NI Act| Once Ingredients U/S 138 Are Established By Complainant, Burden To Rebut Presumption U/S 139 Lies Upon Accused: Karnataka HC

The Karnataka High Court reiterated that the burden to rebut the presumption under Section 139 of the Negotiable Instruments Act (NI Act) lies on the Accused, once the ingredients of Section 138 are established.

The Trial Court had acquitted the accused citing that the complainant failed to prove a legally enforceable debt or liability. The High Court partly allowed the Criminal Appeal filed by the complainant.

“On careful reading of the dictum of the Hon’ble Supreme Court, it guided us that the burden lies on the accused to rebut the presumption. Once the ingredients of Section 138 of the NI Act are established, the Court has to raise a presumption under Section 139 of the NI Act that the cheque was indeed, issued in discharge of debt or liability”, the Bench of Justice S Rachaiah observed.

Advocate R V Jayaprakash appeared for the Appellant and Advocate N Jagadish appeared for the Respondent.

A complaint was filed by a partnership firm (Appellant) against another partnership firm (Respondent) for dishonoring a cheque. The Appellant claimed that the Respondent owed them an amount of Rs.2,52,095/- for the purchase on a credit basis. The Respondent issued a cheque for Rs.2,50,000/- which was dishonored with the remark "account closed". The Appellant sent a notice to the Respondent but they did not respond. The Appellant filed a case before the Trial Court but the Respondent was acquitted. The Appellant appealed before the High Court challenging the order. The Appellant contended that the acquittal was based on the ground that the Appellant had not proved the legally enforceable debt or liability. 

The Court reiterated that the burden lies on the accused to rebut the presumption under Section 139 once the ingredients of Section 138 of the NI Act are established. The Court referred to the Apex Court Judgment in the case of Rajesh Jain v Ajay Singh.

The Court noted that the Respondent has not issued a reply even after receiving receipt of the legal notice issued by the Complainant/Appellant. The signature and the issuance of the cheque are admitted by the Respondent. The Appellant has produced evidence, which is an account extract showing that the Respondents were due.

Therefore, the Court observed that the Respondent failed in rebutting the presumption under Section 139 of the NI Act. The Court held the Respondents liable and sentenced them to pay a fine of Rs.3.00 lakhs, in default of payment of the fine, to undergo simple imprisonment for one and half years.

Accordingly, the Court partly allowed the Appeal and set aside the judgment and order of acquittal.

Cause Title: Sri Siddivinayaka Adike Stores v M/S. Sri Uduchanada Basappa & Sons

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