S.139 NI Act | Once Complainant Proves That Cheque Was Issued By Accused To Discharge Debt, Burden Shifts On Accused: J&K High Court
Spotlighting the critical shift in evidentiary burden under Section 139 of the Negotiable Instruments Act, 1881 the Jammu and Kashmir and Ladakh High Court has observed that once the complainant proves that a cheque was issued by the accused to discharge a debt, Section 139 mandates that the burden of proof shifts to the accused.
The accused is then required to prove that the cheque was not issued in settlement of any liability and unless this evidential burden is discharged by the accused, the presumed fact will have to be taken to be true without expecting the complainant to do anything further,” explained a bench of Justice Javed Iqbal Wani.
The court made these observations while dismissing an appeal filed by one Choudhary Piara Singh against an acquittal order issued by the Trial Court in a cheque dishonor case under Section 138 of the NI Act.
The complainant, Singh, managing director of Good Luck Finance Corporation, claimed that respondent Sat Pal availed a loan for a truck purchase but defaulted on repayment. Following this, a settlement purportedly took place in 2007, resulting in the issuance of the disputed cheque.
When the cheque was dishonored, Singh sought legal recourse. However, the Trial Court acquitted Sat Pal, accepting his defense that the cheque was issued as a blank, signed document held as security for the loan, rather than as final payment for any outstanding liability.
Aggrieved, Singh appealed and argued that Sat Pal's admission of issuing the cheque, bearing his signature, created a presumption of liability under Section 118 and Section 139 of the NI Act. Conversely, Sat Pal contended that the cheque was blank, without a date, provided merely as security in 1999 when the loan was disbursed, and was subsequently misused by the complainant.
Court's Observations:
After considering the rival contentions Justice Wani upheld the acquittal, grounding his judgment in the statutory framework of Section 139 of the Act. He noted that “Section 139 of the Act of 1881 stipulates that 'Unless contrary is proved,' it shall be presumed that the holder of the cheque received the cheque for the discharge of whole or part of any debt or liability.”
The Court further emphasized that the expression “shall presume” signifies a presumption of law, obligating the Court to uphold the presumption in every case where the factual basis has been established, though the accused may still rebut it by providing counter-evidence.
In support of the principles surrounding evidentiary burden, Justice Wani cited Rangappa v. Sri Mohan and Basalingappa v. Mudibasappa which delineates the standard of proof required to rebut the presumption under Section 139, which is lesser than the strict “beyond reasonable doubt” threshold and operates on the “preponderance of probabilities” principle. The accused may challenge the existence of liability by presenting circumstantial evidence that persuades the Court of the improbability of the alleged debt, the court underscored.
The Court also meticulously reviewed evidence indicating that the cheque in question was issued blank as security at the time the loan was disbursed, thus not signifying any debt-related liability.
Justice Wani observed,
“The cheque in question was blank even without bearing a date, though signed by him and same came to be retained by the complainant/appellant herein at that relevant point of time as security against the loan which was availed by the accused/respondent herein.”
Highlighting the inconsistencies in the complainant's testimony, the Court questioned the basis of the alleged debt amount, noting, “How the amount of Rs. 8,32,909/- covered by the cheque in question has been worked out to be payable by the accused/respondent to the complainant/appellant herein is nothing short of a mystery.”
The court underscored that the complainant failed to demonstrate how the outstanding amount purportedly accumulated to the disputed figure of Rs. 8,32,909/-, especially given the absence of corroborating documents or any record of the claimed 2007 settlement.
In conclusion, Justice Wani observed that, as both parties had led substantial evidence, the Trial Court's dismissal of the complaint was warranted. He affirmed that the complainant failed to convincingly establish a legally enforceable debt, concluding that it cannot by any stretch of imagination be said that the Trial court in the matter has faulted or committed any illegality or perversity.
Consequently, the appeal was dismissed.
Case Title: Chowdhary Piara Singh Vs Sat Pal
Citation: 2024 LiveLaw (JKL) 296