REPORTABLE

IN THE SUPREME COURT OF INDIA    CRIMINAL APPELLATE JURISDICTION

   CRIMINAL APPEAL NO. 508   OF 2019      (Arising out of Special Leave Petition (Crl.) 1883 of 2018)  

ROHITBHAI JIVANLAL PATEL ….. APPELLANT(S)

VS.

STATE OF GUJARAT & ANR.        …..  RESPONDENT(S)

JUDGMENT

Dinesh Maheshwari, J.

Leave granted.

2. This appeal is directed against the common judgment and order dated

08.01.2018 in R/Criminal  Appeal  No.  1187/2017 connected with R/Criminal

Appeal Nos. 1191/2017 to 1196/2017 whereby, the High Court of Gujarat at

Ahmedabad  has  reversed  the  respective  judgment  and  orders  dated

09.06.2017 as passed by the 8th Additional Senior Civil Judge and Additional

Chief  Judicial  Magistrate,  Vadodara  in  7  criminal  cases1 pertaining  to  the

offence under Section 138 of the Negotiable Instruments Act, 1881 ('the NI

Act') for dishonour of 7 cheques in the sum of Rs. 3 lakhs each, as said to

have  been  drawn  by  the  accused-appellant  in  favour  of  the  complainant-

respondent No. 2.  In the impugned judgment and order dated 08.01.2018, the

1 Nos. 44345/2009, 46499/2008, 46254/2008, 48420/2008, 40321/2008, 48631/2008 and  46503/2008 respectively.

1

High Court has disapproved the acquittal of the accused-appellant and, while

holding him guilty of the offence under Section 138 of the NI Act, has awarded

him the punishment of simple imprisonment for a period of 1 year with fine to

the extent of double the amount of cheque (i.e., a sum of Rs. 6 lakhs) with

default stipulation of further imprisonment for a period of 1 year in each case;

and, out of the amount payable as fine, the complainant-respondent No. 2 is

ordered to be compensated to the tune of Rs. 5.5. lakhs in each case.  

3. Briefly  put,  the  substance  of  allegations  and  assertions  of  the

complainant-respondent No. 2 in each of the 7 cases aforesaid had been as

follows: He was having his office in Windor Plaza at Alkapuri, Vadodara and

had been visiting the shop of his friend Shri Jagdishbhai in National Plaza in

the same locality; the accused-appellant, a trader of edible spices, had his

shop  near  the  shop  of  Shri  Jagdishbhai  and  in  due  course  of  time,  the

accused, the complainant and the said Shri Jagdishbhai became good friends.

The complainant alleged that after developing such friendship, the accused

demanded  from him  a  sum of  Rs.  22,50,000/-  as  loan  for  his  immediate

requirement; and he (the complainant) extended such loan to the accused for

a  short  term  by  collecting  money  in  piecemeal  from  his  business  group.

According  to  the  complainant,  upon  regular  demand  for  re-payment,  the

accused gave him cheques of  different  dates drawn on Corporation Bank,

Alkapuri Branch, Vadodara and also gave the acceptance for re-payment on a

stamp paper.  The complainant  alleged that  the cheques  so  issued by the

accused, on being presented to the Bank for collection, were returned unpaid

2

either for  the reason that  the  "opening balance was insufficient"  or for the

reason that the "account was closed". While alleging that the intention of the

accused had been of breach of trust and cheating, the complainant pointed

out  that  he  got  served the  notices  on  the  accused after  dishonour  of  the

cheques but did not receive the requisite payment. It is noticed that in some of

the cases, the accused-appellant did send his reply, denying the transaction

as alleged.

4. With  the  allegations  and  assertions  aforesaid,  the  complainant-

respondent No. 2 filed the above-mentioned 7 complaint cases against the

accused-appellant  in  the  months  of  June  to  November,  2008.  In  trial,  the

complainant examined himself as PW-1 and the said Shri Jagdishbhai as PW-

2.  The  complainant  also  produced  the  relevant  documentary  evidence

including the cheques in question; the Bank returning memos and intimation

letters; the demand notices; the replies wherever sent by the appellant; and

the written acknowledgement on a stamp paper by the accused. The accused

was examined under Section 313 of the Code of Criminal Procedure, 1973

where he asserted that he had no money transaction with the complainant;

and had neither issued any cheque nor written any note for any legal debt in

favour  of  the  complainant.  The  accused-appellant,  however,  asserted  that

several  years  in  the  past,  he  had  some  transaction  with  the  said  Shri

Jagdishbhai  and  the  cheques  and  blank  stamp  paper  lying  with  Shri

Jagdishbhai have been fraudulently misused to unlawfully recover the money

from him. The accused-appellant, however, did not lead any evidence.  

