Cheque dishonour presumption under Section 138 stands unless reliably rebutted; unsupported transaction defence and additional evidence fail.

In a Section 138 prosecution, admission of cheque issuance and outstanding liability attracted the statutory presumption in favour of the complainant, and the conviction was sustained because the accused failed to rebut it with reliable evidence. The defence of alleged badla or forward transactions, and the claim of a private agreement cancelling the cheques, was rejected because it was unsupported by independent proof and the alleged agreement was not binding on the complainant. A belated request to adduce the SEBI report as additional evidence under Section 391 CrPC was also refused for want of necessity. The sentence was then modified from imprisonment to a monetary penalty with compensation.

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Issues: (i) whether the cheques were issued in discharge of a legally enforceable debt or liability so as to attract Section 138 of the Negotiable Instruments Act, 1881; (ii) whether the defence based on alleged badla or forward transactions and the alleged agreement cancelling the cheques rebutted the statutory presumption; (iii) whether additional evidence in the form of the SEBI report should be permitted under Section 391 of the Code of Criminal Procedure, 1973; and (iv) whether the sentence required modification.

Issue (i): whether the cheques were issued in discharge of a legally enforceable debt or liability so as to attract Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The applicant admitted issuance of the cheques and also admitted that amounts were due and payable to the complainant in February 1996. The complainant proved the cheques and the outstanding account statement, and the statutory presumption attached to the dishonoured cheques operated in favour of the complainant. The evidence accepted by the Courts below showed that the cheques were issued towards existing liability.

Conclusion: The cheques were issued in discharge of a legally enforceable liability, and the conviction under Section 138 was sustainable.

Issue (ii): whether the defence based on alleged badla or forward transactions and the alleged agreement cancelling the cheques rebutted the statutory presumption.

Analysis: The defence of illegal forward transactions was not established by independent evidence from the stock exchange or SEBI officials. The documents relied upon by the applicant did not substantiate that the disputed transactions were badla transactions, and the correspondence did not consistently support that case. The alleged agreement was not signed by the complainant and was not binding on him. The Courts below therefore rejected a contradictory defence that was unsupported by reliable evidence.

Conclusion: The defence did not rebut the presumption and did not displace the finding of liability.

Issue (iii): whether additional evidence in the form of the SEBI report should be permitted under Section 391 of the Code of Criminal Procedure, 1973.

Analysis: The application did not identify any witness to be examined or explain why the additional material was necessary in the revisional proceedings. The request was made belatedly, after the report was already available for years, and the proposed evidence did not overcome the concurrent findings against the defence. The exercise of power under Section 391 was therefore unwarranted.

Conclusion: The request for additional evidence was rejected.

Issue (iv): whether the sentence required modification.

Analysis: Although the conviction was upheld, the proceedings had remained pending for a long period and the amount representing the cheque value had already been deposited. In those circumstances, the substantive sentence of imprisonment was considered fit to be substituted by a monetary sentence with compensation to the complainant.

Conclusion: The sentence was modified by setting aside the imprisonment and directing payment of fine, with compensation payable to the complainant.

Final Conclusion: The conviction for dishonour of cheque was maintained, the challenge to the defence and to additional evidence failed, and only the sentence was altered to a monetary one with compensation.

Ratio Decidendi: In a prosecution under Section 138 of the Negotiable Instruments Act, 1881, once issuance of cheque and outstanding liability are admitted, the statutory presumption stands unless the accused rebuts it by reliable evidence; an unsupported plea of illegal transactions or an unproven private agreement does not displace that presumption, and additional evidence in revision will not be allowed without necessity and proper basis.

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