BOMBAY HIGH COURT
R.C. Chavan, J.
Krishna P. Morajkar —Appellant
versus
Joe Ferrao & Anr. —Respondents
Criminal Appeal No.6 of 2012
Decided on 19.7.2013

IMPORTANT POINT
There is no provision of Income Tax Act which makes an amount not shown in income tax returns unrecoverable.

Headnote:(i) Negotiable Instruments Act, 1881—Section 138 read with Sections 118 and 139—Criminal Procedure Code, 1973—Section 378—Dishonour of cheques—Acquittal—Additional Sessions Judge erred in coming to conclusion that since respondent had agreed to sell his business he had enough money with him making it unnecessary for him to borrow any sum from appellant-complainant—Additional Sessions Judge need not have rejected appellant’s case on the ground that accused was not in need of money—If accused had in fact agreed to sell his premises, presumably because he needed money, rather than premises, and if money was not forthcoming for whatever needs he had, it cannot be said that he had no reason to borrow from complainant—This is a case where not only that there is a failure to disclose amount of loan in Income Tax Return of applicant but there is categorical admission on part of applicant that amount was unaccounted amount—Conclusions drawn by Additional Sessions Judge were thoroughly unwarranted and based on an untenable appreciation of evidence— Judgment of Additional Sessions Judge set aside and judgment convicting respondent of offence punishable under Section 138 of Negotiable Instruments Act restored. (Paras 11, 12, 19, 23, 27, 28, 30, 31 and 32)

       (ii) Negotiable Instruments Act, 1881—Section 138—Income Tax Act, 1961—Sections 269SS and 27ID—Dishonour of cheque—Recovery of money—There is no provision of Income Tax Act which makes an amount not shown in income tax returns unrecoverable—Entire scheme of Income Tax Act is for ensuring that all amounts are accounted for—If some amounts are not accounted for, person would be visited with penalty, at times even prosecution under Income Tax Act, but it does not mean that borrower can refuse to pay amount which he has borrowed simply, because there is some infraction of provisions of Income Tax Act—Infraction of provisions of Income Tax Act would be a matter between revenue and defaulter and advantage thereof cannot be taken by borrower—To say that an amount not disclosed in income tax returns becomes irrecoverable would itself defeat provisions of Section 138 of Negotiable Instalments Act. (Para 26)

       (iii) Negotiable Instruments Act, 1881—Sections 138 and 139—Dishonour of cheque—Rebuttal of presumption of debt—Section 139 is an example of a reverse onus clause that has been included in furtherance of legislative objective of improving credibility of negotiable instruments—While Section 138 specifies a strong criminal remedy in relation to dishonour of cheques, rebuttable presumption under Section 139 is a device to prevent undue delay in course of litigation—However, offence made punishable by Section 138 can be better described as a regulatory offence since bouncing of a cheque is largely in nature of a civil wrong whose impact is usually confined to private parties involved in commercial transactions—In such a scenario, test of proportionality should guide construction and interpretation of reverse onus clauses and accused/defendant cannot be expected to discharge an unduly high standard or proof—In absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden—When an accused has to rebut presumption under Section 139, standard of proof for doing so is that of preponderance of probabilities—If accused is able to raise a probable defence which creates doubts about existence of a legally enforceable debt or liability, prosecution can fail—Accused can rely on materials submitted by complainant in order to raise such a defence and it is conceivable that in some cases accused may not need to adduce evidence of his own. (Paras 27 and 28)

       (iv) Negotiable Instruments Act, 1881—Sections 138 read with Sections 118(b) and 139—Dishonour of cheque—When a person signs a cheque and delivers it, even if it is a blank cheque or a post dated cheque, presumptions under Section 118(b) and 139 of Negotiable Instruments Act would have to be raised and would have to be rebutted by raising a probability—Unless Courts start discouraging flimsy defences, acceptability of cheques would not increase—Problem of unaccounted money would be reduced if transactions take place by cheques—Even a cash advance when repaid by cheque gels accounted—Making it unrecoverable would only push persons to extra judicial methods of recovery—Courts would not only be defeating object of the provision but also indirectly be party to increase lawlessness—This cannot be allowed by Courts. (Para 31)