Case Note & Summary
The appellant, Vithal @ Vithoba Gorakh Shinde, was the original complainant in a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) against the respondent, Sangram Narsing Panchal. The complainant alleged that he advanced Rs.35,000/- to the accused for furniture work, but the accused failed to commence work and later issued a cheque dated 25.11.1997 for the same amount towards repayment. The cheque was dishonoured on 26.11.1997 with the endorsement 'Account Closed'. The complainant issued a statutory notice on 26.11.1997, which was served on the accused, but the accused did not pay. The trial court acquitted the accused, holding that the debt was not legally enforceable as the transaction was for furniture work and not a loan. The High Court allowed the appeal, setting aside the acquittal. The court held that the presumption under Section 139 of the NI Act applies, and the accused failed to rebut it. The dishonour due to 'Account Closed' is covered under Section 138. The court convicted the accused and sentenced him to simple imprisonment for one year and directed payment of Rs.35,000/- as compensation, in default, further imprisonment for three months.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Presumption under Section 139 - The complainant proved issuance of cheque for Rs.35,000/- towards repayment of advance, dishonour due to 'Account Closed', and service of statutory notice. The accused failed to rebut the presumption that the cheque was issued for discharge of a legally enforceable debt. The trial court's acquittal was based on erroneous reasoning that the debt was not legally enforceable due to the nature of the transaction. Held that the accused's defence was not proved and the acquittal was set aside. (Paras 1-10) B) Negotiable Instruments Act - Dishonour of Cheque - 'Account Closed' - The dishonour of a cheque on the ground that the account is closed falls within the ambit of Section 138 of the NI Act, as it amounts to non-payment due to insufficiency of funds or other reasons. The drawer cannot escape liability by closing the account before the cheque is presented. (Paras 5-6) C) Negotiable Instruments Act - Statutory Notice - Section 138 - The complainant issued a statutory notice on 26.11.1997 after dishonour, which was served on the accused. The accused failed to make payment within 15 days of receipt. The requirement of valid notice was satisfied. (Paras 4-5)
Issue of Consideration
Whether the acquittal of the accused for offence under Section 138 of Negotiable Instruments Act, 1881 was proper in light of the evidence on record, particularly when the cheque was dishonoured due to 'Account Closed' and the accused failed to rebut the presumption under Section 139 of the Act.
Final Decision
Appeal allowed. Judgment and order of acquittal dated 21.10.2000 passed by 3rd Jt. Judicial Magistrate First Class, Latur in STCC No.5427/1997 is set aside. Respondent/original accused is convicted for offence under Section 138 of Negotiable Instruments Act, 1881 and sentenced to suffer simple imprisonment for one year and to pay compensation of Rs.35,000/- to the complainant, in default, to suffer simple imprisonment for three months.
Law Points
- Presumption under Section 139 of Negotiable Instruments Act
- 1881
- Burden of proof on accused to rebut presumption
- Dishonour of cheque on ground of 'Account Closed' amounts to dishonour under Section 138
- Requirement of valid statutory notice
- Liability of drawer despite closure of account
