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Judgment
Instant Criminal Revision has been preferred against the concurrent finding of learned Courts below, wherein and whereunder they found petitioner to be guilty for the offence punishable under Section 138 of N.I. Act.
2. Brief fact of the prosecution case:-
1st respondent being complainant lodged private complaint before learned Magistrate concerned under Section 138 of the Negotiable Instruments Act (For short, The N.I.Act). In nutshell, 1st accused was a private limited company, A2 was its managing director, A3 and A4 were other directors. Complainant joined as a shareholder in the company of the accused by agreement dated 10.07.1993 by investing a sum of Rs.3,00,000/-. By the said agreement, it was fixed that A2 was having 70% of the shares and complainant was having 30% of the shares in the said company. However, later complainant intended to withdraw from the company as a shareholder. A2 agreed to take over the shares of the complainant on 03.10.1996. Accounts were looked into and verified. A1 was found to be liable to pay a sum of Rs.5,71,000/- regarding the shares of the complainant, A2 on behalf of A1, agreed to make part payment on or before 30.11.1996 and balance was agreed to be paid on or before 31.03.1997 with interest and gave written undertaking to that effect. The said agreed payment date was reviewed from time to time by execution of several agreements and documents. However, finally it is alleged that a postdated cheque was issued on behalf of A1 amounting to Rs.9,00,000/- dated 03.07.2000, in presence of witnesses towards full and final settlement of the complainant’s claim regarding the surrender of Shares. Cheque was presented by the complainant through his banker for encashment. But it was dishonored. Hence, the private complaint was filed. Complainant has examined himself as PW.1 and produced several documents including share holding agreement and different agreements wherein petitioner being A2 has agreed to take over shares of petitioner. After completion of prosecution witnesses, A2 examined himself as RW.1 and exhibited some documents marked as Ex.D1 to D6.
On hearing both sides, learned trial Court has acquitted A3 and A4 but has found A1 and A2 to be guilty for an offence under Section 138 of N.I.Act and convicted them. It was went upto appeal, which was dismissed confirming the order of conviction. Hence, this revision.
4. Submissions of the petitioner’s counsel:
It is contented that learned Courts has failed to appreciate the facts and circumstances of this case. A2 himself deposed before the learned trial Court as RW.1 and has exhibited several documents. They are not considered by any of the Courts below properly. It is argued that complainant was a shareholder of the company and he had every opportunity and scope to visit the office of the company. The documents, which were marked and exhibited on behalf of the prosecution, never showed any legally enforceable debt. It is further argued that several agreements were placed and exhibited regarding the shareholdings, withdrawal of shareholdings and also for undertaking to make payment. But no agreement or documentary evidence was there on the date of issuance of cheque to show the full and final settlement of the complainant's claim regarding handing over shares to the tune of Rs.9,00,000/- towards settlement between the parties. The company was in huge debt thereby concerned Bank started proceeding in the month of June, 2000, the complainant being one of the shareholders, came to know the same thereby used an old cheque of the company to foist this false case. He further submits that evidence of defence demonstrated cheque in question was misplaced from the cheque leaf of the company, thereby, they lodged the complaint to the Bank in the year 1996 regarding misplace of the cheque. The complainant has used the cheque which was misplaced to forge the entire case under Section 138 of N.I.Act. He further submits that complainant knowing the fact that State Bank of Hyderabad has initiated a proceeding before the Debt Recovery Tribunal of Andhra Pradesh, Hyderabad, suddenly used the misplaced cheque to lodge the false case.
5. Submissions on behalf of the 1st respondent:-
It is submitted by the complainant that several documents including agreements executed by petitioner as well as relevant arguments have been marked before the learned trial Court as Exs.P1 to P18. It has been successfully proved before learned trial Court that accused/petitioner has legally enforceable debt to the complainant for taking over shares of the complainant from the company. Learned trial Court as well as learned appellate Court has categorically observed that petitioner/accused failed to rebut the statutory presumption under Section 139 read with 118 of N.I.Act. Both the Courts below concurrent finding cannot be interfered with in this revision case. Thus, the instant revision is liable to be dismissed.
6. Observation of this Court:-
Admittedly both the Courts below has concurrent finding against petitioner to be guilty for an offence punishable under Section 138 of NI Act. It has to be considered whether the evidence of the petitioner as RW.1 and documents being marked Exs.D1 to D6 are sufficient to rebut the statutory presumption under Section 139 read with 118 of N.I.Act. Law regarding rebuttal of statutory presumption by an accused in a case under Section 138 of N.I.Act was settled by Hon'ble Supreme Court in several cases.
In Rangappa v. Sri Mohan reported in (2010) 11 SCC 441, the Hon'ble Apex Court has held in paragraphs 27, 28, 30, which reads as follows:
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 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 or proof.
28.In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of "preponderance of probabilities". Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.
