Himachal Pradesh High Court
Lazi Ram Thakur vs Kamlender Rattan (Since Deceased ... on 29 October, 2024
( 2024:HHC:10405 ) IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Revision No. 257 of 2018 Reserved on: 18.10.2024 Date of Decision: 29.10.2024.
[
Lazi Ram Thakur ...Petitioner
Versus
Kamlender Rattan (since deceased through Lrs) ...Respondents Coram Hon'ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 No For the Petitioner : Mr. Mohan Sharma, Advocate.
For the Respondents : Mr. Naresh K. Sharma, Advocate,
for respondents No.1(a) to 1(d)
Mr. Ajit Sharma, Deputy Advocate
General, for respondent
No.2/State.
Rakesh Kainthla, Judge
The petitioner has filed the present revision petition against the judgment dated 29.03.2018 passed by learned Additional Sessions Judge, Ghumarwin, District Bilaspur, H.P. (Camp at Bilaspur) (learned Appellate Court) vide which the 1 Whether reporters of Local Papers may be allowed to see the judgment? Yes.
2( 2024:HHC:10405 ) judgment and order dated 15.09.2015 passed by learned Judicial Magistrate First Class, Court No.2, Ghumarwin, District Bilaspur, H.P. (learned Trial Court) were upheld. (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 revision are that the complainant filed a complaint against the accused for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (hereinafter referred to as NI Act). It was asserted that the complainant is a permanent resident of Ghumarwin and is running a business of daily needs items as a wholesaler. He has a Branch Office at Parwanoo, District Solan, H.P. The accused is running a shop and was known to the complainant. The accused approached the complainant to purchase various daily need articles. He purchased various items in July, August and September. He paid some amount to the complainant and issued a cheque of ₹1,57,711/- for discharging his remaining liability. The complainant presented the cheque before his bank and the cheque was returned with the memo "Exceeds arrangement".
The complainant issued a notice to the accused asking him to 3 ( 2024:HHC:10405 ) 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 before the learned Trial Court.
3. The learned Trial Court found sufficient reasons to summon 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, to which the accused pleaded not guilty and claimed to be tried.
4. The complainant examined himself (CW-1) to prove his case.
5. The accused in his statement recorded under Section 313 of Cr.P.C. stated that the complainant does not have any office at Ghumarwin. He only has an office at Parwanoo. He admitted that he was running a shop in the name of Pooja Enterprises. He admitted that he used to buy the articles from the complainant. He stated that he used to make advance payments and the wrong bills were issued by the complainant.
He had not taken the articles mentioned in the bill from the accused. He paid the whole amount to the complainant. The 4 ( 2024:HHC:10405 ) cheque was handed over to the complainant at the time of the commencement of the business as a security. He did not receive any notice and no payment is to be made by him. He examined Sudhir Ranjan (DW-1).
6. Learned Trial Court held that the accused has not disputed his signatures on the cheque. There is a presumption of consideration attached to the cheque. The evidence of the accused was insufficient to rebut the presumption. Minor differences in the statement of the complainant and the bills are not sufficient to discard the complainant's case. The defence evidence did not establish that the money was paid to the complainant as the proof of disbursement of the money was not brought on record. The notice was dishonoured with an endorsement "Exceeds arrangement". The notice was served upon the accused but he failed to pay the amount. Hence, the accused was convicted of the commission of an offence punishable under Section 138 of the NI Act and he was sentenced to undergo simple imprisonment for six months and pay a compensation of ₹ 2,00,000/- to the complainant.
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7. Being aggrieved from the judgment and order passed by the learned Trial Court, the accused filed an appeal which was decided by learned Additional Sessions Judge, Ghumarwin, District Bilaspur (learned Appellate Court). Learned Appellate Court concurred with the findings recorded by the learned Trial Court that the cheque carried with it a presumption of consideration. The accused failed to rebut the presumption by leading satisfactory evidence. His plea that he had issued the cheque as security was not proved on record. The statement of Sudhir Ranjan (DW-1) did not prove the payment of money to the complainant. Hence, he prayed that the revision be dismissed.
8. Being aggrieved from the judgments and the order passed by learned Courts below, the accused has filed the present revision asserting that learned Courts below failed to properly appreciate the material placed before them. The learned Courts below discarded the evidence regarding the payment made by the complainant to the accused which showed that the accused had made the payment to the complainant and nothing was due towards him. The plea of the accused that he had issued a blank cheque as security was highly probable and 6 ( 2024:HHC:10405 ) this was wrongly discarded by learned Courts below. Therefore, it was prayed that the present revision be allowed and the judgments and order passed by learned Courts below be set aside.
