The main legal point established in the judgment is the requirement of a legally enforceable debt or liability for an offense under Section 138 of the NI Act and the burden of proof on the accused to rebut the presumption in favor of the holder of the cheque.

1. This is an appeal u/s 378(4) Cr.P.C filed by the appellant, feeling aggrieved by the judgment dated 26.05.2012 passed by the learned Metropolitan Magistrate whereby the respondent/accused was acquitted in complaint case No.1291/1/10 for offence u/s 138 of Negotiable Instruments Act(hereinafter referred as NI Act), 1881.

2. The appellant/complainant filed a complaint u/s 138 of NI Act inter alia on the allegations that he had given a loan of Rs. 44 lakhs to the accused in May, 2004 which was to be returned after a period of 3 months along with interest at the rate of 4% per month. The accused, however, failed to comply with the terms and did not make the payment within time along with interest. In partial discharge of his liability, the accused issued 3 cheques Ex.CW1/A to Ex.CW1/C bearing No.759028 dated 02.08.2004 for a sum of Rs.4,50,000/-; cheque bearing No.655987 dated 08.09.2004 for a sum of Rs. 5 lakhs and third cheque bearing No.655989 dated 17.09.2004 for a sum of Rs. 4 lakhs, all drawn on State Bank of India, Central Market, Lajpat Nagar, Delhi in favour of the complainant. On presentation, all the cheques were returned dishonoured with the remarks “Funds Insufficient” and “refer to drawer” vide return memo Ex.CW1/D to Ex.CW1/F dated 18.09.2004 and 27.09.2004. Complainant sent a legal notice Ex.CW 1/G to the accused through his counsel dated 13.10.2004 by registered AD post as well as by UPC Ex.CW 1/H and Ex. CW 1/I respectively. However, the accused failed to make the payment within the stipulated period. Hence the complaint was filed.

3. After the complainant filed his pre-summoning evidence, the accused was summoned u/s 138 of the NI Act. Notice u/s 251 Cr.P.C was served upon him, to which he pleaded not guilty and claimed trial. In order to substantiate his case complainant stepped into the witness box. Statement of accused u/s 313 Cr.P.C read with Section 281 Cr.P.C was recorded wherein he denied having taken any loan from the complainant. According to him the cheques in question were handed over by him to the complainant for construction of property/plot out of the property bearing No.B-1/202 & 203, Lajpat Nagar, Delhi. He denied having received any legal notice of demand and preferred to lead defence evidence. He examined three witnesses in his defence.

4. After hearing learned counsel for the parties, the learned Trial Court observed that the signatures on the cheques and issuance of the same to the complainant was admitted by the accused. Therefore, the execution of the cheques stands duly proved. Once the execution of the cheques stands duly proved, the presumption of law u/s 118 and 139 of NI Act come in favour of the complainant and the initial burden of proof shifts upon the accused. As regards service of legal demand notice issued by the complainant, the plea of the respondent that the same was never received by him as the report on the envelope Ex.CW1/J is to the effect “unclaimed” did not find favour with the learned Trial Court who relied upon C.C. Alavi Haji v. Palapetty Muhammed and Another, (2007) 6 SC 555 for observing that since the accused does not dispute his address written on the postal card/envelope, the service of legal notice can be deemed to have been effected. Moreover, the accused appeared before the Court upon service of summons on the same address. However, the plea of the accused that the cheques in question were never issued for repayment of any loan as the accused has never taken any loan from the complainant and the cheques were issued for the purpose of construction of property by the complainant found favour with the learned Trial court who noted various infirmities and contradictions in the statement of the complainant. It was observed that the accused was only expected to rebut the presumptions of law on the scale of preponderance of probabilities and was not required to prove his defence beyond reasonable doubt. Once the accused was able to rebut the presumptions