TaxTMI 
TaxTMI 
2024 (10) TMI 377
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.... under Section 138 of N.I. Act. It was asserted that the complainant is a non- banking Financial Company engaged in providing financial assistance to the people for the purchase of the vehicle. The accused approached the complainant and asked for financial assistance by way of a loan for the purchase of the vehicle. The complainant entered into a Loan Agreement with the accused and advanced a sum of Rs.3,40,000/- for the purchase of the vehicle Mahindra Bolero. The accused was to repay Rs.4,59,000/- which included Rs.3,40,000/- as loan amount and Rs.1,19,000/- as the financial charges. The amount was to be repaid in 60 equated monthly instalments of Rs.7,650/- each. The accused was irregular in making the payment of several instalments. He violated the terms and conditions of the hire purchase agreement and defaulted in regular payment of the instalments. The accused surrendered the vehicle to the complainant on 22.02.2007 and the complainant disposed of the vehicle on 21.03.2007 as per the prescribed procedure. The complainant had to suffer a huge loss after adjusting the sale consideration. The accused issued a cheque for Rs.94,135/- on 18th April 2008 drawn on Kangra Central Co-....
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....away by the complainant. The accused had admitted the issuance of the cheque and there is a presumption in favour of the complainant that the cheque was issued in discharge of the legal liability. The burden was upon the accused to rebut this presumption by providing satisfactory evidence, but the accused failed to discharge this burden. Learned Trial Court erred in acquitting the accused. His plea that a blank signed cheque was issued as a security was not proved by any evidence. Therefore, it was prayed that the present appeal be allowed and the judgment passed by the learned Trial Court be set aside. 8.I have heard Mr Deepak Gupta learned counsel for the appellant-complainant and Mr. Vivek Singh Thakur learned counsel for the respondent-accused. 9.Mr Deepak Gupta learned counsel for the appellant-complainant submitted that a cheque carries with it a presumption of consideration. The accused was required to rebut the same. Learned Trial Court failed to notice this presumption and acquitted the accused merely on the ground that the vehicle was seized by the complainant. The version of the complainant that the accused had surrendered the vehicle was more probable than the ver....
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....ly appreciated the evidence on record and gave due consideration to all material pieces of evidence. The second point for consideration is whether the finding of the trial court is illegal or affected by an error of law or fact. If not, the third consideration is whether the view taken by the trial court is a possible view. A decision of acquittal is not meant to be reversed on a mere difference of opinion. What is required is an illegality or perversity. 27.It may be noted that the possibility of two views in a criminal case is not an extraordinary phenomenon. The "two-views theory" has been judicially recognised by the courts and it comes into play when the appreciation of evidence results in two equally plausible views. However, the controversy is to be resolved in favour of the accused. For, the very existence of an equally plausible view in favour of the innocence of the accused is a reasonable doubt in the case of the prosecution. Moreover, it reinforces the presumption of innocence. Therefore, when two views are possible, following the one in favour of the innocence of the accused is the safest course of action. Furthermore, it is also settled that if the view of th....
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....ppellate court is of the view that the acquittal rendered by the trial court deserves to be upturned (see Vijay Mohan Singh v. State of Karnataka [Vijay Mohan Singh v. State of Karnataka, (2019) 5 SCC 436 : (2019)2SCC(Cri)586]and Anwar Ali v. State of H.P. [Anwar Ali v. State of H.P., (2020) 10 SCC 166 : (2021) 1 SCC (Cri) 395] ). 7.2. With an order of acquittal by the trial court, the normal presumption of innocence in a criminal matter gets reinforced (see Atley v. State of U.P. [Atley v. State of U.P., 1955 SCC Online SC 51: AIR 1955 SC 807]). 7.3. If two views are possible from the evidence on record, the appellate court must be extremely slow in interfering with the appeal against acquittal (see Sambasivan v. State of Kerala [Sambasivan v. State of Kerala, (1998) 5 SCC 412: 1998 SCC (Cri) 1320])." 13.The present appeal must be decided as per the parameters laid down by the Hon'ble Supreme Court. 14.Vivek Guleria (CW-1) stated in his examination-in- chief that the accused had taken a loan from the complainant to purchase the Mahindra Bolero Camper. The amount of Rs.3,40,000/- was advanced, which included the financial charges of Rs.1,19,000/-. The amount....