9. I have heard Mr. Mohan Sharma, learned counsel for the petitioner/accused and Mr. Naresh K. Sharma, learned counsel for legal heirs of the complainant and Mr Ajit Sharma, learned Deputy Advocate General, for respondents No.2/State.
10. Mr Mohan Sharma, learned counsel for the petitioner/accused submitted that the learned Courts below erred in appreciating the material placed before them. The complainant asserted in his complaint that he had presented the cheque with his bank at Chandigarh and the bank of the accused is located at Shimla. The Courts at Ghumarwin had no jurisdiction to hear and entertain the present complaint.
Learned Trial Court erred in entertaining the complaint and convicting the accused. Learned First Appellate Court had also not appreciated this aspect. The statement of Sudhir Ranjan (DW-1) proved that the money was paid to the complainant by the accused through a demand draft. Therefore, his plea that he 7 ( 2024:HHC:10405 ) had paid the money to the complainant and nothing was due to the complainant was duly established. The statement of Sudhir Ranjan was not properly appreciated by learned Courts below.
Therefore, he prayed that the present revision be allowed and the judgments and order passed by learned Courts below be set aside.
11. Mr. Naresh Kumar Sharma, learned counsel for the legal heirs of the complainant supported the judgments and order passed by the learned Courts below and submitted that no interference is required with them. He submitted that the statement of Sudhir Ranjan was rightly discarded because he admitted that he could not depose about the encashment of the demand draft in the absence of the record. The accused had not stepped into the witness box to establish the plea taken by him that the cheque was issued as a security. Hence, he prayed that the present revision be dismissed. He relied upon the judgments of this Court in Banshi Ram versus H.P. Co-operative Bank Ltd. Cr.
Revision No. 118 of 2019 decided on 12.01.2024 in support of his submission.
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12. Mr. Ajit Sharma, learned Deputy Advocate General for respondent No.2/State adopted the submissions of Mr. Naresh Kumar Sharma and submitted that no interference is required with the judgments and order passed by learned Courts below.
13. I have given considerable thought to the submissions made at the bar and have gone through the records carefully.
14. It was laid down by the Hon'ble Supreme Court in Malkeet Singh Gill v. State of Chhattisgarh, (2022) 8 SCC 204:
(2022) 3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that the revisional court is not an appellate court and it can only rectify the patent defect, errors of jurisdiction or the law. It was observed on page 207: -
"10. Before adverting to the merits of the contentions, at the outset, it is apt to mention that there are concurrent findings of conviction arrived at by two courts after a detailed appreciation of the material and evidence brought on record. The High Court in criminal revision against conviction is not supposed to exercise the jurisdiction like to the appellate court and the scope of interference in revision is extremely narrow. Section 397 of the Criminal Procedure Code (in short "CrPC") vests jurisdiction to satisfy itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior court. The object of the provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error 9 ( 2024:HHC:10405 ) which is to be determined on the merits of individual cases. It is also well settled that while considering the same, the Revisional Court does not dwell at length upon the facts and evidence of the case to reverse those findings.
15. This position was reiterated in State of Gujarat v.
Dilipsinh Kishorsinh Rao, 2023 SCC OnLine SC 1294 wherein it was observed:
"13. The power and jurisdiction of the Higher Court under Section 397 Cr. P.C. which vests the court with the power to call for and examine records of an inferior court is for the purposes of satisfying itself as to the legality and regularities of any proceeding or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law or the perversity which has crept into such proceedings. It would be apposite to refer to the judgment of this court in Amit Kapoor v. Ramesh Chandra, (2012) 9 SCC 460 where the scope of Section 397 has been considered and succinctly explained as under:
"12. Section 397 of the Code vests the court with the power to call for and examine the records of an inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well- founded error and it may not be appropriate for the court to scrutinise the orders, which upon the face of it bear a token of careful consideration and appear to be in accordance with the law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored or judicial 10 ( 2024:HHC:10405 ) discretion is exercised arbitrarily or perversely. These are not exhaustive classes but are merely indicative. Each case would have to be determined on its own merits.
13. Another well-accepted norm is that the revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the exercise of revisional jurisdiction itself should not lead to injustice ex-facie. Where the Court is dealing with the question as to whether the charge has been framed properly and in accordance with law in a given case, it may be reluctant to interfere in the exercise of its revisional jurisdiction unless the case substantially falls within the categories aforestated. Even framing of charge is a much-advanced stage in the proceedings under the CrPC."
