PRINCIPAL COMMISSIONER OF INCOME TAX vs. SHRI MANISH KUMAR SINGHAL

P a g e | 3 2025:HHC:19713 3. The learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, notice of accusation was put to him for the commission of an offence punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried. 4. The complainant examined himself as CW1 to prove his case. 5. The accused, in his statement recorded under Section 313 of Cr.P.C., admitted that he knew the accused. He denied the rest of the complainant’s case. He examined himself as (DW1) and Narinder Kumar (DW2). 6 Learned Trial Court held that the accused stated in his examination-in-chief that he had issued two cheques as security. He also admitted in his cross-examination that the second cheque was issued towards the cost of the apple crop. This contradicted his version. The cheque carried with it a presumption that it was issued in discharge of the legal liability for valid consideration. The cheque was dishonoured with an endorsement ‘insufficient funds’. The notice was duly served upon the accused and the accused failed to pay the amount despite the receipt of the notice;

P a g e | 4 2025:HHC:19713 hence, the accused was convicted of the commission of an offence punishable under Section 138 of NI Act and he was sentenced to undergo simple imprisonment for a period of one year, pay a fine of ₹5,20,000/- and in default of payment of fine to further undergo imprisonment for three months. 7. Being aggrieved from the judgment passed by the learned Trial Court, the accused filed an appeal, which was decided by the learned Additional Sessions Judge, Rohru (learned Appellate Court). Learned Appellate Court concurred with the findings recorded by the learned Trial Court that the accused had failed to rebut the presumption of consideration attached to the cheque. The evidence led by the accused failed to rebut this presumption. The cheque was dishonoured with an endorsement ‘funds insufficient’. The notice was duly served upon the accused but he failed to pay the amount despite the receipt of a valid notice of demand; therefore, he was rightly convicted of the commission of an offence punishable under Section 138 of the NI Act. The learned Trial Court had imposed an adequate sentence, and no interference was required with the sentence imposed by the learned Trial Court; hence, the appeal filed by the accused was dismissed.

P a g e | 5 2025:HHC:19713 8. Being aggrieved from the judgments and order passed by learned Courts below, the accused has filed the present revision asserting that learned Courts below erred in appreciating the evidence. The cheque was never issued to discharge the legal liability. The complainant failed to lead any evidence in support of his plea; therefore, it was prayed that the present revision be allowed and the judgments and order passed by the learned Courts below be set aside. 9. I have heard Mr. B.R. Sharma, learned counsel for the petitioner/accused and Mr. Ajay Kumar Lahota, learned counsel for the respondent/ 10. Mr. B.R. Sharma, learned counsel for the petitioner/accused, submitted that the learned Courts below erred in appreciating the evidence. The defence evidence proved that the cheque was issued as a security in discharge of legal liability, and it was misused by the complainant. The notice was not served upon the accused, and the requirement of Section 138 of the NI Act was not satisfied; therefore, he prayed that the present revision be allowed and the judgments and order passed by the learned Courts below be set aside.

P a g e | 6 2025:HHC:19713 11. Mr. Ajay Kumar Lahota, learned counsel for the respondent/complainant, supported the judgments and order passed by the learned Courts below and submitted that no interference is required with them. 12. I have given considerable thought to the submissions made at the bar and have gone through the records carefully. 13 It was laid down by the Hon’ble Supreme Court in Malkeet Singh Gill v. State of Chhattisgarh, (2022) 8 SCC 204: (2022) 3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that the revisional court is not an appellate court and it can only rectify the patent defect, errors of jurisdiction or the law. It was observed at page 207: - “10. Before adverting to the merits of the contentions, at the outset, it is apt to mention that there are concurrent findings of conviction arrived at by two courts after a detailed appreciation of the material and evidence brought on record. The High Court in criminal revision against conviction is not supposed to exercise the jurisdiction like the appellate court, and the scope of interference in revision is extremely narrow. Section 397 of the Criminal Procedure Code (in short “CrPC”) vests jurisdiction to satisfy itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior court. The object of the provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error which is to be determined on the merits of individual cases. It is also well settled that while considering the same,

