2006 (7) TMI 576 - SC - Companies Law

Whether burden of proof in terms of Section 118 had been discharged or not? Held that - The evidences adduced by the parties before the trial court lead to one conclusion that the Appellant had been able to discharge his initial burden. The burden thereafter shifted to the Second Respondent to prove his case. He failed to do so. We have gone through the oral evidences. The Second Respondent has even failed to prove that the Appellant had paid to him a sum of Rs. 5000/- by cash. In any event the High Court entertained an appeal treating to be an appeal against acquittal, it was in fact exercising the revisional jurisdiction. Even while exercising an appellate power against a judgment of acquittal, the High Court should have borne in mind the well-settled principles of law that where two views are possible, the appellate court should not interfere with the finding of acquittal recorded by the court below. We, therefore, are of the opinion that the impugned judgment cannot be sustained which is set aside accordingly. The appeal is allowed. The Appellant is on bail. He is discharged from the bail bonds. The Second Respondent shall pay and bear the costs of the Appellant. Counsels fee assessed at Rs. 10,000/-.

Issues Involved:
1. Validity of the cheque issued by the Appellant.
2. Interpretation and application of Section 139 of the Negotiable Instruments Act.
3. Burden of proof and presumption under Sections 118(a) and 139 of the Act.
4. Admissibility and credibility of the books of accounts maintained by the Second Respondent.
5. Reversal of the appellate court's judgment by the High Court.

Issue-wise Detailed Analysis:

1. Validity of the Cheque Issued by the Appellant:
The Second Respondent, a member of the Cochin Stock Exchange, accused the Appellant of issuing a cheque dated 17.8.1992, which was dishonored due to insufficient funds. The Appellant contended that the cheque was given as security and not for discharging any debt. The trial court found the Appellant guilty under Section 138 of the Negotiable Instruments Act, but the appellate court reversed this, finding the Appellant's explanation more probable. The High Court later reinstated the conviction, which was contested in this judgment.

2. Interpretation and Application of Section 139 of the Negotiable Instruments Act:
The Appellant argued that the trial court and the High Court misconstrued Section 139, which presumes that the cheque was issued for discharging a debt unless proven otherwise. The High Court erred by requiring the Appellant to prove his innocence beyond a reasonable doubt, instead of merely raising a probable defense.

3. Burden of Proof and Presumption under Sections 118(a) and 139 of the Act:
The court reiterated that the presumptions under Sections 118(a) and 139 are rebuttable. The Appellant only needed to raise a probable defense to shift the burden back to the prosecution. The appellate court found that the Appellant had successfully rebutted the presumption by demonstrating discrepancies in the Second Respondent's accounts and the lack of proper documentation.

4. Admissibility and Credibility of the Books of Accounts Maintained by the Second Respondent:
The Second Respondent's failure to produce original books of accounts and maintain statutory records as required by the Cochin Stock Exchange's bye-laws significantly weakened his case. The appellate court noted discrepancies amounting to Rs. 14,63,555/- between the Second Respondent's accounts and those maintained by the Stock Exchange, undermining the credibility of the claim against the Appellant.

5. Reversal of the Appellate Court's Judgment by the High Court:
The High Court's decision to reverse the appellate court's judgment was based on an incorrect interpretation of the burden of proof and the presumption under Section 139. The High Court failed to address the discrepancies in the Second Respondent's accounts and erroneously concluded that the Appellant had acknowledged the correctness of the statements of accounts. The Supreme Court found that the High Court committed a manifest error in reversing the appellate court's judgment, which had rightly acquitted the Appellant based on the evidence presented.

Conclusion:
The Supreme Court set aside the High Court's judgment, reinstating the appellate court's decision to acquit the Appellant. The Appellant was discharged from the bail bonds, and the Second Respondent was ordered to bear the costs of the Appellant, including counsels' fees assessed at Rs. 10,000/-.

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