This article is written by Prashant Prasad. The present article exhaustively discusses Section 139 of the Negotiable Instruments Act, 1881 along with the landmark cases associated with it. Furthermore, this article discusses the effect of presumption under this Section and how such presumption can be rebutted. The article also draws a comparative analysis of the presumption under Section 118(a) and Section 139 of the Negotiable Instrument Act, 1881.
Table of Contents
Introduction
In the primitive age, there used to exist a barter system, and no such mechanism was there on the basis of which the transaction could have been done through any negotiable instruments. However, as society evolved there was a compelling need for a common medium for the exchange, and to address the other crucial problems related to the transaction, an Act was introduced, namely the Negotiable Instrument Act, 1881 (hereinafter referred to as “the Act”). This Act is a significant legislation that provides the mechanism for the regulation of negotiable instruments such as promissory notes, bills of exchange, and cheques. The Act was enacted in the year 1881, and prior to that, the English Negotiable Instrument Act was applicable. The present Act is based on the English Act with certain alterations that suit the Indian context.
The main aim behind the enactment of this Act was to ensure a uniform legal framework for the use of different negotiable instruments in the country. The Act makes sure that any kind of transaction through the negotiable instrument must be simple and efficient. Furthermore, the Act provides the legal framework and remedies in case of any dispute related to the negotiable instrument. The Act only deals with three types of negotiable instruments which are promissory notes, bills of exchange, and cheques. A promissory note refers to the written promise to pay a specific amount of money to the person whose name is mentioned in the promissory note. The bill of exchange refers to a written order binding one party to pay a specific sum of money to another party on demand or at a fixed date. Lastly, a cheque is a written order that is made to the bank to pay a certain sum of money to the payee (i.e., the person in whose favour the payment is to be made).
Chapter 17 of the Act, which includes Sections 138–147, majorly deals with the portion of “penalties in case of dishonour of cheques” and the other important elements associated with it. This chapter was brought in by the 1988 Amendment (w.e.f 1-4-1989). This article tries to bring out a detailed analysis of Section 139 of the Act, which deals with the presumption in favour of the holder.
Principles relating to presumption under Section 139 of Negotiable Instruments Act, 1881
In the case of Basalingappa vs. Mudibasappa (2019), the court summarised the various principles relating to the presumption under Section 139 of the Act, are as follows –
- If the execution of the cheque has been admitted, then it is presumed that the cheque was issued for discharging the debt or liabilities.
- This presumption is a rebuttable presumption and the accused can challenge such presumption. The accused can show a probable defence on his part and the standard of proof for rebutting the presumption is a preponderance of probability.
- The accused can present their own evidence or else the accused can use the complainant’s evidence to support their defence and rebut the presumption.
- The court can infer from the probabilities and overall circumstance and the evidence presented about the presumption and can also shift the presumption based on the situation.
- The accused need not personally testify to rebut the presumption, as Section 139 of the Act imposes an evidentiary burden and not a persuasive burden.
Section 138 vis-à-vis Section 139 of Negotiable Instruments Act, 1881
Section 138 of the Act provides criminal liability in case of the dishonour of cheques and further Section 139 of the Act provides the rule of presumption that the holder of the cheque has received the cheque for discharging the whole or part of the debt or liability.
The presumption under Section 139 arises after fulfilling some of the basic ingredients that are covered under Section 138 of the Act. Therefore before understanding the presumption under Section 139, one needs to be well-versed with Section 138 of the Act. Section 138 of the Act lays down the punishment in case of the dishonour of the cheque. For raising criminal liability under Section 138 of the Act, the following ingredients must be satisfied –
- The drawer must have drawn a cheque on an account that is maintained by him, for the payment of a certain sum of money to another person.
- The cheque that is being issued by the drawer must have been issued for discharging some debts or liabilities. The debt or liability may be discharged as a whole or in part.
