2006 (9) TMI 619 - HC - Indian Laws

Section 138 N.I. Act: Presumptions apply to payee & holder. Time-barred debts included. Compensation emphasis.

P.N. Gopinathan Versus Sivadasan Kunju and Ors.

P.N. Gopinathan Versus Sivadasan Kunju and Ors. - TMI Issues Involved:1. Availability of presumption under Section 139 of the N.I. Act to a payee.2. Applicability of Section 138 of the N.I. Act to cheques issued for time-barred debts.3. Simultaneous presumption under Sections 118 and 139 of the N.I. Act.4. Sentence and compensation awarded by the lower courts.Issue-wise Detailed Analysis:1. Availability of Presumption under Section 139 of the N.I. Act to a Payee:The primary contention was whether the presumption under Section 139 is available to a payee or only to a holder. The court concluded that the presumption under Section 139 is available to both the payee and the holder. The rationale is that Section 118(a) does not limit the presumption to the payee alone but is a presumption against the maker or drawer of the cheque. The court emphasized that the presumption under Section 139 is necessary for a successful prosecution under Section 138, as it specifically deals with the discharge of a legally enforceable debt or liability. The court also clarified that the definition of 'holder' under Section 8 includes the payee, thus allowing the payee to benefit from the presumption under Section 139.2. Applicability of Section 138 of the N.I. Act to Cheques Issued for Time-barred Debts:The court addressed whether Section 138 applies to cheques issued for time-barred debts. Referring to the Division Bench decision in Ramakrishnan v. Parthasaradhy, the court held that Section 138 is applicable to such cheques. The rationale is that a cheque, even if issued for a time-barred debt, constitutes a promise to pay under Section 25(3) of the Contract Act, which is valid and enforceable. The court dismissed the argument that an additional agreement is necessary for the promise in the cheque to be valid, affirming that the cheque itself is a sufficient promise under Section 25(3).3. Simultaneous Presumption under Sections 118 and 139 of the N.I. Act:The petitioner argued that simultaneous presumptions under Sections 118 and 139 cannot be drawn for a promissory note and a subsequent cheque issued for its discharge. The court rejected this argument, stating that there is no legal principle or precedent to support it. The court clarified that the presumption under Sections 118 and 139 can be invoked for the cheque issued to discharge the liability under the promissory note. The court did not express an opinion on whether the presumption under Section 118 can still be drawn for the promissory note after the issuance of the cheque, as it was not relevant to the case.4. Sentence and Compensation Awarded by the Lower Courts:The petitioner faced a sentence of one month of simple imprisonment and was directed to pay Rs. 3,00,000 as compensation. The court upheld the verdict of guilty and the conviction under Section 138 but modified the sentence. The petitioner was sentenced to imprisonment till the rising of the court, with a direction to pay the compensation. In case of default, the petitioner would undergo simple imprisonment for three months. The court emphasized the need to ensure adequate compensation to the complainant, who had to endure a prolonged legal battle. The court also noted that the lower court had not imposed a default sentence, which was necessary to ensure justice.Conclusion:The court upheld the conviction under Section 138 of the N.I. Act and clarified the applicability of presumptions under Sections 118 and 139. It affirmed that Section 138 applies to cheques issued for time-barred debts and that the presumption under Section 139 is available to both the payee and the holder. The sentence was modified to imprisonment till the rising of the court, with a default sentence of three months of simple imprisonment if the compensation is not paid.