Himachal Pradesh High Court
Reserved On: 12.09.2024 vs Raghubir Chand on 3 October, 2024
2024:HHC:9472-DB IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Appeal No. 495 of 2010 Reserved on: 12.09.2024 Date of Decision: 03.10.2024 M/s Mahindra & Mahindra Finance Ltd. ..Appellant Versus Raghubir Chand ...Respondent Coram Hon'ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 No For the Appellant : Mr. Deepak Gupta, Advocate. For the Respondent : Mr. Vivek Singh Thakur, Advocate. Rakesh Kainthla, Judge The present appeal is directed against the Judgment dated 25th August 2010 passed by learned Judicial Magistrate, First Class Court No.3 Shimla (learned Trial Court) vide which, the respondent (accused before learned Trial Court) was acquitted of the commission of an offence punishable under Section 138 read with Section 142 of Negotiable Instruments Act (in short N.I. Act). (Parties shall hereinafter be referred to as in the same manner as they were arrayed before the learned Trial Court for convenience).
1 Whether reporters of Local Papers may be allowed to see the judgment? Yes. 2
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2. Briefly stated, the facts giving rise to the present appeal are that the complainant filed a complaint before the learned Trial Court against the accused for taking action against him for the commission of an offence punishable under Section 138 of N.I. Act. It was asserted that the complainant is a non- banking Financial Company engaged in providing financial assistance to the people for the purchase of the vehicle. The accused approached the complainant and asked for financial assistance by way of a loan for the purchase of the vehicle. The complainant entered into a Loan Agreement with the accused and advanced a sum of ₹3,40,000/- for the purchase of the vehicle Mahindra Bolero. The accused was to repay ₹4,59,000/- which included ₹3,40,000/- as loan amount and ₹1,19,000/- as the financial charges. The amount was to be repaid in 60 equated monthly instalments of ₹7,650/- each. The accused was irregular in making the payment of several instalments. He violated the terms and conditions of the hire purchase agreement and defaulted in regular payment of the instalments. The accused surrendered the vehicle to the complainant on 22.02.2007 and the complainant disposed of the vehicle on 21.03.2007 as per the prescribed procedure. The complainant had to suffer a huge loss 3 2024:HHC:9472-DB after adjusting the sale consideration. The accused issued a cheque for ₹94,135/- on 18th April 2008 drawn on Kangra Central Co-operative Bank to discharge his liability. The complainant presented the cheque with his Bank and the cheque was dishonoured with an endorsement "account closed". The complainant issued a notice to the accused asking him to pay the amount within 15 days of the receipt of the notice. The notice was duly served upon the accused but the accused failed to pay the amount. Hence, a complaint was filed before the Court for taking action against the accused.
3. The learned Trial Court found sufficient reasons to proceed against the accused. When the accused appeared, the learned Trial Court put notice of accusation for the commission of an offence punishable under Section 138 of N.I. Act. The accused pleaded not guilty and claimed to be tried.
4. The complainant examined Vivek Guleria (CW-1) to prove its case.
5. The accused in his statement recorded under Section 313 of Cr.P.C. admitted that he had borrowed a sum of ₹3,40,000/- from the complainant and he was to repay ₹4,59,000/- which included ₹1,19,000/- as financial charges in 4 2024:HHC:9472-DB 60 equated monthly instalments of ₹7,650/-. He denied that he had defaulted on the repayment of the loan. He stated that his vehicle was snatched by the complainant and he had not received any notice. He had handed over a blank cheque signed by him at the time of the purchase of the vehicle. He was innocent and he was falsely implicated. The statements of Roop Lal (DW-1) and Baldev Singh (DW-2) were recorded in defence.
6. The learned Trial Court held that the version of the complainant that he had surrendered the vehicle was not proved and the version of the accused that the vehicle was forcibly taken by the complainant appeared to be probable. The complainant claimed to have issued a Demand Notice to the accused asking him to pay the amount, but this Demand Notice was not proved as per the Law. It was also not proved that this notice was served upon the accused. The statement of account produced by the complainant was also not proved as per the Law. There was no evidence regarding the existence of legally enforceable debt. Hence, the accused was acquitted.
7. Being aggrieved from the judgment passed by the learned Trial Court, the complainant has filed the present appeal asserting that the learned Trial Court failed to properly 5 2024:HHC:9472-DB appreciate the material placed before it. It was wrongly held that the vehicle was forcibly taken away by the complainant. The accused had admitted the issuance of the cheque and there is a presumption in favour of the complainant that the cheque was issued in discharge of the legal liability. The burden was upon the accused to rebut this presumption by providing satisfactory evidence, but the accused failed to discharge this burden. Learned Trial Court erred in acquitting the accused. His plea that a blank signed cheque was issued as a security was not proved by any evidence. 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 Mr Deepak Gupta learned counsel for the appellant-complainant and Mr. Vivek Singh Thakur learned counsel for the respondent-accused.
