Ashok Kumar vs Daulat Ram

Sushil Kukreja, J

The instant appeal has been preferred by the appellant-complainant (hereinafter referred to as the complainant) under Section 378 of Criminal Procedure Code (for short “Cr.P.C.”) against judgment dated 06.09.2013, passed by learned Judicial Magistrate 1st  Class, Rajgarh, District Sirmaur, H.P., in Criminal Complaint No.28/3 of 2011, whereby the accused (respondent herein) was acquitted of the offence punishable under Section 138 of the Negotiable Instruments Act (for short, “the NI Act”).

Briefly stated the facts of the case, as emerge from the record, are that the complainant, due to his friendly relations with the accused, paid him a sum of Rs.2,50,000/- on 11.10.2011 as he was in urgent need of the money for his personal use. In order to discharge his liability, the accused issued a cheque bearing No.5492002 dated 20.12.2011 amounting to Rs.2,50,000/- in favour of the complainant, drawn at HP State Co-operative Bank, Lana Cheta, Tehsil Rajgarh. However, on presentation, the aforesaid cheque was dishonoured with the remarks ‘funds insufficient’ in the bank account of the accused. Thereafter, the complainant issued a legal notice dated 28.01.2012 to the accused demanding the cheque amount, but the accused neither replied to the said notice nor any payment was made to him. Subsequently, the complainant filed a complaint against the accused before the learned trial Court.

The learned trial Court after having found sufficient material against the accused had put notice of accusation to him, vide order dated 26.09.2012 and on conclusion of trial, the learned trial Court acquitted the accused for the commission of the offence under Section 138 of the NI Act, hence, the present appeal by the complainant.

Learned Senior Counsel for the petitioner-complainant contended that the learned Trial Court has gravely erred in dismissing the complaint merely on the basis of assumptions and presumptions and has wrongly come to the conclusion that the appellant-complainant had failed to specify in his complaint or in the statement that exactly what was the need that forced the accused/respondent to avail the financial help from him. He further contended that the learned Trial Court has wrongly concluded that the onus was upon the appellant to prove that the cheque in question was issued by the respondent for the lawful discharge of his liability. He also contended that the respondent had desperately failed to rebut the legal presumption as envisaged under Sections 118 and 139 of NI Act. With these submissions, he prayed for setting-aside of the impugned judgment of the Trial Court and acceptance of the instant appeal.

Per contra, learned Senior Counsel for the respondent-accused while supporting the judgment of the Trial Court, contended that there was no infirmity in the findings returned by the learned trial Court as the same were borne out from the record of the case, therefore, the present appeal deserves to be dismissed.

I have heard learned Senior Counsel for the appellant/ complainant as well as learned Senior Counsel for the respondent/ accused and also gone through the record carefully.

Before adverting to the merits of the case, it would be apposite to have a look into the legal position. It has been laid down by the Hon’ble Supreme Court in Rohitbhai Jivanial Patel Versus State of Gujarat and another, (2019) 18 SCC 106, that ordinarily, the Appellate Court will not upset the judgment of acquittal, if the view taken by Trial Court is one of the possible views of matter, however, the same rule with same rigour cannot be applied in a matter relating to the offence under Section 138 of the NI Act, particularly where a presumption is drawn that the holder has received the cheque for the discharge, wholly or in part, of any debt or liability. Relevant portion of the aforesaid judgment is reproduced as under:-

“12. According to the learned counsel for the accused-appellant, the impugned judgment is contrary to the principles laid down by this Court in the case of Arulvelu because the High Court has set aside the judgment of the Trial Court without pointing out any perversity therein. The said case of Arulvelu related to offences under Sections 304-Band 498-AIPC. Therein, on the scope of the powers of Appellate Court in an appeal against acquittal, this Court observed as follows:

"36. Carefully scrutiny of all these judgments lead to the definite conclusion that the appellate court should be very slow in setting aside a judgment of acquittal particularly in a case where two views are possible. The trial court judgment cannot be set aside because the appellate court's view is more probable. The appellate court would not be justified in setting aside the trial court judgment unless it arrives at a clear finding on marshalling the entire evidence on record that the judgment of the trial court is either perverse or wholly unsustainable in law."

