SANJEEV NARULA, J. (Oral):
5. Accordingly, the application stands disposed of.
6. The present application under Section 419(4) of the Bharatiya
Nagarik Suraksha Sanhita, 20231 seeks leave to appeal against the judgment
dated 19th November, 2024 passed by the JMFC (NI Act-03), Patiala House
Court, New Delhi, in CC No. 13496/2019, titled as "Sanjeev Singh
Chauhan v. Trilok Singh", whereby the Trial Court has acquitted the
Respondent for the offence under Section 138 of the Negotiable Instruments
Act, 1881.2
Factual Background
7. The relevant facts of the case, as set out in the complaint are
summarised as follows:
7.1 In May 2017, the Petitioner advanced a friendly loan of ₹10,00,000/-
to the Respondent, who is stated to be a personal acquaintance. The loan was
disbursed partly by way of cheque for ₹2,00,000/-, and the remaining
amount was paid in cash.
7.2 At the time of receiving the loan, the Respondent executed a mortgage
deed in favour of the Petitioner and undertook to repay the amount in 32
monthly instalments of ₹21,000/- each. However, the Respondent defaulted
and failed to pay any of the agreed instalments.
7.3 Subsequently, the Respondent issued a cheque bearing No. 024562
towards discharge of his liability. The said cheque, when presented for
encashment on 16th August, 2019, was returned unpaid due to insufficient
funds in the Respondent's account.
7.4 Following this, the Petitioner issued the statutory legal notice dated
20th August, 2019 under Section 138(b) NI Act, calling upon the Respondent
to make the payment for the amount of dishonoured cheque. However, the
"BNSS"
"NI Act"
Respondent failed to make the outstanding payments, leading to the filing
of the complaint for the offence under Sections 138 NI Act.
Proceedings before the Trial Court
7.5 On the basis of the complaint, the Trial Court took cognizance and
summoned the Respondent. Upon appearance, notice under Section 251 of
the Code of Criminal Procedure, 19733 was served, to which the Respondent
pleaded not guilty and claimed trial.
7.6 In support of his case, the Petitioner examined himself as well as CW-
1 and one Sh. Sanjay Kumar, CW-2. The Petitioner adduced evidence to
prove the following documents:
1. Original cheque in question Ex-CW1/1
2. Original bank return memo Ex-CW1/2
3. Legal demand notice Ex-CW1/3
4. Postal receipt of speed post and delivering Ex-CW1/4
detail
5. Bank account statement from 01.04.2017 Ex-CW1/X1
to 30.08.2017
6. ITR of Sh. Sanjay for the period 2017- Ex-CW1/X2
7. ITR of Ms. Kiran for the period 2018-2019 Ex-CW1/X3
7.7 At the same time, Sh. Sanjay Kumar, CW-2, relied upon following
documents:
1. Statement of bank account for the period Ex-CW-2/XX1
01.04.2021 to 31.03.2022
"CrPC"
2. Salary slips for the month July, 2019 till Ex-CW-2/XX2
November, 2019
7.8 Subsequently, in the statement recorded under Section 313 CrPC, the
Respondent denied liability and alleged misuse of the cheque by the
Petitioner. However, the Respondent did not lead any defence evidence. The
statement of the Respondent under Section 313 CrPC reads as follows:
"Q1. All the incriminating evidence has been put to the accused and the
accused has been asked as to what he has to say?
Ans. I have signed the cheque in question. I have not filled the
particulars on the same. I have received the legal notice. L have taken an
amount of Rs. 1,65,000/- from the complainant in two installments of Rs.
1,25,000/- and Rs. 40,000/- respectively by way of cheque. The cheque in
question was given to the complainant only far security purposes and the
same has been misused by the complainant. I am ready & willing to pay
Rs. 1,65,000/- to the complainant. I have no liability equivalent to the
amount of cheque in question. This is a false case against me.
Q2. Do you wish to lead DE.
Ans. No."
7.9 Based on the material on record and the evidence led by the parties,
the Trial Court proceeded to deliver the impugned judgment, whereby the
Respondent was acquitted of the offence under Section 138 of the NI Act.
