SUMETI VIJ versus M/S PARAMOUNT TECH FAB INDUSTRIES on 9 March 2021

1. Leave granted.

2. The appellant is aggrieved by the judgment dated 30[th] April,2019 passed by the High Court of Himachal Pradesh holding the appellantguilty of offence under Section 138 of the Negotiable Instruments Act,1881 (hereinafter referred to as the “Act”) after reversal of the findingof acquittal returned by the learned trial Judge by its judgment dated 28[th]September, 2012.

3. The brief facts of the case which emanates from the recordare that the appellant accused approached the complainant- respondentin its factory at Moginand and expressed her desire to purchase non-woven fabric from the complainant. On the basis of order placed by theappellant, non-woven fabric was sold to the appellant vide invoice No.120dated 01[st] October, 2010 and invoice No.135 dated 16[th] October, 2010amounting to Rs.5,07,062/- and Rs.5,10,000/- which was deliveredthrough public carrier truck bearing Nos. HR-38G-5607 and HP-71-0693 to the appellant accused and in lieu thereof, a cheque bearingNo.323930 dated 15[th] October, 2010 and No.323935 dated 01[st] November,2010 were issued by the appellant in the name of the complainant fromher account of the Punjab National Bank, Karnal in order to meet thelegal existing and enforceable liabilities. The cheques on presentationwere returned vide memo dated 19[th] October, 2010 and 10[th] November,2010 from Punjab National Bank, Karnal with a note of “insufficientfunds” in the account of the appellant. Two legal notices dated 29[th]October, 2010 and 19[th] November, 2010 were sent by the complainantto the appellant on two addresses. The notices were duly served but theappellant neither responded to the notices nor made any payment infurtherance thereto within the statutory period hence, two separatecomplaints were filed by the complainant-respondent under Section 138of the Act against the appellant-accused.

4. The complainant-respondent recorded the preliminary evidencebefore the learned trial Judge and thereafter, the appellant-accused wasdirected to be summoned for committing an offence punishable underSection 138 of the Act. After the presence of the appellant had beensecured, the learned trial Judge put notice of accusation, vis-a-viz theaccused, for an offence allegedly committed by her under Section 138of the Act whereto she pleaded not guilty and claimed trial.

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A5. The complainant in order to prove its case against the appellant-accused, has examined three witnesses and placed reliance on thedocumentary evidence which were duly exhibited and referred to indetail by the learned trial Judge in para 3 of its judgment. On conclusionof recording of complainant’s evidence, the statement of the appellant-accused was recorded under Section 313 of the Code of CriminalBProcedure (hereinafter referred to as the “Code”) by the learned trialJudge wherein the appellant-accused claimed innocence and pleadedfalse implication in the case however, did not lead any evidence indefence.

6. On perusal of the evidence on record, the learned trial JudgeCreturned a finding that the complainant failed to establish that the material/goods were delivered to the appellant in lieu of which, the cheques wereissued, and in the absence of burden being discharged by the complainant,the onus to disprove or rebut the presumption could not be shifted to theappellant as referred under Section 139 of the Act. Accordingly, the trialDcourt returned the finding of acquittal of the appellant, which was thesubject matter of challenge in appeal before the High Court at the instanceof the complainant.

7. The High Court on reappraisal of the evidence on recordaffirmed that the primary burden was discharged by the complainantEthat the cheques were issued by the appellant in lieu of the materialsupplied, and documentary evidence duly exhibited was placed on recordto substantiate the claim, and it was for the appellant-accused to dischargeher burden to rebut in defence as required under Section 139 of the Act.In the instant case, the appellant only recorded her statement underSection 313 of the Code. However, no evidence was recorded to disproveFor rebut the presumption in defence. Taking into consideration the overallmaterial on record while setting aside the finding of acquittal recordedby the trial Judge, held that the appellant was guilty of committing anoffence under Section 138 of the Act and consequently, awardedappropriate punishment of fine/sentence by the impugned judgment datedG30[th] April, 2019, which is the subject matter of challenge in appeals beforeus.

