to the said Act are required to be interpreted in the
light of the object intended to be achieved by it
despite there being deviation from general law. The
Apex Court expressed that the object of section 138 of
the said Act was to ensure that commercial and
mercantile activities are conducted in smooth and
healthy manner. The explanation to section 138 of the
said Act clearly provides that a debt or other liability
referred to in section means a legally enforceable debt
or other liability. The alleged liability to repay an
unaccounted cash amount admittedly not disclosed in the
Income Tax Return cannot be a legally recoverable
liability. If such liability is held to be a legally
recoverable debt, it will render the explanation to
section 138 of the said Act nugatory. It will defeat
the very object of section 138 of the Act of ensuring
that the commercial and mercantile activities are
conducted in a healthy manner. The provision of section
138 cannot be resorted to for recovery of an unaccounted
amount. A cheque issued in discharge of alleged
liability of repaying "unaccounted" cash amount cannot
be said to be a cheque issued in discharge of a legally
enforceable debt or liability within the meaning of
explanation of section 138 of the said Act. Such an
effort to misuse the provision of section 138 of the
said Act has to be discouraged.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION NO.4694 OF 2008
Sanjay.. Mishra
Versus
Ms.Kanishka Kapoor @ Nikki
&.. Anr.
Ms.A.T.Jhaveri, A.P.P for the State.
CORAM : A.S.OKA, J.
DATE : 24th February 2009.
Citation: 2009 (4) MHLJ155
The submissions of the learned senior counsel
appearing for the applicant were heard in support of
this application under sub-section 4 of section 378 of
the Code of Criminal Procedure, 1973.
2.The applicant is the complainant. The applicant
filed a complaint against the 1st respondent alleging
commission of offence under section 138 of the
Negotiable Instruments Act, 1881 (hereinafter referred
to as the said Act).
3.With a view to appreciate the submissions made
by the learned senior counsel appearing for the
applicant, it will be necessary to refer to the facts of
the case in brief. According to the case of the
applicant the 1st respondent approached him in September
2004 through one Mrs.Kalayni Singh. The said
Mrs.Kalyani Singh was known to the applicant. The 1st
respondent represented that she was in need of financial
assistance and she agreed to return the amount advanced
within a period of three months to the 1st respondent.
The applicant advanced a friendly loan of Rs.15 lacs to
the 1st respondent. She executed a hundi on 15th
September 2004 in the sum of Rs.15 lacs and also issued
a cheque dated 28th December 2004 favouring the
applicant. The said cheque was dishonoured and after
issuing notice, the present complaint was filed by the
applicant. The learned trial Judge passed an order of
acquittal. The learned Judge held that the applicant
has failed to establish that the cheque was issued by
the 1st respondent in discharge of legal liability of
the loan amount. The learned Judge observed that the
1st respondent has denied her signatures on the bill of
exchange as well as the cheque subject matter of the
complaint. The learned Judge has taken into account
various circumstances borne out by the evidence on
record and has passed order of acquittal. The learned
Judge also considered the admission of the applicant
that the amount advanced was an unaccounted amount which
was not disclosed to the Income Tax Authority.
4.The learned senior counsel appearing for the
applicant submitted that there is evidence on record to
show that the 1st respondent accepted the liability to
repay the loan of Rs.15 lacs. He submitted that the
defence that the cheque and bill of exchange has not
been signed by the 1st respondent has not been
substantiated. When attention of the learned senior
counsel appearing for the applicant was invited to the
categorical admission of the applicant that the entire
amount subject matter of the loan was an unaccounted
cash amount which was not disclosed in the Income Tax
Return, he submitted that this is no ground to hold that
the presumption under section 139 of the said Act stands
rebutted. He submitted that even assuming that the
amount advanced was an unaccounted money, at the most
the applicant will face an action under the Income Tax
Act, 1961 but this is not a ground to say that the
presumption under section 139 of the said Act stood
rebutted. He submitted that as the liability to repay a
sum of Rs.15 lacs on the part of the 1st respondent was
established, the learned Judge has committed an error by
acquitting the 1st respondent.
