Recently, the Kerala High Court upheld the acquittal of an accused in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881, ruling that the accused had successfully rebutted the statutory presumption under Sections 118 and 139 of the Act. The Court observed that mere admission of signature on a cheque does not automatically prove a legally enforceable debt or liability. The Bench emphasised that once the accused raises a probable defence supported by credible circumstances, the burden shifts back to the complainant to establish the existence of consideration and financial capacity.
Brief Facts:
The complainant and the accused were friends. As per the complaint, the accused allegedly borrowed ₹50,000 on 6 May 2006 and later issued a cheque dated 9 August 2006 for the said amount in repayment of the debt. Upon presentation, the cheque was dishonoured due to insufficient funds. Despite issuance of a statutory notice, the accused failed to make the payment, leading to the filing of a complaint under Section 138 of the NI Act.
During trial, the complainant examined herself as PW1 and produced Exhibits P1 to P6, while the accused examined DW1 and marked Exhibit D1. After evaluating the evidence, the trial court held that the accused had rebutted the statutory presumption of liability and consequently acquitted him. The complainant then filed an appeal challenging the acquittal.
Contentions of the Appellant:
The counsel for the appellant argued that the accused had not disputed his signature on the cheque and, therefore, the presumption under Section 139 of the NI Act ought to operate in the complainant’s favour. It was contended that the trial court had failed to appreciate the evidence in its proper perspective and erred in concluding that the accused had successfully rebutted the presumption.
Contentions of the Respondent:
The defence, on the other hand, argued that the complainant’s claim lacked credibility as she had failed to establish the source of funds allegedly lent to the accused. It was pointed out that the complainant herself had availed loans from two cooperative banks for her personal needs, contradicting her assertion that she had advanced ₹50,000 to the accused out of proceeds received from a property sale. Through the testimony of DW1 (Manilal) and Exhibit D1, the defence established that no money consideration had been received in connection with the property exchange, thereby undermining the complainant’s version.
Observations of the Court:
The High Court undertook a detailed analysis of the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act and the burden of proof resting upon the accused to rebut such presumptions. Relying on precedents such as Shree Daneshwari Traders v. Sanjay Jain, Basalingappa v. Mudibasappa, and APS Forex Services Pvt. Ltd. v. Shakti International Fashion Linkers, the Court reiterated that, “To rebut the statutory presumption, the accused need not prove his defence beyond a reasonable doubt. A probable defence that creates doubt about the existence of a debt or liability is sufficient.”
The Court observed that the accused had presented a consistent defence, that he had given a blank cheque to one Raveendran as security for a chitty transaction, which was later misused by the complainant. The explanation, coupled with supporting documentary evidence, was found credible enough to create a reasonable doubt regarding the existence of any legally enforceable debt.
The Bench further relied on the Apex Court’s guidance in Chandrappa v. State of Karnataka regarding appellate interference in acquittal cases, observing that where two views are reasonably possible, the appellate court should not disturb the trial court’s finding of acquittal.
Emphasising that Section 138 of the NI Act is a regulatory offence intended to promote credibility of negotiable instruments, the Court noted that the test of proportionality must guide the interpretation of statutory presumptions. The complainant’s failure to prove the source of funds and the circumstances surrounding the alleged loan further weakened her case.
The decision of the Court:
After reappreciating the evidence, the Kerala High Court held that the trial court’s view was both reasonable and legally sustainable. The Court concluded that the accused had successfully rebutted the presumption under Sections 118 and 139 of the NI Act by raising a probable defence supported by cogent evidence, thereby shifting the burden back to the complainant, who failed to discharge it.
Accordingly, the Court dismissed the appeal, affirming the acquittal of the accused under Section 138 of the Negotiable Instruments Act, 1881.
Case Title: Thangam vs. V.V. Haridasan & Ors.
Case No.: CRL. A No. 2311 OF 2007
Coram: Justice Johnson John
Advocate for Petitioner: Adv. K.P. Sudheer, Priya Vijayan
Advocate for Respondent: Advs. P. Shrihar, P. Vani, Chelson Chembarathy, Alex M. Thombra (SR. Public Prosecutor)
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