BASALINGAPPA …APPELLANT(S) VERSUS MUDIBASAPPA …RESPONDENT(S)

Presumption was rebutted – lack of faninaical capacity of complainant

The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor

contemplated and even if led, is to be seen with a doubt.

The bare denial of the passing of the consideration apparently does not appear to be any defence.

Something which is probable has to be brought on record for getting the benefit

of shifting the onus of proving to the plaintiff.

To disprove the presumption, the defendant has to bring on record such facts

and circumstances upon consideration of which the court may either believe that the

consideration did not exist or its nonexistence was so probable that a prudent

man would, under the circumstances of the case, shall act upon the plea that it did

not exist……

Trail court dismissed the complaint as complainant failed to prove his financial capcity being retd. RTC employee where as admitted the financial postion of the accused well.

High court set aside the acquital and convicted by stating that though Accused need not entered into witness box he not made any suggestions of other source of income of the complainant.

Apex court held that

In the instant case the cheque amount involved is Rs.6,00,000/- and
the complainant is an retired bus conductor and he had retired from service in the year 1997 and has received the entire retirement monetary benefits of Rs.8,00,000/- and the same was deposited in the account of the complainant and it was encashed by the complainant.
It is observed that the complainant is silent as to his source of income at present.
He has nowhere specified as to what is he working and his earning, to show his position to lend the amount as specified in the cheque.
There is no single document to show his earning nor has the complainant executed any document for having lent such heavy amount of Rs.6,00,000/- to the accused.
Further, it is the suggestion of the accused to PW-1 that, the accused by transferring his interest to lease hold to one M/s. Sri.Lakshmi Narasimha industries has received a sum of Rs.15,00,000/- and
it is also admitted by PW-1 that he was the witness to the said transaction.
From the above, it raises doubt on the very cheque Ex.P-1 held by the complainant and the nonproduction of any document by the complainant to show his earning, and the complainant has not executed any document before lending such huge amount to the accused.

Such circumstance raises serious doubt on the transaction as claimed by the complainant.

Hon’ble High Court of Karnataka has clearly established that, the accused need not enter the witness box and rebut the presumptions.

I am of the opinion that the whole transaction is at a doubt and the circumstance does not give rise to the lending of loan amount of Rs.6,00,000/- as claimed by the complainant

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.636 of 2019
(arising out of SLP (Crl.) No.8641/2018)
BASALINGAPPA …APPELLANT(S)
VERSUS
MUDIBASAPPA …RESPONDENT(S)
J U D G M E N T
ASHOK BHUSHAN,J.
This is an appeal by accused challenging the
judgment of the High Court of Karnataka dated
04.07.2018 by which judgment the Criminal Appeal
filed by the complainant against the acquittal of the
accused has been allowed and the accused has been
convicted under Section 138 of the Negotiable
Instruments Act, 1881 and sentenced to fine of
Rs.8,00,000/-, in default of which to undergo simple
imprisonment for three months.

