RANGAPPAversusSRI MOHAN

                   (2010] 6 S.C.R. 507


                       RAN GAPPA                                 A
                             v.
                       SRI MOHAN
           (Criminal Appeal No. 1020 of 2010)
                      MAY 07, 2010
                                                                 B
[K.G. BALAKRISHNAN, CJI., P. SATHASIVAM AND J.M.
                 PANCHAL, JJ.]                 .

    Negotiable Instruments Act, 1881:
                                                                 c
      ss. 139 and 138 - Presumption in favour of holder -
Manner of rebuttal of statutory presumption - Held:
Presumption mandated bys. 139 includes existence of
legally enforc_eable debt or liability - It is in nature of
rebuttable presumption - Accused can raise a defence D
wherein existence of legally enforceable debt or liability can
be contested - However, initial presumption favours the
complainant - Reverse onus clause is included and the same
is guided by the test of proportionality - Accused cannot be
expected to discharge an unduly high standard of proof - E
Standard of proof for rebutting presumption is of
 'preponderance of probabilities' - If accused is able to raise
a probable defence which creates doubts about the existence
of legally enforceable debt or liability, prosecution can fail -
On facts, dishonour of cheque on account of 'stop payment'
instructions sent by accused - Complaint uls. 138 - Acquittal F
by trial court in view of discrepancies in the complainant's
 version - Conviction by High Court since accused ·did not
raise a probable defence to rebut the statutory presumption,
does not call for interference - Complaint disclosed prima
facie existence of a legally enforceable debt or liability """' G
Accused failed to reply to the statutory notice uls. 138.

   s. 138 - Applicability of - Held: s. 138 is applicable when
cheque is dishonoured on account of 'stop payment'
                              507                                H
    508      SUPREME COURT REPORTS              [2010) 6 S.C.R.


A instructions sent by accused to his bank in respect of post-
  dated cheque, irrespective of insufficiency of funds.
          The appellant engaged the services of the
    respondent-engineer for supervising the construction of
    his house. The appellant requested the respondent for a
8
    hand loan to meet the construction expenses. In view of
    the acquaintance, the respondent paid the same by way
    of cash. The appellant issued a cheque for repayment of
    the said amount. The respondent presented the cheque
    for encashment. The bank issued a return memo stating
C that the payment had been stopped by the drawer.
    Thereafter, the appellant did not honour the cheque
    within the statutorily prescribed period and also did not
    reply to the notice u/s. 138 of the Negotiable Instruments
  . Act, 1881. The respondent filed a complaint against the
D appellant for offence punishable u/s.138 of the Act. The
    trial court acquitted the appellant u/s.138 in view of some
    discrep·ancies in the complainant's version. The High
    Court holding that the appellant did not raise a probable
  . defence to rebut the statutory presumption, convicted the
E appellant for commission of offence u/s. 138 of the Act
    and directed to pay fine of Rs. 75,000/-. Hence the present
    appeal.

          Disposing of the appeal, the Court
F      HELD: 1. Ordinarily in cheque bouncing cases, what
  the courts have to consider is whether the ingredients of
  the offence enumerated in s.138 of the Negotiable
  Instruments Act, 1881 have been met and if so, whether
  the accused was able to rebut the statutory presumption
G contemplated by s.139 of the Act. With respect to the facts
  of the instant case, it must be clarified that contrary to the
  trial court's finding, s.138 of the Act can indeed be
  attracted when a cheque is dishonoured on account of
  'stop payment' instructions sent by the accused to his
H
             RANGAPPA v. SRI MOHAN                   509

