A) ABSTRACT / HEADNOTE

The case revolves around the dishonor of cheques under Section 138 of the Negotiable Instruments Act, 1881, examining whether the cheques were issued in discharge of a legally enforceable debt. The petitioner, a partnership firm, alleged financial assistance provided to the respondent, for which cheques were issued that subsequently bounced due to insufficient funds. The trial court convicted the respondent, relying on presumptions under Sections 118 and 139 of the Negotiable Instruments Act. However, the appellate and High Courts overturned the decision, emphasizing the lack of evidence to substantiate the claim of a legally enforceable debt. The Supreme Court upheld these findings, concluding no interference was warranted due to the absence of perversity or error in the lower courts’ judgments.

Keywords:

Dishonor of cheque, Negotiable Instruments Act, legally enforceable debt, rebuttable presumption, appellate jurisdiction

B) CASE DETAILS

• Judgment Cause Title: M/S Rajco Steel Enterprises v. Kavita Saraff and Another
• Case Number: Petition for Special Leave to Appeal (Criminal) No. 5583 of 2022
• Judgment Date: April 9, 2024
• Court: Supreme Court of India
• Quorum: Justice Aniruddha Bose and Justice Sanjay Kumar
• Author: Justice Aniruddha Bose
• Citation: [2024] 4 S.C.R. 255
• Legal Provisions Involved: Sections 118, 139, and 138 of the Negotiable Instruments Act, 1881; Section 374(3) and Section 378 of the Code of Criminal Procedure, 1973
• Judgments Overruled by the Case: None
• Case is Related to: Criminal Law, Negotiable Instruments

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The case primarily dealt with the legal presumption under Sections 118 and 139 of the Negotiable Instruments Act, which cast a burden on the drawer of a dishonored cheque to rebut its presumption of having been issued in discharge of a debt or liability. The petitioner alleged financial assistance granted to the respondent, for which cheques were issued but subsequently dishonored. The respondent claimed that no financial assistance was provided and contested the cheques as having been misused. Lower courts analyzed evidence to determine whether a legally enforceable debt existed.

D) FACTS OF THE CASE

1. The petitioner, a partnership firm dealing in steel and iron products, alleged financial assistance provided to the respondent.
2. Four cheques, drawn on Axis Bank, were presented for payment but were dishonored due to insufficient funds.
3. The petitioner issued a demand notice under Section 138, which the respondent failed to respond to.
4. The respondent claimed the cheques were issued as part of stock market transactions conducted in her account for the petitioner, and denied liability.
5. The Trial Court convicted the respondent under Section 138, but the Appellate Court and High Court reversed the decision, finding the petitioner failed to prove the existence of a legally enforceable debt.

E) LEGAL ISSUES RAISED

1. Whether the cheques were issued in discharge of a legally enforceable debt or liability.
2. Whether the respondent successfully rebutted the presumption under Sections 118 and 139 of the Negotiable Instruments Act.
3. Whether the findings of the appellate and High Court were perverse or based on no evidence.

F) PETITIONER/APPELLANT’S ARGUMENTS

1. Presumption of Debt or Liability: The petitioner argued that the cheques, having been drawn and dishonored, raised a statutory presumption under Section 139, which the respondent failed to rebut.
2. Burden of Proof: Cited judgments including Oriental Bank of Commerce v. Prabodh Kumar Tewari [(2022) 7 SCR 72] and Kalamani Tex v. P. Balasubramanian [(2021) 5 SCC 283], to argue that proving the debt was not required as extensively as in civil proceedings.
3. Trial Court Findings: Emphasized the trial court’s acceptance of the petitioner’s evidence, and argued that the Appellate Court and High Court failed to properly consider this.

G) RESPONDENT’S ARGUMENTS

1. Rebuttal of Presumption: The respondent argued that the presumption under Section 139 stood rebutted, as there was no evidence of a legally enforceable debt.
2. Misuse of Cheques: Claimed that the cheques were blank and issued for other purposes, not as repayment of any debt.
3. No Loan Transaction: Argued the petitioner failed to provide documentation proving the alleged financial assistance, relying on judgments like Basalingappa v. Mudibasappa [(2019) 5 SCC 418].
4. Signature and Content Mismatch: Highlighted inconsistencies, such as different inks used for the signature and the cheque content.

H) JUDGMENT

a. Ratio Decidendi:

1. Lack of Evidence for Debt: The petitioner failed to establish the cheques were issued for repayment of financial assistance.
2. Rebuttal by Respondent: Evidence provided by the respondent was deemed plausible, effectively rebutting the presumption under Sections 118 and 139.
3. Appellate Findings Not Perverse: The Supreme Court found no perversity in the findings of the appellate and High Court.

b. Obiter Dicta:

1. Courts reiterated the limited scope of interference under Article 136 of the Constitution when concurrent findings exist.
2. The balance of probabilities favors the respondent in rebutting presumptions under the Negotiable Instruments Act.

c. Guidelines (If Any):

• Courts must rely on substantial evidence before concluding a legally enforceable debt exists under Section 138.
• Presumption under Section 139 is rebuttable with plausible defense and supportive evidence.

I) REFERENCES

a. Important Cases Referred:

1. Oriental Bank of Commerce v. Prabodh Kumar Tewari [(2022) 7 SCR 72]
2. Kalamani Tex v. P. Balasubramanian [(2021) 5 SCC 283]
3. Basalingappa v. Mudibasappa [(2019) 5 SCC 418]
4. Rohitbhai Jivanlal Patel v. State of Gujarat [(2019) 18 SCC 106]
5. John K. Abraham v. Simon C. Abraham [(2014) 2 SCC 236]

b. Important Statutes Referred:

1. Negotiable Instruments Act, 1881 – Sections 118, 139, and 138
2. Code of Criminal Procedure, 1973 – Sections 374(3) and 378