Basalingappa vs Mudibasappa

REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.636 of 2019 (arising out of SLP (Crl.) No.8641/2018)

BASALINGAPPA ...APPELLANT(S)

VERSUS

MUDIBASAPPA ...RESPONDENT(S)

J U D G M E N T

ASHOK BHUSHAN,J.

This is an appeal by accused challenging the

judgment of the High Court of Karnataka dated

04.07.2018 by which judgment the Criminal Appeal

filed by the complainant against the acquittal of the

accused has been allowed and the accused has been

convicted under Section 138 of the Negotiable

Instruments Act, 1881 and sentenced to fine of

Rs.8,00,000/-, in default of which to undergo simple

imprisonment for three months.

2. The brief facts of the case for deciding the Signature Not Verified

appeal are:-

Digitally signed by ARJUN BISHT Date: 2019.04.09 17:41:18 IST Reason: 1

2.1 The complainant gave a notice dated

12.03.2012 to the accused, the appellant

stating dishonour of cheque dated

27.02.2012 for an amount of Rs.6,00,000/-

for want of sufficient funds. Thereafter,

on non-payment of the amount, a complaint

dated 25.04.2012 was filed by the

complainant under Section 138 of the

Negotiable Instruments Act, 1881

(hereinafter referred to as “Act, 1881).

2.2 Allegation in the complaint was that the

accused requested the complainant to lend a

hand loan to meet out urgent and family

necessary for a sum of Rs.6,00,000/-.

Complainant lent hand loan of Rs.6,00,000/-

dated 27.02.2012 in favour of the accused.

A cheque dated 27.02.2012 for Rs.6,00,000/-

was given by the accused, but the same was

returned by the bank with the endorsement

“Funds Insufficient” on 01.03.2012.

2 2.3 After notice dated 12.03.2012, which was

served on the accused on 13.03.2012, a

complaint was filed. PW1 filed his

examination-in-chief and was also cross-

examined on behalf of the accused. The

complainant in support of the complaint

filed original cheque dated 27.02.2012,

original cheque return memo dated

01.03.2012, office copy of the notice dated

12.03.2012, postal receipt dated

12.03.2012, acknowledgment letter issued by

the Department of Post dated 16.04.2012 and

letter to Head Post Office dated

11.04.2012. The accused in support of his

defence filed Ex.D1 – certified copy of

plaint in O.S. No. 148 of 2011, Ex.D2-

Certified copy of the private complaint

No.119/2012 in CC No. 2298 of 2012 and in

Ext.D3, certified copy of registered sale

agreement.

3 2.4 The trial court framed following two

questions:-

1. Whether the complainant proves beyond all reasonable doubts that, the accused had issued a cheque bearing No.839374 dated 27-02-2012 for Rs.6,00,000/- of Pragathi Gramin Bank, Nijalingappa Colony Branch, Raichur in favour of complainant, towards discharge of legally enforceable debt or liability and the same was dishonored for ‘ Funds Insufficient’ and even after deemed legal notice the accused has not paid the debt covered under the above said cheque and thereby committed an offence punishable Under Section 138 of Negotiable Instruments Act?

2. What Order?

2.5 The trial court after considering the

evidence and material on record held that

if the accused is able to raise a probable

defense which creates doubts about the

existence of a legally enforceable debt or

liability, the prosecution can fail. By

judgment dated 20.02.2015, the accused was

acquitted for the offence under Section

138. Complainant aggrieved by said

4 judgment filed a Criminal Appeal under

Section 378(4) of Code of Criminal

Procedure. The High Court set aside the

judgment of the trial court and convicted

the accused for the offence under Section

138. Accused aggrieved by judgment of the

High Court has come up in this appeal.

3. Shri S.N. Bhat, learned counsel for the appellant

submits that accused has successfully rebutted the

presumption under Section 139 and has raised probable

defence, which was accepted by the trial court after

considering the material on record. The High Court

erred in setting aside the acquittal order. The

accused has questioned the financial capacity of the

complainant and without there being any proof of

financial capacity, the High Court erred in observing

that judgment of the trial court is perverse. It is

submitted that burden of proof on accused under

Section 138 is not a heavy burden as is on a

prosecution to prove the offence beyond reasonable

doubt. It is submitted that the complainant being a

5 retired employee of Karnataka State Road Transport

Corporation, who having retired in 1977 and encashed

his retirement benefits of Rs.8,00,000/-, there was

no financial capacity. It is submitted that

complainant has filed cases under Section 138 against

other persons also. Complainant had also made a

payment of Rs.4,50,000/- for the agreement of sale.

