Dishonour of Cheque : Burden Heavily upon Complainant to Show he had Requisite Funds for Advancing Money to Accused [Case Law]

Negotiable Instruments Act, 1881 - Ss. 118, 138, 139 - Presumptions as to negotiable instruments - Dishonour of cheque for insufficiency, etc., of funds in the account - Presumption in favour of holder - In order to draw presumption under Section 118 read with Section 139 of the Act, the burden is heavily upon the appellant/complainant to show: (i) that he had the requisite funds for advancing the sum of money to the accused, (ii) that the issuance of cheque in support of repayment of money advanced was true, and (iii) that the accused was bound to make payment as had been agreed while issuing cheque in favour of the complainant. [Para 9]

Negotiable Instruments Act, 1881 - S. 139 - Presumption in favour of holder - The presumption mandated by Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. It is settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of ‘preponderance of probabilities’ and not beyond reasonable doubt. [Para 8]

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.

Coram The Hon’ble Mr. Justice Tarlok Singh Chauhan, Judge.

4th May, 2018

Cr. Appeal No. 49 of 2018

Amar Singh Mehta …Appellant

Versus

Sukh Ram Sharma and another …Respondents.

For the Appellant : Mr. B.S. Chauhan, Senior Advocate, with Mr. Munish Datwalia, Advocate.

For the Respondents : Mr. Anil Chauhan and Mr. Dinender Panwar, Advocates, for respondent No.1. Mr. Vinod Thakur, Addl. A.G. for respondent No.2.

The respondent No.1 has been acquitted of the offence punishable under Section 138 of the Negotiable Instruments Act (for short ‘Act’) by learned Judicial Magistrate 1st Class, Court No.1, Solan, District Solan, H.P. passed in Criminal Case No. 1136-3 of 2011/09 on 19.6.2017 and aggrieved thereby the appellant/complainant has filed the instant appeal.

2. Brief facts giving rise to the present appeal are that the appellant has filed the complaint against the respondent on the allegation that the respondent in discharge of his liability and for consideration towards the appellant, issued cheque baring No. 100133 dated 13.5.2009 for Rs.10,000/-, cheque No. 100134 dated 13.5.2009 for Rs.10,500/- and cheque No.100132 dated 15.6.2009 for Rs. 33,600/- drawn on Union Bank of India, Branch Solan of Account No. 362002010777222 with the assurance that the same would be honoured on its presentation in the bank under all circumstances. However, when the appellant presented these cheques for its encashment in Baghat Urban Cooperative Bank Ltd., Solan, Branch who in turn sent these to the Union Bank of India, Solan, but were dishonoured and returned to the appellant on 16.9.2009 due to the reason ‘Funds insufficient’. Thereafter, a legal notice was sent by the appellant to respondent No.1 on dated 5.10.2012 through registered letter dated 18.9.2009 for arranging the cheque amount. However, despite the said notice, respondent No.1 did not comply with the terms and conditions thereof necessitating the filing of the complaint.

3. After recording the preliminary evidence, learned Magistrate took cognizance against respondent No.1 for commission of offence punishable under Section 138 of the Act and after securing the presence of respondent No.1, he was admitted on bail. On finding a prima facie case, notice of accusation for commission of offence punishable under Section 138 of the Act was put to respondent No.1 on 22.2.2017 to which he pleaded not guilty and claimed trial.

4. In support of his case, the appellant/complainant examined himself as his witness and thereafter the statement of respondent No.1 was recorded under Section 313 Cr.P.C. wherein he refuted the case of the appellant in its entirety.

5. The learned Magistrate after evaluating the material on record came to categoric findings that no case was made against respondent No.1 and accordingly acquitted him.

6. Aggrieved by the acquittal of respondent No.1, the appellant/ complainant has filed this appeal mainly on the ground that the learned trial Court had not appreciated the Section 118 (a) and Section 139 of the Act wherein presumption is drawn in favour of the holder of the Negotiable Instruments Act. It is further averred that in absence of there being any defence on the part of respondent No.1, he could not have been acquitted.

