Cheque dishonour liability survives lack of money-lending licence where statutory presumptions under Sections 118 and 139 remain unrebutted.

In a cheque dishonour prosecution, the absence of a money-lending licence did not by itself make the underlying debt unenforceable or defeat liability under Section 138 of the Negotiable Instruments Act, 1881. The Calcutta HC treated the Bengal Money-Lender's Act, 1940 as a regulatory statute whose consequences for unauthorised lending operate under that Act, not as a complete defence to cheque dishonour proceedings. The Court also found that the presumptions under Sections 118 and 139, including consideration and legally enforceable debt, remained unrebutted because the accused relied only on alleged illegality of lending, while issuance, dishonour, notice, and non-payment were undisputed. The conviction was upheld and compensation directed.

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Issues: (i) Whether the absence of a money-lending licence rendered the underlying liability unenforceable so as to defeat prosecution under Section 138 of the Negotiable Instruments Act, 1881; (ii) Whether the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881 stood rebutted on the facts.

Issue (i): Whether the absence of a money-lending licence rendered the underlying liability unenforceable so as to defeat prosecution under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The Court held that the transactions were in substance money-lending transactions, but money-lending without licence was not totally barred by the Bengal Money-Lender's Act, 1940. That Act was treated as a regulatory statute, and its consequences for unauthorised lending were held to operate in proceedings under that Act rather than as a complete defence to a prosecution under Section 138 of the Negotiable Instruments Act, 1881. The Court relied on the principle that the relevant enquiry in a cheque dishonour case is whether the cheque was issued for discharge of a debt or liability, and not whether the complainant held a money-lending licence.

Conclusion: The absence of a money-lending licence did not defeat the enforceability of the liability or the prosecution under Section 138 of the Negotiable Instruments Act, 1881.

Issue (ii): Whether the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881 stood rebutted on the facts.

Analysis: The Court held that the presumption under Section 139 includes the existence of a legally enforceable debt or liability, and the presumption under Section 118 also operated in favour of consideration. The accused relied only on the alleged illegality of the lending transaction, but that contention was rejected because lending without licence under the Bengal Money-Lender's Act, 1940 was not itself prohibited in a manner that displaced the presumptions. As the cheques, their dishonour, service of notice, and non-payment were undisputed, the presumptions remained unrebutted.

Conclusion: The presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881 remained unrebutted and the ingredients of Section 138 were proved.

Final Conclusion: The acquittal was held unsustainable, the conviction under Section 138 of the Negotiable Instruments Act, 1881 was upheld on merits, and compensation was directed against the accused persons.

Ratio Decidendi: In a prosecution for cheque dishonour, the absence of a money-lending licence does not by itself negate a legally enforceable debt or rebut the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881 unless the underlying liability is shown to be legally unenforceable.

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