Negotiable Instruments Act, 1881 - Section 138 - Complainant
failed to establish the source of funds which he is alleged to have utilized
for the disbursal of the loan - Non-disclosure of the facts pertaining to the
earlier two cheques, and the steps, if any, taken for recovery was again a
material consideration which indicated that there was a doubt in regard to the
transaction - the presumption under Section 139 of the Act stood rebutted and
that the defence stood probabalised.
An important facet in the matter was
that the complainant failed to establish the source of funds which he is
alleged to have utilized for the disbursal of the loan of Rs.15 lakhs to the
appellant. During the course of his cross-examination the complainant deposed
that earlier, the appellant had furnished two cheques, one of ICICI Bank for
Rs.5 lakhs and another of Canara Bank for Rs.10 lakhs which he had presented.
The complainant admitted that he had not mentioned anything about the accused
having issued these two cheques in his complaint. Nothing was stated by the
complainant in regard to the fate of the earlier two cheques which were
allegedly issued by the appellant. The non-disclosure of the facts pertaining
to the earlier two cheques, and the steps, if any, taken for recovery was again
a material consideration which indicated that there was a doubt in regard to
the transaction.
Negotiable Instruments Act, 1881 - Section 139 of the Act
mandates that it shall be presumed, unless the contrary is proved, that the
holder of a cheque received it, in discharge, in whole or in part, of a debt,
or liability. The expression "unless the contrary is proved"
indicates that the presumption under Section 139 of the Act is rebuttable. In
determining whether the presumption has been rebutted, the test of
proportionality must guide the determination. The standard of proof for
rebuttal of the presumption under Section 139 of the Act is guided by a preponderance
of probabilities.
From the judgment of the High Court,
the significant aspect of the case which stands out is that there has been no
appreciation of the evidence or even a reference to the reasons furnished by
the first appellate court. The High Court reversed the order of acquittal by
holding that a mere denial of the transactions or an omnibus denial of the
entire transaction could not be considered as a tenable defence. The judgment
of the High Court is unsatisfactory and does not contain any reference to the
evidence whatsoever. There was absolutely no valid basis to displace the
findings of fact which were arrived at by the first appellate court, while
acquitting the accused.
Facts of the Case
In the present case, it is necessary
now to consider whether the presumption under Section 139 stands rebutted by
the accused-appellant. The defence of the appellant is that he has not borrowed
the amount of Rs. 15 lakhs from the complainant as alleged nor had he issued
the cheque (Exhibit P-1) in discharge of a legally enforceable debt.
Specifically, the defence of the accused is that no payment was made by the
complainant to him, in discharge of which the cheques have been issued. His
defence was that the cheque was issued to the complainant on an assurance of a
loan which would be obtained from a financial institution. This, as we have
noted, was also the defence in reply to the notice of demand issued by the
complainant.
2019 (2) SCALE 548
IN THE SUPREME
COURT OF INDIA
CRIMINAL APPELLATE
JURISDICTION
[DR.DHANANJAYA Y.
CHANDRACHUD] AND [M.R. SHAH] JJ;
JANUARY 18, 2019
CRIMINAL APPEAL
NO(S).95-96 OF 2019
(Arising out of
Special Leave Petition(Crl.) No(s). 3737-3738 of 2016)
ANSS RAJASHEKAR
APPELLANT(s)
VERSUS
AUGUSTUS JEBA
ANANTH RESPONDENT(s)
For Petitioner(s)
Mr. Jay Kishor Singh, AOR
For Respondent(s)
Mr. Abhay Kumar, AOR Mr. Saurabh Mishra, Adv. Mr. Vineet Kumar Singh, Adv. Mr.
Himanshu Pal Singh, Adv.
J U D G M E N T
DR.DHANANJAYA Y. CHANDRACHUD, J.
Leave granted.
These appeals arise from the judgment
and order of a learned Single Judge of the High Court of Karnataka dated 14
November 2014, reversing the judgment of the Lower Appellate Court acquitting the
appellant of an offence under Section 138 of the Negotiable Instruments Act,
1881 ('the Act').
