N.I.Act Section 118,138 & 139- Presumption as to negotiable instruments – “Until the contrary is proved / Section 138, 118(a) and 139 – Presumptions under – Rebuttable Presumption – Preponderance of probability

Head Note:-

Banking Public Financial Institutions and Negotiable Instruments (Amendment) Act, 1988 – Section 138 – Negotiable Instruments Act, 1881 – Sections 118, 138 and 139- Presumption as to negotiable instruments - “Until the contrary is proved” - Legislature chooses to provide adequate safeguards in the Act to protect honest drawers from unnecessary harassment but this does not preclude the person against whom presumption is drawn from rebutting it and proving to the contrary.

Held:- Thus, in the light of the evidence on record indicating grave weaknesses in the complainant’s case, we are of the view that the High Court has rightly set aside the findings recorded by the Courts below and consequently set aside the conviction and sentence since there were glaring inconsistencies in the complainant’s case giving rise to perverse findings resulting into unwarranted conviction and sentence of the respondent. In fact, the trial court as also the first appellate court of facts seems to have missed the important ingredients of Sections 118 (a) and 139 of the N.I. Act which made it incumbent on the courts below to examine the defence evidence of rebuttal as to whether the respondent/accused discharged his burden to disprove the complainant’s case and recorded the finding only on the basis of the complainant’s version. On scrutiny of the evidence which we did to avoid unwarranted conviction and miscarriage of justice, we have found that the High Court has rightly overruled the decision of the courts below which were under challenge as the trial court as also the 1st Appellate Court misdirected itself by ignoring the defence version which succeeded in dislodging the complainant’s case on the strength of convincing evidence and thus discharged the burden envisaged under Sections 118 (a) and 139 of the N.I. Act which although speaks of presumption in favour of the holder of the cheque, it has included the provisos by incorporating the expressions “until the contrary is proved” and “unless the contrary is proved” which are the riders imposed by the Legislature under the aforesaid provisions of Sections 118 and 139 of the N.I. Act as the Legislature chooses to provide adequate safeguards in the Act to protect honest drawers from unnecessary harassment but this does not preclude the person against whom presumption is drawn from rebutting it and proving to the contrary.

T.S. Thakur (Concurring)

Negotiable Instruments Act, 1881 – Section 138, 118(a) and 139 – Presumptions under - Rebuttable Presumption – Preponderance of probability - Standard of proof required for such rebuttal is preponderance of probabilities and not proof beyond reasonable doubt. The rebuttal does not have to be conculsively established but such evidence must be adduced before the court in support of the defence that the court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the ‘prudent man’. The standard of proof so as to prove a defence on the part of an accused is preponderance of probabilities.

(2013) 40 SCD 033

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 261 2013

(Arising out of SLP (Crl.) 6761/2010)

                                                          VIJAY ..                                                         Appellant

Versus

                                                          LAXMAN & ANR                                      . ..Respondents

 T.S. Thakur and Gyan Sudha Misra, JJ. On February 07, 2013

 Judgment : Gyan Sudha Misra, J.

1. Leave granted.

2. This appeal by special leave which was heard at length at the admission stage itself is directed against the judgment and order dated 29.1.2010 passed by a learned single Judge of the High Court of Madhya Pradesh Bench at Indore, in Criminal Revision No. 926/2009, whereby the conviction and sentence of one year alongwith a fine of Rupees One Lakh and Twenty Thousand imposed on the appellant for commission of an offence under Section 138 of The Banking Public Financial Institutions and Negotiable Instruments (Amendment) Act, 1988 ( For short the ‘N.I. Act’ ) has been set aside and the criminal revision was allowed. The complainant- appellant, therefore, has assailed the judgment and order of the High Court which reversed the concurrent findings of fact recorded by the trial court and set aside the order of conviction and sentence of the respondent.

3. In order to appreciate the merit of this appeal, the essential factual details as per the version of the complainant-appellant is that the respondent-accused (since acquitted) had borrowed a sum of Rs.1,15,000/- from the complainant-appellant for his personal requirement which was given to him as the relationship between the two was cordial. By way of repayment, the respondent issued a cheque dated 14.08.2007 bearing No.119682 amounting to Rs.1,15,000/- drawn on Vikramaditya Nagrik Sahkari Bank Ltd. Fazalapura, Ujjain in favour of the appellant. The complainant- appellant alleged that on 14.8.2007 when the cheque was presented to the bank for encashment the same was dishonoured by the bank on account of ‘insufficient funds’. The complainant-appellant, therefore, issued a legal notice after a few days on 17.8.2007 to the accused-respondent which was not responded as the respondent neither replied to the notice nor paid the said amount.

4. It is an admitted fact that the respondent-accused is a villager who supplied milk at the dairy of the complainant’s father in the morning and evening and his father made payment for the supply in the evening. Beyond this part, the case of the respondent-accused is that the complainant took security cheques from all the milk suppliers and used to pay the amount for one year in advance for which the milk had to be supplied. It is on this count that the respondent had issued the cheque in favour of the complainant which was merely by way of amount towards security which was meant to be encashed only if milk was not supplied. Explaining this part of the defence story, one of the witnesses for the defence Jeevan Guru deposed that when any person entered into contract to purchase milk from any person in the village, the dairy owner i.e. the complainant’s side made payment of one year in advance and in return the milk supplier like the respondent issued cheques of the said amount by way of security. In view of this arrangement, the accused Laxman started supplying milk to the complainant’s father. In course of settlement of accounts, when accused Laxman asked for return of his security cheque, since he had already supplied milk for that amount to the complainant’s father Shyam Sunder, he was directed to take back the cheque later on. The accused insisted for return of the security cheque since the account had been settled but the cheque was not given back to the respondent as a result of which an altercation took place between the respondent/accused and the milk supplier due to which the accused lodged a report at the police station on 13.8.2007, since the complainant’s father Shyam Sunder also assaulted the respondent-accused and abused him who had refused to return the cheque to the respondent-accused which had been issued by him only by way of security. As a counter blast, the complainant presented the cheque for encashment merely to settle scores with the Respondent/milk supplier.

5. The complaint-appellant, however, filed a complaint under Section 138 of the N.I. Act before the Judicial Magistrate 1st Class, Ujjain, who while conducting the summary trial prescribed under the Act considered the material evidence on record and held the Respondent guilty of offence under Section 138 of the N.I. Act and hence recorded an order of conviction of the respondent-accused due to which he was sentenced to undergo rigorous imprisonment for one year and a fine of Rs.1,20,000/- was also imposed. The respondent-accused feeling aggrieved of the order preferred an appeal before the IXth Additional Sessions Judge, Ujjain, M.P. who also was pleased to uphold the order of conviction and hence dismissed the appeal.

