TaxTMI 
TaxTMI 
2020 (6) TMI 9
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....the drawer Naveen Shandil. 3. The Bhagat Urban Co-operative Bank Limited issued a memo Ex. CW1/C to the said effect informing the Allahabad Bank about the dishonor of the cheque. Vide memo Ex. CW-1/D, the Allahabad Bank, reported the complainant about the same. 4. On receipt of the communication from Allahabad Bank, the drawee, Vijay Kumar issued legal notice Ex. CW-1/E, under Section 138 of the Negotiable Instruments Act, 1881 (after now called 'NIA'), through counsel, asking the drawer to make payment of Rs. 4,00,000/- within fifteen days from the receipt of such notice. 5. The legal notice stood duly served upon the accused, as is evident from the endorsement on the memo Ex. CW-1/F. 6. On failure of the drawer to make the requisite payment within fifteen days from the date of receipt of the notice, the drawee filed a criminal complaint under Section 138 of the NIA before Chief Judicial Magistrate, Solan. 7. The plea of the complainant-drawee reads as follows: "3. That the accused assured the complainant that the same cheque will be honoured as and when the same would be presented in the bank, but to the utter surprise of the complainant when the cheque in....
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....ch allegations, the defence tendered in evidence the statement Ex. D-1 of said Roshan Lal, made in one of the complaints filed by him. The defence also put questions to the complainant about the absence of any written agreement qua the borrowing of money by the accused from the complainant. In cross-examination, the complainant stated that he had handed over the money to the accused in the house of Roshan Lal and in his presence. He denied that he had taken the bounced cheque from Roshan Lal Verma. The accused further suggested to the complainant that he did not have enough money to the extent of the cheque amount, which he could have paid to him. 12. After completion of the complainant's evidence, the stand taken by the accused in his statement under Section 313 CrPC is also similar. In answer to question No.15, the accused stated that cheque of this series was with Roshan Lal Verma, and there was no financial dealing of the accused with the complainant. 13. Based on this evidence, vide judgment dated 11.10.2017, passed in Criminal case no.623/3/14/10, the Chief Judicial Magistrate, Solan, convicted the accused and sentenced him to pay compensation to the tune of Rs. 4,10,00....
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....at convict Naveen Shandil S/O Sh. Hira Singh, R/O Negi colony Shamti, Teh. & District Solan, H.P. was admitted in this Jail on 04.05.2018 in compliance of the Jail Warrant dated 03.05.2018, issued by the Ld. C.J.M. Solan in case No.623/14/10, u/s 138 N.I. Act titled as Vijay Kumar v/s Naveen Shandil (photocopy Attached) to undergo Simple Imprisonment for 06 months for the commission of offence punishable u/s 138 N.I.Act. The convict Naveen Shandil was kept at sub jail Solan on 03.05.2018 for night stay as per order of Ld. C.J.M. Solan (photo copy attached). The convict was released from this Jail on 01.10.2018 after completion of his sentence, including remission. It is therefore requested that the Hon'ble High Court of H.P. may be apprised accordingly on the next date of hearing fixed for 27.12.2019 in the matter." 19. Because the petitioner had already undergone the entire sentence, coupled with the fact that the counsel for the petitioner never put in an appearance, this Court appointed Mr. Rajesh Kumar Parmar and Ms. Manika Mittal, Advocates, as Legal Aid Counsel to represent the petitioner, apart from Mr. Raman Sethi, Advocate who already stood appointed as Amicus ....
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.... rupees four lacs by the complainant to the petitioner. It is not the case with the complainant that he transferred this amount through RTGS or electronic mode to the petitioner's account. If this was a cash transaction, then, from where does the complainant get this money. Further, being an income tax payee, how could he hand over an amount beyond Rs. 20,000/- in cash, which is legally not permissible. To attract provisions of Section 138 of the NI Act ibid the debt or liability must be a legally recoverable debt. 26. Mr. Sethi, further contended that in K. Subra Mani versus K. Damodara Naidu, 2015 (1) SCC 99, it has been held by the Hon'ble Supreme Court that in a case where the complainant fails to prove the source income from which alleged loan was made to the accused presumption in favor of the holder of the cheque in terms of Section 139 of the Act ibid stood rebutted and accused is liable to be acquitted. Another case in which Hon'ble Supreme Court has upheld the acquittal on the ground of series defects/lacunae in evidence of the complainant; John K. Abraham versus Simon C. Abraham; 2014(2) SCC 236. Where the complainant has not established the debt or other li....
