2025 (1) TMI 216 - HC - Indian Laws

Delhi HC overturns acquittal in Section 138 NI Act case, rules accused failed to rebut presumptions

Delhi HC set aside trial court's acquittal in dishonour of cheque case under Section 138 NI Act. Accused admitted issuing cheque but denied taking loan, ... Dishonour of Cheque - acquittal of offence under Section 138 of the Negotiable Instruments Act, 1881 - rebuttal of presumptions raised u/s 139 and 118 of the NI Act - HELD THAT:- It is trite law that a Court while considering the challenge to an order of acquittal ought to only interfere if the Court finds that the appreciation of evidence is perverse. The present case, however, relates to acquittal of an accused in a complaint under Section 138 of the NI Act. The restriction on the power of Appellate Court in regard to other offence does not apply with same vigor in the offence under NI Act which entails presumption against the accused. The Hon’ble Apex Court in the case of ROHITBHAI JIVANLAL PATEL VERSUS STATE OF GUJARAT & ANR. [2019 (3) TMI 769 - SUPREME COURT] had observed '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.'. It is also well settled that once the execution of the cheque is admitted, the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration and the presumption under Section 139 of the NI Act that the holder of the cheque/ respondent received the cheque in discharge of a legally enforceable debt or liability are raised against the accused. On a perusal of the record, it is seen that right from the time of framing of notice, the statement of the respondent under Section 313 of the CrPC, and during the course of the trial, the respondent denied taking any loan from the appellant. The respondent, however, did not dispute the issuance of the cheque in question, or his signatures on the cheque. He consistently maintained that it was in fact the respondent who had advanced the loan to the appellant - It is pertinent to note that the presumptions under Section 118 and 139 of the NI Act are not absolute, and may be controverted by the accused. From a perusal of the record, it is apparent that the respondent was acquitted of the offence under Section 138 of the NI Act chiefly on the premise that on a juxtaposition of the financial status of both the parties, the respondent appeared to be more financially sound that the appellant. In the present case, except for the averments made by the respondent, no material is led to demonstrate that the appellant did not possess the financial wherewithal to advance the said loan in question. Even at the stage of cross-examination, no question is put to the appellant to indicate that she did not possess the financial means to advance the loan in question. For this reason, in the opinion of this Court, the burden never shifted upon the appellant to demonstrate that she possessed the means to advance the said loan. Conclusion - The respondent failed to rebut the presumptions raised against him under Sections 139 and 118 of the NI Act. The impugned judgment dated 24.07.2019, acquitting the respondent of the offence under Section 138 of the NI Act is accordingly set aside - List on 16.01.2025 for further directions. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the respondent was rightly acquitted of the offence under Section 138 of the Negotiable Instruments Act, 1881 ('NI Act') by the learned Additional Sessions Judge ('ASJ').Whether the presumptions under Sections 118 and 139 of the NI Act were effectively rebutted by the respondent.Whether the appellant demonstrated sufficient financial capacity to advance the alleged loan to the respondent.Whether the ASJ's judgment was perverse or unsustainable in law, warranting interference by the appellate court.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Acquittal of the Respondent under Section 138 of the NI ActRelevant Legal Framework and Precedents: Section 138 of the NI Act deals with the dishonor of cheques for insufficiency of funds. The presumptions under Sections 118 and 139 of the NI Act favor the holder of the cheque, presuming it was issued for a debt or liability. The burden shifts to the accused to rebut these presumptions.Court's Interpretation and Reasoning: The court highlighted that once the execution of the cheque is admitted, presumptions under Sections 118 and 139 arise. The respondent admitted to signing the cheque, thus these presumptions were in favor of the appellant.Key Evidence and Findings: The respondent claimed the cheque was issued as a loan to the appellant's husband, not as a discharge of any liability owed by him. The ASJ found the respondent financially more sound than the appellant, questioning her capacity to lend the alleged amount.Application of Law to Facts: The appellate court emphasized that the respondent failed to provide substantial evidence to rebut the presumptions. The court noted that the respondent's defense lacked credibility, particularly his claim that the cheque was conditional on the appellant providing a guarantor.Treatment of Competing Arguments: The appellant argued that the ASJ erred by not considering the legal presumptions in her favor. The respondent contended that the appellant lacked the financial means to lend the amount and that his defense was probable. The court found the appellant's arguments more persuasive.Conclusions: The court concluded that the respondent did not successfully rebut the presumptions under Sections 118 and 139 of the NI Act. The judgment of acquittal by the ASJ was set aside.Issue 2: Financial Capacity of the AppellantRelevant Legal Framework and Precedents: The burden to prove financial capacity initially lies with the accused unless contested in a reply to the statutory notice. The accused can challenge the complainant's financial capacity through evidence or cross-examination.Court's Interpretation and Reasoning: The court noted that since the execution of the cheque was not disputed, it was not necessary for the appellant to initially prove her financial capacity.Key Evidence and Findings: The respondent failed to produce evidence challenging the appellant's financial means. The ASJ's reliance on the appellant's lack of income tax records was deemed insufficient to rebut the presumptions.Application of Law to Facts: The court found that the respondent did not effectively challenge the appellant's financial capacity through evidence or cross-examination.Treatment of Competing Arguments: The respondent argued that the appellant could not have advanced the loan due to her financial status. The court found this argument unsubstantiated by evidence.Conclusions: The court concluded that the appellant's financial capacity was not effectively challenged by the respondent, and the presumptions in favor of the appellant remained intact.3. SIGNIFICANT HOLDINGSPreservation of Verbatim Quotes: The court reiterated the principle that 'once the execution of the cheque is admitted, the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration and the presumption under Section 139 of the NI Act that the holder of the cheque received the cheque in discharge of a legally enforceable debt or liability are raised against the accused.'Core Principles Established: The judgment reinforced the principle that the burden of rebutting the presumptions under Sections 118 and 139 of the NI Act lies with the accused, and mere financial incapacity of the complainant, without substantive evidence, does not suffice to rebut these presumptions.Final Determinations on Each Issue: The court set aside the ASJ's judgment of acquittal, holding that the respondent failed to rebut the statutory presumptions effectively. The case was listed for further directions, and the respondent was directed to be present at the next hearing.The judgment underscores the importance of statutory presumptions under the NI Act and the evidential burden on the accused to rebut such presumptions effectively. The court's analysis highlights the necessity for concrete evidence when challenging the financial capacity of the complainant in cheque dishonor cases.