Holding

The High Court was incorrect to set aside the acquittal; the accused’s defence was not wholly improbable and the statutory presumption was properly rebutted on a probability basis.

Summary

The appellant Kamala S. was charged under Section 138 of the Negotiable Instruments Act for issuing a cheque that was dishonoured for insufficient funds. She contended that the cheque was drawn to settle the balance of a property sale, not to discharge any debt. The trial court found her defence probable, rebutted the presumption under Section 139, and acquitted her. The Kerala High Court reversed the acquittal, holding that she failed to discharge the statutory burden of proof. The Supreme Court held that the presumption under Sections 138, 139 and 142 is rebuttable on a probability basis, and that the trial court’s finding of a probable defence could not be set aside without proper reasoning. Consequently, the Court allowed the appeal, set aside the High Court judgment and restored the acquittal.

Issues considered

The presumption under Section 139 of the Negotiable Instruments Act that a cheque is drawn for discharge of debt can be rebutted by the accused's defence.
Whether the High Court erred in overturning the trial court’s acquittal when the defence was found probable.
The standard of proof required to rebut the statutory presumption (preponderance of probability).
Whether an appellate court may interfere with a judgment of acquittal where two views of the evidence are possible.

Legislation cited

Code of Criminal Procedure, 1973s. 357(3)
Negotiable Instruments Act, 1881s. 138, s. 139, s. 142

Subjects

Negotiable Instruments ActSection 138Section 139presumptionburden of proofcheque dishonourcriminal liabilityacquittalappellate interference

Judgment

:A ' ' KAMALA S. + ,__
v.
VIDY ADHARAN M.J. AND ANR.

FEBRUARY 20, 2007

B (S.B. SINHA AND MARKANDEY KATJU, JJ.]

Negotiable Instruments Act, 1881-Sections 138, 139 and 142- }
'
Dishonour of cheque-Presumption in favour of holder of Negotiable
Instruments - Criminal complaint by holder ofcheque that the drawer borrowed
c money and the cheque issued dishonoured-Drawer's case that cheque drawn
not in discharge of any debt or liability-Trial court holding that the drawer's
.~

defence was probable and presumption raised stood discharged-Acquittal
ofdrawer-Set aside by High Court holding that the drawer failed to discharge
the purden of proof-Correctness of-Held: Drawer's case not wholi'y an
D improbable one-If it was probable, the findings of trial court could not be
rejected without meeting the reasoning therefor-Interference by High Court
-1
not correct that too when two views were possible.
'
According to the appellant, S-wife of respondent, owned a property and
executed sale deeds in favour of Rand T as a security in lieu of some amount
E paid in favour of.S. When R and T demanded money back from S, she
approached the appellant for purchase of the property for consideration of
Rs.5 lakhs. T executed a sale deed in favour of appellant and appellant withdrew
Rs.4 lakhs and paid to S which in turn was paid to T & R. Appellant further
issued a cheque in favour of respondent and gave it to S as the property was
short by few cents. Cheque was dishonoured for insufficient funds upon
>-
F
presentation. Respondent issued a notice but the amount was not repaid.
Respondent then filed complaint petition under section 138 of the Negotiable
Instruments Act, 1881 alleging that the appellant had borrowed a sum of Rs.
1 lakh from the respondent for purchasing a house. Appellant contended that
the cheque was drawn for payment of balance consideration for sale of a
G property in her favour by wife of respondent and not for discharge of any debt
or security. Trial Court held that the defence of the appellant was a probable ~ t
one and the presumption raised under section 142 of the Act stood discharged
whereas the complainant failed to discharge the onus and acquitted the
appellant. Respondent filed appeal. High Court set aside the order holding
H 852
KAMALA S. v. VIDY AD HARAN M.J. 853
that the appellant had not been able to discharge the burden of prooflaid down A
under sections 138 and 139 of the Act and convicted the appellant. Hence the
present appeal.

Appellant-complainant contended that the trial court keeping in view
the entire materials on records had arrived at an opinion that the burden had
fully been discharged by the appellant and, thus, could not have set aside the B
said finding as the said defence was a probable one.

Respondent contended that in view of the agreement between the parties,
a cheque was drawn by the appellant within a period of 5 months from the
date of agreement, a presumption in terms of section 139 was correctly rai~ed C
by the High Court; and that even if the defence raised by the appellant was
true, she has failed to offer any explanation as to why the cheque had to be
issued.

