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2023 (1) TMI 794 - SC - Indian LawsDishonor of Cheque - declared income was sufficient to prove loan or not - requirement of presumption once and execution of cheque is admitted - rebuttal of presumption - preponderance of probabilities - HELD THAT - The learned Trial Court found that the Income Tax Returns of the complainant did not disclose that he lent amount to the accused, and that the declared income was not sufficient to give loan of Rs.3 lakh. Therefore, the case of the complainant that he had given a loan to the accused from his agricultural income was found to be unbelievable by the learned Trial Court. The learned Trial Court found that it was highly doubtful as to whether the complainant had lent an amount of Rs.3 lakh to the accused. The learned Trial Court also found that the complaint had failed to produce the promissory note alleged to have been executed by the accused on 25th October 1998. The learned Trial Court had found that the accused had rebutted the presumption on the basis of the evidence of the defence witnesses and attending circumstances. In the case of M/S. KALAMANI TEX ANR VERSUS P. BALASUBRAMANIAN 2021 (2) TMI 505 - SUPREME COURT , the learned Trial Court had dismissed the complaint. In appeal, at the behest of the complainant, the same was allowed and the accused were convicted for the offence punishable under Section 138 of the N.I. Act - It is seen that in the facts of the said case, this Court found that the defence raised by the appellants/accused did not inspire confidence or meet the standard of preponderance of probability. In the present case, the defence raised by the appellant satisfies the standard of preponderance of probability . A distinguishing fact between the criminal proceedings and the civil proceedings in the present case is that, while in the criminal proceedings the complainant had failed to produce the promissory notes, in the civil proceedings, the complainant had proved the promissory notes. The High Court found that the Civil Appeals were required to be decided on the basis of the preponderance of probabilities. The High Court found that the complainant had established that he was working as a LIC Agent, that his father was owning extensive agricultural properties and that he was deriving agricultural income. The High Court, on the basis of the evidence placed on record, relying on the preponderance of probability, came to a conclusion that the plaintiff had the financial ability to lend the sum of Rs.3 lakh as on 20th October 1998 - Though it was sought to be argued before the High Court that in view of the judgment in the criminal proceedings, the suit(s) was also liable to be dismissed, the High Court rightly observed that the adjudication in civil matters is based on preponderance of probabilities whereas adjudication in criminal cases is based on the principle that the accused is presumed to be innocent and the guilt of the accused should be proved to the hilt and the proof should be beyond all reasonable doubt. There are no reason to interfere with the judgments and orders passed by the High Court - the decrees of the High Court are modified, thereby restricting them to the amount already deposited by the appellants in this Court in the civil and criminal proceedings, along with interest accrued thereon. The respondents in both the Civil Appeals would be entitled to withdraw 50% of the amount each from the amount deposited in this Court with interest accrued upto date. Application disposed off.
Issues Involved:
1. Conviction under Section 138 of the Negotiable Instruments Act, 1881. 2. Recovery of money based on promissory notes. 3. Financial capacity of the complainant to lend money. 4. Validity of blank cheques issued as security. 5. Reversal of trial court judgments by the High Court. 6. Standard of proof in criminal vs. civil proceedings. Issue-wise Detailed Analysis: 1. Conviction under Section 138 of the Negotiable Instruments Act, 1881: The Criminal Appeals challenge the common judgment and order of conviction and sentence dated 28th October 2008 and 30th October 2008 passed by the Madras High Court. The Appellant was convicted under Section 138 of the N.I. Act and sentenced to a fine of Rs. 7 Lakhs in each case for two cheques amounting to Rs. 3.5 Lakhs each. The cheques were dishonored with an endorsement stating "account closed." Statutory notices were sent, and complaints were instituted under Section 138 of the N.I. Act, which were initially dismissed by the Trial Court but later reversed by the High Court. 2. Recovery of money based on promissory notes: The Civil Appeals challenge the judgments dated 08th August 2011 and 03rd February 2012 passed by the Madras High Court, which decreed the Original Suits filed by the plaintiff-respondents for recovery of money based on promissory notes. The High Court found that the promissory notes were valid and enforceable, and the plaintiffs had the financial ability to lend the sum of Rs. 3 Lakhs. 3. Financial capacity of the complainant to lend money: The Appellant argued that the Respondents did not have the financial capacity to lend Rs. 3 Lakhs each, as they had not declared such amounts in their Income Tax Returns from 1992-1999. The Trial Court found that the complainants did not have the financial capacity to lend the money, as evidenced by their Income Tax Returns. This was a key factor in the Trial Court's decision to acquit the Appellant. 4. Validity of blank cheques issued as security: The Appellant contended that the blank cheques issued in 1992 as security for chit funds were misused by the Respondents in 1999. The cheques were drawn on a bank account that was closed in 1997. The High Court found that no material evidence was produced to substantiate the claim that the cheques were issued as security for chit funds. 5. Reversal of trial court judgments by the High Court: The High Court reversed the well-reasoned judgments of the Trial Court, which had acquitted the Appellant in the criminal cases and dismissed the civil suits. The High Court found that the complainants had established their case based on the preponderance of probabilities in civil proceedings and the presumption under Section 139 of the N.I. Act in criminal proceedings. 6. Standard of proof in criminal vs. civil proceedings: The Supreme Court noted that the standard of proof in criminal proceedings differs from that in civil proceedings. In criminal cases, the guilt of the accused must be proved beyond a reasonable doubt, whereas in civil cases, the decision is based on the preponderance of probabilities. The High Court correctly applied this distinction in its judgments. Judgment: - The Supreme Court allowed the Criminal Appeals, quashing the High Court's judgment of conviction and sentence, and restored the Trial Court's acquittal of the Appellant. - The Civil Appeals were dismissed, but the decrees of the High Court were modified to restrict them to the amount already deposited by the Appellants in the Court, along with accrued interest. - The Respondents in both Civil Appeals were entitled to withdraw 50% of the deposited amount with interest. Conclusion: The Supreme Court's judgment highlights the importance of the standard of proof in different types of legal proceedings and underscores the necessity for substantial evidence to support financial claims in both criminal and civil cases. The decision also emphasizes the significance of rebutting presumptions under Section 139 of the N.I. Act with credible evidence.
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