2019 (4) TMI 660 - SC - Indian Laws

Dishonor of Cheque - insufficiency of funds - doubt about the discharge of legally enforceable debt or liability - Section 138 of Negotiable Instruments Act - rebuttal of presumptions - Section 139 of the Act - burden to prove - Held that:- The complainant being holder of cheque and the signature on the cheque having not been denied by the accused, presumption shall be drawn that cheque was issued for the discharge of any debt or other liability. The presumption under Section 139 is a rebuttable presumption.

This Court in Bharat Barrel & Drum Manufacturing Company Vs. Amin Chand Pyarelal, [1999 (2) TMI 627 - SUPREME COURT] had occasion to consider Section 118(a) of the Act. This Court held that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable and defendant can prove the non-existence of a consideration by raising a probable defence.

A Three-Judge Bench of this Court in Rangappa Vs. Sri Mohan, [2010 (5) TMI 391 - SUPREME COURT OF INDIA] had occasion to elaborately consider provisions of Sections 138 and 139. In the above case, trial court had acquitted the accused in a case relating to dishonour of cheque under Section 138. The High Court had reversed the judgment of the trial court convicting the accused. In the above case, the accused had admitted signatures on the cheque. This Court held that where the fact of signature on the cheque is acknowledged, a presumption has to be raised that the cheque pertained to a legally enforceable debt or liability, however, this presumption is of a rebuttal nature and the onus is then on the accused to raise a probable defence.

Thus, the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability, which, of course, is in the nature of a rebuttable presumption.

In the present case, signature on cheque having been admitted, a presumption shall be raised under Section 139 that cheque was issued in discharge of debt or liability. The question to be looked into is as to whether any probable defence was raised by the accused. In cross-examination of the PW1, when the specific question was put that cheque was issued in relation to loan of ₹ 25,000/- taken by the accused, the PW1 said that he does not remember. PW1 in his evidence admitted that he retired in 1997 on which date he received monetary benefit of ₹ 8 lakhs, which was encashed by the complainant.

The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the burden on the complainant to prove his financial capacity and other facts.

High Court without discarding the evidence, which was led by defence could not have held that finding of trial court regarding financial capacity of the complainant is perverse - the accused has raised a probable defence and the findings of the trial court that complainant failed to prove his financial capacity are based on evidence led by the defence. The observations of the High Court that findings of the trial court are perverse are unsustainable.

Appeal allowed - the judgment of the High Court is set aside and that of the trial court is restored.