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TaxTMI 
TaxTMI 
TaxTMI 
2003 (11) TMI 336
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....y the aforesaid sum for the reasons given in the letter dated 12-2-1993 (Annexure P-1). The appellant deposited the first cheque for encashment. The said cheque was dishonoured by the Bank on the ground that the respondent had issued instructions to stop payment. The appellant sent a legal notice to the respondent regarding the dishonour of the cheque demanding payment of Rs. 40,000 within 15 days. As the respondent did not comply with the aforesaid notice, a complaint was filed against the respondent under section 142 of the Negotiable Instruments Act (hereinafter referred to as "the Act") for offence punishable under section 138 of the Act. According to the appellant, the respondent/accused was working as Managing Director of the appellant-Company. The services of the respondent were discontinued from the month of July, 1992. The appellant examined its General Manager on their behalf to prove the complaint. The respon-dent in defence did not examine any witness. The respondent also did not step in the witness box so as to subject himself to the cross-examination. He only brought on record the letter dated 12-2-1993 written by him to the Company. True copy of the advice from the B....
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.... the ingredients of section 138 of the Act are satisfied and the accused committed an offence punishable under section 138 of the Act. 6. Shri A.K. Sanghi, learned counsel appearing for the respondent/accused, submitted that the appellant/complainant scrupulously avoided in the complaint and in the examination-in-chief of P.W. 1 to state the relationship with the respondent/accused and there is also no whisper in the complaint as well as in the evidence led on behalf of the appellant regarding the receipt of the letter dated 12-2-1993. It was further submitted that the appellant has not placed before the trial Court any details or statement as to how the respondent is liable for any dues alleged to be against the respondent Shri A.K. Sanghi would further submit that mere presentation or delivery of the cheque, in the instant case, to the appellant by the respondent will not amount to acceptance of the debt or liability and on the contrary, the respondent has given the entire history in his letter dated 12-2-1993 before presentation of the cheque in the month of April, 1993 to the Bank. It was further stated that the very letter was drafted by Rajan Kinnerkar and it was prepared, a....
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....trate and the judgment rendered by the High Court. In our view, the High Court and the learned Judicial Magistrate failed to give effect to section 139 of the Act which creates a presumption unless the contrary is proved that the holder of cheque received the cheque for discharge in whole or in part of any debt or other liability. We have perused the contents of the letter dated 12-2-1993. Neither the said letter is proved nor its contents nor is the document produced in the proceedings of the Court. It is pertinent to note that in the said letter, the respondent/complainant did not, however, deny the liability as such but merely shifted it on third person. The veracity of the contents of the letter could only be verified if the contents of the letter were proved. The High Court and the learned Judicial Magistrate have ignored the admission of the liability by the respondent who said that the liability did exist but he was not responsible for it. While considering this, the High Court and the learned Magistrate treated the proof adduced by the respondent, namely, the letter, denying the liability and that some other person is liable as sufficient to rebut the presumption under sect....
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....f credibility and dependability could be re-introduced in the practice of issuing negotiable instruments in the form of cheques. The best way to do this was to provide a criminal remedy of penalty, which is just the thing that is sought to be done by the Amending Act." To fulfil the objective, the Legislature while amending the Act has made the following procedure : "(i )Under section 138 a deeming offence is created. (ii)In section 139, a presumption is ingrained that the holder of the cheque received it in discharge of liability. (iii)Disallowing a defence in section 140 that drawer has no reason to believe that cheque would be dishonoured. (iv)An explanation is provided to section 138 to define the words "debt or other liability" to mean a legally enforceable debt or other liability." If the aforesaid are borne in mind then the findings of the High Court are legally perverse, namely, that section 138 of the Act has application only in the case of transactions involving mercantile relationship and the second being that the appellant has failed to prove the liability. Paragraph 18 of the judgment of the High Court contains both the findings which read as under: "In this cas....
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....ad the Bank Manager been examined it would have been clear whether the account had sufficient amount to pay the amount of the cheque or not? It would have enabled also to know on what date stop payment order was sent by the drawer to the Bank. The learned Magistrate committed a serious mistake in not allowing the application and the proceedings passed thereon have suffered from serious infirmity going to the root of the matter. The High Court and the learned Judicial Magistrate have also not noticed that the respondent was otherwise admitting the liability when the cheques were being issued. This was sufficient evidence to prove that there was a liability and as per the presumption under section 139, the cheques issued, therefore, were towards the liability even as per the version of the respondent. The relevant section which is section 138 of the Act giving the ingredients of the offence. In the opening words of the section it is stated : "Where any cheques drawn by a person on an account maintained by him with a bank for payment of any amount of money to any person from out of that account for the discharge in whole or in part, of any debt or other liability. . . ." Both the Co....
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....the bank on 8-8-1994 to stop the payment whereas the cheques were presented for encashment on 9-8-1984 although the same were drawn on 23-2-1994, 26‑2‑1994 and 28-2-1994. The learned counsel for the respondent strongly relied upon the following observations in Electronics Trade and Technology Development Corpn. Ltd. (SCC p. 742, para 6). 'Suppose after the cheque is issued to the payee or to the holder in due course and before it is presented for encashment, notice is issued to him not to present the same for encashment and yet the payee or holder in due course presents the cheque to the bank for payment and when it is returned on instructions, section 138 does not get attracted.' The learned counsel for the appellant submitted that if the attention of the Court was drawn to the provisions of section 139 of the Act which according to him, had an important bearing on the point in issue, the Court would certainly not have made the above observations. The said section reads as under : '139. Presumption in favour of holder.-It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in section 138 for th....
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....ence in the written statement that the four cheques were given for intended transactions was not the answer given by the appellant to the notice under section 138. Then he had said that the cheques were given to assist the bank for restructuring (Ext.H). It was necessary for the appellant at least to show on the basis of acceptable evidence either that his explanation in the written statement was so probable that a prudent man ought to accept it or to establish that the effect of the material brought on record, in its totality rendered the existence of the fact presumed, improbable. (Vide Trilok Chand Jain v. State of Delhi [1975] 4 SCC 761). The appellant has done neither, in the absence of any such proof the presumption under sections 138 and 139 must prevail." (p. 28) 17. Learned counsel also relied on paragraph 7 of the judgment of this Court in the case of K.N. Beena v. Muniyappan [2001] 8 SCC 458 which reads as under: "7. In this case admittedly the 1st respondent has led no evidence except some formal evidence. The High Court appears to have proceeded on the basis that the denials/averments in his reply dated 21-5-1993 were sufficient to shift the burden of proof on to the....
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....e a cheque is issued by a drawer, a presumption under section 139 must follow and merely because the drawer issued notice to the drawee or to the bank for stoppage of payment it will not preclude an action under section 138 of the Act by the drawee or the holder of the cheque in due course. This was the view taken by this Court in Modi Cements Ltd. v. Kuchil Kumar Nandi [1998] 3 SCC 249. On same facts is the decision of this Court in Ashok Yeshwant Badave v. Surendra Madhavrao Nighojakar [2001] 3 SCC 726. The decision in Modi's case overruled an earlier decision of this Court in Electronics Trade & Technology Development Corpn. Ltd. v. Indian Technologists & Engineers (Electronics) (P.) Ltd. [1996] 2 SCC 739 which had taken a contrary view. We are in respectful agreement with the view taken in Modi's case.The said view is in consonance with the object of the legislation. On the faith of payment by way of a post-dated cheque, the payee alters his position by accepting the cheque. If stoppage of payment before the due date of the cheque is allowed to take the transaction out of the purview of section 138 of the Act, it will shake the confidence which a cheque is otherwise intended to....