Law Web: Whether court should dismiss complaint for dishonour of cheque if cheque amount is more than amount due?

However, the learned Trial Court found contradiction in the

number of cartons in the complaint as well as in the statement of

the appellant. It was found that the cheque amount is more than

the amount allegedly due on the date when cheque was

presented, therefore, the complaint was dismissed. It held that

there are three different versions as to the number of apple

cartons, therefore, the alleged amount would have been less than

the amount claimed by the complainant.

Once the agent of the respondent has admitted the settlement of

due amount and in absence of any other evidence the Trial Court

or the High Court could not dismiss the complaint only on account

of discrepancies in the determination of the amount due or oral

evidence in the amount due when the written document

crystalizes the amount due for which the cheque was issued.

28. The accused has failed to lead any evidence to rebut the statutory

presumption, a finding returned by both the Trial Court and the

High Court. Both Courts not only erred in law but also committed

perversity when the due amount is said to be disputed only on

account of discrepancy in the cartons, packing material or the rate

to determine the total liability as if the appellant was proving his

debt before the Civil Court. Therefore, it is presumed that the

cheques in question were drawn for consideration and the holder

of the cheques i.e., the appellant received the same in discharge

of an existing debt. The onus, thereafter, shifts on the accusedappellant

to establish a probable defence so as to rebut such a

presumption, which onus has not been discharged by the

respondent.

29. Learned counsel for the respondent has referred to the judgment

reported in M. S. Narayana Menon v. State of Kerala 9 (2006) 6 SCC 39 that evidence adduced by the complainant can be relied upon to rebut

the presumption of consideration. However, said judgment has no

applicability to the facts of the present case as the Trial Court has

found that the presumption is not rebutted but still the Trial Court

dismissed the complaint for the reason that the appellant has

failed to prove the amount mentioned in the cheque as due

amount. Once the cheque is proved to be issued it carries

statutory presumption of consideration. Then the onus is on the

respondent to disprove the presumption at which the respondent

has miserably failed.

30. In Kumar Exports evidence to rebut the presumption was led and

accepted by the Court. In these circumstances, it was held that

the burden shifts back to the complainant and the presumption

under the Act will not again come to his rescue. However, in the

present case, the presumption of consideration has not been

rebutted by the respondent even on the basis of the evidence laid

by the appellant. The difference in the number of cartons supplied

or the rate charged is not relevant when the accounts were settled

in writing to rebut the presumption of consideration of issuance of

a cheque.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1545 OF 2019

UTTAM RAM Vs DEVINDER SINGH HUDAN

HEMANT GUPTA, J.

Dated:OCTOBER 17, 2019.

1. The appellant is aggrieved against an order passed by the High

Court of Himachal Pradesh, Shimla on 17.12.2018, whereby, the

order of dismissal of complaint under Section 138 of the

Negotiable Instruments Act, 18811 by the learned Trial Court was

not interfered with.

2. None has put appearance on behalf of respondent No. 1, despite

service. Therefore, on 16.09.2019, this Court requested Ms. Liz

Mathew, Advocate to assist the Court on behalf of respondent

No.1.

1 for short the “Act”

3. The appellant owns apple orchard in District Kullu, Himachal

Pradesh. The appellant also used to supply apple cartons, trays

and other packing materials to other apple growers on cash and

credit basis. He also owns commercial ropeway which connects

various other apple orchards with the roadhead as a facility to the

growers to carry their produce from the orchards to the market.

4. In the year 2011, respondent No. 1 purchased apple crops of

various growers which was carried out through ropeway to the

roadhead for further transportation. The packing material was

procured by the respondent on credit basis from the appellant

through his authorised agent Prem Chand son of Kumat Ram. In

the month of September 2011, the accounts were finally settled

between the appellant and the authorised agent of respondent No.

1 and a sum of Rs.5,38,856/- was found recoverable. A cheque No.

942816 dated 2.10.2011 was issued for the said amount, but the

said cheque was returned by the bank on 11.10.2011 on

presentation with the endorsement “insufficient funds”.

5. The appellant thereafter served a legal notice on 27.10.2011

under registered cover sent to the official and home addresses of

respondent No. 1. But, in spite of receipt of the notice of

27.10.2011, no payment was made which led to filing of a

complaint by the appellant.

6. The appellant in his complaint stated that total amount of

Rs.7,86,300/- was found payable on account of bags, gunny bags

and packing materials and after adjusting the payment of Rs.

