Holding

The Special Court had jurisdiction because the statutory period relates to the securities transactions, and the appellant failed to rebut the statutory presumptions of liability, so the conviction stands.

Summary

Hiten P. Dalal (appellant) issued four cheques to Standard Chartered Bank between December 1991 and March 1992 for securities transactions. The cheques were dishonoured for insufficient funds and the bank served notices under Section 138 of the Negotiable Instruments Act. Dalal was convicted by a Special Court established under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 and sentenced to one year imprisonment and a fine. On appeal, the Supreme Court examined whether the Special Court had jurisdiction, holding that the statutory period in Section 3(2) of the Act applies to the underlying securities transactions, not to the date of the offence, and therefore jurisdiction was proper. The Court also affirmed that the presumptions of liability under Sections 118, 138 and 139 of the Negotiable Instruments Act shift the evidential burden to the accused, which Dalal failed to discharge. Consequently, the conviction and sentence were upheld and the appeal dismissed.

Issues considered

The Special Court's jurisdiction over offences where the securities transaction occurred within the statutory period but the cheque dishonour occurred after that period.
Whether the presumption of liability under Sections 118, 138 and 139 of the Negotiable Instruments Act can be rebutted and who bears the burden of proof.
The appellant's liability for the dishonoured cheques under Section 138 of the Negotiable Instruments Act.

Legislation cited

Code of Criminal Procedure, 1973s. 247
Indian Evidence Act, 1872s. 114, s. 3
Negotiable Instruments Act, 1881s. 118, s. 138, s. 139
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992s. 3(2), s. 4, s. 7, s. 9-A(1)(b)

Subjects

Special Court jurisdictionSecurities transactionsNegotiable Instruments ActSection 138Presumption of liabilityBurden of proofCheque dishonourCriminal appeal

Judgment

·-
/

A HITEN P. DALAL
v.
BRA TINDRANA TH BANERJEE

JULY 1i,2001

B [B.N. KIRPAL, RUMA PAL AND BRIJESH KUMAR, JJ.]

Special Court (Trial of Offences relating to Transactions in Securities)
Act, 1992-Section 3(2)-Special Court set up for trial of offences committed
C between 1.4.1991 and 6.6.1992-Cheques issued between December 1991
and March 1992-Dishonour of the cheques for insuffi~iency of funds-
Jurisdiction of Special Court for offences committed after the statutory
period-Held, the stat11t01y period relates to transaction in securities and
not to offences-Hence, Special Court has jurisdiction since the issuance of
cheques is within the statuto1y period.
D
Negotiable Instruments Act, 1881-Sections 118, 138 and 139-
Presumption of liability-Dishonour of cheques issued by appellant-Denial
of liability for payment by appellant-Held, burden ofproof is on the accused
to disapprove the presumption-Conviction upheld since the appellant failed
E to discharge the burden-Evidence Act, 1872-Sections 3 and 114.

Appellant issued four cheques in favour of a Bank relating to
transactions in securities during the period between December 1991 to March
1992 for a total amount of about Rs. 78.46 crores. The cheques were returned
dishonoured for insufficiency of funds. The Bank served notices on the
p appellant under Section 138 of the Negotiable Instruments Act, 1881. On
failure to make the payment, the appellant was convicted under the Act by
Special Court, which was set up under the Special Court (Trial of Offences
relating to Transactions in Securities) Act, 1992 and sentenced to
imprisonment for one year and a fine of Rs. 1 lakh.

G In appeal to this Court, the appellant contended that the jurisdiction of
the Special Court under Section 3(2) of the Special Court Act was limited to
the offences committed between 1.4.1991 and 6.6.1992; that the Special Court
had no jurisdiction as the offence took place after 6.6.1992; and that the ~- •
cheques, which were issued to the Bank for certain intended security
H transactions, never materialised and therefore the Bank should have returned •
900 .
HITEN P. DALAL v. BRA TINDRANATH BANERJEE 901
the cheques to the appellant instead of encashing them as there was no liability A
to be discharged by the appellant.
+ The respondent, who filed a complaint on behalf of the Bank, contended
that the statutory period stipulated under Section 3(2) of the Special Court
Act relates to ·transactions in securities and not to offences, and that the
cheques were issued by the appellant to discharge his liabilities to the Bank. B
I

