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CASE NO.: Appeal (crl.)  1012 of 1999

PETITIONER: M.S. Narayana Menon @ Mani

RESPONDENT: State of Kerala & Anr.

DATE OF JUDGMENT: 04/07/2006

BENCH: S.B. Sinha & P.P. Naolekar

JUDGMENT: J U D G M E N T

S.B. SINHA, J :

       The Second Respondent was a member of the Cochin Stock  Exchange.  The Appellant used to carry on transactions in shares through the  Second Respondent in the said Stock Exchange.  They have been on  business terms for some time.  A complaint petition was filed on 19.11.1992  by the Second Respondent herein against the Appellant purported to be for  commission of an offence under Section 138 of the Negotiable Instruments  Act (for short "the Act"), on the following allegations:

       The Second Respondent had been carrying on business of stock and  share brokers under the name and style of "Midhu and Midhun’s Co.".  It is  a sole proprietory concern.  The Appellant also used to do transactions in  shares through him in his capacity as a share broker.  It has not been  disputed that the Appellant had closed the account and, thus, when the  cheque in question being dated 31.7.1992 (Ex. P-1) drawn on Ernakulam  Banerji Road branch of the Syndicate Bank, was presented for encashment  by the complainant through his bankers, namely, the Cochin Stock Exchange  Extension Counter of the Syndicate Bank, it was returned on 4.8.1982 with  the remarks "account closed".

       Allegedly, a sum of Rs. 3,00,033/- was, thus, owing and due to him  from the Appellant in relation to the said transactions.  The Appellant is said  to have paid a sum of Rs. 5000/- in cash and issued another cheque being  dated 17.8.1992 drawn on Ernakulam Broadway Branch of the Vijaya Bank  for a sum of Rs. 2,95,033/-.  The said cheque being Exhibit P-3 was  presented for encashment on 18.8.1992 through the same bankers, but it was  dishonoured on 19.8.1992 as the funds in the account of the Appellant were  found to be insufficient.   

       A notice was issued by the complainant on 27.8.1992 informing the  Appellant about the dishonour of the said cheque.  He sent a reply to the said  notice.  The defence of the Appellant had been that the first cheque was a  blank cheque given by him to Respondent No. 2 by way of security.  The  second cheque was issued in February, 1992 and the same had been given  for the purpose of discounting.   

       The Respondent is said to have not issued any contract note pertaining  to the transactions the Appellant had with him.   

       At the trial, Respondent No. 2 has examined five witnesses including  himself.  The Appellant examined three witnesses.  Respondent No. 2,  however, did not produce the original books of accounts in order to prove  the transactions he had with the Appellant.  

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       The prosecution of the Appellant was confined to the dishonour of the  cheque dated 17.8.1992 only.  

       In the said proceedings, the Appellant herein raised a plea that the  Respondent No. 2 was in dire financial assistance and a cheque for a sum of  Rs. 2,95,033/- was given by way of loan so as to enable him to tide over his  difficulties.  He also adduced his evidence before the Trial Court.  The Trial  Court in its judgment dated 15.7.1994 opined that the Appellant herein had  failed to discharge the onus placed on him in terms of Section 139 of the Act  stating:

"To the evidence adduced in this case, I have to  hold that the accused failed to rebut the  presumptions available to Ext. p3 cheque.  The  case of P.W.1 that the cheque was issued by the  accused on the date mentioned therein for  discharging a liability due to him, is supported by  Ext. D2 to D9.  The case of the complainant that  the accused paid Rs. 5,000/- and thereafter he  issued Ext. P3 cheque, is only to be accepted under  this circumstance.  I find that the cheque was  issued by the accused for discharging a liability  legally due to the complainant, point answered  accordingly."

       A verdict of guilt against the Appellant under Section 138 of the Act  on the basis of the said findings was recorded.  He was sentenced to undergo  rigorous imprisonment for one year.   

       On an appeal preferred thereagainst by the Appellant herein, the said  judgment of conviction and sentence was, however, set aside.  The appellate  court analysed the evidences on records in great details and concluded that  explanation offered by the Appellant was more probable.   

       The complainant, however, aggrieved by and dissatisfied therewith  filed a criminal appeal before the High Court which has been allowed by  reason of a judgment dated 24.5.1999 which is impugned herein.