bank in respect of a post-dated cheque, irrespective of     A·
insufficiency of funds in the account. [Para 9] [518-D-F]
   Goa P/ast (Pvt.) Ltd. v. Chico Ursula D'Souza (2003) 3
sec 232, referred to.
     2.1. The presumption mandated by s.139 of the Act 8
does indeed include the existence of a legally enforceable
debt or liability. This is .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 C
no doubt that there is ar. initial presumption which.
favours the complainant. 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 s.138 of the D
Act specifies a strong criminal remedy in relation to the
dishonour of cheques, the rebuttable presumption u/s.
139 is a device to prevent undue delay in the course of
litigation. However, it must be remembered that the
offence made punishable by s.138 can be better E
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
in commercial transactions. In such a scenario, the test
of proportionality should guide the construction and F
interpretation of reverse onus clauses and the accused/
defendant cannot be expected to discharge an unduly •
high standard or proof. In the absence of compelling ·
justifications, reverse onus clauses usually impose an
evidentiary burden and not a persuasive burden. When G
an accused has to rebut the. presumption under s.139,
the standard of proof for doing so is that of
 'preponderance of probabilities'. Therefore, if the
 accused is able to raise a probable defence which creates
 doubts about the existence of a legally enforceable debt H
    510    SUPREME COURT REPORTS              [2010] 6 S.C.R.

A or liability, the prosecution can fail. 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
   cases the accused may not need to adduce evidence of
   his/her own. [Para 14) [525-G; 526-A-Gl
B
        2.2. The High Court's view that the accused did not
   raise a probable defence is accepted. The defence of the
   loss of a blank cheque was taken up belatedly and the
   accused had mentioned a different date in the 'stop
C payment' instructions to his bank. The Instructions to
   'stop payment' had not even mentioned that the cheque
  had been lost. A perusal of the trial record also shows
  that the accused appeared to be aware of the fact that the
  cheque was with the complainant. Furthermore, the very
  fact that the accused had failed to reply to the statutory
D notice u/s.138 of the Act leads to the inference that there
  was merit in the complainant's version. Apart from not
  raising a probable defence, the appellant-accused was
  not able to contest the existence of a legally enforceable
  debt or liability. The fact that the accused had made
E regular payments to the complainant in relation to the
  construction of his house does not preclude the
  possibility of the complainant having spent his own
  money for the same purpose. As per the record of the
  case, there was a slight discrepancy in the complainant's
F version, in so far as it was not clear' whether the accused
  had asked for a hand loan to meet the construction-
  relatcd expenses or whether the complainant had
  Incurred the said expenditure over a period of time. Either
  way, the complaint discloses the prima facie existence of
G a legally enforceable debt or liability since the
  complainant has maintained that his money was used for
  the construction-expenses. Since the accu~ed did admit
  that the sign;i~ur~ on •.._e cheque was hi~, the statutory
  presumption comes into play and the same has not been
H rebutted even with regard to the materials submitted by
              RANGAPPA v. SRI MOHAN                         511


the complainant. thus, there is no reason to interfere with       A
the final order ot'the High Court which recorded a finding
of conviction against the appellant. [Paras 15 and 16)
[526-H; 257-A-G]

    Krishna Ja{}ardhan Bhat v. Dattatraya G. Hegde (2098) 8
4 SCC 54; Hiten P. Dalal v. Bratindranath Banerjee (2001) 6
SCC 16; Mal/avarapu Kasivisweswara Rao v. Thadikonda        .\
Ramulu Firm and Ors. 2008 (8) SCALE 680; {3harat Barrel
& Drum Manufacturing Company · . Amin Chand Pyarelal
(1993) 3 SCC 35; M. M. T. C. Ltc'. and Anr. v. Medchl
Chemicals & Pharma (P) Ltd. (2002) 1 SCC 234, referred C
to.
                      Case Law Reforence:
      2003 (3) sec 232         Referred to.         Para 9
                                                                  D
      -(2008) 4 sec 54         Referred to.         Para 10
      (2001) 6 sec 16          Referred to.         Para 11
      2008 (8) SCALE 680 . Referred to.             Para 12
                                                                  E
      1993 (3) sec 35          Referred to.         Para 12
      (2002) 1 sec 234         Referred to.         Para 13

    CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
No. 1020 of 2010.                                                 F
     From the Judgment & Order dated 26.10.2005 of the High
Court of Karnataka, Bangalore in Criminal Appeal No. 1367
of 2005. -

      Girish Ananthamurthy, P.P. Singh for'the Appellant.         G

   Basava Prabhu S. Patil, s'. Subrahmanya Prasad, V.N.
Raghupathy for the Respondent.

      The Judgment of the Court was delivered by                  -H
    512      SUPREME COURT
                     ·,
                           REPORTS                 [2010] 6 S.C.R.

A         K.G. BALAKRISHNAN, CJI. 1. Leave granted.

