Dishonour Of Cheque Issued For Discharge Of Later Liability Clearly Covered By Negotiable Instrument Act: Chhattisgarh HC [Read Order]

Dishonour Of Cheque Issued For Discharge Of Later Liability Clearly Covered By Negotiable Instrument Act: Chhattisgarh HC [Read Order]

Chhattisgarh High Court held in Madan Tiwari v. Yashwant Kumar Sahu & Anr that dishonour of cheque issued for discharge of later liability is clearly covered by the Negotiable Instrument Act, 1881.

Bench of Justice Rajani Dubey said further that cheques undoubtedly represent the outstanding liability. That once the loan is disbursed and installments fall due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Negotiable Instrument Act, 1881.


Respondent filed a complaint alleging that applicant, who was running an institution (Pleasant Health Welfare Foundation) at Dongargaon had appointed the complainant and 21 other persons on agreement basis. Complainant and other persons deposited some amount as per the agreement, with the institution. In the agreement it was mentioned that the amount so deposited would be refunded after completion of probation period of one year. It is the case of the complainant and other persons that after completion of probation period, they have not been regularized therefore, the complainant and others demanded for refund of the amount of Rs. 3,16,000/- from the applicant/institution.

The applicant issued a cheque bearing for Rs. 3,16,000/- in favour of the complainant. When the cheque was deposited by the complainant in the bank, the bank dishonoured, stating therein that payment of the cheque was not being made because of insufficient amount being in the account of the drawer. Thereafter, the opposite party-applicant was sent a legal notice dated 10/05/2004 and the complaint was presented in the Court against the opposite party-accused. Thereafter, complainant issued a legal notice and when the applicant did not respond to the same, complaint was filed against the applicant for the offence under Section 138 of the Negotiable Instrument Act. After framing the charges and recording of evidence, learned trial court allowed the complaint filed by the respondent holding that the applicant has committed offence punishable under Section 138 of the Negotiable Instrument Act and sentenced him to undergo Rigorous Imprisonment for two years and fine of Rs. 5,000/- with default stipulation. Against this order, the applicant filed criminal appeal before the appellate authority whereby the judgment of conviction and order of sentence was affirmed and filed revision before the Chhattisgarh High Court.

Signing of Cheque Admission of Liability

Court said that the signing of cheque by the applicant indicates that he admitted his liability, and he has not rebutted the presumption of 139 Negotiable Instrument Act, therefore not only debt, but the liability also calls for criminal proceedings under the act. It said that from the close scrutiny of witnesses' in the present case it is clear that the applicant had signed and given cheque to the complainant.

Court relied on judgment of Supreme Court in Rangapa V. Sri Mohan, (2010) 11 SCC in which court held that once issuance of a cheque and signature thereon are admitted, presumption of a legally enforceable debt in favour of the holder of the cheque arises. It is for the accused to rebut the said presumption, though accused need not adduce his own evidence and can rely upon the material submitted by the complainant. However, mere statement of the accused may not be sufficient to rebut the said presumption.

Court dismissing the revision application said that it finds no merit in it. It noted that the trial court as well as the Appellate Court having found that cheque contained the signatures of the accused/applicant and it was presented in the Bank of the presumption under Section 139 was rightly raised which was not rebutted by the accused. That both the trial court and the appellate court convicted the applicant under Section 138 of the Negotiable Instrument Act. The Trial Court and the Appellate Court arrived at the specific concurrent factual finding that the cheque had admittedly been signed by the applicant-accused.

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