Supreme Court: In an appeal against the Judgment and order of Punjab and Haryana High Court, wherein the Court upheld the acquittal order of the Trial Court concerning an offence under Section 138 of the Negotiable Instruments Act, 1881 (‘NI Act’), the division bench of Aravind Kumar and SVN Bhatti, JJ. while setting aside the impugned judgment, allowed the complaint filed under Section 138 NI Act and convicted the accused with fine of twice the amount of the cheque (Rs.13,90,408/-) , failing which he shall undergo simple imprisonment for one year.
Background:
The accused along with his wife, approached the complainant with a request for lending him money. The complainant contended that he had lent a sum of Rs. 6 lakhs on that day and has lent further sums thereafter, in the genuine belief that the accused would honour his promise of timely repayment and return the sum borrowed with interest. The accused failed to repay as per the agreed timeline. Thereafter, the accused changed his telephone number without notice to the complainant, with the intent of evading his payment obligations. In 2017, the complainant managed to trace him. The accused sought for forgiveness and promised to repay the amounts borrowed along with interest, within three months. Yet again, the accused defaulted on his promise. He was not found in his residential address. On direct confrontation, the accused is said to have issued a post-dated cheque for a sum of Rs.6,95,204/- towards part repayment of outstanding dues. The accused assured the complainant that the balance dues would be repaid by issuing a second cheque in the month of December 2017. On its presentation, the cheque was returned with the endorsement ‘Funds Insufficient’. The complainant issued a demand notice through on 26-10-2017 and called upon the accused to make repayment of the cheque amount and other expenses incurred within 15 days. Since the demand was not complied with, a complaint under Section 138 NI Act was instituted on 29-11-2017, before the Court of Judicial Magistrate First Class.
Thereafter, the accused was tried for the offence under Section 138 of the NI Act. The Trial Court acquitted him. The High Court upheld the order of acquittal. Aggrieved, the complainant has preferred this appeal.
Issues:
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Whether the accused can be said to have discharged his ‘evidential burden’, for the courts below to have concluded that the presumption of law supplied by Section 139 had been rebutted?
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Whether the complainant has, in the absence of the artificial force supplied by the presumption under Section 139, independently proved beyond reasonable doubt that the cheque was issued in discharge of a debt/liability?
Analysis:
The Court said that the legal burden is the burden of proof which remains constant throughout a trial. On the other hand, the evidential burden may shift from one party to another as the trial progresses, according to the balance of evidence given at any particular stage.
After taking note of Section 130 of the NI Act, 1881, the Court said that in all trials concerning dishonour of cheque, the courts are called upon to consider whether the ingredients of the offence enumerated in Section 138 of the Act have been met and if so, whether the accused was able to rebut the statutory presumption contemplated by Section 139 of the Act. Further, it said that Section 139 is a reverse onus clause and requires the accused to prove the non-existence of the presumed fact, i.e., that cheque was not issued in discharge of a debt/liability.
The Court said that the NI Act provides for two presumptions, one under Section 118 of the Act, which directs that it shall be presumed, until the contrary is proved, that every negotiable instrument was made or drawn for consideration. Further, under Section 139, which stipulates that unless the contrary is proved, it shall be presumed that the holder of the cheque received the cheque for the discharge of, whole or part of any debt or liability. The ‘presumed fact’ directly relates to one of the crucial ingredients necessary to sustain a conviction under Section 138.
Further, it said that Section 139 of the NI Act, which takes the form of a ‘shall presume’ clause is illustrative of a presumption of law. It is obligatory for the Court to raise this presumption in every case where the factual basis for the raising of the presumption has been established. But this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary, as is clear from the use of the phrase ‘unless the contrary is proved’.
After taking note of Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197, wherein it was held that presumption takes effect even in a situation where the accused contends that ‘a blank cheque leaf was voluntarily signed and handed over by him to the complainant. Therefore, the Court said that mere admission of the drawer’s signature, without admitting the execution of the entire contents in the cheque, is now sufficient to trigger the presumption.
The Court further said that as soon as the complainant discharges the burden to prove that the instrument was issued by the accused for discharge of debt, the presumptive device under Section 139 of the Act helps shift the burden on the accused. The effect of the presumption is to transfer the evidential burden on the accused of proving that the cheque was not received by the Bank towards the discharge of any liability. Until this evidential burden is discharged by the accused, the presumed fact will have to be taken to be true, without expecting the complainant to do anything further.
