Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2021 Supreme(SC) 135

SUPREME COURT OF INDIA
INDU MALHOTRA, AJAY RASTOGI, JJ.
Sumeti Vij – Appellant
Versus
M/s Paramount Tech Fab Industries – Respondent
Criminal Appeal Nos. 292, 293 of 2021, SLP (Crl.) Nos. 8498, 8564 of 2019
Decided On : 09-03-2021

Advocates Appeared:
For the Appellant(s) :Ritesh Khatri, Advocate
For the Respondent(s):Amit Gupta, Hari Shankar Mahapatra, M/s. Mitter & Mitter Co., Advocate

IMPORTANT POINTS
(1) Dishonour of cheque – Proceedings under Section 138 of N.I. Act are quasi-criminal in nature and principles which apply to acquittal in other criminal cases are not applicable in cases instituted under the Act.
(2) Statement of accused recorded under Section 313 of Cr.P.C. is not a substantive evidence of defence, but only an opportunity to accused to explain incriminating circumstances appearing in prosecution case of accused.

Headnote:
Negotiable Instruments Act, 1881 – Section 138 read with Sections 118(a) and 139 – Criminal Procedure Code, 1973 – Section 313 – Dishonour of cheque – Reversal of acquittal by High Court – Appellant has only recorded her statement under Section 313 of Cr.P.C., and has not adduced any evidence to rebut presumption that cheques were issued for consideration – Once facts came on record remained unrebutted and supported with evidence on record with no substantive evidence of defence of appellant to explain incriminating circumstances appearing in complaint against her, no error has been committed by High Court in impugned judgment and appellant has been rightly convicted for offence punishable under Section 138 of Act and needs no interference of this Court – There is mandate of presumption of consideration in terms of provisions of Act and onus shifts to accused on proof of issuance of cheque to rebut presumption that cheque was issued not for discharge of any debt or liability in terms of Section 138 of Act – Proceedings under Section 138 of Act are quasi-criminal in nature and principles which apply to acquittal in other criminal cases are not applicable in cases instituted under the Act – Likewise, under Section 139 of Act, presumption is raised that holder of a cheque received cheque for discharge, in whole or in part, of any debt or other liability – To rebut this presumption, facts must be adduced by accused which on a preponderance of probability (not beyond reasonable doubt as in case of criminal offences), must then be proved – Two separate legal notices were served by complainant which were duly received by appellant and even after receiving notices, appellant neither responded to notices nor made any payment within statutory period of fifteen days – Statement of accused recorded under Section 313 of Code is not a substantive evidence of defence, but only an opportunity to accused to explain incriminating circumstances appearing in prosecution case of accused – There is no evidence to rebut presumption that cheques were issued for consideration – Appeals dismissed. (Paras 12, 14, 16, 17, 19, 21 and 24)
Facts of the case:
Appellant is aggrieved by the judgment dated 30th April, 2019 passed by High Court of Himachal Pradesh holding appellant guilty of offence under Section 138 of Negotiable Instruments Act, 1881 after reversal of the finding of acquittal returned by trial Judge.
Findings of Court:
High Court has not committed any error in recording the finding of guilt of appellant and convicting her for an offence being committed under Section 138 of the Act under its impugned judgment which needs no further interference.
Result : Appeals dismissed.

Judgement Key Points

Key Points: - (!) NI Act proceedings under Section 138 are quasi-criminal in nature; principles of acquittal in other criminal cases do not apply. (!) - (!) Section 118(a) provides presumption of consideration for negotiable instruments; (!) Section 139 provides presumption that the cheque was issued for discharge of debt or liability; (!) burden shifts to accused to rebut by preponderance of probabilities. (!) - (!) To rebut, accused may show nonexistence of debt/consideration or that nonexistence is probable; direct or circumstantial evidence may be used; mere denial is insufficient. (!) - (!) The presumption under Section 139/118 is not re-opened after evidence is adduced unless rebuttal is accepted; if accused does not rebut, conviction under Section 138 may stand. (!) - (!) The accused’s statement under Section 313 Cr.P.C. is not substantive defence evidence; it is for explanation of incriminating circumstances. (!) - (!) The High Court’s reversal of acquittal and conviction upheld where accused failed to rebut presumption and no defence evidence was adduced. (!) - (!) Two separate legal notices were served; failure to respond supports presumption of debt/liability. (!) - (!) The object of NI Act is to enhance acceptability of cheques in settlement of liabilities; safeguards to prevent harassment of honest drawers. (!)