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....en Rs.3,40,000/- as a loan and he was to repay Rs.4,59,000/- which included the financial charges of Rs.1,19,000/- in 60 equated monthly instalments of Rs.7,650/-. He admitted that the loan was to be repaid in 60 monthly equated instalments of Rs.7,650/-. Thus, the issuance of the loan amount and the liability of the accused to repay the same are not in dispute. 18.The statement of account (Ex.CW1/M) shows that the accused had defaulted in the repayment of the loan. The instalments were not being paid regularly. This corroborates the version of the complainant that the accused had defaulted in the repayment of the loan and the loan was not repaid as per the schedule. 19.The accused stated that he had issued a blank security cheque, which was misused by the complainant. This means that the issuance of the cheque was not disputed by him. It was laid down by this Court in Naresh Verma vs. Narinder Chauhan 2020(1) Shim. L.C. 398 that where the accused had not disputed his signatures on the cheque, the Court must presume that it was issued in discharge of legal liability and the burden would shift upon the accused to rebut the presumption. It was observed: - "8. Once sign....
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....0) 3 SCC (Cri) 575] in the following words: (SCC pp. 120-21, para 18) "18. In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant-accused." 14. Once the 2nd appellant had admitted his signatures on the cheque and the deed, the trial court ought to have presumed that the cheque was issued as consideration for a legally enforceable debt. The trial court fell in error when it called upon the res....
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.... course, such presumption is rebuttable in nature. However, to rebut the presumption, the accused was required to lead the evidence that the full amount due and payable to the complainant had been paid. In the present case, no such evidence has been led by the accused. The story put forward by the accused that the cheques were given by way of security is not believable in the absence of further evidence to rebut the presumption and more particularly the cheque in question was issued for the second time after the earlier cheques were dishonoured. Therefore, both the courts below have materially erred in not properly appreciating and considering the presumption in favour of the complainant that there exists legally enforceable debt or liability as per Section 139 of the NI Act. It appears that both, the learned trial court as well as the High Court, have committed an error in shifting the burden upon the complainant to prove the debt or liability, without appreciating the presumption under Section 139 of the NI 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 ....
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....aidhyan Balan, (1999) 7 SCC 510: 1999 SCC (Cri) 1284] wherein it is held as hereunder: (SCC pp. 516-17, para 9) "9. As the signature in the cheque is admitted being that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date on which the cheque bears. Section 139 of the Act enjoins the Court to presume that the holder of the cheque received it for the discharge of any debt or liability. The burden was on the accused to rebut the aforesaid presumption. The trial court was not persuaded to rely on the interested testimony of DW 1 to rebut the presumption. The said finding was upheld [Sankaran Vaidhyan Balan v. K. Bhaskaran, Criminal Appeal No. 234 of 1995, order dated 23-10-1998 (Ker)] by the High Court. It is not now open to the accused to contend differently on that aspect." 15.The learned counsel for the respondent has however referred to the decision of this Court in Basalingappa v. Mudibasappa [Basalingappa v. Mudibasap pa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571] wherein it is held as hereunder: (SCC pp. 432-33, paras 25-26) "25. We....
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....his financial capacity. In the years 2010-2011, as per own case of the complainant, he made a payment of Rs 18 lakhs. During his cross- examination, when the financial capacity to pay Rs 6 lakhs to the accused was questioned, there was no satisfactory reply given by the complainant. The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the burden on the complainant to prove his financial capacity and other facts." 16.In that light, it is contended that the very materials produced by the appellant and the answers relating to lack of knowledge of property details by PW 1 in his cross- examination would indicate that the transaction is doubtful, and no evidence is tendered to indicate that the amount was paid. In such an event, it was not necessary for the respondent to tender rebuttal evidence, but the case put forth would be sufficient to indicate that the respondent has successfully rebutted the presumption. 17.On the position of law, the provisions referred to in Sections 118 and 139 of the NI Act as also the enunciation of law as made by this Court need no reiteration as there is no ambiguity whatsoever. In, Basalingappav. M....
