Sec.138 NI Act - Cheque Bounce case = It is well settled that the proceedings under Section 138 of the Act are quasicriminal in nature, and the principles which apply to acquittal in other criminal cases are not applicable in the cases instituted under the Act. Likewise, under Section 139 of the Act, a presumption is raised that the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or other liability. To rebut this presumption, facts must be adduced by the 11 accused which on a preponderance of probability (not beyond reasonable doubt as in the case of criminal offences), must then be proved.In the instant case, the appellant has only recorded her statement under Section 313 of the Code, and has not adduced any evidence to rebut the presumption that the cheques were issued for consideration. Once the facts came on record remained unrebutted and supported with the evidence on record with no substantive evidence of defence of the appellant to explain the incriminating circumstances appearing in the complaint against her, no error has been committed by the High Court in the impugned judgment, and the appellant has been rightly convicted for the offence punishable under Section 138 of the Act and needs no interference of this Court.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO(S). 292 OF 2021
(Arising out of SLP(Crl.) No(s).8498 of 2019)
SUMETI VIJ ...APPELLANT(S)
VERSUS
M/S PARAMOUNT TECH FAB
INDUSTRIES ...RESPONDENT(S)
WITH
CRIMINAL APPEAL NO(S). 293 OF 2021
(Arising out of SLP(Crl.) No(s).8564 of 2019)
J U D G M E N T
Rastogi, J.
1. Leave granted.
2. The appellant is aggrieved by the judgment dated 30th April,
2019 passed by the High Court of Himachal Pradesh holding the
appellant guilty of offence under Section 138 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as the “Act”) after
1
reversal of the finding of acquittal returned by the learned trial
Judge by its judgment dated 28th September, 2012.
3. The brief facts of the case which emanates from the record
are that the appellant accused approached the complainantrespondent in its factory at Moginand and expressed her desire to
purchase nonwoven fabric from the complainant. On the basis of
order placed by the appellant, nonwoven fabric was sold to the
appellant vide invoice No.120 dated 01st October, 2010 and
invoice No.135 dated 16th October, 2010 amounting to
Rs.5,07,062/ and Rs.5,10,000/ which was delivered through
public carrier truck bearing Nos. HR38G5607 and HP710693
to the appellant accused and in lieu thereof, a cheque bearing
No.323930 dated 15th October, 2010 and No.323935 dated 01st
November, 2010 were issued by the appellant in the name of the
complainant from her account of the Punjab National Bank,
Karnal in order to meet the legal existing and enforceable
liabilities. The cheques on presentation were returned vide memo
dated 19th October, 2010 and 10th November, 2010 from Punjab
National Bank, Karnal with a note of “insufficient funds” in the
account of the appellant. Two legal notices dated 29th October,
2010 and 19th November, 2010 were sent by the complainant to
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the appellant on two addresses. The notices were duly served but
the appellant neither responded to the notices nor made any
payment in furtherance thereto within the statutory period
hence, two separate complaints were filed by the complainantrespondent under Section 138 of the Act against the appellantaccused.
4. The complainantrespondent recorded the preliminary
evidence before the learned trial Judge and thereafter, the
appellantaccused was directed to be summoned for committing
an offence punishable under Section 138 of the Act. After the
presence of the appellant had been secured, the learned trial
Judge put notice of accusation, visaviz the accused, for an
offence allegedly committed by her under Section 138 of the Act
whereto she pleaded not guilty and claimed trial.
5. The complainant in order to prove its case against the
appellantaccused, has examined three witnesses and placed
reliance on the documentary evidence which were duly exhibited
and referred to in detail by the learned trial Judge in para 3 of its
judgment. On conclusion of recording of complainant’s evidence,
the statement of the appellantaccused was recorded under
3
Section 313 of the Code of Criminal Procedure (hereinafter
referred to as the “Code”) by the learned trial Judge wherein the
appellantaccused claimed innocence and pleaded false
implication in the case however, did not lead any evidence in
defence.
6. On perusal of the evidence on record, the learned trial
Judge returned a finding that the complainant failed to establish
that the material/goods were delivered to the appellant in lieu of
which, the cheques were issued, and in the absence of burden
being discharged by the complainant, the onus to disprove or
rebut the presumption could not be shifted to the appellant as
referred under Section 139 of the Act. Accordingly, the trial court
returned the finding of acquittal of the appellant, which was the
subject matter of challenge in appeal before the High Court at the
instance of the complainant.
