, relying on a precedent from the Bombay High Court. However, the Court noted that this issue was not raised or decided by the lower courts and that the Complainant's case was that the loan was given and remained unpaid, irrespective of licensing.

The Court implicitly held that the absence of a license does not negate the existence of a debt or liability for the purpose of Section 138 N.I. Act, especially when the transaction is otherwise established. The Court did not find merit in this argument as it did not affect the core question of liability for dishonour of cheque.

Issue 4: Burden of proof regarding existence of debt and liability

The Petitioner argued that the Complainant failed to prove the exact date of loan disbursement and the subsisting liability at the time of cheque issuance. The Court observed that the Complainant admitted the loan was given in August 2019, with approximate dates, and produced bank statements showing withdrawal of substantial amounts corroborating financial capacity.

The Court held that exact precision in dates is not mandatory and that the evidence on record sufficiently established the loan transaction and outstanding liability. The Court also noted that the Petitioner did not provide any evidence of repayment or discharge of liability.

The Court thus concluded that the Complainant discharged the burden of proof to establish the existence of debt and liability at the time of issuance of the cheque.

Issue 5: Validity of imposition of fine exceeding Rs. 10,000/- by the learned Metropolitan Magistrate

The Petitioner challenged the fine of Rs. 10,65,000/- as ultra vires Section 29(2) Cr.P.C., which limits the fine that a First-Class Magistrate can impose to Rs. 10,000/-. The Court clarified that the trial was under the Special Act (N.I. Act), where Section 138 provides for punishment with imprisonment and fine which may extend to twice the amount of the cheque.

The Court held that the special provision under the N.I. Act prevails over the general provisions of Cr.P.C. and that the learned Metropolitan Magistrate had jurisdiction to impose a fine up to twice the cheque amount. Since the cheque amount was Rs. 6,00,000/-, the fine imposed was within the statutory limit.

The Court rejected the Petitioner's contention and upheld the fine imposed.

3. SIGNIFICANT HOLDINGS

- "The Petitioner has been rightly convicted and sentenced by the Ld. Metropolitan Magistrate... which has been rightly upheld by the learned ASJ."

- "The presumption under the N.I. Act is rebuttable and can be rebutted in the course of trial. Once this presumption is rebutted, the onus would shift on the Complainant to establish beyond reasonable doubt that the cheque was in fact issued in discharge of an existing debt or liability."

- "The trial has been held under a Special Act i.e. Negotiable Instruments Act wherein Section 138 itself provides that in case the offence is proved under Section 138, the person convicted may be punished with an imprisonment of a term, which may extend to two years and the fine which may extend to twice the amount of the cheque or with both. This being conviction in a trial under the Special Act, it would prevail over the general law as contained in Cr.P.C."

- "The Petitioner's defence that the cheque was misused by a third party and that she did not know the Complainant is rejected on the ground that she failed to adduce any evidence in support and her own admissions corroborate the Complainant's case."

- "The Complainant has discharged the burden of proof to establish the existence of legally enforceable debt or liability at the time of issuance of the cheque."