       2. In the present case, the trial court had acquitted the
  appellant-accused in a case related to the dishonour of a
  cheque under Section 138 of the Negotiable Instruments Act,
  1881 [Hereinafter '.Act']. This finding of acquittal had been made
8
  by the Addi. JMFC at Ranebennur, Karnataka in Criminal Case
  No. 993/2001, by way of a judgment dated 30-5-2005. On
  appeal by the respondent-complainant, the High Court had
  reversed the trial court's decision and recorded a finding of
C conviction while directing that the appellant-accused should pay
  a fine of Rs. 75,000, failing which he would have to undergo
  three months simple imprisonment (S.1.). Aggrieved by this final
  order passed by the High Court of Karnataka [in Criminal
  Appeal No. 136712005) dated 26-10-2005, the appellant-
  accused has approached this Court by way of a petition
D seeking special leave to appeal. The legal question before us
  pertains to the proper interpretation of Section 139 of the Act
  which shifts the burden of proof on to the accused in respect
  of cheque bouncing cases. More specifically, we have been
  asked to clarify the manner in which this statutory presumption
E can be rebutted.
        3. Before addressing the legal question, it would be apt
  to survey the facts leading up to the present litigation.
  Admittedly, both the appellant-accused and the respondent-
F claimant are residents of Ranebennur, Karnataka. The
  appellant-accused is a mechanic who had engaged the
  services of the respondent-complainant who is a Civil Engineer,
  for the purpose of supervising the construction of his house in
  Ranebennur. The said construction was completed on 20-10-
G 1998 and this indicates that the parties were well acquainted
  with each other.
       4. As per the respondent-complainant, the chain of facts
  unfolded in the following manner. In October 1998, the accused
  had requested him for a hand loan of Rs. 45,000 in order to
H meet the construction expenses. In view of their acquaintance,
                  RANGAPPA v. SRI MOHAN                        513
                  [K.G. BALAKRISHNAN, CJI.]
    the complainant had paid Rs. 45,000 by way of cash. On A
    receiving this amount, the appellant-accused had initially
    assured repayment by October 1999 but on the failure to do
.   so, he sought more time till December,2000. The accused had
    then issued a cheque bearing No. 0886322, post-dated for 8-
    2-2001 for Rs. 45,000 drawn on Syndicate Bank, Kudremukh B
    Branch. Consequently, on 8-2-2001, the complainant had
    presented this cheque through Karnataka Bank, Ranebennur
    for encashment. However, on 16-2-2001 the said Bank issued
    a return memo stating that the 'Payment has been stopped by
    the drawer' and this memo was handed over to the complainant c
    on 21-2-2001. The complainant had then issued notice to the
    accused in. this regard on 26-2-2001. On receiving the same,
    the accused failed to honour the cheque within the statutorily
    prescribed period and also did not reply to the notice sent in
    the manner contemplated under Section 138 of the Act. 0
     Following these developments, the complainant had filed a
    complaint (under Section 200 of the Code of Criminal
     Procedure) against the accused for the offence punishable
    under Section 138 of the Act.
         5. The appellant-accused had raised the defence that the      E
    cheque in question was a blank cheque bearing his signature
    which had been lost and that it had come into the hands of the
    complainant who had then tried to misuse it. The accused's
    case was that there was no legally enforceable debt or liability
    between the parties since he had not asked for a hand loan as      F
    alleged by the complainant.
         6. The trial judge found in favour of the accused by taking
    note of some discrepancies in the complainant's version. As
    per the trial judge, in the course of the cross-examination the G
    complainant was not certain as to when the accused had
    actually issued the cheque. It was noted that while the complaint
    stated that the cheque had been issued in December 2000, at
    a later point it was conceded that the cheque had been handed
    over when the accused had met the complainant to obtain the H
      514     SUPREME COURT REPORTS                  [2010] 6 S.C.R.

