S. 138 NI Act | 'Capacity To Give Loan Not Shown, Contradictions In Statements' : Supreme Court Upholds Acquittal In Cheque Dishonour Case

The Supreme Court upheld the acquittal in a cheque dishonour case by taking note of certain contradictions in the statements of the complainant, as well as his inability to show the financial capacity to advance the loan as well as the lack of acknowledgement of the loan in the Income Tax returns.

Although the signature of the accused in the cheque was established, the Court stated that the presumption under Section 139 of the Negotiable Instruments Act 1881 is not attracted in the instant case.

While in the complaint, the complainant stated that the accused issued the cheque at the time of borrowing the amount, in his cross-examination, he gave a different version; that it was given six months after the lending, when he made a demand for repayment.

"Furthermore, there was no financial capacity or acknowledgement in his Income Tax Returns by the Appellant to the effect of having advanced a loan to the Respondent. Even further the Appellant has not been able to showcase as to when the said loan was advanced in favour of the Respondent nor has he been able to explain as to how a cheque issued by the Respondent allegedly in favour of Mr Mallikarjun landed in the hands of the instant holder, that is, the Appellant," the Court stated.

Raising doubts about the complainant's case, a bench of Justices BV Nagarathna and Augustine George Masih said :

“Admittedly, the Appellant was able to establish that the signature on the cheque in question was of the Respondent and in regard to the decision of this Court in Bir Singh (supra), a presumption is to ideally arise. However, in the above referred context of the factual matrix, the inability of the Appellant to put forth the details of the loan advanced, and his contradictory statements, the ratio therein would not impact the present case to the effect of giving rise to the statutory presumption under Section 139 of the NI Act 1881. The Respondent (accused) has been able to shift the weight of the scales of justice in his favour through the preponderance of probabilities.”

Section 139 of the NI Act states that the holder of the cheque received the cheque from a drawer for the discharge of a particular liability. The provision creates a presumption against the drawer and grants the right to the drawer/accused to present evidence to rebut the said presumption.

In the present case, the appellant claimed to have advanced a loan amount of Rs.2 Lakhs to the respondent/accused to be returned within six months from the date of execution of the agreement. It was also claimed by the appellant that he had received a signature blank cheque from the accused for security purposes, however, neither the appellant was able to show details of the loan advance nor he was able to show when did he received the signature blank cheque.

Applying the settled principle of law, the Judgment authored by Justice Masih said :

"The liability of the defence in cases under Section 138 of the NI Act 1881 is not that of proving its case beyond reasonable doubt. An accused may establish non-existence of a debt or liability either through conclusive evidence that the concerned cheque was not issued towards the presumed debt or liability, or through adduction of circumstantial evidence vide standard of preponderance of probabilities. Since a presumption only enables the holder to show a prima facie case, it can only survive before a court of law subject to contrary not having been proved to the effect that a cheque or negotiable instrument was not issued for a consideration or for discharge of any existing or future debt or liability. "

The Court also noted that since the respondent was acquitted by the trial court and High Court, therefore it would be impermissible for the appellate courts to reverse the acquittal to conviction unless the decision of the courts below was based on an incorrect approach.

Finding the decision of the courts below as tenable which doesn't require any interference, the Court dismissed the appeal and upheld the concurrent findings of the courts below regarding the acquittal of the respondent/accused.

Appearance:

For Petitioner(s) Mr. Anand Sanjay M Nuli, Sr. Adv. M/S. Nuli & Nuli, AOR Ms. Akhila Wali, Adv. Mr. Suraj Kaushik, Adv. Mr. Agam Sharma, Adv.

For Respondent(s) Ms. Supreeta Sharanagouda, AOR Mr. Sharanagouda Patil, Adv. Mr. Jyotish Pandey, Adv.

Case Details: SRI DATTATRAYA VERSUS SHARANAPPA, CRIMINAL APPEAL NO. 3257 OF 2024

Citation : 2024 LiveLaw (SC) 560

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