TaxTMI 
TaxTMI 
2025 (11) TMI 1186
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.... stated, the facts giving rise to the present appeal are that the complainant filed a complaint before the learned Trial Court for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (hereinafter referred to as 'NI' Act). It was asserted that the accused No. 1 issued a cheque bearing No.725301 dated 30.11.1999 in favour of the complainant for consideration received from him on his behalf and on behalf of accused No. 2 for a sum of Rs. 50,000/- drawn on Indian Overseas Bank, Shimla. The complainant presented the cheque to his bank, but it was returned with an endorsement 'insufficient funds'. The complainant served a legal notice upon the accused demanding the payment of money within 15 days of the receipt of the notice. The notice was served upon the accused on 07.03.2000. However, he failed to repay the amount. Hence, a complaint was filed before the learned Trial Court for taking action against the accused as per the law. 3. Learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, a notice of accusation was put to him for the commission of an offence punishable under Section 138 of the NI Act, to whi....
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....as issued as security and not towards the discharge of the legal liability. The cheque was issued by Aakash Sood on behalf of his father and not in his individual capacity. The learned Trial Court erred in convicting and sentencing the accused. Therefore, the appeal filed by the accused was allowed, and he was acquitted of the commission of an offence punishable under Section 138 of the NI Act. 8. Being aggrieved by the judgment passed by the learned Appellate Court, the complainant has filed the present appeal, asserting that the learned Appellate Court erred in acquitting the accused. It was not disputed that the cheque was signed by Aakash Sood in the capacity of a partner of the firm. It was not for the complainant to prove that the accused, Aakash Sood, was a partner of the firm, but for the accused to disprove the fact. The defence taken by the accused that he had a business transaction with the complainant and that he had returned the amount was not proved. Aakash Sood was made a party in his individual capacity, and he could not have been acquitted because the cheque was issued on behalf of Aakash Boot House. Reliance was placed upon the suggestion made to the accused, b....
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....ure put on the cheque, and the existence of legally enforceable debts/liability was required to be proved by the complainant. The plea taken by the accused that he was running a Chit fund scheme with the complainant was highly probable. Therefore, he prayed that the present appeal be dismissed. He relied upon the judgments titled Ramrajsingh Vs. State of M.P. and another 2009(3) ICC, M/s Kamal General Store Vs. Kishori Lal Vij, Latest HLJ 2008 HP 1474, N.K. Wahi Vs. Shekhar Singh and others, AIR 2007 SC 1454, Kuldeep Thakur Vs. M/s Mohar Mahesh Construction Pvt. Ltd., Latest HLJ 2012 HP 423, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, Paresh P. Rajda Vs. State of Maharashtra and another, (2008) 7 SCC 442, DCM Financial Services Ltd. Vs. J.N. Sareen and another (2008) 8 SCC 1, Krishna Janardhan Vs. Dattatraya G. Hegde (2008) 4 SCC 54, K. Prakashan Vs. P.K. Surenderan (2008) 1 SCC 258, Alakapuri Cooperating Housing Society Ltd. Vs. Jayantibhai Naginbhai (2009) 3 SCC 467 and M/s Kumar Exports Vs. M/s Sharma Carpets AIR 2009 SC 1518 in support of his submission. 13. I have given considerable thought to the submissions made at the bar and have gone through the recor....
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....cumstances", "distorted conclusions", "glaring mistakes", etc., are not intended to curtail the extensive powers of an appellate court in an appeal against acquittal. Such phraseologies are more in the nature of "flourishes of language" to emphasise the reluctance of an appellate court to interfere with an acquittal than to curtail the power of the court to review the evidence and to come to its own conclusion. (4) An appellate court, however, must bear in mind that in the case of acquittal, there is a double presumption in favour of the accused. Firstly, the presumption of innocence is available to him under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. Secondly, the accused, having secured his acquittal, the presumption of his innocence is further reinforced, reaffirmed and strengthened by the trial court. (5) If two reasonable conclusions are possible on the basis of the evidence on record, the appellate court should not disturb the finding of acquittal recorded by the trial court." 40. Further, in H.D. Sundara v. State of Karnataka [H.D. Su....
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....l has to be decided as per the parameters laid down by the Hon'ble Supreme Court. 16. Accused Aakash Sood (DW-1) admitted in his cross-examination that the cheque (Ext.CW1/A) was signed by him as a partner, and he had put the seal himself. Learned Trial Court had rightly held that the admission of the signatures and issuance of the cheque would trigger a presumption under Section 118(a) and Section 139 of the NI Act that the cheque was issued for consideration to discharge the debt/liability. It was laid down by the Hon'ble Supreme Court in APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020) 12 SCC 724, that when the issuance of a cheque and signature on the cheque are not disputed, a presumption would arise that the cheque was issued in discharge of the legal liability. It was observed: - "7.2. What is emerging from the material on record is that the issuance of a cheque by the accused and the signature of the accused on the said cheque are not disputed by the accused. The accused has also not disputed that there were transactions between the parties. Even as per the statement of the accused, which was recorded at the time of the framing of t....