       Submission of Mr. L. Nageswara Rao, learned senior counsel  appearing on behalf of the Appellant is that the Trial Court and the High  Court misconstrued and misinterpreted Section 139 of the Act and  furthermore failed to take into consideration the principle of law that once  the accused discharges the initial burden placed on him, the burden of proof  would revert back to the prosecution.

       The High Court, according to the learned counsel, acted illegally and  without jurisdiction in arriving at the finding that it was for the accused to  prove his innocence by adducing positive evidence for rebutting the  statutory presumption that he had not received the cheque of the nature  referred to under Section 138 of the Act for the discharge, in whole or in  part, of any debt or other liability.

       Mr. E.M.S. Anam, learned counsel appearing on behalf of the  Respondent, on the other hand, argued that statutory presumption raised to  the effect that an accused in terms of Section 139 of the Act although is a  rebuttable one, the question will have to be determined upon taking into  consideration another presumption drawn in terms of Section 118(a) thereof.

       According to the learned counsel, the Appellant did not dispute the  statement of accounts in relation to certain transactions.  He had also  acknowledged his liability in relation to some of the transactions.  In that  view of the matter, it was urged, that the dispute being only in relation to the  quantum of debt, the impugned judgment of the High Court must be  sustained against the Appellant as he rebutted the presumption arising  against him under Section 118(a) read with Section 139 of the Act.

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       Before adverting to the propositions of law adverted to by the learned  counsel, we may notice certain broad facts.   

       Issuance of three cheques being Ex. P-1, 2 and 3 by the Appellant is  not in dispute.  One of the cheques being Exhibit P-1, according to the  accused, however, was a blank one.

       Cochin Stock Exchange has been constituted under the Securities  Contracts (Regulation) Act, 1956.  It is governed by the provisions of the  Securities and Exchange Board of India Act, 1992 as also the Securities  Contracts (Regulation) Rules, 1957 framed under the 1956 Act.

       The transactions carried out by the brokers in the Cochin Stock  Exchange are governed by the bye-laws framed by it as also the regulations  made under the provisions of the aforementioned Act.  Indisputably,  dealings in the stock exchange are governed by the bye-laws made under the  statute which were marked as Exhibit D-15 in terms whereof inter alia  trading sessions, meaning thereby, meetings of the members of the Cochin  Stock Exchange must be held on the floor of the Exchange itself; entry  wherefor is restricted only to its members.  All transactions by the investors  and speculators must be made through the members of the Exchange.   Whereas the Second Respondent was a member of the Stock Exchange, the  Appellant was not.  They belong to different districts in the State of Kerala.   Indisputably, the Appellant had been taking the services of the Second  Respondent for transacting his business of purchase and sale of shares.   

       All bargains on securities carried on for a period of 14 days is known  as settlement.  A statement of accounts is furnished by a broker to the  investor in prescribed form being Form A together with a contract note.  The  contract note contains accounts of the securities purchased or sold, its  quantity, rate as also the date of transaction.  The same is issued so as to  enable an investor to compare the entries in the contract note with those  made in the statement of accounts enabling him to confirm or deny the  particulars contained therein.  The dispute between the parties appears to be  covered by settlement Nos. 15 to 22 during the years 1991-92.  The Second  Respondent in his evidence admitted that Exhibits D-2 to D-9 corresponded  to P-10 series which pertained to settlement Nos. 15/91 to 22/92 showing  transactions entered into by and between him and the Appellant for a sum of  Rs. 3,00,033/-.   

       According to the Appellant, Exhibits D-2 to D-9 did not reflect the  correct accounts of the transactions and the entries made therein are false.   His further plea was that the date of the cheque (being Exhibit P-3) was not  in his own handwriting which had been issued to the complainant so as to  enable him to facilitate the complainant to discount the same and overcome  his economic exigencies.

       The learned appellate court noticed that it had been accepted that if  Exhibits D-2 to D-9 accounts corresponding to Exhibit P-10 series cannot be  relied on as true and correct accounts incorporating the particulars of various  transactions, the complainant’s case will fall to the ground as the story of  issuance of the cheque by the Appellant could not have been founded  thereupon.  As regards the contention of the Second Respondent that the  Appellant was estopped and precluded from disputing the correctness of  Exhibit P-10 series as he having accepted and acknowledged the correctness  thereof, it was held:

