Case Note & Summary
The appellant, Sami Labs Limited, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the respondent, M.V. Joseph, who was a former employee. The respondent had availed a housing loan of Rs. 5,00,000 from the appellant and agreed to repay with interest. After resigning from service, he issued a cheque dated 21.08.2007 for Rs. 5,00,000 drawn on UTI Bank towards repayment. The cheque was dishonoured with the endorsement 'funds insufficient'. Despite statutory notice, the respondent failed to pay. The trial court acquitted the respondent, holding that the complainant failed to prove a legally enforceable debt. The High Court reversed the acquittal, holding that the presumption under Section 139 of the NI Act was in favour of the complainant and the respondent failed to rebut it. The court found that the loan agreement and repayment schedule were proved, and the cheque was issued towards a legally enforceable debt. The appeal was allowed, and the respondent was convicted under Section 138 of the NI Act and sentenced to pay a fine of Rs. 5,50,000, with default sentence.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Presumption under Section 139 - Rebuttal - The complainant proved the issuance of cheque and signature of accused, raising presumption of legally enforceable debt. The accused failed to rebut the presumption by preponderance of probabilities. Held that the trial court erred in acquitting the accused. (Paras 10-15) B) Negotiable Instruments Act - Legally Enforceable Debt - Housing Loan - The accused issued cheque towards repayment of housing loan availed from employer. The loan agreement and repayment schedule were proved. Held that the debt was legally enforceable. (Paras 5-9) C) Criminal Procedure Code, 1973 - Appeal against Acquittal - Section 378(4) - The appellate court can interfere if the trial court's findings are perverse or based on no evidence. Held that the acquittal was perverse and liable to be set aside. (Paras 16-18)
Issue of Consideration
Whether the trial court was justified in acquitting the accused for the offence under Section 138 of the Negotiable Instruments Act, 1881, despite the presumption under Section 139 of the Act and the evidence on record.
Final Decision
The appeal is allowed. The judgment of acquittal dated 08.06.2010 passed by the XII Addl. C.M.M., Bengaluru in C.C.No.448/2008 is set aside. The respondent/accused is convicted for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 and sentenced to pay a fine of Rs.5,50,000/- (Rupees Five Lakhs Fifty Thousand only), in default to undergo simple imprisonment for a period of six months. Out of the fine amount, Rs.5,00,000/- shall be paid to the appellant as compensation.
Law Points
- Presumption under Section 139 of Negotiable Instruments Act
- 1881
- Rebuttal of presumption
- Standard of proof for rebuttal
- Dishonour of cheque
- Legally enforceable debt or liability
