Supreme Court of India
BASALINGAPPAversusMUDIBASAPPA
- Citation
- 2019 INSC 500
- Decided
- 9 April 2019
- Disposal
- Appeal(s) allowed
- Bench
- ASHOK BHUSHAN
Holding
A probable defence raised by the accused, based on the complainant’s inability to prove his financial capacity, suffices to rebut the Section 139 presumption, rendering the High Court's reversal of the acquittal unsustainable.
Summary
The appellant, Mudibasappa, issued a cheque for Rs.6,00,000 that was returned for insufficient funds, leading the complainant, Basalingappa, to file a complaint under Section 138 of the Negotiable Instruments Act. The trial court acquitted the accused, holding that the complainant failed to prove his financial capacity to lend the amount, but the High Court reversed this acquittal and convicted the accused. On appeal, the Supreme Court examined the rebuttable presumption under Section 139 that a cheque is issued for the discharge of a debt and the burden on the accused to raise a probable defence. The Court found that the evidence, including the complainant’s own admissions of large outflows of money and inability to explain his capacity, constituted a probable defence, shifting the burden back to the complainant. Consequently, the High Court’s finding that the trial court’s decision was perverse was unsustainable. The Supreme Court allowed the appeal, set aside the High Court judgment, and restored the trial court’s acquittal of the accused.
Issues considered
- The presumption under Section 139 of the Negotiable Instruments Act and whether it is rebuttable by the accused.
- Whether the accused raised a probable defence sufficient to shift the burden of proof to the complainant regarding financial capacity.
- The standard of proof required to rebut the presumption (preponderance of probabilities).
- Whether the High Court erred in holding the trial court's finding as perverse.
Legislation cited
- Indian Evidence Act, 1872
- Negotiable Instruments Act, 1881s. 118(a), s. 138, s. 139
Subjects
Negotiable Instruments ActSection 138Section 139PresumptionProbable defenceFinancial capacityBurden of proofReverse onusCriminal appeal
Judgment
[2019] 6 S.C.R. 555 555
BASALINGAPPA A
v.
MUDIBASAPPA
(Criminal Appeal No. 636 of 2019)
APRIL 09, 2019 B
[ASHOK BHUSHAN AND K. M. JOSEPH, JJ.]
Negotiable Instruments Act, 1981 – ss.118(a), 138 and 139 –
Complainant case was that he gave a hand loan of Rs.6,00,000/- to
the accused – Accused gave a cheque dated 27.02.2012 for
C
Rs.6,00,000/- but the same was returned by the bank with the
endorsement ‘Funds Insufficient’ on 01.03.2012 – Complaint was
filed – Trial court acquitted the accused for the offence u/s. 138 of
the Act on basis that complainant failed to prove his financial
capacity – However, the High Court set aside the judgment of the
trial court and convicted the accused for the offence u/s.138 – D
Accused questioned financial capacity of the complainant alleging
that complainant had retired in the year 1997 and had encashed
his retirement benefits of Rs.8,00,000/- and made a payment of
Rs.4,50,000/- for an agreement to sale in the year 2010 – Besides
that, during the period from 2009 to Nov, 2011 complainant made
E
several other payments to different persons – On appeal, held:
Complainant admitted that he had received monetary benefit of
Rs.8,00,000/-, which was encashed – Complainant also admitted
that he made payment of Rs.4,50,000/- – During the cross-
examination of the complainant, he did not give satisfactory reply
regarding his financial capacity to pay Rs.6,00,000/- to the accused F
– Evidence on record indicate that within two years, amount of
Rs.18,00,000/- was given out by the complainant to different persons
– It was incumbent on the complainant to have explained his financial
capacity – Thus, evidence on record, was a probable defence on
behalf of the accused, which shifted the burden on the complainant
G
to prove his financial capacity and other facts – The findings of the
trial court that complainant failed to prove his financial capacity
was based on evidence led by the defence – Thus, observations of
the High Court unsustainable – Judgment of the trial Court restored.
H
555
556 SUPREME COURT REPORTS [2019] 6 S.C.R.
A Allowing the appeal, the Court
HELD: 1. After having noticed the ratio laid down by the
Supreme Court in various cases on Sections 118(a) and 139, this
Court now summarise the principles enumerated by the Supreme
Court in following manner:-
B (i) Once the execution of cheque is admitted Section 139
of the Act mandate presumption that the cheque was for the
discharge of any debt or other liability.
(ii) The presumption under Section 139 is a rebuttable
presumption and the onus is on the accused to raise the probable
C defence. The standard of proof for rebutting the presumption is
that of preponderance of probabilities.
(iii) To rebut the presumption, it is open for the accused to
rely on evidence led by him or accused can also rely on the
materials submitted by the complainant in order to raise a
D probable defence. Inference of preponderance of probabilities
can be drawn not only from the materials brought on record by
the parties but also by reference to the circumstances upon which
they rely.
(iv) That it is not necessary for the accused to come in the
E witness box in support of his defence, Section 139 imposed an
evidentiary burden and not a persuasive burden.
