Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(J&K) 204

IN THE HIGH COURT OF JAMMU AND KASHMIR AND LADAKH AT JAMMU
Rajesh Sekhri, J.
Jagdish Raj Gupta – Appellant
Versus
Parshotam Gupta – Respondent
CRAA No. 243 of 2014
Decided On : 07-05-2025

Advocates Appeared:
For the Appellant :Mr. R.S. Thakur, Sr. Advocate with Mr. Vasharan Thakur, Advocate.
For the Respondent:Mr. Rahil Raja, Advocate, Mr. Athrav Mahajan, Advocate

The statutory presumptions under Sections 118 and 139 NI Act can be rebutted by the accused through evidence demonstrating non-existence of legal debt or liability, relying on preponderance of probabilities.

Headnote:(A) Negotiable Instruments Act, 1881 - Sections 138, 118, and 139 - Complaint for dishonour of cheque - Appeal against dismissal of complaint - Respondent borrowed Rs.20 lacs, issued cheque for repayment, which was dishonoured due to 'Funds Insufficient' - Appellant served demand notice but respondent failed to refund within statutory period. (Paras 1-4, 8, 14, 26)

(B) Presumption of consideration and debt - Issuance and signing of cheque by accused gives rise to presumption under Sections 118 and 139 NI Act - Respondent admitted cheque issuance but asserted it was for land deal, creating burden to rebut presumption. (Paras 18, 20, 24)

(C) Evidence and Defence - Respondent's argument relied on non-repayment of cheque and failure of the appellant to establish financial capacity, thus shifting burden back - Appellant's failure to prove loan date and source of income raised doubt regarding debt existence. (Paras 9, 31, 41, 46)

(D) Findings - Trial court ruled lack of evidence by complainant on debt legitimacy and financial capacity, thus dismissing claim - Appeal dismissed affirming acquittal of respondent. (Paras 51, 52)

Findings of Court:
The trial court dismissed the complaint due to failure of the appellant to prove that the cheque was issued in discharge of a legally enforceable debt, and due to insufficient evidence regarding loan advancement.

Issues: The primary issues were whether the cheque was issued in relation to a legally enforceable debt and whether the presumption under Sections 118 and 139 was adequately rebutted.

Ratio Decidendi: The court found that the respondent successfully rebutted the presumption of consideration through evidence that the cheque was related to a non-existent debt.

Result: Appeal dismissed.

Table of Content
1. overview of appeal and factual background. (Para 1 , 3 , 4)
2. arguments presented by both parties regarding the cheque. (Para 9 , 10 , 11)
3. discussion on presumption of issuance of cheque and denial of liability. (Para 12 , 13 , 14 , 15 , 16)
4. court's analysis of the legal presumptions under the ni act. (Para 17 , 18 , 19 , 20 , 22)
5. methods of rebutting presumptions under the ni act. (Para 21 , 23 , 24 , 25 , 26)
6. discussion on evidence and defendant's defense. (Para 30 , 31 , 32 , 33 , 34)
7. examination of appellant's failure to prove financial capacity. (Para 41 , 42 , 46 , 47)
8. final decision and dismissal of the appeal. (Para 51 , 52)

JUDGMENT :

Rajesh Sekhri, J.

1. This appeal has been directed against judgment dated 11.08.2014, passed by learned Special Railway Magistrate, Sub-Judge, Jammu [“the trial court”] in a complaint titled “Jagdish Raj Gupta vs. Parshotam Gupta”, vide which the complaint preferred by the appellant came to be dismissed and respondent came to be acquitted of the charge under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act” for short).

2. Before a closer look at the grounds urged in the memo of appeal, it shall be apt to have an overview of the backgrounds facts.

FACTUAL BACKGROUND

3. The gravamen of charge against the respondent is that he borrowed an amount of Rs. 20.00 lacs from the appellant and in lieu, issued a cheque bearing no. 2225230 dated 03.05.2007, drawn on the Citizens Co-operative Bank Ltd., Vinayak Bazar, Jammu. The appellant presented the cheque to his banker, JCC Bank, Jammu for collection, which on presentation came to be dishonoured, with the endorsement, “Funds Insufficient”. Case of the appellant is that since respondent did not refund the loan amount despite due service of demand notice, dated 26.10.2007, upon him within the stipulated period of 30 days, he preferred a complaint under Section 138 of NI Act against the respondent.

4. The respondent entered appearance on 25.01.2008 and his preliminary statement under Section 242 of Code of Criminal Procedure, 1989 (“Cr.P.C.” for short) came to be recorded by the trial Court on 02.02.2009, whereby though he admitted the issuance and signing of the impugned cheque as also filling up of the cheque amount, but denied his liability by contending that said cheque was issued by him in relation to some property transaction and there was no balance amount to be paid to the complainant appellant. He also denied the receipt of demand notice, pleaded not guilty and claimed to be tried, prompting the trial court to ask the complainant appellant to adduce evidence.

5. The complainant appellant besides himself appearing in the witness box, examined the concerned postman to prove service of demand notice upon the accused respondent, Sh. Raj Gopal, Manager, Citizen Co-operative Bank Vinayak Bazar Jammu to prove that impugned cheque was dishonoured for the reason of “Insufficient Funds” and Sh. Sham Choudhary, Accounts Clerk of the JCC Bank Talab Tillo, Jammu, to prove the presentation of impugned cheque in his bank in account no. 4877 for encashment and issuance of memo on 25.10.2007 by the banker of the respondent for the reason “Funds Insufficient”.

6. On conclusion of the appellant complainant’s evidence on 31.05.2010, the incriminating evidence was put to the respondent accused, under Section 342 Cr.P.C. The respondent once again admitted the issuance and signing of the impugned cheque, but denied his liability that it was issued for discharge of legally enforceable debt. The respondent denied having borrowed any amount from the appellant and contended that cheque in question was issued by him for the purpose of purchasing a land, which could not be purchased, but the appellant complainant, who happens to be his cousin brother, refused to return the cheque. The respondent also denied receipt of demand notice and examined four witnesses in defence to rebut the claim.

7. On conclusion of defence evidence, the appell