30.The fact that the accused had made regular payments to the complainant in relation to the construction of his house does not preclude the possibility of the complainant having spent his own money for the same purpose. As per the record of the case, there was a slight discrepancy in the complainant's version, insofar as it was not clear whether the accused had asked for a hand loan to meet the construction-related expenses or whether the complainant had incurred the said expenditure over a period of time. Either way, the complaint discloses the prima facie existence of a legally enforceable debt or liability since the complainant has maintained that his money was used for the construction expenses. Since the accused did admit that the signature on the cheque was his, the statutory presumption comes into play and the same has not been rebutted even with regard to the materials submitted by the complainant.”
In Basalingappa v. Mudibasappa reported in (2019) 5 SCC 418, the Hon’ble Apex Court in paragraphs 25, 25.1 to 25.5 held as follows:
“25.We having noticed the ratio laid down by this Court in the above cases on Sections 118(a) and 139, we now summarise the principles enumerated by this Court in following manner:
25.1.Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
25.2.The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities.
25.3.To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.
25.4.That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden.
25.5.It is not necessary for the accused to come in the witness box to support his defence.
In Rajaram v. Maruthachalam reported in (2023) 16 SCCC 125, the Hon’ble Supreme Court in paragraphs 25 and 33 observed as follows:
25.It can thus be seen that this Court has held that once the execution of cheque is admitted, Section 139 of the NI Act mandates a presumption that the cheque was for the discharge of any debt or other liability. It has, however, been held that the presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. It has further been held that to rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. It has been held that inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.
33.After taking into consideration the defence witnesses and the attending circumstances, the learned trial court found that the defence was a possible defence and as such, the accused was entitled to benefit of doubt. The standard of proof for rebutting the presumption is that of preponderance of probabilities. Applying this principle, the learned trial court had found that the accused had rebutted the presumption on the basis of the evidence of the defence witnesses and attending circumstances.
This Court is holding revisional jurisdiction in dealing with concurrent finding of conviction of petitioner under Section 139 NI Act. The power of High Court in revision against order of conviction is very limited. The Hon'ble Supreme Court in Kuntegowda v. Thurubaiah reported in (2026) SCC Online SC 1485 has held in paragraphs 7.1, 7.3 and 7.5 as follows:
7.1.This Court, in the State of Maharashtra v. Jagmohan Singh Kuldip Singh Anand, (2004) 7 SCC 659 : 2004 SCC (Cri) 2003 observed that the High Court, in exercise of its revisional jurisdiction, cannot embark upon an in-depth roving re-examination of the oral evidence and medical evidence and come to a conclusion contrary to the consistent one reached by two courts below. In the facts of the present case, in the impugned judgment, the High Court gravely erred in upsetting the concurrent findings of conviction of the trial court and the Appellate Court by substituting its own conclusions and reasoning on the merits of the case and thereby erred in setting aside the well-reasoned and correct judgment and orders of the trial and appellate courts.
7.3.The contours for exercise of revisional jurisdiction has been well settled by the judicial dicta of this Court wherein time and again it has been observed that the High Court shall not interfere with the orders of the lower court unless:
i.The order or finding of the lower court is perverse, grossly erroneous, glaringly unreasonable or wholly unreliable or untenable in law.
ii.The lower court has passed the impugned order after considering an immaterial or irrelevant material or no material at all.
iii.There is a non-consideration of any relevant material or the judicial discretion has been exercised arbitrarily or capriciously.
7.5.In the facts of the present case, we find that the High Court has failed to highlight any reason or material satisfaction to the effect that there was any such glaring contradiction or perversity apparent on the face of the record so as to justify the exercise of the powers under revisional jurisdiction and thereby erred in interfering with the judgment and orders of the courts below. Therefore, the present appeal has to be allowed by setting aside the impugned order of the High Court. In view of the aforesaid discussion, we are of the view that the High Court committed an error in setting aside the order of conviction in exercise of revisional jurisdiction. No sufficient ground has been mentioned by the High Court in its judgment to enable it to exercise its revisional jurisdiction for setting aside the conviction.
In view of the above ratio, this Revisional Court has to determine whether finding of Courts below are perverse in the attending facts and circumstances of this case or, wholly unreliable regarding the conviction against the petitioner. There is another scope of this Court to interfere if the Courts below have erroneously not considered any relevant materials thereby passed an order of conviction capriciously.
The narration of the present defence case is that through his reply/notice that a blank cheque with signature of petitioner was misplaced in the year 1996 and he gave report to the police but police did not register a case. He also informed the same to the Bank. It is further case that the impugned cheque was never delivered to the complainant to discharge liability for the payment of the share holdings.
Admittedly accused under Section 138 of N.I.Act can rebut statutory presumption under Section 139 read with 118 of N.I.Act, where standard of proof of such rebuttal is preponderance of probabilities.
