Cheque Issued as Security Can Still Attract Liability Under Section 138 NI Act- HP High Court

Introduction: In a recent judgment, the Himachal Pradesh High Court reaffirmed the conviction of the petitioner, Sanjeev Kumar alias Vicky, in a cheque dishonour case. The judgment upheld the trial court's decision, convicting the petitioner under Section 138 of the Negotiable Instruments Act (NI Act), which was previously confirmed by the Additional Sessions Judge, Kullu. The court reiterated the importance of statutory presumptions under Sections 118 and 139 of the NI Act, particularly when the accused fails to raise a credible defense.

Facts of the Case: The respondent, Narender Kumar & Sons, filed a complaint under Section 138 of the NI Act, stating that on September 30, 2017, the petitioner had purchased apple packaging material worth ₹1,00,000 from the respondent. To discharge his liability, the petitioner issued a cheque for ₹1,00,000, but the cheque was dishonoured due to insufficient funds. Despite receiving a legal notice, the petitioner failed to make the payment, leading to the initiation of legal proceedings. The trial court convicted the petitioner and sentenced him to six months of simple imprisonment and directed him to pay compensation of ₹1,50,000 to the respondent. The petitioner’s appeal to the Additional Sessions Court was dismissed, prompting this criminal revision petition before the High Court.

Statutory Presumptions under Sections 118 and 139 of NI Act: The court reiterated the statutory presumptions that a cheque is issued towards a lawful liability unless rebutted by the accused. The court noted that the petitioner did not dispute the issuance of the cheque or his signature. As per the court, “Both the trial and appellate courts rightly invoked Sections 118 and 139 of the Act, which presume that the cheque was issued to discharge lawful liability.”

Rebuttable Nature of Presumptions: The court emphasized that while the presumption is rebuttable, the accused is required to raise a probable defense by producing evidence. In this case, the petitioner failed to lead any defense evidence despite being provided multiple opportunities. The court referenced the Apex Court's decision in M/s Laxmi Dyechem v. State of Gujarat, underscoring that an accused can rebut the presumption by demonstrating a lack of enforceable debt or liability, either through cross-examination or positive evidence. However, in the present case, the petitioner failed to do so.

Security Cheques: The petitioner argued that the cheque was issued as security, not for the discharge of a liability. The court, citing Sripati Singh v. State of Jharkhand (2021), observed that even security cheques can be presented for encashment if the underlying obligation is not fulfilled. The court rejected the petitioner’s defense, stating, “A cheque issued as security cannot be treated as a worthless piece of paper, and its dishonour can attract liability under Section 138.”

Limited Scope of Revisional Jurisdiction: The court also highlighted the limited scope of revisional jurisdiction under Section 397 of the Code of Criminal Procedure. It stated that the High Court's role in such cases is supervisory, primarily concerned with correcting miscarriages of justice. Unless there are glaring errors, revisional courts should not reappreciate evidence already considered by the trial and appellate courts. The court held that both lower courts had meticulously dealt with the evidence, leaving no scope for interference.

Legal Reasoning: The court’s reasoning was firmly grounded in the statutory presumptions under Sections 118 and 139 of the NI Act. Since the petitioner did not deny the issuance of the cheque or his signature, the onus was on him to rebut the presumption of liability. The court reiterated that in cheque dishonour cases, the offense is quasi-criminal in nature, primarily designed to enforce financial obligations between private parties. The petitioner’s failure to provide any substantial defense, coupled with the overwhelming evidence produced by the respondent, led to the court upholding the conviction.

Quotes from the Judgment: Justice Sandeep Sharma, delivering the judgment, noted, “In the absence of any credible defense or evidence from the accused, the statutory presumptions under Sections 118 and 139 of the NI Act remain unrebutted, and the issuance of the cheque towards discharge of a lawful liability stands proven.”

Conclusion: The Himachal Pradesh High Court’s judgment reinforces the importance of the statutory presumptions under the Negotiable Instruments Act. The decision sends a clear message that mere issuance of a cheque, followed by its dishonour, creates a legal obligation unless rebutted by the accused. This ruling is likely to serve as a precedent in cheque dishonour cases, especially those involving security cheques, further strengthening the legal framework surrounding Section 138 of the NI Act.

Date of Decision: August 21, 2024​.