Commissioner of Income Tax, vs. Agricultural Market Committee,

Neutral Citation No. ( 2024:HHC:5402-DB ) IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Appeal No. 130 of 2011 Reserved on: 04.07.2024 Date of Decision: 18.07.2024 M/s Asia Trade Links ...Appellant Versus M/s Sharma Electronics ...Respondent Coram Hon’ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 No For the Appellant : Mr. Ajay Kumar, Senior Advocate, with Mr. Rohit, Advocate. For the Respondent : Mr. Rishabh Chauhan, Advocate. Rakesh Kainthla, Judge

The present appeal is directed against the judgment dated 18.2.2011, passed by learned Judicial Magistrate First Class, Kangra at Dharamshala (learned Trial Court), vide which the respondent (accused before the learned Trial Court) was acquitted of the commission of an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). (The parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience) 1 Whether reporters of Local Papers may be allowed to see the judgment? Yes.

2 2. Briefly stated, the facts giving rise to the present appeal are that the complainant filed a complaint before the learned Trial Court for the commission of an offence punishable under Section 138 of the NI Act. It was asserted that the complainant is the proprietor of M/s Asia Tradelinks. He is the distributor of electronic goods and appliances. The accused purchased different electronic goods and appliances from the complainant from time to time. The complainant prepared the balance statement and an amount of ₹2,70,123/- was pending against the accused. The accused signed the balance statement and issued a cheque for ₹2,70,123/- drawn on Punjab National Bank to discharge his liabilities. The complainant presented the cheque but it was dishonoured with the endorsement ‘insufficient funds’. The complainant issued a notice asking the accused to pay the amount within 15 days; however, the accused failed to do so. Hence, the complaint was filed for taking action against the accused. 3. The Learned Trial Court recorded the preliminary evidence and found sufficient reasons to summon the accused. 4. When the accused appeared, the notice of accusation was put to him for the commission of an offence punishable

3 under Section 138 of the NI Act. The accused pleaded not guilty and claimed to be tried. 5. The complainant examined himself (CW1), Kultar Chand Verma (CW2) and Man Chand (CW3) to prove his case. 6. The accused in his statement recorded under Section 313 of Cr.P.C., admitted that he is the proprietor of M/s Sharma Electronics. He denied the rest of the complainant’s case and claimed that he had handed over the blank cheque as a security. He admitted that notice was served upon him but stated that no payment was to be made by him. He stated that he wanted to lead evidence but he did not lead any oral evidence and tendered the document in evidence. 7. The learned Trial Court held that Section 139 of the NI Act creates a presumption in favour of the accused. The presumption is rebuttable. The cheque was issued for a sum of ₹2,70,123/- on 20.8.2007; however, the statement of account shows that ₹3,12,372/- was due on 2.8.2007. Therefore, the cheque of ₹2,70,123/- could not have been issued. The statement of the complainant that the accused returned items worth ₹42,249 was not admissible because such a fact was not pleaded in the complaint. The items were returned on 6.8.2007 and there

4 was no question of issuing the cheque on 2.8.2007. The bills were not filed to show the amount due to the accused. The defence version that a security cheque was issued was highly probable. Hence, the accused was acquitted. 8. Being aggrieved from the judgment passed by the learned Trial Court, the complainant filed the present appeal asserting that the learned Trial Court failed to properly appreciate the evidence. Learned Trial Court discussed the evidence as if it was dealing with the civil suit. It ignored the presumption contained in Section 139 of the NI Act. Therefore, it was prayed that the present appeal be allowed and the judgment passed by the learned Trial Court be set aside. 9. I have heard Mr Ajay Kumar, learned Senior Counsel with Mr Rohit, learned Counsel for the appellant/complainant and Mr Rishabh Chauhan, learned Counsel for the respondent- accused. 10. Mr. Ajay Kumar, learned Senior Counsel for the appellant/complainant submitted that the learned Trial Court erred in acquitting the accused. There is a presumption in favour of the complainant that the cheque was issued for discharging the legal liability. Learned Trial Court failed to notice this

