BASALINGAPPA versus MUDIBASAPPA

[2019] 6 S.C.R. 555

BASALINGAPPA

MUDIBASAPPA

(Criminal Appeal No. 636 of 2019)

APRIL 09, 2019

[ASHOK BHUSHAN AND K. M. JOSEPH, JJ.]

Negotiable Instruments Act, 1981 – ss.118(a), 138 and 139 –Complainant case was that he gave hand loan of Rs.6,00,000/- tothe accused – Accused gave cheque dated 27.02.2012 forRs.6,00,000/- but the same was returned by the bank with theendorsement ‘Funds Insufficient’ on 01.03.2012 – Complaint wasfiled – Trial court acquitted the accused for the offence u/s. 138 ofthe Act on basis that complainant failed to prove his financialcapacity – However, the High Court set aside the judgment of thetrial court and convicted the accused for the offence u/s.138 –Accused questioned financial capacity of the complainant allegingthat complainant had retired in the year 1997 and had encashedhis retirement benefits of Rs.8,00,000/- and made payment ofRs.4,50,000/- for an agreement to sale in the year 2010 – Besidesthat, during the period from 2009 to Nov, 2011 complainant madeseveral other payments to different persons – On appeal, held:Complainant admitted that he had received monetary benefit ofRs.8,00,000/-, which was encashed – Complainant also admittedthat he made payment of Rs.4,50,000/- – During the cross-examination of the complainant, he did not give satisfactory replyregarding his financial capacity to pay Rs.6,00,000/- to the accused– Evidence on record indicate that within two years, amount ofRs.18,00,000/- was given out by the complainant to different persons– It was incumbent on the complainant to have explained his financialcapacity – Thus, evidence on record, was probable defence onbehalf of the accused, which shifted the burden on the complainantto prove his financial capacity and other facts – The findings of thetrial court that complainant failed to prove his financial capacitywas based on evidence led by the defence – Thus, observations ofthe High Court unsustainable – Judgment of the trial Court restored.

AAllowing the appeal, the Court

HELD: 1. After having noticed the ratio laid down by theSupreme Court in various cases on Sections 118(a) and 139, thisCourt now summarise the principles enumerated by the SupremeCourt in following manner:-B

(i) Once the execution of cheque is admitted Section 139of the Act mandate presumption that the cheque was for thedischarge of any debt or other liability.

(ii) The presumption under Section 139 is rebuttablepresumption and the onus is on the accused to raise the probableCdefence. The standard of proof for rebutting the presumption isthat of preponderance of probabilities.

(iii) To rebut the presumption, it is open for the accused torely on evidence led by him or accused can also rely on thematerials submitted by the complainant in order to raise aDprobable defence. Inference of preponderance of probabilitiescan be drawn not only from the materials brought on record bythe parties but also by reference to the circumstances upon whichthey rely.

(iv) That it is not necessary for the accused to come in theEwitness box in support of his defence, Section 139 imposed anevidentiary burden and not persuasive burden.

(v) It is not necessary for the accused to come in the witnessbox to support his defence. [Para 23][573-B-F]

2. Applying the preposition of law as noted above, in factsFof the present case, it is clear that signature on cheque havingbeen admitted, presumption shall be raised under Section 139that cheque was issued in discharge of debt or liability. Thequestion to be looked into is as to whether any probable defencewas raised by the accused. In cross-examination of the PW1,Gwhen the specific question was put that cheque was issued inrelation to loan of Rs.25,000/- taken by the accused, the PW1said that he does not remember. PW1 in his evidence admittedthat he retired in 1997 on which date he received monetary benefitof Rs. 8 lakhs, which was encashed by the complainant. It was

also brought in the evidence that in the year 2010, the complainantentered into sale agreement for which he paid an amount ofRs.4,50,000/- to one ‘BG’ towards sale consideration. Paymentof Rs.4,50,000/- being admitted in the year 2010 and furtherpayment of loan of Rs.50,000/- with regard to which complaintNo.119 of 2012 was filed by the complainant, copy of whichcomplaint was also filed as Ex.D2, there was burden on thecomplainant to prove his financial capacity. In the year 2010-2011,as per own case of the complainant, he made payment of Rs.18lakhs. During his cross-examination, when financial capacity topay Rs.6 lakhs to the accused was questioned, there was nosatisfactory reply given by the complainant. The evidence onrecord, thus, is probable defence on behalf of the accused, whichshifted the burden on the complainant to prove his financialcapacity and other facts. [Para 24][573-F-H; 574-A-C]

3. This Court is of the view that when evidence was ledbefore the Court to indicate that apart from loan of Rs.6 lakhsgiven to the accused, within 02 years, amount of Rs.18 lakhshave been given out by the complainant and his financial capacitybeing questioned, it was incumbent on the complainant to haveexplained his financial capacity. Court cannot insist on personto lead negative evidence. The observation of the High Courtthat trial court’s finding that the complainant failed to prove hisfinancial capacity of lending money is perverse cannot besupported. This Court failed to see that how the trial court’sfindings can be termed as perverse by the High Court when itwas based on consideration of the evidence, which was led onbehalf of the defence. [Para 28][575-G-H; 576-A-B]