16. The present revision has to be decided as per the parameters laid down by the Hon'ble Supreme Court.
17. It was submitted on behalf of the accused that the learned Trial Court did not have the jurisdiction as the cheque was presented at Chandigarh before the bank of the complainant and it was drawn at Shimla. Therefore, the Courts at Shimla or Chandigarh will have jurisdiction. This submission will not help the accused. Section 462 of Cr.P.C. reads that no finding sentence or order of any criminal Court shall be set aside merely on the ground that the enquiry trial or further proceedings took place in a wrong Sessions Division, District, sub-Division or other 11 ( 2024:HHC:10405 ) local area unless it appears that such error has occasioned a failure of justice. It was laid down by the Hon'ble Supreme Court in State of Karnataka v. Kuppuswamy Gownder, (1987) 2 SCC 74:
1987 SCC (Cri) 280 that the judgment passed by a competent court cannot be set aside on the ground of lack of territorial jurisdiction. When the plea of lack of territorial jurisdiction is not taken before the learned Trial Court or the Appellate Court, such a plea cannot be taken before the High Court. It was observed at page 79:
"14. The High Court, however, observed that provisions of Section 465 CrPC cannot be made use of to regularise this trial. No reasons have been stated for this conclusion. Section 465 CrPC reads as under:
"Finding or sentence when reversible by reason of error, omission or irregularity.--(1) Subject to the provisions hereinbefore contained, no finding, sentence or order passed by a court of competent jurisdiction shall be reversed or altered by a court of appeal, confirmation or revision on account of any error, omission or irregularity in the complaint, summons, warrant, proclamation, order, judgment or other proceedings before or during the trial or in any inquiry or other proceedings under this Code, or any error, or irregularity in any sanction for the prosecution, unless in the opinion of that court, a failure of justice has in fact been occasioned thereby. (2) In determining whether any error, omission or irregularity in any proceeding under this Code, or any error, or irregularity in any sanction for the prosecution has occasioned a failure of justice, the 12 ( 2024:HHC:10405 ) court shall have regard to the fact whether the objection could and should have been raised at an earlier stage in the proceedings."
It is provided that a finding or sentence passed by a court of competent jurisdiction could not be set aside merely on the ground of irregularity if no prejudice is caused to the accused. It is not disputed that this question was neither raised by the accused at the trial nor any prejudice was pleaded either at the trial or at the appellate stage and therefore in the absence of any prejudice such a technical objection will not affect the order or sentence passed by the competent court. Apart from Section 465, Section 462 provides for remedy in cases of trial in wrong places. Section 462 reads as under:
"462. Proceedings in wrong place.--No finding, sentence or order of any Criminal Court shall be set aside merely on the ground that the inquiry, trial or other proceedings in the course of which it was arrived at or passed, took place in a wrong Sessions Division, district, sub-division or other local area, unless it appears that such error has in fact occasioned a failure of justice."
This provision even saves a decision if the trial has taken place in a wrong Sessions Division or sub-division or a district or other local area and such an error could only be of some consequence if it results in failure of justice, otherwise no finding or sentence could be set aside only on the basis of such an error.
15. It is therefore clear that even if the trial before the III Additional City Civil and Sessions Judge would have in a Division other than the Bangalore Metropolitan Area for which III Additional City Civil and Sessions Judge is also notified to be a Sessions Judge still the trial could not have been quashed in view of Section 462. This goes a long way to show that even if a trial takes place in a wrong place where the court has no territorial jurisdiction to try the case still unless failure of justice is pleaded and 13 ( 2024:HHC:10405 ) proved, the trial cannot be quashed. In this view of the matter therefore reading Section 462 alongwith Section 465 clearly goes to show that the scheme of the Code of Criminal Procedure is that where there is no inherent lack of jurisdiction merely either on the ground of lack of territorial jurisdiction or on the ground of any irregularity of procedure an order or sentence awarded by a competent court could not be set aside unless a prejudice is pleaded and proved which will mean failure of justice. But in the absence of such a plea merely on such technical grounds, the order or sentence passed by a competent court could not be quashed.