6. The respondent-accused, thereafter, filed a criminal revision in the High Court against the concurrent judgment and orders of the courts below but the High Court was pleased to set aside the judgment and orders of the courts below as it was held that the impugned order of conviction and sentence suffered from grave miscarriage of justice due to non- consideration of the defence evidence of rebuttal which demolished the complainant’s case.

7. Assailing the judgment and order of reversal passed by the High Court in favour of the respondent-accused acquitting him of the offence under Section 138 of the Act, learned counsel appearing for the complainant-appellant submitted that the learned single Judge of the High Court ought not to have interfered with the concurrent findings of fact recorded by the courts below by setting aside the judgment and order recording conviction of the respondent and sentencing him as already indicated herein before. The High Court had wrongly appreciated the material evidence on record and held that the respondent-accused appeared to be an illiterate person who can hardly sign and took notice of some dispute affecting the complainant’s case since an incident had taken place on 13.8.2007, while the alleged cheque was presented on 14.8.2007 for encashment towards discharge of the loan of Rs.1,15,000/-. Learned counsel also assailed the finding of the High Court which recorded that the cheque was issued by way of security of some transaction of milk which took place between the respondent-accused and father of the complainant- appellant and thus dispelled the complainant-appellant’s case.

8. Learned counsel representing the respondent-accused however refuted the complainant’s version and submitted that the case lodged by the complainant-appellant against the respondent was clearly with an ulterior motive to harass the respondent keeping in view the grudge in mind by lodging a false case alleging that personal loan of Rs.1,15,000/- was granted to the respondent and the answering respondent had issued cheque towards the repayment of said loan which could not stand the test of scrutiny of the High Court as it noticed the weakness in the evidence led by the complainant.

9. Having heard the learned counsels for the contesting parties in the light of the evidence led by them, we find substance in the plea urged on behalf of the complainant-appellant to the extent that in spite of the admitted signature of the respondent-accused on the cheque, it was not available to the respondent-accused to deny the fact that he had not issued the cheque in favour of the complainant for once the signature on the cheque is admitted and the same had been returned on account of insufficient funds, the offence under Section 138 of the Act will clearly be held to have been made out and it was not open for the respondent- accused to urge that although the cheque had been dishonoured, no offence under the Act is made out. Reliance placed by learned counsel for the complainant-appellant on the authority of this Court in the matter of K.N. Beena vs. Muniyappan And Anr., 2001 (7) Scale 331 adds sufficient weight to the plea of the complainant-appellant that the burden of proving the consideration for dishonour of the cheque is not on the complainant-appellant, but the burden of proving that a cheque had not been issued for discharge of a lawful debt or a liability is on the accused and if he fails to discharge such burden, he is liable to be convicted for the offence under the Act. Thus, the contention of the counsel for the appellant that it is the respondent-accused (since acquitted) who should have discharged the burden that the cheque was given merely by way of security, lay upon the Respondent/ accused to establish that the cheque was not meant to be encashed by the complainant since respondent had already supplied the milk towards the amount. But then the question remains whether the High Court was justified in holding that the respondent had succeeded in proving his case that the cheque was merely by way of security deposit which should not have been encashed in the facts and circumstances of the case since inaction to do so was bound to result into conviction and sentence of the Respondent/ Accused.

10. It is undoubtedly true that when a cheque is issued by a person who has signed on the cheque and the complainant reasonably discharges the burden that the cheque had been issued towards a lawful payment, it is for the accused to discharge the burden under Section 118 and 139 of the N.I. Act that the cheque had not been issued towards discharge of a legal debt but was issued by way of security or any other reason on account of some business transaction or was obtained unlawfully. The purpose of the N.I. Act is clearly to provide a speedy remedy to curb and to keep check on the economic offence of duping or cheating a person to whom a cheque is issued towards discharge of a debt and if the complainant reasonably discharges the burden that the payment was towards a lawful debt, it is not open for the accused/signatory of the cheque to set up a defence that although the cheque had been signed by him, which had bounced, the same would not constitute an offence.

11. However, the Negotiable Instruments Act incorporates two presumptions in this regard: one containing in Section 118 of the Act and other in Section 139 thereof. Section 118 (a) reads as under:-

“118. Presumption as to negotiable instruments.—Until the contrary is proved, the following presumptions shall be made— 1. of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;”

Section 139 of the Act reads as under:-                                                                  

“139. Presumption in favour of holder.-It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.”

12. While dealing with the aforesaid two presumptions, learned Judges of this Court in the matter of P. Venugopal vs. Madan P. Sarathi, (2009) 1 SCC 492 had been pleased to hold that under Sections 139, 118 (a) and 138 of the N.I. Act existence of debt or other liabilities has to be proved in the first instance by the complainant but thereafter the burden of proving to the contrary shifts to the accused. Thus, the plea that the instrument/cheque had been obtained from its lawful owner or from any person in lawful custody thereof by means of an offence or fraud or had been obtained from the maker or acceptor thereof by means of an offence or fraud or for unlawful consideration, the burden of disproving that the holder is a holder in due course lies upon him. Hence, this Court observed therein, that indisputably, the initial burden was on the complainant but the presumption raised in favour of the holder of the cheque must be kept confined to the matters covered thereby. Thereafter, the presumption raised does not extend to the extent that the cheque was not issued for the discharge of any debt or liability which is not required to be proved by the complainant as this is essentially a question of fact and it is the defence which has to prove that the cheque was not issued towards discharge of a lawful debt.

