If a cheque was issued in favour of complainant, would she still be required to prove loan transaction as she would have been in civil trial recovery? Court explains

Dwarka Courts, New Delhi: Medha Arya, MM (NI Act-03), resolved the dispute pertaining to Section 138 of Negotiable Instruments Act, 1881 in light of the 4 conditions laid down under the said Section.

Complainant was friends with one Lata Bhola for a number of years and the accused, son of Lata Bhola alongwith his mother told the complainant that they want to purchase a house but they were facing paucity of funds and requested the complainant to advance to them a friendly loan of Rs 6,30,000. Both son and mother agreed to repay the loan of complainant within 15 days, however, they avoided the repayment of the loan even after the expiry of the 15 days period.

Later, the cheque in question was issued by the accused with the assurance that it shall be duly honoured upon presentation. However, to the utter shock and dismay of the complainant, the said cheque in question was dishonoured vide cheque returning memo with remarks ‘payment stopped by drawer’.

When the accused failed to repay the cheque amount even after expiry of the 15 days from the date of service of legal notice, the complaint was filed by the complainant seeking the summoning, trial and conviction of the accused of the offence punishable under Section 138 NI Act.

Complainant’s case was that the period of limitation as per Section 142 of the N.I. Act, and the territorial jurisdiction to try the present complaint vests with this Court.

By virtue of Section 146 of NI Act, this Court is bound to presume the fact that the cheque was dishonoured for the reason mentioned in the returning memo, and this presumption has also not been dislodged by the accused.

Analysis, Law and Decision

Section 138 NI Act:

Before finding of conviction with the offence punishable under Section 138 N.I. Act can be returned against the accused, it has to be established, cumulatively-

(i) that the cheque in question was issued by the accused in favour of the complainant for the discharge of legally enforceable liability.

(ii) presentation of the cheque to the bank within three months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(iii) a demand being made in writing by the payee or holder in due course by the issuance of a notice in writing to the drawer of the cheque within thirty days of the receipt of information from the bank of the return of the cheques; and

(iv) the failure of the drawer to make payment of the amount of money to the payee or the holder in due course within fifteen days of the receipt of the notice.

In the opinion of this Court, the complainant proved on record that the cheque in question was presented by the complainant with her bank for encashment within the period of its validity. Accordingly, condition no. (ii) of Section 138 NI Act was satisfied.

Accused did not dispute that the legal notice was served upon him within the statutory period of limitation, hence condition (iii) was satisfied.

Further, the accused axiomatically admitted that he did not pay the amount of cheque in question to the complainant even after the expiry of 15 days from the date of receipt of legal notice. Therefore condition no. (iv) was satisfied.

Whether the cheque in question was issued by the accused to the complainant in discharge of legally enforceable liability?

Section 139 of the NI Act, 1881 carves out a presumption in favour of the drawee that the cheque was issued to him in discharge of a debt or other liability of a legally enforceable nature. Also, the said provision must be read along with Section 118 of the same enactment which spells out another presumption in favour of the drawee that every negotiable instrument was drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.

Whether presumption under Section 139 N.I. Act read with Section 118 N.I. Act can be raised against the accused?

Court opined that such presumption can be duly raised against the accused as he has admitted his signatures on the cheque in question and has also admitted that the particulars on the same were filled by him.

Whether the accused has been able to discharge the onus of proof placed upon him?

Court stated that the journey of trial qua a complaint under Section 138 NI Act commences after a determination is made that the presumption as per Sections 139/118 NI Act can be raised against the accused, from the point of the accused who is required to prove that the cheque in question was not given for consideration or for the discharge of any legally enforceable debt.

The accused took the stand all along that he had obtained a loan of Rs 2,50,000/- from the brother of the complainant, Sanjeev Nagpal, but he was not examined as a witness by the accused. The evaluation of the testimonies of the above witnesses as well as the aforementioned circumstance clearly establishes that the accused has not been successful in proving his defense in the affirmative.

Whether the accused has been able to dislodge the presumption against him under Section 139 of the NI Act, by perforating the case of the complainant?

Even if it is so conceded, the fact that the cheque in question was given to the complainant as a security cheque, in postdated condition or otherwise, does not dent the case of the complainant sufficiently.

Further, even if it is conceded that the loan was advanced by the complainant only to the mother of the accused and not to the accused and his mother together, the cheque issued by the accused can still be construed to be issued in discharge of “any other liability”, and the accused cannot avoid penal consequences of the dishonour of the cheque merely because the loan amount was not advanced to him by the complainant.

Elaborating further, the Court stated that the offence punishable under Section 138 NI Act is premised on theory of reverse onus of proof, and the complainant was not required, as she would have been required in a civil trial of recovery perhaps, to prove a loan transaction, as she had a valid cheque in question made in her favour by the accused. With the presumptions stacked against him, the first order of business required the accused to plug loopholes in the case of the complainant, and only thereafter would the requirement for the complainant to prove her case beyond reasonable doubt have arisen.

Concluding the matter, Court held that the accused failed to establish the version that he set forth in the affirmative, and in perforating the case of the complainant and dislodging the presumption of Sections 139/118 NI Act stacked against him.

Therefore, accused was convicted for the offence punishable under Section 138 NI Act. [Geetika Mehra v. Satyam Bhola, Ct. Case No. 28164 of 2018, decided on 18-11-2021]

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