P a g e | 7 2025:HHC:19713 the Revisional Court does not dwell at length upon the facts and evidence of the case to reverse those findings. 14. This position was reiterated in State of Gujarat v. Dilipsinh Kishorsinh Rao, 2023 SCC OnLine SC 1294, wherein it was observed: “13. The power and jurisdiction of the Higher Court under Section 397 Cr. P.C., which vests the court with the power to call for and examine records of an inferior court, is for the purposes of satisfying itself as to the legality and regularity of any proceeding or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law or the perversity which has crept into such proceedings. It would be apposite to refer to the judgment of this court in Amit Kapoor v. Ramesh Chandra, (2012) 9 SCC 460, where the scope of Section 397 has been considered and succinctly explained as under: “12. Section 397 of the Code vests the court with the power to call for and examine the records of an inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error, and it may not be appropriate for the court to scrutinise the orders, which, upon the face of it, bear a token of careful consideration and appear to be in accordance with the law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes but are merely indicative.

P a g e | 8 2025:HHC:19713 Each case would have to be determined on its own merits. 13. Another well-accepted norm is that the revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the exercise of revisional jurisdiction itself should not lead to injustice ex facie. Where the Court is dealing with the question as to whether the charge has been framed properly and in accordance with law in a given case, it may be reluctant to interfere in the exercise of its revisional jurisdiction unless the case substantially falls within the categories aforestated. Even framing of charge is a much- advanced stage in the proceedings under the CrPC.” 15. It was held in Kishan Rao v. Shankargouda, (2018) 8 SCC 165: (2018) 3 SCC (Cri) 544: (2018) 4 SCC (Civ) 37: 2018 SCC OnLine SC 651 that it is impermissible for the High Court to reappreciate the evidence and come to its conclusions in the absence of any perversity. It was observed at page 169: “12. This Court has time and again examined the scope of Sections 397/401 CrPC and the ground for exercising the revisional jurisdiction by the High Court. In State of Kerala v. Puttumana Illath Jathavedan Namboodiri [State of Kerala v. Puttumana Illath Jathavedan Namboodiri, (1999) 2 SCC 452: 1999 SCC (Cri) 275], while considering the scope of the revisional jurisdiction of the High Court, this Court has laid down the following: (SCC pp. 454-55, para 5) “5. … In its revisional jurisdiction, the High Court can call for and examine the record of any proceedings for the purpose of satisfying itself as to the correctness, legality or propriety of any finding, sentence or order. In other words, the jurisdiction is one of supervisory

P a g e | 9 2025:HHC:19713 jurisdiction exercised by the High Court for correcting a miscarriage of justice. But the said revisional power cannot be equated with the power of an appellate court, nor can it be treated even as a second appellate jurisdiction. Ordinarily, therefore, it would not be appropriate for the High Court to reappreciate the evidence and come to its own conclusion on the same when the evidence has already been appreciated by the Magistrate as well as the Sessions Judge in appeal unless any glaring feature is brought to the notice of the High Court which would otherwise tantamount to a gross miscarriage of justice. On scrutinising the impugned judgment of the High Court from the aforesaid standpoint, we have no hesitation in coming to the conclusion that the High Court exceeded its jurisdiction in interfering with the conviction of the respondent by reappreciating the oral evidence. …” 13. Another judgment which has also been referred to and relied on by the High Court is the judgment of this Court in Sanjaysinh

Ramrao

Chavan v. Dattatray

Gulabrao Phalke [Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke, (2015) 3 SCC 123: (2015) 2 SCC (Cri) 19]. This Court held that the High Court, in the exercise of revisional jurisdiction, shall not interfere with the order of the Magistrate unless it is perverse or wholly unreasonable or there is non-consideration of any relevant material, the order cannot be set aside merely on the ground that another view is possible. The following has been laid down in para 14: (SCC p. 135) “14. … Unless the order passed by the Magistrate is perverse or the view taken by the court is wholly unreasonable or there is non-consideration of any relevant material or there is palpable misreading of records, the Revisional Court is not justified in setting aside the order, merely because another view is possible. The Revisional Court is not meant to act as an appellate court. The whole purpose of the revisional jurisdiction is to preserve the power in the court to do justice in