Dismissing the appeal, the Court

HELD: 1. The Statement of Objects and Reasons of the Special Court
·~
(Trial of Offences relating to Transactions in Securities) Act, 1992 and the
Preamble to the Act makes it clear that the purpose of the enactment was to c
deal with those particular transactions relating to the period specified un~er
SectiQn 3(2) of the Act. Under this Section, the statutory period occurs after
the word transaction. From the language used under various sections of the
Act, it is apparent that the period relates to the transaction in securities and
the date of the offence is immaterial. In these circumstances, the ambit of the
Special Courts jurisdiction, whether in criminal proceedings or in civil D
disputes, is in respect of the transactions in securities entered into after
1.4.1991 and on or before 6.6.1992. The transactions, i.e. the issuance of four
~
cheques, is within the statutory period and therefore the Special Court had
the Jurisdiction to entertain the complaint. [904-D-F; 905-B; 907-D)

Harshad Shanti/al Mehta v. Custodian & Ors., [1998) 5 SCC 1, relied, E
on.

Minoo Mehta v. Sharak D. Mehta, [1998) 2 SCC 418, distinguished.

2. Presumptions are rules of evidence and do not conflict with the
)..
presumption of innocence, because by the latter all that is meant is that the F
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. In other
words, provided the facts required to form the basis of a presumption of law
exists, no discretion is left with the Court but to draw the statutory conclusion.
G
~ However, this does not preclude the person against whom the presumption is
drawn from rebutting it and proving the contrary. 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 H
902 SUPREME COURT REPORTS [2001 ].3 S.C.R.
-
A standard ofreasonability being that of the 'prudent man'. The burden was on
the appellant to disapprove the presumptions under Sections 138 and 139 of
the Negotiable Instruments Act, 1881, a burden which he failed to discharge
at all. In the absence of any such proof, the presumptions under Sections 138
and 139 of the Act must prevail. [909-D-G; 913-G-H; 914-B)

B State of Madras v. A. Vaidyantha Iyer, AIR (1958) SC 61; Kundan Lal
Rallaram v. Custodian, Evacuee Property, Bombay, AIR (1961) SC 1316;
Dhanvantrai Balwantrai Desai v. State of Maharashtra, AIR (1964) SC 575
(CB); V.D. Jhingan v. State of Uttar Pradesh, AIR (1966) SC 1762;
Sailendranath Bose v. The State of Bihar, AIR (1968) SC 1292; Ram Krishna
C Bedu Rane v. State ofMaharashtra, [1973) 1 SCC 366; Trilok Chand Jain v.
State ofDelhi, [1975) 4 SCC 761 and Standard Chartered Bank v. Custodian,
[2000) 6 sec 427, referred to.

CRlMINAL APPELLATE JURISDICTION : Criminal Appeal No. 688
of 1995.
D
From the Judgment and Order dated 30.4.93 of the Special Court
at Bombay in CRl. Application No. 1 of 1992.

V.S. Kotwal, P.S. Sudheer, Manish Parikh, P. Venugopal and K.J. i ..
John for the Appellant.
E V.A. Bobde, Tushad A. Cooper and K.R. Nambiar for the Respondent.

The Judgment of the Court was delivered by

RUMA PAL, J. !he appellant was found gµilty of an offence under
Section 138 of the Negotiable Instruments Act, 1881 by the Special Court set
F up under the Special Court (Trial of Offences relating to Transactions in ~·

Securities) Act, 1992 (referred to as, the "Act"). The appellant was sentenced
to rigorous imprisonment for a term of one year and a fine for a sum of Rs.
1 Iakh, in default to undergo further rigorous imprisonment for a term of three
months. Aggrieved by the judgment and order of the Special Court, the
G appellant has preferred this appeal.
0
In the course ·of the hearing of the appeal before this Court, learned
counsel for the appellant raised a preliminary issue based on the language 'of
sub Section 2 of Section 3 of th~ Act. It was contended that the jurisdiction
of the Special Court was limited to of(ences committed between 1.4.1991 and
H on or before 6.6.1992 and the offence alleged having taken place after 6.6.92,
HITEN P. DALAL v. BRATINDRANATH BANERJEE[RUMA PAL,J.] 903

the Special Court had no jurisdiction to try it. The Bench then hearing the A
appeal, recorded i11 its order dated 7.9.1999:

" ......... Prima Facie we are not in agreement with the contention
raised by the learned counsel for the appellant on first principles but
the learned counsel for the appellant has brought to our notice a
judgment of this Court in the case of Minoo Mehta v. Sharak D. B
Mehta, (1998] 2 SCC 418. In the aforesaid judgment on facts of that
case this question possibly did not arise for consideration but even
otherwise Their Lordships in paragraph 12 have come to the conclusion:

'Therefore, every offence pertaining to any transaction in securities
which is covered by the sweep of the Act, that is if such transaction C
has taken place between 1.4.1991 and on or before 6.6.1992 would be
subjected to the provisions of the Act regarding trial of such an
offence.'