9. Mr Deepak Gupta learned counsel for the appellant- complainant submitted that a cheque carries with it a presumption of consideration. The accused was required to rebut the same. Learned Trial Court failed to notice this presumption and acquitted the accused merely on the ground that the vehicle was seized by the complainant. The version of the complainant 6 2024:HHC:9472-DB that the accused had surrendered the vehicle was more probable than the version of the accused that the vehicle was snatched by the accused. Learned Trial Court erred in acquitting the accused; therefore, he prayed that the present appeal be allowed and the judgment passed by the learned Trial Court be set aside.
10. Mr. Vivek Singh Thakur, learned counsel for the respondent-accused supported the judgment passed by the learned Trial Court and submitted that no interference is required with it.
11. I have given considerable thought to the submissions made at the bar and have gone through the records carefully.
12. The present appeal has been filed against a judgment of acquittal. It was laid down by the Hon'ble Supreme Court in Mallappa v. State of Karnataka, (2024) 3 SCC 544: 2024 SCC OnLine SC 130 that while deciding an appeal against acquittal, the High Court should see whether the evidence was properly appreciated on record or not; second whether the finding of the Court is illegal or affected by the error of law or fact and thirdly; whether the view taken by the Trial Court was a possible view, which could have been taken based on the material on record. The Court 7 2024:HHC:9472-DB will not lightly interfere with the judgment of acquittal. It was observed:
"25. We may first discuss the position of law regarding the scope of intervention in a criminal appeal. For, that is the foundation of this challenge. It is the cardinal principle of criminal jurisprudence that there is a presumption of innocence in favour of the accused unless proven guilty. The presumption continues at all stages of the trial and finally culminates into a fact when the case ends in acquittal. The presumption of innocence gets concretised when the case ends in acquittal. It is so because once the trial court, on appreciation of the evidence on record, finds that the accused was not guilty, the presumption gets strengthened and a higher threshold is expected to rebut the same in appeal.
26. No doubt, an order of acquittal is open to appeal and there is no quarrel about that. It is also beyond doubt that in the exercise of appellate powers, there is no inhibition on the High Court to reappreciate or re-visit the evidence on record. However, the power of the High Court to reappreciate the evidence is a qualified power, especially when the order under challenge is of acquittal. The first and foremost question to be asked is whether the trial court thoroughly appreciated the evidence on record and gave due consideration to all material pieces of evidence. The second point for consideration is whether the finding of the trial court is illegal or affected by an error of law or fact. If not, the third consideration is whether the view taken by the trial court is a fairly possible view. A decision of acquittal is not meant to be reversed on a mere difference of opinion. What is required is an illegality or perversity.
27. It may be noted that the possibility of two views in a criminal case is not an extraordinary phenomenon. The "two-views theory" has been judicially recognised by the courts and it comes into play when the appreciation of evidence results in two equally plausible views. However, 8 2024:HHC:9472-DB the controversy is to be resolved in favour of the accused. For, the very existence of an equally plausible view in favour of the innocence of the accused is in itself a reasonable doubt in the case of the prosecution. Moreover, it reinforces the presumption of innocence. Therefore, when two views are possible, following the one in favour of the innocence of the accused is the safest course of action. Furthermore, it is also settled that if the view of the trial court, in a case of acquittal, is a plausible view, it is not open for the High Court to convict the accused by reappreciating the evidence. If such a course is permissible, it would make it practically impossible to settle the rights and liabilities in the eye of the law.
28. In Selvaraj v. State of Karnataka [Selvaraj v. State of Karnataka, (2015) 10 SCC 230: (2016) 1 SCC (Cri) 19]: (SCC pp. 236-37, para 13)
"13. Considering the reasons given by the trial court and on an appraisal of the evidence, in our considered view, the view taken by the trial court was a possible one. Thus, the High Court should not have interfered with the judgment of acquittal. This Court in Jagan M. Seshadri v. State of T.N. [Jagan M. Seshadri v. State of T.N., (2002) 9 SCC 639: 2003 SCC (L&S) 1494] has laid down that as the appreciation of evidence made by the trial court while recording the acquittal is a reasonable view, it is not permissible to interfere in appeal. The duty of the High Court while reversing the acquittal has been dealt with by this Court, thus : (SCC p. 643, para 9) '9. ... We are constrained to observe that the High Court was dealing with an appeal against acquittal. It was required to deal with various grounds on which acquittal had been based and to dispel those grounds. It has not done so. Salutary principles while dealing with appeal against acquittal have been overlooked by the High Court. If the appreciation of evidence by the trial court did not suffer from any flaw, as indeed none has been pointed out in the impugned judgment, the order of 9 2024:HHC:9472-DB acquittal could not have been set aside. The view taken by the learned trial court was a reasonable view and even if by any stretch of imagination, it could be said that another view was possible, that was not a ground sound enough to set aside an order of acquittal.'"