P a g e | 10 2025:HHC:19713 accordance with the principles of criminal jurisprudence. The revisional power of the court under Sections 397 to 401 CrPC is not to be equated with that of an appeal. Unless the finding of the court, whose decision is sought to be revised, is shown to be perverse or untenable in law or is grossly erroneous or glaringly unreasonable or where the decision is based on no material or where the material facts are wholly ignored or where the judicial discretion is exercised arbitrarily or capriciously, the courts may not interfere with the decision in exercise of their revisional jurisdiction.” 14. In the above case, also conviction of the accused was recorded, and the High Court set aside [Dattatray Gulabrao Phalke v. Sanjaysinh Ramrao Chavan, 2013 SCC OnLine Bom 1753] the order of conviction by substituting its own view. This Court set aside the High Court's order holding that the High Court exceeded its jurisdiction in substituting its views, and that too without any legal basis. 16. This position was reiterated in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 13, wherein it was observed at page 205: “16. It is well settled that in exercise of revisional jurisdiction under Section 482 of the Criminal Procedure Code, the High Court does not, in the absence of perversity, upset concurrent factual findings. It is not for the Revisional Court to re-analyse and re-interpret the evidence on record. 17. As held by this Court in Southern Sales & Services v. Sauermilch Design and Handels GmbH [Southern Sales & Services v. Sauermilch Design and Handels GmbH, (2008) 14 SCC 457], it is a well-established principle of law that the Revisional Court will not interfere even if a wrong order is passed by a court having jurisdiction, in the absence of a jurisdictional error. The answer to the first question is therefore, in the negative.”

P a g e | 11 2025:HHC:19713 17. The present revision has to be decided as per the parameters laid down by the Hon’ble Supreme Court. 18. The accused admitted the issuance of the cheque while appearing as DW1. He stated that he had issued the cheque to the complainant as a guarantee because Narender Kumar had taken money from the complainant. This statement shows that the complainant admitted the issuance of the cheque. It was laid down by this Court in Naresh Verma vs. Narinder Chauhan 2020(1) Shim. L.C. 398 that where the accused had not disputed his signatures on the cheque, the Court has to presume that it was issued in discharge of legal liability and the burden would shift upon the accused to rebut the presumption. It was observed: - “8. Once signatures on the cheque are not disputed, the plea with regard to the cheque having not been issued towards discharge of lawful liability, rightly came to be rejected by learned Courts below. Reliance is placed upon Hiten P. Dalal v. Bartender Nath Bannerji, 2001 (6) SCC 16, wherein it has been held as under: "The words 'unless the contrary is proved' which occur in this provision make it clear that the presumption has to be rebutted by 'proof' and not by a bare explanation which is merely plausible. A fact is said to be proved when its existence is directly established or when, upon the material before it, the Court finds its existence to be so probable that a reasonable man would act on the supposition that it exists. Unless, therefore, the explanation is supported

P a g e | 12 2025:HHC:19713 by proof, the presumption created by the provision cannot be said to be rebutted......" 9. S.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 nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability. 19. Similar is the judgment in Basalingappa vs. Mudibasappa 2019 (5) SCC 418 wherein it was held: “26. Applying the proposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque, having been admitted, a presumption shall be raised under Section 139 that the cheque was issued in discharge of debt or liability.” 20. This position was reiterated in Kalamani Tex v. P. Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25: (2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75 wherein it was held at page 289: “14. Once the 2nd appellant had admitted his signatures on the cheque and the deed, the trial court ought to have presumed that the cheque was issued as consideration for a legally enforceable debt. The trial court fell in error when it called upon the respondent complainant to explain the circumstances under which the appellants were liable to pay. Such an approach of the trial court was directly in the teeth of the established legal position as discussed above, and amounts to a patent error of law.” 21. Similar is the judgment in APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020) 12 SCC 724, wherein it was observed: -