3

5. After having heard the parties, the Trial Court formulated similar points

for determination in each of these 7 cases which could be noticed as under2:

"1.  Whether  the  complainant  proves  that  the  accused  has issued and handed over the Cheque bearing No. 763346 of Rs. 3,  00,000/-  towards  legal  due  amount  from  the  account maintained by him,  and upon presenting the said  cheque in bank  of  the  complainant  for  encashment,  the  same  was returned back unpaid with endorsement of the bank "Today's opening balance is insufficient" and thereafter the complainant has served demand notice to the accused and the said notice has been served to the accused even though, the accused has not paid the cheque amount within the stipulated Notice period and  thereby  the  accused  has  committed  offence  punishable under section 138 of the Negotiable Instrument Act?

2. What order?"

6. After examining the record, the Trial Court found that the accused had

admitted his signature on the cheques and, with reference to the decision of

this Court in the case of Rangappa v. Sri Mohan : (2010) 11 SCC 441, drew

the presumption envisaged by Section 139 of NI Act.  

6.1. However,  after having drawn the presumption, the Trial  Court  found

several  factors in favour of the accused and observed,  inter alia,  that:  (a)

there  was  no  documentary  evidence  to  show  the  source  of  income  for

advancing the loan to the accused; (b) the complainant failed to record the

transaction in the form of receipts, promissory notes or even kaccha notes;

(c)  vague  and  uncertain  statement  was  made  by  the  complainant  as

compared  to  the  statement  of  his  witness-Shri  Jagdishbhai;  (d) the

complainant had no knowledge about the dates and other particulars of such

2 The extraction is from the judgment of the Trial Court in Criminal Case No. 46499 of 2008.

4

cheques; (e)  the witness of complainant was in know of the facts more than

the complainant; (f) the complaint allegedly extended the loan to the tune of

Rs. 22,50,000/- but the 7 cheques in these cases were of Rs. 3,00,000/- each

and there was no explanation from the complainant as regards the remaining

Rs.  1,50,000/-;  and (g)  the suggestion about  washing away of  the earlier

cheques in rains was also doubtful when the complainant's office was on the

8th floor of Windor Plaza  

6.2 With reference to the aforesaid factors and circumstances,  the Trial

Court  concluded  that  the  accused  was  successful  in  bringing  rebuttal

evidence  to  the  requisite  level  of  preponderance  of  probabilities;  and

observed that  the complainant  had failed to prove,  beyond all  reasonable

doubt, that the cheques were issued in part payment of the loan amount of

Rs. 22,50,000/-. Hence, all the 7 complaint cases were dismissed by similar

but  separate  judgment  and  orders  dated  09.06.2017  while  observing  as

under3:-  

"19……All  these  circumstances  creates  doubt  of  the complainant (sic) as  alleged  and  accused  has  brought  on record  rebuttable  evidence  upto  to  requisite  level  ie. Preponderance of probabilities and as such considering section 5,6,32 and 118 and 139 of N.I. Act complainant failed to prove complaint beyond reasonable doubt that the cheque has been issued for the recoverable debt/liability.

*** *** *** ***

22.  Therefore  as  discussion  made  herein  above  the complainant failed to prove that the disputed cheque has been issued by the accused for the part payment of transaction of Rs.  22,50,000/-  therefore accused is  entitled to  get  acquittal

3 . Again, the extraction is from the judgment of the Trial Court in Criminal Case No. 46499 of 2008.

5

who has brought on record the circumstances which rebut the presumption under section 118,119, of N.I. Act… (sic)"              

7. Against  the  aforementioned  judgment  and  orders  of  acquittal,  the

complainant preferred appeals before the High Court of Gujarat, which have

been considered and decided together by the impugned common judgment

and order dated 08.01.2018. The High Court observed that the presumption

under Sections 118 and 139 of the NI Act was required to be drawn that the

cheques were issued for consideration and until  contrary was proved, such

presumption  would  hold  good;  that  the  complainant  had  proved  legally

enforceable  debt  in  the  oral  as  also  documentary  evidence,  including  the

written acknowledgment by the accused on stamp paper; and that except bare

denial, nothing was brought on record by the accused to dislodge the proof

adduced by the complainant.

7.1 The High Court  observed that  if  the transaction in question was not

reflected in the accounts and income-tax returns, that would at best hold the

assesse  or  lender  liable  for  action  under  the  income-tax  laws  but,  if  the

complainant  succeeds in  showing the lending of  amount,  the existence of

legally enforceable debt cannot be denied. The High Court also observed that

the issue regarding washing away of  the cheques in rain water was of  no

significance when the accused had accepted his liability in clear terms. The

High Court found that the defence plea of the accused that the money was

given as hand loan by his friend Shri Jagdishbhai got falsified by the version of

the said Shri Jagdishbhai, who was examined as a witness on behalf of the

6

complainant. The High Court, therefore, set aside the impugned orders and,

while convicting the accused-appellant for the offence under Section 138 of

the  NI  Act,  sentenced  him  in  the  manner  noticed  hereinbefore.  The  High

Court, inter alia, observed and held as under:        