Petitioner's grounds of challenge
8. Aggrieved by the impugned judgment of acquittal, the Petitioner has
preferred the present application seeking leave to appeal, raising the
following grounds:
8.1 The Trial Court failed to properly apply the statutory presumptions
under Sections 118(a) and 139 of NI Act. Once the execution of the cheque
is admitted, as in the present case, there arises a presumption in favour of the
holder that the cheque was issued for the discharge, in whole or in part, of a
legally enforceable debt or liability. This presumption is rebuttable in nature,
but the burden lies squarely on the drawer of the cheque to disprove the
existence of such liability by leading cogent and credible evidence. In the
present case, the Respondent unequivocally admitted to having signed and
issued the cheque in question. However, beyond a bare assertion that the
cheque was given as "security," no substantive defence was raised, nor was
any evidence adduced to rebut the presumption. It is well-settled that a mere
plea that the cheque was issued as security, without anything more, cannot
discharge the burden imposed under Sections 118 and 139 of the Act. In the
absence of any supporting material or circumstances demonstrating that no
debt or liability existed, the statutory presumption must stand .
8.2 The Trial Court erroneously reversed the burden of proof and rejected
the complaint on the ground that the Petitioner failed to establish the
underlying loan transaction. This approach is legally untenable, as it runs
contrary to the settled legal position that the initial burden on the
complainant shifted to the Respondent upon proof of execution of the
cheque, which in this case stands admitted.
8.3 The finding that there was insufficient evidence to establish the loan
overlooks the express provision under Section 139, which presumes that the
cheque was issued in discharge of a legally enforceable liability. The Trial
Court, instead of evaluating whether the Respondent had discharged the
onus to rebut the presumption, wrongly insisted on documentary proof from
the Petitioner, despite the statutory presumption operating in his favour.
8.4 The Respondent, in his statement under Section 313 CrPC, did not
deny the signature on the cheque, nor did he lead any evidence to rebut the
presumption. His sole defence that the cheque was given as 'security'
remained uncorroborated by any material evidence. In this context, the
judgments in V.S. Yadav v. Reena,4 and Hiten P. Dalal v. Bratindranath
Banerjee5 are squarely applicable, wherein it was held that the presumption
under Section 139 can be rebutted only by cogent evidence, and not by a
mere plausible explanation.
8.5 While certain discrepancies were observed in the narration of events
regarding the disbursal of the loan, these were adequately clarified. The
Petitioner and Respondent were friends, and the Respondent is stated to
have borrowed a sum of ₹10 lakhs from the Petitioner on 10th May, 2017.
Out of this amount, ₹8 lakhs was paid in cash and ₹2 lakhs by cheque. It is
the Petitioner's case that the Respondent later returned the cheque and
requested that the balance be paid in cash. The Petitioner managed to
arrange ₹75,000/- in cash and issued another cheque for ₹1,25,000/- to make
up the remaining amount. Although this factual sequence was not
specifically mentioned in the initial complaint or supporting affidavit, it was
clearly brought on record during the Petitioner's cross-examination and
remains uncontroverted. The Trial Court, however, failed to take this
explanation into account when evaluating the Petitioner's claim. This
omission has resulted in a misreading of the evidentiary record and has
materially affected the outcome of the case.
Analysis
9. In proceedings under Section 138 of the NI Act, the law creates a
presumption in favour of the holder of the cheque that it was issued in
discharge of a legally enforceable debt or liability. Section 118(a) of the Act
presumes that the cheque was made or drawn for consideration, while
2010 SCC OnLine Del 3294.
(2001) 6 SCC 16.
Section 139 mandates that the Court shall presume that the cheque was
issued for the discharge of such liability. Once execution of the cheque is
admitted or established, these statutory presumptions operate automatically
in favour of the complainant. However, it is equally well-settled that these
presumptions are rebuttable. The accused is entitled to demonstrate, by
cogent material or circumstances, that the debt or liability did not exist at the
time of issuance of the cheque. The presumption does not render the
complainant's case infallible, it only shifts the initial burden, which can be
discharged by the accused on a balance of probabilities.
10. However, the presumption under Section 139 is rebuttable. The
accused is not required to conclusively prove a negative fact. Rather, the
burden is to raise a probable defence sufficient to create reasonable doubt
regarding the existence of a legally enforceable debt or liability. The
Supreme Court, in Rajesh Jain v. Ajay Singh,6 held that the phrase "unless
the contrary is proved" in Section 139 does not imply that the accused must
necessarily prove the negative, i.e., that the instrument was not issued in
discharge of any debt or liability. Instead, it suffices if the accused can
demonstrate that the existence of such liability is improbable, so as to
persuade a prudent person, under the given circumstances, that no such debt
existed.
11. The law permits the accused to rebut the statutory presumption in two
distinct ways: first, by leading evidence to directly prove that no debt or
liability existed; or second, by relying on circumstantial or inherent
inconsistencies in the complainant's case to show, on a preponderance of
probabilities, that the debt was not legally enforceable. The Supreme Court,
in Rohitbhai Jivanlal Patel v. State of Gujarat,7 observed that if the
accused raises a plausible defence that creates doubts about the existence of
a legally enforceable debt or liability, the burden shifts back to the
complainant, and the presumptions under Sections 118 and 139 of the Act
no longer benefit him. Thus, the law does not compel the accused to prove a
negative. It merely requires the accused to place before the Court a defence
that is credible and probable in the facts of the case.
