Thursday 22 August 2019

Whether court can raise presumption U/S 139 of NI Act even if there is no pleading in complaint?

The use of the phrase “until the contrary is proved” in Section
118 of the Act and use of the words “unless the contrary is
proved” in Section 139 of the Act read with definitions of “may
presume” and “shall presume” as given in Section 4 of the
Evidence Act, makes it at once clear that presumptions to be
raised under both the provisions are rebuttable. When a
presumption is rebuttable, it only points out that the party on
whom lies the duty of going forward with evidence, on the fact
presumed and when that party has produced evidence fairly and
reasonably tending to show that the real fact is not as presumed,
the purpose of the presumption is over.
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 of the Act.” [underlining
added].
18. In the present case, by examining himself as PW-1, the
complainant has discharged the initial burden cast upon him
that the cheques were issued for the rice bags purchased on
credit. With the examination of PW-1, the statutory
presumption under Section 139 of the Act arises that the
cheques were issued by the respondent-accused for the
discharge of any debt or other liability in whole or in part. The
courts below disbelieved the evidence of the complainant on
the ground that there are no averments in the complaint that
the commodities were sold for cash and that the rice bags were
sold on credit and the cheques were issued for the goods sold
on credit. Though the complaint contains no specific
averments that the cheques were issued for the purchase
made on credit, in his evidence, PW-1 clearly stated that the
cheques were issued for the commodities purchased on credit.

The courts below erred in brushing aside the evidence of PW-1
on the ground that there were no averments in the complaint as
to the purchases made by cash and purchase. The courts
below also erred in not raising the statutory presumption under
Section 139 of the Act that the complainant received the
cheques to discharge the debt or other liability in whole or in
part.
19. It is for the respondent-accused to adduce evidence to
prove that the cheques were not supported by consideration
and that there was no debt or liability to be discharged by him.
The receipts-Ex.-22/C (colly) relied upon by the respondentaccused
do not create doubt about the purchases made on
credit and the existence of a legally enforceable debt for which
the cheques were issued. The courts below erred in saying
that by the receipts-Ex.22/C (colly), the respondent-accused
has rebutted the statutory presumption raised under Section
139 of the Negotiable Instruments Act. The oral and the
documentary evidence adduced by the complainant are
sufficient to prove that it was a legally enforceable debt and that
the cheques were issued to discharge the legally enforceable

debt. With the evidence adduced by the complainant, the
courts below ought to have raised the presumption under
Section 139 of the Act. The evidence adduced by the
respondent-accused is not sufficient to rebut the presumption
raised under Section 139 of the Act. The defence of the
respondent that though he made payment for the
commodities/rice bags, the blank cheques were not returned by
the appellant-complainant is quite unbelievable and
unacceptable. The impugned judgment of the High Court
cannot be sustained and is liable to be set aside. 
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS.61-62 OF 2011

M/S SHREE DANESHWARI TRADERS  Vs  SANJAY JAIN AND ANOTHER 

R . BANUMATHI, J.
Dated:August 21, 2019.



These appeals arise out of the judgment dated
28.07.2008 in Criminal Appeal Nos.53 and 54 of 2006 passed
by the High Court of Bombay in and by which the High Court
dismissed the appeals filed by the appellant-complainant
thereby upholding the acquittal of the respondent-accused
Sanjay Jain under Section 138 of the Negotiable
Instruments Act.
2. Brief facts which led to filing of these appeals are as
under:-

The appellant-complainant had been supplying the
commodities and rice bags to the respondent-accused on his
request. In this regard, the respondent-accused issued various
cheques which when presented for collection were
dishonoured. The appellant had filed two complaints under
Section 138 of the Negotiable Instruments Act - complaint
No.339/OA/NI/2004/A and complaint No.499/OA/NI/2004/A
against the respondent-accused alleging that the cheques
issued by the respondent-accused in lieu of payment owed to
the appellant were dishonoured on presentation. It was
averred that despite issuance of legal notice, the respondent
did not make payments.
3. In case No.339/OA/NI/2004/A, the respondent-accused
issued three cheques drawn on UTI Bank details of which are
as under:-
-------------------------------------------------------------------------------------------
Date Number Amount
-------------------------------------------------------------------------------------------
1. 08.08.2003 002497 Rs.17,540.00
2. 18.08.2003 002463 Rs.17,871.00
3. 25.08.2003 002480 Rs.17,760.00
-------------------------------
Total = Rs.53,171.00
2
4. In case No.499/OA/NI/2004/A, the respondent-accused
issued nine cheques, details of which are as under:-
Date Number Amount
-------------------------------------------------------------------------------------------
1. 01.09.2003 002481 Rs.18,000.00
2. 15.09.2003 633427 Rs.20,000.00
3. 22.09.2003 633428 Rs.20,000.00
4. 29.09.2003 633429 Rs.20,000.00
5. 03.10.2003 531977 Rs.25,000.00
6. 06.10.2003 633430 Rs.20,979.00
7. 13.10.2003 531975 Rs.20,000.00
8. 27.10.2003 531976 Rs.25,000.00
9. 10.11.2003 531978 Rs.25,000.00
-------------------------------
Total = Rs.1,93,979.00
5. When the above said cheques were presented to United
Western Bank, Margao Branch for encashment, cheques were
returned by the bank unpaid on 04.02.2004 and 20.02.2004
with the endorsement “not arranged for/funds insufficient” and
“funds insufficient”. The appellant thereafter issued legal
notices to the respondent-accused dated 05.02.2004 and
23.02.2004 respectively making a demand for the payment of
the cheque amount. The said notices were received by the
respondent-accused; though respondent acknowledged the
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receipt of the notices, he did not make the payment nor
arranged that amount in satisfaction of the cheques issued by
him. Hence, the complainant filed two complaints under
Section 138 of the Negotiable Instruments Act as noted above.
6. Taking into account the receipts produced by the
respondent-accused, the trial court acquitted the respondentaccused
in both the cases. The trial court rejected the case of
the appellant that the respondent sometimes used to purchase
rice bags on credit and sometimes used to purchase rice bags
on payment of cash and the same being inconsistent with the
documents produced by the appellant. The trial court held that
in the written complaint, the appellant-complainant has not
alleged anywhere that the respondent used to make credit as
well as cash purchases. The trial court held that the
respondent left blank cheques with the appellant as security
whenever he used to make credit purchases and therefore, the
presumption under Section 139 of the Act is not available to the
appellant.
7. In appeal, the High Court affirmed the acquittal of the
respondent-accused and held that the respondent had taken
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the defence that the subject cheques were issued as security
towards the goods supplied for which payment was
subsequently made by cash. The High Court held that by
producing the relevant receipts, the respondent has rebutted
the presumption and that the respondent was able to prove that
the cheques were issued by way of security towards the goods
supplied to him for which he made the payment by cash. The
High Court further held that it was incumbent upon the
complainant to have explained in the complaint that the cash
payments made by the respondent were related to other
commodities and the cheques were made for payment of rice
bags. Holding that the case of the appellant was not consistent,
the High Court affirmed the order of acquittal and dismissed the
appeals filed by the complainant-appellant.
8. The learned counsel for the appellant submitted that the
transaction between the parties was a mercantile transaction
and during the course of the business, running accounts were
maintained when purchases were made at different times and
payments were made by both modes i.e. cash and cheques. It
was submitted that both the courts below overlooked the fact
5
that the transactions were mercantile transactions mixed up
with cash payments and also payments made by cheques. It
was submitted that the courts below erred in not keeping in
view the statutory presumption available under Section 139 of
the Negotiable Instruments Act to the appellant and that the
respondent-accused failed to rebut the presumption by leading
cogent and consistent evidence. The learned counsel urged
that the impugned judgment is contrary to the object of Section
138 and Section 139 of the Negotiable Instruments Act and is
liable to be set aside.
9. The learned counsel appearing for the respondent
submitted that the respondent used to leave the cheques with
the complainant when he purchased the commodities – rice
bags and used to make cash payment towards those
commodities for which complainant issued receipts. It was
submitted that even though the complainant received the
money for the rice bags, he failed to return the cheques and
had misused those cheques and filed false complaints against
the respondent. It was submitted that the respondent has
rebutted the statutory presumption by producing twenty
6
receipts-Ex.-22/C (colly) ranging from 02.09.2003 to
17.11.2003 as also receipts-Ex.16/C (colly). The total amount
of the receipts issued by the complainant is Rs.1,94,000/- and
taking into consideration that the amount has been paid, the
courts below rightly held that the presumption under Section
139 of the Negotiable Instruments Act was rebutted by the
respondent-accused.
10. We have carefully considered the submissions and
perused the impugned judgment and other materials on record.
The point falling for consideration is whether the courts below
were right in acquitting the respondent-accused by holding that
the appellant-complainant has failed to prove that the
respondent owed him debt and that the cheques were issued
for the discharge of the said debt.
11. The appellant is a commission agent/merchant
conducting his business and he used to supply rice bags to the
respondent-accused on his request. Admittedly, the transaction
between the appellant-complainant and the respondentaccused
was a mercantile transaction. During the course of
business, running accounts were maintained by the parties.
7
Case of the appellant is that the respondent used to purchase
rice bags sometimes on credit and sometimes on cash. In his
evidence, PW-1-complainant stated that the cheques were
issued for the credit transaction payable to the appellant by the
respondent. Per contra, case of the respondent is that Ex.-
16/C (colly) and Ex.-22/C (colly) were issued against the cash
payment made by the respondent-accused and though the
payments were made, the cheques issued by the respondentaccused
were not returned to him. The respondent-accused
relies upon the various receipts-Ex.-22/C (colly) which are as
under:-
Sr.No. Receipt No. Date Amount
1. 1276 02.09.2003 Rs.16,000/-
2. 1291 04.09.2003 Rs.2,000/-
3. 1340 08.09.2003 Rs.16,000/-
4. 1489 27.09.2003 Rs.20,000/-
5. 1556 03.10.2003 Rs.20,000/-
6. 1615 06.10.2003 Rs.14,500/-
7. 1621 08.10.2003 Rs.5,000/-
8. 1682 13.10.2003 Rs.15,500/-
9. 1689 13.10.2003 Rs.3,300/-
10. 1746 20.10.2003 Rs.17,000/-
11. 1763 23.10.2003 Rs.1,500/-
12. 1760 23.10.2003 Rs.2,300/-
13. 1808 27.10.2003 Rs.16,000/-
14. 1828 01.11.2003 Rs.3,000/-
15. 1882 05.11.2003 Rs.20,000/-
16. 1942 11.11.2003 Rs.15,000/-
17. 1941 11.11.2003 Rs.3,000/-
18. 1953 15.11.2003 Rs.3,000/-
19. 1958 17.11.2003 Rs.12,000/-
20. 2001 17.11.2003 Rs.3,000/-
8
12. Case of the complainant is that whenever the respondent
used to make cash purchases, cash memos/receipts were
issued to the respondent and the above twenty receipts Ex.-
22/C (colly) pertain to cash sale. Complainant-PW-1 further
stated that the cheques issued by the respondent-accused are
subject matter of the complaints and pertain to the credit
purchases made by the respondent-accused and the
respondent has not made the payment or cleared the dues of
the purchases made by him on credit. On the other hand, case
of the respondent is that he always used to make credit
purchase and used to leave blank cheques with the
complainant-appellant and thereafter, he used to make
payment for which the complainant used to issue receipts to
the respondent; however, the appellant did not return the blank
cheques left by the respondent with the appellant though the
respondent made the payments and those cheques were
misused by the appellant-complainant.
13. As seen from the receipts-Ex.-16/C (colly) and Ex.-22/C
(colly), though the amount said to have been credited to the
account of the respondent, the receipts contain the expression
9
“cheques are subject to realisation”. The format of the receipt-
Ex.-16 (colly) is as under:-
M (CST) 4265 dt 4.9.91 Tel: ………
M (ST) 6104 dt 4.9.91 Res: ……..
M/s SHREE DANESHWARI TRADERS
General Merchant & Commission Agent
Shop No.8, Masjid Building
Malbhar, MARGAO-GOA
No.1145 Date: 18.8.03
RECEIPT
Credited to the account of M/s Shantadurga Stores, Margao, the amount
of Rs. Fifteen Thousand only, by Cash/Cheque/Draft Rs.15,000/-.
For M/s. Shree Daneshwari Traders
L/F ____________________________
Cheques are subject to realisation.
Case of the appellant is that the receipts-Ex.-22/C (colly) were
issued by the appellant to the respondent towards cash
payment made by the respondent during the course of
business. The courts below failed to consider that Ex.-22/C
(colly) were issued by the appellant to the respondent as
against the cash payment made by respondent. Whereas the
cheques were issued towards the credit purchases of
10
commodities from the complainant which is a legally
enforceable debt.
14. DW-2 is the father of respondent-accused. In his
evidence, DW-2 stated that the respondent used to leave blank
cheques with him in order to carry out the business transaction.
DW-2 has stated that they used to purchase rice bags from the
complainant and had left the cheques with the complainant.
Admittedly, the cheques are in the handwriting of DW-2. In his
evidence, DW-2 stated that though the amount pertaining to the
purchase of rice has already paid, the complainant did not
return the cheques in spite of having received the amount
pertaining to the purchase of rice. It is quite unbelievable that in
a business/mercantile transaction, the accused even after
making payment towards the purchase of rice bags, did not
insist for the return of the cheques. It is quite improbable that
the respondent-accused did not take any steps to get back the
cheques and continued with the business transaction even
though the complainant has not returned the cheques after
payment of the money.
11
15. The trial court in its judgment referred to the three
cheques and observed that the three cheques bearing
Nos.2463, dated 18.08.2003; 2480 dated 25.08.2003 and 2497
dated 08.08.2003 go to suggest that the later cheque bearing
No.2497 was given much more earlier to 18.08.2003 or
25.08.2003 which seems inconsistent and it would not have
been in the normal course of business. The trial court held that
the date of issuance of the three cheques suggests that the
cheques were already with the complainant and they were
utilised by the complainant thereafter. On this aspect, PW-1
was cross-examined as to why cheque bearing No.2497 was
issued on 08.08.2003 while it ought to have been issued after
25.08.2003 to which PW-1 stated that he does not know about
the same. After referring to the above three cheques, the trial
court held that in view of inconsistency, the presumption
available under Section 139 of the Negotiable Instruments Act
is not available to the complainant which was affirmed by the
High Court. It was further held that the blank cheques left by
the accused were with the complainant and they have been
used to file the complaint. The courts below did not keep in
12
view that the appellant has no control over the manner of
issuance of cheques by the respondent and how it was issued.
Merely because, later cheque No.2497 was said to have been
issued by the respondent at an earlier date i.e. 08.08.2003, it
cannot be held that the complainant had used the blank
cheques issued by the respondent.
16. Under Section 138 of the Negotiable Instruments Act,
once the cheque is issued by the drawer, a presumption under
Section 139 of the Negotiable Instruments Act in favour of the
holder would be attracted. Section 139 creates a statutory
presumption that a cheque received in the nature referred to
under Section 138 of the Negotiable Instruments Act is for the
discharge in whole or in part of any debt or other liability. The
initial burden lies upon the complainant to prove the
circumstances under which the cheque was issued in his
favour and that the same was issued in discharge of a legally
enforceable debt.
17. It is for the accused to adduce evidence of such facts and
circumstances to rebut the presumption that such debt does
not exist or that the cheques are not supported by
13
consideration. Considering the scope of the presumption to be
raised under Section 139 of the Act and the nature of evidence
to be adduced by the accused to rebut the presumption, in
Kumar Exports v. Sharma Carpets (2009) 2 SCC 513, the
Supreme Court in paras (14-15) and paras (18-20) held as
under:-
“14. Section 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 the nature referred to in Section 138 for
the discharge, in whole or in part, of any debt or other liability.
15. Presumptions are devices by use of which the courts are
enabled and entitled to pronounce on an issue notwithstanding
that there is no evidence or insufficient evidence. Under the
Evidence Act all presumptions must come under one or the other
class of the three classes mentioned in the Act, namely, (1) “may
presume” (rebuttable), (2) “shall presume” (rebuttable), and (3)
“conclusive presumptions” (irrebuttable). The term “presumption”
is used to designate an inference, affirmative or disaffirmative of
the existence of a fact, conveniently called the “presumed fact”
drawn by a judicial tribunal, by a process of probable reasoning
from some matter of fact, either judicially noticed or admitted or
established by legal evidence to the satisfaction of the tribunal.
Presumption literally means “taking as true without examination
or proof”.
……..
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 shall end only when the contrary is proved by
the accused, that is, the cheque was not issued for consideration
and in discharge of any debt or liability. A presumption is not in
itself evidence, but only makes a prima facie case for a party for
whose benefit it exists.
19. The use of the phrase “until the contrary is proved” in Section
118 of the Act and use of the words “unless the contrary is
proved” in Section 139 of the Act read with definitions of “may
presume” and “shall presume” as given in Section 4 of the
Evidence Act, makes it at once clear that presumptions to be
raised under both the provisions are rebuttable. When a
presumption is rebuttable, it only points out that the party on
whom lies the duty of going forward with evidence, on the fact
presumed and when that party has produced evidence fairly and
reasonably tending to show that the real fact is not as presumed,
the purpose of the presumption is over.
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 of the Act.” [underlining
added].
18. In the present case, by examining himself as PW-1, the
complainant has discharged the initial burden cast upon him
that the cheques were issued for the rice bags purchased on
credit. With the examination of PW-1, the statutory
presumption under Section 139 of the Act arises that the
cheques were issued by the respondent-accused for the
discharge of any debt or other liability in whole or in part. The
courts below disbelieved the evidence of the complainant on
the ground that there are no averments in the complaint that
the commodities were sold for cash and that the rice bags were
sold on credit and the cheques were issued for the goods sold
on credit. Though the complaint contains no specific
averments that the cheques were issued for the purchase
made on credit, in his evidence, PW-1 clearly stated that the
cheques were issued for the commodities purchased on credit.

