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CASE NO.: Appeal (crl.)  518 of 2006

PETITIONER: Krishna Janardhan Bhat

RESPONDENT: Dattatraya G. Hegde

DATE OF JUDGMENT: 11/01/2008

BENCH: S.B. Sinha & Harjit Singh Bedi

JUDGMENT: J U D G M E N T

S.B. SINHA,  J :                   1.      Appellant and one R.G. Bhat were jointly running a business in the  name and style of Vinaya Enterprises at Hubli together. Appellant executed  a Power of Attorney in his favour.   

2.      Allegedly, he had handed over four blank cheques to the said  constituted attorney for meeting the expenses of the business.   The counter  foil of the cheque books was also allegedly filled in by Shri R.G. Bhat.    

       The cheque bearing No. 044483 was shown to have been a self drawn  one for a sum of Rs. 1500/-.    

3.      Disputes and differences having arisen between the appellant and the  said R.G. Bhat in connection with running of the said business, the power of  attorney granted in his favour was cancelled by the appellant.   Disputes and  differences between the parties were referred to the Panchayat. In the  meeting of the Panchayat held on 02.10.1996, complainant/respondent who  is the brother-in-law of the said R.G. Bhat was admittedly present.  He  participated therein.  The result of the said meeting of the Panchayat is not  known but it is not in dispute that the appellant herein issued a public notice  through his advocate in a local newspaper on 3.10.1996 to the following  effect: \023My client Sh. Krishna Janardhana Bhat,  Proprietor of Vinaya Enterprises, Tarihal Hubli has  given authority to give notice as follows.

My client appointed Shri Raghavendra Ganapati  Bhat as his power of Attorney Holder on 21.8.1993  to run Vinay Enterprises as agent.   He has started  misusing the terms and conditions of the Power of  Attorney.   Hence my client cancelled the Power of  Attorney on 21.8.96 by giving notice.  If at all  anybody deals with him on the Power of Attorney  my client is not responsible in future.\024          5.      On the premise that the respondent advanced a sum of Rs. 1,50,000/-  to the appellant on 14.6.1998 and the latter on his own went to his house on  20.7.1998 to return the loan by an account payee cheque which having been  dishonoured when presented; a complaint petition was filed.  

6.      Prior thereto, a notice was sent on 27.8.1998 which was allegedly  served on the appellant on 5.9.1998.   He on that day itself sent a reply  alleging in substance that the complainant had been colluding with R.G.  Bhat in regard thereto, stating:

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\023Your client D.G. Hegde Goddalamane is husband  of sister of my power of attorney holder R.G. Bhat  (Proprietor Prasad Enterprises Tarihal Industrial  Estate) of Hubli.  I do not have any dealing with  him as alleged in your letter.      Knowing that the power of attorney holder  R.G. Bhat has lost faith and having acted illegally  and in anticipation of his committing further illegal  acts I have legally cancelled my power of attorney  and published the notice in a famous Kannada  daily \023Samyukta Karnataka\024 on 3.10.96.  From  that date I do not have any relation with him or any  of his relatives including your client.      Please verify the handwriting and signature  on the cheque and advice your client not to do such  (illegalities) colluding with his brother-in-law.\024

7.      The learned Trial Judge convicted the appellant and sentenced him to  undergo imprisonment for six months and further directed payment of  compensation for a sum of Rs. 1,50,000/-.  An appeal preferred thereagainst  was dismissed by the Sessions Judge by a judgment and order dated  28.7.2004.   

8.      The High Court in exercise of its revisional jurisdiction, however, on  a revision petition filed by the appellant, partly allowed the same by  reducing the substantive sentence to one week.

9.      The Special Leave Petition was filed by the appellant in person.  As it  was noticed by a Bench of this Court that some question of law arises for its  consideration, Mr. S. Balakrishnan, learned senior counsel was requested to  assist the Court.    