I have heard learned counsel for the parties and have gone through the records of the case carefully.

7. Before adverting to the relative merits of the case, it would be necessary to reproduce the relevant provisions of the Negotiable Instruments Act. Sections 118, 138 and 139 of the Negotiable Instruments Act, read thus: 

“118. Presumptions as to negotiable instruments. —Until the contrary is proved, the following presumptions shall be made:— 

(a) of consideration —that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration; 

(b) as to date —that every negotiable instrument bearing a date was made or drawn on such date; 

(c) as to time of acceptance —that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity; 

(d) as to time of transfer —that every transfer of a negotiable instrument was made before its maturity; 

(e) as to order of indorsements —that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon; 

(f) as to stamps —that a lost promissory note, bill of exchange or cheque was duly stamped; 

(g) that holder is a holder in due course —that the holder of a negotiable instrument is a holder in due course: 

Provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.” 

“138. Dishonour of cheque for insufficiency, etc., of funds in the account. —Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: 

Provided that nothing contained in this section shall apply unless— 

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; 

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and 

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation.— For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.

139. Presumption in favour of holder. – It shall be presumed, unless the contrary is proved, 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.” 

8. The presumption mandated by Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. It is settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of ‘preponderance of probabilities’ and not beyond reasonable doubt. This has rightly so been recorded by the learned trial Court.

9. That apart, in order to draw presumption under Section 118 read with Section 139 of the Act, the burden is heavily upon the appellant/complainant to show: (i) that he had the requisite funds for advancing the sum of money to the accused, (ii) that the issuance of cheque in support of repayment of money advanced was true, and (iii) that the accused was bound to make payment as had been agreed while issuing cheque in favour of the complainant. [Refer: John K. Abraham vs. Simon C. Abraham and another (2014) 2 SCC 236].

10. Bearing in mind the aforesaid exposition of law, it would be noticed that even though the case of the appellant was that respondent No.1 in discharge of his legal enforceable liability had issued three cheques in question, but while appearing as witness, he had failed to point out the precise or rather the exact nature of liability. This assumes importance because admittedly the appellant is under graduate and is, therefore, presumed to be capable of understanding the meaning of liability or debt etc. That apart, even the appellant has failed to give the date, time, place and details of the amount that was advanced by him. Therefore, in such circumstances, the learned trial Magistrate had no option but to have acquitted the accused.

11. At this stage, Mr. B.S. Chauhan, learned Senior Counsel for the appellant would vehemently canvass that the issue in hand is squarely covered by the judgment given by this Court in Cr. Appeal No. 295 of 2017 titled Surinder Singh vs. State of H.P. and another, decided on 03.11.2017. I have gone through the said judgment and find that the same is of no assistance to the appellant for the simple reason that the learned trial Magistrate in that case while interpreting Section 139 had relied upon two Judges Bench decision of the Hon’ble Supreme Court in Krishna Janardhan Bhat vs. Dattatraya G. Hedge, 2008 (4) SCC 54. However, the learned trial Magistrate therein had failed to take note of the fact that the view in Krishna Janardhan Bhat’s case (supra) was subsequently held not to be the correct view by the three Judges Bench of the Hon’ble Supreme Court in Rangappa vs. Sri Mohan (2010) 11 SCC 441 and it was the legal position as set out by the three Judges Bench decision of the Hon’ble Supreme Court in Rangappa’s case (supra) that was quoted in extenso and thereafter the matter was remanded back to the trial Court for decision afresh strictly as per its facts and in accordance with the provisions of law.

12. In view of the aforesaid discussion, no fault can be found with the order/judgment of acquittal passed by the learned trial Court. Consequently, the same is upheld. There is no merit in this appeal and the same is accordingly dismissed.