(v) It is not necessary for the accused to come in the witness
box to support his defence. [Para 23][573-B-F]
2. Applying the preposition of law as noted above, in facts
F
of the present case, it is clear that signature on cheque having
been admitted, a presumption shall be raised under Section 139
that cheque was issued in discharge of debt or liability. The
question to be looked into is as to whether any probable defence
was raised by the accused. In cross-examination of the PW1,
G when the specific question was put that cheque was issued in
relation to 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 monetary benefit
of Rs. 8 lakhs, which was encashed by the complainant. It was
H
BASALINGAPPA v. MUDIBASAPPA 557
also brought in the evidence that in the year 2010, the complainant A
entered into a sale agreement for which he paid an amount of
Rs.4,50,000/- to one ‘BG’ 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, copy of which
B
complaint was also filed as Ex.D2, there was burden on the
complainant to prove his financial capacity. In the year 2010-2011,
as per own case of the complainant, he made payment of Rs.18
lakhs. During his cross-examination, when financial capacity to
pay Rs.6 lakhs to the accused was questioned, there was no
satisfactory reply given by the complainant. The evidence on C
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. [Para 24][573-F-H; 574-A-C]
3. This Court is of the view that when evidence was led
before the Court to indicate that apart from loan of Rs.6 lakhs D
given to the accused, within 02 years, 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. Court cannot insist on a person
to lead negative evidence. The observation of the High Court
that trial court’s finding that the complainant failed to prove his E
financial capacity of lending money is perverse cannot be
supported. This Court failed to see that 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. [Para 28][575-G-H; 576-A-B] F
4. High Court without discarding the evidence, which was
led by defence could not have held that finding of trial court
regarding financial capacity of the complainant is perverse. Thus,
this court is satisfied that accused has raised a probable defence
and the findings of the trial court that complainant failed to prove G
his financial capacity are based on evidence led by the defence.
The observations of the High Court that findings of the trial court
are perverse are unsustainable. Thus, the judgment of the High
Court is unsustainable. [Para 29][576-E-F]
H
558 SUPREME COURT REPORTS [2019] 6 S.C.R.
A Kali Ram v. State of Himachal Pradesh (1973) 2 SCC
808:[1974] 1 SCR 722; Bharat Barrel & Drum
Manufacturing Company v. Amin Chand Pyarelal (1999)
3 SCC 35:[1999] 1 SCR 704; M.S. Narayana Menon
Alias Mani v. State of Kerala and Another (2006) 6 SCC
39:[2006] 3 Suppl. SCR 124; Krishna Janardhan Bhat
B
Vs. Dattatraya G. Hegde (2008) 4 SCC 54:[2008] 1
SCR 605; Kumar Exports Vs. Sharma Carpets (2009) 2
SCC 513:[2008] 17 SCR 572; Rangappa v. Sri Mohan
(2010) 11 SCC 441:[2010] 6 SCR 507 – relied on.
Kishan Rao v. Shankargouda (2018) 8 SCC 165:[2018]
C 5 SCR 69; Gamini Bala Koteswara Rao and others v.
State of Andhra Pradesh through Secretary, (2009) 10
SCC 636:[2009] 14 SCR 1 – referred to.
Case Law Reference
D [2018] 5 SCR 69 referred to Para 4
[1974] 1 SCR 722 relied on Para 10
[1999] 1 SCR 704 relied on Para 11
[2006] 3 Suppl. SCR 124 relied on Para 12
E [2008] 1 SCR 605 relied on Para 15
[2008] 17 SCR 572 relied on Para 17
[2010] 6 SCR 507 relied on Para 18
[2018] 5 SCR 69 relied on Para 21
F [2009] 14 SCR 1 referred to Para 29
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
No. 636 of 2019
G From the Judgment and Order dated 04.07.2018 of the High Court
of Karnataka, Kalaburagi Bench in Criminal Appeal No. 200042 of 2015.
S. N. Bhat, Priyank Jain, D. P. Chaturvedi, Tarun Thakur, Advs.
for the Appellant.
N. R. Sharma, Naresh Kumar, Advs. for the Respondent.
H
BASALINGAPPA v. MUDIBASAPPA 559
The Judgment of the Court was delivered by A
ASHOK BHUSHAN,J.
1. This is an appeal by accused challenging the judgment of the
High Court of Karnataka dated 04.07.2018 by which judgment the
Criminal Appeal filed by the complainant against the acquittal of the
accused has been allowed and the accused has been convicted under B
Section 138 of the Negotiable Instruments Act, 1881 and sentenced to
fine of Rs.8,00,000/-, in default of which to undergo simple imprisonment
for three months.
2. The brief facts of the case for deciding the appeal are:-
C
2.1 The complainant gave a notice dated 12.03.2012 to the accused,
the appellant stating dishonour of cheque dated 27.02.2012 for
an amount of Rs.6,00,000/- for want of sufficient funds.
Thereafter, on non-payment of the amount, a complaint dated
25.04.2012 was filed by the complainant under Section 138 of
the Negotiable Instruments Act, 1881 (hereinafter referred to as D
“Act, 1881).
2.2 Allegation in the complaint was that the accused requested the
complainant to lend a hand loan to meet out urgent and family
necessary for a sum of Rs.6,00,000/-. Complainant lent hand
loan of Rs.6,00,000/- dated 27.02.2012 in favour of the accused. E
A cheque dated 27.02.2012 for Rs.6,00,000/- was given by the
accused, but the same was returned by the bank with the
endorsement “Funds Insufficient” on 01.03.2012.
2.3 After notice dated 12.03.2012, which was served on the accused
on 13.03.2012, a complaint was filed. PW1 filed his examination- F
in-chief and was also cross-examined on behalf of the accused.
The complainant in support of the complaint filed original cheque
dated 27.02.2012, original cheque return memo dated 01.03.2012,
office copy of the notice dated 12.03.2012, postal receipt dated
12.03.2012, acknowledgment letter issued by the Department of
G
Post dated 16.04.2012 and letter to Head Post Office dated
11.04.2012. The accused in support of his defence filed Ex.D1
– certified copy of plaint in O.S. No. 148 of 2011, Ex.D2- Certified
copy of the private complaint No.119/2012 in CC No. 2298 of
2012 and in Ext.D3, certified copy of registered sale agreement.