29. In Sanjeev v. State of H.P. [Sanjeev v. State of H.P., (2022) 6 SCC 294: (2022) 2 SCC (Cri) 522], the Hon'ble Supreme Court analysed the relevant decisions and summarised the approach of the appellate court while deciding an appeal from the order of acquittal. It observed thus: (SCC p. 297, para 7) "7. It is well settled that:
7.1. While dealing with an appeal against acquittal, the reasons which had weighed with the trial court in acquitting the accused must be dealt with, in case the appellate court is of the view that the acquittal rendered by the trial court deserves to be upturned (see Vijay Mohan Singh v. State of Karnataka [Vijay Mohan Singh v. State of Karnataka, (2019) 5 SCC 436 :
(2019) 2 SCC (Cri) 586] and Anwar Ali v. State of H.P. [Anwar Ali v. State of H.P., (2020) 10 SCC 166 :
(2021) 1 SCC (Cri) 395] ).
7.2. With an order of acquittal by the trial court, the normal presumption of innocence in a criminal matter gets reinforced (see Atley v. State of U.P. [Atley v. State of U.P., 1955 SCC OnLine SC 51: AIR 1955 SC 807]).
7.3. If two views are possible from the evidence on record, the appellate court must be extremely slow in interfering with the appeal against acquittal (see Sambasivan v. State of Kerala [Sambasivan v. State of Kerala, (1998) 5 SCC 412: 1998 SCC (Cri) 1320])."
13. The present appeal has to be decided as per the parameters laid down by the Hon'ble Supreme Court. 10
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14. Vivek Guleria (CW-1) stated in his examination-in- chief that the accused had taken a loan from the complainant to purchase the Mahindra Bolero Camper. The amount of ₹3,40,000/- was advanced, which included the financial charges of ₹1,19,000/-. The amount was to be repaid in sixty equated monthly instalments of ₹7,650/-. The accused failed to repay the amount as per the schedule; hence a notice was issued by the complainant. The accused surrendered the vehicle on 22.02.2007. The Company issued a notice to the accused, but the accused did not visit the office of the Company to take the vehicle; hence the Company sold the vehicle on 21.03.2007 and adjusted the amount in the loan account. The Company suffered a huge loss and a notice was issued to the accused. The accused issued a cheque (Ex.CW1/E) for discharging his liability. The cheque was dishonoured by the Bank. A notice was issued to the accused, which was not delivered to the accused because he refused to accept the same, however, the notice sent by UPC was received by the accused. The accused failed to pay the money despite the receipt of the valid notice of demand.
11
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15. He stated in his cross-examination that documents were prepared at the time of the surrender of the vehicle, but these documents were not produced before the Court. The photocopy of the notice sent to the accused was placed on record, but it was not filed along with the complaint. He admitted that the notice (Ex.CW1/C) did not contain any date of its issuance nor any diary dispatch number. The outstanding amount was also not referred to in it. The accused had a liability of ₹93,500/- on the date of issuance of the cheque (Ex.CW1/E). The accused had not paid the first instalment. He denied that the complaint did not mention that the cheque was issued to repay the outstanding amount.
16. He admitted that the statement of the outstanding amount was not annexed to the complaint. He denied that no notice was served upon the accused and the accused had not surrendered the vehicle. He denied that the accused had issued 20 cheques as security. He admitted that the vehicle was sold first and the cheque was presented before the Bank thereafter. He admitted that the date of the sale of the vehicle was not mentioned and the statement of account was prepared after 12 2024:HHC:9472-DB filing of the complaint. He had not produced any document showing the auction of the vehicle.
17. The statement of this witness regarding the issuance of the loan and the financial charges has not been disputed in the cross-examination. The accused also admitted in his statement recorded under Section 313 of Cr.P.C. that he had taken ₹3,40,000/- as a loan and he was to repay ₹4,59,000/- which included the financial charges of ₹1,19,000/- in 60 equated monthloy instalments of ₹7,650/-. He admitted that the loan was to be repaid in 60 monthly equated instalments of ₹7,650/-. Thus, the issuance of the loan amount and the liability of the accused to repay the same are not in dispute.
18. The statement of account (Ex.CW1/M) shows that the accused had defaulted in the repayment of the loan. The instalments were not being paid regularly. This corroborates the version of the complainant that the accused had defaulted in the repayment of the loan and the loan was not repaid as per the schedule.
19. The accused stated that he had issued a blank security cheque, which was misused by the complainant. This means that the issuance of the cheque was not disputed by him. It was laid 13 2024:HHC:9472-DB 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 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 for the discharge, in whole or in part, of any debt or other liability.
20. Similar is the judgment in Basalingappa vs. Mudibasappa 2019 (5) SCC 418 wherein it was held:
"26. Applying the proposition of law as noted above, in the facts of the present case, it is clear that the signature 14 2024:HHC:9472-DB 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 Kalamani Tex v. P. Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25: (2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75wherein it was held at page 289:
"13. 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 crystallised by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat [Rohitbhai Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106, para 18: (2020) 3 SCC (Civ) 800 : (2020) 3 SCC (Cri) 575] in the following words : (SCC pp. 120-21, para 18) "18. In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the 15 2024:HHC:9472-DB complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant-accused."
14. 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 respondent complainant to explain the circumstances under which the appellants were liable to pay. Such 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."