The complainant was also a witness of a sale

agreement executed by accused, where he received an

amount of Rs.15 lakhs as consideration. There was

sufficient material on record to discharge the burden

and the High Court erred in setting aside the

acquittal order.

4. Learned counsel for the complainant refuting the

submissions of the learned counsel for the appellant

contends that signature on the cheque having been

admitted by the accused, a presumption has rightly

been raised that cheque was given in discharge of a

debt or liability. The accused has not been able to

prove any probable defence and the High Court has

rightly convicted the accused. No case was taken by

6 the accused that complainant has no other source of

income. Learned counsel for the complainant has

relied on judgment of this Court in Kishan Rao Vs.

Shankargouda, (2018) 8 SCC 165.

5. We have considered the submissions of the counsel

for the parties and have perused the records.

6. To recapitulate facts again, the cheque dated

27.02.2012 was presented for encashment by the

complainant, which was returned on 01.03.2012.

Signature on the cheque is not denied by the accused,

due to which presumption shall be raised that cheque

was issued in discharge of any debt or liability.

The complainant gave his evidence to prove his case.

In the examination-in-chief, he stated that a loan of

Rs.6,00,000/- was a hand loan and in discharge of the

same, the accused had given a cheque dated

27.02.2012. Neither in the complaint nor in

examination-in-chief, complainant stated the date of

giving the loan to the accused, however, in his

cross-examination, he stated that in the month of

November, 2011, accused availed loan of

7 Rs.6,00,000/-. In cross-examination, he further

stated that except accused, he has not lent loan to

any other person. He denied having filed a suit for

recovery of money against one Balana Gouda. However,

he admitted that suit was filed on the basis of

promissory note with interest at the rate of @18% per

month. He further admitted that he has filed a

criminal case under Section 138 of Negotiable

Instruments Act, 1881 against one Siddesh bearing CC

No.2298 of 2012. When a suggestion was given that

the complainant had lent Rs.25,000/- to the accused,

he said that he does not remember the accused has

borrowed Rs.25,000/- from him. In his cross-

examination, he has admitted that he has signed as a

witness to the agreement to transfer the lease hold

rights of accused in favour of one M/s. Sri Lakshmi

Narasimha Industries. Further on question, whether

the accused received Rs.15 lakhs from the said

transaction, he showed his ignorance. Suggestion was

also put that a blank cheque was issued at the time

of loan availing of Rs.25,000/-. Suggestion was also

8 put in his cross-examination that he was not having

Rs.6,00,000/- on hand on the date of loan.

7. Now, we look into the facts alleged by the

defence. In the cross-examination, although

complainant denied that he has filed any case under

Section 138 against any person but Ex.D2 is certified

copy of the complaint filed by the complainant

against Shri Siddesh under Section 138 of Act, 1881

for punishing the accused. Further the date of

cheque, which was alleged to be issued by Shri

Siddesh was also 27.02.2012. Ex.D3 was an agreement

of sale dated 07.01.2010, by which the complainant

paid Rs.4,50,000/- to Balana Gouda towards sale

consideration. In document transferring the

leasehold rights by the accused to one M/s. Sri

Lakshmi Narasimha Industries, the complainant was a

witness, who admitted his signature on the deed. In

his cross-examination, accused case was that by

virtue of such transfer of leasehold rights, he

received Rs.15 lakhs. The trial court after

9 marshalling the evidence made following observations

in Paragraph No.17:-

“17. In the instant case the cheque amount involved is Rs.6,00,000/- and the complainant is an retired bus conductor and he had retired from service in the year 1997 and has received the entire retirement monetary benefits of Rs.8,00,000/- and the same was deposited in the account of the complainant and it was encashed by the complainant. It is observed that the complainant is silent as to his source of income at present. He has nowhere specified as to what is he working and his earning, to show his position to lend the amount as specified in the cheque. There is no single document to show his earning nor has the complainant executed any document for having lent such heavy amount of Rs.6,00,000/- to the accused. Further, it is the suggestion of the accused to PW-1 that, the accused by transferring his interest to lease hold to one M/s. Sri.Lakshmi Narasimha industries has received a sum of Rs.15,00,000/- and it is also admitted by PW-1 that he was the witness to the said transaction. From the above, it raises doubt on the very cheque Ex.P-1 held by the complainant and the non-

production of any document by the complainant to 18 C.C.NO.2675-2012 show his earning, and the complainant has not executed any document before lending such huge amount to the accused. Such circumstance raises serious doubt on the transaction as claimed by the complainant. Hon’ble High Court of Karnataka has clearly established that, the accused need not enter the witness box and rebut the

