Satya Devi Vs Jarman Singh

The present application has been filed for seeking leave to appeal against the judgment dated 17.12.2022 passed by learned Additional Sessions Judge, Nalagarh, District Solan, H.P. (learned Appellate Court), vide which the respondent (accused before the learned Trial Court) was acquitted of the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (NI Act). (Parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience.)

¶12

1 Whether reporters of Local Papers may be allowed to see the judgment? Yes.

¶13

2

¶14

2. Briefly stated, the facts giving rise to the present application are that the complainant presented a complaint against the accused before the learned Trial Court for the commission of an offence punishable under Section 138 of the NI Act. It was asserted that the complainant and the accused were friends. The accused was facing financial difÏculties, and he demanded ₹ 4,42,000/- from the complainant. The complainant advanced the amount as a loan. The accused issued a cheque for ₹4,42,000/- drawn on Punjab National Bank to repay the amount taken by him. The complainant presented the cheque to the bank, but it was dishonoured with the remarks “funds insufÏcient”. The complainant served a notice upon the accused asking him to repay the money within fifteen days of the receipt of the notice. The notice was duly served upon the accused, but he failed to repay the amount; hence, a complaint was filed before the learned Trial Court for taking action as per the law.

¶15

3. The learned Trial Court found sufÏcient reasons to summon the accused. When the accused appeared, a notice of accusation was put to him for the commission of an offence punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried.

¶16

The complainant examined herself (CW1) to prove her case.

¶17

3

¶18

The accused, in his statement recorded under Section 313 of CrPC, denied the complainant’s case in its entirety. He examined Ramesh Kumar (DW-1) and Nitin Thakur (DW-2) to prove his defence.

¶19

The learned Trial Court held that the statement of the complainant proved that the accused had borrowed ₹ 4,42,000/and issued a cheque to discharge his liability. The accused did not dispute his signature on the cheque and stated that the cheque was handed over to the complainant’s husband as security. The admission of the signatures on the cheque would trigger a presumption under Section 118(a) and 139 of the NI Act, and the burden would shift upon the accused. The evidence led by the accused was not sufÏcient to rebut the presumption. The cheque was dishonoured with an endorsement “funds insufÏcient”. The notice was duly served upon the accused, and he failed to repay the amount, despite the receipt of a valid notice of demand. Hence, the accused was convicted of the commission of an offence punishable under Section 138 of the NI Act and sentenced to undergo simple imprisonment of six months, pay a compensation of ₹5,50,000/- and in default of payment of compensation, to undergo further simple imprisonment for one month.

¶20

4

¶21

Being aggrieved by the judgment and order passed by the learned Trial Court, the accused filed an appeal, which was decided by the learned Additional Session Judge, Nalagarh (learned Appellate Court). Learned Appellate Court held that the accused did not dispute the execution of the cheque in the crossexamination of the complainant; therefore, the learned Trial Court had rightly held that a presumption would arise that the cheque was issued for consideration to discharge the liability. The accused could rebut the presumption by cross-examining the complainant’s witnesses or leading the evidence. The crossexamination of the complainant made it highly doubtful that she had any money with her to advance it to the accused. She had admitted that she was a housewife and had no independent source of income. She admitted that her husband had filed a complaint against the accused under Section 138 of the NI Act, and it is highly unlikely that a person would advance the loan after the accused had failed to repay the earlier loan. The complainant’s version was not proved beyond a reasonable doubt, and the learned Trial Court had erred in convicting the accused. Hence, the appeal was allowed and the accused was acquitted of the commission of an offence punishable under Section 138 of the N.I. Act.

