Case Note & Summary
The complainant, Ajay Shetty, proprietor of M/s. Pride Industries, filed two complaints against the accused, Savio Faria, proprietor of Grace Marketing, under Section 138 of the Negotiable Instruments Act, 1881, for dishonour of two cheques. The complainant had supplied lubricants, auto polishes, etc., to the accused from August 1999 to January 2002. The accused issued two cheques: one for Rs.15,200 dated 18.10.2002 drawn on Ratnakar Bank Limited, and another for Rs.50,000 dated 11.11.2002 drawn on Union Bank of India. Both cheques were presented for payment and returned unpaid due to 'insufficient funds' and 'exceeds arrangements' respectively. The complainant issued statutory notices, but the accused did not pay. The accused's defence was that the cheques were given as security deposit in June 2000. The trial court acquitted the accused, holding that the complainant failed to prove that the cheques were issued for a legally enforceable debt. The High Court reversed the acquittal, holding that the presumption under Section 139 of the Act applied and the accused failed to rebut it. The court noted that the accused did not examine any witness or produce any document to support his defence. The court also observed that the accused's admission of liability in a writing (Exhibit 21/C) further supported the complainant's case. The High Court convicted the accused under Section 138 of the Act and sentenced him to pay a fine of Rs.1,00,000 on each cheque, with default simple imprisonment for six months, and directed that the fine amount be paid as compensation to the complainant.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Presumption under Section 139 - Rebuttal - The accused failed to rebut the presumption that the cheques were issued for discharge of a debt or liability, as the defence of security deposit was not proved on a preponderance of probabilities - Held that the trial court erred in acquitting the accused (Paras 8-12). B) Negotiable Instruments Act - Dishonour of Cheque - Burden of Proof - The initial burden on the accused to rebut the presumption is not as heavy as that on the complainant, but the accused must adduce evidence to show that the cheque was not issued for a debt or liability - Held that the accused's mere statement that the cheques were given as security deposit, without corroboration, was insufficient (Paras 8-12).
Issue of Consideration
Whether the accused successfully rebutted the presumption under Section 139 of the Negotiable Instruments Act, 1881 that the cheques were issued for discharge of a debt or liability, and whether the acquittal by the trial court was justified.
Final Decision
The appeals are allowed. The judgment of acquittal dated 23.4.2004 is set aside. The accused is convicted under Section 138 of the Negotiable Instruments Act, 1881 for both cheques. For each cheque, the accused is sentenced to pay a fine of Rs.1,00,000, in default simple imprisonment for six months. The fine amount, if recovered, shall be paid to the complainant as compensation.
Law Points
- Presumption under Section 139 of Negotiable Instruments Act
- 1881
- Rebuttal of presumption
- Burden of proof on accused
- Dishonour of cheque for insufficiency of funds
- Security deposit defence