Having held so in the later part of the said paragraph the Lordships D
have come to the conclusion:

'The offence referred to in sub-section (2) of Section 3 which is
within the sweep of Section 7 of the Act must be on offence committed
by any person and must have the following two characteristics:

1. Such offence must relate to transactions in securities; and E
2 Such offence should be alleged to have been committed between
1.4.1991 and on or before 6.6.1992'.

This statement of law is contrary to what their Lordships have
said in the earlier paragraph as referred to earlier and we are not in F
agreement with the enunciation made in the second part of paragraph
12 quoted· above. In this view of the matter, we think it appropriate
that this appeal should be placed before a 3-Judge Bench."

The matter was thereafter placed before this Bench and heard.
G
The apparently contradictory observations in Minoo Mehta v. Shavak
D. Mehta, need resolution with reference to the provisions of the Act.

The Act was promulgated on 6.6.92 to "provide for the establishment
of a Special Court for the trial of offences relating to transactions in securities
and for matters connected therewith or incidental thereto." H
>
904 SUPREME COURT REPORTS [2001] 3 S.C.R.

A The jurisdiction of the Special Court was specified in Section. 7 and was
limited to offences referred to in section 3(2) of the Act. Section 3(2) insofar
as it is relevant provides: " ...... .

" ................Any offence relating to transactions in securities after the
1st day of April 1991 and on and before 6th June 1992..... "
B
The question is - does the period specified qualify the word "offence"
or the word "transactions" ? If it is the former, the jurisdiction of the Special
Court would be, as ~ontended by the appellant, limited to offences committed
within the period specified whenever the transactions may have taken place.
The respondent has however contended that the period qualifies the word
C 'transactions' and that this was not only clear from the language of the
statutory provisions but also supported by authority.

In our view the respondent's submission is correct and must be accepted.
The Statement of Objects and Reasons of the Act 1 gives the background and
D the focus of the Act as :

"large scale irregularities and malpractices were noticed in transactions
in both the Government and other securities, indulged in by some
brokers in collusion with the employees of various banks and finan~ial
institutions."
E The preamble to the Act also makes it clear that the purpose of the
enactment was to deal with those particular transactions in securities. In sub-
section (2) of Section 3 the statutory period occurs after the word transaction.
If the period were to qualify the word 'offence' the section would have read
"any offence after the 1st day ofApril and on or before 6th June 1992" From
F the language used it is apparent that the period relates ·to the transaction in
securities and that the date of the offence is immaterial. Other sections of the
Act also show that the object of the Act is those particular transactions
which were carried out during a particular period of time. Thus Section 4 of·
the Act allows the Custodian, under certain circumstances to cancel "any
contract or agreement entered into at any time after the first day of April 1991
G and on or before the 6th June of 1992". The position has been further clarified
by Section 9-A( 1)(b) (introduced by way of amendment in 1994) which confers
on the Special Court all the jurisdiction, powers and authority as were
exercisable immediately before the commencement of the amended Act by any ,~.· ·

'See Statemenr of Objects & Reasons of the Special Court (Trial of Offenc~s Relating to
H Transaction in Securities) Amendment Act, 1994
~

HITEN P. DALAL v. BRA TINDRANATH BANERJEE [RUMA PAL, J.] 905
civil court in relation to, inter-aha, any matter or claim - A
.
+- "arising out of transactions in securities entered into after the
/st day of April 1991, and on or before the 6th day of June, 1992,
.... in which a person is notified under sub-section (2) of Sec. 3 is
involved as a party, broker, intermediary or in any other manner."
B
In these circumstances the inevitable conclusion is that the ambit of the
Special Courts jurisdiction, whether_ in criminal proceedings or in civil disputes
is in respect of the transactions in securities entered into after the 1st day
.(
of April 1991 and on or before 6th day of June, 1992.

