Friday, December 27, 2019

Section 138 NI Act: If accused does not deny in the reply notice, delivery of cheque may be presumed [Read

Complainant filed a private complaint against the accused alleging offence punishable under Section 138 of the Negotiable Instruments Act (for short 'the N.I.Act'). His case is that accused, who is the wife of his friend, borrowed from him an amount of Rs.1,30,000/- for her personal needs by the end of November, 2003, agreeing to discharge the debt within a month. Since she failed in her promise, she issued Ext.P1 cheque dated 13.2.2004 in his name drawn on her banker, South Malabar Gramina Bank for the amount borrowed. The cheque on presentment was dishonoured on the ground of want of sufficient funds at the credit of the accused. A notice sent to accused demanding discharge of debt was replied by her denying the whole transaction. Therefore, the complainant lodged prosecution against her invoking Section 138 of the N.I.Act.

The trial court after appreciating the contentions of both parties and analysing the evidence, circumstances and probabilities of the case held that complainant failed to prove that accused had any financial transaction with him and acquitted the accused. Complainant approached the High Court with an appeal.

The case is titled as A.K.Bhaskaran vs K.G.Sheeba dated 18.12.2019.

In the course of discussion, the High Court of Kerala observed as under:

"It is trite law that drawing or execution of a cheque becomes complete only by delivery. Unless there is delivery of cheque, no liability could be fastened on the drawer.

This is what Section 46 of the N.I.Act signifies and is how definition of 'holder' in Section 8 of the said Act becomes significant.

So far as the question of delivery of cheque is concerned, there is ample evidence that accused delivered Ext.P1 to PW1. In Ext.D1 reply notice also, there is no specific denial of delivery of Ext.P1 cheque.

On the other hand, a different cheque bearing No.840577 which has no bearing in the case seems to have been denied in the reply notice.

In all probability, therefore what could be presumed from the totality of evidence and circumstances is that accused had drawn and issued Ext.P1 as a guarantor cheque in favour of PW1 in discharge of liability of her husband".

High Court then dismissed the appeal filed by the complainant and accepted the acquittal order passed by the trail court

Tuesday, December 17, 2019

Supreme Court lays down norms for computation of accident claim

The top court also fixed the amount to be paid to the dependents of road accident victims under heads such as loss of consortium and funeral expens determination of income while computing compensation has to include future prospects so that the method comes within "the ambit and sweep of just compensation" as postulated under the provision of the Motor Vehicle Act.

NEW DELHI: In a path-breaking verdict, the Supreme Court on Tuesday held that 'future prospect' of a person killed in a road accident would be considered while awarding compensation to the dependents and laid down standard critera for computation of such claims.

A five-judge constitution bench headed by Chief Justice Dipak Misra was faced with a vexatious question whether dependents of a road accident victim, who was either self- employed or working on a fixed salary in private or unorganised sector, can get enhanced compensation after addition of certain percentage of the salary drawn by the deceased under the head of 'future prospect'.

ADVER

Accepting the principle of standardisation, it said, "while determining the income, an addition of 50 per cent of actual salary to the income of the deceased towards future prospects, where the deceased had a permanent job and was below the age of 40 years, should be made.

"The addition should be 30 per cent, if the age of the deceased was between 40 to 50 years. In case the deceased was between the age of 50 to 60 years, the addition should be 15 per cent. Actual salary should be read as actual salary less tax."

The bench, which also comprised Justices A K Sikri, A M Khanwilkar, D Y Chandrachud and Ashok Bhushan, fixed the percentage of salary or income of a self-employed and a person working in private sector which would be computed under the head of 'future prospect' for granting compensation to the dependents.

"In case the deceased was self-employed or on a fixed salary, an addition of 40 per cent of the established income should be the warrant where the deceased was below the age of 40 years.

"An addition of 25 per cent where the deceased was between the age of 40 to 50 years and 10 per cent where the deceased was between the age of 50 to 60 years should be regarded as the necessary method of computation. The established income means the income minus the tax component," it said.

The determination of income while computing compensation has to include future prospects so that the method comes within "the ambit and sweep of just compensation" as postulated under the provision of the Motor Vehicle Act

"We are inclined to think that there can be some degree of difference as regards the percentage that is meant for or applied to in respect of the legal representatives who claim on behalf of the deceased who had a permanent job than a person who is self-employed or on a fixed salary. But not to apply the principle of standardisation on the foundation of perceived lack of certainty would tantamount to remaining oblivious to the marrows of ground reality," it said.

