Dishonoured cheque presumption and corporate veil lifting can sustain liability when defences are unsupported and the company is a mere facade

A dishonoured cheque carries a statutory presumption of consideration under the Negotiable Instruments Act, and a bare denial unsupported by written agreement, contemporaneous protest, or reply to notice does not ordinarily rebut that presumption or create a bona fide triable defence in a summary suit. The commentary also notes that where a company is effectively controlled as a family vehicle and the corporate form is used to defeat legitimate claims, the court may lift the corporate veil and fasten joint and several liability on the controllers. Section 70 of the Contract Act is referenced as reinforcing repayment where benefits are received without a valid contractual basis.

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Issues: (i) Whether the defence raised against a summary suit on a dishonoured cheque disclosed a triable issue or was a moonshine defence; (ii) Whether the company's directors could be made jointly and severally liable by lifting the corporate veil.

Issue (i): Whether the defence raised against a summary suit on a dishonoured cheque disclosed a triable issue or was a moonshine defence.

Analysis: A cheque carries a presumption of consideration under Section 118(a) of the Negotiable Instruments Act, 1881. The defence that the cheque was issued only for arranging consultancy services was unsupported by any written agreement, was not backed by any protest or contemporaneous correspondence when the alleged services were not provided, and was not followed by any reply to the legal notice. On these facts, the denial of liability did not rebut the presumption and did not raise a bona fide triable defence.

Conclusion: The defence was correctly treated as moonshine and the dismissal of leave to defend was upheld.

Issue (ii): Whether the company's directors could be made jointly and severally liable by lifting the corporate veil.

Analysis: The company was found to be controlled and run as a family vehicle by the two individual defendants, and no material was produced to dislodge that factual finding. Where the corporate form is used to defeat legitimate claims, the Court may lift the veil to ascertain the actors behind the company. The reasoning was reinforced by the principle that benefits received without a valid contractual basis must be repaid, reflecting the equitable rule in Section 70 of the Contract Act, 1872.

Conclusion: The corporate veil was properly lifted and the individual defendants were held jointly and severally liable.

Final Conclusion: The appeal failed on merits and the decree in the summary suit was sustained.

Ratio Decidendi: In a summary suit on a dishonoured cheque, an unsupported and uncorroborated denial of consideration does not rebut the statutory presumption, and where the corporate form is used as a mere fac ade, the veil may be lifted to fasten liability on the controllers.

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