"\005On a close scrutiny I am of the view that the  said contention on behalf of PW1 cannot be  accepted.  In the case of the statement of accounts  dated 24-1-1992, 7-2-1992 and 21-2-1992 in Ext.  P10 series pertaining to the 20th, 21st and 22nd  settlements (corresponding to Exts. D7 to D9)  there is an endorsement on the reverse to the effect

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that those accounts were received and accepted by  the accused.  But, there is no such endorsement in  the case of the statement of accounts dated 8-11- 1991, 22-11-1991, 6-12-1991, 20-12-1991 and 10- 1-1992 pertaining to the 15th, 16th, 17th, 18th and  19th settlements corresponding to Exts. D2 to D6.   That apart, if Exts. D2 to D9 accounts  corresponding to Ext. P10 series are true then all  the transactions entered therein should find a place  in Ext. D11 series of accounts maintained by the  Cochin Stock Exchange.  With regard to Ext. D11  series of accounts there is no quarrel that the same  are the officially maintained accounts prepared  after every settlement the transactions of which are  fed in to the computer by means of memos of  confirmation like Ext. D1 memo.  A comparison of  Ext. P10 series of accounts with Ext. D11 series of  officially approved accounts will show that  transactions worth Rs. 14,63,555/- entered in Ext.  D10 series go unaccounted in Ext. D11 series.   This is not a small figure to be lightly ignored.   There is no dispute that the column pertaining to  contract number in Ext. P10 series of accounts is  left blank both in the case of purchases as well as  sales of shares.  The specific case of the accused is  that PW1 was not giving him copies of the contract  notes pertaining to the transactions by which he  had purchased and sold shares on behalf of the  accused.  The above version of the accused is  probabilised by the blank columns regarding the  contract number in Ext. P10 series.  If, as asserted  by PW1 he had been promptly giving contract  notes to the accused, then the relevant columns in  Ext. P10 series for entering the contract note  number would have been filled up.  Moreover,  except the bald statements of PW1 that he is  having in his possession carbon copies of the  contract notes issued to the accused, there has been  absolutely no gesture on his part to produce them  before court.  Without comparing the statement of  accounts with the relevant contract note it is  impossible for the accused or any speculator for  that matter, to either confirm or deny the entries in  the statement of accounts\005"

       Admission or acknowledgement of three out of eight statements of  accounts by the Appellant, the learned appellate court opined, by itself  would not be sufficient to invoke the principle of estoppel.  The appellate  court noticed that the parties came to know each other personally at the  Cochin Stock Exchange and till the fifteen settlements they did not meet.  It  was further found that before such acquaintance ripened into thick business  relations some security from the Appellant was sought for by the Second  Respondent by way of abundant caution wherefor only according to the  Appellant a blank cheque was given.  The court having regard to the facts  and circumstances of this case, came to the conclusion that the said version  of the Appellant is quite credible and probable.  In doing so, the business  practice that some security is always asked for in similar transaction was  noticed.   

       The appellate court further held that the stand of the Appellant was  corroborated by the Assistant Secretary of the Cochin Stock Exchange as he  had categorically stated that the members could carry on business in  transactions within the Exchange itself.  It was noticed that the said witness  categorically stated that all its members were required to maintain prescribed  books of accounts for a period of five years but the Second Respondent

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herein clearly and in unequivocal terms admitted that he had not been  maintaining the prescribed books of accounts including register of  transactions, general ledger, clients’ ledger, journals and documents register  showing full particulars of shares and securities received and delivered.  In  the aforementioned situation, it was held that when Exhibit P-10 series of the  statement of accounts which were not traceable to any statutory rules would  not have any probative value particularly when D-11 series of statement of  accounts officially maintained by the Cochin Stock Exchange contained vital  omissions in regard to transactions to the tune of Rs. 14 lakhs.  Furthermore,  the books of accounts having not been kept in the ordinary course of  business were not admissible in evidence and, thus, the genuineness thereof  was open to question.  The learned Judge further came to the conclusion that  the Second Respondent had not been able to prove that the discrepancies  could be explained away as has been sought to be done by the Second  Respondent when there were some other transactions which did not pertain  to the Cochin Stock Exchange particularly when the Appellant had denied or  disputed the same categorically stating that apart from the transactions in the  Cochin Stock Exchange, the Second Respondent had never been engaged by  him for purchasing or selling shares from other Stock Exchanges.  The court  further noticed that even a suggestion had been put on behalf of the Second  Respondent to the Appellant while he was being examined as DW-5 that it  was because brokerage, value of application forms and other transactions  outside the Cochin Stock Exchange which are not included in D-11 series,  those settlements did not tally with Exhibit P-10 series.  Significantly it was  held:

"\005When PW1 himself does not have such a case  either in his oral evidence or in the averments in  his complaint, the explanation for the wide  discrepancy between Ext. P10 series and Ext. D11  series could have been offered by the defence.  The  trial Magistrate could explain away the above  discrepancy by observing that there are certain  variations.  In the first place it was not open to the  defence to put forward such an explanation which  the complainant himself does not have either in his  written complaint or in his testimony.  Secondly,  the discrepancy in figures runs into more than 14  lakhs of rupees.  DW4, the Executive Director of  Cochin Stock Exchange has credibly deposed  before Court that a member of one exchange  cannot transact outside the floor of the exchange  and if one enters into any such transaction which is  called "kerb transaction", he has to report the same  to the exchange of which he is a member.  PW1  has no case that he has reported any of the kerb  transactions entered into by him to the Cochin  Stock Exchange.  Ext. D11 series of statement of  accounts maintained by the Cochin Stock  Exchange does not contain any of those kerb  transactions.  When PW1 was admittedly engaged  by the accused for purchasing and selling shares  from the Cochin Stock Exchange only, Ext. P10  series of accounts which include kerb transactions  entered into by PW1 outside the floor of the  Cochin Stock Exchange cannot be put against the  accused to prove any liability.  Even according to  PW1 his commission (that is, brokerage) ranges  only from 0.25% to 0.75%.  The accused examined  as DW5 has asserted that even if brokerage was  included in Ext. D11 statement of accounts  maintained by the Cochin Stock Exchange still the  said accounts will not tally with Ext. P10 series of  accounts.  As for the value of application forms,  the same comes to only 2 rupees and this cannot

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tilt the balance to the tune of 14 and odd lakhs of  rupees\005"

       The High Court on the contrary did not go into the said contentions at  all.  It proceeded on the basis that the scope and ambit of the evidence to be  adduced in the mater of prosecution of an offence punishable under Section  138 of the Act should not go beyond the requirements of law and that  correctness of the accounts maintained by the Second Respondent in terms  of the provisions of the Act and Rules could not have been a ground to  disbelieve his case.  It was held:

"\005The contention of the 1st respondent is that all  the transactions mentioned in Ext. P10 series are  not found in Ext. D11 series maintained by the  Cochin Stock Exchange in the name of the  appellant as share broker.  The appellant has  explained this contention of the respondent stating  that the transactions conducted by him outside the  Stock Exchange will not be found in the accounts  maintained by the Cochin Stock Exchange and  therefore there is difference in Ext. P10 series and  Ext. D11 series."

       The High Court, in view of the findings of fact arrived at by the  appellate court, in our opinion, committed a manifest error in reversing the  said judgment.  The Second Respondent evidently had not been able to  explain the discrepancies in his books of accounts.  If except putting a  suggestion to the witness, the Second Respondent has not been able to bring  on records any material to show that the parties had any transactions other  than those which had been entered into through the Cochin Stock Exchange,  the explanation of the accused could not have been thrown over board.  The  High Court has furthermore committed a manifest error of record in arriving  at a finding that the Appellant himself or through his agent has  acknowledged as correct the statements appearing in Exhibit P-10 series  dated 16.12.1991, 20.12.1991, 28.12.1991, 10.1.1992, 24.1.1992, 7.2.1992  and 21.2.1992.  Admittedly there had been no acknowledgement in respect  of five statements of accounts being Exhibits D-2 to D-6.

       In view of the said error of record, the findings of the High Court to  the effect that the Appellant had not been able to substantiate his contention  as regard the correctness of the accounts of Exhibit P-10 series must be  rejected.

       In view the aforementioned backdrop of events, the questions of law  which had been raised before us will have to be considered.  Before, we  advert to the said questions, we may notice the provisions of Sections 118(a)  and 139 of the Act which 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."

"139. Presumption in favour of holder \026 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."

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       Presumptions both under Sections 118(a) and 139 of the Act are  rebuttable in nature.