7. The High Court on reappraisal of the evidence on record
affirmed that the primary burden was discharged by the
complainant that the cheques were issued by the appellant in
lieu of the material supplied, and documentary evidence duly
exhibited was placed on record to substantiate the claim, and it
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was for the appellantaccused to discharge her burden to rebut in
defence as required under Section 139 of the Act. In the instant
case, the appellant only recorded her statement under Section
313 of the Code. However, no evidence was recorded to disprove
or rebut the presumption in defence. Taking into consideration
the overall material on record while setting aside the finding of
acquittal recorded by the trial Judge, held that the appellant was
guilty of committing an offence under Section 138 of the Act and
consequently, awarded appropriate punishment of fine/sentence
by the impugned judgment dated 30th April, 2019, which is the
subject matter of challenge in appeals before us.
8. Learned counsel for the appellant submitted that the
complainant was not able to prove that the material/goods were
ever sent or received by the appellant and in terms of the
complaint, the burden was on the complainant to prove that the
material/goods were received by the appellant, against which the
cheques were received as security and even though the appellant
has not placed any evidence to disprove or rebut the presumption
in defence, still the complainant has to discharge its burden and
has to stand on his own legs. In the absence of the primafacie
burden being discharged by the complainant, mere issuance of
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the cheques by the appellant would not have been sufficient to
justify that the cheques were issued in discharge of any debt or
other liability. In support of his submission, learned counsel for
the appellant has placed reliance on the judgment of this Court
in K. Prakashan vs. P.K. Surenderan1 and Indus Airways
Private Limited and Others Vs. Magnum Aviation Private
Limited and Another2
.
9. Learned counsel for the appellant further submits that the
appellant was able to succeed in creating a doubt in the mind of
the court below with regard to the nonexistence of the debt or
liability, and the learned trial court had returned the finding
based on the material available on record. Unless it was found to
be perverse or unsustainable, or a case of nonconsideration of
any relevant material, the High Court was not justified in
reversing and setting aside the finding of acquittal recorded by
the trial court merely on the ground that the view expressed by
the High Court is more plausible with what being expressed by
the trial court in its judgment dated 28th September, 2012.
1 (2008) 1 SCC 258
2 (2014) 12 SCC 539
6
10. Learned counsel for the appellant further submits that the
finding recorded by the High Court in the impugned judgment is
contrary to the settled principles of law as considered by this
Court in appreciating the mandate of Sections 118(a), 138 and
139 of the Act. In consequence thereof, the finding of guilt which
has been recorded by the High Court in the impugned judgment
is unsustainable in law, and has to be set aside.
11. Per contra, learned counsel for the complainantrespondent
while supporting the finding recorded by the High Court in the
impugned judgment submitted that there was sufficient material
available on record to justify that these cheques were issued with
reference to the invoices after delivery of goods, which were duly
exhibited, and cheques were issued in lieu thereof. In the
sequence of facts, the cheques issued by the appellant, on due
presentation to the bank got dishonoured on the ground of
“insufficient funds”. The statutory notice was issued to the
appellant, who failed to respond. The complaints were filed by
placing all documentary evidence in support of the complaint
duly exhibited, and three witnesses in support thereof were
examined, and was able to establish and discharge the burden of
proof. It was for the appellant to come forward with her defence,
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and prove to the contrary as envisaged under Section 139 of the
Act.
12. In the instant case, the appellant has only recorded her
statement under Section 313 of the Code, and has not adduced
any evidence to rebut the presumption that the cheques were
issued for consideration. Once the facts came on record remained
unrebutted and supported with the evidence on record with no
substantive evidence of defence of the appellant to explain the
incriminating circumstances appearing in the complaint against
her, no error has been committed by the High Court in the
impugned judgment, and the appellant has been rightly convicted
for the offence punishable under Section 138 of the Act and
needs no interference of this Court.