5 presumption and discussed the evidence as in a normal criminal case. This affected the outcome. Therefore, he prayed that the present appeal be allowed and the judgment passed by the learned Trial Court be set aside. 11. Mr. Rishabh Chauhan, learned Counsel for the respondent-accused supported the judgment passed by the learned Trial Court and submitted that no interference is required with the same. 12. I have given considerable thought to the submissions and have gone through the records carefully. 13. The present appeal has been filed against a judgment of acquittal. The Hon’ble Supreme Court laid down the parameters of deciding an appeal against acquittal in Jafarudheen v. State of Kerala, (2022) 8 SCC 440, as under: - “Scope of Appeal filed against the Acquittal: 25. While dealing with an appeal against acquittal by invoking Section 378 of the Cr.PC, the Appellate Court has to consider whether the Trial Court's view can be termed as a possible one, particularly when evidence on record has been analyzed. The reason is that an order of acquittal adds up to the presumption of innocence in favour of the accused. Thus, the Appellate Court has to be relatively slow in reversing the order of the Trial Court rendering acquittal. Therefore, the presumption in favour of the accused does not get weakened but only strengthened. Such a double presumption that enures in favour of the

6 accused has to be disturbed only by thorough scrutiny on the accepted legal parameters." 14. This position was reiterated in Siju Kurian versus State of Karnataka 2023 online SCC 429, wherein it was held: - “15.  One of the main contentions raised by the learned counsel appearing for the appellant is to the effect that the High Court ought not to have interdicted with the judgment of the acquittal passed by the Trial Court and only in the event of the judgment of the Trial court was riddled with perversity and the view taken by the Trial Court was not a possible view, same could have been reversed by relying upon the judgment of this Court in case of Murugesan V. State through the Inspector of police(2012) 10 SCC 383 whereunder it came to be held as follows: “33. The expressions “erroneous”, “wrong” and “possible” are defined in the Oxford English Dictio- nary in the following terms: “erroneous.— wrong; incorrect. wrong.—(1) not correct or true, mistaken. (2) unjust, dishonest, or immoral. possible.—(1) capable of existing, happening, or being achieved. (2) that may exist or happen, but that is not certain or probable.” 34. It will be necessary for us to emphasize that a possible view denotes an opinion, which can exist or be formed irrespective of the correctness or other- wise of such an opinion. A view taken by a court lower in the hierarchical structure may be termed as erroneous or wrong by a superior court upon a mere disagreement. However, such a conclusion of the higher court would not take the view rendered by the subordinate court outside the arena of a possible view. The correctness or otherwise of any conclu-

7 sion reached by a court has to be tested on the basis of what the superior judicial authority perceives to be the correct conclusion. A possible view, on the other hand, denotes a conclusion, which can rea- sonably be arrived at regardless of the fact where it is agreed upon or not by the higher court. The fun- damental distinction between the two situations has to be kept in mind. So long as the view taken by the trial court can be reasonably formed, regardless of whether the High Court agrees with the same or not, the view taken by the trial court cannot be inter- dicted and that of the High Court supplanted over and above the view of the trial court.” 16. It need not be restated that it would be open for the High Court to re-apprise the evidence and conclusions drawn by the Trial Court and in the case of the judgment of the trial court being perverse that is contrary to the evidence on record, then in such circumstances the High Court would be justified in interfering with the findings of the Trial Court and/or reversing the finding of the Trial Court. In Gamini Bala Koteswara Rao v. State of Andhra Pradesh (2009) 10 SCC 636: AIR 2010 SC 589 it has been held by this Court as under: “14. We have considered the arguments advanced and heard the matter at great length. It is true, as contended by Mr Rao, that interference in an appeal against an acquittal recorded by the trial court should be rare and in exceptional circumstances. It is, however, well settled by now that it is open to the High Court to reappraise the evidence and conclu- sions drawn by the trial court but only in a case when the judgment of the trial court is stated to be perverse. The word “perverse” in terms as under- stood in law has been defined to mean “against the weight of evidence”. We have to see accordingly as to whether the judgment of the trial court which has been found perverse by the High Court was in fact so. 17. The Appellate Court may reverse the order of acquittal