       What would be the effect of the expressions ’May Presume’, ’Shall  Presume’ and ’Conclusive Proof’ has been considered by this Court in  Union of India (UOI) v. Pramod Gupta (D) by L.Rs. and Ors., [(2005) 12  SCC 1] in the following terms:

"\005It is true that the legislature used two different  phraseologies "shall be presumed" and "may be  presumed" in Section 42 of the Punjab Land  Revenue Act and furthermore although provided  for the mode and manner of rebuttal of such  presumption as regards the right to mines and  minerals said to be vested in the Government vis- ‘-vis the absence thereof in relation to the lands  presumed to be retained by the landowners but the  same would not mean that the words "shall  presume" would be conclusive. The meaning of  the expressions "may presume" and "shall  presume" have been explained in Section 4 of the  Evidence Act, 1872, from a perusal whereof it  would be evident that whenever it is directed that  the court shall presume a fact it shall regard such  fact as proved unless disproved. In terms of the  said provision, thus, the expression "shall  presume" cannot be held to be synonymous with  "conclusive proof"\005"

       In terms of Section 4 of the Evidence Act whenever it is provided by  the Act that the Court shall presume a fact, it shall regard such fact as proved  unless and until it is disproved.  The words ’proved’ and ’disproved’ have  been defined in Section 3 of the Evidence Act (the interpretation clause) to  mean: -  "Proved \026 A fact is said to be proved when, after  considering the matters before it, the Court either  believes it to exist, or considers its existence so  probable that a prudent man ought, under the  circumstances of the particular case, to act upon  the supposition that it exists.

Disproved \026 A fact is said to be disproved when,  after considering the matters before it the Court  either believes that it does not exist, or considers  its non-existence so probable that a prudent man  ought, under the circumstances of the particular  case, to act upon the supposition that it does not  exist."

       Applying the said definitions of ’proved’ or ’disproved’ to principle  behind Section 118(a) of the Act, the Court shall presume a negotiable  instrument to be for consideration unless and until after considering the  matter before it, it either believes that the consideration does not exist or  considers the non-existence of the consideration so probable that a prudent  man ought, under the circumstances of the particular case, to act upon the  supposition that the consideration does not exist.  For rebutting such  presumption, what is needed is to raise a probable defence.  Even for the  said purpose, the evidence adduced on behalf of the complainant could be  relied upon.

       A Division Bench of this Court in Bharat Barrel & Drum  Manufacturing Company v. Amin Chand Payrelal [(1999) 3 SCC 35] albeit  in a civil case laid down the law in the following terms:

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"Upon consideration of various judgments as noted  hereinabove, the position of law which emerges is  that once execution of the promissory note is  admitted, the presumption under Section 118(a)  would arise that it is supported by a consideration.  Such a presumption is rebuttable. The defendant  can prove the non-existence of a consideration by  raising a probable defence. If the defendant is  proved to have discharged the initial onus of proof  showing that the existence of consideration was  improbable or doubtful or the same was illegal, the  onus would shift to the plaintiff who will be  obliged to prove it as a matter of fact and upon its  failure to prove would disentitle him to the grant of  relief on the basis of the negotiable instrument.  The burden upon the defendant of proving the non- existence of the consideration can be either direct  or by bringing on record the preponderance of  probabilities by reference to the circumstances  upon which he relies. In such an event, the plaintiff  is entitled under law to rely upon all the evidence  led in the case including that of the plaintiff as  well. In case, where the defendant fails to  discharge the initial onus of proof by showing the  non-existence of the consideration, the plaintiff  would invariably be held entitled to the benefit of  presumption arising under Section 118(a) in his  favour. The court may not insist upon the  defendant to disprove the existence of  consideration by leading direct evidence as the  existence of negative evidence is neither possible  nor contemplated and even if led, is to be seen  with a doubt\005"

       This Court, therefore, clearly opined that it is not necessary for the  defendant to disprove the existence of consideration by way of direct  evidence.   

       The standard of proof evidently is pre-ponderance of probabilities.   Inference of pre-ponderance of probabilities can be drawn not only from the  materials on records but also by reference to the circumstances upon which  he relies.   

       Presumption drawn under a statute has only an evidentiary value.   Presumptions are raised in terms of the Evidence Act.  Presumption drawn in  respect of one fact may be an evidence even for the purpose of drawing  presumption under another.   

       The Second Respondent herein was a member of a Stock Exchange.   The transactions in relation to the Stock Exchange are regulated by the  statutes and statutory rules.  If in terms of the provisions of a statute, a  member of a Stock Exchange is required to maintain books of accounts in a  particular manner, he would be required to do so, as non-compliance of the  mandatory provisions of the Rules may entail punishment.  It is not in  dispute that transactions comprising purchases and sales of shares by  investors is a matter of confidence.  Both parties would have to rely upon  one another.  For the said purpose, the courts of law may also take judicial  notice of the practice prevailing in such business. The learned Appellate  Judge rightly did so.