   A work.completion certificate for his house in March 2001. Later,
     it was stated thaMhe cheque had been with the complainant
     about 15-20 days prior to the presentation of the same for
     encashment, which would place the date of handing over of the
     cheque in January 2001. Furthermore, the trial judge noted that
 · B in the complaint it had been submitted that the complainant had
     paid Rs. 45,000 in cash as a hand loan to the accused, whereas
     during the cross-examination it appeared that the complainant
     had spent this amount during the construction of the accused's
     house from time to time and that the complainant had realised
   c the extent of the liability after auditing the costs on completion
     of the construction. Apart from these discrepancies on part of
     the complainant, the trial judge also noted that the accused
     used to pay the complainant a monthly salary in lieu of his
     services as a building supervisor apart from periodically
   0 handing    over money which was used for the construction of the
     house. In light of these regular payments, the trial judge found
     it unlikely that the complainant would have spent his own money
     on the construction work. With regard to these observations,
     the trial judge held that there was no material to substantiate
   E that the accused had issued the cheque in relation to a legally
     enforceable debt. It was observed that the accused's failure to
     reply to the notice sent by the complainant did not attract the
     presumption under Section 139 of the Act since the
     complainant had failed to prove that he had given a hand loan
     to the accused and that the accused had issued a cheque as
   F alleged. Furthermore, the trial judge erroneously decided that
     the offence made punishable by Section 138 of the Act had not
     been committed in this case since the alleged dishonour of
     cheque was not on account of insufficiency of funds since the
     accused had instructed his bank to stop payment. Accordingly,
   G the trial judge had recorded a finding of acquittal.
         7. However, on appeal against acquittal, the High Court
    reversed the findings and convicted the appellant-accused. The
    High Court in its order noted that in the course of the trial
. H proceedings, the accused had admitted that the signature on
              RANGAPPA v. SRI MOHAN                         515
              [K.G. BALAKRISHNAN, CJI.]
the impugned cheque (No. 886322, dated 8-2-2001) was A
indeed his own. Once this fact has been acknowledged,
Section 139 of the Act mandates a presumption that the cheque
pertained to a 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 B
present facts, the High Court found that the defence raised by
the accused was not probable. In respect of the accused's
stand that he had lost a blank cheque bearing his signature,
the High Court noted that in the instructions sent by the accused
to his Bank for stopping payment, there is a reference to          c
cheque No. 0886322, dated 20-7-1999. This is in conflict with
 the complainant's version wherein the accused had given
 instructions for. stopping payment in respect of the same
 cheque, albeit one which was dated 8-2-2001. The High Court
 also noted that if the accused had indeed lost a blank cheque
                                                                     0
 bearing his signature, the question of his mentioning the date
 of the cheque as 20-7-1999 could not arise. At a later point in
 the order, it has been noted that the instructions sent by the
 accused to.his bank for stopping payment on the cheque do
 not mention that the same had been lost. However, the
 correspondence does refer to the cheque being dated 20-7- E
  1999. Furthermore, during the cross-examination of the
 complainant, it was suggested on behalf of the accused that
 the complainant had the custody of the cheque since 1998. This
 suggestion indicates that the accused was aware of the fact
 that the complainant had the cheque, thereby weakening his F
 claim of having lost a blank cheque. Furthermore, a.perusal of
 the record shows that the accused had belatedly taken up the
 defence of having lost a blank cheque at the time of his
 examination during trial. Prior to the filing of the complaint, the
 accused had not even rep.lied to the notice sent by the G
 complainant since that would have afforded an opportunity to
  raise the·defence at an earlier stage. All of these circumstances
  led the High Court to conclude that the accused had not raised
  a probable defence to rebut the statutory presumption. It was
~~fu~                                                               H
    516       SUPREME COURT REPORTS                 (2010] 6 S.C.R.


A          '6. Once the cheque relates to the account of the accused
          and he accepts and admits the signatures on the said
          cheque, then initial presumption as contemplated under
          Section 139 of the Negotiable Instruments Act has to be
          raised by the Court in favour of the complainant. The
B         presumption referred to in Section 139 of the N.I. Act is a
          mandatory presumption and not a general presumption,
          but the accused is entitled to rebut the said presumption.
          What is required to be established by the accused in order
          to rebut the presumption is different from each case under
c         given circumstances. But the fact remains that a mere
          plausible explanation is not expected from the accused
          and it must be more than a plausible explanation by way
          of rebuttal evidence. In other words, the defence raised by
          way of rebuttal evidence must be probable and capable
          of being accepted by the Court. The defence raised by the
D
          accused was that a blank cheque was lost by him, which
          was made use of by the complainant. Unless this barrier
          is crossed by the accused, the other defence raised by him
          whether the cheque was issued towards the hand loan or
          towards the amount spent by the complainant need not be
E         considered ... .'