The principles aforesaid are not of much debate. In other words, ordinarily, the Appellate Court will not be upsetting the judgment of acquittal, if the view taken by Trial Court is one of the possible views of matter and unless the Appellate Court arrives at a clear finding that the judgment of the Trial Court is perverse, i.e., not supported by evidence on record or contrary to what is regarded as normal or reasonable; or is wholly unsustainable in law. Such general restrictions are essentially to remind the Appellate Court that an accused is presumed to be innocent unless proved guilty beyond reasonable doubt and a judgment of acquittal further strengthens such presumption in favour of the accused. However, such restrictions need to be visualised in the context of the particular matter before the Appellate Court and the nature of inquiry therein. The same rule with same rigour cannot be applied in a matter relating to the offence under Section 138 of the NI Act, particularly where a presumption is drawn that the holder has received the cheque for the discharge, wholly or in part, of any debt or liability. Of course, the accused is entitled to bring on record the relevant material to rebut such presumption and to show that preponderance of probabilities are in favour of his defence but while examining if the accused has brought about a probable defence so as to rebut the presumption, the Appellate Court is certainly entitled to examine the evidence on record in order to find if preponderance indeed leans in favour of the accused.”

In Kalamani Tex and another Vs. P. Balasubramaniam, (2021) 5 SCC 283,  the  Hon’ble  Supreme Court held that the High Court would not reverse an order of acquittal merely on formation of an opinion different than that of the trial Court,nonetheless, there are numerous decisions of this Court, justifying the invocation of powers by the High Court under Section 378 CrPC, if the trial Court had, inter alia, committed a patent error of law or grave miscarriage of justice or it arrived at a perverse finding of fact. The relevant paras of the aforesaid judgment read as under:-

“11. Having given our thoughtful consideration to the rival submissions, we do not find any valid ground to interfere with the impugned judgment. It is true that the High Court would not reverse an order of acquittal merely on formation of an opinion different than that of the trial Court. It is also trite in law that the High Court ought to have compelling reasons to tinker with an order of acquittal and no such interference would be warranted when there were to be two possible conclusions. Nonetheless, there are numerous decisions of this Court, justifying the invocation of powers by the High Court under Section 378 CrPC, if the trial Court had, inter alia, committed a patent error of law or grave miscarriage of justice or it arrived at a perverse finding of fact.

On a similar analogy, the powers of this Court under Article 136 of the Constitution also do not encompass the re-appreciation of entirety of record merely on the premise that the High Court has convicted the appellants for the first time in exercise of its appellate jurisdiction. This Court in Ram Jag v. State of UP7, Rohtas v. State of Haryana8 and Raveen Kumar v. State of HP , evolved its own limitations on the exercise of powers under Article 136 of the Constitution and has reiterated that while entertaining an appeal by way of special leave, there shall not ordinarily be an attempt to re-appreciate the evidence on record unless the decision(s) under challenge are shown to have committed a manifest error of law or procedure or the conclusion reached is ex¬ facie perverse.

Adverting to the case in hand, we find on a plain reading of its judgment that the trial Court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA.

The Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these ‘reverse onus’ clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. This point of law has been crystalized by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat in the following words:-

“In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant-accused.”

It is a settled proposition of law that presumption under Section 139 of NI Act is a presumption of law, as distinguished from a presumption of fact, such a presumption is a rebuttable presumption and the drawer of the cheque may dispel the same. The rebuttal does not have to be conclusively established, but such evidence must be adduced in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable; the standard of reasonability being that of a 'prudent man'. The aforesaid position in law stands settled in the judgment of the Hon'ble Supreme Court in the matter of Hiten P. Dalal Vs. Bratindranath Banerjee, (2001) 6 SCC 16. While dealing with the aspect of presumption in terms of Section 139 of NI Act, the Hon'ble Supreme Court observed as under:-

“21.The appellant's submission that the cheques were not drawn for the 'discharge in whole or in part of any debt or other liability' is answered by the third presumption available to the Bank under Section 139 of the Negotiable Instruments Act. This section provides that "it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability". The effect of these presumptions is to place the evidential burden on the appellant of proving that the cheque was not received by the Bank towards the discharge of any liability.

Because both Sections 138 and 139 require that the Court "shall presume" the liability of the drawer of the cheques for the amounts for which the cheques are drawn, as noted in State of Madras vs. A. Vaidyanatha Iyer AIR 1958 SC 61, it is obligatory on the Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. "It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused" (ibid). Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court "may presume" a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces 7 of 36 evidence showing the reasonable possibility of the non- existence of the presumed fact.

In other words, provided the facts required to form the basis of a presumption of law exists, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, "after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists". Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the 'prudent man'.