8 in the exercise of its powers and there is no indication in the Code of any limitation or restriction having been placed on the High Court in the exercise of its power as an Appellate court. No distinction can be drawn as regards the power of the High Court in dealing with an appeal, between an appeal from an order of acquittal and an appeal from a conviction. The Code of Criminal Procedure does not place any fetter on the exercise of the power to review at large the evidence upon which the order of acquittal was founded and to conclude that upon that evidence the order of acquittal should be reversed. 18.  In the case of Sheo Swarup v. King Emperor AIR 1934 PC 227, it has been held by the Privy Council as under: But in exercising the power conferred by the Code and before reaching its conclusions upon fact, the High Court should and will always give proper weight and consideration to such matters as: 1) The views/opinion of the trial judge as to the credibility of the witnesses; 2) The presumption of innocence in favour of the accused; 3) The right of the accused to the benefit of any doubt; and 4) The slowness of an appellate court in dis- turbing a finding of fact arrived at by a judge who had the advantage of seeing the wit- nesses. 19. This Court has time and again reiterated the powers of the Appellate Court while dealing with the appeal against an order of acquittal and laid down the general principles in the matter of Chandrappa v. State of Karnataka  (2007) 4 SCC 415 to the following effect: “42. From the above decisions, in our considered view, the following general principles regarding the powers of the Appellate Court while dealing with an appeal against an order of acquittal emerge:

9 (1) An Appellate court has full power to re- view, reappreciate and reconsider the evi- dence upon which the order of acquittal is founded. (2) The Criminal Procedure Code, 1973 puts no limitation, restriction or condition on the ex- ercise of such power and an Appellate court on the evidence before it may reach its own con- clusion, both on questions of fact and law. (3) Various expressions, such as, “substantial and compelling reasons”, “good and suffi- cient grounds”, “very strong circumstances”, “distorted conclusions”, “glaring mistakes”, etc. are not intended to curtail extensive pow- ers of an Appellate court in an appeal against acquittal. Such phraseologies are more in the nature of “flourishes of language” to empha- sise the reluctance of an Appellate court to in- terfere with acquittal than to curtail the power of the court to review the evidence and to come to its own conclusion. (4) An Appellate court, however, must bear in mind that in case of acquittal, there is a double presumption in favour of the accused. Firstly, the presumption of innocence is available to him under the fundamental principle of crim- inal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. Secondly, the accused having secured his acquittal, the presumption of his innocence is further rein- forced, reaffirmed and strengthened by the trial court. (5) If two reasonable conclusions are possible on the basis of the evidence on record, the Ap- pellate court should not disturb the finding of acquittal recorded by the trial court.”

10 15. While dealing with the appeal against the acquittal in a complaint filed for the commission of an offence punishable under Section 138 of the NI Act the Hon’ble Supreme Court held in Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106 that the normal rules with same rigour cannot be applied to the cases under Negotiable Instruments Act because there is a presumption that the holder had received the cheque for discharge of legal liability. The Appellate Court is entitled to look into the evidence to determine whether the accused has discharged the burden or not. It was observed: - 12. According to the learned counsel for the appellant- accused, the impugned judgment is contrary to the principles laid down by this Court in Arulvelu [Arulvelum v. State, (2009) 10 SCC 206 : (2010) 1 SCC (Cri) 288] because the High Court has set aside the judgment of the trial court without pointing out any perversity therein. The said case of Arulvelu [Arulvelum v. State, (2009) 10 SCC 206 : (2010) 1 SCC (Cri) 288] related to the offences under Sections 304-B and 498-A IPC. Therein, on the scope of the powers of the appellate court in an appeal against acquittal, this Court observed as follows : (SCC p. 221, para 36) “36. Careful scrutiny of all these judgments leads to the definite conclusion that the appellate court should be very slow in setting aside a judgment of acquittal particularly in a case where two views are possible. The trial court judgment cannot be set aside because the appellate court's view is more probable. The appellate court would not be justified in setting aside the trial court judgment unless it arrives at a clear finding on marshalling the entire evidence on record that the

11 judgment of the trial court is either perverse or wholly unsustainable in law.” The principles aforesaid are not of much debate. In other words, ordinarily, the appellate court will not be upsetting the judgment of acquittal, if the view taken by the trial court is one of the possible views of the matter and unless the appellate court arrives at a clear finding that the judgment of the trial court is perverse i.e. not supported by evidence on record or contrary to what is regarded as normal or reasonable; or is wholly unsustainable in law. Such general restrictions are essential to remind the appellate court that an accused is presumed to be innocent unless proved guilty beyond reasonable doubt and a judgment of acquittal further strengthens such presumption in favour of the accused. However, such restrictions need to be visualised in the context of the particular matter before the appellate court and the nature of the inquiry therein. The same rule with the same rigour cannot be applied in a matter relating to the offence under Section 138 of the NI Act, particularly where a presumption is drawn that the holder has received the cheque for the discharge, wholly or in part, of any debt or liability. Of course, the accused is entitled to bring on record the relevant material to rebut such presumption and to show that preponderance of probabilities are in favour of his defence but while examining if the accused has brought about a probable defence so as to rebut the presumption, the appellate court is certainly entitled to examine the evidence on record in order to find if preponderance indeed leans in favour of the accused. 13. For determination of the point as to whether the High Court was justified in reversing the judgment and orders of the trial court and convicting the appellant for the offence under Section 138 of the NI Act, the basic questions to be addressed are twofold: as to whether the complainant Respondent 2 had established the ingredients of Sections 118 and 139 of the NI Act, so as to justify drawing of the presumption envisaged therein; and if so, as to whether the appellant-accused had been able to

