Section 139 of the Negotiable Instruments Act,1881.
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.
Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption Under Section 139 is a device to prevent undue delay in the course of litigation.1)
Under Section 139 it is to be presumed, in the absence of any contrary evidence, that the complainant received the cheque for discharge, in whole or in part, of a debt or other legal liability.2)
There is presumptions under Section 118 and 139 of the Negotiable Instruments Act in favour of holder of the cheque. Until contrary is proved, presumption is in favour of holder of cheque that it has been drawn for discharge of debt or liabilities. However, it is rebuttable one and accused can rebut it without entering into witness box, through crossexamination of the prosecution witnesses. Complainant is not absolved from liability to show that cheque was issued for legally enforceable debt or liability. Burden on accused in such case would not be as light as it is in the cases under sec.114 of the Evidence Act.
In case of Goa Plast Pvt. Ltd. vs. Shri Chico Ursula D' Souza3) relations between accused and complainant were of employee and employer. No evidence led to show that accused was liable to pay any due or part thereof and thus liability was not proved. Similarly, it was not proved that the cheque was given towards those liabilities. Accused much prior to presentation of cheques to the Bank had appraised the complainant that he was not liable to pay any amount, and therefore, stopped payment. Bombay High Court had observed that complainant failed to prove that cheque was issued for discharge of legal liabilities.
Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption u/s 1394). It merely raises a presumption in favour of holder of the cheque that the same has been issued for discharge of any debt or other liability. Many a times cheques are issued bearing no date or post dated cheques. Holder of cheque enters the date, and thereafter cheques are presented to banks.
Hon'ble Bombay High Court in case of Purushottamdas Gandhi vs. Manohar Deshmukh5) has observed that inserting such date does not amount to tampering or alteration but by delivery of such undated cheque drawer authorizes holder to insert date. Period of 6 months for presentation of such cheque to the Bank would start from the date mentioned on cheque.
Ashok Badwe vs. Surendra Nighojkar6) Return of cheque is itself an indication that funds are not forthcoming. The words “refer to drawer” or “account closed” are covered under the term “insufficient funds”. Thus, liability of drawer cannot be avoided if he closes account and cheque is dishonoured. A safeguard has been made to prevent hasty action is that the payee or holder in due course of cheque shall make a demand for payment of amount covered by cheque by giving a notice in writing to drawer within 30 days. Offence u/s. 138 is committed only when payment is not made by drawer on expiry of 15 days after service of notice as prescribed by proviso (c) of section 138.
In K. Prakashan Vs. P.K. Surenderan7) it was held by the Hon'ble Supreme Court that the presumption under Section 139 of the NI Act can be raised only when the complainant is able to show that he had requisite funds for advancing loan to the accused.
In Hiten P. Dalal v. Bratindranath Banerjee8) it was held that:
“22. Because both Sections 138 and 139 require that the Court `shall presume' the liability of the drawer of the cheques for the amounts for which the cheques are drawn,…, it is obligatory on the Court to raise this presumption in every case where the factual basis for the raising of the presumption has been established. It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused (…). Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court may presume a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable probability of the non- existence of the presumed fact.”
Kishan Rao v. Shankargouda9)
Section 139 of the Act 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.
Presumptions are devices by use of which the courts are enabled and entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence. Under the Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely,
The term “presumption” is used to designate an inference, affirmative or disaffirmative of the existence of a fact, conveniently called the “presumed fact” drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumption literally means “taking as true without examination or proof”.
The use of the phrase “until the contrary is proved” in Section 118 of the Act and use of the words “unless the contrary is proved” in Section 139 of the Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.
M/S Kalamani Tex vs P. Balasubramanian10)
In this case the Hon’ble Apex Court held that: “Even a blank cheque leaf would attract presumption under S.139 of the Negotiable Instruments Act when signatures are admitted by the accused.”
The Hon’ble Supreme Court observed that even a blank cheque leaf would attract presumption under S.139 of the Negotiable Instruments Act when signatures are admitted by the accused.
The bench comprising Hon’ble Justices NV Ramana ,Surya Kant and Aniruddha Bose observed that ‘reverse onus’ clauses under Section 118 and Section 139 of the Negotiable Instruments Act becomes operative once the signature(s) of an accused on the cheque are established.
Though the presumptions raised under S.118 and S.139 are rebuttable in nature, a probable defence needs to be raised, which must meet the standards of “preponderance of probability” , and not mere possibility, the bench observed.
In this case, the High Court had reversed the order of acquittal of the Judicial Magistrate and convicted the accused under S.138 of the Negotiable Instruments Act noticing that the accused had admitted his signatures on both the cheque and the deed of undertaking and had thus acknowledged the liability.
Agreeing with the view taken by the High Court, the Hon’ble Apex Court bench observed that the trial court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under S.118 and S.139 of the Negotiable Instruments Act.
The Statute mandates that once the signature(s) of an accused on the cheque/negotiate instrument are established, then these ‘reverse onus’ clauses becomes operative. In such a situation , the obligation shifts upon the accused to discharge the presumption imposed upon him.
Once the second appellant had admitted his signature on the cheque and the deed, the trial court ought to have presumed that the cheque was issued as consideration for a legally enforceable debt. The trial court ought to have presumed that the cheque was issued as consideration for a leally enforceable debt. The trial court fell in error when it called upon the complainant respondent to explain the circumstances under which the appellants were liable to pay. Such approach of the trial court was directly in the teeth of the established legal position as discussed above , and amounts to a patent error of law.
The Hon’ble bench observed that the defence raised by the accused in this case does not inspire confidence or meet the standard of ‘preponderance of probability’. The bench observed that “Even if we take the arguments raised by the appellants at face value that only a blank cheque and signed blank stamp papers were given to the respondent, yet the statutory presumption cannot be obliterated“.
It is useful to cite Bir Singh v. Mukesh Kumar, where this court held that “Even a blank cheque leaf, voluntarily signed and handed over by the accused , which is towards some payment, would attract presumption under S.139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.”
Another contention raised by the accused was that the trial court view was possible view, and the High Court committed patent illegality and exceeded its jurisdiction in reversing the acquittal. In this context, the bench observed : “It is true that the High Court would not reverse an order of acquittal merely on formation of an opinion different than that of the trial court.
It is also trite in law that the High Court ought to have compelling reasons to tinker with an order of acquittal and no such interference would be warranted when there were to be two possible conclusions.
Nonetheless , there are numerous decisions of this court, justifying the invocation of powers by the High Court under S. 378 of the Code of Criminal Procedure, 1973 that if the trial court had, inter alia, committed a patent error of law or grave miscarriage of justice or it arrived at a perverse finding of fact , there needs to be a consistent approach towards awarding compensation.”
The bench rejected the plea of the complainant seeking enhanced compensation. The record indicates that neither did the respondent ask for compensation before the High Court nor has he chosen to challenge the High Court’s judgment.Since he has accepted the High Court’s verdict, his claim for compensation stands impliedly overturned,the Hon’ble Court said.
The Hon’ble bench made these observations regarding the adjudication of compensation claims: “We are conscious of the settled principles that the object of Chapter XVII of the Negotiable Instruments Act is not only punitive but also compensatory and restitutive. The provisions of the Negotiable Instruments Act envision a single window for criminal liability for dishonour of cheque as well as civil liability for realization of the cheque amount. It is also well settled that there needs to be a consistent approach towards awarding compensation and unless there exist special circumstances, the Courts should uniformly levy fine upto twice the cheque amount along with simple interest at the rate of 9 percent per annum.“