H
560 SUPREME COURT REPORTS [2019] 6 S.C.R.
A 2.4 The trial court framed following two questions:-
1. Whether the complainant proves beyond all reasonable
doubts that, the accused had issued a cheque bearing
No.839374 dated 27-02-2012 for Rs.6,00,000/- of Pragathi
Gramin Bank, Nijalingappa Colony Branch, Raichur in favour
B of complainant, towards discharge of legally enforceable debt
or liability and the same was dishonored for ‘ Funds Insufficient’
and even after deemed legal notice the accused has not paid
the debt covered under the above said cheque and thereby
committed an offence punishable Under Section 138 of
Negotiable Instruments Act?
C
2. What Order?
2.5 The trial court after considering the evidence and material
on record held that if the accused is able to raise a probable
defense which creates doubts about the existence of a legally
D enforceable debt or liability, the prosecution can fail. By
judgment dated 20.02.2015, the accused was acquitted for the
offence under Section 138. Complainant aggrieved by said
judgment filed a Criminal Appeal under Section 378(4) of Code
of Criminal Procedure. The High Court set aside the judgment
of the trial court and convicted the accused for the offence
E under Section 138. Accused aggrieved by judgment of the
High Court has come up in this appeal.
3. Shri S.N. Bhat, learned counsel for the appellant submits that
accused has successfully rebutted the presumption under Section 139
and has raised probable defence, which was accepted by the trial court
F after considering the material on record. The High Court erred in setting
aside the acquittal order. The accused has questioned the financial
capacity of the complainant and without there being any proof of financial
capacity, the High Court erred in observing that judgment of the trial
court is perverse. It is submitted that burden of proof on accused under
G Section 138 is not a heavy burden as is on a prosecution to prove the
offence beyond reasonable doubt. It is submitted that the complainant
being a retired employee of Karnataka State Road Transport Corporation,
who having retired in 1977 and encashed his retirement benefits of
Rs.8,00,000/-, there was no financial capacity. It is submitted that
complainant has filed cases under Section 138 against other persons
H
BASALINGAPPA v. MUDIBASAPPA 561
[ASHOK BHUSHAN, J.]
also. Complainant had also made a payment of Rs.4,50,000/- for the A
agreement of sale. The complainant was also a witness of a sale
agreement executed by accused, where he received an amount of Rs.15
lakhs as consideration. There was sufficient material on record to
discharge the burden and the High Court erred in setting aside the acquittal
order.
B
4. Learned counsel for the complainant refuting the submissions
of the learned counsel for the appellant contends that signature on the
cheque having been admitted by the accused, a presumption has rightly
been raised that cheque was given in discharge of a debt or liability. The
accused has not been able to prove any probable defence and the High
Court has rightly convicted the accused. No case was taken by the C
accused that complainant has no other source of income. Learned
counsel for the complainant has relied on judgment of this Court in Kishan
Rao Vs. Shankargouda, (2018) 8 SCC 165.
5. We have considered the submissions of the counsel for the
parties and have perused the records. D
6. To recapitulate facts again, the cheque dated 27.02.2012 was
presented for encashment by the complainant, which was returned on
01.03.2012. Signature on the cheque is not denied by the accused, due
to which presumption shall be raised that cheque was issued in discharge
of any debt or liability. The complainant gave his evidence to prove his E
case. In the examination-in-chief, he stated that a loan of Rs.6,00,000/
- was a hand loan and in discharge of the same, the accused had given
a cheque dated 27.02.2012. Neither in the complaint nor in examination-
in-chief, complainant stated the date of giving the loan to the accused,
however, in his cross-examination, he stated that in the month of F
November, 2011, accused availed loan of Rs.6,00,000/-. In cross-
examination, he further stated that except accused, he has not lent loan
to any other person. He denied having filed a suit for recovery of money
against one Balana Gouda. However, he admitted that suit was filed on
the basis of promissory note with interest at the rate of @18% per month.
He further admitted that he has filed a criminal case under Section 138 G
of Negotiable Instruments Act, 1881 against one Siddesh bearing CC
No.2298 of 2012. When a suggestion was given that the complainant
had lent Rs.25,000/- to the accused, he said that he does not remember
the accused has borrowed Rs.25,000/- from him. In his cross-
examination, he has admitted that he has signed as a witness to the H
562 SUPREME COURT REPORTS [2019] 6 S.C.R.
A agreement to transfer the lease hold rights of accused in favour of one
M/s. Sri Lakshmi Narasimha Industries. Further on question, whether
the accused received Rs.15 lakhs from the said transaction, he showed
his ignorance. Suggestion was also put that a blank cheque was issued
at the time of loan availing of Rs.25,000/-. Suggestion was also put in
his cross-examination that he was not having Rs.6,00,000/- on hand on
B
the date of loan.
