Section 138 NI Act: Complainant Bound To Explain His Financial Capacity When It Is Questioned By The Accused: SC [Read Judgment]

In this case (Basalingappa vs. MUudibasappa), the accused had questioned the financial capacity of the complainant. It was brought on record that, during the period from 2009 to November, 2011, amount of Rs.18 lakhs was given by the complainant to different persons including the accused. It was also highlighted that the complainant being a retired employee of Karnataka State Road Transport Corporation, who having retired in 1977 and encashed his retirement benefits of Rs.8,00,000, there was no financial capacity.The Trial court, considering these aspects, had acquitted the accused. The High Court, however, reversed it and convicted him.

The bench comprising Justice Ashok Bhushan and Justice KM Joseph observed that when evidence was led before the Court to indicate that apart from loan of Rs.6 lakhs given to the accused, within 02 years, amount of Rs.18 lakhs have been given out by the complainant and his financial capacity being questioned, it was incumbent on the complainant to have explained his financial capacity. It said:

"Court cannot insist on a person to lead negative evidence. The observation of the High Court that trial court's finding that the complainant failed to prove his financial capacity of lending money is perverse cannot be supported. We fail to see that how the trial court's findings can be termed as perverse by the High Court when it was based on consideration of the evidence, which was led on behalf of the defence...High Court without discarding the evidence, which was led by defence could not have held that finding of trial court regarding financial capacity of the complainant is perverse. We are, thus, satisfied that accused has raised a probable defence and the findings of the trial court that complainant failed to prove his financial capacity are based on evidence led by the defence"

Referring to some decisions on Sections 118(a) and 139 of the Negotiable Instruments Act, the bench also summarized the principles:

• Once the execution of cheque is admitted Section 139 of the 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 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.

• That it is not necessary for the accused to come in the witness box in support of his defence, Section 28 139 imposed an evidentiary burden and not a persuasive burden.

• It is not necessary for the accused to come in the witness box to support his defence.

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