P a g e | 13 2025:HHC:19713 “7.2. What is emerging from the material on record is that the issuance of a cheque by the accused and the signature of the accused on the said cheque are not disputed by the accused. The accused has also not disputed that there were transactions between the parties. Even as per the statement of the accused, which was recorded at the time of the framing of the charge, he has admitted that some amount was due and payable. However, it was the case on behalf of the accused that the cheque was given by way of security, and the same has been misused by the complainant. However, nothing is on record that in the reply to the statutory notice, it was the case on behalf of the accused that the cheque was given by way of security. Be that as it may, however, it is required to be noted that earlier the accused issued cheques which came to be dishonoured on the ground of “insufficient funds” and thereafter a fresh consolidated cheque of ₹9,55,574 was given which has been returned unpaid on the ground of “STOP PAYMENT”. Therefore, the cheque in question was issued for the second time. Therefore, once the accused has admitted the issuance of a cheque which bears his signature, there is a presumption that there exists a legally enforceable debt or liability under Section 139 of the NI Act. However, such a presumption is rebuttable in nature, and the accused is required to lead evidence to rebut such presumption. The accused was required to lead evidence that the entire amount due and payable to the complainant was paid. 9. Coming back to the facts in the present case and considering the fact that the accused has admitted the issuance of the cheques and his signature on the cheque and that the cheque in question was issued for the second time after the earlier cheques were dishonoured and that even according to the accused some amount was due and payable, there is a presumption under Section 139 of the NI Act that there exists a legally enforceable debt or liability. Of course, such presumption is rebuttable in nature. However, to rebut the presumption, the accused was required to lead evidence that the full amount due and payable to the

P a g e | 14 2025:HHC:19713 complainant had been paid. In the present case, no such evidence has been led by the accused. The story put forward by the accused that the cheques were given by way of security is not believable in the absence of further evidence to rebut the presumption, and more particularly, the cheque in question was issued for the second time after the earlier cheques were dishonoured. Therefore, both the courts below have materially erred in not properly appreciating and considering the presumption in favour of the complainant that there exists a legally enforceable debt or liability as per Section 139 of the NI Act. It appears that both the learned trial court as well as the High Court have committed an error in shifting the burden upon the complainant to prove the debt or liability, without appreciating the presumption under Section 139 of the NI Act. As observed above, Section 139 of the Act is an example of reverse onus clause and therefore, once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter, it is for the accused to rebut such presumption by leading evidence.” 22. The presumption under Section 139 of the NI Act was explained by the Hon’ble Supreme Court in Triyambak S. Hegde v. Sripad, (2022) 1 SCC 742: (2022) 1 SCC (Civ) 512: 2021 SCC OnLine SC 788 as under at page 747: “12. From the facts arising in this case and the nature of the rival contentions, the record would disclose that the signature on the documents at Exts. P-6 and P-2 are not disputed. Ext. P-2 is the dishonoured cheque based on which the complaint was filed. From the evidence tendered before the JMFC, it is clear that the respondent has not disputed the signature on the cheque. If that be the position, as noted by the courts below, a presumption would arise under Section 139 in favour of the appellant

P a g e | 15 2025:HHC:19713 who was the holder of the cheque. Section 139 of the NI Act reads as hereunder: “139. Presumption in favour of the holder. —It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.” 13. Insofar as the payment of the amount by the appellant in the context of the cheque having been signed by the respondent, the presumption for passing of the consideration would arise as provided under Section 118(a) of the NI Act, which reads as hereunder: “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

transferred

for consideration.” 14. The above-noted provisions are explicit to the effect that such presumption would remain until the contrary is proved. The learned counsel for the appellant in that regard has relied on the decision of this Court in K. Bhaskaran v. Sankaran

Vaidhyan

Balan [K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510: 1999 SCC (Cri) 1284] wherein it is held as hereunder: (SCC pp. 516-17, para 9) “9. As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins the Court to presume that the holder of the cheque received it for the discharge of any debt or liability. The burden was on the accused to rebut the

P a g e | 16 2025:HHC:19713 aforesaid presumption. The trial court was not persuaded to rely on the interested testimony of DW 1 to rebut the presumption. The said finding was upheld [Sankaran Vaidhyan Balan v. K. Bhaskaran, Criminal Appeal No. 234 of 1995, order dated 23-10- 1998 (Ker)] by the High Court. It is not now open to the accused to contend differently on that aspect.” 15. The learned counsel for the respondent has, however, referred

the

decision

this

Court in Basalingappa v. Mudibasappa [Basalingappa v. Mudibasap pa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571] wherein it is held as hereunder: (SCC pp. 432-33, paras 25-26) “25. We having noticed the ratio laid down by this Court in the above cases on Sections 118(a) and 139, we now summarise the principles enumerated by this Court in the following manner: 25.1. Once the execution of the cheque is admitted, Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability. 25.2. 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. 25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the 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. 25.4. That it is not necessary for the accused to come into the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden.

