Case Note & Summary
The appellant, Peter Mascarenhas, filed two criminal appeals challenging the judgments of the Sessions Court, which had set aside the conviction of the respondents (Monsabre Ashley Oswald Dias and Anita Maria Dias) under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The respondents were originally convicted by the Judicial Magistrate First Class, Vasco da Gama, for dishonour of two cheques of Rs.3,00,000 each. The cheques were issued by the respondents to the appellant as part of a loan transaction of Rs.12,00,000, evidenced by an Agreement of Payment dated 24.10.2005. The cheques were dishonoured on account of 'stop payment advice/insufficiency of funds'. The appellant filed complaints under Section 138 NI Act. The trial court convicted the respondents, but the Sessions Court allowed their appeals, setting aside the conviction. The appellant then appealed to the High Court. The High Court framed the issue of whether a stop payment instruction amounts to dishonour under Section 138. The court held that a stop payment instruction does not absolve the drawer of liability if the cheque was issued for a legally enforceable debt. The presumption under Section 139 NI Act applies, and the burden shifts to the accused to rebut it. The respondents admitted the issuance of the cheques and their signatures but claimed the cheques were given as security for a loan from a third party, not the appellant. However, they failed to lead any evidence to rebut the presumption. The Agreement of Payment clearly showed the loan was from the appellant. The High Court found that the Sessions Court erred in reversing the conviction without proper consideration of the evidence. The court allowed the appeals, restored the conviction and sentence imposed by the trial court, and directed the respondents to pay the cheque amounts with interest.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Stop Payment Instruction - Section 138 - The court considered whether a stop payment instruction given by the drawer before presentation of the cheque constitutes an offence under Section 138. Held that a stop payment instruction does not absolve the drawer of liability if the cheque was issued for discharge of a legally enforceable debt. The presumption under Section 139 applies, and the burden shifts to the accused to rebut it. (Paras 5-10) B) Negotiable Instruments Act - Presumption of Legally Enforceable Debt - Section 139 - The court reiterated that once the issuance of the cheque and the signature are admitted, a presumption arises that the cheque was issued for a legally enforceable debt. The accused must lead evidence to rebut this presumption. In the present case, the accused failed to rebut the presumption. (Paras 8-10) C) Evidence - Agreement of Payment - Admissibility - The court held that the Agreement of Payment dated 24.10.2005, executed by the accused in favour of the complainant, was a valid document evidencing the loan transaction. The accused did not challenge its execution, and it supported the complainant's case. (Paras 4, 10)
Issue of Consideration
Whether the issuance of a stop payment instruction by the drawer of a cheque amounts to dishonour under Section 138 of the Negotiable Instruments Act, 1881, and whether the presumption under Section 139 of the Act applies in such cases.
Final Decision
The High Court allowed the appeals, set aside the judgments of the Sessions Court, and restored the conviction and sentence imposed by the trial court. The respondents were directed to pay the cheque amounts with interest.
Law Points
- Stop payment instruction amounts to dishonour under Section 138 NI Act
- Presumption of legally enforceable debt under Section 139 NI Act
- Burden on accused to rebut presumption
- Agreement of Payment as evidence of debt