13. Applying the ratio of the aforesaid case as also the case of K.N. Beena vs. Muniyappan And Anr. (supra), when we examine the facts of this case, we have noticed that although the respondent might have failed to discharge the burden that the cheque which the respondent had issued was not signed by him, yet there appears to be a glaring loophole in the case of the complainant who failed to establish that the cheque in fact had been issued by the respondent towards repayment of personal loan since the complaint was lodged by the complainant without even specifying the date on which the loan was advanced nor the complaint indicates the date of its lodgement as the date column indicates ‘nil’ although as per the complainant’s own story, the respondent had assured the complainant that he will return the money within two months for which he had issued a post- dated cheque No.119582 dated 14.8.2007 amounting to Rs.1,15,000/- drawn on Vikramaditya Nagrik Sahkari Bank Ltd., Ujjain. Further case of the complainant is that when the cheque was presented in the bank on 14.8.2007 for getting it deposited in his savings account No.1368 in Vikarmaditya Nagrik Sahkari Bank Ltd. Fazalpura, Ujjain, the said cheque was returned being dishonoured by the bank with a note ‘insufficient amount’ on 14.8.2007. In the first place, the respondent-accused is alleged to have issued a post-dated cheque dated 14.8.2007 but the complainant/appellant has conveniently omitted to mention the date on which the loan was advanced which is fatal to the complainant’s case as from this vital omission it can reasonably be inferred that the cheque was issued on 14.8.2007 and was meant to be encashed at a later date within two months from the date of issuance which was 14.8.2007. But it is evident that the cheque was presented before the bank on the date of issuance itself which was 14.8.2007 and on the same date i.e. 14.8.2007, a written memo was received by the complainant indicating insufficient fund. In the first place if the cheque was towards repayment of the loan amount, the same was clearly meant to be encashed at a later date within two months or at least a little later than the date on which the cheque was issued: If the cheque was issued towards repayment of loan it is beyond comprehension as to why the cheque was presented by the complainant on the same date when it was issued and the complainant was also lodged without specifying on which date the amount of loan was advanced as also the date on which compliant was lodged as the date is conveniently missing. Under the background that just one day prior to 14.8.2007 i.e. 13.8.2007 an altercation had taken place between the respondent-accused and the complainant-dairy owner for which a case also had been lodged by the respondent-accused against the complainant’s father/dairy owner, missing of the date on which loan was advanced and the date on which complaint was lodged, casts a serious doubt on the complainant’s plea. It is, therefore, difficult to appreciate as to why the cheque which even as per the case of the complainant was towards repayment of loan which was meant to be encashed within two months, was deposited on the date of issuance itself. The complainant thus has miserably failed to prove his case that the cheque was issued towards discharge of a lawful debt and it was meant to be encashed on the same date when it was issued specially when the complainant has failed to disclose the date on which the alleged amount was advanced to the Respondent/Accused. There are thus glaring inconsistencies indicating gaping hole in the complainant’s version that the cheque although had been issued, the same was also meant to be encashed instantly on the same date when it was issued.

14. Thus, we are of the view that although the cheque might have been duly obtained from its lawful owner i.e. the respondent-accused, it was used for unlawful reason as it appears to have been submitted for encashment on a date when it was not meant to be presented as in that event the respondent would have had no reason to ask for a loan from the complainant if he had the capacity to discharge the loan amount on the date when the cheque had been issued. In any event, it leaves the complainant’s case in the realm of grave doubt on which the case of conviction and sentence cannot be sustained.

15. Thus, in the light of the evidence on record indicating grave weaknesses in the complainant’s case, we are of the view that the High Court has rightly set aside the findings recorded by the Courts below and consequently set aside the conviction and sentence since there were glaring inconsistencies in the complainant’s case giving rise to perverse findings resulting into unwarranted conviction and sentence of the respondent. In fact, the trial court as also the first appellate court of facts seems to have missed the important ingredients of Sections 118 (a) and 139 of the N.I. Act which made it incumbent on the courts below to examine the defence evidence of rebuttal as to whether the respondent/accused discharged his burden to disprove the complainant’s case and recorded the finding only on the basis of the complainant’s version. On scrutiny of the evidence which we did to avoid unwarranted conviction and miscarriage of justice, we have found that the High Court has rightly overruled the decision of the courts below which were under challenge as the trial court as also the 1st Appellate Court misdirected itself by ignoring the defence version which succeeded in dislodging the complainant’s case on the strength of convincing evidence and thus discharged the burden envisaged under Sections 118 (a) and 139 of the N.I. Act which although speaks of presumption in favour of the holder of the cheque, it has included the provisos by incorporating the expressions “until the contrary is proved” and “unless the contrary is proved” which are the riders imposed by the Legislature under the aforesaid provisions of Sections 118 and 139 of the N.I. Act as the Legislature chooses to provide adequate safeguards in the Act to protect honest drawers from unnecessary harassment but this does not preclude the person against whom presumption is drawn from rebutting it and proving to the contrary.

16. Consequently, we uphold the judgment and order of acquittal of the respondent passed by the High Court and hence dismissed this appeal.

T.S. Thakur, J.

1. I have had the advantage of going through the judgment and order proposed by my esteemed colleague Gyan Sudha Misra, J. I entirely agree with the conclusion drawn by Her Ladyship that the respondent has been rightly acquitted of the charge framed against him under Section 138 of the Negotiable Instruments Act, 1881 and that the present appeal ought to be dismissed. I, however, would like to add a few words of my own in support of that conclusion.

2. The factual matrix in which the complaint under Section 138 of the Negotiable Instruments Act was filed against the respondent has been set out in the order proposed by my esteemed sister Misra J. It is, therefore, unnecessary for me to state the facts over again. All that need be mentioned is that according to the complainant the accused had borrowed a sum of Rs.1,15,000/- from the former for repayment whereof the latter is said to have issued a cheque for an equal amount payable on the Vikramaditya Nagrik Sahkari Bank Ltd. Fazalapura, Ujjain. The cheque when presented to the bank was dishonoured for ‘insufficient funds’. The accused having failed to make any payment despite statutory notice being served upon him was tried for the offence punishable under the provision mentioned above. Both the courts below found the accused guilty and sentenced him to undergo imprisonment for a period of one year besides payment of Rs.1,20,000/- towards fine.