12. In the present case, the issuance of the cheque and the signature
thereon are admitted by the Respondent. However, a closer examination of
the record shows that the Trial Court rightly found the statutory
presumptions under Sections 118 and 139 to have been rebutted on a
preponderance of probabilities. The Respondent, in his statement under
Section 313 CrPC, clearly stated that the cheque was given only as security
in respect of a smaller sum of ₹1,65,000/-, and not towards any legally
enforceable liability equivalent to the cheque amount. Notably, the
Respondent categorically denied having taken a loan of ₹10 lakhs, and
asserted that the cheque was misused. The Respondent acknowledged his
liability to the extent of ₹1,65,000/- and expressed his willingness to repay
the same, however, he denied any liability for the amount mentioned in the
cheque. Though he did not lead any defence evidence, his admissions and
explanations were relevant for assessing whether the statutory presumption
stood rebutted.
13. The central issue, therefore, is whether the defence so raised by the
Respondent was sufficient to rebut the presumptions under Sections 118 and
(2023) 10 SCC 148.
(2019) 18 SCC 106.
139 of the NI Act on the touchstone of preponderance of probabilities. In
this regard, it is pertinent to refer to the detailed findings recorded by the
Trial Court:
"19. In paragraph no.3 of the complaint, it has been stated by the
complainant that out of total loan amount of Rs. 10,00,000/-, Rs.2 lakhs
were given to the accused by way of cheque bearing no.791606. During
cross-examination of CW-1 conducted on 19.12.2023, witness was shown
Ex.CW-1/Xl i.e. statement of account of the complainant and was asked to
show entry of Rs.2 lakhs given to the accused by way of cheque to which the
witness deposed that there is an entry of Rs. 1,25,000/- which was given by
him to the accused, however, the same has no entry of Rs.2,00,000/-as
alleged by him in the complaint. The same corroborates the defence taken
by the accused that he had taken a loan or Rs.1,65,000/- from the
complainant in two installments of Rs.1,25,000/- and Rs.40,000/-. During
cross-exan1ination of CW-1 conducted on 20.04.2023, CW-1 deposed
before the court that he has not brought any documentary evidence to show
that the said amount of Rs.2,00,000/- was paid to the accused by way of
cheque bearing no. 791606. CW-1 further deposed that he had taken an
amount of Rs.6 lakhs in cash from his sister-in-law which was paid to the
accused. The said sister-in-law has not been produced before the court in
order to show that said amount was advanced by her to the complainant to
be advanced to the accused.
20. It is further stated by CW-1 that Rs.2 lakhs were arranged from
one Sh.Sanjay and same was also given to the accused. CW-2 Sh. Sanjay
has been examined by complainant in his defence.CW-2 has deposed before
the court that he had paid the said amount of Rs.2 lakhs to the complainant
in the month of May, 2017 at his residence. During his cross-examination.
CW-2 despite many opportunities did not place on record statement of his
bank account for the period 2016-2019 as he had stated before the court
that the said amount of Rs.2 Lakhs was withdrawn by him from his bank
account which was given to complainant. Further, he did not even produce
the salary slips for the period 2016-2019 despite ample opportunities given
to him to produce the same.
21. ln paragraph no.4 of the complaint, it has been stated by the
complainant that accused had also executed a mortgaged deed in his
favour, however, during cross-examination of complainant conducted on
20.11.2023, he admitted that the said alleged mortgaged deed has not been
placed on record.
22. CW-2 has deposed before the court that the loan in question was
given by the complainant to the accused for a period of one year for the
marriage of his daughter. However, in the complaint it has been stated that
the alleged loan amount was to be returned by the accused in 32
installments. There is an apparent contradiction.
23. The court is of the opinion that complainant has failed to prove his
financial capacity to pay the alleged loan of Rs. 10,00,000/ - to the accused.
24. It is also imperative to understand that in order to pronounce a
conviction in a criminal case, the accused 'must be' guilty and not merely
'may be' guilty. For an accused to be guilty, guilt should not be based on
mere surmises and conjectures but it should be based on cogent evidence.
25. In view of the above discussion and in view of the judgments of
Hon'blc Courts as stated above, the accused has been able to raise a
probable defence and has been able to prove his defence on the basis of
preponderance of probabilities that there is no legally enforceable debt or
liability in favour of the complainant and against the accused equivalent to
the amount of cheque in question as on the date of its drawal or on the date
of its presentation. Thus, the accused has been able to rebut the
presumption u/s. 118 r/w section 139 NI Act. Furthermore, the complainant
has failed to prove his case beyond reasonable doubt qua the accused in
respect of the cheque in question.
