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Written by: Riya Ganguly (Intern)

Edited by: Anubhav Yadav (Content Head & Developer)

The Supreme Court recently observed that under Section 139 of the NI Act, execution of a check mandates a presumption that the cheque is for the discharge of any debt or any other liability. The onus to rebut the aforesaid presumption is on the accused by raising probable defence.

CASE NAME: Triyambak S. Hegde v. Sripad (LL 2021 SC 492)

DATE OF DECISION: 23 September 2021

BENCH: J. NV Ramana, J. Surya Kant and J. AS Bopanna

Facts

The respondent, who was known to the appellant, approached the appellant, offering to sell his house located at Sirsi Town, due to his financial difficulty for a consideration of Rs. 4,00,000. An agreement dated 06.06.1996 was executed between the appellant and the respondent wherein the appellant paid an advance amount of Rs.3, 50,000. Later on the appellant discovered that the house stood in the name of the father of the respondent and the respondent did not have the authority to sell the said property. Hence, the appellant demanded the return of Rs.350000 which was paid by him as advance payment. Instead of paying the entire sum of Rs. 350000, the respondent issued a cheque dated 17.05.1998 for a part amount of only Rs.1, 50,000. When the check was presented for realisation on 20.05.1998, it came to be dishonoured with the reason of insufficient funds.

The appellant consequently served a legal noticed to respondent to which he got no response. It was in this view that the appellant filed a complaint under Section 138 NI Act on 14.07.1998 in the Court of the JMFC at Sirsi for the prosecution of the respondent.

In the Court of JMFC

The JMFC noted that the signature on the agreement and the dishonoured cheque was admitted by the respondent.  This raised presumption under Section 118 and 139 of the N.I. Act, which had not been rebutted by the respondent. Hence, the Court of JMFC through its judgment dated 09.06.2005 convicted the respondent under Section 138 of the N.I. Act and sentenced the respondent to undergo simple imprisonment for six months and to pay the fine of Rs. 200000 out of which Rs. 195000 was to be paid as compensation to the appellant.

In the Court of Sessions Judge

Aggrieved by the order of JMFC, the respondent filed an appeal in the court of District and Sessions Judge, Uttara Kannada, Karwar. The learned judge upheld the conviction order of the JMFC.

In the High Court of Karnataka

Challenging the order of session’s judge, the respondent filed a revision petition before the high court. The respondent put forth a new contention in the Revision petition that the appellant did not pay the advance amount of Rs 350000 and that the signature of the respondent had been secured on the cheque worth Rs 150000 and the agreement under peculiar circumstances.

The Single Judge while allowing the Revision Petition observed that the appellant had not discharged the burden of proving the fact that whether he had made a payment of Rs. 3, 50,000 as an advance amount to the respondent and that the cheque issued by the respondent had been used towards repayment of that part advance amount. Hence the HC set aside the conviction order passed by the JMFC, which had been confirmed by the learned Sessions Judge.

In the Supreme Court of India

The appellant contended that the JMFC was justified in raising a presumption in favour of the appellant under Section139 of the NI Act and convicting him since there was no rebuttal evidence or contrary material whatsoever.

The Counsel further relied on the case of K.  Bhaskaran vs. Sankaran Vaidhyan Balan & Anr. (999) 7 SCC 510).

The respondent contended that the lower courts were wrong in their approach of jumping to the very conclusion that the respondent was guilty by raising a presumption against him just on the basis of his admittance of his signature on the cheque.  Moreover, there was no concrete evidence to show that the appellant possessed the funds for the conclusion of the transaction and for the payment of advance amount to the respondent so as to constitute legally recoverable debt. Reliance was placed on the case of Basalingappa vs. Mudibasappa ((2019) 5 SCC 418).

Held

The Court dismissed the decision of the High Court and upheld the decision of learned JMFC and the Sessions judge. It held that the presumption that arose in the favour of the appellant had not been successfully rebutted by the respondent on the touchstone of preponderance of probabilities. The court held that under Section 139 of the NI Act, execution of a check mandates a presumption that the cheque is for the discharge of any debt or other liability. The onus to rebut the aforesaid presumption is on the accused by raising probable defence. Preponderance of probabilities is the standard of proof for rebuttal of the presumption. Materials brought on record by the parties coupled with the reference to the circumstances upon which rely, together help in inferring preponderance of probabilities

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