3. The case set up by the accused in defence is that he is a Milk Vendor who supplied milk to the father of the complainant who runs a dairy farm. The accused claimed that according to the prevailing practice he received an advance towards the supply of milk for a period of one year and furnished security by way of a cheque for a sum of Rs.1,15,000/-. When the annual accounts between the accused-respondent and the dairy owner-father of the complainant was settled, the accused demanded the return of the cheque to him. The dairy owner, however, avoided return of cheque promising to do so some other day. Since the cheque was not returned to the accused despite demand even on a subsequent occasion, an altercation took place between the two leading to the registration of a first information report against the father of the complainant with the jurisdictional police. On the very following day after the said altercation, the cheque which the respondent was demanding back from the father of the complainant was presented for encashment to the bank by the complainant followed by a notice demanding payment of the amount and eventually a complaint under Section 138 against the accused. The case of the accused, thus, admitted the issue and handing over of the cheque in favour of the complainant but denied that the same was towards repayment of any loan. The High Court has rightly accepted the version given by the accused-respondent herein. We say so for reasons more than one. In the first place the story of the complainant that he advanced a loan to the respondent-accused is unsupported by any material leave alone any documentary evidence that any such loan transaction had ever taken place. So much so, the complaint does not even indicate the date on which the loan was demanded and advanced. It is blissfully silent about these aspects thereby making the entire story suspect. We are not unmindful of the fact that there is a presumption that the issue of a cheque is for consideration. Sections 118 and 139 of the Negotiable Instruments Act make that abundantly clear. That presumption is, however, rebuttable in nature. What is most important is that the standard of proof required for rebutting any such presumption is not as high as that required of the prosecution. So long as the accused can make his version reasonably probable, the burden of rebutting the presumption would stand discharged. Whether or not it is so in a given case depends upon the facts and circumstances of that case. It is trite that the courts can take into consideration the circumstances appearing in the evidence to determine whether the presumption should be held to be sufficiently rebutted. The legal position regarding the standard of proof required for rebutting a presumption is fairly well settled by a long line of decisions of this Court.

4. In M.S. Narayana Menon v. State of Kerala (2006) 6 SCC 39, while dealing with that aspect in a case under Section 138 of the Negotiable Instruments Act, 1881, this Court held that the presumptions under Sections 118(a) and 139 of the Act are rebuttable and the standard of proof required for such rebuttal is preponderance of probabilities and not proof beyond reasonable doubt. The Court observed:

“29. In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words “proved” and “disproved” have been defined in Section 3 of the Evidence Act (the interpretation clause)…

30. Applying the said definitions of “proved” or “disproved” to the principle behind Section 118(a) of the Act, the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.

xx xx xx xx

32. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies.

xx xx xx xx

41…Therefore, the rebuttal does not have to be conculsively established but such evidence must be adduced before the court in support of the defence that the court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the ‘prudent man’.”

5 The decision in M.S. Narayana Menon (supra) was relied upon in K. Prakashan v. P.K. Surenderan (2008) 1 SCC 258 where this Court reiterated the legal position as under:

“13. The Act raises two presumptions; firstly, in regard to the passing of consideration as contained in Section 118 (a) therein and, secondly, a presumption that the holder of cheque receiving the same of the nature referred to in Section 139 discharged in whole or in part any debt or other liability. Presumptions both under Sections 118 (a) and 139 are rebuttable in nature.

14. It is furthermore not in doubt or dispute that whereas the standard of proof so far as the prosecution is concerned is proof of guilt beyond all reasonable doubt; the one on the accused is only mere preponderance of probability.” 

6. To the same effect is the decision of this Court in Krishna Janardhan Bhat v. Dattatraya G. Hegde (2008) 4 SCC 54 where this Court observed:

“32… Standard of proof on the part of an accused and that of the prosecution a criminal case is different.

xx xx xx xx

34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is preponderance of probabilities.

xx xx xx xx

45… Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have rebutted. Other important principles of legal jurisprudence, namely presumption of innocence as human rights and the doctrine of reverse burden introduced by Section139 should be delicately balanced.”

7. Presumptions under Sections 118(a) and Section 139 were held to be rebuttable on a preponderance of probabilities in Bharat Barrel & Drum Manufacturing Company v. Amin Chand Pyarelal (1999) 3 SCC 35 also where the Court observed:

“11… Though the evidential burden is initially placed on the defendant by virtue of S.118 it can be rebutted by the defendant by showing a preponderance of probabilities that such consideration as stated in the pronote, or in the suit notice or in the plaint does not exist and once the presumption is so rebutted, the said presumption ‘disappears’. For the purpose of rebutting the initial evidential burden, the defendant can rely on direct evidence or circumstantial evidence or on presumptions of law or fact. Once such convincing rebuttal evidence is adduced and accepted by the Court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the plaintiff who has also the legal burden.”

8. In Hiten P. Dalal v. Bratindranath Banerjee (2001) 6 SCC 16 this Court compared evidentiary presumptions in favour of the prosecution with the presumption of innocence in the following terms:

“22… Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact.

23. In other words, provided the facts required to form the basis of a presumption of law exists, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. …”

9. Decisions in Mahtab Singh & Anr. v. State of Uttar Pradesh (2009) 13 SCC 670, Subramaniam v. State of Tamil Nadu (2009) 14 SCC 415 and Vishnu Dutt Sharma v. Daya Sapra (2009) 13 SCC 729, take the same line of reasoning.

10. Coming then to the present case, the absence of any details of the date on which the loan was advanced as also the absence of any documentary or other evidence to show that any such loan transaction had indeed taken place between the parties is a significant circumstance. So also the fact that the cheque was presented on the day following the altercation between the parties is a circumstance that cannot be brushed away. The version of the respondent that the cheque was not returned to him and the complainant presented the same to wreak vengeance against him is a circumstance that cannot be easily rejected. Super added to all this is the testimony of DW1, Jeevan Guru according to whom the accounts were settled between the father of the complainant and the accused in his presence and upon settlement the accused had demanded return of this cheque given in lieu of the advance. It was further stated by the witness that the complainant’s father had avoided to return the cheque and promised to do so on some other day. There is no reason much less a cogent one suggested to us for rejecting the deposition of this witness who has testified that after the incident of altercation between the two parties the accused has been supplying milk to the witness as he is also in the same business. Non- examination of the father of the complainant who was said to be present outside the Court hall on the date the complainant’s statement was recorded also assumes importance. It gives rise to an inference that the non- examination was a deliberate attempt of the prosecution to keep him away from the court for otherwise he would have to accept that the accused was actually supplying milk to him and that the accused was given the price of the milk in advance as per the trade practice in acknowledgement and by way of security for which amount the accused had issued a cheque in question.

11. In the totality of the above circumstances, the High Court was perfectly justified in its conclusion that the prosecution had failed to make out a case against the accused and in acquitting him of the charges. With these observations in elucidation of the conclusion drawn by my worthy colleague, I agree that the appeal fails and be dismissed.

Negotiable Instruments Act, 1881 – Sections 8, 9, 138, 139 and 142 – Preponderance of probabilities

Head Note: Negotiable Instruments Act, 1881 - Sections 8, 9, 138, 139 and 142 - Preponderance of probabilities - It is not necessary for the defendant to disprove the existence of consideration by way of direct evidence. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies. 