8. Learned counsel for the appellant submitted that the complainantwas not able to prove that the material/goods were ever sent or receivedby the appellant and in terms of the complaint, the burden was on theHcomplainant to prove that the material/goods were received by the appellant, against which the cheques were received as security and eventhough the appellant has not placed any evidence to disprove or rebutthe presumption in defence, still the complainant has to discharge itsburden and has to stand on his own legs. In the absence of the prima-facie burden being discharged by the complainant, mere issuance of thecheques by the appellant would not have been sufficient to justify thatthe cheques were issued in discharge of any debt or other liability. Insupport of his submission, learned counsel for the appellant has placedreliance on the judgment of this Court in K. Prakashan vs. P.K.Surenderan[1]and Indus Airways Private Limited and Others Vs.Magnum Aviation Private Limited and Another[2].

9. Learned counsel for the appellant further submits that theappellant was able to succeed in creating a doubt in the mind of thecourt below with regard to the non-existence of the debt or liability, andthe learned trial court had returned the finding based on the materialavailable on record. Unless it was found to be perverse or unsustainable,or a case of non-consideration of any relevant material, the High Courtwas not justified in reversing and setting aside the finding of acquittalrecorded by the trial court merely on the ground that the view expressedby the High Court is more plausible with what being expressed by thetrial court in its judgment dated 28[th] September, 2012.

10. Learned counsel for the appellant further submits that thefinding recorded by the High Court in the impugned judgment is contraryto the settled principles of law as considered by this Court in appreciatingthe mandate of Sections 118(a), 138 and 139 of the Act. In consequencethereof, the finding of guilt which has been recorded by the High Courtin the impugned judgment is unsustainable in law, and has to be set aside.

11. Per contra, learned counsel for the complainant-respondentwhile supporting the finding recorded by the High Court in the impugnedjudgment submitted that there was sufficient material available on recordto justify that these cheques were issued with reference to the invoicesafter delivery of goods, which were duly exhibited, and cheques wereissued in lieu thereof. In the sequence of facts, the cheques issued bythe appellant, on due presentation to the bank got dishonoured on theground of “insufficient funds”. The statutory notice was issued to theappellant, who failed to respond. The complaints were filed by placing1 (2008) 1 SCC 258

2 (2014) 12 SCC 539

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Aall documentary evidence in support of the complaint duly exhibited, andthree witnesses in support thereof were examined, and was able toestablish and discharge the burden of proof. It was for the appellant tocome forward with her defence, and prove to the contrary as envisagedunder Section 139 of the Act.

B12. In the instant case, the appellant has only recorded herstatement under Section 313 of the Code, and has not adduced anyevidence to rebut the presumption that the cheques were issued forconsideration. Once the facts came on record remained unrebutted andsupported with the evidence on record with no substantive evidence ofdefence of the appellant to explain the incriminating circumstancesCappearing in the complaint against her, no error has been committed bythe High Court in the impugned judgment, and the appellant has beenrightly convicted for the offence punishable under Section 138 of theAct and needs no interference of this Court.

13. The object of introducing Section 138 and other provisions ofDChapter XVII in the Act appears to be to enhance the acceptability ofcheques in the settlement of liabilities. The drawer of the cheque be heldliable to prosecution on dishonour of cheque with safeguards provided toprevent harassment of honest drawers. Section 138 primarily relates toa civil wrong and the amendment made in the year 2000 specificallyEmade it compoundable. The burden of proof was on the accused in viewof presumption under Section 139 of the Act and the standard of proofwas of “preponderance of probabilities”. The N.I. Act including a chequecarrying a presumption of consideration in terms of Sections 118(a) and139 of the Act which is related to the purpose referred to and reads asunder:-F

“118 Presumptions as to negotiable instruments. —Until thecontrary is proved, the following presumptions shall be made:—

(a) of consideration —that every negotiable instrument was madeor drawn for consideration, and that every such instrument, whenGit has been accepted, indorsed, negotiated or transferred, wasaccepted, indorsed, negotiated or transferred for consideration;

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139. Presumption in favour of holder.—It shall be presumed,unless the contrary is proved, that the holder of a cheque received H