12 displace such presumption and to establish a probable defence whereby, the onus would again shift to the complainant? 16. The present appeal has to be decided as per the judgments of the Hon’ble Supreme Court. 17. The complainant Ajay Kumar (CW1) stated that he is running an electronics goods shop. The accused is also running an electronics goods shop at Paprola. He had purchased various items from the complainant. The articles were purchased on credit. The payment was made in cash and cheque. The accused had purchased the articles. A bill was prepared. The balance statement was prepared. A copy was handed over to the accused. The accused confirmed the balance statement. An amount of ₹3,17,372/- was due towards the accused. The accused issued a cheque for ₹2,70,173/-. The cheque was presented which was dishonoured due to insufficient funds. 18. He stated in his cross-examination that he had been running the business since 2001. Earlier his father was running the business and he used to work with his father. He does not obtain any security at the time of starting a business with the people. The demand is made for the security cheques. Some of the parties issue the security cheques but others do not. He could

13 not tell the value of the articles supplied by him to the accused. He volunteered to say that this can be verified from the bills. He admitted that bill (Ex.CW1/H) does not contain the signatures of the accused. The accused had returned the articles and handed over the cheque to him. He admitted that when the business was stopped between the parties, the accused returned some of the articles. He could not say that the accused had issued a cheque of ₹2,00,000/-. He admitted that the statement (Ex.D1) contains an entry regarding the payment of ₹2,00,000/-. He denied that he had told the accused that he (the complainant) was organizing the foreign travel for which he demanded the passport and two blank cheques from the accused. He denied that he had misused the cheques issued by the accused. He denied that the accused demanded the cheques but he had not returned the cheques to the accused. 19. The accused has not disputed in his statement recorded under Section 313 of Cr.P.C. that he is running a business and the complainant is also running the business. The accused has also not disputed that a cheque was issued by him. He claimed that the cheque was issued towards security and it was a blank cheque. It was suggested to the complainant that the

14 accused had returned the articles to him at the time when the business was closed. This corroborates the entry in the statement of account regarding returning of various articles. The statement of account w.e.f. 1.4.2007 till 2.8.2007 shows that an amount of ₹3,12,372/- was due to the accused and some articles were returned. 20. It was suggested to the complainant that the blank cheque was issued in the discharge of the legal liability. The complainant denied such a suggestion. A denied suggestion does not amount to any proof and cannot be used to discard the version of the complainant. In any case, it was laid down by this Court in Hamid Mohammad Versus Jaimal Dass 2016 (1) HLJ 456, that even if the cheque was issued towards the security, the accused will be liable. It was observed: “9. Submission of learned Advocate appearing on behalf of the revisionist that cheque in question was issued to the complainant as security and on this ground, criminal revision petition be accepted is rejected being devoid of any force for the reasons hereinafter mentioned. As per Section 138 of Negotiable Instruments Act 1881 if any cheque is issued on account of other liability then provisions of Section 138 of Negotiable Instruments Act 1881 would be attracted. The court has perused the original cheque Ext. C-1 dated 30.10.2008 placed on record. There is no recital in cheque Ext. C-1 that cheque was issued as a security cheque. It is well-settled law that a cheque issued as security would also come under the provision of Section

15 138 of the Negotiable Instruments Act 1881. See 2016 (3) SCC page 1 titled Don Ayengia v. State of Assam & another. It is well-settled law that where there is a conflict between former law and subsequent law then subsequent law always prevails.” 21. It was laid down by the Hon'ble Supreme Court in Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited 2016(10) SCC 458 that issuing a cheque toward security will also attract the liability for the commission of an offence punishable under Section 138 of N.I. Act. It was observed:- “10. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways Private Limited versus Magnum Aviation Private Limited (2014) 12 SCC 53 with reference to the explanation to Section 138 of the Act and the expression “for the discharge of any debt or other liability” occurring in Section 138 of the Act. We are of the view that the question of whether a post-dated cheque is for “discharge of debt or liability” depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise. 11. Reference to the facts of the present case clearly shows that though the word “security” is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due. It is undisputed that the loan was duly disbursed on 28th February 2002 which was prior to the date of the cheques. Once the loan was disbursed and instalments have fallen due on the date of the cheque as per the agreement, the dishonour of such