13. The object of introducing Section 138 and other provisions
of Chapter XVII in the Act appears to be to enhance the
acceptability of cheques in the settlement of liabilities. The
drawer of the cheque be held liable to prosecution on dishonour
of cheque with safeguards provided to prevent harassment of
honest drawers. Section 138 primarily relates to a civil wrong and
the amendment made in the year 2000 specifically made it
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compoundable. The burden of proof was on the accused in view
of presumption under Section 139 of the Act and the standard of
proof was of “preponderance of probabilities”. The N.I. Act
including a cheque carrying a presumption of consideration in
terms of Sections 118(a) and 139 of the Act which is related to
the purpose referred to and reads as under:
“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;
……..
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.”
14. There is a mandate of presumption of consideration in
terms of the provisions of the Act and the onus shifts to the
accused on proof of issuance of cheque to rebut the presumption
that the cheque was issued not for discharge of any debt or
liability in terms of Section 138 of the Act, which reads as
under:
“138. Dishonour of cheque for insufficiency, etc., of funds in
the account.—Where any cheque drawn by a person on an
account maintained by him with a banker for payment of any
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amount of money to another person from out of that account for
the discharge, in whole or in part, of any debt or other liability, is
returned by the bank unpaid, either because of the amount of
money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to be
paid from that account by an agreement made with that bank,
such person shall be deemed to have committed an offence and
shall, without prejudice to any other provisions of this Act, be
punished with imprisonment for 8 [a term which may be extended
to two years’], or with fine which may extend to twice the amount
of the cheque, or with both:
Provided that nothing contained in this section shall apply unless
—
(a) the cheque has been presented to the bank within a period
of six months from the date on which it is drawn or within
the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said
amount of money by giving a notice; in writing, to the
drawer of the cheque, [within thirty days] of the receipt of
information by him from the bank regarding the return of
the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the
said amount of money to the payee or, as the case may be,
to the holder in due course of the cheque, within fifteen
days of the receipt of the said notice.
Explanation.—For the purposes of this section, “debt or other
liability” means a legally enforceable debt or other liability.”
15. The scope of Section 139 of the Act is that when an accused
has to rebut the presumption, the standard of proof for doing so
is that of “preponderance or probabilities” which has been
examined by a threeJudge Bench of this Court in Rangappa vs.
Sri Mohan3
, which reads as under:
3 (2010) 11 SCC 441
10
“26. In light of these extracts, we are in agreement with the
respondent claimant that the presumption mandated by Section
139 of the Act does indeed include the existence of a legally
enforceable debt or liability. To that extent, the impugned
observations in Krishna Janardhan Bhat [(2008) 4 SCC 54 : (2008)
2 SCC (Cri) 166] may not be correct. However, this does not in any
way cast doubt on the correctness of the decision in that case since
it was based on the specific facts and circumstances therein. As
noted in the citations, this is of course in the nature of a rebuttable
presumption and it is open to the accused to raise a defence
wherein the existence of a legally enforceable debt or liability can
be contested. However, there can be no doubt that there is an
initial presumption which favours the complainant.
27. Section 139 of the Act is an example of a reverse onus clause
that has been included in furtherance of the legislative objective of
improving the credibility of negotiable instruments. While Section
138 of the Act specifies a strong criminal remedy in relation to the
dishonour of cheques, the rebuttable presumption under Section
139 is a device to prevent undue delay in the course of litigation.
However, it must be remembered that the offence made punishable
by Section 138 can be better described as a regulatory offence
since the bouncing of a cheque is largely in the nature of a civil
wrong whose impact is usually confined to the private parties
involved in commercial transactions. In such a scenario, the test of
proportionality should guide the construction and interpretation of
reverse onus clauses and the defendantaccused cannot be
expected to discharge an unduly high standard or proof.”
16. It is well settled that the proceedings under Section 138 of
the Act are quasicriminal in nature, and the principles which
apply to acquittal in other criminal cases are not applicable in
the cases instituted under the Act.
17. Likewise, under Section 139 of the Act, a presumption is
raised that the holder of a cheque received the cheque for the
discharge, in whole or in part, of any debt or other liability.