The top court also fixed the amount to be paid to the dependents of road accident victims under heads such as loss of consortium and funeral expense and said that there would be 10 per cent raise in the amount after every three years.

"Reasonable figures on conventional heads, namely, loss of estate, loss of consortium and funeral expenses should be Rs 15,000, Rs 40,000 and Rs 15,000 respectively. The aforesaid amounts should be enhanced at the rate of 10 per cent in every three years," the court, in its 49-page verdict, said.

The judgement came on a batch of 27 petitions, including one filed by the National Insurance Company Ltd against an order of the Punjab and Haryana High Court, which raised a common issue whether a "standard threshold" amount can be fixed under the head of "future prospect" while awarding compensation to the dependents of the accident victims.

CJI Misra, writing the unanimous verdict for the bench, took serious note of the fact a two-judge bench differed with the earlier view of another bench of same strength and referred the matter to a constitution bench.

"The two-Judge Bench in Santosh Devi should have been well advised to refer the matter to a larger bench as it was taking a different view than what has been stated in Sarla Verma, a judgment by a coordinate Bench. It is because a coordinate bench of the same strength cannot take a contrary view than what has been held by another coordinate Bench," the top court said.

"There can be no doubt that an earlier decision of co- equal bench binds the bench of same strength," it said.

The MV Act provides for award of compensation to be paid by the insurance firms to the victim or his or her family in accident cases by using the methodology provided in the statute itself.

In the claim plea, the family members have to establish the age and income of the deceased and the number of dependents.

Monday, December 16, 2019

Third-party car

Claiming compensation under third-party motor insurance

insurance offers cover against any legal liability to a third party caused when you are at fault. It covers any damage or injury caused by the insured, to another person or property. ... There is no specific limit on the liability coverage for injuries or death of a third party

News is filled with reports of various kinds of road accidents – vehicle knocking another vehicle, damaging property or killing or injuring people. We ourselves have a story or two to tell, bad experiences that might have cost us a bomb. Yet, not many seem to have clarity on how to make a claim when they or their vehicle are hit by another vehicle. In case of damage to our car we either usually settle it ourselves or depend on our car insurer to pay for the damages even if it means losing the accrued No-Claim Bonus (NCB) for no fault of ours. How about learning a bit more about third-party motor insurance, the mandatory cover which we have been paying premiums for so long?

What’s covered under third party motor insurance

A comprehensive motor insurance policy typically has two insurance covers bundled together –the third party insurance and the own damages cover. Some also come with a built-in personal accident cover. As the names suggest, the ‘own damages’ and ‘personal accident’ insurance components are to cover your losses i.e. damage to your car or personal injuries, disability and death, respectively.

While the above two are optional covers, third-party insurance is compulsory for all vehicle-owners as per the Motor Vehicles Act. For this reason, standalone third party insurance policies are often called ‘Act only’ insurance. Your third party insurance does not cover you and your motor vehicle. It covers your legal liability for the damage you may cause to a third party only - bodily injury, death and damage to third party property - while using your vehicle.

Beneficiary of third party insurance is the injured third party. The insured or the policy holder is only nominally the beneficiary of the policy.

In a third party insurance policy the first party is the insured and the second party is the insurance company. The third party here is any third person. . Under your third party insurance, a third party can file a claim for compensation for injury, death, property damage caused by your car. The case for claiming compensation under third party will be filed against you and your insurer. While there is no limit on the liability covered for injury or death, the cover for third-party property (usually the third party’s car) damage is capped at Rs 7.5 lakh. “In case damages exceed the upper limit, the balance has to be paid by the policyholder himself,” says Sanjay Datta, Chief Underwriting & Claims, ICICI Lombard General Insurance.

If you are the third party hit by another’s car then you can claim damages from the other person. In case of injury you can claim medical expenses, compensation for physical disfigurement and also for loss of earnings if you are unable to work after the accident. In case of death, the dependents of the deceased can claim compensation on the basis of the income lost. Medical expenses can also be claimed for treatment of the injury that was the cause of death. For property damage, surveyor's report, original bills from an authorised garage and motor vehicle inspection report are required to quantify the loss. If you are successful in your compensation claim then you would be paid (up to the limits in the policy) by the other person’s insurer under his/her third party insurance.

