REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS.61-62 OF 2011

M/S SHREE DANESHWARI TRADERS              …..Appellant

VERSUS

SANJAY JAIN AND ANOTHER                   ….Respondents

J U D G M E N T

R  . BANUMATHI, J.

These  appeals  arise  out  of  the  judgment  dated

28.07.2008 in Criminal Appeal Nos.53 and 54 of 2006 passed

by the High Court of Bombay in and by which the High Court

dismissed  the  appeals  filed  by  the  appellant-complainant

thereby  upholding  the  acquittal  of  the  respondent-accused

Sanjay  Jain  under       Section  138  of  the  Negotiable

Instruments Act.  

2. Brief  facts  which  led  to  filing  of  these  appeals  are  as

under:-

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The  appellant-complainant  had  been  supplying  the

commodities and rice bags to the respondent-accused on his

request. In this regard, the respondent-accused issued various

cheques  which  when  presented  for  collection  were

dishonoured.   The  appellant  had  filed  two complaints  under

Section  138  of  the  Negotiable  Instruments  Act  -  complaint

No.339/OA/NI/2004/A  and  complaint  No.499/OA/NI/2004/A

against  the  respondent-accused  alleging  that  the  cheques

issued by the respondent-accused in lieu of payment owed to

the  appellant  were  dishonoured  on  presentation.   It  was

averred that despite issuance of legal notice, the respondent

did not make payments.

3. In  case  No.339/OA/NI/2004/A,  the  respondent-accused

issued three cheques drawn on UTI Bank details of which are

as under:-

------------------------------------------------------------------------------------------- Date Number Amount

-------------------------------------------------------------------------------------------

1. 08.08.2003 002497 Rs.17,540.00 2. 18.08.2003 002463 Rs.17,871.00 3. 25.08.2003 002480 Rs.17,760.00

-------------------------------                       Total = Rs.53,171.00

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4. In  case  No.499/OA/NI/2004/A,  the  respondent-accused

issued nine cheques, details of which are as under:-

Date Number Amount -------------------------------------------------------------------------------------------

1.   01.09.2003 002481 Rs.18,000.00 2. 15.09.2003 633427 Rs.20,000.00 3. 22.09.2003 633428 Rs.20,000.00 4. 29.09.2003 633429 Rs.20,000.00 5. 03.10.2003 531977 Rs.25,000.00 6. 06.10.2003 633430 Rs.20,979.00 7. 13.10.2003 531975 Rs.20,000.00 8. 27.10.2003 531976 Rs.25,000.00 9. 10.11.2003 531978 Rs.25,000.00

-------------------------------                       Total = Rs.1,93,979.00

5. When the above said cheques were presented to United

Western Bank, Margao Branch for encashment, cheques were

returned by the bank unpaid on 04.02.2004 and 20.02.2004

with the endorsement “not arranged for/funds insufficient” and

“funds  insufficient”.   The  appellant  thereafter  issued  legal

notices  to  the  respondent-accused  dated  05.02.2004  and

23.02.2004 respectively making a demand for the payment of

the cheque amount.   The said notices were received by the

respondent-accused;  though  respondent  acknowledged  the

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receipt  of  the  notices,  he  did  not  make  the  payment  nor

arranged that amount in satisfaction of the cheques issued by

him.   Hence,  the  complainant  filed  two  complaints  under

Section 138 of the Negotiable Instruments Act as noted above.

6. Taking  into  account  the  receipts  produced  by  the

respondent-accused, the trial  court  acquitted the respondent-

accused in both the cases.  The trial court rejected the case of

the appellant that the respondent sometimes used to purchase

rice bags on credit and sometimes used to purchase rice bags

on payment of cash and the same being inconsistent with the

documents produced by the appellant.  The trial court held that

in  the  written  complaint,  the  appellant-complainant  has  not

alleged anywhere that the respondent used to make credit as

well  as  cash  purchases.   The  trial  court  held  that  the

respondent  left  blank cheques with  the appellant  as security

whenever he used to make credit purchases and therefore, the

presumption under Section 139 of the Act is not available to the

appellant.

7. In  appeal,  the  High  Court  affirmed the  acquittal  of  the

respondent-accused and held that  the respondent had taken

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the defence that the subject cheques were issued as security

towards  the  goods  supplied  for  which  payment  was

subsequently  made  by  cash.   The  High  Court  held  that  by

producing the relevant receipts,  the respondent has rebutted

the presumption and that the respondent was able to prove that

the cheques were issued by way of security towards the goods

supplied to him for which he made the payment by cash.  The

High  Court  further  held  that  it  was  incumbent  upon  the

complainant to have explained in the complaint that the cash

payments  made  by  the  respondent  were  related  to  other

commodities and the cheques were made for payment of rice

bags. Holding that the case of the appellant was not consistent,

the High Court affirmed the order of acquittal and dismissed the

appeals filed by the complainant-appellant.

