Himachal Pradesh High Court
Amar Chand Bhutail & Sons vs Yash Pal Ranta on 29 December, 2023
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Appeal No. 137 of 2011 Reserved on: 06.11.2023 .
Date of Decision:29.12.2023
Amar Chand Bhutail & Sons ....Appellant
Versus
Yash Pal Ranta .....Respondent
of
Coram
Hon'ble Mr. Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 Yes rt For the Appellant : Mr. Balwant Kukreja, Advocate. For the Respondent : Mr. Rakesh Manta, Advocate.
Rakesh Kainthla, Judge The present appeal is directed against the judgment dated 05.03.2011 passed by learned Judicial Magistrate, First Class (JMFC-III), Shimla, vide which the complaint of the appellant (complainant before the learned Trial Court) was dismissed. (The parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience).
2. Briefly stated, the facts giving rise to the present appeal are that the complainant filed a complaint before the 1 Whether reporters of Local Papers may be allowed to see the judgment? Yes ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 2 learned Trial Court for the commission of an offence punishable under Section 138 of the Negotiable Instruments (NI) Act. It was .
asserted that the accused handed over a cheque bearing no.
883400 dated 22.04.2003 to the complainant for ₹ 7,50,000/-
drawn on UCO Bank, Tikkar in the discharge of his liability. The complainant sent the cheque for its collection to his bank. The of complainant's bank forwarded the cheque to the drawee bank.
However, the cheque was dishonoured with the remarks rt 'insufficient balance'. The complainant issued a notice to the accused through his counsel asking him to pay the amount within 15 days from the date of the receipt of the notice. The notice was duly served upon the accused but he failed to pay the amount; hence, the complaint was filed for taking action against the accused.
3. The learned Trial Court found sufficient reasons to proceed against 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. The accused pleaded not guilty and claimed to be tried.
::: Downloaded on - 29/12/2023 20:32:59 :::CIS 34. The complainant examined Vattan Singh (CW1), Ajeet Bhutail (CW2), Jagdish Chand Sharma (CW3), and Vinay Kumar .
(CW4).
5. The accused in his statement recorded under Section 313 of Cr.P.C. denied the case of the complainant. He stated that he was dealing with Van Leer Moulded Fibre India Limited, who of used to supply the apple trays in the name of AC Claridge. He had rt handed over a signed cheque to the Company, which was misused by it. Statement of Suneet Kalra (DW1), Wattan Singh (DW2), accused himself (DW3) were recorded in defence.
6. The learned Trial Court held that the cheque carries with it a presumption that it was drawn for valid consideration and in the discharge of the legal liability. The burden lies upon the accused to rebut this presumption. The complainant failed to produce the account books/ledger showing the business transactions with the accused. He had failed to produce the challan showing the consignment of apple trays to the accused.
The accused stated that he had business transactions with M/s Van Leer Moulded Fibre India Limited. Ajeet Bhutail (CW2) admitted that he was a forwarding agent of M/s Van Leer ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 4 Moulded Fibre India Limited. However, he had failed to establish his plea that all the business of Van Leer Moulded Fibre India .
Limited was carried through him. The version of the accused that he was dealing with Van Leer Moulded Fibre India Limited was highly probable. The accused had successfully rebutted the presumption of consideration attached to the cheque by his of evidence; hence, the accused was acquitted.
7. rt Being aggrieved from the judgment passed by the learned Trial Court, the present appeal has been filed asserting that the learned Trial Court did not properly appreciate the material placed before it. It was duly proved that the accused used to purchase the apple trays from the complainant and make the payment to the complainant. The account was settled between the complainant and the accused. The accused issued a cheque in discharge of his legal liability. Learned Trial Court erred in holding that the complainant was bound to produce the record to prove the consideration. Learned Trial Court relied upon Ext. D1, which was only a copy of the challan regarding the supply of apple trays. Learned Trial Court erred in construing it to be a copy of the ledger. This document was also not proved as per the law. The version of the accused that he was dealing ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 5 directly with M/s Van Leer Moulded Fibre India Limited was not proved and the learned Trial Court erred in holding otherwise.
.
Therefore, it was prayed that the present appeal be allowed and the judgment passed by the learned Trial Court be set aside.
8. I have heard Ms Balwant Kukreja, learned counsel for the appellant and Mr Rakesh Manta, learned counsel for the of respondent/accused
9. Mr rt Balwant Kukreja, learned counsel for the appellant submitted that the learned Trial Court erred in acquitting the accused and dismissing the complaint. The cheque carried a presumption that it was issued in discharge of legal liability and the burden is upon the accused to rebut this presumption. Learned Trial Court erred in holding that the complainant was required to prove the statement of account and the delivery challan. The evidence led by the accused was not sufficient to rebut the presumption of consideration and the learned Trial Court erred in holding otherwise. Therefore, he prayed that the present appeal be allowed and the judgment passed by the learned Trial Court be set aside.
::: Downloaded on - 29/12/2023 20:32:59 :::CIS 610. Mr. Rakesh Manta, learned counsel for the respondent/accused supported the judgment passed by the .
learned Trial Court and submitted that the learned Trial Court had taken a reasonable view. This Court will not interfere with the view of the learned Trial Court even if the Court would have taken a different view had it been sitting on the original side.
of The evidence of the complainant failed to prove the existence of legal liability and the learned Trial Court had rightly dismissed rt the complaint. Hence, he prayed that the present appeal be dismissed.
11. I have given considerable thought to the rival submissions at the bar and have gone through the records carefully.
12. The present appeal has been filed against a judgment of acquittal. The Hon'ble Supreme Court laid down the parameters of deciding an appeal against acquittal in Jafarudheen v. State of Kerala, (2022) 8 SCC 440, as under:-
"Scope of Appeal filed against the Acquittal:
25. While dealing with an appeal against acquittal by invoking Section 378 of the Cr.PC, the Appellate Court has to consider whether the Trial Court's view can be termed as a possible one, particularly when evidence on record ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 7 has been analyzed. The reason is that an order of acquittal adds up to the presumption of innocence in favour of the accused. Thus, the Appellate Court has to be relatively .
slow in reversing the order of the Trial Court rendering acquittal. Therefore, the presumption in favour of the accused does not get weakened but only strengthened. Such a double presumption that enures in favour of the accused has to be disturbed only by thorough scrutiny on the accepted legal parameters."