Judicial statements have differed as to the quantum of rebutting evidence required. In Kundan Lal Rallaram vs Custodian, Evacuee Property, Bombay AIR 1961 SC 1316, this Court held that the presumption of law under Section 118of Negotiable Instruments Act could be rebutted, in certain circumstances, by a presumption of fact raised under Section 114 of the Evidence Act. The decision must be limited to the facts of that case. The more authoritative view has been laid down in the subsequent decision of the Constitution Bench in Dhanvantrai Balwantrai Desai vs State of Maharashtra AIR 1964 SC 575, where this Court reiterated the principle enunciated in State of Madras vs Vaidyanath Iyer (Supra) and clarified that the distinction between the two kinds of presumption lay not only in the mandate to the Court, but also in the nature of evidence required to rebut the two. In the case of a discretionary presumption the presumption if drawn may be rebutted by an explanation which "might reasonably be true and which is consistent with the innocence" of the accused. On the other hand in the case of a mandatory 8 of 36 presumption "the burden resting on the accused person in such a case would not be as light as it is where a presumption is raised under S.114 of the Evidence Act and cannot be held to be discharged merely by reason of the fact that the explanation offered by the accused is reasonable and probable. It must further be shown that the explanation is a true one. The words 'unless the contrary is proved' which occur in this provision make it clear that the presumption has to be rebutted by 'proof' and not by a bare explanation which is merely plausible. A fact is said to be proved when its existence is directly established or when upon the material before it the Court finds its existence to be so probable that a reasonable man would act on the supposition that it exists. Unless, therefore, the explanation is supported by proof, the presumption created by the provision cannot be said to be rebutted......"

In the matter of Kumar Exports Vs. Sharma Carpets, (2009) 2 SCC 513, it has been held by the Hon'ble Supreme Court that Section 118 of the NI Act inter alia directs that it shall be presumed, until the contrary is proved, that every negotiable instrument was made or drawn for consideration. The relevant portion of the aforesaid judgment is reproduced as under:-

“13. In a significant departure from the general rule applicable to contracts, Section 118 of the Act provides certain presumptions to be raised. This Section lays down some special rules of evidence relating to presumptions. The reason for these presumptions is that, negotiable instrument passes from hand to hand on endorsement and it would make trading very difficult and negotiability of the instrument impossible, unless certain presumptions are made. The presumption, therefore, is a matter of principle to facilitate negotiability as well as trade. Section 118 of the Act provides presumptions to be raised until the contrary is proved (i) as to consideration, (ii) as to date of instrument, (iii) as to time of acceptance,(iv) as to time of transfer, (v) as to order of indorsements,(vi) as to appropriate stamp and (vii) as to holder being a holder in due course.

Section 139 of the Act provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.

The use of the phrase "until the contrary is proved" in Section 118 of the Act and use of the words "unless the contrary is proved" in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.”

In the instant case, in support of his case, the complainant himself appeared in the witness box as CW-1 and filed his affidavit by way of examination-in-chief as Ext.CW1/A, wherein he re-asserted and reiterated the averments made in the complaint under Section 138 of NI Act. He also placed on record cheque Ext. CW1/B, letter of Bank Ext. CW1/C, return memo Ext. CW1/D, legal notice Ext. CW1/E and postal receipt Ext.CW1/F.

From the perusal of the evidence of the complainant, it has become clear that the cheque Ext. CW1/B was dishonoured on account of “funds insufficient” in the bank account of the accused, vide memo. Ext.CW1/D. In the light of the evidence on record, the complainant has discharged his initial burden and it is required to be presumed that the cheque in question was drawn for consideration and the complainant received the same in discharge of the existing debt. The onus, therefore, shifts upon the accused to establish probable defence so as to rebut such presumption.

The law is well settled that in order to rebut the statutory presumption, the accused is not expected to prove his defence beyond reasonable doubt as is expected of the prosecution in a criminal trial. The accused may adduce direct evidence to prove that the cheque in question was not supported by consideration and that there was no debt or liability to be discharged by him. On the aspects relating to preponderance of probabilities, the accused has to bring on record such facts and such circumstances which may lead this court to conclude either that the consideration did not exist or that its non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that the consideration did not exist. It is settled position of law that though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfill the requirements of the rebuttal as envisaged under Sections 118 and 139 of the N.I. Act. Reference can also be made to the judgment of the Hon'ble Supreme Court in Rangappa Vs. Sri Mohan (2010) 11 SCC 441, wherein it has been observed that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of `preponderance of probabilities. The relevant paras of the aforesaid judgment are reproduced as under:-

''26. In light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.

Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the 14 of 36 dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/defendant cannot be expected to discharge an unduly high standard or proof.

In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of `preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.' In the present case on hand, the accused merely denied the case of complainant and he has not placed sufficient materials before the court to believe his defence. Mere denial of the case of complainant is not sufficient ground to believe the defence of accused that the complainant has not lent an amount of Rs.30 lakhs to the accused.”

In Rohitbhai Jivanial Patel’s case (supra), it has been held by the Hon'ble Supreme Court that once the accused could not deny his signatures on the cheque in question that had been drawn in favour of the complainant, therefore, it is required to be presumed that the cheque in question was drawn for consideration and the holder of the cheque i.e. the complainant received the same in discharge of an existing debt. The relevant portion of the aforesaid judgment reads as under:-

"15. So far the question of existence of basic ingredients for drawing of presumption under Sections 118 and 139 of the NI Act is concerned, apparent it is that the appellant-accused could not deny his signatures on the cheques in question that had been drawn in favour of the complainant on a bank account maintained by the accused for a sum of Rs.3 lakhs each. The said cheques were presented to the bank concerned within the period of their validity and were returned unpaid for the reason of either the balance being insufficient or the account being closed. All the basic ingredients of Section 138 as also of Sections 118 and 139 are apparent on the fact of the record. The trial court had also consciously taken note of these facts and had drawn the requisite presumption. Therefore, it is required to be presumed that the cheques in question were drawn for consideration and the holder of the cheques i.e. the complainant received the same in discharge of an existing debt. The onus, therefore, shifts on the appellant-accused to establish a probable defence so as to rebut such a presumption."

In his statement recorded under Section 313, Cr.P.C., the accused had not disputed his signatures on the cheque in question. Therefore, it was required to be presumed that the cheque in question was drawn for a consideration and the holder of the cheque, i.e. the complainant received the same in discharge of an existing debt. Now, the onus shifts upon the accused to establish a probable defence so as to rebut such a presumption. The case of the accused is that the complainant wanted to buy land from him and he had also shown land to the Patwari, but thereafter he refused to buy. In his defence, the accused also examined one Sunil Kumar as DW-1, who deposed that the accused had three sons, who are above 35 years of age. He further deposed that the accused was a habitual drinker. However, he did not state anything that the accused had signed the cheque in question and handed over the same to the complainant under the influence of liquor.

It is the burden on the accused to prove his defence by producing sufficient material before the court. Mere denial of the same is not enough to believe his defence. If really, he had not issued the cheque to the complainant, definitely, he would have taken legal action against the complainant, but there is no legal action taken by the accused against the complainant. In his statement under Section 313, Cr.PC, the accused had not denied his signatures on the cheque and stated that the complainant must have taken the cheque from the bank. He also stated that the complainant wanted to buy land from him and he had also shown land to the Patwari, but thereafter he refused to buy. However, no evidence to this effect has been led by the accused. Therefore, the defence of the accused does not appear to be probable.

On overall appraisal of the material available on record, it is the considered opinion of this Court that the accused has failed to discharge his burden to rebut the statutory presumption as well as the facts and circumstances placed on record by the complainant whereby the complainant has proved the guilt of the accused that the accused is liable to pay the amount covered under the cheque. There is no substance in the probable defence of the accused, whereas the complainant has discharged his burden and proved the guilt of the accused. On perusal of the judgment passed by the learned trial Court, it is clear that it had failed to appreciate the statutory presumption drawn under Sections 138 & 139 of NI Act. The reasons given by the learned trial Court in its judgment for acquitting the accused are perverse and not at all sustainable. The accused has failed to rebut the statutory presumption drawn against him under Section 138 of NI Act. All the basic ingredients of Section 138 as well as Sections 118 and 139 of NI Act are apparent in the facts and circumstances of the present case. There is sufficient evidence to come to the conclusion that the cheque Ext. CW1/B was issued by the accused and received by the complainant in discharge of an existing debt as such the accused has committed an offence punishable under Section 138 of NI Act.

Accordingly, the appeal is allowed and the impugned judgment dated 06.09.2013, passed by the learned Judicial Magistrate First Class, Rajgarh, District Sirmour, H.P., is quashed and set aside. Consequently, the accused is convicted for commission of the offence punishable under Section 138 of the Negotiable Instruments Act. List the case for presence of the accused on 9th December, 2024, for being heard on quantum of sentence.