- The cheque given by the drawer must be presented before the bank within the period of 6 months; however, RBI circular dated 4-11-2011 has reduced the period from 6 months to 3 months (w.e.f. 01-04-2012) from the date on which it is drawn by the drawer or within the period of its validity, whichever is earlier.
- The cheque that is presented to the bank must be returned by the bank unpaid, i.e., dishonoured. The dishonour of the cheque might be because of the insufficient amount of money in the account of the drawer or any other reason as the bank may specify.
- When the cheque has been returned by the bank dishonoured, then the holder of the cheque must make the demand of the money mentioned on the cheque by giving notice to the drawer of the cheque. The notice must be issued by the holder of the cheque within the period of 30 days from the receipt of information regarding the dishonour of the cheque.
- The drawer of the cheque must have failed to make the payment within 15 days of receipt of the notice regarding the payment of the money.
If the above-mentioned points have been contravened by the drawer of the cheque, then the criminal liability arises under Section 138 of the Act, and he may be liable for the punishment of imprisonment for a term of up to 2 years or a fine which may extend to twice the amount of cheque or both.
Explanation of Section Section 139 of Negotiable Instruments Act, 1881
Section 139 of the Act provides that unless anything contrary is proved, it shall be presumed that the holder of the cheque has received the cheque for discharging any debt or liability either in whole or in part. It has been stated under Section 138 of the Act that in order to impose criminal liability regarding dishonour of a cheque, the cheque must have been issued in order to discharge the debt or any other liability. However, it is pertinent to note that the presumption made under Section 139 has to be applied only when the case is referred to under Section 138 of the Act, which includes the instance of issuance of the cheque to discharge the liability or debt and further such cheque has been dishonoured by the bank.
As a general rule, the burden of proof is on the complainant to prove beyond a reasonable doubt regarding the certain rights and liabilities that are being asserted by them. However, Section 139 of the Act provides an exception to the general rule, and the onus shifts on the accused.
In the case of Hiten P. Dalal vs. Bratindranath Banargee (2001), it was held by the Hon’ble Supreme Court of India that both Section 138 and Section 139 of the Act required that the court “shall presume” the liability of the drawer for that amount which is mentioned on the cheque. It was further stated that it is obligatory on every court to raise such a presumption where a factual basis for raising such presumption has been established.
Conceptual understanding of presumption under Section 139 of Negotiable Instruments Act, 1881
The literal meaning of the term “presumption” is to consider something as true/false without any proof or in the absence of any examination. The Black Law Dictionary defines presumption as a legal inference or some kind of assumption that the fact exists, based on some known or proven existence of some other facts. The presumption can be of two types i.e. presumption of fact and presumption of law.
- Presumption of fact – Presumption of fact refers to inferences that are naturally drawn from the observation of certain circumstances and the constitution of the human mind. Such presumptions are not conclusive and, hence, rebuttable.
- Presumption of law – Presumption of law can be of two types, i.e. irrebuttable presumption and rebuttable presumption. Irrebuttable presumptions are those presumptions that do not get affected by any evidence that the fact is something else. Irrebuttable presumptions are generally the legal rules that are applied by the court of law in the absence of any conflicting evidence.
Whereas rebuttable presumptions of law are those presumptions that arise when presumptions of law are certain legal rules that define the amount of evidence that is required to support certain allegations, the facts can either be proved or rebutted based on the evidence produced. Such rebuttable presumption can further be divided into two parts i.e. discretionary presumption (may presume) and compulsory presumption (shall presume).
Section 4 of the Indian Evidence Act, 1872, provides three different types of presumption, namely may presume, shall presume, and conclusive proof. Whenever the word ‘may presume’ has been used in the Act then discretion is given to the court to presume certain facts, or the court can refuse to presume such facts. Whenever it is directed by the Act that the court ‘shall presume’, then the court has to presume certain events or facts, and there is no discretion left to the court as there is a legislative command to consider certain facts as proved unless it has been disproved.