7. Now, we look into the facts alleged by the defence. In the
cross-examination, although complainant denied that he has filed any
case under Section 138 against any person but Ex.D2 is certified copy
of the complaint filed by the complainant against Shri Siddesh under
C Section 138 of Act, 1881 for punishing the accused. Further the date of
cheque, which was alleged to be issued by Shri Siddesh was also
27.02.2012. Ex.D3 was an agreement of sale dated 07.01.2010, by
which the complainant paid Rs.4,50,000/- to Balana Gouda towards sale
consideration. In document transferring the leasehold rights by the
D accused to one M/s. Sri Lakshmi Narasimha Industries, the complainant
was a witness, who admitted his signature on the deed. In his cross-
examination, accused case was that by virtue of such transfer of
leasehold rights, he received Rs.15 lakhs. The trial court after marshalling
the evidence made following observations in Paragraph No.17:-
E “17. In the instant case the cheque amount involved is Rs.6,00,000/
- and the complainant is an retired bus conductor and he had
retired from service in the year 1997 and has received the entire
retirement monetary benefits of Rs.8,00,000/- and the same was
deposited in the account of the complainant and it was encashed
by the complainant. It is observed that the complainant is silent as
F to his source of income at present. He has nowhere specified as
to what is he working and his earning, to show his position to lend
the amount as specified in the cheque. There is no single document
to show his earning nor has the complainant executed any
document for having lent such heavy amount of Rs.6,00,000/- to
G the accused. Further, it is the suggestion of the accused to PW-1
that, the accused by transferring his interest to lease hold to one
M/s. Sri.Lakshmi Narasimha industries has received a sum of
Rs.15,00,000/- and it is also admitted by PW-1 that he was the
witness to the said transaction. From the above, it raises doubt on
the very cheque Ex.P-1 held by the complainant and the non-
H
BASALINGAPPA v. MUDIBASAPPA 563
[ASHOK BHUSHAN, J.]
production of any document by the complainant to 18 A
C.C.NO.2675-2012 show his earning, and the complainant has
not executed any document before lending such huge amount to
the accused. Such circumstance raises serious doubt on the
transaction as claimed by the complainant. Hon’ble High Court
of Karnataka has clearly established that, the accused need not
B
enter the witness box and rebut the presumptions. I am of the
opinion that the whole transaction is at a doubt and the
circumstance does not give rise to the lending of loan amount of
Rs.6,00,000/- as claimed by the complainant. Accordingly, Points
No.1 in the Negative.”
8. We having noticed the facts of the case and the evidence on C
the record, we need to note the legal principles regarding nature of
presumptions to be drawn under Section 139 of the Act and the manner
in which it can be rebutted by an accused. We need to look into the
relevant judgments of this Court, where these aspects have been
considered and elaborated. Chapter XIII of the Act, 1881 contains a D
heading “Special Rules of Evidence”. Section 118 provides for
presumptions as to negotiable instruments. Section 118 is as follows:-
“118. Presumptions as to negotiable instruments. —Until
the contrary is proved, the following presumptions shall be made:—
(a) of consideration —that every negotiable instrument was E
made or drawn for consideration, and that every such
instrument, when it has been accepted, indorsed, negotiated
or transferred, was accepted, indorsed, negotiated or
transferred for consideration;
(b) as to date —that every negotiable instrument bearing a date F
was made or drawn on such date;
XXXXXXXXXXXXXXXXXXXXXXX”
9. Next provision, which needs to be noticed is Section 139, which
provides for presumption in favour of holder. Section 139 lays down:-
G
“139. Presumption in favour of holder.—It shall be presumed,
unless the contrary is proved, that the holder of a cheque received
the cheque of the nature referred to in section 138 for the discharge,
in whole or in part, of any debt or other liability.”
H
564 SUPREME COURT REPORTS [2019] 6 S.C.R.
A 10. The complainant being holder of cheque and the signature on
the cheque having not been denied by the accused, presumption shall be
drawn that cheque was issued for the discharge of any debt or other
liability. The presumption under Section 139 is a rebuttable presumption.
Before we refer to judgments of this Court considering Sections 118 and
139, it is relevant to notice the general principles pertaining to burden of
B
proof on an accused especially in a case where some statutory
presumption regarding guilt of the accused has to be drawn. A Three-
Judge Bench of this Court in Kali Ram Vs. State of Himachal Pradesh,
(1973) 2 SCC 808 laid down following:-
“23. ……………………One of the cardinal principles which has
C always to be kept in view in our system of administration of justice
for criminal cases is that a person arraigned as an accused is
presumed to be innocent unless that presumption is rebutted by
the prosecution by production of evidence as may show him to be
guilty of the offence with which he is charged. The burden of
D proving the guilt of the accused is upon the prosecution and unless
it relieves itself of that burden, the courts cannot record a finding
of the guilt of the accused. There are certain cases in which
statutory presumptions arise regarding the guilt of the accused,
but the burden even in those cases is upon the prosecution to
prove the existence of facts which have to be present before the
E presumption can be drawn. Once those facts are shown by the
prosecution to exist, the Court can raise the statutory presumption
and it would, in such an event, be for the accused to rebut the
presumption. The onus even in such cases upon the accused is
not as heavy as is normally upon the prosecution to prove the guilt
F of the accused. If some material is brought on the record consistent
with the innocence of the accused which may reasonably be true,
even though it is not positively proved to be true, the accused
would be entitled to acquittal.”