16 cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability. 12. Judgment in Indus Airways (supra) is clearly distin- guishable. As already noted, it was held therein that liabil- ity arising out of a claim for breach of contract under Sec- tion 138, which arises on account of dishonour of cheque issued was not by itself at par with a criminal liability to- wards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of a cheque issued for dis- charge of later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque, there was a debt/liability in praesenti in terms of the loan agree- ment, as against the case of Indus Airways (supra) where the purchase order had been cancelled and a cheque issued towards advance payment for the purchase order was dis- honoured. In that case, it was found that the cheque had not been issued for discharge of liability but as an advance for the purchase order which was cancelled. Keeping in mind this fine but the real distinction, the said judgment cannot be applied to a case of the present nature where the cheque was for repayment of loan instalment which had fallen due though such deposit of cheques towards repay- ment of instalments was also described as “security” in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of the purchase order which is can- celled and that of a loan transaction where the loan has actually been advanced and its repayment is due on the date of the cheque. 13. The crucial question to determine the applicability of Section 138 of the Act is whether the cheque represents the discharge of existing enforceable debt or liability or whether it represents advance payment without there be- ing subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the underly- ing principle as can be discerned from the discussion of the said cases in the judgment of this Court.” (Emphasis supplied)

17 22. This position was reiterated in Sripati Singh vs. State of Jharkhand AIR 2021 SC 5732, and it was held that a cheque issued as security is not a waste paper and complaint under Section 138 of the N.I. Act can be filed on its dishonour. It was observed: 16. A cheque issued as security pursuant to a financial transaction cannot be considered a worthless piece of pa- per under every circumstance. 'Security' in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, de- posited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the bor- rower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of the amount, the cheque which is issued as security would ma- ture for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow. 17. When a cheque is issued and is treated as 'security' to- wards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security cannot be presented prior to the loan or the instalment maturing for repay- ment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner, if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be an under-

18 standing between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque, which is issued as security can never be presented by the drawee of the cheque. If such is the un- derstanding a cheque would also be reduced to an 'on-de- mand promissory note' and in all circumstances, it would only be civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circum- stance stated above if the cheque is presented and dishon- oured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situa- tion, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation. 23. The conduct of the accused does not support his version that a security cheque was issued by him. The accused did not make any complaint to any person regarding the fact that the complainant had retained a security cheque with him and was not returning the same. He has not even issued any notice to the bank asking it to stop the payment. Hence, the version of the accused that a security cheque was issued was not believable and the learned Trial Court erred in believing such a version based on the discrepancies noticed by the learned Trial Court in the judgment.

19 24. There is a force in the submission of the learned Senior Counsel for the complainant that the learned Trial Court had proceeded to discuss the evidence as if it was dealing with a normal criminal case. There was a presumption in favour of the complainant and the Court had to proceed with an assumption that a cheque was issued in discharge of the legal liability. 25. The accused has not disputed his signatures on the cheque. He only stated that the cheque was issued as a security. 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 NathBannerji, 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

20 reasonable man would act on the supposition that it exists. Unless, therefore, the explanation is supported 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. 26. Similar is the judgment in Basalingappa vs. Mudibasappa 2019 (5) SCC 418 wherein it was held: 24. 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. 27. This position was reiterated in M/S Kalamani Tex and another Versus P. Balasubramanian 2021 (5) SCC 283 wherein it was held: “14. Adverting to the case in hand, we find on a plain reading of its judgment that the trial Court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA. The Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these ‘reverse onus’ clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. This point of law has been crystallized by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106, 18 in the following words: “In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the

21 trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant- accused…..” 15. 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 Complainant-Respondent 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. 16. No doubt, and as correctly argued by senior counsel for the appellants, the presumptions raised under Section 118 and Section 139 are rebuttable in nature. As held in MS Narayana Menon v. State of Kerela (2006) 6 SCC 39, 32, which was relied upon in Basalingappa (supra), a probable defence needs to be raised, which must meet the standard of “preponderance of probability”, and not a mere possibility. These principles were also affirmed in the case of Kumar Exports (supra), wherein it was further held that bare denial of passing of consideration would not aid the case of the accused.”