22. Similar is the judgment in APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020) 12 SCC 724, wherein it was observed: -
7.2. What is emerging from the material on record is that the issuance of a cheque by the accused and the signature of the accused on the said cheque are not disputed by the accused. The accused has also not disputed that there were transactions between the parties. Even as per the statement of the accused, which was recorded at the time of the framing of the charge, he has admitted that some amount was due and payable. However, it was the case on behalf of the accused that the cheque was given by way of security and the same has been misused by the complainant. However, nothing is on record that in the reply to the statutory notice it was the case on behalf of the accused that the cheque was given by way of security. Be that as it may, however, it is required to be noted that earlier the accused issued cheques which came to be dishonoured on the ground of "insufficient funds" and thereafter a fresh consolidated cheque of ₹9,55,574 was given which has been returned unpaid on the ground of "STOP PAYMENT". Therefore, the cheque in question was issued for the second time. Therefore, once the accused has admitted the issuance of a cheque which bears his 16 2024:HHC:9472-DB signature, there is a presumption that there exists a legally enforceable debt or liability under Section 139 of the NI Act. However, such a presumption is rebuttable in nature and the accused is required to lead the evidence to rebut such presumption. The accused was required to lead evidence that the entire amount due and payable to the complainant was paid.
9. Coming back to the facts in the present case and considering the fact that the accused has admitted the issuance of the cheques and his signature on the cheque and that the cheque in question was issued for the second time after the earlier cheques were dishonoured and that even according to the accused some amount was due and payable, there is a presumption under Section 139 of the NI Act that there exists a legally enforceable debt or liability.
Of course, such presumption is rebuttable in nature. However, to rebut the presumption, the accused was required to lead the evidence that the full amount due and payable to the complainant had been paid. In the present case, no such evidence has been led by the accused. The story put forward by the accused that the cheques were given by way of security is not believable in the absence of further evidence to rebut the presumption and more particularly the cheque in question was issued for the second time after the earlier cheques were dishonoured. Therefore, both the courts below have materially erred in not properly appreciating and considering the presumption in favour of the complainant that there exists legally enforceable debt or liability as per Section 139 of the NI Act. It appears that both, the learned trial court as well as the High Court, have committed an error in shifting the burden upon the complainant to prove the debt or liability, without appreciating the presumption under Section 139 of the NI Act. As observed above, Section 139 of the Act is an example of reverse onus clause and therefore, once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and 17 2024:HHC:9472-DB thereafter, it is for the accused to rebut such presumption by leading evidence.
23. Learned Counsel for the complainant rightly submitted that there is a presumption under Section 139 of the N.I. Act that the cheque was issued in the discharge of the legal liability. This presumption was explained by the Hon'ble Supreme Court in Triyambak S. Hegde v. Sripad, (2022) 1 SCC 742:
(2022) 1 SCC (Civ) 512: 2021 SCC OnLine SC 788 as under at page 747:
"12. 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 Exts. P-6 and P-2 are not disputed. Ext. 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 NI 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."
13. 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 passing of the consideration would arise as provided under Section 118(a) of the NI Act which reads as hereunder:
18
2024:HHC:9472-DB "118. Presumptions as to negotiable instruments. --Until the contrary is proved, the following presumptions shall be made:
(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration."
14. The above-noted provisions are explicit to the effect that such presumption would remain until the contrary is proved. The learned counsel for the appellant in that regard has relied on the decision of this Court in K. Bhaskaran v. Sankaran Vaidhyan Balan [K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510:
1999 SCC (Cri) 1284] wherein it is held as hereunder: (SCC pp. 516-17, para 9) "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 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 [Sankaran Vaidhyan Balan v. K. Bhaskaran, Criminal Appeal No. 234 of 1995, order dated 23-10-1998 (Ker)] by the High Court. It is not now open to the accused to contend differently on that aspect."
15. The learned counsel for the respondent has however referred to the decision of this Court in Basalingappa v. Mudibasappa [Basalingappa v. Mudibasap pa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571] wherein it is held as hereunder: (SCC pp. 432-33, paras 25-26) 19 2024:HHC:9472-DB "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 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 preponderance of probabilities.
25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence.
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 preposition of law as noted above, in 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 PW 1, when the specific question was put that a cheque was issued in relation to a loan of Rs 25,000 taken by the accused, PW 1 said that he does not remember. PW 1 in his evidence admitted that he retired in 1997 on which 20 2024:HHC:9472-DB date he received a monetary benefit of Rs 8 lakhs, which was encashed by the complainant. It was also brought in evidence that in the year 2010, the complainant entered into a sale agreement for which he paid an amount of Rs 4,50,000 to Balana Gouda towards sale consideration. Payment of Rs 4,50,000 being admitted in the year 2010 and further payment of loan of Rs 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 financial capacity. In the years 2010-2011, as per own case of the complainant, he made a payment of Rs 18 lakhs. During his cross- examination, when the financial capacity to pay Rs 6 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."
16. 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.