  1. The brief facts of the case for deciding the
    appeal are:-
    1
    2.1 The complainant gave a notice dated
    12.03.2012 to the accused, the appellant
    stating dishonour of cheque dated
    27.02.2012 for an amount of Rs.6,00,000/-
    for want of sufficient funds. Thereafter,
    on non-payment of the amount, a complaint
    dated 25.04.2012 was filed by the
    complainant under Section 138 of the
    Negotiable Instruments Act, 1881
    (hereinafter referred to as “Act, 1881).
    2.2 Allegation in the complaint was that the
    accused requested the complainant to lend a
    hand loan to meet out urgent and family
    necessary for a sum of Rs.6,00,000/-.
    Complainant lent hand loan of Rs.6,00,000/-
    dated 27.02.2012 in favour of the accused.
    A cheque dated 27.02.2012 for Rs.6,00,000/-
    was given by the accused, but the same was
    returned by the bank with the endorsement
    “Funds Insufficient” on 01.03.2012.
    2
    2.3 After notice dated 12.03.2012, which was
    served on the accused on 13.03.2012, a
    complaint was filed. PW1 filed his
    examination-in-chief and was also crossexamined on behalf of the accused. The
    complainant in support of the complaint
    filed original cheque dated 27.02.2012,
    original cheque return memo dated
    01.03.2012, office copy of the notice dated
    12.03.2012, postal receipt dated
    12.03.2012, acknowledgment letter issued by
    the Department of Post dated 16.04.2012 and
    letter to Head Post Office dated
    11.04.2012. The accused in support of his
    defence filed Ex.D1 – certified copy of
    plaint in O.S. No. 148 of 2011, Ex.D2-
    Certified copy of the private complaint
    No.119/2012 in CC No. 2298 of 2012 and in
    Ext.D3, certified copy of registered sale
    agreement.
    3
    2.4 The trial court framed following two
    questions:-
  2. Whether the complainant proves beyond
    all reasonable doubts that, the
    accused had issued a cheque bearing
    No.839374 dated 27-02-2012 for
    Rs.6,00,000/- of Pragathi Gramin Bank,
    Nijalingappa Colony Branch, Raichur in
    favour of complainant, towards
    discharge of legally enforceable debt
    or liability and the same was
    dishonored for ‘ Funds Insufficient’
    and even after deemed legal notice the
    accused has not paid the debt covered
    under the above said cheque and
    thereby committed an offence
    punishable Under Section 138 of
    Negotiable Instruments Act?
  3. What Order?
    2.5 The trial court after considering the
    evidence and material on record held that
    if the accused is able to raise a probable
    defense which creates doubts about the
    existence of a legally enforceable debt or
    liability, the prosecution can fail. By
    judgment dated 20.02.2015, the accused was
    acquitted for the offence under Section
  4. Complainant aggrieved by said
    4
    judgment filed a Criminal Appeal under
    Section 378(4) of Code of Criminal
    Procedure. The High Court set aside the
    judgment of the trial court and convicted
    the accused for the offence under Section
  5. Accused aggrieved by judgment of the
    High Court has come up in this appeal.
  6. Shri S.N. Bhat, learned counsel for the appellant
    submits that accused has successfully rebutted the
    presumption under Section 139 and has raised probable
    defence, which was accepted by the trial court after
    considering the material on record. The High Court
    erred in setting aside the acquittal order. The
    accused has questioned the financial capacity of the
    complainant and without there being any proof of
    financial capacity, the High Court erred in observing
    that judgment of the trial court is perverse. It is
    submitted that burden of proof on accused under
    Section 138 is not a heavy burden as is on a
    prosecution to prove the offence beyond reasonable
    doubt. It is submitted that the complainant being a
    5
    retired employee of Karnataka State Road Transport
    Corporation, who having retired in 1977 and encashed
    his retirement benefits of Rs.8,00,000/-, there was
    no financial capacity. It is submitted that
    complainant has filed cases under Section 138 against
    other persons also. Complainant had also made a
    payment of Rs.4,50,000/- for the agreement of sale.
    The complainant was also a witness of a sale
    agreement executed by accused, where he received an
    amount of Rs.15 lakhs as consideration. There was
    sufficient material on record to discharge the burden
    and the High Court erred in setting aside the
    acquittal order.
  7. Learned counsel for the complainant refuting the
    submissions of the learned counsel for the appellant
    contends that signature on the cheque having been
    admitted by the accused, a presumption has rightly
    been raised that cheque was given in discharge of a
    debt or liability. The accused has not been able to
    prove any probable defence and the High Court has
    rightly convicted the accused. No case was taken by
    6
    the accused that complainant has no other source of
    income. Learned counsel for the complainant has
    relied on judgment of this Court in Kishan Rao Vs.
    Shankargouda, (2018) 8 SCC 165.
  8. We have considered the submissions of the counsel
    for the parties and have perused the records.
  9. To recapitulate facts again, the cheque dated
    27.02.2012 was presented for encashment by the
    complainant, which was returned on 01.03.2012.
    Signature on the cheque is not denied by the accused,
    due to which presumption shall be raised that cheque
    was issued in discharge of any debt or liability.
    The complainant gave his evidence to prove his case.
    In the examination-in-chief, he stated that a loan of
    Rs.6,00,000/- was a hand loan and in discharge of the
    same, the accused had given a cheque dated
    27.02.2012. Neither in the complaint nor in
    examination-in-chief, complainant stated the date of
    giving the loan to the accused, however, in his
    cross-examination, he stated that in the month of