10 presumptions. I am of the opinion that the whole transaction is at a doubt and the circumstance does not give rise to the lending of loan amount of Rs.6,00,000/- as claimed by the complainant. Accordingly, Points No.1 in the Negative.”

8. We having noticed the facts of the case and the

evidence on the record, we need to note the legal

principles regarding nature of presumptions to be

drawn under Section 139 of the Act and the manner in

which it can be rebutted by an accused. We need to

look into the relevant judgments of this Court, where

these aspects have been considered and elaborated.

Chapter XIII of the Act, 1881 contains a heading

“Special Rules of Evidence”. Section 118 provides

for presumptions as to negotiable instruments.

Section 118 is as follows:-

“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;

11 (b) as to date —that every negotiable instrument bearing a date was made or drawn on such date;

XXXXXXXXXXXXXXXXXXXXXXX”

9. Next provision, which needs to be noticed is

Section 139, which provides for presumption in favour

of holder. Section 139 lays down:-

“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.”

10. The complainant being holder of cheque and the

signature on the cheque having not been denied by the

accused, presumption shall be drawn that cheque was

issued for the discharge of any debt or other

liability. The presumption under Section 139 is a

rebuttable presumption. Before we refer to judgments

of this Court considering Sections 118 and 139, it is

relevant to notice the general principles pertaining

to burden of proof on an accused especially in a case

where some statutory presumption regarding guilt of

the accused has to be drawn. A Three-Judge Bench of

12 this Court in Kali Ram Vs. State of Himachal Pradesh,

(1973) 2 SCC 808 laid down following:-

“23. ……………………One of the cardinal principles which has always to be kept in view in our system of administration of justice for criminal cases is that a person arraigned as an accused is presumed to be innocent unless that presumption is rebutted by the prosecution by production of evidence as may show him to be guilty of the offence with which he is charged. The burden of proving the guilt of the accused is upon the prosecution and unless it relieves itself of that burden, the courts cannot record a finding of the guilt of the accused. There are certain cases in which statutory presumptions arise regarding the guilt of the accused, but the burden even in those cases is upon the prosecution to prove the existence of facts which have to be present before the presumption can be drawn. Once those facts are shown by the prosecution to exist, the Court can raise the statutory presumption and it would, in such an event, be for the accused to rebut the presumption. The onus even in such cases upon the accused is not as heavy as is normally upon the prosecution to prove the guilt of the accused. If some material is brought on the record consistent with the innocence of the accused which may reasonably be true, even though it is not positively proved to be true, the accused would be entitled to acquittal.”

11. This Court in Bharat Barrel & Drum Manufacturing

Company Vs. Amin Chand Pyarelal, (1999) 3 SCC 35 had

occasion to consider Section 118(a) of the Act. This

13 Court held that once execution of the promissory note

is admitted, the presumption under Section 118(a)

would arise that it is supported by a consideration.

Such a presumption is rebuttable and defendant can

prove the non-existence of a consideration by raising

a probable defence. In paragraph No.12 following has

been laid down:-

“12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the

14 consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non- existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist……”

12. Justice S.B. Sinha in M.S. Narayana Menon Alias

Mani Vs. State of Kerala and Another, (2006) 6 SCC 39

had considered Sections 118(a), 138 and 139 of the

Act, 1881. It was held that presumptions both under

Sections 118(a) and 139 are rebuttable in nature.

