Burden of rebuttal for bounced cheques lies on the accused, affirms apex court

S D Israni

Laws are made to protect the interests of the citizens of the country and to punish the guilty. In this exercise, the courts play the pivotal role. Unfortunately, at times even a simple provision could lead to varying interpretations by different courts resulting in avoidable confusion and delayed justice for the victims.

A somewhat similar situation came up for the consideration of the apex court in the case of KN Beena v Muniyappan and Another (2001 107 Comp Cas 459 SC). In that case the appellant had filed a complaint under section 138 of the Negotiable Instruments Act, 1881 (the Act), as the cheque issued by the first respondent in favour of the appellant had been dishonoured by the bank with the remarks “insufficient funds”.

The appellant had issued a legal notice as required by the section, but no payment was made by the accused. After trial the Judicial Magistrate-II, Kumbakonam, convicted the accused under section 138 and directed payment of a fine of Rs 65,000. In default the accused was to suffer simple imprisonment for one year. Instead of complying with the magistrate’s order, the accused challenged the conviction and sentence by filing criminal appeal. The said appeal was dismissed by the sessions judge.

The accused then preferred criminal revision before the High Court of Madras. A learned single judge by the impugned order set aside the conviction and acquitted the first respondent. The learned judge acquitted the accused on the ground that the appellant had not proved that the said cheque had been issued for any debt or liability.

The apex court observed that it appeared that the judgment erroneously proceeded on the basis that the burden of proving consideration for a dishonoured cheque was on the complainant. The apex court made a very significant remark about the concerned when it stated that, “It appears that the learned judge had lost sight of sections 118 and 139 of the Negotiable Instruments Act”.

The apex court observed that under section 118 of the Act, unless the contrary was proved, it had to be presumed that the negotiable instrument (including a cheque) had been made or drawn for consideration. Under section 139 the court had to presume, unless the contrary was proved, that the holder of the cheque had received the cheque for discharge, in whole or in part, of a debt or liability.

Accordingly, the apex court held that in complaints under section 138, the court had to presume that the cheque had been issued for a debt or liability. It is not that such a presumption is not rebuttable. However, the burden of proving that a cheque had not been issued for a debt or liability is on the accused.

Earlier, the apex court also had the opportunity of considering similar issue in the case of Hiten P Dalal v Bratindranath Banerjee (2001 6 SCC 16). In that case, the appellant’s submission was that the cheques had not been drawn for the “discharge in whole or in part of any debt or other liability”.

The apex court made a reference to the provisions in section 139 of the Act. That section provides that “it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability”. So the apex court observed that the effect of those presumptions was to place the evidential burden on the appellant of proving that the cheque was not received by it towards the discharge of any liability.

The apex court also made a reference to its own judgment in the case of State of Madras v A Vaidyanatha Iyer, (AIR 1958 SC 61). In that case also the apex court had held that sections 138 and 139 required that the court “shall presume” the liability of the drawer of the cheques for the amounts for which the cheques were drawn.
The apex court stated that it was obligatory on the court to raise the presumption in every case where the factual basis for the raising of the presumption had been established. In Hiten Dalal’s case (supra), the apex court made a very significant remark to the effect that, provided the facts required to form the basis of a presumption of law existed, no discretion was left with the court but to draw the statutory conclusion, but that did not preclude the person against whom the presumption was drawn from rebutting it and proving the contrary.

The apex court noted that the burden was on the appellant to disapprove the presumption under sections 138 and 139, a burden, which he had failed to discharge at all. It is noteworthy that the apex court remarked that mere averment in the written statement of the appellant was not enough.

In the view of the apex court, it was necessary for the appellant to have atleast shown on the basis of acceptable evidence either that his explanation in the written statement was so probable that a prudent man ought to accept it or to establish that the effect of the material brought on the record, in its totality, rendered the existence of the fact presumed, improbable [Vide Trilok Chand Jain v State of Delhi, (1975 4 SCC 761)]. As the appellant had done neither, then in the absence of any such proof, the apex court held that the presumptions under sections 138 and 139 must prevail.

Conclusion
To say the least, it is indeed surprising that an issue, which had been deliberated and decided by the apex court in some of the earlier cases, still continues to generate contrary judgments from some of the courts. It is the law of the land that law as interpreted by the apex court becomes the law and all the courts in the country are required to follow the same.

The provisions in section 138 to 142 of the Act have been specifically enacted to provide quicker relief to the victims of dishonoured cheques.

However, if some of the courts would continue to give contrary interpretation, inspite of the apex court judgments on the same issue, it would defeat the very purpose of the enactment and also result in avoidable delay in dispensing justice to the affected persons. Hopefully, after looking at this latest judgment of the apex court, which sets at rest doubts, if any, about the issue of presumption of guilt on the part of the accused in case of bounced cheques, the lower courts would take cognisance of the views of the apex court and pass orders accordingly.