Holding

Section 139 raises a presumption only that the cheque was drawn for the discharge of a debt, not that the debt exists, and the presumption is rebuttable without the accused having to testify.

Summary

The appellant, a businessman, handed blank cheques to his former power‑of‑attorney partner and later disputed a loan of Rs 1.5 lakh allegedly advanced by the partner's brother‑in‑law, repaying it by an account‑payee cheque that later bounced. He was convicted under Section 138 of the Negotiable Instruments Act, with the conviction upheld by the trial and appellate courts, while a revision reduced his sentence. The Supreme Court examined whether Section 139 creates a presumption that a debt exists and whether the accused must personally testify to rebut that presumption. It held that Section 139 only presumes the cheque was drawn for the discharge of a debt, not that the debt itself exists, and that the presumption is rebuttable using material already on record; the accused need not step into the witness box. The Court found the lower courts erred in applying the presumption to the existence of debt and in requiring personal testimony, and set aside the conviction and sentence.

Issues considered

The scope of the presumption under Section 139 of the Negotiable Instruments Act – does it extend to the existence of a legally enforceable debt?
Whether the accused must personally appear in court to rebut the statutory presumption under Section 139.
The standard of proof required for the accused to discharge the burden of proof under the Act.

Legislation cited

Income Tax Act, 1961s. 269SS, s. 271D
Negotiable Instruments Act, 1881s. 118(a), s. 13(1), s. 138, s. 139

Subjects

Negotiable Instruments ActSection 138Section 139presumptionburden of proofcheque bouncedishonour of chequereverse burdenincome tax provisionspower of attorneyblank cheque misuse

Judgment

[2008] 1 S.C.R. 605

,. ...(, KRISHNA JANARDHAN BHAT A
v.
DATTATRAYAG. HEGDE
(Crl. A. No. 518 of 2006)
JANUARY 11, 2008
B
(S.B. SINHA AND H.S. BEDI, JJ.)
f' -f

' Negotiable Instruments Act, 1881; Ss. 13(1), 118 (a}, 138
and 139:
Dishonour of Cheque - Commission of an offence ul c
s.138 - Presumption under S.139 rlw S.118 of the Act -
Rebuttal - Burden to prove - Held: S.139 merely raises a
presumption in favour of holder of Cheque that it has been
issued in discharge of debt/liability and it could not be
extended to existence of a debt - Courts below erred in D
~
proceeding on the basis that the accused required to step into
the witness box to prove his defence - Burden could be
...
discharged on the basis of material on record - In a case where
false implication cannot be ruled out, background facts and
conduct of parties required to be taken into consideration - In E
the instant case, four cheques allegedly drawn on the same
day by business partner of accused from his cheque book
and allegedly misused in collusion with complainant - Under
the circumstances, Courts below required to draw an inference
-1 as to the probability of respondent-complainant allegedly F
;. advancing a huge sum of Rs.1.5 /akhs to accused by merely
asking and even without keeping any documentary proof in
connection thereof and accused issuing the cheque in
question towards repayment of Joan so advanced, and the
Cheque could not be realized for insufficiency of funds in the
G
bank - The Courts below also failed to notice that advance
taken by way of Joan exceeding Rs.20,0001- if not made by
way of Ale Payee Cheque, it attracts penalty on the drawer of
the Cheque in terms of s. 271 D of the Income Tax Act- Though
provisions u/s. 139 has been inserted to regulate trade activities
605 H
606 SUPREME COURT REPORTS [2008) 1 S.C.R.

A and to safeguard the faith of creditor on the drawer of Cheque
but the Courts shall not turn a blind· eye to ground realities -
Existence of legally recoverable debt not a matter of
presumption uls. 139 of the Act - Hence, the Courts below
acted wrongly in applying legal principles in the fact situation
B of the case - In view of the peculiar facts and circumstances
of the case, High Court should have entertained the revision
application filed by the accused - Income Tax Act, 1961 -
Ss.269 SS and 2710.
Sections 118 and 139 - Mandatory presumption under
C - Scope of
Appellant and his business partner 'R' were jointly ·
running a business. He allegedly handed over four blank
cheques to 'R' after executing power of attorney in his
favour for meeting the business expenses. Disputes and
0
differences having arisen between the appellant and 'R'
in connection with running of the business, the power of
attorney granted in his favour was cancelled by the
appellant and disputes were referred to the Panchayat.
E The appellant also issued a public notice in a local
newspaper notifying about cancellation of power of
attorney. In the meantime, respondent, brother-in-law of
'R', filed a complaint against the appellant on the premise
that he advanced a sum of Rs. 1,50,0001- to the appellant,
who had returned the loan by way of an account payee
F cheque which was allegedly dishonoured when
presented in the Bank. The Trial Judge found the appellant
guilty, convicted and sentenced him to undergo
imprisonment for six months and further directed
payment of certain amount of compensation. An appeal
G preferred thereagainst was dismissed by the first appellate
Court. Revision Petition filed by appellant before the High
Court was partly allowed by it by reducing the substantive
sentence to one week. Hence the present appeal.
'
Amicus Curiae submitted that the Trial Judge, the first
H
KRISHNA JANARDHAN BHAT v. DATIATRAYA G. HEGDE 607

appellate Court as also the High Court committed a serious A
illegality insofar as it misread and misapplied the
provisions of Section 139 of the Negotiable Instruments
Act; that only ingredient No. 2 of Section 138 of the Act is
a subject matter of presumption under Section 139 of the
Act and not the first one; and that except the word of B