Question 1?

What is the presumption and onus of proof under Sections 118(a), 139 and 138 of the Negotiable Instruments Act, 1881 in a case of dishonour of cheque?

Question 2?

What is the role and evidentiary weight of a recording of the accused’s statement under Section 313 Cr.P.C. in NI Act proceedings?

Question 3?

How does the quasi-criminal nature of Section 138 proceedings affect the applicability of acquittal principles from other criminal cases?

JUDGMENT :

AJAY RASTOGI, J.

1. Leave granted.

2. The appellant is aggrieved by the judgment dated 30th April, 2019 passed by the High Court of Himachal Pradesh holding the appellant guilty of offence under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the “Act”) after reversal of the finding of acquittal returned by the learned trial Judge by its judgment dated 28th September, 2012.

3. The brief facts of the case which emanates from the record are that the appellant accused approached the complainant-respondent in its factory at Moginand and expressed her desire to purchase non-woven fabric from the complainant. On the basis of order placed by the appellant, non-woven fabric was sold to the appellant vide Invoice No. 120 dated 01st October, 2010 and Invoice No. 135 dated 16th October, 2010 amounting to Rs. 5,07,062/- and Rs. 5,10,000/- which was delivered through public carrier truck bearing Nos. HR-38G-5607 and HP-71-0693 to the appellant accused and in lieu thereof, a cheque bearing No. 323930 dated 15th October, 2010 and No. 323935 dated 01st November, 2010 were issued by the appellant in the name of the complainant from her account of the Punjab National Bank, Karnal in order to meet the legal existing and enforceable liabilities. The cheques on presentation were returned vide memo dated 19th October, 2010 and 10th November, 2010 from Punjab National Bank, Karnal with a note of “insufficient funds” in the account of the appellant. Two legal notices dated 29th October, 2010 and 19th November, 2010 were sent by the complainant to the appellant on two addresses. The notices were duly served but the appellant neither responded to the notices nor made any payment in furtherance thereto within the statutory period hence, two separate complaints were filed by the complainant-respondent under Section 138 of the Act against the appellant-accused.

4. The complainant-respondent recorded the preliminary evidence before the learned trial Judge and thereafter, the appellant-accused was directed to be summoned for committing an offence punishable under Section 138 of the Act. After the presence of the appellant had been secured, the learned trial Judge put notice of accusation, vis-a-viz the accused, for an offence allegedly committed by her under Section 138 of the Act whereto she pleaded not guilty and claimed trial.

5. The complainant in order to prove its case against the appellant-accused, has examined three witnesses and placed reliance on the documentary evidence which were duly exhibited and referred to in detail by the learned trial Judge in Para 3 of its judgment. On conclusion of recording of complainant’s evidence, the statement of the appellant-accused was recorded under Section 313 of the Code of Criminal Procedure (hereinafter referred to as the “Code”) by the learned trial Judge wherein the appellant-accused claimed innocence and pleaded false implication in the case however, did not lead any evidence in defence.

6. On perusal of the evidence on record, the learned trial Judge returned a finding that the complainant failed to establish that the material/goods were delivered to the appellant in lieu of which, the cheques were issued, and in the absence of burden being discharged by the complainant, the onus to disprove or rebut the presumption could not be shifted to the appellant as referred under Section 139 of the Act. Accordingly, the trial court returned the finding of acquittal of the appellant, which was the subject matter of challenge in appeal before the High Court at the instance of the complainant.

7. The High Court on reappraisal of the evidence on record affirmed that the primary burden was discharged by the complainant that the cheques were issued by the appellant in lieu of the material supplied, and documentary evidence duly exhibited was placed on record to substantiate the claim, and it was for the appellant-accused to discharge her burden to rebut in defence as required under Se