Ashok Singh v. State of U.P.
Background
Ashok Singh had advanced a loan of Rs. 22 lakh to the respondent's kin (the accused, respondent no.2), who issued a cheque for the amount that was later dishonoured with the endorsement "payment stopped by drawer." The Trial Court and Appellate Court both convicted the accused under Section 138 of the NI Act, but the Allahabad High Court set aside the conviction, holding that the complainant had failed to prove the debt was legally enforceable.
Decision Breakdown
The Supreme Court restored the conviction, holding that once the accused admits his signature on the cheque, a statutory presumption under Sections 118 and 139 of the NI Act arises that the cheque was issued for a legally enforceable debt, and the onus shifts to the accused to rebut it with credible evidence. The accused's defence, that the cheque had been lost, was found unconvincing because his police report about the loss was allegedly dated before the cheque was even presented, yet only reached the police a year later and was never converted into an FIR. The Court also held the complaint was maintainable even though the accused's partnership firm was not separately arrayed as an accused, since the accused himself was the signatory and person in charge. Considering the accused's age, the Court modified the sentence to a fine of Rs. 32 lakh instead of reviving the original jail term, with the fuller penalty to apply only if the fine is not paid within four months.
Lesson Learnt
In cheque-bounce cases, admitting your signature on a dishonoured cheque triggers a legal presumption of debt that you must actively and credibly disprove: a vague or poorly-timed defence (like an unconvincing "lost cheque" story) will not be enough to escape liability.