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M/S. Shree Daneshwari Traders v. Sanjay Jain

Criminal Appeal · 2019 INSC 932Decided 21 Aug 2019
Criminal Appeal Nos. 61-62 of 2011
Justice R. Banumathi · Justice A.S. Bopanna

Background

A trader who had been supplying rice bags on credit to the respondent received cheques in payment, which later bounced for insufficient funds. The trial court acquitted the respondent, accepting his defence that he had actually paid in cash for the goods and that the cheques were blank ones left as security that were never returned. The Bombay High Court upheld this acquittal, and the trader-complainant appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that once the complainant proved the cheques were issued and dishonoured, the law creates a statutory presumption under Section 139 of the Negotiable Instruments Act that they were issued to discharge a legally enforceable debt, and it is then up to the accused to rebut that presumption with credible evidence. The Court found that the receipts produced by the respondent (for cash payments) did not actually disprove the existence of the separate credit debt for which the cheques were issued, and that the lower courts had wrongly shifted the burden back onto the complainant without the respondent having genuinely rebutted the presumption. The Supreme Court therefore set aside the acquittal, convicted the respondent under Section 138, and imposed a fine covering the cheque amounts plus compensation (in lieu of imprisonment, given the long passage of time since the 2003 transactions).

Lesson Learnt

When a cheque bounces, the law presumes it was issued to pay off a genuine debt: the person who issued the cheque bears the burden of proving otherwise with solid evidence; a bare claim that the amount was separately paid in cash, without more, is not enough to escape liability.

Official source (sci.gov.in)View Judgment (PDF)

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