16. It is not disputed that the plea of prejudice or failure of justice is neither pleaded nor proved. Not only that, even the judgment of the High Court does not indicate any possibility of prejudice or failure of justice. Learned counsel appearing for the respondent also did not suggest any possibility of prejudice or failure of justice. Under these circumstances therefore the view taken by the High Court does not appear to be correct in view of the language of Section 462 read with Section 465. The judgment of the High Court is therefore set aside. The direction of remand made by the High Court is also quashed. It is unfortunate that these matters pertaining to incidents of 1980 should not have been disposed of till today and that the matter should have remained pending on such technical grounds for all these years. We therefore direct that the appeals be remitted back to the High Court so that they are heard and disposed of on merits as expeditiously as possible."
18. In the present case, no failure of justice was shown by the accused. Therefore, the plea that proceedings were conducted before the wrong criminal Court is not sufficient to invalidate the proceedings.
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19. It was submitted that the cheque was issued in the name of Himalayan Agencies, whereas the complaint was filed by Kamlender Rattan and not by Himalaya Agencies; hence, the complaint is not properly instituted. This submission is not acceptable. It was laid down by the Hon'ble Supreme Court in Shankar Finance & Investments v. State of A.P., (2008) 8 SCC 536:
(2008) 3 SCC (Cri) 558: 2008 SCC OnLine SC 997, that there is no distinction in law between a proprietary concern and individual trading under a trading name. It was observed at page 540: -
10. As contrasted from a company incorporated under the Companies Act, 1956 which is a legal entity distinct from its shareholders, a proprietary concern is not a legal entity distinct from its proprietor. A proprietary concern is nothing but an individual trading under a trade name.
In civil law where an individual carries on business in a name or style other than his name, he cannot sue in the trading name but must sue in his name, though others can sue him in the trading name. Therefore, if the appellant in this case had to file a civil suit, the proper description of the plaintiff should be "Atmakuri Sankara Rao carrying on business under the name and style of M/s Shankar Finance & Investments, a sole proprietary concern". But we are not dealing with a civil suit. We are dealing with a criminal complaint to which the special requirements of Section 142 of the Act apply. Section 142 requires that the complainant should be the payee. The payee is M/s Shankar Finance & Investments. Therefore, in a criminal complaint relating to an offence under Section 138 of the Act, it is permissible to lodge the complaint in the name of the proprietary concern itself.
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11. The next question is where a proprietary concern carries on business through an attorney holder, and whether the attorney holder can lodge the complaint. The attorney holder is the agent of the grantor. When the grantor authorises the attorney holder to initiate legal proceedings and the attorney holder accordingly initiates legal proceedings, he does so as the agent of the grantor and the initiation is by the grantor represented by his attorney holder, and not by the attorney holder in his personal capacity. Therefore where the payee is a proprietary concern, the complaint can be filed: (i) by the proprietor of the proprietary concern, describing himself as the sole proprietor of the "payee"; (ii) the proprietary concern, describing itself as a sole proprietary concern, represented by its sole proprietor; and (iii) the proprietor or the proprietary concern represented by the attorney holder under a power of attorney executed by the sole proprietor. It follows that in this case the complaint could have been validly filed by describing the complainant in any one of the following four methods:
"Atmakuri Shankara Rao, sole proprietor of M/s Shankar Finance & Investments"
or "M/s Shankar Finance & Investments, a sole proprietary concern represented by its proprietor Atmakuri Shankara Rao"
or "Atmakuri Shankara Rao, sole proprietor of M/s Shankar Finance & Investments, represented by his attorney holder Thamada Satyanarayana"
or "M/s Shankar Finance & Investments, a proprietary concern of Atmakuri Shankara Rao, represented by his attorney holder Thamada Satyanarayana".
16( 2024:HHC:10405 ) What would have been improper is for the attorney holder Thamada Satyanarayana to file the complaint in his own name as if he was the complainant."
20. A similar view was taken in Nexus Health & Beauty Care (P) Ltd. v. National Electrical Office, 2012 SCC OnLine HP 5383 wherein it was observed: -
"26. The complaint is not happily worded, no doubt, in the memo of parties the complainant has referred to complainant 'M/s National Electrical Office' but in para 2 it has been pleaded that complainant is providing services of Industrial Electrical fitting under the name and style of 'National Electrical'. Again, in the memo of parties, Subhash Bharwal has been referred to as proprietor but in para 1 of the complaint, the complainant has described itself as a firm. In evidence by way of affidavit Ex.CW-1/A, it has been stated that the complainant is providing services of Industrial Electrical fitting under the name and style of 'National Electrical'. Subhash Pharwal is its sole proprietor. The cheque Ex.C-1 has been issued in the name of 'National Electricals'. The complaint is loosely drafted. But in the complaint, the complainant has described itself as 'National Electrical' in the body of the complaint.