Held:Applying the above said principles to the case on hand, we find that the judgment of the trial Court in having drawn the conclusions to the effect that the appellant sufficiently rebutted the initial presumption as regards the issuance of the cheque under Sections 138 and 139 of the Act, was perfectly justified. We also find that the preponderance of probabilities also fully support the stand of the appellant as held by the learned trial Judge. The judgment of the High Court in having interfered with the order of acquittal by the learned trial Judge without proper reasoning is, therefore, liable to be set aside and is accordingly set aside. Consequently, the conviction and sentence imposed in the judgment impugned is also set aside. Having regard to our above conclusions, the amount deposited by the appellant with the trial Court in a sum of Rs.25 lakhs with accrued interest, if any, shall be refunded to her forthwith on production of a copy of this judgment. The appeal stands allowed with the above directions.

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.1594 OF 2012

Rev. Mother Marykutty                                             …Appellant

VERSUS

Reni C. Kottaram & another                                     …Respondents

Dr. B.S. Chauhan and Fakkir Mohamed Ibrahim Kalifulla, JJ.

 J U D G M E N T: Fakkir Mohamed Ibrahim Kalifulla, J. on October 12, 2012

 The appellant/accused is aggrieved by the judgment dated 17.03.2010 passed in Criminal Appeal No.1707/2007 of the High Court of Kerala at Ernakulam. The respondent herein preferred a complaint against the appellant under Section 142 of the Negotiable Instruments Act (hereinafter called ‘the Act’) for an offence punishable under Section 138 of the Act. According to the complainant, the appellant/ accused entrusted the work of construction of an Old Age Home and a Chapel at Punnaveli, Pathanamthitta District based on an agreement between the appellant and the respondent. According to the respondent, the appellant issued a post dated cheque for Rs.25 lakhs in favour of the respondent towards the outstanding amount due to him for the work done by him. The cheque was dated 21.03.2005. It was claimed that when the cheque was presented by the respondent with his bankers, the same was dishonoured due to insufficiency of funds in the account of the appellant. It was further claimed that though the respondent intimated about the dishonour of the cheque by a lawyer’s notice dated 30.03.2005 served on the appellant on 31.03.2005, she came forward with a reply taking the stand that no amount was due and that the respondent stealthily removed two cheques from the custody of the appellant of which the present one was forged and presented for clearance. Before the trial Court the appellant pleaded not guilty. On behalf of the respondent Exhibits P- 1 to P-20 were marked and the respondent examined himself as P.W.1. On behalf of the appellant Exhibits D-1 to D-4 series were marked, in the course of cross-examination of P.W.1. No oral evidence was adduced on behalf of the appellant. When the incriminating circumstances were put against the appellant under Section 313 of Cr.P.C. she denied the same and filed a written statement.

The trial Court on a detailed analysis of the evidence, placed before it, ultimately held that the appellant was able to rebut the presumption and that there was no circumstance warranting the execution of Exhibit P-1 cheque in favour of the respondent. So holding, the trial Court found the appellant not guilty of the offence under Section 138 of the Act and acquitted her under Section 255(1) of Cr.P.C. Aggrieved by the acquittal of the appellant, the respondent preferred an appeal before the High Court of Kerala at Ernakulam wherein the impugned judgment came to be rendered.

The High Court while reversing the judgment of the trial Court found the appellant guilty of the offence and sentenced her to pay a fine of Rs.30 lakhs and in default to pay the fine amount directed her to undergo simple imprisonment for 1 ½ years. It was further directed that on realization of the fine amount, the same should be paid to the complainant under Section 357(1) of Cr.P.C. Appellant was also directed to appear before the trial Court on 17.07.2010 to make the payment of the fine amount. It was further directed that in default of appearance before the trial Court, the trial Court would be free to proceed against the appellant for taking coercive steps for executing the sentence.

At the time when special leave petition was moved, based on the undertaking of the appellant, she was directed to deposit a sum of Rs.25 lakhs in the trial Court within two weeks. Subject to the said condition notice was issued and interim stay was also granted subject to fulfillment of the said condition. Subsequently, it was reported on 10.11.2010 that the amount directed to be deposited was also deposited.

We have heard Mr. Basava Prabhu Patil, Senior Counsel for the appellant and Shri V. Giri, Senior Counsel for the respondent. We have also perused the material papers placed before us, the judgment of the trial Court as well as that of the High Court.

Mr. Basava Prabhu Patil, Senior Counsel for the appellant in his submissions primarily contended that the appellant discharged her burden by rebutting the initial presumption contemplated under Section 118 read along with Section 139 of the Act and that having regard to the overwhelming preponderance of probabilities existing in favour of the appellant, the trial Court rightly concluded that the appellant was entitled for the acquittal. The learned Senior Counsel further contended that the overwhelming evidence available on record which was considered by the trial Court, though was referred to by the High Court in the impugned judgment has been completely omitted to be considered while reversing the order of acquittal of the trial Court. The learned Senior Counsel, therefore, contended that the impugned judgment of the High Court was liable to be set aside. Apart from the above submission, the learned Senior Counsel by referring to Sections 8, 9, 138, 139 and 142 of the Act sought to raise a contention based on the specific expression “Holder” and “Holder in due course” used in those provisions to contend that the respondent cannot be said to have fulfilled the requirement of the said provisions in order to avail the benefits under the provisions of the Act. Learned Senior Counsel relied upon the decision of this Court, M.S. Narayana Menon alias Mani Vs. State of Kerala and another reported in (2006) 6 SCC 39, in support of his submissions.

As against the above submissions Mr. V. Giri, Learned Senior Counsel for the respondent contended that the appellant was prevaricating in her stand as regards the issuance of the cheque, namely, the one in her reply to the lawyer’s notice and the other before the Court, in her written statement. The learned Senior Counsel by referring to Annexure R-3 and R-4 contended that the contents of the said documents proved appellant’s liability to the respondent and that the appellant miserably failed to rebut the initial presumption relating to the issuance of the cheque in favour of the respondent. As regards the submission based on Sections 8, 9, 138, 139 and 142 of the Act, made by the learned counsel for the appellant it was contended that the said contention has been raised for the first time in this Court and that in any event the status of the respondent as payee/holder of the cheque was duly proved.