13. This position was reiterated in Siju Kurian versus State of of Karnataka 2023 online SCC 429, wherein it was held:-
"15. One of the main contentions raised by the learned rt counsel appearing for the appellant is to the effect that the High Court ought not to have interdicted with the judgment of the acquittal passed by the Trial Court and only in the event of the judgment of the Trial court was riddled with perversity and the view taken by the Trial Court was not a possible view, same could have been reversed by relying upon the judgment of this Court in case of Murugesan V. State through the Inspector of police(2012) 10 SCC 383 whereunder it came to be held as follows:
"33. The expressions "erroneous", "wrong" and "possible" are defined in the Oxford English Dictionary in the following terms:
"erroneous.-- wrong; incorrect.
wrong.--(1) not correct or true, mistaken.
(2) unjust, dishonest, or immoral.
possible.--(1) capable of existing, happening, or being achieved.
(2) that may exist or happen, but that is not certain or probable."
::: Downloaded on - 29/12/2023 20:32:59 :::CIS 834. It will be necessary for us to emphasize that a possible view denotes an opinion, which can exist or be formed irrespective of the correctness or .
otherwise of such an opinion. A view taken by a court lower in the hierarchical structure may be termed as erroneous or wrong by a superior court upon a mere disagreement. But such a conclusion of the higher court would not take the view rendered by the subordinate court outside the arena of a possible view. The correctness or otherwise of any of conclusion reached by a court has to be tested on the basis of what the superior judicial authority perceives to be the correct conclusion. A possible view, on the other hand, denotes a conclusion, rt which can reasonably be arrived at regardless of the fact where it is agreed upon or not by the higher court. The fundamental distinction between the two situations has to be kept in mind. So long as the view taken by the trial court can be reasonably formed, regardless of whether the High Court agrees with the same or not, the view taken by the trial court cannot be interdicted and that of the High Court supplanted over and above the view of the trial court."
16. It need not be restated that it would be open for the High Court to re-apprise the evidence and conclusions drawn by the Trial Court and in the case of the judgment of the trial court being perverse that is contrary to the evidence on record, then in such circumstances the High Court would be justified in interfering with the findings of the Trial Court and/or reversing the finding of the Trial Court. In Gamini Bala Koteswara Rao v. State of Andhra Pradesh (2009) 10 SCC 636: AIR 2010 SC 589 it has been held by this Court as under:
"14. We have considered the arguments advanced and heard the matter at great length. It is true, as contended by Mr Rao, that interference in an appeal against an acquittal recorded by the trial court ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 9 should be rare and in exceptional circumstances. It is, however, well settled by now that it is open to the High Court to reappraise the evidence and .
conclusions drawn by the trial court but only in a case when the judgment of the trial court is stated to be perverse. The word "perverse" in terms as understood in law has been defined to mean "against the weight of evidence". We have to see accordingly as to whether the judgment of the trial court which has been found perverse by the High of Court was in fact so.
17. The Appellate Court may reverse the order of acquittal in the exercise of its powers and there is no indication in the Code of any limitation or restriction having been rt placed on the High Court in the exercise of its power as an Appellate court. No distinction can be drawn as regards the power of the High Court in dealing with an appeal, between an appeal from an order of acquittal and an appeal from a conviction. The Code of Criminal Procedure does not place any fetter on the exercise of the power to review at large the evidence upon which the order of acquittal was founded and to conclude that upon that evidence the order of acquittal should be reversed.
18. In the case of Sheo Swarup v. King Emperor AIR 1934 PC 227, it has been held by the Privy Council as under:
But in exercising the power conferred by the Code and before reaching its conclusions upon fact, the High Court should and will always give proper weight and consideration to such matters as:
1) The views/opinion of the trial judge as to the credibility of the witnesses;
2) The presumption of innocence in favour of the accused;
3) The right of the accused to the benefit of any doubt; and ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 10
4) The slowness of an appellate court in disturbing a finding of fact arrived at by a judge who had the advantage of seeing the .
witnesses.
19. This Court has time and again reiterated the powers of the Appellate Court while dealing with the appeal against an order of acquittal and laid down the general principles in the matter of Chandrappa v. State of Karnataka (2007) 4 SCC 415 to the following effect:
"42. From the above decisions, in our considered of view, the following general principles regarding the powers of the Appellate Court while dealing with an appeal against an order of acquittal emerge:
rt (1) An Appellate court has full power to review, reappreciate and reconsider the evidence upon which the order of acquittal is founded.
(2) The Criminal Procedure Code, 1973 puts no limitation, restriction or condition on the exercise of such power and an Appellate court on the evidence before it may reach its own conclusion, both on questions of fact and law.
(3) Various expressions, such as, "substantial and compelling reasons", "good and sufficient grounds", "very strong circumstances", "distorted conclusions", "glaring mistakes", etc. are not intended to curtail 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 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 case of acquittal, there is a ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 11 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 of 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 rt of acquittal recorded by the trial court."
14. The present appeal has to be adjudicated in the light of the judgments of the Hon'ble Supreme Court.
15. Learned Trial Court held that the cheque carries with it a presumption that it was issued in discharge of the legal liability, the complainant had failed to prove the account books/ledger being maintained by it to show the business transaction with the accused and the challan showing the consignment of the apple trays. Learned Trial Court relied upon the judgment of the Hon'ble Supreme Court in Krishna Janardhan Bhat versus Datta Rai G. Hegde, (2008) 4 SCC 54 in support of its conclusion. This judgment was considered by the Hon'ble Supreme Court in Rangappa v. Sri Mohan, (2010) 11 SCC ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 12 441: 2010 SCC OnLine SC 583, and it was held that the observations made in Krishan Janardhan Bhat (supra) may not be .
correct. It was observed:
"26. In 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 of extent, the impugned observations in Krishna Janardhan Bhat [(2008) 4 SCC 54 : (2008) 2 SCC (Cri) 166] may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was rt based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable 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."
16. It was laid down by the Hon'ble Supreme Court in Uttam Ram Versus Devinder Singh Hudan and another (2019) 10 SCC 287 that the complainant is not to prove the debt as in a Civil Court in view of the presumption but only to prove that the cheque was issued by the accused. It was observed:
"20. The Trial Court and the High Court proceeded as if, the appellant is to prove a debt before a civil court wherein, the plaintiff is required to prove his claim on the basis of evidence to be laid in support of his claim for the recovery of the amount due. Dishonour of a cheque carries a statutory presumption of consideration. The holder of the cheque in due course is required to prove that the cheque was issued by the accused and that when ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 13 the same was presented, it was not honoured. Since there is a statutory presumption of consideration, the burden is on the accused to rebut the presumption that the cheque .
was issued not for any debt or other liability."
17. It was laid down in P. Rasiya v. Abdul Nazer, 2022 SCC OnLine SC 1131 that the complainant is not to state the nature of the transaction or the source of funds. It was observed:
of "By the impugned common judgment and order, the High Court has reversed the concurrent findings recorded by both the courts below and has acquitted the accused on the ground that, in the complaint, the Complainant has rt not specifically stated the nature of transactions and the source of fund. However, the High Court has failed to note the presumption under Section 139 of the N.I. Act. As per Section 139 of the N.I. Act, 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 discharge, in whole or in part, of any debt or other liability. Therefore, once the initial burden is discharged by the Complainant that the cheque was issued by the accused and the signature and the issuance of the cheque are not disputed by the accused, in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for any debt or other liability. The presumption under Section 139 of the N.I. Act is a statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt or other liability which is in favour of the Complainant/holder of the cheque, in that case, it is for the accused to prove the contrary. The aforesaid has not been dealt with and considered by the High Court."
18. Therefore, in view of the binding precedents of the Hon'ble Supreme Court, the complainant is not required to ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 14 prove the existence of legally enforceable debt or liability as this is a matter of presumption. Rather, the accused is required to .
disprove the existence of legally enforceable debt or liability.
19. The accused has not disputed his signatures on the cheque. He stated in his statement recorded under Section 313 Cr.P.C. that he had handed over a signed blank cheque to Van of Leer Moulded Fibre India Limited. He stated while appearing as rt DW3 that the cheque (Ext.CW2/A) bears his signature inside the circle 'A'. It was laid down by this Court in Naresh Verma vs. Narinder Chauhan 2020(1) Shim. L.C. 398 that where the accused had not disputed his signatures on the cheque, the Court has to presume that it was issued in discharge of legal liability and the burden would shift upon the accused to rebut the presumption.
It was observed:-
"8. Once signatures on the cheque are not disputed, the plea with regard to the cheque having not been issued towards discharge of lawful liability, rightly came to be rejected by learned Courts below. Reliance is placed upon Hiten P. Dalal v. Bartender NathBannerji, 2001 (6) SCC 16, wherein it has been held as under:
"The words 'unless the contrary is proved' which occur in this provision make it clear that the presumption has to be rebutted by 'proof' and not by a bare explanation which is merely plausible. A fact is said to be proved when its existence is ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 15 directly established or when upon the material before it the Court finds its existence to be so probable that a reasonable man would act on the .
supposition that it exists. Unless, therefore, the explanation is supported by proof, the presumption created by the provision cannot be said to be rebutted......"
9. S.139 of the Act provides that it shall be presumed unless the contrary is proved, that the holder of a cheque received the cheque of nature referred to in section 138 of for the discharge, in whole or in part, of any debt or other liability.
20. Similar rt is the judgment in Basalingappa vs. Mudibasappa 2019 (5) SCC 418 wherein it was held:
24. Applying the proposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque having been admitted, a presumption shall be raised under Section 139 that the cheque was issued in discharge of debt or liability.
21. This position was reiterated in M/S KalamaniTex and another Versus P. Balasubramanian 2021 (5) SCC 283 wherein it was held:
"14. Adverting to the case in hand, we find on a plain reading of its judgment that the trial Court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA. The Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these 'reverse onus' clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. This point of law has been crystallized by this Court in Rohitbhai Jivanlal Patel v.::: Downloaded on - 29/12/2023 20:32:59 :::CIS 16
State of Gujarat (2019) 18 SCC 106, 18 in the following words:
"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 of 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 rt 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 appellant-accused....."
15. Once the 2nd Appellant had admitted his signatures on the cheque and the Deed, the trial Court ought to have presumed that the cheque was issued as consideration for a legally enforceable debt. The trial Court fell in error when it called upon the Complainant-Respondent to explain the circumstances under which the appellants were liable to pay. Such an approach of the trial Court was directly in the teeth of the established legal position as discussed above and amounts to a patent error of law.
16. No doubt, and as correctly argued by senior counsel for the appellants, the presumptions raised under Section 118 and Section 139 are rebuttable in nature. As held in MS Narayana Menon v. State of Kerela (2006) 6 SCC 39, 32, which was relied upon in Basalingappa (supra), a probable defence needs to be raised, which must meet the standard of "preponderance of probability", and not a mere possibility. These principles were also affirmed in the case of Kumar Exports (supra), wherein it was further ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 17 held that bare denial of passing of consideration would not aid the case of the accused."
22. The Learned Trial Court had rightly pointed out that .
there is a presumption under section 139 of the Negotiable Instruments Act that the cheque was issued in the discharge of the legal liability. This presumption was explained by the of Hon'ble Supreme Court in Triyambak S. Hegde Versus Sripad 2022 (1) SCC 742 as under:
rt
11. From the facts arising in this case and the nature of the rival contentions, the record would disclose that the signature on the documents at Exhibits P-6 and P-2 is not disputed. Exhibit P-2 is the dishonoured cheque based on which the complaint was filed. From the evidence tendered before the JMFC, it is clear that the respondent has not disputed the signature on the cheque.
If that be the position, as noted by the courts below a presumption would arise under Section 139 in favour of the appellant who was the holder of the cheque. Section 139 of the N.I. Act reads as hereunder:-
"139. Presumption in favour of holder- 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."
12 Insofar as the payment of the amount by the appellant in the context of the cheque having been signed by the respondent, the presumption for the passing of the consideration would arise as provided under Section 118(a) of N.I. Act which reads as hereunder: -
"118. Presumptions as to negotiable instruments - Until the contrary is proved, the following ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 18 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."
13. The above-noted provisions are explicit to the effect that such presumption would remain until the contrary is of proved. The learned counsel for the appellant in that regard has relied on the decision of this Court in K. Bhaskaran vs. SankaranVaidhyanBalan&Anr., 1999 (7) SCC rt 510 wherein it is held as hereunder:
"9. As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date on which the cheque bears. Section 139 of the Act enjoins on the Court to presume that the holder of the cheque received it for the discharge of any debt or liability. The burden was on the accused to rebut the aforesaid presumption. The Trial Court was not persuaded to rely on the interested testimony of DW-1 to rebut the presumption. The said finding was upheld by the High Court. It is not now open to the accused to contend differently on that aspect."
14. The learned counsel for the respondent has however referred to the decision of this Court in Basalingappa vs. Mudibasappa, 2019 (5) SCC 418 wherein it is held as hereunder: -
"25. We having noticed the ratio laid down by this Court in the above cases on Sections 118 (a) and 139, we now summarise the principles enumerated by this Court in the following manner:
25.1. Once the execution of the cheque is admitted ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 19 Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
.
25.2. The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of the preponderance of probabilities. 25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the of accused can also rely on the materials submitted by the complainant in order to raise a probable defence.
rt 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.
25.4. That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden.
25.5. It is not necessary for the accused to come into the witness box to support his defence.
26. Applying the proposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque having been admitted, a presumption shall be raised under Section 139 that the cheque was issued in discharge of debt or liability. The question to be looked into is as to whether any probable defence was raised by the accused. In cross-examination of PW1, when the specific question was put that the cheque was issued in relation to a loan of ₹25,000 taken by the accused, PW1 said that he does not remember. PW1 in his evidence admitted that he retired in 1997 on which date he received a monetary benefit of ₹8 lakhs, which was encashed by the complainant. It ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 20 was also brought in the evidence in the evidence that in the year 2010, the complainant entered into a sale agreement for which he paid an amount of .
₹4,50,000 to Balana Gouda towards sale consideration. Payment of ₹4,50,000 being admitted in the year 2010 and a further payment of a loan of ₹ 50,000 with regard to which Complaint No.119 of 2012 was filed by the complainant, copy of which complaint was also filed as Ext. D-2, there was a burden on the complainant to prove his of financial capacity. In the years 2010-2011, as per the own case of the complainant, he made a payment of ₹18 lakhs. During his cross- examination, when the financial capacity to pay ₹ 6 rt lakhs to the accused was questioned, there was no satisfactory reply given by the complainant. The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the burden on the complainant to prove his financial capacity and other facts."
15. In that light, it is contended that the very materials produced by the appellant and the answers relating to lack of knowledge of property details by PW-1 in his cross-examination would indicate that the transaction is doubtful and no evidence is tendered to indicate that the amount was paid. In such an event, it was not necessary for the respondent to tender rebuttal evidence but the case put forth would be sufficient to indicate that the respondent has successfully rebutted the presumption.
16. On the position of law, the provisions referred to in Sections 118 and 139 of N.I. Act as also the enunciation of law as made by this Court needs no reiteration as there is no ambiguity whatsoever. In, Basalingappa vs. Mudibasappa (supra) relied on by the learned counsel for the respondent, though on facts the ultimate conclusion therein was against raising presumption, the facts and circumstances are entirely different as the transaction between the parties as claimed in the said case is peculiar ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 21 to the facts of that case where the consideration claimed to have been paid did not find favour with the Court keeping in view the various transactions and extent of the .
amount involved. However, the legal position relating to presumption arising under Sections 118 and 139 of N.I. Act on a signature being admitted has been reiterated. Hence, whether there is a rebuttal or not would depend on the facts and circumstances of each case.
23. This position was reiterated in Tedhi Singh vs. of Narayan Dass Mahant 2022 (6) SCC 735 wherein it was held:
7. It is true that this is a case under Section 138 of the Negotiable Instruments Act. Section 139 of the N.I. Act rt provides that Court shall presume 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. This presumption, however, is expressly made subject to the position being proved to the contrary. In other words, it is open to the accused to establish that there is no consideration received. It is in the context of this provision that the theory of 'probable defence' has grown. In an earlier judgment, in fact, which has also been adverted to in Basalingappa (supra), this Court notes that Section 139 of the N.I. Act is an example of reverse onus [see (2010) 11 SCC 441). It is also true that this Court has found that the accused is not expected to discharge an unduly high standard of proof. It is accordingly that the principle has developed that all which the accused needs to establish is a probable defence. As to whether a probable defence has been established is a matter to be decided on the facts of each case on the conspectus of evidence and circumstances that exist.
24. Similar is the judgment in P. Rasiya v. Abdul Nazer, 2022 SCC OnLine SC 1131 wherein it was observed:
::: Downloaded on - 29/12/2023 20:32:59 :::CIS 22"As per Section 139 of the N.I. Act, 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 discharge, in whole or in part, of any debt or other liability. Therefore, once the initial burden is discharged by the Complainant that the cheque was issued by the accused and the signature and the issuance of the cheque is not disputed by the accused, in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for any debt or other liability. The of presumption under Section 139 of the N.I. Act is a statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt or other liability which is in favour of the rt Complainant/holder of the cheque, in that case, it is for the accused to prove the contrary."
25. This position was reiterated in Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: 2023 SCC OnLine SC 1275, wherein it was observed at page 161:
33. The NI Act provides for two presumptions: Section 118 and Section 139. Section 118 of the Act inter alia directs that it shall be presumed until the contrary is proved, that every negotiable instrument was made or drawn for consideration. Section 139 of the Act 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". It will be seen that the "presumed fact" directly relates to one of the crucial ingredients necessary to sustain a conviction under Section 138. [The rules discussed hereinbelow are common to both the presumptions under Section 139 and Section 118 and are hence, not repeated--reference to one can be taken as reference to another]
34. Section 139 of the NI Act, which takes the form of a "shall presume" clause is illustrative of a presumption of ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 23 law. Because Section 139 requires that the Court "shall presume" the fact stated therein, it is obligatory on the Court to raise this presumption in every case where the .
factual basis for the raising of the presumption had 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".
35. The Court will necessarily presume that the cheque had been issued towards the discharge of a legally of enforceable debt/liability in two circumstances. Firstly, when the drawer of the cheque admits issuance/execution of the cheque and secondly, in the event where the complainant proves that the cheque was issued/executed rt in his favour by the drawer. The circumstances set out above form the fact(s) which bring about the activation of the presumptive clause. [Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal [Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal, (1999) 3 SCC 35] ]
36. Recently, this Court has gone to the extent of holding 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. [Bir Singh v. Mukesh Kumar [Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197 : (2019) 2 SCC (Civ) 309 : (2019) 2 SCC (Cri) 40] ]. Therefore, the 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.
37. As soon as the complainant discharges the burden to prove that the instrument, say a cheque, was issued by the accused for discharge of debt, the presumptive device under Section 139 of the Act helps shifting the burden on the accused. The effect of the presumption, in that sense, is to transfer the evidential burden on the accused of proving that the cheque was not received by the Bank towards the discharge of any liability. Until this evidential burden is discharged by the accused, the presumed fact ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 24 will have to be taken to be true, without expecting the complainant to do anything further.
38. John Henry Wigmore [John Henry Wigmore and the .
Rules of Evidence: The Hidden Origins of Modern Law] on Evidence states as follows:
"The peculiar effect of the presumption of law is merely to invoke a rule of law compelling the Jury to reach the conclusion in the absence of evidence to the contrary from the opponent but if the opponent does offer evidence to the contrary (sufficient to satisfy the of Judge's requirement of some evidence), the presumption 'disappears as a rule of law and the case is in the Jury's hands free from any rule'."
rt
39. The standard of proof to discharge this evidential burden is not as heavy as that usually seen in situations where the prosecution is required to prove the guilt of an accused. The accused is not expected to prove the non- existence of the presumed fact beyond reasonable doubt. The accused must meet the standard of "preponderance of probabilities", similar to a defendant in a civil proceeding. [Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184 : AIR 2010 SC 1898] ]
26. Therefore, the Court has to start with the presumption that the cheque was issued in discharge of legal liability and the burden is upon the accused to prove the contrary.