22 28. Similar is the judgment in APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020) 12 SCC 724, wherein it was observed:- 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 the 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

23 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 the evidence that the full amount due and payable to the 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 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. 29. Learned Senior Counsel for the complainant rightly submitted that there is a presumption under Section 139 of the NI Act that the cheque was issued in the discharge of the legal liability. This presumption was explained by the Hon’ble Supreme Court in Triyambak S. Hegde Versus Sripad 2022 (1) SCC 742 as under:

24 11. 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 Exhibits P-6 and P-2 is not disputed. Exhibit 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 who was the holder of the cheque. Section 139 of the N.I. Act reads as hereunder:- "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." 12 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 the passing of the consideration would arise as provided under Section 118(a) of N.I. 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 or transferred for consideration." 13. 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 vs. Sankaran Vaidhyan Balan & Anr., 1999 (7) SCC 510 wherein it is held as hereunder: "9. As the signature in the cheque is admitted to be

25 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 on 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 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 by the High Court. It is not now open to the accused to contend differently on that aspect." 14. The learned counsel for the respondent has however referred to the decision of this Court in Basalingappa vs. Mudibasappa, 2019 (5) SCC 418 wherein it is held as hereunder: - "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 the 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

26 in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden. 25.5. It is not necessary for the accused to come into the witness box to support his defence. 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. The question to be looked into is as to whether any probable defence was raised by the accused. In cross-examination of PW1, when the specific question was put that the cheque was issued in relation to a loan of ₹25,000 taken by the accused, PW1 said that he does not remember. PW1 in his evidence admitted that he retired in 1997 on which date he received a monetary benefit of ₹8 lakhs, which was encashed by the complainant. It was also brought in the evidence in the evidence that in the year 2010, the complainant entered into a sale agreement for which he paid an amount of ₹4,50,000 to Balana Gouda towards sale consideration. Payment of ₹4,50,000 being admitted in the year 2010 and a further payment of a loan of ₹ 50,000 with regard to which Complaint No.119 of 2012 was filed by the complainant, 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 the own case of the complainant, he made a payment of ₹18 lakhs. During his cross-examination, when the financial capacity to pay ₹ 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." 15. In that light, it is contended that the very materials

27 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 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. 16. On the position of law, the provisions referred to in Sections 118 and 139 of N.I. Act as also the enunciation of law as made by this Court needs no reiteration as there is no ambiguity whatsoever. In, Basalingappa vs. Mudibasappa (supra) 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 the amount involved. However, the legal position relating to presumption arising under Sections 118 and 139 of N.I. Act on a signature being admitted has been reiterated. Hence, whether there is a rebuttal or not would depend on the facts and circumstances of each case. 30. This position was reiterated in Tedhi Singh vs. Narayan Dass Mahant 2022 (6) SCC 735 wherein it was held: 7. It is true that this is a case under Section 138 of the Negotiable Instruments Act. Section 139 of the N.I. 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 context of this provision that the theory of 'probable

28 defence' has grown. In an earlier judgment, in fact, which has also been adverted to in Basalingappa (supra), this Court notes that Section 139 of the N.I. Act is an example of reverse onus [see (2010) 11 SCC 441). 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. 31. 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 lia- bility. Therefore, once the initial burden is discharged by the Complainant that the cheque was issued by the ac- cused and the signature and the issuance of the cheque is 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 pre- sumption 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 li- ability which is in favour of the Complainant/holder of the cheque, in that case, it is for the accused to prove the con- trary.” 32. 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

29 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 on 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. [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)

30 309 : (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 accused. The accused is not expected to prove the non- existence of the presumed fact beyond 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] ]

31 33. Therefore, the Court has to start with the presumption that the cheque was issued in discharge of legal liability and the burden is upon the accused to prove the contrary. 34. Hon’ble Supreme Court held in Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106, 18 that once the presumption had been drawn, the onus shifted to the accused and unless the accused discharged the onus, any doubt on the complainant’s case could not have been raised for want of evidence regarding the source of fund or non-examination of the witnesses. It was observed:- “18. In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant-accused. The aspect relevant for consideration had been as to whether the appellant- accused

