TaxTMI 
TaxTMI 
2025 (4) TMI 1314
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....ed' and the respondent Hereinafter referred to as the 'Complainant' had known each other for over a decade and shared a friendly relationship. The case of the complainant is that he extended a hand loan of Rs.20,00,000/- (twenty lakh rupees) to the accused, to help him produce a Kannada feature film titled 'Indian Police History'. In discharge of this alleged loan, the accused issued a cheque bearing No.015138, dated 14th October 2008, in favour of the complainant. However, upon presentation for encashment, the cheque was dishonoured on 20th October 2008 with an endorsement 'Refer to Drawer', indicating insufficient funds in the accused's account. 2.2. Consequently, the complainant issued a statutory legal notice dated 25th October 2008, demanding repayment of the amount. The accused, through his reply dated 7th November 2008, denied any liability and raised the following contentions: (i) The cheque in question was issued merely as a security instrument for a smaller loan of Rs.3,50,000/- (three lakh fifty thousand rupees), availed by the appellant-accused for production of Indian Police History, which was completed in 2003. This loan had already been settled in ter....
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....able debt by the accused to the complainant by relying upon the oral evidence of pw. 1, DWs. 1 to 3 and documents available on record." 2.5. Aggrieved by the said order of acquittal, the complainant preferred an appeal before the High Court bearing Criminal Appeal No.94/2011. Vide the impugned judgment dated 21st December 2020, the High Court reversed the finding of acquittal returned by the Trial Court and convicted the accused for an offence punishable under Section 138 of the N.I. Act and directed him to pay Rs.22,00,000/- (twenty two lakh rupees) within eight weeks, in default whereof he was to undergo simple imprisonment for one year. The reasoning for such a conclusion, as can be understood from the perusal of the judgment, is that : "30. Having taken note of the evidence of DW.2, it is clear that the amounts are not given to the complainant. DW.3 though in his evidence, he says that the amount was paid in his presence and the complainant has affixed the signature on Ex.D2. It is elicited in the cross-examination that he does not know anything about the payment of money by the complainant to the accused and also how much amount was paid to him, but he claims that ....
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....d to the service of notice is concerned and so also the Apex Court in the Judgment of Rangappa's case (supra), categorically held that when the notice is issued and the accused did not dispute the issuance of cheque and signature, the presumption available in favour of the complainant unless the evidence of the complainant is rebutted. In the case on hand, though the accused made all efforts to rebut the case of complainant nothing is elicited in the crossexamination of PW.1 and instead of the evidence, which he has adduced as DW.1 and also DWs.2 and 3 and the same falsifies the case of the accused. The very defense of the accused is that in one breath he borrowed an amount of Rs.3 Lakhs and in another breath an amount of Rs.3,50,000/-, totally, repaid the amount of Rs.5,50,000/-, In view of the admission, it is narrow down the case of the complainant since the accused admitted the transaction but only the defense is that he repaid the amount of Rs.5,50,000/-." OUR VIEW 3. In the present special leave petition, while passing order on the application seeking exemption from surrendering, learned Judge in Chambers vide order dated 15th March 2021 directed Rs.11,00,000/- (ele....
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....he contrary is proved, that the promissory note was made for consideration. It is also a settled position that the initial burden in this regard lies on the defendant to prove the non-existence of consideration by bringing on record such facts and circumstances which would lead the court to believe the non-existence of the consideration either by direct evidence or by preponderance of probabilities showing that the existence of consideration was improbable, doubtful or illegal. In this connection, reference may be made to a decision of this Court in Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal [(1999) 3 SCC 35] . In para 12 of the said decision, this Court observed as under : (SCC pp. 50-51) "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 cons....
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....." ( Emphasis Supplied ) 6.2. In Kumar Exports v. Sharma Carpets (2009) 2 SCC 513, this Court examined the presumptions raised by the N.I. Act, and held as follows : "18. Applying the definition of the word "proved" in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. 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. 19. The use of the....
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....nces so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act. 21. The accused has also an option to prove the nonexistence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue." (Emphasis Supplied) 6.3. A three-Judge Bench of this Court in Rangappa (supra) had the occasion to consider Section 139 elaborately. The Court reiterated that where the signature on the cheque is acknowled....
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.... place. So much so, the complaint does not even indicate the date on which the loan was demanded and advanced. It is blissfully silent about these aspects thereby making the entire story suspect. We are not unmindful of the fact that there is a presumption that the issue of a cheque is for consideration. Sections 118 and 139 of the Negotiable Instruments Act make that abundantly clear. That presumption is, however, rebuttable in nature. What is most important is that the standard of proof required for rebutting any such presumption is not as high as that required of the prosecution. So long as the accused can make his version reasonably probable, the burden of rebutting the presumption would stand discharged. Whether or not it is so in a given case depends upon the facts and circumstances of that case. It is trite that the courts can take into consideration the circumstances appearing in the evidence to determine whether the presumption should be held to be sufficiently rebutted. The legal position regarding the standard of proof required for rebutting a presumption is fairly well settled by a long line of decisions of this Court." 6.5. This Court in the case of Baslingappa v. M....
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....but also by reference to the circumstances upon which they rely." 7. The position of law, as is evident from the above, is clear. 8. Now, in the instant facts, let us consider whether the presumption stands sufficiently rebutted or not. In the crossexamination of DW-1 (appellant) it has been stated that he had issued two blank signed cheques for availing the hand loan of Rs.3,50,000/- (three lakh fifty thousand rupees) from the complainant. Further, the accused in the affidavit, submitted in the Trial Court, stated as under: "At that time I have approached the complainant for hand loan of Rs. 3,50,000/- (Rupees Three Lakhs Fifty Thousand only). At the time of giving the above said amount the complainant was took two blank cheques signed by me for security purpose and both the cheques were drawn on Canara Bank, Sampangi Ramanagara, Bangalore- 560 027." 9. Very clearly, therefore, it can be seen that the cheques issued were against an enforceable debt and held by the complainant as such, even though there was no paperwork to that effect. The onus, as such, was shifted upon the other party, i.e., the accused, to raise a probable defence against such presumption. 1....
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....r Section 139 does not again come to the complainant's rescue. Once both parties have adduced evidence, the Court has to consider the same and the burden of proof loses all its importance. [Basalingappa v. Mudibasappa {Basalingappa v. Mudi basappa, (2019) 5 SCC 418 : (2019) 2 SCC (Cri) 571 : AIR 2019 SC 1983] ; see also, Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184 : AIR 2010 SC 1898}]" 12. In our considered view, the complainant has failed to discharge this burden. In his cross-examination, the complainant has stated as follows : "During the year 2002, I have paid loan to the accused on 7-8 times. I have maintained the account on which dates I have paid the loan to the accused. In that regard, I have subscribed my signatures in the book which was with the accused. Accused issued cheques for having obtained 7-8 times loan from me. I have paid the amount to the accused two times in my house and 5-6 times in my lodge. I have not obtained the receipt for having received the loan amount by the accused." It has also come on record that the cheque, subject matter of controversy, was given to the compl....