2024 (8) TMI 468 - SC - Indian Laws

Dishonour of Cheque - insufficient funds - presumption contemplated by virtue of Section 118 of the NI Act 1881 - standard of preponderance of probabilities - reasons to believe - HELD THAT - Earlier, a case of dishonour of a cheque was dealt through provisions of Section 420 read with Section 415 of the IPC 1860. To enhance the acceptability of cheques as well as to provide for adequate safeguards to prevent harassment of honest drawers through painting the liability arising out of dishonour of a cheque with a punitive brush, an amendment to the NI Act 1881 was brought about by introducing Chapter VIII. Thence, seeking to promote credibility in transactions through the medium of banking channels and operations as well as their efficacy. This Court in ICDS. LTD. VERSUS BEENA SHABEER 2002 (8) TMI 577 - SUPREME COURT , has held that proceedings under Section 138 of the NI Act 1881 can be initiated even if the cheque was originally issued as security and was subsequently dishonoured owing to insufficient funds. The failure to honour the concerned cheque is per se deemed as a commission of an offence under Section 138 of the NI Act 1881. The NI Act 1881 enlists three essential conditions that ought to be fulfilled before the said provision of law can be invoked. Firstly, the cheque ought to have been presented within the period of its validity. Secondly, a demand of payment ought to have been made by the presenter of the cheque to the issuer, and lastly, the drawer ought to have had failed to pay the amount within a period of 15 days of the receipt of the demand. These principles and pre-requisites stand well established through Judgment of this Court in SADANANDAN BHADRAN VERSUS MADHAVAN SUNIL KUMAR 1998 (8) TMI 541 - SUPREME COURT . There is an explicit limitation of 30 days, beginning from period when the cause of action arose, prescribed by the statute vide Section 142(b) of the NI Act 1881 to initiate proceedings under Section 138 of the NI Act 1881. Since a presumption only enables the holder to show a prima facie case, it can only survive before a court of law subject to contrary not having been proved to the effect that a cheque or negotiable instrument was not issued for a consideration or for discharge of any existing or future debt or liability - In this backdrop, it is pertinent to make a reference to a decision of 3-Judge Bench in BIR SINGH VERSUS MUKESH KUMAR 2019 (2) TMI 547 - SUPREME COURT which went on to hold that if a signature on a blank cheque stands admitted to having been inscribed voluntarily, it is sufficient to trigger a presumption under Section 139 of the NI Act 1881, even if there is no admission to the effect of execution of entire contents in the cheque. Admittedly, the Appellant was able to establish that the signature on the cheque in question was of the Respondent and in regard to the decision of this Court in Bir Singh, a presumption is to ideally arise - The Respondent has been able to shift the weight of the scales of justice in his favour through the preponderance of probabilities. Upon perusal of the aforementioned principles and applying them to the facts and circumstances of the present matter, it is evident that there is no perversity and lack of evidence in the case of the respondentaccused. The concurrent findings have backing of detailed appraisal of evidences and facts, therefore, do not warrant interference in light of above enlisted principles. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the cheque issued under Section 138 of the NI Act, 1881.
2. Presumption under Section 139 of the NI Act, 1881.
3. Financial capacity and credibility of the complainant.
4. Concurrent findings of acquittal and scope of interference by the Supreme Court.

Issue-wise Detailed Analysis:

1. Validity of the cheque issued under Section 138 of the NI Act, 1881:
The Supreme Court examined the factual background where the respondent issued a cheque to the appellant as a guarantee against repayment of a loan. The cheque was dishonoured due to insufficient funds. The appellant sent a demand notice, and upon failure of the respondent to pay, a complaint was filed under Section 138 of the NI Act. The trial court and the High Court observed contradictions in the appellant's statements regarding the issuance and presentation of the cheque, and the appellant's failure to declare the loan transaction in his Income Tax Returns. The courts found the appellant's evidence insufficient to prove a legally enforceable debt.

2. Presumption under Section 139 of the NI Act, 1881:
The Court discussed the presumption under Section 139, which mandates that the cheque is presumed to be issued for the discharge of a debt unless proven otherwise. The appellant argued that the respondent admitted the signature on the cheque, thereby raising the presumption under Section 139. However, the Court noted that the presumption is rebuttable and the respondent successfully rebutted it by showing inconsistencies in the appellant's claims and lack of evidence of the loan transaction.

3. Financial capacity and credibility of the complainant:
The respondent challenged the financial capacity of the appellant to grant the loan. The appellant failed to provide evidence of his financial capacity or the details of the loan transaction. The courts found that the appellant's inability to prove his financial capacity and the contradictory statements weakened his case. The Court reiterated that the burden of proof shifts to the accused to rebut the presumption under Section 139, which the respondent did successfully.

4. Concurrent findings of acquittal and scope of interference by the Supreme Court:
The Supreme Court emphasized the principles of non-interference in concurrent findings of acquittal unless there is perversity or a grave miscarriage of justice. The Court found no perversity or lack of evidence in the concurrent findings of the trial court and the High Court. The appellant's case was based on contradictory statements and insufficient evidence, leading to the respondent's successful rebuttal of the presumption under Section 139.

Conclusion:
The Supreme Court dismissed the appeal, affirming the High Court's judgment and the trial court's findings. The appellant failed to prove the existence of a legally enforceable debt, and the respondent successfully rebutted the presumption under Section 139. The concurrent findings of acquittal were upheld, and no interference was warranted.