       The definite case of the second Respondent was that the cheque dated  17.8.1992 was issued by the Appellant in discharge of his debt.  The said  liability by way of debt arose in terms of the transactions.  For proving the

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said transactions, the Second Respondent filed books of accounts.  The  books of accounts maintained by the Second Respondent were found to be  not reflecting the correct state of affairs.  A discrepancy of more than Rs.  14,00,000/- was found.   

       It was for the Appellant only to discharge initial onus of proof.  He  was not necessarily required to disprove the prosecution case.  Whether in  the given facts and circumstances of a case, the initial burden has been  discharged by an accused would be a question of fact.  It was matter relating  to appreciation of evidence.  The High Court in its impugned judgment did  not point out any error on the part of the appellate court in that behalf.   

       What would be the effect of a presumption and the nature thereof fell  for consideration before a Full Bench of the Andhra Pradesh High Court in  G. Vasu v. Syed Yaseen Sifuddin Quadri [AIR 1987 AP 139].  In an  instructive judgment, Rao, J. (as His Lordship then was) speaking for the  Full Bench noticed various provisions of the Evidence Act as also a large  number of case laws and authorities in opining:

"From the aforesaid authorities, we hold that once  the defendant adduces evidence to the satisfaction  of the Court that on a preponderance of  probabilities there is no consideration in the  manner pleaded in the plaint or suit notice or the  plaintiff’s evidence, the burden shifts to the  plaintiff and the presumption ’disappears’ and does  not haunt the defendant any longer."

       It was further held:

"For the aforesaid reasons, we are of the view that  where, in a suit on a promissory note, the case of  the defendant as to the circumstances under which  the promissory note was executed is not accepted,  it is open to the defendant to prove that the case set  up by the plaintiff on the basis of the recitals in the  promissory note, or the case set up in suit notice or  in the plaint is not true and rebut the presumption  under S. 118 by showing a preponderance of  probabilities in his favour and against the plaintiff.  He need not lead evidence on all conceivable  modes of consideration for establishing that the  promissory note is not supported by any  consideration whatsoever. The words ’until the  contrary is proved’ in S. 118 do not mean that the  defendant must necessarily show that the  document is not supported by any form of  consideration but the defendant has the option to  ask the Court to consider the non-existence of  consideration so probable that a prudent man  ought, under the circumstances of the case, to act  upon the supposition that consideration did not  exist. Though the evidential burden is initially  placed on the defendant by virtue of S. 118 it can  be rebutted by the defendant by showing a  preponderance of probabilities that such  consideration as stated in the pronote, or in the suit  notice or in the plaint does not exist and once the  presumption is so rebutted, the said presumption  ’disappears’. For the purpose of rebutting the initial  evidential burden, the defendant can rely on direct  evidence or circumstantial evidence or on  presumptions of law or fact. Once such convincing  rebuttal evidence is adduced and accepted by the  Court, having regard to all the circumstances of the

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case and the preponderance of probabilities, the  evidential burden shifts back to the plaintiff who  has also the legal burden. Thereafter, the  presumption under S. 118 does not again come to  the plaintiff’s rescue. Once both parties have  adduced evidence, the Court has to consider the  same and the burden of proof loses all its  importance."

       If for the purpose of a civil litigation, the defendant may not adduce  any evidence to discharge the initial burden placed on him, a ’fortiori’ even  an accused need not enter into the witness box and examine other witnesses  in support of his defence.  He, it will bear repetition to state, need not  disprove the prosecution case in its entirety as has been held by the High  Court.   

       A presumption is a legal or factual assumption drawn from the  existence of certain facts.

       In P. Ramanatha Aiyar’s Advanced Law Lexicon, 3rd edition, at page  3697,  the term ’presumption’ has been defined as under:

"A presumption is an inference as to the existence  of a fact not actually known arising from its  connection with another which is known.

       A presumption is a conclusion drawn from  the proof of facts or circumstances and stands as  establishing facts until overcome by contrary  proof.

