TaxTMI 
TaxTMI 
2024 (9) TMI 453
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....ing to friendly relationship with the Respondent and upon request of the latter, extended financial help in the sum of Rs. 14 lacs on a number of occasions between 29.09.2011 and 11.01.2012. Petitioner was assured that the said amount will be repaid by March, 2012. In discharge of his liability, Respondent issued a cheque bearing No. 546144 for a sum of Rs. 8 lacs, dated 05.03.2012 drawn on Canara Bank, Najafgarh, New Delhi, which on presentation was dishonoured and the reason in the dishonour memo was 'exceeds arrangement'. 3. It is the case of the Petitioner that when the Respondent was informed of the dishonour of the cheque, he apologized to the Petitioner and issued a fresh cheque bearing No.550403 dated 03.04.2012 for a sum of Rs. 8 lacs drawn on Canara Bank, Najafgarh, New Delhi, but the said cheque was also dishonoured on presentation for the same reason 'exceeds arrangement'. Constrained by this, Petitioner sent a legal notice to the Respondent on 17.04.2012 but no payment was made within the prescribed period and Petitioner filed a criminal complaint under Sections 138-142 of Negotiable Instruments Act, 1881 (hereinafter referred to as 'NI Act'). 4. Pre-summoning ev....
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....s gesture won the trust of the Respondent and therefore, having faith in the Petitioner, Respondent issued the cheque of Rs. 8 lacs in his favour. However, the Bank Manager informed him that the cheque was misplaced and in this background, a second cheque for Rs. 8 lacs was issued by the Respondent. Receipt of legal notice sent by the Petitioner calling upon the Respondent to pay the amount was admitted by the Respondent. On failing to get back the payment from the Respondent, Petitioner filed a complaint under Sections 138-142 of NI Act. 8. Petitioner examined himself and the Branch Manager of the concerned Bank while Respondent only gave a Statement under Section 313 Cr.P.C. and did not lead defence evidence. Trial Court convicted the Respondent for the offence punishable under Section 138 NI Act vide judgment dated 15.10.2015 and vide order dated 05.11.2015, sentenced him to simple imprisonment for a period of four months. Respondent was also directed to pay a compensation of Rs.10 lacs to the Petitioner within 30 days and in case of default, to further undergo SI for two months. Trial Court observed that once the Respondent admitted that he had issued the cheque and had sign....
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....om 29.09.2011 till 27.01.2012. Entry of Rs.7 lacs reflected in the bank statement in favour of one Harish was, in fact, the loan advanced to the Respondent as Harish was known to him and therefore, Appellate Court erred in concluding that Petitioner was unable to prove that a sum of Rs. 14 lacs was advanced as loan to the Respondent. 11. It was further contended that Respondent had filed a false and frivolous complaint against the Petitioner under Section 138 read with Section 142 NI Act alleging that he had given a sum of Rs. 18 lacs to the Petitioner on 24.11.2011 for investing in a flat in Kargil Apartments, Dwarka. Petitioner had again approached him with a proposal to invest some money in flats in Lok Nayak Puram and Respondent agreed and issued a cheque of Rs. 8 lacs for investment. In March, 2012, Petitioner informed the Respondent that the deal of flats in Kargil Apartments was finalized and issued a cheque of Rs. 18 lacs, bearing No.100479 dated 25.03.2012 drawn on Oriental Bank of Commerce, Village and Post Office Dichaon Kalan, Najafgarh, New Delhi, in favour of the Respondent to return the money. By this act, it was alleged that Petitioner won the trust of the Respon....
