TaxTMI 
TaxTMI 
2020 (6) TMI 9
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....an 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 question was presented by the complainant in his bank i.e. Al....
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....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. 4,10,000/- and also to undergo simple imprisonment for six months for the commission of the offence pu....
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....il 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 Curiae. 20. I have heard Shri Rajesh Kumar Parmar and Ms. Manika Mittal, Advocates (as legal aid counsel) for the petitioner, Mr.....
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....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 liability for which the cheque has been issued, the acquittal has been upheld by the Hon'ble Supreme Court; Ramdas versus Krishnanand; (2014) 12 SCC 625....
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....r 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 third presumption available to the Banks under Section 139 of the Negotiable Instruments Act. This section provides that "it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the natur....
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....-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 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 13....
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.... 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 presumption that it is issued in discharge of a legally enforceable debt or liability Refer to K.N. Beena v. Muniyappan and Another[(2001) 8 SCC 458; para 6] and Rangappa v. Shrimohan [(2010) 11 SCC 441; para 26]. This presumption is a rebuttable one, if the issuer of the cheque is able to discharge the burden that it wa....
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....used, 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 discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. (Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16, three-Judges' Bench, Para 23). 6) The rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of ....
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.... 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, and the complainant admitted his awareness about this prohibition by law. 36. Section 269SS of the Income Tax Act, 1961, reads as follows: 269SS.Mode of taking or accepting certain loans, deposits and specified sum.- No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electro....
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....961, 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 silent about the cash limit. Thus, these violations alone may not be sufficient to throw away the complaint in entirety; still, it remains as one of the factors which would weigh in favor of the accused, while appreciating the evidence led in the course of discharging the statutory presumptions of Ss. 118 and 139 of the Negotiable Instruments Act, 1881. 39. Another factor that creates a serious doubt in the credibility of the holder of the cheque is that in cross-examination, the complainant admitted that although he was an Income Tax Pay....
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....able 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 two. In the case of discretionary presumption if drawn may be rebutted by an explanation which "might reasonable by true and which is consistent with the innocence" of the accused. On the other hand in the case of a mandatory presumption "the burden resting on the accused person in such a case would not be as light as it is where a presumption is raised under S. 114 of the Evidence Act and cannot be held to be discharged merely by reason of the fact that the explanation offered by the accused is reasonable and probable. It must further be shown that the e....
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.... 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 nonexistence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing 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 consid....
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....ondent 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 Section 118 and 139 of the Negotiable Instruments Act, 1881 by the accused is that the burden to prove the accusations shifts back upon the complainant after the accused reasonably discharge the initial statutory onus of proof by establishing the facts contrary to the complaint's evidence, or by showing that the existence of consideration was improbable, or doubtful, or the same was illegal. After this, the burden shifts back to the complainant who will be obliged to prove her case just like any other criminal trial, where the initial burden is always on the accuser, and it never shifts. Failure to establish the accusations beyond a reasonable doubt....
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.... 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 reexamine any person who has already been examined if his evidence appears to it, to be essential to the arrival of a just decision of the case. Undoubtedly, the CrPC has conferred a very wide discretionary power upon the court in this respect, but such a discretion is to be exercised judiciously and not arbitrarily. The power of the court in this context is very wide, and in exercise of the same, it may summon any person as a witness at any stage of the trial, or other proceedings. The court is competent to exercise such power even suo motu if no such application has been filed by either of the parties. However, the court must satisfy itself, that it was in fact essential t....
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....ich 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., the date mentioned on it. vi. On which time or approximate date, the said money was handed over. 45. On the face of it, it is highly suspicious that why the complainant had handed over such a considerable amount to the accused. Given the facts that what made him hand over such a significant amount, that too without interest, and in the absence of any proven relationship, it is highly suspicious that the complainant had handed over the alleged amount of Rs. 4,00,000/- to the accused. The stand taken by the accused appears to be probable, and he has successfully rebutted the statutory presumptions. 46. In Basalingappa v. Mudibasappa, (2019) 5 SCC 418, Supreme Court observed, 29. Thus, there is a contradiction in what wa....
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....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. Court cannot insist on a person to lead negative evidence. The observation of the High Court that trial court's finding that the complainant failed to prove his financial capacity of lending money is perverse cannot be supported. We fail to see that how the trial court's findings can be termed as perverse by the High Court when it was based on consideration of the evidence, which was led on behalf of the defence. This Court had occasion to consider the expression "perverse" in GaminiBalaKoteswara Rao and others v. State of Andhra Pradesh through Secretary, 2009(4) R.C.R.(Criminal) 475 : (2009) 10 SCC 636, this Court held that although High Court can reappraise the evidence and conclusions drawn by the trial court but judgment of acquittal can be interfered with on....