27. Ajeet Bhutail (CW2) stated that he is a partner of Amar Chand Bhutail and Sons. This firm deals with apple trays.
The accused used to purchase apple trays from the firm and make the payment from time to time. The account was settled ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 25 with the accused in the financial year ending on 31.03.2023. The accused issued a cheque for ₹7,50,000/- on 22.04.2023 towards .
a full and final settlement. He stated in his cross-examination that the firm used to supply apple trays to the accused; however, he could not say the amount of business with the accused. The accused used to make the payment by cash or by cheque.
of Amounts of ₹1,00,000/- to ₹ 2,50,000/- would be received by cheque in the firm. The firm maintains a ledger, which is duly rt audited. The entry regarding the transaction with the accused was also entered in the ledger. The settlement was not reduced to writing. The cheque was issued towards the outstanding amount and interest. He volunteered to say that the interest was more but some of it was left during the settlement. He is a clearing and forwarding agent of Van Leer Moulded Fibre India Limited. The accused used to deal with this Company through the complainant. The complainant was responsible for the supply of the trays and maintaining the account. He did not know that the accused had ever made the payment on behalf of the complainant to Van Leer Moulded Fibre India Limited. It may be possible that some amount was paid by the accused to Van Leer Moulded Fibre India Limited. He volunteered to say ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 26 that if any such payment was made, the same would have been duly credited. He could not say that the 'Mark D1' was .
credit/debit with Van Leer Moulded Fibre India Limited. He denied that the cheque was handed over to Van Leer Moulded as a security. He had not produced any record regarding the forwarding of the apple trays to the accused.
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28. The learned Trial Court had heavily relied upon the rt admissions made in the cross-examination that the account was maintained and no ledger was produced on behalf of the complainant. As already stated, this could not have been used to discredit the version of the complainant because the cheque had a presumption that it was issued in the discharge of the legal liability.
29. The accused stated that he had dealt with Van Leer Moulded Fibre Company, which is now known as Claridge Moulded Fibre Company. He had handed over the security cheque to the Company. The cheque (Ext. CW2/A) was issued by him but the amount was not filled. Ext. DA recorded the transaction with the Company, which was handed over to him by the Company. He had served a notice. The Company had issued a ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 27 letter (Ext. D5). He had made the payment to the company and no payment was due on his behalf. He denied in his cross-
.
examination that he was dealing with the complainant. He denied that the complainant used to maintain the account. He denied that only the complainant used to supply the apple trays to him. He denied that a cheque of ₹7,50,000/- was issued by of him. He did not know that only the complainant was the authorized agent of the Company.
rt
30. Letter (Ext. D5) is stated to have been issued by Rajesh Thakur on behalf of Van Leer Moulded Fibres India Limited on 28.01.2003, in which it was mentioned that he was sending a challan worth ₹3,81,300/-. The earlier amount of ₹2,65,030/- was due, which should be paid by the accused. The accused had also relied upon the copy of the ledger (Ext. D1) in which different GR numbers, sizes and receipts have been mentioned. Learned Trial Court relied upon both these documents to hold that the version of the accused was highly probable.
31. These documents were not properly proved as per the law. The author of these documents did not appear before the ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 28 Court. Ext. D1 was tendered by the accused in his statement on oath. The original record from Van Leer Moulded Fibres India .
Limited was not requisitioned. Similarly, no person appeared from Van Leer Moulded FIbres India Limited to prove the contents of 'Ext. D5'. It is stated to have been received by the accused through the registered A.D (Ext. D4) but the record of of the Company was not requisitioned to show that any such letter was written by the Company or Rajesh Thakur is an employee of rt the Company. It was laid down by this Court in United Commercial Bank versus Durga Dass and another, 1995 (1) Shim. LC 497 = 1995 ILR (HP) 110, that mere exhibition of the document does not amount to the proof. A document has to be proved by examining the person, who had written the document. It was observed:
"12. Learned Counsel for the plaintiff has submitted that since both the documents have been exhibited, in accordance with law, without there being any objection raised in this behalf on behalf of the contesting defendant, in this view of the matter, both these documents stood legally proved and such an objection in regard to its legal proof cannot be raised at this stage. The legal proposition being raised has to be appreciated on the basis of the law laid down by various courts in this regard.
13. In Sait Tarajee Khimchand and others v. Yelamarti Satyam and others, AIR 1971 SC 1865, it has been held that the mere marking of a document as an exhibit does not ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 29 dispense with its proof. In this case, also the documents were private documents which had been exhibited when tendered in evidence. The apex Court made the following .
observations, in paragraph 15 :
"The plaintiffs wanted to rely on Exhibits A-12 and A-13, the day book and the ledger respectively. The plaintiffs did not prove these books. There is no reference to these books in the judgments. The mere marking of an exhibit does not dispense with the proof of documents It is commonplace to say of that the negative cannot be proved. The proof of the plaintiff's books of account became important because the plaintiffs' accounts were impeached and falsified by the defendants' case of larger rtpayments than those admitted by the plaintiffs. The irresistible inference arises that the plaintiffs books would not have supported the plaintiffs."
14. In P.C. Purushothama Reddiar v. S, Perumal, AIR 1972 SC 608, it has been held that it was not open to a party to object to the admissibility of documents which are marked as exhibits without any objection from such party. The earlier case, that is, Sait Tarajee Khimchand and others (supra) AIR 1971 SC 1865, has not been discussed or referred to in this ruling. In this case, that is, P.C. Purushothama Reddiar, AIR 1972 SC 608, the documents, which had been exhibited without any objection from the opposite party, were some police reports and those were assailed to be inadmissible in evidence as the Head- constable who covered those meetings and made those reports, having not been examined in the case. The apex Court observed that the reports in question were made by Government officials in the discharge of their official duties and those officials have been deputed by their superiors to cover the meetings in question. Obviously they were deputed in connection with the maintenance of law and order which was the special responsibility of the police and hence the question whether those reports were made in compliance with any particular provision of law ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 30 was irrelevant as the first part of section 35 of the Evidence Act says that an entry in any public record stating a fact in issue or relevant fact and made by a public .
servant in the discharge of his official duty is relevant evidence and quite clearly the reports in question were made by public servants in discharge of their official duty. It was further held that the issue before the court was whether the respondent had arranged certain election meetings on certain dates and the police reports in question were extremely relevant to establish that fact.
of Hence those reports come within the ambit of the first part of section 35 of the Evidence Act.
