Cheque Bounce Case: Supreme Court Upholds Conviction Under Section 138 of Negotiable Instruments Act

The case of M. Abbas Haji v. T.N. Channakeshava revolved around a dispute under Section 138 of the Negotiable Instruments Act, 1881, concerning a dishonored cheque. The Supreme Court had to determine whether the appellant, who denied signing the cheque, was liable for conviction based on available evidence.

The judgment reinforced the principle that a mere denial of signature is insufficient to escape liability under Section 138. The Court held that the accused must provide a credible explanation for how the cheque reached the complainant’s possession.

Background and Key Issues

The case originated when the complainant alleged that the accused had borrowed Rs. 5,00,000 and issued a cheque dated November 18, 2000 to repay the debt. Upon presentation, the cheque was dishonored due to insufficient funds. The complainant then issued a legal notice, which was served but allegedly not replied to. Subsequently, a complaint was filed under Section 138 of the Negotiable Instruments Act.

The key legal issues before the Supreme Court were:

• Was the accused’s denial of signature sufficient to escape liability?
• Could the opinion of a handwriting expert negate the presumption under Section 139 of the Act?
• Did the High Court correctly overturn the trial court’s acquittal?

Arguments of the Petitioner (M. Abbas Haji)

The petitioner (accused) raised the following arguments:

• He had not signed the cheque in question, and the complainant had fraudulently acquired it.
• The cheque was examined by a handwriting expert, who opined that the signature did not match the accused’s admitted signatures.
• The trial court correctly acquitted him based on the handwriting expert’s report.
• The High Court exceeded its jurisdiction by reversing the acquittal.

Arguments of the Respondent (T.N. Channakeshava)

The complainant countered:

• The accused had not denied receiving the legal notice.
• The accused had not stepped into the witness box to testify that the signature was not his.
• The accused failed to explain how the cheque reached the complainant’s possession.
• The handwriting expert’s opinion was not conclusive and could not override the presumption under Section 139 of the Negotiable Instruments Act.

Supreme Court’s Key Observations

The Supreme Court analyzed the evidentiary value of handwriting expert reports and the statutory presumption under Section 139 of the Negotiable Instruments Act, which presumes that a cheque was issued for consideration unless proved otherwise.

“The original appellant did not step into the witness box to state that he had not signed the cheque. The opinion of the handwriting expert was only an opinion and not conclusive. The accused failed to prove that he had sent a reply to the legal notice since no documentary evidence was produced to support this claim.”

1. Burden of Proof on the Accused

The Court held that once the complainant establishes that a cheque was issued and dishonored, the burden shifts to the accused to rebut the presumption that it was issued for discharge of a debt or liability.

“Section 139 of the Act mandates that the court shall presume that the cheque was issued for the discharge of a debt or liability unless the contrary is proved. Mere denial is not sufficient to rebut this presumption.”

2. Handwriting Expert’s Report Not Conclusive

The Court rejected the accused’s reliance on the handwriting expert’s report, noting that expert opinions are not binding and must be assessed with other evidence.

“The opinion of a handwriting expert is not conclusive proof of authenticity. The accused failed to provide any substantive explanation for how the cheque came into the complainant’s possession.”

3. Importance of the Legal Notice

The Court observed that the accused had received the statutory legal notice but did not respond. If he had genuinely not issued the cheque, he should have immediately taken legal steps to contest the claim.

Final Judgment

The Supreme Court upheld the High Court’s order and confirmed the conviction under Section 138 of the Negotiable Instruments Act. The key directives were:

• The conviction of the accused was affirmed.
• The accused was sentenced to pay a fine of Rs. 5,10,000, failing which he would have to undergo simple imprisonment for one year.
• Since the accused had passed away, the legal heirs were not liable for the fine or imprisonment but could challenge the conviction for the sake of the deceased’s reputation.
• The complainant was allowed to withdraw the amount deposited by the accused.

Impact of the Judgment

The Supreme Court’s ruling has significant implications for cheque bounce cases:

• Strengthening Section 138 Cases: The judgment reinforces the principle that once a cheque is issued, the burden shifts to the accused to prove that it was not issued for a debt.
• Limiting the Role of Handwriting Experts: The ruling clarifies that expert opinions alone cannot rebut statutory presumptions under the Negotiable Instruments Act.
• Emphasizing the Legal Notice Process: The judgment highlights that a failure to respond to a legal notice can weaken the defense in a cheque bounce case.
• Reaffirming High Court’s Power to Reverse Acquittal: The ruling underscores that in quasi-criminal proceedings under Section 138, appellate courts have broad powers to reassess evidence.

The Supreme Court’s decision ensures that accused persons cannot evade liability under Section 138 merely by denying their signature, reinforcing the legal protection available to cheque recipients.

Petitioner Name: M. Abbas Haji.
Respondent Name: T.N. Channakeshava.
Judgment By: Justice Deepak Gupta, Justice Aniruddha Bose.
Place Of Incident: Karnataka.
Judgment Date: 19-09-2019.

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