5.He submitted that mere fact that the amount
advanced is not disclosed in the Income Tax Returns by
itself cannot rebut the presumption under section 139 of
the said Act in every case. He has placed reliance on a
decision of this Court dated 16th January 2009 in
Criminal Application No.3964 of 2007 (R.R.Dubey Vs.
Shamprakash Mishra & Ors.).
6.I have given careful consideration to the
submissions. I have perused a copy of the complaint and
notes of evidence. In the cross-examination, the
applicant has categorically stated thus:
".... The entire amount was given in cash. The
entire amount was my cash amount. The cash
amount was kept at my Chembur’s residence. At
that time, it was unaccounted. I had not
disclosed this amount to the Income Tax after
giving the loan till date. There was no
agreement for interest on the amount given.
....." (Emphasis added)
The complaint was filed in the year 2005. The evidence
of the applicant was recorded on 28th February 2006.
The applicant admitted that the amount allegedly paid by
him to the 1st respondent by way of loan was a cash
amount kept at his residence and at that time it was an
unaccounted amount. He categorically admitted that till
date (i.e. till 28th February 2006) he has not
disclosed the amount to the Income Tax. According to
the case of the complainant, he had advanced loan on
14th September 2004 which was repayable within 90 days.
Thus, on 14th September 2004 the amount allegedly paid
by him to the 1st respondent was stated to be an
unaccounted amount which was kept at the residence of
the applicant. Moreover, till February 2006, when the
evidence was recorded, the said amount was not disclosed
in the Income Tax Returns of the applicant. Thus it
continued to be an unaccounted amount.
7.It is true that merely because amount advanced
is not shown in Income Tax Return, in every case, one
cannot jump to the conclusion that the presumption under
section 139 of the said Act stands rebutted. There may
be cases where a small amount less than a sum of
Rs.20,000/- is advanced in cash by way of loan which may
be repayable within few days or within few months. A
complainant may not show the said amount in the Income
Tax Return as it is repayable within few days or few
months in the same financial year. In such a case the
failure to show the amount in the Income Tax Return may
not by itself amount to rebuttal of presumption under
section 139 of the said Act. If in a given case the
amount advanced by the complainant to the accused is a
large amount and is not repayable within few months, the
failure to disclose the amount in Income-Tax return or
Books of Accounts of the complainant may be sufficient
to rebut the presumption under section 139 of the said
Act.
8.In the present case, the amount was allegedly
advanced in September 2004. The amount is a large
amount of Rs.15 lacs. This is a case where not only
that there is a failure to disclose the amount of loan
in the Income Tax Return of the applicant till the year
2006 but there is a categorical admission on the part of
the applicant that the amount was an "unaccounted"
amount.
9.Before dealing with the aspect of rebuttal of
presumption, it will be necessary to refer to the
ingredients of section 138 of the said Act. It will be
necessary to refer to a recent decision of the Apex
Court in the case of Krishna Janardhan Bhat Vs.
Dattatraya G. Hegde [(2008) 4 Supreme Court Cases 54].
The case before the Apex Court arose out of a complaint
under section 138 of the said Act. The applicant before
the Apex Court was accused of an offence under section
138 of the Act. The submission before the Apex Court
was that the essential requirement of section 138 was
that there has to be a legally enforceable debt. The
Apex Court referred to the provisions of section 271D of
the Income Tax Act, 1961 which reads thus:
"271-D. Penalty for failure to comply with the
provisions of section 269-SS.-(1) If a person
takes or accepts any loan or deposit in
contravention of the provisions of section
269-SS, he shall be liable to pay, by way of
penalty, a sum equal to the amount of the loan
or deposit so taken or accepted.
(2)Any penalty imposable under sub-section
(1) shall be imposed by the Joint Commissioner."