15. Thus, on the basis of the aforesaid circumstances existing in that case, the apex Court came to the rt conclusion that those police reports which had been marked without any objection, now it was not open to the respondent to object to their admissibility.
16. The two cases of the apex Court, referred to above, clearly give guidelines in order to appreciate the proposition of law, being argued in this case. It only means that the documents, which have been exhibited, their nature, relevancy and other legal aspects have to be taken note of before the same are accepted as a legal evidence.
17. In Sir Mohammed Yusuf and another v. D and another, AIR 1968 Bom 112, it has been held that 'the evidence of the contents contained in the document is hearsay evidence unless the writer thereof is examined before the court and an attempt to prove the contents of the document by proving the signature or the handwriting of the author thereof is to set at nought the well-recognized rule that hearsay evidence cannot be admitted'. It was further held that 'even if the entire document is held formally proved, that does not amount to a proof of the truth of the contents of the document, and the only person competent to give evidence on the truthfulness of the contents of the document is the writer thereof.
::: Downloaded on - 29/12/2023 20:32:59 :::CIS 3118. Thus, on the basis of the Law of Evidence Act and the guidelines, which can be taken note of from the cases decided by the apex Court and referred to above, it can .
safely be said that merely exhibiting a document will not absolve the party, relying on the document, from proving its execution and the contents thereof in accordance with law especially when the document is a private document, the scribe and the person who executed it, are the witnesses who alone could successfully and legally prove such a document.
of
19. In the present case the evidence has been referred to above, These two documents were neither scribed nor signed by PW 2, Shri P C. Mittal. These were also not scribed or signed by the defendant in his presence. The rt person who scribed one of the documents has been stated by the witness to be Shri H.R. Mahajan who was presently posted at the Zonal office of the plaintiff bank at Shimla who was not examined by the plaintiff for the reasons best known to the plaintiff bank This PW 2 stated that Ex. PW 2/B was filled by Shri H.R. Mahajan Regarding Ex. PW 2/C the witness stated that he did not know about the person who had filled in the same. These documents, needless to say, are the documents which the defendant was alleged to have executed in favour of the plaintiff- bank and are in possession of the plaintiff-bank but sorry to note that the plaintiff-bank miserably failed to prove these documents in accordance with law. Without there being any legal proof of these documents, they cannot be referred and taken advantage of by the plaintiff-bank, in any manner."
32. Therefore, the learned Trial Court erred in relying upon these documents.
33. The learned counsel for the accused issued a notice dated 29.11.2008 (Ext. DW1/B) to Van Leer Moulded Fibres India ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 32 Limited asserting that a photocopy of the ledger was supplied to the accused. The receipt of the payment was also issued by the .
Company. Therefore, a demand was made to produce the entire relevant voucher w.e.f. 02.08.2002 till 05.11.2002. The Company issued a reply (Ext.DW1/A) through its counsel Sumeet Kaur, Advocate (DW1) denying the allegations of the notice. It was of specifically mentioned that Amar Chand Bhutail and Sons was the clearing and forwarding agent of the Company. The rt Company does not have any direct dealings with the Government of H.P., as well as, the private party. The complainant used to take orders and ensure that the orders were supplied and the payment was remitted to it or directly to the Company. The Company did not have any direct dealings with the accused. The invoices and challans, if any, are available with the complainant. It was also denied that no signed cheques were issued to the Company. There was no question of supply of the copy of the ledger, as no account was maintained by the Company with the accused.
34. This reply was proved by the accused by examining its author Sumeet Kaur-Advocate (DW-1). The Company had specifically denied that it had any transaction with the accused ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 33 or any ledger was issued by it. Learned Trial Court held that the accused had issued a notice to the Company but the Company .
had refused to supply the ledger on the pretext that the accused never remained in direct transaction with the company.
However, the learned Trial Court failed to notice the significance of this notice upon the present case.
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35. Once, it was disputed by the Company by issuing a rt reply to the notice through its Advocate that it had any transaction with the accused or that it has issued any copy of the ledger to the complainant, it was obligatory for the accused to summon any authorized person of the Company to prove the record. The accused could not have tendered the documents in his statement and the learned Trial Court could not have relied upon those documents without insisting upon their proper proof. Thus, the learned Trial Court erred in relying upon the documents, which were not properly proved as per the law to hold that the accused had succeeded in rebutting the presumption attached to the cheque.
36. Even otherwise, there is no circumstantial evidence to prove the contents of the letter 'Ext. D5'. As per this letter, an ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 34 amount of ₹ 3,81,300/- was due. The accused stated on oath that he had made the payment to the Company but did not .
specifically state that the amount mentioned in Ext. D5 was paid to the Company. He has not brought any record to show the payment of the amount reflected in Ext. D5 to the Company.
Thus, there is no evidence to support the contents of the letter of (Ext. D5).
37. rt Therefore, the accused had failed to rebut the presumption attached to the cheque.
38. The accused claimed that it was issued as a security.
It was laid down by this Court in Hamid Mohammad Versus Jaimal Dass 2016 (1) HLJ 456, that even if the cheque was issued towards the security, the accused will be liable. It was observed:
"9. Submission of learned Advocate appearing on behalf of the revisionist that cheque in question was issued to the complainant as security and on this ground, criminal revision petition be accepted is rejected being devoid of any force for the reasons hereinafter mentioned. As per Section 138 of Negotiable Instruments Act 1881 if any cheque is issued on account of other liability then provisions of Section 138 of Negotiable Instruments Act 1881 would be attracted. The court has perused the original cheque Ext. C-1 dated 30.10.2008 placed on record. There is no recital in cheque Ext. C-1 that cheque was issued as a security cheque. It is well-settled law that a cheque issued as security would also come under the ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 35 provision of Section 138 of the Negotiable Instruments Act 1881. See 2016 (3) SCC page 1 titled Don Ayengia v. State of Assam & another. It is well-settled law that where there .
is a conflict between former law and subsequent law then subsequent law always prevails."
39. It was laid down by the Hon'ble Supreme Court in Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited 2016(10) SCC 458 that issuing a of cheque toward security will also attract the liability for the commission of an offence punishable under Section 138 of N.I. rt Act. It was observed:-
"10. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways Private Limited versus Magnum Aviation Private Limited (2014) 12 SCC 53 with reference to the explanation to Section 138 of the Act and the expression "for the discharge of any debt or other liability" occurring in Section 138 of the Act. We are of the view that the question of whether a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise.
11. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due. It is undisputed that the loan was duly disbursed on 28th February 2002 which was prior to the date of the cheques. Once the loan was disbursed and instalments ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 36 have fallen due on the date of the cheque as per the agreement, the dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly .
represent the outstanding liability.
12. Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of a claim for breach of contract under Section 138, which arises on account of dishonour of cheque issued was not by itself at par with a criminal liability towards discharge of acknowledged and admitted of debt under a loan transaction. Dishonour of a cheque issued for discharge of later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque, there was a debt/liability in praesenti in terms of rt the loan agreement, as against the case of Indus Airways (supra) where the purchase order had been cancelled and a cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as an advance for the purchase order which was cancelled. Keeping in mind this fine but the real distinction, the said judgment cannot be applied to a case of the present nature where the cheque was for repayment of loan instalment which had fallen due though such deposit of cheques towards repayment of instalments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of the purchase order which is cancelled and that of a loan transaction where the loan has actually been advanced and its repayment is due on the date of the cheque.
13. The crucial question to determine the applicability of Section 138 of the Act is whether the cheque represents the discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 37 underlying principle as can be discerned from the discussion of the said cases in the judgment of this Court." (Emphasis supplied) .
40. This position was reiterated in Sripati Singh vs. State of Jharkhand AIR 2021 SC 5732, and it was held that a cheque issued as security is not a waste paper and complaint under Section 138 of the N.I. Act can be filed on its dishonour. It was of observed:
16. A cheque issued as security pursuant to a financial rt transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of the amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow.
17. When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 38 security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner, if the amount of loan due .
and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be an understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the of drawer of the cheque in proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque, which is issued as security can never be presented by the drawee of the rt cheque. If such is the understanding a cheque would also be reduced to an 'on-demand promissory note' and in all circumstances, it would only be civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation.
41. Therefore, even if the cheque was a security cheque, it would not absolve the accused of his criminal liability.
42. The accused claimed that the cheque was filled by some other person. There is no satisfactory proof of this fact.
The accused did not file any application to establish that the handwriting on the cheque was not his. In any case, it was laid ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 39 down by the Hon'ble Supreme Court in Bir Singh vs. Mukesh Kumar (2019) 4 SCC 197, that a person is liable for the .
commission of an offence punishable under Section 138 of the NI Act even if the cheque is filled by some other person. It was observed:
"37. A meaningful reading of the provisions of the of Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee rt remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in the discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.
38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence.
39. It is not the case of the respondent accused that he either signed the cheque or parted with it under any threat or coercion. Nor is it the case of the respondent accused that the unfilled signed cheque had been stolen. The existence of a fiduciary relationship between the payee of a cheque and its drawer, would not disentitle the payee to the benefit of the presumption under Section 139 of the Negotiable Instruments Act, in the absence of evidence of the exercise of undue influence or coercion. The second question is also answered in the negative.
40. Even a blank cheque leaf, voluntarily signed and ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 40 handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any .
cogent evidence to show that the cheque was not issued in discharge of a debt.
41. The fact that the appellant-complainant might have been an Income Tax practitioner conversant with knowledge of the law does not make any difference to the law relating to the dishonour of a cheque. The fact that the loan may not have been advanced by a cheque or of demand draft or a receipt might not have been obtained would make no difference. In this context, it would, perhaps, not be out of context to note that the fact that the respondent-accused should have given or signed a rt blank cheque to the appellant complainant, as claimed by the respondent-accused, shows that initially there was mutual trust and faith between them.
42. In the absence of any finding that the cheque in question was not signed by the respondent-accused or not voluntarily made over to the payee and in the absence of any evidence with regard to the circumstances in which a blank signed cheque had been given to the appellant-
complainant, it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent-accused being the drawer, at his request and/or with his acquiescence. The subsequent filling in of an unfilled signed cheque is not an alteration. There was no change in the amount of the cheque, its date or the name of the payee. The High Court ought not to have acquitted the respondent-accused of the charge under Section 138 of the Negotiable Instruments Act."
43. This position was reiterated in Oriental Bank of Commerce vs. Prabodh Kumar Tewari 2022 0 Supreme (SC) 837 wherein it was observed:
::: Downloaded on - 29/12/2023 20:32:59 :::CIS 41"12. The submission which has been urged on behalf of the appellant is that even assuming, as the first respondent submits, that the details in the cheque were not filled in .
by the drawer, this would not make any difference to the liability of the drawer.
xxxxxx
15. A drawer who signs a cheque and hands it over to the payee, is presumed to be liable unless the drawer adduces evidence to rebut the presumption that the cheque has been issued towards payment of a debt or in the discharge of of a liability. The presumption arises under Section 139"
44. Therefore, the cheque is not bad even if it is not filled by the drawer.
rt
45. The accused admitted in his statement on oath that the cheque was dishonoured due to insufficient funds; therefore, the fact that the cheque was dishonoured due to insufficient funds is not in dispute.
46. The complainant stated that he had issued a notice (Ext.CW2/E) to the accused asking him to make the payment of the cheque within 15 days from the date of the receipt of the notice. The accused stated in his statement recorded under Section 313 of Cr.P.C. that he had received the envelope but it was empty. He denied on oath that he had received a notice (Ext.CW2/E) but he volunteered to say that it was blank and nothing was written on it. Significantly, he had not produced the ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 42 envelope received by him to corroborate his version. He did not issue any notice to the counsel that an empty envelope was .
received by him; therefore, his plea that the notice was not received by him is not acceptable.
47. In any case, it was laid down in C.C. Allavi Haji vs. Pala Pelly Mohd. 2007(6) SCC 555 that the person who claims that he of had not received the notice has to pay the amount within 15 days rt from the date of the receipt of the summons from the Court and in case of failure to do so, he cannot take the advantage of the fact that the notice was not received by him. It was observed:
"It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is no stipulation of giving of a notice before filing a complaint. Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the Court that he had made payment within 15 days of receipt of summons (by receiving a copy of the complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the Court along with the copy of the complaint under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the G.C. Act and Section 114 of the Evidence Act. In our view, any other interpretation of the proviso would defeat the very object of the legislation. As observed in Bhaskaran's case ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 43 (supra), if the giving of notice in the context of Clause (b) of the proviso was the same as the receipt of notice a trickster cheque drawer would get the premium to avoid .
receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act."(Emphasis supplied)
48. The accused has not paid any money to the complainant. Thus, it was duly proved that the accused had of failed to pay the money despite the receipt of the notice.
