TaxTMI 
TaxTMI 
2019 (12) TMI 386
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.... upon each other. In the aforesaid background, the accused asked for a friendly loan in the month of March 2014 appertaining to Rs. 25 Lacs and further, assured that the aforesaid amount will be returned back within one month putting reliance upon his assurance, he paid the amount. In the month of 2014, the accused repaid Rs. 1, 24,000/- out of Rs. 25 Lacs, whereupon remaining amount of Rs. 23, 76,000/- stood due and for that, undertook that the aforesaid amount would be repaid in shortest span of time but did not keep his words, whereupon, the complainant exerted pressure for repayment. Lastly, on 18.06.2014, accused called him at his residence and handed over cheque bearing no. 204735 of Canara Bank which the complainant deposited in his account standing in Axis Bank and as reported, the cheque could not be honoured on account of insufficient fund. Thereafter, the complainant served a registered Advocate notice on 08.07.2014 but, even after receipt thereof, accused failed to make payment of the due amount. Thereafter, the complainant had approached the police wherefrom registration of case was declined as a result of which a Complaint Case has been filed. 4. As is evident, aft....
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....acquittal, then in that circumstance, unless and until, there happens to be perversity in ordinary course of nature, the judgment of acquittal should not be interfered with because of the fact that by having such finding, the basic principle of criminal jurisprudence that accused is considered to be innocent unless convicted, is found further strengthened. It has also been submitted that even if the facts of the case probabilizes the contrary conclusion to whatever has been recorded by the learned lower court, the finding so recorded in favour of accused is to be honoured, accepted. That being so, in ordinary course of nature, the finding should not be interfered with. 9. Now coming to the facts of the case, it has been submitted that in accordance with Section 139 of the NI Act, legal fiction having been against the accused, is rebuttable one and, from the cross-examination as well as from the cheque itself, it is evident that save and except signature of the accused, other formalities are in different pen hand-writing and that is suggestive of some other kind of activities than whatsoever been alleged and so, the presence of aforesaid pretentious, abstract would defease the ve....
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.... law is well established that the presumption of innocence which is attached to every Accused person gets strengthened when such an Accused is acquitted by the trial court and the High Court should not lightly interfere with the decision of the trial court which has recorded the evidence and observed the demean our of witnesses. This Court in the case of Chandrappa and Ors. v. State of Karnataka : (2007) 4 SCC 415, laid down the following principles: 42. From the above decisions, in our considered view, the following general principles regarding powers of the appellate court while dealing with an appeal against an order of acquittal emerge: (1) An appellate court has full power to review, reappreciate and reconsider the evidence upon which the order of acquittal is founded. (2) The Code of Criminal Procedure,1973 puts no limitation, restriction or condition on exercise of such power and an appellate court on the evidence before it may reach its own conclusion, both on questions of fact and of law. (3) Various expressions, such as, "substantial and compelling reasons", "good and sufficient grounds", "very strong circumstances", "distorted conclusi....
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....trial Court and held the Accused guilty on re-appreciation of the entire evidence on record, however, the High Court did not record its conclusion on the question whether the approach of the trial Court in dealing with the evidence was patently illegal or the conclusions arrived at by it were wholly untenable. Confirming the order passed by the High Court convicting the Accused on reversal of the acquittal passed by the learned trial Court, after satisfy that the order of acquittal passed by the learned trial Court was perverse and suffer from infirmities, this Court declined to interfere with the order of conviction passed by the High Court. While confirming the order of conviction passed by the High Court, this Court observed in paragraph 8 as under: 8. We have perused the judgment under appeal to ascertain whether the High Court has conformed to the aforementioned principles. We find that the High Court has not strictly proceeded in the manner laid down by this Court in Doshi case : (1996) 9 SCC 225 viz. first recording its conclusion on the question whether the approach of the trial court in dealing with the evidence was patently illegal or the conclusions arrived at b....
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....the trial Court for discarding the testimony of the eye-witnesses were not at all sound. This Court also observed that as the evaluation of the evidence made by the trial court as manifestly erroneous and therefore it was the duty of the High Court to interfere with an order of acquittal passed by the learned Sessions Judge. 11.3 In the case of Atley (supra), in paragraph 5, this Court observed and held as under: "5. It has been argued by the learned Counsel for the Appellant that the judgment of the trial court being one of acquittal, the High Court should not have set it aside on mere appreciation of the evidence led on behalf of the prosecution unless it came to the conclusion that the judgment of the trial Judge was perverse. In Our opinion, it is not correct to say that unless the appellate court in an appeal Under Section 417, Code of Criminal Procedure came to the conclusion that the judgment of acquittal under appeal was perverse it could not set aside that order. It has been laid down by this Court that it is open to the High Court on an appeal against an order of acquittal to review the entire evidence and to come to its own conclusion, of cours....