has

brought

record

such

32 facts/material/circumstances which could be of a reasonably probable defence.” 35. It was laid down by the Hon’ble Supreme Court in Uttam Ram Versus Devinder Singh Hudan and another (2019) 10 SCC 287 that the complainant is not to prove the debt as in a civil court in view of the presumption but only to prove that the cheque was issued by the accused. It was observed: “20. The Trial Court and the High Court proceeded as if, the appellant is to prove a debt before a 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. Dishonour of a cheque carries a statutory presumption of consideration. The holder of the cheque in due course is required to prove that the cheque was issued by the accused and that when the same was 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.” 36. It was laid down in P. Rasiya v. Abdul Nazer, 2022 SCC OnLine SC 1131 that the complainant is not to state the nature of the transaction or the source of funds. It was observed: “By the impugned common judgment and order, the High Court has reversed the concurrent findings recorded by both the courts below and has acquitted the accused on the ground that, in the complaint, the Complainant has not specifically stated the nature of transactions and the source of fund. However, the High Court has failed to note the presumption under Section 139 of the N.I. Act. 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 dis-

33 charge, 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 is- sued 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. The aforesaid has not been dealt with and considered by the High Court.” 37. Therefore, in view of the binding precedents of the Hon’ble Supreme Court, the complainant is not required to prove the existence of legally enforceable debt or liability as this is a matter of presumption. Rather, the accused is required to disprove the existence of legally enforceable debt or liability. 38. In the present case, the accused did not provide any evidence to rebut the presumption. He only stated in his statement recorded under Section 313 of Cr.PC that the cheque was issued in the discharge of legal liability. It was held in Sumeti Vij vs. Paramount Tech Fab Industries AIR 2021 SC 1281 that the accused has to lead defence evidence to rebut the presumption and mere denial in his statement under Section 313 of Cr.P.C. is not sufficient to rebut the presumption. It was observed: “21. That apart, when the complainant exhibited all these

34 documents in support of his complaints and recorded the statement of three witnesses in support thereof, the appellant recorded her statement under Section 313 of the Code but failed to record evidence to disprove or rebut the presumption in support of her defence available under Section 139 of the Act. The statement of the accused recorded under Section 313 of the Code is not substantive evidence of defence, but only an opportunity to the accused to explain the incriminating circumstances appearing in the prosecution case of the accused. Therefore, there is no evidence to rebut the presumption that the cheques were issued for consideration." (Emphasis supplied)” 39. Therefore, the burden could not have been rebutted by merely making suggestions to the complainant or making the statement under Section 313 of Cr.P.C. 40. It was suggested to the complainant that the accused had not filled the cheque. He denied this fact. A denied suggestion does not amount to any proof. The accused did not provide any evidence to establish that he had handed over the blank cheque to the complainant who had filled the same. Hence, this fact has not been established. 41. In any case, it was laid down by the Hon’ble Supreme Court in Bir Singh vs. Mukesh Kumar (2019) 4 SCC 197, that a person is liable for the commission of an offence punishable under Section 138 of the NI Act even if the cheque is filled by some other person. It was observed:

35 “37. A meaningful reading of the provisions of the Nego- tiable 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 li- able unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in the 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 Sec- tion 138 would be attracted. 38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not in- validate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence. 39. It is not the case of the respondent accused that he ei- ther signed the cheque or parted with it under any threat or coercion. Nor is it the case of the respondent accused that the unfilled signed cheque had been stolen. The exis- tence of a fiduciary relationship between the payee of a cheque and its drawer, would not disentitle the payee to the benefit of the presumption under Section 139 of the Negotiable Instruments Act, in the absence of evidence of the exercise of undue influence or coercion. The second question is also answered in the negative. 40. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some pay- ment, 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 dis- charge of a debt. 41. The fact that the appellant-complainant might have been an Income Tax practitioner conversant with knowl- edge of the law does not make any difference to the law relating to the dishonour of a cheque. The fact that the loan may not have been advanced by a cheque or demand draft or a receipt might not have been obtained would

