TaxTMI 
TaxTMI 
2025 (6) TMI 925
X X X X Extracts X X X X
X X X X Extracts X X X X
....erted that the accused obtained a loan of Rs.4,50,000/- from the complainant for setting up a Village Utility Store. This amount was sanctioned by the complainant and was transferred to the accused through RTGS. The accused agreed to pay interest at the rate of 6% per annum; however, he defaulted in repayment of the loan according to the agreed schedule. The complainant approached the accused for settlement of the loan amount, and the accused issued a cheque of Rs.1,60,000/- to the complainant drawn on UCO Bank at The Mall Naya Bazaar Nahan, Sirmour, H.P. The complainant presented the cheque before the bank but it was dishonoured with an endorsement 'insufficient funds'. The complainant served a notice upon the accused asking him to pay the amount within 15 days, however, the accused failed to pay the amount. Hence, the complaint was filed before the learned Trial Court against the accused for taking action as per law. 3. The learned Trial Court found sufficient reason to summon the accused. When the accused appeared, notice of accusation was put to him for the commission of an offence punishable under Section 138 of the NI Act, to which the accused pleaded not guilty and claime....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8 of the NI Act were wrongly invoked. The accused issued a blank cheque as security to raise the loan. 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. H.R. Bhardwaj, learned counsel for the petitioner and Ms. Shashi Kiran Negi, learned counsel for the respondent. 10. Mr. H.R. Bhardwaj, learned counsel for the petitioner, submitted that the learned Courts below erred in convicting and sentencing the accused. A blank cheque was issued as security at the time of taking a loan. The complainant filled out the amount and presented the cheque. The accused is not liable in such circumstances. Learned Courts below failed to appreciate this aspect of the case. Therefore, he prayed that the present revision petition be allowed and the judgments and order passed by the learned Courts below be set aside. 11. Ms. Shashi Kiran Negi, learned counsel for the respondent, submitted that the accused had taken a loan of Rs.4,50,000/-. He failed to pay the amount as per the agreed schedule. He settled the matter with the complainant and issued a cheque of Rs.1,60,000/- in discharge of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or law or the perversity which has crept into such proceedings. It would be 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 exha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess any glaring feature is brought to the notice of the High Court which would otherwise tantamount to a 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 the 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 ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Hon'ble Supreme Court. 18. The issuance of cheque is not disputed. It was asserted in the revision petition that a blank cheque was issued as security to raise the loan. Therefore, learned Courts below had rightly proceeded on the basis that the accused had issued a cheque in favour of the complainant and once the execution of the cheque was admitted, a presumption under Section 118 and Section 139 of the NI Act would arise. 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 has to 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 signatures on the cheque are not disputed, the plea with regard to the cheque having not been issued towards discharge of lawful liability, rightly came to be rejected by learned Courts below. Reliance is placed upon Hiten P. Dalal v. Bartender Nath Bannerji, 2001 (6) SCC 16, wherein it has been held as under : "The words 'unless the contrary is proved' which occur in this provision make it clear that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was the case on behalf of the accused that the cheque was given by way of security, and the same has been misused by the complainant. However, nothing is on record that in the reply to the statutory notice, it was the case on behalf of the accused that the cheque was given by way of security. Be that as it may, however, it is required to be noted that earlier the accused issued cheques which came to be dishonoured on the ground of "insufficient funds" and thereafter a fresh consolidated cheque of Rs.9,55,574 was given which has been returned unpaid on the ground of "STOP PAYMENT". Therefore, the cheque in question was issued for the second time. Therefore, once the accused has admitted the issuance of a cheque which bears his signature, there is a presumption that there exists a legally enforceable debt or liability under Section 139 of the NI Act. However, such a presumption is rebuttable in nature, and the accused is required to lead evidence to rebut such presumption. The accused was required to lead evidence that the entire amount due and payable to the complainant was paid. 9. Coming back to the facts in the present case and considering the fact that the accused has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f that be the position, as noted by the courts below, a presumption would arise under Section 139 in favour of the appellant who was the holder of the cheque. Section 139 of the NI Act reads as hereunder: "139. Presumption in favour of the holder. -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 the discharge, in whole or in part, of any debt or other liability." 13. Insofar as the payment of the amount by the appellant in the context of the cheque having been signed by the respondent, the presumption for passing of the consideration would arise as provided under Section 118(a) of the NI Act, which reads as hereunder: "118. Presumptions as to negotiable instruments. - Until the contrary is proved, the following presumptions shall be made: (a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration." 14. The above-noted provisions are explicit to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ely. 25.4. That it is not necessary for the accused to come into 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 into the witness box to support his defence. 26. Applying the preposition 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. The question to be looked into is as to whether any probable defence was raised by the accused. In the cross-examination of PW 1, when the specific question was put that a cheque was issued in relation to a loan of Rs 25,000 taken by the accused, PW 1 said that he does not remember. PW 1 in his evidence admitted that he retired in 1997, on which date he received a monetary benefit of Rs 8 lakhs, which was encashed by the complainant. It was also brought in evidence that in the year 2010, the complainant entered into a sale agreement for which he paid an amount of Rs 4,50,000 to Balana Gouda towards sale consideration. Payment o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CC OnLine SC 302 wherein it was held at page 739: "8. It is true that this is a case under Section 138 of the Negotiable Instruments Act. Section 139 of the NI Act provides that the court shall presume that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability. This presumption, however, is expressly made subject to the position being proved to the contrary. In other words, it is open to the accused to establish that there is no consideration received. It is in the context of this provision that the theory of "probable defence" has grown. In an earlier judgment, in fact, which has also been adverted to in Basalingappa [Basalingappa v. Mudibasappa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571], this Court notes that Section 139 of the NI Act is an example of reverse onus (see Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4 SCC (Civ) 477: (2011) 1 SCC (Cri) 184]). It is also true that this Court has found that the accused is not expected to discharge an unduly high standard of proof. It is accordingly that the principle has developed that all which the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aise this presumption in every case where the factual basis for the raising of the presumption had been established. But this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary, as is clear from the use of the phrase "unless the contrary is proved". 