Tag Archives: Section 138 of Negotiable Instruments Act

Negotiable Instruments Act, Section 139 – Rebuttable Presumption

Once the execution of cheque is admitted Section 139 of the Negotiable Instruments Act mandates a presumption that the cheque was for the discharge of any debt or other liability. The presumption under Section 139 is a rebuttable preumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities.

        To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.

        It is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a pervasive burden.

        It is not necessary for the accused to come in the witness box to support his defence.  Basalingappa v. Mudibasappa, (2019) 5 SCC 418.

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Dishonour of Cheque – Company to be Arraigned As Accused

In N. Harihara Krishnan v. J. Thomas [N. Harihara Krishnan v. J. Thomas, (2018) 13 SCC 663 adverting to the ingredients of Section 138 of the Negotiable Instruments Act, the Hon’ble Apex Court observed as follows:

“Obviously such complaints must contain the factual allegations constituting each of the ingredients of the offence under Section 138. Those ingredients are: (1) that a person drew a cheque on an account maintained by him with the banker; (2) that such a cheque when presented to the bank is returned by the bank unpaid; (3) that such a cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid.”

The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.

In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused. Himanshu v. B. Shivamurthy, (2019) 3 SCC 797.

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Dishonour of Cheque – Complaint Must Contain Factual Allegations

The scheme of the prosecution in punishing under Section 138 of the Negotiable Instruments Act  is different from the scheme of Cr.P.C. Section 138 creates an offence and prescribes punishment. No procedure for the investigation of the offence is contemplated. The prosecution is initiated on the basis of a written complaint made by the payee of a cheque. Obviously such complaints must contain the factual allegations constituting each of the ingredients of the offence under Section 138. Those ingredients are (1) that a person drew a cheque on an account maintained by him with the banker; (2) that such a cheque when presented to the bank is returned by the bank unpaid; (3) that such a cheque was presented to the bank within a period of six months from the date it was drawn or within the period of it validity whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque, the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made within a period of 30 days from the date of receipt of the information by the payee from the bank regarding the return of the cheque as unpaid. It is obvious from the scheme of Section 138 of the Act, that each one of the ingredients flows from a document which evidences the existence of such an ingredient. The only other ingredient which is required to be proved to establish the commission of an offence under section 138 is that inspite of the demand notice referred to above, the drawer of the cheque failed to make the payment within a period of 15 days from the date of the receipt of the demand. A fact which the complainant can only assert but not prove, the burden would essentially be on the drawer of the cheque to prove that he had in fact made the payment pursuant to the demand. N. Harihara Krishnan v. J. Thomas, 2017 (101) ACC 690.

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Notice for Dishonour of Cheque – Requirements of

In the case of Suman Sethi v. Ajay K. Churiwal, (2000) 2 SCC 8, it was held as under:

       “It is a well settled principle of law that the notice has to be read as a whole. In the notice, demand has to be made for the “said amount”, i.e. the cheque amount. If no such demand is made, the notice no doubt would fall short of its legal requirement. Where in addition to the “said amount” there is also a claim by way of interest, cost etc. whether the notice is bad would depend on the language of the notice. If in a notice while giving the break-up of the claim, the cheque amount, interest, damages etc. are separately specified, other such claims for interest, cost etc. would be superfluous and these, additional claims would be severable and will not invalidate the notice. If, however, in the notice an omnibus demand is made without specifying what was due under the dishonoured cheque, the notice might well fail to meet the legal requirement and may be regarded as bad.”

          In the case of Suman Sethi v. Ajay K. Churiwal, (2000) 2 SCC 8, the Hon’ble Supreme Court has also referred to its judgment in the case of Central Bank of India v. Saxons Farms, 1999 (39) ACC 891 (SC) and held that the object of the notice is to give a chance to the drawer of the cheque to rectify his omission. Though in the notice demand for compensation, interest, cost etc. is also made, the drawer will be absolved from his liability under Section 138 if he makes the payment of the amount covered by the cheque of which he aware within 15 days from the date of receipt of the notice or before the complaint is filed. Hari Mohan Agrawal v. State of U.P., 2017 (101) ACC 843.

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