Case Note & Summary
The case involves three parties: Hewlett Packard (HP), Kores (India) Ltd. (complainant/appellant), and M/s Ambitious Marketing (accused/respondent). Kores was a distributor of HP products and supplied goods to Ambitious, a sub-distributor. Ambitious issued 16 cheques to Kores towards payment for goods. All cheques were dishonoured with the reason 'payment stopped by drawer'. Kores filed six complaints under Section 138 of the Negotiable Instruments Act, 1881. The trial court acquitted Ambitious, holding that the presumption under Section 139 was rebutted due to: (1) non-production of the MoU between Kores and HP, (2) inconsistent evidence of Kores' witnesses, and (3) the accused's stop payment instruction and dispute with HP. Kores appealed. The High Court examined the evidence and found that the accused admitted issuing the cheques and the existence of a business relationship. The accused's defence that he had a dispute with HP and that Kores owed him money from HP was not substantiated. The court held that the presumption under Section 139 NI Act was not rebutted. The stop payment instruction did not absolve liability. The non-production of the MoU between Kores and HP was irrelevant. The court set aside the acquittal and convicted the accused under Section 138 NI Act, sentencing him to simple imprisonment for one year and directing payment of compensation equal to the cheque amounts.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Presumption under Section 139 - Rebuttal - The accused issued cheques towards payment for goods supplied by the complainant. The cheques were dishonoured due to 'payment stopped by drawer'. The accused contended that he had a dispute with HP (manufacturer) and that the complainant had not produced the MoU between them. The trial court acquitted the accused holding that the presumption was rebutted. Held: The accused failed to rebut the presumption under Section 139 NI Act. The dispute with HP was not a valid defence against the complainant who was a holder in due course. The non-production of the MoU between complainant and HP did not affect the liability of the accused towards the complainant. The acquittal was set aside and the accused was convicted under Section 138 NI Act. (Paras 13-20) B) Negotiable Instruments Act - Stop Payment Instruction - Section 138 - Liability - The accused issued a stop payment instruction to the bank before the cheques were presented. The trial court considered this as a valid defence. Held: A stop payment instruction does not absolve the drawer of liability under Section 138 if the cheque was issued in discharge of a legally enforceable debt or liability. The accused must prove that there was no existing debt or liability. In this case, the accused admitted the issuance of cheques and the existence of a business relationship, and his defence of dispute with HP was not sufficient to rebut the presumption. (Paras 15-18) C) Evidence Act - Adverse Inference - Section 114(g) - Non-production of Document - The trial court drew an adverse inference against the complainant for not producing the MoU between complainant and HP. Held: The MoU between complainant and HP was not relevant to the issue of liability between complainant and accused. The accused had a separate MoU with HP which was produced. The non-production of the complainant's MoU with HP did not warrant an adverse inference against the complainant. (Para 13)
Issue of Consideration
Whether the trial court erred in acquitting the accused by holding that the presumption under Section 139 of the Negotiable Instruments Act, 1881 was rebutted, and whether the accused's defence of stop payment and disputes with a third party (HP) were sufficient to rebut the presumption.
Final Decision
The appeals are allowed. The judgment of acquittal passed by the trial court is set aside. The respondent is convicted for the offence under Section 138 of the Negotiable Instruments Act, 1881. The respondent is sentenced to suffer simple imprisonment for one year and to pay compensation to the appellant equal to the amount of the cheques.
Law Points
- Presumption under Section 139 NI Act
- Rebuttal of presumption
- Stop payment instruction
- Dishonour of cheque
- Liability of drawer
- Burden of proof