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.... Bank and on the back of the cheque, an endorsement to this effect was made by the Branch Manager. These admissions of the Respondent were sufficient to prove the case of the Petitioner that he had advanced Rs. 14 lacs and Respondent had issued a cheque in discharge of legal liability towards the Petitioner. 14. Lastly, it was argued that Appellate Court wrongly held that the bank statement of the Petitioner did not show a single transaction of Rs. 10,12,000/- and Petitioner had not stated in his complaint or during the pre-summoning evidence that he had transferred the amount in the account of the Respondent. This finding is against the categorical stand of the Petitioner in his complaint that he had given loan to the Respondent on different occasions from 29.09.2011 to 11.01.2012. Appellate Court wrongly held that the presumption was rebutted by a mere denial by the Respondent of having availed the loan of Rs. 14 lacs, as the presumption in law under Section 139 NI Act predicated on the admission of an accused that the cheque was issued and signed by him, cannot be rebutted by a mere denial. Court has also erred in holding that Petitioner admitted issuance of cheque of Rs. 18 ....
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.... was advanced and nor was any document produced to show part payment in cash to the Respondent. Petitioner made several attempts to establish that loan was advanced but was unsuccessful as neither the ITR nor the balance sheets reflected that payments were made in favour of the Respondent. The stand of the Petitioner that a sum of Rs.7 lacs was paid to the Respondent indirectly through Harish also turned out to be incorrect and Appellate Court rightly noted that no evidence was led to show that Harish had received the amount on behalf of the Respondent. The complaint filed by the Petitioner is false and fabricated with an intent to maliciously prosecute the Respondent and Appellate Court rightly acquitted the Respondent and thus the judgment warrants no interference. 17. Heard learned counsels for the Petitioner and the Respondent and examined their rival submissions. 18. Indisputably, Respondent has been acquitted by the learned Additional Sessions Judge in appeal filed by him against his conviction by the Trial Court and therefore, the first issue that needs consideration is the scope and ambit of interference by an Appellate Court in a judgment acquitting the accused. Appe....
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....ecision was based on an erroneous view of law; (iii) The Trial Court's judgment is likely to result in "grave miscarriage of justice"; (iv) The entire approach of the Trial Court in dealing with the evidence was patently illegal; (v) The Trial Court's judgment was manifestly unjust and unreasonable; (vi) The Trial Court has ignored the evidence or misread the material evidence or has ignored material documents like dying declarations/report of the ballistic expert, etc. (vii) This list is intended to be illustrative, not exhaustive. 2. The appellate court must always give proper weight and consideration to the findings of the Trial Court. 3. If two reasonable views can be reached-one that leads to acquittal, the other to conviction-the High Courts/appellate courts must rule in favour of the accused. 71. Had the well-settled principles been followed by the High Court, the accused would have been set free long ago. Though the appellate court's power is wide and extensive, it must be used with great care and caution." 19. In Bannareddy and Others v. State of Karnataka and Others, 2018 SCC OnLine SC ....
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.... powers to review the evidence and to come to its own conclusion. The power to grant leave must be exercised with care and caution because the presumption of innocence is further strengthened by the acquittal of an accused." 22. It would be relevant and useful to allude to the observations of this Court in Niraj v. Ramesh Pratap Singh @ Raju Singh, 2012 SCC OnLine Del 3813, which are extracted hereunder for ready reference:- "6. It is also well settled that the Appellate court should reverse an acquittal only for very substantial and compelling reasons. In the event, two views are possible on the evidence adduced before the Trial Court and the view taken by the Trial Court is a plausible view, the Appellate Court should not interfere and substitute its own view against the plausible view taken by the Trial Court. In fact, the Supreme Court in Chandrappa v. State of Karnataka, (2007) 4 SCC 415 while referring to previous cases laid down the following general principles regarding the powers of appellate court while dealing an appeal against an order of acquittal:- "42. From the above decisions, in our considered view, the following general principles regarding po....
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.... guilty. The accused possessed this presumption when he was before the trial Court. The trial Court's acquittal bolsters the presumption that he is innocent. This fundamental principle must be kept in view while dealing with the judgments of acquittal passed by the trial Court."" 23. In the backdrop of these judgments, wherein law on interference by an Appellate Court in a judgment acquitting the accused has been crystallized, I may now proceed to examine the impugned judgment passed by the learned ASJ acquitting the Respondent, basis the evidence on record, both oral and documentary and rival arguments of the parties. 24. Before proceeding, it would be important to refer to Section 138 of NI Act, which is extracted hereunder for ready reference:- "Section 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 accoun....