Having heard learned counsel for the respective parties and having bestowed our serious consideration to the contentions raised, at the very outset, we wish to state that while the trial Court made every effort to examine the claim of the respondent as regards the issuance of the cheque by the appellant in his favour and the stand of the appellant by referring to the respective documentary evidence as well as the version of P.W.1 before reaching the conclusion about the guilt of the appellant, we find that the High Court completely failed to consider and appreciate the documents marked on the side of the appellant. We find that though the High Court made a reference to those specific Exhibits, the attention to which was drawn by the learned counsel, namely, Exhibit D-3, Exhibits P-6 to P-8, Exhibits D- 4(A) to D-4(F) series vouchers as well as Exhibit D-4(J) voucher unhesitatingly stated that he did not propose to enter into any finding on merit as the same was unwarranted in the case on hand considering the nature of allegations and claim contained in the case. It also went on to state that in spite of those materials, in its conclusion, the appellant failed to produce whatever records available in her possession to show that no amount was due from her to the respondent. When we made a comparative consideration of the analysis made by the trial Court while holding that no offence was made out as against the appellant, as against the above reasoning of the learned Judge, in the order impugned in this appeal, we are convinced that the High Court has failed to discharge its onerous responsibility of considering the material evidence available on record which were brought to its notice and for the reasons best known, the High Court blatantly declined to examine those materials by simply stating that the same was not warranted.

In order to appreciate the correctness of the impugned judgment of the High Court, as well as, that of the trial Court, it will be worthwhile to refer to certain conclusions drawn by the learned trial Judge by making specific reference to the various documentary evidence placed before it vis-à-vis the oral version of the complainant himself. The significant admission of the respondent as P.W.1 was noted by the trial Court as under:

The construction work entrusted with the respondent had to be completed for a total sum of Rs.78,70,678/- as stated in Exhibit D-3. 

Respondent admitted that he had not completed the work and that he would have got payment only after the measurement of the quantity of the work done. 

All the amounts received from the accused were noted in Exhibit P- 9. 

It was admitted that a sum of Rs.12,60,100/- mentioned in Exhibit D-4 series voucher was not noted in Exhibit P-9. 

The amount received by him from the accused for conducting earth work was also not included in Exhibit P-9. 

The respondent received various amounts by cheques and cash. He, however, denied the suggestion that the accused gave two cheques to one Joychen Manthurthy by way of security on 23.10.2001 while borrowing Rs.5 lakhs from the said person. It was admitted by the respondent that flooring of the building was done by the appellant herself and the expenses were not included in the bill. 

The respondent admitted that he had received Rs.77,31,500/- as per Exhibit P-9 statement while the total amount of work as per Exhibit D-3 agreement was Rs.78,70,678/-. 

The respondent, however, denied the suggestion that excess payments were made by the appellant to him. 

Respondent also admitted that he did not complete the work and the flooring was ultimately done by the appellant herself. 

It was not in dispute that the final payment was to be settled only after completion of the work and that the respondent did not complete the work. 

There was no evidence to conclude that any measurement of the work was done and the accounts were settled. 

As regards the variation in the stand of the appellant, namely, the one in the reply notice and the other in the written statement the same did not materially affect the stand of the appellant in the light of the overwhelming evidence in support of her stand. The fact that the cheque was not in the handwriting of the appellant strengthens the defence version that it was not executed in favour of the respondent. 

There was no reliable documentary evidence adduced by the complainant to hold that a sum of Rs.25 lakhs was due to him warranting execution of Exhibit P-1 cheque. 

There was no amount legally due to the respondent to hold that Exhibit P-1 cheque was as a matter of fact issued by the appellant in favour of the respondent in order to hold that he was a holder of the cheque.

It was based on the above reasoning, the trial Court ultimately concluded that no offence was made out as against the appellant under Section 138 of the Act in order to convict her under Section 142 of the Act. While such an elaborate consideration was made by the trial Court for acquitting the appellant, it will be appropriate to refer to the nature of consideration made by the High Court which has been stated in paragraph 13 of the impugned judgment, which is to the following effect:

“13. Another point vehemently raised by the counsel for the respondent/accused is that no amount is due from the accused to the complainant so as to issue Ext.P1 cheque. In order to substantiate the above submission, the learned counsel has taken me through the documents namely, Ext.D3, Exts.P6 to P8 final bills and Ext.D4(A) to D4(F) series vouchers and also Ext.D4(J) voucher. Regarding this submission, I am not proposed to enter into any finding on merit as the same is unwarranted in the present case considering the nature of allegations and claim contained in this case. But from the materials and evidence on record, it is crystal clear that the accused miserably failed to produce whatever records which she was in possession to show that no amount is due from the accused to the complainant. On the other hand, the attempt was to interpret and explain the documents produced by the complainant. Admittedly, no payment was made to the complainant otherwise than through the vouchers and cheques. If that be so, by producing those documents, the defence plea can be established. But there was no attempt in this regard. When the accused has admitted the transaction claimed by the complainant and the complainant has established his claim that there was outstanding amounts due from the accused to the complainant out of the contract work undertaken by him under Ext.D3 agreement, it is for the accused to establish that no amount is due to the complainant by producing cogent and concrete evidence if they are sticking on their stand. 

(underlining is ours)

We can understand if the High Court had considered those Exhibits, the attention of which was drawn to it and stated as to how it was not in a position to agree with the conclusions drawn by the learned trial Judge. The above statement contained in paragraph 13 of the impugned judgment discloses that the attention of the High Court was drawn to the specific Exhibits which were relied upon by the appellant and referred to by the learned trial Judge to reach a conclusion about the guilt or otherwise of the appellant. After referring to those Exhibits, unfortunately, we find that in the very next sentence the High Court proceeded to state that the appellant failed to produce any material which was in her possession to show that no amount was due from the appellant to the respondent. Such an approach of the High Court, in our considered opinion, has displayed the total perversity in its approach while reversing the order of the trial Judge. Even, Mr. V. Giri, learned Senior Counsel for the respondent in spite of his best efforts was unable to convince us to support the above conclusion found in the judgment of the High Court.

That apart having considered the conclusions of the learned trial Judge, we find that those conclusions were drawn by adducing cogent and convincing reasoning and we do not find any fault in the said conclusions drawn by the learned trial Judge. In the circumstance, the principles set out in the decision relied upon by the learned counsel for the appellant in M.S. Narayana Menon alias Mani (supra) as regards the presumption to be drawn and the preponderance of probabilities to be inferred, as set out in paragraphs 31 to 33, are fully satisfied. Those principles, set out in paragraphs 31 to 33, can be usefully referred to which are as under:

“31. A Division Bench of this Court in Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal albeit in a civil case laid down the law in the following terms: (SCC pp. 50-51, para 12) 

“12. 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. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt.”

