ANSS RAJASHEKAR versus AUGUSTUS JEBA ANANTH on 18 January 2019

[2019] 1 S.C.R. 731

ANSS RAJASHEKAR

v.

AUGUSTUS JEBA ANANTH

(Criminal Appeal Nos. 95-96 of 2019)

JANUARY 18, 2019

[DR. DHANANJAYA Y CHANDRACHUD

AND M.R. SHAH, JJ.]

Negotiable Instruments Act, 1881 – ss.138 and 139 –Dishonour of cheque – Appeal against conviction – Appellant’splea was that there was an absence of legally enforceable debt andthe burden which was cast by the provisions of s.139 was dischargedby him – Complainant’s case was that the appellant had taken aloan of Rs.15 lakhs from him and the cheques were issued byappellant in discharge of the same – The defence of the appellantwas that he did not borrow the said amount as alleged nor did heissue the cheque in discharge of any legally enforceable debt andthat four blank cheques were issued by him to the complainant onhis assurance of a loan from a financial institution – Held:Presumption under s.139 of the Act is rebuttable and the standardof proof for rebuttal of the presumption under s.139 of the Act isguided by a preponderance of probabilities – Complainant failedto establish the source of funds which he allegedly utilized for givingloan of Rs. 15 lakhs to the appellant – There was no receipt ordocument evidencing the payment of the amount – During the courseof his cross-examination, the complainant had deposed that earlier,the appellant had furnished two cheques for Rs. 5 lakhs and Rs. 10lakhs which he had presented – Complainant did not mentionanything about these two cheques in his complaint – Nothing wasstated by the complainant in regard to the fate of the earlier twocheques – Non-disclosure of the facts pertaining to the earlier twocheques, and the steps, if any, taken for recovery was a materialconsideration which indicated that there was a doubt in regard tothe transaction – Appellant duly rebutted the presumption unders.139 of the Act and, therefore, is held entitled to acquittal.

Allowing the appeals, the Court

HELD: 1.1 Section 139 of the Act mandates that it shall bepresumed, unless the contrary is proved, that the holder of a

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Acheque received it, in discharge, in whole or in part, of a debt, orliability. The expression “unless the contrary is proved” indicatesthat the presumption under Section 139 of the Act is rebuttable.Terming this as an example of a “reverse onus clause” the threeJudge Bench of this Court in Rangappa held that in determiningwhether the presumption has been rebutted, the test ofBproportionality must guide the determination. The standard ofproof for rebuttal of the presumption under Section 139 of theAct is guided by a preponderance of probabilities. In the instantcase, the defence of the appellant was that the cheque was issuedto the complainant on an assurance of a loan which would beCobtained from a financial institution. [Paras 10, 11][737-E-F; 738-C-D]

1.2 During the course of his cross-examination, PW-1admitted that a General Power of Attorney was executed by theappellant in his favour. Admittedly, the appellant and the

