TaxTMI 
TaxTMI 
2025 (4) TMI 170
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....No. 13496/2019, titled as "Sanjeev Singh Chauhan v. Trilok Singh", whereby the Trial Court has acquitted the Respondent for the offence under Section 138 of the Negotiable Instruments Act, 1881 ["NI Act"]. Factual Background 7. The relevant facts of the case, as set out in the complaint are summarised as follows: 7.1 In May 2017, the Petitioner advanced a friendly loan of Rs. 10,00,000/- to the Respondent, who is stated to be a personal acquaintance. The loan was disbursed partly by way of cheque for Rs. 2,00,000/-, and the remaining amount was paid in cash. 7.2 At the time of receiving the loan, the Respondent executed a mortgage deed in favour of the Petitioner and undertook to repay the amount in 32 monthly instalments of Rs. 21,000/- each. However, the Respondent defaulted and failed to pay any of the agreed instalments. 7.3 Subsequently, the Respondent issued a cheque bearing No. 024562 towards discharge of his liability. The said cheque, when presented for encashment on 16th August, 2019, was returned unpaid due to insufficient funds in the Respondent's account. 7.4 Following this, the Petitioner issued the statutory legal notice dated 20th August, 2019 unde....
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.... Q2. Do you wish to lead DE. Ans. No." 7.9 Based on the material on record and the evidence led by the parties, the Trial Court proceeded to deliver the impugned judgment, whereby the Respondent was acquitted of the offence under Section 138 of the NI Act. Petitioner's grounds of challenge 8. Aggrieved by the impugned judgment of acquittal, the Petitioner has preferred the present application seeking leave to appeal, raising the following grounds: 8.1 The Trial Court failed to properly apply the statutory presumptions under Sections 118 (a) and 139 of NI Act. Once the execution of the cheque is admitted, as in the present case, there arises a presumption in favour of the holder that the cheque was issued for the discharge, in whole or in part, of a legally enforceable debt or liability. This presumption is rebuttable in nature, but the burden lies squarely on the drawer of the cheque to disprove the existence of such liability by leading cogent and credible evidence. In the present case, the Respondent unequivocally admitted to having signed and issued the cheque in question. However, beyond a bare assertion that the cheque was given as "security," no subst....
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....other cheque for Rs. 1,25,000/- to make up the remaining amount. Although this factual sequence was not specifically mentioned in the initial complaint or supporting affidavit, it was clearly brought on record during the Petitioner's cross-examination and remains uncontroverted. The Trial Court, however, failed to take this explanation into account when evaluating the Petitioner's claim. This omission has resulted in a misreading of the evidentiary record and has materially affected the outcome of the case. Analysis 9. In proceedings under Section 138 of the NI Act, the law creates a presumption in favour of the holder of the cheque that it was issued in discharge of a legally enforceable debt or liability. Section 118 (a) of the Act presumes that the cheque was made or drawn for consideration, while Section 139 mandates that the Court shall presume that the cheque was issued for the discharge of such liability. Once execution of the cheque is admitted or established, these statutory presumptions operate automatically in favour of the complainant. However, it is equally well-settled that these presumptions are rebuttable. The accused is entitled to demonstrate, by cogent mate....
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....1,65,000/-, and not towards any legally enforceable liability equivalent to the cheque amount. Notably, the Respondent categorically denied having taken a loan of Rs. 10 lakhs, and asserted that the cheque was misused. The Respondent acknowledged his liability to the extent of Rs. 1,65,000/- and expressed his willingness to repay the same, however, he denied any liability for the amount mentioned in the cheque. Though he did not lead any defence evidence, his admissions and explanations were relevant for assessing whether the statutory presumption stood rebutted. 13. The central issue, therefore, is whether the defence so raised by the Respondent was sufficient to rebut the presumptions under Sections 118 and 139 of the NI Act on the touchstone of preponderance of probabilities. In this regard, it is pertinent to refer to the detailed findings recorded by the Trial Court: "19. In paragraph no.3 of the complaint, it has been stated by the complainant that out of total loan amount of Rs. 10,00,000/- Rs.2 lakhs were given to the accused by way of cheque bearing no. 791606. During cross-examination of CW-1 conducted on 19.12.2023, witness was shown Ex.CW-1/Xl i.e. statement....
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.... apparent contradiction. 23. The court is of the opinion that complainant has failed to prove his financial capacity to pay the alleged loan of Rs. 10,00,000/ - to the accused. 24. It is also imperative to understand that in order to pronounce a conviction in a criminal case, the accused 'must be' guilty and not merely 'may be' guilty. For an accused to be guilty, guilt should not be based on mere surmises and conjectures but it should be based on cogent evidence. 25. In view of the above discussion and in view of the judgments of Hon'ble Courts as stated above, the accused has been able to raise a probable defence and has been able to prove his defence on the basis of preponderance of probabilities that there is no legally enforceable debt or liability in favour of the complainant and against the accused equivalent to the amount of cheque in question as on the date of its drawal or on the date of its presentation. Thus, the accused has been able to rebut the presumption u/s. 118 r/w section 139 NI Act. Furthermore, the complainant has failed to prove his case beyond reasonable doubt qua the accused in respect of the cheque in question. 26. In vi....
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....hdrawal remains unsupported by any documentary evidence. 17. As for the remaining Rs. 2 lakhs, which the Petitioner claimed to have advanced to the Respondent, he vaguely asserted that the amount was arranged "... from friends, market and out of my own savings." However, the Petitioner failed to disclose the identity of any such friends, or to specify the source or nature of the market-based funding. No supporting material, such as loan documents, receipts, or even a basic outline of the alleged financial arrangements, was placed on record. Furthermore, the Petitioner did not produce his Income Tax Return ["ITR"] records for the relevant years to demonstrate his financial capacity or savings to extend the said loan. As such, the Petitioner has failed to substantiate his claim regarding the loan of Rs. 6 lakhs from his sister-in-law and Rs. 2 lakhs from CW-2, nor has he provided any proof of his financial ability to arrange for the remaining Rs. 2 lakhs from friends, the market, or his personal savings. 18. The Petitioner alleged in Paragraph No. 4 of the complaint that the Respondent had executed a mortgage deed in his favour as security for the loan. However, no such documen....
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.... is apparent that there existed a contradiction in the complaint moved by the Appellant as against his cross-examination relatable to the time of presentation of the cheque by the Respondent as per the statements of the Appellant. This is to the effect that while the Appellant claimed the cheque to have been issued at the time of advancing of the loan as a security, however, as per his statement during the cross examination it was revealed that the same was presented when an alleged demand for repayment of alleged loan amount was raised before the Respondent, after a period of six months of advancement. Furthermore, there was no financial capacity or acknowledgement in his Income Tax Returns by the Appellant to the effect of having advanced 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 Re....