8. The learned counsel for the appellant submitted that the

transaction between the parties was a mercantile transaction

and during the course of the business, running accounts were

maintained when purchases were made at different times and

payments were made by both modes i.e. cash and cheques.  It

was submitted that both the courts below overlooked the fact

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that  the  transactions  were  mercantile  transactions  mixed  up

with cash payments and also payments made by cheques.  It

was submitted that  the courts  below erred in not  keeping in

view the statutory presumption available under Section 139 of

the Negotiable Instruments Act  to the appellant  and that  the

respondent-accused failed to rebut the presumption by leading

cogent and consistent evidence.  The learned counsel urged

that the impugned judgment is contrary to the object of Section

138 and Section 139 of the Negotiable Instruments Act and is

liable to be set aside.

9. The  learned  counsel  appearing  for  the  respondent

submitted that the respondent used to leave the cheques with

the complainant  when he purchased the commodities  –  rice

bags  and  used  to  make  cash  payment  towards  those

commodities  for  which  complainant  issued  receipts.   It  was

submitted  that  even  though  the  complainant  received  the

money for the rice bags, he failed to return the cheques and

had misused those cheques and filed false complaints against

the  respondent.  It  was  submitted  that  the  respondent  has

rebutted  the  statutory  presumption  by  producing  twenty

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receipts-Ex.-22/C  (colly)  ranging  from  02.09.2003  to

17.11.2003 as also receipts-Ex.16/C (colly). The total amount

of the receipts issued by the complainant is Rs.1,94,000/- and

taking into consideration that the amount has been paid, the

courts below rightly held that  the presumption under Section

139  of  the  Negotiable  Instruments  Act  was  rebutted  by  the

respondent-accused.

10. We  have  carefully  considered  the  submissions  and

perused the impugned judgment and other materials on record.

The point falling for consideration is whether the courts below

were right in acquitting the respondent-accused by holding that

the  appellant-complainant  has  failed  to  prove  that  the

respondent owed him debt and that the cheques were issued

for the discharge of the said debt.

11. The  appellant  is  a  commission  agent/merchant

conducting his business and he used to supply rice bags to the

respondent-accused on his request.  Admittedly, the transaction

between  the  appellant-complainant  and  the  respondent-

accused was a mercantile transaction.  During the course of

business,  running  accounts  were  maintained  by  the  parties.

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Case of the appellant is that the respondent used to purchase

rice bags sometimes on credit and sometimes on cash.  In his

evidence,  PW-1-complainant  stated  that  the  cheques  were

issued for the credit transaction payable to the appellant by the

respondent.   Per contra, case of  the respondent is that  Ex.-

16/C (colly) and Ex.-22/C (colly) were issued against the cash

payment  made  by  the  respondent-accused  and  though  the

payments were made, the cheques issued by the respondent-

accused were not returned to him.  The respondent-accused

relies upon the various receipts-Ex.-22/C (colly) which are as

under:-

Sr.No. Receipt No. Date Amount 1. 1276 02.09.2003 Rs.16,000/- 2. 1291 04.09.2003 Rs.2,000/- 3. 1340 08.09.2003 Rs.16,000/- 4. 1489 27.09.2003 Rs.20,000/- 5. 1556 03.10.2003 Rs.20,000/- 6. 1615 06.10.2003 Rs.14,500/- 7. 1621 08.10.2003 Rs.5,000/- 8. 1682 13.10.2003 Rs.15,500/- 9. 1689 13.10.2003 Rs.3,300/-

10. 1746 20.10.2003 Rs.17,000/- 11. 1763 23.10.2003 Rs.1,500/- 12. 1760 23.10.2003 Rs.2,300/- 13. 1808 27.10.2003 Rs.16,000/- 14. 1828 01.11.2003 Rs.3,000/- 15. 1882 05.11.2003 Rs.20,000/- 16. 1942 11.11.2003 Rs.15,000/- 17. 1941 11.11.2003 Rs.3,000/- 18. 1953 15.11.2003 Rs.3,000/- 19. 1958 17.11.2003 Rs.12,000/- 20. 2001 17.11.2003 Rs.3,000/-

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12. Case of the complainant is that whenever the respondent

used  to  make  cash  purchases,  cash  memos/receipts  were

issued to the respondent and the above twenty receipts Ex.-

22/C (colly)  pertain  to cash sale.   Complainant-PW-1 further

stated that the cheques issued by the respondent-accused are

subject  matter  of  the  complaints  and  pertain  to  the  credit

purchases  made  by  the  respondent-accused  and  the

respondent has not made the payment or cleared the dues of

the purchases made by him on credit.  On the other hand, case

of  the  respondent  is  that  he  always  used  to  make  credit

purchase  and  used  to  leave  blank  cheques  with  the

complainant-appellant  and  thereafter,  he  used  to  make

payment for which the complainant used to issue receipts to

the respondent; however, the appellant did not return the blank

cheques left by the respondent with the appellant though the

respondent  made  the  payments  and  those  cheques  were

misused by the appellant-complainant.   

