Sikkim High Court Reiterates High Burden on Drawer to Disprove Presumption of Debt Under Section 139: Upholds Conviction for Cheque Dishonor

Court’s Decision:

The Sikkim High Court dismissed the Revision Petition and upheld the conviction of the Revisionist for dishonoring a cheque of ₹20,00,000 under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The Court found the statutory timelines under the NI Act had been duly followed and affirmed the existence of a legally enforceable debt, rejecting claims of premature filing and repayment. The Revisionist was directed to pay the legally recoverable debt of ₹24,00,000 within six weeks, failing which the sentence imposed by the Appellate Court would be enforced.

Facts:

1. Background of the Dispute:
   • The Revisionist had issued a cheque of ₹20,00,000 on 29-06-2020 to the Respondent for the discharge of a debt.
   • The cheque was presented to the bank on 03-07-2020 and dishonored on 06-07-2020 due to insufficient funds.
   • Following the dishonor, the Respondent issued a legal notice on 13-07-2020 demanding payment.
2. Timelines Under Scrutiny:
   • The legal notice was served on the Revisionist on 11-08-2020.
   • As per Section 138(c), the Revisionist was required to make the payment within 15 days, i.e., by 26-08-2020.
   • The Respondent filed the complaint on 09-09-2020 after the prescribed 15-day period, ensuring compliance with the NI Act’s provisions.
3. Previous Legal Proceedings:
   • The Trial Court convicted the Revisionist, sentencing him to three months’ imprisonment and directing compensation of ₹24,00,000.
   • On appeal, the Appellate Court modified the sentence, imposing a fine of ₹24,00,000 and, in default, one year’s simple imprisonment.

Issues:

1. Whether the legal notice and complaint complied with the timelines mandated under Section 138 of the NI Act.
2. Whether the cheque was issued for the discharge of a legally enforceable debt.

Petitioner’s Arguments:

1. Premature Filing of Complaint:
   • The Revisionist argued that the complaint was filed prematurely as the legal notice was served on 11-08-2020, contrary to the Respondent’s claim of 02-08-2020.
   • It was contended that this timeline discrepancy rendered the cause of action invalid.
2. Repayment of Debt:
   • The Revisionist claimed that he had already repaid ₹43,00,000 through two RTGS transfers of ₹10,00,000 each and a cheque clearance of ₹23,00,000.
   • He argued that these payments far exceeded the ₹20,00,000 loan and negated any legally enforceable debt.

Respondent’s Arguments:

1. Adherence to Timelines:
   • The Respondent maintained that the legal notice and subsequent complaint adhered to statutory timelines under the NI Act.
   • It was highlighted that the cause of action arose on 27-08-2020, allowing the filing of the complaint on 09-09-2020.
2. Existence of Separate Liability:
   • The Respondent argued that the cheque in question pertained to a distinct unpaid loan and was unrelated to the previously repaid amounts.
   • He emphasized that issuing a cheque after alleged repayment suggested its connection to a fresh liability.

Analysis of the Law:

1. Compliance with Section 138 Timelines:
   • Section 138 of the NI Act mandates:
     • Presentation of the cheque within six months.
     • Issuance of a legal notice within 30 days of dishonor.
     • Filing of the complaint after the expiry of 15 days from receipt of notice.
   • The Court found that the Respondent had adhered to all these timelines:
     • The cheque was presented on 03-07-2020.
     • The legal notice was issued on 13-07-2020 and served on 11-08-2020.
     • The complaint was filed on 09-09-2020, after the requisite 15-day period post-notice.
2. Presumption of Debt Under Section 139:
   • Section 139 of the NI Act presumes that the cheque was issued for a legally enforceable debt unless rebutted by the drawer.
   • The Revisionist failed to provide evidence to rebut this presumption, leading the Court to presume the cheque’s validity for discharging a debt.
3. Improbability of Overpayment:
   • The Court noted the improbability of repaying ₹43,00,000 against a loan of ₹20,00,000 and then issuing another cheque for ₹20,00,000.
   • This contradiction undermined the Revisionist’s defense and supported the Respondent’s claim of a distinct liability.

Precedent Analysis:

1. Distinguishing the Cited Cases:
   • The Revisionist relied on Prem Chand Vijay Kumar v. Yashpal Singh and Yogendra Pratap Singh v. Savitri Pandey, which were deemed inapplicable due to differing factual circumstances.
2. Supporting Precedents:
   • The Respondent cited Prahlad Sharma v. Dipika Sharma, reinforcing the presumption of liability under Section 139.

Court’s Reasoning:

1. Clarity in Judicial Reasoning:
   • The High Court emphasized that judicial clarity is critical for maintaining the dignity of courts and reducing appellate burdens.
   • It noted deficiencies in the Trial Court’s judgment regarding the application of Section 138 timelines, which were rectified by the Appellate Court.
2. Evaluation of Evidence:
   • The Court found that the Revisionist’s payments related to a separate loan and did not extinguish the liability represented by the cheque.
   • It concluded that the Revisionist had failed to rebut the presumption under Section 139.

Conclusion:

The High Court upheld the findings of the Trial and Appellate Courts. It directed the Revisionist to pay ₹24,00,000 within six weeks or face imprisonment as stipulated by the Appellate Court.

Implications:

1. Reinforcement of Section 138 Compliance:
   • The judgment underscores the importance of adhering to statutory timelines and procedural requirements under the NI Act.
2. Presumption of Liability:
   • It reaffirms the robust presumption of liability under Section 139, placing a significant burden on the drawer to disprove the debt.
3. Judicial Clarity:
   • The Court highlighted the necessity of clear and well-reasoned judgments to uphold judicial dignity and minimize unnecessary appeals.

Also Read – Orissa High Court: “Wife’s Right to Separate Residence and Maintenance Upheld” – Husband’s Plea Rejected as Court Finds Wife Justified in Living Separately Due to Husband’s Lack of Reconciliation Efforts