That the period mentioned in Section 3(2) refers to the transactions and c
not to the offence is a view which found favour with this Court in Harshad
Shanti/al Mehta v. Custodian and Others2• A Bench of three-Judges of this
Court after considering the various sections of the Act held

"Therefore, the jurisdiction of the Special Court in civil as well as
criminal matters is in respect of transactions during the statutory D
period of 1.4.1991to6.6.1992; and in relation to the properties attached,
of a notified person. The entire operation of the said Act, therefore,
_\ revolves around the transactions in securities during this statutory
period."
"' E
In our opinion the decision in Mino Mehta v. Shavak D. Mehta, (supra),
does not decide to the contrary. In that case shares had been lodged with
the accused by the complainant in December 1991. The accused was to
arrange the sale of the shares '.'nd to pay the sale proceeds to the complainant.
In January, 1992 the accused sold the shares and misappropriated the sale
).
proceeds. Thus the transactions in securities as well as the offence of F
misappropriation had both taken place during the period specified in Section
3 sub-section (2). The only issue before the Court was whether the Special
Court would have jurisdiction to deal with offences even if the accused was
not notified by the Custodian. The· learned Judges decided the issue in the
affirmative.
G
While reaching its conclusion, the Court observed:

" ................ The scheme of Section 7, in the light of the Preamble of the
~ Act and the main purpose for enactment of the Act, appears to be that

'[19981 s sec 1. H
906 SUPREME COURT REPORTS [2001] 3 S·.C.R.

A all criminal proceedings pertaining to prosecutions in connection with
the accused involved in transactions in securities during the relevant
period will lie before the Special Court and not before ordinary courts
as the section starts with a non obstante clause stating that
notwithstanding anything contained in any other law, only Special
Courts will have exclusive jurisdiction to try such offences."
B
Because the offence and the transactions overlapped, the learned Judges
did not make a distinction between the transaction and the offence when they
summed up their conclusions by saying :

C "The offence referred to in, sub-section {2) of Section 3, which is
within the sweep of Section 7 of the Act must be an offence committed
by any person and must have the following two characteristics:

I. Such offence must relate to transactions in securities; and

D 2. Such offence should be alleged to have been committed between
1.4.1991 and on or before 6.6.1992."

The use of the word 'offence' in item 2 was an obvious error because
what was meant has been made clear by the Court in paragraph 15 of the
E judgment which reads:

"Before parting with this case we may state that the learned Senior
•·
Counsel for the appellant also submitted that the offence alleged
against the appellant was not relating to any transaction in securities
during the relevant time but qua the sale consideration alleged to
F have been received by the appellant out of the said transaction and
for which alleged offence under Section 409 prosecution is sought to
be launched against the appellant. It is difficult to agree with this
contention. A conjoint reading of the recitals in the complaint which
obviously must be assumed to be true at this stage would show that
the accused is alleged to have entered into transaction in securities,
G
namely, the shares during the relevant period and out of the said
transaction is alleged to have received sale proceeds which he has not
handed over or transmitted to the complainant who claims to be
entitled to the said amount. Thus the offence alleged is certainly
reijlting to the transaction in securities as said to haw~ been entered
H into by the accused during the relevant period."
HITEN P. DALAL v. BRATINDRANATH BANERJEE[RUMA PAL,J.] 907

It is clear therefore that the summing up did not correctly reflect the A
actual view of the Court:

In the present case the four cheques which are the subject matter of the
criminal proceedings were admittedly executed by the appellant on 24.12.1991,
26.12.1991, 17.2.1992, and 27.3.1992 i.e. within the statutory period. The cheques B
were drawn on the Andhra Bank in favour of the Standard Chartered Bank
(briefly referred to as 'the Bank') for the sums ofRs.27 Crores, Rs.14.5 Crores,
Rs.17 Crores, and Rs.19,95,75,000 respectively. According to the Bank the
cheques were issued for payment of loss suffered by the Bank arising out of
transactions in securities entered into by the Bank through or at the instance
of the appellant during the statutory period. According to the Bank on C
21.5.1992 all four cheques were returned dishonoured by the Andhra Bank
with the remark "Not arranged for". The Bank served notices on the appellant
under Section 138 of the Negotiable Instruments Act on 31.5.1992 and 1.6.1992
calling upon the appellant to make payment in respect of the four cheques
within 15 days from the date of the receipt of the notices. The appellant did D
not pay. The transactions as alleged being within the statutory period, the
Special Court bad the jurisdiction to entertain the complaint and the preliminary
objection of the appellant is, in the circumstances, rejected.
\.
On the merits of the case also, we do not find any reason to interfere
with the decision of the Special Court. In the complaint filed on behalf of the E
Bank by one Bratindranath Banerjee (the respondent herein), on 14th July,
1992, it was alleged that the appellant was acting as a broker in respect of
security transactions between the Bank and other banks and financial
institutions. According to the complaint the appellant had issued the four
cheques in discharge of bis liabilities to the Bank. The four cheques were
presented to Andhra Bank but were dishonoured. A First Information Report F
was lodged against the appellant and others. In the written statement filed by
the appellant under Section 247 of the Code of Criminal Procedure it was said
that pursuant to an oral information from the Bank's officer that the Bank was
working on some new scheme -and methods of augmenting its income and
request for assistance for the same, the appellant agreed to "certain formalities G
and adjustments as and when required". Pursuant to this arrangement, the
appellant bad executed and sent several cheques to the bank including the
four cheques (Ext. B, C, D & E) which related to certain intended transactions
of purchase of security by the appellant from the Standard Chartered Bank.
According to the appellant I}one of these intended transactions actually
materialised and as a result the cheques were never to be acted upon or H
908 SUPREME COURT REPORTS [2001] 3 S.C.R.

A encashed. It was denied that the appellant was liable to make any payment
in respect of the four cheques. According to the appellant although the
transactions had not taken place and the cheques should have been returned
the four cheques were not returned back to the appellant by the Bank through
oversight.

B It is unnecessary to consider the various preliminary stages of the Trial
before the Special Court except to note that charges were framed on 26th
August 1992 by the Special Court against the appellant under Section 138 of
the Negotiable Instruments Act, 1881.

C That the four cheques were executed by the appellant in favour of the
Standard Chartered Bank (hereafter referred to as the Bank), has not been
denied nor was it in dispute that the cheques were dishonoured because of
insufficient funds in the Appellants' account with the drawee, viz. Andhra
i· Bank. Because of the admitted execution of the four cheques by the appellant,
the Bank was entitled to and did in fact rely upon three presumptions in
D support offts case, namely, under Sections 118, 138 and 139 of the Negotiable
Instruments Act. Section 118 provides, inter-alia, that until the contrary is
proved it shall be presumed that 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,
E negotiated or transferred for consideration. The presumption _which arises
under Section 138 provides more specifically that where any cheque drawn
by a person on an account for payment of any amount of money for the
discharge in whole or in part of any debt or other liability, is returned by the
'drawee bank unpaid, either because of the amount of money standing to the
credit of that account is insufficient to honour the cheque, such persons shall
F be deemed to have committed an offence and shall be punished with
imprisonment for a term which may extend to twice the amount of the cheque,
or with both. The nature of the presumption under Section 138 is subject to
the three conditions specified relating to presentation, giving of the notice
and the non payment after receipt of notice by the drawer of the cheque. All
G three conditions have not been denied in th.is case.
The appellant's submis~ion that the cheques were not drawn for the
'discharge in whole or in part of any debt or other liability' is answered by
the third presumption available to the Bank under Section 139 of the Negotiable
Instnlments Act. This sectiop provides that "it shall be presumed, unless the
H contrary is proved, that the holder of a cheque received the cheque, of the
HITEN P. DALALv. BRATINDRANATHBANERJEE[RUMAPAL,J.] 909
A.
•f nature referred to in Section 138 for the discharge, in whole or in part, of any
debt or other liability". The effect of these presumptions is to place the
evidential burden on the appellant of proving that the cheque was not received

• by the Bank towards the discharge of any liability.

