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2025 (2) TMI 137 - HC - Indian LawsDishonour of Cheque - seeking leave to appeal against separate orders of acquittal - discharge of legally enforceable debt or not - rebuttal of statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act - HELD THAT - Under Section 118 of the Act once the signature on the cheque is admitted the presumption is that the cheque was drawn for consideration. In tandem Section 139 reinforces the presumption by holding that the holder of the cheque is deemed to have received it in discharge whether wholly or partially of a debt or liability. These provisions collectively create an inference of a legally enforceable liability thereby shifting the evidentiary burden to the accused to rebut the presumption. However as has been consistently held by the Supreme Court the standard for such a probable defence is that it need only be established on a preponderance of probabilities and it is not incumbent upon the accused to conclusively prove the non-existence of the debt or liability. In the present case the Respondents have not denied signing the cheques in question however they have established a probable defence by demolishing the case of the Petitioner that there was a liability of INR 1.10 Crores payable by the Respondents. Accordingly since no liability was established for the principal amount any alleged obligation to pay profit or interest on the purported investment also stood negated. The Respondents have by their own evidence and through the effective cross-examination of the Petitioner s witness succeeded in rebutting the statutory presumptions under Sections 118 and 139 of the NI Act. The Court examined the statement of accounts purportedly furnished by the Respondents. During cross-examination the sole witness (CW-1) conceded that this statement did not bear the name of the Respondents company nor did it include the company s stamp or the signature of any of its directors. The Court thus rightly observed that these documents appeared to be mere vague and unsubstantiated computer-generated Excel sheets falling short of the mandatory standards prescribed under Section 34 of the Indian Evidence Act 1872 - the Trial Court rightly held that the statement of accounts and the other materials placed on record by the Petitioner failed to discharge the shifted burden of proof regarding the existence of the alleged investment or loan. Conclusion - i) The Respondents have rebutted the statutory presumption on the basis of preponderance of probability that the Petitioner does not have a legally enforceable debt due from the Respondents. The Trial Court rightly held that the burden of proof to establish such a liability shifts on the Petitioner which burden they were not able to discharge. ii) Once it is established that no legally enforceable debt was payable by the Respondents to the Petitioner firm any claim for returns or interest on such a debt becomes untenable. iii) This Court finds no reason to interfere with the impugned order of the Trial Court acquitting the Respondents under Section 138 of the NI Act. Petition dismissed.
ISSUES PRESENTED and CONSIDERED
The primary issues considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The case revolves around the provisions of the Negotiable Instruments Act, particularly Sections 118 and 139, which create a presumption in favor of the holder of the cheque that it was issued for consideration and in discharge of a debt or liability. The burden is on the accused to rebut this presumption by proving, on a preponderance of probabilities, that no such debt or liability exists. The Supreme Court's decisions in cases like Rajesh Jain v. Ajay Singh and others provide guidance on the standard of proof required to rebut these presumptions. Court's interpretation and reasoning: The Court noted that the statutory presumptions under Sections 118 and 139 of the NI Act heavily favor the holder of the cheque. However, these presumptions are rebuttable, and the accused can contest the existence of a legally enforceable debt or liability by raising a probable defense. The Court emphasized that the accused need not conclusively prove the non-existence of the debt but must establish a probable defense on a preponderance of probabilities. Key evidence and findings: The Petitioner alleged that the Respondents owed them INR 1.10 Crores, which was to be repaid with a fixed profit. The cheques in question, issued to discharge this liability, were dishonored. The Petitioner relied on various pieces of evidence, including statements of accounts and acknowledgments from the Respondents, to establish the existence of the liability. However, the Respondents contended that the cheques were misplaced or stolen and that no such transaction or investment occurred. Application of law to facts: The Court found that the Respondents successfully rebutted the statutory presumptions by casting credible doubt on the existence of the alleged investment or debt. The evidence presented by the Petitioner, including statements of accounts and acknowledgments, was deemed insufficient and unreliable. The Court noted discrepancies in the Petitioner's narrative and the lack of documentary evidence to substantiate the alleged transactions. Treatment of competing arguments: The Court carefully considered the arguments presented by both parties. It noted the Petitioner's reliance on statutory presumptions and the evidence submitted to establish the debt. However, it found the Respondents' defense credible, particularly their claim of missing or stolen cheques and the lack of documentary evidence to support the Petitioner's claims. The Court also addressed the Petitioner's arguments regarding the presumption under the NI Act and found them unconvincing in light of the evidence. Conclusions: The Court concluded that the Respondents successfully rebutted the presumption of a legally enforceable debt under the NI Act. The evidence presented by the Petitioner was insufficient to establish the existence of the alleged debt or liability. Consequently, the Trial Court's decision to acquit the Respondents was upheld. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Court reiterated the principles established in Rajesh Jain v. Ajay Singh, emphasizing that the accused need only establish a probable defense on a preponderance of probabilities to rebut the statutory presumptions under the NI Act. The Court noted, "The onus on the accused is not to prove conclusively the non-existence of a debt or liability, but rather to establish, on a preponderance of probabilities, that no such debt or liability exists." Core principles established: The judgment reinforced the principle that the statutory presumptions under the NI Act are rebuttable and that the accused can discharge the burden by raising a probable defense. The Court highlighted the importance of credible evidence and the need for the complainant to substantiate the existence of a debt or liability once the presumption is rebutted. Final determinations on each issue: The Court determined that the Respondents successfully rebutted the statutory presumption of a legally enforceable debt under the NI Act. The evidence presented by the Petitioner was insufficient to establish the existence of the alleged debt or liability. The Trial Court's decision to acquit the Respondents was upheld, and the Petitioner's appeal was dismissed.
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