Sunday, 17 March 2019

Whether complainant should prove source of fund in cheque dishonour case if accused has not discharged presumption U/S 139 of NI Act?

 Hereinabove, we have examined in detail the findings of the Trial Court
and those of the High Court and have no hesitation in concluding that the
present one was clearly a case where the decision of the Trial Court suffered
from perversity and fundamental error of approach; and the High Court was
justified in reversing the judgment of the Trial Court. The observations of the
Trial Court that there was no documentary evidence to show the source of
funds with the respondent to advance the loan, or that the respondent did not
record the transaction in the form of receipt of even kachcha notes, or that
there were inconsistencies in the statement of the complainant and his
witness, or that the witness of the complaint was more in know of facts etc.
would have been relevant if the matter was to be examined with reference to
the onus on the complaint to prove his case beyond reasonable doubt. These
considerations and observations do not stand in conformity with the
presumption existing in favour of the complainant by virtue of Sections 118
and 139 of the NI Act. Needless to reiterate that the result of such
presumption is that existence of a legally enforceable debt is to be presumed
in favour of the complainant. When such a presumption is drawn, the factors
relating to the want of documentary evidence in the form of receipts or
accounts or want of evidence as regards source of funds were not of relevant
consideration while examining if the accused has been able to rebut the
presumption or not. 

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 508 OF 2019


ROHITBHAI JIVANLAL PATEL VS. STATE OF GUJARAT 

Dinesh Maheshwari, J.
Dated: 15th March, 2019.

Leave granted.
2. This appeal is directed against the common judgment and order dated
08.01.2018 in R/Criminal Appeal No. 1187/2017 connected with R/Criminal
Appeal Nos. 1191/2017 to 1196/2017 whereby, the High Court of Gujarat at
Ahmedabad has reversed the respective judgment and orders dated
09.06.2017 as passed by the 8th Additional Senior Civil Judge and Additional
Chief Judicial Magistrate, Vadodara in 7 criminal cases1 pertaining to the
offence under Section 138 of the Negotiable Instruments Act, 1881 ('the NI
Act') for dishonour of 7 cheques in the sum of Rs. 3 lakhs each, as said to
have been drawn by the accused-appellant in favour of the complainantrespondent
No. 2. In the impugned judgment and order dated 08.01.2018, the
1 Nos. 44345/2009, 46499/2008, 46254/2008, 48420/2008, 40321/2008, 48631/2008 and
46503/2008 respectively.
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High Court has disapproved the acquittal of the accused-appellant and, while
holding him guilty of the offence under Section 138 of the NI Act, has awarded
him the punishment of simple imprisonment for a period of 1 year with fine to
the extent of double the amount of cheque (i.e., a sum of Rs. 6 lakhs) with
default stipulation of further imprisonment for a period of 1 year in each case;
and, out of the amount payable as fine, the complainant-respondent No. 2 is
ordered to be compensated to the tune of Rs. 5.5. lakhs in each case.
3. Briefly put, the substance of allegations and assertions of the
complainant-respondent No. 2 in each of the 7 cases aforesaid had been as
follows: He was having his office in Windor Plaza at Alkapuri, Vadodara and
had been visiting the shop of his friend Shri Jagdishbhai in National Plaza in
the same locality; the accused-appellant, a trader of edible spices, had his
shop near the shop of Shri Jagdishbhai and in due course of time, the
accused, the complainant and the said Shri Jagdishbhai became good friends.
The complainant alleged that after developing such friendship, the accused
demanded from him a sum of Rs. 22,50,000/- as loan for his immediate
requirement; and he (the complainant) extended such loan to the accused for
a short term by collecting money in piecemeal from his business group.
According to the complainant, upon regular demand for re-payment, the
accused gave him cheques of different dates drawn on Corporation Bank,
Alkapuri Branch, Vadodara and also gave the acceptance for re-payment on a
stamp paper. The complainant alleged that the cheques so issued by the
accused, on being presented to the Bank for collection, were returned unpaid
2
either for the reason that the "opening balance was insufficient" or for the
reason that the "account was closed". While alleging that the intention of the
accused had been of breach of trust and cheating, the complainant pointed
out that he got served the notices on the accused after dishonour of the
cheques but did not receive the requisite payment. It is noticed that in some of
the cases, the accused-appellant did send his reply, denying the transaction
as alleged.
4. With the allegations and assertions aforesaid, the complainantrespondent
No. 2 filed the above-mentioned 7 complaint cases against the
accused-appellant in the months of June to November, 2008. In trial, the
complainant examined himself as PW-1 and the said Shri Jagdishbhai as PW-
2. The complainant also produced the relevant documentary evidence
including the cheques in question; the Bank returning memos and intimation
letters; the demand notices; the replies wherever sent by the appellant; and
the written acknowledgement on a stamp paper by the accused. The accused
was examined under Section 313 of the Code of Criminal Procedure, 1973
where he asserted that he had no money transaction with the complainant;
and had neither issued any cheque nor written any note for any legal debt in
favour of the complainant. The accused-appellant, however, asserted that
several years in the past, he had some transaction with the said Shri
Jagdishbhai and the cheques and blank stamp paper lying with Shri
Jagdishbhai have been fraudulently misused to unlawfully recover the money
from him. The accused-appellant, however, did not lead any evidence.
3
5. After having heard the parties, the Trial Court formulated similar points
for determination in each of these 7 cases which could be noticed as under2:
"1. Whether the complainant proves that the accused has
issued and handed over the Cheque bearing No. 763346 of Rs.
3, 00,000/- towards legal due amount from the account
maintained by him, and upon presenting the said cheque in
bank of the complainant for encashment, the same was
returned back unpaid with endorsement of the bank "Today's
opening balance is insufficient" and thereafter the complainant
has served demand notice to the accused and the said notice
has been served to the accused even though, the accused has
not paid the cheque amount within the stipulated Notice period
and thereby the accused has committed offence punishable
under section 138 of the Negotiable Instrument Act?
2. What order?"
6. After examining the record, the Trial Court found that the accused had
admitted his signature on the cheques and, with reference to the decision of
this Court in the case of Rangappa v. Sri Mohan : (2010) 11 SCC 441, drew
the presumption envisaged by Section 139 of NI Act.
6.1. However, after having drawn the presumption, the Trial Court found
several factors in favour of the accused and observed, inter alia, that: (a)
there was no documentary evidence to show the source of income for
advancing the loan to the accused; (b) the complainant failed to record the
transaction in the form of receipts, promissory notes or even kaccha notes;
(c) vague and uncertain statement was made by the complainant as
compared to the statement of his witness-Shri Jagdishbhai; (d) the
complainant had no knowledge about the dates and other particulars of such
2 The extraction is from the judgment of the Trial Court in Criminal Case No. 46499 of 2008.
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cheques; (e) the witness of complainant was in know of the facts more than
the complainant; (f) the complaint allegedly extended the loan to the tune of
Rs. 22,50,000/- but the 7 cheques in these cases were of Rs. 3,00,000/- each
and there was no explanation from the complainant as regards the remaining
Rs. 1,50,000/-; and (g) the suggestion about washing away of the earlier
cheques in rains was also doubtful when the complainant's office was on the
8th floor of Windor Plaza
6.2 With reference to the aforesaid factors and circumstances, the Trial
Court concluded that the accused was successful in bringing rebuttal
evidence to the requisite level of preponderance of probabilities; and
observed that the complainant had failed to prove, beyond all reasonable
doubt, that the cheques were issued in part payment of the loan amount of
Rs. 22,50,000/-. Hence, all the 7 complaint cases were dismissed by similar
but separate judgment and orders dated 09.06.2017 while observing as
under3:-
"19……All these circumstances creates doubt of the
complainant (sic) as alleged and accused has brought on
record rebuttable evidence upto to requisite level ie.
Preponderance of probabilities and as such considering section
5,6,32 and 118 and 139 of N.I. Act complainant failed to prove
complaint beyond reasonable doubt that the cheque has been
issued for the recoverable debt/liability.
*** *** *** ***
22. Therefore as discussion made herein above the
complainant failed to prove that the disputed cheque has been
issued by the accused for the part payment of transaction of
Rs. 22,50,000/- therefore accused is entitled to get acquittal
3 . Again, the extraction is from the judgment of the Trial Court in Criminal Case No. 46499 of 2008.
5
who has brought on record the circumstances which rebut the
presumption under section 118,119, of N.I. Act… (sic)"
7. Against the aforementioned judgment and orders of acquittal, the
complainant preferred appeals before the High Court of Gujarat, which have
been considered and decided together by the impugned common judgment
and order dated 08.01.2018. The High Court observed that the presumption
under Sections 118 and 139 of the NI Act was required to be drawn that the
cheques were issued for consideration and until contrary was proved, such
presumption would hold good; that the complainant had proved legally
enforceable debt in the oral as also documentary evidence, including the
written acknowledgment by the accused on stamp paper; and that except bare
denial, nothing was brought on record by the accused to dislodge the proof
adduced by the complainant.
7.1 The High Court observed that if the transaction in question was not
reflected in the accounts and income-tax returns, that would at best hold the
assesse or lender liable for action under the income-tax laws but, if the
complainant succeeds in showing the lending of amount, the existence of
legally enforceable debt cannot be denied. The High Court also observed that
the issue regarding washing away of the cheques in rain water was of no
significance when the accused had accepted his liability in clear terms. The
High Court found that the defence plea of the accused that the money was
given as hand loan by his friend Shri Jagdishbhai got falsified by the version of
the said Shri Jagdishbhai, who was examined as a witness on behalf of the
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complainant. The High Court, therefore, set aside the impugned orders and,
while convicting the accused-appellant for the offence under Section 138 of
the NI Act, sentenced him in the manner noticed hereinbefore. The High
Court, inter alia, observed and held as under:
“24. It is necessary at this stage also to refer to the emphasis
laid by the learned counsel appearing for the respondent No.2
on the source of the fund which has been lent by the appellant.
It has emerged from the detailed examination of the record, as
also detailed examination-in-chief as well as cross-examination,
that the complainant runs the business. He also maintains the
books of account and he has his own factory in the name and
style of ‘Ashirwad Enterprise’ and manufactures plastic. The
said factory is situated at Jambusar. Ordinarily, any prudent
business person would prefer to transact by cheque while
lending money, but it is quite often noticed that the cash
transactions in the business would allow huge sum of money as
cash, which sometimes are shown in the books of account as
cash on hands or otherwise as amount available on books.
Assuming that cheque transaction of lending of amount is
absent and income-tax returns also do not reflect such amount,
that at the best would hold the assessee or lender liable for
action under the Income-tax laws. However, otherwise, if he
succeeds in showing lending of such amount, both by oral
evidence of himself and his friend, on whom even respondent
No.2 relies upon and from the writing of the respondent No.2
given separately along with seven cheques signed by him, what
possible reasons could weigh with the Court to deny the
existence of legally enforceable debt in such glaring
circumstances.
25. Considering the fact that the complainant maintains his
books of account, coupled with the fact that the respondent
No.2 had merely refuted on flimsy ground of his having
transacted with witness Jagdishbhai and not with the
complainant, has failed to discharge the burden which had
shifted upon him. It is to be noted that the respondent No.2 has
admitted his signature on the impugned cheque. At no point of
time, the cheque has been disputed……Once this fact is
acknowledged that the signature on the cheque is that of the
respondent No. 2-accused, section 139 of the Negotiable
Instruments Act would mandate the presumption that the
cheque concerns a legally enforceable debt or liability. Of
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course, this presumption is in the nature of rebuttal and onus is
on the accused thereafter to raise a probable defence.
25.1 As can be noted from the chronology of events and the
material that has been placed before this Court that the defence
raised by the accused is not at all probable. The respondent
No.2-accused states that the money was given as a hand loan
by his friend Jagdishbhai and not the appellant, also gets
falsified completely by the version of Jagdishbhai. It appears
that in case of all the seven cheques when notices were given
prior to the filing of the complaint, he has chosen not to reply to
four of the notices. Either on account of insufficiency of the
funds or because he has closed account that the cheques could
not be realized. All these circumstances cumulatively lead this
Court to conclude that the appellant succeeded in proving the
legally enforceable debt and no probable defence for rebutting
the statutory presumption is raised by the respondent No.2.
25.2 Initial presumption as contemplated under section 139 of
the Negotiable Instruments Act, when the proof of lending of the
money and acceptance of the signatures on the cheques, shall
need to be raised by the Court in favour of the appellant.
*** *** ***
28. ………. Reasonably, when the appellant had proved the
legally enforceable debt, not only through his own evidence, but
also through the evidence of his friend Jagdishbhai and also
other contemporaneous record, more particularly, the document
at Exhibit 24, which is a writing by which the respondent No.2
clearly indicates and accepts his liability to the tune of Rs.
22.50 lakh. Thus, the burden had shifted upon the respondent
No. 2. The presumption which was needed to be drawn by the
Court under section 118 of the Negotiable Instruments Act
would oblige the Court to presume that the cheque had been
issued for consideration and until contrary is proved, such
presumption would hold the ground. Except the bare denial,
nothing has been found to come on record to dislodge the
positive proof that has been adduced by the appellant.
29. In the opinion of this Court, the entire argument that the
rainy water could not have washed away the cheques, pales
into insignificance and is not argument worth consideration,
more particularly, when the respondent-accused in no unclear
terms had accepted his liability of his having accepted the
amount of Rs. 22.50 lakh from the complainant and it also
declared the issuance of seven cheques of particular dates
towards such legally enforceable debt. If it was an
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understanding between the parties qua issuance of fresh
cheques, with an ostensible reason of old cheques having
washed away, those are the non-issues. This Court cannot be
oblivious of the fact that section 138 of the Negotiable
Instruments Act has been made a penal provision not only for
the cheques to give acceptability in the transaction, but it is the
economic blood-line of the country and, therefore, the law
makers have made the special rules of evidence by introducing
sections 118 and 139 of the Negotiable Instruments Act.
30. The trial Court has committed a serious error by not
discharging its obligation of recognizing the evidentiary value
and not appreciating the positive evidence which led to the
reasonable proof of legally enforceable debt existing on the
side of the original complainant."
8. Assailing the judgment and order so passed by the High Court, learned
counsel for the accused-appellant has contended that the impugned judgment
is contrary to the principles laid down in the case of Arulvelu and Anr. v.
State represented by Public Prosecutor & Anr.: (2009) 10 SCC 206,
particularly when the High Court has set aside the considered judgment and
orders of the Trial Court without pointing out any perversity therein. The
learned counsel has argued, with reference to the decisions in M.S. Narayana
Menon alias Mani v. State of Kerala and Anr: (2006) 6 SCC 39 and Kumar
Exports v. Sharma Carpets: (2009) 2 SCC 519, that the High Court has
failed to appreciate the settled principle of law that the accused is only
required to show a probable defence to be acquitted of the charges under
Section 138 of the NI Act. The learned counsel has referred to the reasons
assigned by the Trial Court to acquit the accused-appellant and has submitted
that contradictory statements have been made by the complainant and the
witness; that no clear and cogent evidence has been brought on record to
9
prove the source of funds for advancing any loan by the complainant; that
admittedly, the complainant did not have the amount of Rs. 22,50,000/- and
the same was arranged through his friends and relatives but he made
vacillating statement in that regard and none of such relatives or friends was
examined as witness; that the witness for the complainant had more
knowledge about the transaction than the complainant; that the complainant
appeared to have rather no knowledge regarding the payments, funds and the
period of transaction; and that there was no explanation as to how the
complainant was claiming Rs. 22,50,000/- as the debt, when the sum total of
the instalments (cheques) comes to Rs. 21,00,000/- only. The learned counsel
would also argue that complainant has heavily relied on the stamp paper
dated 21.03.2007 but then, admittedly, the complainant had not signed on the
said stamp paper; and this document, neither notarised nor registered
anywhere and only bearing the signatures of the appellant and of the said Shri
Jagdishbhai, is not of any evidentiary value for the case of the complainant.
According to the learned counsel, the accused-appellant has established his
bonafide defence that he had a financial transaction with Shri Jagdishbhai in
the past; that he gave 7 blank cheques to Shri Jagdishbhai and signed on a
stamp paper as security against such transaction; and that such cheques and
stamp paper were sought to be misused by the complainant. The learned
counsel has contended that in the given circumstances, the judgment and
orders of the Trial Court acquitting the accused-appellant of the offence under
Section 138 of the NI Act deserve to be restored and the impugned judgment
10
and order dated 08.01.2018 deserves to be set aside. The learned counsel
would also submit in the alternative that in any case, the punishment as
awarded in this case is much on the higher side and deserves to be reduced.
9. Per contra, the learned counsel for the complainant-respondent No. 2
has duly supported the impugned judgment and has submitted that the
accused-appellant has only put forward a vague and unsure defence that has
no basis or support and stands falsified from the material on record. The
learned counsel has submitted that not only the presumption under Section
139 NI Act has not been dislodged, in fact, the case of the complainant is
fortified in view of the unequivocal acknowledgement and undertaking stated
by the accused-appellant on the stamp paper; and in the given circumstances,
the High Court has rightly convicted him for the offence under Section 138 of
the NI Act.
10. Having given anxious consideration to the rival submissions and having
examined the record, we are clearly of the view that as regards conviction of
the accused-appellant for the offence under Section 138 NI Act, the impugned
judgment and order dated 08.01.2018 does not call for any interference but,
on the facts and in the circumstances of this case, the punishment as awarded
by the High Court deserves to be modified.
11. According to the learned counsel for the accused-appellant, the
impugned judgment is contrary to the principles laid down by this Court in the
case of Arulvelu (supra) because the High Court has set aside the judgment of
11
the Trial Court without pointing out any perversity therein. The said case of
Arulvelu (supra) related to offences under Sections 304-B and 498-A IPC.
Therein, on the scope of the powers of Appellate Court in an appeal against
acquittal, this Court observed as follows:
"36. Carefully scrutiny of all these judgments lead to the definite
conclusion that the appellate court should be very slow in
setting aside a judgment of acquittal particularly in a case where
two views are possible. The trial court judgment cannot be set
aside because the appellate court's view is more probable. The
appellate court would not be justified in setting aside the trial
court judgment unless it arrives at a clear finding on marshalling
the entire evidence on record that the judgment of the trial court
is either perverse or wholly unsustainable in law."
11.1 The principles aforesaid are not of much debate. In other words,
ordinarily, the Appellate Court will not be upsetting the judgment of acquittal, if
the view taken by Trial Court is one of the possible views of matter and unless
the Appellate Court arrives at a clear finding that the judgment of the Trial
Court is perverse, i.e., not supported by evidence on record or contrary to
what is regarded as normal or reasonable; or is wholly unsustainable in law.
Such general restrictions are essentially to remind the Appellate Court that an
accused is presumed to be innocent unless proved guilty beyond reasonable
doubt and a judgment of acquittal further strengthens such presumption in
favour of the accused. However, such restrictions need to be visualised in the
context of the particular matter before the Appellate Court and the nature of
inquiry therein. The same rule with same rigour cannot be applied in a matter
relating to the offence under Section 138 of the NI Act, particularly where a
presumption is drawn that the holder has received the cheque for the
12
discharge, wholly or in part, of any debt or liability. Of course, the accused is
entitled to bring on record the relevant material to rebut such presumption and
to show that preponderance of probabilities are in favour of his defence but
while examining if the accused has brought about a probable defence so as to
rebut the presumption, the Appellate Court is certainly entitled to examine the
evidence on record in order to find if preponderance indeed leans in favour of
the accused.
12. For determination of the point as to whether the High Court was justified
in reversing the judgment and orders of the Trial Court and convicting the
appellant for the offence under Section 138 of the NI Act, the basic questions
to be addressed to are two-fold: as to whether the complainant-respondent
No. 2 had established the ingredients of Sections 118 and 139 of the NI Act,
so as to justify drawing of the presumption envisaged therein; and if so, as to
whether the accused-appellant had been able to displace such presumption
and to establish a probable defence whereby, the onus would again shift to
the complainant?
13. We may usefully take note of the provisions contained in Sections 118
and 139, being the special rules of evidence applicable to the case as
follows4:
4 The principal and charging part of Section 138 NI Act may also be extracted for ready
reference as follows:
"138 Dishonour of cheque for insufficiency, etc., of funds in the account.
---- Where any cheque drawn by a person on an account maintained by him with a
banker for payment of any amount of money to another person from out of that account
for the discharge, in whole or in part, of any debt or other liability, is returned by the
bank unpaid, either because of the amount of money standing to the credit of that
account is insufficient to honour the cheque or that it exceeds the amount arranged to be
paid from that account by an agreement made with that bank, such person shall be
deemed to have committed an offence and shall, without prejudice to any other
13
"118. Presumption 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;
(b) as to date---that every negotiable instrument bearing a date
was made or drawn on such date;
(c) as to time of acceptance-----that every accepted bill of
exchange was accepted within a reasonable time after its date
and before its maturity;
(d) as to time of transfer----that every transfer of a negotiable
instrument was made before its maturity;
(e) as to order of indorsements----that the indorsements
appearing upon a negotiable instrument were made in the order
in which they appear thereon;
(f) as to stamps--- that a lost promissory note, bill of exchange or
cheque was duly stamped;
(g) that holder is a holder in due course----that the holder of a
negotiable instrument is a holder in due course;
Provided that, where the instrument has been obtained from its
lawful owner, or from any person in lawful custody thereof, by
means of an offence or fraud, or has been obtained from the
maker or acceptor thereof by means of an offence of fraud, or
for unlawful consideration, the burden of proving that the holder
is a holder in due course lies upon him."
"139. Presumption in favour of holder ---- It shall be
presumed, unless the contrary is proved, that the holder is a
cheque received the cheque of the nature referred to in section
138 for the discharge, in whole or in part, if any debt or other
liability."
14. So far the question of existence of basic ingredients for drawing of
presumption under Sections 118 and 139 the NI Act is concerned, apparent it
provisions of this Act ,be punished with imprisonment for [a term which may be extended
to two years], or with fine which may extend to twice the amount of the cheque, or with
both:
*** *** ***"
14
is that the accused-appellant could not deny his signature on the cheques in
question that had been drawn in favour of the complainant on a bank account
maintained by the accused for a sum of Rs. 3 lakhs each. The said cheques
were presented to the Bank concerned within the period of their validity and
were returned unpaid for the reason of either the balance being insufficient or
the account being closed. All the basic ingredients of Section 138 as also of
Sections 118 and 139 are apparent on the face of the record. The Trial Court
had also consciously taken note of these facts and had drawn the requisite
presumption. Therefore, it is required to be presumed that the cheques in
question were drawn for consideration and the holder of the cheques i.e., the
complainant received the same in discharge of an existing debt. The onus,
therefore, shifts on the accused-appellant to establish a probable defence so
as to rebut such a presumption.
15. In Rangappa v. Sri Mohan : (2010) 11 SCC 441, this Court has
reiterated and summarised the principles relating to presumptions under
Sections 118 and 139 of the NI Act and rebuttal thereof in the following:-
"26. In the light of these extracts, we are in agreement with the
respondent claimant that the presumption mandated by Section
139 of the Act does indeed include the existence of a legally
enforceable debt or liability. To that extent, the impugned
observations in Krishna Janardhan Bhat may not be correct.
However, this does not in any way cast doubt on the
correctness of the decision in that case since it is based on the
specific facts and circumstances therein. As noted in the
citations, this is of course in the nature of a rebuttal presumption
and it is open to the accused to raise a defence wherein the
existence of a legally enforceable debt or liability can be
contested. However, there can be no doubt that there is an
initial presumption which favours the complainant.
15
27. Section 139 of the Act is an example of a reverse onus
clause that has been included in furtherance of the legislative
objective of improving the credibility of negotiable instruments.
While Section 138 of the Act specifies a strong criminal remedy
in relation to the dishonour of cheques, the rebuttable
presumption under Section 139 is a device to prevent undue
delay in the course of litigation. However, it must be
remembered that the offence made punishable by Section 138
can be better described as a regulatory offence since the
bouncing of a cheque is largely in the nature of a civil wrong
whose impact is usually confined to the private parties involved
in commercial transactions. In such a scenario, the test of
proportionality should guide the construction and interpretation
of reverse onus clauses and the defendant-accused cannot be
expected to discharge an unduly high standard of proof.
28. In the absence of compelling justifications, reverse onus
clauses usually impose an evidentiary burden and not a
persuasive burden. Keeping this in view, it is a settled position
that when an accused has to rebut the presumption under
Section 139, the standard of proof for doing so is that of
"preponderance of probabilities". Therefore, if the accused is
able to raise a probable defence which creates doubts about
the existence of a legally enforceable debt or liability, the
prosecution can fail. As clarified in the citations, the accused
can rely on the materials submitted by the complainant in order
to raise such a defence and it is conceivable that in some cases
the accused may not need to adduce evidence of his/her own."
16. On the aspects relating to preponderance of probabilities, the accused
has to bring on record such facts and such circumstances which may lead the
Court to conclude either that the consideration did not exist or that its nonexistence
was so probable that a prudent man would, under the
circumstances of the case, act upon the plea that the consideration did not
exist. This Court has, time and again, emphasized that though there may not
be sufficient negative evidence which could be brought on record by the
accused to discharge his burden, yet mere denial would not fulfil the
requirements of rebuttal as envisaged under Section 118 and 139 of the NI
16
Act. This court stated the principles in the case of Kumar Exports (supra) as
follows:
"20. The accused in a trial under Section 138 of the Act has two
options. He can either show that consideration and debt did not
exist or that under the particular circumstances of the case the
non-existence of consideration and debt is so probable that a
prudent man ought to suppose that no consideration and debt
existed. To rebut the statutory presumptions an accused is not
expected to prove his defence beyond reasonable doubt as is
expected of the complainant in a criminal trial. The accused
may adduce direct evidence to prove that the note in question
was not supported by consideration and that there was no debt
or liability to be discharged by him. However, the court need not
insist in every case that the accused should disprove the nonexistence
of consideration and debt by leading direct evidence
because the existence of negative evidence is neither possible
nor contemplated. At the same time, it is clear that bare denial
of the passing of the consideration and existence of debt,
apparently would not serve the purpose of the accused.
Something which is probable has to be brought on record for
getting the burden of proof shifted to the complainant. To
disprove the presumptions, the accused should bring on record
such facts and circumstances, upon consideration of which, the
court may either believe that the consideration and debt did not
exist or their non-existence was so probable that a prudent man
would under the circumstances 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 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.
21. The accused has also an option to prove the non-existence
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
17
probabilities, the evidential burden shifts back to the
complainant and, therefore, the presumptions under Sections
118 and 139 of the Act will not again come to the complainant's
rescue."
17. In the case at hand, even after purportedly drawing the presumption
under Section 139 of the NI Act, the Trial Court proceeded to question the
want of evidence on the part of the complainant as regards the source of
funds for advancing loan to the accused and want of examination of relevant
witnesses who allegedly extended him money for advancing it to the accused.
This approach of the Trial Court had been at variance with the principles of
presumption in law. After such presumption, the onus shifted to the accused
and unless the accused had discharged the onus by bringing on record such
facts and circumstances as to show the preponderance of probabilities tilting
in his favour, any doubt on the complainant's case could not have been raised
for want of evidence regarding the source of funds for advancing loan to the
accused-appellant. The aspect relevant for consideration had been as to
whether the accused-appellant has brought on record such
facts/material/circumstances which could be of a reasonably probable
defence.
18. In order to discharge his burden, the accused put forward the defence
that in fact, he had had the monetary transaction with the said Shri
Jagdishbhai and not with the complainant. In view of such a plea of the
accused-appellant, the question for consideration is as to whether the
accused-appellant has shown a reasonable probability of existence of any
transaction with Shri Jagdishbhai? In this regard, significant it is to notice that
18
apart from making certain suggestions in the cross-examination, the accusedappellant
has not adduced any documentary evidence to satisfy even primarily
that there had been some monetary transaction of himself with Shri
Jagdishbhai. Of course, one of the allegations of the appellant is that the said
stamp paper was given to Shri Jagdishbhai and another factor relied upon is
that Shri Jagdishbhai had signed on the stamp paper in question and not the
complainant.
18.1 We have examined the statement of Shri Jagdishbhai as also the said
writing on stamp papers and are unable to find any substance in the
suggestions made on behalf of the accused-appellant.
18.2 The said witness Shri Jagdishbhai, while pointing out his acquaintance
and friendship with the appellant as also with the respondent, asserted in his
examination-in-chief, inter alia, as under:
"Accused when he comes to our shop where the complainant
in the matter Shashimohan also be present that in both the
complainant and accused being our friends, were made
acquaintance with each other. The accused had necessity of
money in his business, in my presence, had demanded
Rs.22,50,000/- (Rupees twenty two lacs fifty thousandly) on
temporary basis. And thereafter, the complainant from his family
members by taking in piecemeal had given to the accused in
my presence. Thereafter, on demanding the money by the
complainant, the accused had given seven (7) cheques to the
complainant in our presence but such cheques being washed
out in rainy water and on informing me by the complainant I had
informed to the accused. Thereafter, Rohitbhai had given other
seven (7) cheques to the complainant in my presence and the
deed was executed on Rs. 100/- stamp paper in there is my
signature."