10.     Mr. Balakrishnan urged that the learned Trial Judge, the Sessions  Court as also the High Court committed a serious illegality insofar as it  misread and misapplied the provisions of Section 139 of the Negotiable  Instruments Act (for short \023the Act\024).    

       It was contended that the procedural requirements of Section 138 are: (i)     There is a legally enforceable debt. (ii)    The drawer of the cheque issued the cheque to satisfy part or whole  of the debt. (iii)    The cheque so issued has been returned due to insufficiency of  funds.

       It was urged that only ingredient No. 2 is a subject matter of  presumption under Section 139 of the Act and not the first one.    It was  argued that except the word of mouth of the complainant nothing has been  brought on record to prove the offence as against the appellant.    

11.     Mr. S.N. Bhat, learned counsel appearing on behalf of the respondent,  on the other hand, submitted that the appellant has rightly been found guilty  of commission of an offence under Section 138 of the Act as bouncing of the  cheque issued by him carries a mandatory presumption in terms of Section  139 read with Section 118 (a) of the Act.

       It was urged that it is not believable that the appellant despite referring  the dispute to the Panchayat and issuing a paper publication on 3.10.1996  would not insist on taking back the cheque book from his erstwhile  constituted attorney or would not inform the bank thereabout.  Moreover, he  having come out with a positive defence, it was for him to prove the same.

12.     Before we embark upon the factual issue involved herein, we would  notice the manner in which the court proceeded to determine the case.   

       The learned Trial Judge framed the following points for its

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determination:

\023(1) Whether the complainant proves the hilt that  the accused to discharge earlier debt of  Rs.1,50,000/-, has got issued a cheque on  20.7.1998 for Rs.1,50,000/- drawn at Vijay  Bank, Tarahal Branch, Hubli? (2)     If so, whether the said cheque came to be  dishonoured as \023funds insufficient\024 after its  presentation and despite of issuance of  notice, the accused did not pay the due  amount within stipulated time without any  cause, thereby Negotiable Instruments Act?\024  

       The learned Trial Judge noticed the contents of the claim petition as  also the evidence of PW-1.  It also noticed the suggestions given to the said  PW-1 by the appellant herein.  Upon taking into consideration the same as  also the statement of the appellant under Section 313 of the Code of  Criminal Procedure, it posed a question as to whether there was no debt  payable by the accused to the complainant and if so, whether the  complainant colluding with R.G. Bhat had created the cheque with an  intention to cause loss to the appellant.  It, however, without making any  further discussion, answered the said question directly on the material  brought on record referring to a decision of the Karnataka High Court in  S.R. Muralidar v. Ashok G.Y. [ILR 2001 Karnataka 4127] in extenso and  opining that his decision in the case is similar to that of the Karnataka High  Court, stating:

\023Considering the proposition of law, in the present  case also the accused admitted the signature on  Ex.P.1.  But, the contention is that his P.A. Holder  mis-utilized his signed blank cheques through his  relative complainant and the fact of the present  case and fact of the decision mentioned by me are  similar one and the observation made by the  Hon\022ble High Court in the above decision and  principle laid down therein are clearly applicable  to the case in hand.  Therefore, the defence taken  by the accused herein without stepping into the  witness-box, is not acceptable one and there is no  cogent evidence produced by the accused to prove  his special reasons for issuance of the cheque in  question.\024

13.     It again referred to a decision of this Court in K. Bhaskaran v.  Sankaran Vaidhyan Balan and Others [AIR 1999 SC 3762] and made almost  a similar observation holding that as the complainant has discharged his  initial burden, the onus shifted on the accused to produce rebuttal evidence  against the presumption laid down in favour of the complainant stating:

\023Here, the accused has not produced any evidence  to discard the testimony of PW-1.  Therefore, the  presumption is to be drawn in favour of the holder  of the cheque, who has received it for discharge of  liability in view of the decision of the Hon\022ble  Supreme Court.\024

14.     Yet again, it relied upon a decision of the Karnataka High Court in  M/s. Devi Tyres v. Nawab Jan [AIR 2001 Karnataka H.C.R. 2154], wherein  it was opined: \023There is issued (sic) that the amount is payable  and no criminal court is required to embark upon  any enquiry that goes behind the Act of issuance of  the cheque.  If the drawer contends that there were  certain special reasons whereby a cheque was

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issued and that the cheque was not intended to be  encashed or honoured, the onus of establishing this  shifts squarely to the accused.\024

15.     The complainant\022s case was, thus, primarily accepted for the reason  that the appellant did not step into the witness box.   

