Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Dishonour of Cheque as per Section 138 - The law considers the dishonour of a cheque due to insufficient funds, account closure, signature mismatch, or other reasons as an offence under Section 138 of the Negotiable Instruments Act (NIA). The act of dishonour triggers statutory presumptions of consideration and issuance of the cheque for a debt or liability ["Jatan Kumar Singh VS State of U. P. - Allahabad"], ["Jagat Ram Modka VS Ram Prakash Madaik - Himachal Pradesh"], ["Suresh Kumar Goyal VS Darshan Singh - Punjab and Haryana"].
Legal Presumption and Probable Defence - Once the issuance of the cheque is established, there is a statutory presumption that the cheque was issued for a legally enforceable debt or liability. The accused can rebut this presumption by establishing a probable defence, such as the cheque being issued as security, or that it was misused, forged, or that signatures do not match. The defence must be plausible and supported by evidence; mere denial is insufficient ["Jagat Ram Modka VS Ram Prakash Madaik - Himachal Pradesh"], ["Badri Prasad VS Padam Singh - Himachal Pradesh"], ["Gopala Mehnder vs The State of Telangana - Telangana"].
Issuance of Cheque as Security - Cheques issued as security are also covered under Section 138. The courts have held that even if a cheque was given as security, its dishonour can lead to criminal liability if the cheque is presented and dishonoured for reasons like funds insufficiency or account closure ["Jagat Ram Modka VS Ram Prakash Madaik - Himachal Pradesh"], ["SOHAN LAL SHARMA vs SURESH KUMAR GUPTA - Himachal Pradesh"], ["Ved Parkash VS Babu Ram Sharma - Himachal Pradesh"].
Dishonour Due to Signature Issues or Account Closure - Dishonour resulting from signature mismatches, forgery, or account closure is considered within the scope of Section 138. The Supreme Court has clarified that such grounds, involving disputed questions of fact, are matters for trial and do not bar prosecution; the dishonour itself is sufficient to invoke criminal proceedings ["Gopala Mehnder vs The State of Telangana - Telangana"], ["- Telangana"], ["M/S.RIFAH SHOES (P) LTD vs V.MD.IMRAN - Madras"].
Legal Consequences and Court Proceedings - The law emphasizes that the dishonour of a cheque, regardless of reason, entails a criminal offence if the statutory conditions are met. The courts generally hold that the burden of proof shifts to the accused to establish a probable defence, but once the issuance and dishonour are proved, the presumption of consideration stands ["Jatan Kumar Singh VS State of U. P. - Allahabad"], ["Balkour Singh VS State of Punjab - Punjab and Haryana"], ["Rajinder Singh vs Shiv Lal (now deceased) through His LRs. - Himachal Pradesh"].
Limitations and Judicial Discretion - While the offence is strict, courts recognize that factual disputes (e.g., whether the cheque was issued as security or towards a debt) are to be resolved at trial. The proceedings under Section 138 are not meant to be an inquiry into the merits of the case but to determine whether dishonour occurred and whether the statutory criteria are satisfied ["Shaliwahan Singh Rathore S/o Shri Raj Singh Rathore VS State Of Rajasthan Through P. p. - Rajasthan"], ["M/S.RIFAH SHOES (P) LTD vs V.MD.IMRAN - Madras"].
Analysis and Conclusion:The defence against dishonour of a cheque under Section 138 of the NIA hinges on establishing a probable defence such as the cheque being issued as security, forged, or the signatures not matching. The law presumes consideration once issuance is proved, but this presumption can be rebutted with evidence. Grounds like account closure, signature mismatch, or issuing as security are recognized by courts as valid defences, provided they are supported by credible evidence. Ultimately, the offence is primarily established by proof of dishonour, with the accused having the opportunity to contest the validity of the debt or liability during trial.References: ["Jatan Kumar Singh VS State of U. P. - Allahabad"] ["Paramjit Kaur VS Kuldeep Singh - Punjab and Haryana"] ["SOHAN LAL SHARMA vs SURESH KUMAR GUPTA - Himachal Pradesh"] ["Jagat Ram Modka VS Ram Prakash Madaik - Himachal Pradesh"] ["Badri Prasad VS Padam Singh - Himachal Pradesh"] ["Gopala Mehnder vs The State of Telangana - Telangana"] ["M/S.RIFAH SHOES (P) LTD vs V.MD.IMRAN - Madras"] ["Shaliwahan Singh Rathore S/o Shri Raj Singh Rathore VS State Of Rajasthan Through P. p. - Rajasthan"]
Issuing a cheque that bounces can lead to serious legal consequences under Section 138 of the Negotiable Instruments (NI) Act, 1881. But what if the cheque wasn't for a valid debt, or was issued under duress? If you're facing a cheque dishonour case, understanding your defences is crucial. This guide breaks down the primary legal defences, focusing on rebutting the statutory presumption, with insights from key judgments.