The premium rates for third party insurance are fixed by the IRDAI and are the same for all insurance companies. However, the amount you pay as third-party premium may differ according to the engine capacity of your car. For instance, while a smaller Hyundai i10 owner has to pay around Rs 1,500, for a Toyota Altis, the annual third party insurance premium is around Rs 5,000. This fixed third party insurance rate is reviewed by the authority annually and adjustments, usually an increase, are made if needed.

Complex Claims Process

Making a third party motor claim is not easy. The complex course begins with filing an FIR with the police and obtaining a charge sheet, which, as we all know is a mammoth task in itself. After this, one has to approach a motor claims lawyer who files a case in a special court, the Motor Accident Claims Tribunal. Civil courts cannot decide road accident compensation claims. The case has to be either filed in the tribunal with jurisdiction over the area where the accident occurred or with the tribunal with jurisdiction over the area where the claimant or the defendant resides. The court then hears both sides, examines the evidence, and fixes the liability. If the decision is in your favour, you get compensated for your loss.

However, this three-step process is not all that simple as rules differ according to scenario and the insurance coverage that both parties have. This makes the ground reality far more complicated than what it appears on paper.

Here are the different permutations and combinations of situations where A’s car has been damaged by B’s car in an accident and the legal solution(s) in each case.

When A has only a basic third-party insurance

Those who do not have a comprehensive motor cover are on their own as they can only claim compensation under the third party insurance of the other person i.e. in this case B. Your own insurer will neither compensate you nor help you file a complaint as the insurance agreement you have with your own insurer is solely for your liability towards any third-party for damages. However, in this case, your own car has been damaged which is not covered under your third party contract. Here you are the third party and can only claim compensation under B’s third party insurance. So, unless you have an own damages cover, the only way to get compensated is to track down the other vehicle and lodge a complaint against the other party. The onerous task here is establishing the other party's fault in court.

The victim has to establish negligence and only then there is a case against the wrongdoer (B) and his/her insurance company. So, you cannot be sure of getting any money until the court decides in your favour. Moreover, it is not necessary that a favourable decision will mean that you get the full amount you had filed for. The other party and his insurer will only pay you the amount awarded by the court. What is more, if you happen to get less than what you claimed you cannot claim the balance damage compensation from your own insurer under your ‘own damage’ policy because as per law compensation for the same damage cannot be claimed more than once. The above process would be the same irrespective of whether B has comprehensive motor insurance or third party insurance only.

When A has comprehensive motor insurance

When A has comprehensive motor insurance he can choose to follow any ONE of the following courses of action.

i. He can claim compensation under the ‘own damage’ section of his own policy from his insurer. This is the easiest and most commonly adopted method but would result in loss of NCB if any has been earned.

ii. He can file and fight a case on his own to get recompensed under the other party’s third party insurance as explained above. This is the same course of action he would have to adopt if his own policy was only a third party policy.

iii. He can request his own insurer to subrogate the case and fight on his behalf to get recompensed under the other party’s third party insurance. If his insurer refuses to subrogate the case then he has only options (i) and (ii) available to choose from.

In all the above three options it makes no difference whether the other party i.e. B has comprehensive motor insurance or third party only policy.

Subrogation

You can request your insurer to subrogate a case only if you have comprehensive motor insurance and not a ‘third party only’ policy. You will have to apply to your insurer requesting subrogation and it is up to your insurer to accept or reject this request. This decision is taken by the insurer after requisite investigation. Subrogation is the right of an insurer to pursue a third party who has caused an insurance loss to the insured. “The insured has to sign a document giving the subrogation right to his insurer after he gets reimbursed for the losses. The insurance company then approaches the third-party’s insurer to recover the amount of the claim paid to the victim for the loss,” says Sanjay Datta of ICICI Lombard. However, cases of subrogation are very few. It mostly happens in case of death or injury of the insured (in this case A) .

When both parties have comprehensive covers

Unless it is a case of death or disability even if both parties have comprehensive insurance, your insurer will not help you file a claim against another insurer i.e. your insurer will not agree to subrogate your case. Motor insurers have a 'knock-for-knock agreement' in which they agree to bear responsibility for damages to vehicles insured with them as long as it is covered for ‘own damage’, regardless of who (i.e. which insurer) is liable to pay.. "The vehicle repair and medical expenses are to be settled by the insurer who has covered it and no claim will be recoverable from the insurer of the vehicle responsible," says Datta.