The case of the respondent-complainant
is that on 09 March 2005, the appellant issued a cheque in the sum of Rs.5
lakhs in his favour, towards discharge of a liability of Rs.15 lakhs, in
repayment of an amount whichwas borrowed in the month of February, 2004.
According to the complainant, the amount was repayable within six months. When
the complainant presented the cheque on 23 March 2005, it was returned by the
bank for insufficiency of funds. The complainant presented the cheque again for
realisation on 14 July, 2005 but it was returned with the same result. A notice
of demand was issued by the complainant on 10 August, 2005. In response, the appellant-accused
denied that there was a legally enforceable debt. In his reply, the appellant
stated thus:
"4. My client and his wife and
your client and his wife had purchased separate house sites in Survey No. 96/3
at Hoaramvuagrahara Village, Krishnarajapuram Hobli, Bangalore on 31.01.2001.
All these sites situate adjacent to each other. Your client enticed my client
and my client’s wife to give power in his favour so that he could pursue the
matter of getting housing loan from financial institutions at Bangalore.
However your client prepared the power deed incorporating the clauses for sale
also. When my client questioned about the inclusion of clauses for sale, your client
had stated that it had inadvertently typed and the purpose of power deed is only
for obtaining loan and so it need not be registered.
5. Besides this power deed your client
also obtained from my client the originaldocument being Document No. 10470/2001
and Khatha, Tax Receipts, Approved plan and also 4 blank cheques of U.T.I. Bank
Ltd, Tuticorin including the cheque mentioned in your notice and Vysya Bank,
Bangalore Cheque Book containing 10 leaves.
6. Your client obtained these cheques stating
that the financial institutions will insist for the cheque leaves when the loan
is sanctioned as to use these cheques for monthly repayment of loan amount.
Your client has now misused the one such cheque as if it was issued by my
client on 09.03.2005. Subsequently my client and his wife canceled the power
deed and also requested your client to return the cheques and documents.
However, your client is very particular to grab house sites along with half way
constructed building for him and his father. An attempt was also made earlier in
this regard. Your client's father colluding with your client sent a notice dated
09.05.05 containing false allegations to my client to execute the sale deed of said
house site situate at the above mentioned survey number in favour of him. Since
the attempt frizzled out, now the son, your client is trying in a different
way, illegally using the mentioned cheque to harass my client to part with the
said house site."
As the above reply indicates, the
defence of the appellant was that the appellant and his wife and the complainant
and his wife had purchased adjacent house sites. The complainant was alleged to
have persuaded the appellant to execute a power of attorney in his favourfor
the purpose of obtaining a housing loan from the financial institutions in
Bangalore. According to the appellant as many as four blank cheques of U.T.I
Bank Ltd. and a Vysya Bank cheque Book containing ten leaves were obtained by
the complainant from the appellant. One of the cheques which were handed over
by the appellant to the respondent-complainant was alleged to have been misused.
The complainant lodged a complaint
before the Additional Chief Metropolitan Magistrate at Bangalore being CC No.
26999 of 2006 under Section 138 of the Act on 9 September 2005.
The Trial court by a judgment dated 31
January 2009 acquitted the appellant. The complainant - respondent filed
Criminal Appeal No. 285 of 2009 before the High Court. By its judgment dated 29
October 2010 the High Court allowed the appeal and remitted the matter to the Trial
court, having regard to the judgment of this Court in “Rangappa Versus Sri Mohan”1. On remand, the Trial court by a
judgment dated 5 March 2011 convicted the appellant and sentenced him to
undergo imprisonment of one year and to pay a fine of Rs.7 lakhs out of which
an 1 (2010) 11 SCC 441amount of Rs.6.75 lakhs was directed to be paid to the respondent by way
of compensation. The appellant instituted Criminal Appeal No. 245 of 2011
before the Additional Sessions Jude, Bangalore. By a judgment dated 05 March,
2012, the First Appellate Court reversed the conviction and sentence recorded
by the Trial court. The respondent thereupon filed a Criminal Appeal before the
High Court, being Criminal Appeal No. 861 of 2012. The High Court reversed the
judgment of acquittal, recording that while the notice of the appeal was served
upon the appellant, he had remained absent. While recording the conviction
under Section 138 of the Act, the High Court modified the sentence to the
effect that the appellant shall pay a fine of Rs.5 lakhs which would be paid as
compensation to the respondent and, in default, he shall suffer imprisonment
for a period of three months. The conviction recorded by the Trial court was
maintained but the amount of fine was reduced, as noted above.
