The Supreme Court on Wednesday made pertinent observations regarding the burden of proof that falls upon opposing parties in a cheque bouncing dispute under the Negotiable Instruments Act, 1881.
A Bench of Justices R Banumathi and AS Bopanna highlighted that once the complainant discharges the initial burden to prove the existence of a legally enforceable debt, it would fall on the defendant to prove that he is innocent.
The defendant may prove his innocence either by showing that there is no debt or by proving that the cheques he issued were supported by sufficient funds. In this regard, Sections 138 and 139 of the Negotiable Instruments Act are relevant. As explained in the judgment,
"Under Section 138 of the Negotiable Instruments Act, once the cheque is issued by the drawer, a presumption under Section 139 of the Negotiable Instruments Act in favour of the holder would be attracted. Section 139 creates a statutory presumption that a cheque received in the nature referred to under Section 138 of the Negotiable Instruments Act is for the discharge in whole or in part of any debt or other liability.
The initial burden lies upon the complainant to prove the circumstances under which the cheque was issued in his favour and that the same was issued in discharge of a legally enforceable debt.
It is for the accused to adduce evidence of such facts and circumstances to rebut the presumption that such debt does not exist or that the cheques are not supported by consideration."
In the case before the Court, however, the trial court and the High Court had acquitted the accused in a case concerning two cheque bouncing complaints filed by the appellant/complainant. The lower courts ordered the defendant's acquittal on concluding that the complainant had not been able to show that the cheques issued by the defendant were not supported by consideration.
The Supreme Court faulted this approach, emphasising that the complainant had discharged his initial burden once he showed evidence that there existed a legally enforceable debt. In this case of cheque bouncing, the complainant held three blank cheques issued by the defendant, which had bounced when the complainant tried to encash the same.
The defendant claimed that he had already paid off his obligations with cash and that the blank cheques were only given as a form of security. He further contended that the complainant had illegally neglected to return the blank cheques.
After examining the facts of the case, the Supreme Court found the defendant's narrative unbelievable. More importantly, it found that once the complainant's initial burden had been discharged, the defendant was expected to prove his counterclaims. The Bench held,
"The courts below erred in brushing aside the evidence of PW-1 on the ground that there were no averments in the complaint as to the purchases made by cash and purchase. The courts below also erred in not raising the statutory presumption under Section 139 of the Act that the complainant received the cheques to discharge the debt or other liability in whole or in part...
.. It is for the respondent-accused to adduce evidence to prove that the cheques were not supported by consideration and that there was no debt or liability to be discharged by him."
The lower Courts had ruled in the defendant's favour after it took note of cash receipts in his possession, which he claimed had discharged the liability for which the cheques were given as security. The Supreme Court, however, found that this was not sufficient evidence to discharge the defendant's onus to prove that there was no debt.
"The receipts-Ex.-22/C (colly) relied upon by the respondent- accused do not create doubt about the purchases made on credit and the existence of a legally enforceable debt for which the cheques were issued. The courts below erred in saying that by the receipts-Ex.22/C (colly), the respondent-accused has rebutted the statutory presumption raised under Section 139 of the Negotiable Instruments Act."
The Court proceeded to rule in the complainant's favour, observing,
"The oral and the documentary evidence adduced by the complainant are sufficient to prove that it was a legally enforceable debt and that the cheques were issued to discharge the legally enforceable debt. With the evidence adduced by the complainant, the courts below ought to have raised the presumption under Section 139 of the Act. The evidence adduced by the respondent-accused is not sufficient to rebut the presumption raised under Section 139 of the Act. The defence of the respondent that though he made payment for the commodities/rice bags, the blank cheques were not returned by the appellant-complainant is quite unbelievable and unacceptable. The impugned judgment of the High Court cannot be sustained and is liable to be set aside."
It, therefore, convicted the defendant. However, since the complaint dated back to 2003, the Court did not impose a prison sentence. Instead, it directed the defendant to pay a fine of Rs 2,97,150 within 12 weeks. If the defendant fails to pay the same, the Court directed that a penalty of six months rigorous imprisonment would follow