2024 (8) TMI 704 - HC - Indian Laws

Dishonour of Cheque - discharge of the legal debt/liability - preponderance of probablities - whether Respondent had paid back the money or not and if not, the same was payable? - HELD THAT - Indisputably, Respondent has been acquitted by the learned Trial Court and therefore, the first issue that needs consideration is the scope and ambit of interference by an Appellate Court in a judgment acquitting the accused. Appellate Court has, no doubt, wide powers to re-appreciate the evidence in an appeal against acquittal and come to a different conclusion, on facts and law, but there is no gainsaying that this power must be exercised with due care and caution since the presumption of innocence at the start of the trial is strengthened by acquittal of the accused by a judicial order. It is a settled law that in matters relating to dishonour of cheques, Courts have to consider whether the ingredients of Section 138 of NI Act are made out and if so, whether the accused is able to rebut the statutory presumption under Section 139 of NI Act. Coming to the present case, the undisputed position that obtains is that Respondent admitted execution of promissory note Ex. CW1/B and agreement Ex. CW1/C as well as his signatures on 7 cheques in question Ex. CW1/E and Ex. CW1/H-1 to Ex. CW1/H-6. It is also established through cheque return memos dated 12.07.2010 and 06.08.2010, Ex. CW1/F and by Ex. CW1/I-1 to Ex. CW1/I-6, that on presentation with the bank, all 7 cheques were returned unpaid with remarks Funds Insufficient . Whether Respondent had any legally enforceable debt or liability to pay the allegedly due amount under the cheques in question to the Petitioner? - HELD THAT - Reading Section 139 and applying the same, there is little doubt that since Petitioner was the holder of the cheques in question and the signatures on the cheques were not denied by the Respondent, presumption shall be drawn that the cheques were issued for discharge of a debt or other liability. The presumption under Section 139 of NI Act is, however, a rebuttable presumption. At this stage, I may allude to observations of the Supreme Court in BASALINGAPPA VERSUS MUDIBASAPPA 2019 (4) TMI 660 - SUPREME COURT , wherein the Supreme Court, before proceeding to the judgments under Sections 118 and 139 of NI Act noticed the general principles pertaining to burden of proof on an accused especially in a case where some statutory presumption regarding guilt of the accused has to be drawn. In RANGAPPA VERSUS SRI MOHAN 2010 (5) TMI 391 - SUPREME COURT the Supreme Court observed that presumption under Section 139 of NI Act is rebuttable and it is open to the accused to raise a defence and contest that the cheque was not issued in furtherance of an enforceable debt or liability. It was also held that in the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden and therefore when an accused has to rebut the presumption under Section 139 of NI Act, the standard of proof for doing so is preponderance of probabilities . This Court is unable to find any infirmity in the finding of the Trial Court that Respondent was able to set up a plausible defence, which on the principle of preponderance of probability, rebutted the presumption in favour of the Petitioner under Section 139 of NI Act. Execution of agreement Ex. CW1/D-8 reflecting the execution of documents regarding transfer/sale of the property as security for loan of Rs.25 lacs; Respondent being in possession of the coloured photocopies of the documents executed on 27.11.2009 coupled with absence of any explanation by the Petitioner on how these were with the Respondent; doubts over availability of funds to the extent of Rs.50 lacs with the Petitioner; his failure to prove the alleged two separate transactions of purchase of property and loan, certainly raises doubts over Petitioner s version and defence of the Respondent appears to be a probable defence. Thus, presumption under Section 139 of the NI Act stands rebutted. Once presumption under Section 139 was rebutted by the Respondent, burden of proof shifted on the Petitioner and as held by the learned Trial Court, Petitioner was unable to discharge the burden and the Respondent was rightly acquitted of the offence punishable under Section 138 of NI Act. Thus, no ground for grant of leave to appeal is made out. Petition seeking leave to appeal is hereby dismissed.

Summary

Issues Involved:
1. Scope and ambit of interference by an Appellate Court in a judgment acquitting the accused.
2. Whether the ingredients of Section 138 of the Negotiable Instruments Act, 1881 (NI Act) were made out.
3. Whether the statutory presumption under Section 139 of the NI Act was rebutted by the Respondent.
4. Whether the Petitioner was able to discharge the burden of proof after the presumption was rebutted.

Detailed Analysis:

1. Scope and Ambit of Interference by an Appellate Court in a Judgment Acquitting the Accused:
The judgment emphasized that an appellate court has wide powers to re-appreciate evidence in an appeal against acquittal and come to a different conclusion on facts and law. However, this power must be exercised with due care and caution due to the presumption of innocence strengthened by the acquittal. The Supreme Court in Ghurey Lal v. State of Uttar Pradesh elucidated that interference is justified only for "very substantial and compelling reasons," such as when the trial court's conclusion is palpably wrong, based on an erroneous view of law, or likely to result in a "grave miscarriage of justice."

2. Whether the Ingredients of Section 138 of the NI Act Were Made Out:
Section 138 of the NI Act pertains to the dishonour of cheques due to insufficiency of funds. The essential ingredients include the drawing of a cheque for the discharge of any debt or liability, presentation of the cheque to the bank, return of the cheque unpaid, giving notice to the drawer demanding payment, and failure of the drawer to make payment within 15 days of the notice. The Petitioner established that the cheques were dishonoured due to "Funds Insufficient," and a legal notice was sent demanding payment.

3. Whether the Statutory Presumption Under Section 139 of the NI Act Was Rebutted by the Respondent:
Section 139 of the NI Act creates a presumption that the cheque was issued for the discharge of a debt or liability. The Respondent admitted to issuing the cheques but contended that the debt was repaid in cash and the Petitioner misused the cheques. The trial court found the Respondent's defence plausible, noting the execution of documents indicating a loan transaction, the possession of coloured photocopies of cheques by the Respondent, and doubts over the Petitioner's financial capacity to advance Rs. 50 lacs.

4. Whether the Petitioner Was Able to Discharge the Burden of Proof After the Presumption Was Rebutted:
Once the presumption under Section 139 was rebutted, the burden shifted to the Petitioner to prove the existence of the debt or liability. The trial court found that the Petitioner failed to prove the alleged separate transactions of property sale and loan. The Petitioner's inability to explain the presence of coloured photocopies with the Respondent and the failure to show the loan transaction in his income tax return further weakened his case. Consequently, the trial court concluded that the Respondent's defence was probable, and the presumption under Section 139 stood rebutted.

Conclusion:
The High Court upheld the trial court's judgment acquitting the Respondent, finding no substantial and compelling reason to interfere. The Petitioner failed to discharge the burden of proof after the presumption under Section 139 was rebutted. The petition seeking leave to appeal was dismissed.