Explaining the expressions “may presume” and “shall

presume” referring to an earlier judgment, following

was held in paragraph No.28:-

“28. What would be the effect of the expressions “may presume”, ‘shall presume”

15 and “conclusive proof” has been considered by this Court in Union of India v. Pramod Gupta, (2005) 12 SCC 1, in the following terms: (SCC pp. 30-31, para 52)

“It is true that the legislature used two different phraseologies ‘shall be presumed’ and ‘may be presumed’ in Section 42 of the Punjab Land Revenue Act and furthermore although provided for the mode and manner of rebuttal of such presumption as regards the right to mines and minerals said to be vested in the Government vis-à-vis the absence thereof in relation to the lands presumed to be retained by the landowners but the same would not mean that the words ‘shall presume’ would be conclusive. The meaning of the expressions ‘may presume’ and ‘shall presume’ have been explained in Section 4 of the Evidence Act, 1872, from a perusal whereof it would be evident that whenever it is directed that the court shall presume a fact it shall regard such fact as proved unless disproved. In terms of the said provision, thus, the expression ‘shall presume’ cannot be held to be synonymous with ‘conclusive proof’.”

13. It was noted that the expression “shall presume”

cannot be held to be synonymous with conclusive

proof. Referring to definition of words “proved” and

“disproved” under Section 3 of the Evidence Act,

following was laid down in paragraph No.30: 16

“30. Applying the said definitions of “proved” or “disproved” to the principle behind Section 118(a) of the Act, the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.”

14. This Court held that what is needed is to raise a

probable defence, for which it is not necessary for

the accused to disprove the existence of

consideration by way of direct evidence and even the

evidence adduced on behalf of the complainant can be

relied upon. Dealing with standard of proof,

following was observed in paragraph No.32:-

“32. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies.”

17

15. In Krishna Janardhan Bhat Vs. Dattatraya G.

Hegde, (2008) 4 SCC 54, this Court held that an

accused for discharging the burden of proof placed

upon him under a statute need not examine himself. He

may discharge his burden on the basis of the

materials already brought on record. Following was

laid down in Paragraph No.32:-

“32. An accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on record. An accused has a constitutional right to maintain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.”

16. This Court again reiterated that whereas

prosecution must prove the guilt of an accused beyond

all reasonable doubt, the standard of proof so as to

prove a defence on the part of an accused is

“preponderance of probabilities”. In paragraph

No.34, following was laid down:-

“34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is “preponderance of probabilities”. Inference of preponderance

18 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 he relies.”

17. In Kumar Exports Vs. Sharma Carpets, (2009) 2 SCC

513, this Court again examined as to when complainant

discharges the burden to prove that instrument was

executed and when the burden shall be shifted. In

paragraph Nos. 18 to 20, following has been laid

down:-

“18. Applying the definition of the word “proved” in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.

19 19. The use of the phrase “until the contrary is proved” in Section 118 of the Act and use of the words “unless the contrary is proved” in Section 139 of the Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.

20. ……………………The accused 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……………”

20

18. A Three-Judge Bench of this Court in Rangappa Vs.

Sri Mohan, (2010) 11 SCC 441 had occasion to

elaborately consider provisions of Sections 138 and

139. In the above case, trial court had acquitted

the accused in a case relating to dishonour of cheque

under Section 138. The High Court had reversed the

judgment of the trial court convicting the accused.

In the above case, the accused had admitted

signatures on the cheque. This Court held that where

the fact of signature on the cheque is acknowledged,

a presumption has to be raised that the cheque

pertained to a legally enforceable debt or liability,

however, this presumption is of a rebuttal nature and

the onus is then on the accused to raise a probable

defence. In Paragraph No.13, following has been laid

down:-

“13. The High Court in its order noted that in the course of the trial proceedings, the accused had admitted that the signature on the impugned cheque (No. 0886322 dated 8-2- 2001) was indeed his own. Once this fact has been acknowledged, Section 139 of the Act mandates a presumption that the cheque pertained to a legally enforceable debt or liability. This presumption is of a rebuttal nature and the onus is then on the

21 accused to raise a probable defence. With regard to the present facts, the High Court found that the defence raised by the accused was not probable.”

19. After referring to various other judgments of

this Court, this Court in that case held that the

presumption mandated by Section 139 of the Act does

indeed include the existence of a legally enforceable

debt or liability, which, of course, is in the nature

of a rebuttable presumption. In paragraph No.26,

following was laid down:-

“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 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 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.” 22

20. Elaborating further, this Court held that Section

139 of the Act is an example of a reverse onus and

the test of proportionality should guide the

construction and interpretation of reverse onus

clauses on the defendant-accused and the defendant-

accused cannot be expected to discharge an unduly

high standard of proof. In paragraph Nos. 27 and 28,

following was laid down:-

“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.

