The Calcutta High Court has held that an independently uncorroborated police diary entry was insufficient to establish the lost-cheque defence. Once the drawer admits his signature, the presumptions under Sections 118(a) and 139 of the NI Act kick in, and the burden then shifts to the accused to rebut them on a preponderance of probabilities.
The Court explained that a General Diary entry is only the informant’s own account. Without independent, substantive corroboration, it does not establish a probable lost-cheque defence. Further, for a modest hand loan of Rs. 30,000, the absence of a written agreement or an ITR entry does not automatically make the debt unenforceable, especially when the accused never challenged the complainant’s financial capacity.
The Court also said that a proprietorship is not a separate legal entity, and not arraigning the trade name alongside the proprietor does not vitiate the prosecution. Thus, the Court retained Rs. 35,000 compensation and the default sentence while exempting the drawer from seven days’ substantive imprisonment.
Briefly, Tuhin Gangopadhyay challenged his conviction under Section 138 of the Negotiable Instruments Act, 1881, arising from the dishonour of a cheque for Rs. 30,000. The complainant alleged that he had lent this amount for Gangopadhyay’s cloth business, ‘Madhukari Textile’, and that the cheque issued towards repayment was returned unpaid.
Despite receiving the statutory demand notice, Gangopadhyay did not pay within the prescribed period. His defence was that he had never borrowed the money or issued the cheque to the complainant. Instead, his money bag containing a blank signed cheque had been lost, following which he lodged a General Diary entry and instructed his bank to stop payment. The trial court convicted him, and the appellate court upheld the conviction while reducing imprisonment to seven days and fixing the fine payable as compensation at Rs. 35,000.
A Single Judge Bench of Justice Uday Kumar observed that admission of the signature on the cheque attracted the statutory presumptions under Sections 118(a) and 139 of the N.I. Act. Although these presumptions could be rebutted on a preponderance of probabilities, the petitioner’s lost-cheque defence lacked sufficient independent corroboration. The Court found that the General Diary entry and supporting evidence did not establish actual loss or misuse sufficient to displace the presumptions. It therefore found no illegality or perversity in the concurrent rejection of that defence.
The Court further observed that the absence of a written loan agreement or an Income Tax Return entry did not automatically make a modest hand loan of Rs. 30,000 legally unenforceable, particularly when the accused had not raised a probable challenge to the complainant’s financial capacity. It also rejected the objection that ‘Madhukari Textile’ should have been separately named as an accused, since a proprietorship is merely the proprietor’s business name, not a separate legal entity.
The discrepancy between describing the petitioner as unemployed and as running a small cloth business was not considered material suppression warranting dismissal of the revision at the threshold.
