Court’s Decision
The Himachal Pradesh High Court dismissed the criminal revision petition and upheld the conviction and sentence under Section 138 of the Negotiable Instruments Act, affirming the judgments of the Trial Court and Appellate Court. The court held that the issuance of the cheque, its dishonour due to insufficient funds, and failure to pay the amount despite statutory notice constitute the offence, warranting no interference with the concurrent findings of the courts below.
Facts
The complainant bank filed a complaint under Section 138 of the Negotiable Instruments Act, asserting it had advanced a working capital/CC loan of ₹7,00,000 to the accused in April 2013, against which the accused issued a cheque dated 30 July 2016 for ₹7,47,068 towards repayment. The cheque was dishonoured for insufficient funds. A statutory notice was issued on 13 August 2016, and despite its receipt, the accused failed to make payment, leading to the complaint. The Trial Court found sufficient grounds, framed notice, and proceeded with the trial, resulting in conviction and sentencing, which was affirmed by the Appellate Court.
Issues
- Whether the petitioner’s conviction under Section 138 of the Negotiable Instruments Act was sustainable on facts and law.
- Whether the courts below erred in appreciating evidence regarding the issuance, dishonour, and non-payment of the cheque despite notice.
Petitioner’s Arguments
The petitioner argued that the cheque was issued only as security and not towards any legally enforceable debt or liability. It was contended that there was no legally enforceable debt at the time of presentation, and the courts below had erred in convicting the petitioner by misappreciating evidence and the law applicable to Section 138 of the Negotiable Instruments Act.
Respondent’s Arguments
The respondent argued that the cheque was issued to discharge an existing liability arising out of the working capital facility granted to the petitioner, and the dishonour of the cheque due to insufficient funds followed by failure to pay despite statutory notice clearly attracted the penal provisions of Section 138 of the NI Act. It was submitted that the findings of the courts below were based on proper appreciation of evidence, requiring no interference.
Analysis of the Law
The court analysed Section 138 of the Negotiable Instruments Act, clarifying that for an offence to be made out:
- The cheque must be issued for the discharge of any debt or liability.
- It must be presented within the validity period.
- It must be returned unpaid due to insufficiency of funds.
- Notice of demand must be issued within 30 days.
- The drawer must fail to make payment within 15 days of receipt of notice.
The court reiterated that once the issuance of the cheque and its dishonour are proved, a presumption under Section 139 of the NI Act arises, which the accused has to rebut on the balance of probabilities.
Precedent Analysis
While no specific precedent citations are explicitly discussed in the document, the judgment follows the consistent principles laid down by the Supreme Court on the presumption under Section 139 and the procedural compliance under Section 138 of the NI Act, requiring the accused to rebut the statutory presumption with credible evidence.
Court’s Reasoning
The court reasoned that the petitioner’s contention that the cheque was issued as security was not substantiated with credible evidence to rebut the statutory presumption. The fact of issuance, dishonour due to insufficient funds, and non-payment despite the statutory notice were sufficiently proved by the complainant. The court observed that the lower courts had appropriately analysed the evidence, and there was no perversity in the findings warranting interference.
Conclusion
The court concluded that the petitioner failed to establish grounds to interfere with the concurrent findings of conviction under Section 138 of the NI Act. The revision petition was dismissed, and the conviction and sentence were upheld.
Implications
- Reinforces that the presumption under Section 139 of the NI Act is strong and requires credible rebuttal.
- Clarifies that cheques issued as security can attract Section 138 if they are towards a legally enforceable liability.
- Reaffirms that mere denial by the accused is insufficient to displace statutory presumptions under cheque dishonour cases.
Brief on Cases Referred
No explicit precedents were cited in the text, but the reasoning aligns with:
- Rangappa v. Sri Mohan, where the Supreme Court held that statutory presumptions under Section 139 apply even in cheque security disputes.
- Hiten P. Dalal v. Bratindranath Banerjee, affirming that the burden is on the accused to rebut the presumption of a legally enforceable debt.
FAQs
1. What constitutes an offence under Section 138 of the Negotiable Instruments Act?
An offence is constituted when a cheque issued towards discharge of liability is dishonoured due to insufficient funds and payment is not made within 15 days of receipt of statutory notice.
2. Can a cheque issued as security attract Section 138 liability?
Yes, if the cheque is towards an existing liability, it can attract Section 138, even if originally issued as security.
3. What must the accused prove to rebut the presumption under Section 139?
The accused must bring credible evidence to displace the presumption that the cheque was issued towards a legally enforceable debt or liability.
