Cheque Bounce Complaint Cannot Be Dismissed Merely For Violation Of Section 269(SS) of Income Tax Act: Himachal Pradesh HC

The Himachal Pradesh High Court observed that a cheque bounce complaint cannot be dismissed merely for violation of Section 269(SS) of the Income Tax Act.

The court observed that Section 269(SS) of the Income Tax Act is an irrelevant consideration when deciding a complaint under Section 138 of the Negotiable Instruments Act.

Section 269(SS) of the IT Act  prohibits a person from repaying the loan or deposit or any specified sum in cash if the repayable amount of loan or deposit or such specified sum (including interest on such amounts) is INR 20,000 or more.

The Court placed reliance on the case of Surinder Singh vs State of HP, in which it was held that the contravention of Section 269 SS of the Income Tax Act will give rise to a penalty, but will not invalidate the transaction. 

In that context, the Bench of Justice Rakesh Kainthla observed that, "The learned Trial Court was distracted by Section 269(SS) of the Income Tax Act and the complainant being a moneylender which were irrelevant considerations while deciding the complaint under Section 138 of the NI Act".

Counsel CM Thakur appeared for the appellant, while Counsel Vijay Kumar Verma appeared for the respondent.

In this case, an appeal was filed against a judgment where the respondent was acquitted of an offence under Section 138 of the Negotiable Instruments Act.

The complainant, running a cloth shop in Dhalli, Shimla, had lent INR 2 Lakhs to the accused for two months as a friendly loan in September 2014. The accused assured repayment after two months and issued a cheque for the amount. However, the cheque was dishonoured due to insufficient funds. The complainant sent a legal notice, but the accused failed to make the payment, leading to the filing of a complaint. 

The accused, in his statement, claimed the complainant wanted to extract money through fraud and had taken a blank cheque for a cloth credit of INR 20,000. The Trial Court noted a presumption under Sections 118 and 139 of the NI Act, placing the burden on the accused to rebut it. The complainant's inability to recall specific details and lack of documentation at the time of the loan were highlighted. The accused's assertion of the complainant being a moneylender without a license and the illegal transaction of INR 2 Lakhs in cash were considered.

The complainant was perceived to be operating as a moneylender without a license. Additionally, it was highlighted that the complainant had provided INR 2 Lakhs in cash, contrary to Section 269(SS) of the Income Tax Act.

Due to these legal irregularities, the Court dismissed the complaint, leading to the acquittal of the accused. The appeal was filed, arguing that the Trial Court erred in dismissing the complaint and that the accused failed to provide satisfactory evidence to rebut the presumption under Sections 118(a) and 139 of the NI Act.

The High Court observed that, "it was duly proved that the cheque was issued in discharge of the legal liability, wherein dishonoured due to insufficient funds and the accused failed to make the payment despite the receipt of a valid notice of demand; hence, the complainant had succeeded in proving his case beyond reasonable doubt and learned Trial Court erred in holding otherwise."

Relying on the case of Rajesh Jain v. Ajay Singh, the Court observed that when a Court fails to consider the presumption under Section 139 of the Negotiable Instruments Act, its judgment could be interfered with.

Resultantly, the appeal was allowed and the judgment passed by the Trial Court was set aside.

Cause Title: Satyaveer Singh vs Suraj 

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