  Hence, the High Court concluded that the alleged discrepancies
  on part of the complainant which had been noted by the trial
  court were not material since the a:cused had failed to raise
F a probable defence to rebut the presumption placed on him by
  Section 139 of the Act. Accordingly, the High Court recorded
  a finding of conviction.
      8. In the course of the proceedings before this Court, the
G contentions related to the proper interpretation of Sections
  118(a), 138 and 139 of the Act. Before addressing them, it
  would be useful to quote the language of the relevant provisions:

          118. Presumptions as to negotiable instruments. - Until
          the contrary is proved, the following presumptions shall be
H         made:
          RANGAPPA v. SRI MOHAN                           517
          [K.G. BALAKRISHNAN, CJI.]
(a) of consideration: that every negotiable instrument was A
made or drawn for consideration, and that every such
instrument when it has been accepted, endorsed,
negotiated or transferred, was accepted, endorsed,
negotiated or transferred for consideration;
                                                           B

138. Dishonour of cheque for insufficiency, etc., of funds
in the account. - Where any cheque drawn by a person
on an account maintained by him with a banker for
payment of any amount of money to another person from             C
out of that account for the discharge, in whole or in part,
of any debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to the
credit of that account is insufficient to honour the cheque
or that it exceeds the amount arranged to be paid from that       D
 account by an agreement made with that bank, such person
shall be deemed to have committed an offence and shall,
without prejudice to any other provision of this Act, be
 punished with imprisonment for a term which may extend
to two years, or with fine which may extend to twice the          E
 amount of the cheque, or with both:
Provided that nothing contained in this section shall apply
unless-

 (a)   the cheque has been presented to the bank within           F
       a period of six months from the date on which it is
       drawn or within the period of its validity, whichever
       is earlier.

 (b)   the payee or the holder in due course of the cheque,       G
       as the case may be, makes a demand for the
       payment of the said amount of money by giving a
       notice, in writing, to the drawer of the cheque, within
       thirty days of the receipt of information by him from
       the bank regarding the return of the cheque as             H
       unpaid; and
    518      SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A          (c)   the drawer of such cheque fails to make the
                 payment of the said amount of money to the payee
                 or, as the case may be, to the holder in due course
                 of the cheque, within fifteen days of the receipt of
                 the said notice.
B
          Explanation. - For the purposes of this section, 'debt or
          other liability' means a legally enforceable debt or other
          liability.

