2025 (6) TMI 1427 - HC - Indian Laws

Accused successfully rebutted Section 139 presumption in Rs. 15 lakh cheque bounce case, acquittal upheld

Bhavubha Becharsinh Chavda Versus State Of Gujarat & Anr.

Gujarat HC dismissed appeal against acquittal under Section 138 Negotiable Instruments Act. Trial court correctly found complainant failed to prove Rs. 15 ... Dishonour of cheque - acquittal of accused from the offence under Section 138 of the Negotiable Instruments Act, 1881 - rebuttal of presumption u/s 139 of the Act or not - Trial Court has not properly interpreted the evidence and has misread the evidence - HELD THAT:- From the record of the case, it transpires that after the cheque returned unpaid the demand statutory notice was served to the accused. As per the say of the applicant, the accused had taken an amount of Rs. 15,00,000/- from the applicant on 01.12.2008 and had executed a deed regarding his agricultural land and that he had taken the amount on loan from the applicant. The accused had given cheque No.011511 and cheque No.11512 for the amount of Rs. 2,55,000/- each dated 01.12.2008 and cheque No.008978 for the amount of Rs. 2,40,000/- dated 15.04.2009 from his account with The District Co-operative Bank Ltd, Kalikund, Dholka Branch but the cheques had returned unpaid with the endorsement “Funds insufficient”. After the demand statutory notice was given as the amount was not paid the applicant filed Criminal Case No. 1179 of 2009 in the Court of the Judicial Magistrate First Class, Dholka. In the entire evidence on record the applicant has not been able to prove that the amount of Rs. 15,00,000/- was given to the accused and during the cross-examination, the accused has successfully challenged the financial capacity of the applicant - the applicant has stated that the power of attorney for the immovable property of the accused was executed on the date when the amount was advanced, but no such document has been produced on record. During the cross-examination of the applicant by the learned advocate for the accused, the presumption has been successfully rebutted and thereafter no evidence has emerged on record from the applicant to prove his case beyond reasonable doubts. The accused has raised a defence that the cheque in question was forcibly taken from him by the applicant and the applicant was charging huge amount as interest and the accused had filed a criminal complaint against the applicant and others for threatening to kill and kidnap his wife and children and he had consumed some medicine and attempted to commit suicide. The accused has produced the suicide note at Exh.37 and the copy of the FIR at Exh.38 and has examined witness Rakesh Malharao Sarvodaya, the Investigating Officer of Dholka Police Station II C R No. 18 of 2009 filed by the accused under Sections 504, 506(2) and 114 of the IPC - From the evidence produced on record, the accused has succeeded in raising a probable defence and rebutting the presumption raised in favour of the applicant. Conclusion - i) The learned Trial Court has appreciated all the evidence produced on record and has concluded that the applicant has not proved the legally enforceable debt and has concluded that from evidence on record the applicant has successfully rebutted the presumption under Section 139 of the N I Act. ii) The accused had created a reasonable doubt and the applicant has failed to produce reliable and cogent evidence on record about the amount of cheque being the legally recoverable debt from the accused and the applicant has not proved his case beyond reasonable doubt and, the learned Trial Court has passed the impugned judgment and order of acquittal, which is just and proper and does not require any interference of this Court. The present application seeking leave to present an appeal fails and is hereby dismissed. The core legal questions considered in this judgment revolve around the applicability and interpretation of Sections 138, 139, and 118 of the Negotiable Instruments Act, 1881, specifically:1. Whether the presumption under Section 139 of the N.I. Act, that a cheque was issued for discharge of a legally enforceable debt or liability, was rightly drawn in favor of the complainant.2. Whether the accused successfully rebutted the presumption under Section 139 by raising a probable defense on the preponderance of probabilities standard.3. Whether the complainant proved the existence of a legally enforceable debt or liability beyond reasonable doubt.4. The evidentiary burden on the complainant to establish financial capacity and the genuineness of the loan transaction.5. The effect of the accused's defense alleging coercion, threats, and misuse of cheques on the complainant's case.The first issue pertains to the statutory presumption under Section 139 of the N.I. Act that the cheque was issued for discharge of a legally enforceable debt or liability once the cheque's execution is admitted. The Court referred to authoritative precedents, notably the Apex Court's ruling in Rangappa vs Sri Mohan, which clarified that Section 139 creates a rebuttable presumption favoring the complainant but does not absolve the accused from raising a probable defense. The presumption includes the existence of a legally enforceable debt or liability, and the accused must rebut this by a preponderance of probabilities rather than beyond reasonable doubt. The Court emphasized that Section 139 imposes an evidentiary burden, not a persuasive one, on the accused, consistent with the legislative objective of expediting cheque dishonor cases while balancing the rights of both parties.In applying this framework, the Court noted that the complainant had established the issuance of three cheques from the accused's bank account, which were dishonored for 'Funds Insufficient.' The complainant also produced statutory demand notice evidence. However, the complainant's own testimony during cross-examination revealed significant gaps: absence of documentary evidence such as loan agreements, promissory notes, or vouchers; lack of proof of financial capacity to lend Rs. 15,00,000/-; failure to disclose the transaction in income tax returns; and delay in depositing the cheques. The complainant admitted not producing the power of attorney allegedly executed by the accused as security. These lacunae weakened the complainant's claim of a legally enforceable debt.Regarding the accused's defense, the Court observed that the accused denied issuing the cheques for any debt, alleging coercion, threats, and misuse of the cheques. The accused did not testify but examined a witness-the investigating officer of a criminal case filed by the accused against the complainant for intimidation and threats-and produced relevant documents including a suicide note and FIR. The Court found that these materials raised a probable defense, sufficiently rebutting the presumption under Section 139 by creating reasonable doubt about the existence of a legally enforceable debt.The Court analyzed the complainant's failure to prove financial capacity as a critical factor. The complainant's admission that he did not maintain books of accounts, did not show the transaction in tax returns, and did not produce evidence of cash availability undermined the credibility of the alleged loan. The absence of any supporting documentation for the loan transaction and the delay in cheque deposit further weakened the complainant's case. The Court highlighted that while the complainant need not lead negative evidence, he must produce reliable and cogent evidence to establish the debt beyond reasonable doubt, which was not done.The Court also considered the legislative intent and judicial precedents that treat the offence under Section 138 as a regulatory offence with a civil wrong character, requiring a balanced approach in interpreting reverse onus provisions. The accused's ability to raise a probable defense on the preponderance of probabilities standard sufficed to defeat the prosecution's case.In conclusion, the Court upheld the trial court's acquittal of the accused, finding that the complainant failed to discharge the burden of proof regarding the existence of a legally enforceable debt. The accused successfully rebutted the statutory presumption under Section 139 by raising a probable defense supported by evidence. The Court held that the trial court's judgment was neither perverse nor contrary to law and did not warrant interference.Significant holdings include the following verbatim excerpt from the Apex Court in Rangappa:'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 dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation... the accused can raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability... the standard of proof for doing so is that of 'preponderance of probabilities.''Further, the Court summarized principles from Basalingappa vs. Mudibasappa:'(i) Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability. (ii) The presumption Under Section 139 is a rebuttable presumption and the onus is on the Accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. (iii) To rebut the presumption, it is open for the Accused to rely on evidence led by him or Accused can also rely on the materials submitted by the complainant in order to raise a probable defence. (iv) That it is not necessary for the Accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden.'The final determination was that the complainant did not prove the existence of a legally enforceable debt beyond reasonable doubt, and the accused successfully rebutted the presumption under Section 139. Consequently, the trial court's order of acquittal was upheld, and the application for leave to appeal was dismissed.