2025 (9) TMI 1217 - HC - Indian Laws

Petition dismissed where admitted cheque signatures triggered S.118 and S.139 NI Act presumptions; payment plea failed

M/s. SSM Engineers Pvt Ltd & Anr Versus State (GNCT) Of Delhi & Anr.

HC dismissed petition challenging proceedings for cheque dishonour. The court noted the signature on the cheques was admitted, raising statutory ... Dishonour of Cheque - cheque issued as advance cheques and not to discharge any legally enforceable debt - admission of signature on the cheque - discharge of evidential burden to rebut the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act - HELD THAT:- At the outset, it is relevant to note that the signature of Petitioner No. 2 on the cheques in dispute has not been denied. It is trite law that once the execution of the cheque is admitted, the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration and the presumption under Section 139 of the NI Act that the holder of the cheque/respondent received the cheque in discharge of a legally enforceable debt or liability are raised against the accused. From a perusal of the disputed cheques, it can be seen that the signature of Petitioner No. 2 appears on the back side of the subject cheques. Further, no details of the complainant as required were present on the back side of the disputed cheques. In the opinion of this Court the contention of the petitioner that the learned MM as well as the learned ASJ failed to appreciate that the subject cheques were not issued to discharge any legally enforceable debt or that the transactions between the petitioners and Respondent No. 2 were never on credit basis, but were always through advanced payment is bereft of any merit. There are no merit in the contention of the petitioners that the learned ASJ as well as the learned MM failed to appreciate the written communication that had been issued by the petitioners to Respondent No. 2 regarding cancellation of purchase order and return of the subject cheques as well as the letter addressed to the bank to stop the encashment of the subject cheques. Thus, upon a consideration of the totality of circumstances, it is evident that the petitioners have failed to rebut the presumptions under Sections 118 and 139 of the NI Act - petition dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the conviction under Section 138 of the Negotiable Instruments Act is sustainable where the accused admit signatures on the cheques but contend they were issued as advance cheques and not to discharge any legally enforceable debt. 2. Whether the accused discharged the evidential burden to rebut the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act. 3. Admissibility and evidentiary weight of account ledgers/statement of accounts and cancellation/stop-payment communications relied upon by the accused to negate existence of debt. 4. Whether the High Court (in revisional jurisdiction) should interfere with concurrent findings of fact by the trial court and the appellate court where there is no glaring illegality, unreliability or miscarriage of justice. ISSUE-WISE DETAILED ANALYSIS Issue 1: Sustainability of conviction under Section 138 when signatures are admitted but accused claim cheques were advances Legal framework: Admission of signature raises statutory presumptions: under Section 118 (presumption that promissory note, bill or cheque was drawn for consideration) and Section 139 (presumption that cheque was issued in discharge of a legally enforceable debt or liability). Once these presumptions are raised, the evidential burden shifts to the accused to rebut them. Precedent treatment: The Court applied binding authority establishing that admission of signature triggers the presumptions and that the focus shifts to whether the accused has discharged the evidential burden to show absence of debt/liability. Interpretation and reasoning: The Court observed that the signature on the cheques was not denied. Accordingly, presumptions under Sections 118 and 139 were rightly attracted. The appropriate enquiry, post-presumption, is whether the accused led evidence to prove that the cheques were not issued to discharge any legally enforceable debt (i.e., were advances) and thereby rebut the statutory presumptions. Ratio vs. Obiter: Ratio - Where signature on a cheque is admitted, statutory presumptions arise and the accused must discharge the shifted evidential burden; failure to do so permits conviction under Section 138 if other ingredients are satisfied. Conclusion: The conviction is sustainable insofar as the accused admitted signatures and failed to discharge the evidential burden to rebut the presumptions. Issue 2: Whether the accused discharged evidential burden to rebut presumptions under Sections 118 and 139 Legal framework: After activation of presumption, accused may rebut by leading evidence to show non-existence of debt/liability at time of issuance or by proving particular circumstances rendering the presumption inapplicable. If rebuttal succeeds, the