2025 (6) TMI 526 - HC - Indian Laws

Dishonour of Cheque - insufficient funds or not - presumption that the cheque was issued in discharge of the legal liability for valid consideration or not - Rebuttal of presumption u/s 139 of the NI Act - HELD THAT - It was laid down by the Hon ble Supreme Court in Malkeet Singh Gill v. State of Chhattisgarh 2022 (7) TMI 1455 - SUPREME COURT that the revisional court is not an appellate court and it can only rectify the patent defect errors of jurisdiction or the law. In the present case the application does not mention that the applicant was prevented from leading the evidence before the learned Trial Court despite the exercise of due diligence or the evidence came to the notice of the accused during the pendency of the appeal; rather it was asserted that the accused could not lead the evidence due to COVID-19 pandemic which is factually incorrect because the evidence of the accused was closed in July 2022 after the COVID-19 had subsided. The accused wants to prove the Customer Account Ledger Report from 01.03.2016 to 31.12.2017. This report was anterior to the closure of the evidence and could have been produced before the learned Trial Court. No reason was assigned for not producing the document before the learned Trial Court or the learned Appellate Court; hence the document cannot be taken on record during the present proceedings. Consequently the application for leading additional evidence is dismissed. The accused has not disputed the issuance of the cheque in the revision petition. It was stated that the complainant had taken blank cheques as security from the accused at the time of advancing the loan. Learned Courts below had rightly held that once the execution of the cheque was admitted a presumption under Section 118 and Section 139 of the NI Act would arise. It was laid down by this Court in Naresh Verma vs. Narinder Chauhan 2019 (10) TMI 1578 - HIMACHAL PRADESH HIGH COURT 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 held in Sumeti Vij v. Paramount Tech Fab Industries 2021 (3) TMI 383 - SUPREME COURT 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. In the present case also the accused did not appear in the witness box to establish his plea nor did he examine any witness to prove the plea taken by him therefore the learned Courts below had rightly held that the accused had failed to rebut the presumption. 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 deemed receipt of the notice - Therefore it was duly proved before the learned Trial Court that the cheque was issued in discharge of legal liability. It was dishonoured with an endorsement funds insufficient and the accused had failed to pay the amount despite the deemed receipt of the notice of demand. Hence the complainant had proved his case beyond a reasonable doubt and the learned Trial Court had rightly convicted the accused of the commission of an offence punishable under Section 138 of the NI Act. The cheque was issued on 30.07.2016 whereas the sentence was imposed on 24.09.2022 after a lapse of nearly 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 - Therefore the amount of Rs.52, 932/- awarded as compensation on the cheque amount of Rs.7, 47, 068/- is not excessive. The present revision fails and the same is dismissed.

Summary

The core legal questions considered in this judgment pertain to the applicability and interpretation of Section 138 of the Negotiable Instruments Act (NI Act), specifically:

• Whether the accused issued the cheque in discharge of a legally enforceable debt or liability as per the presumption under Section 139 of the NI Act.
• Whether the accused successfully rebutted the statutory presumption arising under Sections 118 and 139 of the NI Act.
• The sufficiency and admissibility of evidence, including the complainant's failure or success in proving the existence of debt and the accused's failure to produce defence evidence.
• The validity of the cheque dishonour endorsement and the service of statutory notice to the accused.
• The scope and exercise of revisional jurisdiction of the High Court under Sections 397 and 401 of the Criminal Procedure Code (CrPC) vis-`a-vis appellate jurisdiction.
• The permissibility and conditions for admitting additional evidence at the appellate or revisional stage under Section 391 of the CrPC.
• The legal effect of a cheque issued as security and whether it attracts liability under Section 138 of the NI Act.
• The appropriateness of the sentence and compensation awarded under Section 138 of the NI Act.

Issue-wise Detailed Analysis:

1. Presumption of Debt and Liability under Sections 118 and 139 of the NI Act

The legal framework mandates that once the accused admits the signature on the cheque, the court shall presume the cheque was issued in discharge of a legally enforceable debt or liability (Section 139), and that the negotiable instrument was made for consideration (Section 118). This presumption is rebuttable but shifts the evidential burden onto the accused to prove otherwise by a preponderance of probabilities.

Precedents such as Hiten P. Dalal v. Bratindranath Banerjee, Basalingappa v. Mudibasappa, Kalamani Tex v. P. Balasubramanian, and APS Forex Services Pvt. Ltd. v. Shakti International Fashion Linkers were relied upon to emphasize that mere denial or bare explanations are insufficient to rebut the presumption; affirmative evidence is required.

In the present case, the accused admitted taking a loan of Rs.7,00,000 but denied issuing the cheque for Rs.7,47,068. The courts below found no evidence from the accused to rebut the presumption, and the complainant's witness (CW1) testified to the issuance of the cheque in discharge of liability. The accused failed to produce any evidence despite multiple opportunities. The court held that the accused failed to rebut the presumption, thus satisfying the legal requirements under Sections 118 and 139.

2. Dishonour of Cheque and Service of Statutory Notice

The cheque was dishonoured with the endorsement "funds insufficient," a fact established by the bank memo (Ex. CW1/B) which carries a presumption of correctness under Section 146 of the Indian Evidence Act. No evidence was produced to rebut this presumption.