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.... stamped; (g) that holder is a holder in due course:- that the holder of a negotiable instrument is a holder in due course : provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him. 28. Section 139 of the NIA reads as follows: 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. 29. JUDICIAL PRECEDENTS ON INITIAL PRESUMPTIONS UNDER SECTIONS 118 AND 139 OF NEGOTIABLE INSTRUMENTS ACT: a) In Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16, A three Judge Bench of Supreme Court holds, [21] The appellant's submission that the cheques were not drawn for the 'discharge in whole or in part of any debt or other liability' is answered by the....
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....f the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the 'prudent man.' b) In Rangappa v. Sri Mohan, (2010) 11 SCC 441, a three-member bench of Supreme Court holds, 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 interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high stand....
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....ions 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 in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists. 19. The use of the phrase "until the contrary is proved" in Section 118 of the Act and use of the words "unless the contrary is proved" in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to 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. d) In T.P. Murugan (Dead) v. Bojan, (2018) 8 SCC 469, Supreme Court holds, 21....Under section 139 of the N.I. Act, once a cheque has been signed and issued in favour of the holder, there is statutory p....
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....nted, it was not honoured. Since there is a statutory presumption of consideration, the burden is on the accused to rebut the presumption that the cheque was issued not for any debt or other liability. (Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287, Para 20). 3) 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 in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists. (Kumar Exports v. Sharma Carpets, 2009 (2) SCC 513, Para 18). 4) Once signature on cheque are admitted, a presumption shall be raised under Section 139 that cheque was issued in discharge of debt or liability. (Basalingappa v. Mudibasappa, (2019) 5 SCC 418, Para 26). 5) Provided the facts required to form the basis of a presumption of law exists, no disc....
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....han Lal had filed six complainants simultaneously under Section 138 of the NIA against him. The accused tendered in his evidence (Ex. D-1), the statement of Roshan Lal, in one of such complaints. The case set up by the accused by way suggestions put to the complainant and explained in his statement under Section 313 CrPC is that said Roshan Lal had passed over the blank cheque to the complainant, who had no business dealing whatsoever with the accused. 34. The accused confronted the complainant in his cross-examination about any written agreement about the lending of the money. To this suggestion, the complainant explained that the accused had handed over the cheque, implying that it was better than receipt or agreement. It sounds logical and appears to be the objective behind the Negotiable Instruments Act, 1881. Thus, the explanation of the complainant is plausible and believable. 35. To discredit the complainant about his financial capacity to handover Rs. 4 lacs by cash, the accused questioned him about the source of the funds. Further, the defense confronted him by mentioning that under the Income Tax Act, an amount exceeding Rs. 20,000/- is prohibited by cash payment....
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....any bank or banking institution referred to in section 51 of that Act; (ii) ―co-operative bank shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (iii) ― loan or deposit means loan or deposit of money; (iv) ―specified sum means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.] 37. Section 271D of the Income Tax Act, 1961, reads as follows: 271D. Penalty for failure to comply with the provisions of section 269SS.- (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. 38. Although the violation of the provisions of S. 269SS of the Income tax Act is an offence under Section 271-D of the Act, but it is not an offence under the Negotiable Instruments Act, 1881, which is sil....
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....stablish the defence version, which not only successfully rebuts the statutory presumption but also establishes the case set up by the defence. 40. JUDICIAL PRECEDENTS ON REVERSING THE BURDEN: a) In Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16, A three Judge Bench of Supreme Court holds, [24] Judicial statements have differed as to the quantum of rebutting evidence required. In Kundan Lal Rallaram v. Custodian, Evacuee Property, Bombay, AIR 1961 SC 1316, this Court held that the presumption of law under Section 118 of Negotiable Instruments Act could be rebutted, in certain circumstances, by a presumption of fact raised under Section 114 of the Evidence Act. The decision must be limited to the facts of that case. The more authoritative view has been laid down in the subsequent decision of the Constitution Bench in Dhanvantrai Balwantrai Desai v. State of Maharashtra, AIR 1964 SC 575, where this Court reiterated the principles enunciated in State of Madras v. VaidyanathIyer (supra) and clarified that the distinction between the two kinds of presumption lay not only in the mandate to the Court, but also in the nature of evidence required to rebut the....
