Case Note & Summary
The appellant, Shriniwas Ramdas Siwerwat, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the respondent, Shantaram Pandurang Deotale, alleging dishonour of three cheques totaling Rs. 3,50,000/-. The cheques were issued on 26/08/2005 and presented for collection but were returned dishonoured on 28/12/2005 with the remark 'payment stopped by the drawer'. A demand notice was issued on 02/01/2006 and served on 13/01/2006, but the respondent failed to pay. The respondent defended by claiming that the cheques were blank and had been cancelled by a notice dated 08/12/2005 which the complainant refused. The trial court acquitted the respondent, holding that the complainant failed to prove that the cheques were issued for a legally enforceable debt. The appellant appealed. The High Court considered the presumption under Sections 118 and 139 of the NI Act, which arises when the signature on the cheque is admitted. The court noted that the respondent admitted his signature on the cheques and also admitted issuing a stop payment instruction. The court held that the trial court erred in not drawing the presumption and in shifting the burden to the complainant. The respondent failed to rebut the presumption as he did not produce any evidence to show that the cheques were blank or that there was no existing liability. The court also relied on the Supreme Court decision in K. Bhaskaran v. Sankaran Vaidhyan Balan, which held that once the signature is admitted, the presumption under Section 118 arises. The High Court allowed the appeal, set aside the acquittal, and convicted the respondent under Section 138 of the NI Act. The respondent was sentenced to pay a fine of Rs. 3,50,000/- (the cheque amount) and in default, to undergo simple imprisonment for three months. The fine amount was directed to be paid as compensation to the appellant.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Presumption of Legally Enforceable Debt - When the signature on the cheque is admitted by the accused, the presumption under Section 118 and Section 139 of the Negotiable Instruments Act, 1881 arises that the cheque was issued for discharge of a legally enforceable debt or liability. The burden then shifts to the accused to rebut the presumption. The trial court erred in acquitting the accused without considering this presumption. (Paras 1-8) B) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Stop Payment Instruction - Issuance of a stop payment instruction does not absolve the accused of liability under Section 138 if the cheque was issued for discharge of a legally enforceable debt. The accused's admission of issuing a stop payment direction coupled with non-payment after demand notice attracts the offence. (Paras 2-8) C) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Rebuttal of Presumption - The accused failed to rebut the presumption of legally enforceable debt as he did not produce any evidence to show that the cheques were blank or that there was no existing liability. The mere denial in reply notice is insufficient to rebut the presumption. (Paras 5-8)
Issue of Consideration
Whether the trial court erred in acquitting the accused under Section 138 of the Negotiable Instruments Act, 1881 despite the presumption of legally enforceable debt arising from the admitted signature on the cheque.
Final Decision
The appeal is allowed. The judgment and order dated 18/08/2008 passed by the learned Chief Judicial Magistrate, Chandrapur in Summary Case No. 914 of 2006 is set aside. The respondent is convicted for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 and sentenced to pay fine of Rs. 3,50,000/- (Rupees Three Lakhs Fifty Thousand only), in default of payment of fine, to undergo simple imprisonment for three months. The fine amount, if recovered, shall be paid to the appellant as compensation.
Law Points
- Presumption under Section 118 and Section 139 of Negotiable Instruments Act
- 1881 arises when signature on cheque is admitted
- burden shifts to accused to rebut
- stop payment instruction does not absolve liability if cheque was issued for discharge of debt