In paragraph 29 of the decision, the Apex Court referred
to the ingredients of the offence under section 138.
Paragraph 29 reads thus:
"29.Section 138 of the Act has three
ingredients viz.:
(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
(iii)that the cheque so issued had been
returned due to insufficiency of funds."
In paragraphs 30 and 31 the Apex Court dealt with the
presumption under section 139 of the said Act.
Paragraphs 30 and 31 read thus:
"30.The proviso appended to the said section
provides for 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 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.Thecourts below,as noticed
hereinbefore, proceeded on the basis that
section 139 raises a presumption in 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 approach on
the part of the courts, we feel, is not
correct." (Emphasis added)
10.Thus, what has been held by the Apex Court is
that section 139 of the said Act merely raises a
presumption in regard to the second aspect of the
matter, namely, that the cheque was drawn in discharge
of debt or other liability. The Apex Court specifically
held that the existence of legally recoverable debt is
not a matter of presumption under section 139 of the
said Act. The Apex Court specifically held that section
139 merely raises a presumption in favour of holder of
cheque that the same has been issued for discharge of
any debt or liability. Thus, even if presumption is not
rebutted, in order to attract section 138 of the said
Act, the debt has to be a "legally enforceable debt" as
is clear from the explanation to section 138 which
provides that for the purposes of the said section the
debt or other liability means a legally enforceable debt
or other liability.
11.The Apex Court also reiterated well established
legal position that for rebutting the presumption under
section 139 of the said Act, it is not necessary in
every case for the accused to step into the witness box.
The Apex Court held that the standard of proof on the
part of the accused and that of prosecution in a
criminal case is different. The prosecution has to
prove the guilt of an accused beyond reasonable doubt,
but the standard of proof so as to prove a defence is
"preponderance of probability". Inference of
preponderance of probabilities can be drawn even by
reference to circumstances. In paragraph 44 the Apex
Court observed thus:
".The presumption of innocence is a human
right (See Narendra Singh v. State of M.P.,
Ranjitsing Brahmajeetsing Sharma v. State of
Maharashtra and Rajesh Ranjan Yadav v. CBI.)
Article 6(2) of the European Convention on Human
Rights provides: "Everyone charged with a
criminal offence shall be presumed innocent
until proved guilty according to law." Although
India is not bound by the aforementioned
Convention and as such it may not be necessary
like the countries forming European countries to
bring common law into land with the Convention,
a balancing of the accused’s rights and the
interest of the society is required to be taken
into consideration. In India, however, subject
to the statutory interdicts, the said principle
forms the basis of criminal jurisprudence. For
the aforementioned purpose the nature of the
offence, seriousness as also gravity thereof may
be taken into consideration. The courts must be
on guard to see that merely on the application
of presumption as contemplated under section 139
of the Negotiable Instruments Act, the same may
not lead to injustice or mistaken conviction.
..." (Emphasis added)
In paragraph 45 the Apex Court held thus:
"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 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 stops at that. It
does not say how presumption drawn should be
held to have rebutted. Other important to have rebutted. Other important
principles of legal jurisprudence, namely,
presumption of innocence as human rights and the
doctrine of reverse burden introduced by section
139 should be delicately balanced. Such
balancing acts, indisputably would largely
depend upon the factual matrix of each case, the
materials brought on record and having regard to
legal principles governing the same." (Emphasis
added)
The Apex Court held that presumption of innocence forms
part of human rights and therefore the doctrine of
reverse burden introduced by section 139 has to be
delicately balanced.
12.Now turning back to the facts of the present
case, assuming that the presumption under section 139 of
the said Act regarding existence of debt or liability is
not rebutted, in order to attract section 138, the debt
or liability has to be a "legally recoverable" debt or
liability. As held by the Apex Court in the case of
Krishna Bhat (supra) there is no presumption under
section 139 of the said Act that the debt is a legally
recoverable debt. In the case of Goa Plast (P) Ltd.