    November, 2011, accused availed loan of
    7
    Rs.6,00,000/-. In cross-examination, he further
    stated that except accused, he has not lent loan to
    any other person. He denied having filed a suit for
    recovery of money against one Balana Gouda. However,
    he admitted that suit was filed on the basis of
    promissory note with interest at the rate of @18% per
    month. He further admitted that he has filed a
    criminal case under Section 138 of Negotiable
    Instruments Act, 1881 against one Siddesh bearing CC
    No.2298 of 2012. When a suggestion was given that
    the complainant had lent Rs.25,000/- to the accused,
    he said that he does not remember the accused has
    borrowed Rs.25,000/- from him. In his crossexamination, he has admitted that he has signed as a
    witness to the agreement to transfer the lease hold
    rights of accused in favour of one M/s. Sri Lakshmi
    Narasimha Industries. Further on question, whether
    the accused received Rs.15 lakhs from the said
    transaction, he showed his ignorance. Suggestion was
    also put that a blank cheque was issued at the time
    of loan availing of Rs.25,000/-. Suggestion was also
    8
    put in his cross-examination that he was not having
    Rs.6,00,000/- on hand on the date of loan.
  10. Now, we look into the facts alleged by the
    defence. In the cross-examination, although
    complainant denied that he has filed any case under
    Section 138 against any person but Ex.D2 is certified
    copy of the complaint filed by the complainant
    against Shri Siddesh under Section 138 of Act, 1881
    for punishing the accused. Further the date of
    cheque, which was alleged to be issued by Shri
    Siddesh was also 27.02.2012. Ex.D3 was an agreement
    of sale dated 07.01.2010, by which the complainant
    paid Rs.4,50,000/- to Balana Gouda towards sale
    consideration. In document transferring the
    leasehold rights by the accused to one M/s. Sri
    Lakshmi Narasimha Industries, the complainant was a
    witness, who admitted his signature on the deed. In
    his cross-examination, accused case was that by
    virtue of such transfer of leasehold rights, he
    received Rs.15 lakhs. The trial court after
    9
    marshalling the evidence made following observations
    in Paragraph No.17:-
    “17. In the instant case the cheque amount
    involved is Rs.6,00,000/- and the
    complainant is an retired bus conductor and
    he had retired from service in the year
    1997 and has received the entire retirement
    monetary benefits of Rs.8,00,000/- and the
    same was deposited in the account of the
    complainant and it was encashed by the
    complainant. It is observed that the
    complainant is silent as to his source of
    income at present. He has nowhere specified
    as to what is he working and his earning,
    to show his position to lend the amount as
    specified in the cheque. There is no single
    document to show his earning nor has the
    complainant executed any document for
    having lent such heavy amount of
    Rs.6,00,000/- to the accused. Further, it
    is the suggestion of the accused to PW-1
    that, the accused by transferring his
    interest to lease hold to one M/s.
    Sri.Lakshmi Narasimha industries has
    received a sum of Rs.15,00,000/- and it is
    also admitted by PW-1 that he was the
    witness to the said transaction. From the
    above, it raises doubt on the very cheque
    Ex.P-1 held by the complainant and the nonproduction of any document by the
    complainant to 18 C.C.NO.2675-2012 show his
    earning, and the complainant has not
    executed any document before lending such
    huge amount to the accused. Such
    circumstance raises serious doubt on the
    transaction as claimed by the complainant.
    Hon’ble High Court of Karnataka has clearly
    established that, the accused need not
    enter the witness box and rebut the
    10
    presumptions. I am of the opinion that the
    whole transaction is at a doubt and the
    circumstance does not give rise to the
    lending of loan amount of Rs.6,00,000/- as
    claimed by the complainant. Accordingly,
    Points No.1 in the Negative.”
  11. We having noticed the facts of the case and the
    evidence on the record, we need to note the legal
    principles regarding nature of presumptions to be
    drawn under Section 139 of the Act and the manner in
    which it can be rebutted by an accused. We need to
    look into the relevant judgments of this Court, where
    these aspects have been considered and elaborated.
    Chapter XIII of the Act, 1881 contains a heading
    “Special Rules of Evidence”. Section 118 provides
    for presumptions as to negotiable instruments.
    Section 118 is as follows:-
    “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;
    11
    (b) as to date —that every negotiable
    instrument bearing a date was made
    or drawn on such date;
    XXXXXXXXXXXXXXXXXXXXXXX”
  12. Next provision, which needs to be noticed is
    Section 139, which provides for presumption in favour
    of holder. Section 139 lays down:-
    “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.”
  13. The complainant being holder of cheque and the
    signature on the cheque having not been denied by the
    accused, presumption shall be drawn that cheque was
    issued for the discharge of any debt or other
    liability. The presumption under Section 139 is a
    rebuttable presumption. Before we refer to judgments
    of this Court considering Sections 118 and 139, it is
    relevant to notice the general principles pertaining
    to burden of proof on an accused especially in a case
    where some statutory presumption regarding guilt of
    the accused has to be drawn. A Three-Judge Bench of
    12
    this Court in Kali Ram Vs. State of Himachal Pradesh,
    (1973) 2 SCC 808 laid down following:-
    “23. ……………………One of the cardinal principles
    which has always to be kept in view in our
    system of administration of justice for
    criminal cases is that a person arraigned
    as an accused is presumed to be innocent