28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and

23 not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.”

21. We may now notice judgment relied by the learned

counsel for the complainant, i.e., judgment of this

Court in Kishan Rao Vs. Shankargouda, (2018) 8 SCC

165. This Court in the above case has examined

Section 139 of the Act. In the above case, the only

defence which was taken by the accused was that

cheque was stolen by the appellant. The said defence

was rejected by the trial court. In paragraph Nos.

21 to 23, following was laid down:-

“21. In the present case, the trial court as well as the appellate court having found that cheque contained the signatures of the accused and it was given to the appellant to present in the Bank, the presumption under Section 139 was rightly raised which was not rebutted by the accused. The accused had not led any evidence to rebut

24 the aforesaid presumption. The accused even did not come in the witness box to support his case. In the reply to the notice which was given by the appellant, the accused took the defence that the cheque was stolen by the appellant. The said defence was rejected by the trial court after considering the evidence on record with regard to which no contrary view has also been expressed by the High Court.

22. Another judgment which needs to be looked into is Rangappa v. Sri Mohan (2010) 11 SCC 441. 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. 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, 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 accused to raise a defence wherein the existence of a legally

25 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.”

23. No evidence was led by the accused. The defence taken in the reply to the notice that cheque was stolen having been rejected by the two courts below, we do not see any basis for the High Court coming to the conclusion that the accused has been successful in creating doubt in the mind of the Court with regard to the existence of the debt or liability. How the presumption

26 under Section 139 can be rebutted on the evidence of PW 1, himself has not been explained by the High Court.

22. The above case was a case where this Court did

not find the defence raised by the accused probable.

The only defence raised was that cheque was stolen

having been rejected by the trial court and no

contrary opinion having been expressed by the High

Court, this Court reversed the judgment of the High

Court restoring the conviction. The respondent

cannot take any benefit of the said judgment, which

was on its own facts.

23. We having noticed the ratio laid down by this

Court in above cases on Sections 118(a) and 139, we

now summarise the principles enumerated by this Court

in following manner:-

(i) Once the execution of cheque is

admitted Section 139 of the Act

mandates a presumption that the

cheque was for the discharge of any

debt or other liability.

27 (ii) 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.

(iii) To rebut the presumption, it is open

for the accused to rely on evidence

led by him or 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.

(iv) That it is not necessary for the

accused to come in the witness box

in support of his defence, Section

28 139 imposed an evidentiary burden

and not a persuasive burden.

(v) It is not necessary for the accused

to come in the witness box to

support his defence.

24. Applying the preposition of law as noted above,

in facts of the present case, it is clear that

signature on cheque having been admitted, a

presumption shall be raised under Section 139 that

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 the PW1, when the specific

question was put that cheque was issued in relation

to loan of Rs.25,000/- taken by the accused, the PW1

said that he does not remember. PW1 in his evidence

admitted that he retired in 1997 on which date he

received monetary benefit of Rs. 8 lakhs, which was

encashed by the complainant. It was also brought in

the evidence that in the year 2010, the complainant

entered into a sale agreement for which he paid an

29 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 Ex.D2, there was burden

on the complainant to prove his financial capacity.

In the year 2010-2011, as per own case of the

complainant, he made payment of Rs.18 lakhs. During

his cross-examination, when 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.

25. There was another evidence on the record, i.e.,

copy of plaint in O.S. No. 148 of 2011 filed by the

complainant for recovery of loan of Rs. 7 lakhs given

to one Balana Gouda in December, 2009. Thus, there

was evidence on record to indicate that in December,

2009, he gave Rs.7 lakhs in sale agreement, in 2010,

30 he made payment of Rs.4,50,000/- towards sale

consideration and further he gave a loan of

Rs.50,000/- for which complaint was filed in 2012 and

further loan of Rs.6 lakhs in November, 2011. Thus,

during the period from 2009 to November, 2011, amount

of Rs.18 lakhs was given by the complainant to

different persons including the accused, which put a

heavy burden to prove the financial capacity when it

was questioned on behalf of the accused, the accused

being a retired employee of State Transport

Corporation, who retired in 1997 and total retirement

benefits, which were encashed were Rs.8 lakhs only.