.
\
mouth of the complainant nothing has been brought on
record to prove the offence as alleged against him .
Respondent-complainant submitted that the
appellant has rightly been found guilty of commission of
an offence under Section 138 of the Act as bouncing of C
the cheque issued by him carries a mandatory
presumption in terms of Section 139 read with Section
118 (a) of the Act; and that it is not believable that the
appellant despite referring the dispute to the Panchayat
and issuing a paper publication thereafter would not insist o
on taking back the cheque book from his erstwhile
constituted attorney or would not inform the bank
thereabout. Moreover, he having come out with a positive
defence, it was for him to prove the same.
Allowing the appeal, the Court E
HELD: 1.1 The complainant's case was primarily
accepted by the trial Judge for the reason that the
appellant did not step into the witness box. The appellate
court took an identical stand. It proceeded on the premise F
J. that the statement of accused under Section 313 of the
Code of Criminal Procedure regarding misuse of blank
cheque by the complainant and filling up Rs. 1,50,000/-
instead of Rs. 1500/- is contradictory to his own admission
in the reply to the notice issued to him. On what basis the
said opinion was formed is not known. The appellate court G
refused to enter into the question as to whether the
prosecution case is wholly unreliable, as the complainant
had not been able to show his source of income so as to
enable him to advance a huge loan of Rs. 1,50,000/-.
[Para -15, 16) [617-G, H; 618-A, BJ H
608 SUPREME COURT REPORTS [2008] 1 S.C.R.

)<_ •
A 1.2 The High Court in exercise of its revisional
jurisdiction although accepted the contention of the
appellant that the presumption under Section 139 of the
Act extends "only to the extent that the holder of the
cheque received the cheque for the discharge in whole
8 or in part of any debt or other liability" and the same only
means that cheque was issued for consideration, but it
does not extend to the extent that the cheque was issued
for the discharge of the debt or liability as pleaded by the
accused; that the complainant had discharged that onus
t ..
.-

c by adducing his own evidence. Observing that the
appellant did not step into the witness box, it was opined
that although the relationship between the appellant and
his business partner 'R' was strained, there was nothing
to show that the relationship between the appellant and
the complainant became strained despite the fact that
D
earlier a Panchayat meeting was held in regard to the said
dispute. The High Court, however, refused to go into the
factual aspect of the matter. (Para -17) [618-D, E, F, G]
1.3 According to the complainant-PW1, his
E acquaintance with the appellant was only through his
...
-
brother-in-law. He did not say that he had friendship with
the appellant. There also does not appear to be any
business transactions between them. He could not state
about the denomination of the notes although according
F to him he had drawn the amount from the society. He did ~
not produce any books of accounts or any other proof to •
show that he got so much money from the bank. He
admittedly did not have any written document pertaining
to the accused. He accepted that there was no witness to
the transaction. He, of course, denied certain suggestions,
G
but the suggestions put to him were required to be
considered by the court below in the backdrop of the facts t-
and circumstances of the case. (Para - 18) [620-C, D, E]
1.4 The courts below failed to notice that ordinarily
H in terms of Section 26955 of the Income Tax Act, any
KRISHNA JANARDHANBHAT v. DATIATRAYA G. HEGDE 609

A"~
advance taken by way of any loan of more than Rs. 20,000/ A
- was to be made by way of an account payee cheque
only and Section 271 D of the Act provides penalty for
failure to comply with the provisions ofsection 269SS.
(Para - 19) [620-E, F]
2.1 Indisputably, a mandatory presumption is B
required to be raised in terms of Section 11 S(b) and Section
139 of the Negotiable Instruments Act. (Para - 20) [621-A]
2.2 The proviso appended to Section 138 of the
Negotiable Instruments Act provides for compliance of c
legal requirements before a complaint petition can be
acted upon by a court of law. Section 139 of the Act merely
raises a presumption in regard to the second aspect of
the matter that the cheque was drawn from the account
of bank for discharge in whole or in part of any debt or
D
other liability which pre-supposes a legally enforceable
~ debt. Existence of legally recoverable debt is not a matter .
of presumption under Section 139 of the Act. (Para - 21)
[621-D, E]
3.1 The courts below proceeded on the basis that E
Section 139 raises a presumption in regard to existence
of a debt also. The courts below committed a serious error
in proceeding on the basis that for proving the defence
the accused is required to step into the witness box and
-I unless he does so he would not be discharging his F
.# burden. Such an approach on the part of the courts is not
correct. (Para - 22) [621-F, G]
3.2 An accused for discharging the burden of proof
placed upon him under a statute need not examine
himself. He may discharge his burden on the basis of the G
·+ materials already brought on records. An accused has a
constitutional right to maintain silence. Standard of proof
on the part of an accused a:1d that of the prosecution in a
criminal case is different. (Para - 23) [621-G, H; 622-A]
H
610 SUPREME COURT REPORTS [2008] 1 S. C.R.

