Dishonour Of Cheque : How To Discharge The Burden Of Accused?
Presumptions are devices by use of which the Courts are enabled and entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence. Under the Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) "may presume" (rebuttable), (2) "shall presume" and (3) "conclusive (irrebuttable). The term is used to designate an inference, affirmative or disaffirmative of the existence of a fact, conveniently called the "presumed fact" drawn by a judicial tribunal, by a process of probable (rebuttable), presumptions" "presumption" reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumption literally means "taking as true without examination or proof".[ Kumar Exports v. Sharma Carpets: 2009 (2) SCC 513]
Presumption Under Section 118(a)
Under S.118(a) of the N.I. Act, there is a presumption that until the contrary is proved, 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.
In the case of "Bharat Barrel & Drum Manufacturing Company v. Amin Chand Pyarelal", 1999 (3) SCC 35, it has been held as under: -
"Upon consideration of various judgments as noted herein above, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under S.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 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 defendant 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 S.118(a) in his favour. The court may not 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. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non - existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that it did not exist."
139. Presumption in favour of holder.- 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.
Section 139 introduces an exception to the general rule as to the burden of proof and shifts the onus on the accused. The presumption under Section 139 of the Negotiable Instruments Act is a presumption of law, as distinguished from presumption of facts. Presumptions are rules of evidence and do not conflict with the presumption of innocence, which requires the prosecution 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 and presumptions of fact unless the accused adduces evidence showing the reasonable possibility of the nonexistence of the presumed fact. [Hiten P. Dalal vs Bratindranath Banerjee]
Section 139, which mandates that unless the contrary is proved, it is to be presumed 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. Needless to mention that the presumption contemplated under Section 139 of the Negotiable Instruments Act, is a rebuttable presumption. However, the onus of proving that the cheque was not in discharge of any debt or other liability is on the accused drawer of the cheque.[ Bir Singh Vs Mukesh Kumar]
Applying the definition of the word "proved" in S.3 of the Evidence Act to the provisions of S.118 and S.139 of the Act, it becomes evident that in a trial under S.138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted.
Shifting of Burden from Complainant to Accused
As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under S.118 and S.139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
In Laxmi Dyechem vs. State of Gujarat, Supreme Court reiterated that in view of Section 139, it has to be presumed that a cheque was issued in discharge of a debt or other liability but the 5 (2005) 5 SCC 294 6 (2007) 1 SCC 70 7 (2012) 13 SCC 375 11 presumption could be rebutted by adducing evidence. The burden of proof was however on the person who wanted to rebut the presumption.
SC held that "however, this presumption coupled with the object of Chapter XVII of the Act leads to the conclusion that by countermanding payment of a post dated cheque, a party should not be allowed to get away from the penal provision of Section 138 of the Act".
Nature of presumption
The use of the phrase "until the contrary is proved" in S.118 of the Act and use of the words "unless the contrary is proved" in S.139 of the Act read with definitions of "may presume" and "shall presume" as given in S.4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over."
In K.N. Beena vs. Muniyappan and Another Court held that in view of the provisions of Section 139 of the Negotiable Instruments Act read with Section 118 thereof, the Court had to presume that the cheque had been issued for discharging a debt or liability. The said presumption was rebuttable and could be rebutted by the accused by proving the contrary. But mere denial or rebuttal by the accused was not enough. The accused had to prove by cogent evidence that there was no debt or liability. The accused had to prove in the trial by leading cogent evidence that there was no debt or liability.
How to discharge the burden
Supreme Court in Kumar Exports v. Sharma Carpets, 2009 (2) SCC 513 held that the accused may adduce evidence to rebut the presumption, but mere denial regarding existence of debt shall not serve any purpose. Following was held in paragraph 20:
"20....The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the Court need not insist in every case that the accused should disprove the non - existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the Court may either believe that the consideration and debt did not exist or their non - existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist..." [Also see Kishan Rao Vs Shankagouda; 2018(8)SCC 165].
Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act. The accused has also an option to prove the non-existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial.
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.
In the case of "Krishna Janardhan Bhat v. Dattatraya G. Hegde", 2008 (4) SCC 54 it was held that presumption under S.139 of the N.I. Act does not include the existence of a legally enforceable debt or liability and that S.139 merely raises a presumption in favour of holder of the cheque that the same has been issued for discharge of any debt or other liability. However, subsequently in the case of "Rangappa v. Mohan" AIR 2010 SC 1898, the Three - Judges Bench of the Apex Court held that the presumption mandated by S.139 of the N.I. Act includes the existence of legally enforceable debt or liability and to that extent, the impugned observations in the case of "Krishna Janardhan Bhat" may not be correct. Thus, the presumption under S.139 of the N.I. Act, in favour of the holder of the cheque, is that a legally enforceable debt or liability exists
Standard of proof required
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.
The 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.
When evidential burden shifts back to Complainant
Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue.