2025 (11) TMI 589 - HC - Indian Laws

Accused rebutted statutory presumption under Ss.118/139 N.I. Act on preponderance of probabilities; complainant failed to prove s.138 offence

E.V. Antony Versus C. Hussain, The State of Kerala.

HC held that the accused successfully rebutted the statutory presumption under Ss.118/139 N.I. Act on the preponderance of probabilities, so the ... Dishonour of Cheque - insufficient funds - alteration in date without drawer confirmation - rebuttal of statutory presumption - preponderance of probabilities - HELD THAT:- It is well settled that the standard of proof which is required from the accused to rebut the statutory presumption under Sections 118 and 139 of the N.I Act is preponderance of probabilities and that the accused is not required to prove his case beyond reasonable doubt. The standard of proof, in order to rebut the statutory presumption, can be inferred from the materials on record and circumstantial evidence. The decision of the Honorable Supreme Court in Sanjabij Tari v. Kishore S. Borcar [2025 (9) TMI 1634 - SUPREME COURT] shows that ultimately, it becomes the duty of the courts to consider carefully and appreciate the totality of the evidence and then come to a conclusion whether in the given case, the accused has shown that the case of the complainant is in peril for the reason that the accused has established a probable defence. It is pertinent to note that the specific case of the accused is that he subscribed for a chitty conducted by the complainant and at the time of receiving the bid amount in the chitty during 1999, the complainant demanded a blank signed cheque as security and accordingly, he entrusted a blank signed cheque to the complainant and in spite of payment of all the chitty installments, the complainant has not returned the cheque by saying that the same is missing - The specific suggestion in cross examination that the accused entrusted Ext.P1 cheque as security at the time of receiving the bid amount in the chitty is not denied and PW1 only stated that the same is not known to him. The evidence of DW1 clearly shows that the cheque was issued from the Nedungadi bank on 03-07-1998 and after the take over of Nedungadi Bank by Punjab National Bank, no cheque was issued to the accused from Pubjab National Bank. Thus, it is apparent that there existed a contradiction in the complaint moved by the appellant as against his cross examination relatable to the time of execution and issuance of the cheque and in view of the evidence of DW1 Bank Manager regarding the issuance of the cheque from the Nedungadi Bank to the accused on 03-07-1998 and the dishonour of the cheque as per Ext.P2 memo dated 24-05-2004 by the Punjab National Bank, the accused has brought on record sufficient material to rebut the statutory presumptions and therefore, there are no reason to interfere with the findings in the impugned judgment that the case of the accused is more probable and that the complainant has not succeeded in proving the offence under Section 138 of the N.I Act against the accused. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the accused successfully rebutted the statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act that a cheque admitted to be signed was issued for discharge of any debt or other liability. 2. Whether alleged material alteration in the cheque (correction in date) negates the presumption of liability or requires drawer confirmation, and whether such alteration is proved to be material. 3. Whether contradictions and infirmities in the complainant's evidence, together with bank records and the accused's plea of delivery of a blank signed cheque as security for a chitty, sufficiently probabilise the defence so as to shift the evidentiary burden back on the complainant. 4. Whether the provenance and bank records of the cheque (issued by a pre-amalgamation bank and dishonour memo issued by successor bank) affect the status of the cheque under Section 6 and the complainant's case on execution and dishonour. ISSUE-WISE DETAILED ANALYSIS Issue 1: Rebuttal of statutory presumptions under Sections 118 and 139 Legal framework: Section 139 creates a rebuttable presumption that a cheque, once proved to be executed by the accused, was issued for discharge of a debt or liability. The standard for rebuttal is preponderance of probabilities; accused may rely on his evidence, materials before the court, and circumstantial evidence. The accused need not prove the defence beyond reasonable doubt. Precedent treatment: Authoritative higher-court principles were summarized that (i) execution admitted gives rise to presumption under Section 139, (ii) presumption is rebuttable on balance of probabilities, (iii) accused may raise probable defence relying on his evidence or complainant's materials, and (iv) evidentiary burden is not a persuasive burden requiring criminal standard. Interpretation and reasoning: The Court evaluated PW1's evidence alongside DW evidence. PW1's cross-examination revealed uncertainty about purpose of the loan, admission of a correction in the cheque date, inability to deny suggestion that the cheque had been delivered as security for chitty payment, and overall unreliability of his account as to time of execution. DW1 (bank manager) produced account-issuance information showing the cheque was issued by a prior bank at an earlier date. The Tribunal found that these materials, taken together, raised a probable defence on the preponderance test. Ratio vs. Obiter: Ratio - the Court applied the established standard that preponderance of probabilities suffices to rebut Section 139 and concluded the accused met that standard by probabilising