The Supreme Court has clarified that at the stage of issuance of process, the statutory presumption under Section 139 of the Negotiable Instruments Act (NI Act) cannot be dislodged in a summary manner merely by contending that the cheque issued was not for any legally enforceable debt or liability. Once the basic ingredients of Section 138 of the NI Act are duly satisfied by the complainant, the rebuttal of the statutory presumption by the drawer can only be made during the course of trial.
A Two-Judge Bench comprising Justice J.K. Maheshwari and Justice Atul S. Chandurkar observed that at the stage of issuance of process by the Metropolitan Magistrate, what is prima facie required to be seen is the issuance of the cheque by the drawer, its dishonour on presentation, issuance of the statutory notice, and filing of the complaint within the prescribed statutory period.
The Bench clarified that if the drawer does not dispute the issuance of the cheque or deny his signature, the statutory presumption as contemplated under Section 139 of the N.I. Act comes into play. Consequently, the burden shifts to the drawer to prove that the cheque was not issued for any legally enforceable debt or liability, an exercise that must be undertaken during the trial.
The Bench noted that the Sessions Court misdirected itself by giving more weightage to the fact that the agreement dated 12th January 2022 was not signed by the second respondent, thereby ignoring that the basic ingredients for attracting the provisions of Section 138 of the N.I. Act had been duly satisfied for the issuance of process. Concluding that the cheque was not issued for a legally enforceable debt at the pre-trial stage itself, without granting an opportunity to the complainant to substantiate her case by leading evidence, amounts to ignoring the statutory presumption.
Such an approach results in the presumption under Section 139 of the N.I. Act getting washed away even prior to the commencement of the trial, added the Bench.
Briefly, the appellant had disputes with her husband regarding the alleged illegal and fraudulent transfer of shares pertaining to Sheth Developers and Realtors (India) Limited and Sheth Developers Private Limited. Following various complaints filed by the appellant, negotiations commenced, and a final draft settlement agreement was drawn up on 12th January 2022.
Under the settlement, the appellant’s husband agreed to gift specific properties and pay a sum of Rs. 50 crores upon the execution of a Declaration-cum-Indemnity document to withdraw the complaints. The second respondent, acting as a mediator and guarantor, issued Cheque for Rs. 50 crores in favour of the appellant on 12th January 2022, to be kept in an escrow account.
The appellant signed the Declaration-cum-Indemnity on 13th January 2022. Subsequently, the sale of shares was completed contrary to the settlement agreement, and the appellant deposited the cheque for encashment. On 06th April 2022, the cheque was dishonoured with the remark ‘payment stopped by drawer’.
The appellant issued a statutory notice under Section 138 of the N.I. Act on 20th April 2022, to which the second respondent replied on 04th May 2022, denying liability. The appellant filed a complaint on 16th June 2022, and the Metropolitan Magistrate issued process on 17th June 2022. The Sessions Court set aside the issuance of process on 30th December 2022, holding there was no legally enforceable debt, and the High Court dismissed the subsequent petition.
Appearances:
For the Appellant: Senior Advocates Mukul Rohatgi and Siddharth Bhatnagar, AOR Ranjeeta Rohatgi, along with Advocates Gaurav Srivastava, Shrika Gautam, and Yuvraj Kashyap.
For the Respondent: Senior Advocates Dr. A.M. Singhvi and Kavin Gulati, AORs Aaditya Aniruddha Pande and E. C. Agrawala, along with Advocates C.d. Mehta, Mahesh Agarwal, Ankur Saigal, Bhavik Mehta, Kajal Dalal, Deepshika Mishra, and Prakruti.