The distinction between ‘may presume’ and ‘shall presume’ is that under may presume, the court can choose whether or not to raise these presumptions, whereas with ‘shall presume,’ the court is obligated to raise such presumptions.
Illustrations
- If person A presents a cheque issued by person B, and the bank dishonours a cheque due to insufficient balance then the court ‘shall presume’ that the cheque was issued to discharge the debt or liabilities.
- If person A gives a post-dated cheque to person B the cheque gets bounced when presented before the court. The court under these scenarios ‘may presume’ that the cheque was given to pay a debt based on the situation and evidence present.
Effect of presumption under Section 139 of Negotiable Instruments Act, 1881
Section 139 of the Act takes the form of “shall presume”, and hence, it created the legal presumption that the cheque is issued by the drawer to pay off the debt or other liabilities. Therefore, the court may assume it as correct once certain conditions are met as enshrined under Section 138 of the Act. However, the drawer can further challenge such presumption by providing certain evidence which can rebut such presumption as the phrase ‘unless the contrary is proved’ is mentioned under the Section.
The court will necessarily presume that the cheque has been issued to discharge certain debts and liabilities under two circumstances, which are as follows –
- When the drawer of the cheque admits issuance/execution of the cheque.
- The complainant proves that the cheque was issued/executed by the drawer in the favour of the complainant.
In the case of Bir Singh vs. Mukesh Kumar (2019), it was held by the court that the presumption could take effect even in the situation when it has been contended by the accused that the blank check was voluntarily signed by him and handed over to the complainant. Therefore, it can be inferred that the mere presence of the drawer’s signature on the cheque without admitting or executing the contents of the cheque is sufficient to give rise to the presumption.
In the case of Maruti Udyog Ltd. vs. Narender (1998), it was held by the Hon’ble Supreme Court of India that a presumption must be drawn under Section 139 of the Act, that the holder of the cheque received the cheque of nature which is referred under Section 138 of the Act for the discharge of any debt and other liabilities unless the contrary is proved.
Rebuttal of presumption under Section 139 of Negotiable Instruments Act, 1881
The accused has the full right to rebut the presumption and prove anything contrary to the presumption that contests the validity regarding the existence of debt or liability. The incorporation of the phrase ‘until the contrary is proved’ in Section 139 of the Act gives us the idea that the presumption can be rebutted if anything contrary is being proved by the accused relating to the presumption.
Therefore, it can be said that the presumption made under Section 139 is a rebuttable presumption, and the accused can prove that the cheque was not issued to discharge the debt or liability. For rebutting the presumption, the accused can employ either direct or circumstantial evidence to prove that there were no debts or liability. However, it is pertinent to note that merely denying the existence of the debt or liability will not serve the purpose, and the accused must prove the fact beyond a reasonable doubt in order to shift the burden of proof towards the complainant.
As a result, it can be inferred that the accused has been left with two major options in order to rebut the presumption, which are as follows-
- Firstly, the accused can present strong evidence supporting the claim that the cheque was issued not to discharge any debt or liabilities. The evidence must be certain, which clearly shows no such debt or liability exists.
- Secondly, the accused can argue that there is no debt or liabilities based on the circumstances of the case. This method is known to prove, by a preponderance of probability, that various pieces of evidence can be used by the accused to rebut such presumption on the basis of circumstantial evidence such as the original complaint of the complainant, legal notice for demand of money, the reply of accused on the notice of demand, or any other evidence related to the cheque.
Important cases on rebutting the presumption under Section 139 of Negotiable Instruments Act, 1881
K.N. Beena vs. Muniyappan (2001)
In this case, it was held by the court that mere denial of the fact on the part of the accused that there is no debt or liability does not rebut the presumption against him. The accused must prove in the trial of the case with some cogent evidence that no debt or liability exists.