4. High Court without discarding the evidence, which wasled by defence could not have held that finding of trial courtregarding financial capacity of the complainant is perverse. Thus,this court is satisfied that accused has raised probable defenceand the findings of the trial court that complainant failed to provehis financial capacity are based on evidence led by the defence.The observations of the High Court that findings of the trial courtare perverse are unsustainable. Thus, the judgment of the HighCourt is unsustainable. [Para 29][576-E-F]

AKali Ram v. State of Himachal Pradesh (1973) 2 SCC808:[1974] 1 SCR 722; Bharat Barrel & DrumManufacturing Company v. Amin Chand Pyarelal (1999)3 SCC 35:[1999] 1 SCR 704; M.S. Narayana MenonAlias Mani v. State of Kerala and Another (2006) 6 SCC39:[2006] 3 Suppl. SCR 124; Krishna Janardhan BhatBVs. Dattatraya G. Hegde (2008) 4 SCC 54:[2008] 1SCR 605; Kumar Exports Vs. Sharma Carpets (2009) 2SCC 513:[2008] 17 SCR 572; Rangappa v. Sri Mohan(2010) 11 SCC 441:[2010] 6 SCR 507 – relied on.

Kishan Rao v. Shankargouda (2018) 8 SCC 165:[2018]C5 SCR 69; Gamini Bala Koteswara Rao and others v.State of Andhra Pradesh through Secretary, (2009) 10SCC 636:[2009] 14 SCR 1 – referred to.

CRIMINAL APPELLATE JURISDICTION: Criminal AppealNo. 636 of 2019

GFrom the Judgment and Order dated 04.07.2018 of the High Courtof Karnataka, Kalaburagi Bench in Criminal Appeal No. 200042 of 2015.

S. N. Bhat, Priyank Jain, D. P. Chaturvedi, Tarun Thakur, Advs.for the Appellant.

N. R. Sharma, Naresh Kumar, Advs. for the Respondent.

The Judgment of the Court was delivered by

ASHOK BHUSHAN,J.

1. This is an appeal by accused challenging the judgment of theHigh Court of Karnataka dated 04.07.2018 by which judgment theCriminal Appeal filed by the complainant against the acquittal of theaccused has been allowed and the accused has been convicted underSection 138 of the Negotiable Instruments Act, 1881 and sentenced tofine of Rs.8,00,000/-, in default of which to undergo simple imprisonmentfor three months.

2. The brief facts of the case for deciding the appeal are:-

2.1 The complainant gave notice dated 12.03.2012 to the accused,the appellant stating dishonour of cheque dated 27.02.2012 foran amount of Rs.6,00,000/- for want of sufficient funds.Thereafter, on non-payment of the amount, complaint dated25.04.2012 was filed by the complainant under Section 138 ofthe Negotiable Instruments Act, 1881 (hereinafter referred to as“Act, 1881).

2.2 Allegation in the complaint was that the accused requested thecomplainant to lend hand loan to meet out urgent and familynecessary for sum of Rs.6,00,000/-. Complainant lent handloan 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 theaccused, but the same was returned by the bank with theendorsement “Funds Insufficient” on 01.03.2012.

2.3 After notice dated 12.03.2012, which was served on the accusedon 13.03.2012, 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 chequedated 27.02.2012, original cheque return memo dated 01.03.2012,office copy of the notice dated 12.03.2012, postal receipt dated12.03.2012, acknowledgment letter issued by the Department ofPost dated 16.04.2012 and letter to Head Post Office dated11.04.2012. The accused in support of his defence filed Ex.D1– certified copy of plaint in O.S. No. 148 of 2011, Ex.D2- Certifiedcopy of the private complaint No.119/2012 in CC No. 2298 of2012 and in Ext.D3, certified copy of registered sale agreement.

CDEFG

2.4 The trial court framed following two questions:-

1. Whether the complainant proves beyond all reasonabledoubts that, the accused had issued cheque bearingNo.839374 dated 27-02-2012 for Rs.6,00,000/- of PragathiGramin Bank, Nijalingappa Colony Branch, Raichur in favourof complainant, towards discharge of legally enforceable debtor liability and the same was dishonored for ‘ Funds Insufficient’and even after deemed legal notice the accused has not paidthe debt covered under the above said cheque and therebycommitted an offence punishable Under Section 138 ofNegotiable Instruments Act?