26. In view of the aforesaid, accused, namely, Trilok Singh S/o Sh. Ajit
Singh is acquitted of offence under section 138 Negotiable Instruments
Act."
14. The Trial Court, after analysing the testimony of CW-1 and CW-2,
noted material inconsistencies and shortcomings in the Complainant's
version. The Petitioner's narrative that a loan of ₹10 lakhs was extended to
the Respondent, of which ₹2 lakhs was given by a cheque, was entirely
contradicted by him during his cross examination. When the Petitioner (CW-
1) was confronted with the Respondent's statement of account, and asked to
show the entry for the ₹2 lakh cheque, the Petitioner could only point to an
entry for ₹1,25,000/-, and was unable to produce any evidence for the ₹2
lakh amount. This corroborates the defence's argument that the Respondent
had taken a loan of ₹1,65,000/-, split into two instalments of ₹1,25,000/- and
₹40,000/-.
15. Further, the Petitioner deposed before the Trial Court that he had
received an amount of ₹6 lakhs in cash from his sister-in-law, which was
subsequently paid to the Respondent. However, during his cross-
examination on 20th November, 2023, the Petitioner admitted that he did not
execute any guarantee or surety document when receiving the
aforementioned amount from his sister-in-law. Significantly, the Petitioner
also failed to examine his sister-in-law as a witness to corroborate his claim
of borrowing ₹6 lakhs from her. As a result, the source of the said amount,
as alleged by the Petitioner, remains unsubstantiated and unsupported by any
evidence.
16. The Petitioner further claimed that an additional amount of ₹2 lakh
was arranged from Sh. Sanjay Kumar, CW-2. However, this statement also
remains unproven. CW-2 deposed before the Trial Court that he had indeed
paid ₹2 lakh to the Petitioner in May 2017. He stated that he withdrew the
said amount from his bank account and handed it over to the Petitioner. To
substantiate this claim, CW-2 was granted multiple opportunities to provide
the statement of his bank account for the period from 2016 to 2019.
However, despite being given such opportunities, CW-2 failed to submit the
relevant bank statement, nor did he produce his salary slips for the pertinent
period. Consequently, the claim that the amount was withdrawn from his
bank account remains unsubstantiated, and the suggestion of such a
withdrawal remains unsupported by any documentary evidence.
17. As for the remaining ₹2 lakhs, which the Petitioner claimed to have
advanced to the Respondent, he vaguely asserted that the amount was
arranged "... from friends, market and out of my own savings." However,
the Petitioner failed to disclose the identity of any such friends, or to specify
the source or nature of the market-based funding. No supporting material,
such as loan documents, receipts, or even a basic outline of the alleged
financial arrangements, was placed on record. Furthermore, the Petitioner
did not produce his Income Tax Return8 records for the relevant years to
demonstrate his financial capacity or savings to extend the said loan. As
such, the Petitioner has failed to substantiate his claim regarding the loan of
₹6 lakhs from his sister-in-law and ₹2 lakhs from CW-2, nor has he
provided any proof of his financial ability to arrange for the remaining ₹2
lakhs from friends, the market, or his personal savings.
18. The Petitioner alleged in Paragraph No. 4 of the complaint that the
Respondent had executed a mortgage deed in his favour as security for the
loan. However, no such document was placed on record at any stage of the
proceedings. When confronted on this aspect, during his cross-examination
on 20th November, 2023, the Petitioner categorically admitted that the
alleged mortgage deed had not been presented before the Court. As such,
this specific averment made in the complaint also remains unsubstantiated.
19. Another aspect warranting mention is the inconsistency in the
Petitioner's case regarding the terms of the alleged loan. In both the
complaint and the affidavit by way of evidence, the Petitioner stated that the
Respondent had agreed to repay the loan in 32 monthly instalments of
₹21,000 each. However, this assertion was contradicted by CW-2 during his
cross-examination on 2nd August, 2024, wherein he deposed that the loan
had been extended for a period of one year specifically for the marriage of
the Respondent's daughter. This discrepancy between the Petitioner's
version and the testimony of his own witness casts serious doubt on the
veracity of the Petitioner's account and undermines the overall credibility of
his claim.