2,47,444/-, an amount of Rs. 5,38,856/- was found to be payable

to the appellant. The appellant has asserted that the said cheque

No. 942816 dated 2.10.2011 was issued by the respondent.

7. In support of the complaint, apart from producing CW1 Dhiraj

Kumar who produced the bank record of dishonour of cheque, the

appellant examined himself as CW2 and also produced Prem

Chand son of Kumat Ram, the agent of respondent as CW3. The

respondent did not appear in witness box but examined Head

Constable Ranjit Singh DW1.

8. Learned Trial Court dismissed the complaint for the reason that

cheque amount was more than the amount alleged on the due

date when cheque was presented. Therefore, the cheque cannot

be said to be drawn towards discharge of whole or in part of any

debt.

9. The appellant in his affidavit reiterated his assertions as were

given in the complaint. In the cross-examination conducted by the

respondent, the appellant stated that cheque in Exh.CW1/B was

filled up by the respondent in October 2011 and that cheque was

given by the respondent himself to him. Three persons, he

himself, accused and the agent of the respondent sat together.

He deposed that he was given up a filled-up cheque. He denied

the suggestion that the accused did not issue the cheque

Exh.CW1/B. He also denied the suggestion that Prem Chand

misused the cheque of the accused because he has stolen the

signed cheque book of the accused and that he has filled up a

blank cheque.

10. CW3 Prem Chand deposed that the respondent purchased, on

contract, apple in their area from apple growers including from the

appellant for further sending them to Shimla, Chandigarh and

Delhi. He deposed that appellant had to recover an amount of

Rs.7,86,300/- and after adjustment of Rs.2,47,444/- the balance

amount was payable by the respondent for which the settlement

was arrived at in his presence when cheque No. 942816 was

issued for a sum of Rs.5,38,856/- dated 2.10.2011.

11. In the cross-examination, he deposed that he used to keep an

account of all the packing materials. He was suggested that the

accused has kept cheque with him and he used to give to the

growers. However, he categorically deposed that cheque

Exh.CW1/B was given in his presence by the accused in Kuthwa.

The account was settled prior to giving of cheque. He denied the

suggestion that he lodged a report in police about missing cheque

book in the year 2011. He deposed that the respondent has

given cheque book by signing them. He denied the suggestion

that the cheque in question was filled up as he colluded with the

appellant. The respondent in his statement under Section 313 of

the Code of Criminal Procedure2 denied the prosecution case. The

relevant question No. 9 and the answer given by the respondent

are as under:

“Q.9 Why the present case has been made out against you

accused?

Ans. This is a false case. My cheque has been misused.”

12. DW1-Ranjit, Head Constable examined by the accused, has

produced an entry dated 09.09.2011 regarding loss of his cheque

book containing cheque Nos. 942801-942820.

13. The learned Trial Court returned a finding that mere production of

entry Exh. DW1/A is not sufficient to prove that he has not issued

the said cheque as such report could have been made with

intention to create false evidence of the loss of cheque book. The

court found that in fact if the cheque has been lost, the accused

had several opportunities to lodge FIR qua the misuse of said

cheque as he has signed acknowledgement of notice Exh.CW1/G.

The learned Trial Court recorded the following findings:

“….Thus, it stands proved beyond reasonable doubt that the

cheque Ext. CW1/B was issued by the accused in favour of

the complainant. Further, the dishonor of the cheque has

also been proved through return memo Ext. CW1/C. Further

the legal demand notice was also issued within a period of

30 days from the date of dishnour. Thereafter, the present

complaint has been filled within the period of limitation.”

14. Still further, the learned Trial Court held the presumption that the

2 for short the “Code”

amount of cheque is legally enforceable debt, has not been

rebutted when the following finding was returned:

“….Neither any meaningful cross-examination of the

complainant has been done on this point of his financial

capacity. Accordingly, the aforesaid presumption has not

been rebutted by the accused by proving that the

complainant did not have the requisite financial capacity.

Accordingly, the said defence is rejected.”

15. However, the learned Trial Court found contradiction in the

number of cartons in the complaint as well as in the statement of

the appellant. It was found that the cheque amount is more than

the amount allegedly due on the date when cheque was

presented, therefore, the complaint was dismissed. It held that

there are three different versions as to the number of apple

cartons, therefore, the alleged amount would have been less than

the amount claimed by the complainant.

16. In an appeal, the High Court relied upon judgments reported as

Hiten P. Dalal v. Bratindranath Banerjee3, Kumar Exports v.

