Liability Of Defence In Cheque Bounce Cases Is Not That Of Proving Its Case Beyond Reasonable Doubt: SC

The Supreme Court said that the liability of the defence in cases under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) is not that of proving its case beyond reasonable doubt.

The Court said thus in a criminal appeal preferred against the judgment of the Karnataka High Court by which the acquittal was affirmed for the offence of cheque dishonourment.

The Court also culled out the principles underlining the exercise of power to adjudicate a challenge against an acquittal bolstered by concurrent findings.

The two-Judge Bench of Justice B.V. Nagarathna and Justice Augustine George Masih observed, “While acknowledging the test of proportionality and having laid the interpretation of Section 139 of the NI Act 1881 hereof, it was further held that an accused cannot be obligated to rebut the said presumption through an unduly high standard of proof. … Therefore, it may be said that the liability of the defence in cases under Section 138 of the NI Act 1881 is not that of proving its case beyond reasonable doubt.”

Senior Advocate Anand Sanjay M. Nuli appeared on behalf of the appellant while AOR Supreeta Sharanagouda appeared on behalf of the respondent.

Brief Facts -

The appellant was the original complainant who claimed to know the respondent for the last six years and that he had borrowed Rs. 2 lakhs from him on account of family necessities and accommodation. Against the said loan, the respondent issued a cheque as a guarantee against repayment. He was to repay the said loan amount within a period of 6 months and an agreement to this effect was also signed between the parties. Since the respondent failed to repay the loan despite repeated requests, the appellant presented the concerned cheque for encashment but the same was dishonoured on account of “insufficient funds”.

Being aggrieved, a demand notice was sent by the appellant and the respondent claimed that the accusations made by the appellant were false and bereft of pertinent details of the loan transaction. Hence, the appellant moved a private complaint and the Trial Court observed that the respondent had failed to explain as to how the cheque landed in the hands of the appellant. However, it adjudicated in favour of the respondent, resultantly, dismissing the complaint of the appellant and acquitting the respondent. Being aggrieved, the appellant approached the High Court but it affirmed the acquittal and hence, he was before the Apex Court.

The Supreme Court in view of the above facts noted, “While describing the offence envisaged under Section 138 of the NI Act 1881 as a regulatory offence for largely being in the nature of a civil wrong with its impact confined to private parties within commercial transactions, the 3-Judge Bench in the decision of Rangappa (supra) highlighted Section 139 of the NI Act 1881 to be an example of a reverse onus clause. This is done so, as the Court expounds, in the light of Parliament’s intent, which can be culled out from the peculiar placing of act of dishonour of cheque in a statute having criminal overtones. The underlying object of such deliberate placement is to inject and enhance credibility of negotiable instruments.”

The Court added that the reverse onus clause serves as an indispensable “device to prevent undue delay in the course of litigation”.

The Court further reiterated that an accused may establish non-existence of a debt or liability either through conclusive evidence that the concerned cheque was not issued towards the presumed debt or liability, or through adduction of circumstantial evidence vide standard of preponderance of probabilities.

“Since a presumption only enables the holder to show a prima facie case, it can only survive before a court of law subject to contrary not having been proved to the effect that a cheque or negotiable instrument was not issued for a consideration or for discharge of any existing or future debt or liability”, it emphasised.

The Court also noted that if a signature on a blank cheque stands admitted to having been inscribed voluntarily, it is sufficient to trigger a presumption under Section 139 of the NI Act, even if there is no admission to the effect of execution of entire contents in the cheque.

“Upon perusal of the aforementioned principles and applying them to the facts and circumstances of the present matter, it is evident that there is no perversity and lack of evidence in the case of the respondent-accused. The concurrent findings have backing of detailed appraisal of evidences and facts, therefore, do not warrant interference in light of above enlisted principles”, it concluded.

Accordingly, the Court dismissed the appeal and affirmed the findings of the High Court.

Cause Title- Sri Dattatraya v. Sharanappa (Neutral Citation: 2024 INSC 586)

Appearance:

Appellant: Senior Advocate Anand Sanjay M Nuli, Advocates Suraj Kaushik, Agam Sharma, Nanda Kumar, Akhila Wali, Shiva Swaroop, Akash Kukreja,

Respondent: AOR Supreeta Sharanagouda, Advocates Sharanagouda Patil, and Jyotish Pandey.

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