Presumption under S.139 and Conviction in case of Cheque Dishonour under Negotiable Instruments Act, 1881

Presumption under S.139 and Conviction in case of Cheque Dishonour under Negotiable Instruments Act, 1881 

Blank Cheques And Unsustainable Defences of Accused

In the case of T.P. Murugan Pvt Ltd v. Bojan [2018] GCtR 6461 (SC), a complaint was filed under S.138 of Negotiable Instruments Act, 1881. Here, the argument made by accused was centred around 10 blank cheques.

In this case, Z (Complainant) had resigned as Director of Company after which M remained in charge of company. M had issued 2 cheques in favour of Z towards discharge of liability for the investments. The cheques were presented for encashment on 03.02.2003 by Z, which were dishonoured due to “Stop Payment” instructions issued by the M. 

With respect to the two cheques which were dishonoured, M (Accused) contended that these were amongst 10 blank cheques signed and handed over to the appellant-K.Posa Nandhi as security, when he borrowed Rs.5,00,000/- in 1995. It was also argued by accused that even though this loan was re-paid in 1996 with interest, the cheques were not returned  and M had issued a letter on 09.11.2002 asking the appellants to return the 10 blank cheques.

The Trial Court found that M had admitted his signatures both on the Pronote and also on the two cheques for Rs. 37,00,000/- and Rs.14,00,000/- respectively. M also admitted that Z had invested capital in their concern viz. M/s. Maanihada Tea Factory. The Court disbelieved the version of the accused (M) with respect to the 10 blank cheques issued to Z in 1995. M failed to place any material on record to show that he had ever asked for return of the 10 blank cheques, allegedly given by him to M, for seven years. M was found guilty under S. 138 of the N.I. Act, and was sentenced by Trial Court to undergo R.I. for six months and Fine of Rs.5000/-, failing which, he shall undergo one month’s R.I.

The District and Sessions Judge held that the presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881 was not rebutted by accused. It was proved by the complainants that there were insufficient funds in the bank account of M(accused) at the time of issuance of the cheques. M(accused) had with mala fide intention issued “Stop Payment” instructions. M(accused) failed to give any explanation as to how the Pronote came into possession of Z. Furthermore, the Sessions Court discarded the evidence adduced by the accused, of DW.2 Mahesh, as being an interested witness, who had falsely stated that he was an employee of N.R.R. Finances. This was rebutted by two witnesses viz. PW.2 and PW.4, who were Directors of N.R.R. Finances who deposed that DW.2 was never employed by this Company. The District and Sessions Court affirmed the conviction and sentence awarded by the Trial Court.

HC, however, set aside the Judgment of conviction. 

Complainant approached Supreme Court challenging the acquittal of accused M.

It was held that under Section 139 of the N.I. Act, 1881 once a cheque has been signed and issued in favour of the holder, there is statutory presumption that it is issued in discharge of a legally enforceable debt or liability. This presumption is a rebuttable one, if the issuer of the cheque is able to discharge the burden that it was issued for some other purpose like security for a loan.

In the present case, M(accused) has failed to produce any credible evidence to rebut the statutory presumption. This would be evident from the following circumstances:- (i) The respondent-accused issued a Pronote for the amount covered by the cheques, which clearly states that it was being issued for a loan; (ii) The defence of the M(accused) that he had allegedly issued 10 blank cheques in 1995 for repayment of a loan, has been disbelieved both by the Trial Court and Sessions Court, on the ground that M did not ask for return of the cheques for a period of seven years from 1995. This defence was obviously a cover-up, and lacked credibility, and hence was rightly discarded. (iii) The letter dated 09.11.2002 was addressed by M after he had issued two cheques on 07.08.2002 for Rs.37,00,000/- and Rs.14,00,000/- knowing fully well that he did not have sufficient funds in his account. The letter dated 09.11.2002 was an after-thought, and was written to evade liability. This defence also lacked credibility, as Z had never asked for return of the alleged cheques for seven years. (iv) The defence of M(accused) that the Pronote dated 07.08.2002 signed by him, was allegedly filled by one Mahesh-DW.2, an employee of N.R.R. Finances, was rejected as being false. DW.2 himself admitted in his cross-examination, that he did not file any document to prove that he was employed in N.R.R. Finances. On the contrary, the appellants - complainants produced PW.2 and PW.4, Directors of N.R.R. Finances Investment Pvt. Ltd., and PW.3, a Member of N.R.R. Chit funds, who deposed that DW.2 was never employed in N.R.R. Finances. 

Z (Complainants) have proved their case by overwhelming evidence to establish that the two cheques were issued towards the discharge of an existing liability and legally enforceable debt. M(accused) having admitted that the cheques and Pronote were signed by him, the presumption under S.139 would operate. M(accused) failed to rebut the presumption by adducing any cogent or credible evidence. Hence, his defence was rejected.