27. On the face of the complaint and affidavit Ex. CW-1/A, prima facie it cannot be said that the complainant is a firm namely M/s National Electrical Office. The complainant in the body of the complaint has described the complainant as 'National Electrical' a sole proprietorship concern of Subhash Bharwal. It will be too technical to throw out the complaint due to loose drafting. At this stage, if the pleadings of the petition are seen the petition is also not less loosely drafted. It starts with the sentence 'complainant issued a cheque for Rs. 2.00 lacs'. The complainant did not issue a cheque of Rs. 2,00,000/-. The cheque was allegedly issued by the 17 ( 2024:HHC:10405 ) accused petitioners. Not only in the opening para of the petition but in other places also the petitioners have used loose expressions. In para 3 of the petition before grounds, it has been pleaded that the "complainant aggrieved and dissatisfied with the order summoning the accused and taking cognizance of the case by Judicial Magistrate, files this petition". The substance of the complaint or petition is to be seen and it should not be thrown out merely on technicalities of loose drafting. It emerges from the complaint that the complainant is the 'National Electrical' sole proprietorship concern of Subhash Bharwal. In view of Milind Shripad Chandurkar (supra), it cannot be said that the complaint is not maintainable."
21. In the present case the complaint was filed by Kamlender Rattan as proprietor of Himalayan Agencies, therefore, the complaint was properly instituted and the same is not defective.
22. The accused did not dispute the complainant was running a business of wholesale in the name and style of Himalayan Agencies. He replied to question No. 2 that the complainant does not have any office at Ghumarwin and he has the office at Parwanoo. Thus, the fact that the complainant is a proprietor of a Himalayan Agency was never in dispute and the complainant was entitled to file the complaint.
23. The accused admitted in his statement recorded under Section 313 of Cr.P.C. that he had issued the cheque. He 18 ( 2024:HHC:10405 ) claimed that he had issued a blank cheque as security at the time of entering into transactions with the complainant. The complainant denied in his cross-examination that the cheque was issued as a security; rather he stated that the accused issued a cheque to discharge the liability to pay ₹ 1,57,711/-. A denied suggestion does not amount to any proof and will not assist the accused. Therefore, the learned Courts below had rightly held that the plea of the accused that the cheque was issued towards the security was not established.
24. 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 19 ( 2024:HHC:10405 ) 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."
25. 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 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.
20( 2024:HHC:10405 ) 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 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.
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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."
26. 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:
"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.22
( 2024:HHC:10405 )
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-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."
27. The accused admitted in his statement recorded under Section 313 of Cr. P.C. that he had issued the cheque. He admitted that he had a business transaction with the 23 ( 2024:HHC:10405 ) complainant. Learned Courts below had rightly held that once the signatures on the cheque were not disputed, the presumption under Sections 118 and 139 of the NI Act would arise. 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 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 24 ( 2024:HHC:10405 ) section 138 for the discharge, in whole or in part, of any debt or other liability.
28. 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 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."
29. 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 25 ( 2024:HHC:10405 ) 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."
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.."
30. 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 26 ( 2024:HHC:10405 ) 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 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 27 ( 2024:HHC:10405 ) 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 thereafter, it is for the accused to rebut such presumption by leading evidence.
31. Learned Courts below had rightly held 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:28
( 2024:HHC:10405 ) "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:
"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 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 29 ( 2024:HHC:10405 ) 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. Mudibasa ppa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571] wherein it is held as hereunder: (SCC pp. 432-33, paras 25-26) "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.30
( 2024:HHC:10405 ) 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 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-
31( 2024:HHC:10405 ) 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 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."
32. 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 32 ( 2024:HHC:10405 ) 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..."
33. 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 33 ( 2024:HHC:10405 ) Complainant/holder of the cheque, in that case, it is for the accused to prove the contrary."
34. 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 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 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 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 34 ( 2024:HHC:10405 ) 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 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 35 ( 2024:HHC:10405 ) 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]]
35. 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.
36. The accused only stated in his statement recorded under Section 313 of Cr.P.C. that he had issued the cheque as a security. He did not provide any evidence to establish this fact.
