Supreme Court held that the presumption under Section 139 of the Negotiable Instruments Act, 1881, includes a presumption that there exists a legally enforceable debt or liability.
The Supreme Court Bench comprising Justices Sanjiv Khanna and J.K. Maheshwari was recently hearing an interesting Appeal on the Negotiable Instruments Act and held that the Presumption under Section 139 of the Negotiable Instruments Act, 1881, includes a presumption that there exists a legally enforceable debt or liability. However, the presumption under Section 139 of the N.I. Act is rebuttable and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested.
In the present Appeal, the appellant admitted that the entries/details in the cheque bearing No. 054984 dated 02.02.2010 for a sum of Rs.9,32,000/- drawn on South Malabar Gramin Bank, Olarikkara Branch, Thrissur, were not in the hand of the accused/respondent- Santosh. Hence, the presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881 does not arise. Accordingly, the High Court agreed with the reasoning given by the trial court that the appellant was not able to adduce sufficient evidence that he was in a position to advance a loan of Rs. 9 lakhs to the respondent. The High Court relied on the judgment of the Supreme Court in John K. Abraham v. Simon C. Abraham, REED 2013 SC 12001.
It was an accepted and admitted position that the respondent accepted his signature on the aforesaid cheque. Interestingly, the respondent had issued a notice in which he stated that the appellant had given a loan of Rs. 5 lakhs, albeit, claimed that the loan was taken by the respondent's brother-in-law. In the notice, the respondent claimed that he had given the aforesaid cheque signed by him to his brother-in-law from whom he had taken a loan of Rs. 5 lakhs. Subsequently, his brother-in-law was involved in criminal cases.
The Supreme Court bench noted in the aforesaid factual background, that the High Court was right in holding that the onus was not on the respondent to show that the debt was neither due nor payable.
Referring to the Sections of the N.I. Act, a three Judges Bench of the Supre Court in T. Vasanthakumar v. Vijaykumari, REED 2015 SC 04001, has held:
“.....in the present case since the cheque as well as the signature has been accepted by the accused-respondent, the presumption under Section 139 would operate. Thus the burden was on the accused to disprove the cheque or the existence of any legally recoverable debt or liability. To this effect, the accused has come up with a story that the cheque was given to the complainant long back in 1999 as a security to a loan; the loan was repaid but the complainant did not, return the security cheque. According to the accused, it was that very cheque used by the complainant to implicate the accused. However, it may be noted that the cheque was dishonoured because the payment was stopped and not for any other reason. This implies that the accused had knowledge of the cheque being presented to the bank, or else how would the accused have instructed her banker to stop the payment. Thus, the story brought out by the accused is unworthy of credit, apart from being unsupported by any evidence."
The above decision refers to an earlier judgment of the Supreme Court in Rangappa v. Sri Mohan, REED 2010 SC 05001, which elucidates on the presumption under Section 139 of the N.I. Act, observes that this includes a presumption that there exists a legally enforceable debt or liability. However, the presumption under Section 139 of the N.I. Act is rebuttable and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested.
A recent decision of a three Judges Bench of the Supreme Court in Kalamani Tex and Another v. P. Balasubramanian, REED 2021 SC 02019, examined the scope and ambit of the presumption under Sections 118 and 139 of the N.I. Act and held:
“ 14. Once the 2nd appellant had admitted his signatures 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 fell in error when it called upon the respondent complainant 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.
Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 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.
18. Considering the fact that there has been an admitted business relationship between the parties, we are of the opinion that the defence raised by the appellants does not inspire confidence or meet the standard of ‘preponderance of probability’. In the absence of any other relevant material, it appears to us that the High Court did not err in discarding the appellants’ defence and upholding the onus imposed upon them in terms of Section 118 and Section 139 of the NIA.”
In view of the aforesaid factual and legal position, The Supreme Court set aside the impugned judgment with an order of remit to the High Court, to decide the appeal on the basis that the appellant was entitled to the benefit of presumption under Section 139 of the N.I. Act. Thereupon, the High Court will consider the evidence and the material on record to decide whether the offence is under Section 138 of the N.I. Act was established and made out.
The appeal was allowed.
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