Because both Sections 138 and 139 require that the Court "shall presume"
the liability of the drawer of the cheques for the amounts for which the B
cheques are drawn, as noted in State of Madras v. A. Vaidyanatha Iyer, AIR
(1958) SC 61, it is obligatory on the Court to raise this presumption in every
_,.(
~
case where the factual basis for the raising of the presumption had been
established. "It introduces an exception to the general rule as to the burden
' of proof in criminal cases and shifts the onus on to the accused" (ibid). Such c
... a presumption is a presumption of law, as distinguished from a presumption
of fact which describes provisions by which the court "may presume" a
certain state of affairs. Presumptions 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 D
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.
\

; In other words, provided the facts required to form the basis of a ·
presumption of law exists, no discretion is left with the Court but to draw the E
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, "after 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" 3 • Therefore, the rebuttal does not have to be F
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
,,,J reasonability being that of the 'prudent man'.
G
Judicial statements have differed as to the quantum of rebutting evidence
required. In Kundan Lal Rallaram v. Custodian, Evacuee Property, Bombay,
AIR ( 1961) SC 1316, this Court held that the presumption of law under Section
...,..
118 of Negotiable Instruments Act could be rebutted, in certain circumstances,
by a presmpption of fact raised under Section 114 of the Evid~nce Act. The
1 Section 3 : Evidence Act. H
910 SUPREME COURT REPORTS [2001] 3 S.C.R.

•
I
A decision must be limited to the facts of that case. The more authoritative view
has been laid down in the subsequent decision of the Constitution Bench in ~
Dhanvantrai Balwantrai Desai v. State of Maharashtra, AIR (t964) SC 575,
where this Court reiterated the principle enunciated in State of Madras v. (.__
Vaidyanath Iyer, (Supra) and clarified that the distinction between the two
kinds of presumption lay not only in the mandate to the Court, but also in
B the nature of evidence required to rebut the two. In the case of a discretionary It

presumption the presumption if drawn may be rebutted by an explanation '
which "might reasonably be true and which is consistent with the innocence"
of the accused. On the other hand in the case of a mandatory presumption :-......-
"the burden resting on the accused pe.rson in such a case would not be as tJ
c light as it is where a presumption is raised under S.114 of the Evidence Act
and cannot be held to be discharged merely by reason of the fact that the
explanation offered by the accused is reasonable and probable. It must further
be shown that the explanation is a true one. The words 'unless the contrary
is proved' which occur in this provision make it clear that the presumption
has to be rebutted by 'proof' and not by a bare explanation which is merely
D plausible. A fact is said to be proved when its existence is directly established
or when upon the material before it the Court finds its existence to be so
probable that a reasonable man would act on the supposition that it exists.
Unless, therefore, the explanation is supported by proof, the presumption +
created by the provision cannot be said to be rebutted ...... " ~

E
[See also V.D. Jhingan v. State of Uttar Pradesh, AIR (1966) SC 1762;
Sailendranath Bose v. The State of Bihar, AIR (1968) SC 1292 and •
Ram Krishna Bedu Rane v. State of Maharashtra, [1973] 1SCC366.]

We will therefore have to consider whether in the case before us, the
F appellant had supported his defence by any proof sufficient to rebut the
presumption drawn against him. At the trial three witnesses were examined
in support of the Bank's case. The first was a Mr. Derek Reed (PW 1), the
Bank's Group Security Adviser. Mr. Reed deposed that he had come to India ._..,..
..,_
with instructions from the Bank to investigate the fraud which appeared to
have been perpetrated in Bombay in which several banks including the Bank
G
were involved. In the course of investigation he found the four cheques Ext.
B, C, D & E from the desk of an officer of the Bank who has since been
dismissed because of his involvement in the fraud. ,....._

Th~ Bank's second witness was Mr. S. Gyananavinayagam (PW2). He
H was the Manager, Operations in Andhra Bank. He deposed that the four
HITEN P. DALAL v. BRA TINDRANATH BANERJEE [RUMA PAL, J.] 911

cheques were dishonoured on the ground of insufficient funds in the A
,J.-
appellant's account. The third witness Mr. Bratindra Nath Banerjee (PW 3)
was the Director of the Bank in-charge of the India Task Force set up by the
... Bank to investigate the fraud. His was the primary evidence relied upon by
the Bank. Broadly speaking, Mr. Banerjee deposed that there were two main
areas of fraud perpetrated by the appellant. According to him the first fraud
committed by the appellant related to large amounts paid by the Bank at the
B
instance of the appellant or through him, for which the Bank had failed to
receive any security or valid bank receipts. The second fraud pertained to the
_,)(_ actual purchase and sale of securities at the instance of the appellant and the
failure of the appellant to pay the Bank the difference between the contract
'·
rate and delivery rate of the securities. He verified the statements pertaining c
to the transactions between the appellant and the Bank prepared on the basis
of the Bank's books of account and other records maintained in the usual
course of the business of the Bank. All the statements (Ex. 0, P Q and T) were
tendered in evidence and marked as exhibits without any objection by the
appellant.
D
The first statement pertained to the period between 8.11.1991 and
18.12.1991 and showed the contract rates, delivery rates, the rates of difference
·~
and the amount of difference of securities mentioned. The statement along

