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TaxTMI 
TaxTMI 
2020 (5) TMI 529
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....nt. 2. The core submission of learned counsel for the appellant is that the trial Court erred in not convicting the respondent and dismissing the complaint merely on the ground that the cheque in question was issued under the capacity of security and security it not legally recoverable debt or liability. He relied upon the judgment of the Apex Court in the case of Rangappa v. Mohan reported in 2010 AIR SCW 2946 to submit that existence of legally recoverable debt is a matter of presumption under Section 139 and accused has to raise a probable defence which may create doubts about existence of legally enforceable debt or liability, then only case of the complainant can fail, otherwise not. 3. It is further submitted by learned counsel ....
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....n 139 of the N.I. Act few decisions of this Court are required to be referred to and considered. 6.1 In the case of K.N.Beena vs. Muniyappan, (2001) 8 SCC 458, it is observed and held by this Court that under Section 118 of the N.I. Act, unless the contrary is proved, it is to be presumed that the negotiable instruments (including a cheque) had been made or drawn for consideration. It is further observed and held that under Section 139, the Court has to presume, unless the contrary is proved, that the holder of the cheque received the cheque for discharge, in whole or in part, of a debt or liability. It is further observed that thus in complaints under Section 138, the Court has to presume that the cheque had been issued f....
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....ong 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 defendantaccused cannot be expected to discharge an unduly high standard or proof." 6.3 In the case of Kishan Rao (Supra) after considering the decision of this Court in the case of Kumar Exports vs. Sharma Carpets, (2009) 2 SCC 513, it is observed and held that the accused may adduce evidence to rebut the presumption, but mere denial regarding existence of debt shall not serve any purpose. This Court in paragraph 19 of that judgment considered paragraph 14, 15, 18 & 19 of the decision in the case of Kumar Exp....
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.... provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and....
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....efence and questioned the financial capacity of the complainant. To that, the complainant failed to prove and establish his financial capacity. Therefore, this Court was satisfied that the accused had a probable defence and consequently in absence of complainant having failed to prove his financial capacity, this Court acquitted the accused. In the present case, the accused never questioned the financial capacity of the complainant. We are of the view that whenever the accused has questioned the financial capacity of the complainant in support of his probable defence, despite the presumption under Section 139 of the N.I. Act about the presumption of legally enforceable debt and such presumption is rebuttable, thereafter the onus sh....
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....lity as per Section 139 of the N.I. Act. It appears that both, the Learned Trial Court as well as the High Court, have committed error in shifting the burden upon the complainant to prove the debt or liability, without appreciating the presumption under Section 139 of N.I. Act. As observed above, Section 139 of the Act is an example of reverse onus clause and therefore once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter it is for the accused to rebut such presumption by leading evidence." 7. Perusal of the above discussion makes it very clear that if any ch....