Lost money in Cheque Bounce case? You don’t have to prove amount due – SC

Lost money in Cheque Bounce case? You don’t have to prove amount due – SC

Cheque Bounce Case: Who should prove the debt/amount due in cheque bounce case? The complainant, who has suffered as the cheque bounced, or respondent who issued the cheque? Supreme Court recently held that the burden of proving the due amount should not be on the complainant as if he has to prove a debt before a civil court. Rather, the burden to rebut the presumption of debt in cheque bounce case (under Negotiable Instruments Act) is on the accused. The apex court’s observation came in Uttam Ram vs Devinder Singh Hudan & ANR last month. Here’s a look at facts of the case and what the top court said:

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The respondent had procured packing material on credit from the appellant, Uttam Ram, to carry apple crop brought from various growers in 2011. The material was procured by the respondent through his authorised agent. The accounts were settled between the appellant and the authorised agent in September 2011.

It was found that the respondent owed Rs 5.39 lakh, for which a cheque was issued. The cheque, however, bounced and the appellant filed a complaint before the Trial Court.

The appeal was dismissed by Trial Court and High Court.

What Supreme Court said

The Supreme Court, however, set aside the HC order. In both the Trial Court and the High Court, the appellant had to prove the guilt of the respondent beyond reasonable doubt. The apex court termed this approach “perverse” and “irrational”.

The SC observed: “We find that the approach of the learned Trial Court and that of the High Court is perverse; irrational as well as suffers from material illegality and irregularity, which cannot be sustained in complaint filed under Section 138 of the Act.”

The top court further said that the Trial Court and the Hight Court “proceeded as if, the appellant is to prove a debt before civil court wherein, the plaintiff is required to prove his claim based on evidence to be laid in support of his claim for the recovery of the amount due.”

“A dishonour of cheque carries a statutory presumption of consideration. The holder of cheque in due course is required to prove that the cheque was issued by the accused and that when the same presented, it was not honoured. Since there is a statutory presumption of consideration, the burden is on the accused to rebut the presumption that the cheque was issued not for any debt or other liability,” SC said.

Person who signs the cheque remains liable

The apex court said that the person who signs the cheque remains liable unless he presents evidence to prove that rebut the presumption that the cheque was issued for payment of a debt.

“A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.”

Even blank cheque will make accused liable

The apex court said: “Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.”

The SC set aside the order passed by the High Court while holding the respondent guilty of dishonour of cheque for an offence under Section 138 of the negotiable Instrument Act. The respondent was asked to pay Rs 10,77,712 as fine (twice of the amount of cheque of Rs.5,38,856) and a cost of litigation of Rs.1,00,000 within three months. “If the amount of fine and the costs are not paid within three months, the respondent shall undergo imprisonment for a period of six months,” SC said.

Source:- yahoo

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