17. On the position of law, the provisions referred to in Sections 118 and 139 of the NI Act as also the enunciation of law as made by this Court need no reiteration as there is no ambiguity whatsoever. In, Basalingappav. Mudibasappa [Basalingappa v. Mudibasappa, (2019) 5 SCC 418 : (2019) 2 SCC (Cri) 571] 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 21 2024:HHC:9472-DB 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 amount involved. However, the legal position relating to the presumption arising under Sections 118 and 139 of the NI Act on signature being admitted has been reiterated. Hence, whether there is a rebuttal or not would depend on the facts and circumstances of each case."
24. This position was reiterated in Tedhi Singh v. Narayan Dass Mahant, (2022) 6 SCC 735: (2022) 2 SCC (Cri) 726: (2022) 3 SCC (Civ) 442: 2022 SCC OnLine SC 302 wherein it was held at page 739:
"8. It is true that this is a case under Section 138 of the Negotiable Instruments Act. Section 139 of the NI Act provides that the 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 [Basalingappa v. Mudibasappa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571], this Court notes that Section 139 of the NI Act is an example of reverse onus (see Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4 SCC (Civ) 477: (2011) 1 SCC (Cri) 184]). 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..."22
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25. Similar is the judgment in P. Rasiya v. Abdul Nazer, 2022 SCC OnLine SC 1131 wherein it was observed:
"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."
26. 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] 23 2024:HHC:9472-DB
34. Section 139 of the NI Act, which takes the form of a "shall presume" clause is illustrative of a presumption of law. Because Section 139 requires that the Court "shall presume" the fact stated therein, 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".
35. The Court will necessarily presume that the cheque had been issued towards the discharge of a legally 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 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 24 2024:HHC:9472-DB 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 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'."
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]]
27. 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.
28. In the present case, the accused has not examined himself to prove that he had issued the cheque as security; rather he examined his driver Roop Lal (DW-1) and Baldev (DW-2) regarding the snatching of the vehicle. Therefore, the version of 25 2024:HHC:9472-DB the complainant that he had issued a blank cheque as a security has not been proved on record.
29. In any case, 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 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."
30. It was laid down by the Hon'ble Supreme Court in Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458: (2017) 1 SCC (Cri) 149:
(2017) 1 SCC (Civ) 126: 2016 SCC OnLine SC 954 that issuing a cheque toward security will also attract the liability for the 26 2024:HHC:9472-DB commission of an offence punishable under Section 138 of N.I. Act. It was observed: -
"9. 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 [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539: (2014) 5 SCC (Civ) 138: (2014) 6 SCC (Cri) 845] with reference to the explanation to Section 138 of the Act and the expression "for discharge of any debt or other liability" occurring in Section 138 of the Act. We are of the view that the question 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.
10. 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 28-2-2002 which was prior to the date of the cheques. Once the loan was disbursed and instalments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.
11. The judgment in Indus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539: (2014) 5 SCC (Civ) 138: (2014) 6 SCC (Cri) 845] 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 on a par with criminal liability towards discharge of acknowledged and admitted 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 27 2024:HHC:9472-DB cheque there was a debt/liability in praesenti in terms of the loan agreement, as against Indus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539: (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845] where the purchase order had been cancelled and 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 advance for the purchase order which was cancelled. Keeping in mind this fine but 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 [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845], one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of the cheque.
12. 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 the different High Courts noted earlier, this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court."
31. This position was reiterated in Sripati Singh v. State of Jharkhand, 2021 SCC OnLine SC 1002: 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 observed:
28
2024:HHC:9472-DB "17. A cheque issued as security pursuant to a financial 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.
18. 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 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 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 cheque. If such is the understanding a cheque would also be reduced to an 'on- 29
2024:HHC:9472-DB 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."
32. In the present case, the statement of account (Ex.CW1/M) shows that the amount of ₹94,135/- was due on 11.06.2008. The cheque was issued for ₹94,135/- on 18.04.2008 which means that the accused had a subsisting liability of ₹94,135/- on the date of issuance of the cheque. Even if a blank cheque was issued by the accused as a security, the complainant had sufficient authority to fill the amount and present it before the Court since the amount of ₹94,135/- was due on 18.04.2008. It was laid down by the Hon'ble Supreme Court in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 138, that a person is liable for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act even if the cheque is filled by some other person. It was observed:
"33. A meaningful reading of the provisions of the 30 2024:HHC:9472-DB 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 remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in 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.
34. 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.
35. 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 exercise of undue influence or coercion. The second question is also answered in the negative.
36. Even a blank cheque leaf, voluntarily signed and 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."
33. This position was reiterated in Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022 SCC OnLine SC 1089 wherein it was observed:
"12. The submission which has been urged on behalf of the 31 2024:HHC:9472-DB 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
16. 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 a liability. The presumption arises under Section 139"
34. The accused claimed that his vehicle was forcibly snatched by the complainant. He has examined two witnesses to prove this fact. Roop Lal (DW-1) stated that he was driving the vehicle bearing Registration No. HP-38B-0267. He was stopped by four people on the way who snatched keys and the vehicle from him. The persons taking the vehicle informed him that they belonged to the complainant Company. He informed the accused about this fact. Baldev Singh (DW-2) also made a similar statement.
