The Gujarat High Court affirmed the acquittal of a trustee under Section 138 of the Negotiable Instruments Act, underscoring that the statutory presumption of debt cannot be displaced without clear evidence and that liability arising from a trust must be pursued against the trust, not an individual trustee.
Background & Facts
The Dispute
The appellant, Dr. Harshad U. Kamle, a doctor and owner of Mamta Hospital, alleged that Respondent No.2, Smt. Janvikaben Harishbhai Purohit, the managing trustee of Tapasvi Charitable Trust, owed him a total of Rs. 6,50,000. The amount comprised cash advances of Rs. 50,000, Rs. 2,00,000 and Rs. 50,000, together with rent of Rs. 1,50,000 payable for premises occupied by the Trust. To recover the sum, the appellant obtained a personal cheque from the respondent dated 01.06.2006 for Rs. 6,50,000, which was later dishonoured.
Key Facts
- 01.06.2006 - Respondent No.2 issued Cheque No. 235630 for Rs. 6,50,000 in favour of the appellant.
- 28.06.2006 - Appellant served a statutory notice demanding payment within 15 days.
- 02.07.2006 - Notice was served on the respondent.
- 11.08.2006 - Complaint filed under Section 138 before the Judicial Magistrate, Nadiad.
- 18.08.2009 - Trial Court convicted the respondent, imposing three months’ simple imprisonment, a fine of Rs. 1,000 and directed payment of Rs. 6,50,000.
- 08.06.2011 - First Appellate Court quashed the conviction and acquitted the respondent.
- 07.08.2026 - Appellant filed the present Criminal Appeal under Section 378 of the CrPC.
- 01.02.2005 - Management of the Trust was transferred to newly inducted trustees, including the appellant’s wife, Smt. Shashiben Kamle.
- 16.03.2005 - Memorandum of Understanding (Exhibit 21) recorded the financial liabilities of the Trust, specifying that the second party would assume rent of Rs. 1,50,000 and other loans.
- 08.05.2005 - Letter from Dr. Vijaykumar Patel to the respondent confirming the transfer of financial administration.
- 13.07.2005 and 10.06.2005 - Letters to the State Bank of India seeking change of authorised signatory for the Trust’s bank account.
Procedural History
- 11.08.2006 - Complaint under Section 138 filed before Judicial Magistrate First Class, Nadiad.
- 18.08.2009 - Trial Court convicted the respondent and ordered payment of Rs. 6,50,000.
- 08.06.2011 - First Appellate Court set aside the conviction and acquitted the respondent.
- 07.08.2026 - Appeal filed before the Gujarat High Court under Section 378 of the CrPC.
Relief Sought
The appellant seeks quashing of the acquittal order dated 08.06.2011, restoration of the conviction, and enforcement of the monetary award of Rs. 6,50,000 against the respondent.
The Legal Issue
Whether the acquittal of the respondent was perverse or illegal in view of the statutory presumption under Section 118 and Section 139 of the Negotiable Instruments Act, 1881, and whether a trustee can be held personally liable for a cheque issued to discharge a liability that, according to the Memorandum of Understanding, belonged to the Trust.
Arguments Presented
For the Appellant
- The appellant contended that the statutory presumption under Section 118 and Section 139 places the burden on the accused to rebut the existence of a legally enforceable debt.
- He relied on Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal and Bijoy Kumar Moni v. Paresh Manna for the proposition that a cheque issued by a trustee in his personal capacity, even if the underlying liability belongs to the Trust, can attract liability under Section 138.
- The appellant argued that the respondent had acknowledged the debt by executing the cheque and that the notice served satisfied the procedural requirements of Section 138.
For the Respondent
- The respondent argued that the liability for rent and the advances was that of the Trust, not of her personally, and that the Memorandum of Understanding expressly limited her personal liability.
- She maintained that the appellant failed to produce any documentary evidence linking the cheque to a legally enforceable personal debt, and that the burden of proof under Section 139 remained on the appellant.
- Citing Babubhai Ambalal Patel v. State of Gujarat and Kamala S. v. Vidhyadharan M.J., the respondent asserted that without joining the other trustees, the complaint was not maintainable.
The Court's Analysis
The Court began by reiterating the statutory framework of Section 138: a cheque dishonoured for insufficient funds gives rise to criminal liability only when it is drawn for the discharge of a legally enforceable debt or liability, and the holder must have served a statutory notice within the prescribed period. The Court noted that Section 118 creates a presumption of consideration, while Section 139 presumes that the holder received the cheque for the discharge of a debt, both of which are rebuttable.
"The presumption drawn under a statute has only an evidentiary value. Presumptions are raised in terms of the Evidence Act. Presumption drawn in respect of one fact may be an evidence even for the purpose of drawing presumption under another."
The Court examined the evidence:
- The cheque was indeed signed by the respondent, satisfying the formal requirement of Section 138.
- The statutory notice dated 28.06.2006 was duly served on 02.07.2006, meeting the notice requirement.
- However, the Court found that the appellant had not established that the cheque was issued to discharge a personal debt of the respondent. The Memorandum of Understanding dated 16.03.2005, and subsequent letters, clearly indicated that the liability for rent and the advances rested with the Trust and the newly inducted trustees.
- The appellant’s reliance on the respondent’s acknowledgment of the cheque’s issuance was deemed insufficient, as the acknowledgment did not specify the nature of the underlying liability.
- The Court emphasized that when the underlying liability belongs to a trust, the proper parties to be impleaded are the trust and its trustees, not a single trustee in a personal capacity, unless the trustee expressly assumes personal liability.
- The Court also considered the extensive jurisprudence cited by both sides, including the Supreme Court’s observations in Sankar Padam Thapa and Bijoy Kumar Moni, which require a clear nexus between the cheque and a personal debt.
- Applying the principle that appellate courts should not disturb an acquittal unless the finding is perverse, the Court held that the First Appellate Court’s conclusion was not perverse; the trial court had erred in attributing personal liability to the respondent.
Consequently, the Court concluded that the appellant had failed to discharge the statutory burden under Section 139, and that the acquittal stood on solid evidentiary ground.
The Verdict
The Gujarat High Court dismissed the appeal, upheld the acquittal order dated 08.06.2011, confirmed the cancellation of the bail bond, and ordered the record to be sent back to the First Appellate Court. No monetary award or further directions were granted.
What This Means For Similar Cases
Presumption Does Not Override Evidentiary Burden
- Practitioners must remember that the statutory presumption under Section 118/139 is merely evidentiary; the complainant must still prove that the cheque was drawn for a personally enforceable debt.
- A mere signature on a cheque, without clear evidence of personal liability, is insufficient to sustain a conviction.
Trust Liability Must Be Sued Against the Trust
- When the underlying obligation arises from a trust, the trust and all its trustees should be impleaded. A single trustee cannot be held personally liable unless she expressly assumes the debt.
- Failure to join the appropriate parties may render the complaint non-maintainable, as highlighted by the Court.
Appellate Review of Acquittals Is Limited
- An appellate court may overturn an acquittal only on a finding of perversity, illegality, or a manifest error of law. Mere disagreement with the trial court’s assessment of credibility is insufficient.
- Lawyers should focus on demonstrating a clear error or omission of material evidence to succeed on appeal.
Practical Takeaways
- Ensure that statutory notice under Section 138 is served correctly and that the underlying debt is demonstrably personal.
- When dealing with trusts, draft pleadings to include the trust and all trustees as respondents.
- In appellate practice, prepare a detailed record of any material evidence omitted or misappreciated by the lower court to meet the high threshold for overturning an acquittal.