2. What Order?

2.5 The trial court after considering the evidence and materialon record held that if the accused is able to raise probabledefense which creates doubts about the existence of legallyenforceable debt or liability, the prosecution can fail. Byjudgment dated 20.02.2015, the accused was acquitted for theoffence under Section 138. Complainant aggrieved by saidjudgment filed Criminal Appeal under Section 378(4) of Codeof Criminal Procedure. The High Court set aside the judgmentof the trial court and convicted the accused for the offenceunder Section 138. Accused aggrieved by judgment of theHigh Court has come up in this appeal.3. Shri S.N. Bhat, learned counsel for the appellant submits thataccused has successfully rebutted the presumption under Section 139and has raised probable defence, which was accepted by the trial courtafter considering the material on record. The High Court erred in settingaside the acquittal order. The accused has questioned the financialcapacity of the complainant and without there being any proof of financialcapacity, the High Court erred in observing that judgment of the trialcourt is perverse. It is submitted that burden of proof on accused underSection 138 is not heavy burden as is on prosecution to prove theoffence beyond reasonable doubt. It is submitted that the complainantbeing retired employee of Karnataka State Road Transport Corporation,who having retired in 1977 and encashed his retirement benefits ofRs.8,00,000/-, there was no financial capacity. It is submitted thatcomplainant has filed cases under Section 138 against other persons

also. Complainant had also made payment of Rs.4,50,000/- for theagreement of sale. The complainant was also witness of saleagreement executed by accused, where he received an amount of Rs.15lakhs as consideration. There was sufficient material on record todischarge the burden and the High Court erred in setting aside the acquittalorder.

4. Learned counsel for the complainant refuting the submissionsof the learned counsel for the appellant contends that signature on thecheque having been admitted by the accused, presumption has rightlybeen raised that cheque was given in discharge of debt or liability. Theaccused has not been able to prove any probable defence and the HighCourt has rightly convicted the accused. No case was taken by theaccused that complainant has no other source of income. Learnedcounsel for the complainant has relied on judgment of this Court in KishanRao Vs. Shankargouda, (2018) 8 SCC 165.

5. We have considered the submissions of the counsel for theparties and have perused the records.

6. To recapitulate facts again, the cheque dated 27.02.2012 waspresented for encashment by the complainant, which was returned on01.03.2012. Signature on the cheque is not denied by the accused, dueto which presumption shall be raised that cheque was issued in dischargeof any debt or liability. The complainant gave his evidence to prove hiscase. In the examination-in-chief, he stated that loan of Rs.6,00,000/- was hand loan and in discharge of the same, the accused had givena 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 ofNovember, 2011, accused availed loan of Rs.6,00,000/-. In cross-examination, he further stated that except accused, he has not lent loanto any other person. He denied having filed suit for recovery of moneyagainst one Balana Gouda. However, he admitted that suit was filed onthe basis of promissory note with interest at the rate of @18% per month.He further admitted that he has filed criminal case under Section 138of Negotiable Instruments Act, 1881 against one Siddesh bearing CCNo.2298 of 2012. When suggestion was given that the complainanthad lent Rs.25,000/- to the accused, he said that he does not rememberthe accused has borrowed Rs.25,000/- from him. In his cross-examination, he has admitted that he has signed as witness to the

Aagreement to transfer the lease hold rights of accused in favour of oneM/s. Sri Lakshmi Narasimha Industries. Further on question, whetherthe accused received Rs.15 lakhs from the said transaction, he showedhis ignorance. Suggestion was also put that blank cheque was issuedat the time of loan availing of Rs.25,000/-. Suggestion was also put inhis cross-examination that he was not having Rs.6,00,000/- on hand onBthe date of loan.

7. Now, we look into the facts alleged by the defence. In thecross-examination, although complainant denied that he has filed anycase under Section 138 against any person but Ex.D2 is certified copyof the complaint filed by the complainant against Shri Siddesh underCSection 138 of Act, 1881 for punishing the accused. Further the date ofcheque, which was alleged to be issued by Shri Siddesh was also27.02.2012. Ex.D3 was an agreement of sale dated 07.01.2010, bywhich the complainant paid Rs.4,50,000/- to Balana Gouda towards saleconsideration. In document transferring the leasehold rights by theDaccused to one M/s. Sri Lakshmi Narasimha Industries, the complainantwas witness, who admitted his signature on the deed. In his cross-examination, accused case was that by virtue of such transfer ofleasehold rights, he received Rs.15 lakhs. The trial court after marshallingthe evidence made following observations in Paragraph No.17:-

E“17. In the instant case the cheque amount involved is Rs.6,00,000/- and the complainant is an retired bus conductor and he hadretired from service in the year 1997 and has received the entireretirement monetary benefits of Rs.8,00,000/- and the same wasdeposited in the account of the complainant and it was encashedby the complainant. It is observed that the complainant is silent asFto his source of income at present. He has nowhere specified asto what is he working and his earning, to show his position to lendthe amount as specified in the cheque. There is no single documentto show his earning nor has the complainant executed anydocument for having lent such heavy amount of Rs.6,00,000/- toGthe accused. Further, it is the suggestion of the accused to PW-1that, the accused by transferring his interest to lease hold to oneM/s. Sri.Lakshmi Narasimha industries has received sum ofRs.15,00,000/- and it is also admitted by PW-1 that he was thewitness to the said transaction. From the above, it raises doubt onthe very cheque Ex.P-1 held by the complainant and the non-

production of any document by the complainant to 18C.C.NO.2675-2012 show his earning, and the complainant hasnot executed any document before lending such huge amount tothe accused. Such circumstance raises serious doubt on thetransaction as claimed by the complainant. Hon’ble High Courtof Karnataka has clearly established that, the accused need notenter the witness box and rebut the presumptions. I am of theopinion that the whole transaction is at doubt and thecircumstance does not give rise to the lending of loan amount ofRs.6,00,000/- as claimed by the complainant. Accordingly, PointsNo.1 in the Negative.”