P a g e | 17 2025:HHC:19713 25.5. It is not necessary for the accused to come into the witness box to support his defence. 26. Applying the preposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque, having been admitted, a presumption shall be raised under Section 139 that the 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 the cross-examination of PW 1, when the specific question was put that a cheque was issued in relation to a loan of Rs 25,000 taken by the accused, PW 1 said that he does not remember. PW 1 in his evidence admitted that he retired in 1997, on which date he received a monetary benefit of Rs 8 lakhs, which was encashed by the complainant. It was also brought in evidence that in the year 2010, the complainant entered into a sale agreement for which he paid an 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, a copy of which complaint was also filed as Ext. D-2, there was a burden on the complainant to prove his financial capacity. In the years 2010-2011, as per own case of the complainant, he made a payment of Rs 18 lakhs. During his cross-examination, when the 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.” 16. In that light, it is contended that the very materials produced by the appellant and the answers relating to lack of knowledge of property details by PW 1 in his cross- examination would indicate that the transaction is

P a g e | 18 2025:HHC:19713 doubtful, and no evidence is tendered to indicate that the amount was paid. In such an event, it was not necessary for the respondent to tender rebuttal evidence, but the case put forth would be sufficient to indicate that the respondent has successfully rebutted the presumption. 17. On the position of law, the provisions referred to in Sections 118 and 139 of the NI Act, as also the enunciation of law as made by this Court, need no reiteration as there is no ambiguity whatsoever. In Basalingappav. Mudibasappa [Basalingappa v. Mudibasappa, (2019) 5 SCC 418 : (2019) 2 SCC (Cri) 571] relied on by the learned counsel for the respondent, though on facts the ultimate conclusion therein was against raising presumption, the facts and circumstances are entirely different as the transaction between the parties as claimed in the said case is peculiar to the facts of that case where the consideration claimed to have been paid did not find favour with the Court keeping in view the various transactions and extent of amount involved. However, the legal position relating to the presumption arising under Sections 118 and 139 of the NI Act on signature being admitted has been reiterated. Hence, whether there is a rebuttal or not would depend on the facts and circumstances of each case.” 23. This position was reiterated in Tedhi Singh v. Narayan Dass Mahant, (2022) 6 SCC 735: (2022) 2 SCC (Cri) 726: (2022) 3 SCC (Civ) 442: 2022 SCC OnLine SC 302 wherein it was held at page 739: “8. It is true that this is a case under Section 138 of the Negotiable Instruments Act. Section 139 of the NI Act provides that the court shall presume 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. This presumption, however, is expressly made subject to the position being proved to the contrary. In other words, it is open to the accused to establish that there is no consideration received. It is in the

P a g e | 19 2025:HHC:19713 context of this provision that the theory of “probable defence” has grown. In an earlier judgment, in fact, which has also been adverted to in Basalingappa [Basalingappa v. Mudibasappa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571], this Court notes that Section 139 of the NI Act is an example of reverse onus (see Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4 SCC (Civ) 477: (2011) 1 SCC (Cri) 184]). It is also true that this Court has found that the accused is not expected to discharge an unduly high standard of proof. It is accordingly that the principle has developed that all which the accused needs to establish is a probable defence. As to whether a probable defence has been established is a matter to be decided on the facts of each case on the conspectus of evidence and circumstances that exist...” 24. Similar is the judgment in P. Rasiya v. Abdul Nazer, 2022 SCC OnLine SC 1131, wherein it was observed: “As per Section 139 of the N.I. Act, 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 discharge, in whole or in part, of any debt or other liability. Therefore, once the initial burden is discharged by the Complainant that the cheque was issued by the accused and the signature and the issuance of the cheque are not disputed by the accused, in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for any debt or other liability. The presumption under Section 139 of the N.I. Act is a statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt or other liability which is in favour of the Complainant/holder of the cheque, in that case, it is for the accused to prove the contrary.”