Sudhir Ranjan (DW1) has not stated anything about the cheque being a security. It was held in Sumeti Vij v. Paramount Tech Fab Industries, (2022) 15 SCC 689: 2021 SCC OnLine SC 201 that the accused has to lead defence evidence to rebut the presumption and mere denial in his statement under Section 313 of Cr.P.C. is not sufficient to rebut the presumption. It was observed at page 700:
36( 2024:HHC:10405 ) "20. That apart, when the complainant exhibited all these documents in support of his complaints and recorded the statement of three witnesses in support thereof, the appellant has recorded her statement under Section 313 of the Code but failed to record evidence to disprove or rebut the presumption in support of her defence available under Section 139 of the Act. The statement of the accused recorded under Section 313 of the Code is not substantive evidence of defence, but only an opportunity to the accused to explain the incriminating circumstances appearing in the prosecution case of the accused. Therefore, there is no evidence to rebut the presumption that the cheques were issued for consideration." (Emphasis supplied)"
37. The complainant admitted in his cross-examination that the cheque was signed in ball pen and was filled in different ink. It was submitted that this is sufficient to invalidate the cheque. This submission is not acceptable. 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 NI Act even if the cheque is filled by some other person. It was observed:
"33. A meaningful reading of the provisions of the 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 37 ( 2024:HHC:10405 ) 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."
38. 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 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 38 ( 2024:HHC:10405 )
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"
39. Therefore, the cheque is not bad even if it is not filled by the drawer.
40. The complainant produced the bills (Ext.C-4 and Ext.C-5) for the amount of ₹72,012/- and ₹36,009/-
respectively. These bills corroborate the version of the complainant that the accused had taken the articles mentioned in the bills from him. The accused stated that the bills were false and the articles were not taken. This plea is not acceptable in the absence of any evidence and the learned Courts below had rightly relied upon the bills.
41. Kamlender Rattan (CW-1) stated in his cross-
examination that he had mentioned the amount of the bill as ₹38,009/- in the complaint but the bill (Ext.C-4) was issued for ₹ 36,009/-. He stated that he had mentioned the amount of bill No. 306 as ₹ 72,002/- in the complaint but the bill (Ext. C-5) was issued for ₹72,012/-. It was submitted that these discrepancies in the bill amount and the complaint will make the complainant's case suspect. This submission is not acceptable.
39( 2024:HHC:10405 ) Learned Appellate Court had rightly pointed out that this is a typographical error which is not sufficient to discard the case of the complainant.
42. In Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: (2020) 1 SCC (Cri) 154: (2020) 1 SCC (Civ) 126: 2019 SCC OnLine SC 1361, the complaint's case was doubted because of discrepancy in the number of apple boxes. The Hon'ble Supreme Court held that there is a presumption of consideration and the complainant is not required to prove the consideration.
Therefore, any discrepancy will not be fatal. It was observed at page 293:
"19. A negotiable instrument including a cheque carries a presumption of consideration in terms of Section 118(a) and under Section 139 of the Act. Sections 118(a) and 139 read as under:
"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;
***
139. Presumption in favour of holder. --It shall be presumed, unless the contrary is proved, that the 40 ( 2024:HHC:10405 ) 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."
20. The trial court and the High Court proceeded as if, the appellant is to prove a debt before 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. A 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 the same 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.
21. There is the mandate of presumption of consideration in terms of the provisions of the Act. The onus shifts to the accused on proof of issuance of cheque to rebut the presumption that the cheque was issued not for discharge of any debt or liability in terms of Section 138 of the Act which reads as under:
"138. Dishonour of cheque for insufficiency, etc. of funds in the account.--Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, ..."
22. In Kumar Exports [Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513: (2009) 1 SCC (Civ) 629: (2009) 1 SCC (Cri) 823], it was held that mere denial of the existence of debt will not serve any purpose but the accused may adduce 41 ( 2024:HHC:10405 ) evidence to rebut the presumption. This Court held as under: (SCC pp. 520-21, para 20) "20. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case, the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the 42 ( 2024:HHC:10405 ) Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act."
(emphasis supplied)
23. In the judgment Kishan Rao v. Shankargouda [Kishan Rao v. Shankargouda, (2018) 8 SCC 165 : (2018) 4 SCC (Civ) 37 : (2018) 3 SCC (Cri) 544], this Court referring to Kumar Exports [Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513 : (2009) 1 SCC (Civ) 629 : (2009) 1 SCC (Cri) 823] and Rangappa [Rangappa v. Sri Mohan, (2010) 11 SCC 441 :
(2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184] returned the following findings : (Kishan Rao case [Kishan Rao v. Shankargouda, (2018) 8 SCC 165 : (2018) 4 SCC (Civ) 37 : (2018) 3 SCC (Cri) 544], SCC pp. 173-74, para 22) "22. Another judgment which needs to be looked into is Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4 SCC (Civ) 477: (2011) 1 SCC (Cri) 184]. A three-judge Bench of this Court had occasion to examine the presumption under Section 139 of the 1881 Act. This Court in the aforesaid case has held that in the event the accused is able to raise a probable defence which creates doubt with regard to the existence of a debt or liability, the presumption may fail. The following was laid down in paras 26 and 27: (SCC pp. 453-54) '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 [Krishna Janardhan Bhat v. Dattatraya G. Hegde, (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 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 43 ( 2024:HHC:10405 ) 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.