       A presumption is a probable consequence  drawn from facts (either certain, or proved by  direct testimony) as to the truth of a fact alleged  but of which there is no direct proof.  It follows,  therefore that a presumption of any fact is an  inference of that fact from others that are known".  (per ABBOTT, C.J., R. v. Burdett, 4 B. & Ald,  161)

       The word ’Presumption’ inherently imports  an act of reasoning \026 a conclusion of the judgment;  and it is applied to denote such facts or moral  phenomena, as from experience we known to be  invariably, or commonly, connected with some  other related facts.  (Wills on Circumstantial  Evidence)  

       A presumption is a probable inference which  common sense draws from circumstances usually  occurring in such cases.  The slightest presumption  is of the nature of probability, and there are almost  infinite shades from slight probability to the  highest moral certainty.  A presumption, strictly  speaking, results from a previously known and  ascertained connection between the presumed fact  and the fact from which the inference is made."

       Having noticed the effect of presumption which was required to be  raised in terms of Section 118(a) of the Act, we may also notice a decision  of this Court in regard to ’presumption’ under Section 139 thereof.

       In Hiten P. Dalal v. Bratindranath Banerjee [(2001) 6 SCC 16], a 3- Judge Bench of this Court held that although by reason of Sections 138 and

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139 of the Act, the presumption of law as distinguished from presumption of  fact is drawn, the court has no other option but to draw the same in every  case where the factual basis of raising the presumption is established.  Pal, J.  speaking for a 3-Judge Bench, however, opined:

"\005Presumptions are rules of evidence and do not  conflict with the presumption of innocence,  because by the latter, all that is meant is that the  prosecution is obliged 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 or fact unless the  accused adduces evidence showing the reasonable  possibility of the non-existence of the presumed  fact. In other words, provided the facts required to  form the basis of a presumption of law exist, no  discretion is left with the court but to draw the  statutory conclusion, but this does not preclude the  person against whom the presumption is drawn  from rebutting it and proving the contrary. A fact  is said to be proved when,  "after considering the matters before it, the  court either believes it to exist, or considers its  existence so probable that a prudent man ought,  under the circumstances of the particular case,  to act upon the supposition that it exists".  Therefore, the rebuttal does not have to be  conclusively established but such evidence must be  adduced before the court in support of the defence  that the court must either believe the defence to  exist or consider its existence to be reasonably  probable, the standard of reasonability being that  of the "prudent man"."

       The court, however, in the fact situation obtaining therein, was not  required to go into the question as to whether an accused can discharge the  onus placed on him even from the materials brought on records by the  complainant himself.  Evidently in law he is entitled to do so.

       In Goaplast (P) Ltd. v. Chico Ursula D’Souza and Another [(2003) 3  SCC 232], upon which reliance was placed by the learned counsel, this  Court held that the presumption arising under Section 139 of the Act can be  rebutted by adducing evidence and the burden of proof is on the person who  want to rebut the presumption.  The question which arose for consideration  therein was as to whether closure of accounts or stoppage of payment is  sufficient defence to escape from the penal liability under Section 138 of the  Act.  The answer to the question was rendered in the negative.  Such a  question does not arise in the instant case.

       In Kundan Lal Rallaram v. Custodian, Evacuee Property, Bombay  [AIR 1961 SC 1316], Subba Rao, J., as the learned Chief Justice then was,  held that while considering the question as to whether burden of proof in  terms of Section 118 had been discharged or not, relevant evidence cannot  be permitted to be withheld.  If a relevant evidence is withheld, the court  may draw a presumption to the effect that if the same was produced might  have gone unfavourable to the plaintiff.  Such a presumption was itself held  to be sufficient to rebut the presumption arising under Section 118 of the Act  stating:

"\005Briefly stated, the burden of proof may be  shifted by presumptions of law or fact, and  presumptions of law or presumptions of fact may  be rebutted not only by direct or circumstantial

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evidence but also by presumptions of law or fact.  We are not concerned here with irrebuttable  presumptions of law."

       Two adverse inferences in the instant case are liable to be drawn  against the Second Respondent:

(i)     He deliberately has not produced his books of accounts. (ii)    He had not been maintaining the statutory books of accounts and  other registers in terms of the bye-laws of Cochin Stock Exchange.

       Moreover, the onus on an accused is not as heavy as that of the  prosecution.  It may be compared with a defendant in a civil proceeding.

