TaxTMI 
TaxTMI 
2025 (5) TMI 1737
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs.1,60,000/- in cash. An agreement (Ex.CW1/K) was executed between the parties regarding this transaction on 31.10.2019. The accused issued two security cheques for Rs.1,60,000/- and Rs.11,00,000/- drawn on H.P. State Cooperative Bank Ltd., Sanjauli, District Shimla, H.P. It was agreed that the cheque would be presented in case of non-return of the loan. The accused failed to return the loan, and the complainant presented the cheque. However, the cheques were dishonoured with an endorsement "insufficient funds". The complainant served legal notice (Ex.CW1/G) upon the accused, asking him to make the payment of the cheque amount within 15 days. The notice was served upon the accused, but he failed to pay the amount. Hence, the complaint was filed before the learned Trial Court to take action against the accused. 3. The learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, the notice of accusation was put to him for the commission of an offence punishable under Section 138 of the Negotiable Instruments (NI) Act, to which he pleaded not guilty and claimed to be tried. 4. The complainant examined himself (CW1) to prove his case. 5. The accus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nterest on the amount advanced to him. The amount of Rs.19,00,000/- was harsh. Hence, the compensation amount was reduced to Rs.15,60,000/-. Consequently, the appeal was partly allowed, and the fine amount was reduced by the learned Appellate Court. 8. Being aggrieved by the judgments and order passed by the learned Courts below, the accused has filed the present petition, asserting that the learned Courts below erred in appreciating the evidence. The judgments are against the facts of the case. The evidence was not properly appreciated. The complainant was required to prove his case beyond a reasonable doubt. The view taken by the learned Courts below was contrary to the record. The accused had no legal liability. There were material contradictions in the statements of the witnesses. Therefore, it was prayed that the present petition be allowed and the judgments and order passed by the learned Courts below be set aside. 9. I have heard Mr. D.N. Sharma, learned counsel for the petitioner/accused. 10. Learned counsel for the petitioner/accused submitted that the learned Courts below failed to properly appreciate the material placed before them. The plea taken by the accused that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....apposite to refer to the judgment of this court in Amit Kapoor v. Ramesh Chandra, (2012) 9 SCC 460, where the scope of Section 397 has been considered and succinctly explained as under: "12. Section 397 of the Code vests the court with the power to call for and examine the records of an inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error, and it may not be appropriate for the court to scrutinise the orders, which, upon the face of it, bear a token of careful consideration and appear to be in accordance with the law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes but are merely indicative. Each case would have to be determined on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... gross miscarriage of justice. On scrutinising the impugned judgment of the High Court from the aforesaid standpoint, we have no hesitation in coming to the conclusion that the High Court exceeded its jurisdiction in interfering with the conviction of the respondent by reappreciating the oral evidence. ..." 13. Another judgment which has also been referred to and relied on by the High Court is the judgment of this Court in Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke [Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke, (2015) 3 SCC 123: (2015) 2 SCC (Cri) 19]. This Court held that the High Court, in exercise of revisional jurisdiction, shall not interfere with the order of the Magistrate unless it is perverse or wholly unreasonable or there is non-consideration of any relevant material, the order cannot be set aside merely on the ground that another view is possible. The following has been laid down in para 14: (SCC p. 135) "14. ... Unless the order passed by the Magistrate is perverse or the view taken by the court is wholly unreasonable or there is non-consideration of any relevant material or there is palpable misreading of records, the Revisional Court is not ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roved when its existence is directly established or when, upon the material before it, the Court finds its existence to be so probable that a reasonable man would act on the supposition that it exists. Unless, therefore, the explanation is supported by proof, the presumption created by the provision cannot be said to be rebutted " 9. S.139 of the Act provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability. 17. Similar is the judgment in Basalingappa vs. Mudibasappa 2019 (5) SCC 418 wherein it was held: "26. Applying the proposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque, having been admitted, a presumption shall be raised under Section 139 that the cheque was issued in discharge of debt or liability." 18. This position was reiterated in Kalamani Tex v. P. Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25: (2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75, wherein it was held at page 289: "14. Once the 2nd appellant had admitted his signatures on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and that even according to the accused some amount was due and payable, there is a presumption under Section 139 of the NI Act that there exists a legally enforceable debt or liability. Of course, such presumption is rebuttable in nature. However, to rebut the presumption, the accused was required to lead 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 a 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....karan v. Sankaran Vaidhyan 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 to be 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 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. Mudibasa ppa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571] wherein it is held as hereunder: (SCC pp. 432-33, paras 25-26) "25. We having noticed the ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....city. 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. Mudibasappa [Basalingappa v. M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rein 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." 23. 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 inter alia directs that it shall be presumed until t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, 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 this evidential burden is not as heavy as that usually seen in situations where the prosecut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cused will be liable. It was observed: "9. Submission of learned Advocate appearing on behalf of the revisionist that the cheque in question was issued to the complainant as security and on this ground, criminal revision petition be accepted is rejected being devoid of any force for the reasons hereinafter mentioned. As per Section 138 of the Negotiable Instruments Act 1881, if any cheque is issued on account of other liability, then the provisions of Section 138 of the Negotiable Instruments Act 1881 would be attracted. The court has perused the original cheque, Ext. C-1 dated 30.10.2008 placed on record. There is no recital in the cheque Ext. C-1, that cheque was issued as a security cheque. It is well-settled law that a cheque issued as security would also come under the provision of Section 138 of the Negotiable Instruments Act 1881. See 2016 (3) SCC page 1 titled Don Ayengia v. State of Assam & another. It is well-settled law that where there is a conflict between former law and subsequent law, then subsequent law always prevails." 28. It was laid down by the Hon'ble Supreme Court in Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd., (2016) 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539: (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845] where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as an advance for the purchase order, which was cancelled. Keeping in mind this fine but real distinction, the said judgment cannot be applied to a case of the present nature where the cheque was for repayment of a loan instalment which had fallen due, though such deposit of cheques towards repayment of instalments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845], one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of the cheque. 12. The crucial question to determine the applicability of Section 138 of the Act is whether the cheque represent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n due to which there would be an understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque, which is issued as security, can never be presented by the drawee of the cheque. If such is the understanding, a cheque would also be reduced to an 'on-demand promissory note' and in all circumstances, it would only be civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation." 30. Therefore, the accused was rightly held l....