¶22

5

¶23

Being aggrieved by the judgment passed by the learned Appellate Court, the complainant has filed the present application for seeking leave to appeal, asserting that the learned Appellate Court erred in setting aside the well-reasoned judgment of the learned Trial Court. The accused filed an application under Section 315 of Cr.P.C. for examining himself, and this application was allowed by the learned Trial Court; however, the accused did not step into the witness box. The defence taken by the accused that he had borrowed ₹ 3,00,000/from the complainant’s husband and returned the same with interest, was not probable. The money paid by the accused was related to some other transaction. The plea taken by the accused that he had issued a security cheque, which was not returned by the complainant’s husband, was false; therefore, it was prayed that the present application be allowed and leave to appeal be granted to the applicant/appellant.

¶24

I have heard Mr Kuldeep Singh Chandel, learned counsel for the applicant/appellant and Mr N.K. Thakur, learned Senior Advocate, assisted by Mr Karanveer Singh, learned counsel for the respondent/accused.

¶25

Mr Kuldeep Singh Chandel, learned counsel for the applicant, submitted that the learned Appellate Court erred in reversing the well-reasoned judgment passed by the learned

¶26

6

¶27

Trial Court. The learned Appellate Court ignored the presumption contained in Section 118(a) and 139 of the NI Act, and the judgment passed by the learned Appellate Court suffers from grave illegality. Therefore, he prayed that the present application be allowed and the leave to appeal be granted to the applicant.

¶28

Mr N.K. Thakur, learned Senior Advocate for the respondent, submitted that the learned Appellate Court reappreciated the evidence and found glaring discrepancies in the complainant’s version. The version of the accused was highly probable, and the learned Appellate Court rightly held that the accused had rebutted the presumption on preponderance of probabilities. The judgment passed by the learned Appellate Court does not suffer from any infirmity. Therefore, he prayed that the present application be dismissed.

¶29

I have given considerable thought to the submissions made at the bar and have gone through the records carefully.

¶30

The complainant admitted in her cross-examination that her husband had also filed a complaint for the dishonour of the cheque against Jarman Singh. She volunteered to say that she found this fact subsequent to the filing of the complaint. It is impossible to believe that the complainant would not have known about the complaint filed by her husband against the accused. Learned Appellate Court had rightly held that both the

¶31

7

¶32

complainant and her husband were residing in the same house. She would have noticed her husband going to the Court, and it is difÏcult to believe that the husband would not have disclosed to the wife about the dishonour of the cheque issued by him to the accused.

¶33

The learned Appellate Court had rightly held that the advancement of a loan by the complainant to the accused in these circumstances was doubtful. No reasonable person would have trusted another with the money when the other person had failed to return it. It was laid down by the Hon’ble Supreme Court in John K. John v. Tom Varghese , (2007) 12 SCC 714: (2008) 3 SCC (Cri) 374: 2007 SCC OnLine SC 1293 that where three civil suits were instituted against the accused, it is highly unlikely that the loan would be advanced to him. It was observed at page 716:

¶34

“11. The relationship between the parties is not in dispute. The complainant is a partner of a firm which is in the business of running a chitty fund. The fact that the respondent subscribed to three chitties and that he could not pay the instalments of the prized amount is not in dispute. The pendency of three civil suits filed by the firm through the appellant against the respondent is also not in dispute . The High Court, upon analysing the materials brought on record by the parties, had arrived at a finding of fact that, in view of the conduct of the parties, it would not be prudent to hold that the respondent borrowed a huge sum despite the fact that the suits had already been filed against him by the appellant. Presumption raised in terms of Section 139 of the Act is rebuttable. If, upon analysis of the evidence brought on record by the parties,

¶35

8

¶36

in a fact situation obtaining in the instant case, a finding of fact has been arrived at by the High Court that the cheques had not been issued by the respondent in discharge of any debt, in our opinion, the view of the High Court cannot be said to be perverse warranting interference by us in exercise of our discretionary jurisdiction under Article 136 of the Constitution. The High Court was entitled to take notice of the conduct of the parties. It has been found by the High Court, as of fact, that the complainant did not approach the Court with clean hands. His conduct was not that of a prudent man. Why no instrument was executed, although a huge sum of money was allegedly paid to the respondent, was a relevant question which could be posed in the matter. It was open to the High Court to draw its own conclusion therein. Not only had no document been executed, even no interest had been charged. It would be absurd to form an opinion that, despite knowing that the respondent was not even in a position to discharge his burden to pay instalments in respect of the prized amount, an advance would be made to him and that too even after the institution of three civil suits . The amount advanced did not even carry any interest. If in a situation of this nature, the High Court has arrived at a finding that the respondent has discharged his burden of proof cast on him under Section 139 of the Act, no exception thereto can be taken.” (emphasis supplied)

