Presumption under Section 138 of Negotiable Instruments Act, 1881 and Absence of Legally Enforceable Liability

Presumption under Section 138 of Negotiable Instruments Act, 1881 and Absence of Legally Enforceable Liability in Manufacturing Sector

Section 138 - "Legally Enforceable Liability" - Absence and Effect on Prosecution of Accused in Cases of Cheque Dishonour - "Manufacturing Sector"- "C" was involved in manufacturing industrial gases at its industrial units located in a single State - A5 company had placed order with "C" and material was to be supplied in the same State where "C" was located - "C" alleged that material was supplied as per order and cheques were issued in part consideration of material supplied by C - C alleged that Rs. 2 lacs was already paid and total liability was 9.6 lacs so amount remaining was around Rs. 7.6 lacs - Cheques 1 and 2 were of Rs. 1 lacs - Cheque 3 was of Rs. 5 lacs - Total Amount of cheque was Rs. 7 lacs - Cheques were dishonoured for want of sufficient funds - Accused was a company A5 - A was Chairman of accused Company "A5" - "A2" was Vice President of Accused Company - Magistrate had acquitted the accused - A argued that cheque were issued as security deposit and there was no legally enforceable liability of C - Defence that "A" raised was that though C supplied material "C" did not supplied original order form, delivery challans, and other documents which would show sale of goods and delivery of such goods to A - Magistrate noted that C failed to produce such documents - Magistrate concluded that presumption has been rebutted by accused A - Held, when C failed to produce delivery memo, invoice memo with complaint or with affidavit of evidence by arguing that such records are bulky, there was no explanation of gap of more than 1 month between date of cheque and actual date of depositing cheque, then acquittal of accused A would be justified - Held, that presumption under S.139 of N.I Act, is a rebuttable one and the standard of proof required for rebutting the presumption shall not be as strong as a standard of proof required for proving case of prosecution - Order of Magistrate acquitted the accused is valid - Acquittal of A5, A and A2 was appropriate. - M/s Aditya  Air Products  Private Ltd. v M/s  Saarth Engineering and  Construction Pvt. Ltd [2014] GCtR 6486 (Nagpur, Bombay)