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...., the defendant has to bring on record such facts and circumstances upon consideration of which the Court may either believe that the consideration did not exist or its nonexistence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist. c) Hon'ble Supreme Court followed Bharat Barrel in Mallavarapu Kasivisweswara Rao v. ThadikondaRamulu, (2008) 7 SCC 655. d) In Kumar Exports v. Sharma Carpets, 2009 (2) SCC 513, Supreme Court holds, 20. The accused in a trial under Section 138 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. Howev....
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....at its nonexistence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist. f) In K.N. Beena v. Muniyappan and Another, (2001) 8 SCC 458, Supreme Court holds, 7. In this case admittedly the 1st Respondent has led no evidence except some formal evidence. The High Court appears to have proceeded on the basis that the denials/averments in his reply dated 21st May, 1993 were sufficient to shift the burden of proof onto the Appellant/Complainant to prove that the cheque was issued for a debt or liability. This is an entirely erroneous approach. The 1st Respondent had to prove in the trial, by leading cogent evidence, that there was no debt or liability. The 1st Respondent not having led any evidence could not be said to have discharged the burden cast on him. The 1st Respondent not having discharged the burden of proving that the cheque was not issued for a debt or liability, the convection as awarded by the Magistrate was correct. The High Court erroneously set aside that conviction. SUM UP: 41. The fundamental law relating to the successful rebuttal of the statutory presumption under....
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....s also to ensure that no prejudice is caused to anyone. The principles underlying section 311 CrPC, 1973 and amplitude of the powers of the Court thereunder have been explained by this Court in several decisions Vide Mohanlal ShamjiSoni v. Union of India, 1991(3) R.C.R (Criminal) 182 : 1991 Supp (1) SCC 271, Zahira Habibulla H. Sheikh v. State of Gujarat, 2004(2) R.C.R. (Criminal) 836 : (2004) 4 SCC 158, Mina Lalita Baruwa v. State of Orissa and Others, 2014(1) R.C.R.(Criminal) 257 : (2013) 16 SCC 173 and Rajaram Prasad Yadav v. State of Bihar and Ors., 2013(3) R.C.R.(Criminal) 726 : 2013 (14) SCC 461 and Natasha Singh v. CBI (State), 2013(3) R.C.R. (Criminal) 368 : 2013 (5) SCC 741. In Natasha Singh v. CBI (State) : (2013) 5 SCC 741, though the application for examination of witnesses was filed by the accused but, on the principles relating to the exercise of powers under Section 311, this Court observed, inter alia, as under:- "8. section 311 CrPC, 1973 empowers the court to summon a material witness, or to examine a person present at "any stage" of "any enquiry", or "trial", or "any other proceedings" under CrPC, or to summon any person as a witness, or to recall and re....
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....Court in any way. There is thus no escape if the fresh evidence to be obtained is essential to the just decision of the case. The determinative factor should therefore be, whether the summoning/recalling of the said witness is in fact, essential to the just decision of the case." 44. During the preliminary evidence recorded by the Court under Section 200 CrPC, the complainant appeared in the witness-box as CW-1. He reiterated the stand taken in the legal notice and also tendered his evidence by way of affidavit Ex. CW-1/A. In the entire evidence, the complainant is silent about the following material aspects, which creates a serious doubt about the existence of any liability against which the accused had drawn the cheque: i. The relationship of the complainant with the accused; ii. For how long they were known to each other; iii. The source of funds of the complainant; iv. What prevailed upon the complainant to hand over a considerable amount to the accused, that too without any interest; v. The time limit to refund the said amount, because the cheque would remain valid for six/three months from the date on which it was drawn. i.e., t....
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.... simply brushed aside by the High Court without assigning any valid reason. Such a serious lacuna in the evidence of the complainant, which strikes at the root of a complaint under Section 138, having been noted by the learned trial Judge, which factor was failed to be examined by the High Court while reversing the judgment of the trial Court, in our considered opinion would vitiate the ultimate conclusion reached by it. 48. In AnssRajashekar v. Augustus Jeba Ananth, 2019(1)R.C.R. (Criminal) 913, Supreme Court observed, 13. Besides what has been set out above, an important facet in the matter was that the complainant failed to establish the source of funds which he is alleged to have utilized for the disbursal of the loan of 15 lakhs to the appellant. 49. In Basalingappa v. Mudibasappa, (2019) 5 SCC 418, Supreme Court holds, 28. We are of the view that when evidence was led before the Court to indicate that apart from loan of Rs. 6 lakhs given to the accused, within 02 years, amount of Rs. 18 lakhs have been given out by the complainant and his financial capacity being questioned, it was incumbent on the complainant to have explained his financial capacity. ....