In the present case, the Supreme Court is hearing an appeal against a 2019 decision given by Himachal Pradesh High Court through which the appellant was held guilty of offence u/s 138 of Negotiable Instruments Act.
DATE: 9TH March, 2021
- Indu Malhotra
- Ajay Rastogi
- Sumeti Vij (APPELLANT)
- M/S Paramount Tech Fab Industries (RESPONDENT)
SUBJECT: In the present case the Supreme Court is dealing with section 138 and 139 of Negotiable Instrument Act, 1881 and section 313 of Cr.P.C. The question before the court was whether burden of proof was on complainant or appellant.
- In the present case, the Supreme Court is hearing an appeal against a 2019 decision given by Himachal Pradesh High Court through which the appellant was held guilty of offence u/s 138 of Negotiable Instruments Act.
- The accused appellant purchased a non woven fabric from M/S Paramount Tech Fab Industries at Moginand. Subsequently, the appellant issued two cheques from her Punjab National Bank Account which were returned from with a note stating “insufficient funds” in the appellant’s account. After that, the complainant sent two legal notices to the appellant but she did not respond, neither did she pay the dues to the complainant. Therefore, the complainant filed two complaint under Section 138 of the Negotiable Instruments Act against the appellant.
- He examined 3 witnesses and put reliance on documentary evidence before the trial judge. The trial judge observed thatthe complainant failed to establish that the materials were delivered to the appellant for which the cheques were issued. Thus, in the absence of burden being discharged by complainant, the onus to disprove he presumption cannot be shifted to appellant. Accordingly, the trial court acquitted the appellant.
- Subsequently, the complainant approached the High Court which affirmed that the primary burden was discharged by complainant that the cheques were issued by the appellant for the materials supplied. Further, the court observed that no evidence was recorded to disprove the presumption in defence. Thus, setting aside the finding of acquittal recorded by the trial judge, the high court held the appellant guilty of offence u/s 138 of Negotiable Instruments Act and awarded appropriate punishment.
- Aggrieved by the decision the present appeal was filed before the supreme court of India.
NEGOTIABLE INSTRUMENTS ACT, 1881
- Section 138- Dishonour of cheque for insufficiency, etc., of funds in the account. —Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless—
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.— For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.
- Section 139- Presumption in favour of holder:-It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.
CRIMINAL PROCEDURE CODE
- Section 313-Power to examine the accused.
(1) In every inquiry or trial, for the purpose of enabling the accused personally to explain any circumstances appearing in the evidence against him, the Court-
(a) may at any stage, without previously warning the accused, put such questions to him as the Court considers necessary;
(b) shall, after the witnesses for the prosecution have been examined and before he is called on for his defence, question him generally on the case: Provided that in a summons- case, where the Court has dispensed with the personal attendance of the accused, it may also dispense with his examination under clause (b).
(2) No oath shall be administered to the accused when he is examined under sub- section (1).
(3) The accused shall not render himself liable to punishment by refusing to answer such questions, or by giving false answers to them.
(4) The answers given by the accused may be taken into consideration in such inquiry or trial, and put in evidence for or against him in any other inquiry into, or trial for, any other offence which such answers may tend to show he has committed.
ISSUES: The key issue before the court was whether the burden of proof was on the appellant or the respondent
ANALYSES OF THE JUDGEMENT
- In the present appeal the main contention of the appellant was that there was nothing to prove that the material goods were sent to the appellant and so the burden lies upon the respondent to prove that the goods were sent to her for which the cheques were issued. Further the appellant putting reliance on K Prakashan v. P.K. Surenderan and Indus Airways Pvt. Lyd. And Ors. v. Magnum Aviation Pvt. Ltd. contended that there is absence of prima facie burden being discharged by the complainant and mere issuance of cheque would not be sufficient to justify that the cheques were issued in discharge of the debt.
- On the other hand the respondent contended that there was sufficient material to justify that cheques were issued with reference to the invoices after delivery of goods. Complaint was filed by placing all documentary evidence in support of the complaint. Further the respondent stated that 3 witnesses were examined to establish and discharge burden of proof. Thus, it was for the appellant to come forward and prove the contrary as envisaged u/s 139 of Negotiable Instruments Act.
- Answering the above contentions, the apex court stated that the object of section 138 is to enhance the acceptability of cheques in the settlement of liabilities.
- The drawer of the cheque will be held liable to prosecution on dishonour of cheque with safeguards provided to prevent harassment of honest drawers.
- Further, the court observed that the appellant only recorded her statement. She has not put forward any evidence to rebut the presumption that the cheques were issued for consideration. Thus, the high court was not at fault in convicting the appellant.
- The Supreme Court observed the burden of proof was on the accused in view of presumption under Section 139 of the Act and the standard of proof was of “preponderance of probabilities”
- Looking into the text of section 138 of the NI Act, the court opined that there is a mandate of presumption of consideration in terms of provision of the act and the onus shifts to the accused on proof of the issuance of cheque to rebut the presumption that it was not issued for discharge of debt.
- The court further held that the statement of the accused recorded under Section 313 of the Code is not a substantive evidence of defence, but only an opportunity to the accused the incriminating circumstances. Therefore, the court observed that there is no evidence to rebut the presumption that the cheques were issued for consideration.
- Thus, the court held that the High Court has not committed any error in convicting the appellant and ordered the appellant to either pay the fine or serve the sentence in compliance with the High Court’s order.
As observed by the court in this judgement itself the object of the provision laid down in section 138 of NI Act is to enhance the acceptability of cheques in the settlement of liabilities and in case where the person issuing the cheques does not exhibit the intention to honour the cheque, he shall be liable on dishonour of the same. In the present case, after the complainant sent legal notice, the accused neither responded to it nor paid the amount which clearly shows the lack of intention to pay the debt. Also, she could not provide material evidence to prove that the cheques were not issued for the discharge of debt. Thus, she was rightly held liable.
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