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....l Nazer, 2022 SCC Online SC 1131 wherein it was observed: "As per Section 139 of the N.I. Act, 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 discharge, in whole or in part, of any debt or other liability. Therefore, once the initial burden is discharged by the Complainant that the cheque was issued by the accused and the signature and the issuance of the cheque are not disputed by the accused, in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for any debt or other liability. The presumption under Section 139 of the N.I. Act is a statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt or other liability which is in favour of the Complainant/holder of the cheque, in that case, it is for the accused to prove the contrary." 26.This position was reiterated in Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: 2023 SCC OnLine SC 1275 wherein it was observed at page 161: 33.The NI Act provides for two presumptions: Section 118 and Section 139. Section 118 of the Act int....
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....plainant discharges the burden to prove that the instrument, say a cheque, was issued by the accused for discharge of debt, the presumptive device under Section 139 of the Act helps shifting the burden on the accused. The effect 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 [John Henry Wigmore and the Rules of Evidence: The Hidden Origins of Modern Law] 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 t....
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....SCC (Civ) 126: 2016 SCC Online SC 954 that issuing a cheque toward security will also attract the liability for the commission of an offence punishable under Section 138 of N.I. Act. It was observed: "9. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539: (2014) 5 SCC (Civ) 138:(2014) 6SCC (Cri)845] with reference to the explanation to Section 138 of the Act and the expression "for discharge of any debt or other liability" occurring in Section 138 of the Act. We are of the view that the question whether a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque, liability or debt exists or the amount has become legally recoverable, the section is attracted and not otherwise. 10.Reference to the facts of the present case clearly shows that though the word "security" is used in Clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreem....
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....bt or liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of the different High Courts noted earlier, this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court." 31.This position was reiterated in Sripati Singh v. State of Jharkhand, 2021 SCC Online SC 1002: AIR 2021 SC 5732, and it was held that a cheque issued as security is not a wastepaper and complaint under Section 138 of the N.I. Act can be filed on its dishonour. It was observed: "17. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not....
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....- was due on 11.06.2008. The cheque was issued for Rs.94,135/- on 18.04.2008 which means that the accused had a subsisting liability of Rs.94,135/- on the date of issuance of the cheque. Even if a blank cheque was issued by the accused as a security, the complainant had sufficient authority to fill the amount and present it before the Court since the amount of Rs.94,135/- was due on 18.04.2008. It was laid down by the Hon'ble Supreme Court in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC Online SC 138, that a person is liable for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act even if the cheque is filled by some other person. It was observed: "33. A meaningful reading of the provisions of the Negotiable Instruments Act including sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the dra....
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....y belonged to the complainant Company. He informed the accused about this fact. Baldev Singh (DW-2) also made a similar statement. 35.The statements of these witnesses are not believable. The accused had not taken any action against the persons, who had taken the vehicle from his driver. He had not even made a report to the police. He simply believed the version of his driver that the vehicle was snatched by the employees of Mahindra and Mahindra. He had not even written a letter to the Company asking the Company whether the vehicle was taken by it or not. He had taken the vehicle on loan and if the vehicle was snatched, he would have taken some steps, at least he would have sought confirmation from the Company whether the vehicle was taken by the Company or not. The fact that the accused had not taken any action immediately after the seizure of the vehicle shows that the version of the defence witnesses is not believable. 36.It was submitted that the complainant had sold the vehicle without associating the accused. Learned Trial Court held that there was no proof of the delivery of the letter (Ex.CW1/C) written by the Company as the postal receipt was not annexed to the same....
