Complainant does not have Financial Capacity: Supreme Court acquits S.138 NI Act accused based on ITRs of Complainant [Read Order]

A two-judge bench of the Supreme Court recently disposed a 10 year old case, wherein conviction of the accused for dishonour of cheque as per Section 138 of the Negotiable Instruments Act, 1881 was set aside as the Income Tax Returns (ITRs) of the Complainant show that he was not in a financial situation to lend money.

The Bench of Justice B R Gavai and Justice M M Sundresh opined that, "the defence raised by the appellant satisfies the standard of “preponderance of probability”".

In 1992, the Appellant ­Rajaram’s wife subscribed to a 5­ year chit fund with one Maruthachalam. Upon Maruthachalam's persuasion that in   order   to   be   a   successful   bidder,   a security by way of a blank cheque must be submitted, the Appellant   submitted   two   signed   blank   cheques, on behalf of his wife, since she did not have a bank account.

The first chit matured in 1997 and, since the wife of the Appellant   was   never   a   successful   bidder,   thus,   the Appellant   and   his   wife   repeatedly   requested   the Respondent to release the amount of the chits, but the Respondent never did so. Instead, he presented the cheques without information or intimation to the applicant.

Both the cheques were furnished for Rs. 3,50,000/- each and were returned unpaid on 14th November 1999 with an endorsement stating “account closed”.

A Cheque Dishonour case was instituted against the appellant, in which the appellants were acquitted by the trial court. However, the High Court reversed the order of acquittal and convicted the accused.

Neha Sharma, for the appellant, submitted   that   the   Respondents herein did not have the financial capacity to lend an amount of Rs.3,00,000/­ each as on 20th October 1998 and 25th October 1998, when the promissory notes were said to have been executed. It is further submitted that although it was the Respondents’ case that they had given the amounts out of their agricultural income.

It was further contended that, as the agricultural income was not declared in their Income Tax Returns from 1992­-1999, thus, there was no material to show that they could have lent money.

The Apex Court had found that in exercise of revisional   jurisdiction   under   Section   482   of   the Code  of Criminal Procedure, 1973, the High Court could not, in the absence of perversity, upset concurrent findings of fact.

Observing that the Income Tax Returns do satisfy the test of “preponderance of probability”, the Supreme Court granted an acquittal to the accused, setting aside the High Court’s decree.

To Read the full text of the Order CLICK HERE

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