49. It was submitted that the notice mentions an amount rt of ₹7,50,000/- along with the returning charges of ₹1,150/- and ₹5,00/-, the cost of the notice; hence, the notice is bad because it does not mention the cheque amount but some other amount as well. This submission is not acceptable. It was laid down in Suman Sethi v. Ajay K. Churiwal, (2000) 2 SCC 380: 2000 SCC OnLine SC 313 that when the amount mentioned in the notice could be segregated, the notice would not be bad. It was observed:
"8. It is a well-settled principle of law that the notice has to be read as a whole. In the notice, demand has to be made for the "said amount" i.e. the cheque amount. If no such demand is made the notice no doubt would fall short of its legal requirement. Where in addition to the "said amount" there is also a claim by way of interest, cost etc. whether the notice is bad would depend on the language of the notice. If in a notice while giving the break-up of the claim the cheque amount, interest, damages etc. are ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 44 separately specified, other such claims for interest, cost etc. would be superfluous and these additional claims would be severable and will not invalidate the notice. If, .
however, in the notice, an omnibus demand is made without specifying what was due under the dishonoured cheque, the notice might well fail to meet the legal requirement and may be regarded as bad.
9. This Court had occasion to deal with Section 138 of the Act in Central Bank of India v. Saxons Farms [(1999) 8 SCC 221: 1999 SCC (Cri) 1411: JT (1999) 8 SC 58] and held that of the object of the notice is to give a chance to the drawer of the cheque to rectify his omission. Though in the notice demand for compensation, interest, cost etc. is also made the drawer will be absolved from his liability under rt Section 138 if he makes the payment of the amount covered by the cheque of which he was aware within 15 days from the date of receipt of the notice or before the complaint is filed.
10. In Section 138 the legislature clearly stated that for the dishonoured cheque the drawer shall be liable for conviction if the demand is not met within 15 days of the receipt of notice but this is without prejudice to any other provision of the Act. If the cheque amount is paid within the above period or before the complaint is filed the legal liability under Section 138 will cease and for recovery of other demands as compensation, costs, interest etc., a civil proceeding will lie. Therefore, if in a notice any other sum is indicated in addition to the "said amount" the notice cannot be faulted, as stated above.
11. Drawing our attention to Section 139 of the Act, Mr Dhavan has urged that if in the notice in addition to "said amount" other demands are made the presumption as contemplated under Section 138 would operate. We are unable to accept the submission of the learned Senior Counsel as Section 139 has to be read with Section 138 and reading both the sections together it would appear that the presumption would arise only in respect of the "said amount".::: Downloaded on - 29/12/2023 20:32:59 :::CIS 45
12. We extract below the relevant portion of the notice:
"I, therefore, by means of this notice call upon you to pay the amount of Rs 20,00,000 along with the .
incidental charges of Rs 1500 spent on the cheque on its presentation and also Rs 340 as notice charges within a period of 15 days from the date of receipt thereof, failing which my clients shall take necessary legal steps against you holding you liable for all costs and consequences thereof, which please note."
of
13. In the notice in question the "said amount" i.e. the cheque amount has been clearly stated. Respondent 1 had claimed in addition to the cheque amount, incidental rt charges and notice charges. These two amounts are severable. In the notice, it was clearly stated that on failure to comply with the demand necessary legal steps will be taken up. If Respondent 1 had paid the cheque amount he would have been absolved from the criminal liability under Section 138. Regarding other claims, a civil suit would be necessary."
50. In the present case also, the amount of ₹7,50,000/-
being the amount of the cheque can clearly be segregated from the cheque returning charges of ₹1,150/-and the cost of the notice ₹500/-; therefore, the cheque cannot be said to be bad.
51. Thus, it was duly proved that the cheque was issued in discharge of the legal liability and it was dishonoured due to insufficient funds and the accused failed to make the payment despite the receipt of a valid notice of demand; hence, the complainant had succeeded in proving its case beyond ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 46 reasonable doubt and learned Trial Court erred in holding otherwise.
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52. The learned Trial Court did not consider the presumption attached to the cheque and wrongly relied upon the documents which were not proved as per the law. It had taken a view which could not have been taken by any reasonable person.
of The judgment of the learned Trial Court proceeds in ignorance rt of the settled position of law and the same is liable to be interfered with even in an appeal against the acquittal.
53. It was laid down in Rajesh Jain (supra) that when the Court failed to consider the presumption under Section 139 of the NI Act, its judgment could be interfered with. It was observed at page 166:
54. As rightly contended by the appellant, 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 then 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 then be to see whether the accused has discharged his onus of rebutting the presumption. If he fails to do so, the court can straightaway proceed to convict him, subject to the ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 47 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 the aid of the presumption. The court would then take an overall view based on the evidence on record and decide accordingly.
55. At the stage when the courts concluded that the signature had been admitted, the court ought to have inquired into either of the two questions (depending on of the method in which the accused has chosen to rebut the presumption): Has the accused led any defence evidence to prove and conclusively establish that there existed no debt/liability at the time of issuance of cheque? In the rt absence of rebuttal evidence being led the inquiry would entail: Has the accused proved the non-existence of debt/liability by a preponderance of probabilities by referring to the "particular circumstances of the case"?
56. The perversity in the approach of the trial court is noticeable from the way it proceeded to frame a question at trial. According to the trial court, the question to be decided was "whether a legally valid and enforceable debt existed qua the complainant and the cheque in question (Ext. CW I/A) was issued in discharge of said liability/debt". When the initial framing of the question itself being erroneous, one cannot expect the outcome to be right. The onus instead of being fixed on the accused has been fixed on the complainant. A lack of proper understanding of the nature of the presumption in Section 139 and its effect has resulted in an erroneous order being passed.
57. Einstein had famously said:
"If I had an hour to solve a problem, I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions."
Exaggerated as it may sound, he is believed to have suggested that the quality of the solution one generates is directly proportionate to one's ability to identify the ::: Downloaded on - 29/12/2023 20:32:59 :::CIS 48 problem. A well-defined problem often contains its own solution within it.
58. Drawing from Einstein's quote, if the issue had been .
properly framed after careful thought and application of judicial mind, and the onus correctly fixed, perhaps, the outcome at trial would have been very different and this litigation might not have travelled all the way up to this Court."
54. Therefore, in view of the above, the present appeal is of allowed and the judgment passed by the learned Trial Court is set aside and the accused is convicted for the commission of an rt offence punishable under Section 138 of the NI Act.
55. Let the accused be produced on 09.01.2024 for hearing him on the quantum of sentence.
(Rakesh Kainthla) Judge 29th December, 2023 (saurav pathania) ::: Downloaded on - 29/12/2023 20:32:59 :::CIS