his defence through documentary and testimonial material. Observations reiterating general principles of law were obiter to the extent they summarized authority. Conclusion: The accused succeeded in rebutting the statutory presumption on the balance of probabilities; the finding of acquittal on this ground is upheld. Issue 2: Alleged material alteration in the cheque and need for drawer confirmation Legal framework: Material alteration in a negotiable instrument can affect its enforceability; however, an admission of signature and the circumstances of alteration (e.g., insertion of date on an undated cheque) are treated in jurisprudence with the presumption of implied consent by the drawer unless the alteration is shown to be material and made without consent. Precedent treatment: The Court noted established authorities stating that insertion of date on an undated cheque may not constitute material alteration if drawer's implied consent can be presumed; conversely, finding of material alteration needs to be supported by evidence demonstrating lack of consent or that alteration was material to the obligation. Interpretation and reasoning: The Sessions court had found material alteration and that the accused rebutted presumptions. On appellate consideration, the High Court observed PW1 admitted a correction in the cheque date and failed to deny that the cheque had been given as security. No direct evidence established that the complainant unilaterally altered the cheque to mislead. Combined with other infirmities, the correction in date did not conclusively establish a material alteration defeating the accused's defence. Ratio vs. Obiter: Ratio - where alteration is limited to a date correction and surrounding evidence indicates possible consent or delivery as security, such alteration alone will not preclude the accused from raising a probable defence sufficient to rebut Section 139. Observations on differing fact patterns and broader principles are obiter. Conclusion: The alleged correction in date was not shown to be a material alteration that would sustain the presumption against the accused; it did not defeat the accused's probabilised defence. Issue 3: Probabilising defence by evidence of delivery of blank cheque as security for chitty and contradictions in complainant's testimony Legal framework: An accused may rebut presumptions by adducing direct or circumstantial evidence that makes non-existence of debt or consideration probable; contradictions in the complainant's evidence and failure to establish source of funds can probabilise the defence and shift burden back to complainant to prove existence of debt and financial capacity. Precedent treatment: Authorities were cited holding that when cross-examination elicits material doubts on existence of debt or source of funds, the presumption under Section 139 may be rebutted. Further, where accused questions the complainant's financial capacity, the onus may shift to the complainant to prove such capacity. Interpretation and reasoning: The Court treated the specific defence that a blank signed cheque had been entrusted as security for a chitty payment. PW1 did not positively deny the suggestion asserting such security transaction, and admitted uncertainty about the purpose of the loan and the date correction. Bank evidence supported that the cheque had been issued earlier (1998) while dishonour occurred in 2004 under the successor bank's memo. Taken cumulatively, these contradictions and documentary facts made the defence version reasonably probable. Ratio vs. Obiter: Ratio - where complainant's evidence contains material contradictions and he fails to negate a credible defence of delivery of cheque as security, the accused may probabilise his case and rebut statutory presumptions. Observations on standards and evidentiary burdens are explanatory. Conclusion: The defence that the cheque was delivered as security for chitty payments, together with contradictions in the complainant's testimony and bank records, sufficiently probabilised the defence and justified acquittal. Issue 4: Effect of cheque provenance and bank amalgamation on cheque status and complainant's proof of execution and dishonour Legal framework: Status of the instrument and identity of issuing/dishonouring bank are relevant to establishing issuance and dishonour. Post-amalgamation handling and bank records may be used to establish the timeframe and source of issuance. Precedent treatment: The Court noted that cheques issued by a bank prior to amalgamation and subsequently processed by successor bank require appraisal of bank records to ascertain issuance and dishonour particulars; such records can either strengthen or weaken complainant's narrative. Interpretation and reasoning: DW1's testimony established that the cheque was issued by the earlier bank in 1998; the dishonour memo was produced by the successor bank in 2004. PW1 could not reliably account for issuance timing. The appellate court found these facts inconsistent with a straightforward loan-issuance-dishonour narrative and supported the accused's explanation that the cheque had been given earlier as security. Ratio vs. Obiter: Ratio - bank provenance and records indicating earlier issuance, when not coherently explained by the complainant, can assist the accused in rebutting Section 139 presumptions. Ancillary remarks about legal implications of amalgamation on definition under Section 6 are observational where not determinative on these facts. Conclusion: The provenance and bank records undermined the complainant's case as to execution and timing and contributed to the finding that the accused probabilised his defence; the acquittal stands.