This Court, therefore, clearly opined that it is not necessary for the defendant to disprove the existence of consideration by way of direct evidence.

32. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies.

33. Presumption drawn under a statute has only an evidentiary value. Presumptions are raised in terms of the Evidence Act. Presumption drawn in respect of one fact may be an evidence even for the purpose of drawing presumption under another.”

Applying the abovesaid principles to the case on hand, we find that the judgment of the trial Court in having drawn the conclusions to the effect that the appellant sufficiently rebutted the initial presumption as regards the issuance of the cheque under Sections 138 and 139 of the Act, was perfectly justified. We also find that the preponderance of probabilities also fully support the stand of the appellant as held by the learned trial Judge. The judgment of the High Court in having interfered with the order of acquittal by the learned trial Judge without proper reasoning is, therefore, liable to be set aside and is accordingly set aside. Consequently, the conviction and sentence imposed in the judgment impugned is also set aside.

Having regard to our above conclusions, the amount deposited by the appellant with the trial Court in a sum of Rs.25 lakhs with accrued interest, if any, shall be refunded to her forthwith on production of a copy of this judgment. The appeal stands allowed with the above directions.

No offence u/s 138 of N.I. Act is committed for dishonour of cheque given as security deposit

HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL APPELLATE JURISDICTION

CRIMINAL WRIT PETITION NO.2243 OF 2009

Joseph Vilangadan. Vs. Phenomenal Health Care Services Ltd. & Anr.

CORAM : J.H.Bhatia, J. DATE : 20th July, 2010

 1.  Heard the learned counsel for the parties.

 2    There is no dispute that the respondent no.1/complainant and M/s. Encon Engineering and Contractors (Hereinafter referred to as ‘Contractors’) had entered into an agreement on 28th January, 2005 whereby Contractors had undertaken to carry out certain works for the respondent. As per the said contract, Contractors deposited the sum of Rs. 10 lacs by undated cheque no.027840 drawn against South Indian Bank Ltd., Palarivattom Branch, Cochin branch with the respondent no.1 as refundable security deposit for the due performance of the agreement. The said undated cheque was in custody of the respondent no.1 and it appears that the respondent no.1 filled in the date on undated cheque as “4.6.2008″. The cheque was presented to the drawee bank through the banker of the respondent no.1. Cheque was returned unpaid on the ground that the drawer had stopped the payment. Therefore, notice was issued by the respondent to the contractor as well as it’s managing partner for the payment of the cheque amount . In spite of notice, payment was not made. Therefore, the respondent no.1 filed complaint under Section 138 of the Negotiable Instruments Act, in the Court of Metropolitan Magistrate 44th Court, Andheri. Process was issued against the accused, who is the petitioner before this Court. Petitioner/accused challenged the issuance of process by filing revision application no.789/2009 before the Sessions Court, Gr. Bombay. By the impugned order dated 8th June, 2009, the learned Additional Sessions Judge rejected the revision application. Hence this petition.

 3.    At the outset it may be stated that before the revisional Court, petitioner had taken several grounds challenging the issuance of process. However, during the arguments before this Court, the learned counsel for the petitioner restricted the challenge only to one point. According to him, cheque was not issued in discharge of any debt or liability and as the cheque was issued as security deposit, provisions of Section 138 are not applicable.

 The learned counsel placed reliance upon several authorities in support of his contention. The learned counsel for the respondent/complainant contended that the said cheque was deposited in lieu of the amount of Rs. 10 lacs which would be otherwise required to be deposited as security by the contractor with the respondent for due performance of the contact and, therefore, it must be held that the cheque was issued in discharge of “other liability.”

4.     Section 138 of the Negotiable Instruments Act provides that where any cheque was drawn by a person on account maintained by him with the banker for the payment of any amount of money to another person for discharge in whole or in part of any debt or other liability and it was returned by the drawee bank unpaid either because the amount of money in the account is insufficient or it exceeds the amount arranged to be paid, such person shall be deemed to have been committed offence and shall be liable to punishment with imprisonment or with fine or with both. Of course, before the offence is committed, several other conditions are required to be fulfilled. We are not concerned with the same for the decision of the present matter. Important ingredient for the offence punishable under Section 138 is that cheque must have been issued for the discharge in whole or in part of any debt or other liability. If the cheque is not issued for the discharge of any debt or other liability, Section 138 can not be invoked. It is now well settled legal position that if the cheque is issued only as security for performance of certain contract or an agreement and not towards the discharge of any debt or other liability, offence punishable under section 138 is not made out. In Travel Force v. Mohan N. Bhave and Another 2007 Mh.L.J.3339 , the cheque in question was issued by the accused for investment in fixed deposit and it was accepted by the complainant as fixed deposit in the scheme. As the cheque was dishonoured, the complaint under Section 138 of the Negotiable Instruments Act was filed. Process was issued by the Magistrate. However, the Sessions Court set aside the order issuing the process holding that the cheque was not issued for discharge in whole or in part of any debt or other liability and, therefore, presumption under Section 139 could not arise in favour of the complainant. Revision application filed by the complainant was rejected by this High Court holding that when the cheque was issued only as a deposit and not in discharge of any debt or liability, offence under Section 138 is not made out.

5.    In M.S.Narayana Menon @ Mani v. State of Kerala and Another(2006) 6 SCC 39, accused and the complainant were brokers working in the stock exchange and the complainant was to enter into certain transactions on behalf of the accused. The cheque was issued for an amount of Rs. 2,95,033/by the accused in favour of the complainant. On presentation, the cheque was dishonoured. After notice also the payment was not made. In the case under Section 138 plea of the accused was that the complainant was in dire need of financial assistance and the said cheque was issued so as to enable him to tide over his financial difficulties and not in discharge of any debt or liability payable to the complainant. During the trial, it was revealed that there was discrepancy of more than Rs. 14 lacs in the account maintained by the complainant. Accused was convicted by the trial Court but was acquitted by the appellate Court . High Court set aside the acquittal and convicted the accused. Accused went to the Supreme Court. After going to the facts and circumstances, the Supreme Court observed thus in paragraph 52:

  “52. We, in the facts and circumstances of this case, need not go into the question as to whether even if the prosecution fails to prove that a large portion of the amount claimed to be a part of the debt was not owing and due to the complainant by the accused and only because he has issued a cheque for a higher amount, he would be convicted if it is held that existence of debt in respect of large part of the said amount has not been proved. The appellants clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act.”