“24. It is necessary at this stage also to refer to the emphasis laid by the learned counsel appearing for the respondent No.2 on the source of the fund which has been lent by the appellant. It has emerged from the detailed examination of the record, as also detailed examination-in-chief as well as cross-examination, that the complainant runs the business. He also maintains the books of account and he has his own factory in the name and style  of  ‘Ashirwad  Enterprise’ and  manufactures  plastic.  The said  factory  is  situated  at  Jambusar.  Ordinarily,  any  prudent business  person  would  prefer  to  transact  by  cheque  while lending  money,  but  it  is  quite  often  noticed  that  the  cash transactions in the business would allow huge sum of money as cash, which sometimes are shown in the books of account as cash  on  hands  or  otherwise  as  amount  available  on  books. Assuming  that  cheque  transaction  of  lending  of  amount  is absent and income-tax returns also do not reflect such amount, that at  the best would hold the assessee or lender liable for action under  the  Income-tax  laws.  However,  otherwise,  if  he succeeds  in  showing  lending  of  such  amount,  both  by  oral evidence of himself and his friend, on whom even respondent No.2 relies upon and from the writing of the respondent No.2 given separately along with seven cheques signed by him, what possible  reasons  could  weigh  with  the  Court  to  deny  the existence  of  legally  enforceable  debt  in  such  glaring circumstances.  

25.  Considering  the  fact  that  the  complainant  maintains  his books  of  account,  coupled  with  the  fact  that  the  respondent No.2  had  merely  refuted  on  flimsy  ground  of  his  having transacted  with  witness  Jagdishbhai  and  not  with  the complainant,  has  failed  to  discharge  the  burden  which  had shifted upon him. It is to be noted that the respondent No.2 has admitted his signature on the impugned cheque. At no point of time,  the  cheque  has  been  disputed……Once  this  fact  is acknowledged that the signature on the cheque is that of the respondent  No.  2-accused,  section  139  of  the  Negotiable Instruments  Act  would  mandate  the  presumption  that  the cheque  concerns  a  legally  enforceable  debt  or  liability.  Of

7

course, this presumption is in the nature of rebuttal and onus is on the accused thereafter to raise a probable defence.

25.1 As can be noted from the chronology of events and the material that has been placed before this Court that the defence raised by the accused is not at all  probable. The respondent No.2-accused states that the money was given as a hand loan by  his  friend  Jagdishbhai  and  not  the  appellant,  also  gets falsified completely  by the version of  Jagdishbhai.  It  appears that in case of all the seven cheques when notices were given prior to the filing of the complaint, he has chosen not to reply to four  of  the  notices.  Either  on  account  of  insufficiency  of  the funds or because he has closed account that the cheques could not be realized. All these circumstances cumulatively lead this Court to conclude that the appellant succeeded in proving the legally enforceable debt and no probable defence for rebutting the statutory presumption is raised by the respondent No.2.

25.2 Initial presumption as contemplated under section 139 of the Negotiable Instruments Act, when the proof of lending of the money and acceptance of the signatures on the cheques, shall need to be raised by the Court in favour of the appellant.

*** *** ***

28.  ………. Reasonably,  when the  appellant  had proved the legally enforceable debt, not only through his own evidence, but also through the evidence of his friend Jagdishbhai  and also other contemporaneous record, more particularly, the document at Exhibit 24, which is a writing by which the respondent No.2 clearly  indicates  and  accepts  his  liability  to  the  tune  of  Rs. 22.50 lakh. Thus, the burden had shifted upon the respondent No. 2. The presumption which was needed to be drawn by the Court  under  section  118  of  the  Negotiable  Instruments  Act would oblige the Court to presume that the cheque had been issued  for  consideration  and  until  contrary  is  proved,  such presumption  would hold  the ground.  Except  the bare denial, nothing  has  been  found  to  come  on  record  to  dislodge  the positive proof that has been adduced by the appellant.

29. In the opinion of this Court,  the entire argument that the rainy water could not have washed away the cheques, pales into  insignificance  and  is  not  argument  worth  consideration, more particularly, when the respondent-accused in no unclear terms  had  accepted  his  liability  of  his  having  accepted  the amount  of  Rs.  22.50  lakh  from the  complainant  and  it  also declared  the  issuance  of  seven  cheques  of  particular  dates towards  such  legally  enforceable  debt.  If  it  was  an

8

understanding  between  the  parties  qua  issuance  of  fresh cheques,  with  an  ostensible  reason  of  old  cheques  having washed away, those are the non-issues. This Court cannot be oblivious  of  the  fact  that  section  138  of  the  Negotiable Instruments Act has been made a penal provision not only for the cheques to give acceptability in the transaction, but it is the economic  blood-line  of  the  country  and,  therefore,  the  law makers have made the special rules of evidence by introducing sections 118 and 139 of the Negotiable Instruments Act.

30.  The  trial  Court  has  committed  a  serious  error  by  not discharging its obligation of  recognizing the evidentiary value and  not  appreciating  the  positive  evidence  which  led  to  the reasonable  proof  of  legally  enforceable  debt  existing  on  the side of the original complainant."

