Oct 19, 201918 min
In this case the following are the key points:
UTTAM RAM vs. DEVINDER SINGH HUDAN AND ANOTHER – Criminal Appeal No. 1545 of 2019 (Arising Out of SLP(Crl) No. 3452 of 2019) – 17-10-2019 – Justice L. Nageswara Rao and Justice Hemant Gupta, JJ.
The holder of cheque (complainant normally) in due course is required to prove that the cheque was issued by the accused and that when the same presented, it was not honoured.
Adjacent reading of sections 118 & 138 N.I Act,1881 explained.
Accused how to rebut the case settled – Hon’ble Supreme Court held that the accused has to led evidence to rebut the statutory presumption. Cross-examination is not enough.
JUDGMENT
Hemant Gupta, J. – The appellant is aggrieved against an
order passed by the High Court of Himachal Pradesh, Shimla on 17.12.2018,
whereby, the order of dismissal of complaint under Section 138 of the
Negotiable Instruments Act, 1881 (for short the “Act”) by the learned
Trial Court was not interfered with.
2. None has put appearance on behalf of respondent No. 1,
despite service. Therefore, on 16.09.2019, this Court requested Ms. Liz Mathew,
Advocate to assist the Court on behalf of respondent No.1.
3. The appellant owns apple orchard in District Kullu,
Himachal Pradesh. The appellant also used to supply apple cartons, trays and
other packing materials to other apple growers on cash and credit basis. He
also owns commercial ropeway which connects various other apple orchards with
the roadhead as a facility to the growers to carry their produce from the
orchards to the market.
4. In the year 2011, respondent No. 1 purchased apple crops
of various growers which was carried out through ropeway to the roadhead for
further transportation. The packing material was procured by the respondent on
credit basis from the appellant through his authorised agent Prem Chand son of
Kumat Ram. In the month of September 2011, the accounts were finally settled
between the appellant and the authorised agent of respondent No. 1 and a sum of
Rs. 5,38,856/- was found recoverable. A cheque No. 942816 dated 2.10.2011 was
issued for the said amount, but the said cheque was returned by the bank on
11.10.2011 on presentation with the endorsement “insufficient funds”.
5. The appellant thereafter served a legal notice on
27.10.2011 under registered cover sent to the official and home addresses of
respondent No. 1. But, in spite of receipt of the notice of 27.10.2011, no
payment was made which led to filing of a complaint by the appellant.
6. The appellant in his complaint stated that total amount
of Rs.7,86,300/- was found payable on account of bags, gunny bags and packing
materials and after adjusting the payment of Rs. 2,47,444/-, an amount of Rs.
5,38,856/- was found to be payable to the appellant. The appellant has asserted
that the said cheque No. 942816 dated 2.10.2011 was issued by the respondent.
7. In support of the complaint, apart from producing CW1
Dhiraj Kumar who produced the bank record of dishonour of cheque, the appellant
examined himself as CW2 and also produced Prem Chand son of Kumat Ram, the
agent of respondent as CW3. The respondent did not appear in witness box but
examined Head Constable Ranjit Singh DW1.
8. Learned Trial Court dismissed the complaint for the
reason that cheque amount was more than the amount alleged on the due date when
cheque was presented. Therefore, the cheque cannot be said to be drawn towards
discharge of whole or in part of any debt.
9. The appellant in his affidavit reiterated his assertions
as were given in the complaint. In the cross-examination conducted by the
respondent, the appellant stated that cheque in Exh.CW1/B was filled up by the
respondent in October 2011 and that cheque was given by the respondent himself
to him. Three persons, he himself, accused and the agent of the respondent sat
together. He deposed that he was given up a filled-up cheque. He denied the
suggestion that the accused did not issue the cheque Exh.CW1/B. He also denied
the suggestion that Prem Chand misused the cheque of the accused because he has
stolen the signed cheque book of the accused and that he has filled up a blank
cheque.
10. CW3 Prem Chand deposed that the respondent purchased, on
contract, apple in their area from apple growers including from the appellant
for further sending them to Shimla, Chandigarh and Delhi. He deposed that
appellant had to recover an amount of Rs. 7,86,300/- and after adjustment of
Rs. 2,47,444/- the balance amount was payable by the respondent for which the
settlement was arrived at in his presence when cheque No. 942816 was issued for
a sum of Rs. 5,38,856/- dated 2.10.2011.