The core issue in many cases is: Defence in Dishonour Cheque. Courts typically presume under Section 139 of the NI Act that a cheque was issued for a legally enforceable debt or liability. However, this presumption is rebuttable. The accused must raise a probable or plausible defence supported by credible evidence to shift the burden back. Mere denial isn't enough—evidence is key. L. MOHAN VS MOHAN NAIDU - 2004 0 Supreme(Kar) 27M. B. Rajasekhar VS Savithramma - Dishonour Of Cheque (2011)
Section 139 creates a strong presumption in favor of the holder (complainant) that the cheque was issued to discharge a debt or liability. L. MOHAN VS MOHAN NAIDU - 2004 0 Supreme(Kar) 27 This shifts the onus to the accused to rebut it by preponderance of probabilities—not beyond reasonable doubt. Kehar Singh, Son of Shri Dole Ram @ Daulat Ram VS Manju Banga, Wife of Shri Jagdish Raj Banga - 2021 0 Supreme(HP) 749
Courts have clarified: The liability of defence in cases under Section 138 of NI Act 1881 is not that of proving its case beyond reasonable doubt – Accused may establish non-existence of a debt or liability either through conclusive evidence... or through adduction of circumstantial evidence vide standard of preponderance of probabilities. Sri Dattatraya VS Sharanappa - 2024 5 Supreme 671
Failure to produce credible evidence means the presumption holds, often leading to conviction. Jeevitha Karthikeyan W/o S Karthikeyan VS Manjunatha Food Products - 2023 0 Supreme(Kar) 395
Several defences can rebut the presumption if backed by evidence:
No Legally Enforceable Debt: Prove the cheque wasn't for any debt, or the debt was time-barred, illegal, or lacked consideration. For instance, invalid loan agreements or absence of financial capacity in the complainant's records can help. M. B. Rajasekhar VS Savithramma - Crimes (2011)ANEETA HADA VS GODFATHER TRAVELS AND TOURS PVT. LTD - 2008 0 Supreme(SC) 806
Cheque Issued as Security: Even security cheques are covered if dishonoured due to insufficient funds. Learned Courts below had rightly held that even if a cheque was issued as a security, the accused would be liable for the dishonour of the security cheque. - 2026 Supreme(Online)(HP) 287 However, if the underlying liability didn't arise, this may form a defence with proof. Md. Matibur Rahman, S/o Md. Abdul Matlib VS Pintu Ghosh, S/o Late P. C. Ghosh - 2023 0 Supreme(Gau) 819
Improper Obtaining or Misuse: Show the cheque was obtained via misrepresentation, coercion, or as a blank cheque misused later. Specific evidence like documents or witnesses is required. M. B. Rajasekhar VS Savithramma - Dishonour Of Cheque (2011)Durgadevi VS Chandrasekaran - 2023 0 Supreme(Mad) 893
Material Alterations or Part Payments: Apparent alterations (e.g., date, amount) or proof of part payments via endorsements can challenge validity. Material alteration of a cheque is a valid defense if evident. M. B. Rajasekhar VS Savithramma - Dishonour Of Cheque (2011)Joseph Sartho VS Gopinathan Nair - Dishonour Of Cheque (2008)
Signature Mismatch: Dishonour due to signature differences may not always trigger liability if unintentional, but requires evidence. There may indeed be situations where a mismatch between the signatories... may result in dishonour. Subir Sarkar VS Sk. Anisur Rahaman - 2023 Supreme(Cal) 435
Mere suggestions of discrepancies without proof fail. Uttam Ram VS Devinder Singh Hudan - 2019 0 Supreme(SC) 1157
The defence must be probable and credible, supported by:- Documentary evidence (e.g., loan agreements, payment receipts, communications).- Oral testimony from witnesses.- Circumstantial evidence meeting preponderance standard.
