Recently, the Kerala High Court held that in cheque dishonour prosecutions under Section 138 of the Negotiable Instruments Act (hereinafter referred to as ‘NI Act’), a complainant discharges the initial burden once credible testimony regarding the transaction and execution of the cheque remains unshaken in cross-examination. The Court set aside the acquittal of an accused in a ₹3 lakh cheque dishonour prosecution and observed that once the execution and signature on the cheque are accepted, courts cannot presume an alternative transaction theory without any supporting material on record.
Brief Facts:
The case stemmed from a prosecution initiated under Section 138 of the NI Act, after a cheque allegedly issued towards repayment of a ₹3 lakh liability was dishonoured for insufficiency of funds. Following non-payment despite statutory notice, the complainant approached the Judicial First Class Magistrate Court, which later acquitted the accused on the ground that the underlying transaction had not been satisfactorily proved. Challenging the acquittal, the complainant moved the High Court, contending that the execution of the cheque and the transaction had been duly established through oral and documentary evidence, while the accused failed to adduce any defence evidence to rebut the statutory presumptions available under the NI Act.
Contentions of the Appellant:
The Counsel argued that the trial Magistrate adopted an unduly hyper-technical approach while appreciating the evidence on record. It was contended that the complainant had consistently established the loan transaction and the issuance of the cheque towards the discharge of the liability. The Appellant further submitted that once the transaction and execution of the cheque were proved through substantive oral and documentary evidence, the statutory presumptions under Sections 118 and 139 of the NI Act automatically came into operation in his favour. The Counsel also argued that the accused failed to rebut these presumptions either through effective cross-examination or by producing any independent evidence in support of the defence.
Contentions of the Respondent:
On the other hand, the defence maintained that although the accused admitted writing and signing the cheque, the transaction was different from the one projected by the complainant. The Counsel contended that the cheque had allegedly reached the complainant through a third party, and therefore, the existence of a legally enforceable liability was doubtful. The prosecution also supported the acquittal recorded by the Magistrate. However, the accused failed to produce any oral or documentary evidence to substantiate the alternative version put forward regarding the cheque transaction.
Observation of the Court:
Justice A. Badharudeen observed, “When the complainant offers himself as a witness and deposes about his case by eliciting the transaction and the mode of execution of the cheque by stating that the accused brought the cheque, written, signed and executed before him, the said version failed to be shaken during cross-examination, this evidence is the substantive evidence to be relied on by the courts to hold that the complainant discharged his initial burden. The said substantive evidence should not be disbelieved by a court of law unless by cross-examination or otherwise the evidence found to be not acceptable for which reasons to be recorded in writing.”
The Court observed that in prosecutions under Section 138 of the NI Act, the complainant is only required to initially establish the transaction and execution of the cheque through credible evidence, following which the statutory presumptions under Sections 118 and 139 of the NI Act become operative in his favour. The Bench emphasised that when a complainant enters the witness box and clearly explains the transaction, execution, and issuance of the cheque, such testimony constitutes substantive evidence unless effectively shaken during cross-examination. The Court clarified that courts cannot discard such evidence casually or on speculative assumptions without recording convincing reasons. It further noted that the accused cannot rebut the statutory presumptions merely through suggestions in cross-examination and must place reliable material or independent evidence on record to probabilise the defence case.
The Bench held that the trial Magistrate adopted an unsustainable and contradictory approach by simultaneously accepting that the accused had written and signed the cheque while doubting the complainant’s version regarding the underlying transaction. The Bench observed that once execution of the cheque stood admitted or proved, the presumption regarding a legally enforceable debt necessarily followed unless rebutted by cogent evidence. The Court found that the accused failed to substantiate the plea that the cheque had reached the complainant through a third party, particularly when no witness or supporting evidence was produced to establish such a defence. The Bench stressed that judicial findings cannot be based on conjectures or assumptions contrary to the evidence available on record.
The Court further emphasised that the evidence tendered by the complainant regarding the source of funds and the circumstances surrounding the loan transaction remained materially consistent throughout the proceedings. The Bench noted that despite extensive cross-examination, the defence could not impeach the credibility of PW1 or create any serious doubt regarding the execution of the cheque. It was also observed that the statutory presumptions embedded in the NI Act were introduced precisely to strengthen the credibility of commercial transactions and negotiable instruments. The Court reiterated that once the complainant satisfies the foundational burden, the evidentiary burden shifts squarely upon the accused to rebut the presumptions through acceptable evidence.
The decision of the Court:
In light of the foregoing discussion, the Court set aside the acquittal recorded by the Trial Court and convicted the accused for the offence punishable under Section 138 of the NI Act. The accused was sentenced to simple imprisonment for one day till the rising of the court and directed to pay a fine of ₹4.5 lakh, out of which ₹4.25 lakh was ordered to be paid to the complainant as compensation under Section 357(1)(b) of the CrPC.
Case Title: Wilfred Jose Vs. Jayapal & Anr.
Case No.: CRL.A No. 1964 of 2008
Coram: Hon’ble Mr. Justice A. Badharudeen
Advocate for the Petitioner: Adv. R.T.Pradeep, Adv. V.Vijulal
Advocate for the Respondent: Sr. PP. Renjit George
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