Supreme Court: 'Burden of proof' on Accused Under NI Act that Cheque was not Issued against any debt or liability

Supreme Court: 'Burden of proof' on Accused Under NI Act that Cheque was not Issued against any debt or liability

The Supreme Court (SC) on 9 March 2021, in the case titled Sumeti Vij (Appellants- Originally Accused) v. M/s Paramount Tech. Fab Industries (Respondents- Originally Complainant) stated that the burden of proof to show that a cheque was not issued for discharge of any debt or liability in terms of Section 138 of the Negotiable Instruments Act (NI Act) is on the accused.

The SC bench comprising of Justices Indu Malhotra and Ajay Rastogi stated that Section 139 of the NI Act creates a presumption in favour of the holder of the cheque that the same was received in discharge of a debt or liability.

The Top Court stated, "There is a mandate of presumption of consideration in terms of the provisions of the Act and the onus shifts to the accused on proof of issuance of cheque, to rebut the presumption that the cheque was issued for discharge of any debt or liability in terms of Section 138 of the Act."

A criminal appeal was filed before the Apex Court against the judgment of the Himachal Pradesh High Court (HC) wherein the HC held that the appellant was guilty of offences under Section 138 of the NI Act.

The factual matrix of the case is that the appellant had brought non-woven fabric from the respondent. The respondents delivered the goods to the appellant by a public carrier truck.

The appellant issued two cheques in the name of the respondents from her account of the Punjab National Bank to meet the legal existing and enforceable liabilities. The cheque bounced and the respondent sent two legal notices to the appellant but did not receive any response within the statutory period.

The respondents filed two separate complaints against the appellant under Section 138 of the NI Act. During the trial, the complainant examined three witnesses and placed reliance on the documentary evidence.

The appellant's statement was recorded under Section 313 of the Code of Criminal Procedure (CrPC) by the Trial Court. The appellant claimed innocence and pleaded false implication in the case. However, the appellant did not lead any evidence in defense.

The Trial Court acquitted the appellant and held that the respondent had failed to establish the material/goods were delivered to the appellant for which the cheques were issued.

An appeal was filed against the said order before the High Court (HC). The HC had overturned the decision of the Trial Court and found the appellant guilty. The primary burden to prove that the cheques were issued by the appellant in lieu of the material supplied was discharged by the respondent. It ruled that "The accused to discharge her burden to rebut in defense as required under Section 139 of the Ni Act which was not done in the present case."

An appeal was filed before the SC, and it stated that the burden of proof was on the accused as per Section 139 of the NI Act, the standard of proof was of "preponderance of probabilities".

The SC noted that there is a mandate of presumption of consideration in terms of the provisions of the NI Act. It added that the onus shifts to the accused on proof of issuance of cheque to rebut the presumption that the cheque was issued not for the discharge of any debt or liability in terms of Section 138 of NI Act.

It is well settled that the proceedings under Section 138 of the NI Act are quasi -criminal in nature, and the principles which apply to acquittal in other criminal cases are not applicable in the cases instituted under the Act.

The bench clarified that "Under Section 139 of the Act, a presumption is raised that the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or other liability. To rebut this presumption, facts must be adduced by the accused which on a preponderance of probability (not beyond reasonable doubt as in the case of criminal offences), must then be proved."

The Top Court concluded that the respondent proved that the appellant placed the order for purchasing non-¬woven fabric, the said goods were delivered. The appellant issues the cheques to discharge her liability which was dishonoured on the ground of "insufficient funds".

It added that no evidence was led by the appellant to rebut the presumption that the cheques were issued for consideration. The SC upheld the conviction of the appellant and dismissed the appeal.