Supreme Court Upholds Acquittal In Cheque Dishonour Case, Cites Complainant's Contradictory Statements And Financial Inconsistencies

Supreme Court Upholds Acquittal In Cheque Dishonour Case, Cites Complainant's Contradictory Statements And Financial Inconsistencies

The Supreme Court upheld an acquittal in a cheque dishonor case, highlighting contradictions in the complainant's statements and his inability to demonstrate the financial capacity to advance the loan, as well as the lack of acknowledgment of the loan in his Income Tax Returns.

Even though the accused's signature on the cheque was confirmed, the Court ruled that the presumption under Section 139 of the Negotiable Instruments Act, 1881 (NI Act), did not apply in this case.

In the complaint, the complainant initially claimed that the accused issued the cheque at the time of borrowing the amount. However, during cross-examination, he provided a different account, stating that the cheque was given six months after the loan was made, following 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 favor of the respondent, nor has he been able to explain as to how a cheque issued by the respondent allegedly in favor 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. The respondent (accused) has been able to shift the weight of the scales of justice in his favor through the preponderance of probabilities.”

Section 139 of the NI Act presumes that a cheque received by the holder was issued by the drawer to discharge a specific liability. This provision shifts the burden to the drawer/accused, allowing them to present evidence to rebut the presumption.

In this case, the appellant claimed to have lent 1.2 lakhs to the respondent/accused, with the expectation of repayment within six months from the date of the agreement. The appellant further asserted that he received a signed blank cheque from the accused as security. However, the appellant failed to provide details of the loan transaction or clarify when the signed blank cheque was received.

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

"The liability of the defense in cases under Section 138 of the NI Act 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 via the 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 the contrary not having been proved to the effect that a cheque or negotiable instrument was not issued for consideration or for discharge of any existing or future debt or liability."

The Court also observed that since the respondent had been acquitted by both the trial court and the High Court, it would be impermissible for the appellate courts to overturn the acquittal and impose a conviction unless the lower courts' decisions were based on a fundamentally flawed approach.

Determining that the decisions of the lower courts were reasonable and did not warrant interference, the Court dismissed the appeal and upheld the concurrent findings that led to the respondent/accused's acquittal.