~ ~
A Bharat Barrel & Orum Manufacturing Company vs. Amin
Chand Payre/al (1999) 3 SCC 35 - referred to.
3.3 Whereas prosecution must prove the guilt of an
accused beyond all reasonable doubt, the standard of
proof so as to prove a defence on the part of an accused
B is 'preponderance of probabilities'. 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. (Para - 25) [623-A, B]
c
3.4 A statutory presumption has an evidentiary value.
The question as to whether the presumption whether
stood rebutted or not, must, therefore, be determined
keeping in view the other evidences on record. For the
said purpose, stepping into the witness box by the
D
appellant is not imperative. In a case of this nature, where

E
the chances of false implication cannot be ruled out, the
background fact and the conduct of the parties together
with their legal requirements are required to be taken into
consideration. (Para - 26) [623-B, C]
'I-

-
M. S. Narayana Menon Alias Mani vs. State of Kera/a and
Another (2006) 6 SCC 39 - relied on.
4.1 According to the accused, four cheques appear
to have been drawn on the same day. The counterfoil of
F the cheque book, according to the appellant, was in the I--
handwriting of 'R' wherein it was shown that apart from •
other payments, a sum of Rs. 1500/- was withdrawn on a
self-drawn cheque. The courts below proceeded to hold
that the defence raised by the appellant has not been
G proved, which is not correct. He did not know that the
said cheque had not been encashed. He replied to the
~-
notice thinking that one of the cheques has been misused.
There is nothing on record to show that he knew that one
of the cheques was still with 'R'. (Para - 28) [623-E, F, G]
H
KRISHNA JANARDHAN BHAT v. DATTATRAYA G. HEGDE 611

• --i, 4.2 Disputes and differences between him and 'R' A
stood established by admission of the respondent himself.
According to the appellant, 'R' had cheated him. The
counterfoil showed that not more than Rs. 20,000/- had
ever been withdrawn from that bank at a time. The courts
were required to draw an inference as to the probability B
of the complainant's advancing a sum of Rs. 1.5 lakhs on
mere asking and that too without keeping any
documentary proof. Even there was no witness. The
purported story that the appellant would himself come
forward to return the amount by a cheque knowing fully C
well that he did not have any sufficient funds is difficult to
believe. (Para - 29) [623-G, H; 624-A, B]
K. Prakashan vs. PK. Surenderan (2007) 12 SCAL.:E 96;
John K. John vs. Tom Varghese & Anr. JT (2007) 13 SC 222;
Hiten P Dalal vs. Bratindranath Banerjee (2001) 6 SCC 16; D
K.N. Beena vs. Muniyappan and Another (2001) 8 SCC 458;

- Narender Singh & Anr. vs. State of M.P (2004) 10 SCC 699;
Ranjitsing Brahmajeetsing Sharma vs. State of Maharashtra
and Anr. (2005) 5 SCC 294 and Rajesh Ranjan Yadav @
Pappu Yadav vs. CBI through its Director (2007) 1 SCC 70 - E
relied on.
4.3 This Court is not oblivious of the fact that the
provision u/s. 139 of the Act has been inserted to regulate
the growing business, trade, commerce and industrial
activities of the country and the strict liability to promote F
greater vigilance in financial matters and to safeguard the
faith of the creditor in the drawer of the cheque which is
essential to the economic life of a developing country
like India. This, however, shall not mean that the courts
shall turn a blind eye to the ground realities. (Para - 34) G
[627-F, G]
4.4 Statute mandates raising of presumption but it
stops at that. It does not say how presumption drawn
should be held to have rebutted. Other important
principles of legal jurisprudence, namely presumption of H
612 SUPREME COURT REPORTS [2008] 1 S.C.R.

A innocence as human rights and the doctrine of reverse ~ •
burden introduced by Section 139 should be delicately
balanced. Such balancing acts, indisputably would largely
depend upon the factual matrix of each case, the materials
brought on record and having regard to legal principles
B governing the same. (Para - 34) [627-G, H; 628-A]
4.5 The courts must be on guard to see that merely
on the application of presumption as contemplated under
Section 139 of the Negotiable Instruments Act, the same
may not lead to injustice or mistaken conviction. It is for
C these reasons that the decisions operating in the field
where the difficulty of proving a negative has been
emphasized has been taken into consideration. It is not
suggested that a negative can never be proved but there
are cases where such difficulties are faced by the accused
D as honest and reasonable mistake of fact. (Para -33)
[626-G; 627-A]
5. Keeping in view the peculiar facts and
circumstances of this case, this Court is of the opinion
that the courts below approached the case from a wholly
E wrong angle, viz., wrong application of the legal principles
-
in the fact situation of the case. The High Court should
have entertained the revision application. (Para - 35)
[628-A, BJ
F M. S. Narayana Menon Alias Mani vs. State of Kera/a and
Another (2006) 6 SCC 39 - relied on.
CRIMINALAPPELLATE JURISDICTION: Criminal Appeal
No. 518 of 2006.
From the final Judgment/Order dated 22.6.2005 of the High
G Court of Karnataka at Bangalore in Crl. R.P. No. 1470/2004.
S. Balakrishnan (A.C.) and Krishna Janardhan Bhat,
Appellant-In-Person.
S.N. Bhat, N.P.S. Pawar and D.P. Chaturvedi for the
H Respondent.
KRISHNA JANARDHAN BHAT v. DATIATRAYA G. HEGDE 613
[S.B. SINHA, J.]
..... The Judgment of the Court was delivered by A