Drespondent are related and there was some civil litigationbetween the father of the complainant and the appellant. Thecomplainant admitted that, as a matter of fact, he himself receivedan amount of Rs. 10 lakhs from the appellant under a loantransaction but stated that he had repaid that amount to theappellant. PW-1 stated that the appellant had requested him for aEloan of Rs. 15 lakhs in February 2004. The defence of the appellantbeing that no amount was actually paid by the complainant to him,the evidence of PW-1 in regard to the payment of the loan assumessignificance. According to PW-1, the loan of Rs. 15 lakhs waspaid into the hands of a representative of the appellant at hisFrequest. The appellant failed to indicate even the name of therepresentative to whom the alleged amount of Rs. 15 lakhs isstated to have been paid over in cash. The entire amount,significantly, is alleged to have been paid over without obtaininga receipt or document evidencing the payment of the amount. Inthe notice of demand that was issued by the complainant to theGappellant after the cheque had been returned for want of funds,the complainant stated that the appellant had sought a ‘financialaccommodation’ of Rs. 15 Lakhs. The first appellate court notedthat while conducting the cross-examination of the accused, thecomplainant had stated that the accused had demanded a loan ofHRs. 15 lakhs, but at that time the complainant had only paid an amount of Rs. 5 Lakhs as a loan for which the accused issued acheque. This suggestion was specifically denied by the accused.In this context, the first appellate court observed that whetherthe complainant had furnished a hand loan of Rs. 15 lakhs to theaccused as stated in the complaint or whether the complainanthad furnished a hand loan of Rs. 15 lakhs to the accused as statedin the complaint or whether the complainant had paid Rs. 20 lakhsas mentioned in the legal notice dated 10 August 2004 or whetherhe had paid an amount of Rs. 5 lakhs as suggested during thecourse of cross-examination was a matter of serious doubt. If thecomplainant had paid Rs. 15 lakhs to the accused, the suggestionduring the course of cross-examination was a matter of seriousdoubt. If the complainant had paid Rs. 15 lakhs to the accused,the suggestion during the course of cross-examination of havingpaid an amount of Rs. 5 lakhs casts serious doubt on the existenceof a debt in the first place. [Para 12][738-E-H; 739-A-D]

2. The complainant failed to establish the source of fundswhich he is alleged to have utilized for the disbursal of the loan ofRs. 15 lakhs to the appellant. During the course of his cross-examination the complainant deposed that earlier, the appellanthad furnished two cheques for Rs. 5 lakhs and Rs. 10 lakhs whichhe had presented. The complainant admitted that he had notmentioned anything about the accused having issued these twocheques in his complaint. Nothing was stated by the complainantin regard to the fate of the earlier two cheques which wereallegedly issued by the appellant. The non-disclosure of the factspertaining to the earlier two cheques, and the steps, if any, takenfor recovery was again a material consideration which indicatedthat there was a doubt in regard to the transaction.[Para 13][739-D-F]

3. The appellant duly rebutted the presumption underSection 139 of the Act. His defence that there was an absence ofa legally enforceable debt was rendered probable on the basis ofthe material on record. Consequently, the order of acquittalpassed by the first appellate court was justified.[Paras 14, 15][739-G; 740-C]

Rangappa v. Sri Mohan (2010) 11 SCC 441 : [2010] 6SCR 507 – relied on.

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SUPREME COURT REPORTS

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Case Law Reference

[2010] 6 SCR 507relied onPara 6

CRIMINAL APPELLATE JURISDICTION: Criminal AppealBNos. 95-96 of 2019.

From the Judgment and Order dated 14.11.2014 of the High Courtof Karnataka at Bangalore in Criminal Appeal No. 861 of 2012.

Jay Kishor Singh, Adv. for the Appellant.

Abhay Kumar, Saurabh Mishra, Vineet Kumar Singh, HimanshuCPal Singh, Advs. for the Respondent.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J. 1. Leavegranted.

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2. These appeals arise from the judgment and order of a learnedSingle Judge of the High Court of Karnataka dated 14 November 2014,reversing the judgment of the Lower Appellate Court acquitting theappellant of an offence under Section 138 of the Negotiable InstrumentsAct, 1881 (‘the Act’).

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3. The case of the respondent-complainant is that on 09 March2005, the appellant issued a cheque in the sum of Rs.5 lakhs in his favour,towards discharge of a liability of Rs.15 lakhs, in repayment of an amountwhich was borrowed in the month of February, 2004. According to thecomplainant, the amount was repayable within six months. When thecomplainant presented the cheque on 23 March 2005, it was returned bythe bank for insufficiency of funds. The complainant presented the chequeagain for realisation on 14 July, 2005 but it was returned with the sameresult. A notice of demand was issued by the complainant on 10 August,2005. In response, the appellant-accused denied that there was a legallyenforceable debt. In his reply, the appellant stated thus:

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“4. My client and his wife and your client and his wife hadpurchased separate house sites in Survey No. 96/3 atHoaramvuagrahara Village, Krishnarajapuram Hobli, Bangaloreon 31.01.2001. All these sites situate adjacent to each other. Yourclient enticed my client and my client’s wife to give power in his H

favour so that he could pursue the matter of getting housing loanfrom financial institutions at Bangalore. However your clientprepared the power deed incorporating the clauses for sale also.When my client questioned about the inclusion of clauses for sale,your client had stated that it had inadvertently typed and thepurpose of power deed is only for obtaining loan and so it neednot be registered.

