Madras HC Convicts Borrower Over ₹6.18 Lakh Bounced Cheque, Orders ₹7.5 Lakh Fine As Compensation To Lender

In brief

The question

Whether the lower appellate court was justified in finding that the appellant had not established execution of the promissory note for consideration, notwithstanding the respondent’s admitted signatures on the promissory note and cheque?

The court held

The High Court allowed the appeal, set aside the acquittal, and held the respondent guilty under Section 138 of the N.I. Act.

It also directed

In place of the trial court’s sentence, it ordered the respondent to pay ₹7,50,000 within four weeks; in default, he must undergo simple imprisonment for three months. The amount is to be paid to the appellant as compensation upon deposit.

01Facts

The appellant alleged that the respondent borrowed ₹6,00,000 on 4 October 2011, executed a promissory note, and issued a cheque for ₹6,18,000 towards repayment. The cheque was dishonoured for “Funds Insufficient”; the respondent did not pay after notice.

p. 2

The Judicial Magistrate convicted the respondent under Section 138 of the Negotiable Instruments Act, 1881, but the I Additional District and Sessions Judge reversed the conviction and acquitted him, finding that execution of the promissory note and passing of consideration had not been proved.

pp. 2–3

The appellant challenged that acquittal.

p. 1

02Issues

i.Whether the lower appellate court was justified in finding that the appellant had not established execution of the promissory note for consideration, notwithstanding the respondent’s admitted signatures on the promissory note and cheque?

pp. 4–6

ii.Whether the respondent’s defence and the alleged inconsistencies in the witnesses’ evidence rebutted the statutory presumption and justified acquittal under Section 138 of the N.I. Act?

pp. 4–6

iii.Whether the trial court’s sentence should be modified in light of the age of the transaction and the compensatory object of Section 138?

p. 6

03Law Applied

Section 138 of the Negotiable Instruments Act, 1881, criminalises the dishonour of a cheque issued towards a legally enforceable debt or liability, subject to fulfilment of the statutory requirements.

p. 2 · p. 6

Where the relevant foundational facts are established, the statutory presumption applies; the accused may rebut it by raising a credible defence.

pp. 4–6

The appeal was brought under Section 378 Cr.P.C.

p. 1

Provisions in the judgment · 2 · Linked ones open on LawLens

Code of Criminal Procedure, 1973 Section 378

Negotiable Instruments Act, 1881 Section 138

04Reasoning

The Court noted that the respondent did not dispute signing either the promissory note or the cheque, and that dishonour for insufficient funds was proved.

p. 4

It found that the respondent’s account—that the documents had been given to a finance-company employee for a top-up loan—was not supported by a complaint specifically alleging their misuse; the respondent also stated in cross-examination that the complaint relied on had no connection with the present case.

pp. 4–5

The discrepancy between the appellant’s and his brother’s accounts of where the promissory note was prepared was considered minor and insufficient to discredit their evidence, particularly as execution at the appellant’s house was not disputed.

p. 5

The Court therefore held that the appellate court’s finding that execution for consideration had not been established was perverse and that the respondent had not rebutted the statutory presumption.

pp. 5–6