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....n 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 clause and therefore, once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter, it is for the accused to rebut such presumption by leading evidence." 17. A similar view was taken in Sanjay Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was observed: "ONCE EXECUTION OF A CHEQUE IS ADMITTED, PRESUMPTIONS UNDER SECTIONS 118 AND 139 OF THE NI ACT ARISE 15. In the present case, the cheque in question has admittedly been signed by the Respondent No. 1-Accused. This Court is of the view that once the execution of the cheque is admitted, the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration a....
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....accused to rebut them. We may consider a few such pronouncements. 6.1. In Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm (2008) 7 SCC 655, this Court observed as under: "17. Under Section 118(a) of the Negotiable Instruments Act, the court is obliged to presume, until the 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 Sect....
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....ble instrument. It is also discernible from the above decision that if the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of the presumption arising under Section 118(a) in his favour." (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....
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....stances of the case, act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence, and if the circumstances so relied upon are compelling, the burden may likewise shift again onto 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 also has 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 Secti....
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....htly accepted the version given by the respondent-accused herein. We say so for more than one reason. In the first place, the story of the complainant that he advanced a loan to the respondent-accused is unsupported by any material, let alone any documentary evidence that any such loan transaction had ever taken 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 circumstance....
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....at to rebut the presumption, it is open for the accused to rely on evidence led by him, or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. It has been held that inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely." 7. The position of law, as is evident from the above, is clear." 19. The accused admitted in his cross-examination that he had sent a notice (Ext.A-1) through his advocate, and the contents of the notice were correct. The notice mentions that the complainant Ramesh Chand had obtained three cheques bearing Sl. No. 725301, 725302 and 725303 drawn on Indian Overseas Bank, The Mall, Shimla, in the sum of Rs. 50,000/- each. These cheques were issued in the name of M/s Mam Raj Ramesh Chand. These cheques were issued by Aakash Sood of M/s Aakash Boot House in consideration of the amount mentioned therein and which had been taken by him from time to time. It was agreed that the cheques would be returned on the repayment of the amount. Akash Sood repaid the entire amount in diffe....
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....he amount mentioned in the cheque was taken by the accused from the complainant. The accused projected a different version in the Court regarding the running of the Chit Fund business and the cheque pertaining to that business. This version was never propounded initially. He specifically stated on oath that he had not received any money from the complainant and had not returned any money to him. Therefore, the accused had not proved that the money mentioned in the cheque (Ext.CW1/A) was returned by him to the complainant as claimed in the notice (Ext. A-1). 23. Learned Appellate Court held that the cheque was issued on behalf of M/s Aakash Boot House. Reliance was placed upon the letter (Ext.CW4/A) written by Roshan Lal Sood, partner, Aakash Boot House, authorising Aakash Sood to sign the cheque on his behalf in his absence. He had also attested the signatures of Akash Sood. This letter will not help the accused. The accused admitted in his cross-examination that he had signed the cheque (Ext.CW1/A) as a partner. It was laid down by the Hon'ble Supreme Court in Dhanasingh Prabhu v. Chandrasekar, (2025) 258 Comp Cas 404: 2025 SCC OnLine SC 1419 that a partner is an agent of the f....
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....t was stated that the complainant had not mentioned in the complaint that accused Aakash Sood was in charge and responsible for the business of a firm, and the requirement of Section 141 of the NI Act was not satisfied. This finding will also not help the accused. It is undisputed that the accused had signed the cheque; therefore, he was a signatory and would be liable by virtue of his position as a signatory. The liability of the signatory was decided by the Hon'ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89. The following question inter alia was referred for consideration by the larger bench: - "(c) Even if it is held that specific averments are necessary, whether, in the absence of such averments, the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for the conduct of its business could be proceeded against." 26. The Hon'ble Supreme Court, after discussing the entire case law on the subject, answered the reference as under: (c) The answer to Question (c) has to be in the affirmative. The question notes that the ma....
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.... Act will give rise to a penalty, but will not invalidate the transaction. It was observed: - 5. The relevant portion of Section 269 SS of the IT Act reads thus: - "(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit' or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) The amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is (twenty) thousand rupees or more. Provided....." 6. Section 271D provides for a penalty for failure to comply with the aforesaid provisions, which reads thus: "271D. Penalty for failure to comply with the provisions of Section 269-SS - (1) If a person takes or accepts any loan or deposit in contravention of the provisions of Section 269-SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) Any pena....
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....nless there is a valid explanation for the same, meaning thereby that the presumption under Section 139 of the Act will not be attracted in cash transactions above Rs. 20,000/- (Rupees Twenty Thousand). 20. However, this Court is of the view that any breach of Section 269SS of the IT Act, 1961, is subject to a penalty only under Section 271D of the IT Act, 1961. Further, neither Section 269SS nor 271D of the IT Act, 1961 states that any transaction in breach thereof will be illegal, invalid or statutorily void. Therefore, any violation of Section 269SS would not render the transaction unenforceable under Section 138 of the NI Act or rebut the presumptions under Sections 118 and 139 of the NI Act because such a person, assuming him/her to be the payee/holder in due course, is liable to be visited by a penalty only as prescribed. Consequently, the view that any transaction above Rs. 20,000/- (Rupees Twenty Thousand) is illegal and void and therefore does not fall within the definition of 'legally enforceable debt' cannot be countenanced. Accordingly, the conclusion of law in P.C. Hari (supra) is set aside." 31. Therefore, the learned Trial Court had rightly held that the ....