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....xceeds the amount arranged to be paid from that account. 26.5. A notice by the payee or the holder in due course making a demand for the payment of the amount to the drawer of the cheque within 30 days of the receipt of information from the bank in regard to the return of the cheque. 26.6. The drawer of the cheque failing to make payment of the amount of money to the payee or the holder in due course within 15 days of the receipt of the notice." 26. In K.Bhaskaran v. Sankaran Vaidhyan Balan and Another, (1999) 7 SCC 510, once again the constituent elements of the offence under Section 138 of NI Act were brought forth as follows: "14. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. The following are the acts which are components of the said offence: (1) drawing of the cheque, (2) presentation of the cheque to the bank, (3) returning the cheque unpaid by the drawee bank, (4) giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice."....
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....ence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, 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 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." 14. S.B. Sinha, J. in M.S. Narayana Menon v. State of Kerala [M.S. Narayana Menon v. State of Kerala, (2006) 6 SCC 39 : (2006) 3 SCC (Cri) 30] 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, the following was held in para 28: (SCC p. 49) "28. Wha....
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....i) 30] held that what is needed is to raise a probable defence, for which it is not necessary for the accused to disprove the existence of consideration by way of direct evidence and even the evidence adduced on behalf of the complainant can be relied upon. Dealing with standard of proof, the following was observed in para 32: (SCC p. 51) "32. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies." 17. In Krishna Janardhan Bhat v. Dattatraya G. Hegde [Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54 : (2008) 2 SCC (Cri) 166] , this Court held that 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. The following was laid down in para 32: (SCC p. 62) "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 reco....
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.... 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. 20. ... 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 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 t....
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....ble presumption. In para 26, the following was laid down: (Rangappa case [Rangappa v. Sri Mohan, (2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184] , SCC p. 453) "26. 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 [Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54 : (2008) 2 SCC (Cri) 166] 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." 22. Elaborating further, this Court in Rangappa case [Rangappa v. Sri Mohan, (2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011)....
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....e is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability. 25.2. The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. 25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. 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 they rely. 25.4. That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden. 25.5. It is not necessary for the accused to come in the witness box to support his defence." 28. Dealing with and analysing the effect of presumption and shifting of onus of proof, the Supreme Court in Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148,....
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.... of the presumption, in that sense, is to transfer the evidential burden on the accused of proving that the cheque was not received by the Bank towards the discharge of any liability. Until this evidential burden is discharged by the accused, the presumed fact will have to be taken to be true, without expecting the complainant to do anything further. 38. John Henry Wigmore on Evidence states as follows: "The peculiar effect of the presumption of law is merely to invoke a rule of law compelling the Jury to reach the conclusion in the absence of evidence to the contrary from the opponent but if the opponent does offer evidence to the contrary (sufficient to satisfy the Judge's requirement of some evidence), the presumption 'disappears as a rule of law and the case is in the Jury's hands free from any rule'." 39. The standard of proof to discharge this evidential burden is not as heavy as that usually seen in situations where the prosecution is required to prove the guilt of an accused. The accused is not expected to prove the non-existence of the presumed fact beyond reasonable doubt. The accused must meet the standard of "preponderance of probabili....
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....idence and, if the circumstances so relied upon are compelling, the burden may likewise shift to the complainant. It is open for him to also rely upon presumptions of fact, for instance those mentioned in Section 114 and other sections of the Evidence Act. The burden of proof may shift by presumptions of law or fact. In Kundan Lal case when the creditor had failed to produce his account books, this Court raised a presumption of fact under Section 114, that the evidence, if produced would have shown the non-existence of consideration. Though, in that case, this Court was dealing with the presumptive clause in Section 118 NI Act, since the nature of the presumptive clauses in Sections 118 and 139 is the same, the analogy can be extended and applied in the context of Section 139 as well. 44. Therefore, in fine, it can be said that once the accused adduces evidence to the satisfaction of the Court that on a preponderance of probabilities there exists no debt/liability in the manner pleaded in the complaint or the demand notice or the affidavit-evidence, the burden shifts to the complainant and the presumption "disappears" and does not haunt the accused any longer. The onus hav....