Bir Singh vs. Mukesh Kumar (2019)
In this case, it was held by the Supreme Court of India that a meaningful reading of some of the provisions of the Act, particularly Sections 20, 87, and 139, makes it clear that a person who signs a cheque and gives it to another person then he is responsible for the cheque even if the cheque is a postdated cheque or a blank cheque, and it will be presumed that the cheque was issued for discharging some debt or liabilities. However, this presumption can be rebutted by adducing some strong evidence that the cheque was issued not to discharge the debt or liabilities.
Shiv Kumar alias Jawahar Saraf vs. Ramavtar Agarwal (2020)
Facts
In the present case, a postdated cheque was issued by the appellant to the complainant amounting to Rs. 7.8 crore. When that cheque was given to the bank for the withdrawal of money, it was dishonoured by the bank. As a result, the complainant of the case served a legal notice demanding the amount of money mentioned on the cheque. The appellant replied to the notice of the complainant by denying the claim made by the complainant. Therefore, a complaint was filed before the court of Judicial Magistrate of First Class. The Magistrate, after considering the circumstances and the nature of the complaint, took cognizance and registered a criminal complaint against the appellant. Aggrieved by the action of the magistrate, the appellant filed a revision petition before the District Judge to quash the complaint that was registered against him. The revision petition was dismissed by the District Judge. Therefore, the appellant moved to the High Court to quash the complaint that was registered against him, but the High Court also dismissed the plea of the appellant.
Finally, an appeal was filed before the Hon’ble Supreme Court of India for quashing the order of the lower court. It was contended by the appellant that there is no legally enforceable debt or liability on him. It was further stated by him that since there is no legally enforceable debt or liability on him, therefore, there is no point in registering a criminal complaint, and this fact should have been taken into consideration by the lower court. The appellant submitted that the order of the lower court must be quashed. The Hon’ble Supreme Court of India, after considering the facts, circumstances, and contentions in the present case, framed the issues and gave the final verdict.
Issues
The main issue before the Hon’ble Supreme Court of India was whether the court, at the stage of taking cognizance, should look into the question of whether the debt or liability was legally enforceable or not.
Judgment
It was held by the Supreme Court of India that at the stage of taking cognizance, the fact that should be considered by the court is whether there is any prima facie case meeting the condition as mentioned under Section 138 of the Act or not. It was further stated by the court that during the initial phase of the case, after satisfying the essentials of Section 138, there is the presumption of the existence of debt or liability under Section 139 of the Act.
Therefore, the court concluded by stating that since all the essentials of Section 138 are fulfilled, the court is competent to take cognizance and register a criminal complaint. It was further added by the court that the drawer of the cheque has full right to raise the defence with supporting evidence that there is no legally enforceable debt or liability in order to rebut the presumption that is drawn under Section 139 of the Act. Finally, it was held by the court that at the initial phase, there is always a presumption in favour of the complainant, and the lower court has made no fault in taking cognizance and registering the criminal complaint against the accused.
Shifting the burden of proof on the complainant
If there exists the instance wherein the accused satisfies the court on the basis of preponderance of probability or on the basis of any other circumstantial evidence that there is no debt or liability on him as opposed to what is mentioned under the complaint. Then, under that condition, the burden of proof shifts to the complainant, and now the complainant will have to prove the existence of the debt or liability on the part of the drawer of the cheque. Now, if the complainant fails to prove the existence of debt or liability on the part of the accused, then under that condition, the complaint case will be dismissed.
In the case of Rangappa vs. Sri Mohan (2010), the Supreme Court of India considered the presumption under Section 139 of the Act. It was held by the court that if the accused is able to raise the probable defence, which raises doubt regarding the existence of certain debt or liabilities, then under that condition, such presumption may fail. It was further added by the court that the presumption under Section 139 of the Act is the initial presumption, which is in the favour of the complainant. However, such a presumption is a “rebuttable presumption”, and it can be rebutted by the accused by providing sufficient evidence that questions the existence of debt or liabilities on the part of the accused. The court also clarified in the present case that Section 139 of the Act is an example of a reverse onus clause, and hence, the burden of proof later shifts to the complainant.
