2025 (6) TMI 751 - HC - Indian Laws

Appeal allowed against acquittal in dishonour of cheque case under Section 138 NI Act

Kerala HC allowed appeal against acquittal in dishonour of cheque case. Trial court convicted accused under Section 138 NI Act for Rs.3 lakh transaction, ... Dishonour of Cheque - challenge to judgment of acquittal - issuance of cheque for the transaction of Rs.3 Lakh was not proved by the complainant - rebuttal of presumptions - burden to prove - source of money - HELD THAT:- The law is well settled that, an initial burden is cast upon the complainant to prove the transaction led to execution of the cheque, so as to canvas benefit of presumptions under Sections 118 and 139 of the NI Act. In the instant case, the trial court found on evidence that the complainant proved the transaction and execution of the cheque and the presumptions in favour of the complainant was not rebutted by the accused. Therefore, the accused was convicted and sentenced by the trial court - The Appellate Court is of the view that a blank cheque leaf entrusted by the accused was misused by the complainant, accepting the case advanced by the accused and the Appellate Court believed the said version. Thereby, reversed the acquittal, finding fault with the evidence of PW1 regarding transaction and execution of Ext.P1 cheque. In the instant case, source of money of the complainant to advance Rs.3,00,000/- to the accused, as contended by the complainant was seriously put under challenge. During cross-examination, PW1 deposed about the source on asserting that he sold properties during the year 2007 and 2008. It is true that PW1 did not produce any documents to substantiate sale of properties as stated by him. He also failed to remember the name of the purchaser/vendee - However, in the instant case, the accused who presumably knew the property sale, summoned and examined the vendee, who pruchased the properties of the complainant, as a defence witness to negate the evidence of PW1 regarding the sale of properties, as stated by him. But, the evidence of DW1, in fact, supported purchase of property from the complainant. When the witness produced by the defence itself supported sale of properties as spoken by PW1, who had no inclination to the complainant, the evidence of PW1 that he sold properties and out of the said amount, the money was given to the accused, is proved as admitted by DW1. Conclusion - The verdict rendered by the first Appellate Court acquitting the accused on the finding that she did not commit the offence punishable under Section 138 of the NI Act is wrong and the same deserves interference. The judgment of the trial court stands restored and the accused is convicted for the offence punishable under Section 138 of the NI Act and she is sentenced to undergo simple imprisonment for a period of one day till rising of the Court and to pay fine of Rs.3,50,000/-. Fine shall be given as compensation to the complainant under Section 357(1)(b) of Cr.P.C. - the judgment of the first Appellate Court stands set aside - Appeal allowed. The core legal issues considered by the Court in this appeal arising under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) are as follows:1. Whether the first Appellate Court erred in holding that the complainant failed to prove the transaction leading to issuance of the cheque (Ext.P1) for Rs.3 Lakh by the accused.2. Whether the first Appellate Court wrongly set aside the trial court's conviction and sentence imposed on the accused under Section 138 of the NI Act.3. Whether the impugned acquittal requires interference by this Court.4. What orders should be passed in light of the findings on the above issues.Issue-wise Detailed Analysis1. Proof of Transaction and Issuance of ChequeThe legal framework governing Section 138 NI Act cases mandates that the complainant initially bears the burden to prove the existence of a debt or liability and that the cheque was issued in discharge thereof. Sections 118 and 139 of the NI Act create presumptions in favour of the holder of the cheque once the cheque is produced in evidence. The accused then bears the onus to rebut this presumption with cogent evidence.Precedents relied upon include the Apex Court's decision in K. Ramesh v. K. Kothandaraman, which clarified that even a voluntarily signed blank cheque leaf handed over to the payee attracts the presumption under Section 139 NI Act. The burden lies on the accused to disprove that the cheque was issued in discharge of a debt or liability. The Court also referred to Bir Singh v. Mukesh Kumar, which emphasized that the drawer remains liable even if the cheque was filled in by another person, provided it was signed by the drawer.In the present case, the trial court accepted the complainant's evidence (PW1) that the accused borrowed Rs.3 Lakh on 19.08.2008 and issued Ext.P1 cheque dated 19.09.2008 as repayment security. The cheque was dishonoured due to insufficient funds, and legal notice was issued. The complainant produced the original cheque, dishonour memo, legal notices, postal receipts, and bank statements as exhibits.While PW1 admitted during cross-examination that he could not recall the name of the purchaser to whom he sold properties to raise the money advanced to the accused, the defence summoned and examined the purchaser (DW1), who corroborated the sale of properties from the complainant. Although DW1 could not recall exact dates or agreement details, his testimony supported the complainant's claim of having sold properties and having funds available.The trial court also relied on Ext.P7 (bank statement) showing deposits of Rs.9,50,000/- in the complainant's account in July 2007, confirming availability of funds. Despite PW1's admission that the money was not withdrawn immediately, the court found that the complainant had sufficiently proved the source of funds and the transaction leading to issuance of the cheque.The first Appellate Court, however, disbelieved PW1's evidence, focusing on his inability to identify who filled the cheque and the handwriting on it. It accepted the accused's contention that the cheque was issued as security for gold loan dealings and was misused by the complainant. This Court found the Appellate Court's reasoning insufficient, especially given the corroborative evidence from DW1 and the bank statement.2. Legitimacy of the Appellate Court's AcquittalThe first Appellate Court reversed the trial court's conviction primarily on the ground that the complainant failed to explain the filling of the cheque and the handwriting on it, thereby doubting the authenticity of the transaction. It accepted the accused's version that the cheque was a security instrument for gold loan dealings and not a repayment of a debt.The Court analyzed the competing arguments and found that the Appellate Court gave undue weight to the complainant's inability to identify the person who filled the cheque and overlooked the statutory presumption under Section 139 NI Act. The Court emphasized that the issuance of the cheque by the accused was admitted and that the burden was on the accused to rebut the presumption of liability, which was not satisfactorily done.Further, the Court noted that the defence itself summoned DW1, who supported the complainant's version of property sale, thereby reinforcing the complainant's claim regarding the source of funds. The Appellate Court's acceptance of the accused's claim of misuse of the cheque as security was found to be unsubstantiated by evidence.3. Interference with the Impugned JudgmentThe Court held that the first Appellate Court erred in reappreciating evidence and reversing the conviction without adequate basis. The Court reiterated settled principles that once the cheque is produced and the complainant proves the transaction, the presumption under Section 139 NI Act applies, and the accused must rebut it with credible evidence.The Court found that the complainant had discharged his initial burden by adducing evidence of the transaction, cheque issuance, dishonour, and demand notice. The accused failed to provide cogent evidence to rebut the presumption that the cheque was issued in discharge of a debt. The Appellate Court's reliance on the complainant's lack of knowledge about who filled the cheque was insufficient to overturn the trial court's finding.Therefore, the Court concluded that the acquittal was erroneous and warranted interference.4. Orders to be PassedAccordingly, the appeal was allowed, the judgment of the first Appellate Court was set aside, and the trial court's conviction and sentence were restored. The accused was convicted under Section 138 NI Act and sentenced to simple imprisonment for one day and a fine of Rs.3,50,000/-, with the fine directed to be paid as compensation under Section 357(1)(b) Cr.P.C. In default of payment, six months' imprisonment was imposed. The accused was directed to surrender before the trial court to undergo the modified sentence.Significant Holdings and Core Principles'When once negotiable instrument has been marked in evidence, presumption regarding its validity would arise and it is for accused to displace the presumption.''Even if a blank cheque leaf is voluntarily signed and handed over by accused towards some payment would attract presumption under Section 139 of Act and in absence of any cogent evidence to show that cheque was not issued in discharge of debt, presumption would hold good.''The onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post-dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act.''If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque.''The complainant has an initial burden to prove the transaction, which led to execution of the cheque alleged to be issued by the accused in his favour. When the source of money to advance the cheque amount is put under challenge, the complainant is expected to give a rational explanation.''The accused failed to rebut the statutory presumption under Section 139 NI Act by adducing cogent evidence.''The appellate court erred in reversing the conviction on the ground that the complainant did not know who filled up the cheque and the handwriting on it.'In conclusion, the Court restored the trial court's conviction and sentence, emphasizing the application of statutory presumptions under the NI Act and the necessity for the accused to rebut such presumptions with credible evidence. The decision underscores the principle that mere doubts about the filling of the cheque or handwriting, without substantive evidence, cannot absolve the drawer from liability under Section 138 NI Act once the cheque is admitted to have been issued.