¶37

A similar view was taken in A.M. Perumal v. Star

¶38

Tours and Travels (India) Ltd. , 2010 SCC OnLine Ker 4874: 2010 Cri LJ 3732, wherein it was observed at page 3735:

¶39

“8. The evidence of PW 1 and Dwl would show that there were various transactions between the revision petitioner and the first respondent, and there are various payments also. Ext. D12 would show that the revision petitioner had been facing another prosecution for dishonour of three other cheques, all issued in discharge of liability, that arose out of a business transaction. This circumstance persuades me to doubt the genuineness of the plea that the cheque was issued in discharge of the liability. In the normal course, if an earlier cheque is dishonoured, the first attempt would be to clear that

¶40

9

¶41

liability. No debtor would deliver another cheque to make room for another prosecution. The possibility of demanding and delivering blank cheques as security cannot be ruled out. No creditor would be content with another cheque for a subsequently arisen liability when the earlier cheque issued in discharge of another liability returned dishonoured and the liability remains not discharged. Acceptance of another cheque in that circumstance would be either with the intent to go for prosecution or to get proof…” (emphasis supplied)

¶42

The complainant stated in her cross-examination that

¶43

she has no source of income. She volunteered to state that her son is residing abroad, who sends her money through cash and the bank. She had not annexed any document regarding the receipt of money by her from her son.

¶44

The admission made by the complainant in her crossexamination that she had no source of income would make her financial capacity to advance the loan highly doubtful. She claimed that her son used to send her money from abroad in cash. She has not explained how the money could have been sent from abroad in cash. She did not say that her son was earning money in Indian currency or that the money sent by her son was converted by her to Indian currency. Thus, the statement that the complainant’s son was sending her money cannot be accepted. It was laid down by the Hon’ble Supreme Court in Tedhi Singh Versus Narayan Dass Mahant (2022)

¶45

6 SCC 735 that the accused has a right to demonstrate that the complainant did not have the financial capacity to advance the

¶46

10

¶47

loan stated to have been advanced by him, and where the complainant’s financial capacity is doubtful, the burden to rebut the presumption is discharged. It was observed: -

¶48

“9. The Trial Court and the First Appellate Court have noted that in the case under Section 138 of the N.I. Act, the complainant need not show in the first instance that he had the capacity. The proceedings under Section 138 of the N.I. Act is not a civil suit. At the time, when the complainant gives his evidence, unless a case is set up in the reply notice to the statutory notice sent, that the complainant did not have the wherewithal, it cannot be expected of the complainant to initially lead evidence to show that he had the financial capacity. To that extent, the Courts, in our view, were right in holding on those lines. However, the accused has the right to demonstrate that the complainant in a particular case did not have the capacity and therefore, the case of the accused is acceptable, which he can do by producing independent materials, namely, by examining his witnesses and producing documents. It is also open to him to establish the very same aspect by pointing to the materials produced by the complainant himself. He can further, more importantly, achieve this result through the crossexamination of the witnesses of the complainant. Ultimately, it becomes the duty of the Courts to consider carefully and appreciate the totality of the evidence and then come to a conclusion whether, in the given case, the accused has shown that the case of the complainant is in peril for the reason that the accused has established a probable defence.”