          139. Presumption in favour of holder. - It shall be
c         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.

o       9. Ordinarily in cheque bouncing cases, what the courts
  have to consider is whether the ingredients of the offence
  enumerated in Section 138 of the Act have been met and if so,
  whether the accused was able to rebut the statutory
  presumption contemplated by Section 139 of the Act. With
E respect to the facts of the present case, it must be clarified that
  contrary to the trial court's finding, Section 138 of the Act can
  indeed be attracted when a cheque is dishonoured on account
  of 'stop payment' instructions sent by the accused to his bank
  in respect of a post-dated cheque, irrespective of insufficiency
F of funds in the account. This position was clarified by this Court
  in Goa Plast (Pvt.) Ltd. v. Chico Ursula D'Souza, (2003) 3
  sec 232, wherein it was held:
          "Chapter XVII containing Sections 138 to 142 was
          introduced in the Act by Act 66 of 1988 with the object of
G         inculcating faith in the efficacy of banking operations and
          giving credibility to negotiable instruments in business
          transactions. These provisions were intended to
          discourage people from not honouring their commitments
          by way of payment through cheques. The court should lean
H         in favour of an interpretation which serves the object of the
             RANGAPPA v. SRI MOHAN                         519
             [K.G. BALAKRISHNAN, CJI.]
      statute. A post-dated cheque will lose its credibility and A
      acceptability if its payment can be stopped routinely. The
      purpose of a post-dated cheque is to provide some
      accommodation to the drawer of the cheque. Therefore, it
      is all the more necessary that the drawer of the cheque
      should not be allowed to abuse the accommodation given . B
      to him by a creditor by way of acceptance of a post-dated
      cheque. In view of Section 139, it has to be presumed that
      a cheque is issued in discharge of any debt or other
      liability. The presumption can be rebutted by adducing
      evidence and the burden of proof is on the person who      c
      wants to rebut the presumption .. This presumption coupled
      with the object of Chapter XVII of the Act leads to the
      conclusion that by countermanding payment of a post-
      dated cheque, a party should not be allowed to get away
      from the penal provision of Section 138. A contrary view
                                                                   0
      would render S. 138 a dead letter and will provide a
       handle to persons trying to avoid payment under legal
      obligations undertaken by them through their own acts
    . which in other words can be said to be taking advantage
      of one's own wrong: ... "
                                                                   E
       10. It has been contended on behalf of the appellant-
ac<;:used that the presumption mandated by Section 139 of the
Act does not extend to the existence of a legally enforceable
debt or liability and that the same stood rebutted in this case,
keeping in mind the discrepancies in the complainant's version. F
It was reasoned that it is open to the accused to rely on the
materials produced by the complainant for disproving the
existence of a legally enforceable debt or liability. It has been
contended that since the complainant did not conclusively show
whether a debt was owed to him in respect of a hand loan or G
in relation to expenditure incurred during the construction of the
accused's house, the existence of a legally enforceable debt
or liability had not been shown, thereby creating a probable
defence for the accused. Counsel appearing for the appellant-
 accused has relied on a decision given by a division bench of H
    520           SUPREME COURT REPORTS                [2010] 6 S.C.R.

A this Court in Krishna Janardhan Bhat v. Dattatraya G. Hegde,
    (2008) 4 sec 54, the operative observations from which are
    reproduced below (S.B. Sinha, J. at Paras. 29-32, 34 and 45):

           "29. Section 138 of the Act has three ingredients viz.:

B          (i)     that there is a legally enforceable debt

           (ii)    that the cheque was drawn from the account of bank
                   for discharge in whole or in part of any debt or other
                   liability which presupposes a legally enforceable
                   debt; and
c
           (iii)   that the cheque so issued had been returned due
                   to insufficiency of funds.

          30. The proviso appended to the said section provides for
D         compliance with legal requirements before a complaint
          petition can be acted upon by a court of law. Section 139
          of the Act merely raises a presumption in regard to the
          second aspect of the matter. Existence of legally
          recoverable debt is not a matter of presumption under
E         Section 139 of the Act. It merely raises a presumption in
          favour of a holder of the cheque that the same has been
          issued for discharge of any debt or other liability.

          31. The courts below, as noticed hereinbefore, proceeded
          on the basis that Section 139 raises a presumption in
F         regard to existence of a debt also. The courts below, in
          our opinion, committed a serious error in proceeding on
          the basis that for proving the defence the accused is
          required to step into the witness box and unless he does
          so he would not be discharging his burden. Such an
G         approach on the part of the courts, we feel, is not correct.
          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. An accused has a constitutional
H
              RANGAPPA v. SRI MOHAN                        521
              [K.G. BALAKRISHNAN, CJI.]
    right to maintain silence. Standard of proof on the part of   A
    the accused and that of the prosecution in a criminal case
    is different.