36 make no difference. In this context, it would, perhaps, not be out of context to note that the fact that the respondent- accused should have given or signed a blank cheque to the appellant complainant, as claimed by the respondent-ac- cused, shows that initially there was mutual trust and faith between them. 42. In the absence of any finding that the cheque in ques- tion was not signed by the respondent-accused or not vol- untarily made over to the payee and in the absence of any evidence with regard to the circumstances in which a blank signed cheque had been given to the appellant- complainant, it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent-accused being the drawer, at his request and/or with his acquiescence. The subsequent filling in of an unfilled signed cheque is not an alteration. There was no change in the amount of the cheque, its date or the name of the payee. The High Court ought not to have acquitted the respondent-accused of the charge under Section 138 of the Negotiable Instru- ments Act.” 42. This position was reiterated in Oriental Bank of Commerce vs. Prabodh Kumar Tewari 2022 0 Supreme (SC) 837 wherein it was observed: “12. The submission which has been urged on behalf of the appellant is that even assuming, as the first respondent submits, that the details in the cheque were not filled in by the drawer, this would not make any difference to the lia- bility of the drawer. xxxxxx 15. A drawer who signs a cheque and hands it over to the payee, is presumed to be liable unless the drawer adduces evidence to rebut the presumption that the cheque has been issued towards payment of a debt or in the discharge of a liability. The presumption arises under Section 139”

37 43. Therefore, the cheque is not bad even if it is not filled by the drawer. 44. Learned Trial Court was also swayed by the fact that the amount of ₹3,12,372/- was due on 2.8.2007. The articles were returned subsequently. Therefore, the complainant could not have adjusted the amount. The fact that the articles were returned was never disputed by the accused in the cross- examination of the complainant. Rather it was suggested to him that the articles were returned to him which shows this fact undisputed. Hence, in this situation, the complainant’s case is not suspect because he had deducted the value of the articles returned by the accused. 45. In any case, it was open for the complainant to accept a lesser amount than was due to him and there is nothing unusual in the acceptance of a lesser amount than due and the complaint could not have been doubted due to this fact alone. It was duly proved by (CW2) Kultar Chand and Man Chand (CW3) that the cheque was dishonoured due to insufficient funds. The memo of dishonour carries with it a presumption of correctness and no evidence was led to rebut this presumption.

38 46. The accused admitted that he had received the notice and no amount was paid by him. Thus, all the ingredients for the commission of offence were duly satisfied. 47. It was laid down in Rajesh Jain (supra) that when the Court failed to consider the presumption under Section 139 of the NI Act, its judgment could be interfered with. It was observed at page 166: 54. As rightly contended by the appellant, there is a fundamental flaw in the way both the courts below have proceeded to appreciate the evidence on record. Once the presumption under Section 139 was given effect, the courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would then necessarily have to shift to the case set up by the accused since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would then be to see whether the accused has discharged his onus of rebutting the presumption. If he fails to do so, the court can straightaway proceed to convict him, subject to the satisfaction of the other ingredients of Section 138. If the court finds that the evidential burden placed on the accused has been discharged, the complainant would be expected to prove the said fact independently, without taking the aid of the presumption. The court would then take an overall view based on the evidence on record and decide accordingly. 55. At the stage when the courts concluded that the signature had been admitted, the court ought to have inquired into either of the two questions (depending on the method in which the accused has chosen to rebut the presumption): Has the accused led any defence evidence to prove and conclusively establish that there existed no

39 debt/liability at the time of issuance of cheque? In the absence of rebuttal evidence being led the inquiry would entail: Has the accused proved the non-existence of debt/liability by a preponderance of probabilities by referring to the “particular circumstances of the case”? 56. The perversity in the approach of the trial court is noticeable from the way it proceeded to frame a question at trial. According to the trial court, the question to be decided was “whether a legally valid and enforceable debt existed qua the complainant and the cheque in question (Ext. CW I/A) was issued in discharge of said liability/debt”. When the initial framing of the question itself being erroneous, one cannot expect the outcome to be right. The onus instead of being fixed on the accused has been fixed on the complainant. A lack of proper understanding of the nature of the presumption in Section 139 and its effect has resulted in an erroneous order being passed. 57. Einstein had famously said: “If I had an hour to solve a problem, I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.” Exaggerated as it may sound, he is believed to have suggested that the quality of the solution one generates is directly proportionate to one's ability to identify the problem. A well-defined problem often contains its own solution within it. 58. Drawing from Einstein's quote, if the issue had been properly framed after careful thought and application of judicial mind, and the onus correctly fixed, perhaps, the outcome at trial would have been very different and this litigation might not have travelled all the way up to this Court.” 48. Therefore, in view of the above, the present appeal is allowed, the judgment passed by the learned Trial Court is set

40 aside and the accused is convicted of the commission of an offence punishable under Section 138 of the NI Act. 49. Let the accused be produced on 26.07.2024 for hearing him on the quantum of sentence.

(Rakesh Kainthla)

Judge 18th July, 2024 (Chander)