19
18.3 This witness was cross-examined on various aspects as regards the
particulars in the writing on the stamp paper and the date and time of the
transactions. In regard to the defence as put in the cross-examination, the
witness stated as under:
"I have got shop in National Plaza but in rain no water logging
has taken place. It is not true that there had been no financial
dealings between me and the accused today. It is not true that I
had given rupees ten lacs to the accused Rohitbhai on
temporary basis. It is not true that for the amount given to the
accused, I had taken seven blank duly cheques also blank
stamp paper without signature. It is not true that there was
quarrel between me and the accused in the matter of payment
of interest. It is not true that even after the payment of Rs. ten
lacs and the huge amount of the interest in the matter of interest
quarrel was made. It is not true that due to the reason of quarrel
with the accused, in the cheques of the accused lying with me
by making obstinate writing has filed the false complaint through
Shashimohan Goyanka. It is not true that no financial dealings
have taken place between the complainant and the accused.
therefore I also the complainant both at the time of evidence the
accused at what place, on what date at what time, the amount
taken has not been able to make clearly. (sic) It is not true that
the blank stamp paper duly signed were lying in which obstinate
writing has been made therefore the same has not been
registered through sub registrar. It is not true that the dealings
have been made between me and accused therefore there is
my signature and the signature of the accused and the
complainant has not signed. It is not true that any types of
dealings between the accused and the complainant having not
been done in my presence therefore in my statement no
clarification has been given. It is not true that the accused in my
presence as mentioned in the complaint any cheque has not
been given. It is not true that I in collusion with the complainant
to usurp the false amount the false complaint has been filed
through Shashimohan Goyanka. It is not true that in support of
the complaint of Shashimohan Goyanka is giving false
statement."
18.4 The statement of Shri Jagdishbhai does not make out any case in
favour of the accused-appellant. It is difficult to say that by merely putting the
20
suggestion about the alleged dealing to Shri Jagdishbhai, the accusedappellant
has been able to discharge his burden of bringing on record such
material which could tilt the preponderance of probabilities in his favour.
18.5 The acknowledgement on the stamp paper as executed by the
appellant on 21.03.2007 had been marked with different exhibit numbers in
these 7 cases. In Complaint Case No. 46499 of 2008, the same is marked as
Ex. 54 and reads as under :
"Today the executor I Rohit Patel Ranchhodray Masala is a
partner. Due to the financial difficulties having been arised, I
have taken Rs.22,500,000/- (Rupees twenty two thousand fifty
thousand only- sic) from my group which are to be paid to
Shashimohan Goyanka.
With reference to that today I have given seven (7) cheques of
Corporation Bank, Alkapuri Branch bearing No. 763346 to
762252 amounting to Rs. 22,50,000/- (Rupees twenty two lacs
fifty thousand only) Dates : (1) 01/4/08, (2) 01/05/08 (3)
01/07/08, (4) 01/08/08 (5) 01/10/08 (6) 01/11/08 (7) 01/12/08
the account of which is 40007.
Earliest these cheques were given but due to rainy water
logging the said cheques having been washed out (7) cheques
have again been given which is acceptable to me."
18.6 The fact of the matter remains that the appellant could not deny his
signatures on the said writing but attempted to suggest that his signatures
were available on the blank stamp paper with Shri Jagdishbhai. This
suggestion is too remote and too uncertain to be accepted. No cogent reason
is available for the appellant signing a blank stamp paper. It is also
indisputable that the cheques as mentioned therein with all the relevant
particulars like cheque numbers, name of Bank and account number are of
21
the same cheques which form the subject matter of these complaint cases.
The said document bears the date 21.03.2007 and the cheques were postdated,
starting from 01.04.2008 and ending at 01.12.2008. There appears
absolutely no reason to discard this writing from consideration.
18.7 One of the factors highlighted on behalf of the appellant is that the said
writing does not bear the signature of the complainant but and instead, it
bears the signatures of said Shri Jagdishbhai. We find nothing unusual or
objectionable if the said writing does not bear the signatures of the
complainant. The said writing is not in the nature of any bi partite agreement
to be signed by the parties thereto. It had been a writing in the nature of
acknowledgement by the accused-appellant about existence of a debt; about
his liability to repay the same to the complainant; about his having issued
seven post-dated cheques; about the particulars of such cheques; and about
the fact that the cheques given earlier had washed away in the rain water
logging. Obviously, this writing, to be worth its evidentially value, had to bear
the signatures of the accused, which it does. It is not unusual to have a
witness to such a document so as to add to its authenticity; and, in the given
status and relationship of the parties, Shri Jagdishbhai would have been the
best witness for the purpose. His signatures on this document, therefore,
occur as being the witness thereto. This document cannot be ruled out of
consideration and existing this writing, the preponderance of probabilities lean
heavily against the accused-appellant.

19. Hereinabove, we have examined in detail the findings of the Trial Court
and those of the High Court and have no hesitation in concluding that the
present one was clearly a case where the decision of the Trial Court suffered
from perversity and fundamental error of approach; and the High Court was
justified in reversing the judgment of the Trial Court. The observations of the
Trial Court that there was no documentary evidence to show the source of
funds with the respondent to advance the loan, or that the respondent did not
record the transaction in the form of receipt of even kachcha notes, or that
there were inconsistencies in the statement of the complainant and his
witness, or that the witness of the complaint was more in know of facts etc.
would have been relevant if the matter was to be examined with reference to
the onus on the complaint to prove his case beyond reasonable doubt. These
considerations and observations do not stand in conformity with the
presumption existing in favour of the complainant by virtue of Sections 118
and 139 of the NI Act. Needless to reiterate that the result of such
presumption is that existence of a legally enforceable debt is to be presumed
in favour of the complainant. When such a presumption is drawn, the factors
relating to the want of documentary evidence in the form of receipts or
accounts or want of evidence as regards source of funds were not of relevant
consideration while examining if the accused has been able to rebut the
presumption or not. The other observations as regards any variance in the
statement of complainant and witness; or want of knowledge about dates and
other particulars of the cheques; or washing away of the earlier cheques in the

rains though the office of the complainant being on the 8th floor had also been
of irrelevant factors for consideration of a probable defence of the appellant.