Third party compensation for only vehicle damage

Even though it is legally possible, insurers hardly receive cases claiming third-party compensation for only vehicle damage. People are advised to settle it out-of-court as the process is not only cumbersome but highly time consuming. Third party claims are filed for injury and death but settlement of these also takes a long time. “On an average, in third-party claims involving bodily injury the turnaround time is one to two years. In case of death, it takes about three to four years to settle claims,” says Datta of ICICI Lombard.

Obviously, unless one does not have a comprehensive cover, no customer is willing to take so much trouble for a small crash that can be swiftly settled with an own-damages claim, even if it means losing out on the NCB. If you are still keen on moving the tribunal, make sure you have all the documents in place. Also, ensure that proper narration of the incident is recorded in the FIR and original records of expenses are kept to substantiate the pecuniary losses. This is crucial to get a verdict in your favour.

WHAT IS THIRD PARTY LIABILITY IN MOTOR INSURANCE?

Third-party insurance is compulsory for all vehicle-owners as per the Motor Vehicles Act. It covers only your legal liability for the damage you may cause to a third party – bodily injury, death and damage to third party property – while using your vehicle. TP cover does not pay for repair of damage to your vehicle. It is, therefore, important to understand its scope in detail.

WHO ARE FIRST AND SECOND PARTIES?

A third party insurance policy is a policy under which the insurance company agrees to indemnify the insured person, if he is sued or held legally liable for injuries or damage done to a third party. The insurance company and the insured are first and second parties, and any other who suffered death, injury or the person who claims damages against you is the third party.

WHO IS THIRD PARTY?

Motor Vehicle Act, 1988, under section 145(g) “third party” includes the Government. “Third party” include everyone (other than the contracting parties to the insurance policy), be it a person travelling in another vehicle, one walking on the road or a passenger in the vehicle itself which is the subject matter of insurance policy.

WHAT IS ‘ACT ONLY’ COVER?

Act only or Third-party policy covers only your legal liability for the damage caused to a third party like bodily injury, death and damage to third party property – while using your vehicle. Third party insurance does not cover damages to your own vehicle.

HOW ‘ACT ONLY’ POLICY INCLUDES “PA” RISK?

Third party or Act Only policy also includes Personal accident risk of an owner-cum driver in the event of permanent disablement or death in an accident. An inbuilt coverage of Rs. 1 lakh in two-wheelers and Rs. 2 lakhs in all other vehicles for the owner-cum-driver while traveling, mounting, or dismounting from the vehicle is available. Accidental cover for co-passengers is optional.

WHO ARE THE BENEFICIARIES?

Motor third-party insurance or the ‘act only’ cover, is a statutory requirement under the Motor Vehicles Act. It is referred to as a ‘third-party’ cover since the beneficiary of the policy is someone other than the two parties involved in the contract i.e. the insured and the insurance company. The policy covers the insured’s legal liability for death/disability of third party loss or damage to third party property. The victim can claim for compensation under ‘no fault liability’ or ‘fault liability’ of the Motor Vehicles Act 1988. However, unlimited compensation is available only for bodily injury or loss of life. In case of damage to a property, the insurer’s liability is limited to maximum Rs.7.5 lakh.

WHO DECIDES THIRD PARTY PREMIUM?

In third party policies the premiums do not vary with the value of what is being insured because what is insured is the ‘legal liability’ and it is not possible to know in advance that what liability will be in case of accident. The compensation to the accident victim is decided by the WC Court or MACT. IRDAI has done away with tariffs. Now the premium on the third party liability cover only is fixed by IRDAI.

Mandatory by law, Third party cover protects you against the legal liability of accidents. It also covers damage caused to any surrounding property. The compulsory nature of third party insurance is justifiable as it makes the process easier for the injured person to recover money from the insured/Insurer. Motor Vehicle Act, 1988 mandate the Third Party insurance for every vehicle used at public place.

Thursday, December 12, 2019

acquitted in cheque bounce case if the plaintiff has no money lending license

The Negotiable Instruments Act defines Law relating to negotiable instruments which are Promissory Notes, Bills of Exchange as well as cheques. A cheque is said to be bounced when a check cannot be processed because the account holder has non-sufficient funds. Section 139 of the N.I. Act says that there is assumption in favour of Holder that the cheque holder received the cheque of the nature referred to in Section 138 for the discharge, in whole in part of any debt or other liability.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

BENCH AT NAGPUR, NAGPUR.