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.... Rao case [(2008) 7 SCC 655], then proceeded to cite an extract from the earlier decision in Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal [(1999) 3 SCC 35] : (SCC pp. 50-51, para 12) "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 improbable 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 consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff....
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....138 would not be made out. The important thing is that the burden of so proving would be on the accused." (emphasis supplied) 26. 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 [(2008) 4 SCC 54 : (2008) 2 SCC (Cri) 166] 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. 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 spec....
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....in the original complaint; case in the legal/demand notice; complainant's case at the trial; plea of the accused in the reply notice; and/or accused's Statement under Section 313 Cr.P.C. or at the trial as to circumstances under which promissory note/cheque was issued. All of these can raise preponderance of probabilities justifying a finding that there was no debt/liability. The evidence could be circumstantial or on presumption of law or fact and need not necessarily be direct. Relevant passages are as under:- "Burden of proof and presumptions : Conceptual underpinnings 28. There are two senses in which the phrase "burden of proof" is used in the Evidence Act, 1872 ("the Evidence Act" hereinafter). One is the burden of proof arising as a matter of pleading and the other is the one which deals with the question as to who has first to prove a particular fact. The former is called the "legal burden" and it never shifts, the latter is called the "evidential burden" and it shifts from one side to the other. [See Kundan Lal Rallaram v. Custodian (Evacuee Property) [Kundan Lal Rallaram v. Custodian (Evacuee Property), 1961 SCC OnLine SC 10 : AIR 1961 SC 1316] .] ....
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....uttable presumption of law). The distinction between "may presume" and "shall presume" clauses is that, as regards the former, the Court has an option to raise the presumption or not, but in the latter case, the Court must necessarily raise the presumption. If in a case the Court has an option to raise the presumption and raises the presumption, the distinction between the two categories of presumptions ceases and the fact is presumed, unless and until it is disproved. [G. Vasu v. Syed Yaseen Sifuddin Quadri [G. Vasu v. Syed Yaseen Sifuddin Quadri, 1986 SCC OnLine AP 147 : AIR 1987 AP 139] ] Section 139, NI Act-Effect of presumption and shifting of onus of proof xxx xxx xxx 41. In other words, the accused is left with two options. The first option-of proving that the debt/liability does not exist-is to lead defence evidence and conclusively establish with certainty that the cheque was not issued in discharge of a debt/liability. The second option is to prove the non-existence of debt/liability by a preponderance of probabilities by referring to the particular circumstances of the case. The preponderance of probability in favour of the accused's case may be eve....
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....ine SC 1899 and relevant passages are as follows:- "21. In light of the aforesaid discussion, and as underscored by this Court recently in the decision of Rajesh Jain v. Ajay Singh, an accused may establish non-existence of a debt or liability either through conclusive evidence that the concerned cheque was not issued towards the presumed debt or liability, or through adduction of circumstantial evidence vide standard of preponderance of probabilities. 22. Since a presumption only enables the holder to show a prima facie case, it can only survive before a court of law subject to contrary not having been proved to the effect that a cheque or negotiable instrument was not issued for a consideration or for discharge of any existing or future debt or liability. In this backdrop, it is pertinent to make a reference to a decision of 3-Judge Bench in Bir Singh v. Mukesh Kumar, which went on to hold that if a signature on a blank cheque stands admitted to having been inscribed voluntarily, it is sufficient to trigger a presumption under Section 139 of the NI Act, 1881, even if there is no admission to the effect of execution of entire contents in the cheque. xxx ....