11. In the cross-examination, he deposed that he used to
keep an account of all the packing materials. He was suggested that the accused
has kept cheque with him and he used to give to the growers. However, he
categorically deposed that cheque Exh.CW1/B was given in his presence by the
accused in Kuthwa. The account was settled prior to giving of cheque. He denied
the suggestion that he lodged a report in police about missing cheque book in
the year 2011. He deposed that the respondent has given cheque book by signing
them. He denied the suggestion that the cheque in question was filled up as he
colluded with the appellant. The respondent in his statement under Section 313
of the Code of Criminal Procedure (for short the “Code”) denied the
prosecution case. The relevant question No. 9 and the answer given by the
respondent are as under:
“Q.9 Why the present case has been made out against you
accused?
Ans. This is a false case. My cheque has been misused.”
12. DW1-Ranjit, Head Constable examined by the accused, has
produced an entry dated 09.09.2011 regarding loss of his cheque book containing
cheque Nos. 942801-942820.
13. The learned Trial Court returned a finding that mere
production of entry Exh. DW1/A is not sufficient to prove that he has not
issued the said cheque as such report could have been made with intention to
create false evidence of the loss of cheque book. The court found that in fact
if the cheque has been lost, the accused had several opportunities to lodge FIR
qua the misuse of said cheque as he has signed acknowledgement of notice
Exh.CW1/G. The learned Trial Court recorded the following findings:
“…Thus, it stands proved beyond reasonable doubt that
the cheque Ext. CW1/B was issued by the accused in favour of the complainant.
Further, the dishonor of the cheque has also been proved through return memo
Ext. CW1/C. Further the legal demand notice was also issued within a period of
30 days from the date of dishonour. Thereafter, the present complaint has been
filled within the period of limitation.”
14. Still further, the learned Trial Court held the
presumption that the amount of cheque is legally enforceable debt, has not been
rebutted when the following finding was returned:
“….Neither any meaningful cross-examination of the
complainant has been done on this point of his financial capacity. Accordingly,
the aforesaid presumption has not been rebutted by the accused by proving that
the complainant did not have the requisite financial capacity. Accordingly, the
said defence is rejected.”
15. However, the learned Trial Court found contradiction in
the number of cartons in the complaint as well as in the statement of the
appellant. It was found that the cheque amount is more than the amount
allegedly due on the date when cheque was presented, therefore, the complaint
was dismissed. It held that there are three different versions as to the number
of apple cartons, therefore, the alleged amount would have been less than the
amount claimed by the complainant.
16. In an appeal, the High Court relied upon judgments
reported as Hiten P. Dalal vs. Bratindranath Banerjee, (2001) 6 SCC 16, Kumar
Exports vs. Sharma Carpets, (2009) 2 SCC 513 and Rangappa vs. Sri Mohan, (2010)
11 441 to hold that the cheque shall be presumed to be for consideration unless
and until, the Court forms a belief that the consideration does not exist or
considers the non-existence of consideration was so probable that a prudent man
would under no circumstances of the case, act upon the plea that the
consideration does not exist. The High Court held as under:
“21. Now, adverting to the facts of the case, it would
be noticed that respondent No. had raised various defences, but, the same were
turned down by the learned Magistrate. However, it was only on the basis of the
contradictions that too in the evidence led by the appellant himself that
respondent No. 1 was ordered to be acquitted.”
17. The High Court again referred to the contradictions
regarding empty apple cartons and the rate per carton, to hold that the
appellant has failed to prove guilt of the respondent beyond reasonable doubt.
18. We find that the approach of the learned Trial Court and
that of the High Court is perverse; irrational as well as suffers from material
illegality and irregularity, which cannot be sustained in complaint filed under
Section 138 of the Act.
19. A negotiable instrument including a cheque carries presumption of consideration in terms of Section 118(a) and under Section 139 of the Act. Sections 118(a) and 139 read as under:
“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;….
139. Presumption in favour of holder.-It shall be presumed,
unless the contrary is proved, that the holder of a cheque received the cheque
of the nature referred to in section 138 for the discharge, in whole or in
part, of any debt or other liability.”
20. The Trial Court and the High Court proceeded as if, the
appellant is to prove a debt before civil court wherein, the plaintiff is
required to prove his claim on the basis of evidence to be laid in support of
his claim for the recovery of the amount due. A dishonour of cheque carries a
statutory presumption of consideration. The holder of cheque in due course is
required to prove that the cheque was issued by the accused and that when the
same presented, it was not honoured. Since there is a statutory presumption of
consideration, the burden is on the accused to rebut the presumption that the
cheque was issued not for any debt or other liability.