CRIMINAL APPEAL NO: 467 /2009

Smt.Nanda w/o Dharam Nandanwar
Vs

Nandkishor s/o Talakram Thaokar

CORAM: A.P.BHANGALE, J.

DATED: 12th January, 2010

Citation: 2010(1)Crimes708, 2010(3)MhLj268

This Appeal at the instance of original complainant, is directed against the judgment and order dated 26th March, 2009 passed by learned Judicial Magistrate First Class, Nagpur in Criminal Complaint Case No.9037/2007, whereby the respondent accused was acquitted of the charge under section 138 of the Negotiable Instruments Act,1881( hereinafter 2. referred to as“the N.I. Act”).The facts in nutshell which gave rise to this appeal are :The complainant claimed that she is carrying on the business in lending money to needy persons. It is her case that the accused had approached her on 3.2.2006 and 8.4.2006 with a request for loan in the sum of Rs. 18,000/ and Rs. 19,000/ respectively for a period of two months and agreed to pay interest at the rate of Rs. 21% per annum, under two promissory notes executed before a Guarantor and accepted the cash. Further, according to the complainant, the accused had on 17.11.2006 issued a cheque in the sum of Rs. 40,000/ towards repayment of loan amount and part of interest.

The cheque bearing No. 76778 was drawn upon Canara Bank, Sadar Bazar Nagpur. The cheque was presented by the complainant on 4.5.2007 to the State Bank of Indore, Gandhibagh, Nagpur, which came to
be dishonoured with remarks “funds insufficient” as informed by the Bank, on 5.5.2007. The complainant by notice dated 21.5.2007 demanded a sum of Rs. 40,000/ and interest at the rate of 21 per cent within 15 days of the receipt of notice. The accused received the notice on 22.5.2007; but did not repay the amount. Hence the complainant filed complaint on 26.6.2007 in the Court of learned Judicial Magistrate, First Class2, Nagpur seeking trial and punishment of the accused for offence punishable under
section 138 of the N.I. Act.

3.The accused did not dispute the fact that he had issued the cheque under his signature and had received notice (Exh.22) from the complainant; but out rightly denied the complaint and any liability on the ground that the complainant was doing business of money lending without any requisite licence for money lending and that the complainant has failed to prove legally enforceable or recoverable debt or legal liability as against accused, in view of the provisions of the Bombay Money Lenders Act, 1946. The accused opposed the complaint stoutly on the ground that under section 139 of the N.I. Act, there cannot be presumption of pre-existing liability and complainant had failed to prove that the cheque was issued towards legally enforceable debt or liability.

4.The trial Court, after considering the evidence led and submissios at the Bar, recorded finding of “not guilty” and acquitted the accused of the offence punishable under section 138 of the N.I. Act.

5. Learned Advocate for the appellant, in support of the appeal, submitted that the accused ought to have been convicted by the trial Court for offence punishable under section 138 of the N.I. Act, since the accused had admitted issuance of cheque under his signature, which was returned dishonoured and remained unpaid. It is further contended that the complainant was not bound to produce money lending license in operation. Learned Advocate for the appellant submitted that the accused ought to have been held guilty. According to learned Advocate for the appellant, mere nonproduction of money lending license in the trial Court, was cited as the prime reason for acquitting the accused and, therefore, judgment and None appeared for the respondent at the time of hearing of this

6.order impugned, be set aside. Appeal.

7. In Krishna Janardhan Bhat vs. Dattatraya G. Hegde : AIR 2008 SC 1325, the Apex Court in Para No.20 observed that sec.138 of the N.I. Act has three ingredients, viz:ig

(iii)that there is a legally enforceable debt; that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes legally enforceable debt ; and,that the cheque so issued had been returned due to insufficiency of funds.(I)

(ii)It is further observed in Para No. 21 while considering presumption u/s 139 of the N.I. Act;“Existence of legally recoverable debt is not a matter of presumption in favor of the holder of the cheque that the same has been issued for discharge of any debt or other liability” In order to prove offense punishable under sec. 138 of the said Act, five ingredients are required to be proved as laid down by the Apex Court in Paragraph No. 10 in Kusum Ignotes and Alloys Ltd. vs. Pennar Peterson Securities Ltd.: (2002 ) 2 SCC 745.