To rebut this presumption, facts must be adduced by the
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accused which on a preponderance of probability (not beyond
reasonable doubt as in the case of criminal offences), must then
be proved. In Rohitbhai Jivanlal Patel vs. State of Gujarat
and Another4
, this Court has examined the scope of Sections
138 and 139 of the Act, which reads as under:
“15. So far the question of existence of basic ingredients for
drawing of presumption under Sections 118 and 139 of the NI Act
is concerned, apparent it is that the appellantaccused could not
deny his signatures on the cheques in question that had been
drawn in favour of the complainant on a bank account maintained
by the accused for a sum of Rs 3 lakhs each. The said cheques
were presented to the bank concerned within the period of their
validity and were returned unpaid for the reason of either the
balance being insufficient or the account being closed. All the basic
ingredients of Section 138 as also of Sections 118 and 139 are
apparent on the face of the record. The trial court had also
consciously taken note of these facts and had drawn the requisite
presumption. Therefore, it is required to be presumed that the
cheques in question were drawn for consideration and the holder of
the cheques i.e. the complainant received the same in discharge of
an existing debt. The onus, therefore, shifts on the appellantaccused to establish a probable defence so as to rebut such a
presumption.
…….
17. On the aspects relating to preponderance of probabilities, the
accused has to bring on record such facts and such circumstances
which may lead the Court to conclude either that the consideration
did not exist or that its nonexistence was so probable that a
prudent man would, under the circumstances of the case, act upon
the plea that the consideration did not exist. This Court has, time
and again, emphasised that though there may not be sufficient
negative evidence which could be brought on record by the accused
to discharge his burden, yet mere denial would not fulfil the
requirements of rebuttal as envisaged under Sections 118 and 139
of the NI Act. This Court stated the principles in Kumar
Exports [Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513]
4 (2019) 18 SCC 106
12
“20. The accused in a trial under Section 138 of the Act has two
options. He can either show that consideration and debt did not
exist or that under the particular circumstances of the case the
nonexistence of consideration and debt is so probable that a
prudent man ought to suppose that no consideration and debt
existed. To rebut the statutory presumptions an accused is not
expected to prove his defence beyond reasonable doubt as is
expected of the complainant in a criminal trial. The accused may
adduce direct evidence to prove that the note in question was
not supported by consideration and that there was no debt or
liability to be discharged by him. However, the court need not
insist in every case that the accused should disprove the nonexistence of consideration and debt by leading direct evidence
because the existence of negative evidence is neither possible
nor contemplated. At the same time, it is clear that bare denial
of the passing of the consideration and existence of debt,
apparently would not serve the purpose of the accused.
Something which is probable has to be brought on record for
getting the burden of proof shifted to the complainant. To
disprove the presumptions, the accused should bring on record
such facts and circumstances, upon consideration of which, the
court may either believe that the consideration and debt did not
exist or their nonexistence was so probable that a prudent man
would under the circumstances of the case, act upon the plea
that they did not exist. Apart from adducing direct evidence to
prove that the note in question was not supported by
consideration or that he had not incurred any debt or liability,
the accused may also rely upon circumstantial evidence and if
the circumstances so relied upon are compelling, the burden
may likewise shift again on to the complainant. The accused
may also rely upon presumptions of fact, for instance, those
mentioned in Section 114 of the Evidence Act to rebut the
presumptions arising under Sections 118 and 139 of the Act.
21. The accused has also an option to prove the nonexistence of
consideration and debt or liability either by letting in evidence or
in some clear and exceptional cases, from the case set out by the
complainant, that is, the averments in the complaint, the case
set out in the statutory notice and evidence adduced by the
complainant during the trial. Once such rebuttal evidence is
adduced and accepted by the court, having regard to all the
circumstances of the case and the preponderance of
probabilities, the evidential burden shifts back to the
complainant and, therefore, the presumptions under Sections
118 and 139 of the Act will not again come to the complainant's
rescue.”
13
It was further considered by this Court in Uttam Ram vs.
Devinder Singh Hudan and Another5
.
18. In the case at hand, elucidating from the principles, the
complainant was able to prove that the appellant placed the order
for purchasing nonwoven fabric which was sold vide invoice No.
