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Burden to rebut presumption of debt in cheque bounce case is on the accused

November 12, 2019[2019] 111 taxmann.com 129 (SC)
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COMPANY LAW : A complaint under Negotiable Instruments Act could not have been dismissed only on account of discrepancies in determination of amount due or oral evidence in amount due when written document crystallizes amount due for which cheque was issued

Facts

• Respondent No. 1 purchased apple crops from appellant/complainant and accounts were finally settled between authorised agent of respondent No. 1 and a sum of Rs. Rs. 5.39 lakhs was found recoverable for which a cheque was issued. As the cheque bounced, appellant filed a complaint before the trial court.

• Trial Court dismissed the complaint for the reason that cheque amount was more than the amount alleged on the due date when cheque was presented. Therefore, the cheque could not be said to be drawn towards discharge of whole or in part of any debt.

• On appeal, the High Court upheld the order of the Trial Court.

• On appeal by appellant to the Supreme Court.

Held

• The approach of the Trial Court and that of the High Court is perverse; irrational as well as suffers from material illegality and irregularity, which cannot be sustained in complaint filed under section 138.

• The Trial Court and the High Court proceeded as if, the appellant is to prove a debt before civil court wherein, the plaintiff is required to prove his claim on the basis of evidence to be laid in support of his claim for the recovery of the amount due. A dishonour of cheque carries a statutory presumption of consideration. The holder of cheque in due course is required to prove that the cheque was issued by the accused and that when the same presented, it was not honoured. Since there is a statutory presumption of consideration, the burden is on the accused to rebut the presumption that the cheque was issued not for any debt or other liability.

• There is the mandate of presumption of consideration in terms of the provisions of the Act. The onus shifts to the accused on proof of issuance of cheque to rebut the presumption that the cheque was issued not for discharge of any debt or liability in terms of section 138.

• Once agent of respondent has admitted settlement of due amount and in absence of any other evidence Trial Court or High Court could not dismiss complaint only on account of discrepancies in determination of amount due or oral evidence in amount due when written document crystalizes amount due for which cheque was issued.

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