5. Besides this power deed your client also obtained from myclient the original document being Document No. 10470/2001 andKhatha, Tax Receipts, Approved plan and also 4 blank chequesof U.T.I. Bank Ltd, Tuticorin including the cheque mentioned inyour notice and Vysya Bank, Bangalore Cheque Book containing10 leaves.

6. Your client obtained these cheques stating that the financialinstitutions will insist for the cheque leaves when the loan issanctioned as to use these cheques for monthly repayment ofloan amount. Your client has now misused the one such chequeas if it was issued by my client on 09.03.2005. Subsequently myclient and his wife canceled the power deed and also requestedyour client to return the cheques and documents. However, yourclient is very particular to grab house sites along with half wayconstructed building for him and his father. An attempt was alsomade earlier in this regard. Your client’s father colluding with yourclient sent a notice dated 09.05.05 containing false allegations tomy client to execute the sale deed of said house site situate at theabove mentioned survey number in favour of him. Since theattempt frizzled out, now the son, your client is trying in a differentway, illegally using the mentioned cheque to harass my client topart with the said house site.”

4. As the above reply indicates, the defence of the appellant wasthat the appellant and his wife and the complainant and his wife hadpurchased adjacent house sites. The complainant was alleged to havepersuaded the appellant to execute a power of attorney in his favour forthe purpose of obtaining a housing loan from the financial institutions inBangalore. According to the appellant as many as four blank chequesof U.T.I Bank Ltd. and a Vysya Bank cheque Book containing ten leaveswere obtained by the complainant from the appellant. One of the chequeswhich were handed over by the appellant to the respondent-complainant ABC

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Awas alleged to have been misused.

5. The complainant lodged a complaint before the Additional ChiefMetropolitan Magistrate at Bangalore being CC No. 26999 of 2006 underSection 138 of the Act on 9 September 2005.

6. The Trial court by a judgment dated 31 January 2009 acquittedBthe appellant. The complainant - respondent filed Criminal Appeal No.285 of 2009 before the High Court. By its judgment dated 29 October2010 the High Court allowed the appeal and remitted the matter to theTrial court, having regard to the judgment of this Court in “RangappaVersus Sri Mohan”[1]. On remand, the Trial court by a judgment dated 5CMarch 2011 convicted the appellant and sentenced him to undergoimprisonment of one year and to pay a fine of Rs.7 lakhs out of which anamount of Rs.6.75 lakhs was directed to be paid to the respondent byway of compensation. The appellant instituted Criminal Appeal No. 245of 2011 before the Additional Sessions Jude, Bangalore. By a judgmentdated 05 March, 2012, the First Appellate Court reversed the convictionDand sentence recorded by the Trial court. The respondent thereuponfiled a Criminal Appeal before the High Court, being Criminal AppealNo. 861 of 2012. The High Court reversed the judgment of acquittal,recording that while the notice of the appeal was served upon theappellant, he had remained absent. While recording the conviction underESection 138 of the Act, the High Court modified the sentence to theeffect that the appellant shall pay a fine of Rs.5 lakhs which would bepaid as compensation to the respondent and, in default, he shall sufferimprisonment for a period of three months. The conviction recorded bythe Trial court was maintained but the amount of fine was reduced, asnoted above.F

7. On 29 April 2016, notice was issued on the question of limitation,there being a delay of 410 days in filing the special leave petition as wellas on the petition. Having considered the cause shown by the appellantfor condoning the delay we deem it appropriate to condone the delay.We do not find from the record of this case that there was any deliberateGact of neglect on the part of the appellant in pursuing his remedies.

