Delhi HC reverses acquittal in Section 138 cheque dishonour case, finds accused failed to rebut presumption under Section 139

Delhi HC set aside acquittal of accused firm and accused no. 3 in dishonour of cheque case under Section 138 NI Act. Court held accused failed to rebut presumption under Section 139 by not producing credible evidence of losses from allegedly inferior materials supplied. Defence claim of defective goods was mere assertion without supporting documentation or counter-claims. Accused no. 3, being purchase manager who placed orders and remained with firm when cheque dishonoured, was vicariously liable under Section 141. Accused no. 2 acquitted while accused no. 1 and no. 3 found guilty. Appeal allowed partially.

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Issues Involved:
1. Validity of stop payment instructions for a cheque under Section 138 of the Negotiable Instruments Act (NI Act).
2. Vicarious liability of accused no. 2 and accused no. 3 under Section 141 of the NI Act.

Issue-wise Detailed Analysis:

1. Validity of Stop Payment Instructions:
The primary issue was whether the accused firm was justified in issuing stop payment instructions for the cheque in question, which was dishonoured. The accused claimed that the materials supplied by the complainant were of inferior quality, which justified stopping the payment. However, the court found that the accused failed to substantiate this claim. The accused did not provide any evidence, such as inspection reports or test results, to prove that the materials were defective. The court noted that the accused's defence was not communicated until after the cheque was dishonoured, and no prior complaints were recorded. The accused's reliance on an email to support their claim was dismissed as it lacked the necessary certification under Section 65B of the Indian Evidence Act. Consequently, the court held that the accused did not have a valid reason for stopping the payment, and the presumption under Section 139 of the NI Act was not rebutted.

2. Vicarious Liability of Accused No. 2 and Accused No. 3:
The court examined the vicarious liability of accused no. 2 and accused no. 3 under Section 141 of the NI Act. Accused no. 2 was acquitted as the court found no evidence to establish that he was a partner or responsible for the conduct of the business of the accused firm. The partnership deeds did not mention accused no. 2, and the complainant failed to prove his involvement.

For accused no. 3, the court considered the Supreme Court's interpretation in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, which states that vicarious liability arises for those in charge of and responsible for the conduct of the business at the time of the offence. Accused no. 3, being the purchase manager, was involved in placing orders and was part of the firm when the offence occurred. The court concluded that accused no. 3 was responsible for the conduct of the firm's business and thus vicariously liable under Section 141 of the NI Act.

Conclusion:
The judgment set aside the trial court's acquittal of the accused firm and accused no. 3, finding them guilty of the offence under Section 138 of the NI Act. The appeal was partially allowed, acquitting accused no. 2 but convicting the accused firm and accused no. 3.

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