S.B. SINHA, J. 1. Appellant and one R.G. Bhat were jointly
running a business in the name and style ofVinaya Enterprises
at Hubli together. Appellant executed a Power of Attorney in his
favour.
B
2. Allegedly, he had handed over four blank cheques to
'I the said constituted attorney for meeting the expenses of the
business. The counterfoil of the cheque books was also allegedly
filled in by Shri R.G. Bhat.
The cheque bearing No. 044483 was shown to have been c
a self drawn one for a sum of Rs. 1500/-.
3. Disputes and differences having arisen between the
appellant and the said R.G. Bhat in connection with running of
the said business, the power of attorney granted in his favour
D
was cancelled by the appellant. Disputes and differences
-1 between the parties were referred to the Panchayat. In the
.,, meeting of the Panchayat held on 02.10.1996, complainanU
respondent who is the brother-in-law of the said R.G. Bhat was
admittedly present. He participated therein. The result of the
said meeting of the Panchayat is not known but it is not in E
dispute that the appellant herein issued a public notice through
his advocate in a local newspaper on 3.10.1996 to the following
effect
"My client Sh. Krishna Janardhana Bhat, Proprietor of
1 F
4
Vinaya Enterprises, Tarihal Hubli has given authority to
give notice as follows.
My client appointed Shri Raghavendra Ganapati Bhat as
his power of Attorney Holder on 21.8.1993 to run Vinay
Enterprises as agent. He has started misusing the terms G
and conditions of the Power of Attorney. Hence my client
cancelled the Power of Attorney on 21.8.96 by giving
notice. If at all anybody deals with him on the Power of
Attorney my client is not responsible in future."
5. On the premise that the respondent advanced a sum of H
614 SUPREME COURT REPORTS [2008] 1 S.C.R.

A Rs. 1,50,000/- to the appellant on 14.6.1998 and the latter on ~ .
his own went to his house on 20.7.1998 to return the loan by an
account payee cheque which having been dishonoured when
presented; a complaint petition was filed.
6. Prior thereto, a notice was sent on 27 .8.1998 which was
B allegedly served on the appellant on 5.9.1998. He on that day
itself sent a reply alleging in substance that the complainant had
been colluding with R.G. Bhat in regard thereto, stating: ,..

"Your client D.G. Hegde Goddalamane is husband of sister
of my power of attorney holder R.G. Bhat (Proprietor
c Prasad Enterprises Tarihal Industrial Estate) of Hubli. I do
not have any dealing with him as alleged in your letter.
Knowing that the power of attorney holder R.G. Bhat
has lost faith and having acted illegally and in anticipation
D of his committing further illegal acts I have legally cancelled
my power of attorney and published the notice in a famous
Kannada daily "Samyukta Karnataka" on 3.10.96. From \.--
that date I do not have any relation with him or any of his ~

relatives including your client.
E Please verify the handwriting and signature on the
cheque and advice your client not to do such (illegalities)
colluding with his brother-in-law."
7. The learned Trial Judge convicted the appellant and
sentenced him to undergo imprisonment for six months and
F further directed payment of compensation for a sum of Rs. )--

1,50,000/-. An appeal preferred thereagainst was dismissed •
by the Sessions Judge by a judgment and order dated
28.7.2004.

G 8. The High Court in exercise of its revisional jurisdiction,
however, on a revision petition filed by the appellant, partly
allowed the same by reducing the substantive sentence to one ~-

week.
9. The Special Leave Petition was filed by the appellant in
H person. As it was noticed by a Bench of this Court that some
KRISHNA JANARDHAN BHAT v. DATTATRAYA G. HEGDE 615
[S.S. SINHA, J.]
~ ~
question of law arises for its consideration, Mr. S. Balakrishnan, A
learned senior counsel was requ~sted to assist the Court.

10. Mr. Balakrishnan urged that the learned Trial Judge,
the Sessions Court as also the High Court committed a serious
illegality insofar as it misread and misapplied the provisions of
Section 139 of the Negotiable Instruments Act (for short "the B
Act").

It was contended that the procedural requirements of
Section 138 are:

(i) There is a legally enforceable debt. c
(ii) The drawer of the cheque issued the cheque to satisfy
part or whole of the debt.

(iii) The cheque so issued has been returned due to
insufficiency of funds. D
~ It was urged that only ingredient No. 2 is a subject matter
of presumption under Section 139 of the Act and not the first
one. It was argued that except the word of mouth of the
complainant nothing has been brought on record to prove the
E
offence as against the appellant.
11. Mr. S. N. Bhat, learned counsel appearing on behalf of
the respondent, on the other hand, submitted that the appellant
has rightly been found guilty of commission of an offence under
.., Section 138 of the Act as bouncing of the cheque issued by him F
4 carries a mandatory presumption in terms of Section 139 read
with Section 118 (a) of the Act.
It was urged that it is not believable that the appellant
despite referring the dispute to the Panchayat and issuing a
paper publication on 3.10.1996 would not insist on taking back G
the cheque book from his erstwhile constituted attorney or would
~
not inform the bank thereabout. Moreover, he having come out
with a positive defence, it was for him to prove the same.
12. Before we embark upon the factual issue involved
H
616 SUPREME COURT REPORTS [2008] 1 S. C.R.

