Court’s decision
The Kerala High Court, in a judgment delivered by Justice Bechu Kurian Thomas, dismissed the appeal filed by the complainant challenging the acquittal of the accused in a prosecution under Section 138 of the Negotiable Instruments Act. The Court held that although the statute raises a presumption under Sections 118 and 139 that the cheque was issued for consideration, the complainant must still establish the existence of a legally enforceable debt. The Bench observed that contradictions in the complainant’s testimony, uncertainty about the source of funds, and a lack of corroborative evidence weakened the complainant’s case to the extent that the statutory presumption stood rebutted.
The Court examined the circumstances surrounding the alleged loan transaction and found that the complainant had failed to establish the financial capacity to advance the large cash amount claimed. The Court also noted contradictions between the complainant’s cross-examination and documentary evidence, in contrast with the accused’s consistent explanation that the cheque was issued to a third person in a different context. Rejecting the appellant’s challenge, the High Court affirmed the trial court’s findings and upheld the acquittal, emphasising that appellate courts must interfere in acquittal only when the lower court’s findings are perverse or unsustainable, which was not the case here.
Facts
The complainant alleged that the accused borrowed a substantial sum in cash and, in discharge of the liability, issued a cheque that was later returned unpaid due to insufficient funds. The complainant presented the cheque, issued notice, and initiated prosecution. The accused denied any liability and contended that the cheque was not issued for any loan but was handed over to a third person for a different purpose. During trial, the complainant asserted financial capacity and relied on a handwritten note to show acknowledgment of liability.
However, during cross-examination, the complainant provided inconsistent statements regarding the source of the cash allegedly advanced. The complainant could not satisfactorily explain why the alleged loan was given without documentation or why the handwritten note differed from earlier assertions. The trial court found inconsistencies and acquitted the accused, prompting the complainant to file the present appeal.
Issues
The central issues considered were:
- Whether the statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act was rightly considered and rebutted.
- Whether the complainant proved the existence of a legally enforceable debt or liability.
- Whether contradictions in the complainant’s testimony and lack of proof of financial capacity were sufficient to defeat the claim.
- Whether the trial court’s acquittal required appellate interference.
Petitioner’s arguments
The appellant argued that the trial court erred in refusing to draw the statutory presumption in favour of the complainant. The appellant contended that the accused had admitted the issuance of the cheque and that mere suggestions of an alternative explanation could not rebut the presumption. The appellant maintained that minor inconsistencies in cross-examination could not outweigh the direct evidence establishing advancement of the loan.
The appellant also contended that the handwritten note produced by the complainant clearly reflected acknowledgment of liability and that the trial court wrongly disregarded it. The appellant insisted that the complainant had the financial means to give the loan and that failure to produce corroborative banking documents did not by itself discredit the transaction. Accordingly, the appellant prayed for reversal of the acquittal and conviction of the accused.
Respondent’s arguments
The accused argued that the complainant had failed to prove financial capacity and that the claim of having advanced such a large sum in cash was inherently improbable. The accused emphasised that the complainant offered contradictory explanations regarding the origin of the funds and had not demonstrated any pattern of similar financial transactions. The accused further contended that the handwritten note relied upon by the complainant was inconsistent with earlier depositions and lacked credibility.
The accused reiterated that the cheque was issued to a third person in an unrelated matter and had been misused. By pointing out inconsistencies in the complainant’s statements and by furnishing a plausible alternative explanation, the accused contended that the presumption stood rebutted. The accused therefore urged the Court to sustain the acquittal.
Analysis of the law
The Court examined the scope of Sections 118 and 139 of the Negotiable Instruments Act, reaffirming that once issuance of the cheque is admitted, a presumption arises in favour of the complainant. However, this presumption is rebuttable and does not dispense with the complainant’s obligation to prove the foundational fact of a legally enforceable debt. The Court observed that rebuttal does not require direct evidence; even a probable defence suffices.
The Court further noted that when the complainant’s evidence regarding the loan transaction is riddled with contradictions and fails to meet the test of preponderance of probabilities, the presumption collapses. The Bench reiterated that financial capacity, consistency of testimony, and plausibility of the alleged transaction are crucial in cheque dishonour cases, especially where cash dealings are asserted without supporting documentation.
Precedent analysis
The Court referred to binding Supreme Court decisions emphasising that statutory presumptions do not automatically result in conviction when the defence raises a probable explanation. The Court relied on precedent holding that if the complainant’s case appears doubtful, the presumption stands rebutted even without direct evidence from the accused. The Bench also cited decisions reiterating that appellate interference in acquittal is justified only when findings are perverse or against the weight of evidence, which was not the situation here.
The High Court thus applied the principles laid down in these decisions to conclude that the acquittal was sound.
Court’s reasoning
Justice Bechu Kurian Thomas reasoned that the complainant’s inability to prove financial capacity raised serious doubt about the existence of the alleged loan. The complainant’s shifting explanations regarding the source of funds undermined credibility. The Court noted that the handwritten note relied upon by the appellant did not align with other evidence and failed the test of reliability.
The accused’s explanation that the cheque was given to a third person for a different purpose, though not conclusively proved, was held to be a probable defence, sufficient to rebut the statutory presumption. The Court emphasised that the burden shifted back to the complainant to establish enforceable liability, which the complainant failed to do. For these reasons, the Court found no reason to interfere with the acquittal.
Conclusion
The Kerala High Court dismissed the appeal, affirming the acquittal of the accused in the cheque dishonour prosecution. The Court held that the complainant had not proved the existence of a legally enforceable debt, and contradictions in testimony rendered the complainant’s case doubtful. Since the accused offered a probable explanation and the presumption under Sections 118 and 139 stood rebutted, conviction was unwarranted. The Court reiterated that appellate courts must exercise great caution before disturbing an acquittal, especially in cases where evidence is inconsistent or lacking in credibility.
Implications
This judgment reinforces that complainants in cheque dishonour cases must present clear, consistent, and corroborative evidence. Mere reliance on statutory presumptions is insufficient when the complainant’s case has inherent weaknesses. The ruling clarifies that accused persons can rebut presumptions through probable explanations without producing direct evidence. It also underscores that appellate courts will not overturn acquittals unless findings are manifestly unreasonable. The decision will influence litigation strategy in Section 138 cases, particularly those involving large cash claims without supporting documentation.