35. The statements of these witnesses are not believable. The accused had not taken any action against the persons, who had taken the vehicle from his driver. He had not even made a report to the police. He simply believed the version of his driver that the vehicle was snatched by the employees of Mahindra and 32 2024:HHC:9472-DB Mahindra. He had not even written a letter to the Company asking the Company whether the vehicle was taken by it or not. He had taken the vehicle on loan and if the vehicle was snatched, he would have taken some steps, at least he would have sought confirmation from the Company whether the vehicle was taken by the Company or not. The fact that the accused had not taken any action immediately after the seizure of the vehicle shows that the version of the defence witnesses is not believable.
36. It was submitted that the complainant had sold the vehicle without associating the accused. Learned Trial Court held that there was no proof of the delivery of the letter (Ex.CW1/C) written by the Company as the postal receipt was not annexed to the same. This is not correct. The letter (Ex.CW1/C) is addressed to the accused and bears the impression of the Postal Department regarding the sending. Further, the burden was upon the accused to show that he did not owe the liability of ₹94,135/- on the date of issuance of the cheque since the cheque carried with it a presumption of consideration. It was rightly submitted on behalf of the complainant that no evidence was led to establish this fact. The complainant had examined a witness and had proved the statement of account on record showing the 33 2024:HHC:9472-DB liability of ₹94,135/- on the date of the issuance of the cheque. The accused on the other hand had not even stepped into the witness box and was satisfied with his statement recorded under Section 313 of Cr.P.C. which does not constitute legally admissible evidence, therefore, the version of the complainant duly corroborated by the documents was to be accepted as correct that the cheque was issued in discharge of the legal liability.
37. The learned Trial Court held in its judgment that the presumption under Section 118 does not extend to the existence of legally enforceable liability. Reliance was placed upon the judgment of the Hon'ble Supreme Court in Krishna Janardhan Bhat vs. Dattatraya G. Hegde, 2004 (4) SCC 54. The judgment of Krishna Janardhan Bhat (supra) was considered by the Hon'ble Supreme Court in Rangappa v. Sri Mohan, (2010) 11 SCC 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 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 34 2024:HHC:9472-DB the correctness of the decision in that case since it was 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."
38. In similar circumstances, the Hon'ble Supreme Court held in Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106, 18 that once the presumption had been drawn, the onus shifted to the accused and unless the accused discharged the onus, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of fund or non- examination of the witnesses. It was observed: -
"18. In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant-accused. The aspect relevant for consideration had been as to whether the appellant-
accused has brought on record such
35
2024:HHC:9472-DB
facts/material/circumstances which could be of a
reasonably probable defence."
39. Therefore, the complaint could not have been dismissed on the ground that the presumption did not extend to the existence of legally enforceable debt or liability.
40. The complainant stated that the cheque was dishonoured with an endorsement "account closed". This is duly corroborated by the memo of dishonour (Ex.CW1/F) in which it has been mentioned that the account was closed on 28.09.2005.
It was laid down by the Hon'ble Supreme Court in NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 4 SCC 253: 1999 SCC (Cri) 524:
1999 SCC OnLine SC 508, that when a cheque is dishonoured due to the account being closed, it will attract the provisions of Section 138 of N.I. Act. It was observed at page 258:
7. Further, the offence will be complete only when the conditions in provisos (a), (b) and (c) are complied with.
Hence, the question is, in a case where a cheque is returned by the bank unpaid on the ground that the "account is closed", would it mean that the cheque is returned as unpaid on the ground that "the amount of money standing to the credit of that account is insufficient to honour the cheque"? In our view, the answer would obviously be in the affirmative because the cheque is dishonoured as the amount of money standing to the credit of "that account" was "nil" at the relevant time apart from it being closed. Closure of the account would be an eventuality after the entire amount in the account is withdrawn. It means that there was no amount in the 36 2024:HHC:9472-DB credit of "that account" on the relevant date when the cheque was presented for honouring the same. The expression "the amount of money standing to the credit of that account is insufficient to honour the cheque" is a genus of which the expression "that account being closed"
is a species. After issuing the cheque drawn on an account maintained, a person, if he closes "that account" apart from the fact that it may amount to another offence, it would certainly be an offence under Section 138 as there was insufficient or no fund to honour the cheque in "that account". Further, the cheque is to be drawn by a person for payment of any amount of money due to him "on an account maintained by him" with a banker and only on "that account" the cheque should be drawn. This would be clear by reading the section along with provisos (a), (b) and (c).
