[Cheque Dishonour] Accused Often Get Away Due To Lack Of Evidence, Courts Must Acknowledge Friendly Cash Loans Between Parties: Delhi HC

While hearing a matter on cheque bounce under the Negotiable Instruments (NI) Act, the Delhi High Court recently said that it would be prudent for courts to acknowledge that friendly cash loans are provided between parties without an existing document trail, with accused often getting acquitted because the complainant is unable to prove the existence of a debt. 

A single judge bench of Justice Anish Dayal in its order also said that it has been often found that acquittals in Section 138 NI Act proceedings place the burden of proving the existence of the debt on the complainant, which is "diametrically opposite to the presumption" placed on the accused under Section 139 NI Act.

For context, Section 138 NI Act pertains to the dishonour of a cheque for insufficiency, etc., of funds in the account, imposing a punishment of imprisonment which may be extended to two years, or a fine which may extend to twice the amount of the cheque, or with both.

Meanwhile, Section 139 states that unless the contrary is proven, it shall be presumed that the holder of a cheque received the cheque of the nature referred to in S 138 for the discharge, in whole or in part, of any debt or other liability. In doing so the provision permits the accused to rebut the presumption against him. 

The High Court further said, "The accused often gets away with an acquittal, despite having tendered and even admitting to the cheque, merely because the complainant is unable to produce documents to support the existence of the debt (usually in the form of a friendly loan provided in cash, which does not have any document trail). It would be unwise for the court to not acknowledge that friendly cash loans are provided by parties, sometimes based on small savings of the lender. In these circumstances rather than focussing on the question as to why the accused gave the cheque in the first place (which he or she admits), the complainant is left unhinged for inability to provide any documentation. Often when accused is asked by the court, as to for what purpose they gave the cheque in the first place, a cogent and rational answer is not forthcoming". 

The high court made the observations while hearing a man's appeal against the trial court's order which acquitted respondent no.1/accused under Section 138 NI Act. 

Presumption arises due to the accused admitting to his signature on the cheque

The High Court noted that respondent no.1/accused in his statement under Section 313 CrPC admitted that the signature on the cheque in question was his own. The court thereafter said that when the signature on the cheque in question is admitted, the presumption under Section 139 shall arise.

It further said that there was a "flaw" in the trial court's judgment–i.e. conclusion that respondent/accused successfully rebutted the presumption under Section 139 only on the basis of his statement under Section 313 CrPC, "having not led any defence evidence". 

"Thus, respondent no. 1 having not led defence evidence, his statement under Section 313 CrPC cannot be read as evidence for the purpose of rebutting presumption raised under Section 139 NI Act. In this light, merely pleading not guilty would not suffice to rebut this presumption either," the high court underscored. 

Trial court failed to note effect of presumption U/S 139 NI Act

Elucidating on Section 139 read with Section 118 NI Act, the court said that the "presumption" under these provisions is essentially based on "pure common sense". For context, Section 118 provides a list of presumptions regarding negotiable instruments, wherein until the contrary is proven, it is presumed that every negotiable instrument was made or drawn for consideration.

"Instead of having the accused prove to the contrary, the accused is acquitted, as in this case, without having led any defence evidence and purely relying upon the inconsistencies in the affirmative proof provided by the complainant. The law and its application, is therefore turned on its head," the high court observed. 

In the present case, the high court noted that when the presumption under Section 139 was raised, the Trial Court should have proceeded with the basis that the cheque was issued in discharge of a debt or liability towards the appellant. It noted that the onus should have been on the respondent to rebut the presumption under Section 139 and had he successfully rebutted it the onus would have then shifted to the appellant. 

It remarked, “The fundamental flaw on part of Trial Court was failing to note effect of the presumption under Section 139 NI Act.”

Setting aside the trial court order, the high court observed that there was a "fundamental error" in the trial court's "approach" where it went on to dissect the case put up by the appellant, instead of first examining whether the respondents had rebutted the presumption under Section 139 of NI Act. 

The high court further said that the appellant is at liberty to approach the Trial Court for further proceedings.

Case Title: Amit Jain vs. Sanjeev Kumar Singh & Anr (Crl.A. 1248/2019)

Citation: 2024 LiveLaw (Del) 926

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