If an accused has a defence against dishonour of the cheque in question, it is he alone who knows the defence and responsibility of spelling out this defence to the Court and then proving this defence is on the accused. Mayank Chawla VS State - 2020 Supreme(Del) 366GULAM REZA VS ITPL INFRASTRUCTURE PVT. LTD. - 2020 Supreme(Del) 1483Maa Tarini Industries Ltd. VS PEC Limited - 2020 Supreme(Del) 1157
Courts won't quash proceedings under Section 482 CrPC based on unproven defences; these are for trial. Mayank Chawla VS State - 2020 Supreme(Del) 366
In quashing petitions, courts stress: The defense raised by the petitioner requires evidence that cannot be evaluated in proceedings under Section 482 of Cr.PC. Mayank Chawla VS State - 2020 Supreme(Del) 366
To build a strong case:- Gather concrete evidence early: agreements, bank statements, witnesses.- Disclose defence promptly before the magistrate. Miracle Infoweb Pvt. Ltd. Through its Director Sh. Suman Bhattacharya VS State - 2013 Supreme(Del) 1473- Document part payments, alterations, or security terms clearly.- Focus on preponderance of probabilities—show the debt likely didn't exist.
Trial courts handle these via summary procedures under NI Act Sections 143-145, allowing affidavits for efficiency. Mayank Chawla VS State - 2020 Supreme(Del) 366
Defending a dishonoured cheque case hinges on rebutting Section 139's presumption with probable evidence. Common defences like no debt, misuse, or alterations work if proven, but courts demand substance over denial. Always consult a lawyer for case-specific strategy—this is general information, not legal advice.
Key Takeaways:- Presumption favors complainant; rebut with evidence. M. B. Rajasekhar VS Savithramma - Dishonour Of Cheque (2011)- Standard: Preponderance of probabilities. Kehar Singh, Son of Shri Dole Ram @ Daulat Ram VS Manju Banga, Wife of Shri Jagdish Raj Banga - 2021 0 Supreme(HP) 749- Security/misuse claims need proof. - 2026 Supreme(Online)(HP) 287Durgadevi VS Chandrasekaran - 2023 0 Supreme(Mad) 893- Trial, not quashing, tests defences. Subir Sarkar VS Sk. Anisur Rahaman - 2023 Supreme(Cal) 435
Stay informed, act swiftly, and protect your rights in NI Act proceedings.
References:1. L. MOHAN VS MOHAN NAIDU - 2004 0 Supreme(Kar) 27 – Burden under Sections 118/139.2. M. B. Rajasekhar VS Savithramma - Dishonour Of Cheque (2011) – Material alterations, probable defence.3. M. B. Rajasekhar VS Savithramma - Crimes (2011) – Supporting evidence needed.4. Durgadevi VS Chandrasekaran - 2023 0 Supreme(Mad) 893 – Misuse of blank cheques.5. Kehar Singh, Son of Shri Dole Ram @ Daulat Ram VS Manju Banga, Wife of Shri Jagdish Raj Banga - 2021 0 Supreme(HP) 749 – Probable defence standard.6. Uttam Ram VS Devinder Singh Hudan - 2019 0 Supreme(SC) 1157 – Section 313 not substantive evidence.7. - 2026 Supreme(Online)(HP) 287 – Security cheque liability.8. Sri Dattatraya VS Sharanappa - 2024 5 Supreme 671 – Preponderance standard.9. Subir Sarkar VS Sk. Anisur Rahaman - 2023 Supreme(Cal) 435 – Signature mismatch.10. Mayank Chawla VS State - 2020 Supreme(Del) 366 – Accused's burden to prove defence.
#ChequeBounceDefence, #NIAct138, #DishonouredCheque
Act, as dishonour of cheque. 18. ... Act, would get attracted and would amount to dishonour of cheque within the meaning of Section 138 of the N.I. Act. ... Defence which may not be allowed in any prosecution under section 138. ... Act prohibits the drawer of the cheque to raise a defence that he had no reason to believe that when he has issued the cheque, the cheque may be dishonoured on presentation before the Bank. 13. ... Learne....
The respondent took a defence that the cheque handed over to Jarnail Singh as security was mis-used. To substantiate the defence, DW1- Navdeep Singh deposed that the respondent had taken a shop on rent from Jarnail Singh, he received a blank cheque as security. ... In the present case, the defence taken by the respondent of mis-use of cheque was substantiated by DW1-Navdeep Singh. ... The complainant in order to prove her case, tendered her affidavit, original cheque,....
do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act.” ... Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatures do not match” or that the “image is not found”, which too implies that the specimen signatures ... The provisions of NIA envision a single window for criminal lia....