Therefore, it can be well inferred that once the presumption is rebutted by the accused, then under that condition, the burden of proof shifts to the complainant, who needs to prove that there exists the debt or liability on the part of the drawer of the cheque.
Presumption under Section 118(a) and Section 139 of Negotiable Instruments Act, 1881
Section 118(a) of the Act states that until the contrary is proved, it shall be presumed that every negotiable instrument was made or drawn for consideration. Further, it has been stated that every such instrument, when accepted, endorsed, or negotiated, was accepted, endorsed, or negotiated for consideration. However, Section 139 of the Act states that it shall be presumed unless the contrary is proved that the holder of the cheque received the cheque of the nature mentioned under Section 138 of the Act for the discharge of whole or part of the debt or any other liabilities.
Basis of presumption
Both Section 118(a) and Section 139 of the Act discuss the presumption regarding negotiable instruments. The major focus of Section 118(a) is to presume that every negotiable instrument was transferred for some valid reason, and usually, it involves the consideration for exchange. The basis of a presumption under this section is the existence of consideration for any negotiable instrument.
The primary focus of Section 139 is to presume that the person holding the cheque has received it to discharge debt or liabilities.
Scope
It is pertinent to note that the scope of Section 118(a) is to cover all negotiable instruments and the transactions associated with them, such as acceptance, endorsement, negotiation, or transfer.
On the other hand, Section 139 specifically deals with only one negotiable instrument, i.e. cheque, and its role in discharging debts and liabilities.
Onus/ burden of proof
In both Sections, the initial presumption is in favour of the instrument holder. However, to challenge such a presumption, one must provide strong evidence to disapprove of it. Under Section 118(a), the person who is challenging the presumption should prove that the instrument was not issued or transferred for consideration.
Under Section 139, the person who is challenging the presumption must prove that the cheque was not issued to discharge the debt or other liabilities.
The presumptions, as mentioned under Section 118(a) and Section 139, are of paramount importance as such presumptions simplify the legal processes by supporting the person who is making the claim without the requirement of major evidence. Such presumption encourages the business transaction by providing a sense of security to the people involved in the business transaction, and any of the negotiable instruments form part of the transaction. It can be inferred that such presumption further reduced the fraud and other related disputes as the person rebutting the presumption must provide strong evidence, and therefore, the chances of fraud and other disputes that might arise from the use of negotiable instruments can be eradicated.
In the case of Rajendra Prasad Mittal and Anr. vs. Manish Garg and Anr. (2023), it was held by the Delhi High Court that if the issuance of a cheque is not disputed, then the presumption under Section 118(a) and Section 139 of the Act shall be in favour of the complainant, and it has to be presumed that the cheque was issued towards some legally enforceable debt.
In the case of Krishan Rao vs. Shankargounda (2018), it was held by the Supreme Court of India that on applying the definition of the term “proved” as mentioned under Section 3 of the Indian Evidence Act, 1872 to the provisions of Section 118 and Section 139 of the Act, when the trail is going under Section 138 of the Act. It can be presumed that every negotiable instrument was made or drawn for consideration, and such a negotiable instrument was executed to discharge debt or liabilities once the execution of the negotiable instrument is either proved or admitted. It was further held by the court that such presumption will live, survive, and exist, and it will only end when the contrary is proved by the accused that the cheque was not issued for discharging any kind of debt or liability.
Other presumptions under the Negotiable Instruments Act, 1881
Section 119 of Negotiable Instruments Act, 1881
This Section describes that, if there has been a lawsuit on the instrument which has been dishonoured. Then the court shall, on proof of the protest, will presume the fact of dishonour, unless and until such fact is disapproved.
