Cheque dishonour liability affirmed where supply, issuance, and statutory presumptions were proved; separate third-party dispute did not rebut the defence.

In a cheque dishonour prosecution, proof of supply through invoices, delivery challans, return memos and supporting oral evidence was sufficient to establish the foundational facts and attract the statutory presumptions under the Negotiable Instruments Act; the accused failed to rebut them with a credible defence. A separate dispute with the manufacturer, non-production of the distributor-manufacturer agreement, and minor differences in witness testimony were held irrelevant to the direct sale transactions between the parties and did not justify acquittal. The cheques were treated as issued towards discharge of liability, not as mere security, and no material prejudice arose from the Section 313 examination. The acquittal was reversed.

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Issues: (i) Whether the complainant proved delivery of goods and the resulting liability, and whether the accused rebutted the statutory presumptions under the Negotiable Instruments Act. (ii) Whether non-production of the agreement between the distributor and the manufacturer, and alleged inconsistencies between the complainant's witnesses, justified the acquittal. (iii) Whether the cheques were issued only as security and whether the examination of the accused under the Code of Criminal Procedure caused prejudice.

Issue (i): Whether the complainant proved delivery of goods and the resulting liability, and whether the accused rebutted the statutory presumptions under the Negotiable Instruments Act.

Analysis: The complainant relied on invoices, delivery challans, cheque return memos, notice correspondence, and oral evidence showing that goods were supplied and cheques were issued against the transactions. The accused did not dispute issuance of cheques or the stop-payment instructions, but sought to link the dispute to a separate disagreement with the manufacturer. The Court held that the business dealings between the complainant and the accused were independent, that the invoices and challans supported supply, and that the accused failed to establish any credible defence showing absence of liability.

Conclusion: The complainant proved the foundational facts, the presumptions under the Negotiable Instruments Act operated in its favour, and the accused failed to rebut them.

Issue (ii): Whether non-production of the agreement between the distributor and the manufacturer, and alleged inconsistencies between the complainant's witnesses, justified the acquittal.

Analysis: The Court held that the omitted agreement between the complainant and the manufacturer had no direct bearing on the separate sale transactions between the complainant and the accused. It further held that the two complainant witnesses performed different commercial roles and deposed from different levels of involvement in the transaction chain, so their differences did not amount to material contradictions. The Court found the trial court's adverse inference and reliance on supposed inconsistencies to be hyper-technical and unsupported by the record.

Conclusion: Non-production of the separate agreement and the witness differences did not dislodge the complainant's case or justify acquittal.

Issue (iii): Whether the cheques were issued only as security and whether the examination of the accused under the Code of Criminal Procedure caused prejudice.

Analysis: The Court held that the cheque amounts matched the invoices and were issued in the course of the admitted supply transactions, so the cheques could not be treated as mere security instruments. It also held that the questioning of the accused under Section 313 of the Code, though not ideal in form, conveyed the substance of the accusations and did not cause prejudice, especially since the accused also entered the witness box. The dishonour for stop-payment, coupled with failure to show sufficient funds, attracted penal liability.

Conclusion: The cheques were issued towards discharge of liability, and no material prejudice was shown from the examination of the accused.

Final Conclusion: The acquittal was reversed, the accused was held liable for dishonour of cheques, and the complaints stood established on the merits.

Ratio Decidendi: In a cheque dishonour prosecution, once supply and issuance of cheques are proved, the statutory presumptions arise and can be displaced only by a credible defence; a separate dispute with a third party, unsupported by material linking it to the cheque transaction, does not rebut liability under Section 138 of the Negotiable Instruments Act, 1881.

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