2021 (12) TMI 377 - SC - Indian Laws

Dishonor of Cheque - discharge of legally enforceable debt - the appellant herein was convicted and sentenced - rebuttal of presumption - preponderance of probability - Section 138 of N.I. Act - HELD THAT - Even if we take the arguments raised by the appellants at face value that only a blank cheque and signed blank stamp papers were given to the respondent, yet the statutory presumption cannot be obliterated. The defence raised by the appellants does not inspire confidence or meet the standard of preponderance of probability . In the absence of any other relevant material, it appears that the High Court did not err in discarding the appellants' defence and upholding the onus imposed upon them in terms of Section 118 and Section 139 of NIA. The object of Chapter XVII of NIA is not only punitive but also compensatory and restitutive. The provisions of NIA envision a single window for criminal liability for dishonour of cheque as well as civil liability for realisation of the cheque amount. It is also well settled that there needs to be a consistent approach towards awarding compensation and unless there exist special circumstances, the courts should uniformly levy fine up to twice the cheque amount along with simple interest @ 9% p.a. - when a cheque is drawn out and is relied upon by the drawee, it will raise a presumption that it is drawn towards a consideration which is a legally recoverable amount; such presumption of course, is rebuttable by proving to the contrary. The onus is on the accused to raise a probable defence and the standard of proof for rebutting the presumption is on preponderance of probabilities. On perusal of Section 138 NI Act, it is indicated that the sum and substance of the defence is that the documents and cheque had been obtained by the respondent on 20.01.2004 by threatening the appellant. In that regard, the circumstances thereto were referred and it has been categorically stated that the appellant had filed a complaint, pursuant to which a case was registered against the respondent for the offence punishable under Sections 365, 342, 323 and 506 of IPC. This makes it relevant for us to take note of the aspect that was considered in the above noted criminal complaint filed by the appellant. The defence sought to be put forth in the instant case and the witnesses examined in the instant proceedings are only by way of improvement in respect of the same cause of action. Therefore, the defence sought to be put forth relating to the cheque and other documents having been obtained by force, cannot be accepted as a probable defence when the respondent successfully discharged the initial burden cast on him of establishing that the cheque signed by the appellant was issued in his favour toward discharge of a legally recoverable amount. The fact that the appellant has admitted about an earlier transaction where according to him, he had borrowed the amount and repaid the same in the year 1995, would indicate that the appellant and the respondent had entered into financial transactions earlier as well and another transaction was probable between the parties who were known to each other. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the cheque issued by the appellant.
2. Presumption of consideration under Section 118(a) and Section 139 of the Negotiable Instruments Act (NI Act).
3. Rebuttal of presumption by the appellant.
4. Allegations of coercion and misuse of the cheque.
5. Acquittal of the appellant by the trial court.
6. Conviction by the High Court.
7. Legal standards for proving the issuance of a cheque and the existence of a debt.

Detailed Analysis:

1. Validity of the Cheque Issued by the Appellant:
The appellant issued a post-dated cheque for ?4,00,000 dated 12.12.2003, which was dishonored due to "insufficient funds." The respondent claimed this cheque was issued to discharge a debt of ?3,75,000 borrowed on 12.06.2003, including interest for six months. The appellant denied this, asserting the cheque was obtained by force on 20.01.2004.

2. Presumption of Consideration Under Section 118(a) and Section 139 of the NI Act:
The court noted that when a cheque is issued, a presumption arises that it is supported by consideration. This presumption is rebuttable. The trial court referenced K. Prakashan vs. P.K. Surendran and Reverend Mother Marykutty vs. Reni C. Kottaram to emphasize that the initial burden of proof is on the complainant to show the cheque was issued for a debt.

3. Rebuttal of Presumption by the Appellant:
The appellant contended that the cheque was obtained under duress and that he had repaid an earlier loan in 1995. The trial court accepted this defense, but the High Court found the appellant failed to rebut the presumption effectively. The High Court relied on Kalamani Tex & Anr. vs. P. Balasubramanian, which held that even a blank cheque signed voluntarily attracts the presumption under Section 139 of the NI Act unless cogent evidence disproves it.

4. Allegations of Coercion and Misuse of the Cheque:
The appellant alleged that the respondent forcibly obtained his signature on blank papers and cheques on 20.01.2004. This allegation was supported by a complaint filed by the appellant, which resulted in a criminal case (C.C. No.6318/2004). However, the respondent was acquitted in this case, weakening the appellant's defense.

5. Acquittal of the Appellant by the Trial Court:
The trial court acquitted the appellant, accepting his defense that the cheque was obtained by coercion and that the debt was not legally enforceable. The court emphasized the absence of a key witness (Mr. Harish Moolya) and the delay in presenting the cheque.

6. Conviction by the High Court:
The High Court reversed the trial court's decision, convicting the appellant. It held that the appellant did not sufficiently rebut the presumption of consideration and that the respondent had established the debt and issuance of the cheque. The High Court's decision was based on the legal presumption under Sections 118(a) and 139 of the NI Act and the appellant's failure to provide a credible defense.

7. Legal Standards for Proving the Issuance of a Cheque and the Existence of a Debt:
The Supreme Court reiterated the principles from various precedents, including Triyambak S. Hegde vs. Sripad and Basalingappa vs. Mudibasappa, emphasizing that the presumption of consideration is rebuttable by showing the non-existence of consideration through a preponderance of probabilities. The appellant's defense of coercion was not accepted as it was already adjudicated in a separate proceeding, resulting in the respondent's acquittal.

Conclusion:
The Supreme Court upheld the High Court's judgment, affirming the conviction of the appellant. The Court found no merit in the appellant's defense and concluded that the respondent had successfully discharged the initial burden of proving the issuance of the cheque for a legally recoverable debt. The appeal was dismissed, and the parties were directed to bear their own costs.