Case Note & Summary
The appeal was filed by the complainant (appellant) against the judgment of acquittal passed by the Judicial Magistrate First Class, Banhatti, in C.C. No. 755/2006, acquitting the accused (respondent) for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881. The complainant alleged that the accused, who was running a finance business named OM Finance Corporation in the premises of Veerabhadreshwar temple, had borrowed a sum of Rs. 1,00,000 from the complainant and issued a cheque dated 15.03.2006 drawn on State Bank of India, Banhatti, towards repayment. When the cheque was presented for encashment, it was dishonoured with an endorsement 'funds insufficient'. The complainant issued a legal notice dated 10.04.2006, which was served on the accused, but the accused failed to make payment within the statutory period, leading to the filing of the complaint. The trial court acquitted the accused on the ground that the complainant failed to prove that the accused had borrowed the amount and that the cheque was issued towards repayment of a legally enforceable debt. The High Court, after hearing both sides, framed the question whether the trial court was justified in acquitting the accused. The court noted that the accused admitted his signature on the cheque and did not dispute the receipt of the legal notice. The court held that the presumption under Section 139 of the NI Act operates in favour of the complainant that the cheque was issued for discharge of a debt or liability. The accused failed to rebut this presumption by adducing evidence. The defence that the cheque was given as security was not proved. The court found that the trial court had erred in acquitting the accused. Accordingly, the appeal was allowed, the judgment of acquittal was set aside, and the accused was convicted under Section 138 of the NI Act. The accused was sentenced to pay a fine of Rs. 1,25,000, in default to undergo simple imprisonment for six months. Out of the fine amount, Rs. 1,20,000 was ordered to be paid as compensation to the complainant.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Presumption under Section 139 - Rebuttal - The complainant proved the execution of the cheque and the existence of a debt; the accused failed to rebut the presumption of legally enforceable debt. The trial court's acquittal was set aside. (Paras 2-10) B) Negotiable Instruments Act - Legally Enforceable Debt - Section 138 - The accused admitted his signature on the cheque and did not dispute the debt; the defence that the cheque was given as security was not proved. The appellate court held that the accused was liable for conviction. (Paras 5-10)
Issue of Consideration
Whether the trial court was justified 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 the same.
Final Decision
Appeal allowed. Judgment of acquittal dated 28.09.2010 in C.C. No. 755/2006 passed by JMFC, Banhatti, is set aside. Respondent/accused is convicted for offence under Section 138 of Negotiable Instruments Act, 1881. Sentenced to pay fine of Rs. 1,25,000, in default to undergo simple imprisonment for six months. Out of fine, Rs. 1,20,000 to be paid as compensation to appellant/complainant.
Law Points
- Presumption under Section 139 of Negotiable Instruments Act
- 1881
- Rebuttal of presumption
- Legally enforceable debt or liability
- Standard of proof in cheque dishonour cases