    unless that presumption is rebutted by the
    prosecution by production of evidence as
    may show him to be guilty of the offence
    with which he is charged. The burden of
    proving the guilt of the accused is upon
    the prosecution and unless it relieves
    itself of that burden, the courts cannot
    record a finding of the guilt of the
    accused. There are certain cases in which
    statutory presumptions arise regarding the
    guilt of the accused, but the burden even
    in those cases is upon the prosecution to
    prove the existence of facts which have to
    be present before the presumption can be
    drawn. Once those facts are shown by the
    prosecution to exist, the Court can raise
    the statutory presumption and it would, in
    such an event, be for the accused to rebut
    the presumption. The onus even in such
    cases upon the accused is not as heavy as
    is normally upon the prosecution to prove
    the guilt of the accused. If some material
    is brought on the record consistent with
    the innocence of the accused which may
    reasonably be true, even though it is not
    positively proved to be true, the accused
    would be entitled to acquittal.”
  14. This Court in Bharat Barrel & Drum Manufacturing
    Company Vs. Amin Chand Pyarelal, (1999) 3 SCC 35 had
    occasion to consider Section 118(a) of the Act. This
    13
    Court held that once execution of the promissory note
    is admitted, the presumption under Section 118(a)
    would arise that it is supported by a consideration.
    Such a presumption is rebuttable and defendant can
    prove the non-existence of a consideration by raising
    a probable defence. In paragraph No.12 following has
    been laid down:-
    “12. Upon consideration of various
    judgments as noted hereinabove, the
    position of law which emerges is that once
    execution of the promissory note is
    admitted, the presumption under Section
    118(a) would arise that it is supported by
    a consideration. Such a presumption is
    rebuttable. The defendant can prove the
    non-existence of a consideration by raising
    a probable defence. If the defendant is
    proved to have discharged the initial onus
    of proof showing that the existence of
    consideration was improbable or doubtful or
    the same was illegal, the onus would shift
    to the plaintiff who will be obliged to
    prove it as a matter of fact and upon its
    failure to prove would disentitle him to
    the grant of relief on the basis of the
    negotiable instrument. The burden upon the
    defendant of proving the non-existence of
    the consideration can be either direct or
    by bringing on record the preponderance of
    probabilities by reference to the
    circumstances upon which he relies. In such
    an event, the plaintiff is entitled under
    law to rely upon all the evidence led in
    the case including that of the plaintiff as
    well. In case, where the defendant fails to
    discharge the initial onus of proof by
    showing the non-existence of the
    14
    consideration, the plaintiff would
    invariably be held entitled to the benefit
    of presumption arising under Section 118(a)
    in his favour. The court may not insist
    upon the defendant to disprove the
    existence of consideration by leading
    direct evidence as the existence of
    negative evidence is neither possible nor
    contemplated and even if led, is to be seen
    with a doubt. The bare denial of the
    passing of the consideration apparently
    does not appear to be any defence.
    Something which is probable has to be
    brought on record for getting the benefit
    of shifting the onus of proving to the
    plaintiff. To disprove the presumption, the
    defendant has to bring on record such facts
    and circumstances upon consideration of
    which the court may either believe that the
    consideration did not exist or its nonexistence was so probable that a prudent
    man would, under the circumstances of the
    case, shall act upon the plea that it did
    not exist……”
  15. Justice S.B. Sinha in M.S. Narayana Menon Alias
    Mani Vs. State of Kerala and Another, (2006) 6 SCC 39
    had considered Sections 118(a), 138 and 139 of the
    Act, 1881. It was held that presumptions both under
    Sections 118(a) and 139 are rebuttable in nature.
    Explaining the expressions “may presume” and “shall
    presume” referring to an earlier judgment, following
    was held in paragraph No.28:-
    “28. What would be the effect of the
    expressions “may presume”, ‘shall presume”
    15
    and “conclusive proof” has been considered
    by this Court in Union of India v. Pramod
    Gupta, (2005) 12 SCC 1, in the following
    terms: (SCC pp. 30-31, para 52)
    “It is true that the legislature used
    two different phraseologies ‘shall be
    presumed’ and ‘may be presumed’ in
    Section 42 of the Punjab Land Revenue
    Act and furthermore although provided
    for the mode and manner of rebuttal
    of such presumption as regards the
    right to mines and minerals said to
    be vested in the Government vis-à-vis
    the absence thereof in relation to
    the lands presumed to be retained by
    the landowners but the same would not
    mean that the words ‘shall presume’
    would be conclusive. The meaning of
    the expressions ‘may presume’ and
    ‘shall presume’ have been explained
    in Section 4 of the Evidence Act,
    1872, from a perusal whereof it would
    be evident that whenever it is
    directed that the court shall presume
    a fact it shall regard such fact as
    proved unless disproved. In terms of
    the said provision, thus, the
    expression ‘shall presume’ cannot be
    held to be synonymous with
    ‘conclusive proof’.”
  16. It was noted that the expression “shall presume”
    cannot be held to be synonymous with conclusive
    proof. Referring to definition of words “proved” and
    “disproved” under Section 3 of the Evidence Act,
    following was laid down in paragraph No.30:
    16
    “30. Applying the said definitions of
    “proved” or “disproved” to the principle
