Failure to Prove Return of Defective Goods and Failure to Stop Payment Establish Liability Under Section 138 NI Act: Delhi High Court

The Delhi High Court has upheld the conviction of Rajesh Kumar Jain under Section 138 of the Negotiable Instruments Act, 1881, for the dishonour of a cheque amounting to Rs. 5,26,785/-. The petitioner was sentenced to four months of simple imprisonment and fined Rs. 8,50,000/-, with the fine amount directed to be paid to the respondent, J.C. Trading.

The case involved a criminal revision petition challenging the judgment of the Special Judge (NDPS), Central District, Tis Hazari Courts, Delhi, which upheld the conviction and sentence imposed by the trial court. The petitioner issued a cheque dated September 9, 2014, which was dishonoured due to insufficient funds. The cheque was issued for payment of goods received from the respondent. Despite receiving a legal notice, the petitioner failed to make the payment, leading to the initiation of proceedings under Section 138 of the NI Act.

Admission of Cheque Signature: The petitioner admitted to signing the cheque but claimed it was filled out by clerical staff and issued for defective goods that were returned.

Legal Notice and Presumption of Service: The trial court presumed the service of the legal notice under Section 27 of the General Clauses Act, as it was dispatched to the petitioner’s address and returned undelivered.

Failure to Prove Return of Goods: The petitioner failed to substantiate the claim of returning the defective goods. No evidence, such as the examination of the transporter, was provided to support this defence.

Rebuttable Presumption Under Section 139 NI Act: The court reiterated that once the cheque’s execution is admitted, a presumption arises that it was issued for a legally enforceable debt or liability. The petitioner did not effectively rebut this presumption.

Distinction from Advance Payment Cases: The court distinguished this case from those where cheques are issued as advance payments for undelivered goods, noting that in the present case, the goods were received and no prior objection to their quality was raised.

Decision: The High Court found no perversity or jurisdictional error in the concurrent findings of the trial and appellate courts. The revision petition was dismissed, upholding the conviction and sentence.

Date of Decision: May 14, 2024

Rajesh Kumar Jain vs. J.C. Trading