Presumption u/Sec 139 of NI Act-Once Presumption is Drawn, Complainant need not Prove Source of Fund-SC

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March 19, 2019

Case name: Rohitbhai Jivanlal Patel v. State of Gujrat & ors.

The instant appeal challenges High Court of Gujarat’s verdict, whereby the Court has reversed the Trial Court’s order pertaining to offence under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheques while convicting the accused-appellant for the offence under Section 138 of NI Act

The High Court while passing it’s order in the case observed that the presumption under Sections 118 and 139 of the Negotiable Instrument Act was required to be drawn that the cheques were issued for consideration and until contrary was proved, such presumption would hold good and that the complainant had proved legally enforceable debt in the oral as also documentary evidence, including the written acknowledgment by the accused on stamp paper; and that except bare denial, nothing was brought on record by the accused to dislodge the proof adduced by the complainant.

Bench’s Verdict

In view of the facts and circumstances of the case and law pertaining to presumption under Section 139 of the NI Act, the Supreme Court ruled that the conviction of the accused-appellant for the offence under Section 138 NI Act and High Court’s order does not call for any interference.

Other remarkable observations made by the Apex Court pertaining to presumption under Section 139 of NI Act are as under:

  • That an accused is presumed to be innocent unless proved guilty beyond reasonable doubt and a judgment of acquittal further strengthens such presumption in favour of the accused. However, such restrictions need to be visualised in the context of the particular matter before the Appellate Court and the nature of inquiry therein. That the same rule with same rigour cannot be applied in a matter relating to the offence under Section 138 of the NI Act, particularly where a presumption is drawn that the holder has received the cheque for the discharge, wholly or in part, of any debt or liability.
  • That though the accused is entitled to bring on record the relevant material to rebut such presumption and to show that preponderance of probabilities are in favour of his defence but while examining if the accused has brought about a probable defence so as to rebut the presumption, the Appellate Court is certainly entitled to examine the evidence on record in order to find if preponderance indeed leans in favour of the accused.
  • While noting the facts of the case, the Supreme Court was of the view that all the basic ingredients of Section 138 as also of Sections 118 and 139 are apparent on the face of the record. Therefore, it is required to be presumed that the cheques in question were drawn for consideration and the holder of the cheques. The onus therefore, shifts on the accused-appellant to establish a probable defence so as to rebut such a presumption.
  • The Supreme Court also opined that though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfil the requirements of rebuttal as envisaged under Section 118 and 139 of the NI Act.
  • That the result of such presumption is that existence of a legally enforceable debt is to be presumed in favour of the complainant. When such a presumption is drawn, the factors relating to the want of documentary evidence in the form of receipts or accounts or want of evidence as regards source of funds were not of relevant consideration while examining if the accused has been able to rebut the presumption or not.

The entire case can be accessed here.

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