2022 (3) TMI 797 - SC - Indian Laws

Dishonor of Cheque - rebuttal of presumption - preponderance of probabilities - probable defence - HELD THAT - It is true that this is a case under Section 138 of the Negotiable Instruments Act. Section 139 of the N.I. Act provides that Court shall presume that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge in whole or in part of any debt or other liability. This presumption however is expressly made subject to the position being proved to the contrary. In other words it is open to the accused to establish that there is no consideration received. It is in the context of this provision that the theory of probable defence has grown. It is also true that this Court has found that the accused is not expected to discharge an unduly high standard of proof. It is accordingly that the principle has developed that all which the accused needs to establish is a probable defence. As to whether a probable defence has been established is a matter to be decided on the facts of each case on the conspectus of evidence and circumstances that exist. In the reply notice the appellant has not set up any case that the respondent did not have the financial capacity to advance the loan. In fact even we notice that there is no reference to the loss of the cheque book or signed cheque leaf. No complaint was given of the loss of the cheque book or the signed cheque leaf either to the police or to the bank - It is relevant to notice that DW5 has further deposed that when the appellant received the notice he asked him about the cheque book and then he told him about the incident of the loss of cheque book. Still at the time when the reply notice was sent the case is not set up about the loss of cheque book and about the cheque relied upon by the respondent being one which is brought into existence using the lost signed cheque leaf. There is no evidence to establish that the appellant had informed the Bank about the loss of the cheque book containing blank cheque. In fact In the statement under Section 313 Cr.PC. appellant had stated that this cheque book containing a blank cheque was lost. Appellant has no case that the signature on the cheque in question was not put by him - in the totality of facts of this case the appellant has not established a case for interference with the finding of the Courts below that the offence under Section 138 N. I. Act stands committed by the appellant. The conviction is upheld and the sentence of imprisonment of one year shall stand vacated. However the appellant shall stand sentenced to fine of 5, 000/- which he will deposit within a period of one month from today in the Trial Court - appeal allowed in part.

Issues Involved:
1. Validity of the High Court's dismissal of the Criminal Revision.
2. Interpretation and application of Section 138 of the Negotiable Instruments Act, 1881.
3. Evaluation of the appellant's probable defense.
4. Examination of the financial capacity of the complainant.
5. Admissibility and relevance of evidence provided by defense witnesses.
6. Determination of appropriate sentencing.

Issue-wise Detailed Analysis:

1. Validity of the High Court's Dismissal of the Criminal Revision:
The appellant challenged the High Court's judgment dismissing Criminal Revision No. 129 of 2018, which affirmed the Sessions Judge's and Chief Judicial Magistrate's orders finding the appellant guilty under Section 138 of the Negotiable Instruments Act, 1881. The appellant was sentenced to one year of simple imprisonment and ordered to pay ?7 Lakhs in compensation.

2. Interpretation and Application of Section 138 of the Negotiable Instruments Act, 1881:
Section 138 mandates that once the execution of a cheque is admitted, there is a presumption that the cheque was for the discharge of any debt or liability. This presumption is rebuttable, and the onus is on the accused to raise a probable defense. The standard of proof for rebutting the presumption is the preponderance of probabilities, as per the judgment in Basalingapa Vs. Mudibasappa.

3. Evaluation of the Appellant's Probable Defense:
The appellant attempted to establish a probable defense by examining DW-1 to DW-4, officers from four banks, to challenge the complainant's financial capacity to lend ?7 Lakhs. The High Court, however, did not appreciate the purpose of examining these witnesses. The appellant argued that the complainant's inability to recall specific withdrawal details undermined his credibility.

4. Examination of the Financial Capacity of the Complainant:
The complainant claimed to have withdrawn ?2-2.5 Lakhs from his bank accounts and provided the remaining amount from his funds. The appellant contended that the complainant's financial capacity was not proven, and the High Court failed to consider this aspect adequately. The trial court and appellate court noted that the complainant need not initially prove financial capacity unless challenged in the reply notice.

5. Admissibility and Relevance of Evidence Provided by Defense Witnesses:
The appellant's defense included evidence from DW-5, the appellant's son, who claimed the signed cheque was lost. However, no complaint about the lost cheque was made to the bank or police. The courts found that the appellant did not establish a probable defense, as there was no evidence of informing the bank about the lost cheque, and the appellant admitted to signing the cheque.

6. Determination of Appropriate Sentencing:
While upholding the conviction, the Supreme Court substituted the one-year imprisonment sentence with a fine of ?5,000, to be deposited within one month. Additionally, the appellant was directed to pay ?15,000 as further compensation to the respondent. Failure to deposit the fine would result in one month of simple imprisonment.

Conclusion:
The appeal was partly allowed, upholding the conviction but modifying the sentence. The appellant was ordered to pay a fine and additional compensation, with the sentence of imprisonment vacated. The judgment emphasized the importance of considering the totality of evidence and the accused's right to establish a probable defense.

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