Vs. Chico Ursula D’Souza [(2004) 2 Supreme Court Cases
235] the Apex Court reiterated that a debt or liability
subject matter of section 138 means a legally
enforceable debt or liability.
13.In the present case, there is a categorical
admission that the amount allegedly advanced by the
applicant was entirely a cash amount and that the amount
was "unaccounted". He admitted not only that the same
was not disclosed in the Income Tax Return at the
relevant time but till recording of evidence in the year
2006 it was not disclosed in the Income Tax Return. By
no stretch of imagination it can be stated that
liability to repay unaccounted cash amount is a legally
enforceable liability within the meaning of explanation
to section 138 of the said Act. The alleged debt cannot
be said to be a legally recoverable debt.
14.In the case of Dalmia Cement (Bharat) Ltd Vs.
Galaxy Traders & Agencies Ltd & Ors. [(2001) 6 Supreme
Court Cases 463], the Apex court has referred to the
object of section 138. Paragraph 3 of the said decision
reads thus:
"3.The Act was enacted and section 138
thereof incorporated with a specified object of
making a special provision by incorporating a
strict liability so far as the cheque, a
negotiable instrument, is concerned. The law
relating to negotiable instruments is the law of
commercial world legislated to facilitate the
activities in trade and commerce making
provision of giving sanctity to the instruments
of credit which could be deemed to be
convertible into money and easily passable from
one person to another. In the absence of such
instruments, including a cheque, the trade and
commerce activities, in the present day world,
are likely to be adversely affected as it is
impracticable for the trading community to carry
on with it the bulk of the currency in force.
The negotiable instruments are in fact the
instruments of credit being convertible on
account of legality of being negotiated and are
easily passable from one hand to another. To
achieve the objectives of the Act, the
legislature has, in its wisdom, thought it
proper to make such provisions in the Act for
conferring such privileges to the mercantile
instruments contemplated under it and provide
special penalties and procedure in case the
obligations under the instruments are not
discharged. The laws relating to the Act are,
therefore, required to be interpreted in the
light of the objects intended to be achieved by
it despite there being deviations from the
general law and the procedure provided for the
redressal of the grievances to the litigants.
Efforts to defeat the objectives of law by
resorting to innovative measures and methods are
to be discouraged, lest it may affect the
commercial and mercantile activities in a smooth
and healthy manner, ultimately affecting the
economy of the country." (Emphasis added)
15.The Apex Court has held that the laws relating
to the said Act are required to be interpreted in the
light of the object intended to be achieved by it
despite there being deviation from general law. The
Apex Court expressed that the object of section 138 of
the said Act was to ensure that commercial and
mercantile activities are conducted in smooth and
healthy manner. The explanation to section 138 of the
said Act clearly provides that a debt or other liability
referred to in section means a legally enforceable debt
or other liability. The alleged liability to repay an
unaccounted cash amount admittedly not disclosed in the
Income Tax Return cannot be a legally recoverable
liability. If such liability is held to be a legally
recoverable debt, it will render the explanation to
section 138 of the said Act nugatory. It will defeat
the very object of section 138 of the Act of ensuring
that the commercial and mercantile activities are
conducted in a healthy manner. The provision of section
138 cannot be resorted to for recovery of an unaccounted
amount. A cheque issued in discharge of alleged
liability of repaying "unaccounted" cash amount cannot
be said to be a cheque issued in discharge of a legally
enforceable debt or liability within the meaning of
explanation of section 138 of the said Act. Such an
effort to misuse the provision of section 138 of the
said Act has to be discouraged.
16.Considering the aforesaid admission of the
applicant, the conclusion recorded by the learned trial
Judge that the applicant has failed to establish that
the cheque was issued towards discharge of a legally
recoverable debt is correct.
17.No case is made out for grant of leave.
Application is rejected.
(A.S. Oka, J)
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