    behind Section 118(a) of the Act, the court
    shall presume a negotiable instrument to be
    for consideration unless and until after
    considering the matter before it, it either
    believes that the consideration does not
    exist or considers the non-existence of the
    consideration so probable that a prudent
    man ought, under the circumstances of the
    particular case, to act upon the
    supposition that the consideration does not
    exist. For rebutting such presumption, what
    is needed is to raise a probable defence.
    Even for the said purpose, the evidence
    adduced on behalf of the complainant could
    be relied upon.”
  17. This Court held that what is needed is to raise a
    probable defence, for which it is not necessary for
    the accused to disprove the existence of
    consideration by way of direct evidence and even the
    evidence adduced on behalf of the complainant can be
    relied upon. Dealing with standard of proof,
    following was observed in paragraph No.32:-
    “32. The standard of proof evidently is
    preponderance of probabilities. Inference
    of preponderance of probabilities can be
    drawn not only from the materials on record
    but also by reference to the circumstances
    upon which he relies.”
    17
  18. In Krishna Janardhan Bhat Vs. Dattatraya G.
    Hegde, (2008) 4 SCC 54, this Court held that an
    accused for discharging the burden of proof placed
    upon him under a statute need not examine himself. He
    may discharge his burden on the basis of the
    materials already brought on record. Following was
    laid down in Paragraph No.32:-
    “32. An accused for discharging the burden
    of proof placed upon him under a statute
    need not examine himself. He may discharge
    his burden on the basis of the materials
    already brought on record. An accused has a
    constitutional right to maintain silence.
    Standard of proof on the part of an accused
    and that of the prosecution in a criminal
    case is different.”
  19. This Court again reiterated that whereas
    prosecution must prove the guilt of an accused beyond
    all reasonable doubt, the standard of proof so as to
    prove a defence on the part of an accused is
    “preponderance of probabilities”. In paragraph
    No.34, following was laid down:-
    “34. Furthermore, whereas prosecution must
    prove the guilt of an accused beyond all
    reasonable doubt, the standard of proof so
    as to prove a defence on the part of an
    accused is “preponderance of
    probabilities”. Inference of preponderance
    18
    of probabilities can be drawn not only from
    the materials brought on record by the
    parties but also by reference to the
    circumstances upon which he relies.”
  20. In Kumar Exports Vs. Sharma Carpets, (2009) 2 SCC
    513, this Court again examined as to when complainant
    discharges the burden to prove that instrument was
    executed and when the burden shall be shifted. In
    paragraph Nos. 18 to 20, following has been laid
    down:-
    “18. Applying the definition of the word
    “proved” in Section 3 of the Evidence Act
    to the provisions of Sections 118 and 139
    of the Act, it becomes evident that in a
    trial under Section 138 of the Act a
    presumption will have to be made that every
    negotiable instrument was made or drawn for
    consideration and that it was executed for
    discharge of debt or liability once the
    execution of negotiable instrument is
    either proved or admitted. As soon as the
    complainant discharges the burden to prove
    that the instrument, say a note, was
    executed by the accused, the rules of
    presumptions under Sections 118 and 139 of
    the Act help him shift the burden on the
    accused. The presumptions will live, exist
    and survive and shall end only when the
    contrary is proved by the accused, that is,
    the cheque was not issued for consideration
    and in discharge of any debt or liability.
    A presumption is not in itself evidence,
    but only makes a prima facie case for a
    party for whose benefit it exists.
    19
  21. The use of the phrase “until the
    contrary is proved” in Section 118 of the
    Act and use of the words “unless the
    contrary is proved” in Section 139 of the
    Act read with definitions of “may presume”
    and “shall presume” as given in Section 4
    of the Evidence Act, makes it at once clear
    that presumptions to be raised under both
    the provisions are rebuttable. When a
    presumption is rebuttable, it only points
    out that the party on whom lies the duty of
    going forward with evidence, on the fact
    presumed and when that party has produced
    evidence fairly and reasonably tending to
    show that the real fact is not as presumed,
    the purpose of the presumption is over.
  22. ……………………The accused may adduce direct
    evidence to prove that the note in question
    was not supported by consideration and that
    there was no debt or liability to be
    discharged by him. However, the court need
    not insist in every case that the accused
    should disprove the non-existence of
    consideration and debt by leading direct
    evidence because the existence of negative
    evidence is neither possible nor
    contemplated. At the same time, it is clear
    that bare denial of the passing of the
    consideration and existence of debt,
    apparently would not serve the purpose of
    the accused. Something which is probable
    has to be brought on record for getting the
    burden of proof shifted to the complainant.
    To disprove the presumptions, the accused
    should bring on record such facts and
    circumstances, upon consideration of which,
    the court may either believe that the
    consideration and debt did not exist or
    their non-existence was so probable that a
    prudent man would under the circumstances
    of the case, act upon the plea that they
    did not exist……………”
    20
  23. A Three-Judge Bench of this Court in Rangappa Vs.
    Sri Mohan, (2010) 11 SCC 441 had occasion to
    elaborately consider provisions of Sections 138 and