********
15. In view of the aforesaid discussion we are of the opinion that even though Section 138 is a penal statute, it is the duty of the court to interpret it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote the efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above "brush away the cobweb varnish, and shew the transactions in their true light" (Wilmot, C.J.) or (by Maxwell) "to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited". Hence, when the cheque is returned by a bank with an endorsement "account closed", it would amount to returning the cheque unpaid because "the amount of money standing to the credit of that account is insufficient to honour the cheque" as envisaged in Section 138 of the Act.37
2024:HHC:9472-DB
41. This Court also took the same view in Bal Krishan Sharma v. Tek Ram, 2006 SCC OnLine HP 105: (2007) 1 BC 138:
(2006) 44 AIC 491: (2006) 4 All LJ (NOC 678) 13: 2006 Cri LJ 1993 :
(2006) 55 ACC (Sum 84) 29 : (2006) 3 CCR 311 : (2006) 2 ALD (Cri) (NOC 65) 8 and observed:
"9. The provisions contained in this chapter are primarily designed to provide an additional criminal remedy, over and above the civil remedies available to the payee or holder in due course of a cheque. This chapter protects the interests of a payee or holder in due course of a dishonoured cheque. The object of the chapter is to enhance the acceptability of the cheque in the settlement of financial liabilities by making the drawer liable for penalties. It is noticed that for establishing the requirements of Section 138, there is no burden on the part of the complainant to prove before a Court the entire details of the transactions resulting in the issuance of the cheque. As observed by the Apex Court in Kusum Ingots and Alloys Limited v. Pennar Peterson Securities Ltd., II (2000) SLT 375: I (2000) CCR 260 (SC): I (2000) BC 300: (2000) 2 SCC 745, the object of bringing Section 138 on statute is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Looking at the object of incorporating Chapter-VIII in the Act, the expression "on account maintained by him" used in Section 138 of the Act, as noticed above, cannot be interpreted to give it an artificial or unrealistic meaning. What the provision says is that the cheque must be drawn on the account which the accused maintained with the Bank. The status of the account, when the cheque was drawn, whether it was live or dead, is irrelevant. What the provision says is that the accused must have an account which is maintained or had maintained with the Bank. The Legislature has not used the present continuous tense. The 38 2024:HHC:9472-DB expression used is "on an account maintained by him"
and not "maintained by him". The cheque, in my view, should have a reference to an account of the accused irrespective of the fact whether such an account was live or dead on the date of issuance of the cheque. The interpretation of the expression "on an account maintained by him" as given by the learned Trial Magistrate and contended by the learned Counsel for the accused is artificial and beyond the legislative intent. While interpreting the provision, the legislative purpose and goal have to be kept in mind. We cannot lose sight of the fact that in this era, financial transactions are not dependent on cash and therefore financial transactions by other modes including "cheques" have to be attached credibility.
10. The following observations of the Supreme Court in NEPC Micon Ltd. v. Magma Leasing Ltd., II (2006) BC 316 (SC): IV (1999) SLT 254: III (1999) CCR 4 (SC) : (1999) 4 SCC 253, are apposite:
"10. This Court in the case of Kanwar Singh v. Delhi Admn. While construing Section 418(i) of the Delhi Municipal Corporation Act, 1959 observed-- 'It is the duty of the Court in construing a statute to give effect to the intention of the legislature. If, therefore, giving a literal meaning to a word used by the draftsman, particularly in a penal statute, would defeat the object of the Legislature, which is to suppress mischief, the Court can depart from the dictionary meaning or even the popular meaning of the word and instead give it a meaning which will advance the remedy and suppress the mischief.
11. Further, while interpreting the statutory provision rule dealing with penalty under the Drugs and Cosmetics Act, 1940 and the rules in the case of Swantraj v. State of Maharashtra, this Court held that every legislation is a social document and judicial construction seeks to decipher the statutory mission, language permitting, taking the one from the rule in Heydon's case of suppressing the evil and advancing the remedy. The Court held that what must tilt the 39 2024:HHC:9472-DB balance is the purpose of the statute, its potential frustration and judicial avoidance of the mischief by a construction whereby the means of licensing meet the ends of ensuring pure and potent remedies for the people. The Court observed that this liberty with language is sanctified by great Judges and textbooks. Maxwell instructs us in these words-- "There is no doubt that the office of the Judge is, to make such construction as will suppress the mischief, and advance the remedy, and suppress all evasions for the continuance of the mischief. To carry out effectively the object of a statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous, manner that which it has prohibited or enjoined: 'quando aliquid prohibetur, prohibetur et omne pe quod devenitur ad illud.'
11. This manner of construction has two aspects one is that Digitally signed the Courts, mindful of the mischief rule, will not be astute by KARAN SINGH GULERIA to narrow the language of a statute so as to allow persons Date:
2024.10.03 within its purview to escape its net. The other is that the 12:49:28 IST statute may be applied to the substance rather than the mere form of transactions, thus defeating any shifts and contrivances which parties may have devised in the hope of thereby falling outside the Act. When the Courts find an attempt at concealment, they will, in the words of Wilmot, C.J. 'brush away the cobweb varnish, and show the transactions in their true light'."
12. Their Lordships proceeded to observe:
"15. In view of the aforesaid discussion, we are of the opinion that even though Section 138 is a penal statute, it is the duty of the Court to interpret it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote the efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques 40 2024:HHC:9472-DB is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above "brush away the cobweb varnish, and show the transactions in their true light" (Wilmot C.J.) or (by Maxwell) "to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited" Hence when the cheque is returned by a Bank with an endorsement "account closed". It would amount to returning the cheque unpaid because "the amount of money standing to the credit of that account is insufficient to honour the cheque" as envisaged in Section 138 of the Act."