8. Assailing the judgment and order so passed by the High Court, learned

counsel for the accused-appellant has contended that the impugned judgment

is contrary to the principles laid down in the case of  Arulvelu and Anr. v.

State represented  by  Public  Prosecutor  &  Anr.:  (2009)  10  SCC  206,

particularly when the High Court has set aside the considered judgment and

orders  of  the  Trial  Court  without  pointing  out  any  perversity  therein.  The

learned counsel has argued, with reference to the decisions in M.S. Narayana

Menon alias Mani v. State of Kerala and Anr: (2006) 6 SCC 39 and Kumar

Exports v.  Sharma Carpets:  (2009) 2 SCC 519,  that  the High Court  has

failed  to  appreciate  the  settled  principle  of  law  that  the  accused  is  only

required to show a probable defence to be acquitted of the charges under

Section 138 of the NI Act. The learned counsel has referred to the reasons

assigned by the Trial Court to acquit the accused-appellant and has submitted

that contradictory statements have been made by the complainant and the

witness; that no clear and cogent evidence has been brought on record to

9

prove the source of funds for advancing any loan by the complainant; that

admittedly, the complainant did not have the amount of Rs. 22,50,000/- and

the  same  was  arranged  through  his  friends  and  relatives  but  he  made

vacillating statement in that regard and none of such relatives or friends was

examined  as  witness;  that  the  witness  for  the  complainant  had  more

knowledge about the transaction than the complainant; that the complainant

appeared to have rather no knowledge regarding the payments, funds and the

period  of  transaction;  and  that  there  was  no  explanation  as  to  how  the

complainant was claiming Rs. 22,50,000/- as the debt, when the sum total of

the instalments (cheques) comes to Rs. 21,00,000/- only. The learned counsel

would  also  argue that  complainant  has  heavily  relied  on  the  stamp paper

dated 21.03.2007 but then, admittedly, the complainant had not signed on the

said  stamp  paper;  and  this  document,  neither  notarised  nor  registered

anywhere and only bearing the signatures of the appellant and of the said Shri

Jagdishbhai, is not of any evidentiary value for the case of the complainant.

According to the learned counsel, the accused-appellant has established his

bonafide defence that he had a financial transaction with Shri Jagdishbhai in

the past; that he gave 7 blank cheques to Shri Jagdishbhai and signed on a

stamp paper as security against such transaction; and that such cheques and

stamp paper were sought  to be misused by the complainant.  The learned

counsel  has contended that  in  the given circumstances,  the judgment  and

orders of the Trial Court acquitting the accused-appellant of the offence under

Section 138 of the NI Act deserve to be restored and the impugned judgment

10

and order dated 08.01.2018 deserves to be set aside. The learned counsel

would  also  submit  in  the  alternative  that  in  any  case,  the  punishment  as

awarded in this case is much on the higher side and deserves to be reduced.

9. Per contra,  the learned counsel for the complainant-respondent No. 2

has  duly  supported  the  impugned  judgment  and  has  submitted  that  the

accused-appellant has only put forward a vague and unsure defence that has

no basis  or  support  and stands  falsified from the material  on  record.  The

learned counsel has submitted that not only the presumption under Section

139 NI Act has not been dislodged, in fact, the case of the complainant is

fortified in view of the unequivocal acknowledgement and undertaking stated

by the accused-appellant on the stamp paper; and in the given circumstances,

the High Court has rightly convicted him for the offence under Section 138 of

the NI Act.

10. Having given anxious consideration to the rival submissions and having

examined the record, we are clearly of the view that as regards conviction of

the accused-appellant for the offence under Section 138 NI Act, the impugned

judgment and order dated 08.01.2018 does not call for any interference but,

on the facts and in the circumstances of this case, the punishment as awarded

by the High Court deserves to be modified.

11. According  to  the  learned  counsel  for  the  accused-appellant,  the

impugned judgment is contrary to the principles laid down by this Court in the

case of Arulvelu (supra) because the High Court has set aside the judgment of

11

the Trial Court without pointing out any perversity therein. The said case of

Arulvelu (supra)  related to offences under Sections 304-B and 498-A IPC.

Therein, on the scope of the powers of Appellate Court in an appeal against

acquittal, this Court observed as follows:

"36. Carefully scrutiny of all these judgments lead to the definite conclusion  that  the  appellate  court  should  be  very  slow  in setting aside a judgment of acquittal particularly in a case where two views are possible. The trial court judgment cannot be set aside because the appellate court's view is more probable. The appellate court would not be justified in setting aside the trial court judgment unless it arrives at a clear finding on marshalling the entire evidence on record that the judgment of the trial court is either perverse or wholly unsustainable in law."

