Case Note & Summary
The appellant, Sami Labs Limited, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, against the respondent, M.V. Joseph, a former employee. The appellant alleged that the respondent was granted a housing loan of Rs. 5,00,000, which he agreed to repay with interest. After resigning from service, the respondent issued a cheque dated 21.08.2007 for Rs. 5,00,000 drawn on UTI Bank towards repayment of the loan. The cheque was presented for collection but was dishonoured with the endorsement 'Account Closed'. A legal notice was sent, but the respondent failed to pay the amount. The trial court acquitted the respondent, holding that the appellant failed to prove the loan and that the cheque was not issued for a legally enforceable debt. The High Court, on appeal, examined the evidence, including the testimony of the appellant's witness and the respondent's admission of issuing the cheque. The court noted that the respondent admitted his signature on the cheque and that the cheque was issued to the appellant. The court applied the presumption under Section 139 of the N.I. Act, which raises a presumption that the cheque was issued for discharge of a debt or liability. The court held that the respondent failed to rebut this presumption. The respondent did not produce any evidence to show that the loan was repaid or that the cheque was not issued for a legally enforceable debt. The mere denial and suggestion that the cheque was given as security were insufficient. The court also noted that the respondent did not examine any witnesses or produce documents to support his defence. The High Court concluded that the trial court's acquittal was perverse and not based on proper appreciation of evidence. The appeal was allowed, the judgment of acquittal was set aside, and the respondent was convicted for the offence under Section 138 of the N.I. Act. The respondent was sentenced to pay a fine of Rs. 5,50,000, in default, simple imprisonment for six months. Out of the fine, Rs. 5,00,000 was ordered to be paid as compensation to the appellant.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Presumption under Section 139 - Rebuttal - The complainant company alleged that the accused, its former employee, issued a cheque for repayment of a housing loan. The cheque was dishonoured. The trial court acquitted the accused, holding that the complainant failed to prove the loan. On appeal, the High Court held that the presumption under Section 139 of the Negotiable Instruments Act, 1881, that the cheque was issued for discharge of a debt or liability, was not rebutted by the accused. The accused's mere denial and failure to produce evidence of repayment or other circumstances did not rebut the presumption. The acquittal was set aside and the accused was convicted. (Paras 1-20) B) Negotiable Instruments Act - Rebuttable Presumption - Section 139 - Standard of Proof - The accused must rebut the presumption under Section 139 by raising a probable defence, not necessarily by proving beyond reasonable doubt. However, the accused must adduce evidence or point to circumstances that create a reasonable doubt about the existence of the debt or liability. In this case, the accused did not produce any evidence to show that the loan was repaid or that the cheque was not issued for a legally enforceable debt. The mere suggestion that the cheque was given as security or for some other purpose was insufficient. (Paras 15-20)
Issue of Consideration
Whether the trial court was justified in acquitting the accused for the offence under Section 138 of the Negotiable Instruments Act, 1881, despite the presumption under Section 139 of the Act and the evidence on record.
Final Decision
The appeal is allowed. The judgment of acquittal dated 08.06.2010 passed by the XII Addl. C.M.M., Bengaluru in C.C.No.448/2008 is set aside. The respondent is convicted for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881. The respondent is sentenced to pay a fine of Rs.5,50,000/- (Rupees Five Lakhs Fifty Thousand only), in default, to undergo simple imprisonment for six months. Out of the fine amount, Rs.5,00,000/- (Rupees Five Lakhs only) shall be paid as compensation to the appellant.
Law Points
- Presumption under Section 139 of Negotiable Instruments Act
- 1881
- Rebuttal of presumption
- Standard of proof for rebuttal
- Dishonour of cheque under Section 138 of Negotiable Instruments Act
