Case Analysis of Rangappa v Sri Mohan

The importance of the present case is evident from the issue which has been dealt herein i.e. proper interpretation of Section 139 of the Negotiable Instruments Act, 1881, which raises a presumption in favour of the holder of the cheque issued to discharge a legally enforceable debt or a liability (i.e. a “cheque, of the nature referred to in Section 138”).

The case was decided on date 07.05.2010 and the case citation is MANU/SC/0376/2010, AIR2010SC1898, 2010(5) SCALE340 by hon’ble Judges: K. G. Balakrishnan, C.J., P. Sathasivam and J. M. Panchal, JJ.

FACTS OF THE CASE:

In the present case, appellant and respondent knew each other and the respondent stated that appellant issued a post dated cheque to the respondent against certain loan furthered by respondent on 8-2-2001 for the same amount which was presented on the same day for encashment by the complainant. Then on 21-02-2001, Bank issued a memo to the complainant stating that the `Payment has been stopped by the drawer’, so complainant issued a notice to the appellant relating to such dishonour, which was neither replied nor honoured by the appellant. So, the respondent filed a complaint against the accused for dishonour of cheque.

The Trial Court acquitted the appellant on the ground that dishonour was not due to ‘insufficiency of funds’ but because of the instructions of the appellant so Section 138is not attracted and further there was no legally enforceable debt between two of them and hence the presumption under Section 139 cannot be raised. On appeal, he was convicted and fined by the High Court on the ground that accused was unable to raise a “probable defence to rebut the presumption placed on him by Section 139” which is a mandatory but rebuttable presumption, in favour of the fact that the cheque relates to a legally enforceable debt or liability and the burden to prove otherwise or to rebut this is on the accused himself; and such presumption under Section 139 is raised as soon as it is proved that the cheque bears his signature.

Then an appeal was made to the Supreme Court against the conviction wherein the appellant contended that there was no legally enforceable debt or liability between the two parties and stated that he has taken no loan. In relation to the cheque, he contended that it was a blank cheque lost by him which was bearing his signature and that the respondent is trying to misuse the same.

ISSUE:

To ‘properly interpret Section 139 of the Negotiable Instruments Act’ and “to clarify the manner in which this statutory presumption can be rebutted.”

JUDGMENT OF THE SUPREME COURT:

The Supreme Court opined that “in cheque bouncing cases, what the courts have to consider is whether the ingredients of the offence enumerated in Section 138 of the Act have been met and if so, whether the accused was able to rebut the statutory presumption contemplated by Section 139 of the Act.” The Supreme Court further pointed out that Section 138 relating to dishonour of cheque comes into place when a cheque is dishonoured irrespective of the fact that it was dishonour due to instruction of stop payment or insufficiency of funds as it can be later proved that the cheque was dishonoured due to actual insufficiency of funds or some other reason.

Further the Court opined that existence of legally recoverable debt is a matter of presumption under Section 139 of the Act and such a presumption lies in favour of the complainant. So, the Supreme Court in the present case differed from observation in Krishna Janardhan Bhat v Dattatraya G. Hegde wherein it was pointed out that “existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act.”

The Court further pointed out in the present case that the presumption is a rebuttable presumption and hence the accused is free to raise a presumption. It was further stated that “Section 139 of the Act is an example of a reverse onus clause” meant “to prevent undue delay in the course of litigation” and to rebut the presumption under Section 139, the standard of proof is that of `preponderance of probabilities’, i.e. the accused is only required “to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability”.

Referring to the facts of the present case, the Court pointed out that the accused was unable to raise a probable defence and to contest the existence of a legally enforceable debt, and further he admitted the signature on the cheque to be his own so this paved a way for the statutory presumption which was not rebutted by him. Hence, the Court didn’t interfere with the judgment of the High Court and dismissed the appeal.

ANALYSIS:

The present case is a prominent example to show the presumption raised in favour of the holder of a negotiable instrument especially a cheque. The very reason of inclusion of the provisions like Section 138 and 139 is to check the growing instances of bouncing of cheques i.e. as a measure to enhance the credibility of negotiable instruments in ever growing commercial transactions and also to check the act of drawing such instruments without any intention to actually respect them. In the present case Court has very well drawn a line so as to balance the probabilities between both the parties. On one hand there was the accused who was contending that he had lost a cheque bearing his signature which the complainant was trying to misuse, for which he later asked the bank to stop payment, but he wasn’t able to prove this fact. Further he wasn’t able to prove that ‘stop payment ’was not due to insufficiency of funds and that there was no legally enforceable debt or liability, which was to be rebutted by him and which was presumed so. He was also required to prove the non existence of consideration based on preponderance of probabilities by reference to the circumstances upon which he relied. So, firstly, the Court interpreted Section 139 properly that presumption is raised in favour of the fact that there lies a legally enforceable debt and secondly, it is a rebuttable presumption which does not require very high standard of proof to rebut it and can be rebutted by raising a probable defence.

REFERENCE:

· Manupatra, Online Legal Search http://www.manupatra.com/(last visited on November 18, 2011).

· http://www.vakilno1.com/bareacts/negoinstruact/chapter13/s118.htm (last visited on November 18, 2011).

· http://www.vakilno1.com/bareacts/negoinstruact/chapter17/s138.htm(last visited on November 18, 2011).

· http://www.vakilno1.com/bareacts/negoinstruact/chapter17/s139.htm(last visited on November 18, 2011).