2018 (7) TMI 2332 - SC - Indian Laws

Dishonour of Cheque - presumption Under Sections 118 and 139 of the N.I. Act was not rebutted by the Respondent - judgment of conviction and sentence passed against the Accused set aside - HELD THAT - Under Section 139 of the N.I. Act, once a cheque has been signed and issued in favour of the holder, there is statutory presumption that it is issued in discharge of a legally enforceable debt or liability. This presumption is a rebuttable one, if the issuer of the cheque is able to discharge the burden that it was issued for some other purpose like security for a loan. In the present case, the Respondent has failed to produce any credible evidence to rebut the statutory presumption - The Appellants have proved their case by overwhelming evidence to establish that the two cheques were issued towards the discharge of an existing liability and legally enforceable debt. The Respondent having admitted that the cheques and Pronote were signed by him, the presumption Under Section 139 would operate. The Respondent failed to rebut the presumption by adducing any cogent or credible evidence. Hence, his defence is rejected. The impugned order passed in Criminal Revision Petition is hereby set aside, and the order of Conviction and Fine passed by the Trial Court is restored - Appeal allowed.

Summary

Issues:
Appeal against judgment under Section 138 of the Negotiable Instruments Act for dishonour of cheques.

Analysis:
1. Background and Allegations:
- The Appellants filed complaints under Section 138 of the Negotiable Instruments Act against the Respondent for dishonour of two cheques.
- The Respondent contended that the cheques were security and not towards any debt or liability.

2. Trial Court Findings:
- The Trial Court found the Respondent guilty under Section 138 of the N.I. Act as he admitted his signatures on the cheques and Pronote.
- The Court disbelieved the Respondent's claim regarding 10 blank cheques issued earlier and sentenced him to undergo imprisonment and pay a fine.

3. District and Sessions Judge's Decision:
- The District and Sessions Judge upheld the Trial Court's decision, stating that the presumption under the N.I. Act was not rebutted by the Respondent.

4. High Court's Ruling:
- The High Court reversed the lower courts' decisions, holding that the cheques were issued as security and not towards any debt.
- The High Court found that the Respondent had raised doubts about the circumstances of issuing the cheques, thereby discharging the presumption under Section 139 of the N.I. Act.

5. Supreme Court's Verdict:
- The Supreme Court observed that the Respondent failed to produce credible evidence to rebut the statutory presumption under Section 139 of the N.I. Act.
- The Court highlighted various circumstances, including the issuance of a Pronote for the cheque amount, to establish that the cheques were indeed towards a legally enforceable debt.
- The Respondent's defenses were deemed lacking credibility, and the Court reinstated the Trial Court's order of conviction and fine.

6. Conclusion:
- The Supreme Court allowed the appeals, setting aside the High Court's judgment and restoring the Trial Court's order of conviction and fine against the Respondent.
- The Court emphasized the importance of proving the purpose of issuing cheques under the N.I. Act and upheld the legal principles governing such cases.