Cheque Dishonour and Probable Defence for Acquittal under S.138 of Negotiable Instruments Act, 1881

Cheque Dishonour and Probable Defence for Acquittal under Section 138 of Negotiable Instruments Act, 1881

In an interesting decision [Hari Kishan v. Ranjeet [2015] GCtR 6584 (Delhi)], acquittal of accused under S.138 of Negotiable Instruments Act, 1881 was found justified. In this case, the accused had been able to rebut the statutory presumption by raising a probable defence. The accused denied having requested the complainant for a loan of Rs.23,70,000/- in the month of June-July 2008, or that he undertook to pay the same before January 2009. After noting that complainant has not been able to explain why, and in what circumstances he claimed to have given blank signed papers to the accused, conviction of accused was found without merit.  It was held that when the case set up by the holder of the cheque itself was dubious, initial presumption u/s. 118 & 139 of NI Act, 1881 itself comes to an end. 

Date of Issuance of Cheque and its Effect on Acquittal in Section 138 of the Negotiable Instruments Act, 1881

Date of Issuance of Cheque and its Effect on Acquittal in Section 138 of the Negotiable Instruments Act, 1881  

In an interesting case [Ghanshyam D. Katira v. Sanjay J. Ganatra [2015] GCtR 6582 (Bombay)], the defence of the accused in case under Section 138 of Negotiable Instruments Act, 1881 is that he had not taken any loan of Rs.1,50,000 from the complainant. 

It was held that when cheque No.440855 had been issued in the year 1998, the possibility of the next cheque – bearing No. 440856 – having been issued in the year 2006 – i.e. after a gap of eight years – is rather remote; and this aspect is capable of rendering the version of the accused, plausible. The accused was acquitted.

The other issue noted was that there is also some confusion as to whether the loan in question was given by the complainant in his capacity as a 'money lender'.  It is not only because the same has been described as a 'friendly loan', but also because the money lenders business is being done by the complainant in the name of 'Harshal Money Lender'.   The cheque has not been issued in favour of 'Harshal Money Lender'. 

HC noted that the version of the complainant about the date, on which a loan was advanced to the accused, and the   date   on   which   the   accused   gave   a   cheque   towards   the purported repayment thereof, cannot be relied upon.   The story put forth by the complainant cannot be accepted as true.

Rebuttal of Presumption and Acquittal for Cheque Dishonour under S.138 of NI Act, 1881

Rebuttal of Presumption and Acquittal for Cheque Dishonour under S.138 of NI Act, 1881 

In an interesting case [Devender Kumar v. Khem Chand [2015] GCtR 6581 (Delhi)], it was held that under Section 139 of Negotiable Instruments Act, 1881, unless the contrary is proved, the holder of the cheque shall be presumed to have received the cheque in discharge of any debt or liability. Sub-clause (a) of Section 118 of the NI Act, inter-alia, provides that unless the contrary is proved, the drawn up negotiable instrument, if accepted, has to be presumed to be for consideration.

In this case there was successful rebuttal of the presumption under Section 139 of the NI Act of any legally enforceable debt and the accused was acquitted. It was held that an accused may not be expected to discharge an unduly high standard of proof. A reverse onus clause requires the accused to raise a probable defence for creating doubt about the existence of a legally enforceable debt or liability for thwarting the prosecution. The standard of proof for doing so would necessarily be on the basis of “preponderance of probabilities” and not “beyond shadow of any doubt”.

When at the commencement of, or in the course of a summary trial under the NI Act, it would appear to the Magistrate that the nature of the case is such that a sentence of imprisonment for a term exceeding one year may have to be passed or that it is for any reason, undesirable to try the case summarily, the Magistrate would, after hearing the parties, record an order to the effect and thereafter recall any witness who may be examined and proceeded to here or re-hear the case in the manner provided by the Code of Criminal Procedure, 1973.