Summary
The High Court in revision had set aside concurrent findings convicting the accused under Section 138 of the Negotiable Instruments Act, 1881 on the ground that the complainant had not proved his bank details, the withdrawal of the Rs.22 lakh loan or when he obtained the cheque. The Supreme Court held that once the signature on the cheque is admitted, the presumptions under Sections 118 and 139 arise and the complainant need not prove his financial capacity at the threshold unless the accused raises that objection and supports it with evidence; the accused's story of a lost cheque, intimated to police only in 2011, did not rebut the presumption, and the complaint was maintainable against the partner who signed the cheque for the firm. The conviction was restored but the sentence was modified to a fine of Rs.32 lakh payable to the complainant within four months.
Issues
- Whether the High Court, in revision, could overturn concurrent findings of guilt under Section 138 NI Act by faulting the complainant for not proving his bank account details, the withdrawal of the loan amount and the date he received the cheque.
- Whether the complainant in a Section 138 prosecution must prove his financial capacity to advance the loan before the presumptions under Sections 118 and 139 operate.
- Whether the accused's plea that the cheque was lost, and his failure to reply to the statutory notice, rebutted the presumption of a legally enforceable debt.
- Whether the complaint was maintainable against the accused partner when the drawer of the cheque, the partnership firm M/s Sun Enterprises, was not arrayed as an accused.
- What sentence should follow restoration of the conviction, having regard to the accused's age and the compoundable nature of the offence.
Provisions considered
- Section 138, Negotiable Instruments Act, 1881The complainant need only establish that the cheque was genuine, was presented within time, and that on dishonour a notice was sent within 30 days, payment not being received within 15 days. Here the cheque dated 17.03.2010 was returned on 07.05.2010 marked 'payment stopped by drawer', the notice of 18.05.2010 went unanswered, and the signature was admitted; the foremost defence available to the accused is to deny that the cheque was issued for a legally enforceable debt. (¶¶ 3, 15, 16, 17)
- Sections 118 and 139, Negotiable Instruments Act, 1881Once the cheque bears the accused's admitted signature, it is presumed to have been drawn for consideration and received in discharge of a debt or liability, and the onus shifts to the accused to show a probable defence. Following Rohitbhai Jivanlal Patel, want of evidence about the complainant's source of funds is not a relevant consideration when examining whether the presumption has been rebutted; following Tedhi Singh and S.S. Production, the complainant need not initially prove his financial capacity unless that case is set up by the accused and buttressed by evidence. (¶¶ 6, 18, 21, 22)
- Section 141, Negotiable Instruments Act, 1881Reading Aneeta Hada, S.M.S. Pharmaceuticals and Sunita Palita harmoniously, the Court held that where the signatory of the cheque, who is also the person in charge of the firm, is arrayed as accused, the complaint is maintainable even though the partnership firm which drew the cheque was not itself arraigned. (¶¶ 19, 20)
- Section 142(1)(b), Negotiable Instruments Act, 1881Noted as the provision under which the complaint must be filed within one month after the drawer fails to pay within fifteen days of the notice of dishonour. (¶ 15)
Held
- In a prosecution under Section 138 NI Act the complainant has only to establish that the cheque was genuine, presented within time, and that after dishonour a notice was sent within 30 days and payment was not received within 15 days, whereupon a complaint lies within one month under Section 142(1)(b). The foremost defence open to the accused is to deny that the cheque was issued for a legally enforceable debt. (¶¶ 15, 16)
- Where the signature on the cheque is admitted and the accused's defence is that the cheque was lost, the chronology is decisive: a loss report dated 12.03.2010 which reached the police only in 2011, after the cheque had been presented, and was never converted into an FIR, strengthens rather than rebuts the statutory presumption, particularly for a sum of Rs.22 lakh. Failure to reply to the statutory notice also raises a rebuttable inference that the accused had no valid defence. (¶¶ 17, 18)
- A complaint under Section 138 is maintainable against a partner who signed the cheque and is the person in charge of the firm, even though the partnership firm as drawer was not arrayed as an accused; the Court reached this on a harmonised reading of Aneeta Hada, S.M.S. Pharmaceuticals and Sunita Palita, noting that it was never urged that the accused was not the person in charge of the firm. (¶¶ 19, 20)
- After the presumption under Section 139 is drawn, the onus is on the accused to bring on record facts showing a probable defence on a preponderance of probabilities; doubt cannot be cast on the complainant's case merely for want of evidence of the source of funds, receipts or accounts. (¶ 21)
- The onus is not on the complainant at the threshold to prove his capacity or financial wherewithal to advance the loan. Only if the accused objects that the complainant lacked the financial means must the complainant produce cogent material of his capacity and of the actual advance. A bare counter-stand by the accused does not shift the onus; the defence must be supported by oral or documentary evidence. The High Court erred in requiring bank account details and the dates of withdrawal and payment, and in disbelieving the complainant's consistent deposition that he withdrew the money from his bank while accepting the accused's unsupported denial. (¶ 22)
- The High Court erred in overturning the concurrent findings of guilt of the trial court and the appellate court; the complainant had established his case. (¶ 23)
- Although restoration of the conviction would ordinarily revive the sentence of one year's simple imprisonment and a fine of Rs.35 lakh, in view of the accused's age and the submission that he be subjected only to a monetary penalty, the sentence was modified to a fine of Rs.32 lakh payable to the complainant within four months, failing which the entire original sentence stands restored with the whole fine of Rs.35 lakh payable to the complainant. (¶ 24)
Result
Appeal allowed; the High Court's revisional order dated 21.02.2024 set aside and the conviction under Section 138 NI Act restored. Sentence modified to a fine of Rs.32,00,000 payable to the appellant-complainant within four months; on default, the trial court's sentence of one year's simple imprisonment and fine of Rs.35,00,000 stands restored, the entire fine being payable to the appellant. Parties to bear their own costs; pending applications allowed.