11.1 The  principles  aforesaid  are  not  of  much  debate.  In  other  words,

ordinarily, the Appellate Court will not be upsetting the judgment of acquittal, if

the view taken by Trial Court is one of the possible views of matter and unless

the Appellate Court arrives at a clear finding that the judgment of the Trial

Court is perverse, i.e.,  not supported by evidence on record or contrary to

what is regarded as normal or reasonable; or is wholly unsustainable in law.

Such general restrictions are essentially to remind the Appellate Court that an

accused is presumed to be innocent unless proved guilty beyond reasonable

doubt  and a judgment of  acquittal  further strengthens such presumption in

favour of the accused. However, such restrictions need to be visualised in the

context of the particular matter before the Appellate Court and the nature of

inquiry therein. The same rule with same rigour cannot be applied in a matter

relating to the offence under Section 138 of the NI Act, particularly where a

presumption  is  drawn  that  the  holder  has  received  the  cheque  for  the

12

discharge, wholly or in part, of any debt or liability. Of course, the accused is

entitled to bring on record the relevant material to rebut such presumption and

to show that preponderance of probabilities are in favour of his defence but

while examining if the accused has brought about a probable defence so as to

rebut the presumption, the Appellate Court is certainly entitled to examine the

evidence on record in order to find if preponderance indeed leans in favour of

the accused.  

12. For determination of the point as to whether the High Court was justified

in reversing the judgment and orders of  the Trial  Court  and convicting the

appellant for the offence under Section 138 of the NI Act, the basic questions

to be addressed to are two-fold: as to whether the complainant-respondent

No. 2 had established the ingredients of Sections 118 and 139 of the NI Act,

so as to justify drawing of the presumption envisaged therein; and if so, as to

whether the accused-appellant had been able to displace such presumption

and to establish a probable defence whereby, the onus would again shift to

the complainant?

13. We may usefully take note of the provisions contained in Sections 118

and  139,  being  the  special  rules  of  evidence  applicable  to  the  case  as

follows4: 4 The principal and charging part of Section 138 NI Act  may also be extracted for ready  reference as follows:

"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

13

"118.  Presumption 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 of fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him."

"139.  Presumption  in  favour  of  holder ----  It  shall  be presumed, unless the contrary is proved, that the holder is a cheque received the cheque of the  nature referred to in section 138 for the discharge, in whole or in part, if any debt or other liability."

14. So far  the  question  of  existence of  basic  ingredients  for  drawing  of

presumption under Sections 118 and 139 the NI Act is concerned, apparent it

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:

*** *** ***"

14

is that the accused-appellant could not deny his signature on the cheques in

question that had been drawn in favour of the complainant on a bank account

maintained by the accused for a sum of Rs. 3 lakhs each. The said cheques

were presented to the Bank concerned within the period of their validity and

were returned unpaid for the reason of either the balance being insufficient or

the account being closed. All the basic ingredients of Section 138 as also of

Sections 118 and 139 are apparent on the face of the record. The Trial Court

had also consciously taken note of these facts and had drawn the requisite

presumption.  Therefore,  it  is  required to  be presumed that  the cheques in

question were drawn for consideration and the holder of the cheques i.e., the

complainant received the same in discharge of an existing debt. The onus,

therefore, shifts on the accused-appellant to establish a probable defence so

as to rebut such a presumption.  

15. In  Rangappa  v.  Sri  Mohan  :  (2010)  11  SCC  441, this  Court  has

reiterated  and  summarised  the  principles  relating  to  presumptions  under

Sections 118 and 139 of the NI Act and rebuttal thereof in the following:-

"26. In the 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 is based on the specific  facts  and  circumstances  therein.  As  noted  in  the citations, this is of course in the nature of a rebuttal 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.

15

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.

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."

16. On the aspects relating to preponderance of probabilities, the accused

has to bring on record such facts and such circumstances which may lead the

Court to conclude either that the consideration did not exist or that its non-

existence  was  so  probable  that  a  prudent  man  would,  under  the

circumstances of the case, act upon the plea that the consideration did not

exist. This Court has, time and again, emphasized that though there may not

be  sufficient  negative  evidence  which  could  be  brought  on  record  by  the

accused  to  discharge  his  burden,  yet  mere  denial  would  not  fulfil  the

requirements of rebuttal as envisaged under Section 118 and 139 of the NI

16

Act. This court stated the principles in the case of  Kumar Exports (supra) as

follows:  

"20. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of  the complainant  in  a criminal  trial.  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. Apart from adducing direct evidence to prove  that  the  note  in  question  was  not  supported  by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling,  the burden may likewise shift  again on to the complainant.  The accused may also rely  upon presumptions of  fact,  for  instance,  those mentioned  in  Section  114  of  the  Evidence  Act  to  rebut  the presumptions arising under Sections 118 and 139.

21. The accused has also an option to prove the non-existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court,  having regard to all  the circumstances  of  the  case  and  the  preponderance  of

17

probabilities,  the  evidential  burden  shifts  back  to  the complainant  and,  therefore,  the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue."

