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2019 (1) TMI 514 - HC - Indian LawsDishonor of Cheque - insufficient funds - Presumptions as to negotiable instruments - Section 138 of Negotiable Instruments Act - Held that - Chapter XVII containing Sections 138 to 142 was introduced in the Act by Act 66 of 1988 with the object of inculcating faith in the efficacy of banking operations and giving credibility to negotiable instruments in business transactions. These provisions were intended to discourage people from not honouring the commitments by way of payment through cheques. It is for this reason that the Courts should lean in favour of an interpretation which serves the object of the statue - In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words proved and disproved have been defined in Section 3 of the Evidence Act. In Rangappa versus Sri Mohan, 2010 (5) TMI 391 - SUPREME COURT OF INDIA , Hon ble three Judge Bench of the Hon ble Supreme Court had occasion to examine the presumption under Section 139 of the Act and it was held that in the event the accused is able to raise a probable defence which creates doubt with regard to the existence of a debt or liability, the presumption may fail. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies. Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the prudent man. The standard of proof so far as the prosecution is concerned, is proof of guilt beyond all reasonable doubt, however, the one on the accused is only mere preponderance of probability. Therefore, once the accused/respondent No.1 has probabilized his defence by showing the consideration to be improbable or doubtful, then obviously, in the given facts and circumstances, the appellant was obliged to prove the existence of consideration as a matter of fact and upon his failure to prove the same, disentitled him to the grant of relief on the basis of negotiable instrument. Appeal dismissed - decided against appellant.
Issues Involved:
1. Dismissal of complaint under Section 138 of the Negotiable Instruments Act. 2. Contradictions in the evidence regarding the number of apple cartons sold and carriage charges. 3. Legal presumption under Sections 118(a) and 139 of the Negotiable Instruments Act. 4. Rebuttal of presumption by the accused. 5. Standard of proof required for rebutting the presumption. Detailed Analysis: 1. Dismissal of Complaint under Section 138 of the Negotiable Instruments Act: The appellant, an orchardist and owner of an apple forwarding agency, filed a complaint under Section 138 of the Negotiable Instruments Act after the respondent’s cheque for ?5,38,856/- was dishonored due to insufficient funds. The trial Magistrate dismissed the complaint, concluding that the cheque amount exceeded the amount allegedly due, thus it was not drawn towards the discharge of any debt or liability. 2. Contradictions in the Evidence: The appellant presented conflicting evidence regarding the number of apple cartons sold and the carriage charges. Initially, the complaint stated 5000 cartons were sold, but during cross-examination, the appellant mentioned 7000-8000 cartons. CW-3, a witness, stated only 2600 cartons were carried. Additionally, the complaint mentioned carriage charges of ?30 per box, while cross-examination revealed charges of ?15 per box in 2011. These contradictions led the trial Magistrate to doubt the appellant’s claims. 3. Legal Presumption under Sections 118(a) and 139 of the Negotiable Instruments Act: Sections 118(a) and 139 create a presumption that every negotiable instrument was made for consideration and for the discharge of debt or liability. This presumption is rebuttable. The Supreme Court has held that the standard of proof for rebutting this presumption is the preponderance of probability, not proof beyond a reasonable doubt. 4. Rebuttal of Presumption by the Accused: The accused can rebut the presumption by raising a probable defense. In this case, the respondent successfully rebutted the presumption by highlighting contradictions in the appellant’s evidence. The Supreme Court in various cases, including M.S. Narayana Menon and Rangappa, has emphasized that the accused must show the non-existence of consideration to be reasonably probable. 5. Standard of Proof Required for Rebutting the Presumption: The standard of proof for the accused is preponderance of probabilities. The accused need not conclusively prove their defense but must show that the consideration's existence is improbable or doubtful. The trial Magistrate found that the respondent had probabilized his defense, shifting the onus back to the appellant, who failed to prove the existence of consideration. Conclusion: The High Court upheld the trial Magistrate’s decision, finding no merit in the appeal due to the appellant's failure to provide consistent and reliable evidence. The contradictions in the appellant’s testimony and the inability to prove the consideration led to the dismissal of the complaint. The appeal was dismissed, and the pending application was disposed of accordingly.
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