21. There is the mandate of presumption of consideration in
terms of the provisions of the Act. The onus shifts to the accused on proof of
issuance of cheque to rebut the presumption that the cheque was issued not for
discharge of any debt or liability in terms of Section 138 of the Act which
reads as under:
“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….”
22. In Kumar Exports, it was held that mere denial of
existence of debt will not serve any purpose but accused may adduce evidence to
rebut the presumption. This Court held as under:
“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 of the Act.” (emphasis supplied)
23. In a judgment reported as Kishan Rao vs. Shankargouda,
(2018) 8 SCC 165, this Court referring to Kumar Exports and Rangappa returned
the following findings:
“22. Another judgment which needs to be looked into is
Rangappa v. Sri Mohan [Rangappa vs. Sri Mohan, (2010) 11 SCC 441 : (2010) 4 SCC
(Civ) 477 : (2011) 1 SCC (Cri) 184] . 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[Krishna Janardhan Bhat vs. Dattatraya G. Hegde, (2008) 4 SCC 54 : (2008) 2
SCC (Cri) 166] , 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.
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.”
24. In a judgment reported as Bir Singh vs. Mukesh Kumar,
(2019) 4 SCC 197 this Court held that presumption under Section 139 of the Act
is a presumption of law. The Court held as under:
“20. Section 139 introduces an exception to the general
rule as to the burden of proof and shifts the onus on the accused. The
presumption under Section 139 of the Negotiable Instruments Act is a
presumption of law, as distinguished from presumption of facts. Presumptions
are rules of evidence and do not conflict with the presumption of innocence,
which requires the prosecution to prove the case against the accused beyond
reasonable doubt. The obligation on the prosecution may be discharged with the
help of presumptions of law and presumptions of fact unless the accused adduces
evidence showing the reasonable possibility of the non-existence of the
presumed fact as held in Hiten P. Dalal [Hiten P. Dalal v. Bratindranath
Banerjee, (2001) 6 SCC 16 : 2001 SCC (Cri) 960] .
xxx xxx xxx
33. A meaningful reading of the provisions of the Negotiable
Instruments Act including, in particular, Sections 20, 87 and 139, makes it
amply clear that a person who signs a cheque and makes it over to the payee
remains liable unless he adduces evidence to rebut the presumption that the
cheque had been issued for payment of a debt or in discharge of a liability. It
is immaterial that the cheque may have been filled in by any person other than
the drawer, if the cheque is duly signed by the drawer. If the cheque is
otherwise valid, the penal provisions of Section 138 would be attracted.
xxx xxx xxx
36. Even a blank cheque leaf, voluntarily signed and handed
over by the accused, which is towards some payment, would attract presumption
under Section 139 of the Negotiable Instruments Act, in the absence of any
cogent evidence to show that the cheque was not issued in discharge of a
debt.”
25. In other judgment reported as Rohitbhai Jivanlal Patel
vs. State of Gujarat and Another, AIR 2019 SC 1876 this Court held as under:
“18. 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 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.”
xxx xxx xxx
20. 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 nonexistence 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
Act…..
xxx xxx xxx
32. 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 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.”
26. In view of the judgments reported to above, we find that
the respondent has not rebutted the presumption of consideration in issuing the
cheque on 2.10.2011 inter alia for the following reasons:
1. Statement of the CW3, that he was not an agent of the
respondent, has not been challenged by the respondent in the cross examination.
2. The statement of the appellant as CW2 that the cheque was
handed over by the respondent personally remains unchallenged.
3. The respondent has not denied even in his statement that
the cheque was not issued by him. The cross examination of the witnesses
produced by the appellant also does not show that the signatures on the cheque
by him have not been disputed.
4. The respondent relies upon entry recorded with the police
on 09.09.2011 that the cheque book was lost. However, the respondent has not
lodged any FIR in respect of loss of cheque, even after the notice of dishonour
of cheque was received by him on 27.10.2011. The mere entry is not proof of
loss of cheque as is found by the learned Trial Court itself as it is
self-serving report to create evidence to avoid payment of cheque amount.
5. The respondent has not appeared as witness to prove the
fact that the cheque book was lost or that cheque was not issued in discharge
of any debt or liability.