8. We having noticed the facts of the case and the evidence onthe record, we need to note the legal principles regarding nature ofpresumptions to be drawn under Section 139 of the Act and the mannerin which it can be rebutted by an accused. We need to look into therelevant judgments of this Court, where these aspects have beenconsidered and elaborated. Chapter XIII of the Act, 1881 contains aheading “Special Rules of Evidence”. Section 118 provides forpresumptions as to negotiable instruments. Section 118 is as follows:-

“118. Presumptions as to negotiable instruments. —Untilthe contrary is proved, the following presumptions shall be made:—

(a)of consideration —that every negotiable instrument wasmade or drawn for consideration, and that every suchinstrument, when it has been accepted, indorsed, negotiatedor transferred, was accepted, indorsed, negotiated ortransferred for consideration;

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

XXXXXXXXXXXXXXXXXXXXXXX”

9. Next provision, which needs to be noticed is Section 139, whichprovides 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 cheque receivedthe cheque of the nature referred to in section 138 for the discharge,in whole or in part, of any debt or other liability.”

A10. The complainant being holder of cheque and the signature onthe cheque having not been denied by the accused, presumption shall bedrawn that cheque was issued for the discharge of any debt or otherliability. The presumption under Section 139 is rebuttable presumption.Before we refer to judgments of this Court considering Sections 118 and139, it is relevant to notice the general principles pertaining to burden ofBproof on an accused especially in case where some statutorypresumption regarding guilt of the accused has to be drawn. Three-Judge Bench of this Court in Kali Ram Vs. State of Himachal Pradesh,(1973) 2 SCC 808 laid down following:-

“23. ……………………One of the cardinal principles which hasCalways to be kept in view in our system of administration of justicefor criminal cases is that person arraigned as an accused ispresumed to be innocent unless that presumption is rebutted bythe prosecution by production of evidence as may show him to beguilty of the offence with which he is charged. The burden ofDproving the guilt of the accused is upon the prosecution and unlessit relieves itself of that burden, the courts cannot record findingof the guilt of the accused. There are certain cases in whichstatutory presumptions arise regarding the guilt of the accused,but the burden even in those cases is upon the prosecution toprove the existence of facts which have to be present before theEpresumption can be drawn. Once those facts are shown by theprosecution to exist, the Court can raise the statutory presumptionand it would, in such an event, be for the accused to rebut thepresumption. The onus even in such cases upon the accused isnot as heavy as is normally upon the prosecution to prove the guiltFof the accused. If some material is brought on the record consistentwith the innocence of the accused which may reasonably be true,even though it is not positively proved to be true, the accusedwould be entitled to acquittal.”

11. This Court in Bharat Barrel & Drum ManufacturingGCompany Vs. Amin Chand Pyarelal, (1999) 3 SCC 35 had occasionto consider Section 118(a) of the Act. This Court held that once executionof the promissory note is admitted, the presumption under Section 118(a)would arise that it is supported by consideration. Such presumption

is rebuttable and defendant can prove the non-existence of considerationby raising probable defence. In paragraph No.12 following has beenlaid down:-

“12. Upon consideration of various judgments as notedhereinabove, the position of law which emerges is that onceexecution of the promissory note is admitted, the presumptionunder Section 118(a) would arise that it is supported by aconsideration. Such presumption is rebuttable. The defendantcan prove the non-existence of consideration by raising aprobable defence. If the defendant is proved to have dischargedthe initial onus of proof showing that the existence of considerationwas improbable or doubtful or the same was illegal, the onus wouldshift to the plaintiff who will be obliged to prove it as matter offact and upon its failure to prove would disentitle him to the grantof relief on the basis of the negotiable instrument. The burdenupon the defendant of proving the non-existence of theconsideration can be either direct or by bringing on record thepreponderance of probabilities by reference to the circumstancesupon which he relies. In such an event, the plaintiff is entitledunder law to rely upon all the evidence led in the case includingthat of the plaintiff as well. In case, where the defendant fails todischarge the initial onus of proof by showing the non-existenceof the consideration, the plaintiff would invariably be held entitledto the benefit of presumption arising under Section 118(a) in hisfavour. The court may not insist upon the defendant to disprovethe existence of consideration by leading direct evidence as theexistence of negative evidence is neither possible nor contemplatedand even if led, is to be seen with doubt. The bare denial of thepassing of the consideration apparently does not appear to be anydefence. Something which is probable has to be brought on recordfor getting the benefit of shifting the onus of proving to the plaintiff.To disprove the presumption, the defendant has to bring on recordsuch facts and circumstances upon consideration of which thecourt may either believe that the consideration did not exist or itsnon-existence was so probable that prudent man would, underthe circumstances of the case, shall act upon the plea that it didnot exist……”