13. As seen from the receipts-Ex.-16/C (colly) and Ex.-22/C

(colly), though the amount said to have been credited to the

account of the respondent, the receipts contain the expression

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“cheques are subject to realisation”.  The format of the receipt-

Ex.-16 (colly) is as under:-

M (CST) 4265 dt 4.9.91 Tel: ……… M (ST) 6104 dt 4.9.91 Res: ……..

M/s SHREE DANESHWARI TRADERS General Merchant & Commission Agent

Shop No.8, Masjid Building Malbhar, MARGAO-GOA

No.1145                           Date: 18.8.03

RECEIPT

Credited to the account of M/s Shantadurga Stores, Margao, the amount

of         Rs. Fifteen Thousand only, by Cash/Cheque/Draft Rs.15,000/-.

For M/s. Shree Daneshwari Traders

                                                       L/F ____________________________

Cheques are subject to realisation.

Case of the appellant is that the receipts-Ex.-22/C (colly) were

issued  by  the  appellant  to  the  respondent  towards  cash

payment  made  by  the  respondent  during  the  course  of

business.   The courts below failed to consider  that  Ex.-22/C

(colly)  were  issued  by  the  appellant  to  the  respondent  as

against the cash payment made by respondent. Whereas the

cheques  were  issued  towards  the  credit  purchases  of

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commodities  from  the  complainant  which  is  a  legally

enforceable debt.

14. DW-2  is  the  father  of  respondent-accused.   In  his

evidence, DW-2 stated that the respondent used to leave blank

cheques with him in order to carry out the business transaction.

DW-2 has stated that they used to purchase rice bags from the

complainant  and had left  the  cheques with  the complainant.

Admittedly, the cheques are in the handwriting of DW-2.  In his

evidence, DW-2 stated that though the amount pertaining to the

purchase  of  rice  has  already  paid,  the  complainant  did  not

return  the  cheques  in  spite  of  having  received  the  amount

pertaining to the purchase of rice. It is quite unbelievable that in

a  business/mercantile  transaction,  the  accused  even  after

making payment  towards the purchase of  rice bags,  did  not

insist for the return of the cheques.  It is quite improbable that

the respondent-accused did not take any steps to get back the

cheques  and  continued  with  the  business  transaction  even

though  the  complainant  has  not  returned  the  cheques  after

payment of the money.

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15. The  trial  court  in  its  judgment  referred  to  the  three

cheques  and  observed  that  the  three  cheques  bearing

Nos.2463, dated 18.08.2003; 2480 dated 25.08.2003 and 2497

dated 08.08.2003 go to suggest that the later cheque bearing

No.2497  was  given  much  more  earlier  to  18.08.2003  or

25.08.2003 which seems inconsistent  and it  would not  have

been in the normal course of business.  The trial court held that

the date of  issuance of  the three cheques suggests that the

cheques  were  already  with  the  complainant  and  they  were

utilised by the complainant thereafter.  On this aspect, PW-1

was cross-examined as to why cheque bearing No.2497 was

issued on 08.08.2003 while it ought to have been issued after

25.08.2003 to which PW-1 stated that he does not know about

the same.  After referring to the above three cheques, the trial

court  held  that  in  view  of  inconsistency,  the  presumption

available under Section 139 of the Negotiable Instruments Act

is not available to the complainant which was affirmed by the

High Court.  It was further held that the blank cheques left by

the accused were with the complainant and they have been

used to file the complaint.  The courts below did not keep in

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view  that  the  appellant  has  no  control  over  the  manner  of

issuance of cheques by the respondent and how it was issued.

Merely because, later cheque No.2497 was said to have been

issued by the respondent at an earlier date i.e. 08.08.2003, it

cannot  be  held  that  the  complainant  had  used  the  blank

cheques issued by the respondent.

16. Under  Section  138  of  the  Negotiable  Instruments  Act,

once the cheque is issued by the drawer, a presumption under

Section 139 of the Negotiable Instruments Act in favour of the

holder  would  be  attracted.   Section  139  creates  a  statutory

presumption that a cheque received in the nature referred to

under Section 138 of the Negotiable Instruments Act is for the

discharge in whole or in part of any debt or other liability.  The

initial  burden  lies  upon  the  complainant  to  prove  the

circumstances  under  which  the  cheque  was  issued  in  his

favour and that the same was issued in discharge of a legally

enforceable debt.   

