TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 325
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is a Cooperative Bank engaged in banking activities. Complainant advanced a loan of Rs. 2,00,000/- to the accused on 29.05.2014. The accused defaulted on the repayment of the loan, and issued a cheque of Rs. 60,000/- to discharge his legal liability. The complainant presented the cheque to its bank, but it was dishonoured with an endorsement "funds insufficient". The notice was served upon the accused, but the accused failed to repay the amount despite the receipt of the notice. Hence, a complaint was filed before the learned Trial Court to take action as per the law. 3. The learned Trial Court found sufficient reasons to summon the accused. When the accused appeared before the learned Trial Court, a notice of accusation was put to him for the commission of an offence punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried. 4. The complainant examined K.C. Sharma (CW1) to prove its case. 5. The accused, in his statement recorded under Section 313 of Cr.P.C., admitted that he had taken a loan of Rs. 2,00,000/- from the complainant and he had issued a cheque. However, he claimed that he had issued the cheque as security. He claimed that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Courts below erred in appreciating the material on record. The complainant misused the blank cheque issued by the accused. The amount of Rs. 2,30,662/- was outstanding as per the statement of account (Ex-CW1/L). A cheque of Rs. 60,000/- was not issued in discharge of the legal liability. The bank had not taken any action against the surety. Complainant misused the security cheque; therefore, it was prayed that the present revision be allowed and the judgments and order passed by the learned Courts below be set aside. 9. I have heard Mr. Pavinder, learned counsel for the petitioner/accused, and Ms. Meenakshi Sharma, learned counsel for the respondent/complainant. 10. Mr. Pavinder, learned counsel for the petitioner/accused, submitted that the learned Courts below erred in appreciating the material on record. The statement of account (Ex-CW1/L) shows that an amount of Rs. 2,30,662/- was due, and the cheque of Rs. 60,000/- was not issued for discharging of the legal liability. The cheque was not dishonoured with an endorsement "funds insufficient". The loan account number mentioned in the notice (Ex-CW1/H) was wrong. The learned Courts below failed to appreciate all these aspects. H....
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 in such proceedings. 15. It would be apposite to refer to the judgment of this Court in Amit Kapoor v. Ramesh Chander [Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460: (2012) 4 SCC (Civ) 687: (2013) 1 SCC (Cri) 986], where scope of Section 397 has been considered and succinctly explained as under: (SCC p. 475, paras 12-13) "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 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 evide....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f quashing criminal proceedings, particularly the charge framed in terms of Section 228 of the Code, should be exercised very sparingly and with circumspection, and that too in the rarest of rare cases. 27.2. The Court should apply the test as to whether the uncontroverted allegations as made from the record of the case and the documents submitted therewith prima facie establish the offence or not. If the allegations are so patently absurd and inherently improbable that no prudent person can ever reach such a conclusion, and where the basic ingredients of a criminal offence are not satisfied, then the Court may interfere. 27.3. The High Court should not unduly interfere. No meticulous examination of the evidence is needed for considering whether the case would end in conviction or not at the stage of framing of charge or quashing of charge. *** 27.9. Another very significant caution that the courts have to observe is that it cannot examine the facts, evidence and materials on record to determine whether there is sufficient material on the basis of which the case would end in a conviction; the court is concerned primarily with the allegations taken as a whole whether they wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 its own merits. 13. Another well-accepted norm is that the revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the exercise of revisional jurisdiction itself should not lead to injustice ex facie. Where the Court is dealing with the question as to whether the charge has been framed properly and in accordance with law in a given case, it may be reluctant to interfere in the exercise of its revisional jurisdiction unless the case substantially falls within the categories aforestated. Even framing of charge is a much-advanced stage in the proceedings under CrPC." 16. This Court in the aforesaid judgment in Amit Kapoor case [Amit Kapoor v. Ramesh Chander,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ficient material on the basis of which the case would end in a conviction; the court is concerned primarily with the allegations taken as a whole whether they will constitute an offence and, if so, is it an abuse of the process of court leading to injustice. *** 27.13. Quashing of a charge is an exception to the rule of continuous prosecution. Where the offence is even broadly satisfied, the Court should be more inclined to permit continuation of prosecution rather than its quashing at that initial stage. The Court is not expected to marshal the records with a view to decide admissibility and reliability of the documents or records, but it is an opinion formed prima facie." 