After taking note of Basalingappa v. Mudibasappa, (2019) 5 SCC 418 the Court said that to rebut the presumption and prove to the contrary, it is open to the accused to raise a probable defence, wherein the existence of a legally enforceable debt or liability can be contested. The words ‘until the contrary is proved’ occurring in Section 139 do not mean that accused must necessarily prove the negative that the instrument is not issued in discharge of any debt/liability, but the accused has two options. The first option is to prove that the debt/liability does not exist- and conclusively establish with certainty that the cheque was not issued in discharge of a debt/liability. The second option is to prove the non-existence of debt/liability by a preponderance of probabilities by referring to the circumstances of the case.
The Court added that the nature of evidence required to shift the evidential burden need not necessarily be direct evidence i.e., oral or documentary evidence or admissions made by the opposite party; it may comprise circumstantial evidence or presumption of law or fact.
Thus, the Court concluded that once the accused adduces evidence to the satisfaction of the Court that on a preponderance of probabilities there exists no debt/liability in the manner pleaded in the complaint or the demand notice or the affidavit-evidence, the burden shifts to the complainant and the presumption ‘disappears’ and does not haunt the accused any longer. The onus having now shifted to the complainant, he will be obliged to prove the existence of a debt/liability as a matter of fact and his failure to prove it would result in dismissal of his complaint case.
The Court noted that the accused has neither replied to the demand notice nor has led any rebuttal evidence in support of his case. The case set up by him needs to be drawn from the suggestions put in during the cross examination and from his reply given in the statement recorded under Section 313 of the Code of Criminal Procedure, 1973.
As per the Court, the present case set up by the accused is thoroughly riddled with contradictions. It is apparent on the face of the record that there is not the slightest credibility perceivable in the defense set up by the accused.
The Court said that in his Section 313 statements, he admitted taking a loan of Rs 20 lakh and having repaid some interest, but in the cross examination of the complainant, a suggestion is made that the accused had no financial dealings with the complainant.
Further, it noted that in the accused’s Section 313 statement, he stated that his cheque book and passbook are kept in his sister in law’s house, yet, in the cross examination of the accused’s sister-in-law, she has denied that any blank cheque was given to her by her brother-in-law. The Court found it highly unnatural to presume that the accused would leave his signed cheque and passbook in his sister-in law’s house.
The Court said that nothing significant has been drawn from the cross-examination of the complainant to raise any suspicion in the case set up by the complainant. Other than some minor inconsistencies, the case of the complainant has been consistent throughout. The complainant’s case satisfied every ingredient necessary for sustaining a conviction under Section 138. The case of the defense was limited only to the issue as to whether the cheque had been issued in discharge of a debt/liability. The accused, having miserably failed to discharge his evidential burden, that fact will have to be taken to be proved by force of the presumption, without requiring anything more from the complainant.
The Court accepted the contention of the complainant that there is a fundamental flaw in the way both the Courts below have proceeded to appreciate the evidence on record. Once the presumption under Section 139 was given effect to, the Courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would necessarily have to shift on the case set up by the accused, since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would be to see whether the accused has discharged his onus of rebutting the presumption. If he fails to do so, the Court should have proceeded to convict him, subject to satisfaction of the other ingredients of Section 138. If the Court finds that the evidential burden placed on the accused has been discharged, the complainant would be expected to prove the said fact independently, without taking aid of the presumption.
The Court said that there has been fundamental error in the approach with which the High Court has proceeded to consider the evidence on record, as the High Court in the impugned order has stated that the complainant has proved the issuance of cheque, which means that the presumption would come into immediate effect. The High Court also found that the accused has rebutted the presumption by putting questions to the complainant and explaining the circumstances under Section 313 CrPC. According to the High Court, the burden was primarily on the complainant to prove the debt amount. There is no elucidation of material circumstances in which the Court reached such conclusion. Therefore, according to the High Court, the burden was primarily on the complainant to prove the debt amount.
Thus, the Court said that this case calls for interference, while answering the issues in negative.
[Rajesh Jain v Ajay Singh, 2023 SCC OnLine SC 1275 , decided on 09-10-2023]
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