11. This Court in Bharat Barrel & Drum Manufacturing
G Company Vs. Amin Chand Pyarelal, (1999) 3 SCC 35 had occasion
to consider Section 118(a) of the Act. This Court held that once execution
of the promissory note is admitted, the presumption under Section 118(a)
would arise that it is supported by a consideration. Such a presumption
H
BASALINGAPPA v. MUDIBASAPPA 565
[ASHOK BHUSHAN, J.]
is rebuttable and defendant can prove the non-existence of a consideration A
by raising a probable defence. In paragraph No.12 following has been
laid down:-
“12. Upon consideration of various judgments as noted
hereinabove, the position of law which emerges is that once
execution of the promissory note is admitted, the presumption B
under Section 118(a) would arise that it is supported by a
consideration. Such a presumption is rebuttable. The defendant
can prove the non-existence of a consideration by raising a
probable defence. If the defendant is proved to have discharged
the initial onus of proof showing that the existence of consideration
was improbable or doubtful or the same was illegal, the onus would C
shift to the plaintiff who will be obliged to prove it as a matter of
fact and upon its failure to prove would disentitle him to the grant
of relief on the basis of the negotiable instrument. The burden
upon the defendant of proving the non-existence of the
consideration can be either direct or by bringing on record the D
preponderance of probabilities by reference to the circumstances
upon which he relies. In such an event, the plaintiff is entitled
under law to rely upon all the evidence led in the case including
that of the plaintiff as well. In case, where the defendant fails to
discharge the initial onus of proof by showing the non-existence
of the consideration, the plaintiff would invariably be held entitled E
to the benefit of presumption arising under Section 118(a) in his
favour. The court may not insist upon the defendant to disprove
the existence of consideration by leading direct evidence as the
existence of negative evidence is neither possible nor contemplated
and even if led, is to be seen with a doubt. The bare denial of the F
passing of the consideration apparently does not appear to be any
defence. Something which is probable has to be brought on record
for getting the benefit of shifting the onus of proving to the plaintiff.
To disprove the presumption, the defendant has to bring on record
such facts and circumstances upon consideration of which the
court may either believe that the consideration did not exist or its G
non-existence was so probable that a prudent man would, under
the circumstances of the case, shall act upon the plea that it did
not exist……”
H
566 SUPREME COURT REPORTS [2019] 6 S.C.R.
A 12. Justice S.B. Sinha in M.S. Narayana Menon Alias Mani
Vs. State of Kerala and Another, (2006) 6 SCC 39 had considered
Sections 118(a), 138 and 139 of the Act, 1881. It was held that
presumptions both under Sections 118(a) and 139 are rebuttable in nature.
Explaining the expressions “may presume” and “shall presume” referring
to an earlier judgment, following was held in paragraph No.28:-
B
“28. What would be the effect of the expressions “may presume”,
‘shall presume” and “conclusive proof” has been considered by
this Court in Union of India v. Pramod Gupta, (2005) 12 SCC
1, in the following terms: (SCC pp. 30-31, para 52)
C “It is true that the legislature used two different phraseologies
‘shall be presumed’ and ‘may be presumed’ in Section 42 of
the Punjab Land Revenue Act and furthermore although
provided for the mode and manner of rebuttal of such
presumption as regards the right to mines and minerals said to
be vested in the Government vis-à-vis the absence thereof in
D relation to the lands presumed to be retained by the landowners
but the same would not mean that the words ‘shall presume’
would be conclusive. The meaning of the expressions ‘may
presume’ and ‘shall presume’ have been explained in Section
4 of the Evidence Act, 1872, from a perusal whereof it would
E be evident that whenever it is directed that the court shall
presume a fact it shall regard such fact as proved unless
disproved. In terms of the said provision, thus, the expression
‘shall presume’ cannot be held to be synonymous with
‘conclusive proof’.”
F 13. It was noted that the expression “shall presume” cannot be
held to be synonymous with conclusive proof. Referring to definition of
words “proved” and “disproved” under Section 3 of the Evidence Act,
following was laid down in paragraph No.30:
“30. Applying the said definitions of “proved” or “disproved” to
G the principle behind Section 118(a) of the Act, the court shall
presume a negotiable instrument to be for consideration unless
and until after considering the matter before it, it either believes
that the consideration does not exist or considers the non-existence
of the consideration so probable that a prudent man ought, under
the circumstances of the particular case, to act upon the supposition
H
BASALINGAPPA v. MUDIBASAPPA 567
[ASHOK BHUSHAN, J.]
that the consideration does not exist. For rebutting such A
presumption, what is needed is to raise a probable defence. Even
for the said purpose, the evidence adduced on behalf of the
complainant could be relied upon.”
14. This Court held that what is needed is to raise a probable
defence, for which it is not necessary for the accused to disprove the B
existence of consideration by way of direct evidence and even the
evidence adduced on behalf of the complainant can be relied upon. Dealing
with standard of proof, following was observed in paragraph No.32:-
“32. The standard of proof evidently is preponderance of
probabilities. Inference of preponderance of probabilities can be C
drawn not only from the materials on record but also by reference
to the circumstances upon which he relies.”
15. In Krishna Janardhan Bhat Vs. Dattatraya G. Hegde,
(2008) 4 SCC 54, this Court held that an accused for discharging the
burden of proof placed upon him under a statute need not examine D
himself. He may discharge his burden on the basis of the materials already
brought on record. Following was laid down in Paragraph No.32:-
“32. An accused for discharging the burden of proof placed upon
him under a statute need not examine himself. He may discharge
his burden on the basis of the materials already brought on record. E
An accused has a constitutional right to maintain silence. Standard
of proof on the part of an accused and that of the prosecution in a
criminal case is different.”
16. This Court again reiterated that whereas prosecution must
prove the guilt of an accused beyond all reasonable doubt, the standard F
of proof so as to prove a defence on the part of an accused is
“preponderance of probabilities”. In paragraph No.34, following was
laid down:-
“34. Furthermore, whereas prosecution must prove the guilt of
an accused beyond all reasonable doubt, the standard of proof so
G
as to prove a defence on the part of an accused is “preponderance
of probabilities”. Inference of preponderance of probabilities can
be drawn not only from the materials brought on record by the
parties but also by reference to the circumstances upon which he
relies.”
