Cheque presumption and partner liability: defence failed on debt, but conviction could not stand without arraigning the firm.

A cheque is presumed to have been issued for consideration and in discharge of a debt or liability under Sections 118(a) and 139 of the Negotiable Instruments Act, 1881, and that presumption is displaced only by a probable defence on a preponderance of probabilities. On the facts, the account statement, C-Forms and transaction history supported liability for goods supplied, so the defence of advance payment failed. Vicarious liability under Section 141 could not be fastened on a partner where the partnership firm was not arraigned as an accused, so the partner's conviction in that complaint was set aside. In the complaints where the firm was impleaded, conviction was upheld.

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Issues: (i) Whether the cheques were issued towards an existing liability for price of goods supplied, or as advance payment for future supply of goods. (ii) Whether a partner could be convicted for an offence under Section 138 of the Negotiable Instruments Act, 1881 when the partnership firm was not arraigned as an accused.

Issue (i): Whether the cheques were issued towards an existing liability for price of goods supplied, or as advance payment for future supply of goods.

Analysis: A statutory presumption arose under Sections 118(a) and 139 of the Negotiable Instruments Act, 1881 that the cheques were supported by consideration and were issued towards discharge of a debt or liability. The accused led no evidence and was required to show circumstances creating a probable defence on the standard of preponderance of probabilities. The account statement, C-Forms, and surrounding transaction history showed repeated supplies and payments and indicated that the amount due exceeded the cheque amounts. The material on record did not support the plea that the cheques were issued as advance payment for goods not supplied.

Conclusion: The presumption was not rebutted and the cheques were held to have been issued for consideration towards the price of goods supplied.

Issue (ii): Whether a partner could be convicted for an offence under Section 138 of the Negotiable Instruments Act, 1881 when the partnership firm was not arraigned as an accused.

Analysis: Liability under Section 141 of the Negotiable Instruments Act, 1881 is vicarious and arises only when the company or firm is prosecuted as an accused. Where the firm was not impleaded in one complaint and only the partner was proceeded against, conviction of the partner was impermissible. Where the firm itself was arraigned in the remaining complaints, conviction of the firm under Section 138 was sustainable.

Conclusion: The partner's conviction in the complaint where the firm was not arraigned was set aside, while the firm's conviction in the other complaints was upheld.

Final Conclusion: The appeals succeeded only to the extent of the complaint in which the firm was not made an accused, and the remaining appeals resulted in conviction of the firm for dishonour of cheques.

Ratio Decidendi: A cheque is presumed to be issued for consideration and for discharge of a debt or liability unless the accused rebuts that presumption on a preponderance of probabilities, and vicarious liability under Section 141 of the Negotiable Instruments Act, 1881 cannot be fastened on a partner unless the firm or company is itself arraigned as an accused.

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