The statutory notice was sent to the accused's address as per records, and the courts invoked the presumption that service was proper. The accused did not rebut this presumption or pay the amount within the prescribed period. The courts relied on C.C. Allavi Haji v. Pala Pelly Mohd. to hold that failure to pay after deemed receipt of notice disentitles the accused from claiming non-service of notice.

3. Defence Evidence and Rebuttal of Presumption

The accused contended that the cheque was taken as security and that he had repaid the loan in part. However, he neither led evidence nor examined witnesses despite repeated adjournments and opportunities. The courts held that the statement under Section 313 of the CrPC is not substantive evidence and mere denial is insufficient to rebut the statutory presumption. The accused's failure to produce evidence was fatal to his defence.

Precedents such as Sumeti Vij v. Paramount Tech Fab Industries and Bir Singh v. Mukesh Kumar were cited to reinforce that the accused must lead evidence to rebut the presumption and that failure to do so justifies conviction.

4. Cheque Issued as Security

The accused argued the cheque was issued as security and hence should not attract criminal liability. The court noted that the law is settled that even a cheque issued as security attracts liability under Section 138 if dishonoured, as held in Hamid Mohammad v. Jaimal Dass, Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd., and Sripati Singh v. State of Jharkhand. The cheque, even if issued as security, is not "waste paper" and the drawer remains liable unless the debt is discharged before presentation.

5. Scope of Revisional Jurisdiction

The revisional jurisdiction under Sections 397 and 401 CrPC is supervisory and limited to correcting patent errors, jurisdictional errors, or gross miscarriage of justice. It is not an appellate jurisdiction to reappreciate evidence or substitute findings of fact. The court relied on authoritative pronouncements in Malkeet Singh Gill v. State of Chhattisgarh, State of Gujarat v. Dilipsinh Kishorsinh Rao, Kishan Rao v. Shankargouda, and Bir Singh v. Mukesh Kumar to emphasize the narrow scope of revision.

In the present case, concurrent findings of conviction by the trial and appellate courts after detailed appreciation of evidence were not shown to be perverse or erroneous. Hence, no interference was warranted.

6. Admissibility of Additional Evidence at Revisional Stage

The accused sought to place on record a customer account ledger report and letter under Section 432 BNSS (corresponding to Section 391 CrPC) to show the cheque amount was wrongly filled. The court examined the principles governing additional evidence at appellate/revisional stages, citing State of Rajasthan v. Asharam, Sukhjeet Singh v. State of U.P., Rajeswar Prasad Misra v. State of W.B., Rambhau v. State of Maharashtra, and others.

The power to admit additional evidence is discretionary and exercised only if the party was prevented from producing it despite due diligence or the evidence came to light during pendency of appeal. It cannot be used to fill gaps or for retrial. Here, the evidence was available before closure of defence evidence, and no sufficient cause was shown for non-production earlier. The court held the application for additional evidence was rightly rejected.

7. Sentence and Compensation

The accused was sentenced to three months' simple imprisonment and ordered to pay compensation of Rs.8,00,000. The court upheld the sentence as proportionate and deterrent in nature, referencing Bir Singh v. Mukesh Kumar which recognized the penal provisions of Section 138 as deterrent to prevent callous issuance of cheques.

The compensation was justified as the cheque was issued in 2016, and the sentence was passed after six years, causing loss of interest and litigation expenses to the complainant. The court relied on Kalamani Tex v. P. Balasubramanian for the principle that courts should levy compensation up to twice the cheque amount with simple interest at 9% p.a., and found the awarded amount not excessive.

Treatment of Competing Arguments

The accused's contentions regarding non-existence of debt, misuse of blank cheques, and inability to produce evidence due to COVID-19 were rejected on factual and legal grounds. The courts found that the accused admitted the loan but failed to produce evidence of repayment or rebuttal. The complainant's evidence was found credible and sufficient to establish the liability and dishonour of cheque. The accused's attempt to introduce additional evidence at revisional stage was disallowed as it was not shown to be newly discovered or prevented from being produced earlier.

Significant Holdings:

"The presumption under Section 139 of the NI Act 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."

"Mere denial in the statement under Section 313 of CrPC is not sufficient to rebut the presumption under Section 139 of the NI Act; the accused must lead evidence."

"A cheque issued as security would also come under the provision of Section 138 of the Negotiable Instruments Act."

"The High Court in criminal revision against conviction is not supposed to exercise the jurisdiction like the appellate court, and the scope of interference in revision is extremely narrow."

"The power to take additional evidence under Section 391 CrPC must be exercised sparingly and only in suitable cases where failure of justice would otherwise occur."

"The penal provisions of Section 138 of the Negotiable Instruments Act are intended to be deterrent to callous issuance of negotiable instruments without serious intention to honour the promise."

The final determinations were that the accused was rightly convicted under Section 138 of the NI Act as the cheque was issued in discharge of legal liability, was dishonoured for insufficient funds, and the accused failed to pay the amount despite notice. The accused failed to rebut the statutory presumption or produce defence evidence. The revisional court declined to interfere with concurrent findings of fact. The application for additional evidence was dismissed. The sentence and compensation awarded were held to be appropriate and lawful.