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....ose infirmities. It also emerges that the High Court is entitled to re-appreciate the entire evidence independently and come to its own conclusion, however, the High Court would not be justified in interfering with the order of acquittal solely on the ground on re-appreciation of the entire evidence that two views are possible." 16. It has been settled at rest that mere dishonour of cheque could not raise a cause of action unless the payee makes a demand in writing to the drawer for payment and the drawer fails as observed by the Apex Court in Rajneesh Aggarwal v. Amit J. Bhalla reported in 2001 (1) PLJR 177 SC. 17. In likewise manner, it has also been conclusively held that service of notice of demand is a condition precedent for filing a complaint as observed by the Apex Court in Central Bank of India & Anr v. M/s Saxons Farms & Ors reported in 2000 (1) PLJR 17 (SC). So far legal requirement attracting Section 138 and further the obligation of the accused, more particularly, during course of discharging its obligation in terms of Section 139 of the Act coupled with sanctity of the cheque (Negotiable Instrument) having so issued, in the background of conflicting judgment, Kr....
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....ls to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation. - For the purposes of this section, 'debt or other liability' means a legally enforceable debt or other liability. 139. Presumption in favour of holder.- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt, or other liability. 9. Ordinarily in cheque bouncing cases, what the courts have to consider is whether the ingredients of the offence enumerated in Section 138 of the Act have been met and if so, whether the accused was able to rebut the statutory presumption contemplated by Section 139 of the Act. With respect to the facts of the present case, it must be clarified that contrary to the trial court's finding, Section 138 of the Act can indeed be attracted when a cheque is dishonoured on account of 'stop payment' instructions sent by the accused to his bank in respect of a post-dated cheque, irrespective o....
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....in relation to expenditure incurred during the construction of the accused's house, the existence of a legally enforceable debt or liability had not been shown, thereby creating a probable defence for the accused. Counsel appearing for the appellant-accused has relied on a decision given by a division bench of this Court in Krishna Janardhan Bhat v. Dattatraya G. Hegde : (2008) 4 SCC 54, the operative observations from which are reproduced below (S.B. Sinha, J. at Paras. 29-32, 34 and 45): 29. Section 138 of the Act has three ingredients viz.: (i) that there is a legally enforceable debt (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and (iii) that the cheque so issued had been returned due to insufficiency of funds. 30. The proviso appended to the said section provides for compliance with legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a ma....
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....lanced. Such balancing acts, indisputably would largely depend upon the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same. (emphasis supplied) 11. With respect to the decision cited above, counsel appearing for the respondent-claimant has submitted that the observations to the effect that the 'existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act' and that 'it merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability' [See Para. 30 in Krishna Janardhan Bhat (supra)] are in conflict with the statutory provisions as well as an established line of precedents of this Court. It will thus be necessary to examine some of the extracts cited by the respondent-claimant. For instance, in Hiten P. Dalal v. Bratindranath Banerjee : (2001) 6 SCC 16, it was held (Ruma Pal, J. at Paras. 2223): "22. Because both Sections 138 and 139 require that the Court 'shall presume' the liability of the drawer of the cheques for the amounts for which the cheques are drawn,..., it is....
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....o believe the non-existence of the consideration either by direct evidence or by preponderance of probabilities showing that the existence of consideration was improbable, doubtful or illegal.... This decision then proceeded to cite an extract from the earlier decision in Bharat Barrel & Drum Manufacturing Company v. Amin Chand Pyarelal : (1993) 3 SCC 35(Para. 12): "Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbably or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the c....
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....or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused.... (emphasis supplied) 14. In light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. 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 ....
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....ail and for better appreciation, the same is quoted below:- "11. Section 138 of the Negotiable Instruments Act, 1881, constituting Chapter XVII of the Act which was introduced by Act 66 of 1988, inter alia, provides: "138. Dishonour of cheque for insufficiency, etc., of funds in the account.-Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice. to any other provision of this Act, be punished with imprisonment for a term which may extend to two year, or with fine which may extend to twice the amount of the cheque, or with both 12. The proviso to Section 138, however, is all important and stipulates three distinct conditions precedent, which must be sa....