  24. In the above case, trial court had acquitted
    the accused in a case relating to dishonour of cheque
    under Section 138. The High Court had reversed the
    judgment of the trial court convicting the accused.
    In the above case, the accused had admitted
    signatures on the cheque. This Court held that where
    the fact of signature on the cheque is acknowledged,
    a presumption has to be raised that the cheque
    pertained to a legally enforceable debt or liability,
    however, this presumption is of a rebuttal nature and
    the onus is then on the accused to raise a probable
    defence. In Paragraph No.13, following has been laid
    down:-
    “13. The High Court in its order noted that
    in the course of the trial proceedings, the
    accused had admitted that the signature on
    the impugned cheque (No. 0886322 dated 8-2-
    2001) was indeed his own. Once this fact
    has been acknowledged, Section 139 of the
    Act mandates a presumption that the cheque
    pertained to a legally enforceable debt or
    liability. This presumption is of a
    rebuttal nature and the onus is then on the
    21
    accused to raise a probable defence. With
    regard to the present facts, the High Court
    found that the defence raised by the
    accused was not probable.”
  25. After referring to various other judgments of
    this Court, this Court in that case held that the
    presumption mandated by Section 139 of the Act does
    indeed include the existence of a legally enforceable
    debt or liability, which, of course, is in the nature
    of a rebuttable presumption. In paragraph No.26,
    following was laid down:-
    “26. In light of these extracts, we are in
    agreement with the respondent claimant that
    the presumption mandated by Section 139 of
    the Act does indeed include the existence
    of a legally enforceable debt or liability.
    To that extent, the impugned observations
    in Krishna Janardhan Bhat, (2008) 4 SCC 54
    may not be correct. However, this does not
    in any way cast doubt on the correctness of
    the decision in that case since it was
    based on the specific facts and
    circumstances therein. As noted in the
    citations, this is of course in the nature
    of a rebuttable presumption and it is open
    to the accused to raise a defence wherein
    the existence of a legally enforceable debt
    or liability can be contested. However,
    there can be no doubt that there is an
    initial presumption which favours the
    complainant.”
    22
  26. Elaborating further, this Court held that Section
    139 of the Act is an example of a reverse onus and
    the test of proportionality should guide the
    construction and interpretation of reverse onus
    clauses on the defendant-accused and the defendantaccused cannot be expected to discharge an unduly
    high standard of proof. In paragraph Nos. 27 and 28,
    following was laid down:-
    “27. 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. While Section 138
    of the Act specifies a strong criminal
    remedy in relation to the dishonour of
    cheques, the rebuttable presumption under
    Section 139 is a device to prevent undue
    delay in the course of litigation. However,
    it must be remembered that the offence made
    punishable by Section 138 can be better
    described as a regulatory offence since the
    bouncing of a cheque is largely in the
    nature of a civil wrong whose impact is
    usually confined to the private parties
    involved in commercial transactions. In
    such a scenario, the test of
    proportionality should guide the
    construction and interpretation of reverse
    onus clauses and the defendant-accused
    cannot be expected to discharge an unduly
    high standard of proof.
  27. In the absence of compelling
    justifications, reverse onus clauses
    usually impose an evidentiary burden and
    23
    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.”
  28. We may now notice judgment relied by the learned
    counsel for the complainant, i.e., judgment of this
    Court in Kishan Rao Vs. Shankargouda, (2018) 8 SCC
  29. This Court in the above case has examined
    Section 139 of the Act. In the above case, the only
    defence which was taken by the accused was that
    cheque was stolen by the appellant. The said defence
    was rejected by the trial court. In paragraph Nos.
    21 to 23, following was laid down:-
    “21. In the present case, the trial court
    as well as the appellate court having found
    that cheque contained the signatures of the
    accused and it was given to the appellant
    to present in the Bank, the presumption
    under Section 139 was rightly raised which
    was not rebutted by the accused. The
    accused had not led any evidence to rebut
    24
    the aforesaid presumption. The accused even
    did not come in the witness box to support
    his case. In the reply to the notice which
    was given by the appellant, the accused
    took the defence that the cheque was stolen
    by the appellant. The said defence was
    rejected by the trial court after
    considering the evidence on record with
    regard to which no contrary view has also
    been expressed by the High Court.
  30. Another judgment which needs to be
    looked into is Rangappa v. Sri Mohan (2010)
    11 SCC 441. A three-Judge Bench of this
    Court had occasion to examine the
    presumption under Section 139 of the 1881
    Act. This Court in the aforesaid case has
    held that in the event the accused is able
    to raise a probable defence which creates
    doubt with regard to the existence of a
    debt or liability, the presumption may
    fail. Following was laid down in paras 26
    and 27: (SCC pp. 453-54)
    “26. In light of these extracts, we
    are in agreement with the respondent
    claimant that the presumption
    mandated by Section 139 of the Act
    does indeed include the existence of
    a legally enforceable debt or
    liability. To that extent, the
    impugned observations in Krishna
    Janardhan Bhat, may not be correct.
