2019 (8) TMI 905 - SC - Indian Laws

Dishonor of Cheque - acquittal of the respondent-accused - existence of debt or not - issuance of cheque in discharge of debt or not - Section 138 of the Negotiable Instruments Act - whether the courts below were right in acquitting the respondent-accused by holding that the appellant-complainant has failed to prove that the respondent owed him debt and that the cheques were issued for the discharge of the said debt? HELD THAT - Under Section 138 of the Negotiable Instruments Act, once the cheque is issued by the drawer, a presumption under Section 139 of the Negotiable Instruments Act in favour of the holder would be attracted. Section 139 creates a statutory presumption that a cheque received in the nature referred to under Section 138 of the Negotiable Instruments Act is for the discharge in whole or in part of any debt or other liability. The initial burden lies upon the complainant to prove the circumstances under which the cheque was issued in his favour and that the same was issued in discharge of a legally enforceable debt - It is for the accused to adduce evidence of such facts and circumstances to rebut the presumption that such debt does not exist or that the cheques are not supported by consideration. In the present case, by examining himself as PW-1, the complainant has discharged the initial burden cast upon him that the cheques were issued for the rice bags purchased on credit. With the examination of PW-1, the statutory presumption under Section 139 of the Act arises that the cheques were issued by the respondent-accused for the discharge of any debt or other liability in whole or in part. The courts below disbelieved the evidence of the complainant on the ground that there are no averments in the complaint that the commodities were sold for cash and that the rice bags were sold on credit and the cheques were issued for the goods sold on credit. Though the complaint contains no specific averments that the cheques were issued for the purchase made on credit, in his evidence, PW-1 clearly stated that the cheques were issued for the commodities purchased on credit. With the evidence adduced by the complainant, the courts below ought to have raised the presumption under Section 139 of the Act. The evidence adduced by the respondent-accused is not sufficient to rebut the presumption raised under Section 139 of the Act. The defence of the respondent that though he made payment for the commodities/rice bags, the blank cheques were not returned by the appellant-complainant is quite unbelievable and unacceptable. The impugned judgment of the High Court cannot be sustained and is liable to be set aside. Appeal allowed.

Summary

Issues Involved:
1. Whether the cheques issued by the respondent-accused were for the discharge of a legally enforceable debt under Section 138 of the Negotiable Instruments Act.
2. Whether the respondent-accused successfully rebutted the presumption under Section 139 of the Negotiable Instruments Act.
3. Whether the trial court and the High Court correctly acquitted the respondent-accused based on the evidence presented.

Issue-wise Detailed Analysis:

1. Discharge of Legally Enforceable Debt:
The appellant-complainant supplied commodities and rice bags to the respondent-accused, who issued various cheques that were dishonoured upon presentation due to insufficient funds. The appellant filed complaints under Section 138 of the Negotiable Instruments Act, asserting that the cheques were issued for payment owed to him. The trial court and the High Court found that the cheques were issued as security for goods supplied, for which payment was made in cash. However, the Supreme Court held that the appellant had proved that the cheques were issued for credit purchases and that the respondent had not cleared the dues. The Supreme Court emphasized the statutory presumption under Section 139 of the Act, which presumes that the cheques were issued for discharging a debt unless proven otherwise by the accused.

2. Rebuttal of Presumption under Section 139:
The respondent-accused argued that the cheques were left as security and that payments were made in cash, supported by receipts. The trial court and the High Court accepted this defense, concluding that the respondent had rebutted the presumption under Section 139 by producing receipts for cash payments. However, the Supreme Court found that the evidence presented by the respondent was not sufficient to rebut the statutory presumption. The Court noted that the receipts contained the phrase "cheques are subject to realisation," indicating that the payments were not conclusively settled. The Supreme Court held that the appellant's evidence was consistent and credible, proving that the cheques were issued for a legally enforceable debt.

3. Acquittal by Trial Court and High Court:
The trial court acquitted the respondent-accused, finding inconsistencies in the appellant's case and accepting the respondent's defense that the cheques were issued as security. The High Court affirmed this decision, emphasizing that the respondent had successfully rebutted the presumption under Section 139. However, the Supreme Court disagreed, stating that the lower courts failed to properly apply the statutory presumption and overlooked crucial evidence. The Supreme Court concluded that the appellant had met the initial burden of proving that the cheques were issued for a debt, and the respondent had not adequately rebutted this presumption.

Conclusion:
The Supreme Court set aside the High Court's judgment, convicting the respondent-accused under Section 138 of the Negotiable Instruments Act. The Court imposed a fine of ?2,97,150 on the respondent, to be paid within twelve weeks, failing which the respondent would undergo imprisonment for six months. The fine amount was directed to be paid to the appellant-complainant as compensation.

Final Judgment:
The Supreme Court allowed the appeals, convicted the respondent-accused, and imposed a fine, with a default sentence of imprisonment, emphasizing the statutory presumptions under Sections 138 and 139 of the Negotiable Instruments Act and the insufficiency of the respondent's evidence to rebut these presumptions.