Sec 138 NI Act - Accused Relies On Income Tax Returns To Show Complainant Did Not Have Financial Capacity; Supreme Court Affirms Acquittal

The Supreme Court observed that the standard of proof for rebutting the presumption under Section 139 of the Negotiable Instruments Act is that of preponderance of probabilities. 

In this case arising out of cheque bounce complaint, the accused was acquitted by the Trial Court. The High Court reversed the acquittal and convicted the accused. 

In appeal, the Apex Court noted that the accused had examined the Income Tax Officer who produced certified copies of the Income Tax Returns of the complainant for the relevant financial year to show that the complainant had not declared that he had lent Rs.3 lakh to the accused and that the complainant(s) did not have financial capacity to lend money as alleged.

Trial Court found that the Income Tax Returns of the complainant did not disclose that he lent amount to the accused, and that the declared income was not sufficient to give loan of Rs.3 lakh. Therefore, the case of the complainant that he had given a loan to the accused from his agricultural income was found to be unbelievable by the  Trial Court. The Trial Court found that it was highly doubtful as to whether the complainant had lent an amount of Rs.3 lakh to the accused.

The bench, agreeing with the Trial Court view, observed that the defence raised by the appellant satisfies the standard of “preponderance of probability”.

"The standard of proof for rebutting the presumption is that of preponderance of probabilities. Applying this principle, the learned Trial Court had found that the accused had rebutted the presumption on the basis of the evidence of the defence witnesses and attending circumstances.", the court said.

Referring to observations made in Baslingappa v. Mudibasappa (2019) 5 SCC 418, the court added:

"This Court has held that once the execution of cheque is admitted, Section 139 of the N.I. Act mandates a presumption that the cheque was for the discharge of any debt or other liability. It has however been held that the presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. It has further been held that to rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. It has been held that inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely."

Case details

Rajaram Sriramulu Naidu (D) vs Maruthachalam (D) | 2023 LiveLaw (SC) 46 | CrA 1978 OF 2013 | 18 Jan 2023 | Justice B R Gavai and M M Sundresh

For Appellant(s) Mr. Rameshwar Prasad Goyal, AOR Ms. Neha Sharma, AOR Mr. Anil Agarwalla, Adv.

For Respondent(s) Mr. Pramit Saxena, AOR Mr. V. Prabhakar, Adv. Ms. Jyoti Parasher, Adv. Mr. N.J. Ramachandar, Adv. Mr. R. Chandrachud, AOR

Headnotes

Negotiable Instruments Act, 1881 ; Section 139 - The standard of proof for rebutting the presumption is that of preponderance of probabilities - once the execution of cheque is admitted, Section 139 of the N.I. Act mandates a presumption that the cheque was for the discharge of any debt or other liability - The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities - To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence - Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely - Referred to Baslingappa v. Mudibasappa (2019) 5 SCC 418 (Para 12-20)

Code of Criminal Procedure, 1973 ; Section 378 - Scope of interference in an appeal against acquittal is limited - Unless the High Court found that the appreciation of the evidence is perverse, it could not have interfered with the finding of acquittal recorded by the Trial Court. (Para 21)

Practice and procedure - Standard of proof  - Standard of proof in criminal proceedings differs with that in civil proceedings -  Adjudication in civil matters is based on preponderance of probabilities whereas adjudication in criminal cases is based on the principle that the accused is presumed to be innocent and the guilt of the accused should be proved to the hilt and the proof should be beyond all reasonable doubt. (Para 29-30)

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