Can the complainant (ie., the “payee” or the “holder in due course”) in a prosecution for offence under section 138 of the Negotiable Instruments Act (the Act, for short) be presumed to be the “holder” of the cheque? Can the presumption under section 139 of the Act be drawn in favour of the complainant, invariably in all such complaints treating him as the “holder” of the cheque? Can the mere admission of the handwriting and signature in the cheque lead to the presumption under section 139 of the Act that the cheque is received for the discharge of a debt or liability? These are the main questions which arise for consideration in this appeal.

FACTS, BRIEFLY:

2. The appellant filed a complaint before Magistrate’s Court, alleging offence under Section 138 of the Negotiable Instruments Act (‘the Act’, for short), against first respondent herein. The accused-first respondent allegedly borrowed a sum of Rs.60,000/- from complainant and issued a cheque, Ext.P1 for the discharge of the debt. The cheque, on presentation was dishonoured, due to insufficiency of funds. Notice was issued to accused, other legal formalities were complied with, and a complaint was filed against first respondent. PWs.1 to 3 were examined and Exts.P1 to P7 were marked, on the side of the complainant/appellant. The accused examined DWs.1 to 3 and marked Exts.D1 and D2 on his side.

DEFENCE PLEA:

3. According to accused he had been mentally sick for the past 8 to 9 years prior to the alleged transaction. Because of the peculiarity of the disease, his mental condition was impaired. In such state of mind, he as in the habit of issuing cheques to various persons, without owing anything to them. He used to assume himself to be a very affluent person during such period. But, people used to return such cheques, understanding the peculiar and abnormal habit of the accused. Ex.P1 is one such cheques issued to complainant which was misused by the complaint to file the complaint. The accused actually did not owe any money to complainant and he did not issue any cheque for the discharge of any debt or other liability, as alleged.

4. On an analysis of the evidence, particularly, medical evidence adduced by accused, trial court found that prosecution failed to establish that Ext.P1 cheque was issued by the accused for the discharge of a debt and hence the accused was acquitted. According to learned counsel appearing for appellant, handwriting and signature in the cheque are admitted by the accused and hence the court is bound to draw the presumption under section 139 of the Act that the cheque was issued for the discharge of a debt or liability. The acquittal is therefore, illegal.

5. In the light of the above contention, the first question to be decided is whether the mere admission of the handwriting and signature in the cheque would lead to the presumption under section 139 of the Act that the cheque is received for the discharge of a debt or liability? In my view, it will not. To support my view, a detailed analysis of section 139 of the Act is absolutely essential. Prior to that, a flash-reference to section 138 is also necessary.

6. A reading of section 138 of the Act reveals that one of the main ingredients to be proved in an offence under section 138 of the Act is that ‘THE CHEQUE IS DRAWN FOR THE DISCHARGE OF A DEBT OR OTHER LIABILITY’ (vide Kumsum Ingots & Allys Ltd. v. Pennar Peterson Securities Ltd., (2000) 2 SCC 745). This ingredient constitutes two factors: I) the ‘DRAWING’ of the cheque and ii) the specific ‘PURPOSE’ for which the cheque is drawn. Both these factors have to be independently proved to attract the offence under section 138 of the Act. But, does the admission of handwriting and signature in the cheque prove both these factors?

DOES ADMISSION PROVE?

7. The admission of the handwriting and signature of the accused in the cheque may prove one of the above factors ie., the cheque is “DRAWN” by him, provided the court is satisfied that the cheque