• with the deal slips, cost memos, instruction issued by the Reserve Bank of
India and entry in a clearing sheet in respect of four deal slips were marked . E
as Ext. 'O'. Out of Ext. 'O', difference ofrates covered by four deal slips had
been settled by the appellant by giving a cheque for Rs. 15 crores. The
balance amount on this account was Rs. 45,77,40,250.

The second statement prepared and vouched for by Mr. Banerjee was
Ext. 'P' prepared in connection with transactions between 28.12.1991 and F
17.2.1992. The statement was supported by 18 deal slips. The liability of the
appellant on this account was claimed to be Rs. 56,50,50,000. Ext. 'P' was
subsequently corrected by Ext. 'T' which gave the figure of appellant's
<' liability for the period covered by Ext. 'P' as Rs. 39,50,50,000.
G
The third statement was marked as Ext. 'Q'. This gave particulars of the
claim for the period 21.2.1992 to 27.3.1992. The appellants liability for this
period was claimed to be Rs. 30,97,34,135. Ext. 'Q' was supported by five deal
_,,,.J..
slips.

All the deal slips which were printed forms and serially numbered H
912 SUPREME COURT REPORTS [2001] 3 S.C.R.

A showed the contract rate and the delivery rates.. They were prepared by
dealers of the.Bank. Mr. Banerjee also stated that the use of the abbreviation
'DIR' in the column which required the name of the Broker, referred to the
Appellant. The witness also showed that in respect of certain transactions
where the contract rate was less than the delivery rate, the appellant was paid
B by the Bank. In dealing with the appellant's case namely that the cheques had T

been given for intended deals which had never taken place, Mr. Banerjee said
that he had gone· through all the deal slips which had been brought with him
to the Court and that there was no evidence of any cancellation of any deal
between the appellant and the Bank.

C In the course of his examination, Mr. Banerjee also gave evidence of
.•
payment made by the Bank to the appellant amounting to Rs.1240 crores and
of the loss suffered by the Bank on account of the non-furnishing of bank.
receipts/securities.

Two further witnesses were produced by the Bank. One proved the
D appellant's account with the Bank and the second proved the Appel!ant's
account with Andhia Bank for the relevant period.

{
As far as the appellant's defence was concerned, he did not enter the
witness box to support his case that the four cheques in particular had been
p given in respect of any arrangement or in respect of any transactions which
did not materialise. The four witnesses called by the Appellant apart from
those subpoenaed ·to produce documents, were Mr. Ramesh Laxman Kamat
(DW 1) Mr. S.R. A. Rao (DW 2), Mr. G.D. Bhalla (DW 3) and Mr. G. CKC
Talukdar (DW. 4). The Special Court found that the evidence of DW l was
not credit-worthy and that "almost all points including inconsequential points
F and points which could not be denied, (he) prevaricated ....... (and) ...... sought
to deny the truth until truth could no longer be denied." DW 1 was then a
Deputy Gener11l Manager of the State Bank of India (referred to as SBI). He
had sought to contend that a number of transactions mentioned in the four
statements viz. Exs. 0, P and Q were ready forward transactions between the
G Bank and SBI, and did not reflect the sale and purchase of securities. It was
a case which he was unable to substantiate with reference to the documents
already on record or produced from the custody of the CBI. The documents
produced by the witness himself were found by the Special Court to be
suspected.

H The second witness for the defence, Mr. SRA Rao also sought to
----c
HITEN p_ DALALv. BRATINDRANATHBANERJEE[RUMA PAL,J.] 913

establish that one transaction in Ex.O was non~existent or a dummy transaction. A
The third defence witness, Mr. G.D. Bhalla, Branch Manager of Andhra Bank,
}
proved that the appellant had made payments of several crores to the Bank.

The fourth witness, G.K. Talukdar, a staff officer of the Reserve Bank
of India produced a list stipulating contract rates of several securities, in an
attempt to show that the contract rates claimed by the Bank were not correct ..
B
It was not stated that the list applied to the Bank or that other rates could
not be conti:acted for.

