Cheque Dishonour, Privity of Contract and Acquittal under S.138 of Negotiable Instruments Act, 1881

Cheque Dishonour, Privity of Contract and Acquittal under S.138 of Negotiable Instruments Act, 1881

In this case dealing with Section 138 of Negotiable Instruments Act, 1881 accused was acquitted in Kanti Lal V. Jain v. Kutiappa Silks [2017] GCtR 6596 (Madras). 

In this case complainant argued that the accused did not deny the execution of the cheques and therefore, the presumption under Sec.139 of the Negotiable Instruments Act should have been invoked to uphold the conviction and sentence.

It was the specific case of the complainant that there was no privity of contract between the complainant and the accused and that the accused had issued the impugned cheques to Mr.Rajkumar Chopda, who, in turn, has discounted the cheques with the complainant. Thus, the complainant is a “holder in due course” and in law, he can maintain a complaint for an offence punishable under Sec.138 of Negotiable Instruments Act. On that Court observed that it should have to be seen whether the complainant had proved that the cheques were issued by the accused in discharge of a legally enforceable debt to Mr.Rajkumar Chopda. 

Admittedly, in this case, Mr.Rajkumar Chopda was not examined as witness. The presumption under Sec.139 of Negotiable Instruments Act can be invoked only if the complainant proves beyond  reasonable doubt certain minimum facts. In this case, the accused examined himself as witness and has established that 32 cheques were given to Mr.Rajkumar Chopda in trust and not towards discharge of any legally enforceable debt and that, when Mr.Rajkumar Chopda did not supply the materials, for which, the cheques were issued, the accused had given instructions to their bank for “ stop payment”. The accused also filed a suit in O.S.No.668 of 2005 against Mr.Rajkumar Chopda for mandatory injunction directing him to return the impugned cheques. That apart, Mr.Rajkumar Chopda has issued two indemnity bonds dated 03.12.2004, which were marked as Exs.D.7 and D.8, wherein, he had undertaken to return the cheques, as he was not able to procure the textile goods from North India for supplying to the accused.

Acquitting the accused it was held that in a criminal case, it is not necessary for the accused to disprove the case of the prosecution beyond reasonable doubt. If the accused is able to satisfy the court by legally acceptable evidence that the case of the prosecution lacks bona fide, the accused will be entitled to benefit of doubt.