138 n i act

Dear Mr Badouria

In a proceeding under section 138, NI Act, the assumption is that the holder of the cheque/ complainant has received the cheque in discharge of any debt or liability unless the contrary is proved (section 139 NI Act). Further the Complainant has to prove three ingredients:

(i) that there is a legally enforceable debt;

(ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and

(iii) that the cheque so issued had been returned due to insufficiency of funds.

In this regard, please refer to the Supreme Court Judgment in the matter of Krishna Janardhan Bhat v. Dattatraya G. Hegde. (AIR 2008 SC 1325: 2008 (4) SCC 54).

Please also note that the presumption raised in favour of the holder of the cheque must be kept confined to the matters covered thereby. The presumption raised does not extend to the extent that the cheque was issued for the discharge of any debt or liability which is required to be proved by the complainant. [P. Venugopal v. Madan P. Sarathi (AIR 2009 SC 568)]

Divya Jyoti Jaipuriar, Adv.

+91-9868002365

divyajyoti [at] jaipuriar [dot] com

yes the points are relevant and my frnd Divya Jyoti has referrred to two best judgments in this regard.

There are no of judmgents thereafter by even SC an high courts the

PRESUMPTION MUST BE FOR LEGAL LIABILITY and not otherwise.

However many times the lower courts may not appreciate such finer points due to pressure ot oppnent and his advocate and hence only recourse will be revision in higher courts.

There are no of steps even other wise to go in revision prior to final judgement which varies from case to case.

BOMABAY HIGH COURT  in Criminal  Application No- 4694 of 2008 decided on 4^th Feb 2009.

A CHEQUE ISSUED IN DISCHARGE OF ALLEGED LIABILITY OF REPAYING “ UNACCOUNTED “ AMOUT CAN NOT BE SAID TO BE A CHEQUE ISSUED IN DISCHARGE OF LEGALLY ENFORCEABLE LIABILITY.

SUCH AN EFFORT TO MISUSE THE PROVISION OF SECTION 138 OF THE SAID ACT HAS TO BE DISCOURAGED.

BOMABAY HIGH COURT  in Criminal  Application No- 4694 of 2008 decided on 4^th Feb 2009.

Their lordships have discussed the SC case IN

SUPREME COURT Appeal (crl.) 518 of 2006 DATE: 11/01/2008.

24. In Bharat Barrel & Drum Manufacturing Company v. Amin Chand
Payrelal [(1999) 3 SCC 35] interpreting Section 118(a) of the Act, this Court opined:

Upon consideration of various judgments as noted
hereinabove, the position of law which emerges is
that once execution of the promissory note is
admitted, the presumption under Section 118(a)
would arise that it is supported by a consideration.
Such a presumption is rebuttable.

The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was
improbable or doubtful or the same was illegal, the
onus would shift to the plaintiff who will be
obliged to prove it as a matter of fact and upon its
failure to prove would disentitle him to the grant of
relief on the basis of the negotiable instrument.


In John K. John v. Tom Varghese & Anr. [JT 2007 (13) SC 222], this
Court held:

The High Court was entitled to take notice of the conduct of the parties. It has been found by the High Court as of fact that the complainant did not approach the court with clean hands. His conduct was not that of a prudent man. Why no instrument was executed although a huge sum of money was allegedly paid to the respondent was a relevant question which could be posed in the matter. It was open to the High Court to draw its own conclusion therein. Not only no document had been executed, even no interest had been charged.