17. In the case at  hand, even after purportedly drawing the presumption

under Section 139 of the NI Act, the Trial Court proceeded to question the

want  of  evidence on the part  of  the complainant  as regards the source of

funds for advancing loan to the accused and want of examination of relevant

witnesses who allegedly extended him money for advancing it to the accused.

This approach of the Trial Court had been at variance with the principles of

presumption in law. After such presumption, the onus shifted to the accused

and unless the accused had discharged the onus by bringing on record such

facts and circumstances as to show the preponderance of probabilities tilting

in his favour, any doubt on the complainant's case could not have been raised

for want of evidence regarding the source of funds for advancing loan to the

accused-appellant.  The  aspect  relevant  for  consideration  had  been  as  to

whether  the  accused-appellant  has  brought  on  record  such

facts/material/circumstances  which  could  be  of  a  reasonably  probable

defence.

18. In order to discharge his burden, the accused put forward the defence

that  in  fact,  he  had  had  the  monetary  transaction  with  the  said  Shri

Jagdishbhai  and  not  with  the  complainant.  In  view  of  such  a  plea  of  the

accused-appellant,  the  question  for  consideration  is  as  to  whether  the

accused-appellant  has shown a reasonable probability  of  existence of  any

transaction with Shri Jagdishbhai? In this regard, significant it is to notice that

18

apart from making certain suggestions in the cross-examination, the accused-

appellant has not adduced any documentary evidence to satisfy even primarily

that  there  had  been  some  monetary  transaction  of  himself  with  Shri

Jagdishbhai. Of course, one of the allegations of the appellant is that the said

stamp paper was given to Shri Jagdishbhai and another factor relied upon is

that Shri Jagdishbhai had signed on the stamp paper in question and not the

complainant.

18.1 We have examined the statement of Shri Jagdishbhai as also the said

writing  on  stamp  papers  and  are  unable  to  find  any  substance  in  the

suggestions made on behalf of the accused-appellant.

18.2 The said witness Shri Jagdishbhai, while pointing out his acquaintance

and friendship with the appellant as also with the respondent, asserted in his

examination-in-chief, inter alia, as under:

"Accused when he comes to our shop where the complainant in  the  matter  Shashimohan also  be  present  that  in  both  the complainant  and  accused  being  our  friends,  were  made acquaintance with each other.  The accused had necessity  of money  in  his  business,  in  my  presence,  had  demanded Rs.22,50,000/-  (Rupees  twenty  two  lacs  fifty  thousandly)  on temporary basis. And thereafter, the complainant from his family members by taking in piecemeal had given to the accused in my  presence.  Thereafter,  on  demanding  the  money  by  the complainant, the accused had given seven (7) cheques to the complainant in our presence but such cheques being washed out in rainy water and on informing me by the complainant I had informed to the accused. Thereafter, Rohitbhai had given other seven (7) cheques to the complainant in my presence and the deed was executed on Rs. 100/- stamp paper in there is my signature."  

19

18.3 This witness was cross-examined on various aspects as regards the

particulars in the writing on the stamp paper and the date and time of the

transactions. In regard to the defence as put in the cross-examination, the

witness stated as under:  

"I have got shop in National Plaza but in rain no water logging has taken place. It is not true that there had been no financial dealings between me and the accused today. It is not true that I had  given  rupees  ten  lacs  to  the  accused  Rohitbhai  on temporary basis. It is not true that for the amount given to the accused,  I  had  taken  seven  blank  duly  cheques  also  blank stamp paper  without  signature.  It  is  not  true  that  there  was quarrel between me and the accused in the matter of payment of interest. It is not true that even after the payment of Rs. ten lacs and the huge amount of the interest in the matter of interest quarrel was made. It is not true that due to the reason of quarrel with the accused, in the cheques of the accused lying with me by making obstinate writing has filed the false complaint through Shashimohan Goyanka.  It is not true that no financial dealings have taken place between the complainant and the accused. therefore I also the complainant both at the time of evidence the accused at what place, on what date at what time, the amount taken has not been able to make clearly. (sic) It is not true that the blank stamp paper duly signed were lying in which obstinate writing  has  been  made  therefore  the  same  has  not  been registered through sub registrar. It is not true that the dealings have been made between me and accused therefore there is my  signature  and  the  signature  of  the  accused  and  the complainant  has  not  signed.  It  is  not  true  that  any  types  of dealings between the accused and the complainant having not been  done  in  my  presence  therefore  in  my  statement  no clarification has been given. It is not true that the accused in my presence as mentioned in the complaint  any cheque has not been given. It is not true that I in collusion with the complainant to usurp the false amount the false complaint  has been filed through Shashimohan Goyanka. It is not true that in support of the  complaint  of  Shashimohan  Goyanka  is  giving  false statement."   

18.4 The  statement  of  Shri  Jagdishbhai  does  not  make  out  any  case  in

favour of the accused-appellant. It is difficult to say that by merely putting the

20

suggestion  about  the  alleged  dealing  to  Shri  Jagdishbhai,  the  accused-

appellant has been able to discharge his burden of bringing on record such

material which could tilt the preponderance of probabilities in his favour.  