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 termsof the provisions of the Act and the onus shifts to the accused on proofof issuance of cheque to rebut the presumption that the cheque wasissued not for discharge of any debt or liability in terms of Section 138 ofthe Act, which reads as under:- “138. Dishonour of cheque for insufficiency, etc., of fundsin the account.—Where any cheque drawn by a person on anaccount maintained by him with a banker for payment of anyamount of money to another person from out of that account forthe discharge, in whole or in part, of any debt or other liability, isreturned by the bank unpaid, either because of the amount ofmoney standing to the credit of that account is insufficient to honourthe cheque or that it exceeds the amount arranged to be paidfrom that account by an agreement made with that bank, suchperson shall be deemed to have committed an offence and shall,without prejudice to any other provisions of this Act, be punishedwith imprisonment for 8 [a term which may be extended to twoyears’], or with fine which may extend to twice the amount of thecheque, or with both:

Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a periodof six months from the date on which it is drawn or withinthe period of its validity, whichever is earlier; (b)the payee or the holder in due course of the cheque, as thecase may be, makes a demand for the payment of the saidamount of money by giving a notice; in writing, to the drawerof the cheque, [within thirty days] of the receipt ofinformation by him from the bank regarding the return ofthe cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment ofthe said amount of money to the payee or, as the case maybe, to the holder in due course of the cheque, within fifteendays of the receipt of the said notice.

Explanation.—For the purposes of this section, “debt or otherliability” means a legally enforceable debt or other liability.”

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A15. The scope of Section 139 of the Act is that when an accusedhas to rebut the presumption, the standard of proof for doing so is that of“preponderance or probabilities” which has been examined by a three-Judge Bench of this Court in Rangappa vs. Sri Mohan[3], which readsas under:- B“26. In light of these extracts, we are in agreement with therespondent claimant that the presumption mandated by Section139 of the Act does indeed include the existence of a legallyenforceable debt or liability. To that extent, the impugnedobservations in Krishna Janardhan Bhat [(2008) 4 SCC 54 :(2008) 2 SCC (Cri) 166] may not be correct. However, this doesCnot in any way cast doubt on the correctness of the decision inthat case since it was based on the specific facts and circumstancestherein. As noted in the citations, this is of course in the nature ofa rebuttable presumption and it is open to the accused to raise adefence wherein the existence of a legally enforceable debt orDliability can be contested. However, there can be no doubt thatthere is an initial presumption which favours the complainant.

27. Section 139 of the Act is an example of a reverse onus clausethat has been included in furtherance of the legislative objectiveof improving the credibility of negotiable instruments. While SectionE138 of the Act specifies a strong criminal remedy in relation to thedishonour of cheques, the rebuttable presumption under Section139 is a device to prevent undue delay in the course of litigation.However, it must be remembered that the offence made punishableby Section 138 can be better described as a regulatory offencesince the bouncing of a cheque is largely in the nature of a civilFwrong whose impact is usually confined to the private partiesinvolved in commercial transactions. In such a scenario, the testof proportionality should guide the construction and interpretationof reverse onus clauses and the defendant-accused cannot beexpected to discharge an unduly high standard or proof.”

G16. It is well settled that the proceedings under Section 138 of theAct are quasi-criminal in nature, and the principles which apply to acquittalin other criminal cases are not applicable in the cases instituted underthe Act.

