In Section 138 NI Act revision, partial discharge of liability warrants proportionate reduction of compensation despite conviction.

The Respondent/Complainant filed a complaint under Section 138 of the Negotiable Instruments Act (NI Act) alleging that Petitioner Nos. 2 and 3, on behalf of Petitioner No. 1, issued two cheques (Rs. 5 lakhs and Rs. 10 lakhs) for event management services consolidated at Rs. 40 lakhs.

The cheques were dishonored for "insufficient funds".

The Trial Court convicted the Petitioners on 27.10.2016, sentencing the individuals to four months’ imprisonment and a fine/compensation of Rs. 18 lakhs.

On appeal, the Appellate Court upheld the conviction but set aside the substantive sentence of imprisonment.

The Petitioners moved the High Court in revision, contending that a payment of Rs. 5 lakhs via Demand Draft and Rs. 10 lakhs in cash to the Complainant’s father discharged the liabilities.

1. Whether the Petitioners successfully rebutted the statutory presumption under Section 139 of the NI Act regarding the discharge of the debt.

2. Whether the Appellate Court erred in maintaining the full compensation amount despite finding that one of the cheque amounts (Rs. 5 lakhs) had been paid via Demand Draft.

Section 138 of the NI Act regarding the dishonor of cheques for insufficiency of funds.

Statutory presumptions under Section 118(a) and Section 139 of the NI Act, which mandate that a holder of a cheque is presumed to have received it in discharge of a debt unless the contrary is proved.

The principle that the burden of proof to rebut this presumption by a "preponderance of probabilities" lies on the accused, as per Rajesh Jain v. Ajay Singh (2023).

The limited scope of revisional jurisdiction under Sections 397/401 CrPC, as per Malkeet Singh Gill v. State of Chhattisgarh and State of Gujarat v. Dilipsinh Kishorsinh Rao, which restrict interference to cases of patent error, perversity, or illegality.

The Court observed that the Petitioners admitted to the signatures and issuance of the cheques, thereby triggering the Section 139 presumption.

Regarding the first cheque (Rs. 5 lakhs, Ex. CW-1/4), the Court noted that the Appellate Court had factually found that a Demand Draft for the same amount was delivered to the Respondent, effectively rebutting the presumption for that specific debt.

The High Court found a "patent error" in the Appellate Court's failure to reduce the compensation accordingly.

Regarding the second cheque (Rs. 10 lakhs, Ex. CW-1/5), the Petitioners claimed they paid the Complainant’s father in cash. The Court rejected this defense because: (i) the father (DW4) testified the cash was for separate "ground leveling work," (ii) the Petitioners provided no cogent evidence that the father was authorized to collect funds for the HUF, and (iii) the Petitioners failed to take steps like "stop payment" instructions or police complaints to recover the cheque after the alleged cash payment.

The Court reduced the total compensation/fine from Rs. 18 lakhs to Rs. 12 lakhs. The conviction under Section 138 NI Act and the findings regarding the Rs. 10 lakh cheque were upheld, as the Petitioners failed to provide cogent evidence to rebut the presumption for that specific instrument; the petition was otherwise dismissed.