Negotiable Instruments Act, 1881 – ss.138 and 139 – Dishonour of cheque – Appeal against conviction – Appellant’s plea was that there was an absence of legally enforceable debt and the burden which was cast by the provisions of s.139 was discharged by him – Complainant’s case was that the appellant had taken a loan of Rs.15 lakhs from him and the cheques were issued by appellant in discharge of the same – The defence of the appellant was that he did not borrow the said amount as alleged nor did he issue the cheque in discharge of any legally enforceable debt and that four blank cheques were issued by him to the complainant on his assurance of a loan from a financial institution – Held: Presumption under s.139 of the Act is rebuttable and the standard of proof for rebuttal of the presumption under s.139 of the Act is guided by a preponderance of probabilities – Complainant failed to establish the source of funds which he allegedly utilized for giving loan of Rs. 15 lakhs to the appellant – There was no receipt or document evidencing the payment of the amount – During the course of his cross-examination, the complainant had deposed that earlier, the appellant had furnished two cheques for Rs. 5 lakhs and Rs. 10 lakhs which he had presented – Complainant did not mention anything about these two cheques in his complaint – Nothing was stated by the complainant in regard to the fate of the earlier two cheques – Non-disclosure of the facts pertaining to the earlier two cheques, and the steps, if any, taken for recovery was a material consideration which indicated that there was a doubt in regard to the transaction – Appellant duly rebutted the presumption under s.139 of the Act and, therefore, is held entitled to acquittal.
Allowing the appeals, the Court
HELD: 1.1 Section 139 of the Act mandates that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it, in discharge, in whole or in part, of a debt, or liability. The expression “unless the contrary is proved” indicates that the presumption under Section 139 of the Act is rebuttable. Terming this as an example of a “reverse onus clause” the three Judge Bench of this Court in Rangappa held that in determining whether the presumption has been rebutted, the test of proportionality must guide the determination. The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities. In the instant case, the defence of the appellant was that the cheque was issued to the complainant on an assurance of a loan which would be obtained from a financial institution. [Paras 10, 11][737-E-F; 738C-D]
1.2 During the course of his cross-examination, PW-1 admitted that a General Power of Attorney was executed by the appellant in his favour. Admittedly, the appellant and the respondent are related and there was some civil litigation between the father of the complainant and the appellant. The complainant admitted that, as a matter of fact, he himself received an amount of Rs. 10 lakhs from the appellant under a loan transaction but stated that he had repaid that amount to the appellant. PW-1 stated that the appellant had requested him for a loan of Rs. 15 lakhs in February 2004. The defence of the appellant being that no amount was actually paid by the complainant to him, the evidence of PW-1 in regard to the payment of the loan assumes significance. According to PW-1, the loan of Rs. 15 lakhs was paid into the hands of a representative of the appellant at his request. The appellant failed to indicate even the name of the representative to whom the alleged amount of Rs. 15 lakhs is stated to have been paid over in cash. The entire amount, significantly, is alleged to have been paid over without obtaining a receipt or document evidencing the payment of the amount. In the notice of demand that was issued by the complainant to the appellant after the cheque had been returned for want of funds, the complainant stated that the appellant had sought a ‘financial accommodation’ of Rs. 15 Lakhs. The first appellate court noted that while conducting the cross-examination of the accused, the complainant had stated that the accused had demanded a loan of Rs. 15 lakhs, but at that time the complainant had only paid an amount of Rs. 5 Lakhs as a loan for which the accused issued a cheque. This suggestion was specifically denied by the accused. In this context, the first appellate court observed that whether the complainant had furnished a hand loan of Rs. 15 lakhs to the accused as stated in the complaint or whether the complainant had furnished a hand loan of Rs. 15 lakhs to the accused as stated in the complaint or whether the complainant had paid Rs. 20 lakhs as mentioned in the legal notice dated 10 August 2004 or whether he had paid an amount of Rs. 5 lakhs as suggested during the course of cross-examination was a matter of serious doubt. If the complainant had paid Rs. 15 lakhs to the accused, the suggestion during the course of cross-examination was a matter of serious doubt. If the complainant had paid Rs. 15 lakhs to the accused, the suggestion during the course of cross-examination of having paid an amount of Rs. 5 lakhs casts serious doubt on the existence of a debt in the first place. [Para 12][738-E-H; 739-A-D]
2. The complainant failed to establish the source of funds which he is alleged to have utilized for the disbursal of the loan of Rs. 15 lakhs to the appellant. During the course of his crossexamination the complainant deposed that earlier, the appellant had furnished two cheques for Rs. 5 lakhs and Rs. 10 lakhs which he had presented. The complainant admitted that he had not mentioned anything about the accused having issued these two cheques in his complaint. Nothing was stated by the complainant in regard to the fate of the earlier two cheques which were allegedly issued by the appellant. The non-disclosure of the facts pertaining to the earlier two cheques, and the steps, if any, taken for recovery was again a material consideration which indicated that there was a doubt in regard to the transaction. [Para 13][739-D-F]
3. The appellant duly rebutted the presumption under Section 139 of the Act. His defence that there was an absence of a legally enforceable debt was rendered probable on the basis of the material on record. Consequently, the order of acquittal passed by the first appellate court was justified. [Paras 14, 15][739-G; 740-C]
Rangappa v. Sri Mohan (2010) 11 SCC 441 : [2010] 6 SCR 507 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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