¶49

This question was also considered by the Hon’ble Supreme Court in Basalingappa Versus Mudibasappa (2019)

¶50

5 SCC 418, and it was held that where the financial capacity to pay ₹6,00,000/- was questioned and there was no satisfactory reply, the accused had raised a probable defence. It was observed: -

¶51

11

¶52

“26. Applying the preposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque, having been admitted, a presumption shall be raised under Section 139 that the cheque was issued in discharge of debt or liability. The question to be looked into is whether any probable defence was raised by the accused. In cross-examination of the PW1, when the specific question was put that a cheque was issued in relation to a loan of Rs. 25,000/-taken by the accused, the PW1 said that he does not remember. PW1, in his evidence, admitted that he retired in 1997, on which date he received a monetary benefit of Rs. 8 lakhs, which was encashed by the complainant. It was also brought in the evidence that in the year 2010, the complainant entered into a sale agreement for which he paid an amount of Rs. 4,50,000/-to Balana Gouda towards sale consideration. Payment of Rs. 4,50,000/-being admitted in the year 2010, and further payment of loan of Rs. 50,000/-with regard to which complaint No.119 of 2012 was filed by the complainant, a copy of which complaint was also filed as Ex.D2, there was a burden on the complainant to prove his financial capacity. In the years 2010-2011, as per the own case of the complainant, he made a payment of Rs. 18 lakhs. During his cross-examination, when the financial capacity to pay Rs. 6 lakhs to the accused was questioned, there was no satisfactory reply given by the complainant. The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the burden on the complainant to prove his financial capacity and other facts.

¶53

There was another evidence on the record, i.e., a copy of the plaint in O.S. No. 148 of 2011 filed by the complainant for recovery of a loan of Rs. 7 lakhs given to one Balana Gouda in December 2009. Thus, there was evidence on record to indicate that in December 2009, he gave ₹ 7 lakhs in a sale agreement, in 2010, he made a payment of ₹ 4,50,000/-towards sale consideration, and further, he gave a loan of ₹ 50,000/-for which a complaint was filed in 2012 and further loan of ₹ 6 lakhs in November 2011. Thus, during the period from 2009 to November 2011, an amount of ₹ 18 lakhs was given by the complainant to different persons including the accused, which put a heavy burden to prove the financial capacity when it was questioned on behalf of the accused,

¶54

12

¶55

the accused being a retired employee of State Transport Corporation, who retired in 1997 and total retirement benefits, which were encashed were ₹ 8 lakhs only. The High Court observed that, though the complainant is a retired employee, the accused did not even suggest that a pension is the only means for the survival of the complainant. The following observations were made in Paragraph 16 of the judgment of the High Court:

¶56

"17. Though the complainant is a retired employee, the accused did not even suggest that a pension is the only means of survival for the complainant. Under these circumstances, the Trial Court's finding that the complainant failed to discharge his initial burden of proof of lending capacity is perverse."

¶57

There is one more aspect of the matter which also needs to be noticed. In the complaint filed by the complainant as well as in the examination-in-chief, the complainant has not mentioned on which date the loan of Rs. 6 lakhs was given to the accused. It was during crossexamination, he gave the date as November 2011. Under Section 118 (b), a presumption shall be made as to the date that every negotiable instrument was made or drawn on such date. Admittedly, the cheque is dated 27.02.2012; there is not even a suggestion by the complainant that a post-dated cheque was given to him in November 2011 bearing a date 27.02.2012. Giving of a cheque on 27.02.2012, which was deposited on 01.03.2012, is not compatible with the case of the complainant when we read the complaint submitted by the complainant, especially Para 1 of the complaint, which is extracted as below:

¶58

"1. The accused is a very good friend of the complainant. The accused requested the Complainant a hand loan to meet the urgent and family necessary sum of 6,00,000/-(Rupees Six Lakh) and on account of long-standing friendship and knowing the difÏculties, which are being faced by the accused, the complainant agreed to lend a hand loan to meet out the financial difÏculties of the accused and accordingly the Complainant lends hand loan Rs. 6,00,000/-(Rupees Six Lakh) dated 27.02.2012 in favour of the Complainant, stating that on its presentation it will be honoured. But to the surprise

¶59

13

¶60

of the Complainant on presentation of the same for collection through his Bank, the Cheque was returned by the Bank with an endorsement "Funds InsufÏcient" on 01-03-2012."

