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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
PRITHVIRAJ K. CHAVAN, J.
Arti Rajesh Karangutkar – Appellant
Versus
Anna Rocky Fernandes - Respondent
Criminal Appeal No.764 of 2009
Decided on : 19-12-2023.
[N.I. Act] - [Negotiable Instruments Act, 1881] - [Section 138, Section 139, Section 269-SS] - [The court discussed the provisions of Section 138 of the Negotiable Instruments Act, which penalizes the dishonor of cheques issued in discharge of a legally enforceable debt. It emphasized the presumption of liability under Sections 118 and 139, which shifts the burden of proof to the accused to demonstrate the non-existence of debt. The court also addressed the misapplication of Section 269-SS of the Income Tax Act, clarifying that it pertains to the acceptance of cash loans and does not bar the advancement of loans in cash. The court concluded that the respondent failed to rebut the presumption of debt, leading to the reversal of the acquittal and conviction of the respondent.]
Fact of the Case:
The appellant lent Rs.3,00,000 to the respondent, who issued four cheques as repayment. The cheques were dishonored due to insufficient funds. The appellant filed a complaint under Section 138 of the N.I. Act after the respondent failed to repay despite receiving a legal notice.
Finding of the Court:
The court found that the respondent did not successfully rebut the presumption of debt established under Sections 118 and 139 of the N.I. Act. The evidence presented by the appellant was credible, while the respondent's defenses were deemed implausible and unsupported.
Issues: Whether the respondent issued the cheques in discharge of a legally enforceable debt and whether the defenses raised by the respondent were sufficient to rebut the statutory presumptions under the N.I. Act.
Ratio Decidendi: The court reiterated that under Sections 138 and 139 of the N.I. Act, the burden of proof lies with the accused to demonstrate the non-existence of a debt once the complainant establishes a prima facie case. The court also clarified the applicability of Section 269-SS of the Income Tax Act, stating it does not prevent cash advances but penalizes the acceptance of cash loans above Rs.20,000.
Final Decision: The appeal was allowed, the acquittal of the respondent was quashed, and the respondent was convicted under Section 138 of the N.I. Act, sentenced to one year of simple imprisonment and a fine of Rs.5,00,000.
JUDGMENT:
1. This appeal is directed against a judgment and order of acquittal rendered by the Metropolitan Magistrate 50th Court, Vikroli, Mumbai on 1st September, 2008 in C.C No.1578/SS of 2007, thereby acquitting respondent No.1-accused of an offence punishable under section 138 of the Negotiable Instruments Act, 1881 (for short “N.I Act”).
2. Appellant and respondent No.1 were friends and neighbours. In the month of January, 2007, the appellant had advanced a friendly loan of Rs.3,00,000/- to respondent No.1, pursuant to respondent No.1’s request as she was in financial need due to the ailment of her husband who was suffering from blood cancer as well as daughter of respondent No.1 was also in need of financial help as she was undergoing a training as an Air Hostess.
3. The appellant, on humanitarian grounds, lent an amount of Rs.3,00,000/- to respondent No.1 by way of loan, which she promised to refund by the end of June, 2007. It is the contention of the appellant that in lieu of the said amount, respondent No.1 had issued four cheques, details of which are as under;
(b) Cheque No.445881 dated 24th May, 2007 for Rs.1,25,000/-;
(c) Cheque No.445260 dated 24th July, 2007 for Rs.25,000/- and
(d) Cheque No.445882 dated 23th June, 2007 for Rs.25,000/-.
The cheques were drawn on UTI Bank Limited Ghatkopar which was subsequently known as Axis Bank. Upon instructions of respondent No.1, the appellant had deposited the cheques in the Bank as respondent No.1 could not repay the amount till June, 2007.
4. The appellant had initially deposited two cheques of Rs.1,25,000/- each in the Axis Bank on 3rd October, 2007 at it’s Mulund Branch. On 5th October, 2007, she received a memo from the Axis Bank informing her that cheques deposited by her were dishonoured for insufficiency of funds.
5. A legal notice dated 8th October, 2007 was issued to respondent No.1 calling upon her to repay the amount of Rs.3,00,000/- within a period of 15 days. It was duly received by respondent No.1 on 11th October, 2007. The notice was not replied by respondent No.1 which resulted in filing of the complaint against her by the appellant-complainant in the Court of Metropolitan Magistrate, Vikhroli bearing Complaint No.1578/SS/2007 under section 138 of the N.I Act in order to enforce the legal liability.
6. The learned Metropolitan Magistrate, after recording the evidence of the complainant as well as respondent No.1 acquitted respondent No.1 of the offence punishable under section 138 of the N.I. Act.
7. At the outset, Mr. Desai, learned Counsel for the appellant contended that the trial Court has committed grave error in both law and facts in acquitting respondent No.1 since findings returned by the Magistrate are sans considering the vital admissions given by respondent No.1 in her cross-examination as well as certain aspects which were surfaced even during the cross-examination of the appellant substantiating the appellant’s case. Mr. Desai would argue that the Court below had emphasized more on the source of income of the complainant which is immaterial in view of the ratio laid down by this Court in case of Krishna P. Morajkar, S/o Late Paras Morajkar Vs. Mr. Joe Ferrao S/o Domnic Ferrao and State of Goa, 2013 SCC Online Bom 862. He submits that the Court below wrongly relied upon the provisions of Section 269-SS of the Income Tax Act which had absolutely no bearing in the given set of facts and circumstances. The Counsel would argue that in view of the facts, circumstances and evidence on record, the appeal needs to be allowed.
8. On the other hand, Mr. Jain, learned Counsel for respondent No.1 vehemently argued the appellant has failed in making out any case under section 138 of the N.I Act as the evidence on record is quite insufficient to hold respondent No.1 guilty for the said offence. Mr. Jain, at the outset, would argue that the cheques in question were stolen by the appellant and even signatures
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Dishonour of cheque – Provision does not say that a person cannot advance more than Rs.20,000/- in cash to another person.
The issuance of a cheque under the Negotiable Instruments Act creates a statutory presumption of debt, which the accused must rebut to avoid liability; mere claims of illegality without evidence do n....
The presumption under Section 139 of N.I. Act is a presumption of law, as distinguished from the presumption of facts. Presumptions are rules of evidence and do not conflict with the presumption of i....
A cheque issued as security does not constitute a legally enforceable debt under Section 138 of the Negotiable Instruments Act, and the presumption of liability can be rebutted by presenting credible....
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