Sharma Carpets4 and Rangappa v. Sri Mohan5 to hold that

the cheque shall be presumed to be for consideration unless and

until, the Court forms a belief that the consideration does not exist

or considers the non-existence of consideration was so probable

that a prudent man would under no circumstances of the case, act

upon the plea that the consideration does not exist. The High

3 (2001) 6 SCC 16

4 (2009) 2 SCC 513

5 (2010) 11 441

Court held as under:

“21. Now, adverting to the facts of the case, it would be

noticed that respondent No. had raised various defences,

but, the same were turned down by the learned Magistrate.

However, it was only on the basis of the contradictions that

too in the evidence led by the appellant himself that

respondent No. 1 was ordered to be acquitted.”

17. The High Court again referred to the contradictions regarding

empty apple cartons and the rate per carton, to hold that the

appellant has failed to prove guilt of the respondent beyond

reasonable doubt.

18. We find that the approach of the learned Trial Court and that of the

High Court is perverse; irrational as well as suffers from material

illegality and irregularity, which cannot be sustained in complaint

filed under Section 138 of the Act.

19. A negotiable instrument including a cheque carries presumption of

consideration in terms of Section 118(a) and under Section 139 of

the Act. Sections 118(a) and 139 read as under:

“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 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;….

xxx xxx xxx

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.”

20. The Trial Court and the High Court proceeded as if, the appellant is

to prove a debt before civil court wherein, the plaintiff is required

to prove his claim on the basis of evidence to be laid in support of

his claim for the recovery of the amount due. A dishonour of

cheque carries a statutory presumption of consideration. The

holder of cheque in due course is required to prove that the

cheque was issued by the accused and that when the same

presented, it was not honoured. Since there is a statutory

presumption of consideration, the burden is on the accused to

rebut the presumption that the cheque was issued not for any

debt or other liability.

21. There is the mandate of presumption of consideration in terms of

the provisions of the Act. The onus shifts to the accused on proof

of issuance of cheque to rebut the presumption that the cheque

was issued not for discharge of any debt or liability in terms of

Section 138 of the Act which reads as under:

“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

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

account by an agreement made with that bank, such

person shall be deemed to have committed an offence and

shall….”

22. In Kumar Exports, it was held that mere denial of existence of

debt will not serve any purpose but accused may adduce evidence

to rebut the presumption. This Court held as under:

“20. The accused in a trial under Section 138 of the Act has

two options. He can either show that consideration and

debt did not exist or that under the particular

circumstances of the case the non-existence of

consideration and debt is so probable that a prudent man

ought to suppose that no consideration and debt existed. To

rebut the statutory presumptions an accused is not

expected to prove his defence beyond reasonable doubt as

is expected of the complainant in a criminal trial. The

accused may adduce direct evidence 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 evidence is neither possible nor contemplated.

At the same time, 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 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. Apart from

adducing direct evidence to prove that the note in question

was not supported by consideration or that he had not

incurred any debt or liability, the accused may also rely

upon circumstantial evidence and if the circumstances so

relied upon are compelling, the burden may likewise shift

again on to the complainant. The accused may also rely

upon presumptions of fact, for instance, those mentioned in

Section 114 of the Evidence Act to rebut the presumptions

arising under Sections 118 and 139 of the Act.”

(emphasis supplied)

23. In a judgment reported as Kishan Rao v. Shankargouda6, this

Court referring to Kumar Exports and Rangappa returned the

following findings:

“22. Another judgment which needs to be looked into

is Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010)

11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri)

184] . 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

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 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 [Krishna Janardhan

Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54 : (2008) 2

SCC (Cri) 166] , 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 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.

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 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

6 (2018) 8 SCC 165

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-accused cannot be expected to discharge an

unduly high standard of proof.”

24. In a judgment reported as Bir Singh v. Mukesh Kumar7, this

Court held that presumption under Section 139 of the Act is a

presumption of law. The Court held as under:

“20. Section 139 introduces an exception to the general

rule as to the burden of proof and shifts the onus on the

accused. The presumption under Section 139 of the

Negotiable Instruments Act is a presumption of law, as

distinguished from presumption of facts. Presumptions are

rules of evidence and do not conflict with the presumption

of innocence, which requires the prosecution 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 and presumptions of fact

unless the accused adduces evidence showing the

reasonable possibility of the non-existence of the presumed

fact as held in Hiten P. Dalal [Hiten P. Dalal v. Bratindranath

Banerjee, (2001) 6 SCC 16 : 2001 SCC (Cri) 960] .

