2024 (6) TMI 995 - HC - Indian Laws

High Court restores conviction in cheque bounce case after appellate court wrongly acquitted accused under Section 138

Madras HC set aside appellate court's acquittal order in dishonour of cheque case under Section 138 of Negotiable Instruments Act. Accused had not denied ... Dishonour of Cheque - acquittal of accused - rebuttal of presumption under Sections 118 and 139 of the Negotiable Instruments Act - HELD THAT:- The accused had not denied her signature on the cheque (Ex.P1). Once the signature is admitted there is a presumption under Sections 118 and 139 of the Negotiable Instruments Act unless the contrary is proved. The trial court judge had infact analysed this aspect and had convicted the accused for the offence punishable under Section 138 of the Negotiable Instruments Act. It is seen from the records that the complainant examined himself as P.W.1 on 16.02.2015 and the accused cross examined P.W.1 only on 07.10.2015. In the meantime, the accused was also questioned under Section 313 Cr.P.C. Therefore, the complainant, in the absence of a specific averment in the reply notice with regard to his financial capacity cannot be expected to prove his means at the fag end of the trial. The trial court Judge had analysed all the documents threadbare and had come to the conclusion that the accused is guilty of the offence punishable under Section 138 of NI Act. On the other hand the appellate court judge, even without a specific plea by the accused that the complainant did not have sufficient means to lend a sum of Rs.4,00,000/- to her, had rendered a finding that the complainant was not possessed of sufficient means. The other aspects of the case have not at all been properly analysed by the appellate court Judge and therefore the judgment and orders passed by the appellate court is liable to be set aside. The judgment and orders passed by the appellate court judge is set aside and the judgment and orders passed by the trial court judge is restored. The conviction and sentence passed by the trial court judge against the accused is hereby confirmed. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the presumption under Sections 118 and 139 of the Negotiable Instruments Act arises where the signature on the cheque is admitted and what burden shifts thereby? 2. Whether the complainant was required to prove his means or financial capacity to have lent the alleged amount and, if so, whether failure to produce income tax returns or evidence of means justifies acquittal. 3. Whether the existence of collateral or alternative narratives (alleged handing over of cheques by a third party, FIRs between third parties and accused, mobile call records) rebuts the statutory presumption or otherwise creates reasonable doubt sufficient for acquittal. 4. Whether the appellate court erred in placing the entire burden of proof on the complainant and reversing a trial court conviction without adequate analysis of the evidence. ISSUE-WISE DETAILED ANALYSIS Issue 1: Operation of presumptions under Sections 118 and 139 of the Negotiable Instruments Act Legal framework: Section 118 creates a presumption that negotiable instruments were made or drawn for consideration; Section 139 creates a statutory presumption that the holder received the cheque for discharge of any debt or liability. Both are rebuttable presumptions: 'shall presume' clauses that operate unless the contrary is proved. Precedent treatment: The Court followed established authority applying Sections 118 and 139 to infer the existence of debt and receipt by the holder where the signature is admitted and no contrary evidence is produced by the accused. Interpretation and reasoning: The Court observed that the accused did not dispute her signature on the cheque. Once signature is admitted, the statutory presumptions arise and impose an evidentiary burden on the accused to rebut. The trial court rightly drew these presumptions and convicted. The appellate court's approach - treating the presumptions as requiring the complainant to prove matters beyond the statutory foundation - was held to be incorrect. Ratio vs. Obiter: Ratio - admission of signature triggers presumptions under Sections 118 and 139, placing evidentiary burden on accused to rebut. Obiter - none on this point beyond applied reasoning. Conclusion: The presumption under Sections 118 and 139 applied; in absence of effective rebuttal by the accused, the ingredients for conviction under Section 138 of the N.I. Act stood established. Issue 2: Necessity of proving complainant's means/financial capacity to lend the alleged sum Legal framework: Fundamental requirement for Section 138 conviction is existence of debt/liability discharged by the cheque; direct statutory requirement to prove lender's overall means is not an independent ingredient of the offence. Precedent treatment: The Court relied on the proposition that the complainant need not prove exhaustive evidence of means where the statutory presumptions and case evidence establish the existence of debt and cheque issuance; isolated holdings that scrutinize means were distinguished where no specific plea was taken at appropriate stage. Interpretation and reasoning: The Court noted that the accused did not raise a specific, pleaded challenge to the complainant's financial capacity in the reply notice and did not pursue such point in time to require extensive proof by the complainant late in trial. The complainant testified and produced the cheque and statutory notice; absence of income tax returns alone does not displace the presumptions unless a clear, specific challenge prompting proof is made by the accused. Ratio vs. Obiter: Ratio - complainant is not required to preemptively prove comprehensive means where no specific plea on means is taken by the accused; general absence of income tax returns is not fatal in itself. Obiter - procedural fairness considerations about timing of pleas affecting evidentiary burdens. Conclusion: The appellate court erred in acquitting on the sole ground that the complainant failed to prove means or produce income tax returns; such deficiency did not negate the statutory presumption or the established case when no timely specific challenge was raised. Issue 3: Effect of third-party narratives, FIRs and subsequent communications on the statutory presumption and proof of guilt Legal framework: A statutory presumption under Section 139 can be rebutted by demonstrating existence of facts showing cheque was not issued for discharge of debt; extraneous documents or allegations must directly undermine the complainant's case or explain chain of custody of the cheque. Precedent treatment: The Court treated allegations of third-party involvement and related FIRs as matters requiring proof of direct relevance and connection to the cheque transaction; mere existence of other disputes or subsequent communications does not automatically displace the presumption. Interpretation and reasoning: The accused's contention that cheques issued to a finance company were later handed to the complainant was unsupported: the accused failed to mark the alleged complaint she claimed to have lodged against the third party; the FIR relied upon actually showed that the third party lodged complaint against the accused, not vice versa. Mobile call records relied upon by defence were subsequent to filing and did not establish pre-existing collusion in relation to the cheque. The defence did not explain how the cheques came into complainant's hands nor produce cogent evidence to rebut the presumption. Ratio vs. Obiter: Ratio - extraneous allegations and subsequent communications do not rebut Section 139 presumption absent specific, relevant, and convincing evidence showing alternative genesis of the cheque or lack of debt. Obiter - note on relevance and timing of documentary/electronic evidence. Conclusion: The alternative narratives and documents did not successfully rebut the presumptions; they failed to create reasonable doubt sufficient to justify acquittal. Issue 4: Whether appellate court improperly shifted entire burden onto complainant and failed to analyse evidence Legal framework: Appellate interference requires demonstration that the appellate court misappreciated evidence or reached conclusions contrary to law; trial court findings based on correct application of law merit restoration unless shown perverse. Precedent treatment: The Court applied standards of appellate review - checking whether the appellate court engaged in proper evidentiary analysis and followed statutory presumptions - and found that the appellate court misapplied burdens by demanding proof of complainant's means absent a specific plea. Interpretation and reasoning: The appellate court's finding that the complainant lacked sufficient means was rendered without there being a specific plea by the accused and in contradiction to trial court's careful analysis. The Court held that the appellate court effectively shifted the onus wrongly onto the complainant and failed to consider that the accused had the opportunity and duty to rebut the presumptions. Ratio vs. Obiter: Ratio - appellate court erred in reversing conviction by imposing an incorrect evidentiary burden and by failing to properly analyze or give effect to statutory presumptions and trial findings. Obiter - procedural observation on when a complainant must be required to produce evidence of means. Conclusion: The appellate court's acquittal was set aside; the trial court conviction and sentence were restored because the appellate court misapplied burdens and did not adequately analyze the evidence in light of statutory presumptions.