      34. Furthermore, whereas prosecution must prove the         B
       guilt of an accused beyond all reasonable doubt, the
     standard of proof so as to prove a defence on the part
          of the accused is 'preponderance of probabilities'.
         Inference of preponderance of probabilities can be
    drawn not only from the materials brought on record by        c
     the parties but also by reference to the circumstances
                                      upon which he relies."
    (emphasis supplied)
Specifically in relation to the nature of the presumption         0
contemplated by Section 139 of the Act, it was observed;
    "45. We are not oblivious of the fact that the said provision
    has been inserted to regulate the growing business, trade,
    commerce and industrial activities of the country and the
    strict liability to promote greater vigilance in financial E
    matters and to safeguard the faith of the creditor in the
    drawer of the cheque which is essential to the economic
    life of a developing country like India: This however, shall
    not mean that the courts shall put a blind eye to the ground
    realities. Statute mandates raising of presumption but it F
    stops at that. It does not say how presumption drawn
    should be held to have been rebutted. Other important
    principles of legal jurisprudence, namely, presumption of
    innocence as a human right and the doctrine of reverse
    burden introduced by Section 139 should be delicately G
    balanced. Such balancing acts, indisputably would largely
    depend upon the factual matrix ofeach case, the materials
    brought on record and having regard to legal principles
    governing the same."
                                          (emphasis supplied)     H
    522       SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A      11. With respect to the decision cited above, counsel
  appearing for the respondent-claimant has submitted that the
  observations to the effect that the 'existence of legally
  recoverable debt is not a matter of presumption· under Section
  139 of the Act' and that 'it merely raises a presumption in favour
B of a holder of the cheque that the same has been issued for
  discharge of any debt or other liability' [See Para. 30 in Krishna
  Janardhan Bhat (supra)] are in conflict with the statutory
  provisions as well as an established line of precedents of this
  Court. It will thus be necessary to examine some of the extracts
c cited by the respondent-claimant. For instance, in Hiten P.
  Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16, it was held
  (Ruma Pal, J. at Paras. 22-23):

          "22. Because both Sections 138 and 139 require that the
          Court 'shall presume' the liability of the drawer of the
D         cheques for the amounts for which the cheques are drawn,
          ... , it is obligatory on the Court to raise this presumption
          in every case where the factual basis for the raising of the
          presumption has been established. It introduces an
          exception to the general rule as to the burden of proof in
E         criminal cases and shifts the onus on to the accused( ... ).
          Such a presumption is a presumption of law, as
          distinguished from a presumption of fact which describes
          provisions by which the court may presume a certain state
          of affairs. Presumptions are rules of evidence and do not
F         conflict with the presumption of innocence, because by the
          latter all that is meant is that the prosecution is obliged to
          prove the case against the accused beyond reasonable
          doubt. The obligation on the prosecution may be
          discharged with the help of presumptions of law or fact
G         unless the accused adduces evidence showing the
          reasonable probability of the non-existence of the
          presumed fact.

          23. In other words, provided the facts required to form the

H
             RANGAPPA v. SRI MOHAN                           523
             [K.G. BALAKRISHNAN, CJI.]
    basis of a presumption of law exists, the discretion is left     A
    with the Court to draw the statutory conclusion, but this
    does not preclude the person against whom the
    presumption is drawn from rebutting it and proving the
    contrary. A fact is said to be proved when, after
    considering the matters before it, the Court either believes     B
    it to exist, or considers its existence so probable that a
    prudent man ought, under the circumstances of the
    particular case, to act upon the supposition that it exists.
    Therefore, the rebuttal does not have to be conclusively
    established but such evidence must be adduced before             c
    the Court in support of the defence that the Court must
    either believe the defence to exist or consider its existence
    to be reasonably probable, the standard of reasonability
    being that of the prudent man."

                                           (emphasis supplied)       D

    12. The respondent-claimant has also referred to the
decision reported.as Mal/avarapu Kasivisweswara Rao v.
Thadikonda Ramu/u Firm & Ors., 2008 (8) SCALE 680,
wherein it was observed:                                             E

    "Under Section 118(a) of the Negotiable Instruments Act,
    the court is obliged to presume, until the contrary is proved,
    that the promissory note was made for consideration. It is
    also a settled position that the initial burden in this regard
    lies on the defendant to prove the non-existence of              F
    consideration by bringing on record such facts and
    circumstances which would lead the Court to believe the
    non-existence of the consideration either by direct
    evidence or by preponderance of probabilities showing that
    the existence of consideration was improbable, doubtful          G
    or illegal. .. ."

This decision then proceeded to cite an extract from the earlier
decision in Bharat Barrel & Drum Manufacturing Company v.
Amin Chand Pyarelal, (1993) 3 SCC 35 (Para. 12):                     H
    524       SUPREME COURT REPORTS                  [2010] 6 S.C.R.