120 dated 01st October, 2010 and invoice No. 135 dated
16th October, 2010 amounting to Rs.5,07,062/ and
Rs.5,10,000/ which was delivered through public carrier truck
bearing Nos. HR38G5607 and HP710693 and in lieu thereof,
the cheques bearing No.323930 dated 15th October, 2010 and
No.323935 dated 01st November, 2010 in favour of the
complainant were issued by appellant in order to discharge her
liability. On the cheques being presented for encashment to the
State Bank of India, Branch Kala Amb, the same were
dishonoured on the ground of “insufficient funds” in the account
of the appellant and the same were returned vide memo dated
19th October and 10th November, 2010 by Punjab National Bank,
Karnal.
5 (2019) 10 SCC 287
14
19. Thereafter, two separate legal notices were served by the
complainant which were duly received by the appellant and even
after receiving the said notices, the appellant neither responded
to the notices nor made any payment within the statutory period
of fifteen days and only thereafter, two separate complaints were
filed by the complainant under Section 138 of the Act against the
appellantaccused.
20. There was no response by the appellant at any stage either
when the cheques were issued, or after the presentation to its
banker, or when the same were dishonoured, or after the legal
notices were served informing the appellant that both the
cheques on being presented to its banker were returned with a
note that it could not be honoured because of “insufficient
funds”.
21. That apart, when the complainant exhibited all these
documents in support of his complaints and recorded the
statement of three witnesses in support thereof, the appellant
has 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.
15
The statement of the accused recorded under Section 313 of the
Code is not a 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.
22. The judgment on which learned counsel for the appellant
has placed reliance i.e. K. Prakashan vs. P.K. Surenderan6
may not be of any assistance for the reason that in the case
dealing under Section 138 of the Act, the prosecution has to
prove the case and these cases being quasicriminal in nature are
to be proved on the basis of the principles of “preponderance of
probabilities”, and not on the principles as being examined in the
criminal case to prove the guilt of the accused beyond reasonable
doubt. So far as other case cited by the learned counsel for the
appellant i.e. Indus Airways Private Limited and Others Vs.
Magnum Aviation Private Limited and Another7
, there was
sufficiency of material on record to justify that the cheques were
issued as advance payment for purchase of goods, and one of the
6 (2008) 1 SCC 258
7 (2014) 12 SCC 539
16
terms and conditions of the contract was that the entire payment
would be made to the supplier in advance. However, much within
the time, the suppliercomplainant received the letter from the
purchasers cancelling the purchase orders and requested the
supplier to return both the cheques. The supplier pursuant
thereto, sent response asking the purchasers as to when the
supplier could collect the payment, and only thereafter, the
suppler sent a legal notice to the purchasers and filed a
complaint under Section 138 of the Act. In the given
circumstances, it was observed by this Court that the
complainant had failed even primafacie that there was a legally
enforceable debt or other liability subsisting on the date of drawal
of the cheque as contemplated under Section 138 of the Act. This
judgment would not be of any help to the appellant in the instant
case.
23. When the matter was earlier heard on 01st March, 2021, we
directed the learned counsel for the appellant to seek
instructions whether his client is ready to make payment of the
stated cheque amount in both the criminal appeals i.e.
Rs.5,07,062/ and Rs.5,10,000/ and posted the matter for
further hearing on 05th March, 2021. Learned counsel for the
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appellant on instructions, informed that his client is not willing
to discharge the stated amount, and wants to argue the case on
merits. After hearing the counsel for both the parties, we reserved
the order on 05th March, 2021 and still afforded an opportunity
that by 06th March, 2021 evening, the appellant can still reconsider her instructions as noticed by us in the order of 01st
March, 2021. It has been informed to us that the appellant is
interested to get the outcome of the present appeals on merits.
24. In the given circumstances, the High Court, in our view, has
not committed any error in recording the finding of guilt of the
appellant and convicting her for an offence being committed
under Section 138 of the Act under its impugned judgment,
which in our considered view, needs no further interference.
Consequently, the appeals are without any substance, and are
accordingly dismissed.
25. The bail bonds stand cancelled and the appellant shall
either pay the fine, or serve the sentence in compliance with the
judgment dated 30th April, 2019 passed by the High Court of
Himachal Pradesh.
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26. Pending application(s), if any, shall stand disposed of.
……………………………J.
(INDU MALHOTRA)
.
…………………………..J.
(AJAY RASTOGI)
NEW DELHI
March 09, 2021
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