Section 137 of Negotiable Instruments Act, 1881
This Section discusses the presumption as to foreign law. It has been stated under this Section that, the law of any foreign country pertaining to the promissory note, bill of exchange, and cheque shall be presumed to be the same as that of India, unless and until something contrary is proved.
Section 146 of Negotiable Instruments Act, 1881
It has been described under this Section that if a bank’s slip or memo having an official mark denoting that the cheque has been dishonoured is produced before the court of law, in any proceeding under chapter 17. Then, it shall be presumed that the cheque has been dishonoured, unless and until such fact is disapproved.
Landmark cases on Section 139 of Negotiable Instrument Act, 1881
Rajesh Jain vs. Ajay Singh (2023)
Facts of the case
In the present case, Mr. Ajay Singh, i.e. respondent/accused, along with his wife, approached Mr. Rajesh Jain, i.e. appellant, on 1st March 2014 with a request to lend him some money. It was contended by Mr. Rajesh Jain that the sum of Rs. 6 lacs was lent by him to Mr. Ajay Kumar on a genuine belief that he would return the money as he had promised. Subsequently, Mr. Ajay Kumar failed to repay the money at the time he had promised. Moreover, the accused changed the phone number without any notice to the complainant with the intention of evading the obligation to make the payment that he had previously promised. In the year 2017, the complaint managed to find the accused somehow and at that particular time, the accused sought forgiveness and promised to repay the amount within 3 months from that day. After the expiry of the said period, the accused was not yet found, and he managed to conceal himself for a period of 7 months. Finally, the complainant located him at the new residential address, and in direct confrontation, the accused issued a postdated cheque to the complainant of Rs. 6,95,204 towards the payment that was due. It was further assured by the accused that the due amount would be repaid by issuing another cheque in the month of December 2017.
When the cheque was presented to the bank it was dishonoured due to the insufficient amount of money in the bank. As a result, the complainant issued a legal notice to the accused demanding the amount to be paid, which was mentioned in the cheque within 15 days. The accused did not comply with the demand made by the complainant, and therefore, a complaint under Section 138 of the Act was instituted before the court of Judicial Magistrate, First Class. The Trial Court, as well as the High Court, acquitted the accused on the ground that the accused had rebutted the presumption under Section 139 of the Act. The court ruled that the accused rebutted the presumption by raising genuine doubts about the existence of legally enforceable debts or liabilities. Aggrieved by the decision of the lower court, an appeal was filed before the Hon’ble Supreme Court of India.
Issues of the case
The major issues before the Hon’ble Supreme Court of India were –
- Whether the accused has provided sufficient evidence before the lower court to discharge the presumption under Section 139 of the Act?
- Whether the complainant in the absence of any presumption under Section 139 of the Act, was able to prove beyond the reasonable doubt that the cheque was issued to discharge the debt or liability?
Judgement of the case
The Supreme Court of India ruled that both the lower courts had erred while admitting the evidence in the case. It was observed by the court that once the accused admitted that there was his signature on the cheque, it was the court’s obligation to raise a presumption under Section 139 of the Act. The presumption can be in favour of the complainant that the accused has drawn the cheque to discharge his debt or liability. Thereafter, the burden of proof to rebut such presumption is on the accused either with the help of any strong evidence or on the basis of preponderance of probability that no such debt or liabilities exist.
The court found that the accused failed to rebut the presumption, and the evidence produced was full of contradiction and inconsistencies. It was further stated by the court that the lower court had wrongfully fixed the burden on the complainant to prove his case beyond reasonable doubt. Therefore, the Supreme Court of India set aside the judgement that was delivered by the lower courts and further convicted the accused with a fine of twice the amount of the cheque.
