[Sec 138 NI Act] Burden To Prove That Cheque In Dispute Was Not Issued For Legally Enforceable Debt Is On Accused: Bombay HC
While considering a case of dishonor of cheque which was alleged to be issued by the accused (landlord) to the complainant (tenant) against a hand loan given by the complainant to the accused, the Bombay High Court held that in a complaint under Section 138 of the Negotiable Instruments Act, the burden on the complainant is to prove the delivery of the cheque and that the legally enforceable debt exists.
On the delivery of cheque either wholly blank or having written thereon an incomplete negotiable instrument, the person so signing shall be liable upon such instrument to the holder in due course for such amount, added the Court.
Finding that the accused (landlord) had himself admitted that he had delivered the cheque in dispute to the complainant (tenant), however, the rent was due and hence the amount was to be adjusted towards the rent, the Bombay High Court observed that the cheque in dispute was not issued for the legally enforceable debt and therefore, the burden to prove the rent was due was on the accused.
The Single Judge Bench of Justice S.G Mehare observed that “The fact in issue, in this case, is whether the cheque in dispute was issued towards a legally enforceable debt or liability. It has been proved that the legally enforceable debt existed on the day of delivering the cheque in dispute. The essential ingredient, attracting Section 138 of N.I. Act has also been proved, and the legal presumptions have not been rebutted. Therefore, this Court is of the view that two stories of the complainant would not damage his case of delivering the cheque for a legally enforceable debt”.
Advocate Santosh N. Patne appeared for the Applicant, whereas APP S.B Narwade appeared for the Respondent.
The brief facts of the case are that the complainant filed a complaint case against the accused person under section 138 of the N.I. On July 5, 2001, the accused person took a hand loan of rupees ten thousand from the complainant and in return, the accused issued a post-dated cheque to the complainant. Later, the accused requested the complainant for failure to pay the amount on multiple occasions. The complainant had no option but to en-cash the post-dated cheque before the bank, however, the bank returned the cheque on the ground of insufficient funds.
After considering the submission, the Bench observed that Section 139 of the N.I. Act speaks of the presumption in favour of the holder that the cheque received by the holder was for the discharge, in whole or in part, of any debt or other liability.
Stating that as per Section 138 of the N.I Act, the cheque shall be delivered to discharge the payment of the amount or debt, and such debt shall be legally enforceable, the Bench observed that the holder, in due course, must establish the liability of the drawer was legal and that shall be enforceable under the law.
“The drawer shall owe the debt of the amount mentioned in the instrument. Section 118 of the N.I Act also provides for the presumption of consideration, as to date, the time of acceptance, the time of transfer, orders of endorsements and the stamp and also presumes that the holder of the N.I Act is a holder in due course”, added the Bench.
Highlighting that issuing the cheque as security impliedly admits the debt, the High Court found that without suggesting or bringing anything in cross-examination of the complainant about issuing the cheque in dispute as security the accused, in his statement under section 313 of CrPC, had come up with a defence of issuing the cheque in dispute as a security.
The High Court, therefore, explained that in a case of issuing a cheque as security, the accused must prove that he had discharged the debt and it was never intended to be negotiated, or it has been misused.
In the facts of the present case, the Bench found that nothing was on record that the cheque in dispute was issued as a security and was misused, even on repaying the debt.
“Though the complainant has two stories about the debt, the common thread was that the accused had issued the cheque in dispute towards the debt. In the facts of the case, it is to be answered whether it damaged the case of the complainant as contradictory statements and was a serious infirmity raising a reasonable doubt over the case of the complainant”, added the Bench.
Accordingly, the High Court allowed the criminal revision and concluded that the Additional Sessions Judge erred in disbelieving the complainant, for the sole reason, that he had two stories which was a serious infirmity.
Cause Title: Kalidas Vishwanath Gore v. The State of Maharashtra and Anr.