Allowing the appeal, the Court
D
HELD: 1.1. The Negotiable Instruments Act, 1881 contains provisions
raising presumption as regards the negotiable instruments under Section
/ l 18(a) of the Act as also under Section 139 thereof. The said presumptions
are rebuttable ones. Whether presumption stood rebutted or not would depend
upon the facts and circumstances of each case. [Para 15) (585-G-H)
E
MS. Narayana Menon Alias Mani v. State of Kera/a and Anr., (2006) 6
sec 39, relied on.
1.2. The standard of proof in discharge of the burden in terms of Section
139 of the Act being of preponderance of a probability, the inference therefor F
can be drawn not only from the materials brought on record but also from the
reference to the circumstances upon which the accused relies upon.
(Para 17) [859-C-D)

2.1. According to the appellant, two Sale Deeds were executed showing
considerations therefor as Rs. 80,000/- and Rs. 20,000/- only at the instance G
of the appellant although the agreed consideration therefor was Rs. 5 lakhs.
A finding of fact was arrived at that the cheque was not signed 5 months after
the execution of the agreement as contained in the exhibit but on the same
day. This finding was arrived at on comparison of the colour of the ink and
'letter pattern' obtaining in both the documents. A further finding of fact was H
854 SUPREME COURT REPORTS [2007] 2 S.C.R.

A arrived at by the Trial Judge that the same had been written by the same pen. + C..
The respondent who examined himself as PW-1 accepted that he had received
a sum of Rs. 20,000/- after the execution of the said Deed of Sale, but raised
a contention that said amount had not been paid in relation to another
transaction; but what other.transaction was entered into by and between the
B parties thereto had not been disclosed. Despite a definite stand taken by the
appellant in that behalf, the respondent did not bring any fact to establish as
to what the possible transaction could have been. (Paras 21 and 23) (860-E-G)

2.2. High Court only on the premise that R and T had not been examined
and th_e appellant did not exhibit the Sale Deeds executed in their favour by
C the wife of the respondent opined that the said finding was perverse. The
reasonings of the Trial Judge had not been met by the High Court. Nothing
has been stated as to why the findings of the Trial Judge were not probable.
(Para 24) (861-D-E]

. 2.3. Having considered the entire fact situation obtaining in the instant
D case the opinion that the defence case cannot said to be wholly improbable
one. If it was probable, the findings of the Trial Judge could not have been
thrown out without meeting the reasonings therefor. Therefore, High Court
was not correct in interfering with the said judgment. Further, when two views
are possible, the High Court while exercising its appellate power against a
E judgment of acquittal shall not ordinarily interfere therewith.
(Paras 25 and 26] (861-E-G)

V. Venkata Subbarao v. State represented by Inspector of Police, A.P.,
(2006) 14 SCALE 125, relied on

F CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 233 of .~
2007.

From the final Judgment/Order dated 10.3.2006 of the High Court of
Kerala at Emakulam in Cr!. A. No. I017/2002.

G , K.V. Viswanathan, M. Greesh Kumar and Khwairakpam Nobin Singh for
the Appellant.
' -1""'
K. Rajeev, K.C. Ranjit, Rutwik Panda, Boby Angushnr and Sahadev
Singh for the Respondents.

H The Judgment of the Court was delivered by
KAMALA S. v. VIDY ADHARAN M.J. [S.B. SINHA, J.] 855
S.B. SINHA, J. l. Leave granted. A
r-
2. Appellant herein was charged with commission of an offence under
Section 138 of the Negotiable Instruments Act, 1881 (for short, 'the Act') on
the premise that a cheque issued by her on 05.09.1997 for a sum of Rs. I lakh
drawn in favour of the respondent herein, when presented, was dishonoured
for the reason "funds insufficient". A legal notice was sent to her, but despite B
the receipt thereof, she had not repaid the said amount.