16.     The appellate court took an identical stand.  It proceeded on the  premise that the statement of accused under Section 313 of the Code of  Criminal Procedure regarding misuse of blank cheque by the complainant  and filling up Rs. 1,50,000/- instead of Rs. 1500/- is contradictory to his own  admission in the reply to the notice issued to him.   

       On what basis the said opinion was formed is not known.  The  appellate court refused to enter into the question as to whether the  prosecution case is wholly unreliable, as the complainant had not been able  to show his source of income so as to enable him to advance a huge loan of  Rs. 1,50,000/-, holding:

\023Now as far as the financial ability of the  complainant to issue cheque for such huge amount  to the accused is not a matter to be considered by  the trial court or by me also since issue of Ex.P.1  and its dishonour is proved by the complainant  beyond reasonable doubt.\024

17.     The High Court in exercise of its revisional jurisdiction although  accepted the contention of the appellant that the presumption under Section  139 of the Act extends \023only to the extent that the holder of the cheque  received the cheque for the discharge in whole or in part of any debt or other  liability\024 and the same only means \023that cheque was issued for  consideration, but does not extend to the extent that the cheque was issued  for the discharge of the debt or liability as pleaded by the accused\024, opined  that the complainant had discharged that onus by adducing his own  evidence.  Observing that the appellant did not step into the witness box, it  was opined that although the relationship between the appellant and Shri  R.G. Bhat was strained, there was nothing to show that the relationship  between the appellant and the complainant became strained despite the fact  that a panchayat meeting was held in regard to the said dispute in 1996.  The  High Court, however, refused to go into the factual aspect of the matter  stating that it was exercising a revisional jurisdiction, stating:

\023Since the burden of proving that the cheque had  been misused is on the accused-petitioner, and  there being a concurrent finding of the Trial Court  and the Appellant Court with regard to that holding  that the petitioner had failed to discharge that  burden, I do not find any ground to interfere in the  order of the Trial Court and that the Appellate  Court, so far as they hold the petitioner guilty of an  offence punishable under Section 138 of the  Negotiable Instruments Act.\024

18.     Before embarking upon the legal issues, we may analyse the  deposition of PW-1 \026 Complainant.  He was a resident of village  Goddalmane.  Appellant is a resident of village Kekkar.  As he was running  an industry at Hubli, he sometimes resided in Hubli also.  They were said to  be friends.  He asked him to give a loan of Rs. 1.5 lakhs in the first week of  June, 1998 and the amount was handed over to him on 14th June, 1998.  It  was allegedly agreed that on the appellant\022s failure to repay the said loan  within one month, 15% interest would be charged.  No document was  executed; no pronote was executed; no receipt was obtained.  Appellant is  said to have come to his house suo moto on 20.07.1998 and handed over the  cheque which was sent to Varada Grameen Bank for collection whereupon  notice had been issued.  Despite the fact that he was aware that a dispute had

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been raised in regard to the writings in the cheque, the same was not proved.   Merely, the cheque was tendered and it was marked as an exhibit.  The  cheque appears to have been issued as a proprietor of a business concern.   