ABC

A12. Justice S.B. Sinha in M.S. Narayana Menon Alias ManiVs. State of Kerala and Another, (2006) 6 SCC 39 had consideredSections 118(a), 138 and 139 of the Act, 1881. It was held thatpresumptions both under Sections 118(a) and 139 are rebuttable in nature.Explaining the expressions “may presume” and “shall presume” referringto an earlier judgment, following was held in paragraph No.28:-B

“28. What would be the effect of the expressions “may presume”,‘shall presume” and “conclusive proof” has been considered bythis Court in Union of India v. Pramod Gupta, (2005) 12 SCC1, in the following terms: (SCC pp. 30-31, para 52)

C“It is true that the legislature used two different phraseologies‘shall be presumed’ and ‘may be presumed’ in Section 42 ofthe Punjab Land Revenue Act and furthermore althoughprovided for the mode and manner of rebuttal of suchpresumption as regards the right to mines and minerals said tobe vested in the Government vis-à-vis the absence thereof inDrelation to the lands presumed to be retained by the landownersbut the same would not mean that the words ‘shall presume’would be conclusive. The meaning of the expressions ‘maypresume’ and ‘shall presume’ have been explained in Section4 of the Evidence Act, 1872, from perusal whereof it wouldEbe evident that whenever it is directed that the court shallpresume fact it shall regard such fact as proved unlessdisproved. In terms of the said provision, thus, the expression‘shall presume’ cannot be held to be synonymous with‘conclusive proof’.”

F13. It was noted that the expression “shall presume” cannot beheld to be synonymous with conclusive proof. Referring to definition ofwords “proved” and “disproved” under Section 3 of the Evidence Act,following was laid down in paragraph No.30:

“30. Applying the said definitions of “proved” or “disproved” tothe principle behind Section 118(a) of the Act, the court shallpresume negotiable instrument to be for consideration unlessand until after considering the matter before it, it either believesthat the consideration does not exist or considers the non-existenceof the consideration so probable that prudent man ought, underthe circumstances of the particular case, to act upon the supposition

that the consideration does not exist. For rebutting suchpresumption, what is needed is to raise probable defence. Evenfor the said purpose, the evidence adduced on behalf of thecomplainant could be relied upon.”

14. This Court held that what is needed is to raise probabledefence, for which it is not necessary for the accused to disprove theexistence of consideration by way of direct evidence and even theevidence adduced on behalf of the complainant can be relied upon. Dealingwith standard of proof, following was observed in paragraph No.32:-

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

15. In Krishna Janardhan Bhat Vs. Dattatraya G. Hegde,(2008) 4 SCC 54, this Court held that an accused for discharging theburden of proof placed upon him under statute need not examinehimself. He may discharge his burden on the basis of the materials alreadybrought on record. Following was laid down in Paragraph No.32:-

“32. An accused for discharging the burden of proof placed uponhim under statute need not examine himself. He may dischargehis burden on the basis of the materials already brought on record.An accused has constitutional right to maintain silence. Standardof proof on the part of an accused and that of the prosecution in acriminal case is different.”

16. This Court again reiterated that whereas prosecution mustprove the guilt of an accused beyond all reasonable doubt, the standardof proof so as to prove defence on the part of an accused is“preponderance of probabilities”. In paragraph No.34, following waslaid down:-

“34. Furthermore, whereas prosecution must prove the guilt ofan accused beyond all reasonable doubt, the standard of proof soas to prove defence on the part of an accused is “preponderanceof probabilities”. Inference of preponderance of probabilities canbe drawn not only from the materials brought on record by theparties but also by reference to the circumstances upon which herelies.”

[2019] 6 S.C.R.

17. In Kumar Exports Vs. Sharma Carpets, (2009) 2 SCC513, this Court again examined as to when complainant discharges theburden to prove that instrument was executed and when the burdenshall be shifted. In paragraph Nos. 18 to 20, following has been laiddown:-

“18. Applying the definition of the word “proved” in Section 3 ofthe Evidence Act to the provisions of Sections 118 and 139 of theAct, it becomes evident that in trial under Section 138 of the Acta presumption will have to be made that every negotiable instrumentwas made or drawn for consideration and that it was executedfor discharge of debt or liability once the execution of negotiableinstrument is either proved or admitted. As soon as the complainantdischarges the burden to prove that the instrument, say note,was executed by the accused, the rules of presumptions underSections 118 and 139 of the Act help him shift the burden on theaccused. The presumptions will live, exist and survive and shallend only when the contrary is proved by the accused, that is, thecheque was not issued for consideration and in discharge of anydebt or liability. presumption is not in itself evidence, but onlymakes prima facie case for party for whose benefit it exists.

