2025 (6) TMI 1347 - HC - Indian Laws

Accused fails to rebut Section 139 presumption in cheque dishonour case, conviction upheld with Rs.4,80,000 compensation

Mahesh Gautam Versus Rajeev Kohli

The HC dismissed a revision petition in a cheque dishonour case. The accused failed to rebut the presumption under Section 139 of the Negotiable ... Dishonour of Cheque - insufficient funds - failure to rebut the presumption of consideration - Accused failed to pay the amount despite a deemed notice of demand - HELD THAT:- It was laid down by the Hon’ble Supreme Court in Malkeet Singh Gill v. State of Chhattisgarh, [2022 (7) TMI 1455 - SUPREME COURT] that a revisional court is not an appellate court and it can only rectify the patent defect, errors of jurisdiction or the law. It was held in Kishan Rao v. Shankargouda [2018 (7) TMI 101 - SUPREME COURT] that it is impermissible for the High Court to reappreciate the evidence and come to its conclusions in the absence of any perversity. The accused claimed in his statement recorded under Section 313 of Cr.P.C. that the cheque was given in lieu of the transfer of the stock to a Company in which the accused was an employee and the Firm, to which the stock was transferred had given another cheque. The name of any Firm was not mentioned in this statement, therefore, the plea taken by the accused regarding the issuance of the cheque on behalf of T.R. Associates was an afterthought and was rightly discarded by the learned Courts below - A blank unsigned cheque does not carry any value and cannot constitute any security; therefore, it is highly improbable that the complainant would have accepted the blank unsigned cheque as a security. The accused did not examine any witness from Shah Bihari Foods or T.R. Associates to establish his version and in the absence of the statement of any officials of Shah Bihari Foods or T.R. Associates, learned Courts below were justified in rejecting the version of the accused. The complainant specifically stated that the cheque was issued in the discharge of the legal liability. This was duly corroborated by the bill, whereas the plea taken by the accused that he had issued an unsigned blank cheque was not at all probable, therefore, the learned Courts below had rightly held that the cheque was issued in discharge of the legal liability. In the present case, the accused has not proved that he was not responsible for non-service; therefore, the learned Courts below had rightly held that the notice was duly served upon the accused - Therefore, it was duly proved on record that the accused had issued a cheque to discharge his legal liability, which cheque was dishonoured with an endorsement ‘funds insufficient’ and the notice was deemed to be served upon the accused but he failed to pay the amount; hence, he was rightly convicted by the learned Trial Court. Learned Trial Court awarded a compensation of ₹4,80,000/- to the complainant. The cheque was issued on 01.06.2015. The sentence was imposed on 30.08.2022 after the lapse of more than 07 years. The complainant lost interest, which he would have obtained by depositing the amount in the bank and he had to pay the litigation expenses for filing and prosecuting the complaint. He was entitled to be compensated for the same - Therefore, the amount of ₹1,86,784/- on the principal amount of ₹2,63,216/- cannot be said to be excessive and no interference is required with the compensation awarded by the learned Trial Court. Conclusion - The presumption under Section 139 of the Negotiable Instruments Act that the cheque was issued for discharge of a legally enforceable debt or liability stands rebutted only by preponderance of probabilities and not beyond reasonable doubt. The present revision fails and the same is dismissed. The core legal questions considered by the Court in this matter can be identified as follows:1. Whether the issuance of the cheque by the accused was duly proved and whether the presumption under Section 139 of the Negotiable Instruments Act (NI Act) that the cheque was issued for discharge of a legal liability was rebutted by the accused.2. Whether the cheque was dishonoured due to insufficient funds or on account of signature mismatch, and the legal consequences thereof under Section 138 of the NI Act.3. Whether the accused's plea that the cheque was issued as a security for a transaction involving third parties (TR Associates and Shah Bihari Foods) was credible and supported by evidence.4. Whether the legal notice issued to the accused was duly served and complied with the requirements under the NI Act.5. The scope and limits of revisional jurisdiction of the High Court in criminal matters, particularly in cases involving concurrent findings of fact.6. The appropriateness of the sentence and compensation awarded by the Trial Court under Section 138 of the NI Act.Issue-wise Detailed Analysis:1. Proof of Issuance of Cheque and Presumption of ConsiderationThe legal framework under Section 139 of the NI Act establishes a presumption that the cheque was issued for discharge of a legally enforceable debt or liability once the cheque is proved to have been issued by the accused. The burden then shifts to the accused to rebut this presumption by adducing evidence to the contrary.In the present case, the complainant proved issuance of the cheque by producing the cheque itself (Ext. CW1/A), the bill of sale (Bill No. 51 dated 25.05.2015) showing the transaction amounting to Rs. 2,90,440/-, and the complainant's testimony corroborated by business records presumed correct under Section 114 of the Indian Evidence Act. The accused admitted his proprietorship of the firm MVASKT India and the issuance of the cheque but denied the liability.The accused's defense was that the cheque was issued as a security for payment to be made by TR Associates and that the complainant had misused a blank unsigned cheque. However, this plea was first raised during the trial and not in the initial statement recorded under Section 313 Cr.P.C., indicating it was an afterthought. No corroborative evidence from TR Associates or Shah Bihari Foods was produced to substantiate this claim. The bills produced did not support the accused's version, as they pertained to different dates, amounts, and items.The Court found that the accused failed to rebut the presumption of consideration under Section 139 of the NI Act, and the plea that the cheque was a security was highly improbable