27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof.'"
24. In the judgment Bir Singh v. Mukesh Kumar [Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Civ) 309 : (2019) 2 SCC (Cri) 40], this Court held that presumption under Section 139 of the Act is a presumption of law. The Court held as under: (SCC pp. 206 & 208-09, paras 20, 33 & 36) "20. Section 139 introduces an exception to the general rule as to the burden of proof and shifts the onus on the accused. The presumption under Section 139 of the Negotiable Instruments Act is a presumption of law, as distinguished from a presumption of facts.
Presumptions are rules of evidence and do not conflict with the presumption of innocence, which requires the prosecution to prove the case against the accused 44 ( 2024:HHC:10405 ) beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law and presumptions of fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact as held in Hiten P. Dalal [Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16: 2001 SCC (Cri) 960].
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33. A meaningful reading of the provisions of the 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.
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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."
25. In other judgment Rohitbhai Jivanlal Patel v. State of Gujarat [Rohitbhai Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106: 2019 SCC OnLine SC 389: AIR 2019 SC 1876] this Court held as under: (SCC paras 15, 17 and 22) "15. So far the question of the existence of basic ingredients for drawing of presumption under Sections 118 and 139 of the NI Act is concerned, apparent it is that the appellant-accused could not deny his signature on the cheques in question that had been drawn in favour of the complainant on a bank account maintained by the accused for a sum 45 ( 2024:HHC:10405 ) of Rs 3 lakhs each. The said cheques were presented to the bank concerned within the period of their validity and were returned unpaid for the reason of either the balance being insufficient or the account being closed. All the basic ingredients of Section 138 as also of Sections 118 and 139 are apparent on the face of the record. The trial court had also consciously taken note of these facts and had drawn the requisite presumption. Therefore, it is required to be presumed that the cheques in question were drawn for consideration and the holder of the cheques i.e. the complainant received the same in discharge of an existing debt. The onus, therefore, shifts on the appellant-accused to establish a probable defence so as to rebut such a presumption.
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17. On the aspects relating to a preponderance of probabilities, the accused has to bring on record such facts and such circumstances which may lead the Court to conclude either that the consideration did not exist or that its non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist. This Court has, time and again, emphasised that though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfil the requirements of rebuttal as envisaged under Sections 118 and 139 of the NI Act....
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22. The result of the discussion in the foregoing paragraphs is that the major considerations on which the trial court chose to proceed clearly show its fundamental error of approach where, even after drawing the presumption, it had proceeded as if the complainant was to prove his case beyond a reasonable doubt. Such being the fundamental flaw on the part of 46 ( 2024:HHC:10405 ) the trial court, the High Court [Shashi Mohan Goyanka v. State of Gujarat, 2018 SCC OnLine Guj 3674] cannot be said to have acted illegally or having exceeded its jurisdiction in reversing the judgment of acquittal. As noticed hereinabove, in the present matter, the High Court has conscientiously and carefully taken into consideration the views of the trial court and after examining the evidence on the record as a whole, found that the findings of the trial court are vitiated by perversity. Hence, interference by the High Court was inevitable; rather had to be made for a just and proper decision of the matter."
43. Thus, the minor discrepancies in the amount of the bill are not sufficient to discard the version of the complainant.
44. The accused stated in his statement recorded under Section 313 of Cr.P.C. that he had paid the amount to the complainant. Sudhir Ranjan (DW-1) proved a demand draft of ₹ 80,000/- & ₹ 50,000/- issued in the name of Himalayan Agency. He admitted in his cross-examination that he had no record regarding the encashment of the demand draft. He volunteered to say that the branch issuing demand draft is different and the branch paying the amount is different. He also admitted that a person getting the demand draft issued can get it cancelled. His testimony shows that even though demand drafts were issued, there is no evidence that the amount was paid.
