Rangappa v. Sri Mohan
Supreme Court of India, 7 May 2010, 3 judges
The presumption under Section 139 of the Negotiable Instruments Act includes the existence of a legally enforceable debt or liability; it is rebuttable, and the accused need only raise a probable defence on a preponderance of probabilities.
Facts
The appellant, a mechanic, had engaged the respondent, a civil engineer, to supervise the construction of his house. The respondent said he had given the appellant Rs. 45,000 and received a post-dated cheque for that sum, which was returned with the remark 'Payment has been stopped by the drawer'. The appellant did not reply to the statutory notice. In the complaint under Section 138, he pleaded that a signed blank cheque had been lost and misused and that no debt existed. The trial court acquitted him, noting discrepancies in the complainant's version and wrongly holding that a stop-payment instruction did not attract Section 138. The High Court reversed the acquittal and convicted him, holding that he had not raised a probable defence.
Questions before the Court
- Does the presumption under Section 139 of the Negotiable Instruments Act extend to the existence of a legally enforceable debt or liability?
- How may the accused rebut that presumption, and had the appellant done so?
What the Court held
- Section 138 is attracted when a post-dated cheque is dishonoured on the drawer's 'stop payment' instructions, irrespective of insufficiency of funds.
- The presumption under Section 139 includes the existence of a legally enforceable debt or liability. To that extent the observations in Krishna Janardhan Bhat v. Dattatraya G. Hegde may not be correct, though that decision itself stands on its facts.
- Section 139 is a reverse onus clause imposing an evidentiary, not a persuasive, burden. The accused rebuts it on a preponderance of probabilities by raising a probable defence, and may rely on the complainant's own materials without necessarily leading evidence.
- The appellant's defence of a lost blank cheque was belated and inconsistent with his stop-payment instruction, and he did not reply to the statutory notice. He raised no probable defence, and the High Court's conviction was upheld.
Why it matters
A three-Judge Bench settles that the Section 139 presumption covers the existence of a legally enforceable debt, departing from observations in Krishna Janardhan Bhat. It also fixes the standard for rebuttal as a preponderance of probabilities, describes Section 138 as a regulatory offence, and confirms that the accused may rely on the complainant's material, so that cheque bounce trials turn on whether a probable defence is raised.
In the Court's words
Copied from the official judgment; each passage links to its page.
“In light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein.”
“In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail.”
“With respect to the facts of the present case, it must be clarified that contrary to the trial court's finding, Section 138 of the Act can indeed be attracted when a cheque is dishonoured on account of 'stop payment' instructions sent by the accused to his bank in respect of a post-dated cheque, irrespective of insufficiency of funds in the account.”
Provisions interpreted
Case and bench
- Parties
- Rangappa v. Sri Mohan
- Case
- Criminal Appeal No. 1020 of 2010 (arising out of SLP (Crl.) No. 407 of 2006)
- Decided
- 7 May 2010
- Bench
- K.G. Balakrishnan, P. Sathasivam, J.M. Panchal
- Opinions
- Unanimous. Judgment delivered by K.G. Balakrishnan, C.J.I.
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