xxx xxx xxx

33. A meaningful reading of the provisions of the

Negotiable Instruments Act including, in particular, Sections

20, 87 and 139, makes it amply clear that a person who

signs a cheque and makes it over to the payee remains

liable unless he adduces evidence to rebut the presumption

that the cheque had been issued for payment of a debt or

in discharge of a liability. It is immaterial that the cheque

may have been filled in by any person other than the

drawer, if the cheque is duly signed by the drawer. If the

cheque is otherwise valid, the penal provisions of Section

138 would be attracted.

xxx xxx xxx

7 (2019) 4 SCC 197

36. Even a blank cheque leaf, voluntarily signed and

handed over by the accused, which is towards some

payment, would attract presumption under Section 139 of

the Negotiable Instruments Act, in the absence of any

cogent evidence to show that the cheque was not issued in

discharge of a debt.”

25. In other judgment reported as Rohitbhai Jivanlal Patel v. State

of Gujarat and Another8 this Court held as under:

“18. So far the question of existence of basic ingredients

for drawing of presumption under Sections 118 and 139 the

NI Act is concerned, apparent it is that the accusedappellant

could not deny his signature on the cheques in

question that had been drawn in favour of the complainant

on a bank account maintained by the accused for a sum of

Rs. 3 lakhs each. The said cheques were presented to the

Bank concerned within the period of their validity and were

returned unpaid for the reason of either the balance being

insufficient or the account being closed. All the basic

ingredients of Section 138 as also of Sections 118 and 139

are apparent on the face of the record. The Trial Court had

also consciously taken note of these facts and had drawn

the requisite presumption. Therefore, it is required to be

presumed that the cheques in question were drawn for

consideration and the holder of the cheques i.e., the

complainant received the same in discharge of an existing

debt. The onus, therefore, shifts on the accused-appellant

to establish a probable defence so as to rebut such a

presumption.”

xxx xxx xxx

20. On the aspects relating to preponderance of

probabilities, the accused has to bring on record such facts

and such circumstances which may lead the Court to

conclude either that the consideration did not exist or that

its nonexistence was so probable that a prudent man

would, under the circumstances of the case, act upon the

plea that the consideration did not exist. This Court has,

time and again, emphasized 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

8 AIR 2019 SC 1876

envisaged under Section 118 and 139 of the NI Act…..

xxx xxx xxx

32. The result of discussion in the foregoing paragraphs is

that the major considerations on which the Trial Court chose

to proceed clearly show its fundamental error of approach

where, even after drawing the presumption, it had

proceeded as if the complainant was to prove his case

beyond reasonable doubt. Such being the fundamental flaw

on the part of the Trial Court, the High Court cannot be said

to have acted illegally or having exceeded its jurisdiction in

reversing the judgment of acquittal. As noticed

hereinabove, in the present matter, the High Court has

conscientiously and carefully taken into consideration the

views of the Trial Court and after examining the evidence

on record as a whole, found that the findings of the Trial

Court are vitiated by perversity. Hence, interference by the

High Court was inevitable; rather had to be made for just

and proper decision of the matter.”

26. In view of the judgments reported to above, we find that the

respondent has not rebutted the presumption of consideration in

issuing the cheque on 2.10.2011 inter alia for the following

reasons:

1. Statement of the CW3, that he was not an agent of the

respondent, has not been challenged by the respondent in

the cross examination.

2. The statement of the appellant as CW2 that the cheque was

handed over by the respondent personally remains

unchallenged.

3. The respondent has not denied even in his statement that

the cheque was not issued by him. The cross examination of

the witnesses produced by the appellant also does not show

that the signatures on the cheque by him have not been

disputed.

4. The respondent relies upon entry recorded with the police on

09.09.2011 that the cheque book was lost. However, the

respondent has not lodged any FIR in respect of loss of

cheque, even after the notice of dishonour of cheque was

received by him on 27.10.2011. The mere entry is not proof

of loss of cheque as is found by the learned Trial Court itself

as it is self-serving report to create evidence to avoid

payment of cheque amount.

5. The respondent has not appeared as witness to prove the

fact that the cheque book was lost or that cheque was not

issued in discharge of any debt or liability.

6. The statement of accused under Section 313 of the Code is

only to the effect that the cheque has been misused. There

is no stand in the statement that the cheque book was

stolen.

7. The statement of accused under Section 313 is not a

substantive evidence of defence of the accused but only an

opportunity to the accused to explain the incriminating

circumstances appearing in the prosecution case of accused.

Therefore, there is no evidence to rebut the presumption

that the cheque was issued for consideration.

27. Once the agent of the respondent has admitted the settlement of