2025 (7) TMI 475 - HC - Indian Laws

Dishonour of Cheque - insufficient funds - acquittal of an accused in a complaint under Section 138 of the NI Act - power of Appellate Court in an appeal against the order of acquittal - HELD THAT - The restriction on the power of Appellate Court in an appeal against the order of acquittal in regard to other offence does not apply with same vigour in the offence under NI Act which entails presumption against the accused. The Hon ble Apex Court in the case of Rohitbhai Jivanlal Patel v. State of Gujarat 2019 (3) TMI 769 - SUPREME COURT had observed that the accused is entitled to bring on record the relevant material to rebut such presumption and to show that preponderance of probabilities are in favour of his defence but while examining if the accused has brought about a probable defence so as to rebut the presumption the appellate court is certainly entitled to examine the evidence on record in order to find if preponderance indeed leans in favour of the accused. It is well settled that once the execution of the cheque is admitted the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration and the presumption under Section 139 of the NI Act that the holder of the cheque/ respondent received the cheque in discharge of a legally enforceable debt or liability are raised against the accused - From a perusal of the record it is evident that Respondent No. 2 has not denied the issuance or his signatures on the impugned cheque. Respondent No. 2 however raised a probable defence by stating that the entire cheque amount had been repaid by him. Further Respondent No. 2 placed on record a statement of accounts of his mother to substantiate that the entire sum of Rs. 10, 00, 000/- had been repaid to the petitioner. The acquittal of Respondent No. 2 was not premised on whether the version of Respondent No. 2 was without blemish per se or not but on the fact that the petitioner failed to show that the sum of Rs. 9, 00, 000/- as received by him pertained to a separate transaction. Once Respondent No. 2 had raised a probable defence to the satisfaction of the Court the presumptions under Sections 118(a) or 139 of the NI Act were no longer in the favour of the petitioner. For this reason the petitioner having failed to lead evidence to show the existence of the debt/liability his contentions that there were contradictions in the version of Respondent No. 2 or that the presumptions under Section 118 and 139 of the NI Act were in his favour do not bolster the case of the petitioner - It is pertinent to note that a decision of acquittal fortifies the presumption of innocence of the accused and the said decision must not be upset until the appreciation of evidence is perverse. This Court finds no such perversity in the impugned judgment so as to merit an interference in the finding of acquittal. Consequently this Court finds no reason to entertain the present appeal - Appeal dismissed.

Summary

The core legal questions considered in this judgment revolve around the applicability and rebuttal of statutory presumptions under the Negotiable Instruments Act, 1881, specifically Sections 138, 118(a), and 139. The principal issues include:

1. Whether the accused (Respondent No. 2) had legally enforceable debt/liability towards the complainant at the time of issuance of the cheque under Section 138 of the NI Act.

2. The effect of admission of signatures on the cheque and promissory note in raising presumptions under Sections 118(a) and 139 of the NI Act.

3. Whether the accused successfully raised a probable defence rebutting the statutory presumptions by showing repayment of the loan amount.

4. The extent of appellate court interference in an acquittal order in cases under Section 138 of the NI Act, considering the statutory presumptions and evidentiary burden shifts.

Issue-wise Detailed Analysis

1. Presumptions under Sections 118(a) and 139 of the NI Act and their applicability

The legal framework establishes that once the execution of the cheque is admitted, Sections 118(a) and 139 of the NI Act create statutory presumptions in favor of the complainant: the cheque was drawn for consideration and received in discharge of a legally enforceable debt or liability. The Supreme Court's ruling in Rangappa v. Sri Mohan confirms these presumptions arise automatically upon admission of signatures.

The Court referred to the recent authoritative pronouncement in Rajesh Jain v. Ajay Singh, which clarifies that once the presumption under Section 139 is activated, the evidential burden shifts to the accused to rebut the presumption by raising a probable defence. The accused is not required to prove a negative but only to show on a preponderance of probabilities that no debt or liability existed at the time of issuance of the cheque.

The Court emphasized that the presumption under Section 139 is not absolute and can be controverted by the accused through direct or circumstantial evidence, or by raising relevant presumptions of fact under the Evidence Act. Once the accused discharges this burden, the presumption 'disappears' and the complainant must independently prove the debt/liability.

2. Whether Respondent No. 2 raised a probable defence rebutting the statutory presumptions

Respondent No. 2 did not deny signatures on the cheque or promissory note but contended that the entire loan amount of Rs. 10,00,000/- had already been repaid. To substantiate this, Respondent No. 2 produced a bank statement evidencing a transfer of Rs. 9,00,000/- from his mother's account to the complainant's account and asserted that the remaining Rs. 1,00,000/- was paid in cash on the same day.

The complainant admitted receipt of Rs. 9,00,000/- but contended it pertained to a separate transaction with Respondent No. 2's mother, not the loan transaction with Respondent No. 2. However, the complainant failed to produce any evidence to substantiate this claim or to distinguish the Rs. 9,00,000/- from the loan transaction.