P a g e | 20 2025:HHC:19713 25. This position was reiterated in Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: 2023 SCC OnLine SC 1275, wherein it was observed at page 161: 33. The NI Act provides for two presumptions: Section 118 and Section 139. Section 118 of the Act inter alia directs that it shall be presumed until the contrary is proved that every negotiable instrument was made or drawn for consideration. Section 139 of the Act stipulates that “unless the contrary is proved, it shall be presumed that the holder of the cheque received the cheque for the discharge of, whole or part of any debt or liability”. It will be seen that the “presumed fact” directly relates to one of the crucial ingredients necessary to sustain a conviction under Section 138. [The rules discussed hereinbelow are common to both the presumptions under Section 139 and Section 118 and are hence not repeated—reference to one can be taken as reference to another] 34. Section 139 of the NI Act, which takes the form of a “shall presume” clause, is illustrative of a presumption of law. Because Section 139 requires that the Court “shall presume” the fact stated therein, it is obligatory for the Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. But this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary, as is clear from the use of the phrase “unless the contrary is proved”. 35. The Court will necessarily presume that the cheque had been issued towards the discharge of a legally enforceable debt/liability in two circumstances. Firstly, when the drawer of the cheque admits issuance/execution of the cheque and secondly, in the event where the complainant proves that the cheque was issued/executed in his favour by the drawer. The circumstances set out above form the fact(s) which bring about the activation of the presumptive clause.

P a g e | 21 2025:HHC:19713 [Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal [Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal, (1999) 3 SCC 35]] 36. Recently, this Court has gone to the extent of holding that presumption takes effect even in a situation where the accused contends that a blank cheque leaf was voluntarily signed and handed over by him to the complainant. [Bir Singh v. Mukesh Kumar [Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Civ) 309: (2019) 2 SCC (Cri) 40] ]. Therefore, the mere admission of the drawer's signature, without admitting the execution of the entire contents in the cheque, is now sufficient to trigger the presumption. 37. As soon as the complainant discharges the burden to prove that the instrument, say a cheque, was issued by the accused for discharge of debt, the presumptive device under Section 139 of the Act helps shifting the burden on the accused. The effect of the presumption, in that sense, is to transfer the evidential burden on the accused of proving that the cheque was not received by the Bank towards the discharge of any liability. Until this evidential burden is discharged by the accused, the presumed fact will have to be taken to be true, without expecting the complainant to do anything further. 38. John Henry Wigmore [John Henry Wigmore and the Rules of Evidence: The Hidden Origins of Modern Law] on Evidence states as follows: “The peculiar effect of the presumption of law is merely to invoke a rule of law compelling the Jury to reach the conclusion in the absence of evidence to the contrary from the opponent but if the opponent does offer evidence to the contrary (sufficient to satisfy the Judge's requirement of some evidence), the presumption ‘disappears as a rule of law and the case is in the Jury's hands free from any rule’.” 39. The standard of proof to discharge this evidential burden is not as heavy as that usually seen in situations where the prosecution is required to prove the guilt of an

P a g e | 22 2025:HHC:19713 accused. The accused is not expected to prove the non- existence of the presumed fact beyond a reasonable doubt. The accused must meet the standard of “preponderance of probabilities”, similar to a defendant in a civil proceeding. [Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4 SCC (Civ) 477: (2011) 1 SCC (Cri) 184: AIR 2010 SC 1898]] 26. Narender Kumar (DW2) stated that he had transactions with the complainant. Om Prakash, the accused, was a surety. He stated in his cross-examination that Om Prakash is his friend. He did not bring any statement of account with him. He did not produce any record regarding the taking of the loan. 27. It was never suggested to the complainant in his cross- examination that the accused had issued a cheque as a guarantor for the repayment of the loan by Narender. It was stated in the application under Section 145(2) of the NI Act seeking permission to cross-examine the complainant and the witnesses that the accused has paid the entire money. Thus, it is apparent that the accused has taken a contradictory defence. He initially stated that he had paid the entire amount to the complainant. Thereafter, he came up with a plea that the cheque was issued as a security for the repayment of the loan by Narender which was never suggested to the complainant in his cross-examination and was also not asserted in the statement recorded under Section 313 of Cr.P.C.