On 29 April 2016, notice was issued on
the question of limitation, there being a delay of 410 days in filing the
special leave petition as well as on the petition. Having considered the cause
shown by the appellant forcondoning the delay we deem it appropriate to condone
the delay. We do not find from the record of this case that there was any
deliberate act of neglect on the part of the appellant in pursuing his remedies.
Assailing the judgment of the High
Court, learned counsel appearing on behalf of the appellant has addressed the
submissions on two aspects. First, it is submitted that there is an absence of
a legally enforceable debt. Hence, it is urged that the conviction which has
been recorded by the High Court is unsustainable. Secondly, it is urged that
the appellant discharged the burden which is cast by the provisions of Section
139 and established a defence on a preponderance of probabilities as required
by the judgment of this Court in Rangappa (supra). The learned counsel has extensively
relied upon the judgment of acquittal by the Additional Sessions Judge dated 5
March, 2012, adopting the appreciation of evidence in that judgment as the submissions
of the appellant in support of the present appeal. Learned counsel submitted
that the High Court should have been circumspect in overturning the judgment of
acquittal. No reasons have been disclosed in theimpugned judgment upon
assessment of evidence, much less reasons for coming to the conclusion that the
acquittal by the first appellate court was either perverse or would lead to a
miscarriage of justice.
On the other hand, learned counsel
appearing on behalf of the complainant-respondent has submitted, placing
reliance on the judgment in Rangappa (supra), that the appellant failed to
discharge the burden which cast upon him and that the presumption under Section
139 of the Act applies to the facts of the present case. Adverting to the
material on the record it is urged that the fact that the cheque was signed by
the accused and was drawn on the bank where he has an account is not in dispute.
It is urged that the defence was correctly appreciated by the Trial court while
recording a conviction under Section 138 and the High Court in restoring that
conviction has not fallen into error.
Section 139 of the Act mandates that
it shall be presumed, unless the contrary is proved, that the holder of a
cheque received it, in discharge, in whole or in part, of a debt, or liability.
The expression "unless the contrary is proved" indicates that the
presumption underSection 139 of the Act is rebuttable. Terming this as an example
of a “reverse onus clause” the three Judge Bench of this Court in Rangappa (supra) held that in determining
whether the presumption has been rebutted, the test of proportionality must
guide the determination. The standard of proof for rebuttal of the presumption under
Section 139 of the Act is guided by a preponderance of probabilities. This Court
held thus:
“28 In the absence of compelling justifications,
reverse onus clauses usually impose an evidentiary burden and not a persuasive
burden. Keeping this in view, it is a
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'.
Therefore, if the accused is able to raise a probable defence which creates
doubts about the existence of a legally enforceable debt or liability, the prosecution
can fail. As clarified in the citations, the accused can
rely on the materials submitted by the complainant in order to raise such a
defence and it is conceivable that in some cases the accused may not need to
adduce evidence of his/her own.“
(emphasis supplied)
In the present case, it is necessary
now to consider whether the presumption under Section 139 stands rebutted by
the accused-appellant. The defence of the appellant isthat he has not borrowed
the amount of Rs. 15 lakhs from the complainant as alleged nor had he issued
the cheque (Exhibit P-1) in discharge of a legally enforceable debt. Specifically,
the defence of the accused is that no payment was made by the complainant to
him, in discharge of which the cheques have been issued. His defence was that
the cheque was issued to the complainant on an assurance of a loan which would
be obtained from a financial institution. This, as we have noted, was also the
defence in reply to the notice of demand issued by the complainant.
