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.   

2. The  brief  facts  of  the  case  for  deciding  the

appeal are:-

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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.   

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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  cross-

examined  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.

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2.4 The  trial  court  framed  following  two

questions:-

1. 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?  

2. 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

138.    Complainant  aggrieved  by  said

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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

138.  Accused aggrieved by judgment of the

High Court has come up in this appeal.   

3. 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

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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.  

4. 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

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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.

5. We have considered the submissions of the counsel

for the parties and have perused the records.    

6. 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

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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  cross-

examination, 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

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put in his cross-examination that he was not having

Rs.6,00,000/- on hand on the date of loan.

7. 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

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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 non- production  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

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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.”

8. 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;

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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.”

11. 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

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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

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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  non- existence  was  so  probable  that  a  prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist……”  

12. 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”

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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’.”

13. 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:   

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“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.”

14. 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.”

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15. 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.”

16. 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

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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.”

17. 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.

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19. 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.

20. ……………………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……………”

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18. 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

139.  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

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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.”

19. 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.”

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20. 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 defendant-

accused  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.

28. In  the  absence  of  compelling justifications,  reverse  onus  clauses usually  impose  an  evidentiary  burden  and

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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.”

21. 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

165.   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

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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.

22. 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

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enforceable debt or liability can be contested. However, there can be no doubt  that  there  is  an  initial presumption  which  favours  the complainant.

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.”

23. 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

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under Section 139 can be rebutted on the evidence  of  PW  1,  himself  has  not  been explained by the High Court.

22. 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.       

23. 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.  

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(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

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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.  

24. 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

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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.      

25. 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,

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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.”  

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26. 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

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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.”

27. 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, appellant-

accused has not denied his signature on the cheque.   

28. 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.”

29. 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.  

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30. 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.        

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