35. The Court will necessarily presume that the cheque had been issued towards the discharge of a legally enforceable debt/liability in two circumstances. Firstly, when the drawer of the cheque admits issuance/execution of the cheque and secondly, in the event where the complainant proves that the cheque was issued/executed in his favour by the drawer. The circumstances set out above form the fact(s) which bring about the activation of the presumptive clause. [Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal [Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal, (1999) 3 SCC 35]] 36. Recently, this Court has gone to the extent of holding that presumption takes effect even in a situation where the accused contends that a blank cheque leaf was voluntarily signed and handed over by him to the complainant. [Bir Singh v. Mukesh Kumar [Bir Singh v. Mukesh Kumar, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atement under Section 313 of Cr.P.C is not sufficient to rebut the presumption. It was observed at page 700: "20. That apart, when the complainant exhibited all these documents in support of his complaints and recorded the statement of three witnesses in support thereof, the appellant has recorded her statement under Section 313 of the Code but failed to record evidence to disprove or rebut the presumption in support of her defence available under Section 139 of the Act. The statement of the accused recorded under Section 313 of the Code is not substantive evidence of defence, but only an opportunity for the accused to explain the incriminating circumstances appearing in the prosecution's case against the accused. Therefore, there is no evidence to rebut the presumption that the cheques were issued for consideration." (Emphasis supplied)" 27. In the present case, the accused did not appear in the witness box, nor did he examine any witness to establish the plea taken by him that he had issued a blank signed cheque to raise a loan, and the learned Courts below had rightly rejected this plea. 28. In any case, the issuance of the cheque as a security will not absolv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due. It is undisputed that the loan was duly disbursed on 28th February 2002, which was prior to the date of the cheques. Once the loan was disbursed and instalments have fallen due on the date of the cheque as per the agreement, the dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability. 12. Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of a claim for breach of contract under Section 138, which arises on account of dishonour of a cheque issued, was not by itself at par with a criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of a cheque issued for discharge of a later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque, there was a debt/liability in praesenti in terms of the loan agreement, as against the case of Indus ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rties to defer the payment of the amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow. 18. When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form, and in that manner, if the amount of the loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... attracted. 34. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence. 35. It is not the case that the respondent accused him of either signing the cheque or parted with it under any threat or coercion. Nor is it the case that the respondent accused that the unfilled signed cheque had been stolen. The existence of a fiduciary relationship between the payee of a cheque and its drawer would not disentitle the payee to the benefit of the presumption under Section 139 of the Negotiable Instruments Act, in the absence of evidence of exercise of undue influence or coercion. The second question is also answered in the negative. 36. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to have been given as a loan to the accused, only then the complainant would have to bring before the Court cogent material to indicate that he had the financial capacity and had actually advanced the amount in question by way of loan. In the case at hand, the appellant had categorically stated in his deposition and reiterated in the cross- examination that he had withdrawn the amount from the bank in Faizabad (Typed Copy of his deposition in the paperbook wrongly mentions this as 'Firozabad'). The Court ought not to have summarily rejected such a stand, more so when respondent no. 2 did not make any serious attempt to dispel/negate such a stand/statement of the appellant. Thus, on the one hand, the statement made before the Court, both in examination-in-chief and cross- examination, by the appellant with regard to withdrawing the money from the bank for giving it to the accused has been disbelieved whereas the argument on behalf of the accused that he had not received any payment of any loan amount has been accepted. In our decision in S. S. Production v. Tr. Pavithran Prasanth, 2024 INSC 1059, we opined : '8. From the order impugned, it is clear that though the contenti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly, achieve this result through the cross- examination of the witnesses of the complainant. Ultimately, it becomes the duty of the courts to consider carefully and appreciate the totality of the evidence and then come to a conclusion whether, in the given case, the accused has shown that the case of the complainant is in peril for the reason that the accused has established a probable defence.' (emphasis supplied)' (underlining in original; emphasis supplied by us in bold) 36. Therefore, the complainant was not required to prove the advancement of the loan, especially when the accused has not disputed the taking of the loan from the complainant. 37. Thus, there is no infirmity in the findings recorded by the learned Courts below that the accused had issued a cheque to discharge his legal liability. 38. Shabnam Katoch (CW-1) stated that the cheque was dishonoured due to 'insufficient funds'. The memo (Ext.C-3/CW1) shows that the cheque was dishonoured with an endorsement 'funds insufficient'. It was laid down by the Hon'ble Supreme Court in Mandvi Cooperative Bank Ltd. v. Nimesh B. Thakore, (2010) 3 SCC 83: (2010) 1 SCC (Civ) 625: (2010) 2 SCC (Cri) 1: 2010 SCC OnLine SC....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 138, by ignoring statutory presumption 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) 42. The accused has not paid any money to the complainant; hence, it was duly proved that the accused had failed to pay the money despite the deemed receipt of the notice. 43. Therefore, it was duly proved before the learned Trial Court that the cheque was issued in discharge of legal liability. It was dishonoured with an endorsement 'funds insufficient' and the accused had failed to pay the amount despite the deemed receipt of the notice of demand. Hence, the complainant had proved his case beyond a reasonable doubt, and the learned Trial Court had rightly convicted the accused of the commission of an offence punisha....