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2025 (4) TMI 684 - HC - Indian LawsDishonour of Cheque - acquittal of accused - Rebuttal of presumption u/s 139 of NI Act - HELD THAT - The present case however relates to acquittal of an accused in a complaint under Sections 138 read with 142 of the NI Act. The restriction on the power of the Appellate Court in regard to other offence does not apply with the same vigour in the offence under provisions of the NI Act which entails presumption against the accused. It is also well settled that once the execution of the cheque is admitted the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration and the presumption under Section 139 of the NI Act that the holder of the cheque received the said cheque in discharge of a legally enforceable debt or liability are raised against the accused. Since the appellant failed to provide any cogent documentary evidence in corroboration of his testimony the learned MM held that the defence raised by the accused is a probable one to rebut the presumption under Section 139 of the NI Act and that the complainant had failed to discharge the onus which shifted upon him to show the existence of a legal financial liability. In the present case the accused/ Respondent No. 2 has sought to prove his case by controverting that the cheques in question were not issued in discharge of any legally enforceable debt. It has been contended that the said signed cheques were stolen from his office drawer by the appellant and that the same were misused. It was also argued that the appellant as per his own deposition stated that his annual turnover was Rs. 13, 00, 000/- in the year 2016 besides other rental and agricultural income which makes it apparent that the appellant did not have the financial capacity to advance the said loan - It is seen that no complaint of the signed cheques being stolen from the office drawer of Respondent No. 2 was made by him. The learned MM erred in noting that Respondent No. 2 was successful in rebutting the presumptions insofar as he did not lead any evidence to corroborate that the signed cheques were forcibly taken from his possession or were misused. In the instant case upon a consideration of the totality of circumstances it is evident that Respondent No. 2 had failed to rebut the presumptions under Sections 118 and 139 of the NI Act resultantly the question of source of the loan advanced by the appellant and his financial capacity does not arise - The onus cannot be said to be shifted on the complainant to prove his financial capacity merely because the accused makes a vague bald assertion. Merely denying liability does not suffice to dislodge the presumptions raised under Section 118 and 139 of the NI Act. In terms of the dictum of the Hon ble Apex Court in Bir Singh v. Mukesh Kumar 2019 (2) TMI 547 - SUPREME COURT mere admission of the signature of the drawer on the cheque is sufficient to activate the presumption under Section 139 of the NI Act. It is not a pre-requisite that the drawer must also admit the execution of the entire contents of the cheque. Conclusion - The onus was on the accused/ Respondent No. 2 to rebut the presumptions. It was not for the complainant/ appellant to establish that he had the means to advance the loan or that the signed cheques were issued in discharge of any legally enforceable debt. Having failed to rebut the presumptions the contention of Respondent No. 2 that the burden was on the appellant to establish his financial means do not bolster the case of the complainant. The impugned judgment dated 30.08.2019 acquitting Respondent No. 2 of the offence under Section 138 of the NI Act is accordingly set aside - List on 01.05.2025 for further directions.
ISSUES PRESENTED and CONSIDERED
1. Whether the learned Metropolitan Magistrate (MM) erred in acquitting Respondent No. 2 of the offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) by concluding that the presumption under Section 139 of the NI Act was rebutted. 2. Whether the appellant sufficiently demonstrated the financial capacity to advance the loan to Respondent No. 2, and whether the burden of proof regarding the financial capacity was appropriately considered by the trial court. 3. Whether the defence of the accused regarding the cheques being stolen was adequately substantiated and whether it was sufficient to rebut the presumption under Section 139 of the NI Act. ISSUE-WISE DETAILED ANALYSIS 1. Presumption under Section 139 of the NI Act Relevant legal framework and precedents: Section 139 of the NI Act raises a presumption that the holder of a cheque received it for the discharge of a debt or liability. The presumption under Section 139 is rebuttable, and the accused can contest it by raising a probable defence. The burden initially lies on the accused to rebut the presumption, which then shifts to the complainant to prove the existence of a debt or liability as a matter of fact. Key cases referenced include Rangappa v. Sri Mohan and Rajesh Jain v. Ajay Singh. Court's interpretation and reasoning: The Court noted that the presumption under Section 139 is not absolute and can be rebutted by the accused by raising a probable defence. The accused is not required to prove the non-existence of the debt beyond a reasonable doubt but must show that the non-existence of the debt is probable. Key evidence and findings: The accused contended that the cheques were stolen and that the complainant did not have the financial capacity to advance the loan. However, the Court found that the accused did not file any complaint regarding the theft of cheques and failed to substantiate the claim of theft with evidence. Application of law to facts: The Court found that the accused's mere denial of liability and assertion that the cheques were stolen was insufficient to rebut the presumption under Section 139. The absence of a complaint about the stolen cheques weakened the accused's defence. Treatment of competing arguments: The appellant argued that the trial court erred in concluding that the presumption was rebutted without sufficient evidence from the accused. The Court agreed with the appellant, emphasizing that the accused failed to provide credible evidence to support the claim of theft. Conclusions: The Court concluded that the presumption under Section 139 was not effectively rebutted by the accused, and the trial court erred in acquitting Respondent No. 2 based on the claim of theft. 2. Financial Capacity of the Appellant Relevant legal framework and precedents: The financial capacity of the complainant to advance a loan is often scrutinized in cases under Section 138 of the NI Act. However, the initial burden to dispute the complainant's financial capacity rests with the accused. Reference was made to the case of Tedhi Singh v. Narayan Dass Mahant. Court's interpretation and reasoning: The Court noted that the accused did not raise the issue of financial capacity in response to the statutory notice or during the trial. The burden to prove financial incapacity was not effectively shifted to the complainant. Key evidence and findings: The accused did not provide evidence to support the claim that the complainant lacked the financial capacity to advance the loan. The complainant's testimony regarding financial capacity was not effectively challenged. Application of law to facts: The Court held that the accused's failure to raise the issue of financial capacity at the appropriate stage and lack of evidence meant that the complainant was not required to prove financial capacity. Treatment of competing arguments: The appellant argued that the trial court incorrectly focused on the complainant's financial capacity without the accused having raised a credible challenge. The Court agreed, highlighting that the onus was not on the complainant to prove financial capacity absent a substantive challenge. Conclusions: The Court concluded that the trial court erred in considering the complainant's financial capacity without a credible challenge from the accused. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Court emphasized: "The onus was on the accused/ Respondent No. 2 to rebut the presumptions. It was not for the complainant/ appellant to establish that he had the means to advance the loan, or that the signed cheques were issued in discharge of any legally enforceable debt." Core principles established: The presumption under Section 139 of the NI Act places an initial burden on the accused to raise a probable defence. Mere denial or unsubstantiated claims are insufficient to rebut the presumption. The financial capacity of the complainant need not be proven unless credibly challenged by the accused. Final determinations on each issue: The Court set aside the trial court's judgment acquitting Respondent No. 2 and found that the accused failed to rebut the presumptions under Sections 118 and 139 of the NI Act. The matter was listed for further directions, with Respondent No. 2 directed to be present at the next hearing.
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