19. The use of the phrase “until the contrary is proved” in Section118 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 boththe provisions are rebuttable. When presumption is rebuttable, itonly points out that the party on whom lies the duty of going forwardwith evidence, on the fact presumed and when that party hasproduced evidence fairly and reasonably tending to show that thereal fact is not as presumed, the purpose of the presumption isover.

20. ……………………The accused may adduce direct evidenceto prove that the note in question was not supported byconsideration and that there was no debt or liability to be dischargedby him. However, the court need not insist in every case that theaccused should disprove the non-existence of consideration anddebt 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 andexistence of debt, apparently would not serve the purpose of theaccused. Something which is probable has to be brought on recordfor getting the burden of proof shifted to the complainant. Todisprove the presumptions, the accused should bring on recordsuch facts and circumstances, upon consideration of which, thecourt may either believe that the consideration and debt did notexist or their non-existence was so probable that prudent manwould under the circumstances of the case, act upon the plea thatthey did not exist……………”18. Three-Judge Bench of this Court in Rangappa Vs. SriMohan, (2010) 11 SCC 441 had occasion to elaborately considerprovisions of Sections 138 and 139. In the above case, trial court hadacquitted the accused in case relating to dishonour of cheque underSection 138. The High Court had reversed the judgment of the trialcourt convicting the accused. In the above case, the accused had admittedsignatures on the cheque. This Court held that where the fact of signatureon the cheque is acknowledged, presumption has to be raised that thecheque pertained to legally enforceable debt or liability, however, thispresumption is of rebuttal nature and the onus is then on the accusedto raise probable defence. In Paragraph No.13, following has beenlaid down:-

“13. The High Court in its order noted that in the course of thetrial proceedings, the accused had admitted that the signature onthe impugned cheque (No. 0886322 dated 8-2-2001) was indeedhis own. Once this fact has been acknowledged, Section 139 ofthe Act mandates presumption that the cheque pertained to alegally enforceable debt or liability. This presumption is of rebuttalnature and the onus is then on the accused to raise probabledefence. With regard to the present facts, the High Court foundthat the defence raised by the accused was not probable.”

19. After referring to various other judgments of this Court, thisCourt in that case held that the presumption mandated by Section 139 ofthe Act does indeed include the existence of legally enforceable debtor liability, which, of course, is in the nature of rebuttable presumption.In paragraph No.26, following was laid down:-

“26. In light of these extracts, we are in agreement with therespondent claimant that the presumption mandated by Section139 of the Act does indeed include the existence of legallyenforceable debt or liability. To that extent, the impugnedobservations in Krishna Janardhan Bhat, (2008) 4 SCC 54may not be correct. However, this does not in any way cast doubton the correctness of the decision in that case since it was basedon the specific facts and circumstances therein. As noted in thecitations, this is of course in the nature of rebuttable presumptionand it is open to the accused to raise defence wherein theexistence of legally enforceable debt or liability can be contested.However, there can be no doubt that there is an initial presumptionwhich favours the complainant.”

20. Elaborating further, this Court held that Section 139 of theAct is an example of reverse onus and the test of proportionality shouldguide the construction and interpretation of reverse onus clauses on theDdefendant-accused and the defendant-accused cannot be expected todischarge an unduly high standard of proof. In paragraph Nos. 27 and28, following was laid down:-

“27. Section 139 of the Act is an example of reverse onusclause that has been included in furtherance of the legislativeEobjective of improving the credibility of negotiable instruments.While Section 138 of the Act specifies strong criminal remedyin relation to the dishonour of cheques, the rebuttable presumptionunder Section 139 is device to prevent undue delay in the courseof litigation. However, it must be remembered that the offencemade punishable by Section 138 can be better described as aFregulatory offence since the bouncing of cheque is largely in thenature of civil wrong whose impact is usually confined to theprivate parties involved in commercial transactions. In such ascenario, the test of proportionality should guide the constructionand interpretation of reverse onus clauses and the defendant-Gaccused cannot be expected to discharge an unduly high standardof proof.

28. In the absence of compelling justifications, reverse onus clausesusually impose an evidentiary burden and not persuasive burden.Keeping this in view, it is settled position that when an accusedhas 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 probable defence whichcreates doubts about the existence of legally enforceable debtor liability, the prosecution can fail. As clarified in the citations,the accused can rely on the materials submitted by the complainantin order to raise such defence and it is conceivable that in somecases the accused may not need to adduce evidence of his/herown.”

