9911796707🚨 Important Update for Our Users
We are transitioning to our new and improved portal - www.taxtmi.com - for a better experience.
⚠️ This portal will be discontinued on 31-07-2025
If you encounter any issues or problems while using the new portal,
please
let us know via our feedback form
so we can address them promptly.
Follow us:
|
Home
2025 (7) TMI 406 - HC - Indian LawsDishonour of Cheque - insufficient funds - legally enforceable debt or not - sufficient reasons to summon the accused - shifting of burden upon the accused to rebut the presumption - HELD THAT - It was laid down by the Hon ble Supreme Court in Malkeet Singh Gill v. State of Chhattisgarh 2022 (7) TMI 1455 - SUPREME COURT that a revisional court is not an appellate court and it can only rectify the patent defect errors of jurisdiction or the law. It was held in Kishan Rao v. Shankargouda 2018 (7) TMI 101 - SUPREME COURT that it is impermissible for the High Court to reappreciate the evidence and come to its conclusions in the absence of any perversity. In the present case the cheque was drawn in the account number mentioned on the cheque. The accused did not dispute in her statement recorded under Section 313 of Cr.P.C. that she had taken the loan from the complainant. It is not shown that the account number mentioned in the cheque is incorrect. Therefore the cheque was drawn by the accused in the loan account in her name. Since the loan account was maintained by the complainant and the complainant was entitled to the money deposited in the loan account therefore the complainant was the holder in the due course and entitled to file the complaint. Hence the submission that the cheque was not issued in the name of the complainant and the complaint filed by the complainant is not maintainable cannot be accepted. The accused did not lead any evidence and relied upon the statement under Section 313 of Cr.P.C. to prove her defence. This was not sufficient. It was held in Sumeti Vij v. Paramount Tech Fab Industries 2021 (3) TMI 383 - SUPREME COURT that the accused has to lead defence evidence to rebut the presumption and mere denial in her statement under Section 313 of Cr.P.C. is not sufficient to rebut the presumption - the learned Trial Court had rightly held that the accused had failed to rebut the presumption attached to the cheque. In the present case the accused has not paid any money to the complainant; hence it was duly proved that the accused had failed to pay the money despite the receipt of the notice - Therefore it was duly proved on record that the cheque was issued in discharge of the legal liability which was dishonoured with an endorsement funds insufficient and the accused failed to pay the amount despite the deemed receipt of the notice of demand. Hence the complainant had proved its case beyond a reasonable doubt and the learned Trial Court had rightly convicted the accused of the commission of an offence punishable under Section 138 of the NI Act. Thus there is no infirmity in imposing the sentence of imprisonment in case of default in the payment of compensation - Revision dismissed.
The core legal questions considered in this judgment are:
1. Whether the complainant, a banking institution, was entitled to file a complaint under Section 138 of the Negotiable Instruments Act (NI Act) despite the cheque being drawn in the loan account name and not directly in the complainant's name. 2. Whether the accused issued the cheque in question and if the presumption under Section 139 of the NI Act that the cheque was issued for discharge of a legally enforceable debt or liability applies. 3. Whether the accused successfully rebutted the presumption of liability under Section 139 of the NI Act by adducing evidence or raising a probable defence. 4. Whether the amount received by the complainant under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Scheme absolves the accused from liability to repay the loan amount. 5. Whether the cheque was valid despite allegations of material alterations and the cheque being filled by persons other than the accused. 6. Whether the notice of demand was properly served upon the accused as required under Section 138 of the NI Act. 7. Whether the sentence of imprisonment and compensation awarded by the trial court and modified by the appellate court were appropriate and lawful, including the legality of imprisonment in default of payment of compensation. Issue-wise Detailed Analysis: 1. Complainant's Entitlement to File Complaint under Section 138 of NI Act The cheque was drawn in the name of the loan account maintained by the complainant bank, not directly in the complainant's name. The accused did not dispute taking the loan and issuing the cheque. The Court referred to precedents clarifying that the holder in due course of the cheque, including a bank holding a loan account, is entitled to file a complaint under Section 138. The Court relied on a judgment where it was held that a cheque drawn on a loan account maintained by a bank is valid and the bank is entitled to file a complaint as holder in due course. The Court rejected the accused's contention that the complaint was not maintainable because the cheque was not drawn in the complainant's name, holding that the complainant was rightly entitled to file the complaint. 2. Presumption under Section 139 of the NI Act and Issuance of Cheque The accused admitted borrowing Rs. 21,15,000 from the complainant but denied issuing the cheque. The Court noted that admission of the signature on the cheque triggers a statutory presumption under Section 139 that the cheque was issued for discharge of a legally enforceable debt or liability. The Court extensively reviewed Supreme Court precedents elucidating that this presumption is rebuttable, but the burden lies on the accused to raise a probable defence supported by evidence. Mere denial or plausible explanation without evidence is insufficient to rebut the presumption. The Court found that the accused neither disputed the signature nor led any evidence to rebut the presumption. The Court also rejected the argument that the cheque was a blank signed security cheque filled in by the complainant, holding that even such a cheque attracts Section 138 liability unless convincingly rebutted. The Court relied on authoritative rulings that a cheque filled by a person other than the drawer does not invalidate the instrument if signed by the drawer. 