Cheque Bouncing Cases; Manner of Rebuttal of Statutory Presumption

Cheque Bouncing Cases : The Supreme Court of India in Rangappa v. Sri Mohan (2010) 11 SCC 441 has held that presumption mandated by Section 139 of the Negotiable Instrument Act, 1881 includes existence of legally enforceable debt or liability. It is in nature of rebuttable presumption.

A bench comprising of Chief Justice K.G. Balakrishnan, P. Sathasivam and J.M. Panchal observed that the accused can raise a defence wherein existence of legally enforceable debt or liability can be contested.

However, initial presumption favours the complainant. Reverse onus clause is included and the same is guided by the test of proportionality.

the Judgment said.

While disposing of the Appeal the Apex Court further held that the accused cannot be expected to discharge an unduly high standard of proof. Standard of proof for rebutting presumption is of `preponderance of probabilities’.

If accused is able to raise a probable defence which creates doubts about the existence of legally enforceable debt or liability, prosecution can fail.

Dishonour of Cheque

On facts, dishonour of cheque on account of `stop payment’ instructions sent by accused. Acquittal by trial court in view of discrepancies in the complainant’s version. Conviction by High Court since accused did not raise a probable defence to rebut the statutory presumption, does not call for interference.

Complaint disclosed prima facie existence of a legally enforceable debt or liability. Accused failed to reply to the statutory notice u/s.138.

Section 138 is applicable when cheque is dishonoured on account of `stop payment’ instructions sent by accused to his bank in respect of post-dated cheque, irrespective of insufficiency of funds.

Facts of the Case

The appellant engaged the services of the respondent-engineer for supervising the construction of his house. The appellant requested the respondent for a hand loan to meet the construction expenses. In view of the acquaintance, the respondent paid the same by way of cash. The appellant issued a cheque for repayment of the said amount.

The respondent presented the cheque for encashment. The bank issued a return memo stating that the payment had been stopped by the drawer. Thereafter, the appellant did not honour the cheque within the statutorily prescribed period and also did not reply to the notice u/s. 138 of the Negotiable Instruments Act, 1881.

The respondent filed a complaint against the appellant for offence punishable u/s.138 of the Act. The trial court acquitted the appellant u/s.138 in view of some discrepancies in the complainant’s version.

The High Court holding that the appellant did not raise a probable defence to rebut the statutory presumption, convicted the appellant for commission of offence u/s. 138 of the Act and directed to pay fine of Rs. 75,000/-. Hence the present appeal.

The Apex Court held that ordinarily in cheque bouncing cases, what the courts have to consider is whether the ingredients of the offence enumerated in s.138 of the Negotiable Instruments Act, 1881 have been met and if so, whether the accused was able to rebut the statutory presumption contemplated by s.139 of the Act.

With respect to the facts of the instant case, it must be clarified that contrary to the trial court’s finding, s.138 of the Act can indeed be attracted when a cheque is dishonoured on account of `stop payment’ instructions sent by the accused to his bank in respect of a post- dated cheque, irrespective of insufficiency of funds in the account.

Goa Plast (Pvt.) Ltd. v. Chico Ursula D’Souza (2003) 3 SCC 232, referred to.

The presumption mandated by s.139 of the Act does indeed include the existence of a legally enforceable debt or liability. This is in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested.

However, there can be no doubt that there is an initial presumption which favours the complainant. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments.

While s.138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption u/s. 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by s.138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions.

In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/defendant cannot be expected to discharge an unduly high standard or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden.

When an accused has to rebut the presumption under s.139, the standard of proof for doing so is that of `preponderance of probabilities’. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail.

The accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.

The High Court’s view that the accused did not raise a probable defence is accepted. The defence of the loss of a blank cheque was taken up belatedly and the accused had mentioned a different date in the `stop payment’ instructions to his bank.

The instructions to `stop payment’ had not even mentioned that the cheque had been lost. A perusal of the trial record also shows that the accused appeared to be aware of the fact that the cheque was with the complainant.

Furthermore, the very fact that the accused had failed to reply to the statutory notice u/s.138 of the Act leads to the inference that there was merit in the complainant’s version. Apart from not raising a probable defence, the appellant-accused was not able to contest the existence of a legally enforceable debt or liability.

The fact that the accused had made regular payments to the complainant in relation to the construction of his house does not preclude the possibility of the complainant having spent his own money for the same purpose.

As per the record of the case, there was a slight discrepancy in the complainant’s version, in so far as it was not clear whether the accused had asked for a hand loan to meet the construction-related expenses or whether the complainant had incurred the said expenditure over a period of time.

Either way, the complaint discloses the prima facie existence of a legally enforceable debt or liability since the complainant has maintained that his money was used for the construction-expenses.

Since the accused did admit that the signature on the cheque was his, the statutory presumption comes into play and the same has not been rebutted even with regard to the materials submitted by the complainant.

Thus, there is no reason to interfere with the final order of the High Court which recorded a finding of conviction against the appellant.