Mere Denial Of Existence Of Debt Not Enough To Rebut Presumption U/S 139 NI Act; Accused Has To Raise Probable Defence: Karnataka HC

The Karnataka High Court observed that mere denial of existence of debt by accused is not enough to rebut the presumption under Section 139 of the Negotiable Instruments Act.

The court said that the accused has to raise probable defence which require to create a doubt with regard to the existence of debt or liability.

The Single Judge Bench of Justice S Rachaiah was dealing with a Criminal Appeal contesting a sentence of acquittal in a case related to Section 138 of the Negotiable Instrument Act.

In this case, the Trial Court after appreciating the oral and documentary on record, convicted the accused and sentenced him to pay an amount of Rs.20.00 lakhs. However, in an appeal filed by the accused, the Appellate Court allowed the appeal and set aside the judgment of conviction. Aggrieved with the acquittal, the applicant/complainant approached the High Court under Section 378 Of Cr.P.C praying to set aside the impugned judgment of acquittal.

The applicant/complainant submitted before the High Court that the accused approached him for financial assistance of Rs.20.00 lakhs for his domestic problems. The applicant stated that considering his need, they advanced the said amount in cash to the accused while the accused at the time of availing the said loan agreed to repay the same within six months. 

The applicant further submitted that later when he demanded the accused to repay the said amount, the accused issued two cheques for a sum of Rs.10.00 lakhs each and instructed the complainant to present the cheques for encashment. However, when those cheques were presented for encashment, the cheques were returned with a shara as ‘funds insufficient’. Accordingly, a notice was issued and brought to the knowledge of the accused about the dishonour of cheques but the notice was returned with a shara as 'door lock, intimation delivered, not claimed'.

Further, it was submitted that once the execution of the cheques and the signatures are admitted, the presumption has to be raised in favour of the complainant that the said cheques were issued for consideration and the accused had to rebut the presumption by leading cogent evidence.

On the other hand, the Respondent submitted that mere possession of the cheques is not sufficient to justify the loan transactions. They stated that the complainant has to prove his case beyond all reasonable doubt that he had lent such a huge amount when the accused denied the transactions.

Considering the submissions of both sides, the Court referred to several judgements of the Apex Court and observed, "On careful reading of the dictum of the Hon’ble Supreme Court, it makes it clear that the presumption under Section 139 of the N.I Act provides that Court shall presume that the holder of a cheque received the cheque of the nature referred to in Section 138 of the N.I Act for the discharge, in whole or in part of any debt or other liability. The burden lies on the accused to rebut the presumption. The probable defence raised by the accused would be a matter to be decided on the facts of each case and the circumstances that existed."

Further, the Court stated, "In the case of Kishan Rao (Kishan Rao V. Shankargouda (2018) 8 SCC 165) stated supra, it makes it clear that to rebut the presumption under Section 139 of the N.I. Act, mere denial regarding the existence of debt shall not be serve any purpose. However, the accused has to raise probable defence which require to create a doubt with regard to the existence of debt or liability."

Also, on the aspect of the notice not being received by the accused, the Court observed, "It is settled principles of law that if the notice is issued to the correct address of the accused and if the notice is not able to serve due to the reasons assigned in the said shara, it is deemed that the notice is served to the accused in terms of Section 27 of General Clause Act read with Section 114 of the Indian Evidence Act."

The High Court accordingly allowed the appeal and confirmed the conviction sentence passed by the Additional Chief Metropolitan Magistrate, Bengaluru. The Court also directed the Trial Court to take necessary steps to secure the presence of the accused to execute the sentence after the appeal period is over.

Cause Title: R Pramod v. Gangadharaiah [CRIMINAL APPEAL NO. 2000 OF 2022 (A)]

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