Introduction:
In a significant ruling reiterating the balanced approach to the presumptions under the Negotiable Instruments Act, the Kerala High Court recently upheld the acquittal of an accused in a cheque dishonour case, observing that the statutory presumption under Section 139 of the NI Act can be rebutted by raising a probable defence supported by credible evidence. The decision, delivered by Justice Johnson John in Crl. Appeal No. 2311/2007 (Thangam v. V.V. Haridasan and Anr.), underlines that the offence under Section 138 of the Negotiable Instruments Act is a regulatory offence intended to promote the credibility of negotiable instruments, and hence, the accused cannot be expected to discharge an unduly high standard of proof. The Court found that when the defence evidence is sufficient to create reasonable doubt about the existence of a legally enforceable debt or liability, the presumption in favour of the complainant stands rebutted. The appeal was filed by the complainant, who alleged that the accused had borrowed Rs. 50,000 and issued a cheque that was later dishonoured. The trial court had earlier acquitted the accused, finding that he successfully rebutted the statutory presumption and that the complainant failed to prove the loan transaction. Upholding that finding, the High Court concluded that the trial court’s view was legally sustainable and based on sound appreciation of evidence.
Arguments of the Complainant (Appellant):
The complainant, Thangam, had approached the trial court alleging that she had loaned Rs. 50,000 to the accused, who had given her a cheque to discharge this debt. The cheque, however, was returned unpaid due to insufficiency of funds. Despite the issuance of a statutory notice demanding repayment, the accused failed to clear the amount, prompting her to initiate proceedings under Section 138 of the NI Act. In her appeal before the High Court, she challenged the trial court’s acquittal of the accused, contending that the trial court had erred in appreciating the evidence and in concluding that the accused had rebutted the statutory presumption under Section 139.
Her counsel, Advocates K.P. Sudheer and Priya Vijayan, argued that once the issuance of the cheque and the signature thereon are admitted or proved, the presumption arises under Section 139 of the NI Act that the cheque was issued for a legally enforceable debt or liability. They contended that the trial court failed to give due weight to this mandatory presumption and had wrongly placed an excessive burden on the complainant. The appellant submitted that the accused had not adduced sufficient evidence to rebut the presumption and that his explanation—that the cheque was issued blank and misused—was highly improbable and unsupported by credible material.
The complainant further claimed that she had sold her property and received money from the sale, out of which she lent Rs. 50,000 to the accused. She asserted that the accused’s claim that the cheque was given to one Raveendran in connection with a chitty transaction was a fabricated defence meant to evade liability. Her counsel argued that the accused’s version was inconsistent and that no evidence was presented to prove the alleged loss of the cheque. The complainant also maintained that the accused had failed to lodge any complaint regarding the alleged misuse of his cheque, which weakened his defence.
It was further argued that the trial court’s reliance on the accused’s evidence and documents, particularly the exchange deed marked as Exhibit D1, was misplaced. The complainant contended that the exchange deed did not conclusively prove the absence of consideration or her inability to lend money. On the contrary, she maintained that she had sufficient funds from the property transaction and the loan she had taken, thereby establishing her financial capacity. The appellant therefore prayed that the acquittal be set aside and the accused be convicted and sentenced under Section 138 of the NI Act, in accordance with law.
Arguments of the Accused (Respondent):
The accused, represented by Advocates P. Shrihari, P. Vani, Chelson Chembarathy (State Brief for R1), and Alex M. Thombra (Senior Public Prosecutor), defended the trial court’s findings and argued that the acquittal was well-founded. They asserted that the complainant had failed to establish the core elements of an offence under Section 138, namely, the existence of a legally enforceable debt and the issuance of the cheque in discharge thereof. The defence submitted that the complainant’s own admissions in cross-examination destroyed the foundation of her claim. She had admitted that she sold her property to one Manilal and that the accused was introduced to her by a person named Raveendran. She also admitted that she had availed of a personal loan of Rs. 90,000, which raised serious doubts about her financial capacity to lend Rs. 50,000 to the accused.
