LI Network
Published on: January 20, 2024 at 11:16 IST
The Himachal Pradesh High Court recently emphasized that a cheque bounce complaint cannot be summarily dismissed solely for contravening Section 269(SS) of the Income Tax Act.
In its observation, the Court underscored that Section 269(SS) of the Income Tax Act is not a pertinent consideration when adjudicating a complaint under Section 138 of the Negotiable Instruments Act.
Section 269(SS) of the Income Tax Act prohibits the repayment of a loan or deposit, or any specified sum in cash, if the amount exceeds INR 20,000, including interest. However, the High Court clarified that a violation of this section does not invalidate the transaction but may lead to a penalty, as established in the case of Surinder Singh vs State of HP.
Justice Rakesh Kainthla, presiding over the case, stated, “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.”
The case involved an appeal against the acquittal of the respondent under Section 138 of the Negotiable Instruments Act. The complainant, operating a cloth shop in Dhalli, Shimla, had extended a friendly loan of INR 2 Lakhs to the accused in September 2014.
Despite the accused’s assurance of repayment and the issuance of a cheque, the cheque bounced due to insufficient funds. Following a legal notice, the accused failed to make the payment, prompting the filing of a complaint.
The accused, in defense, alleged fraudulent intentions on the part of the complainant and claimed that the cheque was for a cloth credit of INR 20,000.
The Trial Court, considering the complainant’s lack of specific details and documentation during the loan, emphasized the accused’s allegations of the complainant operating as an unlicensed moneylender and the cash transaction violating Section 269(SS) of the Income Tax Act.
As a result, the Court dismissed the complaint, leading to the accused’s acquittal. The appeal contested the Trial Court’s decision, asserting that the complainant had successfully proven the legal liability through a dishonored cheque and a valid notice of demand.
The High Court, citing Rajesh Jain v. Ajay Singh, emphasized that a failure to consider the presumption under Section 139 of the Negotiable Instruments Act could warrant interference with the judgment. Consequently, the appeal was allowed, and the Trial Court’s judgment was overturned.
Cause Title: Satyaveer Singh vs Suraj