H
568 SUPREME COURT REPORTS [2019] 6 S.C.R.
A 17. In Kumar Exports Vs. Sharma Carpets, (2009) 2 SCC
513, this Court again examined as to when complainant discharges the
burden to prove that instrument was executed and when the burden
shall be shifted. In paragraph Nos. 18 to 20, following has been laid
down:-
B “18. Applying the definition of the word “proved” in Section 3 of
the Evidence Act to the provisions of Sections 118 and 139 of the
Act, it becomes evident that in a trial under Section 138 of the Act
a presumption will have to be made that every negotiable instrument
was made or drawn for consideration and that it was executed
for discharge of debt or liability once the execution of negotiable
C instrument is either proved or admitted. As soon as the complainant
discharges the burden to prove that the instrument, say a note,
was executed by the accused, the rules of presumptions under
Sections 118 and 139 of the Act help him shift the burden on the
accused. The presumptions will live, exist and survive and shall
D end only when the contrary is proved by the accused, that is, the
cheque was not issued for consideration and in discharge of any
debt or liability. A presumption is not in itself evidence, but only
makes a prima facie case for a party for whose benefit it exists.
19. The use of the phrase “until the contrary is proved” in Section
E 118 of the Act and use of the words “unless the contrary is proved”
in Section 139 of the Act read with definitions of “may presume”
and “shall presume” as given in Section 4 of the Evidence Act,
makes it at once clear that presumptions to be raised under both
the provisions are rebuttable. When a presumption is rebuttable, it
only points out that the party on whom lies the duty of going forward
F with evidence, on the fact presumed and when that party has
produced evidence fairly and reasonably tending to show that the
real fact is not as presumed, the purpose of the presumption is
over.
20. ……………………The accused may adduce direct evidence
G to prove that the note in question was not supported by
consideration and that there was no debt or liability to be discharged
by him. However, the court need not insist in every case that the
accused should disprove the non-existence of consideration and
debt by leading direct evidence because the existence of negative
H
BASALINGAPPA v. MUDIBASAPPA 569
[ASHOK BHUSHAN, J.]
evidence is neither possible nor contemplated. At the same time, A
it is clear that bare denial of the passing of the consideration and
existence of debt, apparently would not serve the purpose of the
accused. Something which is probable has to be brought on record
for getting the burden of proof shifted to the complainant. To
disprove the presumptions, the accused should bring on record
B
such facts and circumstances, upon consideration of which, the
court may either believe that the consideration and debt did not
exist or their non-existence was so probable that a prudent man
would under the circumstances of the case, act upon the plea that
they did not exist……………”
18. A Three-Judge Bench of this Court in Rangappa Vs. Sri C
Mohan, (2010) 11 SCC 441 had occasion to elaborately consider
provisions of Sections 138 and 139. In the above case, trial court had
acquitted the accused in a case relating to dishonour of cheque under
Section 138. The High Court had reversed the judgment of the trial
court convicting the accused. In the above case, the accused had admitted D
signatures on the cheque. This Court held that where the fact of signature
on the cheque is acknowledged, a presumption has to be raised that the
cheque pertained to a legally enforceable debt or liability, however, this
presumption is of a rebuttal nature and the onus is then on the accused
to raise a probable defence. In Paragraph No.13, following has been
laid down:- E
“13. The High Court in its order noted that in the course of the
trial proceedings, the accused had admitted that the signature on
the impugned cheque (No. 0886322 dated 8-2-2001) was indeed
his own. Once this fact has been acknowledged, Section 139 of
the Act mandates a presumption that the cheque pertained to a F
legally enforceable debt or liability. This presumption is of a rebuttal
nature and the onus is then on the accused to raise a probable
defence. With regard to the present facts, the High Court found
that the defence raised by the accused was not probable.”
19. After referring to various other judgments of this Court, this G
Court in that case held that the presumption mandated by Section 139 of
the Act does indeed include the existence of a legally enforceable debt
or liability, which, of course, is in the nature of a rebuttable presumption.
In paragraph No.26, following was laid down:-
H
570 SUPREME COURT REPORTS [2019] 6 S.C.R.
A “26. In light of these extracts, we are in agreement with the
respondent claimant that the presumption mandated by Section
139 of the Act does indeed include the existence of a legally
enforceable debt or liability. To that extent, the impugned
observations in Krishna Janardhan Bhat, (2008) 4 SCC 54
may not be correct. However, this does not in any way cast doubt
B
on the correctness of the decision in that case since it was based
on the specific facts and circumstances therein. As noted in the
citations, this is of course in the nature of a rebuttable presumption
and it is open to the accused to raise a defence wherein the
existence of a legally enforceable debt or liability can be contested.
C However, there can be no doubt that there is an initial presumption
which favours the complainant.”
20. Elaborating further, this Court held that Section 139 of the
Act is an example of a reverse onus and the test of proportionality should
guide the construction and interpretation of reverse onus clauses on the
D defendant-accused and the defendant-accused cannot be expected to
discharge an unduly high standard of proof. In paragraph Nos. 27 and
28, following was laid down:-
“27. Section 139 of the Act is an example of a reverse onus
clause that has been included in furtherance of the legislative
E objective of improving the credibility of negotiable instruments.
