2025 (5) TMI 1443 - HC - Indian Laws

Revision petition - Cheque issued for discharge of debt or liability Or liability or merely as security for loans extended - Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Offence punishable under Section 138 of the Negotiable Instrument Act 1881 - accused raised defense that the agreement was executed under threat - Challenged the judgment of conviction and order of sentence - preponderance of probabilities - HELD THAT - The accused attempted to discharge the onus by examining Udai Singh(DW1) Sanjay Gurjar(DW2) and Mukesh Tewada(DW3). These witness generally stated about extension of loan to them by the complainant Ravi and made generalized statement that Devkaran had informed them that Ravi is threatening for recovery of the loan amount. The learned trial Court in Para 16 to 23 of the judgement has extensively dealt with defense evidence and gave a reasoned conclusion that the defense evidence is not trustworthy and sufficient to rebut the legal presumption in favour of holder of the cheque. The first Appellate Court in Para 12 and 13 of the judgment has dealt with the defense evidence and affirmed the conclusion of the trial Court for the reasons stated therein. Both the Courts unanimously concluded that there is no trustworthy evidence or material to show loan transactions between the complainant and the defense witnesses. Further the defense evidence had failed to rebut the transaction of loan between the complainant and the accused and the issuance of cheque by the accused for payment of liability. The learned trial Court and the First Appellate Court considered the defense of the accused in detail and committed no error in concluding that no inference can be drawn that the cheque in question was issued as guarantee for loans extended by the complainant to other persons on behalf of the accused. Thus the accused had failed to establish probability in his defense. The complainant did not submit any documentary evidence to establish availability of the amount said to be advanced as loan to the accused. The accused has failed to establish his defense even on preponderance of probability therefore there was no occasion to shift the onus of proof on the complainant to establish existence of legally recoverable debt or liability. The evidence of complainant Ravi(PW1) remained unrebutted regarding advancement of loan to the accused and issuance of cheque by the accused to repay the loan. Therefore considering the statutory presumption in favour of the holder of cheque absence of documentary evidence to establish financial capacity of the complainant is immaterial. Thus the considered opinion of this Court no patent illegality perversity or impropriety is made out in the concurrent finding of conviction by the learned trial Court and the first Appellate Court. The sentence imposed by the trial Court and affirmed by the first Appellate Court is proper and appropriate. Consequently no interference in concurrent finding of conviction of the petitioner/accused for offence punishable under Section 138 of the Negotiable Instrument Act and the sentence imposed is called for in exercise of revisional jurisdiction. The revision petition being devoid of merit is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

(a) Whether the complainant successfully proved the existence of a legally enforceable debt or liability against the accused under Section 138 of the Negotiable Instruments Act, 1881.

(b) Whether the cheque in question was issued by the accused in discharge of any debt or liability or merely as security for loans extended by the complainant to third parties at the behest of the accused.

(c) Whether the defense evidence was properly considered and whether it successfully rebutted the statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act.

(d) Whether the lower courts committed any error or illegality in convicting the accused and imposing sentence under Section 138 of the Negotiable Instruments Act.

(e) Whether the complainant's failure to produce documentary evidence of his financial capacity to advance the loan affects the validity of the conviction.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Proof of legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act

The legal framework governing this issue is primarily Sections 118, 139 of the Negotiable Instruments Act, 1881, and relevant Supreme Court precedents. Section 118 provides presumptions as to negotiable instruments, including that every negotiable instrument was made or drawn for consideration. Section 139 creates a rebuttable presumption that the holder of the cheque received it for discharge of any debt or liability.

The Supreme Court in Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal held that once execution of the promissory note or cheque is admitted, a presumption of consideration arises, which is rebuttable by the accused by raising a probable defense. The accused must bring facts and circumstances that make the non-existence of consideration probable, shifting the burden back to the complainant to prove the debt.

Similarly, in Kumar Exports v. Sharma Carpets, the Court clarified that the presumption under Sections 118 and 139 are rebuttable and the accused need not produce direct evidence but must raise a probable defense on the preponderance of probabilities.

The Supreme Court in Rangappa v. Sri Mohan further emphasized that the presumption includes the existence of a legally enforceable debt or liability, which the accused can contest by adducing evidence to establish the contrary on a balance of probabilities.

In the present case, the accused did not dispute his signatures on the cheque and the notarized agreement, thereby attracting the statutory presumption under Sections 118 and 139. The accused's burden was to rebut this presumption by establishing a probable defense.