H3 (2010) 11 SCC 441

17. Likewise, under Section 139 of the Act, a presumption is raisedthat the holder of a cheque received the cheque for the discharge, inwhole or in part, of any debt or other liability. To rebut this presumption,facts must be adduced by the accused which on a preponderance ofprobability (not beyond reasonable doubt as in the case of criminaloffences), must then be proved. In Rohitbhai Jivanlal Patel vs. Stateof Gujarat and Another[4], this Court has examined the scope of Sections138 and 139 of the Act, which reads as under:- “15. So far the question of existence of basic ingredients fordrawing of presumption under Sections 118 and 139 of the NI Actis concerned, apparent it is that the appellant-accused could notdeny his signatures on the cheques in question that had been drawnin favour of the complainant on a bank account maintained by theaccused for a sum of Rs 3 lakhs each. The said cheques werepresented to the bank concerned within the period of their validityand were returned unpaid for the reason of either the balancebeing insufficient or the account being closed. All the basicingredients of Section 138 as also of Sections 118 and 139 areapparent on the face of the record. The trial court had alsoconsciously taken note of these facts and had drawn the requisitepresumption. Therefore, it is required to be presumed that thecheques in question were drawn for consideration and the holderof the cheques i.e. the complainant received the same in dischargeof an existing debt. The onus, therefore, shifts on the appellant-accused to establish a probable defence so as to rebut such apresumption.

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17. On the aspects relating to preponderance of probabilities, theaccused has to bring on record such facts and such circumstanceswhich may lead the Court to conclude either that the considerationdid not exist or that its non-existence was so probable that a prudentman would, under the circumstances of the case, act upon theplea that the consideration did not exist. This Court has, time andagain, emphasised that though there may not be sufficient negativeevidence which could be brought on record by the accused todischarge his burden, yet mere denial would not fulfil the AB

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requirements of rebuttal as envisaged under Sections 118 and 139of the NI Act. This Court stated the principles in KumarExports [Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513]

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“20. The accused in a trial under Section 138 of the Act has twooptions. He can either show that consideration and debt did notBexist or that under the particular circumstances of the case thenon-existence of consideration and debt is so probable that aprudent man ought to suppose that no consideration and debtexisted. To rebut the statutory presumptions an accused is notexpected to prove his defence beyond reasonable doubt as isexpected of the complainant in a criminal trial. The accused mayCadduce direct evidence to prove that the note in question was notsupported by consideration and that there was no debt or liabilityto be discharged by him. However, the court need not insist inevery case that the accused should disprove the non-existence ofconsideration and debt by leading direct evidence because theDexistence of negative evidence is neither possible nor contemplated.

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At the same time, it is clear that bare denial of the passing of theconsideration and existence of debt, apparently would not servethe purpose of the accused. Something which is probable has tobe brought on record for getting the burden of proof shifted to thecomplainant. To disprove the presumptions, the accused should E

bring on record such facts and circumstances, upon considerationof which, the court may either believe that the consideration anddebt did not exist or their non-existence was so probable that aprudent man would under the circumstances of the case, act uponthe plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported byconsideration or that he had not incurred any debt or liability, theaccused may also rely upon circumstantial evidence and if thecircumstances so relied upon are compelling, the burden maylikewise shift again on to the complainant. The accused may also F

rely upon presumptions of fact, for instance, those mentioned inGSection 114 of the Evidence Act to rebut the presumptions arisingunder Sections 118 and 139 of the Act.

21. The accused has also an option to prove the non-existence ofconsideration and debt or liability either by letting in evidence or insome clear and exceptional cases, from the case set out by the H

complainant, that is, the averments in the complaint, the case setout in the statutory notice and evidence adduced by the complainantduring the trial. Once such rebuttal evidence is adduced andaccepted by the court, having regard to all the circumstances ofthe case and the preponderance of probabilities, the evidentialburden shifts back to the complainant and, therefore, thepresumptions under Sections 118 and 139 of the Act will not againcome to the complainant’s rescue.”

It was further considered by this Court in Uttam Ram vs.Devinder Singh Hudan and Another[5].

18. In the case at hand, elucidating from the principles, thecomplainant was able to prove that the appellant placed the order forpurchasing non-woven fabric which was sold vide invoice No. 120 dated01[st] October, 2010 and invoice No. 135 dated 16[th] October, 2010amounting to Rs.5,07,062/- and Rs.5,10,000/- which was deliveredthrough public carrier truck bearing Nos. HR-38G-5607 and HP-71-0693 and in lieu thereof, the cheques bearing No.323930 dated 15[th]October, 2010 and No.323935 dated 01[st] November, 2010 in favour ofthe complainant were issued by appellant in order to discharge her liability.On the cheques being presented for encashment to the State Bank ofIndia, Branch Kala Amb, the same were dishonoured on the ground of“insufficient funds” in the account of the appellant and the same werereturned vide memo dated 19[th] October and 10[th] November, 2010 byPunjab National Bank, Karnal.