The High Court observed that though the complainant

is retired employee, the accused did not even suggest

that pension is the only means for survival of the

complainant. Following observations were made in

Paragraph 16 of the judgment of the High Court:-

“16. Though the complainant is retired employee, the accused did not even suggest that pension is the only means for survival of the complainant. Under these circumstances, the Trial Court’s finding that the complainant failed to discharge his initial burden of proof of lending capacity is perverse.”

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26. There is one more aspect of the matter which also

needs to be noticed. In the complaint filed by the

complainant as well as in examination-in-chief the

complainant has not mentioned as to on which date,

the loan of Rs.6 lakhs was given to the accused. It

was during cross-examination, he gave the date as

November, 2011. Under Section 118(b), a presumption

shall be made as to date that every negotiable

instrument was made or drawn on such date.

Admittedly, the cheque is dated 27.02.2012, there is

not even a suggestion by the complainant that a post

dated cheque was given to him in November, 2011

bearing dated 27.02.2012. Giving of a cheque on

27.02.2012, which was deposited on 01.03.2012 is not

compatible with the case of the complainant when we

read the complaint submitted by the complainant

especially Para 1 of the complaint, which is

extracted as below:-

“1. The accused is a very good friend of the complainant. The accused requested the Complainant a hand loan to meet out urgent and family necessary a sum of Rs.6,00,000/- (Rupees Six Lakh) and on account of long standing friendship and knowing the difficulties, which is being faced by the

32 accused the complainant agreed to lend hand loan to meet out the financial difficulties of the accused and accordingly the Complainant lend hand loan Rs.6,00,000/- (Rupees Six Lakh) dated 27.02.2012 in favour of the Complainant stating that on its presentation it will be honored. But to the surprise of the Complainant on presentation of the same for collection through his Bank the Cheque was returned by the Bank with an endorsement “Funds Insufficient” on 01-03- 2012.”

27. Thus, there is a contradiction in what was

initially stated by the complainant in the complaint

and in his examination-in-chief regarding date on

which loan was given on one side and what was said in

cross-examination in other side, which has not been

satisfactorily explained. The High Court was unduly

influenced by the fact that the accused did not reply

the notice denying the execution of cheque or legal

liability. Even before the trial court, appellant-

accused has not denied his signature on the cheque.

28. We are of the view that when evidence was led

before the Court to indicate that apart from loan of

Rs.6 lakhs given to the accused, within 02 years,

amount of Rs.18 lakhs have been given out by the

33 complainant and his financial capacity being

questioned, it was incumbent on the complainant to

have explained his financial capacity. Court cannot

insist on a person to lead negative evidence. The

observation of the High Court that trial court’s

finding that the complainant failed to prove his

financial capacity of lending money is perverse

cannot be supported. We fail to see that how the

trial court’s findings can be termed as perverse by

the High Court when it was based on consideration of

the evidence, which was led on behalf of the defence.

This Court had occasion to consider the expression

“perverse” in Gamini Bala Koteswara Rao and others

Vs. State of Andhra Pradesh through Secretary, (2009)

10 SCC 636, this Court held that although High Court

can reappraise the evidence and conclusions drawn by

the trial court but judgment of acquittal can be

interfered with only judgment is against the weight

of evidence. In Paragraph No.14 following has been

held:-

“14. We have considered the arguments advanced and heard the matter at great length. It is true, as contended by Mr Rao, that interference in an appeal against an

34 acquittal recorded by the trial court should be rare and in exceptional circumstances. It is, however, well settled by now that it is open to the High Court to reappraise the evidence and conclusions drawn by the trial court but only in a case when the judgment of the trial court is stated to be perverse. The word “perverse” in terms as understood in law has been defined to mean “against the weight of evidence”. We have to see accordingly as to whether the judgment of the trial court which has been found perverse by the High Court was in fact so.”

29. High Court without discarding the evidence, which

was led by defence could not have held that finding

of trial court regarding financial capacity of the

complainant is perverse. We are, thus, satisfied

that accused has raised a probable defence and the

findings of the trial court that complainant failed

to prove his financial capacity are based on evidence

led by the defence. The observations of the High

Court that findings of the trial court are perverse

are unsustainable. We, thus, are of the view that

judgment of the High Court is unsustainable.

35 30. In result, the appeal is allowed and the judgment

of the High Court is set aside and that of the trial

court is restored.

......................J. (ASHOK BHUSHAN )

......................J. (K.M. JOSEPH ) New Delhi, April 09, 2019.

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