The Apex Court held that circumstances like lack of documentary evidence to show the source of funds of complainant to advance the loan or lack of any written record of the transaction in the form of receipt of even kachcha notes do not rebut the presumption raised under Section 139 of the NI Act. The Court further held that in a proceeding under Section 138, the standard of proof is not beyond reasonable doubt but preponderance of probabilities.
The above ratio was passed by the Supreme Court in the matter of Rohitbhai Jivanlal Patel Vs. State of Gujarat & Anr., Criminal Appeal No. 508 of 2019 decided on 15th March, 2019.
The complainant alleged that the accused demanded from him a sum of Rs. 22,50,000/- as loan for his immediate requirement; and he extended such loan to the accused for a short term. According to the complainant, upon regular demand for re-payment, the accused gave him cheques of different dates drawn and also gave the acceptance for re-payment on a stamp paper. The said cheques when presented were dishonoured and proceedings under section 138 of NI Act were instituted against the accused person.
After examining the record, the Trial Court found that the accused had admitted his signature on the cheques and drew the presumption envisaged by Section 139 of NI Act. However, after having drawn the presumption, the Trial Court found several factors in favour of the accused and observed, inter alia, that: (a) there was no documentary evidence to show the source of income for advancing the loan to the accused; (b) the complainant failed to record the transaction in the form of receipts, promissory notes or even kaccha notes. Based on these grounds, the trial court acquitted the accused.
In the impugned order, the High Court had observed that if the transaction in question was not reflected in the accounts and income-tax returns, that would at best hold the assesse or lender liable for action under the income-tax laws but, if the complainant succeeds in showing the lending of amount, the existence of legally enforceable debt cannot be denied. The High Court, therefore, convicted the accused-appellant for the offence under Section 138 of the NI Act.
The Apex Court observe that so far the question of existence of basic ingredients for drawing of presumption under Sections 118 and 139 the NI Act is concerned, apparent it is that the accused-appellant could not deny his signature on the cheques in question that had been drawn in favour of the complainant on a bank account maintained by the accused for a sum of Rs. 3 lakhs each. The said cheques were presented to the Bank concerned within the period of their validity and were returned unpaid for the reason of either the balance being insufficient or the account being closed. Therefore, the court held that all the basic ingredients of Section 138 as also of Sections 118 and 139 are apparent on the face of the record.
Finding fault in the decision of the trial court, the Apex Court observed that even after purportedly drawing the presumption under Section 139 of the NI Act, the Trial Court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused.
The Court held that such approach of the Trial Court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant’s case could not have been raised for want of evidence regarding the source of funds for advancing loan to the accused-appellant.
The Court further held that the observations of the Trial Court that there was no documentary evidence to show the source of funds with the respondent to advance the loan, or that the respondent did not record the transaction in the form of receipt of even kachcha notes would have been relevant if the matter was to be examined with reference to the onus on the complaint to prove his case beyond reasonable doubt. It was further held that the result of such presumption is that existence of a legally enforceable debt is to be presumed in favour of the complainant. When such a presumption is drawn, the factors relating to the want of documentary evidence in the form of receipts or accounts or want of evidence as regards source of funds were not of relevant consideration while examining if the accused has been able to rebut the presumption or not.