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Rangappa v. Sri. Mohan (2010)11SCC441

Rangappa v. Sri. Mohan (2010)11SCC441

FACTS-

  • The appellant, who is a mechanic, engaged the respondent, a civil engineer, to supervise the construction of his house. 
  • The appellant requested a hand loan of Rs. 45,000 from the respondent to meet construction expenses. The appellant assured repayment by October 1999 but later issued a post-dated cheque for February 8, 2001. 
  • The cheque was dishonoured due to a "stop payment" instruction issued by the appellant. 
  • The respondent filed a complaint under Section 138 of the Negotiable Instruments Act when the appellant failed to honour the cheque.
  • The appellant claimed that the cheque in question was a blank cheque bearing his signature, which had been lost and misused by the respondent. Also, it was contended that no legally enforceable debt or liability between him and the respondent.
  • The trial court acquitted the appellant-accused, finding discrepancies in the complainant's version and ruling that no legally enforceable debt was proven.
  • The High Court reversed the trial court's decision, convicting the appellant-accused based on the statutory presumption of a legally enforceable debt under Section 139 of the Negotiable Instruments Act.

ISSUE-

  • Whether the appellant's defence of a lost blank cheque and absence of a legally enforceable debt or liability was probable and sufficient to rebut the statutory presumption under Section 139 of the Act?

RULE-

  • Section 139 of the Negotiable Instruments Act presumes that a cheque was issued for the discharge of a debt or liability. The burden of proof lies with the accused to raise a probable defence to rebut this presumption. The standard of proof for the accused is the preponderance of probabilities.

HELD-

  • Goa Plast (Pvt.) Ltd. v. Chico Ursula D'Souza (2003) 3 SCC 232: The court observed that dishonour due to 'stop payment' instructions should not exempt the drawer from liability under Section 138, emphasizing the importance of honouring post-dated cheques and discouraging their routine stoppage
  • In Hiten P. Dalal v. Bratindranath Banerjee (2001) 6 SCC 16: This case highlighted that the presumption under Sections 138 and 139 shifts the burden of proof to the accused, who must then rebut it by proving the non-existence of a legally enforceable debt or liability.
  • In Krishna Janardhan Bhat v. Dattatraya G. Hegde (2008) 4 SCC 54, The court clarified the nature of the presumption under Section 139, stating that while it presumes the issuance of a cheque for discharge of any debt or liability, the accused can rebut this presumption with a probable defence.
  • The defence of a lost blank cheque was belated and inconsistent, weakening the appellant's case.
  • The appellant failed to prove the non-existence of a legally enforceable debt or liability despite discrepancies in the complainant's version.
  • Regular payments made by the appellant to the respondent did not negate the existence of a debt or liability.
  • The complainant's version disclosed a prima facie legally enforceable debt or liability.
  • The High Court's finding of conviction against the appellant was upheld.
  • The appellant failed to raise a probable defence or contest the existence of a legally enforceable debt or liability, and the statutory presumption under Section 139 remained unrebutted. Therefore, the appeal was dismissed.

COMMENTARIES RATIO/NOTE-

 

  • 1.33.4.4 Averment in Complaint

 

In VK Balakrishna Pillai v KV Abdullakutty, a Single Judge of the Kerala High Court quoted with approval the view of the Division Bench in PK Mohammed Rasheed v State of Kerala, and held that even if there is no express or explicit averments in the complaint, court would be justified in taking the cognizance of the offence under section 138 of the Act if the ingredients can be deducted or discerned from the implications or inferences from the complaint.

 

Thus, Kerala High Court in Thomas Varghese v Jerome Pvt, held that it cannot be said that a complaint under section 138 of the Act should be thrown out at the threshold if the banker’s endorsement while returning the cheque is anything other than that the amount of money standing to the credit of the account of the drawer is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank. If the circumstances as contemplated under section 138 of the Act are made out, the court has to examine whether the return of the cheque was on account of insufficiency of funds belonging to the drawer. This can be done even without reference to the endorsement made by the banker. Endorsements like “Refer to the Drawer”, “Account Closed”, “Payment has been Stopped”, made by the banker at the time of the return of the cheque are having the effect of proving that the cheque has bounced. If the bouncing of the cheque was on account of insufficiency of funds belonging to the drawer, then the drawer will be subjecting himself to proceeding under section 138 of the Act.