A cheque issued as security for a debt is valid under Section 138 of the NI Act, and the burden of proof lies on the accused to demonstrate otherwise.

J U D G M E N T

This appeal is at the instance of the complainant in CC No.81 of 2007 on the file of Judicial First Class Magistrate Court-III, Kottarakkara, challenging acquittal of the accused under Section 138 of the Negotiable Instruments Act (for short, ‘the NI Act’), vide judgment dated 23.04.2007.

2. The case of the complainant is that, accused borrowed Rs.25,000/- from her on 10.06.2005, and towards discharge of that debt, issued Ext.P1 cheque dated 18.06.2005, assuring that it would be honoured on presentation before the bank. But that cheque was dishonoured for the reason ‘funds insufficient’. Registered notice sent by the complainant intimating dishonour of the cheque and demanding the cheque amount was received by the accused, but the amount was not repaid. Hence the complaint. 3. On taking cognizance and on appearance of the accused before the trial court, particulars of offence was read over and explained, to which she pleaded not guilty and claimed to be tried.

4. Thereupon, PW1 was examined, and Exts. P1 to P6 were marked from the side of the complainant to prove her case.

5. On closure of complainant’s evidence, accused was questioned under Section 313 of Cr.P.C. She denied all the incriminating circumstances brought on record, and stated that Ext.P1 cheque was given by her, to her sister Saraswathy, as a blank signed cheque, a s a sec urity, when Smt.Saraswathy borrowed Rs.5,000/- from the complainant. Subsequently, the relationship between the complainant and Smt.Saraswathy got strained, and one Mr.Varghese intervened in that matter. There was no financial transaction between the complainant and the accused, and she never handed over Ext.P1 cheque to the complainant, towards discharge of any legally enforceable debt. DW1-the mediator was examined as a defence witness.

6. On analysing the facts and evidence, and on hearing the rival contentions from either side, the trial court acquitted the accused, finding that there was no money transaction between the complainant and the accused. Aggrieved by the acquittal of the accused, the complainant has preferred this appeal.

7. Heard learned counsel for the appellant/complainant and learned counsel for the 1st respondent/accused.

8. The case of the appellant/complainant is that, she advanced Rs.25,000/- to the accused on 10.06.2005 and towards discharge of that debt, she received Ext.P1 cheque dated 18.06.2005 issued by the accused. When that cheque was presented before the bank, it was returned dishonoured for the reason ‘funds insufficient’. In spite of notice, the amount was not paid. Learned counsel for the appellant/complainant would contend that the complainant had proved her case beyond any doubt and the presumptions available under Sections 118 and 139 of the NI Act also was there to her rescue. Even then, the trial court acquitted the accused without any valid reasons and hence the impugned judgment is liable to be set aside.

9. Learned counsel for the 1 st respondent would contend that there was no financial transaction between the appellant and the 1st respondent and she never issued Ext.P1 cheque to the complainant. But at the same time, the 1st respondent is admitting that, her sister Saraswathy had borrowed Rs.5,000/- from the complainant and as a security for that transaction, a blank cheque signed by the accused, was given to her. Since the accused herself was admitting that her sister had borrowed Rs.5,000/- from the complainant, she was not supposed to dispute the financial capacity of the complainant. PW1, the complainant deposed before court that, she had sold away her land for Rs.7,00,000/- and from that amount, she advanced Rs.25,000/- to the accused. Though copy of the Sale Deed is not produced by the complainant, in