To understand the principles of preponderance of the probabilities, it is necessary to follow Wright v. Wright (1948) 77 CLR 191:
“The belief regarding the existence of a fact may be founded on a preponderance of probabilities. A prudent man faced with conflicting probabilities concerning a fact will act on the supposition that the fact exists, if on weighing the various probabilities he finds that the preponderance is in favour of the existence of the particular fact as a prudent man. The court invariably applies this test for finding whether a fact in issue is said to be proved. The first step in this process is to fix the probabilities. The second is to weight them, though the two often intermingle. The impossible is weeded out at the first stage; the improbable at the second stage. Within the wide range of probabilities the Court often has a difficult choice to make, but it is this choice which ultimately determines where the preponderance of probabilities lies. The nature and gravity of an issue necessarily determines the manner of attaining satisfaction of the truth of the issue.”
In a Rishi Kesh Singh v. The State reported in AIR 1970 Allahabad 51, it is held that preponderance of probability means “an outweighing in the process of balancing however slight may be the tilt of the balance or the preponderance”.
Learned trial Court in dealing with the defence of petitioner has categorized that petitioner being DW.1 has testified his execution of agreement with complainant whereunder complainant intends to surrender his share holdings and petitioner being A2 intends to take said share holdings. Learned appellate Court has also observed that petitioner has not filed any document, especially police report, to show the theft of the cheque. Learned appellate Court has also pointed out that DW.1, during evidence, has admitted that he did not file any suit for cancellation of the said document.
Let me consider, whether the defence as raised by the petitioner before the learned trial Court has sufficient to rebut statutory presumption of this case. Ex.D5 is a letter dated 11.10.1995, by which accused informed the Chief Manager of State Bank of Hyderabad that a particular cheque has been misplaced. The cheque bearing No.0800670 was missed. The said cheque is impugned herein, which alleged to have been issued on 03.07.2000. Though it is true that A1 or A2 have not filed complaint regarding theft of cheque, but document suggests that they informed the concerned Bank regarding theft of cheque. On that score, version of defence, though not conclusive but it placed a reasonable circumstance in support of his case.
It further appears that all the terms and conditions between complainant and A1 and A2 were documented through different agreements vide Ex.P1, Ex.P5, Ex.P6, Ex.P8 etc. The private complaint has alleged that A2 on behalf of A1 did not follow terms and conditions of agreements. Thereafter, when complainant forced petitioner/A2 in terms of legal action, A2 came to Gudivada on 18.06.2000 and met with the complainant in his house in presence of mediators. He tried to convince complainant that he should pay the entire amount subject to sometime be given. But the complainant refused, accordingly, in presence of mediators, a cheque for an amount of Rs.9,00,000/- was given towards full and final settlement.
Surprisingly, though several documents/agreements are prepared to show readiness and willingness of petitioner to take over shares of complaint, but there is no document or agreement regarding the full and final settlement which was said to have arrived at in presence of mediators. When all the documents in respect of price of share holdings were properly documented, full and final settlement regarding value of entire share of complainant was not documented.
Let me consider, whether above two points in favour of the defence is sufficient to prove their case under principle of preponderance of probabilities. In proving the case in rebutting statutory presumption under Section 139 read with Section 118 of N.I.Act, accused required to raise points which are of such a nature of fact, existence of which can raise a question to the mind of a Court to disbelieve existence of prosecution case. These are not mere denial or creating confusion of prosecution case. But it was lead to a particular query suggesting by some facts which may slightly lean to the mind of the Court to believe the defence. 50% tilting is sufficient to raise such a probability.
In the present facts and circumstances of the case, the probabilities of believing defence case have sufficiently narrated on following points; i) while the cheque was missed in the year 1996 and it was duly informed to the Bank, ii) complainant has initiated the proceedings, after the Bank has started recovery proceedings against A1/company and iii) there is no documentation on the date of issuance of the cheque regarding full and final settlement of the claim of complainant.
Under the above discussion, I am of the view that learned trial Court as well as learned appellate Court has lost sight regarding the value of evidence of RW.1 as well as documents marked. Basically, when Bank stated recovery proceeding against A1, company, A2 being a shareholder, shall never purchase any share of that company from anyone. Thus, the circumstance of issuance of impugned cheque at that relevant point of time is doubtful. There are sufficient documents to hold that petitioner has sufficiently rebutted the statutory presumption under Section 139 read with Section 118 of N.I.Act. In this case, in my view, the appellate Court as well as learned trial Court has committed error in assessing the entire facts and circumstances of this case. Thereby, order of conviction and sentence against petitioner appears to be illegal and improper. Thus, the same is hereby set aside.
In view of the above, the instant Criminal Revision Case is allowed. There shall be no order as to costs.
Accordingly, the petitioner/accused is hereby acquitted from this case.
The sureties standing in favour of the petitioner are also released.
Miscellaneous petitions, if any, pending in this criminal revision case shall stand closed.