¶61

Thus, there is a contradiction in what was initially stated by the complainant in the complaint and his examination-in-chief regarding the date on which the loan was given on one side and what was said in crossexamination on the other side, which has not been satisfactorily explained. The High Court was unduly influenced by the fact that the accused did not reply to the notice denying the execution of the cheque or legal liability. Even before the trial court, the appellant-accused had not denied his signature on the cheque.

¶62

We are of the view that when evidence was led before the Court to indicate that apart from a loan of Rs. 6 lakhs given to the accused, within 02 years, an 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. The court cannot insist on a person to lead negative evidence. The observation of the High Court that the trial court's finding that the complainant failed to prove his financial capacity for lending money is perverse cannot be supported. We fail to see 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.”

¶63

It was laid down by the Hon’ble Supreme Court in

¶64

Dattatraya v. Sharanappa, (2024) 8 SCC 573: (2024) 3 SCC (Cri) 776: 2024 SCC OnLine SC 1899 that when the financial capacity of the accused is not established, the accused is entitled to acquittal. It was observed:

¶65

“29. Applying the aforementioned legal position to the present factual matrix, it is apparent that there existed a contradiction in the complaint made by the appellant as against his cross-examination related to the time of

¶66

14

¶67

presentation of the cheque by the respondent, as per the statements of the appellant. This is 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, 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 when the said loan was advanced in favour of the respondent, nor has he been able to explain 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.

¶68

A similar view was taken in John K. Abraham

¶69

Versus Simon C. Abraham & Another (2014) 2 SCC 236,

¶70

wherein it was held:-

¶71

“9. It has to be stated that in order to draw the presumption under Section 118 read along with 139 of the Negotiable Instruments Act, the burden was heavy upon the complainant to have shown that he had required funds for having advanced the money to the accused; that the issuance of the cheque in support of the said payment advanced was true and that the accused was bound to make the payment as had been agreed while issuing the cheque in favour of the complainant.

¶72

Keeping the said statutory requirements in mind, when we examine the facts as admitted by the respondent-complainant, as rightly concluded by the learned trial Judge, the respondent was not even aware of the date when the substantial amount of Rs.1,50,000/was advanced by him to the appellant, that he was not sure as to who wrote the cheque, that he was not even aware when exactly and where exactly the transaction took place for which the cheque came to be issued by the

¶73

15

¶74

appellant. Apart from the said serious lacuna in the evidence of the complainant, he further admitted as PW.1 by stating once in the course of the cross-examination that the cheque was in the handwriting of the accused and the very next moment taking a diametrically opposite stand that it is not in the handwriting of the accused and that it was written by the complainant himself, by further reiterating that the amount in words was written by him.”

¶75

It was submitted that there is a presumption under

¶76

Section 118(a) and 139 of the NI Act regarding the consideration. This presumption will not help the complainant. There is no dispute with the proposition of law that a presumption arises by the admission of the signature on the cheque under the NI Act that it was issued for consideration in the discharge of the legal liability. However, the presumption is rebuttable, and the moment evidence is led, the presumption would stand rebutted. It was laid down by the Hon’ble Supreme

¶77

Court in Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: 2023 SCC OnLine SC 1275 that the presumption applies in the absence of evidence and disappears after the production of the evidence. It was observed:

¶78

“38. John Henry Wigmore [John Henry Wigmore and the Rules of Evidence: The Hidden Origins of Modern Law] on Evidence states as follows:

¶79

“The peculiar effect of the presumption of law is merely to invoke a rule of law compelling the Jury to reach the conclusion in the absence of evidence to the contrary from the opponent but if the opponent does offer evidence to the contrary (sufÏcient to satisfy the Judge's requirement of some evidence), the presumption ‘disappears as a

¶80

16

¶81

rule of law and the case is in the Jury's hands free from any rule’.”

¶82