The brunt of the evidence given by the appellant's witnesses was as
to the nature of the transactions between the appellant and the Bank. However, c
not one of the defence witnesses gave any evidence in support of the only
defence of the Appellant, namely that the four cheques in question had been
given towards intended ·transactions which did not take place. No one said
why the appellant had executed and delivered the particular cheques to the
Bank or that the appellant had not given the four cheques to discharge his ,
debts to the Bank. Nor did any defence witness claim that the cheques were D
given an account of any ready forward transactions. In fact, DW 1 in cross-
examination admitted that it was not the practice of a purchasing party to
~ hand over cheques in advance. The appellant alone could have said why he
had admittedly executed the four cheques, handed them over to the Bank and
never asked for their return. He did not choose to do so. E
As said by the Special Court :
/
"Thus according to the Accused, the cheques Exs. B and C were
delivered on 23rd December 1991. This ostensibly was for intended
\
purchases of 2 crores and 1.08 crores- Units. According to him the
)- F
cheque Ex. D was given on 17th February 1992. This ostensibly for
intended purchase of 1,22,50,000 Units. The Ex. E was allegedly given
on 27th March 1992 for intended purchase of 7 crore Units of Can Star
and IO crore Units of Can Premium. Apart from what is stated in the
Written Statement there is no evidence or proof in support of this
case." G
The burden was on the appellant to disapprove the presumptions under
__..,
,._ Ss. 138 and 139 a burden which he failed to discharge at all. The averment
in the written statement of the appellant was not enough. Incidentally, the
defence in the written statement that the four cheques were given foi; intended
transactions was not the answer given by the Appellant to the notice under H
914 SUPREME COURT REPORTS (2001] 3 S.C.R.

A Section 138. Then he had said that the cheques were given to assist the Bank
for restructuring (Ex. H). It was necessary for the appellant at least to show
on the basis of acceptable evidence either that his explanation in the written
statement was so probable that a prudent man ought to accept it or to
establish that the effect of the material brought on the record, in its totality,
B rendered the existence of the fact presumed, improbable. ( Vide Trilok Chand
Jain v. State of Delhi, (1975] 4 SCC 761. The appellant has done neither. In
the absence of any such proof the presumptions under Sections 138 and 139
must prevail.

We may also mention here that in proceedings initiated by the Bank to
C recover monies from the appellant in connection with the first area of fraud
mentioned by B. Banerjee (PW 3), this Court in Standard Chartered Bank v.
Custodian, [2000] 6 SCC 427 upholding the decision of the Special Court,
found that the appellant was liable to pay the Bank a sum of Rs. 280.00 crores
which is several times the amount covered by the four cheques in question.
D The argument of the Appellant before the Special Court that no offence
under section 138 had in fact been committed because he could not have paid
within the period of 15 days after receipt of the notice even if he wanted to,
was rightly rejected. The appellant's submission was based on the fact that f
he had been notified by the Custodian under section 3 of the Act and all his
E properties had consequently stood attached. But, as observed by the.Learned
Special Court, the Special Court had ~efore it a number of applications by a
number of parties asking for permission to fulfill their obligations under
contracts. In some cases the Court had granted them. There was nothing
which prevented the Appellant from applying to the Special Court for
F permission to fulfill his obligations or to pay off his debts under the cheques
Exs. B, C, D & E. No attempt had been made by the Appellant to make any
payment towards the dishonoured cheques. The appellant would not have
paid even if he could have. This is clear not only from the correspondence,
and the appellant's conduct but also from his defence of total denial of
liability. The argument was therefore wholly academic.
G
The Special Court found the appellant's defence improbable and the
evidence adduced at his instance flawed and unbelievable. After meticulously
scanning both the oral and documentary evidence and ultimately drawing on
the presumptions statutorily provided under sections 118, 138 and 139 of the
Negotiable Instruments Act, the appellant was found guilty. For .the reasons
H stated earlier, there is no ground for us to decide differently and tO differ from
HITEN P. DALAL v. BRA TINDRANATH BAN,ERJEE [RUMA PAL, J.] 915

the view taken by the Special Court in holding the appellant guilty of the
A
offence with which he was charged. We therefore affirm the conviction and
sentence imposed on the appellant by the Special Court and dismiss the
appeal with costs assessed at Rs. 10,000.

B.S. Appeal dismissed. B