They are as follows :“

(i)A person must have drawn a cheque on an account maintained by him in a Bank for payment of certain amount of money to another person from out of that account for the discharge of any legally enforceable

(ii) debt or other liability. that cheque has been presented to the Bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(iii) that cheque is returned by the Bank unpaid, either because the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that

(iv) account by an agreement made with the Bank;the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing to the
drawer of the cheque within 15 days of the receipt of the information by him from the Bank regarding return of the cheque as unpaid.

(v)the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 30 days of the receipt of such notice.” Under section 139 of the N.I. Act, there is presumption in favour of holder that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole in part of any debt or other liability. The explanation to section 138 makes it clear that “debt or other liability” means legally enforceable debt or other liability. Under section 118 of the N.I. Act it can legally be inferred that the cheque was made or drawn for Thus, bearing in mind the relevant provisions of the N.I. Act, it

8. Consideration on the date which the cheque bears. must be emphasized that only legally enforceable debt or liability can be enforced in the proceedings under section 138 of the said Act, because the explanation to the penal provision is abundantly clear that the dishonoured cheque must have been received by the complainant against a legally. The complainant in the present case, is a money lender who had

9.enforceable debt or liability. advanced loan to the accused on the basis of the two promissory notes dated 3.2.2006 and 8.4.2006 respectively for loan of Rs. 18,000/ and Rs. 19,000/ respectively, at interest at the rate of 21 per cent per annum. It is thus case of the complainant that the accused had issued cheque No. 767789 drawn upon Canara Bank, Sadar Bazar, Nagpur for Rs. 40,000/ towards repayment of loan amount and interest.

Thus, it was incumbent upon the complainant to establish the fact that she held valid money lending license in accordance with the provisions of Bombay Money Lenders Act, 1946 for the relevant period of the transaction. The complainant –money lender did not produce such a valid money lending license at the time when complaint was instituted nor till it is decided although required. Furthermore, no such valid money lender's license is produced even during pendency of this Appeal. Section 10 of the Bombay Money Lenders Act, 1946 runs thus:
No Court shall pass decree in favour of money 10(1)lender in any suit to which this Act applies including such suit pending in the Court before the commencement of the Bombay Money Lenders (Amendment ) Act, 1975 unless the Court is satisfied that at the time when loan or any part thereof to which the suit relates was advanced
the money lender held a valid license and if the Court is satisfied, the money lender did not hold a valid license, it shall dismiss the suit.

The words “No court” and “in any suit” used in the Section are wider in scope to embrace any suit or proceeding initiated by a money lender who is required to hold and prove valid license for money lending for the relevant period of the loan transaction or transactions. The trial Court was, therefore, entitled to insist upon the complainant for production of valid license for money lending and also to infer in view of Section 114 (g) of the Evidence Act that the document withheld was unfavourable to the complainant who withheld it. Thus, the legal position cannot be disputed that Courts are bound to dismiss the suit by money lender for recovery of loans when such money lender was found carrying on business of money lending on the date or dates of the transaction without having valid money lending license. The Court, in view of Sec.10(1) of the Bombay Money Lenders Act, 1946 is bound to dismiss the suit instituted without production of valid money lending license operative at the time of suit loan transactions.

In other words, a money lender cannot enforce such loan transaction lawfully without production of valid money lending license operative at the time of transaction of loan to be recovered. Thus, no fault can be found with the trial Court as it was duty bound to dismiss the complaint by the complainant a money lender who was engaged in business of money lending without a valid money lending license at the time of transaction in view of clear provisions of Sec. 10 of the Bombay Lenders Act, 1946 as the learned Court could not have assisted the complainant to facilitate or further the illegal claim or claim prohibited by law in the complaint. Since explanation to Sec. 138 of the N.I. Act clearly stipulated that the debt or liability means legally enforceable debt or other liability the claim by money lender against her borrower without production of valid and operative money lending license covering period of transaction was unenforceable claim under section 138 of the N.I. Act was bound to be dismissed.

