2022 (11) TMI 491 - HC - Indian Laws

High Court reinstates conviction under Section 138 of Negotiable Instruments Act, emphasizing evidentiary standards

The High Court set aside the appellate court's acquittal and reinstated the trial court's conviction under Section 138 of the Negotiable Instruments Act. ... Dishonor of Cheque - fund insufficient - discharge of burden to prove - rebuttal of presumption under Section 139 of the N.I. Act - evidence under Section 200 of Code of Criminal Procedure and under Section 145 of the N.I. Act - HELD THAT:- In P. RASIYA VERSUS ABDUL NAZER AND ANR. [2022 (8) TMI 1303 - SUPREME COURT], the Hon’ble Supreme Court has dealt with the issue relating to nature of transactions and source of funds of the complainant in the backdrop of the provisions of Section 138 of the N.I. Act held that once the initial burden is discharged by the Complainant that the cheque was issued by the accused and the signature and the issuance of the cheque is not disputed by the accused, in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for any debt or other liability. The presumption under Section 139 of the N.I. Act is a statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt or other liability which is in favour of the Complainant/holder of the cheque, in that case, it is for the accused to prove the contrary. In TEDHI SINGH VERSUS NARAYAN DASS MAHANT [2022 (3) TMI 797 - SUPREME COURT] the Hon’ble Supreme Court was pleased to deal with the manner in which complainant is expected to lead evidence in a proceeding under the provisions of Section 138 of N.I. Act. It has been held that unless the accused in reply notice to the statutory notice sent is able to set up a case regarding the capacity of the complainant there is no requirement of the complainant to lead such evidence. In case the accused intends to demonstrate he has to examine his witness and place documentary materials to rebut the prosecution or the complainant’s case. In this case the accused did not adduce any evidence nor did she rely upon any documentary materials to rebut the prosecution or the complainant’s case. As such the aforesaid three judgments of the Hon’ble Supreme Court assumes importance in view of the fact that all the questions which were confronted relate to source of funds of the complainant and the capacity of the complainant to give such money to the accused neither any document has been relied upon by the defence to show that there cannot be such due nor the signature in the cheque has been disputed. Thus, it would be very difficult for a Court to accept rebuttal of the statutory presumption available under the provisions of the Negotiable Instruments Act - no materials have been produced to show as to how the cheque was in possession of the complainant as there are no allegations of lost cheque or the signature in the cheque being forged. Although it is permitted in a case of such nature to raise a probable defence from the available materials in the cross-examination of the prosecution witness only, but the nature of the cross-examination and the probable defence raised by the accused do not qualify as a rebuttal to the provisions under Section 139 of the N.I. Act and the learned Appellate Court unnecessarily resorted to the issue of difference in ink as no case has been made out by the accused for the cheque having been lost or the same was obtained by coercion. Having regard to the factual circumstances presented by the prosecution/complainant in this case in its evidence and the accused having failed to create or raise any defence to rebut the statutory presumption the order of the Appellate Court calls for interference - the respondent/accused is directed to comply with the order of the learned Judicial Magistrate 5th Court, Barrackpore, within a period of four weeks i.e. by 7th December, 2022, in the alternative the learned Judicial Magistrate, 5th Court, Barrackpore would exercise his powers under Section 421 of the Code of Criminal Procedure for executing the sentence. Application allowed. Issues Involved:1. Legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act.2. Presumption under Section 139 of the N.I. Act.3. Evidentiary burden and rebuttal of presumption.4. Appreciation of evidence by the trial and appellate courts.Issue-wise Detailed Analysis:1. Legally Enforceable Debt or Liability Under Section 138 of the N.I. Act:The complainant alleged that the accused issued a cheque for Rs. 9,70,000/- in discharge of a debt arising from a business transaction. The cheque was dishonored due to insufficient funds. The complainant sent a demand notice which was allegedly refused by the accused. The trial court convicted the accused under Section 138 of the N.I. Act, emphasizing the documentary evidence such as the cheque, deposit slips, return memos, and demand notice. The appellate court, however, acquitted the accused, noting the absence of an agreement, trade license, income tax returns, and documentation of the loan transaction, thereby questioning the legally enforceable debt or liability.2. Presumption Under Section 139 of the N.I. Act:The trial court relied on the presumption under Section 139 of the N.I. Act, which states that the holder of the cheque is presumed to have received it for discharge of a debt or liability, unless the contrary is proved. The appellate court acknowledged this presumption but highlighted that it is rebuttable. The appellate court found that the complainant failed to prove the transaction independently, as there were no supporting documents or witnesses to substantiate the claim of a legally enforceable debt.3. Evidentiary Burden and Rebuttal of Presumption:The trial court found the accused guilty, relying on the statutory presumption and the lack of rebuttal evidence from the defense. The appellate court, however, emphasized that the complainant must independently prove the issuance of the cheque in discharge of a liability. The appellate court noted inconsistencies, such as different inks used on the cheque and the absence of documentation, which it deemed sufficient to rebut the presumption. The High Court, referencing Supreme Court precedents, clarified that the accused must raise a probable defense to rebut the presumption, which was not effectively done in this case.4. Appreciation of Evidence by the Trial and Appellate Courts:The trial court convicted the accused based on the unchallenged documentary evidence and the statutory presumption. The appellate court reversed this decision, focusing on the lack of supporting evidence for the complainant's claims and the improbability of the transaction. The High Court criticized the appellate court's approach, stating that the presumption under Section 139 should not be easily rebutted without substantial evidence from the defense. The High Court reinstated the trial court's conviction, emphasizing that the accused failed to provide a credible defense or challenge the signature on the cheque.Conclusion:The High Court set aside the appellate court's acquittal and reinstated the trial court's conviction, directing the accused to comply with the trial court's order within four weeks. The High Court underscored the importance of the statutory presumption under Section 139 and the need for the accused to provide substantial evidence to rebut it. The decision highlights the evidentiary standards and the role of statutory presumptions in cases under the Negotiable Instruments Act.