T.P. Murugan (Dead) Thr. LRs. & Posa Nandhi v. Bojan
Background
The appellants had invested capital in a tea company run by the respondent and, after resigning as directors, sought return of their dues. The respondent issued a promissory note for Rs. 51 lakhs and two cheques (for Rs. 37 lakh and Rs. 14 lakh) toward discharge of that liability, but later issued "stop payment" instructions and the cheques bounced. The Trial Court and the Sessions Court both convicted the respondent under Section 138 of the Negotiable Instruments Act, rejecting his defence that the cheques were blank security cheques given years earlier for an unrelated loan, but the Madras High Court, hearing an ex parte revision, reversed the conviction on the view that the respondent had raised enough doubt to rebut the statutory presumption.
Decision Breakdown
The Supreme Court held that once a cheque is shown to have been signed and issued by the accused, Section 139 of the N.I. Act raises a rebuttable presumption that it was issued in discharge of a legally enforceable debt, and the accused must produce credible evidence to rebut it: mere assertions are not enough. Here, the respondent had admitted his signatures on both the cheques and the promissory note (which itself recorded that it was issued for a loan), failed to explain why he never sought return of the allegedly blank "security" cheques for seven years, and could not substantiate his claim that a third party had filled in the promissory note, a claim independently disproved by other witnesses. Finding that the respondent had failed to rebut the presumption with any cogent evidence, the Court set aside the High Court's order, restored the original conviction and fine, and allowed the appeals.
Lesson Learnt
Once you admit your signature on a cheque that bounces, the law presumes it was issued to repay a genuine debt: to escape conviction under Section 138 of the N.I. Act, you must produce real, credible evidence to the contrary, not just raise a bare doubt or unsupported claim.