    However, this does not in any way
    cast doubt on the correctness of the
    decision in that case since it was
    based on the specific facts and
    circumstances therein. As noted in
    the citations, this is of course in
    the nature of a rebuttable
    presumption and it is open to the
    accused to raise a defence wherein
    the existence of a legally
    25
    enforceable debt or liability can be
    contested. However, there can be no
    doubt that there is an initial
    presumption which favours the
    complainant.
  31. 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. While Section
    138 of the Act specifies a strong
    criminal remedy in relation to the
    dishonour of cheques, the rebuttable
    presumption under Section 139 is a
    device to prevent undue delay in the
    course of litigation. However, it
    must be remembered that the offence
    made punishable by Section 138 can be
    better described as a regulatory
    offence since the bouncing of a
    cheque is largely in the nature of a
    civil wrong whose impact is usually
    confined to the private parties
    involved in commercial transactions.
    In such a scenario, the test of
    proportionality should guide the
    construction and interpretation of
    reverse onus clauses and the
    defendant-accused cannot be expected
    to discharge an unduly high standard
    of proof.”
  32. No evidence was led by the accused. The
    defence taken in the reply to the notice
    that cheque was stolen having been rejected
    by the two courts below, we do not see any
    basis for the High Court coming to the
    conclusion that the accused has been
    successful in creating doubt in the mind of
    the Court with regard to the existence of
    the debt or liability. How the presumption
    26
    under Section 139 can be rebutted on the
    evidence of PW 1, himself has not been
    explained by the High Court.
  33. The above case was a case where this Court did
    not find the defence raised by the accused probable.
    The only defence raised was that cheque was stolen
    having been rejected by the trial court and no
    contrary opinion having been expressed by the High
    Court, this Court reversed the judgment of the High
    Court restoring the conviction. The respondent
    cannot take any benefit of the said judgment, which
    was on its own facts.
  34. We having noticed the ratio laid down by this
    Court in above cases on Sections 118(a) and 139, we
    now summarise the principles enumerated by this Court
    in following manner:-
    (i) Once the execution of cheque is
    admitted Section 139 of the Act
    mandates a presumption that the
    cheque was for the discharge of any
    debt or other liability.
    27
    (ii) The presumption under Section 139 is
    a rebuttable presumption and the
    onus is on the accused to raise the
    probable defence. The standard of
    proof for rebutting the presumption
    is that of preponderance of
    probabilities.
    (iii) To rebut the presumption, it is open
    for the accused to rely on evidence
    led by him or accused can also rely
    on the materials submitted by the
    complainant in order to raise a
    probable defence. Inference of
    preponderance of probabilities can
    be drawn not only from the materials
    brought on record by the parties but
    also by reference to the
    circumstances upon which they rely.
    (iv) That it is not necessary for the
    accused to come in the witness box
    in support of his defence, Section
    28
    139 imposed an evidentiary burden
    and not a persuasive burden.
    (v) It is not necessary for the accused
    to come in the witness box to
    support his defence.
  35. Applying the preposition of law as noted above,
    in facts of the present case, it is clear that
    signature on cheque having been admitted, a
    presumption shall be raised under Section 139 that
    cheque was issued in discharge of debt or liability.
    The question to be looked into is as to whether any
    probable defence was raised by the accused. In
    cross-examination of the PW1, when the specific
    question was put that cheque was issued in relation
    to loan of Rs.25,000/- taken by the accused, the PW1
    said that he does not remember. PW1 in his evidence
    admitted that he retired in 1997 on which date he
    received monetary benefit of Rs. 8 lakhs, which was
    encashed by the complainant. It was also brought in
    the evidence that in the year 2010, the complainant
    entered into a sale agreement for which he paid an
    29
    amount of Rs.4,50,000/- to Balana Gouda towards sale
    consideration. Payment of Rs.4,50,000/- being
    admitted in the year 2010 and further payment of loan
    of Rs.50,000/- with regard to which complaint No.119
    of 2012 was filed by the complainant, copy of which
    complaint was also filed as Ex.D2, there was burden
    on the complainant to prove his financial capacity.
    In the year 2010-2011, as per own case of the
    complainant, he made payment of Rs.18 lakhs. During
    his cross-examination, when financial capacity to pay
    Rs.6 lakhs to the accused was questioned, there was
    no satisfactory reply given by the complainant. The
    evidence on record, thus, is a probable defence on
    behalf of the accused, which shifted the burden on
    the complainant to prove his financial capacity and
    other facts.
  36. There was another evidence on the record, i.e.,
    copy of plaint in O.S. No. 148 of 2011 filed by the
    complainant for recovery of loan of Rs. 7 lakhs given
    to one Balana Gouda in December, 2009. Thus, there
    was evidence on record to indicate that in December,
    2009, he gave Rs.7 lakhs in sale agreement, in 2010,
    30
    he made payment of Rs.4,50,000/- towards sale
    consideration and further he gave a loan of
    Rs.50,000/- for which complaint was filed in 2012 and
    further loan of Rs.6 lakhs in November, 2011. Thus,
    during the period from 2009 to November, 2011, amount
    of Rs.18 lakhs was given by the complainant to