47( 2024:HHC:10405 )
45. Reliance was placed upon his testimony where he volunteered to say that the demand drafts were encashed.
However, this part of the statement will not help the accused because he admitted in the subsequent line that he had no record regarding the encashment of the demand draft. Thus, his testimony does not prove the payment of the money by the accused to the complainant.
46. No other evidence was led to show that the cheque was not issued in the discharge of the legal liability. Thus, the learned Courts below had rightly held that the accused had failed to rebut the presumption of consideration attached to the cheque.
47. The complainant stated that the cheque was dishonoured with an endorsement "Exceeds arrangement". This version is corroborated by the cheque returning memo (Ext. C-3) wherein the reason for dishonour was mentioned as "Exceeds Arrangement". There is a presumption under Section 146 of the NI Act regarding the correctness of the memo of dishonour and no evidence was led to rebut this presumption. Hence, the learned Courts below had rightly held that the cheque was 48 ( 2024:HHC:10405 ) dishonoured with an endorsement of Exceeds Arrangement which would attract the provisions of Section 138 of the NI Act.
48. The complainant stated that he sent the legal notice to the accused asking him to pay the amount within 15 days of the receipt of the notice. A perusal of the notice (Ext. C-6) shows that it was issued at the same address on which the accused was served. The accused has also given the same address in his statement under Section 313 of Cr.P.C. before the learned Trial Court. Therefore, the notice was sent to the correct address and is deemed to have been served in view of Section 27 of the General Clauses Act. No evidence was led to rebut this presumption. Thus, learned Courts below had rightly held that the notice was deemed to be served upon the accused.
49. 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 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:
"It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of 49 ( 2024:HHC:10405 ) 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 (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)
50. The accused has not paid any money to the complainant; hence, it was duly proved that the accused had failed to pay the money despite the receipt of the notice.
51. Thus, it was duly proved that the cheque was issued in discharge of legal liability and it was dishonoured with an endorsement of Exceeds Arrangement and the accused failed to pay the amount despite the receipt of a valid notice of demand.
Hence, the complainant had succeeded in proving his case 50 ( 2024:HHC:10405 ) beyond reasonable doubt and the learned Trial Court had rightly convicted him for the commission of an offence punishable under Section 138 of the NI Act.
52. The learned Trial Court had sentenced the accused to undergo simple imprisonment for six months. The legislature had introduced the offence of dishonour of cheques to instil confidence in the public about the transactions carried with the cheque. 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 the penal provisions of Section 138 is a deterrent in nature. It was observed at page 203:
"6. The object of Section 138 of the Negotiable Instruments Act is to infuse credibility into negotiable instruments including cheques and to encourage and promote the use of negotiable instruments including cheques in financial transactions. The penal provision of Section 138 of the Negotiable Instruments Act is intended to be a deterrent to callous issuance of negotiable instruments such as cheques without serious intention to honour the promise implicit in the issuance of the same."
53. In view of this, the sentence of six months is not excessive.
54. Learned Trial Court had imposed a compensation of 51 ( 2024:HHC:10405 ) ₹2,00,000/-. The cheque was issued for an amount of ₹1,57,711/- on 15.10.2009. The learned Trial Court imposed the sentence on 15.09.2015 after a lapse of about six years. The complainant lost interest on the amount and he had to pay the litigation expenses for filing the complaint. He was entitled to be compensated for the same. It was laid down by the Hon'ble Supreme Court in Kalamani Tex v. P. Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25: (2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75 that the Courts should uniformly levy a fine up to twice the cheque amount along with simple interest at the rate of 9% per annum. It was observed at page 291: -
19. As regards the claim of compensation raised on behalf of the respondent, we are conscious of the settled principles that the object of Chapter XVII of NIA is not only punitive but also compensatory and restitutive. The provisions of NIA envision a single window for criminal liability for the dishonour of a cheque as well as civil liability for the realisation of the cheque amount. It is also well settled that there needs to be a consistent approach towards awarding compensation and unless there exist special circumstances, the courts should uniformly levy fines up to twice the cheque amount along with simple interest @ 9% p.a. [R. Vijayan v. Baby, (2012) 1 SCC 260, para 20: (2012) 1 SCC (Civ) 79: (2012) 1 SCC (Cri) 520]"
55. Therefore, the amount of ₹ 2,00,000/- is not excessive.
52( 2024:HHC:10405 )
56. Thus, there is no infirmity in the judgments and order passed by learned Courts below and no interference is required with them.
57. Consequently, the present revision fails and the same is dismissed. Records of the learned Courts below be sent back forthwith.
(Rakesh Kainthla) Judge 29th October, 2024 (Nikita)