18.5 The  acknowledgement  on  the  stamp  paper  as  executed  by  the

appellant on 21.03.2007 had been marked with different exhibit numbers in

these 7 cases. In Complaint Case No. 46499 of 2008, the same is marked as

Ex. 54 and reads as under :  

"Today  the  executor  I  Rohit  Patel  Ranchhodray  Masala  is  a partner.  Due to the financial  difficulties having been arised,  I have taken Rs.22,500,000/- (Rupees twenty two thousand fifty thousand  only-  sic)  from my  group  which  are  to  be  paid  to Shashimohan Goyanka.

With reference to that today I have given seven (7) cheques of Corporation  Bank,  Alkapuri  Branch  bearing  No.  763346  to 762252 amounting to Rs. 22,50,000/- (Rupees twenty two lacs fifty  thousand  only)  Dates  :  (1)  01/4/08,  (2)  01/05/08  (3) 01/07/08, (4) 01/08/08 (5) 01/10/08 (6) 01/11/08 (7) 01/12/08 the account of which is 40007.

Earliest  these  cheques  were  given  but  due  to  rainy  water logging the said cheques having been washed out (7) cheques have again been given which is acceptable to me."

18.6 The fact  of  the matter remains that the appellant could not deny his

signatures on the said writing but attempted to suggest that his signatures

were  available  on  the  blank  stamp  paper  with  Shri  Jagdishbhai.  This

suggestion is too remote and too uncertain to be accepted. No cogent reason

is  available  for  the  appellant  signing  a  blank  stamp  paper.  It  is  also

indisputable  that  the  cheques  as  mentioned  therein  with  all  the  relevant

particulars like cheque numbers, name of Bank and account number are of

21

the same cheques which form the subject matter of these complaint cases.

The said document bears the date 21.03.2007 and the cheques were post-

dated,  starting  from 01.04.2008 and ending  at  01.12.2008.  There  appears

absolutely no reason to discard this writing from consideration.

18.7 One of the factors highlighted on behalf of the appellant is that the said

writing does not  bear  the signature of  the complainant  but  and instead,  it

bears the signatures of  said Shri  Jagdishbhai.  We find nothing unusual  or

objectionable  if  the  said  writing  does  not  bear  the  signatures  of  the

complainant. The said writing is not in the nature of any bi partite agreement

to be signed by the parties thereto.  It  had been a writing in the nature of

acknowledgement by the accused-appellant about existence of a debt; about

his  liability  to repay the same to the complainant;  about his having issued

seven post-dated cheques; about the particulars of such cheques; and about

the fact that the cheques given earlier had washed away in the rain water

logging. Obviously, this writing, to be worth its evidentially value, had to bear

the  signatures  of  the  accused,  which  it  does.  It  is  not  unusual  to  have a

witness to such a document so as to add to its authenticity; and, in the given

status and relationship of the parties, Shri Jagdishbhai would have been the

best  witness  for  the  purpose.  His  signatures  on  this  document,  therefore,

occur as being the witness thereto.  This  document  cannot  be ruled out  of

consideration and existing this writing, the preponderance of probabilities lean

heavily against the accused-appellant.  

22

19. Hereinabove, we have examined in detail the findings of the Trial Court

and those of the High Court and have no hesitation in concluding that the

present one was clearly a case where the decision of the Trial Court suffered

from perversity and fundamental error of approach; and the High Court was

justified in reversing the judgment of the Trial Court. The observations of the

Trial Court that there was no documentary evidence to show the source of

funds with the respondent to advance the loan, or that the respondent did not

record the transaction in the form of receipt of even kachcha notes, or that

there  were  inconsistencies  in  the  statement  of  the  complainant  and  his

witness, or that the witness of the complaint was more in know of facts etc.

would have been relevant if the matter was to be examined with reference to

the onus on the complaint to prove his case beyond reasonable doubt. These

considerations  and  observations  do  not  stand  in  conformity  with  the

presumption existing in favour of the complainant by virtue of Sections 118

and  139  of  the  NI  Act.  Needless  to  reiterate  that  the  result  of  such

presumption is that existence of a legally enforceable debt is to be presumed

in favour of the complainant. When such a presumption is drawn, the factors

relating  to  the  want  of  documentary  evidence  in  the  form  of  receipts  or

accounts or want of evidence as regards source of funds were not of relevant

consideration  while  examining  if  the  accused  has  been  able  to  rebut  the

presumption or not. The other observations as regards any variance in the

statement of complainant and witness; or want of knowledge about dates and

other particulars of the cheques; or washing away of the earlier cheques in the

23

rains though the office of the complainant being on the 8th floor had also been

of irrelevant factors for consideration of a probable defence of the appellant.

Similarly, the factor that the complainant alleged the loan amount to be Rs.