The complainant moneylender despite availing of sufficient opportunity in the trial Court could not produce valid and operative money lending license at the time of transaction of loan, hence dismissal of complaint cannot be faulted as the complainant failed to establish legally enforceable debt or liability of the accused. Sec. 5 of the Bombay Money Lenders Act prohibits business of money lending except in accordance with terms and conditions of money lending license. In the present case, it was claimed that the loans were advanced at interest on the basis of two promissory notes executed in front of a guarantor.

Thus, when transaction of money lending without valid license was prohibited by law, no court can help or assist a party money lender to enforce or recover a claim, except in accordance with law i.e. the Bombay Money Lenders Act, 1946 in this case. The complainant withheld important document without any explanation; hence presumption arose against the complainant in view of Section 114 (g) of the Evidence Act for non production of license.

Learned Advocate for the appellant made a reference to ruling in Rajesh Varma vs. Aminexs Holdings and Investments and others : 2008 (3) Mah.L.J. 460 to submit that every loan is not covered by the provisions of the Act inasmuch as section 2 (g) expressly excluded advance of any sum exceeding Rs. 3000/ made on the basis of negotiable instrument other than a promissory note. In the case in hand, the money lender had advanced loans at interest on the basis of two promissory notes hence the ruling cited cannot be come to the rescue of the complainant in the facts and circumstances of the present case as the complainant could not establish legally enforceable debt or liability from the accused towards complainant.

Since the complainant has failed to establish salutory or basic ingredients of offence punishable under sec. 138 of the said Act or observed in Kusum Ingots 's case ( supra ), the complaint was rightly dismissed and the finding as to acquittal was correct and logical by the trial Court. No ground is made out so as to interfere in this Appeal. The acquittal of the accused is justified, as the cheque in question was, in fact, had not been issued for any legally enforceable debt or liability in view of the provisions of the Bombay Money Lenders Act, 1946.

10 .invalid without licence. According to law of Contract, it would not be possible to enforce any agreement or consideration, the object of which is unlawful, within the meaning of Section 23 of the Indian Contract Act, 1872, which is couched in the following terms :What considerations and objects are “23.unlawful, and what not The consideration or object of an agreement is lawful, unless it is forbidden by law, or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or
involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful, Every agreement of which the object or consideration is unlawful, is void.” Thus, pithily put, the transaction in question, is also hit by the
provisions of Section 23 of the Indian Contract Act, 1872.

11. Hence this Court is of the considered view that the complainant could not establish her case against the accused so as to bring home the guilt on the part of the accused. The cheque in question was not issued to discharge loan enforceable according to law and, therefore, notwithstanding that it
was dishonoured by non payment of loan remaining unpaid despite demand notice in writing, it cannot came within the purview of Section 138 of the N.I. Act. As such, it would not be possible for this Court to reverse the acquittal and to fasten criminal liability upon the accused, under section 138 of the N.I.

Act. The Appeal is, therefore, dismissed.

Thursday, December 5, 2019

Supreme Court: A dishonor of cheque carries a statutory presumption of consideration

Supreme Court: A dishonor of cheque carries a statutory presumption of consideration. Read Judgm

In the case titled as Uttam Ram v. Devinder Singh Hudan and Ors., SC Bench comprising of Justice L. Nageswara Rao and Justice Hemant Gupta has held the decision of both the High Court and trial court to acquit the respondent to be illegal and totally unsustainable in law. According to general rule, the holder of cheque in due course is required to prove that the cheque was issued by the Accused and that when the same presented, it was not honored.

SC Bench stated that since there is a statutory presumption of consideration, the burden is on the Accused to rebut the presumption that the cheque was issued not for any debt or other liability. In Kumar Exports, it was held that mere denial of existence of debt will not serve any purpose but Accused may adduce evidence to rebut the presumption.

The accused failed to lead any evidence before the Supreme Court to rebut the statutory presumption. The decision of both the High Court and the Trial Court was based on finding that there existed discrepancy in the cartons, packing material or the rate to determine the total liability and the amount on the cheque exceeded the total liability of accused and proceeded as if the Appellant was to prove his debt before the Court.

The Supreme Court on observation found that the accused failed to lead any evidence to rebut the statutory presumption. Therefore, it presumed that the cheques in question were drawn for consideration and the holder of the cheques i.e., the Appellant received the same in discharge of an existing debt.

Thus, the Order passed by the High Court was set aside and directed the respondent/accused to pay twice the amount of cheque ₹5,38,856 and cost of litigation of ₹1,00,000.