The Court noted contradictions in Respondent No. 2's statements regarding the issuance of the cheque and loan amount, but held that despite these contradictions, Respondent No. 2 raised a probable defence sufficient to rebut the statutory presumptions. The Court underscored that the acquittal was not based on the absence of contradictions but on the complainant's failure to prove the existence of debt/liability after the presumption was rebutted.

3. Burden of proof and evidentiary considerations

After Respondent No. 2 successfully raised a probable defence, the onus shifted back to the complainant to prove the existence of debt/liability. The Court found that the complainant failed to discharge this burden, as no evidence was brought forth to demonstrate that the Rs. 9,00,000/- received was for a separate transaction distinct from the loan. The purported cash payment of Rs. 1,00,000/- was also not substantiated by credible evidence.

The Court observed that the complainant's witnesses lacked genuineness and originality, and the documentary evidence presented by Respondent No. 2 was credible enough to establish repayment on a preponderance of probabilities.

4. Scope of appellate interference in acquittal under Section 138 NI Act

The Court examined the principle that appellate courts are generally slow to interfere with acquittals, especially where two views are possible, and interference requires a finding that the trial court's judgment is perverse or wholly unsustainable. However, the Court distinguished cases under Section 138 of the NI Act, where statutory presumptions apply, allowing the appellate court a more probing review of evidence to determine if the accused successfully rebutted the presumption.

The Court relied on the Supreme Court's decision in Rohitbhai Jivanlal Patel v. State of Gujarat, which clarifies that the appellate court can examine whether the accused raised a probable defence to rebut the presumption and whether the evidence on record supports such a conclusion.

Applying this principle, the Court found no perversity in the impugned judgment acquitting Respondent No. 2, as the trial court's findings were supported by evidence and the complainant failed to prove the debt/liability once the presumption was rebutted.

5. Treatment of contradictions and credibility

The Court acknowledged contradictions in Respondent No. 2's statements regarding the loan amount and issuance of the cheque but held that such contradictions did not negate the probable defence raised. The Court emphasized that the acquittal was not premised on a flawless defence but on the complainant's failure to prove the debt/liability after the presumption was rebutted.

The Court further noted that the complainant's failure to substantiate the claim that the Rs. 9,00,000/- was for a separate transaction weakened his case significantly.

Conclusions on each issue

- The presumptions under Sections 118(a) and 139 of the NI Act were rightly raised against Respondent No. 2 upon admission of signatures on the cheque and promissory note.

- Respondent No. 2 successfully raised a probable defence by producing evidence of repayment of the loan amount, thereby rebutting the statutory presumptions.

- The burden shifted back to the complainant to prove the existence of debt/liability, which was not discharged due to lack of evidence distinguishing the Rs. 9,00,000/- from a separate transaction.

- The appellate court correctly applied the law by examining the evidence to determine that the trial court's acquittal was neither perverse nor unsustainable.

- Contradictions in the accused's statements were insufficient to overturn the acquittal in the absence of evidence supporting the complainant's case.

Significant Holdings

"Ordinarily, the appellate court will not be upsetting the judgment of acquittal, if the view taken by the trial court is one of the possible views of matter and unless the appellate court arrives at a clear finding that the judgment of the trial court is perverse i.e. not supported by evidence on record or contrary to what is regarded as normal or reasonable; or is wholly unsustainable in law."

"The presumption under Section 139 of the NI Act is not absolute, and may be controverted by the accused. In doing so, the accused only ought to raise a probable defence on a preponderance of probabilities to show that there existed no debt in the manner so pleaded by the complainant in his complaint/ demand notice or the evidence. Once the accused successfully raises a probable defence to the satisfaction of the Court, his burden is discharged, and the presumption 'disappears.' The burden then shifts upon the complainant, who then has to prove the existence of such debt as a matter of fact."

"Once the accused adduces evidence to the satisfaction of the Court that on a preponderance of probabilities there exists no debt/liability in the manner pleaded in the complaint or the demand notice or the affidavit-evidence, the burden shifts to the complainant and the presumption 'disappears' and does not haunt the accused any longer."

"The fundamental error in the approach lies in the fact that the High Court has questioned the want of evidence on the part of the complainant in order to support his allegation of having extended loan to the accused, when it ought to have instead concerned itself with the case set up by the accused and whether he had discharged his evidential burden by proving that there existed no debt/liability at the time of issuance of cheque."

"A decision of acquittal fortifies the presumption of innocence of the accused, and the said decision must not be upset until the appreciation of evidence is perverse."

The Court ultimately dismissed the appeal, affirming the acquittal on the ground that the accused had raised a probable defence rebutting the statutory presumptions under Sections 118(a) and 139 of the NI Act, and the complainant failed to prove the existence of a legally enforceable debt or liability at the time of issuance of the cheque.