13. If the interpretation as contended by the learned Counsel for the accused and the Trial Court is to be accepted, then a person who receives the cheque will have to ensure that the account is alive. If he does not, he runs the risk of losing his money and denial of benefits under Section 138 of the Act. This certainly cannot be the legislative intent. Any account holder with intent to defeat the provisions of Section 138 of the Act, may retain a cheque leaf after closing his account with the Bank to defraud any honest payee. Should such a dishonest account holder be permitted to escape the proceedings under Section 138 of the Act?
14. Learned Counsel for the accused would contend that the observations in NEPC Micon Limited were that if a cheque is dishonoured on the ground that the account is closed then it would come within the sweep of Section 138 of the Act but if the cheque is issued on a closed account, then such an act of a dishonest person would not fall within the mischief of Section 138 of the Act. It is true that the NEPC case does not specifically deal with the cheques issued on accounts closed prior to the date of issuance of the cheque. Nevertheless, this case does not indicate that such cases are intended to be taken out of the sweep of Section 138 of the Act. In my opinion, the expression "on an account maintained by him"
necessarily includes an account which was maintained by 41 2024:HHC:9472-DB him, i.e., the account which has been closed as also the account which is still maintained by him.
15. The Supreme Court in N.A. Issac v. Jeemon P. Abraham, III (2006) BC 422 (SC): VI (2004) SLT 154: IV (2004) CCR 124 (SC): 2005 (1) Civil Court Cases 690 (SC), interpreted Section 138 of the Act and observed that contention that this provision will not be applicable when the cheque is issued from an already closed account cannot be upheld as such an interpretation would defeat the object of insertion of the provision in the Act. Their Lordships observed:
"Section 138 does not call for such a narrow construction".
Their Lordships approved that the expression used in Section 138 of the Act includes the cheques issued on a closed account.
16. For the reasons recorded above, the findings recorded by the Trial Magistrate holding that Section 138 of the Act is not applicable to a cheque drawn on a closed account, cannot be upheld."
42. Thus, the accused would be liable for the commission of an offence punishable under Section 138 of N.I. Act when the cheque was dishonoured with an endorsement of the account closed.
43. The complainant stated that a notice (Ex.CW1/H) was issued to the accused by registered post as well as a postal certificate. The registered letter (Ex.CW1/L) was returned with an endorsement 'refused'. Thus, the same was deemed to have been delivered to the accused. Further, the complainant stated that the registered letter sent by UPC was not returned, therefore, the same is presumed to have been served upon the accused. It was 42 2024:HHC:9472-DB laid down by the Hon'ble Supreme Court in C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555: (2007) 3 SCC (Cri) 236:
2007 SCC OnLine SC 772 that when the registered letter containing the notice is returned unserved with the endorsement of refused, the notice is deemed to have been served. It was observed at page 564:
"14. Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement "refused" or "not available in the house" or "house locked" or "shop closed" or "addressee not in the station", due service has to be presumed. (Vide Jagdish Singh v. Natthu Singh [(1992) 1 SCC 647: AIR 1992 SC 1604]; State of M.P. v. Hiralal [(1996) 7 SCC 523] and V. Raja Kumari v. P. Subbarama Naidu [(2004) 8 SCC 774: 2005 SCC (Cri) 393] .) It is, therefore, manifest that in view of the presumption available under Section 27 of the Act, it is not necessary to aver in the complaint under Section 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved."43
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44. In any case, the accused did not pay the amount to the complainant within 15 days of his appearance in the Court. It was laid down in C.C. Allavi Haji vs. Pala Pelly Mohd. 2007(6) SCC 555 that the person who claims that he had not received the notice has to pay the amount within 15 days 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 notice was not received by him. It was observed:
"17. 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 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 (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).44
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45. Thus, the ingredients of Section 138 of the Negotiable Instrument Act were duly satisfied in the present case and the learned Trial Court erred in acquitting the accused.
46. Learned Trial Court had improperly construed the presumption under Section 139 and Section 118 of N.I. Act, which affected the whole approach of learned Trial Court and such a judgment is liable to be interfered with even while exercising jurisdiction against an order of acquittal. It was laid down in Rajesh Jain (supra) that when the Court failed to consider the presumption under Section 139 of the Negotiable Instruments 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 to 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 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 45 2024:HHC:9472-DB 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 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 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 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 46 2024:HHC:9472-DB outcome at trial would have been very different and this litigation might not have travelled all the way up to this Court."
47. Consequently, the present appeal is allowed and the judgment passed by the learned Trial Court is set aside. The accused is convicted of the commission of an offence punishable under Section 138 of N.I. Act.
48. Let the accused be produced on 24.10.2024 to be heard on the quantum of sentence.
(Rakesh Kainthla) Judge 3rd October, 2024 (saurav pathania)