2018 (7) TMI 2229 - HC - Indian Laws

Dishonor of Cheque - rebuttal of presumption - evidence in support of defence or not - whether presumption under Section 139 read with Section 118 of the aforesaid Act would operate against the respondent (original accused) for an alleged offence of dishonour of cheque under Section 138 of the said Act? - whether the respondent had rebutted such presumption when he failed to file reply to the complaint of the appellant and he did not adduce any direct evidence in order to support his defence? - HELD THAT - Although presumption does arise against the accused in such cases under Sections 118 and 139 of the said Act the presumption is rebuttable on the touchstone of preponderance of probabilities. The accused is also entitled to show that the foundational facts on which such presumption arises have not been proved by the complainant and further that the accused can rebut a presumption under the said provisions either by adducing direct evidence in support of his stand or by discrediting the complainant in cross-examination to demonstrate that his defence was probable. On the accused demonstrating the real facts of the matter either by direct evidence or by showing that the evidence and material placed on record by the complainant himself was not believable and that it stood discredited the presumption would cease to operate against the accused. In the present case it was not disputed that the signatures on the cheques were that of the respondent. It was argued that the cross-examination of the appellant demonstrated that he had failed to support his case of having advanced cash hand loan to the respondent. It was further contended that the cross-examination also demonstrated that the cheques were issued for some other transaction and not for repayment of hand loan as claimed by the appellant - the appellant failed to produce any material in support of his claim that he had indeed advanced cash hand loan of 2 lakhs to the respondent. This was a foundational fact in the present case because according to the appellant the cheques in question had been issued by the respondent in order to repay the said loan amount. The appellant failed to discharge the initial burden to show that he had required funds for advancing money to the respondent. A perusal of the statements made in cross-examination by the appellant shows that he has completely failed to prove the foundational fact of having advanced loan to the respondent. Therefore his claim that the cheques in question were issued by the respondent for repayment of the loan could not be accepted. The failure on the part of the appellant to produce his account statement and absence of entry in accounts maintained by him regarding loan advanced to the respondent does show that there was no material to support the basic facts on which the entire case of the appellant was based - As the foundational facts were not established by the appellant in the present case it cannot be said that the trial Court committed any error in holding that the respondent deserved to be acquitted. The appellant s case stood completely discredited in cross-examination and therefore he could not succeed before the trial Court riding on the presumption said to operate in his favour under Sections 118 and 139 of the aforesaid Act. Appeal dismissed.

Summary

Issues involved:
1. Whether the presumption under Section 139 read with Section 118 of the Negotiable Instruments Act, 1881, operates against the respondent for the offence of dishonour of cheque under Section 138.
2. Whether the respondent rebutted such presumption despite failing to file a reply to the complaint and not adducing any direct evidence.
3. Whether the trial Court was justified in acquitting the respondent.

Issue-wise detailed analysis:

1. Presumption under Section 139 read with Section 118 of the Negotiable Instruments Act, 1881:
The appellant contended that the presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881, operated against the respondent for the dishonour of cheques. The appellant issued two cheques to repay a loan of ?2 lakhs, which were dishonoured due to insufficient funds. The trial Court acknowledged that the presumption in favour of the appellant did operate under Sections 118 and 139. However, the presumption is rebuttable, as established in precedents like M.S. Narayana Menon vs. State of Kerala and Kumar Exports vs. Sharma Carpets, which clarified that the presumption can be rebutted by raising a probable defence.

2. Rebuttal of Presumption by the Respondent:
The respondent did not reply to the statutory notice, failed to file any submissions or response to the complaint, and did not enter the witness box to adduce evidence in support of his defence. Despite this, the respondent argued that the appellant failed to prove the foundational facts of the loan. The trial Court found that the appellant could not provide necessary details or documentary evidence to support his claim of having advanced the loan. The appellant admitted in cross-examination that he could not produce bank statements or account entries to substantiate the loan. The trial Court considered this sufficient to demonstrate that the respondent's defence was probable, thereby rebutting the presumption.

3. Justification of the Trial Court's Acquittal of the Respondent:
The trial Court, after considering the entire material on record, held that the appellant failed to establish the foundational facts necessary to support his claim. The appellant's inability to provide evidence of the loan and the inconsistencies in his statements during cross-examination discredited his case. The trial Court concluded that the presumption under Sections 118 and 139 ceased to operate, and the burden shifted back to the appellant, who failed to discharge it. The trial Court's decision to acquit the respondent was based on the principle that when two views are possible, the one in favour of the accused must be adopted. The High Court affirmed this view, finding no merit in the appellant's appeal.

Conclusion:
The High Court upheld the trial Court's judgment, confirming the acquittal of the respondent. The presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881, was rebutted by the respondent through cross-examination, which discredited the appellant's case. The appellant's failure to prove the foundational facts led to the dismissal of the appeal.