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.... neither Section138 nor Section 142 or any other provision contained in the Act forbids the holder or payee of the cheque from presenting the cheque for encashment on any number of occasions within a period of six months of its issue or within the period of its validity, whichever is earlier. That such presentation will be perfectly legal and justified was not disputed before us even at the Bar by Learned Counsel appearing for the parties and rightly so in light of the judicial pronouncements on that question which are all unanimous. Even Sadanandan Bhadran's case (supra) the correctness whereof we are examining, recognized that the holder or the payee of the cheque has the right to present the same any number of times for encashment during the period of six months or during the period of its validity, whichever is earlier. 16. Presentation of the cheque and dishonour thereof within the period of its validity or a period of six months is just one of the three requirements that constitutes 'cause of action' within the meaning of Sections 138 and 142(b) of the Act, an expression that is more commonly used in civil law than in penal statutes. For a dishonour to cu....
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.... 20. *** 21. *** 22. *** 23. *** 24. *** 25. *** 26. *** 27. *** 28. *** 29. It is trite that the object underlying Section 138 of the Act is to promote and inculcate faith in the efficacy of banking system and its operations, giving credibility to Negotiable Instruments in business transactions and to create an atmosphere of faith and reliance by discouraging people from dishonouring their commitments which are implicit when they pay their dues through cheques. The provision was intended to punish those unscrupulous persons who issued cheques for discharging their liabilities without really intending to honour the promise that goes with the drawing up of such a negotiable instrument. It was intended to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case the cheque was dishonoured and to safeguard and prevent harassment of honest drawers. (See Mosaraf Hossain Khan v. Bhagheeratha Engg. Ltd. : (2006) 3 SCC 658, C.C. Alavi Haji v. Palapetty Muhammed & Anr. : (2007) 6 SCC 555 and Damodar S. Prabhu v.Sayed Babulal H. : (2010) 5 SCC 663)....
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.... reasonably possible". 31. The decision of this Court in Nathi Deviv. Radha Devi : (2005) 2 SCC 271, reiterates the rule of purposive construction in the following words: "Even if there exists some ambiguity in the language or the same is capable of two interpretations, it is trite the interpretation which serves the object and purport of the Act must be given effect to. In such a case the doctrine of purposive construction should be adopted". 32. To the same effect is the decision of this Court in S.P. Jain v. Krishan Mohan Gupta : (1987) 1 SCC 191, where this Court observed: "We are of the opinion that law should take a pragmatic view of the matter and respond to the purpose for which it was made and also take cognizance of the current capabilities of technology and life-style of the community. It is well settled that the purpose of law provides a good guide to the interpretation of the meaning of the Act. We agree with the views of Justice Krishna Iyer in Busching Schmitz Private Ltd's case (supra) that legislative futility is to be ruled out so long as interpretative possibility permits". 20. In Basalingappa v. Mudibasappa reported in ....
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....is presumed to be innocent unless that presumption is rebutted by the prosecution by production of evidence as may show him to be guilty of the offence with which he is charged. The burden of proving the guilt of the Accused is upon the prosecution and unless it relieves itself of that burden, the courts cannot record a finding of the guilt of the Accused. There are certain cases in which statutory presumptions arise regarding the guilt of the Accused, but the burden even in those cases is upon the prosecution to prove the existence of facts which have to be present before the presumption can be drawn. Once those facts are shown by the prosecution to exist, the Court can raise the statutory presumption and it would, in such an event, be for the Accused to rebut the presumption. The onus even in such cases upon the Accused is not as heavy as is normally upon the prosecution to prove the guilt of the Accused. If some material is brought on the record consistent with the innocence of the Accused which may reasonably be true, even though it is not positively proved to be true, the Accused would be entitled to acquittal. 11. This Court in Bharat Barrel & Drum Manufacturing Co. ....
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....believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist...... 12. Justice S.B. Sinha in M.S. Narayana Menon Alias Mani v. State of Kerala and Anr. 6 : (2006) 6 SCC 39 had considered Sections 118(a), 138 and 139 of the Act, 1881. It was held that presumptions both Under Sections 118(a) and 139 are rebuttable in nature. Explaining the expressions "may presume" and "shall presume" referring to an earlier judgment, following was held in paragraph No. 28: 28. What would be the effect of the expressions "may presume", 'shall presume" and "conclusive proof" has been considered by this Court in Union of India v. Pramod Gupta, : (2005) 12 SCC 1, in the following terms: (SCC pp. 30-31, para 52) It is true that the legislature used two different phraseologies 'shall be presumed' and 'may be presumed' in Section 42 of the Punjab Land Revenue Act and furthermore although provided for the mode and manner of rebuttal of such presumption as regards the right to mines and minerals said to be vested in the Government vis....
