INDIA BUSINESS WORLD - JANUARY 1^st - JANUARY 15^th - 2008

SECTION 138 OF NEGOTIABLE INSTRUMENT ACT: CONVICTION ONLY IF CHEQUE ISSUED FOR DISCHARGE OF DEBT, SAYS SUPREME COURT

The Supreme Court has held that unless and until a complainant in a case under Section 138 of Negotiable Instrument Act proves that a cheque was issued for discharge of a debt or liability the defendant cannot be convicted.

A bench comprising Justices S P Sinha and Harjit Singh Bedi in their judgement, dated January 11, also said that the mere fact that the accused did not enter the witnessbox to get himself examined does not prove that he had committed an offence of issuing a cheque without having sufficient funds in his account as the accused had a constitutional right to maintain silence.

The apex court in its judgement noted "the proviso appended to the said Section provide for compliance of legal requirement before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of a cheque that the same has been issued for discharge of any debt or other liability.

"The courts below, as noticed herein before proceeded on the basis that Section 139 raises a presumption in regard to existence of a debt also. The courts below in our opinion committed a serious error in proceeding on the basis that for proving the defence the accused is required to step into the witnessbox and unless he ds so he would not be discharging his burden. Such an approach on part of the courts, we feel is not correct.

"An accused for discharging the burden of proof plays upon him under a statute need not examine himself. He may discharge his burden on the basis of the material already brought on record. An accused has a constitutional right to maintain silence. Standard of proof on part of accused and that of prosecution in a criminal case is different." The apex court allowed the appeal of Krishna Janardhan Bhat against his conviction and sentence for an offence under Section 138 of the Negotiable Instrument Act. The apex court set aside the orders of trial court Hubli, Sessions Judge Hubli as well as Karnataka High Court.

According to the prosecution the appellant had issued a cheque for Rs 1.5 lakh in favour of Dattatraya G Hegde in 1998 which was dishonoured on presentation due to insufficient funds.

All the courts below concluded that the cheque was issued for discharge of a debt or liability despite the fact that Mr Hegde did not produce any evidence to prove the existence of any debt or liability against Mr Bhatt.