It is in this background, it would be
necessary to advert to the material which was relied upon by the first appellate
court to acquit the accused-appellant. During the course of his
cross-examination, PW-1 admitted that a General Power of Attorney was executed
by the appellant in his favour. Admittedly the appellant and the respondent are
related and there was some civil litigation between the father of the
complainant and the appellant. The complainant admitted that, as a matter of fact,
he himself received an amount of Rs.10 lakhs from the appellant under a loan
transaction but stated that hehad repaid that amount to the appellant. PW-1
stated that the appellant had requested him for a loan of Rs.15 lakhs in
February 2004. The defence of the appellant being that no amount was actually
paid by the complainant to him, the evidence of PW-1 in regard to the payment
of the loan assumes significance. According to PW-1, the loan of Rs.15 lakhs
was paid into the hands of a representative of the appellant at his request.
The appellant failed to indicate even the name of the representative to whom
the alleged amount of Rs.15 lakhs is stated to have been paid over in cash. The
entire amount, significantly, is alleged to have been paid over without
obtaining a receipt or document evidencing the payment of the amount. In the
notice of demand that was issued by the complainant to the appellant after the
cheque had been returned for want of funds, the complainant stated that the appellant
had sought a 'financial accommodation' of Rs.15 Lakhs and paid a sum of
Rs.20,000 (corrected thereafter in a corrigendum). The first appellate court noted
in the course of its judgment that while conducting the cross-examination of
the accused, the complainant had stated that the accused had demanded a loan of
Rs.15 lakhs, but at that time the complainant had only paid anamount of Rs.5
Lakhs as a loan for which the accused issued Exhibit P1. This suggestion was
specifically denied by the accused. In this context, the first appellate court
observed that whether the complainant had furnished a hand loan of Rs.15 lakhs
to the accused as stated in the complaint or whether the complainant had paid
Rs.20 lakhs as mentioned in the legal notice dated 10 August 2004 or whether he
had paid an amount of Rs.5 lakhs as suggested during the course of
cross-examination was a matter of serious doubt. If the complainant had paid
Rs.15 lakhs to the accused, the suggestion during the course of
cross-examination of having paid an amount of Rs.5 lakhs casts serious doubt on
the existence of a debt in the first place.
Besides what has been set out above,
an important facet in the matter was that the complainant failed to establish
the source of funds which he is alleged to have utilized for the disbursal of
the loan of Rs.15 lakhs to the appellant. During the course of his
cross-examination the complainant deposed that earlier, the appellant had furnished
two cheques, one of ICICI Bank for Rs.5 lakhs and another of Canara Bank for
Rs.10 lakhs which he hadpresented. The complainant admitted that he had not mentioned
anything about the accused having issued these two cheques in his complaint.
Nothing was stated by the complainant in regard to the fate of the earlier two cheques
which were allegedly issued by the appellant. The non-disclosure of the facts
pertaining to the earlier two cheques, and the steps, if any, taken for
recovery was again a material consideration which indicated that there was a doubt
in regard to the transaction.
On a totality of the facts and
circumstances and based on the evidence on the record, the first appellate court
held that the presumption under Section 139 of the Act stood rebutted and that
the defence stood probabalised. From the judgment of the High Court, the significant
aspect of the case which stands out is that there has been no appreciation of
the evidence or even a reference to the reasons furnished by the first
appellate court. The High Court adverted to the judgment of this Court in
Rangappa (supra). Having adverted to that decision, the High Court reversed the
order of acquittal by holding that a mere denial of the transactions or an omnibus
denial of the entire transaction could not beconsidered as a tenable defence.
The judgment of the High Court is unsatisfactory and does not contain any reference
to the evidence whatsoever. There was absolutely no valid basis to displace the
findings of fact which were arrived at by the first appellate court, while
acquitting the accused.
For the reasons indicated above, we
are of the view that having regard to the law laid down by the three Judge
Bench in Rangappa (supra) the appellant duly rebutted the presumption under
Section 139 of the Act. His defence that there was an absence of a legally enforceable
debt was rendered probable on the basis of the material on record.
Consequently, the order of acquittal passed by the first appellate court was justified.
In the circumstances, we allow these
appeals and set aside the impugned judgment of the High Court convicting the
appellant under Section 138 of the Act. We, accordingly, restore the order of
acquittal passed by the first appellate court.