17. It is for the accused to adduce evidence of such facts and

circumstances to rebut  the presumption that  such debt  does

not  exist  or  that  the  cheques  are  not  supported  by

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consideration. Considering the scope of the presumption to be

raised under Section 139 of the Act and the nature of evidence

to  be adduced by  the accused to  rebut  the  presumption,  in

Kumar  Exports  v.  Sharma  Carpets  (2009)  2  SCC  513,  the

Supreme Court  in  paras  (14-15)  and  paras  (18-20)  held  as

under:-

“14. Section 139 of the Act provides that it shall be presumed, unless  the  contrary  is  proved,  that  the  holder  of  a  cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability. 15. Presumptions are devices by use of  which the courts are enabled and entitled to pronounce on an issue notwithstanding that  there  is  no  evidence  or  insufficient  evidence.  Under  the Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) “may presume” (rebuttable), (2) “shall presume” (rebuttable), and (3) “conclusive presumptions” (irrebuttable). The term “presumption” is used to designate an inference, affirmative or disaffirmative of the existence of a fact, conveniently called the “presumed fact” drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumption literally means “taking as true without examination or proof”. ……..

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

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shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists. 19. 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 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

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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 of  the Act.”  [underlining added].

18. In the present case, by examining himself as PW-1, the

complainant has discharged the initial  burden cast  upon him

that the cheques were issued for the rice bags purchased on

credit.   With  the  examination  of  PW-1,  the  statutory

presumption  under  Section  139  of  the  Act  arises  that  the

cheques  were  issued  by  the  respondent-accused  for  the

discharge of any debt or other liability in whole or in part. The

courts below disbelieved the evidence of the complainant on

the ground that there are no averments in the complaint that

the commodities were sold for cash and that the rice bags were

sold on credit and the cheques were issued for the goods sold

on  credit.   Though  the  complaint  contains  no  specific

averments  that  the  cheques  were  issued  for  the  purchase

made on credit, in his evidence, PW-1 clearly stated that the

cheques were issued for the commodities purchased on credit.

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The courts below erred in brushing aside the evidence of PW-1

on the ground that there were no averments in the complaint as

to  the  purchases  made  by  cash  and  purchase.  The  courts

below also erred in not raising the statutory presumption under

Section  139  of  the  Act  that  the  complainant  received  the

cheques to discharge the debt or other liability in whole or in

part.

19. It  is  for  the respondent-accused to adduce evidence to

prove that  the cheques were not  supported by consideration

and that there was no debt or liability to be discharged by him.

The receipts-Ex.-22/C (colly)  relied  upon by  the respondent-

accused do not  create doubt  about  the purchases made on

credit and the existence of a legally enforceable debt for which

the cheques were issued.  The courts below erred in saying

that  by  the  receipts-Ex.22/C  (colly),  the  respondent-accused

has rebutted the statutory  presumption raised under  Section

139  of  the  Negotiable  Instruments  Act.   The  oral  and  the

documentary  evidence  adduced  by  the  complainant  are

sufficient to prove that it was a legally enforceable debt and that

the cheques were issued to discharge the legally enforceable

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debt.   With  the  evidence  adduced  by  the  complainant,  the

courts  below  ought  to  have  raised  the  presumption  under

Section  139  of  the  Act.  The  evidence  adduced  by  the

respondent-accused is not sufficient to rebut the presumption

raised  under  Section  139  of  the  Act.  The  defence  of  the

respondent  that  though  he  made  payment  for  the

commodities/rice bags, the blank cheques were not returned by

the  appellant-complainant  is  quite  unbelievable  and

unacceptable.  The  impugned  judgment  of  the  High  Court

cannot  be  sustained  and  is  liable  to  be  set  aside.   The

respondent-accused  is  convicted  under  Section  138  of  the

Negotiable  Instruments  Act  in  both  the complaints;  however,

considering that the cheque transaction was of the year 2003,

at this distant point of time, we do not deem it appropriate to

impose any sentence of imprisonment on the accused.

20. In the result, the impugned judgment of the High Court in

Criminal Appeal Nos.53 and 54 of 2006 is set aside and these

appeals  are  allowed.   The  respondent-accused  is  convicted

under Section 138 of Negotiable Instruments Act and a fine of

Rs.2,97,150/- (Rs.53,171/- + Rs.1,93,979/- + compensation of

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Rs.50,000/-) is imposed on the respondent in default of which,

the respondent shall undergo imprisonment for six months. The

fine amount of Rs.2,97,150/- is to be deposited before the trial

court  within  twelve  weeks  from  today,  failing  which  the

respondent  shall  be  taken  into  custody  to  serve  the  default

sentence.   On  deposit  of  fine  amount,  the  amount  of

Rs.2,97,150/- shall be paid to the appellant-complainant.

                                                   ………………………….J.                                                                [R. BANUMATHI]

………………………….J.                                                                [A.S. BOPANNA]

New Delhi; August 21, 2019.

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