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.... the offence under Section 138 NI Act but the Appellate Court has set aside the judgment of the Trial Court and acquitted the Respondent. Applying the principles elucidated by the Supreme Court, since the Respondent admitted the issuance of the cheque in question as also his signatures, a presumption arose in favour of the Petitioner under Section 139 NI Act that the cheque was issued in discharge of debt/liability. The moot question, therefore, that arises for consideration is whether any probable defence was raised by the Respondent to rebut the said presumption. 33. Defence of the Respondent was that the cheque in question for a sum of Rs. 8 lacs was given by him for the sole purpose of investment in flats in Lok Nayak Puram, Bakkarwala, New Delhi, pursuant to a proposal by the Petitioner as they were earlier also dealing with each other for purchase of some property at Kargil Apartments. Respondent had filed a complaint under Section 138 NI Act against the Petitioner when the cheque issued by him for a sum of Rs. 18 lacs was dishonoured when presented in the bank by the Respondent, relating to Kargil Apartments. Petitioner was unable to dent this defence and his own witness ....
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....tand of the Petitioner of having advanced the loan. It is pertinent to mention that during pendency of the appeal, certified copy of the bank account statement was produced by the Petitioner, but it is noted by the Appellate Court that there was not a single entry showing transfer of Rs. 10,12,000/- into the account of the Respondent through demand draft or cheques. An entry of Rs.7 lacs was found in the name of one Harish on 21.12.2011 but as rightly noted by the Court, the same could not be read as an entry in favour of the Respondent as no evidence came on record that Rs.7 lacs were transferred to Harish on behalf of the Respondent. Even with regard to the alleged cash payment of Rs.3,87,000/-, no receipt was produced by the Petitioner. Therefore, the Appellate Court rightly came to the conclusion that there was no evidence on record to establish that Petitioner had advanced a sum of Rs. 14 lacs to the Respondent as loan. 37. It is crucial to note that for the first time in the cross-examination, Petitioner explained the circumstances in which the cheques came to be issued. It was his case that the second cheque was issued as the first cheque of Rs. 8 lacs was taken away by t....
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.... Evidence Act that the evidence if produced would have shown the non-existence of the consideration. Following these observations, in Rajesh Jain (supra), the Supreme Court held as follows in paragraphs 42 and 43, which at the cost of repetition are extracted hereunder:- "42. The nature of evidence required to shift the evidential burden need not necessarily be direct evidence i.e. oral or documentary evidence or admissions made by the opposite party; it may comprise circumstantial evidence or presumption of law or fact. 43. The accused may adduce direct evidence to prove that the instrument was not issued in discharge of a debt/liability and, if he adduces acceptable evidence, the burden again shifts to the complainant. At the same time, the accused may also rely upon circumstantial evidence and, if the circumstances so relied upon are compelling, the burden may likewise shift to the complainant. It is open for him to also rely upon presumptions of fact, for instance those mentioned in Section 114 and other sections of the Evidence Act. The burden of proof may shift by presumptions of law or fact. In Kundan Lal case [Kundan Lal Rallaram v. Custodian (Evacuee Prop....
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....ed a loan to the Respondent. Even further the Appellant has not been able to showcase as to when the said loan was advanced in favour of the Respondent nor has he been able to explain as to how a cheque issued by the Respondent allegedly in favour of Mr. Mallikarjun landed in the hands of the instant holder, that is, the Appellant. 28. Admittedly, the Appellant was able to establish that the signature on the cheque in question was of the Respondent and in regard to the decision of this Court in Bir Singh (supra), a presumption is to ideally arise. However, in the above referred context of the factual matrix, the inability of the Appellant to put forth the details of the loan advanced, and his contradictory statements, the ratio therein would not impact the present case to the effect of giving rise to the statutory presumption under Section 139 of the NI Act, 1881. The Respondent has been able to shift the weight of the scales of justice in his favour through the preponderance of probabilities. 29. The Trial Court had rightly observed that the Appellant was not able to plead even a valid existence of a legally recoverable debt as the very issuance of cheque is dubi....