       Despite the fact that R.G. Bhat was his brother-in-law, he denied that  he was running the said business.  He also feigned his ignorance as to  whether the said industry was being run by R.G. Bhat on the basis of the  Power of Attorney executed by the appellant.  He, however, accepted that  they had been running it together.  He also accepted the relationship between  him and R.G. Bhat.  He knew about the dispute.  He accepted that a  panchayat meeting was held in regard thereto.  Surprisingly, he denied his  knowledge in regard to the existence of the power of attorney stating that the  same was not made in his presence.  He admitted that he was present on  2.10.1996 in the panchayat meeting to resolve the problem arising out of the  dispute between R.G. Bhat and the appellant.  He accepted that wooden and  steel materials were placed in Vinay Enterprises and R.G. Bhat had been  running the same type of industry in Tarihal Industrial Estate.  According to  him, he had been running such an industry in the name of Prasad Enterprises  even prior to 1996.  His acquaintance, according to him, with the appellant  was only through his brother-in-law.  He did not say that he had friendship  with the appellant.  There also does not appear to be any business  transactions between them.  He could not state about the denomination of the  notes although according to him he had drawn the amount from the society.   

       He did not produce any books of accounts or any other proof to show  that he got so much money from the bank.  He admittedly did not have any  written document pertaining to the accused.  He accepted that there was no  witness to the transaction.  He, of course, denied certain suggestions, but the  suggestions put to him were required to be considered by the court below in  the backdrop of the facts and circumstances of the case.   

19.     The courts below failed to notice that ordinarily in terms of Section  269SS of the Income Tax Act, any advance taken by way of any loan of  more than Rs. 20,000/- was to be made by way of an account payee cheque  only.   

       Section 271D of the Income Tax Act reads as under:

\023271D. Penalty for failure to comply with the  provisions of section 269SS.  (1) If a person takes  or accepts any loan or deposit in contravention of  the provisions of section 269SS, he shall be liable  to pay, by way of penalty, a sum equal to the  amount of the loan or deposit so taken or accepted. (2) Any penalty imposable under sub-section (1)  shall be imposed by the Joint Commissioner.\024

20.     Indisputably, a mandatory presumption is required to be raised in  terms of Section 118(b) and Section 139 of the Act.  Section 13(1) of the Act  defines \021negotiable instrument\022 to mean \023a promissory note, bill of exchange  or cheque payable either to order or to bearer\024.

       Section 138 of the Act has three ingredients, viz.:

(i)     that there is a legally enforceable debt; (ii)    that the cheque was drawn from the account of bank for discharge  in whole or in part of any debt or other liability which pre- supposes a legally enforceable debt; and  (iii)   that the cheque so issued had been returned due to insufficiency of  funds.   

21.     The proviso appended to the said section provides for compliance of  legal requirements before a complaint petition can be acted upon by a court  of law.  Section 139 of the Act merely raises a presumption in regard to the

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second aspect of the matter.  Existence of legally recoverable debt is not a  matter of presumption under Section 139 of the Act.  It merely raises a  presumption in favour of a holder of the cheque that the same has been  issued for discharge of any debt or other liability.   

22.     The courts below, as noticed hereinbefore, proceeded on the basis that  Section 139 raises a presumption in regard to existence of a debt also.  The  courts below, in our opinion, committed a serious error in proceeding on the  basis that for proving the defence the accused is required to step into the  witness box and unless he does so he would not be discharging his burden.   Such an approach on the part of the courts, we feel, is not correct.

23.     An accused for discharging the burden of proof placed upon him  under a statute need not examine himself.  He may discharge his burden on  the basis of the materials already brought on records.  An accused has a  constitutional right to maintain silence.  Standard of proof on the part of an  accused and that of the prosecution in a criminal case is different.    

24.     In Bharat Barrel & Drum Manufacturing Company v. Amin Chand  Payrelal [(1999) 3 SCC 35] interpreting Section 118(a) of the Act, this Court  opined:

\023Upon 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\024                                                 [Emphasis supplied]

25.     Furthermore, whereas prosecution must prove the guilt of an accused  beyond all reasonable doubt, the standard of proof so as to prove a defence  on the part of an accused is \021preponderance of probabilities\022.  Inference of  preponderance of probabilities can be drawn not only from the materials  brought on records by the parties but also by reference to the circumstances  upon which he relies.   