3. Rebuttal of Presumption and Probable Defence The accused contended that the cheque amount was not due as the vehicle was seized and sold by the complainant, and amounts were received under the CGTMSE Scheme. The Court held that these contentions do not amount to a probable defence sufficient to rebut the statutory presumption. The Court emphasized that the accused failed to produce evidence to prove that the loan amount or instalments were paid or that the cheque was not issued towards discharge of liability. The Court noted that the accused's bare denial in the statement under Section 313 Cr.P.C. was insufficient. The Court also rejected the plea that the cheque was not presented for the amount claimed, observing that the accused did not provide details of payments made or account credits to support this claim. 4. Effect of Amount Received under CGTMSE Scheme The accused argued that the complainant's receipt of amounts under the CGTMSE insurance scheme absolved her of liability. The Court referred to the Scheme's terms and judicial precedents holding that the Scheme is an insurance mechanism protecting the bank's interest and does not discharge the borrower's liability. The bank is obligated to recover the outstanding amount from the borrower even after receiving insurance proceeds. The Court cited judgments from various High Courts and the Supreme Court confirming that amounts received under such schemes do not relieve the borrower of repayment obligations. Accordingly, the Court rejected the accused's contention that the amount received under the Scheme absolved her of liability. 5. Validity of Cheque Despite Material Alterations and Third-Party Filling The accused alleged that the cheque was materially altered and filled by persons other than herself. The Court referred to binding Supreme Court rulings which clarify that a cheque signed by the drawer is valid even if filled by another person, and the drawer remains liable unless the presumption under Section 139 is rebutted. The Court found no evidence of coercion, fraud, or forgery to invalidate the cheque. The Court also rejected the argument that different handwriting on the cheque invalidated it. The accused's failure to lead evidence to rebut the presumption was fatal to her defence. 6. Service of Notice of Demand The complainant sent the statutory notice to the accused's correct address, which was the same as the one used in the trial proceedings and for service of summons. The Court held that the notice was duly served and deemed to be received by the accused. The Court relied on precedent that a drawer who does not pay the cheque amount within 15 days of receipt of summons cannot claim non-receipt of notice to escape liability. The accused failed to pay the amount after receipt of notice, confirming default. 7. Sentence and Compensation Awarded The trial court sentenced the accused to simple imprisonment for one year and awarded compensation of Rs. 13,03,293/-, with a default sentence of one month imprisonment for non-payment of compensation. The appellate court reduced the imprisonment to till the rising of the court, finding the original sentence harsh, but upheld the compensation. The Court upheld the appellate court's modification. The Court discussed the nature of Section 138 NI Act penalties as deterrent and compensatory. It noted that compensation awarded by the trial court was only 10% of the cheque amount, which was inadequate per Supreme Court directions prescribing fines up to twice the cheque amount with interest. However, since the complainant did not appeal, the Court declined to interfere with compensation quantum. The Court also upheld the legality of imprisonment in default of payment of compensation, relying on Supreme Court rulings which clarify that courts may impose default sentences under Section 357(3) Cr.P.C. to enforce compensation orders. The Court emphasized that default sentences serve as a mode of enforcement and deterrence, not as punishment per se, and must consider the accused's ability to pay. The Court rejected the accused's submission that such default imprisonment was impermissible. Significant Holdings: "The cheque was drawn by the accused in the loan account in her name. Since the loan account was maintained by the complainant and the complainant was entitled to the money deposited in the loan account, therefore, the complainant was the holder in due course and entitled to file the complaint." "Once signatures on the cheque are not disputed, the Court has to presume that it was issued in discharge of legal liability and the burden would shift upon the accused to rebut this presumption." "Even if the cheque was issued as security, the same would attract the provisions of the NI Act." "The money paid under the CGTMSE Scheme is only for the purpose of making good the proportionate loss admitted by the insurer subject to recovery of the same from the borrower. The borrower remains liable to repay the entire outstanding amount." "The notice sent to the accused at the address mentioned in the complaint and proceedings is deemed to be served. Failure to pay within 15 days of receipt of summons disentitles the accused from claiming non-receipt of notice." "The penal provisions of Section 138 of the NI Act are deterrent in nature and intended to infuse credibility into negotiable instruments." "The courts can impose a sentence of imprisonment in default of payment of compensation awarded under Section 357(3) Cr.P.C., which serves as a mode of enforcement and deterrence." "The revisional jurisdiction of the High Court is limited and cannot be exercised to reappreciate evidence or substitute its own view in the absence of perversity or gross miscarriage of justice." Final determinations:
|