21. We may now notice judgment relied by the learned counselfor the complainant, i.e., judgment of this Court in Kishan Rao Vs.Shankargouda, (2018) 8 SCC 165. This Court in the above case hasexamined Section 139 of the Act. In the above case, the only defencewhich was taken by the accused was that cheque was stolen by theappellant. The said defence was rejected by the trial court. In paragraphNos. 21 to 23, following was laid down:-

“21. In the present case, the trial court as well as the appellatecourt having found that cheque contained the signatures of theaccused and it was given to the appellant to present in the Bank,the presumption under Section 139 was rightly raised which wasnot rebutted by the accused. The accused had not led any evidenceto rebut the aforesaid presumption. The accused even did notcome in the witness box to support his case. In the reply to thenotice which was given by the appellant, the accused took thedefence that the cheque was stolen by the appellant. The saiddefence was rejected by the trial court after considering theevidence on record with regard to which no contrary view hasalso been expressed by the High Court.

22. Another judgment which needs to be looked into is Rangappav. Sri Mohan (2010) 11 SCC 441. three-Judge Bench of thisCourt had occasion to examine the presumption under Section139 of the 1881 Act. This Court in the aforesaid case has heldthat in the event the accused is able to raise probable defencewhich creates doubt with regard to the existence of debt orliability, the presumption may fail. Following was laid down in paras26 and 27: (SCC pp. 453-54)

“26. In light of these extracts, we are in agreement with therespondent claimant that the presumption mandated by Section

139 of the Act does indeed include the existence of legallyenforceable debt or liability. To that extent, the impugnedobservations in Krishna Janardhan Bhat, may not be correct.However, this does not in any way cast doubt on the correctnessof the decision in that case since it was based on the specificfacts and circumstances therein. As noted in the citations, thisis of course in the nature of rebuttable presumption and it isopen to the accused to raise defence wherein the existenceof legally enforceable debt or liability can be contested.However, there can be no doubt that there is an initialpresumption which favours the complainant.

27. Section 139 of the Act is an example of reverse onusclause that has been included in furtherance of the legislativeobjective of improving the credibility of negotiable instruments.While Section 138 of the Act specifies strong criminal remedyin relation to the dishonour of cheques, the rebuttablepresumption under Section 139 is device to prevent unduedelay in the course of litigation. However, it must beremembered that the offence made punishable by Section 138can be better described as regulatory offence since thebouncing of cheque is largely in the nature of civil wrongwhose impact is usually confined to the private parties involvedin commercial transactions. In such scenario, the test ofproportionality should guide the construction and interpretationof reverse onus clauses and the defendant-accused cannot beexpected to discharge an unduly high standard of proof.”

23. No evidence was led by the accused. The defence taken inthe reply to the notice that cheque was stolen having been rejectedby the two courts below, we do not see any basis for the HighCourt coming to the conclusion that the accused has beensuccessful in creating doubt in the mind of the Court with regardto the existence of the debt or liability. How the presumption underSection 139 can be rebutted on the evidence of PW 1, himself hasnot been explained by the High Court.

22. The above case was case where this Court did not find thedefence raised by the accused probable. The only defence raised wasthat cheque was stolen having been rejected by the trial court and noHcontrary opinion having been expressed by the High Court, this Court

reversed the judgment of the High Court restoring the conviction. Therespondent cannot take any benefit of the said judgment, which was onits own facts.

23. We having noticed the ratio laid down by this Court in abovecases on Sections 118(a) and 139, we now summarise the principlesenumerated by this Court in following manner:-

(i) Once the execution of cheque is admitted Section 139 of theAct mandates presumption that the cheque was for thedischarge of any debt or other liability.

(ii) The presumption under Section 139 is rebuttable presumptionCand the onus is on the accused to raise the probable defence.The standard of proof for rebutting the presumption is that ofpreponderance of probabilities.

(iii) To rebut the presumption, it is open for the accused to rely onevidence led by him or accused can also rely on the materialssubmitted by the complainant in order to raise probableDdefence. Inference of preponderance of probabilities can bedrawn not only from the materials brought on record by theparties but also by reference to the circumstances upon whichthey rely.

(iv) That it is not necessary for the accused to come in the witnessbox in support of his defence, Section 139 imposed anevidentiary burden and not persuasive burden.

(v) It is not necessary for the accused to come in the witness boxto support his defence.

24. Applying the preposition of law as noted above, in facts of thepresent case, it is clear that signature on cheque having been admitted, apresumption shall be raised under Section 139 that cheque was issued indischarge of debt or liability. The question to be looked into is as towhether any probable defence was raised by the accused. In cross-examination of the PW1, when the specific question was put that chequewas issued in relation to loan of Rs.25,000/- taken by the accused, thePW1 said that he does not remember. PW1 in his evidence admittedthat he retired in 1997 on which date he received monetary benefit ofRs. 8 lakhs, which was encashed by the complainant. It was also broughtin the evidence that in the year 2010, the complainant entered into sale