    different persons including the accused, which put a
    heavy burden to prove the financial capacity when it
    was questioned on behalf of the accused, the accused
    being a retired employee of State Transport
    Corporation, who retired in 1997 and total retirement
    benefits, which were encashed were Rs.8 lakhs only.
    The High Court observed that though the complainant
    is retired employee, the accused did not even suggest
    that pension is the only means for survival of the
    complainant. Following observations were made in
    Paragraph 16 of the judgment of the High Court:-
    “16. Though the complainant is retired
    employee, the accused did not even suggest
    that pension is the only means for survival
    of the complainant. Under these
    circumstances, the Trial Court’s finding
    that the complainant failed to discharge
    his initial burden of proof of lending
    capacity is perverse.”
    31
  37. There is one more aspect of the matter which also
    needs to be noticed. In the complaint filed by the
    complainant as well as in examination-in-chief the
    complainant has not mentioned as to on which date,
    the loan of Rs.6 lakhs was given to the accused. It
    was during cross-examination, he gave the date as
    November, 2011. Under Section 118(b), a presumption
    shall be made as to date that every negotiable
    instrument was made or drawn on such date.
    Admittedly, the cheque is dated 27.02.2012, there is
    not even a suggestion by the complainant that a post
    dated cheque was given to him in November, 2011
    bearing dated 27.02.2012. Giving of a cheque on
    27.02.2012, which was deposited on 01.03.2012 is not
    compatible with the case of the complainant when we
    read the complaint submitted by the complainant
    especially Para 1 of the complaint, which is
    extracted as below:-
    “1. The accused is a very good friend of
    the complainant. The accused requested the
    Complainant a hand loan to meet out urgent
    and family necessary a sum of Rs.6,00,000/-
    (Rupees Six Lakh) and on account of long
    standing friendship and knowing the
    difficulties, which is being faced by the
    32
    accused the complainant agreed to lend hand
    loan to meet out the financial difficulties
    of the accused and accordingly the
    Complainant lend hand loan Rs.6,00,000/-
    (Rupees Six Lakh) dated 27.02.2012 in favour
    of the Complainant stating that on its
    presentation it will be honored. But to the
    surprise of the Complainant on presentation
    of the same for collection through his Bank
    the Cheque was returned by the Bank with an
    endorsement “Funds Insufficient” on 01-03-
    2012.”
  38. Thus, there is a contradiction in what was
    initially stated by the complainant in the complaint
    and in his examination-in-chief regarding date on
    which loan was given on one side and what was said in
    cross-examination in other side, which has not been
    satisfactorily explained. The High Court was unduly
    influenced by the fact that the accused did not reply
    the notice denying the execution of cheque or legal
    liability. Even before the trial court, appellantaccused has not denied his signature on the cheque.
  39. We are of the view that when evidence was led
    before the Court to indicate that apart from loan of
    Rs.6 lakhs given to the accused, within 02 years,
    amount of Rs.18 lakhs have been given out by the
    33
    complainant and his financial capacity being
    questioned, it was incumbent on the complainant to
    have explained his financial capacity. Court cannot
    insist on a person to lead negative evidence. The
    observation of the High Court that trial court’s
    finding that the complainant failed to prove his
    financial capacity of lending money is perverse
    cannot be supported. We fail to see that how the
    trial court’s findings can be termed as perverse by
    the High Court when it was based on consideration of
    the evidence, which was led on behalf of the defence.
    This Court had occasion to consider the expression
    “perverse” in Gamini Bala Koteswara Rao and others
    Vs. State of Andhra Pradesh through Secretary, (2009)
    10 SCC 636, this Court held that although High Court
    can reappraise the evidence and conclusions drawn by
    the trial court but judgment of acquittal can be
    interfered with only judgment is against the weight
    of evidence. In Paragraph No.14 following has been
    held:-
    “14. We have considered the arguments
    advanced and heard the matter at great
    length. It is true, as contended by Mr Rao,
    that interference in an appeal against an
    34
    acquittal recorded by the trial court
    should be rare and in exceptional
    circumstances. It is, however, well settled
    by now that it is open to the High Court to
    reappraise the evidence and conclusions
    drawn by the trial court but only in a case
    when the judgment of the trial court is
    stated to be perverse. The word “perverse”
    in terms as understood in law has been
    defined to mean “against the weight of
    evidence”. We have to see accordingly as to
    whether the judgment of the trial court
    which has been found perverse by the High
    Court was in fact so.”
  40. High Court without discarding the evidence, which
    was led by defence could not have held that finding
    of trial court regarding financial capacity of the
    complainant is perverse. We are, thus, satisfied
    that accused has raised a probable defence and the
    findings of the trial court that complainant failed
    to prove his financial capacity are based on evidence
    led by the defence. The observations of the High
    Court that findings of the trial court are perverse
    are unsustainable. We, thus, are of the view that
    judgment of the High Court is unsustainable.
    35
  41. In result, the appeal is allowed and the judgment
    of the High Court is set aside and that of the trial
    court is restored.

………………….J.
(ASHOK BHUSHAN )
………………….J.
(K.M. JOSEPH )
New Delhi,
April 09, 2019.
36