Case Note & Summary
The appellant, APS Forex Services Pvt. Ltd., a foreign exchange business, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the respondents, Shakti International Fashion Linkers and others, alleging dishonour of a cheque for Rs.9,55,574/-. The appellant claimed that the respondents availed foreign exchange services and paid partially, leaving a balance of Rs.12,55,513/-. The respondents issued four cheques that were dishonoured, and later issued a consolidated cheque which was also dishonoured due to 'stop payment'. The trial court acquitted the respondents, holding that the appellant failed to prove legal liability. The High Court dismissed the leave to appeal, confirming the acquittal. The Supreme Court allowed the appeal, holding that the courts below erred in not applying the presumption under Section 139 of the Act. The Court noted that the accused admitted issuance of the cheque and signature, and even admitted part payment and some amount due. The presumption under Section 139 that the cheque was issued for a legally enforceable debt arose, and the accused failed to lead evidence to rebut it. The Court set aside the acquittal and convicted the respondents under Section 138, sentencing them to pay the cheque amount as compensation.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Presumption under Section 139 - Rebuttal - The appellant-complainant alleged that the respondent-accused issued a cheque for Rs.9,55,574/- which was dishonoured due to 'stop payment'. The accused admitted issuance and signature but claimed the cheque was given as security. The trial court and High Court acquitted the accused, holding that the complainant failed to prove legal liability. The Supreme Court held that once issuance and signature are admitted, the presumption under Section 139 of the Negotiable Instruments Act, 1881 that the cheque was issued for a legally enforceable debt arises. The accused must lead evidence to rebut this presumption; mere assertion of security is insufficient without evidence. The courts below erred in shifting the burden to the complainant. (Paras 5-10) B) Negotiable Instruments Act - Presumption - Section 139 - Burden of Proof - The Supreme Court reiterated that under Section 139 of the Negotiable Instruments Act, 1881, the court must presume that the cheque was issued for discharge of a debt or liability. This presumption is rebuttable, and the burden of proving otherwise lies on the accused. In the absence of evidence to rebut the presumption, the accused cannot be acquitted. (Paras 6-7) C) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Stop Payment - The accused issued a fresh consolidated cheque after earlier cheques were dishonoured for 'insufficient funds'. The subsequent cheque was returned unpaid due to 'stop payment'. The Supreme Court held that the issuance of a fresh cheque after earlier dishonour strengthens the presumption of liability. The accused's failure to lead evidence to rebut the presumption resulted in conviction. (Paras 5, 10)
Issue of Consideration
Whether the courts below erred in acquitting the accused under Section 138 of the Negotiable Instruments Act, 1881 despite the presumption under Section 139 of the Act and the accused's failure to rebut it.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned judgments of the High Court and the trial court, and convicted the respondents for the offence under Section 138 of the Negotiable Instruments Act, 1881. The respondents were directed to pay the cheque amount of Rs.9,55,574/- as compensation to the appellant within eight weeks, failing which they shall undergo simple imprisonment for six months.
Law Points
- Presumption under Section 139 of Negotiable Instruments Act
- 1881 is rebuttable
- once issuance of cheque and signature are admitted
- burden shifts to accused to prove absence of legally enforceable debt
- failure to lead evidence to rebut presumption leads to conviction.