3. Before the learned Trial Judge, a defence was raised by the appellant
~ herein that the cheque in question was not drawn in discharge of any debt
or security but in fact was drawn for payment of a balance consideration for
sale of a property in her favour by the wife of the respondent.
c
4. According to the appellant, Smt. Sathyabhama owned a property
bearing old Survey No. 1363/3-1-1 measuring an area of 4 7 cents. She had
executed two Sale Deeds, one in favour of Mr. Ramchandran Nair and another
in favour ofThankamony conveying to them 20 cents and 27 cents respectively.
D
The Sale Deeds were allegedly execi:ted in favour of the aforementioned
,_ persons as a security in lieu of some amount paid in her favour. However,
when the Thankamony and Ramchandran Nair demanded the money back
-~
from the wife of the respondent, the appellant was approached for purchase
of the said property for a consideration of Rs. 5 lakhs. On 05.09.1997, the said
Thankmony executed a Deed for Sale in favour of the appellant wherefor she E
had withdrawn a sum of Rs. 4 lakhs from bank. The said amount was paid to
Sathyabhama which in tum was paid to Thankamony and Ramchandran Nair.
However, as there was a dispute in regard to the exact area of the property
and measurement therefor had not been taken, she had given a cheque to
Sathyabhama in the name of her husband as demanded by Sathyabhama on
... F
an understanding that the consideration shall be reduced if the area found
) in the Sale Deed is found short. As upon measurement, the area of the
property conveyed in his favour was found to be short by 4 cents, the
appellant paid a sum of Rs. 20,000/- to the respondent on 27.11.1997. Allegedly,
however the respondent had asked for a sum of Rs. I 0,000(- more from the
appellant, but a sum of Rs. 5,000/- was only given to him on 18.12.1997 G
towards full and final settlement thereof and in that view of the matter no
further amount was due for her.
-(-

5. However, despite the same, a cheque was produced before a bank
which, as noticed hereinbefore, was dishonoured.
H
'.

856 SUPREME COURT REPORTS [2007] 2 S.C.R.

A 6. A complaint petition was filed thereafter on the allegation that the
appellant had borrowed a sum of Rs. I lakh from the respondent for purchasing ·"'+- ' .
a house and the same was to be repaid within a period of 5 months.

7. The learned Trial Judge considered the evidence adduced on behalf
of the complainant and found the defence of the appellant to be a probable
B one and having regard to the facts and circumstances of this case, held that
the presumption raised under Section 142 of the Act stood discharged and
the complainant failed to discharge the onus placed on him stating :

" ... This also suggests that Ext. P2 may be a signed blank cheque
'issued by the accused to PW! as a security. Thus the facts and
c circumstances discussed above leads one to the conclusion that the
defence set up by accused that he had issued a signed blank cheque
·as a security along with Ext. Pl agreement and Ext. P2 is that cheque
he had issued is probable. The circumstances discussed above are
badly damaging the prosecution case and they are sufficient to displace
D the presumptions available to the complainant. These circumstances
in fact corroborates PW I to show the reasonable possibility of the
non existence of the presumed fact. The accused need not prove his
defence case beyond reasonable doubt. Here the evidence tendered
by DWI together with the circumstances discussed above is seen
sufficient to rebut the presumptions. Now the burden again shifts to
E the complainant and he is to prove by independent positive evidence
the most material fact of existence of debt of the accused. The
complainant had not produced sufficient evidence to prove his case
beyond reasonable doubt, without the help of the presumptions ... "

8. On the said finding, the learned Trial Judge recorded a judgment of
F acquittal. On an appeal preferred by the respondent herein thereagainst, the .>--
High Court, however, reversed the said finding, opining that the appellant had
not been able to discharge the burden of proof laid down under Sections 138
and 139 of the Act, which read as under:

"138. Dishonour of cheque for insufficiency, etc., of funds in the
G account.-Where any cheque drawn by a person on an account
maintained by him with a banker for payment of any amount of money
to another person from out of that account for the discharge, in whole
or in part, of any debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to the credit of that
H account is insufficient to honour the cheque or that it exceeds the
~ ---r
KAMALA S. v. VIDYADHARAN M.J. [S.B. SINHA, J.] 857
amount arranged to be paid from that account by an agreement made A
.,.....
f
with that bank, such person shall be deemed to have committed an
I
offence and shall, without prejudice to any other provision of this
Act, be punished with imprisonment for a term which may extend to
two years, or with fine which may extend to twice the amount of the
cheque, or with both:
B
Provided that nothing contained in this section shall apply unless-

(a) the cheque has been presented to the bank within a period of six
months from the date on which it is drawn or within the period
-~
of its validity, whichever is earlier.
(b) the payee or the holder in due course of the cheque, as the case
c
may be, makes a demand for the payment of the said amount of
money by giving a notice, in writing, to the drawer of the cheque,
- within thirty days of the receipt of information by him from the
bank regarding the return of the cheque as unpaid, and
(c) the drawer of such cheque fails to make the payment of the said D
amount of money to the payee or; as the case may be, to the
r-- holder in due course of the cheque, within fifteen days of the
,. receipt of the said notice.
Explanation.-For the purposes of this section, "debt or other liability"
means a legally enforceable debt or other liability." E

"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, or any debt or other liability."
... 9. The High Court in arriving at the said conclusion, although accepted
F
}
that the Sale Deeds had been executed in favour of the appellant herein, but
despite the fact that the defence witnesses had fully supported her statement,
who also examined herself as DW-1, held "There is no explanation for non-
mentioning of the same" in the reply to the notice which had been served on
G
her by the respondent.

