Court’s Decision
In Crl. A. No. 2231 of 2008, the Kerala High Court dismissed a criminal appeal filed by the complainant challenging the acquittal of the accused in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881. The Court held that the trial court’s findings were reasonable and well-supported by evidence. It endorsed the conclusion that the complainant failed to discharge the initial burden necessary to avail the benefit of statutory presumptions under Sections 118 and 139 of the NI Act.
The Court held:
“I am not inclined to re-visit the view taken by the learned Magistrate… I fully endorse the finding of the learned Magistrate and the said finding does not require any interference.”
Facts
The complainant alleged that the accused borrowed ₹1,25,000 in August 2004 and issued a cheque dated 16.11.2004 (Exhibit P1) in discharge of this liability. Upon presentation, the cheque was dishonoured for the reason “exceeds arrangement”. Despite issuance of a demand notice, no payment was made, prompting initiation of proceedings under Section 138 of the NI Act.
During the trial, the complainant was examined as PW1, and documents including the cheque, dishonour memo, demand notice, postal receipts, and acknowledgment were marked as Exhibits P1 to P5. The accused examined himself as DW1 and produced Exhibits D1 to D12, including vouchers evidencing payments made in connection with an earlier loan transaction.
Issues
- Whether the trial court erred in acquitting the accused under Section 138 of the NI Act.
- Whether the complainant proved the existence of a legally enforceable debt of ₹1,25,000 at the time of cheque issuance.
- Whether the complainant was entitled to the benefit of the presumptions under Sections 118 and 139 of the NI Act.
Petitioner’s Arguments
The complainant contended that:
- The cheque was issued in discharge of a liability arising from a loan of ₹1,25,000 advanced in August 2004.
- The accused admitted the issuance of the cheque, and thus the presumption under Sections 118 and 139 applied.
- The trial court erred in relying heavily on Ext. D8 (a voucher acknowledging receipt of ₹2,000 on 18.09.2004), which pertained to an earlier transaction.
- The accused’s prompt repayment of earlier dues (₹40,000 as per Ext. D7) only reinforced the complainant’s credibility and showed that the accused was a regular borrower.
- Merely because the complainant’s family members were not examined does not vitiate the credibility of PW1’s deposition.
Respondent’s Arguments
The accused argued that:
- He had only borrowed ₹50,000 from the complainant in 2003 at 6% interest and had regularly repaid it.
- He paid ₹12,500 in March 2004 and ₹40,000 in June 2004, leaving a balance of only ₹10,000.
- Ext. D8 showed that he paid another ₹2,000 on 18.09.2004, which contradicted the complainant’s claim of a fresh ₹1,25,000 loan in August 2004.
- The cheque in question was issued as security for the prior transaction and not for a new loan.
- The complainant had not satisfactorily established the source of funds for the alleged new loan and failed to discharge the burden required to invoke Section 139.
Analysis of the Law
The High Court reiterated that while Section 139 of the NI Act creates a presumption in favour of the holder of the cheque, it is a rebuttable presumption. The presumption arises only when the foundational facts—such as the existence of a legally enforceable debt—are proved.
The Court noted that:
- Exts. D1 to D8 supported the accused’s case of a prior ₹50,000 loan and repayments.
- Ext. D8, a voucher dated 18.09.2004 (after the alleged second loan), showed a payment of ₹2,000 by the accused to the complainant, undermining the complainant’s story of a separate ₹1,25,000 loan.
- The complainant had failed to explain the issuance of Ext. D8 or prove why a new loan would be advanced while a prior debt remained unpaid.
- Though PW1 stated he received funds from his son-in-law, no corroborative evidence was offered.
- Failure to examine witnesses present during the transaction was not fatal, but the absence of such corroboration weakened the complainant’s case in light of the documentary evidence produced by the accused.
Precedent Analysis
While the judgment does not cite specific case law, it is in line with the following principles laid down in prior rulings:
- Bharat Barrel and Drum Manufacturing Co. v. Amin Chand Pyarelal, (1993) 3 SCC 35: Presumption under Section 118 is rebuttable.
- Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513: Once the accused rebuts the presumption by preponderance of probability, the burden shifts back to the complainant.
- Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54: Mere issuance of a cheque is not sufficient to presume the existence of a legally enforceable debt.
Though not explicitly referred to, the trial court and High Court applied these settled principles in their analysis.
Court’s Reasoning
The High Court agreed with the trial court that:
- The evidence suggested only one loan transaction of ₹50,000 in 2003.
- The complainant failed to prove a second loan of ₹1,25,000 in August 2004.
- Ext. D8 dated 18.09.2004 was crucial in disproving the complainant’s claim.
- The trial court rightly placed reliance on the evidence of DW1 and the contemporaneous vouchers.
Importantly, the Court observed that statutory presumptions cannot override reasonable inferences drawn from documentary and oral evidence:
“The case put up by the complainant… that he again advanced ₹1,25,000 to the accused during the 1st week of August 2004 while the earlier transaction itself was not closed… is not probable.”
Conclusion
The High Court dismissed the appeal, holding that the acquittal was based on a sound appreciation of evidence:
“This appeal fails and is dismissed accordingly.”
Implications
This judgment reinforces the principle that presumptions under Sections 118 and 139 of the NI Act do not dispense with the requirement to establish a legally enforceable debt. It underscores that:
- Issuance of a cheque alone is insufficient.
- If the defence produces plausible evidence, the presumption stands rebutted.
- Courts are justified in dismissing complaints where the complainant’s version appears improbable or unsupported by credible evidence.
The ruling provides guidance for both complainants and accused in cheque dishonour cases, illustrating the kind of evidentiary scrutiny courts will apply before invoking the penal consequences of Section 138.