       In Harbhajan Singh v. State of Punjab and another [AIR 1966 SC 97],  this Court while considering the nature and scope of onus of proof which the  accused was required to discharge in seeking the protection of exception 9 to  Section 499 of the Indian Penal Code stated the law as under:

"\005In other words, the onus on an accused person  may well be compared to the onus on a party in  civil proceedings, and just as in civil proceedings  the court trying an issue makes its decision by  adopting the test of probabilities, so must a  Criminal Court hold that the plea made by the  accused is proved if a preponderance of probability  is established by the evidence led by him..."  

       In V.D. Jhingan v. State of Uttar Pradesh, [AIR 1966 SC 1762], it was  stated: "\005It is well-established that where the burden of  an issue lies upon the accused, he is not required to  discharge that burden by leading evidence to prove  his case beyond a reasonable doubt\005"

       [See also State of Maharashtra v. Wasudeo Ramchandra Kaidalwar,  AIR 1981 SC 1186]

       In Kali Ram v. State of Himachal Pradesh [(1973) 2 SCC 808],  Khanna, J., speaking for the 3-Judge Bench, held: "\005One of the cardinal principles which has  always to be kept in view in our system of  administration of justice for criminal cases is that a  person arraigned as an accused is presumed to be  innocent unless that presumption is rebutted by the  prosecution by production of evidence as may  show him to be guilty of the offence with which he  is charged. The burden of proving the guilt of the  accused is upon the prosecution and unless it  relieves itself of that burden, the courts cannot  record a finding of the guilt of the accused. There  are certain cases in which statutory presumptions  arise regarding the guilt of the accused, but the  burden even in those cases is upon the prosecution  to prove the existence of facts which have to be  present before the presumption can be drawn.  Once those facts are shown by the prosecution to  exist, the Court can raise the statutory presumption  and it would, in such an event, be for the accused  to rebut the presumption. The onus even in such  cases upon the accused is not as heavy as is  normally upon the prosecution to prove the guilt of  the accused. If some material is brought on the

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record consistent with the innocence of the  accused which may reasonably be true, even  though it is not positively proved to be true, the  accused would be entitled to acquittal."

       In The State through the Delhi Administration v. Sanjay Gandhi [AIR  1978 SC 961], it was stated:

"\005Indeed, proof of facts by preponderance of  probabilities as in a civil case is not foreign to  criminal jurisprudence because, in cases where the  statute raises a presumption of guilt as, for  example, the Prevention of Corruption Act, the  accused is entitled to rebut that presumption by  proving his defence by a balance of probabilities.  He does not have to establish his case beyond a  reasonable doubt. The same standard of proof as in  a civil case applies to proof of incidental issues  involved in a criminal trial like the cancellation of  bail of an accused\005"

       The evidences adduced by the parties before the trial court lead to one  conclusion that the Appellant had been able to discharge his initial burden.   The burden thereafter shifted to the Second Respondent to prove his case.   He failed to do so.   

       The submission of the Second Respondent that the Appellant had not  denied his entire responsibility and the dispute relating only to the quantum  of debt cannot be accepted.   

       We in the facts and circumstances of this case need not go into the  question as to whether even if the prosecution fails to prove that a large  portion of the amount claimed to be a part of debt was not owing and due to  the complainant by the accused and only because he has issued a cheque for  a higher amount, he would be convicted if it is held that existence of debt in  respect of large part of the said amount has not been proved.  The Appellant  clearly said that nothing is due and the cheque was issued by way of  security.  The said defence has been accepted as probable.  If the defence is  acceptable as probable the cheque therefor cannot be held to have been  issued in discharge of the debt as, for example, if a cheque is issued for  security or for any other purpose the same would not come within the  purview of Section 138 of the Act.         We have gone through the oral evidences.  The Second Respondent  has even failed to prove that the Appellant had paid to him a sum of Rs.  5000/- by cash.

       In any event the High Court entertained an appeal treating to be an  appeal against acquittal, it was in fact exercising the revisional jurisdiction.   Even while exercising an appellate power against a judgment of acquittal,  the High Court should have borne in mind the well-settled principles of law  that where two views are possible, the appellate court should not interfere  with the finding of acquittal recorded by the court below.

       We, therefore, are of the opinion that the impugned judgment cannot  be sustained which is set aside accordingly.  The appeal is allowed.  The  Appellant is on bail.  He is discharged from the bail bonds.  The Second  Respondent shall pay and bear the costs of the Appellant.  Counsels’ fee  assessed at Rs. 10,000/-.