IO. On the aforementioned finding, the appellant was sentenced to
---r-
imprisonment till rising of the Court and pay compensation of a sum of Rs.
I lakh to the complainant in terms of Section 357(3) of the Code of Criminal
Procedure; and in default thereof to undergo simple imprisonment for 6 months. H
~-·

858 SUPREME COURT REPORTS [2007] 2 S.C.R.

A · 11. Mr. K.V. Viswanathan, the learned counsel appearing on behalf of
the appellant, would submit that the High Court committed a manifest error
I
"
<
!:1
in passing the impugned judgment, inasmuch as the learned Trial Judge
keeping in view the entire materials on records had arrived at an opinion that
the. burden had fully been discharged by the appellant, and, thus, could not
i
have reversed the said finding as the said defence was a probable one.
B
12. Mr. Rajeev, learned counsel appearing on behalf of the respondent,
on the other hand, would draw our attention to a declaration made by the
appellant herein contained in Annexure R-1, which is in the following terms:

"!, Sukumaran Kamala at Baiju Bhawanam in Puthoor Mukku,
'r
c Kadavoor Desom in Kadavoor Village hereby execute this agreement
on 05.09.1997 (Nineteen Ninety Seven September five) and given to
Vidhyadharan s/o Kunhikrishnan at Vidhyamandiram, at Error Amsom ,_
Desam in Eroor Village.

I have obtained from you Rs. One lakh for the purpose of
D purchasing a property. I hereby undertake that I will repay Rs. One
lakh within five months from this date. If I fail to repay Rs. One lakh
within the due date you are entitled to this amount along with interest _,
from such date and that you can realize from my properties.
'>.

All the above stipulations have written with my full knowledge
E and consent and signed."

13. The learned counsel would contend that keeping in view the fact
that in terms of the said document a cheque was drawn by the appellant
herein within a period of 5 months from 05.09.1997, a presumption in terms
of Section 139 of the Act was correctly raised by the High Court.
F .,..
14. It was submitted that even if the defence raised by the appellant
herein was true, she has failed to offer any explanation as to why the cheque
had to be issued.

15. The Act contains provisions raising presumption as regards the
G
negotiable instruments under Section l 18(a) of the Act as also under Section
139 thereof. The said presumptions are rebuttable ones. Whether presumption
stood rebutted or not would depend upon the facts and circumstances of ...~
each case.

H 16. The nature and extent of such presumption came up for consideration
KAMALA S. v. VIDY ADHARAN M.J. [S.B. SINHA, J.] 859
before this Court in MS. Narayana Menon Alias Mani v. State of Kera/a and A
Anr., [2006] 6 SCC 3,9 wherein it was held :

"30. Applying the said definitions of "proved" or "disproved" to the
principle behind Section I I8(a) of the Act, the court shall presume a
negotiable instrument to be for consideration unless and until after
considering th.e matter before it, it either believes that the consideration B
docs not exis!' or considers the non-existence of the consideration so
probable that: a prudent man ought, under the circumstances of the
particular case, to act upon the supposition that the consideration
does not exist. For rebutting such presumption, what is needed is to
raise a probable defence. Even for the said purpose, the evidence C
adduced on behalf of the complainant could be relied upon."

17. This Court. clearly laid down the law that standard of proof in
discharge of the burden in terms of Section 139 of the Act being of
preponderance of a probability, the inference therefor can be drawn not only
from the materials brought on record but also from the reference to the D
circumstances upon which the accused relies upon. Categorically stating that
the burden of proof on accused is not as high as that of the prosecution, it
I
was held;

"33. Presumption drawn under a statute has only an evidentiary value.
Presumptions are raised in terms of the Evidence Act. Presumption E
drawn in respect of one fact may be an evidence even for the purpose
of drawing presumption under another."

It was further observed that ;
-...!.
" 38. If for the purpose of a civil litigation, the defendant may not F
\
adduce any evidence to discharge the initial burden placed on him,
a "fortiori" even an accused need not enter into the witness box and
examine other witnesses in support of his defence. He, it will bear
repetition to state, need not disprove the prosecution case in its
entirety as has been held by the High Court.
G
39. A presumption is a legal or factual assumption drawn from the
existence of certain facts."