26.     A statutory presumption has an evidentiary value.  The question as to

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whether the presumption whether stood rebutted or not, must, therefore, be  determined keeping in view the other evidences on record.  For the said  purpose, stepping into the witness box by the appellant is not imperative.  In  a case of this nature, where the chances of false implication cannot be ruled  out, the background fact and the conduct of the parties together with their  legal requirements are required to be taken into consideration.

27.     In M.S. Narayana Menon Alias Mani v. State of Kerala and Another  [(2006) 6 SCC 39], it was held that once the accused is found to discharge  his initial burden, it shifts to the complainant.

28.     Four cheques, according to the accused, appear to have been drawn on  the same day.  The counterfoil of the cheque book, according to the  appellant, was in the handwriting of R.G. Bhat wherein it was shown that  apart from other payments, a sum of Rs. 1500/- was withdrawn on a self- drawn cheque.  The courts below proceeded to hold that the defence raised  by the appellant has not been proved, which, in our opinion, is not correct.   He did not know that the said cheque had not been encashed.  He replied to  the notice thinking that one of the cheque has been misused.  There is  nothing on record to show that he knew that one of the cheques was still  with R.G. Bhat.

29.     Disputes and differences between him and R.G. Bhat stood  established by admission of the respondent himself.  Similar industry was  being run by R.G. Bhat although he was acting as the constituted attorney of  the appellant.  According to the appellant, R.G. Bhat had cheated him.  The  counterfoil showed that not more than Rs. 20,000/- had ever been withdrawn  from that bank at a time.  The courts were required to draw an inference as  to the probability of the complainant\022s advancing a sum of Rs. 1.5 lakhs on  mere asking and that too without keeping any documentary proof.  Even  there was no witness.  The purported story that the appellant would himself  come forward to return the amount by a cheque knowing fully well that he  did not have any sufficient funds is difficult to believe.

30.     In K. Prakashan v. P.K. Surenderan [2007 (12) SCALE 96], this Court  following M.S. Narayana Menon (supra) opined:

\02312.         The Act raises two presumptions; firstly, in  regard to the passing of consideration as contained  in Section 118 (a) therein and, secondly, a  presumption that the holder of cheque receiving  the same of the nature referred to in Section 139  discharged in whole or in part any debt or other  liability.  Presumptions both under Sections 118  (a) and 139 are rebuttable in nature.  Having regard  to the definition of terms \021proved\022 and \021disproved\022  as contained in Section 3 of the Evidence Act as  also the nature of the said burden upon the  prosecution vis-‘-vis an accused it is not necessary  that the accused must step into the witness box to  discharge the burden of proof in terms of the  aforementioned provision.  

13.     It is furthermore not in doubt or dispute that  whereas the standard of proof so far as the  prosecution is concerned is proof of guilt beyond  all reasonable doubt; the one on the accused is  only mere preponderance of probability.\024

       In John K. John v. Tom Varghese & Anr. [JT 2007 (13) SC 222], this  Court held:

\02310\005The High Court was entitled to take notice of   the conduct of the parties.  It has been found by the  High Court as of fact that the complainant did not

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approach the court with clean hands.  His conduct  was not that of a prudent man.  Why no instrument  was executed although a huge sum of money was  allegedly paid to the respondent was a relevant  question which could be posed in the matter.  It  was open to the High Court to draw its own  conclusion therein.  Not only no document had  been executed, even no interest had been charged.   It would be absurd to form an opinion that despite  knowing that the respondent even was not in a  position to discharge his burden to pay instalments  in respect of the prized amount, an advance would  be made to him and that too even after institution  of three civil suits.  The amount advanced even did  not carry any interest.  If in a situation of this  nature, the High Court has arrived at a finding that  the respondent has discharged his burden of proof  cast on him under Section 139 of the Act, no  exception thereto can be taken.\024

