The High Court of Manipur, in a significant ruling on the Negotiable Instruments Act, 1881, has held that the statutory presumption that a cheque was issued for a debt or liability under Section 139 cannot be invoked unless the complainant first establishes the existence of a legally recoverable debt. Upholding the acquittal of an accused in a cheque bounce case, the court clarified that a mere admission of a signature on a cheque by the accused is insufficient to attract the presumption.
The judgment was delivered by Justice A. Guneshwar Sharma in a criminal appeal filed by Shri Manoj Kumar Jain against the acquittal of Shri Mahendra Kumar Jain by the Chief Judicial Magistrate, Imphal West.
Background of the Case
The dispute arose from a failed land transaction between the appellant, Shri Manoj Kumar Jain, and the respondent, Shri Mahendra Kumar Jain. According to the appellant, he advanced a sum of ₹1.8 crore by cheque and ₹24 lakh in cash to the respondent in December 2015 for the purchase of land.
Subsequently, the land deal was cancelled. While the respondent returned the ₹1.8 crore that was paid by cheque, he allegedly issued a cheque (No. 302992) dated 11.12.2017 for ₹24 lakh to refund the cash amount.
The appellant presented this cheque for encashment on 18.01.2018, but it was dishonoured by the State Bank of India with the remark “Insufficient Funds”. Following the dishonour, the appellant sent a legal notice on 24.01.2018, which was received by the respondent. When the respondent failed to pay the amount within the stipulated 15-day period, the appellant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881.
On 04.03.2023, the Chief Judicial Magistrate, Imphal West, acquitted the respondent, concluding that the complainant “could not establish that there was existence of any legally enforceable debt or other liabilities and blatantly failed to discharge the initial burden cast upon the complainant.” This acquittal was challenged by the appellant before the High Court.
Arguments of the Parties
Appellant’s Submissions: The appellant argued that the trial court had erred by not applying the presumption under Section 139 of the NI Act, which presumes that a cheque was issued for the discharge of a debt. It was contended that once the respondent admitted his signature on the cheque, the burden of proof shifted to him to disprove the existence of the debt, which he failed to do. The appellant’s counsel highlighted that the respondent’s claim of having misplaced the cheque was not supported by an FIR or a formal complaint to the bank. The appellant also submitted his income tax returns to show his financial capacity and that the amount was reflected as a due.
Respondent’s Submissions: The respondent’s counsel maintained that he never received ₹24 lakh in cash from the appellant and, therefore, never issued the cheque in question. He claimed that the cheque book containing the said cheque was missing from his office, and he had orally reported the matter to his bank manager.
High Court’s Analysis and Decision
After a thorough review of the trial court records, evidence, and legal precedents, Justice A. Guneshwar Sharma found no grounds to interfere with the acquittal.
The Court observed that the central issue was whether the complainant had successfully established the existence of a legally recoverable debt of ₹24 lakh. It noted that the complainant himself admitted during cross-examination that he had no documents to prove the cash payment. Furthermore, the complainant’s own witnesses, his two brothers (PW-2 & PW-3), did not support his case regarding the ₹24 lakh transaction.
The High Court affirmed the trial court’s finding that the initial burden of proof lies on the complainant. The judgment stated, “It is the settled proposition of law that the existence of debt and liability cannot be presumed and it has to be first established under Section 138 NI Act and only after that the statutory presumption under Section 139 of the Act will come into play.”
Citing the Supreme Court’s decision in Ranjit Sarkar v. Ravi Ganesh Bhardwaj, the Court reiterated that the “Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act.”
The Court concluded that since the complainant failed to produce any proof of the cash payment and his witnesses did not corroborate his claim, he had not discharged the initial burden of proving the existence of the debt. Consequently, the presumption under Section 139 could not be applied against the accused.
In its final order, the Court held: “In the cash in hand, the complaint could not establish the existence of legally recoverable debt, i.e., payment of a sum of Rs.24,00,000/- lakh to the accused by cash as he could not produce any document as proof of such payment. Mere admission of signature of the accused on the cheque will not attract the presumption under Section 139 of NI Act.”
Finding no illegality in the trial court’s decision, the High Court dismissed the appeal and upheld the acquittal of Shri Mahendra Kumar Jain.
