Cheque Dishonour Cases - What Should Courts Ask Accused Once Presumption Under S.139 NI Act Is Applicable? Supreme Court Explains

Reiterating the principles relating to the presumption under Section 139 of the Negotiable Instruments Act 1881, the Supreme Court reversed the acquittal of an accused in a case for cheque dishonour.

A bench comprising Justices Aravind Kumar and SVN Bhatti observed that there was a "fundamental flaw" in the approach taken by both the Trial Court and the High Court.

Summarising the law relating to presumption under Section 139 NI Act and the mode of its rebuttal, the Court stated :

"Once the presumption under Section 139 was given effect to, the Courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would then necessarily have to shift on the case set up by the accused, since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would then be to see whether the accused has discharged his onus of rebutting the presumption. If he fails to do so, the Court can straightaway proceed to convict him, subject to satisfaction of the other ingredients of Section 138. If the Court finds that the evidential burden placed on the accused has been discharged, the complainant would be expected to prove the said fact independently, without taking aid of the presumption. The Court would then take an overall view based on the evidence on record and decide accordingly".  

Two questions which the Courts should ask?

When the Courts have concluded that the signature in the cheque has been admitted and its execution has been proved, then the Courst should inquire into either of the two questions :

1. Has the accused led any defense evidence to prove and conclusively establish that there existed no debt/liability at the time of issuance of cheque?

2. In the absence of rebuttal evidence being led the inquiry would entail: Has the accused proved the nonexistence of debt/liability by a preponderance of probabilities by referring to the 'particular circumstances of the case'?

Referring to a catena of precedents, the Court reiterated that as soon as the complainant proves the execution of the cheque, the burden of proof shifts to the accused by virtue of Section 139. "Until 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." the Court explained.

The standard of proof to discharge this burden of proof on the accused is not heavy and can be established through the preponderance of probabilities. The accused can either adduce direct evidence or through circumstantial evidence.

Once both parties have adduced evidence, Section 139 presumption does not come to the rescue of the complainant

Further, the Court explained :

"Therefore, in fine, it can be said that once the accused adduces evidence to the satisfaction of the Court that on a preponderance of probabilities there exists no debt/liability in the manner pleaded in the complaint or the demand notice or the affidavit-evidence, the burden shifts to the complainant and the presumption 'disappears' and does not haunt the accused any longer. The onus having now shifted to the complainant, he will be obliged to prove the existence of a debt/liability as a matter of fact and his failure to prove would result in dismissal of his complaint case. Thereafter, the presumption under Section 139 does not again come to the complainant's rescue. Once both parties have adduced evidence, the Court has to consider the same and the burden of proof loses all its importance."

Coming to the facts of the case, the Court said that the framing of the issues by the Trial Court were erroneous as the presumption under Section 139 was not applied. The Court further held that the accused has not discharged the burden of proof. Merely by raising some suggestions in the cross-examination, the burden of proof can't be discharged. A probable defence has to be set up, the Court said.

"The fundamental error in the approach lies in the fact that the High Court has questioned the want of evidence on part of the complainant in order to support his allegation of having extended loan to the accused, when it ought to have instead concerned itself with the case set up by the accused and whether he had discharged his evidential burden by proving that there existed no debt/liability at the time of issuance of cheque." the Court observed.

Setting aside the judgments of the Trial Court and the Punjab and Haryana High Court, the Supreme Court convicted the respondent-accused with fine of twice the amount of the cheque namely Rs.13,90,408/- (Rupees thirteen thousand ninety thousand four hundred and eight only) failing which he shall undergo simple imprisonment for one year.

Case Title : Rajesh Jain v. Ajay Singh

Citation : 2023 LiveLaw (SC) 866

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