Kerala High Court Upholds Acquittal in Cheque Dishonour Case for Failure to Prove Debt — “Complainant Failed to Provide Specific Date of Transaction and Falsified Source of Funds, Defeating Presumption under Sections 118 and 139 of NI Act”

Court’s Decision

The Kerala High Court dismissed a criminal appeal under Section 378(4) of the CrPC challenging the acquittal of the accused in a cheque dishonour case under Section 138 of the Negotiable Instruments Act. The Court upheld the trial court’s finding that the complainant failed to establish the underlying debt or liability and held:

“A definite finding that the accused committed the offence could not be found by this Court from the evidence tendered.”

“The finding of the trial court that the transaction which led to execution of Ext.P1 cheque was not proved is only to be confirmed.”

Consequently, the judgment of acquittal was affirmed and the appeal was dismissed.

Facts

• The case arose from the dishonour of a cheque (Ext.P1) dated 01.01.2004 for ₹1,50,000/- issued by the accused to the complainant.
• The complainant alleged that the cheque was issued towards repayment of a legally enforceable debt.
• Upon dishonour of the cheque, proceedings were initiated under Section 138 of the NI Act.
• The trial court examined PW1 (complainant) and admitted documents Exts.P1 to P6. The defence examined DW1, the bank manager.

Issues

1. Whether the trial court erred in acquitting the accused under Section 138 of the NI Act?
2. Whether the findings of the trial court required interference by the appellate court?
3. What order should be passed in the appeal?

Petitioner’s Arguments

• It was argued that although the date of the loan transaction was not mentioned in the complaint or legal notice, the complainant had clarified during cross-examination that the amount was lent a month prior to the cheque date (i.e., around 01.12.2003).
• The complainant initially claimed the loaned amount came from the sale proceeds of property deposited in Federal Bank, Pala, but corrected himself after DW1 (Bank Manager) was examined.
• Later, he stated that the money was from a loan of ₹3,00,000/- obtained from Meenachil East Urban Co-operative Bank on 10.11.2003, and claimed to have documents to prove the loan and sale of property.
• The complainant contended that he was entitled to the presumptions under Sections 118 and 139 of the NI Act and that the presumption had not been rebutted by the accused.

Respondent’s Arguments

• The respondent pointed out that the complainant failed to provide a specific date of the transaction in any of his pleadings or affidavits.
• During cross-examination, for the first time, the complainant mentioned a vague timeframe, without identifying a specific date.
• The initial claim about the source of funds (sale of property and deposit in Federal Bank) was proven false through DW1’s deposition, which confirmed that the relevant bank account was opened only in 2004–2005, after the alleged transaction.
• The subsequent version regarding a loan from Meenachil East Urban Co-operative Bank was not supported by any documentary evidence.
• It was contended that the evidence of PW1 was untrustworthy, and the presumption under the NI Act stood rebutted.
• The respondent invoked the principle of double presumption in favour of an acquitted accused, as established in Dasegowda C.K. & Others v. State of Karnataka, 2014 KHC 4456.

Analysis of the Law

• The court emphasized that in order to invoke the presumption under Sections 118 and 139 of the NI Act, the complainant must first establish the foundational facts—namely, the existence of a legally enforceable debt.
• Here, the trial court found, and the High Court agreed, that no such foundation had been laid due to contradictions in the complainant’s version of events and the absence of any documentary proof of the loan or sale of property.
• The presumption under Section 139 was thus held to be rebuttable and not absolute.
• The High Court noted that falsity in the source of funds story seriously damaged the complainant’s credibility.

Precedent Analysis

• The Court relied on the decision in Dasegowda C.K. & Others v. State of Karnataka [2014 KHC 4456], which laid down the principle that: “In the case of acquittal, there are double presumptions in favour of the accused—firstly, the presumption of innocence, and secondly, that the trial court’s judgment reinforces that presumption.”
• The appellate court should not interfere with an acquittal unless the findings are manifestly perverse or unsupported by evidence.

Court’s Reasoning

• The High Court agreed with the trial court that the complainant’s evidence on the transaction was inconsistent and unsupported.
• The complainant’s initial claim about the sale of property and deposit in Federal Bank was proven false.
• His revised version about a cooperative bank loan lacked documentary support.
• These contradictions and the failure to prove the debt defeated the statutory presumptions.
• Thus, the acquittal was justified and did not warrant interference.

Conclusion

The criminal appeal was dismissed, and the judgment of acquittal passed by the Judicial First Class Magistrate, Erattupetta, was upheld. The Court found no merit in the appeal and directed the registry to forward a copy of the judgment to the jurisdictional court.

Implications

• The judgment reiterates the foundational principle that statutory presumptions under the NI Act are rebuttable and not automatic.
• Complainants in cheque dishonour cases must produce reliable and consistent evidence to prove the existence of a legally enforceable debt or liability.
• Contradictory evidence or unproven sources of funds can negate the presumption under Sections 118 and 139.
• The decision underscores the appellate court’s deference to acquittals unless findings are patently unreasonable.

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