6. The statement of accused under Section 313 of the Code is
only to the effect that the cheque has been misused. There is no stand in the
statement that the cheque book was stolen.
7. The statement of accused under Section 313 is not a
substantive evidence of defence of the accused but only an opportunity to the
accused to explain the incriminating circumstances appearing in the prosecution
case of accused. Therefore, there is no evidence to rebut the presumption that
the cheque was issued for consideration.
27. Once the agent of the respondent has admitted the
settlement of due amount and in absence of any other evidence the Trial Court
or the High Court could not dismiss the complaint only on account of
discrepancies in the determination of the amount due or oral evidence in the
amount due when the written document crystalizes the amount due for which the
cheque was issued.
28. The accused has failed to lead any evidence to rebut the
statutory presumption, a finding returned by both the Trial Court and the High
Court. Both Courts not only erred in law but also committed perversity when the
due amount is said to be disputed only on account of discrepancy in the
cartons, packing material or the rate to determine the total liability as if
the appellant was proving his debt before the Civil Court. Therefore, it is
presumed that the cheques in question were drawn for consideration and the
holder of the cheques i.e., the appellant received the same in discharge of an
existing debt. The onus, thereafter, shifts on the accused-appellant to
establish a probable defence so as to rebut such a presumption, which onus has
not been discharged by the respondent.
29. Learned counsel for the respondent has referred to the
judgment reported in M. S. Narayana Menon vs. State of Kerala, (2006) 6 SCC 39
that evidence adduced by the complainant can be relied upon to rebut the
presumption of consideration. However, said judgment has no applicability to
the facts of the present case as the Trial Court has found that the presumption
is not rebutted but still the Trial Court dismissed the complaint for the
reason that the appellant has failed to prove the amount mentioned in the
cheque as due amount. Once the cheque is proved to be issued it carries
statutory presumption of consideration. Then the onus is on the respondent to
disprove the presumption at which the respondent has miserably failed.
30. In Kumar Exports evidence to rebut the presumption was
led and accepted by the Court. In these circumstances, it was held that the
burden shifts back to the complainant and the presumption under the Act will
not again come to his rescue. However, in the present case, the presumption of
consideration has not been rebutted by the respondent even on the basis of the
evidence laid by the appellant. The difference in the number of cartons
supplied or the rate charged is not relevant when the accounts were settled in
writing to rebut the presumption of consideration of issuance of a cheque.
31. In Vijay vs. Laxman and another, (2013) 3 SCC 86 this
Court found grave discrepancies in the case of the complainant and that no case
is made out for when the High Court had set aside the conviction on the basis
of clear evidence giving rise to the perverse findings.
32. Learned counsel appearing for the respondent also referred to M. S. Narayana Menon and K. Prakashan vs. P. K. Surenderan, (2008) 1 SCC 258 that if two views are possible, the appellate court shall not reverse a judgment of acquittal only because another view is possible to be taken. Learned counsel also relies upon a judgment reported as John K. Abraham vs. Simon C. Abraham, (2014) 2 SCC 236 that mere fact that the statutory notice was not replied cannot prejudice to the case of the respondent. We do not find any merit in the arguments raised by the learned counsel for the respondent. In fact, the findings recorded by the courts below are total misreading of the statutory provisions more so when the respondent has not led any evidence to rebut the presumption of consideration. Cross-examination on the prosecution witness is not sufficient to rebut the presumption of consideration. Mere discrepancies in the statement in respect of the cartons, trays or the packing material or the rate charged will not rebut the statutory presumption which is proved by CW3 Prem Chand.
33. The conclusion drawn by the Trial Court and the High
Court to acquit the respondent is not only illegal but being perverse is
totally unsustainable in law. Before concluding, we would like to put on record
that Ms. Mathew has ably assisted this Court in canvassing that the order
passed by the High Court does not warrant any interference in the present
appeal against acquittal.
34. Consequently, the present appeal is allowed, order passed by the High Court is set aside. The respondent is held guilty of dishonour of cheque for an offence under Section 138 of the Act. The respondent shall pay Rs. 10,77,712/- as fine i.e. twice of the amount of cheque of Rs. 5,38,856/- and a cost of litigation of Rs. 1,00,000/- within three months. If the amount of fine and the costs are not paid within three months, the respondent shall undergo imprisonment for a period of six months.