APS Forex Services Pvt. Ltd vs. Shakti International Fashion Linker and Ors. (2020)
Facts of the case
In the present case, the appellant has a business of sale and purchase of foreign exchange, and the accused approached him for the issuance of foreign exchange currency for the sum of Rs. 19,01,320/- and this amount was paid by the complainant through Visa Travel Money Card (VTM). The accused withdrew the said amount on two different days i.e. on 10/01/2014 and on 20/02/2014. It was stated by the complainant that the accused paid the amount of Rs. 6,45,807/- and the amount of Rs. 12,55,513/- was left. The accused issued four cheques to discharge his debts, but all four cheques totalled Rs. 9,55,574/-, which was dishonoured. Subsequently, the accused again issued a cheque of Rs. 9,55,574/- but it was again dishonoured with the reason that it was instructed by the drawer to “stop payment”.
As a result, a legal notice was sent by the complainant to the accused demanding the amount of money, but the accused failed to make the payment of the amount mentioned on the cheque. Therefore, the complainant filed a complaint before the Learned Metropolitan Magistrate. However, it was observed by the Learned Metropolitan Magistrate that there is no legal liability on the accused, as the payment through card was not established nor proved. Therefore, the complaint was dismissed. Aggrieved by the decision of the Learned Metropolitan Magistrate, the complainant filed an appeal before the Learned Session Judge, even the session judge dismissed the appeal on the ground that the said appeal is not maintainable. Thereafter, an appeal was filed before the High Court, but the High Court confirmed the order of acquittal of the lower court and dismissed the appeal. Finally, the case came before the Hon’ble Supreme Court of India by way of an appeal for a final decision.
Issues of the case
The main issue before the court was to determine whether there was any legally enforceable debt or liabilities.
Judgement of the case
It was observed by the Supreme Court of India that once the cheque is issued and the signature on the cheque is admitted, then, as per Section 139 of the Act, presumption is made in favour of the complainant. The presumption based on this Section is the existence of debt or liabilities on the part of the accused. It was stated by the court that the burden of proof is on the accused to rebut the presumption that there is no such debt or liabilities on him.
The Supreme Court of India held that no such evidence had been put forward by the accused to prove his innocence or to rebut the presumption. Therefore, the Supreme Court of India concluded that both the Trial Court and the High Court had made the mistake of not appreciating the presumption in favour of the complainant. As a result, the judgement and the order passed by the Trial Court, as well as the High Court, were quashed and set aside.
Rangappa vs. Sri Mohan (2010)
Facts of the case
In the present case, the appellant, i.e., the accused, was a mechanic and had engaged the service of the respondent, i.e., the complainant. The complainant was the civil engineer, and he was responsible for supervising the construction of the house of the accused. Both the accused and the complainant were residents of Ranebennur, Karnataka, and they were well acquainted with each other.
It was stated by the complainant that the accused had requested a home loan of Rs. 45,000 to meet the needs of construction in October 1998. The complainant paid the said amount via cash, and it was assured by the accused that the loan would be repaid by October 1999. However, he failed to make the payment and asked for an extension till December 2000. The accused had then issued a postdated cheque for 8/02/2001 to the complainant for the amount of Rs. 45,000. The complainant presented the cheque on 8/02/2001 before the bank for encashment. However, on 16/02/2001, a return memo was issued by the bank stating that “payment has been stopped by the drawer”, and the same memo was handed over to the complainant on 21/02/2001. As a result, a legal notice was issued to the accused relating to the matter, but the accused failed to give the reply as prescribed under Section 138 of the Act. Thereafter, the complainant filed a complaint under Section 200 of the Criminal Procedure Code, 1973, against the accused for the offence punishable under Section 138 of the Act.
It was contended by the accused that the cheque in question was the blank cheque bearing his signature, which had been lost and ended up in the hands of the complainant, who was misusing the cheque. It was further stated by the accused that there is no legally enforceable debt or liability among the parties, and he has not demanded any loan as alleged by the complainant.
