Does an accused in a Section 138 NI Act case need independent evidence of the complainant’s financial incapacity to rebut the statutory presumption of debt?

Summary

Practical Impact

What’s New / What Lawyers Should Note

• The rebuttable presumption under Section 139 NI Act arises on admission of execution; the accused must lead independent evidence (documents, witnesses, cross-examination) to challenge the drawer’s capacity.
• Mere assertion of the complainant’s impecuniosity, without examining third‐party witnesses or producing bank/Income Tax records, is insufficient to rebut Section 139 presumption.
• Breach of Section 269SS IT Act (cash transaction above ₹20,000) does not render a debt unenforceable or prevent application of Section 139 NI Act; P.C. Hari is overruled.
• In revisional jurisdiction, High Courts cannot interfere with concurrent Trial and Sessions Court findings absent perversity.
• Failure to reply to the statutory Section 138 notice permits an inference of liability.

Summary of Legal Reasoning

1. Scope of Chapter XVII NI Act: Introduced by Act 66 of 1988 to enhance cheque credibility and penalize bouncing.
2. Presumptions under Sections 118 & 139: Admission of signature triggers presumption the cheque discharged a legally enforceable debt; presumption is rebuttable but initial onus lies on the drawer to produce independent proof.
3. Rebuttal Standard: Accused must lead documents or examine independent witnesses (e.g., bank officials, IT officer) or rely on complainant’s own evidence under cross-examination; mere specious contentions or untested salary figures fail.
4. Effect of Section 269SS IT Act: Penalty under Section 271D does not invalidate the debt. Kerala HC’s decision to the contrary is set aside.
5. Revisional Jurisdiction: High Court in revision cannot re-appraise evidence or upset concurrent findings unless the lower courts’ conclusions are perverse.
6. Inference from Non-reply: Failure to respond to the statutory notice under Section 138 strengthens the presumption in favor of complainant.
7. Procedural and Compounding Guidelines: Directions issued for expedited summons, service, summary trials, online payments, dashboard monitoring, and modified compounding costs.

Arguments by the Parties

Petitioner-Complainant:

• High Court misapplied revisional jurisdiction to overturn concurrent convictions without perversity.
• No evidence supported the drawer’s lack of means to loan ₹6 lakh; he funded from personal and family sources.
• High Court erred in refusing recall of its ex-parte order under inherent powers.

Respondent No. 1-Accused:

• Complainant’s salary of ₹2,300/month and debts made it impossible to advance ₹6 lakh.
• Under Rangappa and APS Forex, Section 139 presumption is rebuttable; onus shifts back when financial capacity is questioned.
• Issued a blank cheque for bank loan purposes, creating a probable defence.

Factual Background

In 2006–07, the complainant advanced a cash loan of ₹6 lakh to his friend. The friend issued a cheque in discharge of that loan, which bounced for insufficiency. A complaint under Section 138 NI Act led to conviction by the Trial Court and Sessions Court. In revision, the Bombay High Court quashed the conviction ex parte. The Supreme Court restored the concurrent convictions and imposed a payment plan of ₹7.5 lakh in 15 monthly instalments.

Statutory Analysis

• Section 138 NI Act: Offence when a cheque is dishonoured for insufficiency or exceeding arrangements; punishable with imprisonment or fine.
• Sections 118 & 139 NI Act: Presume execution for consideration and discharge of debt; presumption is rebuttable but places initial onus on the drawer.
• Section 269SS & 271D IT Act: Cash transaction above ₹20k attracts penalty but does not void debt or affect NI Act presumptions.
• Section 482 CrPC: High Court’s inherent powers cannot override final ex parte orders once functus officio.
• Compounding (Section 147 NI Act, Section 255 CrPC, BNSS 2023): Court may allow settlement; guidelines revised for graded costs.
• Summary Trial (Section 143, 251 CrPC / Sections 223, 274 BNSS): Directions for procedural streamlining.

Dissenting / Concurring Opinion Summary

No separate dissenting or concurring opinions recorded; judgment delivered unanimously by a two-judge bench.

Procedural Innovations

• Service & Summons: Mandate dasti service by complainant; electronic service under BNSS 2023; affidavit of service required.
• Online Payment Facility: QR/UPI links in summons for accused to pay at threshold; settlement orders under Section 147 NI Act.
• Complaint Synopsis: Standardized format capturing parties, cheque details, dishonour facts, notice particulars, cause of action, relief sought.
• Pre-cognizance Summons: No requirement to issue pre-cognizance summons under Section 223 BNSS for NI Act complaints.
• Summary Trial Questions: Template under Section 251 CrPC / 274 BNSS to record admissions/defences immediately post-cognizance.
• Interim Deposit: Encouraged under Section 143A NI Act.
• Court Management: Physical hearings post-service; realistic pecuniary limits for evening courts; dashboards and monthly reviews by District & Sessions Judges; monthly administrative committees.

Alert Indicators

• 🚨 Breaking Precedent – Kerala HC’s P.C. Hari decision on cash debts set aside
• ✔ Precedent Followed – Rangappa v. Sri Mohan on NI Act presumptions affirmed
• 🔄 Conflicting Decisions – Corrects District/High Courts treating NI Act as pure civil recovery proceedings