2003 (11) TMI 336 - SC - Indian Laws

Dishonour of cheques - whether the account had sufficient amount to pay the amount of the cheque or not? Held that - Undoubtedly, dishonour of a cheque by the Bank causes incalculable loss, injury and inconvenience to the payee and the entire credibility of the business transactions within and outside the country suffers a serious set back. The Parliament, in order to restore the credibility of cheques as a trustworthy substitute for cash payment enacted the aforesaid provisions. The remedy available in a Civil Court is a long drawn matter and an unscrupulous drawer normally takes various pleas to defeat the genuine claim of the payee. Therefore, grant one month s time from this date to the respondent herein to pay a sum of ₹ 80,000 (twice the amount of the cheque) by way of Demand Draft drawn in favour of the appellant and payable at Goa (in the address given in the paper book). In default thereof, the respondent shall suffer simple imprisonment for six months.

Issues Involved:
1. Liability under Section 138 of the Negotiable Instruments Act.
2. Rebuttal of presumption under Section 139 of the Negotiable Instruments Act.
3. Interpretation and application of Sections 138 and 139.
4. Adequacy of evidence and burden of proof.
5. Relationship between the parties and its relevance.
6. Stop payment instructions and their implications.

Issue-wise Detailed Analysis:

1. Liability under Section 138 of the Negotiable Instruments Act:
The respondent issued 10 post-dated cheques totaling Rs. 4 lakhs to the appellant. The first cheque was dishonored due to stop payment instructions. The appellant sent a legal notice demanding payment, which was not complied with, leading to a complaint under Section 142 for an offense under Section 138. The Judicial Magistrate acquitted the respondent, finding the appellant failed to prove liability and the respondent rebutted the presumption under Section 139. The High Court confirmed this acquittal.

2. Rebuttal of presumption under Section 139 of the Negotiable Instruments Act:
The appellant argued that the presumption under Section 139 must be rebutted with evidence, not mere statements. The respondent's letter denying liability and attributing it to another person was insufficient without evidence. The Judicial Magistrate and High Court erred in accepting the letter as sufficient rebuttal without proof.

3. Interpretation and application of Sections 138 and 139:
Sections 138 and 139 were enacted to ensure credibility in cheque transactions and provide a criminal remedy for dishonor. The courts below misinterpreted these sections by requiring the appellant to prove the liability beyond the issuance of the cheque and its dishonor. The High Court's interpretation defeated the purpose of the provisions.

4. Adequacy of evidence and burden of proof:
The appellant's General Manager testified, while the respondent did not present any witness or subject himself to cross-examination. The courts below failed to consider the appellant's evidence and the respondent's lack of evidence. The presumption under Section 139 was not properly applied.

5. Relationship between the parties and its relevance:
The courts below erroneously considered the master-servant relationship irrelevant to the liability under Section 138. The liability was a legally enforceable debt, irrespective of the relationship. The High Court's focus on the relationship was misplaced.

6. Stop payment instructions and their implications:
The stop payment instructions indicated insufficient funds, which the courts below ignored. The appellant's application to examine the Bank Manager was wrongly disallowed, which could have clarified the account status. The courts failed to consider that the respondent admitted liability by issuing the cheques.

Conclusion:
The Supreme Court set aside the judgments of the High Court and the Judicial Magistrate, holding that Section 138 was applicable and the respondent committed an offense. The respondent was given one month to pay Rs. 80,000 or face six months' imprisonment. The appeal was disposed of accordingly.

← Previous Next →