Gujarat HC upholds Acquittal order under NI Act as Applicant failed to Submit ITR proving Financial capacity [Read Order]

The Gujarat High Court upheld the acquittal order under the Negotiable Instrument Act (NI) , 1881 as the applicant failed to submit Income Tax Return (ITR) proving the financial capacity.

Bhavubha Bechar Sinh Chavda, the applicant – original complainant seeking leave to file an appeal against the judgment and order dated 12.03.2025 passed by the 2nd Additional Judicial Magistrate First Class, Dholka (“Trial Court”) in Criminal Case No. 1181 of 2009, whereby the respondent No. 2 - original accused came to be acquitted from the offence under Section 138 of the Negotiable Instruments Act, 1881 (‘the N I Act”).

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The respondent No. 2 referred to as “the accused” as he stood in the original case for the sake of convenience, clarity and brevity. The applicant filed a complaint against the accused under Section 138 of the Act, as the accused had taken a hand loan of Rs.15,00,000/- from the applicant and the accused had issued cheque No.011511 and cheque No.11512 for the amount of Rs.2,55,000/- each dated 01.12.2008, cheque No.008978 for the amount of Rs.2,40,000/- dated 15.04.2009 and cheque No.142995 for the amount of Rs.7,50,000/- dated 04.05.2009 from his account with The District Co-operative Bank Ltd, Kalikund, Dholka Branch.

The applicant deposited cheque No. 142995 for the amount of Rs.7,50,000/- dated 04.05.2009 in his account with The Ahmedabad District Co-operative Bank Ltd, Kalikund, Dholka Branch and the cheque was dishonored and the reason mentioned in the return memo was “Funds Today's Opening Balance Insufficient”.

The applicant sent the statutory demand notice to the accused on 23.05.2009 which was duly served but no payment was made. The applicant filed the criminal complaint before the Court of the Judicial Magistrate First Class, Dholka under Section 138 of the N I Act, 1881 which was registered as Criminal Case No. 1181 of 2009.

The accused was served with the summons and the accused appeared before the Trial Court and his plea was recorded and the entire evidence of the applicant was taken on record. The applicant was examined on oath and 07 documentary evidences were produced in support of his case and after the closing pursis was filed, the further statement of the accused under Section 313 of the Code of Criminal Procedure was recorded wherein the accused stated that he has not issued any cheque in favor of the applicant and a false complaint has been filed.

The accused refused to step into the witness box but examined one witness on oath and produced 02 documentary evidences in his defence and after the arguments of the advocates for both the parties were heard, by the impugned judgment and order, the Trial Court acquitted the accused from the offence under Section 138 of the N I Act.

Aggrieved and dissatisfied with the same, the applicant has preferred the present application seeking leave to appeal mainly stating that the Trial Court has not properly interpreted the evidence and has misread the evidence and the impugned judgment is perverse, erroneous and contrary to law.

The Trial Court has not appreciated that the applicant has successfully established that the cheque in question was issued by the accused from the bank account maintained by him. The applicant has proved that the cheque was written by the accused and it was dishonoured and as the applicant is the holder in due course of the cheques in question the statutory presumption under Section 139 of the N I Act is to be drawn in favour of the applicant.

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The Trial Court has not appreciated the provisions of Section 118 and 138 of the N I Act in proper perspective. The fact of the amount paid by the applicant to the accused is not negated, but the Trial Court has disbelieved the same. The accused had failed to rebut the presumption and hence the judgment and order of acquittal is bad in law and the leave to appeal must be granted.

During the cross examination of the applicant by the advocate for the accused the applicant has stated that he files his Income Tax Returns, but does not have any books of accounts with him, and he has not shown in his Income Tax Returns that he has financial transactions with the accused.

From the record of the case, it transpires that after the cheque returned unpaid the demand statutory notice was served to the accused. As per the say of the applicant, the accused had taken an amount of Rs.15,00,000/- from the applicant on 01.12.2008 and had executed a deed regarding his agricultural land and that he had taken the amount on loan from the applicant.

The accused had given cheque No.142995 for the amount of Rs.7,50,000/- dated 04.05.2009 from his account with The District Co-operative Bank Ltd, Kalikund, Dholka Branch but the cheque had returned unpaid with the endorsement “Funds Todays Opening Balance Insufficient”. After the demand statutory notice was given as the amount was not paid the applicant filed Criminal Case No. 1181 of 2009 in the Court of the Judicial Magistrate First Class, Dholka.

In the entire evidence on record the applicant has not been able to prove that the amount of Rs.15,00,000/- was given to the accused and during the cross-examination, the accused has successfully challenged the financial capacity of the applicant. It is the case of the applicant that the accused had taken the amount of Rs.15,00,000/- as hand loan from him, but there is no of evidence that the applicant had the financial capacity to give the amount of Rs.15,00,000/-, the accused in cash on 01.12.2008.

A single bench of Justice S.V. Pinto observed that the applicant has categorically stated that he has not shown the amount in his Income Tax Returns and there is no evidence on record to suggest that the applicant had the financial capacity and he could advance the huge amount of Rs.15,00,000/- in cash to the accused. Moreover, the applicant has stated that the power of attorney for the immovable property of the accused was executed on the date when the amount was advanced, but no such document has been produced on record.

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The accused had created a reasonable doubt and the applicant has failed to produce reliable and cogent evidence on record about the amount of cheque being the legally recoverable debt from the accused and the applicant has not proved his case beyond reasonable doubt and, in light of the above observation, the Trial Court has passed the impugned judgment and order of acquittal, which is just and proper and does not require any interference of this Court.

The court dismissed the application seeking leave to an appeal.

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