NI Act : Test Of Proportionality Must Guide In Determining If Presumption Under Sec.139 Was Rebutted [Read Judgment]

Finding that the presumption under Section 139 of the Negotiable Instruments Act regarding the existence of legally enforceable debt was rebutted, the Supreme Court acquitted an accused in a case filed under Section 138 NI Act.

"...in determining whether the presumption has been rebutted, the test of proportionality must guide the determination. The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities", observed the bench of Justices D Y Chandrachud and M R Shah while setting aside the High Court judgment, which had reversed the acquittal by the first appellate court.

The case pertained to the dishonour of a cheque for Rs.15 lakhs, which was allegedly issued by the accused in discharge of a loan taken for the said amount from the complainant. The accused had denied the transaction in the reply given to the statutory demand notice issued by the complainant and stated that the blank cheques, which were issued in relation to an earlier sale transaction, was misused by the complainant. 

The trial court initially acquitted the accused. This was later reversed by the appellate court, which remitted the matter for fresh trial. In the second round, the trial court convicted the accused. In the appeal against conviction, the first appellate court set aside trial court's order and acquitted the accused. In the revision filed by the complainant against this, the High Court restored the trial court's conviction.

Against the High Court's judgment, the accused approached the Supreme Court.

Applying the test of preponderance of probabilities as laid down by SC in Rangappa v Sri Mohan (2010) 11 SCC 411, the SC held that the accused had rebutted the presumption under Section 139 based on the following facts :

• There were inconsistent versions by the complainant regarding the amount. In the notice, the amount was stated to be Rs.20 lakhs; in complaint it was Rs.15 lakhs; in cross examination, the complainant mentioned the amount as Rs.5 lakhs.
• Complainant failed to establish the source of funds which have been utilized for giving the loan to the accused.
• Complainant admitted in cross examination that the accused had issued two cheques -for 5 lakhs and 10 lakhs- earlier. But  nothing was stated regarding the fate of those cheques. This non-disclosure created a doubt on the transaction.
• The complainant failed to recollect the name of the representative of the accused to whom the cash was paid.
• The entire amount was paid without obtaining any receipt or document

Based on these facts, the SC observed:

"On a totality of the facts and circumstances and based on the evidence on the record, the first appellate court held that the presumption under Section 139 of the Act stood rebutted and that the defence stood probabalised. From the judgment of the High Court, the significant aspect of the case which stands out is that there has been no appreciation of the evidence or even a reference to the reasons furnished by the first appellate court". 

The SC termed the HC judgment "unsatisfactory" for not making any reference to evidence on record. 

"There was absolutely no valid basis to displace the findings of fact which were arrived at by the first appellate court,while acquitting the accused", observed the apex court.

The accused was acquitting holding that his "defence that there was an absence of a legally enforceable debt was rendered probable on the basis of the material on record".

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