2025 (6) TMI 1425 - HC - Indian Laws

Accused fails to rebut presumption under Section 139, conviction upheld for dishonoured cheque under Section 138 NI Act

BASTIN PC Versus GEORGE, STATE OF KERALA

Kerala HC dismissed accused's revision petition in dishonour of cheque case. Court upheld conviction under Section 138 NI Act, finding accused failed to ... Dishonour of Cheque - discharge of any debt/liability or not - rebuttal of presumption under Section 118(a) and 139 N.I. Act or not - HELD THAT:- Section 118(a) of the N.I Act provides that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration - Section 139 of the N.I Act explicitly provides that unless the contrary is proved, it shall be presumed that the holder of a cheque received the cheque of the nature referred to in Section 138 of N.I Act for the discharge, in whole or in part, of any debt or other liability. In Rengappa v. Sri.Mohan [2010 (5) TMI 391 - SUPREME COURT], the Apex Court held that the presumption mandated by Section 139 of N.I.Act includes a presumption that there exist a legally enforceable debt or liability. This is of course a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. The Apex Court further held that the standard of proof for doing so is that of preponderance of probabilities. It was also held that in view of Section 139 of N.I Act there is an initial presumption, which favours the complainant. The evidence on record would show that accused and the complainant are relatives and there was close acquaintance between them. This Court finds no reason to disbelieve the version of PW1 that accused borrowed an amount of ₹15 lakhs from the complainant and in discharge of the said liability, accused issued Ext.P1 cheque. The evidence on record would show that the accused issued Ext.P1 cheque to the complainant in discharge of a legally enforceable debt. It also stands established that Ext.P1 cheque issued by the accused was dishonoured due to insufficient funds in the account of the accused. It stands proved that Ext.P1 cheque issued by the accused in discharge of a legally enforceable debt was dishonoured due to insufficient funds in the account of the accused and in spite of service of notice, accused failed to pay the amount covered by Ext.P1 cheque. Conclusion - The learned Magistrate and the learned Sessions Judge have analysed the evidence in its correct perspective and this Court finds no reason to interfere with the impugned judgment of conviction and order of sentence - The Criminal Revision Petition is devoid of any merit and accordingly stands dismissed. 1. ISSUES PRESENTED and CONSIDERED- Whether the accused issued the cheque (Ext.P1) in discharge of a legally enforceable debt or liability to the complainant.- Whether the presumption under Sections 118(a) and 139 of the Negotiable Instruments Act (N.I. Act) applies and whether the accused successfully rebutted this presumption.- Whether the complainant complied with the statutory requirement of serving a valid notice under Section 138 of the N.I. Act upon dishonour of the cheque.- Whether the accused's contention that the cheque was issued as security in a business transaction and not in discharge of any debt holds merit.- Whether the conviction and sentence under Section 138 of the N.I. Act against the accused are sustainable.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Whether the accused issued the cheque in discharge of a legally enforceable debt or liabilityThe relevant legal framework includes Sections 118(a) and 139 of the N.I. Act. Section 118(a) presumes that every negotiable instrument is made or drawn for consideration, and Section 139 creates a rebuttable presumption that the cheque was issued in discharge of a debt or liability.The Court relied on the Apex Court's ruling in Rengappa v. Sri Mohan, which clarified that the presumption under Section 139 includes the existence of a legally enforceable debt or liability. This presumption favors the complainant but is rebuttable on the balance of probabilities.The complainant (PW1) testified that the accused, a relative, borrowed Rs.15 lakhs and issued Ext.P1 cheque in discharge of that liability. Documentary evidence included Ext.P1 cheque, Ext.P2 bank memo showing dishonour due to insufficient funds, and lawyer's notice (Ext.P5) sent to the accused.The accused denied issuance of the cheque in discharge of any debt, claiming that Ext.P1 was issued to PW2 (son of complainant) as security in a business transaction involving purchase and sale of ornaments. The accused alleged misuse of the cheque by complainant following a dispute.The Court found the accused failed to produce any material evidence to rebut the presumption under Sections 118(a) and 139. The complainant's evidence was credible and unchallenged, and the Court accepted that the cheque was issued in discharge of the Rs.15 lakh debt.Issue 2: Applicability and rebuttal of presumption under Sections 118(a) and 139 of the N.I. ActThe presumption under Section 139 places an initial onus on the accused to rebut the claim that the cheque was issued for discharge of debt. The accused's defence was that the cheque was a security for business dealings with PW2, not a payment instrument for any debt.However, the Court observed that the accused did not substantiate this defence with any documentary or oral evidence. No defence witnesses were examined, and no material was adduced to disprove the complainant's claim.The Court referred to the Apex Court's decision in Bir Singh v. Mukesh Kumar, emphasizing that a signed cheque issued to the payee attracts the presumption under Section 139, and the burden lies on the accused to provide cogent evidence to rebut it.Consequently, the Court held that the accused failed to discharge the burden of proof, and the presumption under Section 139 stood unrebutted.Issue 3: Validity of service of notice under Section 138 of the N.I. ActSection 138 requires the complainant to send a notice demanding payment within 30 days of receiving the dishonour memo. The accused contended that no valid notice was served as the notice was returned 'unclaimed' and the address was incorrect.The complainant produced Ext.P5, the registered notice, returned with endorsement 'unclaimed' and 'addressee absent.' The Court held that this indicated deliberate refusal or avoidance by the accused to accept the notice.The Court cited the principle in C.C. Alavi Haji v. Palappetty Muhammed that dispatch of notice by registered post to the correct address satisfies the statutory requirement, and the burden shifts to the accused to prove non-receipt or incorrect address.The accused did not provide evidence to disprove the address or notice service. Therefore, the Court found that the complainant complied with the statutory notice requirement.Issue 4: Accused's defence of cheque issued as security in business transactionThe accused claimed the cheque was issued as security in a business dealing with PW2 and was misused by complainant after a dispute. However, the Court noted absence of any supporting evidence or corroboration for this claim.The accused did not adduce any defence evidence or witnesses to substantiate this narrative. The Court found this defence to be unsubstantiated and insufficient to rebut the presumption under Section 139.Issue 5: Sustainability of conviction and sentence under Section 138 of the N.I. ActThe Court reviewed the findings of the trial court and the Sessions Court, which convicted the accused under Section 138 and sentenced him to three months' simple imprisonment and a fine of Rs.22,98,000/-.The evidence established that Ext.P1 cheque was issued by the accused in discharge of a legally enforceable debt, was dishonoured due to insufficient funds, and the accused failed to pay despite notice.The Court found no infirmity or illegality in the lower courts' findings or sentencing order and declined to interfere with the conviction and sentence.3. SIGNIFICANT HOLDINGS'A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.'The Court established that the presumption under Section 139 of the N.I. Act is a rebuttable presumption favoring the complainant, and the accused must produce cogent evidence to rebut it. Failure to do so results in the presumption standing unrebutted.The Court reaffirmed that service of notice by registered post to the drawer's correct address, even if returned unclaimed, satisfies the statutory requirement under Section 138, shifting the burden of proof to the accused to disprove receipt.Final determinations:- The accused issued Ext.P1 cheque in discharge of a legally enforceable debt of Rs.15 lakhs.- The cheque was dishonoured due to insufficient funds.- The complainant duly served the statutory notice under Section 138 of the N.I. Act.- The accused failed to rebut the presumption under Sections 118(a) and 139 of the N.I. Act.- The conviction and sentence under Section 138 of the N.I. Act are upheld and sustained.