Moreover, by now it is well settled that dishonour of cheque issued as security can also attract offence under Section 138 of the Negotiable Instruments Act. Hon’ble Apex Court in case titled Sripati Singh v. ... In the case at hand, at no point of time, petitioner disputed the factum with regard to his having issued cheque to the complainant, rather his defence simplicitor as put forth was that cheque in question was issued as security, but same was misused. ... To raise probable defence#HL_E....
138 of the Act in case of its dishonour. ... No doubt, by way examining DW-2, Bhag Chand and putting a defence that cheque in question was issued as security cheque, attempt came to be made on behalf of the accused to set up a case that cheque in question was not issued towards discharge of lawful liability, but evidence, as have been discussed ... To raise probable defence, accused can rely on the materials submitted by the complainant. ... It is no doubt true that the disho....
It is no doubt true that the dishonour of cheques in order to qualify for prosecution under Factum with regard to issuance of cheque as well as signatures thereupon stands duly proved in accordance with law. Accused though was afforded due opportunity to lead the evidence in defence, but he failed to avail the same. ... With a view to rebut the presumption, accused tried to set up a case that cheque in question was issued as security but such defence of him never came to be probablized. 11.
Dishonour of a cheque issued for the disucharge of a later liability is clearly covered by the statute in question. ... Learned Courts below had rightly held that even if a cheque was issued as a security, the accused would be liable for the dishonour of the security cheque. ... The complainant stated that the cheque was dishonoured with the endorsement ‘funds insufficient’. She relied upon a memo of dishonour (Ext. CW-1/C) in which the reason for dishonour....
Dishonour of cheque for insufficiency, etc. of funds in the account. ... Earlier, a case of dishonour of a cheque was dealt through provisions of Section 420 read with Section 415 of the IPC 1860. ... Defence which may not be allowed in any prosecution under section 138 - It shall not be a defence in a prosecution for an offence under section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on ....
There may indeed be situations where a mismatch between the signatories on the cheque drawn by the drawer and the specimen available with the bank may result in dishonour of the cheque even when the drawer never intended to invite such a dishonour. ... not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act. ... Sri Mohan (2010) 11 SCC 441 has approved the above decision and held that failure of the drawer of the cheque....
Further, invalidation of the cheque on account of merger with another bank would be a disputed question of fact and would be a probable defence that the petitioner is free to take before the trial Court. ... The dishonour of cheque with remarks ‘account closed’ would certainly be an offence under Section 138 of the NI Act as has been held by the Hon’ble Supreme Court in NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 4 SCC 253. ... Section 138 of the NI Act deals with dishonour of cheques and to make out ....
If an accused has a defence against dishonour of the cheque in question, it is he alone who knows the defence and responsibility of spelling out this defence to the Court and then proving this defence is on the accused. There is no presumption that even if an accused fails to bring out his defence, he is still to be considered innocent. Once the complainant has brought forward his case by giving his affidavit about the issuance of cheque, dishonour of cheque, issuance of demand notice etc., he can be cross-examined only if the accused makes an application to the Court as to....
Once the complainant has brought forward his case by giving his affidavit about the issuance of cheque, dishonour of cheque, issuance of demand notice etc., he can be cross-examined only if the accused makes an application to the Court as to, on what point he wants to cross examine the witness(es) and then only the Court shall recall the witness by recording reasons thereto. There is no presumption that even if an accused fails to bring out his defence, he is still to be considered innocent. If an accused has a defence against dishonour of the cheque in question, it is he alone who....
If an accused has a defence against dishonour of the cheque in question, it is he alone who knows the defence and responsibility of spelling out this defence to the Court and then proving this defence is on the accused. There is no presumption that even if an accused fails to bring out his defence, he is still to be considered innocent. Once the complainant has brought forward his case by giving his affidavit about the issuance of cheque, dishonour of cheque, issuance of demand notice etc., he can be cross-examined only if the accused makes an application to the Court as to....
There is no presumption that even if an accused fails to bring out his defence, he is still to be considered innocent. If an accused has a defence against dishonour of the cheque in question, it is he alone who knows the defence and responsibility of spelling out this defence to the Court and then proving this defence is on the accused. Once the complainant has brought forward his case by giving his affidavit about the issuance of cheque, dishonour of cheque, issuance of demand notice etc., he can be cross-examined only if the accused makes an application to the Court as to....
If an accused has a defence against dishonour of the cheque in question, it is he alone who knows the defence and responsibility of spelling out this defence to the court and then proving this defence is on the accused. The proper procedure to be followed by Magistrate is that soon after summoning, the accused must be asked to disclose his defence and his plea should be recorded.
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