Summary
Where the drawer admitted issuing and signing the cheque and its dishonour, notice and the timely complaint were undisputed, the Sessions Court in revision could not set aside the summoning order under Section 138 of the NI Act by holding at the pre-trial stage that the cheque was not for a legally enforceable debt; the Section 139 presumption can be rebutted only at trial. The complaint was restored.
Issues
- Whether, at the stage of issuance of process on a complaint under Section 138 of the NI Act, the complaint can be dismissed on a finding that the cheque was not issued for a legally enforceable debt or liability.
- Whether the Sessions Court and the High Court were justified in setting aside the summoning order because the settlement agreement underlying the cheque was not signed by the drawer.
Provisions considered
- Section 138, Negotiable Instruments Act, 1881At the summoning stage the Magistrate need only see prima facie the issuance of the cheque, its dishonour on presentation, the statutory notice and the filing of the complaint within time; these ingredients were undisputed here, justifying issue of process. (¶¶ 7, 8, 10)
- Section 139, Negotiable Instruments Act, 1881Where the drawer does not dispute issuing or signing the cheque, the presumption that it was for a debt or liability (including its legal enforceability) arises and shifts the burden to the drawer, to be discharged at trial; it cannot be displaced summarily at the stage of process. (¶¶ 8, 9, 10)
- Section 118, Negotiable Instruments Act, 1881Noted, through the quoted passage from Rajesh Jain v. Ajay Singh, as the companion presumption that a negotiable instrument was made or drawn for consideration. (¶ 9)
Held
- At the stage of issuance of process on a Section 138 complaint, what must be seen prima facie is the drawing of the cheque in the complainant's favour, its dishonour, the statutory notice and the filing of the complaint within the prescribed period. If the drawer does not dispute issuing or signing the cheque, the Section 139 presumption is triggered and the burden shifts to the drawer to prove that it was not for a legally enforceable debt or liability. (¶ 8)
- Rebuttal of the Section 139 presumption is an exercise for trial, on the complainant's material or the drawer's evidence; the presumption cannot be dislodged summarily before trial merely by contending that the cheque was not for an enforceable debt. Rangappa v. Sri Mohan and Rajesh Jain v. Ajay Singh were relied on. (¶¶ 8, 9)
- The Sessions Court misdirected itself by giving weight to the fact that the drawer had not signed the settlement agreement and to the pending disputes between the complainant and her husband, while ignoring that the ingredients of Section 138 were satisfied; holding the debt unenforceable before trial, with no rebuttal material from the drawer, washed away the statutory presumption. Even Sunil Todi treats disputed questions about outstanding liability as questions of fact for trial. (¶ 10)
Result
Appeal allowed; the Sessions Court's revisional order and the High Court's order upholding it set aside; the complaint restored to the Metropolitan Magistrate for trial on its own merits, without any expression of opinion on the merits.