Supreme Court Upholds Acquittal In 16-Year-Old Cheque Dishonour Case Due To Lack Of Evidence Of Legally Enforceable Debt

Supreme Court Upholds Acquittal in 16-Year-Old Cheque Dishonour Case Due to Lack of Evidence of Legally Enforceable Debt

In a recent decision, the Supreme Court upheld the acquittal of an accused in a cheque dishonour case that dated back 16 years. The court's ruling was based on the complainant's failure to substantiate the existence of a legally enforceable debt against the accused.

The Supreme Court, in considering four petitions for special leave to appeal filed by a partnership firm called Rajco Steel Enterprises, which specializes in iron and steel products, against a judgment rendered by the Calcutta High Court, has upheld the decision of the High Court. The High Court had dismissed Rajco Steel Enterprises' appeal challenging the acquittal of the accused/respondent 1 for offenses under Section 138 of the Negotiable Instrument Act, 1881 (NI Act).

The division bench comprising Justices Aniruddha Bose and Sanjay Kumar concluded that there was no error in the findings of the High Court, and prior to that, in the findings of the First Appellate Court, which ruled against Rajco Steel Enterprises. The court affirmed that these findings were not flawed or devoid of evidence.

The petitioner, represented by its partner, initiated four complaint cases under the aforementioned provision, following the dishonour of four cheques allegedly issued by the accused due to insufficient funds. The petitioner asserted that these cheques were issued between November 7th, 2008 and November 24th, 2008, drawn on Axis Bank Limited. The defense's contention, essentially, was that the dishonoured cheques were neither issued nor delivered to Rajco Steel. Instead, they were purportedly acquired unlawfully by Rajco Steel from the custody of the investigating agency, namely, the CBI, and subsequently presented for encashment deliberately. The primary argument of the accused, therefore, was that there existed no debt because the cheques were never issued in the first instance.

The Trial Court determined that the contested cheques were not part of the seized cheque book by the CBI and were indeed issued to settle a legally binding debt. Consequently, the accused was found guilty by the Trial Court for violating Section 138 of the NI Act, as she had not successfully countered the presumption outlined in Section 118 in conjunction with Section 139 of the NI Act.

The petitioner's appeal to the High Court challenging the acquittal verdict was likewise rejected. The High Court determined that neither Rajco Steel nor the prosecution could provide valid documentary evidence to support the existence of any enforceable debt or liability on the part of the accused.

The First Appellate Court overturned this decision and acquitted the accused. It determined that Rajco Steel had not presented any documentation demonstrating a loan transaction. Furthermore, there was no evidence confirming that the accused had handed over the cheques to Rajco Steel. The First Appellate Court also observed discrepancies, noting that the accused's signature and the amounts written on the cheques were in different inks. Based on these findings, the court concluded that the accused had effectively rebutted the presumption of guilt as outlined in the aforementioned sections of the NI Act.

The petitioner's appeal to the High Court against the acquittal verdict was similarly rejected. The High Court determined that neither Rajco Steel nor the prosecution could provide valid documentary evidence to support the existence of any enforceable debt or other liability on the part of the accused.

The Court acknowledged that the central issue in this proceeding revolves around whether the cheques were issued to settle a debt and if so, whether the accused successfully refuted the presumption under Section 118 read with Section 139 of the 1881 Act. However, the Court referred to the case of Narendra Pratap Narain Singh v. State of U.P, which established that the Court's jurisdiction under Article 136 of the Constitution of India to intervene with concurrent factual findings is not in question when such findings lack evidence or are deemed perverse. Consequently, the Bench articulated that the critical inquiry it must undertake is whether the conclusions reached by the First Appellate Court and the High Court are devoid of evidence or are indeed perverse.

The Court remarked that both the Courts meticulously scrutinized the evidence presented, particularly against Rajco Steel.

Regarding the issue of whether the amount stated in the cheques constituted payment toward a legally binding debt, the Court noted that Rajco Steel had not demonstrated any advance of funds for financial assistance. Additionally, both appellate bodies, upon reviewing the evidence, did not discover the presence of any enforceable debt or liability. This critical observation undermines the foundation of Rajco Steel's argument.

Therefore, the Court observed that “Both the appellate fora, ongoing through the evidence did not find existence of any “enforceable debt or other liability… We are of the opx`inion that there is no perversity in the finding of the High Court, and prior to that, in the finding of the First Appellate Court, that went against the complainant/petitioner. It cannot be held that these findings were perverse, or based on no evidence. No point of law is involved in this set of cases that would warrant our interference.”

Accordingly, the Special Leave Petition was dismissed.