19. Thereafter, two separate legal notices were served by thecomplainant which were duly received by the appellant and even afterreceiving the said notices, the appellant neither responded to the noticesnor made any payment within the statutory period of fifteen days andonly thereafter, two separate complaints were filed by the complainantunder Section 138 of the Act against the appellant-accused.

20. There was no response by the appellant at any stage eitherwhen the cheques were issued, or after the presentation to its banker, orwhen the same were dishonoured, or after the legal notices were servedinforming the appellant that both the cheques on being presented to itsbanker were returned with a note that it could not be honoured becauseof “insufficient funds”.

5 (2019) 10 SCC 287

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A21. That apart, when the complainant exhibited all these documentsin support of his complaints and recorded the statement of three witnessesin support thereof, the appellant has recorded her statement under Section313 of the Code, but failed to record evidence to disprove or rebut thepresumption in support of her defence available under Section 139 ofthe Act. The statement of the accused recorded under Section 313 ofBthe Code is not a substantive evidence of defence, but only an opportunityto the accused to explain the incriminating circumstances appearing inthe prosecution case of the accused. Therefore, there is no evidence torebut the presumption that the cheques were issued for consideration.

22. The judgment on which learned counsel for the appellant hasCplaced reliance i.e. K. Prakashan vs. P.K. Surenderan[6]may not be ofany assistance for the reason that in the case dealing under Section 138of the Act, the prosecution has to prove the case and these cases beingquasi-criminal in nature are to be proved on the basis of the principles of“preponderance of probabilities”, and not on the principles as beingDexamined in the criminal case to prove the guilt of the accused beyondreasonable doubt. So far as other case cited by the learned counsel forthe appellant i.e. Indus Airways Private Limited and Others Vs.Magnum Aviation Private Limited and Another[7], there wassufficiency of material on record to justify that the cheques were issuedas advance payment for purchase of goods, and one of the terms andEconditions of the contract was that the entire payment would be made tothe supplier in advance. However, much within the time, the supplier-complainant received the letter from the purchasers cancelling thepurchase orders and requested the supplier to return both the cheques.The supplier pursuant thereto, sent response asking the purchasers as toFwhen the supplier could collect the payment, and only thereafter, thesuppler sent a legal notice to the purchasers and filed a complaint underSection 138 of the Act. In the given circumstances, it was observed bythis Court that the complainant had failed even prima-facie that therewas a legally enforceable debt or other liability subsisting on the date of drawal of the cheque as contemplated under Section 138 of the Act.GThis judgment would not be of any help to the appellant in the instantcase.

6 (2008) 1 SCC 2587 (2014) 12 SCC 539H

23. When the matter was earlier heard on 01[st] March, 2021, wedirected the learned counsel for the appellant to seek instructions whetherhis client is ready to make payment of the stated cheque amount in boththe criminal appeals i.e. Rs.5,07,062/- and Rs.5,10,000/- and posted thematter for further hearing on 05th March, 2021. Learned counsel for theappellant on instructions, informed that his client is not willing to dischargethe stated amount, and wants to argue the case on merits. After hearingthe 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 re-consider her instructions as noticed by us in theorder of 01st March, 2021. It has been informed to us that the appellantis interested to get the outcome of the present appeals on merits.

24. In the given circumstances, the High Court, in our view, hasnot committed any error in recording the finding of guilt of the appellantand convicting her for an offence being committed under Section 138 ofthe Act under its impugned judgment, which in our considered view,needs no further interference. Consequently, the appeals are withoutany substance, and are accordingly dismissed.

25. The bail bonds stand cancelled and the appellant shall eitherpay the fine, or serve the sentence in compliance with the judgmentdated 30th April, 2019 passed by the High Court of Himachal Pradesh.

26. Pending application(s), if any, shall stand disposed of.

Divya Pandey

Appeals dismissed

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