Aagreement for which he paid an amount of Rs.4,50,000/- to Balana Goudatowards sale consideration. Payment of Rs.4,50,000/- being admitted inthe year 2010 and further payment of loan of Rs.50,000/- with regard towhich complaint No.119 of 2012 was filed by the complainant, copy ofwhich complaint was also filed as Ex.D2, there was burden on thecomplainant to prove his financial capacity. In the year 2010-2011, asBper own case of the complainant, he made payment of Rs.18 lakhs.During his cross-examination, when financial capacity to pay Rs.6 lakhsto the accused was questioned, there was no satisfactory reply given bythe complainant. The evidence on record, thus, is probable defence onbehalf of the accused, which shifted the burden on the complainant toCprove his financial capacity and other facts.25. There was another evidence on the record, i.e., copy of plaintin O.S. No. 148 of 2011 filed by the complainant for recovery of loan ofRs. 7 lakhs given to one Balana Gouda in December, 2009. Thus, therewas evidence on record to indicate that in December, 2009, he gaveDRs.7 lakhs in sale agreement, in 2010, he made payment of Rs.4,50,000/- towards sale consideration and further he gave loan of Rs.50,000/-for which complaint was filed in 2012 and further loan of Rs.6 lakhs inNovember, 2011. Thus, during the period from 2009 to November, 2011,amount of Rs.18 lakhs was given by the complainant to different personsincluding the accused, which put heavy burden to prove the financialEcapacity when it was questioned on behalf of the accused, the accusedbeing retired employee of State Transport Corporation, who retired in1997 and total retirement benefits, which were encashed were Rs.8lakhs only. The High Court observed that though the complainant is retiredemployee, the accused did not even suggest that pension is the onlyFmeans for survival of the complainant. Following observations weremade in Paragraph 16 of the judgment of the High Court:-

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

26. There is one more aspect of the matter which also needs tobe noticed. In the complaint filed by the complainant as well as inexamination-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 duringcross-examination, he gave the date as November, 2011. Under Section118(b), presumption shall be made as to date that every negotiableinstrument was made or drawn on such date. Admittedly, the cheque isdated 27.02.2012, there is not even suggestion by the complainant thata post dated cheque was given to him in November, 2011 bearing dated27.02.2012. Giving of cheque on 27.02.2012, which was deposited on01.03.2012 is not compatible with the case of the complainant when weread the complaint submitted by the complainant especially Para 1 ofthe complaint, which is extracted as below:-

“1. The accused is very good friend of the complainant. Theaccused requested the Complainant hand loan to meet out urgentand family necessary sum of Rs.6,00,000/- (Rupees Six Lakh)and on account of long standing friendship and knowing thedifficulties, which is being faced by the accused the complainantagreed to lend hand loan to meet out the financial difficulties ofthe accused and accordingly the Complainant lend hand loanRs.6,00,000/- (Rupees Six Lakh) dated 27.02.2012 in favour ofthe Complainant stating that on its presentation it will be honored.But to the surprise of the Complainant on presentation of the samefor collection through his Bank the Cheque was returned by theBank with an endorsement “Funds Insufficient” on 01-03-2012.”

27. Thus, there is contradiction in what was initially stated bythe complainant in the complaint and in his examination-in-chief regardingdate 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 didnot reply the notice denying the execution of cheque or legal liability.Even before the trial court, appellant-accused has not denied his signatureon the cheque.

28. We are of the view that when evidence was led before theCourt 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 thecomplainant and his financial capacity being questioned, it was incumbenton the complainant to have explained his financial capacity. Court cannotinsist on person to lead negative evidence. The observation of theHigh Court that trial court’s finding that the complainant failed to prove

Ahis 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 perverseby the High Court when it was based on consideration of the evidence,which was led on behalf of the defence. This Court had occasion toconsider the expression “perverse” in Gamini Bala Koteswara Raoand others Vs. State of Andhra Pradesh through Secretary, (2009)B10 SCC 636, this Court held that although High Court can reappraisethe evidence and conclusions drawn by the trial court but judgment ofacquittal can be interfered with only judgment is against the weight ofevidence. In Paragraph No.14 following has been held:-

“14. We have considered the arguments advanced and heard theCmatter at great length. It is true, as contended by Mr Rao, thatinterference in an appeal against an acquittal recorded by the trialcourt should be rare and in exceptional circumstances. It is,however, well settled by now that it is open to the High Court toreappraise the evidence and conclusions drawn by the trial courtDbut only in case when the judgment of the trial court is stated tobe perverse. The word “perverse” in terms as understood in lawhas been defined to mean “against the weight of evidence”. Wehave to see accordingly as to whether the judgment of the trialcourt which has been found perverse by the High Court was infact so.”E29. High Court without discarding the evidence, which was led bydefence could not have held that finding of trial court regarding financialcapacity of the complainant is perverse. We are, thus, satisfied thataccused has raised probable defence and the findings of the trial courtthat complainant failed to prove his financial capacity are based onFevidence led by the defence. The observations of the High Court thatfindings of the trial court are perverse are unsustainable. We, thus, areof the view that judgment of the High Court is unsustainable.

30. In result, the appeal is allowed and the judgment of the HighCourt is set aside and that of the trial court is restored.G

Ankit Gyan

Appeal allowed.