Introduction
In the recent judgment of Dattatraya v. Sharanappa[i], the Hon’ble Supreme Court upheld the concurrent findings of acquittal by the Trial Court and the High Court of Karnataka in the case under s. 138 of the Negotiable Instruments Act, 1881 (‘NI Act’). The case centred around a disputed cheque bounce, where Dattatraya (‘Appellant’) sought to enforce liability against Sharanappa (‘Respondent’). The Supreme Court’s ruling reaffirms the importance of a robust evidentiary basis in cheque bounce cases, particularly where the presumption under s. 139 of the NI Act is effectively rebutted by the Respondent.
Brief Facts
The Appellant allegedly lent the Respondent Rs. 2 Lakhs to meet his family's necessities. In return, the Respondent issued a cheque as a guarantee for repayment. When the Respondent failed to repay the loan, the Appellant presented the cheque for encashment, but it was dishonoured due to insufficient funds. In his reply, the Respondent denied the allegations, claiming that the loan transaction, as asserted by the Appellant, never occurred.
Dissatisfied by the Respondent’s reply, the Appellant filed a private complaint under s. 200 of the Criminal Procedure Code, 1973 (CrPC), which was registered as Complaint Case no. 468 of 2014 before the Judicial Magistrate, First Class at Gulbarga.
The Respondent pleaded that the cheque was never meant to be a repayment instrument for any loan from the Appellant but was given to a third party, Mr. Mallikarjun, for security purposes. The Respondent also argued that the cheque somehow ended up with the Appellant and that there was no valid loan transaction between them.
The Trial Court found merit in the Respondent’s arguments and acquitted him, noting inconsistencies in the Appellant’s testimony and a lack of documentary evidence supporting the loan.
The High Court, upon appeal, affirmed the Trial Court’s decision, emphasising the Appellant’s failure to prove the loan’s existence and the Respondent’s financial capacity to grant such a loan.
The Appellant then filed the appeal before the Supreme Court, inter alia, arguing that the Respondent did not adequately rebut the presumption under s. 139 of the NI Act.
Held
The Supreme Court dismissed the appeal, affirming the Respondent’s acquittal by the lower courts. The Supreme Court agreed with the findings of the Trial Court and the High Court, concluding that the Appellant failed to prove the existence of a legally recoverable debt. The Supreme Court’s decision was based on the following contentions:
Dubious Issuance of the Cheque: The Supreme Court found inconsistencies in the Appellant’s evidence, particularly regarding the purpose and timing of the cheque issuance. The Appellant initially claimed that the cheque was given as security at the time of the loan. Still, later, during the cross-examination, it was stated that the cheque was presented after a demand for repayment.
Financial Capacity and Lack of Documentation: The Appellant’s inability to prove his financial capacity to lend the alleged amount, mainly due to the absence of any mention of the loan in his income tax returns, significantly weakened his claim.
Rebuttal of Presumption under s. 139 of the NI Act: The Respondent rebutted the presumption under s. 139 of the NI Act, which ordinarily presumes that a cheque was issued to discharge a debt or liability. The Supreme Court cited Rangappa v. Sri Mohan[ii], which held that the presumption under s. 139 of the NI Act is rebuttable, and the burden shifts to the accused to prove the non-existence of debt or liability through a preponderance of probabilities.
Non-Interference in Concurrent Findings: The Supreme Court highlighted the principle of non-interference with concurrent findings of acquittal, particularly in cases where there is no apparent perversity or miscarriage of justice. This principle is rooted in the respect for liberty enshrined in a. 21 of the Constitution of India. The Supreme Court referred to Rajesh Jain v. Ajay Singh[iii] and Babu v. State of Kerala[iv], which reinforce that concurrent findings should not be overturned unless there is a clear error in law or evidence.
Our Analysis
The Supreme Court’s judgement reinforces that merely holding a signed cheque does not automatically constitute a legally enforceable debt. The complainant must provide clear and consistent evidence to substantiate their claims. The Court’s emphasis on the Appellant’s failure to declare the loan in his income tax returns highlights the judiciary’s approach to scrutinising the credibility of financial transactions.
By upholding the concurrent findings of the lower court and High Court, the Supreme Court demonstrated judicial restraint, emphasising the principle of non-interference. This judgment reaffirms the Supreme Court’s role as a guardian of fairness and ensures that legal processes are not merely procedural but rooted in substantive justice. It highlights the importance of a comprehensive and well-documented approach in legal disputes, encouraging parties to maintain rigorous standards of evidence. This judgement also subtly underscores the idea that, while powerful, legal presumptions are not immune to challenge.
End Notes
[i] 2024 SCC OnLine SC 1899.
[ii] [2010] 11 SCC 441.
[iii] [2023] 10 SCC 148.
[iv] [2010] 9 SCC 189.
Authored by Priyavansh Kaushik, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.
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