8. Assailing the judgment of the High Court, learned counselappearing on behalf of the appellant has addressed the submissions ontwo aspects. First, it is submitted that there is an absence of a legally H 1 (2010) 11 SCC 441

enforceable debt. Hence, it is urged that the conviction which has beenrecorded by the High Court is unsustainable. Secondly, it is urged thatthe appellant discharged the burden which is cast by the provisions ofSection 139 and established a defence on a preponderance of probabilitiesas required by the judgment of this Court in Rangappa(supra). Thelearned counsel has extensively relied upon the judgment of acquittal bythe Additional Sessions Judge dated 5 March, 2012, adopting theappreciation of evidence in that judgment as the submissions of theappellant in support of the present appeal. Learned counsel submittedthat the High Court should have been circumspect in overturning thejudgment of acquittal. No reasons have been disclosed in the impugnedjudgment upon assessment of evidence, much less reasons for comingto the conclusion that the acquittal by the first appellate court was eitherperverse or would lead to a miscarriage of justice.

9. On the other hand, learned counsel appearing on behalf of thecomplainant-respondent has submitted, placing reliance on the judgmentin Rangappa (supra), that the appellant failed to discharge the burdenwhich cast upon him and that the presumption under Section 139 of theAct applies to the facts of the present case. Adverting to the materialon the record it is urged that the fact that the cheque was signed by theaccused and was drawn on the bank where he has an account is not indispute. It is urged that the defence was correctly appreciated by theTrial court while recording a conviction under Section 138 and the HighCourt in restoring that conviction has not fallen into error.

10. Section 139 of the Act mandates that it shall be presumed,unless the contrary is proved, that the holder of a cheque received it, indischarge, in whole or in part, of a debt, or liability. The expression “unlessthe contrary is proved” indicates that the presumption under Section 139of the Act is rebuttable. Terming this as an example of a “reverse onusclause” the three Judge Bench of this Court in Rangappa(supra) heldthat in determining whether the presumption has been rebutted, the testof proportionality must guide the determination. The standard of prooffor rebuttal of the presumption under Section 139 of the Act is guided bya preponderance of probabilities. This Court held thus:

“28 In the absence of compelling justifications, reverse onus clausesusually impose an evidentiary burden and not a persuasive burden.Keeping this in view, it is a settled position that when anaccused has to rebut the presumption under Section 139, the A

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Astandard of proof for doing so is that of `preponderance ofprobabilities’. Therefore, if the accused is able to raise aprobable defence which creates doubts about the existenceof a legally enforceable debt or liability, the prosecution canfail. As clarified in the citations, the accused can rely on thematerials submitted by the complainant in order to raise such aBdefence and it is conceivable that in some cases the accused maynot need to adduce evidence of his/her own.” (emphasis supplied)

11. In the present case, it is necessary now to consider whetherthe presumption under Section 139 stands rebutted by the accused-appellant. The defence of the appellant is that he has not borrowed theCamount of Rs. 15 lakhs from the complainant as alleged nor had heissued the cheque (Exhibit P-1) in discharge of a legally enforceabledebt. Specifically, the defence of the accused is that no payment wasmade by the complainant to him, in discharge of which the cheques havebeen issued. His defence was that the cheque was issued to theDcomplainant on an assurance of a loan which would be obtained from afinancial institution. This, as we have noted, was also the defence inreply to the notice of demand issued by the complainant.