A herein, we would notice the manner in which the court proceeded
to determine the case.
The learned Trial Judge framed the following points for its
determination:
B "(1) Whether the complainant proves the hilt that the
accused to discharge earlier debt of Rs.1,50,000/-
, has got issued a cheque on 20. 7 .1998 for
Rs.1,50,000/- drawn at Vijay Bank, Tarahal Branch,
Hubli?
c (2) If so, whether the said cheque came to/be
dishonoured as "funds insufficient" after its
presentation and despite of issuance of notice, the
accused did not pay the due amount within stipulated
time without any cause, thereby Negotiable
D Instruments Act?"
The learned Trial Judge noticed the contents of the claim
petition as also the evidence of PW-1. It also noticed the
suggestions given to the said PW-1 by the appellant herein.
E Upon taking into consideration the same as also the statement
of the appellant under Section 313 of the Code of Criminal
Procedure, it posed a question as to whether there was no debt
payable by the accused to the complainant and if so, whether
the complainant colluding with R.G. Bhat had created the cheque
with an intention to cause loss to the appellant. It, however,
F without making any further discussion, answered the said
question directly on the material brought on record referring to
.
a decision of the Karnataka High Court in S.R. Muralidar v.
Ashok G Y (ILR 2001 Karnataka 4127] in extenso and opining
that his decision in the case is similar to that of the Karnataka
G High Court, stating:
"Considering the proposition of law, in the present case
also the accused admitted the signature on Ex.P.1. But,
the contention is that his P.A. Holder mis-utilized his signed
blank cheques through his relative complainant and the
H
KRISHNA JANARDHAN BHAT v. DATIATRAYA G. HEGDE 617
[S.B. SINHA, J.]
.... ...+ fact of the present case and fact of the decision mentioned A
by me are similar one and the observation made by the
Hon'ble High Court in the above decision and principle
laid down therein are clearly applicable to the case in
hand. Therefore, the defence taken by the accused herein
without stepping into the witness-box, is not acceptable B
one and there is no cogent evidence produced by the
i accused to prove his special reasons for issuance of the
cheque in question."
· 13. It again referred to a decision of this Court in K. .
Bhaskaran v. Sankaran Vaidhyan Ba/an and Others [AIR 1999 c
SC 3762] and made almost a similar observation holding that
as the complainant has discharged his initial burden, the onus
shifted on the accused to produce rebuttal evidence against
the presumption laid down in favour of the complainant stating:
D
"Here, the accused has not produced any evidence to
-~ disca.rd the testimony of PW-1. Therefore, the presumption
·~
is to be drawn in favour of the holder of the cheque, who
has received it for discharge of liability in view of the
decision of the Hon'ble Supreme Court."
E
14. Yet again, it relied upon a decision of the Karnataka
High Court in Mis. Devi Tyres v. Nawab Jan [AIR 2001 Karnataka
H.C.R. 2154], wherein it was opined: '
"There is issued (sic) that the amount is payable and no
~
criminal court is required to embark upon any enquiry that F
Al
goes behind the Act of issuance of the cheque. If the drawer
contends that there were certain special reasons whereby
a cheque was issued and that the cheque was not intended
to be encashed or honoured, the onus of establishing this
shifts squarely to the accused:" G
-t 15. The complainant's case was, thus, primarily accepted
for the reason that the appellant did not step into the witness.
box.
16. The appellate court took an identical stand. It H
618 SUPREME COURT REPORTS [2008] 1 S.C.R.

A proceeded on the premise that the statement of accused under
Section 313 of the Corle of Criminal Procedure regarding
misuse of blank cheque by the complainant and filling up Rs.
1,50,000/- instead of Rs. 1500/- is contradictory to his own
admission in the reply to the notice issued to him.
B On what basis the said opinion was formed is not known.
The appellate court refused to enter into the question as to
whether the prosecution case is wholly unreliable, as the
complainant had not been able to show his source of income
so as to enable him to advance a huge loan of Rs. 1,50,000/-,
C holding:

"Now as far as the financial ability of the complainant to
issue cheque for such huge amount to the accused is not
a matter to be considered by the trial court or by me also
since issue of Ex.P.1 and its dishonour is proved by the
D
complainant beyond reasonable doubt."