The courts below erred in brushing aside the evidence of PW-1
on the ground that there were no averments in the complaint as
to the purchases made by cash and purchase. The courts
below also erred in not raising the statutory presumption under
Section 139 of the Act that the complainant received the
cheques to discharge the debt or other liability in whole or in
part.
19. It is for the respondent-accused to adduce evidence to
prove that the cheques were not supported by consideration
and that there was no debt or liability to be discharged by him.
The receipts-Ex.-22/C (colly) relied upon by the respondentaccused
do not create doubt about the purchases made on
credit and the existence of a legally enforceable debt for which
the cheques were issued. The courts below erred in saying
that by the receipts-Ex.22/C (colly), the respondent-accused
has rebutted the statutory presumption raised under Section
139 of the Negotiable Instruments Act. The oral and the
documentary evidence adduced by the complainant are
sufficient to prove that it was a legally enforceable debt and that
the cheques were issued to discharge the legally enforceable

debt. With the evidence adduced by the complainant, the
courts below ought to have raised the presumption under
Section 139 of the Act. The evidence adduced by the
respondent-accused is not sufficient to rebut the presumption
raised under Section 139 of the Act. The defence of the
respondent that though he made payment for the
commodities/rice bags, the blank cheques were not returned by
the appellant-complainant is quite unbelievable and
unacceptable. The impugned judgment of the High Court
cannot be sustained and is liable to be set aside. The
respondent-accused is convicted under Section 138 of the
Negotiable Instruments Act in both the complaints; however,
considering that the cheque transaction was of the year 2003,
at this distant point of time, we do not deem it appropriate to
impose any sentence of imprisonment on the accused.
20. In the result, the impugned judgment of the High Court in
Criminal Appeal Nos.53 and 54 of 2006 is set aside and these
appeals are allowed. The respondent-accused is convicted
under Section 138 of Negotiable Instruments Act and a fine of
Rs.2,97,150/- (Rs.53,171/- + Rs.1,93,979/- + compensation of
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Rs.50,000/-) is imposed on the respondent in default of which,
the respondent shall undergo imprisonment for six months. The
fine amount of Rs.2,97,150/- is to be deposited before the trial
court within twelve weeks from today, failing which the
respondent shall be taken into custody to serve the default
sentence. On deposit of fine amount, the amount of
Rs.2,97,150/- shall be paid to the appellant-complainant.
………………………….J.
[R. BANUMATHI]
………………………….J.
[A.S. BOPANNA]
New Delhi;
August 21, 2019.

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