The Bombay High Court has upheld an 18-month conviction under Section 138 of the Negotiable Instruments Act, rejecting the argument that an undisclosed cash loan violates Sections 269SS and 271AAD of the Income-tax Act and is therefore unenforceable. The Court explained that under Sections 118 and 139 of the NI Act, the presumption applies once the cheque’s signature is admitted, and the accused must rebut it through a probable defence on a preponderance of probabilities.
The High Court clarified that accused’s shifting stand that the cheque was lost or stolen and misused did not establish a probable defence sufficient to rebut the presumption. The Court reiterated that an objection to financial capacity requires supporting material from the complainant. Here, it accepted the explanation of how the loan was funded and noted that no such objection appeared in the notice reply.
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Briefly, Manoj Punamchand Oswal challenged concurrent judgments convicting him under Section 138 of the Negotiable Instruments Act, and sentencing him to 18 months’ simple imprisonment, with compensation of Rs. 10 lakhs and a further three months’ simple imprisonment in default of payment.
The complainant, Vijay Omkarmal Gandhi, alleged that he had advanced a cash hand-loan of Rs. 8.5 lakh for business purposes. The cheque issued towards repayment was dishonoured with the remark “refer to drawer”, and payment was not made despite a demand notice. Oswal admitted his signature on the cheque but denied taking the loan and claimed that the cheque had been lost or stolen and misused.
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A Single Judge Bench of Justice M.M. Sathaye observed that revisional jurisdiction under Sections 397 and 401 CrPC does not permit reappreciation of evidence merely to reach a different conclusion from concurrent factual findings. Since Oswal had not denied his signature, the presumptions under Sections 118 and 139 of the NI Act applied. His inconsistent claims that the cheque was lost or stolen and misused did not establish a probable defence sufficient to rebut those presumptions.
The Court rejected the alleged mismatch between the payee and the account in which the cheque was deposited, relying on the bank witness’s evidence that it was credited to Vijay Gandhi’s account, not Vijay Industries’ account. It also accepted the complainant’s explanation of how he arranged the loan amount and found no merit in the financial-capacity objection. The alleged inconsistency about whether the loan was for business or a bungalow, and the delay in depositing the cheque within its validity period, were not material to the case.
