Cheque dishonor conviction upheld under Section 138 as accused failed to rebut statutory presumption of consideration

SC reversed lower courts' dismissal of cheque dishonor complaint under Section 138 of Negotiable Instruments Act. Respondent failed to rebut statutory presumption under Sections 118(a) and 139 regarding consideration for cheque issuance. Trial Court and HC erred by dismissing complaint based on discrepancies in amount determination despite written documentation crystallizing dues. Court held presumption established that cheque was drawn for existing debt discharge. Respondent found guilty, ordered to pay fine of Rs. 10,77,712 (twice cheque amount) plus Rs. 1,00,000 litigation costs within three months. Appeal allowed.

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Issues Involved:
1. Dismissal of complaint under Section 138 of the Negotiable Instruments Act, 1881.
2. Presumption of consideration under Sections 118(a) and 139 of the Negotiable Instruments Act.
3. Rebuttal of presumption by the accused.
4. Legal interpretation of discrepancies in evidence.
5. Statutory presumption of consideration and its burden of proof.

Detailed Analysis:

1. Dismissal of Complaint under Section 138 of the Negotiable Instruments Act, 1881:
The appellant was aggrieved by the High Court's order upholding the trial court's dismissal of the complaint under Section 138 of the Negotiable Instruments Act. The trial court dismissed the complaint on the grounds that the cheque amount exceeded the alleged due amount and found contradictions in the number of apple cartons mentioned by the appellant.

2. Presumption of Consideration under Sections 118(a) and 139 of the Negotiable Instruments Act:
The Supreme Court emphasized that a negotiable instrument, including a cheque, carries a presumption of consideration under Sections 118(a) and 139 of the Act. The statutory presumption implies that the cheque was issued for the discharge of a debt or liability unless rebutted by the accused. The trial court and the High Court misinterpreted this presumption by treating the case as if the appellant needed to prove the debt in a civil court.

3. Rebuttal of Presumption by the Accused:
The accused failed to rebut the presumption of consideration. The court noted several points:
- The statement of CW3 (agent of the respondent) was not challenged in cross-examination.
- The appellant's statement that the cheque was handed over personally by the respondent remained unchallenged.
- The respondent did not deny issuing the cheque or dispute his signature on it.
- The respondent's entry with the police about the loss of the cheque book was not substantiated by an FIR, even after receiving the notice of dishonor.
- The respondent did not appear as a witness to prove the loss of the cheque book or that the cheque was not issued for any debt or liability.
- The respondent's statement under Section 313 of the Code merely claimed misuse of the cheque without substantiating the claim.

4. Legal Interpretation of Discrepancies in Evidence:
The trial court and the High Court focused on discrepancies in the number of apple cartons and the rate per carton, which led to the dismissal of the complaint. The Supreme Court found this approach flawed, emphasizing that once the cheque is issued, it carries a statutory presumption of consideration. The discrepancies in the appellant's statements were deemed irrelevant as the accounts were settled in writing, crystallizing the amount due.

5. Statutory Presumption of Consideration and its Burden of Proof:
The Supreme Court reiterated that the burden of proof shifts to the accused to rebut the presumption of consideration. The accused must bring forth evidence or circumstances that make the non-existence of consideration probable. Mere denial or discrepancies in the appellant's statements do not suffice to rebut the statutory presumption. The court cited several judgments, including Kumar Exports v. Sharma Carpets and Rangappa v. Sri Mohan, to support the principle that the presumption under Section 139 is a rebuttable presumption that favors the complainant.

Conclusion:
The Supreme Court found the approach of the trial court and the High Court perverse and materially illegal. It held that the accused failed to rebut the presumption of consideration. Consequently, the Supreme Court allowed the appeal, set aside the High Court's order, and found the respondent guilty of dishonor of cheque under Section 138 of the Act. The respondent was ordered to pay a fine of Rs. 10,77,712/- and litigation costs of Rs. 1,00,000/- within three months, failing which he would undergo imprisonment for six months.

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