22,50,000/-  and seven cheques being of  Rs.  3,00,000/-  each leading to  a

deficit of Rs. 1,50,000/-,  is not even worth consideration for the purpose of the

determination of  real  questions involved in the matter.  May be,  if  the total

amount of cheques exceeded the alleged amount of  loan, a slender doubt

might have arisen, but, in the present matter, the total amount of 7 cheques is

lesser than the amount of loan. Significantly, the specific amount of loan (to

the tune of Rs. 22,50,000/-) was distinctly stated by the accused-appellant in

the aforesaid acknowledgment dated 21.03.2017.   

20. On perusing the order of the Trial Court, it is noticed that the Trial Court

proceeded to pass the order of acquittal on the mere ground of 'creation of

doubt'. We are of the considered view that the Trial Court appears to have

proceeded on a misplaced assumption that by mere denial or mere creation of

doubt, the appellant had successfully rebutted the presumption as envisaged

by Section 139 of the NI Act. In the scheme of the NI Act, mere creation of

doubt is not sufficient.  

21. The result of discussion in the foregoing paragraphs is that the major

considerations on which the Trial  Court  chose to  proceed clearly  show its

fundamental error of approach where, even after drawing the presumption, it

had  proceeded  as  if  the  complainant  was  to  prove  his  case  beyond

reasonable doubt. Such being the fundamental flaw on the part of the Trial

24

Court,  the  High  Court  cannot  be  said  to  have  acted  illegally  or  having

exceeded its  jurisdiction in  reversing the judgment  of  acquittal.  As noticed

hereinabove, in the present matter, the High Court has conscientiously and

carefully  taken  into  consideration  the  views  of  the  Trial  Court  and  after

examining the evidence on record as a whole, found that the findings of the

Trial Court are vitiated by perversity. Hence, interference by the High Court

was inevitable;  rather  had to  be made for  just  and proper  decision of  the

matter.

22. For  what  has  been discussed hereinabove,  the  findings of  the  High

Court convicting the accused-appellant for offence under Section 138 of the NI

Act deserves to be, and are, confirmed.  

23. Coming to  the  question  of  punishment  for  the  offence aforesaid,  as

noticed, the High Court has awarded the punishment of simple imprisonment

for a period of one year together with fine to the extent of double the amount

of  cheque  (i.e.,  a  sum  of  Rs.  6  lakhs)  with  default  stipulation  of  further

imprisonment for a period of one year in each case; and, out of the amount

payable  as  fine,  the  complainant-respondent  No.  2  is  ordered  to  be

compensated to the tune of Rs. 5.5 lakhs in each case. In the totality of the

circumstances  of  this  case  and  looking  to  the  nature  of  offence  which  is

regulatory in nature, while we find that the punishment as regards monetary

terms calls for no interference but then, the sentence of imprisonment deserve

to be modified.

25

23.1 In  the  singular  and  peculiar  circumstances  of  this  case,  where  the

matters relating to 7 cheques issued by the appellant in favour of respondent

No. 2 for a sum of Rs. 3 lakhs each are being considered together; and the

appellant is being penalised with double the amount of cheques in each case

i.e., in all a sum of Rs. 42,00,000/-, in our view, the appellant deserves to be

extended another  chance  to  mend  himself  by  making  payment  of  fine,  of

course, with the stipulation that in case of default in payment of the amount of

fine, he would undergo simple imprisonment for a period of one year.

24. Therefore,  this  appeal  is  partly  allowed  in  the  following  terms:  The

common  judgment  and  order  dated  08.01.2018  in  R/Criminal  Appeal  No.

1187/2017 connected with R/Criminal Appeal Nos. 1191/2017 to 1196/2017

by  the  High  Court  of  Gujarat  at  Ahmedabad  is  maintained  as  regards

conviction of the accused-appellant for the offence under Section 138 of the

Negotiable Instruments Act, 1881 for dishonour of 7 cheques in the sum of Rs.

3 lakhs each, as drawn by him in favour of the complainant-respondent No. 2;

however,  the  sentence is  modified  in  the  manner  that  in  each of  these 7

cases, the accused-appellant shall pay fine to the extent of double the amount

of each cheque (i.e., a sum of Rs. 6 lakhs in each case) within 2 months from

today  with  the  stipulation  that  in  case  of  default  in  payment  of  fine,  the

accused-appellant shall undergo simple imprisonment for a period of one year.

On recovery of the amount of fine, the complainant-respondent No. 2 shall be

compensated  to  the  tune  of  Rs.  5.5  lakhs  in  each  case.  In  the  event  of

26

imprisonment for default in payment of fine, the sentences in all the 7 cases

shall run concurrently.

25. The  Trial  Court  shall  take  steps  for  enforcement  of  this  judgment

forthwith.

…….…..………………J.         (Abhay Manohar Sapre)

….….…………………J.         (Dinesh Maheshwari)  1

New Delhi, Dated: 15th March, 2019.   

27