While Section 138 of the Act specifies a strong criminal remedy
in relation to the dishonour of cheques, the rebuttable presumption
under Section 139 is a device to prevent undue delay in the course
of litigation. However, it must be remembered that the offence
made punishable by Section 138 can be better described as a
F regulatory offence since the bouncing of a cheque is largely in the
nature of a civil wrong whose impact is usually confined to the
private parties involved in commercial transactions. In such a
scenario, the test of proportionality should guide the construction
and interpretation of reverse onus clauses and the defendant-
G accused cannot be expected to discharge an unduly high standard
of proof.
28. In the absence of compelling justifications, reverse onus clauses
usually impose an evidentiary burden and not a persuasive burden.
Keeping this in view, it is a settled position that when an accused
H has to rebut the presumption under Section 139, the standard of
BASALINGAPPA v. MUDIBASAPPA 571
[ASHOK BHUSHAN, J.]
proof for doing so is that of “preponderance of probabilities”. A
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. As clarified in the citations,
the accused can rely on the materials submitted by the complainant
in order to raise such a defence and it is conceivable that in some
B
cases the accused may not need to adduce evidence of his/her
own.”
21. We may now notice judgment relied by the learned counsel
for the complainant, i.e., judgment of this Court in Kishan Rao Vs.
Shankargouda, (2018) 8 SCC 165. This Court in the above case has
examined Section 139 of the Act. In the above case, the only defence C
which was taken by the accused was that cheque was stolen by the
appellant. The said defence was rejected by the trial court. In paragraph
Nos. 21 to 23, following was laid down:-
“21. In the present case, the trial court as well as the appellate
court having found that cheque contained the signatures of the D
accused and it was given to the appellant to present in the Bank,
the presumption under Section 139 was rightly raised which was
not rebutted by the accused. The accused had not led any evidence
to rebut the aforesaid presumption. The accused even did not
come in the witness box to support his case. In the reply to the E
notice which was given by the appellant, the accused took the
defence that the cheque was stolen by the appellant. The said
defence was rejected by the trial court after considering the
evidence on record with regard to which no contrary view has
also been expressed by the High Court.
F
22. Another judgment which needs to be looked into is Rangappa
v. Sri Mohan (2010) 11 SCC 441. A three-Judge Bench of this
Court had occasion to examine the presumption under Section
139 of the 1881 Act. This Court in the aforesaid case has held
that in the event the accused is able to raise a probable defence
which creates doubt with regard to the existence of a debt or G
liability, the presumption may fail. Following was laid down in paras
26 and 27: (SCC pp. 453-54)
“26. In light of these extracts, we are in agreement with the
respondent claimant that the presumption mandated by Section
H
572 SUPREME COURT REPORTS [2019] 6 S.C.R.
A 139 of the Act does indeed include the existence of a legally
enforceable debt or liability. To that extent, the impugned
observations in Krishna Janardhan Bhat, may not be correct.
However, this does not in any way cast doubt on the correctness
of the decision in that case since it was based on the specific
facts and circumstances therein. As noted in the citations, this
B
is of course in the nature of a rebuttable presumption and it is
open to the accused to raise a defence wherein the existence
of a legally enforceable debt or liability can be contested.
However, there can be no doubt that there is an initial
presumption which favours the complainant.
C 27. Section 139 of the Act is an example of a reverse onus
clause that has been included in furtherance of the legislative
objective of improving the credibility of negotiable instruments.
While Section 138 of the Act specifies a strong criminal remedy
in relation to the dishonour of cheques, the rebuttable
D presumption under Section 139 is a device to prevent undue
delay in the course of litigation. However, it must be
remembered that the offence made punishable by Section 138
can be better described as a regulatory offence since the
bouncing of a cheque is largely in the nature of a civil wrong
whose impact is usually confined to the private parties involved
E in commercial transactions. In such a scenario, the test of
proportionality should guide the construction and interpretation
of reverse onus clauses and the defendant-accused cannot be
expected to discharge an unduly high standard of proof.”
23. No evidence was led by the accused. The defence taken in
F the reply to the notice that cheque was stolen having been rejected
by the two courts below, we do not see any basis for the High
Court coming to the conclusion that the accused has been
successful in creating doubt in the mind of the Court with regard
to the existence of the debt or liability. How the presumption under
G Section 139 can be rebutted on the evidence of PW 1, himself has
not been explained by the High Court.
22. The above case was a case where this Court did not find the
defence raised by the accused probable. The only defence raised was
that cheque was stolen having been rejected by the trial court and no
H contrary opinion having been expressed by the High Court, this Court
BASALINGAPPA v. MUDIBASAPPA 573
[ASHOK BHUSHAN, J.]
reversed the judgment of the High Court restoring the conviction. The A
respondent cannot take any benefit of the said judgment, which was on
its own facts.
23. We having noticed the ratio laid down by this Court in above
cases on Sections 118(a) and 139, we now summarise the principles
enumerated by this Court in following manner:- B
(i) Once the execution of cheque is admitted Section 139 of the
Act mandates a presumption that the cheque was for the
discharge of any debt or other liability.
(ii) The presumption under Section 139 is a rebuttable presumption
and the onus is on the accused to raise the probable defence. C
The standard of proof for rebutting the presumption is that of
preponderance of probabilities.
(iii) To rebut the presumption, it is open for the accused to rely on
evidence led by him or accused can also rely on the materials
submitted by the complainant in order to raise a probable D
defence. Inference of preponderance of probabilities can be
drawn not only from the materials brought on record by the
parties but also by reference to the circumstances upon which
they rely.
(iv) That it is not necessary for the accused to come in the witness E
box in support of his defence, Section 139 imposed an
evidentiary burden and not a persuasive burden.