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....on the basis of the materials already brought on record. Following was laid down in Paragraph No. 32: 32. An Accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on record. An Accused has a constitutional right to maintain silence. Standard of proof on the part of an Accused and that of the prosecution in a criminal case is different. 16. This Court again reiterated that whereas prosecution must prove the guilt of an Accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an Accused is "preponderance of probabilities". In paragraph No. 34, following was laid down: 34. Furthermore, whereas prosecution must prove the guilt of an Accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an Accused is "preponderance of probabilities". Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies. 17. In Kumar Exports v. Sharma Ca....
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....ing of the consideration and existence of debt, apparently would not serve the purpose of the Accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the Accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.... 18. A Three-Judge Bench of this Court in Rangappa v. Sri Mohan, : (2010) 11 SCC 441 had occasion to elaborately consider provisions of Sections 138 and 139. In the above case, trial court had acquitted the Accused in a case relating to dishonour of cheque Under Section 138. The High Court had reversed the judgment of the trial court convicting the Accused. In the above case, the Accused had admitted signatures on the cheque. This Court held that where the fact of signature on the cheque is acknowledged, a presumption has to be raised that the cheque pertained to a legally enforceable debt or liability, however, this pr....
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....e 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. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the Defendant-Accused cannot be expected to discharge an unduly high standard of proof. 28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an Accused has to rebut the presumption Under Section 139, the standard of proof for doing so is that of "preponderance of probabilities". Therefore, if the Accused is able to raise a probable defence which cre....
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....cision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the Accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. 27. 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. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpr....
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....4003, It has been held as follows:- "16. Under Section 138 of the Negotiable Instruments Act, once the cheque is issued by the drawer, a presumption Under Section 139 of the Negotiable Instruments Act in favour of the holder would be attracted. Section 139 creates a statutory presumption that a cheque received in the nature referred to Under Section 138 of the Negotiable Instruments Act is for the discharge in whole or in part of any debt or other liability. The initial burden lies upon the complainant to prove the circumstances under which the cheque was issued in his favour and that the same was issued in discharge of a legally enforceable debt. 17. It is for the Accused to adduce evidence of such facts and circumstances to rebut the presumption that such debt does not exist or that the cheques are not supported by consideration. Considering the scope of the presumption to be raised Under Section 139 of the Act and the nature of evidence to be adduced by the Accused to rebut the presumption, in Kumar Exports v. Sharma Carpets : (2009) 2 SCC 513, the Supreme Court in paras (14-15) and paras (1820) held as under: 14. Section 139 of the Act provides that i....
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.... be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over. 20. The Accused in a trial Under Section138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an Accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The Accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the Accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence o....
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....ainant received the cheques to discharge the debt or other liability in whole or in part. 19. It is for the Respondent-Accused to adduce evidence to prove that the cheques were not supported by consideration and that there was no debt or liability to be discharged by him. The receipts-Ex.-22/C (colly) relied upon by the Respondent-Accused do not create doubt about the purchases made on credit and the existence of a legally enforceable debt for which the cheques were issued. The courts below erred in saying that by the receipts-Ex. 22/C (colly), the Respondent-Accused has rebutted the statutory presumption raised Under Section 139 of the Negotiable Instruments Act. The oral and the documentary evidence adduced by the complainant are sufficient to prove that it was a legally enforceable debt and that the cheques were issued to discharge the legally enforceable debt. With the evidence adduced by the complainant, the courts below ought to have raised the presumption Under Section 139 of the Act. The evidence adduced by the Respondent- Accused is not sufficient to rebut the presumption raised Under Section 139 of the Act. The defence of the Respondent that though he made paymen....
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....tal receipt, Ext-3, complaint petition, Ext-4. Nothing has been adduced on behalf of defence/Respondent No.2 24. The evidence of PWs-1 and 2 are not at all relevant because of the fact that they are not the persons anyway concerned with the affairs, although, came to the side of the complainant, PW-3. PW-3, during course of examination-in-chief has stated that he gave friendly loan of an amount of Rs. 25 Lacs on an undertaking at the end of the accused that the same will be returned back within one month. In the month of April, 2014, a sum of Rs. 1, 24, 000/- was returned back whereupon, Rs. 23, 76,000/- remained due for which, on persistent demand, accused issued a Cheque on 18.06.2014 which he deposited in his account running in the Axis Bank, Danapur which was dishonoured as, the bank had reported that signature is mismatching. He had deposited the slip issued by the bank. He served registered Advocate notice on 08.07.2014, exhibited the receipt issued by the post office. As within stipulated period, accused failed to pay, on account thereof, got this case filed. During cross-examination at para-3, he has stated that there was no document relating to aforesaid transaction. Ca....