17. The High Court in exercise of its revisional jurisdiction
although accepted the contention of the appellant that the
presumption under Section 139 of the Act extends "only to the
E extent that the holder of the cheque received the cheque for the
discharge in whole or in part of any debt or other liability" and
the same only means "that cheque was issued for consideration,
but does not extend to the extent that the cheque was issued for
the discharge of the debt or liability as pleaded by the accused",
F opined that the complainant had discharged that onus by
adducing his own evidence. Observing that the appellant did ..
not step into the witness box, it was opined that although the
relationship between the appellant and Shri R.G. Bhat was
strained, there was nothing to show that the relationship between
G the appellant and the complainant became strained despite the
fact that a panchayat meeting was held in regard to the said
+-
dispute in 1996. The High Court, however, refused to go into
the factual aspect of the matter stating that it was exercising a
revisional jurisdiction, stating:
H "Since the burden of proving that the cheque had been
KRISHNA JANARDHAN BHAT v. DATTATRAYA G. HEGDE 619
[S.B. SINHA, J.]
-~ -+
misused is on the accused-petitioner, and there being a A
concurrent finding of the Trial Court and the Appellant Court
with regard to that holding that the petitioner had failed to
discharge that burden, I do not find any ground to interfere
in the order of the Trial Court and that the Appellate Court.
so far as they hold the petitioner guilty of an offence B
punishable under Section 138 of the Negotiable
i Instruments Act."

18. Before embarking upon the legal issues, we may
analyse the deposition of PW-1 - Complainant. He was a
resident of village Goddalmane. Appellant is a resident of village c
Kekkar. As he was running an industry at Hubli, he sometimes
resided in Hubli also. They were said to be friends. He asked
him to give a loan of Rs. 1.5 lakhs in the first week of June,
1998 and the amount was handed over to him on 14th June,
1998. It was allegedly agreed that on the appellant's failure to D
~
repay the said_ loan within one month, 15% interest would be
charged. No document was executed; no pronote was executed;
no receipt was obtained. Appellant is said to have come to his
house suo moto on 20.07.1998 and handed over the cheque
which was sent to Varada Grameen Bank for collection E
whereupon notice had been issued. Despite the fact that he
was aware that a dispute had been raised in regard to the
writings fn the cheque, the same was not proved. Merely, the
cheque was tendered and it was marked as an exhibit. The

.. 1
cheque appears to have been issued as a proprietor of a F
business concern .

Despite the fact that R.G. Bhat was his brother-in-law, he
denied that he was running the said business. He also feigned
his ignorance as to whether the said industry was being run by
R.G. Bhat on the basis of the Power of Attorney executed by the G
~
appellant. He, however, accepted that they had been running it
together. He also accepted the relationship between him and
R.G. Bhat. He knew about the dispute. He accepted that a
panchayat m~eting was held in regard thereto. Surprisingly, he
denied his knowledge in regard to the existence of the power of H
~
1'
620 SUPREME COURT REPORTS [2008] 1 S.G.R. I
I

A attorney stating that the same was not made in his presence. +- ,. j
He admitted that he was present on 2.10.1996 in the panchayat
meeting to resolve the problem arising out of the dispute
between R.G. Bhat and the appellant. He· accepted that wooden
and steel materials were placed in Vinay Enterprises and R.G.
B . Bhat had been running the same type of industry in Tarihal
Industrial Estate. According to him, he had been running such
an industry in the name of Prasad Enterprises even prior to 1996. r
His acquaintance, according to him, with the appellant was only
through his brother-in-law. He did not say that he had friendship
c with the appellant. There also does not appear to be any
business transactions between them. He could not state about
the denomination of the notes although according to him he had
drawn the amount from the society.
He did not produce any books of accounts or any other
D proof to show that he got so much money from the bank. He
admittedly did not have any written document pertaining to the .,,.
accused. He accepted that there was no witness to the
transaction. He, of course, denied certain suggestions, but the
suggestions put to him were required to be considered by the
E court below in the backdrop of the facts and circumstances of
the case.
19. The courts below failed to notice that ordinarily in terms
of Section 269SS of the Income Tax Act, any advance taken by
way of any loan of more than Rs. 20,000/- was to be made by
F way of an account payee cheque only. ~
..
Section 271 D of the Income Tax Act reads as under:
"271 D. Penalty for failure to comply with the provisions of
section 269SS. (1) If a person takes or accepts any loan
G or deposit in contravention of the provisions of section
269SS, he shall be liable to pay, byway of penalty, a sum ~
equal to the amount of the loan or deposit so taken or
accepted.
(2) Any penalty imposable under sub-section (1) shall be
H
KRISHNA JANARDHAN BHAT v. DATIATRAYA G. HEGDE 621
[S.B. SINHA, J.]
" --.+ imposed by the Joint Commissioner." A
20. Indisputably, a mandatory presumption is required to
be raised in terms of Section 118(b) and Section 139 of the
Act. Section 13(1) of the Act defines 'negotiable instrument' to
mean "a promissory note, bill of exchange or cheque payable
either to order or to bearer". 8

Section 138 of the Act has three ingredients, viz.:
i
(i) that there is a legally enforceable debt;
(ii) that the cheque was drawn from the account of bank c
for discharge in whole or in part of any debt or other
liability which pre-supposes a legally enforceable
debt; and
(iii) that the cheque so issued had been returned due to
insufficiency of funds. D
-.../ 21. The proviso appended to the said section provides
for compliance of legal requirements before a complaint petition
can be acted upon by a court of law. Section 139 of the Act
merely raises a presumption in regard to the second aspect of
the matter. Existence of legally recoverable debt is not a matter E
of presumption under Section 139 of the Act. It merely raises a
presumption in favour of a holder of the cheque that the same
has been issued for discharge of any debt or other liability.