17. The revisional court cannot sit as an appellate court and start appreciating the evidence by finding out inconsistencies in the statements of witnesses, and it is not legally permissible. The High Courts ought to be cognizant of the fact that the trial court was dealing with an application for discharge. 16. It was held in Kishan Rao v. Shankargouda, (2018) 8 SCC 165: (2018) 3 SCC (Cri) 544: (2018) 4 SCC (Civ) 37: 2018 SCC OnLine SC 651 that it is impermissible for the High Court to reappreciate the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 justified in setting aside the order, merely because another view is possible. The Revisional Court is not meant to act as an appellate court. The whole purpose of the revisional jurisdiction is to preserve the power in the court to do justice in accordance with the principles of criminal jurisprudence. The revisional power of the court under Sections 397 to 401 CrPC is not to be equated with that of an appeal. Unless the finding of the court, whose decision is sought to be revised, is shown to be perverse or untenable in law or is grossly erroneous or glaringly unreasonable or where the decision is based on no material or where the material facts are wholly ignored or where the judicial discretion is exercised arbitrarily or capriciously, the courts may not interfere with the decision in exercise of their revisional jurisdiction." 14. In the above case, also the conviction of the accused was recorded, and the High Court set aside [Dattatray Gulabrao Phalke v. Sanjaysinh Ramrao Chavan, 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 20. 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." 21. 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 signature on the cheque and the deed, the trial court ought to have presumed that the cheque was i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 of the NI Act. As observed above, Section 139 of the Act is an example of reverse onus clau....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er: (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. 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 having noticed the ratio laid down by this Court in the above cases on Sections 118(a) and 139, we now summarise the prin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....akhs. 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. Mudibasappa, (2019) 5 SCC 418 : (2019) 2 SCC (Cri) 571] relied on by the learned counsel for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontrary 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 inter alia directs that it shall be presumed until the contrary is proved that every negotiable instrument was made or drawn for consideration. Se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 prosecution is required to prove the guilt of an accused. The accused is not expected to prove th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e documents in support of his complaints and recorded the statement of three witnesses in support thereof, the appellant 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)" 30. Thus, a statement under Section 313 of the CrPC was not sufficient to prove the plea taken by the accused. 31. Even if the cheque was issued as security, it was rightly held by the learned Courts below that the complainant had a right to present the same to the bank, when the accused had a subsisting liability on the date of the issuance of the cheque. It was laid down by this Court in Hamid Mohammad Versus Jaimal Dass 2016 (1) HLJ 456, that even if the cheque was issued towards the security, the accuse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. 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 Airways (supra), where the purchase order had been cancelled and a 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 the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 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 p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at page 471: "Liability of guarantor/surety 16. As far as the guarantee is concerned, the law is very well-settled. The liability of the surety and the principal debtor is coextensive. The creditor has remedies available to recover the amount payable by the principal borrower by proceeding against both or any of them. The creditor can proceed against the guarantor first without exhausting its remedies against the principal borrower." 38. Therefore, it was not necessary to take action against the guarantor and the bank was justified in taking action against the principal debtor. Moreover, the accused, being a principal debtor, had issued the cheque and only he could have been liable for its dishonour in the proceedings initiated under Section 138 of the NI Act. 39. Thus, the learned Courts below had rightly held that the accused had failed to rebut the presumption attached to the cheque, and there is no infirmity in the findings recorded by the learned Courts below. 40. Column No. 1 of the memo of dishonour (Ex-CW1/C) mentioned that the cheque was dishonoured with the endorsement "funds insufficient". Therefore, the submission that the cheque was not proved to be dishonoured ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hin 15 days of receipt of the summons from the Court along with the copy of the complaint under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 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) 44. The accused has not paid any money to the complainant; hence, it was duly proved that the accused had failed to repay the money despite the receipt of the notice. 45. 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 repay the amount despite the re....