P a g e | 23 2025:HHC:19713 Thus, the learned Courts below had rightly held that this plea was an afterthought which could not have been relied upon. 28. The complainant stated that he had sold four cows to the accused, and the cheque was issued towards their cost. There is nothing in his cross-examination to show that he was making a false statement. Therefore, learned Courts below had rightly accepted the complainant’s testimony. 29. It was submitted that no person was examined to prove the delivery of the cows to the accused. This submission will not help the accused. It was laid down by the Hon’ble Supreme Court in Ashok Kumar Versus State of U.P, 2025 SCC Online SC 706 that the complainant is not to prove the advancement of the loan because it is a matter of presumption. It was observed: 22. The High Court while allowing the criminal revision has primarily proceeded on the presumption that it was obligatory on the part of the complainant to establish his case on the basis of evidence by giving the details of the bank account as well as the date and time of the withdrawal of the said amount which was given to the accused and also the date and time of the payment made to the accused, including the date and time of receiving of the cheque, which has not been done in the present case. Pausing here, such presumption on the complainant, by the High Court, appears to be erroneous. The onus is not on the complainant at the threshold to prove his capacity/financial wherewithal to make the payment in discharge of which the cheque is

P a g e | 24 2025:HHC:19713 alleged to have been issued in his favour. Only if an objection is raised that the complainant was not in a financial position to pay the amount so claimed by him to have been given as a loan to the accused, only then the complainant would have to bring before the Court cogent material to indicate that he had the financial capacity and had actually advanced the amount in question by way of loan. In the case at hand, the appellant had categorically stated in his deposition and reiterated in the cross- examination that he had withdrawn the amount from the bank in Faizabad (Typed Copy of his deposition in the paperbook wrongly mentions this as ‘Firozabad’). The Court ought not to have summarily rejected such a stand, more so when respondent no. 2 did not make any serious attempt to dispel/negate such a stand/statement of the appellant. Thus, on the one hand, the statement made before the Court, both in examination-in-chief and cross- examination, by the appellant with regard to withdrawing the money from the bank for giving it to the accused has been disbelieved whereas the argument on behalf of the accused that he had not received any payment of any loan amount has been accepted. In our decision in S. S. Production v. Tr. Pavithran Prasanth, 2024 INSC 1059, we opined: ‘8. From the order impugned, it is clear that though the contention of the petitioners was that the said amounts were given for producing a film and were not by way of return of any loan taken, which may have been a probable defence for the petitioners in the case, but rightly, the High Court has taken the view that evidence had to be adduced on this point which has not been done by the petitioners. Pausing here, the Court would only comment that the reasoning of the High Court, as well as the First Appellate Court and Trial Court, on this issue is sound. Just by taking a counter-stand to raise a probable defence would not shift the onus on the complainant in such a case, for the plea of defence has to be buttressed by evidence, either oral or documentary, which in the present case has not been done. Moreover, even if it is

P a g e | 25 2025:HHC:19713 presumed that the complainant had not proved the source of the money given to the petitioners by way of loan by producing statement of accounts and/or Income Tax Returns, the same ipso facto, would not negate such claim for the reason that the cheques having being issued and signed by the petitioners has not been denied, and no evidence has been led to show that the respondent lacked capacity to provide the amount(s) in question. In this regard, we may make profitable reference to the decision in Tedhi Singh v. Narayan Dass Mahant, (2022) 6 SCC 735: ‘10. The trial court and the first appellate court have noted that in the case under Section

138

of the

NI Act,

the

complainant need not show in the first instance that he had the capacity. The proceedings under Section

138

the

NI Act

is not a civil suit. At the time, when the

complainant gives his evidence, unless a case is set up in the reply notice to the statutory notice sent, that the complainant did not have the wherewithal, it cannot be expected of the complainant to initially lead evidence to show that he had the financial capacity.

To that extent,

the courts in our view were right in holding on those lines. However, the

accused has the right to demonstrate

that the complainant in a particular case did not have the capacity and therefore, the case of the accused is acceptable, which he can do by producing independent materials, namely, by examining his witnesses and producing documents. It is also open to him to establish the very same aspect by pointing to the materials produced by the complainant himself. He can further, more importantly, achieve this result through the cross- examination

the

witnesses

the complainant.

Ultimately,

it becomes the duty of the

courts to consider carefully and appreciate the totality of the evidence and then come to a conclusion whether, in the given case, the accused has shown that the case of the complainant is in peril for the reason that the accused has established a probable defence.’ (emphasis supplied)’