1 22. The courts below, as noticed hereinbefore, proceeded F
.. on the basis that Section 139 raises a presumption in regard to
existence of a debt also. The courts below, in our opinion,
committed a serious error in proceeding on the basis that for
proving the defence the accused is required to step into the
witness box and unless he does so he would not be discharging G
his burden. Such an approach on the part of the courts, we feel,
is not correct.
23.An accused for discharging the burden of proof placed
upon him under a statute need not examine himself. He may
discharge his burden on the basis of the materials already H
622 SUPREME COURT REPORTS [2008] 1 S.C.R.

A brought on records. An accused has a constitutional right to
maintain silence. Standard of proof on the part of an accused
and that of the prosecution in a criminal case is different.
24. In Bharat Barrel & Drum Manufacturing Company v.
B Amin Chand Payrelal [(1999) 3 SCC 35] interpreting Section
118(a) of the Act, this Court opined:
"Upon consideration of various judgments as noted
hereinabove, the position of law which emerges is that
once execution of the promissory note is admitted, the
c presumption under Section 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
D
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 the grant of relief on the basis of the
negotiable instrument. The burden upon the defendant
E 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 plaintiff is entitled
under law to rely upon all the evidence led in the case
F. 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 Section 118(a) in his favour.
G The court may not insist 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 ... "
H [Emphasis supplied]
KRISHNA JANARDHAN BHAT v. DATIATRAYA G. HEGDE 623
[S.B. SINHA, J.]

... ..+ 25. Furthermore, whereas prosecution most prove the guilt A
of an accused beyond all reasonable doubt, the standard of
proof so as to prove a defence on the part of an accused is
'preponderance of probabilities'. 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 B
circumstances upon which he relies.
26. A statutory presumption has an evidentiary value. The
question as to whether the presumption whether stood rebutted
or not, must, therefore, be determined keeping in view the other
evidences on record. For the said purpose, stepping into the c
witness box by the appellant is not imperative. In a case of this
nature, where the chances of false implication cannot be ruled
out, the background fact and the conduct of the parties together
with their legal requirements are required to be taken into
consideration: D

27. In M.S. Narayana Menon Alias Maniv. State of Kera/a
../.
and Another [(2006) 6 sec 39], it was held that once the
accused is found to discharge his initial burden, it shifts to the
complainant.
E
28. Four cheques, according to the accused, appear to
have been drawn on the same day. The counterfoil of the cheque
book, according to the appellant, was in the handwriting of R.G.
Bhat wherein it was shown that apart from other payments, a
sum of Rs. 1500/- was withdrawn on a self-drawn cheque. The F
1 courts below proceeded to hold that the defence raised by the
A
appellant has not been proved, which, in our opinion, is not
correct. He did not know that the said cheque had not been
encashed. He replied to the notice thinking that one of the
cheque has been misused. There is nothing on record to show
G
that he knew that one of the cheques was still with R.G. Bhat.
29. Disputes and differences between him and R.G. Bhat
stood established by admission of the respondent himself.·
Similar industry was being run by R.G. Bhat although he was
acting as the constituted attorney of the appellant. According to H
624 SUPREME COURT REPORTS [2008] 1 S.C.R.

A the appellant, R.G. Bhat had cheated him. The counterfoil showed +. ,..
that not more than Rs. 20,000/- had ever been withdrawn from
that bank at a time. The 'courts were required to draw an
inference as to the probability of the complainant's advancing a
sum of Rs. 1.5 lakhs on mere asking and that too without keeping
B any documentary proof. Even there was no witness. The
purported story that the appellant would himself come forward
to return the amount by a cheque knowing fully well that he did
not have any sufficient funds is difficult to believe.
30. In K. Prakashan v. PK. Surenderan [2007 (12) SCALE
c 96], this Court following M. S. Narayana Menon (supra) opined:
"12. The Act raises two presumptions; firstly, in regard to
the passing of consideration as contained in Section 118
(a) therein and, secondly, a presumption that the holder of
cheque receiving the same of the nature referred to in
D
Section 139 discharged in whole or in part any debt or
other liability. Presumptions both under Sections 118 (a) ~
and 139 are rebuttable in nature. Having regard to the
definition of terms 'proved' and 'disproved' as contained
in Section 3 of the Evidence Act as also the nature of the
E said burden upon the prosecution vis-a-vis an accused it
is not necessary that the accused must step into the witness
box to discharge the burden of proof in terms of the
aforementioned provision.