31.     Mr. Bhat relied upon a decision of this Court in Hiten P. Dalal v.  Bratindranath Banerjee [(2001) 6 SCC 16] wherein this Court held:   \02322\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.  23 . 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,  \023after 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\024.  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 \023prudent man\024.\024                  [See also K.N. Beena v. Muniyappan and Another (2001) 8 SCC 458]

32.     We assume that the law laid down therein is correct.  The views we  have taken are not inconsistent therewith.

33.     But, we may at the same time notice the development of law in this  area in some jurisdictions.   

       The presumption of innocence is a human right. [See Narender Singh  & Anr. v. State of M.P. (2004) 10 SCC 699, Ranjitsing Brahmajeetsing  Sharma v. State of Maharashtra and Anr. (2005) 5 SCC 294 and Rajesh  Ranjan Yadav @ Pappu Yadav v. CBI through its Director (2007) 1 SCC

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70]  Article 6(2) of he European Convention on Human Rights provides :  \023Everyone charged with a  criminal offence shall be presumed innocent until  proved guilty according to law\024.  Although India is not bound by the  aforementioned Convention and as such it may not be necessary like the  countries forming European countries to bring common law into land with  the Convention, a balancing of the accused rights and the interest of the  society is required to be taken into consideration.  In India, however, subject  to the statutory interdicts, the said principle forms the basis of criminal  jurisprudence.  For the aforementioned purpose the nature of the offence,  seriousness as also gravity thereof may be taken into consideration. The  courts must be on guard to see that merely on the application of presumption  as contemplated under Section 139 of the Negotiable Instruments Act, the  same may not lead to injustice or mistaken conviction.  It is for the  aforementioned reasons that we have taken into consideration the decisions  operating in the field where the difficulty of proving a negative has been  emphasized.  It is not suggested that a negative can never be proved but  there are cases where such difficulties are faced by the accused e,g,. honest  and reasonable mistake of fact.  In a recent Article \023The Presumption of  Innocence and Reverse Burdens : A Balancing Duty\024 published in [2007]  C.L.J. (March Part) 142 it has been stated :-

\023In determining whether a reverse burden is compatible  with the presumption of innocence regard should also be  had to the pragmatics of proof.  How difficult would it be  for the prosecution to prove guilt without the reverse  burden?  How easily could an innocent defendant  discharge the reverse burden?  But courts will not allow  these pragmatic considerations to override the legitimate  rights of the defendant.   Pragmatism will have greater  sway where the reverse burden would not pose the risk of  great injustice \026 where the offence is not too serious or  the reverse burden only concerns a matter incidental to  guilt.  And greater weight will be given to prosecutorial  efficiency in the regulatory environment.\024  

34.     We are not oblivious of the fact that the said provision has been  inserted to regulate the growing business, trade, commerce and industrial  activities of the country and the strict liability to promote greater vigilance in  financial matters and to safeguard the faith of the creditor in the drawer of  the cheque which is essential to the economic life of a developing country  like India.  This, however, shall not mean that the courts shall put a blind eye  to the ground realities.  Statute mandates raising of presumption but it stops  at that.  It does not say how presumption drawn should be held to have  rebutted.  Other important principles of legal jurisprudence, namely  presumption of innocence as human rights and the doctrine of reverse  burden introduced by Section 139 should be delicately balanced.  Such  balancing acts, indisputably would largely depend upon the factual matrix of  each case, the materials brought on record and having regard to legal  principles governing the same.   

35.     Keeping in view the peculiar facts and circumstances of this case, we  are of the opinion that the courts below approached the case from a wholly  wrong angle, viz., wrong application of the legal principles in the fact  situation of the case.  In view of the legal position as has been enunciated by  this Court in M.S. Narayana Menon (supra) and later cases, we are of the  opinion that the High Court should have entertained the revision application.

36.     For the reasons aforementioned, the appeal is allowed.  The judgments  of conviction and sentence passed against the appellant are set aside.