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....ilar circumstances, the Hon'ble Supreme Court held in Rohit bhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106, 18 that once the presumption had been drawn, the onus shifted to the accused and unless the accused discharged the onus, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of fund or non- examination of the witnesses. It was observed: - "18. In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence ....
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....of money due to him "on an account maintained by him" with a banker and only on "that account" the cheque should be drawn. This would be clear by reading the section along with provisos (a), (b) and (c). ******** 15. In view of the aforesaid discussion we are of the opinion that even though Section 138 is a penal statute, it is the duty of the court to interpret it consistent with the legislative intent and purpose to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote the efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above "brush away the cobweb varnish, and shew the transactions in their true light" (Wilmot, C.J.) or (by Maxwell) "to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited"....
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.... whether such an account was alive or dead on the date of issuance of the cheque. The interpretation of the expression "on an account maintained by him" as given by the learned Trial Magistrate and contended by the learned Counsel for the accused is artificial and beyond the legislative intent. While interpreting the provision, the legislative purpose and goal must be kept in mind. We cannot lose sight of the fact that in this era, financial transactions are not dependent on cash and therefore financial transactions by other modes including "cheques" must be attached credibility. 10.The following observations of the Supreme Court in NEPC Micon Ltd. v. Magma Leasing Ltd., II (2006) BC 316 (SC): IV (1999) SLT 254: III (1999) CCR 4 (SC): (1999) 4 SCC 253, are apposite: "10. This Court in the case of Kanwar Singh v. Delhi Admn. While construing Section 418(i) of the Delhi Municipal Corporation Act, 1959 observed- 'It is the duty of the Court in construing a statute to give effect to the intention of the legislature. If, therefore, giving a literal meaning to a word used by the draftsman, particularly in a penal statute, would defeat the object of the Legislature, whic....
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....e to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote the efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above "brush away the cobweb varnish, and show the transactions in their true light" (Wilmot C.J.) or (by Maxwell) "to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited" Hence when the cheque is returned by a Bank with an endorsement "account closed". It would amount to returning the cheque unpaid because "the amount of money standing to the credit of that account is insufficient to honour the cheque" as envisaged in Section 138 of the Act." 13.If the interpretation as contended by the learned Counsel for the accused and the Trial Court is to be accepted, then a person who receives the che....
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....the account closed. 43. The complainant stated that a notice (Ex.CW1/H) was issued to the accused by registered post as well as a postal certificate. The registered letter (Ex.CW1/L) was returned with an endorsement 'refused'. Thus, the same was deemed to have been delivered to the accused. Further, the complainant stated that the registered letter sent by UPC was not returned, therefore, the same is presumed to have been served upon the accused. It was laid down by the Hon'ble Supreme Court in C.C. Alavi Haji v.Palapetty Muhammed, (2007) 6 SCC 555: (2007) 3 SCC (Cri) 236:2007 SCC Online SC 772 that when the registered letter containing the notice is returned unserved with the endorsement of refused, the notice is deemed to have been served. It was observed at page 564 "14. Section 27 gives rise to a presumption that service of notice has been affected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that despite the return of the notice unserved, it is deemed to have been served or that t....
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....sumption to the contrary under Section 27 of the G.C. Act and Section 114 of the Evidence Act. In our view, any other interpretation of the proviso would defeat the very object of the legislation. As observed in Bhaskaran's case (supra), if the giving of notice in the context of Clause (b) of the proviso was the same as the receipt of notice a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act." (Emphasis supplied). 45.Thus, the ingredients of Section 138 of the Negotiable Instrument Act were duly satisfied in the present case and the learned Trial Court erred in acquitting the accused. 46.Learned Trial Court had improperly construed the presumption under Section 139 and Section 118 of N.I. Act, which affected the whole approach of learned Trial Court, and such a judgment is liable to be interfered with even while exercising jurisdiction against an order of acquittal. It was laid down in Rajesh Jain (supra) that when the Court failed to consider the presumption under Section 139 of the Negotiable Instruments Act, its judgment could be interfered with. It was ....