P a g e | 26 2025:HHC:19713 (underlining in original; emphasis supplied by us in bold) 30. Therefore, the case of the complainant cannot be faulted because no witness deposed about the delivery of the cow to the accused. 31. The complainant stated that the cheque was dishonoured with the endorsement ‘funds insufficient’. The memo (Ext. C3/CW1) shows the reason for dishonour as ‘funds insufficient’. It was laid down by the Hon’ble Supreme Court in Mandvi Cooperative Bank Ltd. v. Nimesh B. Thakore, (2010) 3 SCC 83: (2010) 1 SCC (Civ) 625: (2010) 2 SCC (Cri) 1: 2010 SCC OnLine SC 155 that the memo issued by the Bank is presumed to be correct and the burden is upon the accused to rebut the presumption. It was observed at page 95: 24. Section 146, making a major departure from the principles of the Evidence Act, provides that the bank's slip or memo with the official mark showing that the cheque was dishonoured would, by itself, give rise to the presumption of dishonour of the cheque, unless and until that fact was disproved. Section 147 makes the offences punishable under the Act compoundable. 32. In the present case, no evidence was produced to rebut the presumption, and the learned Courts below had rightly held that the cheque was dishonoured with an endorsement ‘insufficient funds’

P a g e | 27 2025:HHC:19713 33. The complainant stated that he had issued a notice to the accused asking him to pay the amount. The accused admitted in his cross-examination that he had received a notice regarding the cheque, and he had not sent any reply to the notice; therefore, the receipt of the notice is not disputed. 34. The accused did not claim that he had paid the money to the complainant, and it was duly proved that the accused had failed to pay the money despite the receipt of a valid notice of demand. 35. Therefore, it was proved on record that the complainant had issued a cheque in discharge of the legal liability, which was dishonoured with an endorsement ‘funds insufficient’. The complainant issued a valid notice of demand, which was duly served upon the accused, and the accused failed to pay the amount despite the receipt of the notice of demand. Therefore, all the ingredients of the commission of the offence punishable under Section 138 of the NI Act were duly satisfied, and the learned Trial Court had rightly convicted the accused of the commission of an offence punishable under Section 138 of the NI Act.

P a g e | 28 2025:HHC:19713 36. Learned Trial Court sentenced the accused to undergo simple imprisonment for a period of one year. It was laid down by the Hon’ble Supreme Court in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 138 that the penal provisions of Section 138 is deterrent in nature. It was observed at page 203: “6. The object of Section 138 of the Negotiable Instruments Act is to infuse credibility into negotiable instruments, including cheques, and to encourage and promote the use of negotiable instruments, including cheques, in financial transactions. The penal provision of Section 138 of the Negotiable Instruments Act is intended to be a deterrent to callous issuance of negotiable instruments such as cheques without serious intention to honour the promise implicit in the issuance of the same.” 37. Keeping in view the deterrent nature of the sentence to be awarded, the sentence of one year’s imprisonment cannot be said to be excessive, and no interference is required with it. 38. Learned Trial Court ordered the payment of a fine of ₹5,20,000/-. The sentence was imposed on 06.07.2023, and the cheque was issued on 04.05.2018. Thus, the sentence was imposed after the lapse of more than 5 years. The complainant lost interest that he would have obtained by depositing the money in the Bank. He had to pay the litigation expenses for filing the complaint. He

P a g e | 29 2025:HHC:19713 was entitled to be compensated for the same. It was laid down by the Hon’ble Supreme Court in Kalamani Tex v. P. Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25: (2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75 that the Courts should uniformly levy a fine up to twice the cheque amount along with simple interest at the rate of 9% per annum. It was observed at page 291: - 19. As regards the claim of compensation raised on behalf of the respondent, we are conscious of the settled principles that the object of Chapter XVII of NIA is not only punitive but also compensatory and restitutive. The provisions of NIA envision a single window for criminal liability for the dishonour of a cheque as well as civil liability for the realisation of the cheque amount. It is also well settled that there needs to be a consistent approach towards awarding compensation, and unless there exist special circumstances, the courts should uniformly levy fines up to twice the cheque amount along with simple interest @ 9% p.a. [R. Vijayan v. Baby, (2012) 1 SCC 260, para 20: (2012) 1 SCC (Civ) 79: (2012) 1 SCC (Cri) 520]” 39. Therefore, the amount of ₹1,20,000/- on the principal of ₹4,00,000/- cannot be said to be excessive and no interference is required with it. 40. No other point was urged. 41. In view of the above, the present revision fails, and the same is dismissed.

P a g e | 30 2025:HHC:19713 42. Records of the learned Courts below be sent back forthwith, along with a copy of this judgment. (Rakesh Kainthla) Judge 25th June, 2025 (saurav pathania)