F 13. It is furthermore not in doubt or dispute that whereas
~
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."
In John K. John v. Tom Varghese &Anr. [JT 2007 (13) SC
G 222], this Court held:
"10 ... The High Court was entitled to take notice of the
conduct of the parties. It has been found by the High Court
as of fact that the complainant did not approach the court
with clean hands. His conduct was not that of a prudent
H
KRISHNA JANARDHAN BHAT v. DATIATRAYA G. HEGDE 625
[S.B. SINHA, J.]
... .-.+
man. Why no instrument was executed although a huge A
sum of money was allegedly paid to the respondent was
a relevant question which could be posed in the matter. It
was open to the High Court to draw its own conclusion
therein. Not only no document had been executed, even
no interest had been charged. It would be absurd to form B
an opinion that despite knowing that the respondent even
was not in a position to discharge his burden to pay
instalments in respect of the prized amount, an advance
would be made to him and that too even after institution of
three civil suits. The amount advanced even did not carry c
any interest. If in a situation of this nature, the High Court
has arrived at a finding that the respondent has discharged
his burden of proof cast on him under Section 139 of the
Act, no exception thereto can be taken."
31. Mr. Bhat relied upon a decision of this Court in Hiten D
~ P. Dalal v. Bratindranath Banerjee [(2001) 6 SCC 16] wherein
this Court held:
"22 ... 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 E
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 F
presumed fact.
23 . In other words, provided the facts required to form the
basis of a presumption of law exist, no discretion is left
with the court but to draw the statutory conclusion, but this
G
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 H
626 SUPREME COURT REPORTS [2008] 1 S.C.R.
'
+.. ..
A .that a prudent man ought, under the circumstances of the
particular case, to act upon the supposition that it exists".
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
B either believe the defence to exist or consider its existence
to be reasonably probable, the standard of reasonability
being that of the "prudent man"."
[See also K.N. Beena v. Muniyappan and Another (2001) ,r

c a sec 458]
32. We assume that the law laid down therein is correct.
The views we have taken are not inconsistent therewith.
33. But, we may at the same time notice the development
D of law in this area in some jurisdictions.
The presumption of innocence is a human right. [See
Narender Singh & Anr. v. State of M.P. (2004) 10 SCC 699,
Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra
and Anr. (2005) 5 SCC 294 and Rajesh Ranjan Yadav @
E Pappu Yadav v. CBI through its Director (2007) 1 SCC 70]
Article 6(2) of he European Convention on Human Rights
provides : "Everyone charged with a criminal offence shall be
presumed innocent until proved guilty according to law". Although
India is not bound by the aforementioned Convention and as
~
such it may not be necessary like the countries forming European
F
countries to bring common law into land with the Convention, a
.
balancing of the accused rights and the interest of the society is
required to be taken into consideration. In India, however, subject
to the statutory interdicts, the said principle forms the basis of
criminal jurisprudence. For the aforementioned purpose the
G
nature of the offence, seriousness as also gravity thereof may
be taken into consideration. The courts must be on guard to
see that merely on the application of presumption as
contemplated under Section 139 of the Negotiable Instruments
H
Act, the same may not lead to injustice or mistaken conviction.
-
KRISHNA JANARDHAN BHAT v. DATTATRAYA G. HEGDE 627
[S.B. SINHA, J.]
.. ~ It is for the aforementioned reasons that we have taken into A
consideration the decisions operating in the field where the
difficulty of proving a negative has been emphasized. It is not
suggested that a negative can never be proved but there are
cases where such difficulties are faced by the accused e,g,.
honest and reasonable mistake of fact. In a recent Article "The B
Presumption of Innocence and Reverse Burdens: A Balancing
Duty" published in [2007] C.L.J. (March Part) 142 it has been
1
stated :-
"In determining whether a reverse burden is compatible
with the presumption of innocence regard should also be c
had to the pragmatics of proof. How difficult would it be for
the prosecution to prove guilt without the reverse burden? .
How easily could an innocent defendant discharge the
reverse burden? But courts will not allow these pragmatic
considerations to override the legitimate rights of the D
defendant. Pragmatism will have greater sway where the
~
· reverse burden would not pose the risk of great injustice
-where the offence is not too serious or the reverse burden
only concerns a matter incidental to guilt. And greater
weight will be given to prosecutorial efficiency in the E
regulatory environment."
34. We are not oblivious of the fact that the said provision
has been inserted to regulate the growing business, trade,
commerce and industrial activities of the country and the strict
i liability to promote greater vigilance in financial matters and to F
,,. safeguard the faith of the creditor in the drawer of the cheque
which is essential to the economic life of a developing country
like India. This, however, shall not mean that the courts shall put
a blind eye to the ground realities. Statute mandates raising of
presumption but it stops at that. It does not say how presumption G
drawn should be held to have rebutted. Other important principles
of legal jurisprudence, namely presumption of innocence as
human rights and the doctrine of reverse burden introduced by
Section 139 should be delicately balanced. Such balancing
acts, indisputably would largely depend upon the factual matrix H
628 SUPREME COURT REPORTS (2008] 1 S.C.R.

A of each case, the materials brought on record and having regard ;.. •
to legal principles governing the same.
35. Keeping in view the peculiar facts and circumstances
of this case, we are of the opinion that the courts below
approached the case from a wholly wrong angle, viz., wrong
8 application of the legal principles in the fact situation of the case.
In view of the legal position as has been enunciated by this Court
in M.S. Narayana Menon (supra) and later cases, we are of
the opinion that the High Court should have entertained the
revision application.
c
36. For the reasons aforementioned, the appeal is allowed.
The judgments of conviction and sentence passed against the
appellant are set aside.
S.K.S. Appeal allowed.
D