(v) It is not necessary for the accused to come in the witness box
to support his defence.
F
24. Applying the preposition of law as noted above, in facts of the
present case, it is clear that signature on cheque having been admitted, a
presumption shall be raised under Section 139 that cheque was issued in
discharge of debt or liability. The question to be looked into is as to
whether any probable defence was raised by the accused. In cross-
examination of the PW1, when the specific question was put that cheque G
was issued in relation to 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 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
H
574 SUPREME COURT REPORTS [2019] 6 S.C.R.
A 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, copy of
which complaint was also filed as Ex.D2, there was burden on the
complainant to prove his financial capacity. In the year 2010-2011, as
B
per own case of the complainant, he made payment of Rs.18 lakhs.
During his cross-examination, when 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
C prove his financial capacity and other facts.
25. There was another evidence on the record, i.e., copy of plaint
in O.S. No. 148 of 2011 filed by the complainant for recovery of 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
D Rs.7 lakhs in sale agreement, in 2010, he made payment of Rs.4,50,000/
- towards sale consideration and further he gave a loan of Rs.50,000/-
for which complaint was filed in 2012 and further loan of Rs.6 lakhs in
November, 2011. Thus, during the period from 2009 to November, 2011,
amount of Rs.18 lakhs was given by the complainant to different persons
including the accused, which put a heavy burden to prove the financial
E capacity when it was questioned on behalf of the accused, the accused
being a retired employee of State Transport Corporation, who retired in
1997 and total retirement benefits, which were encashed were Rs.8
lakhs only. The High Court observed that though the complainant is retired
employee, the accused did not even suggest that pension is the only
F means for survival of the complainant. Following observations were
made in Paragraph 16 of the judgment of the High Court:-
“16. Though the complainant is retired employee, the accused
did not even suggest that pension is the only means for survival of
the complainant. Under these circumstances, the Trial Court’s
G finding that the complainant failed to discharge his initial burden
of proof of lending capacity is perverse.”
26. 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
examination-in-chief the complainant has not mentioned as to on which
H
BASALINGAPPA v. MUDIBASAPPA 575
[ASHOK BHUSHAN, J.]
date, the loan of Rs.6 lakhs was given to the accused. It was during A
cross-examination, he gave the date as November, 2011. Under Section
118(b), a presumption shall be made as to 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 dated
B
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:-
“1. The accused is a very good friend of the complainant. The
accused requested the Complainant a hand loan to meet out urgent C
and family necessary a sum of Rs.6,00,000/- (Rupees Six Lakh)
and on account of long standing friendship and knowing the
difficulties, which is being faced by the accused the complainant
agreed to lend hand loan to meet out the financial difficulties of
the accused and accordingly the Complainant lend hand loan D
Rs.6,00,000/- (Rupees Six Lakh) dated 27.02.2012 in favour of
the Complainant stating that on its presentation it will be honored.
But to the surprise of the Complainant on presentation of the same
for collection through his Bank the Cheque was returned by the
Bank with an endorsement “Funds Insufficient” on 01-03-2012.”
E
27. Thus, there is a contradiction in what was initially stated by
the complainant in the complaint and in his examination-in-chief regarding
date on which loan was given on one side and what was said in cross-
examination in other side, which has not been satisfactorily explained.
The High Court was unduly influenced by the fact that the accused did
not reply the notice denying the execution of cheque or legal liability. F
Even before the trial court, appellant-accused has not denied his signature
on the cheque.
28. We are of the view that when evidence was led before the
Court to indicate that apart from loan of Rs.6 lakhs given to the accused,
within 02 years, amount of Rs.18 lakhs have been given out by the G
complainant and his financial capacity being questioned, it was incumbent
on the complainant to have explained his financial capacity. Court cannot
insist on a person to lead negative evidence. The observation of the
High Court that trial court’s finding that the complainant failed to prove
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576 SUPREME COURT REPORTS [2019] 6 S.C.R.
A his financial capacity of lending money is perverse cannot be supported.
We fail to see that 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. This Court had occasion to
consider the expression “perverse” in Gamini Bala Koteswara Rao
and others Vs. State of Andhra Pradesh through Secretary, (2009)
B
10 SCC 636, this Court held that although High Court can reappraise
the evidence and conclusions drawn by the trial court but judgment of
acquittal can be interfered with only judgment is against the weight of
evidence. In Paragraph No.14 following has been held:-
“14. We have considered the arguments advanced and heard the
C matter at great length. It is true, as contended by Mr Rao, that
interference in an appeal against an acquittal recorded by the trial
court should be rare and in exceptional circumstances. It is,
however, well settled by now that it is open to the High Court to
reappraise the evidence and conclusions drawn by the trial court
D but only in a case when the judgment of the trial court is stated to
be perverse. The word “perverse” in terms as understood in law
has been defined to mean “against the weight of evidence”. We
have to see accordingly as to whether the judgment of the trial
court which has been found perverse by the High Court was in
fact so.”
E
29. High Court without discarding the evidence, which was led by
defence could not have held that finding of trial court regarding financial
capacity of the complainant is perverse. We are, thus, satisfied that
accused has raised a probable defence and the findings of the trial court
that complainant failed to prove his financial capacity are based on
F evidence led by the defence. The observations of the High Court that
findings of the trial court are perverse are unsustainable. We, thus, are
of the view that judgment of the High Court is unsustainable.
30. In result, the appeal is allowed and the judgment of the High
Court is set aside and that of the trial court is restored.
G
Ankit Gyan Appeal allowed.
H
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