The trial court ruled in favour of the accused as the court took into consideration some of the discrepancies on the part of the complainant. Aggrieved by the decision of the Trial Court, an appeal was filed to the High Court and thereby, the High Court reversed the findings of the trial court and convicted the accused. Finally, the appeal was filed by the accused, and the Hon’ble Supreme Court of India made the final decision.
Issues of the case
- The major issue associated with the case was what is the proper interpretation of Section 139 of the Act, which shifts the burden of proof on the accused in respect of dishonour of the cheque?
- What is the manner in which the statutory presumption under Section 139 of the Act can be rebutted?
Judgement of the case
The Apex Court stated that in case of dishonour of cheque, the court has to consider whether the ingredients mentioned under Section 138 of the Act have been fulfilled. In case the conditions are fulfilled, then the court needs to observe whether the accused was able to rebut the statutory presumption as enshrined under Section 139 of the Act in order to discharge the liability present on the accused. The Apex Court considered that Section 138 of the Act could be attracted in the situation when the cheque was dishonoured on account of the instruction to “stop payment” sent by the accused to the bank.
The Supreme Court observed that in the present scenario, the presumption can be raised under Section 139 of the Act, which includes the existence of legally enforceable debt or liabilities. Ultimately, the Apex Court supported the decision of the High Court, and it was held that there was no reason as such to interfere with the judgement of the High Court and the appeal was dismissed.
Conclusion
Section 139 of the Act plays a crucial role in the situation wherein the cheque has been dishonoured by establishing a general presumption that the cheque was issued to discharge the debt or liability. However, it is pertinent to note that the presumption can be rebutted by the accused either by providing some conclusive proof or demonstrating on the balance of probability that such debt or liability is not in existence. This opportunity given to the accused ensures fairness in the adjudication of the matter, along with safeguarding the rights of both parties present in the dispute. In contemporary times, Section 139 of the Act offers great benefits to the parties by simplifying the entire process in the case of cheque dishonour.
The presumption made can sometimes be problematic for the person who issues the cheque for some other reasons, and the legal consequence might be faced by him because of such issuance, although the party issuing the cheque does have the right to rebut the presumption. However, rebutting the presumption by proving the non-existence of certain debts or liabilities can be burdensome for the accused. This problem can be overcome if there can be certain reform in the present provision regarding the presumption by providing clear exceptions or guidelines in order to enhance effectiveness and fairness in the entire process. Despite encountering some challenges and ambiguities in certain situations, Section 139 of the Act remains a crucial provision that enhances the integrity of the translation among the parties and contributes significantly to the reliability of negotiable instruments.
Frequently Asked Questions (FAQs)
What are the consequences if the accused fails to rebut the presumption under Section 139 of the Act?
In case the accused fails to rebut the presumption, then under that condition, the court, on proper satisfaction that the conditions of Section 138 of the Act are fulfilled, may convict the accused in accordance with the punishment prescribed under Section 138 of the Act.
Does Section 139 of the Act apply to all kinds of negotiable instruments?
No, Section 139 of the Act merely applies to one negotiable instrument, i.e. cheque. For other negotiable instruments, this provision is not applicable.
Is there any specific situation in which the accused need not rebut the presumption and still be discharged from the presumption made under this Section?
If there exists a situation wherein the complainant fails to prove that the cheque was issued by the drawer, then under that situation, the accused need not rebut the presumption, as the presumption under Section 139 will not be invoked.
Can circumstantial evidence be used by the accused to rebut the presumption?
Third-party evidence or circumstantial evidence may be used by the accused to rebut the presumption. However, the circumstantial evidence should point out the fact that there is no existing debt or liabilities in existence on the of the accused.
References
- https://www.taxmann.com/research/fema-banking-insurance/top-story/105010000000017486/rebuttal-under-section-139-of-ni-act-when-and-how-experts-opinion
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3332572
- https://www.scconline.com/blog/post/2023/10/12/explained-supreme-court-verdict-principles-of-presumption-evidential-burden-under-ni-act/
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