Cheque bounce accused acquitted as complainant did not show amount given as loan in his income tax return.
In a recent judgment, Hon’ble Supreme Court has confirmed the acquittal of accused in a case of cheque dishonour where the complainant did not show the amount advanced in his income tax returns.
ABCAUS Case Law Citation:
4197 (2024) (08) abcaus.in SC
In the instant case, the appellant had challenged the order passed by the High Court whereby the Single Judge affirmed the acquittal of the Respondent in the alleged offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (NI Act 1881)
The respondent had borrowed Rs. Two Lakhs from the Appellant on account of family necessities and accommodation. Against the said loan the Respondent had issued a cheque as a guarantee against repayment which was to be made within a period of six months. The parties also signed an agreement to this effect.
However, when the Respondent failed to repay the loan despite repeated requests, the Appellant presented the cheque for encashment but the cheque was dishonoured on account of insufficient funds.
Thereafter, the Appellant issued a notice to the respondent alleging Respondent of intentional cheating and to have committed offences punishable under Section 138 of the NI Act 1881 and Section 420 of the IPC 1860. However, the respondent denied having taken any loan from the appellant. Instead, it was the contention of the respondent that the concerned cheque was issued in favour of a third person for security purposes, however, he did not return the same to the Respondent. However, Respondent failed to explain as to how the cheque landed in the hands of the Appellant, and for what purpose was the cheque issued to third party.
The Appellant filed a complaint under Section 200 of the CPC 1973 before Judicial Magistrate. During the trial, among other things, the Court observed that the Agreement relied upon by the Appellant did not include signature of the Respondent as against the terms of the agreement, but a signature was made by the Respondent on the plain paper not on the stamp paper itself, and the same was not sustainable in the eyes of law.
The Trial Court also scrutinized the Income Tax Returns of the Appellant, from where it was revealed that the Appellant failed to declare the alleged loan transaction as part of his returns to the Income Tax Department.
Accordingly, the Trial Court adjudicated in favour of the Respondent by dismissing the complaint moved by the Appellant and acquitting the Respondent.
The Hon’ble High Court observed that admittedly, there was a contradiction in the statement
of the Appellant as to when the cheque was issued in his favour. Further, the Hon’ble High Court held that the contention of the Respondent as to the financial capacity of the Appellant to grant a loan in his favour was to be discharged by him, and being unable to do so, it shall be presumed that a loan transaction had not taken place.
Accordingly, the findings of the Trial Court were affirmed.
Aggrieved, the Appellant challenged the impugned judgment on the grounds that as the signature on the concerned cheque was admitted by the Respondent, the Appellant was able to successfully raise a presumption under Section 139 of the NI Act 1881 and as per the submissions of the Respondent, he had failed to rebut the said presumption.
The Hon’ble Supreme Court observed that the presumption u/s 139 entails an obligation on the court conducting the trial for an offence under Section 138 of the NI Act 1881 to presume that the cheque in question was issued by the drawer or accused for the discharge of a particular liability. The use of expression “shall presume” ameliorates the conundrum pertaining to the right of the accused to present evidence for the purpose of rebutting the said presumption. Furthermore, the effect of such presumption is that non filing of the complaint along with relevant documents, thereby prima facie establishing the case against the drawer, the onus of proof shifts on the drawer or accused to adduce cogent material and evidence for rebutting the said presumption.
The Hon’ble High Court observed that 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 circ*mstantial evidence vide standard of preponderance of probabilities.
The Hon’ble High Court further observed that 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.
In this backdrop it was observed that a full bench held that if a signature on a blank cheque stands admitted to having been inscribed voluntarily, it is sufficient to trigger a presumption under Section 139 of the NI Act 1881, even if there is no admission to the effect of execution of entire contents in the cheque.
It was further noted that Section 140 creates a legal fiction legal fiction barring the drawer of a cheque, which was dishonoured, to take a defence that at the time of issuance of the cheque in question he or she had no reason to believe that the same will be dishonoured upon being presented by the holder of such a cheque, especially and specifically for the reasons underlined in Section 138 of the NI Act 1881.
The Hon’ble Supreme Court noted that there existed a contradiction in the complaint moved by the Appellant as against his cross-examination relatable to the time of presentation of the cheque by the Respondent as per the statements of the Appellant. This was to the effect that while the Appellant claimed the cheque to have been issued at the time of advancing of the loan as a security, however, as per his statement during the cross-examination it was revealed that the same was presented when an alleged demand for repayment of alleged loan amount was raised before the Respondent, after a period of six months of advancement.
Furthermore, the Hon’ble Supreme Court observed that 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 had not been able to showcase as to when the said loan was advanced in favour of the Respondent nor had he been able to explain as to how a cheque issued by the Respondent allegedly in favour of a third party landed in the hands the Appellant.
The Hon’ble Supreme Court noted that admittedly, the Appellant was able to establish that the
signature on the cheque in question was of the Respondent and as per the decision of the Court, a presumption is to ideally arise. However, the inability of the Appellant to put forth the details of the loan advanced, and his contradictory statements, the ratio of the decision 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 had been able to shift the weight of the scales of justice in his favour through the preponderance of probabilities.
The Hon’ble Supreme Court opined that the Trial Court rightly observed that the Appellant was not able to plead even a valid existence of a legally recoverable debt as the very issuance of cheque was dubious based on the fallacies and contradictions in the evidence adduced by the parties. Furthermore, the fact that the Respondent had inscribed his signature on the agreement drawn on a white paper and not on a stamp paper as presented by the Appellant, creates another set of doubt in the case. Since the accused has been able to cast a shadow of doubt on the case presented by the Appellant, he has therefore successfully rebutted the presumption stipulated by Section 139 of the NI Act 1881.
The Hon’ble Supreme Court further observed that while the signature of the Respondent on the cheque drawn by him as well as on the agreement between the parties stood admitted, in case where the concern of financial capacity of the creditor is raised on behalf of an accused, the same is to be discharged by the complainant through leading of cogent evidence.
The Hon’ble Supreme Court opined that in a case of concurrent findings of fact favouring the acquittal of the accused, Court would ordinarily not interfere with such view unless concurrent findings of acquittal are ‘perverse’ i.e. there has been failure of justice.
Accordingly, the appeal was dismissed and the findings of the High Court were affirmed.
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