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2025 (4) TMI 170 - HC - Indian LawsSeeking leave to appeal - Acquittal of accused - Dishonour of Cheque - legally enforceable debt or not - failure to properly apply the statutory presumptions under Sections 118 (a) and 139 of NI Act - HELD THAT - In proceedings under Section 138 of the NI Act the law creates a presumption in favour of the holder of the cheque that it was issued in discharge of a legally enforceable debt or liability. Section 118 (a) of the Act presumes that the cheque was made or drawn for consideration while Section 139 mandates that the Court shall presume that the cheque was issued for the discharge of such liability. Once execution of the cheque is admitted or established these statutory presumptions operate automatically in favour of the complainant. However it is equally well-settled that these presumptions are rebuttable. The accused is entitled to demonstrate by cogent material or circumstances that the debt or liability did not exist at the time of issuance of the cheque. The presumption does not render the complainant s case infallible it only shifts the initial burden which can be discharged by the accused on a balance of probabilities. The Supreme Court in Rajesh Jain v. Ajay Singh 2023 (10) TMI 418 - SUPREME COURT held that the phrase unless the contrary is proved in Section 139 does not imply that the accused must necessarily prove the negative i.e. that the instrument was not issued in discharge of any debt or liability. Instead it suffices if the accused can demonstrate that the existence of such liability is improbable so as to persuade a prudent person under the given circumstances that no such debt existed. In the present case the issuance of the cheque and the signature thereon are admitted by the Respondent. However a closer examination of the record shows that the Trial Court rightly found the statutory presumptions under Sections 118 and 139 to have been rebutted on a preponderance of probabilities. The Respondent in his statement under Section 313 CrPC clearly stated that the cheque was given only as security in respect of a smaller sum of Rs. 1, 65, 000/- and not towards any legally enforceable liability equivalent to the cheque amount - The Respondent acknowledged his liability to the extent of Rs. 1, 65, 000/- and expressed his willingness to repay the same however he denied any liability for the amount mentioned in the cheque. Though he did not lead any defence evidence his admissions and explanations were relevant for assessing whether the statutory presumption stood rebutted. Whether the defence so raised by the Respondent was sufficient to rebut the presumptions under Sections 118 and 139 of the NI Act on the touchstone of preponderance of probabilities? - HELD THAT - This Court finds no infirmity in the Trial Court s conclusion that the Petitioner failed to establish his financial capacity to have advanced the alleged loan of Rs. 10 lakhs to the Respondent. This finding stands well-supported by the inconsistencies in the Petitioner s own evidence the absence of corroborative documentation and the failure to produce income tax returns reflecting the alleged loan transaction - it would be profitable to take note of the recent judgment of the Supreme Court in Sri Dattatraya v. Sharanappa 2024 (8) TMI 468 - SUPREME COURT where the Court upheld the acquittal of an accused in a cheque dishonour case inter alia on the ground that the complainant had failed to substantiate the loan transaction either through documentary evidence or by reflecting the same in his income tax returns. The Court further noted that contradictions in the complainant s deposition undermined the credibility of his claim and that despite the presumption under Section 139 of the NI Act the accused had succeeded in rebutting the same on a preponderance of probabilities. Conclusion - The Trial Court rightly concluded that the Petitioner s failure to substantiate the source of the alleged loan his inability to produce any supporting documentation such as bank records or income tax returns and the inconsistencies in his testimony rendered his claim inherently improbable. The Respondent through his cross-examination and the surrounding circumstances successfully rebutted the statutory presumption under Section 139 of the NI Act. This Court finds no perversity or legal infirmity in the Trial Court s reasoning. The impugned judgment therefore calls for no interference. Petition dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework primarily involves Sections 118(a) and 139 of the NI Act, which create a presumption in favor of the holder of the cheque that it was issued in discharge of a legally enforceable debt or liability. These presumptions are rebuttable, and the burden shifts to the accused to demonstrate the non-existence of such liability. The Court referenced precedents such as V.S. Yadav v. Reena and Hiten P. Dalal v. Bratindranath Banerjee, which emphasize the necessity for cogent evidence to rebut the presumption under Section 139. Court's Interpretation and Reasoning The Court interpreted that the statutory presumptions under Sections 118(a) and 139 of the NI Act operate in favor of the complainant once the execution of the cheque is admitted. However, these presumptions are rebuttable, and the accused can rebut them by raising a probable defence that creates reasonable doubt about the existence of a legally enforceable debt or liability. Key Evidence and Findings The Petitioner failed to substantiate the claim of a Rs. 10 lakh loan to the Respondent. The evidence presented, including bank statements and testimonies, contained inconsistencies. The Petitioner could not produce documentary evidence to support the alleged loan, such as income tax returns or a mortgage deed, which was claimed to have been executed by the Respondent. The Respondent admitted to signing the cheque but claimed it was issued as security for a smaller amount of Rs. 1,65,000/-, which he was willing to repay. Application of Law to Facts The Trial Court found that the Respondent successfully rebutted the presumption under Sections 118 and 139 by demonstrating inconsistencies in the Petitioner's narrative and the lack of supporting evidence for the alleged loan. The Court emphasized that the burden of proof shifted back to the Petitioner once the Respondent raised a plausible defence, which the Petitioner failed to discharge. Treatment of Competing Arguments The Petitioner argued that the Trial Court failed to apply the statutory presumptions correctly and erroneously reversed the burden of proof. However, the Court found that the Respondent's defence was sufficient to rebut the presumption on a preponderance of probabilities. The Petitioner's failure to produce corroborative evidence and the inconsistencies in his testimony undermined his claim. Conclusions The Court concluded that the Trial Court's judgment was sound, as the Petitioner failed to establish a legally enforceable debt or liability. The Respondent successfully rebutted the presumption under Section 139 of the NI Act, and the Petitioner's case was not proven beyond a reasonable doubt. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning The Court emphasized, "In order to pronounce a conviction in a criminal case, the accused 'must be' guilty and not merely 'may be' guilty. For an accused to be guilty, guilt should not be based on mere surmises and conjectures but it should be based on cogent evidence." Core principles established The judgment reinforces the principle that while statutory presumptions under the NI Act favor the complainant, they are rebuttable, and the accused can discharge the burden by raising a plausible defence. The complainant must substantiate the claim with credible evidence, especially when the accused provides a reasonable explanation for the cheque's issuance. Final determinations on each issue The Court upheld the Trial Court's acquittal of the Respondent, finding no error in its application of legal principles or assessment of evidence. The Petitioner's failure to prove the existence of a legally enforceable debt or liability and the Respondent's successful rebuttal of the statutory presumption justified the acquittal.
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