Appellate Court Orders Accused to Pay for Dishonored Cheque

The appellate court overturned the trial court's decision to acquit the accused under Section 138 of the Negotiable Instruments Act. The accused failed to rebut the presumption that the cheque issued was for a legally enforceable debt, not merely as security. The appellate court ordered the accused to pay the complainant the amount on the cheque plus compensation within two months, with the threat of one year of rigorous imprisonment for non-compliance.

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Issues Involved:
1. Whether the cheque issued by the accused was for a legally enforceable debt or merely as security.
2. Whether the trial court erred in acquitting the accused under Section 138 of the Negotiable Instruments Act.

Detailed Analysis:

Issue 1: Whether the cheque issued by the accused was for a legally enforceable debt or merely as security.

The complainant filed a case under Section 138 of the Negotiable Instruments Act, alleging that the accused issued a cheque for Rs. 2,10,000, which was dishonored due to insufficiency of funds. The accused claimed the cheque was given as security and not for a legally enforceable debt. The trial court dismissed the complaint and acquitted the accused, accepting the defense that the cheque was for security purposes.

The appellate court examined the presumption under Section 139 of the Act, which states that the cheque is presumed to be for the discharge of a debt or liability unless the contrary is proved. The court referred to several precedents, including Rangappa v. Mohan and APS Forex Services Pvt. Ltd. vs. Shakti International Fashion Linkers & Ors., emphasizing that the presumption of a legally enforceable debt exists and must be rebutted by the accused with evidence.

In this case, the accused failed to provide evidence to rebut the presumption. The court noted that the accused did not call Mohsin, the mediator, as a witness, which could have supported her claim that the cheque was for security. The court concluded that the accused did not discharge the burden of proof to rebut the presumption under Sections 118 and 139 of the Act.

Issue 2: Whether the trial court erred in acquitting the accused under Section 138 of the Negotiable Instruments Act.

The appellate court found that the trial court erred in its judgment by not properly appreciating the presumption in favor of the complainant under Section 139 of the Act. The trial court wrongly assumed that a cheque given as security cannot be encashed and does not attract liability under Section 138 of the Act.

The appellate court highlighted that the accused admitted the issuance and signing of the cheque, which creates a presumption of a legally enforceable debt. The court stated that the burden was on the accused to rebut this presumption, which she failed to do. The complainant provided sufficient evidence, including the testimony of the Chief Manager of Syndicate Bank, proving the dishonor of the cheque.

Conclusion:

The appellate court set aside the trial court's judgment, allowed the appeal, and held that the accused must pay Rs. 2,10,000 and compensation of Rs. 1,50,000 to the complainant within two months. Failure to do so would result in the accused undergoing rigorous imprisonment for one year.

Final Order:

The trial court's judgment dated 22.6.2015 is set aside. The accused is ordered to pay Rs. 2,10,000 and Rs. 1,50,000 as compensation to the complainant within two months, failing which she will face rigorous imprisonment for one year. The trial court is to be informed accordingly.

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