The accused claimed that the cheque was issued as security for loans extended by the complainant to other persons at his behest, not for any debt owed by him. However, the defense evidence, including testimony of three witnesses, was found by the trial and appellate courts to be generalized, untrustworthy, and insufficient to rebut the presumption. The Courts held that the accused failed to establish the non-existence of debt or consideration with any credible evidence.

The Courts applied the principle that bare denial is inadequate and something probable must be brought on record to rebut the presumption. The accused's defense did not meet this standard.

(b) Nature of the cheque: security or discharge of debt/liability

The accused contended that the cheque was given as security for loans extended by the complainant to third parties, not as repayment of any debt owed by him. This contention was examined by the trial and appellate courts.

Both courts analyzed the defense evidence and found no credible material to support the contention that the cheque was a guarantee or security instrument. The Courts noted absence of any trustworthy evidence of loan transactions between the complainant and defense witnesses. The Courts concluded that no inference could be drawn that the cheque was issued as security for loans to others.

The Courts' reasoning aligns with the principle that the presumption under Section 139 applies unless convincingly rebutted. The accused's failure to establish a probable defense meant the presumption that the cheque was issued for discharge of debt or liability remained intact.

(c) Consideration of defense evidence

The accused submitted defense evidence through three witnesses who stated that the complainant had extended loans to various persons and that the accused was threatened for recovery. The trial court and appellate court extensively examined this evidence.

The Courts found the defense evidence to be generalized, lacking credibility, and insufficient to rebut the statutory presumption. The Courts reasoned that the defense witnesses did not provide concrete or trustworthy evidence of the alleged loan transactions or threats, and therefore the defense failed to raise a probable defense on the preponderance of probabilities.

Both courts explicitly rejected the accused's defense, holding that the evidence did not disprove the existence of debt or consideration supporting the cheque.

(d) Alleged errors or illegality in the lower courts' judgments

The revision petition alleged that the lower courts erred in convicting the accused and imposing sentence, including ignoring defense evidence and convicting on presumption alone.

The High Court examined the scope of revision under Section 397 Cr.P.C., emphasizing its limited supervisory jurisdiction to correct patent illegality or jurisdictional error and not to reappreciate evidence or act as a second appellate court.

The Court relied on recent Supreme Court authority clarifying that concurrent findings of fact by trial and appellate courts after detailed appreciation of evidence are not to be lightly disturbed in revision.

After reviewing the record and judgments, the Court found no patent illegality, perversity, or error in the concurrent findings of conviction and sentence. The Courts had duly considered the defense and evidence and reached reasoned conclusions. Therefore, no interference was warranted.

(e) Complainant's financial capacity and absence of documentary evidence

The accused argued that the complainant failed to prove financial capacity to advance the loan, as no documentary evidence was produced.

The Court held that this absence is immaterial in light of the statutory presumption in favor of the holder of the cheque and the unchallenged evidence of the complainant regarding the loan and issuance of the cheque.

The Court reasoned that the complainant's evidence remained unrebutted and the burden to disprove the presumption rested on the accused, who failed to discharge it. Therefore, lack of documentary proof of financial capacity did not vitiate the conviction.

3. SIGNIFICANT HOLDINGS

"Once execution of the cheque is admitted, the statutory presumption under Section 139 of the Negotiable Instruments Act arises that the cheque was issued for discharge of any debt or liability. This presumption is rebuttable by the accused by adducing evidence to establish, on the preponderance of probabilities, that the cheque was not issued for such purpose."

"Bare denial of the passing of consideration or existence of debt is insufficient. The accused must bring on record facts and circumstances making the non-existence of consideration or debt probable, thereby shifting the burden back to the complainant."

"The Courts have a limited supervisory jurisdiction under Section 397 Cr.P.C. in criminal revision and cannot reappreciate evidence or disturb concurrent findings of fact unless there is a patent illegality or jurisdictional error."

"The absence of documentary evidence to establish the complainant's financial capacity to advance the loan is immaterial where the complainant's evidence remains unrebutted and the statutory presumption in favor of the holder of the cheque stands unrebutted."

"Defense evidence that is generalized, untrustworthy, and insufficient to raise a probable defense cannot rebut the statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act."

Final determinations:

- The accused's conviction under Section 138 of the Negotiable Instruments Act was rightly upheld by the trial and appellate courts.

- The accused failed to rebut the statutory presumption of debt or liability supporting the cheque.

- The defense evidence was properly considered and found inadequate to displace the presumption.

- No error or illegality was committed by the lower courts warranting interference in revision.

- The sentence imposed was proper and appropriate.