 From these observations, it appears that if the cheque was not issued for discharge of any debt or liability but as a security only, offence is not made out under Section 138.

6.    Coming to the facts of the present case from the complaint as well as particulars of the agreement executed on 28.1.2005, it is clear that cheque was issued as a security deposit at the time of entering into contract for due performance of the terms of the contract. Agreement shows that the contractor had deposited the undated cheque no.027840 with the respondent as refundable security deposit for due performance of the agreement. Even the allegations in the complaint are not different. Admittedly, when this agreement was entered into, no debt or liability was in existence and under that agreement, parties had entered into a contract whereby contractor was to perform certain works for the respondent. Naturally, as per the terms of the contract and the allegations made in the complaint if the contractor would fail to perform the agreement, respondent could encash the cheque and recover an amount of security deposit.

7.   The learned counsel for the respondents vehemently contended that the contractor was to perform so many works and in respect of some works, his rates were higher and in respect of some other, rates were lower than the other bidders. He was also advanced certain amount for carrying out certain works from time to time. Contractor had completed works in which higher rates were given to him but he ignored to carry out those works where the rates were less and thereafter he ignored to complete those particular works resulting into the disputes between the parties. Admittedly, the disputes had occurred in the year 2006 and the contractor filed a suit against the respondent in the year 2006. Not only was this, admittedly, matter also referred to arbitrator in respect of said disputes. The learned counsel for the respondents pointed out that undated cheque was lying with the respondent since 28.1.2005. However, for the first time a date “4.6.2008” was put on him and then cheque was presented for encashment, which was returned unpaid with endorsement “payment was stopped”. It shows that date was put on the cheque by the respondents long after disputes had arisen between the parties. Proviso (a) to Section 138 requires that the cheque should be presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. In the present case though the cheque was drawn and handed over on 28.1.2005, date was not put on it. If the date would have been put, cheque would have been valid for six months from 28.1.2005. However, the respondent put the date 4.6.2008, i.e., almost three years after the period of cheque was over. Thus, the cheque was not presented to the drawee bank within six months from the date when it was actually drawn. Anyhow, it is not necessary to enter into that controversy for the purpose of deciding the present petition. Fact remains that the cheque was issued towards the security deposit and not towards the discharge of any debt or liability.

8.   The learned counsel for the respondent contends that it is not necessary that the cheque should be issued for discharge of a debt. According to him, it may be issued towards the discharge of other liability also and in support of this, he placed reliance on ICDS Limited v. Beena Shabeer and Another (2002) 6 SCC 426. In that case, husband of the accused/respondent no.1 had obtained a car under hire purchase agreement from the complainant. The accused was a guarantor for payment of the amount by her husband and towards the part payment of the said transaction, she had issued a cheque in favour of the complainant. Cheque was dishonoured and the payment was not made in spite of the notice. High Court quashed the complaint on the ground that cheque from the guarantor could not be said to have been issued for the purpose of discharge of any debt or liability. However, the Supreme Court set aside the order of the High Court. The Supreme Court observed thus in paragraphs 10 and 11.

  “10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the section stands with the words “Where any cheque”. The above noted three words are of extreme significance, in particular, by reason of the user of the word “any ”the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment. 11. The issue as regards the coextensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any discussion therein. The language of the statute depicts the intent of the lawmakers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act. “Any cheque” and “other liability” are the two key expressions which stand as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the statute. Any contra interpretation would defeat the intent of the legislature. The High Court, it seems, got carried away by the issue of guarantee and guarantor’s liability and thus has overlooked the true intent and purport of Section 138 of the Act. The judgments recorded in the order of the High Court do not have any relevance in the contextual facts and the same thus do not lend any assistance to the contentions raised by the respondents.” Supreme Court in ICDS Ltd. v. Beena Shabeer and Another (2002) Supreme Court Cases 426 considered provisions of the law and held that when the cheque is issued by the guarantor in discharge of such other liability, provisions of section 138 are applicable. Infact, section 138 itself specifically provides that the cheque should have been issued by a person for the discharge of any debt or other liability. The guarantor may not be himself a debtor but he guarantees the repayment of the loan taken by the principal debtor. By giving such a guarantee, the guarantor incurs a liability towards the creditor and for the discharge of that liability, if he issues cheque, he will be covered by the provisions of Section 138. As the cheque was issued for the discharge of “other liability” case would be covered by Section 138.

9.   In the present case, there was no liability or debt towards the complainant/respondent when the cheque was issued by the contractor. From the language of the agreement as well as allegations made in the complaint, it is clear that said cheque was issued as security deposit and not towards the discharge of any debt or lone. The learned counsel for the respondent contended that in M.S.Narayana Menon @ Mani (Supra), evidence was led by the parties and on the basis of evidence, the Supreme Court came to conclusion that the cheque was issued as a security and, therefore, Section 138 would not be applicable. According to the learned counsel, in this case only process has been issued and the parties are yet to go to the trial and, therefore, said authority in M.S. Narayana Menon @ Mani (Supra) would not be applicable. It would be difficult to accept this contention. Ratio in M.S.Narayana Menon @ Mani (Supra), is applicable to the facts of the present case. When on the face of the complaint itself, it is clear that the cheque was issued as a security deposit and not towards the discharge of any debt or other liability, case under Section 138 is not made out. When the complaint itself does not make out criminal case to issue the process, to force the accused to undergo trial would be clear misuse of the process of the Court and this should not be allowed. The Additional Sessions Judge while rejecting the revision application dealt with the liability of the contractor on the basis of terms of the contract and the cheque. The learned counsel for the respondent also contended that the matter was referred to arbitrator and arbitrator also held that the contractor is liable to pay on the basis of that cheque. As far as civil liability of the contractor/ petitioner is concerned, it is not necessary to look into the same in present matter. Suit was filed in the year 2006 and the arbitrator was also appointed in 2008, therefore, civil liability of the parties against each other can be looked into the said litigation or arbitration proceedings. In the present matter, we have only to see whether the offence under Section 138 of the Negotiable Instruments Act is made out or not. The learned Revisional Court did not address to this question properly before rejecting revision application.

10.  In view of the facts and circumstances, I find that no case to issue process under Section 138 was made out and, therefore, process issued by the trial Court is liable to be quashed. 11 For the aforesaid reasons, petition is allowed. The order passed by the learned Metropolitan Magistrate to issue process under Section 138 is hereby quashed. Rule made absolute accordingly.