A         "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 under Section 118{a) would arise that it is
          supported by a consideration. Such a presumption is
B         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
          improbably or doubtful or the same was illegal, the onus
c         would 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 preponderance
D
          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
E      showing the non-existence of the consideration, the plaintiff
       would invariably be held entitled 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
F      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 passing of the consideration
          apparently does not appear to be any defence.
          Something which is probable has to be brought on record
G         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 non-existence
H         was so probable that a prudent man would, under the
               RANGAPPA v. SRI MOHAN                          525
               [K.G BALAKRISHNAN, CJI.]
     circumstances of the case, act upon the plea that it did         A
     not exist."

                                            (emphasis supplied)

Interestingly, the very same extract has also been approvingly
cited in Krishna Janardhan Bhat (supra).                              8

     13. With regard to the facts in the present case, we can
also refer to the following observations in M. M. T. C. Ltd. and
Anr. v. Medchl Chemicals & Pharma (P) Ltd., (2002) 1 SCC
234 (Para. 19):                                                       C

    "... The authority shows that even when the cheque is
    dishonoured by reason of stop payment instruction, by
    virtue of Section 139 the Court has to presume that the
    cheque was received by the holder for the discharge in
    whole or in part, of any debt or liability. Of course this is a   D
    rebuttable presumption. The accused can thus show that
    the 'stop payment' instructions were not issued because
    of insufficiency or paucity of funds. If the accused shows
    that in his account there was sufficient funds to clear the
    amount of the cheque· at the time of presentation of the          E
    cheque for encashment at the drawer bank and that the
    stop payment notice had been issued because of other
    valid causes including that there was no existing debt or
    liability at the time of presentation of cheque for
    encashment, then offence under Section 138 would not              F
    be made out. The important thing is that the burden of so
    proving would be on the accused .... "

                                            (emphasis supplied)

     14. In light of these extracts, we are in agreement with the     G
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 (supra) may not be
correct. However, this does not in any way cast doubt on the          H
    526      SUPREME COURT REPORTS                    [2010) 6 S.C.R.


A   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
B   can be contested. However, there can be no doubt that there
    is an initial presumption which favours the complainant. 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
c   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 regulatory offence since the bouncing of a
0
    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 accused/defendant cannot be expected to
E   discharge an unduly high standard or proof. 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 has
    to rebut the presumption under Section 139, the standard of
F   proof for doing so is that of 'preponderance of probabilities'.
    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
G    by the complainant in order to raise such a defence and it is
     conceivable that in some cases the accused may not need to
     adduce evidence of his/her own.

       15. Coming back to the facts in the present case, we are
H in agreement with the High Court's view that the accused did
                 RANGAPPA v. SRI MOHAN                          527
                 [K.G. BALAKRISHNAN, CJI.]
  not raise a probable defence. As noted earlier, the defence of        A
  the loss of a blank cheque was taken up belatedly and the
  accused had mentioned a different date in the 'stop payment'
  instructions to his bank. Furthermore, the instructions to 'stop
, payment' had not even mentioned that the cheque had been
  lost. A perusal of the trial record also shows that the accused       B
  appeared to be aware of the fact that the cheque was with the
  complainant. Furthermore, the very fact that the accused had
  failed to reply to the statutory notice under Section 138 of the
  Act leads to the inference that there was merit in the
  complainant's version. Apart from not raising a probable              c
  defence, the appellant-accused was not able to contest the
  existence of a legally enforceable debt or liability. The fact that
  the accused had made regular payments to the complainant
  in relation to the construction of his house does not preclude
  the possibility of the complainant having spent his own money
                                                                        0
  for the same purpose. As per the record of the case, there was
  a slight discrepancy in the complainant's version, in so far as
  it was not clear whether the accused had asked for a hand loan
  to meet the construction-related expenses or whether the
  complainant had incurred the said expenditure over a period
  of time. Either way, the complaint discloses the prima facie          E
  existence of a legally enforceable debt. or liability since the
  complainant has maintained that his money was used for the
  construction-expenses. Since the accused did admit that the
  signature on the cheque was his, the statutory presumption
  comes into play and the same has not been rebutted even with          F
  regard to the materials submitted by the complainant.

       16. In conclusion, we find no reason to interfere with the
 final order of the High Court, dated 26-10-2005, which recorded
 a finding of conviction against the appellant. The present appeal      G
 is disposed of accordingly.

 N.J.                                         Appeal disposed of.