and rightly discarded by the courts below.2. Dishonour of Cheque: Insufficient Funds vs. Signature MismatchThe cheque was dishonoured with the endorsement 'funds insufficient' as per the memo of dishonour (Ext. CW1/A) and corroborated by the testimony of the bank officer (CW3) and the accused's bank statement showing insufficient balance. The accused contended that the signatures on the cheque did not match the specimen signatures, implying forgery or misuse.The Court referred to authoritative Supreme Court precedents which clarify that dishonour due to signature mismatch also attracts penal liability under Section 138 of the NI Act. The Court cited the decisions in Laxmi Dyechem, Peeranbi, and R. Manimehalai, which held that the dishonour on grounds such as signature mismatch or insufficient funds falls within the ambit of Section 138 and does not absolve the drawer of liability.Therefore, even if the signatures differed, the dishonour on grounds of insufficient funds was sufficient to invoke Section 138 NI Act. The accused's argument on signature mismatch was rejected as not exculpatory.3. Credibility of Accused's Plea Regarding Third-Party TransactionsThe accused's claim that the cheque was issued on behalf of TR Associates and related to goods consigned by Shah Bihari Foods, which the complainant refused to accept, was examined. This version was not put forth in the initial statement under Section 313 Cr.P.C. and was considered an afterthought. The accused did not produce any evidence from Shah Bihari Foods or TR Associates to substantiate these allegations.The bills produced by the complainant did not support the accused's claim as the bills were distinct and did not show any transaction involving TR Associates. The Court noted that a blank unsigned cheque cannot constitute security and that the complainant would unlikely accept such a cheque as security.The accused's failure to produce relevant witnesses or documentary evidence from the third parties further weakened his defense. The Courts below were justified in rejecting this improbable version.4. Service of Legal NoticeThe complainant issued a legal notice dated 25.08.2015 to the accused, which was returned with the endorsement 'refused.' The Court relied on settled legal principles that when a notice is sent by registered post to the correct address and is returned unclaimed or refused, service is deemed to have been effected under Section 27 of the General Clauses Act and Section 114 of the Evidence Act.The accused did not prove that he was not responsible for non-service. The Court referred to Supreme Court precedents including C.C. Allavi Haji and Priyanka Kumari, which establish that deemed service suffices for the purposes of Section 138 NI Act.Hence, the notice was held to be duly served, and the accused's failure to pay the cheque amount within the stipulated period was established.5. Scope of Revisional JurisdictionThe Court extensively examined the scope of revisional jurisdiction of the High Court under Sections 397 and 401 Cr.P.C., emphasizing that it is supervisory and not appellate in nature. The Court cannot reappreciate evidence or substitute its own view when concurrent findings of fact have been recorded by the Trial and Appellate Courts, unless there is a patent illegality, perversity, or gross miscarriage of justice.The Court relied on authoritative Supreme Court rulings including Malkeet Singh Gill, State of Gujarat v. Dilipsinh Kishorsinh Rao, Kishan Rao, Sanjaysinh Ramrao Chavan, and Bir Singh v. Mukesh Kumar, which collectively underscore that revisional jurisdiction is limited to correcting errors of jurisdiction or law and not to re-assess factual findings.In the present case, no such error or perversity was demonstrated, and the concurrent findings of the lower courts were held to be based on proper appreciation of evidence.6. Sentence and CompensationThe Trial Court sentenced the accused to undergo simple imprisonment for one year and awarded compensation of Rs. 4,80,000/- to the complainant. The Court noted the deterrent nature of Section 138 NI Act, which aims to promote credibility of negotiable instruments and prevent callous issuance of cheques without intention to honour them.The sentence was held to be appropriate and not excessive, in line with Supreme Court guidance in Bir Singh v. Mukesh Kumar.Regarding compensation, the Court referred to the Supreme Court's decision in Kalamani Tex v. P. Balasubramanian, which advocates uniform imposition of fines up to twice the cheque amount with simple interest at 9% per annum, to compensate for loss of interest and litigation expenses. The awarded compensation was found reasonable and no interference was warranted.Significant Holdings:'The presumption under Section 139 of the Negotiable Instruments Act that the cheque was issued for discharge of a legally enforceable debt or liability stands rebutted only by preponderance of probabilities and not beyond reasonable doubt.''Dishonour of cheque with an endorsement 'funds insufficient' or 'signature mismatch' attracts penal liability under Section 138 of the Negotiable Instruments Act.''A blank unsigned cheque does not constitute valid security and cannot be relied upon to absolve the drawer of liability.''Service of legal notice by registered post, when returned unclaimed or refused, is deemed to be valid service under Section 27 of the General Clauses Act and Section 114 of the Evidence Act.''The revisional jurisdiction of the High Court under Sections 397 and 401 Cr.P.C. is limited to correcting patent illegality or error of jurisdiction and does not extend to reappreciation of evidence or substitution of concurrent findings of fact.''The penal provisions of Section 138 of the Negotiable Instruments Act are deterrent in nature, aimed at ensuring credibility of negotiable instruments.''Compensation awarded under Section 138 NI Act should be consistent with Supreme Court guidelines, allowing fines up to twice the cheque amount along with simple interest to cover loss of use and litigation costs.''In the absence of any evidence to the contrary, the presumption under Section 114 of the Indian Evidence Act regarding the correctness of business records applies and supports the complainant's case.'Accordingly, the Court upheld the conviction and sentence of the accused under Section 138 of the NI Act, dismissed the revision petition, and affirmed the compensation awarded by the Trial Court.