GOA PLAST (P.) LTD. versus CHICO URSULA DSOUZA

Citation: [2003] SUPP. 5 S.C.R. 835 · Decided: 20-11-2003 · Supreme Court of India · Bench: B.P. SINGH · Disposal: Disposed off

Judgment (excerpt)

GOA PLAST (P.) LTD. 
A 
v. 
CHICO URSULA D'SOUZA 
NOVEMBER 20, 2003 
[B.P. SINGH AND DR. AR. LAKSHMANAN, JJ.] 
B 
Negotiable Instruments Act, 1881: 
Ss. 138, 139 and 142-Dishonour of cheque-Instructions by drawer 
to stop payment-Liability of drawer-Presumption in favour of drawee- C 
Absence of mercantile relationship between parties-Relevancy of-Object 
and ingredients of ss. 138 and 139-Held, cheque issued by drawer having 
been returned to drawee unpaid because of stop payment instructions, drawer 
shall be deemed to have committed offence punishable u/s 138-s. J 39 creates 
a presumption, unless contrary is proved, that holder of cheque received it D 
for discharge of debt or any other liability-Drawer failed to rebut the 
presumption-For cases filed under s.142 relationship between drawer and 
drawee is not material because liability admitted is one which can be legally 
enforced by way of suit. 
The respondent, a former Managing Director of the appellant-company, E 
issued some post-dated cheques in favour of the appellant-company towards 
the liability of the amount misappropriated from the funds of the company. 
The first cheque deposited by the Company for encashment was dishonoured 
by the bank on the ground that the respondent had issued instr1,1ction to stop 
payment After due notice to the respondent, a complaint under s.142 of the 
Negotiable Instruments Act, 1881 was filed against him for offence punishable F 
under section 138 of the Act. The respondent wrote a letter dated 12.2.1993 
to the Company denying his liability to pay the aforesaid sum and stated 
therein that a third person was responsible for the unexplained expenditure 
of the Company. The trial court acquitted the respondent holding that the 
complainant failed to prove the liability and that the respondent had rebutted G 
the presumption under s.139 of the Act The appeal of the Company was also 
dismissed by the High Court Aggrieved, the company filed the present appeal. 
It was contended for the appellant-company that mere issuance of cheque 
in favour of the company was sufficientlto show that the respondent owed 
~5 
H 
836 
SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R. 
A liability to the company and once the cheque was dishonoured nothing further 
was required to be proved by the complainant; and that the presumption had 
to be rebutted by leading evidence and not by mere explanation or statement. 
B 
c 
Disposing of the appeal, the Court 
HELD: I.I. Section 138 of the Negotiable Instruments Act, 1881 will 
be attracted in the facts of the case and a case for punishment under the 
provisions is made out The cheque issued by the respondent had been stopped 
for payment on his instructions and the cheque was returned to the appellant 
unpaid. The respondent shall be deemed to have committed an offence. 
1849-C-DI 
1.2. The High Court and the trial court have clearly misunderstood the 
object behind Section 138 of the Act. Sections 138 and 139 of the Act were 
enacted in view of the fact that cheques were issued for payment of admitted 
liability but the drawer used to dishonour the said liability by issuing 
instructions to the Bank for stop payment. To avoid the aforesaid and to create 
D an element of credibility and dependability, the aforesaid sections were enacted 
which provide a criminal remedy of penalty if the ingredients of the sections 
are satisfied. (841-E-Fl 
Modi Cements Ltd. v. Kuchil Kumar Nandi, 11998) 3 SCC 249, relied 
on. 
E 
2.1. The High Court and the trial court failed to give effectto Section 139 
of the Act which creates a presumption, unless the contrary is proved, that the 
holder of cheque received the cheque for discharge in whole or in part of any 
debt or other liability. The courts below treated the proof adduced by the 
respondent, namely, the letter dated 12.2.1993 denying the liability and stating 
F therein that some other person is liable for it, as sufficient to rebut the 
presumption under Section 139 of the Act Neither the said letter is proved nor 
its contents nor is the document produced in the proceedings of the Court. 
However, in the said letter the respondent did not deny the liability as such but 
merely shifted it on third person. The veracity of the contents of the letter could 
G only be verified ifthe contents of the letter were proved. Both the Courts have 
ignored the admission of the liability by the respondent who said that the liability 
did exist but he was not responsible for

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