20. In view of the foregoing discussion, this Court finds no infirmity in
"ITR"
the Trial Court's conclusion that the Petitioner failed to establish his
financial capacity to have advanced the alleged loan of ₹10 lakhs to the
Respondent. This finding stands well-supported by the inconsistencies in the
Petitioner's own evidence, the absence of corroborative documentation, and
the failure to produce income tax returns reflecting the alleged loan
transaction. On this issue, it would be profitable to take note of the recent
judgment of the Supreme Court in Sri Dattatraya v. Sharanappa,9 where the
Court upheld the acquittal of an accused in a cheque dishonour case, inter
alia, on the ground that the complainant had failed to substantiate the loan
transaction either through documentary evidence or by reflecting the same in
his income tax returns. The Court further noted that contradictions in the
complainant's deposition undermined the credibility of his claim and that,
despite the presumption under Section 139 of the NI Act, the accused had
succeeded in rebutting the same on a preponderance of probabilities. The
relevant observations of the Court are as follows:
"27. Applying the aforementioned legal position to the present factual
matrix, it is apparent that there existed a contradiction in the
complaint moved by the Appellant as against his cross-examination
relatable to the time of presentation of the cheque by the Respondent
as per the statements of the Appellant. This is to the effect that while
the Appellant claimed the cheque to have been issued at the time of
advancing of the loan as a security, however, as per his statement
during the cross examination it was revealed that the same was
presented when an alleged demand for repayment of alleged loan
amount was raised before the Respondent, after a period of six months
of advancement. Furthermore, there was no financial capacity or
acknowledgement in his Income Tax Returns by the Appellant to the
effect of having advanced a loan to the Respondent. Even further the
Appellant has not been able to showcase as to when the said loan was
advanced in favour of the Respondent nor has he been able to explain
as to how a cheque issued by the Respondent allegedly in favour of Mr
Mallikarjun landed in the hands of the instant holder, that is, the
Crl. Appeal No. 3257/2024, decided on 7 th August, 2024.
Appellant.
28. Admittedly, the Appellant was able to establish that the signature
on the cheque in question was of the Respondent and in regard to the
decision of this Court in Bir Singh (supra), a presumption is to ideally
arise. However, in the above referred context of the factual matrix,
the inability of the Appellant to put forth the details of the loan
advanced, and his contradictory statements, the ratio therein would
not impact the present case to the effect of giving rise to the statutory
presumption under Section 139 of the NI Act 1881. The Respondent
has been able to shift the weight of the scales of justice in his favour
through the preponderance of probabilities.
29. The Trial Court had rightly observed that the Appellant was not
able to plead even a valid existence of a legally recoverable debt as
the very issuance of cheque is dubious based on the fallacies and
contradictions in the evidence adduced by the parties."
[Emphasis Supplied]
21. At this juncture, it is pertinent to deal with the Petitioner's contention
that he had inadvertently failed to mention the issuance of a substitute
cheque for ₹1,25,000/- in his complaint or his evidence by way of affidavit.
According to his version, the initial loan of ₹10 lakhs comprised ₹8 lakhs in
cash and ₹2 lakhs by cheque. He now claims that the Respondent returned
the cheque and demanded cash instead, upon which he arranged ₹75,000/- in
cash and issued a new cheque for ₹1,25,000/-. This revised narrative
appears to be a mere afterthought, prompted by the Trial Court's finding that
the cheque for ₹2 lakhs was not reflected in the Petitioner's bank statement.
The Petitioner, in his complaint under Section 138 NI Act, as well as the
affidavit filed before the Trial Court, unequivocally stated that he had
provided ₹2 lakhs by cheque to the Respondent. This assertion forms the
foundation of the Petitioner's case. It is implausible that he could have
omitted such a material fact inadvertently. In fact, during his cross-
examination on 20th April, 2023, he expressly affirmed that the payment was
made via cheque No. 791606 drawn on State Bank of India, and offered to
produce his passbook in support. These contradictions point to an attempt to
shift the narrative at the appellate stage, and the revised version now
presented is nothing more than an effort to dilute the impact of the evidence
and misrepresent the nature of the alleged transaction.
22. In view of the foregoing, the Trial Court rightly concluded that the
Petitioner's failure to substantiate the source of the alleged loan, his inability
to produce any supporting documentation such as bank records or income
tax returns, and the inconsistencies in his testimony rendered his claim
inherently improbable. The Respondent, through his cross-examination and
the surrounding circumstances, successfully rebutted the statutory
presumption under Section 139 of the NI Act. Applying the principles laid
down by the Supreme Court in the decisions discussed above, this Court
finds no perversity or legal infirmity in the Trial Court's reasoning. The
impugned judgment, therefore, calls for no interference.
23. Dismissed, along with pending applications.
SANJEEV NARULA, J
MARCH 27, 2025
d.negi/nk