Similarly, the factor that the complainant alleged the loan amount to be Rs.
22,50,000/- and seven cheques being of Rs. 3,00,000/- each leading to a
deficit of Rs. 1,50,000/-, is not even worth consideration for the purpose of the
determination of real questions involved in the matter. May be, if the total
amount of cheques exceeded the alleged amount of loan, a slender doubt
might have arisen, but, in the present matter, the total amount of 7 cheques is
lesser than the amount of loan. Significantly, the specific amount of loan (to
the tune of Rs. 22,50,000/-) was distinctly stated by the accused-appellant in
the aforesaid acknowledgment dated 21.03.2017.
20. On perusing the order of the Trial Court, it is noticed that the Trial Court
proceeded to pass the order of acquittal on the mere ground of 'creation of
doubt'. We are of the considered view that the Trial Court appears to have
proceeded on a misplaced assumption that by mere denial or mere creation of
doubt, the appellant had successfully rebutted the presumption as envisaged
by Section 139 of the NI Act. In the scheme of the NI Act, mere creation of
doubt is not sufficient.
21. The result of discussion in the foregoing paragraphs is that the major
considerations on which the Trial Court chose to proceed clearly show its
fundamental error of approach where, even after drawing the presumption, it
had proceeded as if the complainant was to prove his case beyond
reasonable doubt. Such being the fundamental flaw on the part of the Trial

Court, the High Court cannot be said to have acted illegally or having
exceeded its jurisdiction in reversing the judgment of acquittal. As noticed
hereinabove, in the present matter, the High Court has conscientiously and
carefully taken into consideration the views of the Trial Court and after
examining the evidence on record as a whole, found that the findings of the
Trial Court are vitiated by perversity. Hence, interference by the High Court
was inevitable; rather had to be made for just and proper decision of the
matter.
22. For what has been discussed hereinabove, the findings of the High
Court convicting the accused-appellant for offence under Section 138 of the NI
Act deserves to be, and are, confirmed.
23. Coming to the question of punishment for the offence aforesaid, as
noticed, the High Court has awarded the punishment of simple imprisonment
for a period of one year together with fine to the extent of double the amount
of cheque (i.e., a sum of Rs. 6 lakhs) with default stipulation of further
imprisonment for a period of one year in each case; and, out of the amount
payable as fine, the complainant-respondent No. 2 is ordered to be
compensated to the tune of Rs. 5.5 lakhs in each case. In the totality of the
circumstances of this case and looking to the nature of offence which is
regulatory in nature, while we find that the punishment as regards monetary
terms calls for no interference but then, the sentence of imprisonment deserve
to be modified.

23.1 In the singular and peculiar circumstances of this case, where the
matters relating to 7 cheques issued by the appellant in favour of respondent
No. 2 for a sum of Rs. 3 lakhs each are being considered together; and the
appellant is being penalised with double the amount of cheques in each case
i.e., in all a sum of Rs. 42,00,000/-, in our view, the appellant deserves to be
extended another chance to mend himself by making payment of fine, of
course, with the stipulation that in case of default in payment of the amount of
fine, he would undergo simple imprisonment for a period of one year.
24. Therefore, this appeal is partly allowed in the following terms: The
common judgment and order dated 08.01.2018 in R/Criminal Appeal No.
1187/2017 connected with R/Criminal Appeal Nos. 1191/2017 to 1196/2017
by the High Court of Gujarat at Ahmedabad is maintained as regards
conviction of the accused-appellant for the offence under Section 138 of the
Negotiable Instruments Act, 1881 for dishonour of 7 cheques in the sum of Rs.
3 lakhs each, as drawn by him in favour of the complainant-respondent No. 2;
however, the sentence is modified in the manner that in each of these 7
cases, the accused-appellant shall pay fine to the extent of double the amount
of each cheque (i.e., a sum of Rs. 6 lakhs in each case) within 2 months from
today with the stipulation that in case of default in payment of fine, the
accused-appellant shall undergo simple imprisonment for a period of one year.
On recovery of the amount of fine, the complainant-respondent No. 2 shall be
compensated to the tune of Rs. 5.5 lakhs in each case. In the event of

imprisonment for default in payment of fine, the sentences in all the 7 cases
shall run concurrently.
25. The Trial Court shall take steps for enforcement of this judgment
forthwith.
…….…..………………J.
(Abhay Manohar Sapre)
….….…………………J.
(Dinesh Maheshwari) 1
New Delhi,
Dated: 15th March, 2019.

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