The defence further produced Manilal as DW1, who testified that the complainant’s property transaction with him was an exchange deed rather than a sale deed involving monetary consideration. The certified copy of the Exchange Deed (Exhibit D1) supported this claim, indicating that the complainant had not received any money from the property transaction as alleged. This, according to the defence, completely negated the complainant’s claim that she used the sale proceeds to lend money to the accused. The accused’s statement under Section 313 Cr.P.C. was also consistent with this version, where he explained that he had issued a blank cheque to Raveendran in connection with a chitty transaction, which was allegedly lost and later misused by the complainant.
The defence contended that this evidence was sufficient to raise a probable defence and rebut the presumption under Section 139 of the NI Act. They pointed out that the complainant had not produced any contemporaneous document or witness to prove the loan transaction. Moreover, the accused’s version, supported by DW1 and Exhibit D1, created reasonable doubt about the complainant’s claim of having advanced any loan. The respondents therefore argued that the presumption stood effectively rebutted, and the trial court had rightly concluded that the complainant failed to discharge the burden of proving her case beyond reasonable doubt.
Court’s Judgment and Observations:
After thoroughly examining the records, evidence, and arguments from both sides, Justice Johnson John upheld the trial court’s judgment, finding that there was no illegality or perversity in the acquittal. The Court began by reaffirming the settled position of law under Sections 138 and 139 of the Negotiable Instruments Act. It noted that once the issuance of the cheque and signature are admitted, a presumption arises in favour of the complainant that the cheque was issued in discharge of a legally enforceable debt or liability. However, the presumption is rebuttable, and the accused is not required to prove his defence beyond reasonable doubt but only needs to raise a probable defence to create reasonable doubt about the existence of a valid debt.
Citing several judicial precedents, the Court reiterated that the offence under Section 138 of the NI Act is a regulatory offence meant to enhance the credibility of negotiable instruments, not a strict liability offence. Therefore, the principles of proportionality and fairness must guide the interpretation of the statutory presumptions. Justice Johnson John observed, “It is well settled that the offence made punishable under Section 138 of the N.I. Act is a regulatory offence for improving the credibility of negotiable instruments and therefore, the test of proportionality should guide the construction and interpretation of the statutory presumptions and the accused cannot be expected to discharge an unduly high standard of proof. Therefore, if the accused is able to raise a probable defence, which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail.”
Applying this principle to the case at hand, the Court found that the accused had successfully raised a probable defence. The evidence of DW1 (Manilal) and the documentary evidence (Exhibit D1) clearly demonstrated that the complainant had not received any money from the property transaction as alleged, thereby negating her claim of having sufficient funds to lend Rs. 50,000 to the accused. The Court noted that the complainant’s own cross-examination revealed inconsistencies, including her admission of having taken a loan of Rs. 90,000 for personal needs. These factors, when viewed together, weakened her credibility and financial capacity.
The Court observed that the trial court’s finding—that the accused’s evidence was sufficient to rebut the presumption—was a “possible view” based on the material before it. It emphasized that an appellate court should not interfere with an acquittal merely because another view is possible unless the trial court’s findings are perverse or unreasonable. The Court remarked: “On a careful re-appreciation of the entire evidence, I find that the view taken by the trial court is a possible view, as the evidence of DW1 and Exhibit D1 is sufficient to rebut the statutory presumption regarding consideration, especially in view of the fact that the accused has disputed the transaction and financial capacity of the complainant.”
Accordingly, the Court dismissed the appeal, affirming the trial court’s judgment of acquittal. The decision reinforces that the burden on the accused under Section 139 is not heavy, and once a probable defence is established through credible evidence or cross-examination, the presumption stands rebutted. The High Court’s reasoning strikes a balance between protecting the sanctity of negotiable instruments and safeguarding the rights of accused persons from unwarranted prosecution.