Mere Reply Notice Insufficient Without Proof to Rebut Cheque Liability Presumption: Madras HC

Madras High Court has set aside the acquittal of respondents in a cheque dishonor case under Section 138 of the Negotiable Instruments Act, 1881, and ordered a fresh trial. The High Court found that the trial court had failed to consider critical evidence, specifically a bank certificate proving a ₹40,00,000 loan transfer, which the appellant claimed was crucial to the case.

In the case of S.P. Vijayakumar vs. M/s. Jai Marketings and Others (Crl.A. No. 264 of 2024), Justice M. Nirmal Kumar overturned the trial court’s decision, which had acquitted the respondents in a case involving a dishonored cheque for ₹25,00,000. The cheque was issued as repayment for a loan provided by the appellant to the respondents. The trial court had dismissed the complaint on January 5, 2023, accepting the respondents' defense that they had already repaid a significant portion of the loan, but the High Court found the judgment to be based on a misreading of the evidence.

The appellant, S.P. Vijayakumar, filed a private complaint against M/s. Jai Marketings, represented by its partners S.G. Sekar and E. Arokyasamy, alleging that a loan of ₹33,00,000 was given to them in September 2015 for business development. A promissory note confirming the loan was executed, and the respondents later made partial repayments of ₹8,00,000. For the balance of ₹25,00,000, the respondents issued a cheque dated April 20, 2017, which was dishonored due to insufficient funds. Despite issuing a statutory notice to the respondents, no payment was made, leading the appellant to file a complaint under Section 138 of the Negotiable Instruments Act.

During the trial, the respondents claimed they had repaid ₹29,50,000 through RTGS and cash payments, leaving only ₹3,50,000 unpaid. They argued that the cheque for ₹25,00,000 was given as a "security cheque" rather than for repayment of the principal amount. However, the trial court dismissed the complaint, relying on the respondents' defense in their reply notice and their answers during questioning under Section 313 of the Code of Criminal Procedure (Cr.P.C.).

In his judgment, Justice M. Nirmal Kumar noted several key errors made by the trial court:

The appellant produced a bank certificate dated November 9, 2018, from Axis Bank, confirming the transfer of ₹40,00,000 (₹33,00,000 on September 19, 2015, and ₹7,00,000 on September 21, 2015) to the respondents. However, the trial court did not mark this critical document as an exhibit, despite it being part of the court record. The appellant’s failure to ensure this document was marked during the trial, coupled with the trial court's failure to consider it, was a significant oversight.

The trial court had accepted the respondents' claims made in their reply notice that ₹29,50,000 was repaid through a combination of RTGS and cash payments. However, the court did not critically assess whether the respondents had provided adequate proof of these cash payments. The High Court found that the trial court gave undue credence to the respondents' claims without requiring any concrete evidence to back them up. Justice Kumar remarked that "merely relying upon the reply notice without any further proof is not acceptable."

Inadequate Rebuttal of Presumption Under Section 139 of the NI Act:

The High Court reiterated the well-settled legal principle that once the issuance of a cheque is admitted, there is a statutory presumption under Section 139 of the Negotiable Instruments Act that the cheque was issued for a legally enforceable debt. The burden then shifts to the accused to disprove this presumption. In this case, the respondents admitted issuing the cheque and signing it, but they failed to present sufficient evidence to rebut the presumption of debt. Justice Kumar emphasized that the presumption could not be defeated merely by claims made in a reply notice without substantive evidence.

The Madras High Court concluded that the trial court’s judgment was based on a misreading of evidence and failed to account for crucial documents that could have materially affected the outcome of the case. The court set aside the trial court's judgment and ordered a fresh trial with specific instructions:

The trial court was directed to mark the Axis Bank certificate dated November 9, 2018, as evidence, as it conclusively proved the loan amount transferred to the respondents.

The respondents would be given an opportunity to explain or contest the contents of the Axis Bank certificate.

The trial court was instructed to reconsider the entire body of evidence and arrive at a fresh conclusion, adhering to legal principles outlined by the Supreme Court and High Court in cases involving Section 138 of the NI Act.

The trial court was ordered to complete the retrial within two months from the receipt of the judgment.

The judgment highlights the critical importance of properly considering all evidence, particularly in cases involving dishonored cheques, where statutory presumptions under Section 138 and Section 139 of the Negotiable Instruments Act play a pivotal role. The Madras High Court’s intervention ensures that both the appellant and respondents will have a fair opportunity to present and challenge evidence, leading to a just resolution of the case.

Date of Decision: October 18, 2024

S.P. Vijayakumar vs. M/s. Jai Marketings & Others