12. It is in this background, it would be necessary to advert to thematerial which was relied upon by the first appellate court to acquit theEaccused-appellant. During the course of his cross-examination, PW-1admitted that a General Power of Attorney was executed by the appellantin his favour. Admittedly the appellant and the respondent are relatedand there was some civil litigation between the father of the complainantand the appellant. The complainant admitted that, as a matter of fact, hehimself received an amount of Rs.10 lakhs from the appellant under aFloan transaction but stated that he had repaid that amount to the appellant.PW-1 stated that the appellant had requested him for a loan of Rs.15lakhs in February 2004. The defence of the appellant being that no amountwas actually paid by the complainant to him, the evidence of PW-1 inregard to the payment of the loan assumes significance. According toGPW-1, the loan of Rs.15 lakhs was paid into the hands of a representativeof the appellant at his request. The appellant failed to indicate even thename of the representative to whom the alleged amount of Rs.15 lakhsis stated to have been paid over in cash. The entire amount, significantly,is alleged to have been paid over without obtaining a receipt or documentevidencing the payment of the amount. In the notice of demand that wasH

issued by the complainant to the appellant after the cheque had beenreturned for want of funds, the complainant stated that the appellant hadsought a ‘financial accommodation’ of Rs.15 Lakhs and paid a sum ofRs.20,000 (corrected thereafter in a corrigendum). The first appellatecourt noted in the course of its judgment that while conducting the cross-examination of the accused, the complainant had stated that the accusedhad demanded a loan of Rs.15 lakhs, but at that time the complainanthad only paid an amount of Rs.5 Lakhs as a loan for which the accusedissued Exhibit P1. This suggestion was specifically denied by the accused.In this context, the first appellate court observed that whether thecomplainant had furnished a hand loan of Rs.15 lakhs to the accused asstated in the complaint or whether the complainant had paid Rs.20 lakhsas mentioned in the legal notice dated 10 August 2004 or whether he hadpaid an amount of Rs.5 lakhs as suggested during the course of cross-examination was a matter of serious doubt. If the complainant had paidRs.15 lakhs to the accused, the suggestion during the course of cross-examination of having paid an amount of Rs.5 lakhs casts serious doubton the existence of a debt in the first place.

13. Besides what has been set out above, an important facet inthe matter was that the complainant failed to establish the source offunds which he is alleged to have utilized for the disbursal of the loan ofRs.15 lakhs to the appellant. During the course of his cross-examinationthe complainant deposed that earlier, the appellant had furnished twocheques, one of ICICI Bank for Rs.5 lakhs and another of Canara Bankfor Rs.10 lakhs which he had presented. The complainant admitted thathe had not mentioned anything about the accused having issued thesetwo cheques in his complaint. Nothing was stated by the complainant inregard to the fate of the earlier two cheques which were allegedly issuedby the appellant. The non-disclosure of the facts pertaining to the earliertwo cheques, and the steps, if any, taken for recovery was again a materialconsideration which indicated that there was a doubt in regard to thetransaction.

14. On a totality of the facts and circumstances and based on theevidence on the record, the first appellate court held that the presumptionunder Section 139 of the Act stood rebutted and that the defence stoodprobabalised. From the judgment of the High Court, the significant aspectof the case which stands out is that there has been noappreciation ofthe evidence or even a reference to the reasons furnished by the first AB

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Aappellate court. The High Court adverted to the judgment of this Courtin Rangappa(supra). Having adverted to that decision, the High Courtreversed the order of acquittal by holding that a mere denial of thetransactions or an omnibus denial of the entire transaction could not beconsidered as a tenable defence. The judgment of the High Court isunsatisfactory and does not contain any reference to the evidenceBwhatsoever. There was absolutely no valid basis to displace the findingsof fact which were arrived at by the first appellate court, while acquittingthe accused.

15. For the reasons indicated above, we are of the view that havingregard to the law laid down by the three Judge Bench in RangappaC(supra) the appellant duly rebutted the presumption under Section 139 ofthe Act. His defence that there was an absence of a legally enforceabledebt was rendered probable on the basis of the material on record.Consequently, the order of acquittal passed by the first appellate courtwas justified.

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16. In the circumstances, we allow these appeals and set asidethe impugned judgment of the High Court convicting the appellant underSection 138 of the Act. We, accordingly, restore the order of acquittalpassed by the first appellate court.

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Devika Gujral

Appeals allowed.

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