Presumption under Section 139 NI Act Displaces Burden — Punjab & Haryana High Court Affirms Conviction in Cheque Dishonour Case

Punjab and Haryana High Court dismissed a revision petition filed against concurrent findings of conviction under Section 138 of the Negotiable Instruments Act, 1881. Justice Deepak Gupta ruled that the petitioner failed to rebut the statutory presumption under Section 139 of the NI Act and rejected all defenses, including non-service of legal notice, absence of loan in income tax records, and alleged defects in the return memo.

The case stemmed from a complaint by Harpal Singh alleging that the accused issued a cheque for ₹5 lakh towards repayment of a loan, which, upon presentation, was dishonoured with the endorsement “insufficient funds.” The petitioner contended that no legally enforceable liability existed as the alleged loan was neither reflected in the complainant’s books nor in his income tax returns. The Court rejected this argument outright, holding that “it is not a civil case, where the plaintiff is required to prove the debt. The presumption under Section 139 of the NI Act squarely applies, and once signature on the cheque is not denied, the burden to rebut the presumption shifts on the accused.”

The petitioner’s plea that the legal notice was never served was also negated. The Court, relying on C.C. Alavi Haji vs. Palapetty Muhammed (2007) 6 SCC 555, reaffirmed the principle that “when a notice is sent by registered post and is returned with endorsements such as ‘unclaimed’, ‘addressee not found’, or ‘house locked’, it will be deemed to have been duly served.” The Court observed that the accused made no effort to discharge the liability even after being summoned, demonstrating that the opportunity provided by the proviso to Section 138 was not bona fide utilised.

The Court also took serious note of the petitioner’s conduct during the pendency of the revision. While seeking leniency, the petitioner offered to compound the matter by paying ₹7 lakh, and later, the complainant reduced the demand to ₹8 lakh, taking into account accrued interest since 2003. However, the petitioner ultimately backed out. The Court commented that “such conduct itself shows the unscrupulous nature of the petitioner who does not want to honour the commitment.”

Addressing the objection that the dishonour memo lacked the bank’s stamp, the Court invoked Section 146 of the NI Act and clarified that “the law only requires the cheque return memo to bear the official mark or signature of the bank officer; the absence of a rubber stamp does not vitiate the presumption.”

The Court heavily relied on Rangappa vs. Sri Mohan, (2010) 11 SCC 441, reiterating that “Section 139 includes the presumption regarding the existence of a legally enforceable debt or liability. The accused is expected to rebut it on the scale of preponderance of probabilities.” The petitioner failed to bring on record any credible evidence to probabilize his defense.

The High Court upheld the concurrent judgments of the Trial Court and Appellate Court convicting the petitioner and sentencing him to six months simple imprisonment. Dismissing the revision, the Court directed the Trial Court to execute the sentence forthwith.

Justice Deepak Gupta concluded that “there is absolutely no illegality or perversity in the judgments passed by the trial Court and the Appellate Court, both of which are well-reasoned and justified.”

Date of Decision: 27th March 2025