complainant must then prove existence of debt independently. Precedent treatment: The Court followed authoritative guidance that the court must concentrate on the case set up by the accused once presumption is invoked and assess whether the accused discharged the onus of rebuttal. Interpretation and reasoning: The accused relied on ledger entries, an alleged cancellation letter received by a named employee of the complainant, and a stop-payment request to the bank. The Court examined the evidence: ledgers were not maintained properly (no entries after a date preceding issuance of cheques), difference between credits and debits unclear, and no corroborative financial documents produced. The alleged cancellation communication (Mark A) was not corroborated: the complainant denied receipt and the accused failed to summon the alleged recipient as a witness. No bank official or company employee was produced to prove the stop-payment request or its receipt. The Court also noted unexplained facts adverse to the accused (signatures on back of cheques contrary to bank practice in certain presentations), which weighed against acceptance of the accused's account. Ratio vs. Obiter: Ratio - Failure to lead credible, corroborative evidence to rebut statutory presumptions results in the accused failing to discharge the evidential burden; concurrent findings of courts below on this issue are not interfered with absent perversity. Conclusion: The accused did not discharge the evidential burden to rebut presumptions under Sections 118 and 139; therefore the presumption stood and supported conviction. Issue 3: Evidentiary value of ledgers/statement of accounts and cancellation/stop-payment communications Legal framework: Documents relied upon by accused to negate existence of debt must be properly maintained, proved in evidence and corroborated where necessary. Oral assertions about receipt of communications require proof by calling relevant witnesses or documentary proof of receipt. Precedent treatment: The Court applied the standard that documentary proof must be credible and supported by examination of relevant persons to establish receipt/efficacy of communications. Interpretation and reasoning: The ledgers/statement of accounts exhibited deficiencies: entries ceased well before the cheques were issued, and entries lacked clarity as to credits and debits. The cancellation letter was disputed by the complainant and signatures on it were not proved; the alleged recipient was not produced as a witness. The accused also failed to produce bank evidence to prove stop-payment instructions. The absence of primary witnesses or corroborative bank records undermined the probative value of these documents. Ratio vs. Obiter: Ratio - Uncorroborated or improperly maintained financial records and unproved cancellation/stop-payment communications cannot successfully rebut statutory presumptions; such documents carry little weight if crucial witnesses are not examined. Conclusion: The ledgers and alleged communications lacked requisite proof and reliability; they did not rebut the presumption of debt/liability. Issue 4: Scope of High Court revisional jurisdiction vis-à-vis concurrent findings of fact Legal framework: In revisional jurisdiction under supervisory provisions, the High Court must confine itself to testing correctness, legality and propriety of impugned orders and should not reappreciate evidence as a second appellate court unless the impugned findings are wholly unreasonable, untenable or amount to gross miscarriage of justice. Precedent treatment: The Court adhered to the established principle that revisional interference is limited and not to be exercised to reweigh evidence where concurrent findings are reasonable. Interpretation and reasoning: The Court found that the trial court and appellate court had examined the accused's contentions comprehensively and recorded concurrent findings on material points (admission of signatures, insufficiency of ledger and communication evidence, failure to call key witnesses). No glaring illegality, perverse finding or miscarriage of justice was shown to justify revisional interference. Ratio vs. Obiter: Ratio - Where concurrent findings of fact by the trial and appellate courts are supported by evidence and not wholly untenable, the High Court in revisional jurisdiction must refrain from interference. Conclusion: Revisional interference was unwarranted; the impugned concurrent judgment did not suffer from such illegality or perversity as to require intervention. Overall Conclusion On the totality of circumstances the accused failed to rebut the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act; the documents and oral assertions relied upon by the accused were inadequately proved and corroborated; and the High Court, exercising revisional jurisdiction, found no infirmity in the concurrent findings of fact and law recorded by the courts below. Conviction under Section 138 is accordingly sustained and revision dismissed.