18. Indisputably, a sale deed was executed in favour of the appellant
herein by the persons in whose favour the wife of the respondent had
executed Deeds of Sale. H
860 SUPREME COURT REPORTS [2007] 2 S.C.R.

A 19. A sum of Rs. 4 lakhs had been withdrawn by the appellant from the
bank.

20. The document was executed on the same day on which Exhibit P-
l was executed.

B 21. The learned Trial Judge as also the High Court had arrived at a
finding of fact that the testimony of the appellant (DW-1) was supported by
other witnesses examined on her behalf. The High Court, however, proceeded
to hold that Ramchandran Pillai and Thankamony had not been examined nor ~
the purported Deeds of Sale executed on their behalf by the wife of the
C respondent had been examined. Appellant, as noticed hereinbefore, examined
herself. The wife of the complainant had been working in a school near her
house. Her explanation in regard to the circumstances in which she had drawn
a cheque was not controverted. Appellant also examine:! the scribe of the
deed. According to the appellant, two Sale Deeds were executed showing
considerations therefor as Rs. 80,000/- and Rs. 20,000/- only at the instance
D of the appellant although the agreed consideration therefor the same was Rs.
5 lakhs. DW-3, Shashi was also a document writer.

22. The testimonies of the said witnesses were relied upon by the
learned Trial Judge.

E 23. A finding of fact was arrived at that the cheque was not signed 5
months after the execution of the agreement as contained in Ex. P-1 but on
the same day. This finding was arrived at on comparison of the colour of the
ink and 'letter pattern' obtaining in both the documents. A further finding of
fact was arrived at by the learned Trial Judge that the same had been written
by the same pen. The respondent who examined himself as PW-I accepted ;. .
F that he had received a sum of Rs. 20,000/- after the execution of the said Deed
of Sale, but raised a contention that said amount had not been paid in relation
to another transaction; but what other transaction was entered into by and
between the parties thereto had not been disclosed. Despite a definite stand
taken by the appellant in that behalf, the respondent did not bring any fact
G to establish as to what the possible transaction could have been. It was,
therefore, opined ;

" ... This also suggests that Ext. P2 may be a signed blank cheque
· issued by the accused to PW! as a security. Thus the facts and
circumstances discussed above leads one to the conclusion that the
H
KAMALA S. v. VIDYADHARAN M.J. [S.B. SINHA, J.] 861
defence set up by the accused that he had issued a signed blank A
cheque as a security along with Ext. PI agreement and Ext. P2 is that
cheque he had issued is probable. The circumstances discussed above
are badly damaging the prosecution case and they are sufficient to
displace the presumptions available to the complainant. These
circumstances in fact corroborates PWI to show the reasonable
possibility of the non existence of the presumed fact. The accused B
need not prove his defence case beyond reasonable doubt. Here the
evidence tendered by DWI together with the circumstances discussed
above is seen sufficient to rebut the presumptions. Now the burden
again shifts to the complainant and he is to prove by independent
positive evidence the most material fact of existence of debt of the C
accused. The complainant had not produced sufficient evidence to
prove his case beyond reasonable doubt, without the help of the
presumptions. Thus the complainant failed to prove beyond reasonable
doubt that the accused had issued Ext. Pl cheque towards the
repayment of Rs. 1,00,000/- he had borrowed from PWI as alleged .... "

24. The High Court, on the other hand, only on the premise that said D
Ramchandran Pillai and Thankamony had not been examined and the appellant
'r did not exhibit the Deeds of Sale executed in their favour by the wife of the
) respondent opined that the said finding was perverse. The reasonings of the
learned Trial Judge had not been met by the High Court. Nothing has been
stated as to why the findings of the learned Trial Judge were not probable. E

25. Having considered the entire fact situation obtaining in the present
case, we are of the opinion that the defence case cannot said to be wholly
improbable one. If it was probable, the findings of the learned Trial Judge
could not have been thrown out without meeting the reasonings therefor. The
High Court, therefore, in our opinion was not correct in interfering with the F
said Judgment.

26. It is now well settled when two views are possible, the High Court
while exercising its appellate power against a judgment of acquittal, shall not
ordinarily interfere therewith. [See V. Venkata Subbarao v. State represented
by Inspector ofPolice, A.P. (2006) 14 SCALE 125]. G
27. For the reasons aforementioned, the impugned judgment cannot be
sustained, which is set aside accordingly. The appeal is allowed.

N.J. Appeal allowed.
H